TIDMLIV
RNS Number : 0648Z
Livermore Investments Group Limited
24 May 2016
Livermore Investments Group Limited
Annual Report & Consolidated Financial Statements for the
year ended 31 December 2015
Highlights
-- Net Asset Value per share - USD 0.77 after payment of interim
dividend of USD 0.0256 per share (December 2014: USD 0.82).
-- In addition to the USD 5m dividend, the Company bought back
3,000,000 shares during the year at an average price of GBP
0.34.
-- Wyler Park property in Bern, Switzerland was refinanced for a
minimum term of 5 years. Lease with SBB was extended by another 10
years until 2029.
-- No material developments in the private equity portfolio.
Chairman's and Chief Executive's Review
Introduction
We are pleased to announce the consolidated financial results
for Livermore Investments Group Limited ("Livermore" or "the
Company") and its subsidiaries (together "the Group") for the year
ended 31 December 2015.
The year-end NAV was USD 0.77 per share after payment of a USD
5m dividend, USD 0.0256 per share (2014 NAV: USD 0.82 per share).
Further, the Company bought back 3,000,000 shares for a total cost
of USD 1.54m. Net loss for the year was USD 4.7m (2014 Net Profit:
USD 7.2m).
Wyler Park, our investment property in Bern, Switzerland
performed well, generating over CHF 5.4m (USD 5.6m) in net rent
during the year. All of the 39 apartments and commercial spaces are
fully rented. The loan against Wyler Park was successfully
refinanced in January 2015 for a minimum term of 5 years and annual
interest expense was reduced to CHF 1.1m from circa CHF 3.3m in
prior years. Further, management successfully extended the lease
with SBB by another 10 years until 2029.
The portfolio recorded gains from revaluation as well as
increased income from the Wyler Park project. These gains were
offset by administration expenses, negative mark-to-market on the
CLO portfolio on account of lower loan prices and credit concerns
in the high-yield market, as well as certain impairments on legacy
private equity positions. Interest and dividend income from the
financial portfolio totalled USD 25.7m (2014: USD 26.6m).
Financial Review
The NAV of the Group at 31 December 2015 was USD 148.6m. Net
loss during the year was USD 4.7m, which represents earnings per
share of USD (0.02).
Administrative expenses excluding provisions were USD 4.6m
(2014: USD 7.2m).
The overall change in the NAV is primarily attributed to the
following:
31 December 2015 31 December 2014
-------------------------------------------- ----------------- -----------------
US $m US $m
-------------------------------------------- ----------------- -----------------
Shareholders' funds at beginning of year 160.0 168.4
-------------------------------------------- ----------------- -----------------
___________ ___________
-------------------------------------------- ----------------- -----------------
Income from investments 30.9 31.8
-------------------------------------------- ----------------- -----------------
Other income 0.1 0.5
-------------------------------------------- ----------------- -----------------
Realised losses on investments (2.4) (1.6)
-------------------------------------------- ----------------- -----------------
Loss on impairment of investments (31.7) (8.9)
-------------------------------------------- ----------------- -----------------
Unrealised gains / (losses) on investments 8.5 (9.4)
-------------------------------------------- ----------------- -----------------
Unrealised exchange losses (0.4) (0.6)
-------------------------------------------- ----------------- -----------------
Administration costs (5.2) (7.2)
-------------------------------------------- ----------------- -----------------
Net finance costs (2.5) (7.2)
-------------------------------------------- ----------------- -----------------
Tax charge (1.9) (0.8)
-------------------------------------------- ----------------- -----------------
___________ ___________
-------------------------------------------- ----------------- -----------------
Decrease in net assets from operations (4.6) (3.4)
-------------------------------------------- ----------------- -----------------
Purchase of own shares (1.5) -
-------------------------------------------- ----------------- -----------------
Dividends paid (5.0) (5.0)
-------------------------------------------- ----------------- -----------------
Adjustments for share option expiry (0.3) -
-------------------------------------------- ----------------- -----------------
___________ ___________
-------------------------------------------- ----------------- -----------------
Shareholders' funds at end of year 148.6 160.0
-------------------------------------------- ----------------- -----------------
------ ------
-------------------------------------------- ----------------- -----------------
Net Asset Value per share US $0.77 US $0.82
-------------------------------------------- ----------------- -----------------
Dividend & Buyback
For the year ended 31 December 2015, the Company paid a dividend
of USD 5m (USD 0.0256 per share).
During 2015, the Company bought back 3,000,000 shares to be held
in treasury for a total cost of USD 1.54m. As at 31 December 2015,
the Company held 111,830,818 shares in treasury.
In addition since 1 January 2016 to date, the Company has
purchased 17,475,585 shares to be held in treasury for a total cost
of USD 7.86m.
Richard B Rosenberg Noam Lanir
Chairman Chief Executive Officer
20 May 2016
Review of Activities
Introduction and Overview
2015 was a challenging year for financial markets as investors
fretted over several issues ranging from slow global economic
growth, persistently low inflation, low productivity growth, the
length of the current business cycle, further slowdown in China,
falling energy and commodity prices, and policy tools remaining
with central banks to manage a potential downturn. The main issue,
however, was the strength of the US Dollar on the back of monetary
policy divergence between the US and the rest of the developed
world. The strength of the US Dollar created significant monetary
policy tightening via the currency route in the rest of the world
and especially in emerging markets. In the US, cutbacks in spending
from the energy and mining sector offset gains from lower oil
prices. Corporate earnings declined as exporters and multinational
companies struggled with the stronger currency and energy and
mining sector faced lower prices for their products. Indicators in
the high yield and credit market flashed warning signs in the
latter half of the year and gave up a significant part of their
first half gains.
During the year, significant effort was put into first,
refinancing the Wyler Park property at good terms, and second, to
extend the lease with SBB. Both efforts were successful. The new
financing has reduced the interest burden from CHF 3.3m per annum
in prior years to about CHF 1.1m per annum going forward, and the
lease extension until 2029 has contributed to the increase of the
value of the property from CHF 115.8m in 2014 to CHF 123.3m in
2015.
The Group financial portfolio continued to generate strong cash
flows despite mark-to-market losses on the CLO portfolio as
concerns over the health of speculative grade credit markets and
forced liquidations significantly affected investor sentiment.
In 2015, the Group generated interest and dividend income of USD
25.7m and investment property income of USD 5.2m. The Group
reported NAV/share of USD 0.77 after a dividend of USD 0.0256/share
(2014: USD 0.82) and net loss of USD 4.7m. Administrative expenses
amount to USD 5.2m (2014: USD 7.2m) and finance costs were USD 2.5m
(2014: USD 7.3m), of which USD 1.3m relates to the loan against the
Wyler Park property.
The Group does not have an external management company structure
and thus does not bear the burden of external management and
performance fees. Furthermore, the interests of Livermore's
management are aligned with those of its shareholders as management
members have a large ownership interest in Livermore shares.
Considering the strong liquidity position of Livermore, together
with its strong foothold in the US CLO market as well as the
robustness of its investment portfolio and the alignment of
management's interests with those of its shareholders, management
believes that the Group is well positioned to benefit from current
market conditions.
Global Investment Environment
The global economy continued to recover in 2015, however,
contrary to expectations, growth did not strengthen and stayed at
anaemic levels. While the economies of Euro area and US grew
moderately driven by services sector on the back of domestic
demand, industrial activity was lacklustre as growth in China
slowed. The economic environment continued to be dominated by
considerable uncertainty including that from the Greek debt crisis,
geopolitical tensions such as Ukraine, and military conflict in the
Middle East.
Energy and commodity prices continued to fall in 2015 amid slow
growth and the Chinese efforts to transition to a services oriented
economy. Low oil commodity prices negatively affected growth in
several emerging market countries dependent on commodity exports.
Low prices further contributed to low inflation rates in many
countries.
In the US, GDP grew by a modest 2.4% in 2015 but labour market
conditions continued to improve towards full employment levels
supported by robust services sector growth and unemployment rate
fell to 5% by the end of the year. This prompted a sharp divergence
in expected monetary policy between the US and rest of the
developed world and the US Dollar strengthened against most
currencies. A stronger US Dollar had the effect of creating tighter
monetary conditions across the world further depressing growth.
Concerned about potential inflation due to high employment levels,
the US Federal Reserve indeed raised its main interest rate by
0.25% in December 2015 for the first time since 2008.
In the Euro area, GDP grew by 1.6% in 2015 as compared to 0.9%
in 2014. This moderate recovery was supported by the highly
expansionary monetary policy of the European Central Bank (ECB) and
the associated weakening of the Euro. The ECB started purchasing
securities at the rate of EUR 60 billion per month in March and by
December announced extending these purchases until March 2017 in
addition to lowering its deposit rate by another 0.10% to -0.30%.
Credit conditions gradually improved and business confidence picked
up. Low energy prices also improved household purchasing power.
Although the unemployment rate continued to decline in the Euro
area, it remained at elevated levels with a reading of 10.4% as of
year-end 2015.
The Swiss economy faced several challenges in 2015, mainly
emanating from sharp appreciation of the Swiss franc following
discontinuation of minimum exchange rate versus the Euro in
mid-January 2015 as well as weakening of the global economy in the
second half of the year. Against a backdrop of increasingly
divergent monetary policy between the US and Euro zone, the Swiss
National Bank (SNB) could no longer support the minimum exchange
rate regime and its discontinuation caused a sharp increase in the
value of the Swiss franc. To discourage safe haven inflows in the
Swiss Franc, the SNB cut the deposit rates further into negative
territory to -0.75%. GDP declined in the first quarter and
recovered only marginally by year end 2015. Overall, GDP increased
by 0.9% in 2015 vs 1.9% in 2014. Sales and profit margins came
under severe pressure in several industries and the tough business
environment left an impact on the labour market with unemployment
rate increasing to 3.4% in December 2015. Inflation as measured by
the Swiss consumer price index was -1.1% in 2015.
Growth in emerging economies presented an uneven picture.
Economic growth in China slowed slightly to 6.9% reflecting robust
growth in services sector. However, momentum in industrial activity
slowed perceptibly dampened by overcapacity in heavy industry and
construction. Recession in Brazil and Russia deepened further as a
result of the slump in commodity prices. The People's Bank of China
(PBOC) eased monetary policy significantly in 2015. While in the
first half of the year the PBOC focussed on stimulating the
economy, further easing in the second half was driven by turbulence
in China's stock market and the PBOC's efforts to make its currency
exchange rate more flexible.
Financial markets faced significant volatility in 2015 as
investors braced for slow global growth, a long structure
transition of the Chinese economy, cut backs in investment due to
low energy and commodity prices, a stronger US Dollar and
potentially higher short term rates in the US amidst geopolitical
tensions and conflict in the Middle East.
The S&P 500 Index managed to generate a positive total
return of 1.38% in 2015 including dividends while the EuroSTOXX 50
Index generated a net return of 6.4% driven by aggressive monetary
and a lower exchange rate. The US Dollar was up 9.25% against
international currencies as measured by the DXY Index. The Euro on
the other hand ended the year at 1.086 as compared to 1.21 versus
the US Dollar at the start of 2015.
Against widely held expectations of higher longer term rates,
the US and German 10 year treasury yields were only marginally
changed yielding 2.26% and 0.629% respectively at the end of the
year as compared to 2.17% and 0.54% respectively at the beginning
of 2015. 2015 was a challenging year for US credit as concerns over
potential rate increases in the US as well as declining earnings
growth and low energy and commodity prices raised the specter of
higher default rates in 2016 with potentially lower recoveries if
commodity prices stay low. Both investment grade and high yield
finished 2015 with negative returns. Total returns for investment
grade and high yield were -0.75% and -5.56%, respectively. Spreads
widened on the year (+32bp for investment grade, +168bp for high
yield), resulting in excess returns of -1.64% and -7.15% for
investment grade and high yield, respectively. Loans outperformed
high yield, but still had only the second negative return (-0.69%)
in 19 years of data.
Sources: Board of Governors of the Federal Reserve System,
European Central Bank (ECB), Swiss National Bank, Bloomberg, Morgan
Stanley
Livermore's Strategy
The financial portfolio is focused on fixed income instruments
which generate regular cash flows and include exposure mainly to
senior secured and usually broadly syndicated US loans and to a
limited extent emerging market debt through investments in CLOs.
This part of the portfolio is geographically focused on the US with
some exposure to Europe and emerging markets.
The remaining portfolio is focused on Switzerland and Asia with
investments primarily in real estate and select private equity
opportunities. Investments are focused on sectors that Management
believes will provide superior growth over the mid to long term
with relatively low downside risk.
Strong emphasis is given to maintaining sufficient liquidity and
low leverage at the overall portfolio level and to re-invest in
existing and new investments along the economic cycle.
Review of Significant Investments
Name Book Value
US $m
-------------------- ------------
Wyler Park* 46.9
SRS Charminar 7.1
Other Real Estate
Assets 1.2
-------------------- ------------
Total 55.2
-------------------- ------------
* Net of related loan.
Wyler Park - Switzerland
Wyler Park is a top quality mixed-use property located in Bern,
Switzerland. It has over 16,800 square meters of commercial space,
4,100 square meters of residential space, and another 7,800 square
meters available for additional commercial development. The
commercial part is leased entirely to SBB (AAA rated), the Swiss
national transport authority wholly owned by the Swiss
Confederation, and serves as the headquarters of their Passenger
Traffic division. The annual rental income from the commercial area
of the project is CHF 4.43m (USD 4.61m).
Following the successful development of 39 residential
apartments, management rented out all of them. The entire property
is fully rented and the annual rental income from the residential
area is about CHF 0.98m (USD 1.02m).
Livermore is the sole owner of Wyler Park through its wholly
owned Swiss subsidiary, Livermore Investments AG. The loan
outstanding on the project as of 31 December 2015 is CHF 76.6m (USD
76.4m), which is a non-recourse loan to Livermore Investments AG
backed only by this property. In January 2015, management
successfully refinanced the loan against Wyler Park with a Swiss
bank. The principal amount of the new loan facility is CHF 78.0m.
The facility is committed until at least 30 June 2019 at a margin
of CHF Libor + 1.4%.
In September 2015, management successfully negotiated a lease
extension with SBB for an additional 10 years. The lease now
extends until 2029. As part of the agreement, Livermore will invest
up to a maximum of CHF 3.95m to upgrade the ventilation and cooling
systems and to increase capacity. SBB is expected to invest CHF
9m.
The valuation of the property on current-use basis, as of
year-end 2015 is CHF 123.3m (USD 123.3m).
Management continues to evaluate the potential development of
the additional commercial development rights of 7,800 square meters
attached to the property.
SRS Charminar - India
Livermore invested USD 20m in 2008 in a leading Indian Real
Estate company, in association with SRS Private and other investors
as part of a total investment of USD 132.1m. In 2009, the promoters
of the investee company were arrested on charges of criminal
conspiracy, cheating, and misappropriation of funds. Later it was
discovered that the investee company had breached the terms of the
investment agreement resulting in a default. On 13 January 2011 the
Company Law Board ("CLB") passed an order and allowed
Infrastructure Leasing & Financial Services Limited
("IL&FS") to become an 80% shareholder and control the
management of the company. SRS Charminar and other investors have
agreed to a settlement with IL&FS wherein the settlement amount
will be paid in four tranches over five years.
In November 2015, Livermore received the first tranche of the
settlement in the amount of USD 2.9m. The next tranche is expected
in late 2016.
The carrying amount of the investment is based on discounted
expected cash flows and as of year-end was USD 7.1m (2014: USD
9.1m).
Financial portfolio and trading activity
The Group manages a financial portfolio valued at USD 90.3m (net
of leverage) as at 31 December 2015, which is invested mainly in
fixed income and credit related securities.
The following is a table summarizing the financial portfolio as
of year-end 2015
Name 2015 2014
Book Value Book Value US
US $m $m
-------------------------- ------------- --------------
Investment in the
loan market through
CLOs 66.0 82.2
Fixed income investment 5.0 -
Babylon 0.9 0.9
Hedge Funds 1.0 1.1
Corporate bonds 1.8 2.0
Other Public Equities 2.0 1.9
-------------------------- ------------- --------------
Total 76.7 88.1
-------------------------- ------------- --------------
Total net of leverage 90.3* 99.1**
-------------------------- ------------- --------------
* this figure includes USD 5m which the Company invested during
the period in the first loss tranche of a warehouse facility for
accumulating loans with the intention to transfer these loans to a
CLO.
** this figure includes USD 16m which the Company invested
during the period in the first loss tranche of warehouse facilities
for accumulating loans with the intention to transfer these loans
to a CLO.
Senior Secured Loans and Collateralized Loan Obligations
(CLO):
2015 was a volatile year in the US Leveraged Loan market.
Although the US Leveraged Loan market generated a total return of
-0.70% as measured by the S&P LSTA Total Return Index, the
market experienced significant intra-year volatility. Earlier in
the year, conditions in the Leveraged Loan market continued to stay
difficult much alike the fourth quarter of 2014. Concerns were
driven by declines in the high yield market, continued withdrawals
from retail funds, and intensified pressure on the Energy and
Metals/Mining sector as oil and commodity prices stayed low and new
issue CLO issuance was muted. Late in the first quarter and the
second quarter, however, saw a sharp recovery as oil prices bounced
back and loan prices recovered sharply further helped by strong new
issue CLO creation. CLO equity prices increased in tandem and
management reduced exposure to short reinvestment period CLO equity
positions at high levels. Further, management took advantage of
lower loan prices by pricing a new CLO in the first quarter and
also accumulating loans for another CLO which was priced in July
2015 when liability costs were near the lows for the year. Both
these new issue CLOs ramped well and generated strong first
payments. In the third quarter, however, oil and commodity prices
took another step down bringing significant stress into the high
yield and leveraged loan market. Outflows from retail funds
accelerated and loan prices fell on concerns of higher default and
risks in the credit market as well as serious lack of liquidity.
CLO equity prices suffered one of their worst mark-to-market
declines. According to estimates, the total return in 2015 for USD
CLO equity issued after 2010 was between -13.4% to -15%(1) .
The Group's CLO portfolio, however, continued to generate strong
cash flows aggregating USD 21.3m in 2015. Also, warehousing for
CLO's generated net cash income of USD 1.6m during the year.
Management reinvested proceeds into long new issue CLOs with clean
collateral. As of the end of the year 2015, all of the Group's US
CLO equity positions were comfortably passing their
Overcollateralization (OC) tests and remain in healthy shape. CLO
Managers also took the opportunity of loan price volatility and
wide new issue loan spreads to trade out of some credit risk loans
and purchase better quality loans at low prices. Management
continues to actively monitor the CLO portfolio and position it
towards longer reinvestment period and better quality collateral
CLOs.
While default rates stayed low at 1.5% on a trailing twelve
month basis, management expects the default rate to tick up as
energy and metals/mining related companies run out of liquidity in
2016 and idiosyncratic situations arise in other sectors if the US
high yield and leveraged loan markets deteriorate further.
Management is also focused and engaged with CLO managers to
actively manage exposure to Caa/CCC rated loans in the underlying
CLO portfolios ahead of rating agency downgrades of credit risk
loans.
1. Morgan Stanley, in its written January 2016 CLO market
commentary, estimated total returns for 2015 to be -15%; Citi
Research, in a report published in January 2016, estimated total
returns for 2015 to be -14.1%; and the total return of J.P.
Morgan's PricingDirect, a pricing source for CLO 2.0 equity that is
published annually, was -13.4% for 2015.
The Group's CLO portfolio is divided into the following
geographical areas:
2015 Percentage 2014 Amount Percentage
Amount
US $000 US $000
US CLOs 60,401 91.6% 68,704 83.6%
Global Credit
CLOs 4,780 7.2% 12,008 14.6%
European CLOs 765 1.2% 1,505 1.8%
------ ------ ------ ------
65,946 100% 82,217 100%
------ ------ ------ ------
Private Equity Funds
The other private equity investments held by the Group are
incorporated in the form of Managed Funds (mostly closed end funds)
mainly in the emerging economies of India and China. The
investments of these funds into their portfolio companies were
mostly done in 2008 and 2009. Blue Ridge fund was unwound during
the year and all distributions paid. The Group expects material
exits of portfolio companies from other funds to materialize
between 2016 and 2018. During the reporting period distributions of
USD 0.22m from SRS Private and USD 0.06m Blue Ridge fund were
received.
The following summarizes the book value of the private equity
funds as at year-end 2015
Name Book Value
US $m
--------------------------- ------------
SRS Private (India) 1.7
Evolution Venture
(Israel) 1.6
India Blue Mountains
(India) 0.7
Elephant Capital (India) 0.4
Da Vinci (Russia) 0.3
Panda Capital (China) 0.3
Other investments 1.0
--------------------------- ------------
Total 6.0
--------------------------- ------------
SRS Private Fund: SRS Private is a private equity fund focused
on real estate in India. The fund has invested in residential and
mixed use projects in India as well as directly in certain real
estate companies. The assets are primarily located in and around
major cities of India such as Mumbai and Hyderabad. Approximately
58% of the net asset value of the fund is invested in mixed-use
assets (commercial and residential combined), 20% is in SRS
Charminar, 10.6% is in land primarily for residential assets, 3.5%
is invested at the entity level of real estate developers, and 8%
in net cash and receivables. In 2015, the fund distributed USD
0.22m from proceeds of partial sale of a mixed use property in
Mumbai. As of year-end 2015, the investment was valued at USD
1.7m.
Evolution Venture: Evolution is an Israel focused Venture
Capital fund. It invests in early stage technology companies. Its
investments include a carrier-class Mobile Broadband Wireless (MBW)
Wi-Fi solutions company, a mobile keyboard and language correction
software company, a software company operating in the digital radio
market, a software test tool developer, and a virtualization
technology company. The keyboard and language correction software
company and the virtualization technology company have been
performing well. The Wi-Fi solutions company has not recovered from
a failed launch and has been written down.
India Blue Mountains: India Blue Mountains was a fund developing
4 star hotels in India. In September 2015, the fund was
restructured into three separate SPV's holding the Mumbai, Pune,
and Goa assets and liabilities. Livermore now holds the same
percentage in each of the SPV's as it held in India Blue
Mountains.
Given the high debt load on the individual assets, as well as
delays and underperformance, net asset values for the properties
held under the SPVs have declined. As of year-end 2015, the Group's
investment in India Blue Mountain properties were valued at USD
0.7m.
Elephant Capital: India-focused private equity fund, which is
listed on the AIM exchange (Ticker: ECAP). The fund has realized
some of its investments and remains with its unlisted portfolio of
investments in Amar Chitra Katha (offline and digital content
company), Air Works India (aircraft maintenance company), and
Global Cricket Ventures (online venture to distribute cricket
content).
As of August 2015, the audited NAV of the fund was GBP 5.44m or
36 pence per share. The fund returned GBP 1m to shareholders via
its buy-back programme in March 2015. Further details on Elephant
Capital and its portfolio companies is available at
www.elephantcapital.com.
On 26 February 2016, the Board announced its intention to delist
from the AIM exchange in order to reduce expenses relative to the
value of its remaining assets. The delisting has been completed and
Elephant Capital is now a private company.
Da Vinci: The fund is primarily focused on Russia and CIS
countries and is primarily invested in the Moscow Exchange and a
Ukrainian coal company. The Moscow Exchange performed well in local
currency terms increasing turnover in derivative and spot markets.
The coal company is located in Western Ukraine. The fund is
building a club of investors to support and facilitate this
investment. The Group's investment in the fund was valued at USD
0.3m as of 31 December 2015.
Panda Capital: Panda Capital is a China-based private equity
fund focused on early-stage industrial operations in China. The
fund's main investment is in a bamboo flooring company in China,
which provides an innovative low cost alternative to hardwood
flooring in shipping containers. The manager is in the process of
building up operational capacity for product manufacturing.
Blue Ridge: Blue Ridge is a China focused private equity fund.
The fund was dissolved on 30 December 2015. To date, the fund has
distributed USD 1.7m (77.9% of investment).
The following table reconciles the review of activities to the
Group's financial assets and investment property as of year-end
2015
2015
Name Book Value
US $m
-------------------------- -------------
Significant Investments 55.2
Private Equity Funds 6.0
Financial Portfolio 76.7
-------------------------- -------------
Total 137.9
-------------------------- -------------
Available- for-sale
financial assets (note
4) 81.2
Financial assets at
fair value through
profit or loss (note
5) 9.8
Net Investment property
(note 8 & 17) 46.9
Total 137.9
-------------------------- -------------
Events after the reporting date
There were no material events after the end of the reporting
year, which have a bearing on the understanding of these
consolidated financial statements.
Litigation
At the time of this Report, there is one matter in litigation
that the Group is involved in. Further information is provided in
note 32 to the consolidated financial statements.
Report of the Directors
The Directors submit their annual report and audited
consolidated financial statements of the Group for the year ended
31 December 2015.
The Board's objectives
The Board's primary objectives are to supervise and control the
management activities, business development, and the establishment
of a strong franchise in the Group's business lines. Measures aimed
at increasing shareholders' value over the medium to long-term,
such as an increase in NAV are used to monitor performance.
The Board of Directors
Richard Barry Rosenberg (age 60), Non-Executive Director,
Chairman of the Board
Richard joined the Group in December 2004. He became
Non-Executive Chairman on 31 October 2006. He qualified as a
chartered accountant in 1980 and in 1988 co-founded the accountancy
practice SRLV. He has considerable experience in giving
professional advice to clients in the leisure and entertainment
sector. Richard is a director of a large number of companies
operating in a variety of business segments.
Noam Lanir (age 49), Founder and Chief Executive Officer
Noam founded the Group in July 1998, to develop a specialist
online marketing operation. Noam has led the growth and development
of the Group's operations over the last sixteen years which
culminated in its IPO in June 2005 on AIM. Prior to 1998, Noam was
involved in a variety of businesses mainly within the online
marketing sector. He is also the major shareholder of Babylon Ltd,
an International Internet Company listed on the Tel Aviv Stock
Exchange. He is also a major benefactor of a number of charitable
organisations.
Ron Baron (age 48), Executive Director and Chief Investment
Officer
Ron was appointed as Executive Director and Chief Investment
Officer on 10 August 2007. Ron has led the establishment and
development of Livermore's investment platform as a leading
specialized house in the credit space. Ron also has wide investment
and M&A experience. From 2001 to 2006 Ron served as a member of
the management at Bank Leumi, Switzerland and was responsible for
investment's activity. Prior to this he spent five years as a
commercial lawyer advising banks and large corporations on
corporate transactions, including buy-outs and privatisations. Ron
has over 16 years of experience as an investment manager with
particular focus on the US credit market and CLOs. He holds an MBA
from INSEAD Fontainebleau and a LLB (LAW) and BA in Economics from
Tel Aviv University.
Directors' responsibilities in relation to the consolidated
financial statements
The Directors are responsible for preparing the Annual Report
and the consolidated financial statements in accordance with
applicable law and International Financial Reporting Standards as
adopted by the European Union.
The Directors are required to prepare consolidated financial
statements for each financial year which give a true and fair view
of the financial position of the Group, and its financial
performance and cash flows for that period. In preparing these
consolidated financial statements, the Directors are required
to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgments and estimates that are reasonable and prudent;
-- State whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
-- Prepare the consolidated financial statements on the going
concern basis unless it is inappropriate to presume that the Group
will continue in business.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Group's
transactions, and at any time enable the financial position of the
Group to be determined with reasonable accuracy and enable them to
ensure that the consolidated financial statements comply with the
applicable law and International Financial Reporting Standards as
adopted by the European Union. They are also responsible for
safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Group's
website. Legislation in the British Virgin Islands governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Disclosure of information to the Auditor
In so far as the Directors are aware:
-- there is no relevant audit information of which the Company's auditor is unaware; and
-- the Directors have taken all steps that they ought to have
taken to make themselves aware of any relevant audit information
and to establish that the auditor is aware of that information.
Substantial Shareholdings
As at 28 April 2016 the Directors are aware of the following
interests in 3 per cent or more of the Company's issued ordinary
share capital:
Number % of issued % of voting
of Ordinary ordinary rights*
Shares share capital
------------- --------------- ------------
Groverton Management Ltd 151,412,173 49.79 78.74
RB Investments GmbH 25,456,903 8.37 13.24
Merrill Lynch Pierce, Fenner
& Smith, Inc 9,329,051 3.07 4.85
* after consideration of treasury shares (note 14).
Save as disclosed in this report and in the remuneration report,
the Company is not aware of any person who is interested directly
or indirectly in 3% or more of the issued share capital of the
Company or could, directly or indirectly, jointly or severally,
exercise control over the Company.
Details of transactions with Directors are disclosed in note 30
to the consolidated financial statements.
Corporate Governance Statement
Introduction
The Company recognises the importance of the principles of good
Corporate Governance and the Board is pleased to accept its
commitment to such high standards throughout the year. As an AIM
quoted company, Livermore is not required to follow the provisions
of the UK Corporate Governance Code - September 2012 (the
"Code").
The Board Constitution and Procedures
The Company is controlled through the Board of Directors, which
currently comprises one Non-Executive Director and two Executive
Directors. The Chief Executive's responsibility is to focus on
co-ordinating the company's business and implementing group
strategy.
A formal schedule of matters is reserved for consideration by
the Board, which meets approximately four times each year. The
Board is responsible for implementation of the investing strategy
as described in the circular to shareholders dated 6 February 2007
and adopted pursuant to shareholder approval at the Company's EGM
on 28 February 2007. It reviews the strategic direction of the
Group, its codes of conduct, its annual budgets, its progress
towards achievement of these budgets and any capital expenditure
programmes. In addition, the Directors have access to advice and
services of the Company Secretary and all Directors are able to
take independent professional advice if relevant to their duties.
The Directors receive training and advice on their responsibilities
as necessary. All Directors, submit themselves to re-election at
least once every three years.
Board Committees
The Board delegates clearly defined powers to its Audit and
Remuneration Committees. The minutes of each Committee are
circulated by the Board.
Remuneration Committee
The Remuneration Committee comprises of the Non-Executive
Chairman of the Board and a Non-Executive Director. Following the
resignation of one of the Non-Executive Directors, this committee
has one member until a new Non-Executive Director is appointed. The
Remuneration Committee considers the terms of employment and
overall remuneration of the Executive Directors and key members of
Executive management regarding share options, salaries, incentive
payments and performance related pay. The remuneration of
Non-Executive Directors is determined by the Board.
Audit Committee
The Audit Committee comprises of the Non-Executive Chairman of
the Board and a Non-Executive Director and is chaired by the
Chairman of the Board. Following the resignation of one of the
Non-Executive Directors, this committee has one member until a new
Non-Executive Director is appointed. The duties of the Committee
include monitoring the auditor's performance and reviewing
accounting policies and financial reporting procedures.
Communication with Investors
The Directors are available to meet with shareholders throughout
the year. In particular the Executive Directors prepare a general
presentation for analysts and institutional shareholders following
the interim and preliminary results announcements of the Company.
The chairman, Richard Rosenberg, is available for meetings with
shareholders throughout the year. The Board endeavours to answer
all queries raised by shareholders promptly.
Shareholders are encouraged to participate in the Annual General
Meeting at which the Chairman will present the key highlights of
the Group's performance. The Board will be available at the Annual
General Meeting to answer questions from shareholders.
Internal Control
The Board is responsible for ensuring that the Group has in
place a system of internal controls and for reviewing its
effectiveness. In this context, control is defined in the policies
and processes established to ensure that business objectives are
achieved cost effectively, assets and shareholder value safeguarded
and that laws and regulations are complied with. Controls can
provide reasonable but not absolute assurance that risks are
identified and adequately managed to achieve business objectives
and to minimise material errors, frauds and losses or breaches of
laws and regulations.
The Group operates a sound system of internal control, which is
designed to ensure that the risk of mis-statement or loss is kept
to a minimum.
Given the Group's size and the nature of its business, the Board
does not consider that it is necessary to have an internal audit
function. An internal audit function will be established as and
when the Group is of an appropriate size.
The Board undertakes a review of its internal controls on an
ongoing basis.
Going Concern
The Directors have reviewed the current and projected financial
position of the Group, making reasonable assumptions about interest
and dividend income, future trading performance, valuation
projections and debt requirements. On the basis of this review, the
Directors have a reasonable expectation that the Company and the
Group have adequate resources to continue in operational existence
for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the Annual Report and
accounts.
Independence of Auditor
The Board undertakes a formal assessment of the auditor's
independence each year, which includes:
-- a review of non-audit related services provided to the Company and related fees;
-- discussion with the auditor of a written report detailing all
relationships with the Company and any other parties which could
affect independence or the perception of independence;
-- a review of the auditor's own procedures for ensuring
independence of the audit firm and partners and staff involved in
the audit, including the rotation of the audit partner;
-- obtaining written confirmation from the auditor that it is independent;
-- a review of fees paid to the auditor in respect of audit and non-audit services.
Remuneration Report
The Directors' emoluments, benefits and shareholdings during the
year ended 31 December 2015 were as follows:
Directors' Emoluments
Each of the Directors has a service contract with the
Company.
Director Date of Fees Benefits Reward Share options Total emoluments
agreement US $000 US $000 payments expense
US $000 US $000
------------------ ------------ --------- --------- ---------- --------------
2015 2014
US $000 US $000
------------------ ------------ --------- --------- ---------- -------------- --------- ---------
Richard
Barry Rosenberg 10/06/05 69 - 22 - 91 99
------------------ ------------ --------- --------- ---------- -------------- --------- ---------
Noam Lanir 10/06/05 400 45 - - 445 445
------------------ ------------ --------- --------- ---------- -------------- --------- ---------
Ron Baron 01/09/07 350 - 1,528 - 1,878 2,978
------------------ ------------ --------- --------- ---------- -------------- --------- ---------
The dates are presented in day / month / year format.
Directors' Interests
Interests of Directors in ordinary shares
Notes As at 31 December 2015 As at 31 December 2014
------------------ ------- ------------------------------------------- ------------------------------------------
Number Percentage Percentage Number of Percentage Percentage
of Ordinary of ordinary of voting Ordinary of ordinary of voting
Shares share capital rights Shares share capital rights
------------------ ------- ------------- --------------- ----------- ------------ --------------- -----------
Noam Lanir a) 151,412,173 49.787% 78.740% 154,412,173 50.773% 79.068%
------------------ ------- ------------- -------------- ------------ ------------ --------------- -----------
Ron Baron b) 25,456,903 8.371% 13.240% 13,915,419 4.576% 7.126%
------------------ ------- ------------- -------------- ------------ ------------ --------------- -----------
Richard
Barry Rosenberg 15,000 0.005% 0.01% 15,000 0.005% 0.008%
--------------------------- ------------- -------------- ------------ ------------ --------------- -----------
Notes:
a) Noam Lanir is interested in his ordinary shares by virtue of
the fact that he owns directly or indirectly all of the issued
share capital of Groverton Management Limited.
b) In 2007, loans of USD 5.523m were made to RB Investments
GMBH, a company owned by Ron Baron, for the acquisition of shares
in the Company. Interest was payable on these loans at 6 month US
LIBOR plus 0.25% per annum and the loans were secured on the shares
acquired. The loans were repayable on the earlier of the employee
leaving the Company or April 2013. In December 2012 the Board
decided to renew the outstanding amount of these loans for a period
of another five years. Based on the Board's decision, the
outstanding amount will be reduced annually on a straight line over
five years, as long as the key management employee remains with the
Company. The relevant reduction in the loan amount for the year was
USD 1.128m. The loans together with their related accrued interest
of USD 0.117m were classified as "other assets" and are included
under trade and other receivables (note 12).
Interests of Directors in share options
No of options Date Exercise Exercise Vesting period
at of grant price, Price*, of options
31 December GBP US $
2015
--------------- -------------- ---------- --------- --------- ---------------
Noam Lanir 10,000,000 19/07/06 0.78 1.15 Vested
--------------- -------------- ---------- --------- --------- ---------------
Richard Barry 500,000 13/05/08 0.30 0.44 Vested
Rosenberg
150,000 19/07/06 0.78 1.15 Vested
--------------- -------------- ---------- --------- --------- ---------------
The options are exercisable up to 10 years after the date of
grant. No options were exercised during the year ended 31 December
2015.
* The exercise prices as per the share option scheme are quoted
in British Pounds. The indicative equivalent USD amounts shown in
the table above are based on the exchange rates as at 31 December
2015.
Share Option Scheme
The Company's remuneration committee (the "Committee") is
responsible for administering the Share Option Scheme. Options to
acquire Shares in the Company may be granted under the Share Option
Scheme to any employee or director of the Company or of other Group
entities.
The option exercise price per Ordinary Share is determined by
the Committee but will be no less than market value of the Ordinary
Shares on the dealing day immediately preceding the date of grant.
The options are subject to continuous service conditions but are
not subject to any performance criteria.
The Share Option Scheme will terminate ten years after it was
adopted by the Company, or earlier in certain circumstances.
Remuneration Policy
The Group's policy has been designed to ensure that the Group
has the ability to attract, retain and motivate executive directors
and key management personnel to ensure the success of the
organization.
The following key principles guide its policy:
-- policy for the remuneration of executive directors will be
determined and regularly reviewed independently of executive
management and will set the tone for the remuneration of other
senior executives
-- the remuneration structure will support and reflect the
Group's stated purpose to maximize long-term shareholder value
-- the remuneration structure will reflect a just system of rewards for the participants
-- the overall quantum of all potential remuneration components
will be determined by the exercise of informed judgement of the
independent remuneration committee, taking into account the success
of the Group and the competitive global market
-- a significant personal shareholding will be developed in
order to align executive and shareholder interests
-- the assessment of performance will be quantitative and
qualitative and will include exercise of informed judgement by the
remuneration committee within a framework that takes account of
sector characteristics and is approved by shareholders
-- the committee will be proactive in obtaining an understanding of shareholder preferences
-- remuneration policy and practices will be as transparent as
possible, both for participants and shareholders
-- the wider scene, including pay and employment conditions
elsewhere in the Group, will be taken into account, especially when
determining annual salary increases.
Review of the Business and Risks
Risks
The Board considers that the risks the Shareholders face can be
divided into external and internal risks.
External risks to shareholders and their returns are those that
can severely influence the investment environment within which the
Group operates, and include economic recession, declining corporate
profitability, rising inflation and interest rates and excessive
stock-market speculation.
The Group's portfolio is exposed to interest rate changes,
credit risk, liquidity risk and volatility particularly in the US,
EU, Switzerland and India. In addition, the portfolio is exposed to
currency risks as some of the underlying portfolio is invested in
assets denominated in non-US currencies while the Company's
functional currency is USD. Investments in certain countries such
as India and China are exposed to governmental and regulatory
risks. The SRS Charminar investment is specifically subject to
regulatory and legal risks as well as currency risk.
The mitigation of these risks is achieved by investment
diversification, both by sector and by geography. The Group also
engages from time to time in certain hedging activities to mitigate
these risks.
Internal risks to shareholders and their returns are related to
Portfolio risks (investment and geography selection and
concentration), balance sheet risk (gearing) and/or investment
mismanagement risks. The Group's portfolio has a significant
exposure to senior secured loans of US companies and emerging
market countries therefore has a concentration risk to this asset
class.
A periodic internal review is performed to ensure transparency
of Group activities and investments. All service providers to the
Group are regularly reviewed. The mitigation of the risks related
to investments is effected by investment restrictions and
guidelines and through reviews at Board Meetings.
As the portfolio of the Company is invested in non USD
currencies (mainly EUR, CHF and INR), it is exposed to movements in
these currencies.
On the asset side, the Group's exposure to interest rate risk is
limited to the interest bearing deposits and portfolio of bonds and
loans in which the Group invests.
Management monitors liquidity to ensure that sufficient liquid
resources are available to the Group. The Group's credit risk is
primarily attributable to its fixed income portfolio, which is
exposed to corporate bonds with a particular exposure to the
financial sector and to US senior secured loans.
Further information on Financial risk management is provided in
note 35 of the consolidated financial statements.
Share Capital
There was no change in the authorised share capital during the
year to 31 December 2015. The authorised share capital is
1,000,000,000 ordinary shares with no par value.
Related party transactions
Details of any transactions of the Group with related parties
during the year to 31 December 2015 are disclosed in note 30 to the
consolidated financial statements.
By order of the Board of Directors
Chief Executive Officer
20 May 2016
Report of the independent auditor to the members of Livermore
Investments Group Limited
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial
statements of Livermore Investments Group Limited (the "Company")
and its subsidiaries (together with the Company, "the Group"),
which comprise the consolidated statement of financial position as
at 31 December 2015 and the consolidated statements of profit or
loss, comprehensive income, changes in equity, and cash flows for
the year then ended, and a summary of significant accounting
policies and other explanatory information.
Board of Directors' Responsibility for the Consolidated
Financial Statements
The Board of Directors is responsible for the preparation of
consolidated financial statements that give a true and fair view in
accordance with International Financial Reporting Standards as
adopted by the European Union (EU) and for such internal control as
the Board of Directors determines is necessary to enable the
preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. We conducted
our audit in accordance with International Standards on Auditing.
Those Standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance as to
whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor's
judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation of
the consolidated financial statements that give a true and fair
view 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 entity's internal control. An audit
also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by the
Board of Directors as well as evaluating the overall presentation
of the consolidated financial statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the consolidated financial statements give a
true and fair view of the financial position of the Group as at 31
December 2015 and of its financial performance and its cash flows
for the year then ended in accordance with International Financial
Reporting Standards as adopted by the EU.
Emphasis of Matters
We draw attention to Note 4 to the consolidated financial
statements which describes the existence of material uncertainty of
the future cash flows relating to the investment of the Group
through SRS Charminar Investments Ltd, an Indian Real Estate
company.
We also draw attention to Note 32 to the consolidated financial
statements which describes the existence of material uncertainty
over the outcome of a legal case against one of the custodian banks
that the Group uses and Livermore as the beneficial owner.
Our opinion is not qualified in respect of these matters.
Other Matter
This report, including the opinion, has been prepared for and
only for the Company's members as a body and for no other purpose.
We do not, in giving this opinion, accept or assume responsibility
for any other purpose or to any other person to whose knowledge
this report may come to.
Augoustinos Papathomas
Certified Public Accountant and Registered Auditor for and on
behalf of
Grant Thornton (Cyprus) Ltd
Certified Public Accountants and Registered Auditors
Limassol
Date: 20 May 2016
Livermore Investments Group Limited
Consolidated Statement of Financial Position as at 31 December
2015
Note 2015 2014
Assets US $000 US $000
Non-current assets
Property, plant and equipment 3 26 42
Available- for-sale financial assets 4 78,464 99,374
Financial assets at fair value through
profit or loss 5 1,533 1,806
Investment property 8 123,324 116,609
Other assets 12 1,128 2,538
--------- ---------
204,475 220,369
--------- ---------
Current assets
Trade and other receivables 12 4,490 20,890
Available- for-sale financial assets 4 2,683 2,561
Financial assets at fair value through
profit or loss 5 8,268 3,704
Current tax asset 20 6 -
Derivative financial instruments 16 - 1,125
Cash at bank 13 25,770 3,807
--------- ---------
41,217 32,087
--------- ---------
Total assets 245,692 252,456
--------- ---------
Equity
Share capital 14 - -
Share premium and treasury shares 14 177,053 178,597
Other reserves 2,631 2,937
Retained earnings (31,047) (21,560)
--------- ---------
Total equity 148,637 159,974
--------- ---------
Liabilities
Non-current liabilities
Bank loans 17 75,003 -
Deferred tax 11 3,937 2,272
Provisions 31 385 -
--------- ---------
79,325 2,272
--------- ---------
Current liabilities
Bank loans 17 1,407 78,092
Bank overdrafts 18 13,208 10,355
Trade and other payables 19 2,770 1,758
Provisions 31 128 -
Current tax payable 20 - 5
Derivative financial instruments 16 217 -
--------- ---------
17,730 90,210
--------- ---------
Total liabilities 97,055 92,482
--------- ---------
Total equity and liabilities 245,692 252,456
--------- ---------
Net asset value per share
Basic and diluted net asset value per
share (US $) 21 0.77 0.82
--------- ---------
These consolidated Financial Statements were approved by the
Board of Directors on 20 May 2016.
The notes 1 to 36 form part of these consolidated financial
statements.
Livermore Investment Group Limited
Consolidated Statement of Profit or Loss for the year ended 31
December 2015
Note 2015 2014
US $000 US $000
Investment income
Interest and dividend income 23 25,675 26,619
Investment property income 24 5,227 5,159
Loss on investments 25 (26,136) (9,885)
------ ------
Gross profit 4,766 21,893
Other income 35 462
Administrative expenses 26 (5,155) (7,219)
------ ------
Operating (loss) /profit (354) 15,136
Finance costs 27 (2,454) (7,286)
Finance income 27 - 109
------ ------
(Loss) / profit before taxation (2,808) 7,959
Taxation charge 28 (1,951) (755)
------ ------
(Loss) / profit for the year (4,759) 7,204
------ ------
Earnings per share
Basic and diluted earnings per share
( US $) 29 (0.02) 0.04
------ ------
The profit for the year is wholly attributable to the owners of
the parent.
The notes 1 to 36 form part of these consolidated financial
statements.
Livermore Investment Group Limited
Consolidated Statement of Comprehensive Income for the year
ended 31 December 2015
Note 2015 2014
US $000 US $000
(Loss) / profit for the year (4,759) 7,204
Other comprehensive income:
Items that will be reclassified subsequently
to the profit or loss
Available for sale financial assets -
fair value losses (34,906) (17,128)
Foreign exchange losses from translation
of subsidiaries (314) (626)
------ ------
(39,979) (10,550)
------ ------
Reclassification to profit or loss
Available for sale financial assets
- Reclassification to profit or loss
due to disposals 25 3,459 (1,709)
* Reclassification to profit or loss due to impairment 25 31,726 8,861
------ ------
35,185 7,152
------ ------
Total comprehensive income for the year (4,794) (3,398)
------ ------
The total comprehensive income for the year is wholly
attributable to the owners of the parent.
The notes 1 to 36 form part of these consolidated financial
statements.
Livermore Investment Group Limited
Consolidated Statement of Changes in Equity for the year ended
31 December 2015
Share Share Treasury Share Translation Investments Retained Total
capital premium Shares option reserve revaluation earnings
Note reserve reserve
US $000 US $000 US $000 US $000 US $000 US $000 US $000 US $000
Balance at 1 January
2014 - 215,499 (36,902) 5,777 (788) 8,550 (23,765) 168,371
Dividends - - - - - - (4,999) (4,999)
------ ------ ------ ------ ------ ------ ------ ------
Transactions with
owners - - - - - - (4,999) (4,999)
------ ------ ------ ------ ------ ------ ------ ------
Profit for the year - - - - - - 7,204 7,204
Other comprehensive
income:
Available-for-sale
financial assets
* Fair value losses - - - - - (17,128) - (17,128)
* Reclassification to profit or loss due to disposals 25 - - - - - (1,709) - (1,709)
* Reclassification to profit or loss due to impairment 25 - - - - - 8,861 - 8,861
Foreign exchange
losses arising from
translation of subsidiaries - - - - (626) - - (626)
------ ------ ------ ------ ------ ------ ------ ------
Total comprehensive
income for the year - - - - (626) (9,976) 7,204 (3,398)
------ ------ ------ ------ ------ ------ ------ ------
Balance at 31 December
2014 - 215,499 (36,902) 5,777 (1,414) (1,426) (21,560) 159,974
Purchase of own shares - - (1,544) - - - - (1,544)
Dividends - - - - - - (4,999) (4,999)
Transfer on expiry
of options - - - (271) - - 271 -
------ ------ ------ ------ ------ ------ ------ ------
Transactions with
owners - - (1,544) (271) - - (4,728) (6,543)
------ ------ ------ ------ ------ ------ ------ ------
Loss for the year - - - - - - (4,759) (4,759)
Other comprehensive
income:
Available-for-sale
financial assets
* Fair value losses - - - - - (34,906) - (34,906)
* Reclassification to profit or loss due to disposals 25 - - - - - 3,459 - 3,459
* Reclassification to profit or loss due to impairment 25 - - - - - 31,726 - 31,726
Foreign exchange
losses arising from
translation of subsidiaries - - - - (314) - - (314)
------ ------ ------ ------ ------ ------ ------ ------
Total comprehensive
income for the year - - - - (314) 279 (4,759) (4,794)
------ ------ ------ ------ ------ ------ ------ ------
Balance at 31 December
2015 - 215,499 (38,446) 5,506 (1,728) (1,147) (31,047) 148,637
------ ------ ------ ------ ------ ------ ------ ------
The notes 1 to 36 form part of these consolidated financial
statements.
Livermore Investments Group Limited
Consolidated Statement of Cash Flows for the year ended 31
December 2015
Note 2015 2014
US $000 US $000
Cash flows from operating activities
(Loss) / profit before tax (2,808) 7,959
Adjustments for
Depreciation 3 16 13
Provision charge 31 513 -
Interest expense 27 1,607 3,780
Interest and dividend income 23 (25,675) (26,619)
Loss on investments 25 26,136 9,885
Exchange differences 27 723 3,506
---------- ----------
512 (1,476)
Changes in working capital
Increase in trade and other receivables 17,164 (16,292)
Decrease in trade and other payables 959 (1,050)
---------- ----------
Cash flows from operations 18,635 (18,818)
Interest and dividends received 25,969 25,773
Settlement of litigation - (26)
Tax paid (216) (167)
---------- ----------
Net cash from operating activities 44,388 6,762
---------- ----------
Cash flows from investing activities
Purchase of property, plant and equipment - (32)
Acquisition of investments (32,415) (27,340)
Proceeds from sale of investments 13,679 33,262
Settlement of derivative 2,332
Acquisition of associate 9 (7,500) -
Capital return of associate 8,183 -
Capital return of joint venture - 5,000
---------- ----------
Net cash used for investing activities (15,721) 10,890
---------- ----------
Cash flows from financing activities
Purchase of own shares 14 (1,544) -
Proceeds from bank loans 78,610 7,242
Repayments of bank loans (79,751) (11,547)
Interest paid (1,731) (3,884)
Dividends paid (4,999) (4,999)
---------- ----------
Net cash used for financing activities (9,415) (13,188)
---------- ----------
Net increase / (decrease) in cash and
cash equivalents 19,252 4,464
Cash and cash equivalents at the beginning
of the year (6,548) (11,038)
Exchange differences on cash and cash
equivalents (124) 93
Translation differences on foreign operations'
cash and cash equivalents (18) (67)
---------- ----------
Cash and cash equivalents at the end
of the year 13 12,562 (6,548)
---------- ----------
The notes 1 to 36 form part of these consolidated financial
statements.
Notes on the Financial Statements
1. General Information
Incorporation, principal activity and status of the Company
1.1. The Company was incorporated as an international business
company and registered in the British Virgin Islands (BVI) on 2
January 2002 under IBC Number 475668 with the name Clevedon
Services Limited. The liability of the members of the Company is
limited.
1.2. The Company changed its name to Empire Online Limited on 5
May 2005 and then to Livermore Investments Group Limited on 28
February 2007.
1.3. The principal activity of the Group changed to investment
activities on 1 January 2007. Before that the principal activity of
the Group was the provision of marketing services to the online
gaming industry and, since 1 January 2006, the operation of online
gaming.
1.4. The principal legislation under which the Company operates
is the BVI Business Companies Act, 2004.
1.5. The registered office of the Company is located at Trident
Chambers, PO Box 146, Road Town, Tortola, British Virgin
Islands.
2. Accounting Policies
The significant accounting policies applied in the preparation
of the consolidated financial statements are as follows:
2.1. Basis of preparation
The consolidated financial statements of Livermore Investments
Group Limited have been prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union and on a going concern basis. The consolidated financial
statements have been prepared on the historical cost basis except
for the following:
-- Financial instruments at fair value through profit or loss
(including derivatives) are measured at fair value.
-- Available- for- sale financial assets are measured at fair value.
-- Investment property is measured at fair value.
-- Investments in associates and joint ventures are measured at fair value.
The financial information is presented in US dollars because
this is the currency in which the Group primarily operates.
The Directors have reviewed the accounting policies used by the
Group and consider them to be the most appropriate.
2.2. Adoption of new and revised IFRS
As from 1 January 2015, the Group adopted all the new or revised
IFRS and relevant amendments which became effective and also were
endorsed by the European Union, and are relevant to its
operations.
The adoption of the above did not have a material effect on the
consolidated financial statements.
All IFRS issued by the International Accounting Standards Board
(IASB) which are effective for the year ended 31 December 2015,
have been adopted by the EU through the endorsement procedure
established by the European Commission, with the exception of
certain provisions of IAS 39: "Financial Instruments: Recognition
and Measurement" relating to portfolio hedge accounting.
The following Standards, Amendments to Standards and
Interpretations had been issued by the date of authorisation of
these consolidated financial statements but are not yet effective,
or have not yet been endorsed by the EU, for the year ended 31
December 2015:
Endorsed Effective for annual
by the periods beginning
EU on or after
No 1 January 2018
* IFRS 9: "Financial Instruments"
No 1 January 2016
* IFRS 14: "Regulatory Deferral Accounts"
No 1 January 2018
* IFRS 15: "Revenue from Contracts with Customers"
No 1 January 2019
* IFRS 16: "Leases"
Yes 1 January 2016
* Annual Improvements to IFRS 2012-2014 Cycle
No 1 January 2016
* Amendment to IFRS 10, IFRS 12, and IAS 28:
"Investment Entities: Applying the Consolidation
Exception"
No to be determined
* Amendment to IFRS 10, and IAS 28: "Sale or
Contribution of Assets between an Investor and its
Associate or Joint Venture"
Yes 1 January 2016
* Amendment to IFRS 11: "Accounting for Acquisitions of
Interests in Joint Operations"
Yes 1 January 2016
* Amendment to IAS 1: "Disclosure Initiative"
No 1 January 2017
* Amendment to IAS 7: "Disclosure Initiative"
No 1 January 2017
* Amendment to IAS 12: "Recognition of Deferred Tax
Assets for Unrealised Losses"
Yes 1 January 2016
* Amendment to IAS 16 and IAS 38: "Clarification of
Acceptable Methods of Depreciation and Amortisation"
Yes 1 January 2016
* Amendments to IAS 16 and IAS 41: "Bearer Plants"
Yes 1 January 2016
* Amendment to IAS 27: "Equity Method in Separate
Financial Statements"
The Board of Directors expects that when the above Standards or
Interpretations become effective in future periods, they will not
have a material effect on the consolidated financial statements,
other than for IFRS 9.
IFRS 9 "Financial Instruments" replaces IAS 39 "Financial
Instruments: Recognition and Measurement". The new standard
introduces extensive changes to IAS 39's guidance on the
classification and measurement of financial assets and introduces a
new 'expected credit loss' model for the impairment of financial
assets. IFRS 9 also provides new guidance on the application of
hedge accounting.
Management is not yet in a position to provide quantified
information regarding the impact of IFRS 9. At this stage the main
areas of expected impact are as follows:
-- the classification and measurement of the Company's financial
assets will need to be reviewed based on the new criteria that
consider the assets' contractual cash flows and the business model
in which they are managed
-- an expected credit loss--based impairment will need to be
recognised on the Company's financial assets at amortised cost and
any investments in debt--type assets, unless classified as at fair
value through profit or loss in accordance with the new
criteria
2.3. Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and all of its subsidiaries. Control is
achieved where the Company is exposed, or has right, to variable
returns from its involvement with a subsidiary and has the ability
to affect those returns through its power over the subsidiary.
The financial statements of all the Group companies are prepared
using uniform accounting policies. Where necessary, adjustments are
made to the financial statements of subsidiaries to bring their
accounting policies into line with those used by the Group. All
subsidiaries have a reporting date of 31 December.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
The results and cash flows of any subsidiaries acquired or
disposed of during the year are included in the consolidated
financial statements from the effective date of acquisition or up
to the effective date of disposal.
2.4. Investments in associates and joint ventures
An associate is an entity over which the Group is able to exert
significant influence but not control.
A joint venture is an arrangement that the Group controls
jointly with one or more other investors, and over which the Group
has rights to a share of the arrangement's net assets rather than
direct rights to underlying assets and obligations for underlying
liabilities.
Investments in associates and joint ventures are measured at
fair value through profit or loss in accordance with IAS 39, based
on the exemption available by IAS 28 "Investments in Associates and
Joint Ventures" for entities that are venture capital organisations
or similar entities.
2.5. Current assets are those which, in accordance with IAS 1
Presentation Of Financial Statements are:
-- expected to be realised within normal operating cycle, via
sale or consumption, or
-- held primarily for trading, or
-- expected to be realised within 12 months from the reporting
date, or
-- cash and cash equivalent not restricted in their use.
All other assets are non-current.
2.6. Investment property income
Rental income is recognised on a straight line basis over the
lease term. Service charges and management fees are recognised as
the related costs are incurred and charged. Changes to rental
income that arise from reviews to open market rental values or
increases that are indexed linked on a periodic basis are
recognised from the date on which the adjustment becomes due. Lease
incentives granted are recognised as an integral part of the net
consideration for the use of the property. Lease incentives are
allocated evenly over the life of the lease. Rental income and
services charged are stated net of VAT and other related taxes.
2.7. Interest and dividend income
-- Interest income is recognised based on the effective interest
method.
-- Dividend income is recognised on the date that the Group's
right to receive payment is established, which in the case of
quoted securities is the ex-dividend date.
2.8. Foreign currency
The individual financial statements of each Group company are
presented in the currency of the primary economic environment in
which it operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial
position of each Group company are expressed in USD, which is the
functional currency of the Company and the presentation currency
for the consolidated financial statements.
Transactions in foreign currencies other than each group
entity's functional currency are recorded at the rates of exchange
prevailing on the dates of the transaction. Monetary assets and
liabilities denominated in non-functional currencies are translated
into functional currency equivalents using year-end spot foreign
exchange rates. Non-monetary assets and liabilities are translated
upon initial recognition using exchange rates prevailing at the
dates of the transactions. Non-monetary assets that are measured in
terms of historical cost in foreign currency are not
re-translated.
Gains and losses arising on the settlement of monetary items and
on the re-translation of monetary items are included in the profit
or loss for the year. Those that arise on the re-translation of
non-monetary items carried at fair value are included in the profit
or loss of the year except for differences arising on the
re-translation of non-monetary available-for-sale financial assets
in respect of which gains and losses are recognised in other
comprehensive income. For such non-monetary items any exchange
component of that gain or loss is also recognised in other
comprehensive income.
The results and financial position of all Group entities that
have a functional currency different from US dollars are translated
into the presentation currency as follows:
(i) assets and liabilities are translated at the closing rate at the reporting date; and
(ii) income and expenses and also cash flows are translated at
an average exchange rate (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case the items are translated at
the rates prevailing at the dates of the transactions); and
(iii) exchange differences arising are recognised in other
comprehensive income within the translation reserve. Such
translation exchange differences are reclassified to profit or loss
in the period in which the foreign operation is disposed of.
2.9. Taxation
Current tax is the tax currently payable based on taxable profit
for the year in accordance with the tax laws applicable in
jurisdictions where the Group operates.
Deferred taxes are calculated using the liability method on
temporary differences. Deferred tax is generally provided on the
difference between the carrying amounts of assets and liabilities
and their tax bases. However, deferred tax is not provided on the
initial recognition of goodwill, nor on the initial recognition of
an asset or liability unless the related transaction is a business
combination or affects tax or accounting profit. Deferred tax on
temporary differences associated with shares in subsidiaries and
joint ventures is not provided if reversal of these temporary
differences can be controlled by the group and it is probable that
reversal will not occur in the foreseeable future. In addition, tax
losses available to be carried forward as well as other income tax
credits to the group are assessed for recognition as deferred tax
assets.
Deferred tax liabilities are provided in full, with no
discounting. Deferred tax assets are recognised to the extent that
it is probable that the underlying deductible temporary differences
will be able to be offset against future taxable income. Current
and deferred tax assets and liabilities are calculated at tax rates
that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted as
at the reporting date.
Changes in deferred tax assets or liabilities are recognised as
a component of tax expense within profit or loss, except where they
relate to items that are charged or credited directly to equity in
which case the related deferred tax is also charged or credited
directly to equity.
2.10. Investment property
Certain of the Group's properties are classified as investment
property, being held for long term investment gains and to earn
rental income.
Investment properties are measured initially at cost, and
thereafter are stated at fair value, which reflects market
conditions at the reporting date. Gains or losses arising from
changes in the fair values of investment properties are included in
the profit or loss in the year in which they arise.
Investment property is valued at fair value based on valuations
provided by a certified external valuer.
2.11. Equity instruments
Equity instruments issued by the Company are recorded at
proceeds received, net of direct issue costs.
Own equity instruments purchased by the Company or its
subsidiaries are recorded at the consideration paid, including
directly associated assets, and they are deducted from total equity
as treasury shares until they are sold or cancelled. Where such
shares are subsequently sold, any consideration received is
included in total equity.
The share premium account includes any premiums received on the
initial issuing of the share capital. Any transaction costs
associated with the issuing of shares are deducted from the premium
paid.
2.12. Share Options
IFRS 2 "Share-based Payment" requires the recognition of equity
settled share based payments at fair value at the date of
grant.
The Group issues equity-settled share based payments to certain
employees. The fair value of share-based payments to employees at
grant date is measured using the Binomial pricing model.
The fair value determined at the grant date is expensed on a
straight-line basis over the vesting period, based on the Group's
estimate of the shares that will eventually vest and adjusted for
the effect of non market-based vesting conditions. The
corresponding credit is taken to the share option reserve.
On exercise of the options any related amounts recognised in the
share option reserve are transferred to share premium.
On lapse of the options any related amounts recognised in the
share option reserve are transferred to retained earnings.
2.13. Borrowing costs
Borrowing costs primarily comprise interest on the Group's
borrowings. Any borrowing costs directly attributable to the
acquisition, construction or production of qualifying assets are
added to the cost of the corresponding assets until such time as
the assets are substantially ready for their intended use or sale.
All other borrowing costs are expensed in the period in which they
are incurred and reported within "finance costs".
No borrowing costs have been capitalised for either 2015 or
2014.
2.14. Financial assets
Financial assets are recognised when the Group becomes a party
to the contractual provisions of the financial instrument.
A financial asset is derecognised only where the contractual
rights to the cash flows from the asset expire or the financial
asset is transferred and that transfer qualifies for derecognition.
A financial asset is transferred if the contractual rights to
receive the cash flows of the asset have been transferred or the
Group retains the contractual rights to receive the cash flows of
the asset but assumes a contractual obligation to pay the cash
flows to one or more recipients. A financial asset that is
transferred qualifies for derecognition if the Group transfers
substantially all the risks and rewards of ownership of the asset,
or if the Group neither retains nor transfers substantially all the
risks and rewards of ownership but does transfer control of that
asset.
Financial assets are measured initially at fair value plus
transaction costs, except for financial assets carried at fair
value through profit or loss, which are measured initially at fair
value.
Financial assets are measured subsequently as described
below.
All financial assets except for those at fair value through
profit or loss are subject to review for impairment at least at
each reporting date. Financial assets are impaired when there is
any objective evidence that a financial asset or a group of
financial assets is impaired. Different criteria to determine
impairment are applied for each category of financial assets, which
are also described below.
Loans and receivables
-- Trade and other receivables
Trade and other receivables are initially recognised at their
fair value which normally is their original transaction value, and
are subsequently measured at their amortised cost. An estimate for
doubtful debts is made when collection of the full amount is no
longer probable. Bad debts are written off when identified. Where
the time value of money is significant receivables are discounted
to present value.
-- Cash and cash equivalents
Cash comprises cash in hand and on demand deposits with banks.
Cash equivalents are short term, highly liquid investments that are
readily convertible to known amounts of cash. They include
unrestricted short-term bank deposits originally purchased with
maturities of three months or less.
Bank overdrafts are considered to be a component of cash and
cash equivalents, since they form an integral part of the Group's
cash management.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include
financial assets that are either classified as held for trading or
are designated by the Group to be carried at fair value through
profit or loss upon initial recognition. All assets within this
category are measured at their fair value, with changes in value
recognised in the profit or loss when incurred. Upon initial
recognition, attributable transaction costs are recognised in
profit or loss when incurred.
Available-for-sale financial assets
Available-for-sale financial assets include non-derivative
financial assets that are either designated as such or do not
qualify for inclusion in any of the other categories of financial
assets. Financial assets within this category are measured at fair
value, with changes in fair value recognised in other comprehensive
income, within the investments revaluation reserve. Unquoted equity
investments for which the fair value cannot be reliably measured
are stated at cost less impairment. Gains and losses arising from
investments classified as available-for-sale are recognised in the
profit or loss when they are sold or when the investment is
impaired.
In the case of impairment of available-for-sale financial
assets, the cumulative loss previously recognised in other
comprehensive income is reclassified to profit or loss. Impairment
losses recognised in the profit or loss on equity instruments are
not subsequently reversed through the profit or loss. Impairment
losses recognised previously on debt securities are reversed
through the profit or loss when the increase in fair value can be
related objectively to an event occurring after the impairment loss
was recognised in the profit or loss.
An assessment for impairment is undertaken at least at each
reporting date, following the IAS 39 guidance.
2.15. Financial liabilities
Financial liabilities are recognised when the Group becomes a
party to the contractual provisions of the financial
instrument.
A financial liability is derecognised when it is extinguished,
discharged, cancelled or expires.
Financial liabilities are measured initially at fair value plus
transaction costs, except for financial liabilities carried at fair
value through profit or loss, which are measured initially at fair
value.
Financial liabilities at amortised cost
After initial recognition financial liabilities are measured at
amortised cost using the effective interest rate method.
Derivative financial liabilities
The Group's financial liabilities also include financial
derivative instruments.
All derivative financial instruments which are not designated as
hedging instruments are measured at fair value through profit or
loss.
2.16. Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the
obligation, and a reliable estimate of the amount can be made.
Where the Company expects a provision to be reimbursed, for example
under an insurance contract, the reimbursement is recognised as a
separate asset but only when the reimbursement is virtually
certain.
No provision is made for possible claims or where an obligation
exists but it is not possible to make a reliable estimate.
Costs associated with claims made by the Group are charged to
the profit or loss as they are incurred.
2.17. Segment reporting
In identifying its operating segments, management generally
follows the Group's investment activity lines. Each of these
operating segments is managed separately as each of these
investment activity lines requires different monitoring and
strategic decision making process as well as allocation of
resources.
The measurement policies the Group uses for segment reporting
under IFRS 8 are the same as those used in its consolidated
financial statements. Any inter-segment transfers are carried out
at arm's length prices.
2.18. Critical accounting judgments and key sources of
estimation uncertainty
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates and
requires management to exercise its judgement in the process of
applying the Group's accounting policies. It also requires the use
of assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period.
Although these estimates are based on management's best knowledge
of current events and actions, actual results may ultimately differ
from those estimates.
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
Critical accounting judgements
(i) Impairment of available-for-sale financial assets
The Group follows the guidance in IAS 39 on determining when an
investment is impaired. This determination requires significant
judgments. In making this judgment, the Group evaluates, among
other factors, the duration and extent to which the fair value of
an investment is less than its cost and the financial health and
near-term business outlook for the investee, including factors such
as industry and sector performance, changes in technology and
financing cash flow. The management regards a fall in fair value
below cost of 30% or more, or for 12 months or more, to be
significant.
The Group assesses at each reporting date whether financial
assets are impaired. If impairment has occurred, this loss is
recognised to profit or loss.
If there is objective evidence that an impairment loss has been
incurred on an unquoted equity instrument that is not carried at
fair value because its fair value cannot be reliably measured, or
on a derivative asset that is linked to and must be settled by
delivery of such an unquoted equity instrument, the amount of the
loss is measured as the difference between the asset's carrying
amount and the present value of estimated future cash flows
discounted at the current market rate of return of similar
financial assets.
(ii) Classification of financial assets
The Management exercises significant judgement in determining
the appropriate classification of the financial assets of the
Group, especially for its investments and the identification of any
embedded derivatives. The factors considered include the
contractual terms and characteristics which are very carefully
examined, and also the Group's intentions and expected needs for
the realisation of the financial assets.
Investments in loan markets through CLOs are classified as
available-for-sale. All other investments are classified as at fair
value through profit or loss upon initial recognition, because this
reflects more fairly the way these assets are managed by the Group.
The Group's business is investing in financial assets with a view
to profiting from their total return in the form of income and
capital growth. This portfolio of financial assets is managed and
its performance evaluated on a fair value basis, in accordance with
a documented investment strategy, and information about the
portfolio is provided internally on that basis to the Group's Board
of Directors and other key management personnel.
(iii) Deferred tax assets
The tax rules applicable for the relevant Company's operations
are carefully taken into consideration for the recognition of a
deferred tax asset. If a positive forecast of taxable income
indicates the probable use of a deferred tax asset, especially when
it can be utilised without a time limit, that deferred tax asset is
usually recognised in full. The recognition of deferred tax assets
that are subject to certain legal or economic limits or
uncertainties is assessed individually by management based on the
specific facts and circumstances.
Estimation uncertainty
The following are the significant estimates that have the most
significant effect on recognition and measurement of relevant
items.
(i) Fair value of financial instruments
Management uses valuation techniques in measuring the fair value
of financial instruments, where active market quotes are not
available. Details of the bases used for financial assets and
liabilities are disclosed in note 7. In applying the valuation
techniques management makes maximum use of market inputs, and uses
estimates and assumptions that are, as far as possible, consistent
with observable data that market participants would use in pricing
the instrument. Where applicable data is not observable, management
uses its best estimate about the assumptions that market
participants would make. These estimates may vary from the actual
prices that would be achieved in an arm's length transaction at the
reporting date.
Refer also to note 4 for estimation uncertainty over the fair
value determination of the investment in SRS Charminar.
(ii) Fair value of investment property
Investment property is stated at fair value. The fair valuation
is based on discounted cash-flow (DCF) method. Under this method,
the current market value of the property is determined as the total
of all projected future net earnings (before interest, taxes,
depreciation and amortization) discounted to present-day
equivalents. These net earnings are discounted individually for
property with due allowance for specific opportunities and threats,
and with adjustment in line with market conditions and risks. A
one-period DCF model was adopted under which the valuation period
extends for 100 years from the valuation date, with an implicit
residual value in the 11th period. Discounting is based on a
risk-adjusted interest rate and a gross yield determined
individually for each property on the basis of appropriate
benchmarks derived from arm's-length transactions. The weighted
average discount rate used is 4.09% and the weighted average gross
yield used is 4.68%. The valuations assume 1% annual inflation for
income and all expenditure.
Further details are disclosed in note 8.
3. Property, plant and equipment
Office Computer Fixtures Motor Total
Renovation Hardware and Fittings Vehicles
US $000 US $000 US $000 US $000 US $000
Cost
As at 1 January 2014 377 176 113 26 692
Additions - - - 32 32
Disposals - - - (26) (26)
------ ------ ------ ------ ------
As at 1 January 2015 377 176 113 32 698
Additions - - - - -
------ ------ ------ ------ ------
As at 31 December
2015 377 176 113 32 698
Accumulated depreciation
As at 1 January 2014 (377) (164) (102) (26) (669)
Charge for the year - (8) (5) - (13)
On disposals - - - 26 26
------ ------ ------ ------ ------
As at 1 January 2015 (377) (172) (107) - (656)
Charge for the year - (4) (3) (9) (16)
------ ------ ------ ------ ------
As at 31 December
2015 (377) (176) (110) (9) (672)
------ ------ ------ ------ ------
Net book value
As at 31 December
2015 - - 3 23 26
------ ------ ------ ------ ------
As at 31 December
2014 - 4 6 32 42
------ ------ ------ ------ ------
4. Available-for-sale financial assets
2015 2014
US $000 US $000
Non-current assets
Fixed income investments (CLO Income
Notes) 65,946 82,217
Private equities 5,295 7,891
Financial and minority holdings 7,223 9,266
------ ------
78,464 99,374
------ ------
Current assets
Public equity investments 1,619 1,491
Hedge funds 1,064 1,070
------ ------
2,683 2,561
------ ------
For description of each of the above categories, refer to note
6.
The Group treats its investments in the loan market through CLOs
as non-current investments as the Group generally intends to hold
such investments over a longer period.
During 2015, due to market conditions, management considered the
impairment of certain available-for- sale financial assets.
Impairment testing indicated that for those financial assets their
carrying amount may not be recoverable.
The related impairment charges in 2015, of USD 31.726m (2014 USD
8.861m), are included within loss on investments (note 25), and
represent impairment losses arising due to:
2015 2014
US $000 US $000
Significant fall in value 11,119 5,693
Prolonged fall in value 1,490 1,328
Significant and prolonged fall in value 19,117 1,840
------ ------
31,726 8,861
------ ------
Investment in SRS Charminar
Included in the Financial and minority holdings is the
investment in SRS Charminar Investments Ltd ("SRS Charminar"), a
private company incorporated in the Republic of Mauritius.
Livermore invested USD 20m in SRS Charminar acquiring a 15%
ownership stake. SRS Charminar through its wholly owned
subsidiaries invested INR 5.2b (USD 132.1m at date of investment)
which is equivalent to USD 82.5m as at 31 December 2014 (2013: 83m)
in a real estate company in India ("investee company").
In 2009, the promoters of the investee company were arrested on
charges of criminal conspiracy, cheating, and misappropriation of
funds. Later it was discovered that the investee company had
breached the terms of the investment agreement resulting in a
default.
On January 13, 2011 the Company Law Board ("CLB") passed an
order and allowed Infrastructure Leasing & Financial Services
Limited ("IL&FS") to become an 80% shareholder and control the
management of the company.
SRS Charminar and other investors have agreed to a settlement
with IL&FS wherein the settlement amount will be paid in four
tranches over five years. The last two tranches are not guaranteed
by IL&FS and the significant uncertainty of these payments has
been considered in the discount rates used of 35% and 30%
respectively in contrast to the 8% used for discounting the first
two tranches. Also, all regulatory and court approvals were
received and the effective date of the settlement was fixed.
The Group received the first tranche of USD 2.9m in late 2015.
The carrying amount of the investment is based on discounted
expected cash flows and was USD 7.1m (2014: USD 9.1m), which
represents its estimated fair value. SRS Charminar's only holding
is its investment in the investee company (through its wholly owned
subsidiaries) and thus its fair value is wholly attributable to the
above mentioned investment.
Also included in Private equities is the investment in SRS
Private Investments, L.P. ("SRS Private") with a carrying amount at
reporting date of USD 1.7m (2014: USD 3.7m) which is based on a net
asset valuation (NAV). SRS Private through a fund has invested in
various real estate projects in India as well as in SRS Charminar,
and its investment in SRS Charminar as at 31 December 2015 amounts
approximately to 20% (2014: 17%) of its net assets.
5. Financial assets at fair value through profit or loss
2015 2014
US $000 US $000
Non-current assets
Private equities 330 330
Real estate entities 1,203 1,476
------ ------
1,533 1,806
------ ------
Current assets
Fixed income investments 6,655 1,623
Public equity investments 1,613 1,717
Hedge funds - 65
Other investments - 299
------ ------
8,268 3,704
------ ------
For description of each of the above categories, refer to note
6.
6. Financial assets at fair value
The Group allocates its non-derivative financial assets at fair
value (notes 4 and 5) as follows:
-- Fixed income investments relate to fixed and floating rate
bonds, perpetual bank debt, and investments in the loan market
through CLOs.
-- Private equities relate to investments in both high growth
opportunities in emerging markets and deep value opportunities in
mature markets. The company generally invests directly in prospects
where it can exert significant influence.
-- Financial and minority holdings relate to significant
investments (of over USD 5m) which are strategic for the Company
and are done in the form of equity purchases or convertible loans.
Main investments under this category are in the fields of real
estate.
-- Hedge funds relate to investments in funds managed by
sophisticated investment managers that pursue investment strategies
with the goal of generating absolute returns.
-- Public equity investments relate to investments in shares of
companies listed on public stock exchanges.
-- Real estate entities relate to investments in real estate projects.
-- Other investments are investments not otherwise included in the categories above.
7. Fair value measurements of financial assets and liabilities
The following table presents financial assets measured at fair
value in the consolidated statement of financial position in
accordance with the fair value hierarchy. This hierarchy groups
financial assets and liabilities into three levels based on the
significance of inputs used in measuring the fair value of the
financial assets and liabilities. The fair value hierarchy has the
following levels:
- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the
measurement date;
- Level 2: inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
or indirectly; and
- Level 3: unobservable inputs for the asset or liability.
The level within which the financial asset is classified is
determined based on the lowest level of significant input to the
fair value measurement.
Valuation of financial assets and liabilities
-- Fixed Income Investments, and Public Equity Investments are
valued per their closing market prices on quoted exchanges, or as
quoted by market maker. Investments in open warehouse facilities
that have not yet been converted to CLOs, are valued based on an
adjusted net asset valuation.
The Group values the CLOs based on the valuation reports
provided by market makers. CLOs are typically valued by market
makers using discounted cash flow models. The key assumptions for
cash flow projections include default and recovery rates,
prepayment rates and reinvestment assumptions on the underlying
portfolios (typically senior secured loans) of the CLOs.
Default and recovery rates: The amount and timing of defaults in
the underlying collateral and the amount and timing of recovery
upon a default affect are key to the future cash flows a CLO will
distribute to the CLO equity tranche. All else equal, higher
default rates and lower recovery rates typically lead to lower cash
flows. Conversely, lower default rates and higher recoveries lead
to higher cash flows.
Prepayment rates: Senior loans can be pre-paid by borrowers.
CLOs that are within their reinvestment period may, subject to
certain conditions, reinvest such prepayments into other loans
which may have different spreads and maturities. CLOs that are
beyond their reinvestment period typically pay down their senior
liabilities from proceeds of such pre-payments. Therefore the rate
at which the underlying collateral prepays impacts the future cash
flows that the CLO may generate.
Reinvestment assumptions: A CLO within its reinvestment period
may reinvest proceeds from loan maturities, prepayments, and
recoveries into purchasing additional loans. The reinvestment
assumptions define the characteristics of the loans that a CLO may
reinvest in. These assumptions include the spreads, maturities, and
prices of such loans. Reinvestment into loans with higher spreads
and lower prices will lead to higher cash flows. Reinvestment into
loans with lower spreads will typically lead to lower cash
flows.
Discount rate: The discount rate indicates the yield that market
participants expect to receive and is used to discount the
projected future cash flows. Higher yield expectations or discount
rates lead to lower prices and lower discount rates lead to higher
prices for CLOs.
-- Private Equities are valued using market valuation techniques
as determined by the Directors, mainly on the basis of discounted
cash flow techniques or valuations reported by third-party managers
of such investments.
-- Financial and Minority holdings are valued using market
valuation techniques as determined by the Directors, mainly on the
basis of discounted cash flow techniques or valuations reported by
third-party managers of such investments.
-- Hedge Funds are valued per reports provided by the funds on a
periodic basis, and if traded, per their closing bid market prices
on quoted exchanges, or as quoted by market maker.
-- Real Estates entities are valued by independent qualified
property valuers with substantial relevant experience on such
investments. Underlying property values are determined based on
their estimated market values.
-- Derivative instruments are valued at fair value as provided
by counter parties (banks) of the derivative agreement.
Financial assets and financial liabilities measured at fair
value in the consolidated statement of financial position are
grouped into the fair value hierarchy as follows:
2015 2015 2015 2015 2014 2014 2014 2014
US $000 US $000 US $000 US $000 US $000 US $000 US $000 US $000
Level Level Level Total Level Level Level Total
1 2 3 1 2 3
Assets
Fixed income investments 1,634 65,946 5,021 72,601 1,623 82,217 - 83,840
Private equities - - 5,625 5,625 - - 8,221 8,221
Financial and
minority holdings - - 7,223 7,223 - - 9,266 9,266
Public equity
investments 3,232 - - 3,232 3,208 - - 3,208
Hedge funds - 1,064 - 1,064 - 1,135 - 1,135
Real estate entities - - 1,203 1,203 - - 1,476 1,476
Investment in - - - - - - - -
associate and
joint venture
Other investments - - - - 299 - - 299
Total return swaps - - - - - - 1,125 1,125
------ ------ ------ ------ ------ ------ ------ ------
4,866 67,010 19,072 90,948 5,130 83,352 20,088 108,570
------ ------ ------ ------ ------ ------ ------ ------
Liabilities
Forward contract - 217 - 217 - - - -
------ ------ ------ ------ ------ ------ ------ ------
- 217 - 217 - - - -
------ ------ ------ ------ ------ ------ ------ ------
The methods and valuation techniques used for the purpose of
measuring fair value are unchanged compared to the previous
reporting period.
No financial assets or liabilities have been transferred between
levels.
Financial assets within level 3 can be reconciled from beginning
to ending balances as follows:
Available-for-sale At fair value through Derivative
profit or loss financial
instruments
Financial Private Other investments Real Private Fixed Total
and equities estate equities Income return
minority investments swap
holdings Total
US $000 US $000 US $000 US $000 US $000 US $000 US $000 US $000
As at 1 January 2014 9,068 9,081 2 1,588 569 - - 20,308
Purchases - 323 - - - - - 323
(Losses) / gains -
recognised
in:
-Profit or loss - (1,470) - 68 (239) - 1,125 (516)
-Other comprehensive
income 198 (43) (2) - - - - 153
Exchange difference - - - (180) - - - (180)
------ ------ ------ ------ ------ ------ ------ ------
As at 1 January 2015 9,266 7,891 - 1,476 330 - 1,125 20,088
Purchases - - - - - 5,000 - 5,000
Settlement - (59) - - - - (1,332) (1,391)
(Losses) / gains
recognised
in:
-Profit or loss (2,043) (2,134) - 104 - 21 207 (3,845)
-Other comprehensive
income - (403) - - - - - (403)
Exchange difference - - - (377) - - - (377)
------ ------ ------ ------ ------ ------ ------ ------
As at 31 December 2015 7,223 5,295 - 1,203 330 5,021 - 19,072
------ ------ ------ ------ ------ ------ ------ ------
The above gains and losses recognised can be allocated as
follows:
Available-for-sale At fair value through Derivative
profit or loss financial
instruments
Financial Private Other investments Real Private Fixed Total
and equities estate equities Income return
minority investments swap
holdings Total
2014 US $000 US $000 US $000 US $000 US $000 US $000 US $000 US $000
Profit or loss
-Financial assets held
at year-end - (1,470) - 68 (239) - 1,125 (516)
------ ------ ------ ------ ------ ------ ------ ------
- (1,470) - 68 (239) - 1,125 (516)
------ ------ ------ ------ ------ ------ ------ ------
Other comprehensive
income
-Financial assets held
at year-end 198 (43) (2) - - - - 153
------ ------ ------ ------ ------ ------ ------ ------
198 (43) (2) - - - - 153
------ ------ ------ ------ ------ ------ ------ ------
Total gains / (losses)
for 2014 198 (1,513) (2) 68 (239) - 1,125 (363)
------ ------ ------ ------ ------ ------ ------ ------
2015 US $000 US $000 US $000 US $000 US $000 US $000 US $000 US $000
Profit or loss
-Financial assets held
at year-end (2,043) (2,134) - 104 - 21 - (4,052)
-Financial assets not
held
at year-end - - - - - - 207 207
------ ------ ------ ------ ------ ------ ------ ------
(2,043) (2,134) - 104 - 21 207 (3,845)
------ ------ ------ ------ ------ ------ ------ ------
Other comprehensive
income
-Financial assets held
at year-end - (403) - - - - - (403)
------ ------ ------ ------ ------ ------ ------ ------
- (403) - - - - - (403)
------ ------ ------ ------ ------ ------ ------ ------
Total gains / (losses)
for 2015 (2,043) (2,537) - 104 - 21 207 (4,248)
------ ------ ------ ------ ------ ------ ------ ------
The Group has not developed any quantitative unobservable inputs
for measuring the fair value of its level 3 financial assets at 31
December 2015 and 2014. Instead the Group used prices from
third-party pricing information without adjustment.
A reasonable change in any individual significant input used in
the level 3 valuations is not anticipated to have a significant
change in fair values as above.
8. Investment property
2015 2014
US $000 US $000
Valuation as at 1 January 116,609 129,916
Fair value gain (note 25) 7,819 61
Exchange difference (1,104) (13,368)
------ ------
As at 31 December 123,324 116,609
------ ------
The investment property relates to Wyler Park property in Bern,
Switzerland, which is used for earning rental income. The Group has
no restriction on the realizability of the property or the
remittance of income and any proceeds of disposal.
Wyler Park investment property loan (note 17) is secured on the
property itself.
Fair valuation
The investment property is the Group's only non-financial asset
measured at fair value on a recurring basis, and its fair value is
classified within the fair value hierarchy as level 3.
The investment property was valued by the independent
professional valuers Wüest & Partners as at 31 December 2015
and 2014 on the basis of open market value in accordance with the
appraisal and valuation guidelines of the Royal Institute of
Certified Surveyors, and the European Group of Valuers'
Associations. The investment property is revalued annually on 31
December.
The significant inputs and assumptions are developed in close
consultation with management. The valuation processes and fair
value changes are reviewed by the Board of Directors at each
reporting date.
The fair values of investment property are estimated using the
discounted cash-flow (DCF) method. With this method, the current
market value of a property is determined as the total of all
projected future net earnings (before interest, taxes, depreciation
and amortization) discounted to present-day equivalents. These net
earnings are discounted individually for each property with due
allowance for specific opportunities and threats, and with
adjustment in line with market conditions and risks. All projected
cash flows are presented to ensure maximum transparency.
The valuations are based on the following assumptions:
- The property has been appraised as continuation scenario. That
means, that no change of use scenarios have been calculated as well
that would result to a higher value.
- A one-period DCF model was adopted. The valuation period
extends for 100 years from the valuation date, with an implicit
residual value in the 11th period.
- Discounting is based on a risk-adjusted interest rate. Rates
are determined on the basis of appropriate benchmarks derived from
arm's-length transactions. These are broken down as follows:
risk-free interest rate + property risk (immobility of capital) +
premium for macro-location + premium for micro-location depending
on use + premium for property quality and income risk + any other
specific premiums.
- The valuations assume 1% annual inflation for income and all
expenditure. Where a nominal discount rate is applied, this is
adjusted accordingly.
- Credit risks posed by specific tenants are not explicitly
factored into the valuation.
- Allowance is made for the specific indexing provisions in
existing leases. An indexing factor of 80% (Swiss average) is
assumed for the period following lease expiry.
- For existing tenancies, the timing of individual payments is
assumed to comply with the terms of the lease.
Following lease expiry, cash flows for commercial premises are
taken to be quarterly in advance, for housing monthly in
advance.
- In terms of running costs, entirely separate service charge
accounts are assumed, with no tenancy-related ancillary costs to be
borne by the owner.
- The maintenance (repair and upkeep) costs were calculated by
means of a lifecycle analysis of the individual building elements.
The building structure's remaining lifespan was estimated and
periodic refurbishments modelled on the basis of the general
condition of the fabric as determined during the property
inspection.
Appropriate annual reserves were calculated accordingly and
plausibility tested using comparables and Wüest & Partner's own
benchmarks. The calculation factors in 100% of repair costs in the
first 10 years; the proportion applied from year 11 onwards is
limited to the value-preserving investments (recoverable
share).
The valuations are sensitive to the above inputs, all of which
are unobservable.
Future rental income
The future minimum rental income under non-cancellable rental
agreements, is receivable as follows:
2015 2014
US $000 US $000
- Less than 1 year 5,629 5,923
- Between 1 and 5 years 23,050 21,186
- Over 5 years 36,879 -
------ ------
65,558 27,109
------ ------
Rental agreements are quoted in Swiss Francs. The equivalent USD
amounts shown in the table above are based on the exchange rates as
at 31 December 2015 and 31 December 2014 respectively.
9. Investments in associate and joint venture
2015 2014
US $000 US $000
As at 1 January - 5,524
Additions 7,500 -
Capital return (8,183) (5,000)
Fair value (loss) / gain 683 (524)
------ ------
As at 31 December - -
------ ------
Name of investee Type of Place of Principal Proportion Fair value
investment incorporation activity of voting
rights held
2015 2014
US $000 US $000
Silvermore Investment
Ltd Joint venture Cayman Islands holding (dormant) 50% - -
----- ------
- -
----- -----
As at 31 December 2014 Silvermore had ceased to be a contractual
party to a Total Return Swap (ISDA) agreement with Citibank N.A.
and had no other assets or liabilities. Silvermore Ltd is dormant
since January 2015.
During the year, the Group invested in a 25% interest in
Highbridge Loan Management Warehouse 7-2015 Ltd (a company
incorporated in Cayman Islands), through its subsidiary Mountview
Holdings Ltd, until Highbridge was converted into a CLO. After the
conversion into a CLO the entity ceased to be an associate of the
Group.
10. Details of subsidiaries
Details of the investments in which the Group has a controlling
interest are as follows:
Name of Subsidiary Place of Holding Proportion Principal activity
incorporation of voting
rights
and shares
held
Livermore Properties British Virgin Ordinary shares 100% Holding of investments
Limited Islands
Mountview Holdings British Virgin Ordinary shares 100% Investment vehicle
Limited Islands
Silvermore 2 Ltd Cayman Islands Ordinary shares 100% Investment vehicle
(Dormant)
Sycamore Loan Strategies Cayman Islands Ordinary shares 100% Investment vehicle
Ltd
Sycamore Loan Funding Cayman Islands Ordinary shares 100% Investment vehicle
Ltd
Livermore Israel Israel Ordinary shares 100% Holding of investments
Investments Ltd
Livermore Capital Switzerland Ordinary shares 100% Administration services
AG
Livermore Investments Switzerland Ordinary shares 100% Real Estate owner
AG* and management
Enaxor S.a.r.l Luxembourg Ordinary shares 100% Holding of investment
Livermore Investments Cyprus Ordinary shares 100% Administration services
Cyprus Limited
Sandhirst Limited* Cyprus Ordinary shares 100% Holding of investments
* Held by Enaxor S.a.r.l.
Silvermore 2 Ltd was dissolved in 2016.
Blackline Investments Inc. was dissolved during the year.
11. Deferred tax
The Company is an international business company based in the
British Virgin Islands (BVI) and, under its laws, is not subject to
taxation. Deferred taxes relate to the temporary differences
between carrying amounts and corresponding tax base of its
subsidiaries, in Switzerland.
The deferred tax shown in the consolidated statement of
financial position relates to the following items:
2015 2014
US $000 US $000
Investment property - revaluation
surplus (6,362) (5,805)
Derivative financial instruments
- recognised carrying amount - 47
Tax losses 2,425 3,486
------ ------
Net deferred tax (liability) (3,937) (2,272)
------ ------
The movement on the deferred taxation account is as follows:
Investment Derivative Tax losses Total
property financial
instruments
US $000 US $000 US $000 US $000
As at 1 January 2014 (5,845) 344 3,545 (1,956)
(Charged) / credited to profit
or loss (note 28)
- timing differences (329) (294) 166 (457)
Exchange difference 369 (3) (225) 141
------ ------ ------ ------
As at 1 January 2015 (5,805) 47 3,486 (2,272)
(Charged) / credited to profit
or loss (note 28)
- timing differences (895) (46) (913) (1,854)
Exchange difference 338 (1) (148) 189
------ ------ ------ ------
As at 31 December 2015 (6,362) - 2,425 (3,937)
------ ------ ------ ------
The Group expects that future taxable profits will be available
in the jurisdiction where the deferred tax assets occurred
(Switzerland) so as to utilise the carrying amount of the deferred
tax assets recognised as at the end of the year.
As at 31 December 2015 and 2014 there is no unrecognised
deferred tax asset.
12. Trade and other receivables
2015 2014
US $000 US $000
Financial items
Accrued interest and dividend income 304 514
Amounts due by related parties
(note 30) 2,514 2,497
Other receivables 272 16,757
------ ------
3,090 19,768
Non-Financial items
Other assets (note 30) 2,256 3,384
Prepayments 272 276
------ ------
5,618 23,428
------ ------
Allocated as:
Current assets 4,490 20,890
Non-current assets (other assets
- note 30) 1,128 2,538
------ ------
5,618 23,428
------ ------
Other receivables at 31 December 2014 include:
(a) an amount of USD 15m that the Company invested during the
period in the first loss tranche of a warehouse facility for
accumulating loans with the intention to transfer these loans to a
CLO. In December 2014, the said CLO was priced and the loans
accumulated in the warehouse were agreed to be transferred at
purchase price to the CLO on 10 January, 2015. Consequently,
Livermore's investment amount plus net carry earned became
receivable as of the end of December 2014. On 16 January 2015
Livermore received a net amount of USD 16.3m.
(b) an amount of USD 1m that the Company invested during the
period in the first loss tranche of a warehouse facility for
accumulating loans with the intention to transfer these loans to a
CLO. In December 2014, the said CLO was priced and the loans
accumulated in the warehouse were agreed to be transferred at
purchase price to the CLO on 15 January, 2015. Consequently,
Livermore's investment amount plus net carry earned became
receivable as of the end of December 2014. On 16 January 2015
Livermore received a net amount of USD 1.039m.
13. Cash and cash equivalents
Cash and cash equivalents included in the consolidated statement
of cash flows comprise the following at the reporting date:
2015 2014
US $000 US $000
Cash at bank 25,770 3,807
Bank overdrafts used for cash management
purposes (13,208) (10,355)
------ ------
Cash and cash equivalents for the
purposes of the consolidated statement
of cash flows 12,562 (6,548)
------ ------
14. Share capital
Authorised share capital
The Company has authorised share capital of 1,000,000,000
ordinary shares with no par value, and no restrictions.
Issued share capital Number of Share premium
shares arising
US $000
Ordinary shares with no par value
As at 31 December 2014 and 31 December
2015 304,120,401 215,499
---------- ----------
Treasury shares Number of US $000
shares
As at 1 January 2014 108,830,818 36,902
---------- ---------
As at 1 January 2015 108,830,818 36,902
Additions 3,000,000 1,544
---------- ---------
As at 31 December 2015 111,830,818 38,446
---------- ----------
In the consolidated statement of financial position the amount
included as share premium and treasury shares comprises of:
2015 2014
US $000 US $000
Share premium 215,499 215,499
Treasury shares (38,446) (36,902)
-------- --------
177,053 178,597
-------- --------
15. Share options
The Company has a share option scheme for acquiring ordinary
shares of the Company.
Outstanding options Number Average Average
of options exercise exercise
price GBP price* USD
As at 1 January 2014 and 31
December 2014 11,340,000 0.75 1.18
Options expired (690,000) 0.71 1.05
--------
As at 31 December 2015 10,650,000 0.76 1.12
----------
Exercisable options Number Average Average
of options exercise exercise
price GBP price* USD
As at 31 December 2014 and
31 December 2015 11,340,000 0.75 1.18
Options expired (690,000) 0.71 1.05
--------
As at 31 December 2015 10,650,000 0.76 1.12
----------
Details of share options outstanding at 31 December 2015
Number of Grant Vesting Earliest Expiry date Exercise Exercise Fair value
options date date exercise of exercise price Price* at grant
date period GBP USD date USD
3,383,334 19/07/06 19/07/07 19/07/07 19/07/16 0.78 1.15 1,608,710
3,383,333 19/07/06 19/07/08 19/07/08 19/07/16 0.78 1.15 1,824,133
3,383,333 19/07/06 19/07/09 19/07/09 19/07/16 0.78 1.15 2,001,774
166,667 13/05/08 13/05/09 13/05/09 13/05/18 0.30 0.44 21,703
166,667 13/05/08 13/05/10 13/05/10 13/05/18 0.30 0.44 24,115
166,666 13/05/08 13/05/11 13/05/11 13/05/18 0.30 0.44 25,820
---------- ----------
10,650,000 5,506,255
---------- ----------
The fair value of options granted to employees was determined
using the Binomial valuation model. The model takes into account a
volatility rate of 41-45% calculated using the historical
volatility of a peer group of similar companies and a risk free
interest rate of 4.0-4.4% and it has been assumed the options have
an expected life of two years post date of vesting.
The options lapse at the earliest of the expiry date of exercise
period or the termination of the corresponding employee's
service.
* The exercise prices as per the share option scheme are quoted
in British Pounds. The indicative equivalent USD amounts shown in
the table of details above as well as the average exercise prices
are based on the exchange rates as at 31 December 2015.
16. Derivative financial instruments
2015 2014
US $000 US $000
Current assets
Total return swap - 1,125
------ ------
Current liabilities
Forward contract 217 -
------ ------
Forward contracts
The Group uses forward foreign exchange contracts to mitigate
exchange rate exposure arising from forecast transactions between
USD and CHF. As at the reporting date the outstanding forward
agreements are as follows:
Notional contract Foreign exchange Contract exchange Contract termination
amount currency rate date
USD 5,000,000 CHF 0.9965 19 February 2016
USD 5,000,000 CHF 0.9988 19 February 2016
USD 10,000,000 CHF 1.0096 19 February 2016
USD 5,000,000 CHF 1.0234 19 February 2016
Forward contracts are considered by the Management as economic
hedge arrangements but have not been designated as hedging
instruments for accounting purposes and their fair value changes
are recognised in the profit or loss. The calculation of the fair
value of forward contracts is based on the contractual cash flows
of future anticipated net settlement using the foreign exchange
rates prevailing at the reporting date.
During 2014 the Group used forward currency contracts; however,
no such derivatives were open at 31 December 2014.
Total Return Swaps
As at 31 December 2014 the Group was a contractual party to a
Total Return Swap (ISDA) agreement with Macquarie bank. Based on
the swap agreement the Group is entitled to receive the total
returns arising from a portfolio of loan assets (referenced
assets), and is obliged to pay interest at a floating rate on the
facility amount (warehouse facility):
Referenced Total returns Facility amount Floating rate Maturity
assets amount date
USD 300,000,000 Interest payments, USD 270,000,000 3M USD Libor 18 Sept.
fees, repayment + 1.9% 2015
premiums or penalties,
and other distributions
The swap was entered as a means for accumulating loans with the
intention to transfer these loans to a CLO. In December 2014, the
said CLO was priced and the loans accumulated in the warehouse were
agreed to be transferred to the CLO on 10 January, 2015.
Consequently, on 16 January 2015 the swap was terminated.
The calculation of the fair value of the swap is based on
discounted cash flows of future anticipated interest payments
compared with the discounted cash flows of anticipated total
returns receivable.
For the year ended 31 December 2015 a net fair value gain of USD
990,787 (2014: gain USD 3,133,381) has been recognised in the
profit or loss in relation to all derivative financial
instruments.
17. Bank loans
2015 2014
US $000 US $000
-
As at 1 January 78,092 87,974
Additions 78,822 -
Repayment (79,751) (830)
Exchange difference (541) (9,052)
Refinancing fees (212) -
------ ------
As at 31 December 76,410 78,092
------ ------
Allocated as:
Current bank loans 1,407 78,092
Non-current bank loans 75,003 -
------ ------
76,410 78,092
------ ------
The bank loan relates to Wyler Park investment property purchase
(note 8) and is secured on this property. The loan was refinanced
during the year. The principal amount of the loan facility as of 31
December 2015 is CHF 76.6 million. The facility is committed until
at least 30 June 2019. The loan facility maybe extended up to 30
June 2029, unless terminated by either party.
The loan bears interest at 3-Month CHF Libor (with a floor rate
at zero) plus 1.40% margin. The effective Interest rate of the loan
as at 31 December 2015 is 1.40%.
18. Bank overdrafts
2015 2014
US $000 US $000
Short term bank overdrafts 13,208 10,355
------ ------
Short term bank overdrafts bear Libor + lender's margin and have
an average interest rate of 1.78% (2014 1.49%).
The Group's bank overdraft facilities are secured by the Group's
financial assets portfolio up to an amount, as at 31 December 2015,
of USD 31.5m.
The Group's bank overdraft undrawn facilities at 31 December
2015 amount to USD 18.3m.
19. Trade and other payables
2015 2014
US $000 US $000
Financial items
Trade payables 444 727
Amounts due to related parties
(note 30) 1,377 579
Accrued expenses 386 430
------ ------
2,207 1,736
Non-financial items
Prepayment from tenants 510 -
VAT payable 53 22
------ ------
2,770 1,758
------ ------
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value. All amounts fall
due within one year.
20. Current tax (asset) / payable
2015 2014
US $000 US $000
Corporation tax (6) 5
------ ------
21. Net asset value per share
Net asset value per share has been calculated by dividing the
net assets attributable to ordinary shareholders by the closing
number of ordinary shares (net of treasury shares) in issue during
the relevant financial periods.
Diluted net asset value per share is calculated after taking
into consideration the potentially dilutive shares in existence as
at 31 December 2015 and 31 December 2014.
2015 2014
Net assets attributable to ordinary
shareholders (USD 000) 148,637 159,974
------------- -------------
Closing number of ordinary shares in
issue 192,289,583 195,289,583
------------- -------------
Basic net asset value per share (USD) 0.77 0.82
------------- -------------
Net assets attributable to ordinary
shareholders (USD 000) 148,637 159,974
Dilutive share options - exercise amount 221 234
------------- -------------
Net assets attributable to ordinary
shareholders including the effect of
potentially diluted shares (USD 000) 148,858 160,208
------------- -------------
Closing number of ordinary shares in
issue 192,289,583 195,289,583
Dilutive share options 500,000 500,000
------------- -------------
Closing number of ordinary shares including
the effect of potentially diluted shares 192,789,583 195,789,583
------------- -------------
Diluted net asset value per share (USD) 0.77 0.82
------------- -------------
Number of Shares
Ordinary shares 304,120,401 304,120,401
Treasury shares (111,830,818) (108,830,818)
------------- -------------
Closing number of ordinary shares in
issue 192,289,583 195,289,583
------------- -------------
The Share options (note 15) granted on 13 May 2008 have a
dilutive effect on the net asset value per share, given that their
exercise price is lower than the net asset value per Company's
share at 31 December 2015 and 2014. All other share options do not
impact the diluted net asset value per share for 2015 and 2014 as
their exercise price was higher than the net asset value per share
at 31 December 2015 and 2014.
Repurchase of own shares
The Board believes that the ability of the Company to
re-purchase its own Ordinary shares in the market may potentially
benefit equity shareholders of the Company. The repurchase of
Ordinary shares at a discount to the underlying net asset value
enhances the net asset value per share of the remaining equity
shares.
In 2015, the Company bought 3,000,000 of its Ordinary shares at
an average price of USD 0.51 per share.
In 2014 the Company did not buy any own shares.
22. Segment reporting
The Group's monitoring and strategic decision making process in
relation to its investments is separated into two activity lines
which are also identified as the Group's operating segments. These
operating segments are monitored and strategic decisions are made
on the basis of segment operating results.
Segment information can be analysed as follows:
Equity and Investment Total per financial
debt instruments property activities statements
investment
activities
2015 2014 2015 2014 2015 2014
Segment results US $000 US $000 US $000 US $000 US $000 US $000
Investment income
Interest and dividend
income 25,675 26,619 - - 25,675 26,619
Investment property income - - 5,227 5,159 5,227 5,159
(Loss) / gain on investments (33,955) (9,946) 7,819 61 (26,136) (9,885)
------ ------ ------ ------ ------ ------
Gross (loss) / profit (8,280) 16,673 13,046 5,220 4,766 21,893
Other income 35 462 - - 35 462
Administrative expenses (4,510) (5,417) (645) (1,802) (5,155) (7,219)
------ ------ ------ ------ ------ ------
Operating (loss) / profit (12,755) 11,718 12,401 3,418 (354) 15,136
Finance costs (1,109) (4,254) (1,345) (3,032) (2,454) (7,286)
Finance income - 109 - - - 109
------ ------ ------ ------ ------ ------
(Loss) / profit before
taxation (13,864) 7,573 11,056 386 (2,808) 7,959
Taxation charge - - (1,951) (755) (1,951) (755)
------ ------ ------ ------ ------ ------
(Loss) / profit for year (13,864) 7,573 9,105 (369) (4,759) 7,204
------ ------ ------ ------ ------ ------
Segment assets 121,104 134,815 124,588 117,641 245,692 252,456
------ ------ ------ ------ ------ ------
Segment liabilities 15,681 11,278 81,374 81,204 97,055 92,482
------ ------ ------ ------ ------ ------
The Group's investment income and its investments are divided
into the following geographical areas:
Equity and Investment Total per
debt instruments property activities financial
investment statements
activities
2015 2014 2015 2014 2015 2014
Investment Income US $000 US $000 US $000 US $000 US $000 US $000
Switzerland - - 13,046 6,732 13,046 6,732
Other European countries (22) (723) - - (22) (723)
United States (5,950) 18,400 - - (5,950) 18,400
India (2,235) (1,729) - - (2,235) (1,729)
Asia (73) (787) (73) (787)
------ ------ ------ ------ ------ ------
(8,280) 15,161 13,046 6,732 4,766 21,893
------ ------ ------ ------ ------ ------
Investments
Switzerland - - 123,324 116,609 123,324 116,609
Other European countries 5,089 6,225 - - 5,089 6,225
United States 72,030 83,843 - - 72,030 83,843
India 10,004 14,219 - - 10,004 14,219
Asia 3,825 4,283 - - 3,825 4,283
------ ------ ------ ------ ------ ------
90,948 108,570 123,324 116,609 214,272 225,179
------ ------ ------ ------ ------ ------
Investment income, comprising interest and dividend income,
gains or losses on investments, and investment property income, is
allocated on the basis of the customer's geographical location in
the case of the investment property activities segment and the
issuer's location in the case of the equity and debt instruments
investment activities segment. Investments are allocated based on
the issuer's location.
During 2015, 81.9% of the Group's rent relates to rental income
from a single customer (SBB - Swiss national transport authority)
in the investment property activities segment (2014: 89%).
23. Interest and dividend income
2015 2014
US $000 US $000
Interest from investments 127 434
Dividend income 25,548 26,185
------ ------
25,675 26,619
------ ------
24. Investment property income
2015 2014
US $000 US $000
Gross rental income 5,634 5,923
Direct expenses (407) (764)
------ ------
5,227 5,159
------ ------
All direct expenses relate to the generation of rental
income.
25. Loss on investments
2015 2014
US $000 US $000
(Loss) / gain on sale of
investments (3,459) 1,709
Investment property revaluation 7,819 61
Foreign exchange loss - (232)
Loss due to impairment of
available-for-sale financial
assets (31,726) (8,861)
Fair value losses on financial
assets through profit or
loss (320) (5,067)
Fair value gain on associate 683 -
Fair value loss on investment
in joint venture - (524)
Fair value gains on derivative
instruments 991 3,133
Bank custody fees (124) (104)
------ ------
(26,136) (9,885)
------ ------
The investments disposed of during the year resulted in the
following realised losses (i.e. in relation to their original
acquisition cost):
2015 2014
US $000 US $000
Available-for-sale (5,723) (2,682)
At fair value through profit
or loss (303) (2,374)
------ ------
(6,026) (5,056)
------ ------
26. Administrative expenses
2015 2014
US $000 US $000
Legal expenses 188 118
Directors' fees and expenses 2,414 3,522
Other salaries and expenses 213 1,152
Professional and consulting
fees 872 1,299
Office costs 358 299
Depreciation 16 13
Other operating expenses 447 657
Provision charge 513 -
Audit fees 134 159
------ ------
5,155 7,219
------ ------
Throughout 2015 the Group employed 7 members of staff (2014:
6).
Other salaries and expenses include USD 21,640 of social
insurance and similar contributions (2014: USD 82,632), as well as
USD 6,593 of defined contributions plan costs (2014: USD
19,499).
27. Finance costs and income
2015 2014
US $000 US $000
Finance costs
Bank interest on investment property
loan* 1,340 3,032
Other swap interest cost - 496
Other bank interest 267 252
Foreign exchange loss 847 3,506
------ ------
2,454 7,286
------ ------
Finance income
Foreign exchange gain - 109
------ ------
Net finance costs 2,454 7,177
------ ------
*Includes interest payments on a related swap.
28. Taxation
2015 2014
US $000 US $000
Current tax charge 97 298
Deferred tax charge 1,854 457
------ ------
1,951 755
------ ------
The tax charge for the year can
be reconciled to the accounting
profit as follows:
(Loss) / profit before tax (2,808) 7,959
------ ------
Effect of applicable corporation
tax rates 2,301 177
Effect of income not subject to
tax (1,961) (131)
Effect of expenses not deductible
for tax purposes 39 232
Effect of current year losses (383) (87)
Property tax 101 107
Deferred tax charge 1,854 457
------ ------
Tax for the year 1,951 755
------ ------
The parent company is an international business company based in
the British Virgin Islands (BVI) and, under the BVI laws, is not
subject to corporation tax. Corporation tax is calculated with
reference to the results of the Company's subsidiaries in
Switzerland and Cyprus.
29. Earnings per share
Basic earnings per share has been calculated by dividing the
profit for the year attributable to ordinary shareholders of the
parent Company by the weighted average number of ordinary shares in
issue of the parent during the relevant financial periods.
Diluted earnings per share is calculated after taking into
consideration other potentially dilutive shares in existence during
the year ended 31 December 2015 and the year ended 31 December
2014.
2015 2014
(Loss) / profit for the year attributable
to ordinary shareholders of the parent
(USD 000) (4,759) 7,204
------------- -------------
Weighted average number of ordinary
shares outstanding 194,599,172 195,289,583
------------- -------------
Basic earnings per share (USD) (0.02) 0.04
------------- -------------
Weighted average number of ordinary
shares outstanding 194,599,172 195,289,583
Dilutive effect of share options 59,005 84,418
--------- ---------
Weighted average number of ordinary
shares including the effect of potentially
dilutive shares 194,658,177 195,374,001
------------- -------------
Diluted earnings per share (USD) (0.02) 0.04
------------- -------------
The Share options (note 15) granted on 13 May 2008 have a
dilutive effect on the weighted average number of ordinary shares
only, given that their exercise price is lower than the average
market price of the Company's shares on the London Stock Exchange
(AIM division) during the year ended 31 December 2015 and 2014. All
other share options do not impact the diluted earnings per share
for 2015 and 2014 as their exercise price was higher than the
average market price of the Company's shares during the year ended
31 December 2015 and 2014.
30. Related party transactions
The Group is controlled by Groverton Management Ltd, an entity
owned by Noam Lanir, which at 31 December 2015 held 78.74% (2014:
79.06%) of the Company's effective voting rights.
2015 2014
US $000 US $000
Amounts receivable from key management
Other assets 2,256 3,384 (1)
Directors' current accounts 2,514 2,497
------ ------
4,770 5,881
------- -------
Amounts payable to other related
party
Loan payable (499) (499) (2)
------ ------
(499) (499)
------- -------
Amounts payable to key management
Directors' current accounts (35) (80)
Other key management personnel (843) - (3)
------ ------
(878) (80)
------- -------
Key management compensation
Short term benefits
Executive directors' fees 795 795 (4)
Executive directors' reward payments 1,528 2,628
Non-executive directors' fees 69 74
Non-executive directors' reward
payments 22 25
Other key management fees 383 -
------ ------
2,797 3,522
------- -------
(1) Loans of USD 5.523m were made to a key management employee
for the acquisition of shares in the Company. Interest was payable
on these loans at 6 month US LIBOR plus 0.25% per annum and the
loans were secured on the shares acquired. The loans were repayable
on the earlier of the employee leaving the Company or April 2013.
In December 2012 the Board decided to renew the outstanding amount
of these loans for a period of another five years. Based on the
Board's decision, the outstanding amount is reduced annually on a
straight line over five years, as long as the key management
employee remains with the Company. The relevant reduction in the
loan amount for the year was USD 1.128m. The loans are classified
as "other assets" and are included under trade and other
receivables (note 12).
(2) A loan with a balance at 31 December 2015 of USD 0.499m (31
December 2014: USD 0.499m) has been received from an other related
company, Chanpak Ltd. The loan is free of interest, it is unsecured
and is repayable on demand. This loan is included within trade and
other payables (note 19).
(3) The amount payable to other key management personnel relates
to a payment made on behalf of the Company for investment purposes
and accrued consultancy fees.
(4) These payments were made directly to companies to which they are related.
No social insurance and similar contributions nor any other
defined benefit contributions plan costs were incurred for the
Group in relation to its key management personnel in either 2015 or
2014.
Noam Lanir, through an Israeli partnership, is the major
shareholder of Babylon Limited, an Israel based Internet Services
Company. The Group as of 31 December 2015 held a total of 1.941m
shares at a value of USD 0.931m (2014: 1.941m shares at a value of
USD 0.922m) which represents 4% of its effective voting rights. The
investment in Babylon Ltd is included within public equity
investments under financial assets at fair value through profit or
loss (note 5).
During the year the Group received administrative services of
USD 0.039m (2014: 0.103) in connection with investments from an
other related company, Mash Medical Life Tree Marketing Ltd.
During the year deeds of pledges of an amount of USD 5.4m were
given for an other related party, Chanpak Ltd, in relation to a
bank loan which was repaid in February 2016.
31. Provisions
The movement in provisions for the year is as follows:
2015 2014
US $000 US $000
As at 1 January - 26
Additions (note 32) 513 -
Settlements - (26)
----- -----
As at 31 December 513 -
------ ------
Allocated as:
Current liability 128 -
Non-current liability 385 -
------ ------
513 -
------ ------
32. Litigation
Fairfield Sentry Ltd vs custodian bank and beneficial owners
One of the custodian banks that the Group uses faces a
contingent claim up to USD 2.1m, and any interest as will be
decided by a US court and related legal fees, with regards to the
redemption of shares in Fairfield Sentry Ltd, which were bought in
2008 at the request of Livermore and on its behalf. The same case
was also filed in BVI where the Privy Council ruled against the
plaintiffs.
As a result of the surrounding uncertainties over the existence
of any obligation for Livermore, as well as for the potential
amount of exposure, the Directors cannot form an estimate of the
outcome for this case and therefore no provision has been made.
No further information is provided on the above case as the
Directors consider it could prejudice its outcome.
Ex employee vs Empire Online Ltd
In 2007 an ex employee of Empire Online Limited (the Company's
former name) filed a law suit against one of its Directors and the
Company in the Labor Court in Tel Aviv. According to the lawsuit
the plaintiff claimed compensation relating to the sale of all
commercial activities of Empire Online Limited until the end of
2006, and the dissolution of the company and the terms of
termination of his employment with Empire Online Limited.
Prior to the filing of the lawsuit in Israel, the Company filed
a claim against the plaintiff in the Court in Cyprus based upon
claims concerning breach of faith of the plaintiff towards his
employers. Litigation was completed in Israel.
On 5 March 2014, the Labor Court in Tel Aviv issued a ruling in
which the court denied most of the plaintiff's claims and accepted
only his claim for termination of employment. On 16 April 2014 the
plaintiff filed an appeal against the ruling. On 10 June 2015 the
court held a hearing of the appeal and suggested that both sides to
settle the dispute by means of mediation. On 20 January 2016 the
parties reached an agreement for an out of court settlement, for
which a corresponding provision has been made (note 31).
33. Commitments
As part of the lease extension agreement with SBB in 2015, the
Group will invest up to a maximum of CHF 3.95m and SBB is expected
to invest up to CHF 9m to upgrade the property and allow for
additional workspaces.
Other than the above, the Group has no capital or other
commitments as at 31 December 2015.
34. Events after the reporting date
There were no material events after the end of the reporting
year, which have a bearing on the understanding of these
consolidated financial statements.
35. Financial risk management objectives and policies
Background
The Group's financial instruments comprise available for sale
financial assets, financial assets at fair value through profit or
loss, derivatives, cash balances and receivables and payables that
arise directly from its operations. For an analysis of financial
assets and liabilities by category, refer to note 36.
Risk objectives and policies
The objective of the Group is to achieve growth of shareholder
value, in line with reasonable risk, taking into consideration that
the protection of long-term shareholder value is paramount. The
policy of the Board is to provide a framework within which the
investment manager can operate and deliver the objectives of the
Group.
Risks associated with financial instruments
Foreign currency risk
Foreign currency risks arise in two distinct areas which affect
the valuation of the investment portfolio, 1) where an investment
is denominated and paid for in a foreign currency; and 2) where an
investment has substantial exposure to non-US Dollar underlying
assets or cash flows denominated in a foreign currency. The Group
in general does not hedge its currency exposure. The Group
discretionally and partially hedges against foreign currency
movements affecting the value of the investment portfolio based on
its view on the relative strength of certain currencies. Any
hedging transactions represent economic hedges; the Group does not
apply hedge accounting in any case. Management monitors the effect
of foreign currency fluctuations through the pricing of the
investments. The level of financial instruments denominated in
foreign currencies held by the Group at 31 December 2014 is the
following:
2015 2015 2015 2014 2014 2014
US $000 US $000 US $000 US $000 US $000 US $000
Financial Liabilities Net Financial Liabilities Net value
assets value assets
British Pounds
(GBP) 1,611 (4,475) (2,864) 1,485 (6,982) (5,497)
Euro 2,641 (253) 2,388 3,947 (228) 3,719
Swiss Francs
(CHF) 28,653 (9) 28,644 31,109 (8) 31,101
Indian Rupee
(INR) 7,099 - 7,099 9,142 - 9,142
Israel Shekels
(ILS) 2,850 (90) 2,760 2,892 (90) 2,802
Others - (5) (5) - (5) (5)
------ ------ ------ ------ ------ ------
Total 42,854 (4,832) 38,022 48,575 (7,313) 41,262
------ ------ ------ ------ ------ ------
Also, some of the USD denominated investments are backed by
underlying assets which are invested in non-USD assets. For
instance, investments in certain emerging market private equity
funds are denominated in USD but the funds in turn have invested in
assets denominated in non-USD currencies.
A 10% increase of the following currency rates against the rate
of United States Dollar (USD) at 31 December 2015 would have the
following impact. A 10% decrease of the following currencies
against USD would have an approximately equal but opposite
impact.
2015 2015 2014 2014
US $000 US $000 US $000 US $000
Profit Other comprehensive Profit Other comprehensive
or loss income or loss income
British Pounds
(GBP) (445) 159 (696) 146
Euro 162 77 221 150
Swiss Francs
(CHF) 2,842 - 3,110 -
Indian Rupee
(INR) - 710 - 914
Israel Shekels
(ILS) 273 3 280 -
------ ------ ------ ------
Total 2,832 949 2,915 1,210
------ ------ ------ ------
The above analysis assumes that all other variables in
particular, interest rates, remain constant. The analysis does not
include the impact arising from the translation of foreign
operations from their functional to the presentation currency.
Interest rate risk
The Group is exposed to interest rate risk on its
interest-bearing instruments which are affected by changes in
market interest rates. The Group has borrowings of USD 76.4m (2014:
USD 78.0m) related to a real estate asset (Wylerpark, Bern).
The Group has banking credit lines which are available on short
notice for the Group to use in its investment activities, the costs
of which are based on variable rates plus a margin. When an
investment is made utilising the facility, consideration is given
to the financing costs which would impact the returns. The level of
banking facilities used is monitored by both the Board and the
management on a regular basis. The level of banking facilities
utilised at 31 December 2015 was USD 13.2m (2014: USD 10.4m).
As at 31 December 2015 the Group had no financial liabilities
that bore an interest rate risk, other than the previously
disclosed bank facilities.
Interest rate changes will also impact equity prices. The level
and direction of changes in equity prices are subject to prevailing
local and world economics as well as market sentiment all of which
are very difficult to predict with any certainty.
The Group has fixed and floating rate financial assets including
bank balances that bear interest at rates based on the banks
floating interest rates. In particular, the fair value of the
Group's fixed rate financial assets is likely to be negatively
impacted by an increase in interest rates. The interest income of
the Group's floating rate financial assets is likely to be
positively impacted by an increase in interest rates.
The Group has exposure to US bank loans and to a lesser degree
emerging market loans through CLO equity tranches. An investment in
the CLO equity tranche represents a leveraged investment into such
loans. As these loans (assets of a CLO) and the liabilities of a
CLO are floating rate in nature (typically 3 month LIBOR as the
base rate), the residual income to CLO equity tranches is normally
linked to the floating rate benchmark and thus normally do not
carry substantial interest rate risk. In the current low rate
environment, however, most loans feature a LIBOR floor. The
presence of LIBOR floors creates an interest rate risk to CLO
equity distributions as long as the benchmark rate is below the
weighted average LIBOR floor level on the CLO loan portfolio. Thus,
an increase in the benchmark floating rate up to the weighted
average LIBOR floor level is expected to cause distributions to CLO
equity to reduce whereas a decrease in the benchmark floating rate
is expected to increase such distributions.
The Group's interest bearing assets and liabilities are as
follows:
2015 2014
US $000 US $000
Financial assets - subject
to:
- fair value changes 4,534 4,903
- interest changes 88,816 83,869
------ ------
Total 93,350 88,772
------ ------
Financial liabilities
- subject to:
- interest changes 89,618 88,447
------ ------
Total 89,618 88,447
------ ------
Changes in market interest rates will affect the valuation of
fixed rate interest bearing instruments. A 1% (100 basis points)
change in market interest rates would result in an estimated -0.18%
change in the net asset value as at 31 December 2015 (2014:
-0.23%).
An increase of 1% (100 basis points) in interest rates would
have the following impact. An equivalent decrease would have an
approximately equal but opposite impact.
2015 2015 2014 2014
US $000 US $000 US $000 US $000
Profit Other comprehensive Profit Other comprehensive
or loss income or loss income
Financial assets
- fair value changes (269) - (322) -
- interest changes 888 - 839 -
Financial liabilities
- interest changes (896) - (884) -
------ ------ ------ ------
(277) - (367) -
------ ------ ------ ------
The above analysis assumes that all other variables, in
particular currency rates, remain constant.
Market price risk
By the nature of its activities, most of the Group's investments
are exposed to market price fluctuations. The Board monitors the
portfolio valuation on a regular basis and consideration is given
to hedging or adjusting the portfolio against large market
movements.
The Group had no single major financial instrument that in
absolute terms and as a proportion of the portfolio could result in
a significant reduction in the NAV and share price. Due to the very
low exposure of the Group to public equities, and having no
specific correlation to any market, the equity price risk is low.
The portfolio as a whole does not correlate exactly to any
Index.
Management of risks is primarily achieved by having a
diversified portfolio to spread the market price risk. The Group
has investments in CLO equity tranches. These investments represent
leveraged exposure to typically senior secured loans. Investments
in CLOs are subject to many risks including market price risk,
liquidity, credit risk, interest rate, reinvestment and certain
other risks.
Prices of these CLO investments may be volatile and will
generally fluctuate due to a variety of factors that are inherently
difficult to predict, including but not limited to changes in
prevailing credit spreads and yield expectations, interest rates,
underlying portfolio credit quality and market expectations of
default rates on non-investment grade loans, general economic
conditions, financial market conditions, legal and regulatory
developments, domestic and international economic or political
events, developments or trends in any particular industry, and the
financial condition of the obligors that constitute the underlying
portfolio.
A 10% uniform change in the value of the Group's portfolio of
financial instruments (excluding private equities and financial and
minority holdings) would result in a 4.84% change in the net asset
value as at 31 December 2015 (2014: 5.55%), and would have the
following impact (either positive or negative, depending on the
corresponding sign of the change):
2015 2015 2014 2014
US $000 US $000 US $000 US $000
Profit Other comprehensive Profit Other comprehensive
or loss income or loss income
Available-for-sale
financial assets - 6,721 - 7,677
Financial assets at
fair value through
profit or loss 358 - 403 -
------ ------ ------ ------
358 6,721 403 7,677
------ ------ ------ ------
Derivatives
The Investment Manager may use derivative instruments in order
to mitigate market risk or to take a directional investment. These
provide a limited degree of protection and would not materially
impact the portfolio returns if a large market movement did
occur.
Credit Risk
The Group invests in a wide range of securities with various
credit risk profiles including investment grade securities and sub
investment grade positions. The investment in debt instruments is
both in investment grade securities and in sub investment grade or
unrated debt instruments. The investment manager mitigates the
credit risk via diversification across issuers. However, the Group
is exposed to a migration of credit rating, widening of credit
spreads and default of any specific issuer.
The Group only transacts with regulated institutions on normal
market terms which are trade date plus one to three days. The
levels of amounts outstanding from brokers are regularly reviewed
by the management. The duration of credit risk associated with the
investment transactions is the period between the date the
transaction took place, the trade date and the date the stock and
cash are transferred, the settlement date. The level of risk during
the period is the difference between the value of the original
transaction and its replacement with a new transaction. The Group
is mainly exposed to credit risk in respect of its fixed income
investments (mainly CLOs) of USD 72.6m (2014: USD 83.8m). The
Group's maximum credit risk exposure at 31 December 2015 is as
follows:
2015 2014
US $000 US $000
Financial assets:
Loans and receivables:
Trade and other receivables 3,090 19,768
Cash at bank 25,770 3,807
------ ------
28,860 23,575
Available-for-sale financial assets 65,946 82,217
Financial assets at fair value through
profit or loss 6,655 1,623
Investments in associate and joint - -
venture
Derivatives - 1,125
------ ------
101,461 108,540
------- -------
The fair values of the Group's investments in bonds and other
debt instruments are also affected by the credit risk of those
instruments. However, it is not practical to provide an analysis of
the changes in fair values due to the credit risk impact for the
year or previous periods, nor to provide any relevant sensitivity
analysis.
The Group has exposure to US senior secured loans and to a
lesser degree emerging market loans through CLO equity tranches.
These loans are primarily non-investment grade loans or interests
in non-investment grade loans, which are subject to credit risk
among liquidity, market value, interest rate, reinvestment and
certain other risks. It is anticipated that these non-investment
grade loans generally will be subject to greater risks than
investment grade corporate obligations.
A non-investment grade loan or debt obligation or an interest in
a non-investment grade loan is generally considered speculative in
nature and may become a defaulted security for a variety of
reasons. A defaulted security may become subject to either
substantial workout negotiations or restructuring, which may
entail, among other things, a substantial reduction in the interest
rate, a substantial write-down of principal, and a substantial
change in the terms, conditions and covenants with respect to such
defaulted security. In addition, such negotiations or restructuring
may be quite extensive and protracted over time, and therefore may
result in substantial uncertainty with respect to the ultimate
recovery on such defaulted security. Bank loans have historically
experienced greater default rates than has been the case for
investment grade securities.
The Group has no investment in sovereign debt as at 31 December
2015 or 2014.
At 31 December the credit rating distribution of the Group's
asset portfolio subject to credit risk (CLOs, bonds and other debt
instruments, bank balances and receivables) was as follows:
Rating 2015 Percentage 2014 Amount Percentage
Amount
US $000 US $000
AA 18,772 18.5%
A+ - - 1,000 0.9%
A 976 1.0% 16,125 14.9%
A- 6,326 6.2% 4,321 4.0%
BB 2,900 2.9% 3,280 3.0%
BB+ 1,116 1.1% 1,111 1.0%
BB- 518 0.5% 512 0.5%
Not Rated 70,853 69.8% 82,191 75.7%
------ ------ ------ ------
101,461 100% 108,540 100%
------ ------ ------ ------
Included within "not rated" amounts are investments in loan
market through CLOs of USD 63.046m (2014: USD 78.936m).
The modelled IRRs on the CLO portfolio are in low teens
percentage points.
Liquidity Risk
The major financial liability of the Group is the bank loan of
CHF 76.4m (USD 78.0m) used for purchase of a real estate property,
which has a maturity in 2029. The loan is collateralized by
property valued at CHF 123.3m (USD 123.3m) at 31 December 2015. The
loan is non-recourse, i.e. the holding company and its assets
(apart from the Wyler Park property) are neither pledged for this
loan nor liable for recovery in case of default. The following
table summarizes the contractual cash outflows in relation to the
Group's financial liabilities according to their maturity.
31 December 2015 Carrying Less than Between Between Over
amount 1 year 1 and 2 and 5 years
2 years 5 years
US $000 US $000 US $000 US $000 US $000
Bank loan 76,410 2,477 2,557 75,531 -
Bank overdraft 13,208 13,208 - - -
Trade and other payables 2,207 2,207 - - -
Forward contracts - - -
------ ------ ------ ------ ------
Total 91,825 17,892 2,557 75,531 -
------ ------ ------ ------ ------
31 December 2014 Carrying Less than Between Between Over
amount 1 year 1 and 2 and 5 years
2 years 5 years
US $000 US $000 US $000 US $000 US $000
Bank loan 78,092 78,143 - - -
Bank overdraft 10,355 10,355
Trade and other payables 1,736 1,736 - - -
------ ------ ------ ------ ------
Total 90,183 90,234 - - -
------ ------ ------ ------ ------
A significant proportion of the Group's portfolio is invested in
mid-term private equity investments with low or no liquidity. The
investments of the Group in publicly traded securities are subject
to availability of buyers at any given time and may be very low or
non-existent subject to market conditions.
There is currently no exchange traded market for CLO securities
and they are traded over-the-counter through private negotiations
or auctions subject to market conditions. Currently the CLO market
is liquid, but in times of market distress the realization of the
investments in CLOs through sales may be below fair value.
The management take into consideration the liquidity of each
investment when purchasing and selling in order to maximise the
returns to shareholders by placing suitable transaction levels into
the market.
At 31 December 2015, the Group had liquid investments totalling
USD 102.6m, comprising of USD 25.8m in cash and cash equivalents,
USD 65.9 in investments in loan market through CLOs, USD 6.6m in
other fixed income investments, USD 3.2m in public equities and USD
1.1m in hedge funds. Management structures and manages the Group's
portfolio based on those investments which are considered to be
long term, core investments and those which could be readily
convertible to cash, are expected to be realised within normal
operating cycle and form part of the Group's treasury function.
Capital Management
The Group considers its capital to be its issued share capital
and all of its reserves.
The Group manages its capital to ensure that it will be able to
continue as a going concern while maximising the return to
shareholders through the optimisation of the balance between its
net debt and equity.
Net debt to equity ratio is calculated using the following
amounts as included on the consolidated statement of financial
position, for the reporting periods under review:
2015 2014
US $000 US $000
Cash at bank (25,770) (3,807)
Bank overdrafts 13,208 10,355
Bank loans 76,410 78,092
------ ------
Net Debt 63,848 84,640
------ ------
Total equity 148,637 159,974
------ ------
Net debt to equity ratio 0.43 0.53
------- -------
The Board believes that the ratio remains at an acceptable and
manageable level.
36. Financial assets and liabilities by IAS 39 category
Note 2015 2014
US $000 US $000
Financial assets:
Loans and receivables:
Trade and other receivables 12 3,090 19,768
Cash at bank 13 25,770 3,807
------ ------
28,860 23,575
Available-for-sale financial assets 4 81,147 101,935
Financial assets at fair value through
profit or loss 5 9,801 5,510
Derivative financial instruments 16 - 1,125
------ ------
119,808 132,145
------- -------
Financial liabilities:
Financial liabilities at amortised
cost:
Bank loan 17 76,410 78,092
Bank overdrafts 18 13,208 10,355
Trade and other payables 19 2,207 1,736
------ ------
91,825 90,183
Financial liabilities at fair value
through profit or loss:
Derivative financial instruments 16 217 -
------ ------
92,042 90,183
------- -------
The carrying amount of the financial assets and liabilities at
amortised cost approximates to their fair value.
Shareholder Information
Registrars
All enquiries relating to shares or shareholdings should be
addressed to:
Capita Registrars
PXS
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone: 0870 162 3100
Facsimile: 020 8639 2342
Change of Address
Shareholders can change their address by notifying Capita
Registrars in writing at the above address.
Website
www.livermore-inv.com
The Company's website provides, amongst other things, the latest
news and details of the Company's activities, share price details,
share price information and links to the websites of our
brands.
Direct Dividend Payments
Dividends can be paid automatically into shareholders' bank or
building society accounts. Two primary benefits of this service
are:
-- There is no chance of the dividend cheque going missing in the post; and
-- The dividend payment is received more quickly because the
cash sum is paid directly into the account on the payment date
without the need to pay in the cheque and wait for it to clear.
As an alternative, shareholders can download a dividend mandate
and complete and post to Capita Registrars.
Lost Share Certificate
If your share certificate is lost or stolen, you should
immediately contact Capita Registrars on 0870 162 3100 who will
advise on the process for arranging a replacement.
Duplicate Shareholder Accounts
If, as a shareholder, you receive more than one copy of a
communication from the Company you may have your shares registered
in at least two accounts. This happens when the registration
details of separate transactions differ slightly. If you wish to
consolidate such multiple accounts, please call Capita Registrars
on 0870 162 3100.
Please note that the Directors of the Company are not seeking to
encourage shareholders to either buy or sell the Company's
shares.
Corporate Directory
Secretary Principal Bankers
Chris Sideras Bank Hapoalim
Registered Office 18 Boulevard Royal
Trident Chambers BP 703
PO Box 146 L-2017
Road Town Luxembourg
Tortola
British Virgin Islands FIBI Bank
Company Number Seestrasse 61
475668 Zurich 8027
Registrars Switzerland
Capita Registrars
PXS Credit Suisse AG
34 Beckenham Road Seeefldstrasse 1
Beckenham Zurich 8070
Kent BR3 4TU Switzerland
England
Auditor UBS AG
Grant Thornton (Cyprus) Ltd Paradeplatz 6
143, Spyrou Kyprianou Avenue CH-8098 Zürich
Limassol 3083 Switzerland
Cyprus
Solicitors Bank Julius Baer & Co. Ltd.
Travers Smith Bahnhofstrasse 36,
10 Snow Hill CH-8010 Zurich,
London Switzerland
EC1A 2AL
England
Nominated Adviser & Broker
Arden Partners plc
125 Old Broad Street
London
EC2N 1AR
England
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEDFADFMSESI
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May 24, 2016 02:01 ET (06:01 GMT)
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