TIDMLIV
RNS Number : 2915G
Livermore Investments Group Limited
26 May 2017
Livermore Investments Group Limited
Annual Report & Consolidated Financial Statements for the
year ended 31 December 2016
Highlights
-- Net Asset Value per share increased 16.8% to USD 0.90 (December 2015: USD 0.77).
-- In addition, the Company returned USD 22.9m to shareholders
in 2016 by distributing a dividend of USD 0.0858 per share and
buying back 17,475,585 shares at an average price of GBP 0.34.
-- Successfully sold its Wyler Park property in Bern in 2016.
The investment generated a total return of 122% on the investment
amount.
-- CLO portfolio performed strongly generating over 41% gains in 2016.
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 2016.
The year-end NAV was USD 0.90 per share after payment of a USD
15m dividend, USD 0.0858 per share (2015 NAV: USD 0.77 per share).
Further, the Company bought back 17,475,585 shares in the year for
a total cost of USD 7.86m. Net profit, including discontinued
operations, for the year was USD 34.0m (2015 Net loss: USD
4.7m).
Following the successful refinancing and lease extension with
SBB of its Wyler Park property in Bern, the Company took advantage
of strong demand for properties offering stable yields in the
market and sold the property in October 2016 generating a total
return of 122% on invested capital.
The Company recorded gains from the sale of the Wyler Park
property and a solid performance from the financial portfolio as
the CLO market recovered sharply after management took advantage of
low prices earlier in the year. Interest and dividend income from
the financial portfolio totalled USD 26.3m (2015: USD 25.7m).
Financial Review
The NAV of the Group at 31 December 2016 was USD 157.2m (2015:
USD 148.6m). Net profit, including discontinued operations, during
the year was USD 34m, which represents earnings per share of USD
0.19.
Administrative expenses, including discontinued operations,
excluding provisions were USD 8.2m (2015: USD 5.2m).
The overall change in the NAV is primarily attributed to the
following:
31 December 2016 31 December 2015
----------------------------------------------------- ----------------- -----------------
US $m US $m
----------------------------------------------------- ----------------- -----------------
Shareholders' funds at beginning of year 148.6 160.0
----------------------------------------------------- ----------------- -----------------
___________ ___________
----------------------------------------------------- ----------------- -----------------
Income from investments 30.4 30.9
----------------------------------------------------- ----------------- -----------------
Disposal of Wyler Park 7.6 -
----------------------------------------------------- ----------------- -----------------
Other income - 0.1
----------------------------------------------------- ----------------- -----------------
Realised gains / (losses) on investments 0.3 (2.5)
----------------------------------------------------- ----------------- -----------------
Loss on impairment of investments - (31.7)
----------------------------------------------------- ----------------- -----------------
Unrealised gains on investments (2.9) 8.4
----------------------------------------------------- ----------------- -----------------
Unrealised exchange profit / (losses) 1.7 (0.4)
----------------------------------------------------- ----------------- -----------------
Administration costs (8.2) (5.2)
----------------------------------------------------- ----------------- -----------------
Net finance costs (1.2) (2.5)
----------------------------------------------------- ----------------- -----------------
Tax credit / (charge) 3.8 (2.0)
----------------------------------------------------- ----------------- -----------------
___________ ___________
----------------------------------------------------- ----------------- -----------------
Increase / (decrease) in net assets from operations 31.5 (4.9)
----------------------------------------------------- ----------------- -----------------
Purchase of own shares (7.9) (1.5)
----------------------------------------------------- ----------------- -----------------
Dividends paid (15.0) (5.0)
----------------------------------------------------- ----------------- -----------------
___________ ___________
----------------------------------------------------- ----------------- -----------------
Shareholders' funds at end of year 157.2 148.6
----------------------------------------------------- ----------------- -----------------
------ ------
----------------------------------------------------- ----------------- -----------------
Net Asset Value per share US $0.90 US $0.77
----------------------------------------------------- ----------------- -----------------
Dividend & Buyback
For the year ended 31 December 2016, the Board announced an
interim dividend of USD 15m (USD 0.0858 per share) to members on
the register on 6 January 2017. The dividend was paid on 27 January
2017.
During 2016, the Company bought back 17,475,585 shares to be
held in treasury for a total cost of USD 7.86m. As at 31 December
2016, the Company held 129,306,403 shares in treasury.
Richard B Rosenberg Noam Lanir
Chairman Chief Executive Officer
25 May 2017
Review of Activities
Introduction and Overview
The Company had a very strong performance in 2016, demonstrating
the knowledge and skills of the management team to create value as
well as the resilience of the portfolio. Despite a tough start from
a global economy and financial markets perspective, the Company
generated a 16.8% increase in Net Asset Value per share in 2016.
The success in 2016 came headwinds in the energy and commodity
markets and unexpected geo-political events such as "Brexit" and
the US election results.
During the year, significant effort was put into actively
managing the CLO portfolio as well as negotiating the sale of the
Wyler Park property. Active CLO portfolio management included
several secondary purchases when the markets mispriced credit risk
earlier in the year as well as engaging with CLO managers to manage
risky loans and taking advantage of the weak US Leveraged Loan
market to increase spread on the underlying collateral. Further,
management converted its existing warehouse into a CLO and the
warehouse generated a 23% return over its 10 months' life.
The Wyler Park sale was accomplished as a sale of shares of the
company holding the Wyler Park asset generating a total return of
122% on invested capital. The sale generated USD 57.2m in net cash
to the Company.
In 2016, the Group generated interest and dividend income of USD
26.3m and investment property income of USD 4.5m. The Group
reported NAV/share of USD 0.90 after a dividend of USD 0.0858/share
(2015: USD 0.77) and net profit of USD 34m. Administrative expenses
amount to USD 8.2m (2015: USD 5.2m) and finance costs were USD 1.2m
(2015: USD 2.5m).
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 moderate global economic recovery continued in 2016.
Following subdued growth in the first half of the year, the global
economy gained momentum primarily stimulated by developments in the
US. Favourable financing conditions, robust economic growth in
China and the stabilisation of commodity prices contributed to the
slight upturn in global manufacturing. The economic situation in
many commodity exporting countries, however, remained challenging.
Oil and commodity prices recovered somewhat over the course of the
year.
Inflation, as measured by the CPI, remained below central bank
targets in most advanced economies. Compared to 2015, however,
annual inflation recorded a slight increase in most cases,
predominantly due to higher energy prices. In the euro area,
inflation dropped to an average of 0.2%, remaining well short of
the ECB's price stability objective of 'below, but close to 2%'. In
the US, inflation reached 2.1% in December 2016, its highest level
since June 2014, and averaged 1.3% in 2016, following virtual price
stagnation in the previous year.
Economic growth in the US averaged 1.6% in 2016, down
significantly over the previous year. The strength of the US dollar
and rising credit risk premia dampened investment and exports.
Furthermore, investment activity in the energy and mining sector
continued to decline due to low oil and commodity prices. In the
second half of the year, however, the US economy gained momentum
driven by private consumption. The labour market edged closer to
full employment with the unemployment rate down to 4.7% by the end
of the year.
In the euro area, GDP advanced by 1.7% in 2016, having grown by
2.0% the previous year. The expansionary monetary policy of the
European Central Bank (ECB) continued to bolster economic
developments. The economy picked up in all euro area countries and
was broad based, with Germany remaining the driving force. Low
energy prices and favourable financing conditions contributed to
domestic demand, while exports expanded slightly thanks to the weak
euro. Employment continued to gain momentum and the unemployment
rate dropped below 10%.
Japan's moderate economic recovery continued in 2016, with GDP
advancing by 1.0%. However, the substantial appreciation of the yen
in the first half of 2016 weighed significantly on the Japanese
economy. Consequently, the government launched a comprehensive
economic stimulus package and postponed the next consumption tax
increase. The labour market continued to improve and the
unemployment rate registered a further decline, dropping to 3.1% by
December.
Switzerland's economy gained some momentum in 2016, sustaining
its recovery from the sharp appreciation of the Swiss franc at the
beginning of 2015. GDP was up by 1.3%, following growth of 0.8% in
the previous year whereas the situation on the labour market
continued to stabilise.
Disappointing manufacturing indicators in China at the beginning
of the year raised concerns about the country's growth outlook,
leading to turbulence on the international financial markets.
Monetary and fiscal stimulus measures subsequently helped to
stabilise the economy. GDP growth averaged 6.7% in 2016.
The Indian economy developed favourably overall. GDP grew
slightly above potential (around 7%) in the first three quarters.
In addition, the government made some headway with important reform
packages, such as the nationwide harmonisation of the goods and
services tax. In November, the government carried out a surprise
currency reform aimed at curtailing the shadow economy, but
bottlenecks in the supply and distribution of new banknotes put a
considerable damper on economic growth.
In view of low core inflation, central banks in many countries
maintained their expansionary monetary policies. One exception was
the US, where inflation had come in close to target. Given the
favourable labour market situation and satisfactory inflation
development, the US Federal Reserve raised the target range for its
policy rate by 0.25 percentage points to between 0.5% and 0.75% in
December. The ECB, by contrast, introduced further substantial
easing measures lowering its deposit rate by 0.1 percentage points
to - 0.4%, and the main refinancing rate by 0.05 percentage points
to 0%. Furthermore, it increased its monthly asset purchases and
pledged to purchase corporate bonds for the first time.
Persistently low inflation induced the Bank of Japan to adopt
negative rates and yield curve control policies.
Global financial markets started the year on the back foot as
concerns over China's growth and capital flight issues took hold
and the market digested the US Federal Reserve's expectation of
multiple rate hikes in 2016. Already high credit risk premia and
the downslide in oil and commodity markets did not help the
situation. However, the financial markets recovered sharply from
March onwards as the ECB and the Bank of Japan instituted
additional easing measures and data out of China was
supportive.
The S&P 500 Index dropped 11.5% but recovered sharply and
ended the year 9.8% higher than the start of the year whereas the
EuroStoxx 50 Index recovered to almost flat levels after dropping
18.5% earlier in the year. The yields on the US treasury bonds
ended marginally higher at 2.444% versus 2.2694% at the start of
the year as expectations of expansionary fiscal policies took hold
with the election of a new US President. However, German and Euro
area government bond yields declined on account of lower interest
rates and additional monetary policy easing. Credit spreads
recovered sharply in response to better growth prospects, recovery
in energy and commodity markets, and additional monetary policy
easing. US High yield and Leveraged Loan markets generated total
returns of 17.5% and 9.88% as measured by the Bloomberg Barclays US
Corporate High Yield Total Return Index and the Credit Suisse
Leveraged Loan Index respectively.
Sources: Board of Governors of the Federal Reserve System,
European Central Bank (ECB), Swiss National Bank, Bloomberg, Morgan
Stanley
Livermore's Strategy
The financial portfolio is focused on fixed income instruments
which generate regular cash flows and include exposure mainly to
senior secured and usually broadly syndicated US loans and to a
limited extent emerging market debt through investments in CLOs.
This part of the portfolio is geographically focused on the US.
Strong emphasis is given to maintaining sufficient liquidity and
low leverage at the overall portfolio level and to re-invest in
existing and new investments along the economic cycle.
Financial portfolio and trading activity
The Group manages a financial portfolio valued at USD 103.3m as
at 31 December 2016, which is invested mainly in fixed income and
credit related securities.
The following is a table summarizing the financial portfolio as
of year-end 2016
Name 2016 2015
Book Value Book Value
US $m US $m
------------------- ------------- -----------
Investment in
the loan market
through CLOs 81.8 66.0
Open Warehouse
facilities 17.3 5.0
Hedge Funds 1.0 1.0
Perpetual Bonds 1.2 1.8
Other Public
Equities 2.0 2.9
------------------- ------------- -----------
Invested Total 103.3 76.7
------------------- ------------- -----------
Cash 60.4 25.8
------------------- ------------- -----------
Total 163.7 102.5
------------------- ------------- -----------
Senior Secured Loans and Collateralized Loan Obligations
(CLO):
US senior secured loans are a floating rate asset class with a
senior secured claim on the borrower and with overall low
volatility and low correlation to the equity market. CLOs are
managed portfolios invested into diversified pools of senior
secured loans and financed with long term financing.
With the energy and commodity complex continuing to trade at
very low levels, 2016 had a difficult start for the credit and US
Leveraged Loan and CLO market. US senior secured loans offered wide
spreads and very attractive risk-return characteristics. By
mid-March, however, the credit markets and US Leveraged Loan
markets started a strong recovery as investors saw the value and
concerns about defaults and economic growth diminished. The US
Leveraged Loan market returned an impressive 9.88% in 2016 as
measured by the Credit Suisse Leveraged Loan Index, the highest
annual return since 2010.
As expected, CLO managers also took advantage of the weaker loan
market earlier in the year and invested in higher spreads and lower
priced loans to add value. In addition, with the specialized
experience of management, the Company bought strong performing CLO
equity positions at deep discount, while the existing portfolio
continued to outperform the market - highlighting management's
strong selection and origination expertise. Further, as spreads in
the debt markets tightened, management worked with its CLO managers
and refinanced a few of its positions to lower the cost of
financing in those CLOs.
The Group's CLO portfolio generated a return of approximately
40% in 2016 and continued to generate strong cash flows aggregating
USD 26.0m in 2016. In addition, the Group converted its warehouse
into a CLO and generated a 23% cash return during the 10 month
warehousing period. In the second half of the year, the Company
invested in the first-loss tranche of three new warehouse
facilities with long tenures and no mark-to-market triggers.
Management successfully converted these warehouses into new issue
CLOs in 2017 as it expects cost of CLO financings to decline
materially given the demand for floating rate secured debt. As of
the end of the year 2016, all of the Group's US CLO equity
positions were passing their Overcollateralization (OC) tests and
remained robust. Management continues to actively monitor the CLO
portfolio and position it towards longer reinvestment periods with
better quality loans and conduct relative value as well as
opportunistic trading.
Looking into the near future, management believes that default
rates should continue to stay below historical averages as only
4.4% of the US Leveraged Loan market matures before 2019 and the
new US Government expects to increase economic growth. Management
continues to focus on sectors such as Retail, Healthcare and Energy
that are expected to undergo shifts due to technology or
regulation.
While management maintains a positive view on the CLO portfolio,
mid-long term performance may be negatively impacted by a strong
pull back in the US or European economy or geo-political events
that could result in a spike in defaults. Despite positive
developments in the overall health of the US economy, we
acknowledge the continued below trend growth globally as well as
headwinds relating to the potential monetary tightening in the US,
weak commodity markets and geopolitical risks.
The Group's CLO portfolio is divided into the following
geographical areas:
2016 Percentage 2015 Percentage
Amount Amount
US US $000
$000
US CLOs 78,725 96.28% 60,401 91.6%
Global Credit
CLOs 2,495 3.05% 4,780 7.2%
European
CLOs 548 0.67% 765 1.2%
------ ------ ------ ------
81,768 100% 65,946 100%
------ ------ ------ ------
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. The Group expects material exits of
portfolio companies from funds to materialize between 2017 and
2020. During the reporting period distributions of USD 0.2m were
received from SRS Private.
The following summarizes the book value of the private equity
funds as at year-end 2016
Name Book Value
US $m
----------------------- ------------
Evolution Venture
(Israel) 1.9
SRS Private (India) 1.3
Elephant Capital
(India) 0.6
Da Vinci (Russia) 0.4
Panda Capital
(China) 0.3
Other investments 1.0
India Blue Mountains -
(India)
----------------------- ------------
Total 5.5
----------------------- ------------
Evolution Venture: Evolution is an Israel focused Venture
Capital fund. It invests in early stage technology companies. Its
investments include a carrier-class Mobile Broadband Wireless (MBW)
Wi-Fi solutions company, a mobile keyboard and language correction
software company, a software company operating in the digital radio
market, a software test tool developer, and a virtualization
technology company. The virtualization technology company has been
performing well.
SRS Private Fund: SRS Private is a private equity fund focused
on real estate in India. The fund has invested in residential and
mixed use projects in India as well as directly in certain real
estate companies. The assets are primarily located in and around
major cities of India such as Mumbai and Hyderabad. In 2016, the
fund distributed USD 0.2m from proceeds of its investment in SRS
Charminar.
Elephant Capital: India-focused private equity fund, which is
AIM quoted (Ticker: ECAP). During the period, the fund delisted
from the LSE/AIM market in order to reduce costs given the small
size of the remaining fund. Livermore owns 9.9% of the delisted
fund. As of August 2016, the fund reported an unaudited NAV of 0.36
pence per share.
Da Vinci: The fund is primarily focused on Russia and CIS
countries and is primarily invested in the Moscow Exchange and a
Ukrainian coal company.
Panda Capital: Panda Capital is a China-based private equity
fund focused on early-stage industrial operations in China. The
fund's main investment is in a bamboo flooring company in China,
which provides an innovative low cost alternative to hardwood
flooring in shipping containers. The manager is in the process of
building up operational capacity for product manufacturing.
India Blue Mountains: India Blue Mountains was a hotel and
hospitality development fund that has been reorganized into three
separate companies each holding a hotel development in India in
Mumbai, Pune and Goa. Once developed, all hotels will be managed by
the Accor Group (Novotel brands). Accor has also invested equity
and holds a 26% stake in all of the hotels. The Pune hotel is now
operational.
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 been reduced to nil.
The following table reconciles the review of activities to the
Group's financial assets as of 31 December 2016
2016
Name Book Value
US $m
---------------------- -------------
Financial Portfolio 103.3
Private Equity
Funds 5.5
---------------------- -------------
Total 108.8
---------------------- -------------
Financial assets
at fair value
through profit
or loss (note
5) 102.1
Financial assets
at fair value
through other
comprehensive
income (note
6) 6.7
Total 108.8
---------------------- -------------
Events after the reporting date
The three warehouse facilities that the Company invested in,
during 2016, were converted to CLOs in May 2017. For two out of the
three warehouses, with a carrying amount as at 31 December 2016 of
USD 11.185m, the company invested an additional amount of USD 15.5m
during 2017 (before their conversion). For these two warehouses,
Livermore's investment amount plus net carry amounting to USD 28.1m
became receivable in May 2017. For the other one, with a carrying
amount as at 31 December 2016 of USD 6.066m, the Company invested
an additional amount of USD 3m during 2017 (before its conversion).
For that warehouse, the amount to be received has not yet been
determined, however it is expected that it will exceed Livermore's
investment amount. There were no other 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 33 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 2016.
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 61), 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 50), 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 eighteen 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 49), Executive Director and Chief Investment
Officer
Ron was appointed as Executive Director and Chief Investment
Officer on 10 August 2007. Ron has led the establishment and
development of Livermore's investment platform as a leading
specialized house in the credit space. Ron also has wide investment
and M&A experience. From 2001 to 2006 Ron served as a member of
the management at Bank Leumi, Switzerland and was responsible for
investment activity. Prior to this he spent five years as a
commercial lawyer advising banks and large corporations on
corporate transactions, including buy-outs and privatisations. Ron
has over 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 23 April 2017 the Directors are aware of the following
interests in 3 per cent or more of the Company's issued ordinary
share capital:
Number % of % of
of Ordinary issued voting
Shares ordinary rights*
share
capital
------------- ---------- ---------
Groverton Management
Ltd 133,936,588 44.04 76.62
RB Investments GmbH 25,456,903 8.37 14.56
Merrill Lynch Pierce,
Fenner & Smith, Inc 9,329,051 3.07 5.34
* after consideration of treasury shares (note 15).
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 31
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 (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 2016 were as follows:
Directors' Emoluments
Each of the Directors has a service contract with the
Company.
Director Date of Fees Benefits Reward Total emoluments
agreement US US $000 payments
$000 US $000
------------------ ------------ ------ --------- ----------
2016 2015
US $000 US $000
------------------ ------------ ------ --------- ---------- --------- ---------
Richard
Barry Rosenberg 10/06/05 60 - 50 110 91
------------------ ------------ ------ --------- ---------- --------- ---------
Noam Lanir 10/06/05 400 45 500 945 445
------------------ ------------ ------ --------- ---------- --------- ---------
Ron Baron 01/09/07 350 - 3,628 3,978 1,878
------------------ ------------ ------ --------- ---------- --------- ---------
The dates are presented in day / month / year format.
Directors' Interests
Interests of Directors in ordinary shares
Notes As at 31 December As at 31 December
2016 2015
------------ ------- ----------------------------------------- -----------------------------------------
Number Percentage Percentage Number Percentage Percentage
of Ordinary of ordinary of voting of Ordinary of ordinary of voting
Shares share rights Shares share rights
capital capital
------------ ------- ------------- ------------- ----------- ------------- ------------- -----------
Noam Lanir a) 133,936,588 44.041% 76.620% 151,412,173 49.787% 78.740%
------------ ------- ------------- ------------- ----------- ------------- ------------- -----------
Ron Baron b) 25,456,903 8.371% 14.560% 25,456,903 8.371% 13.240%
------------ ------- ------------- ------------- ----------- ------------- ------------- -----------
Richard
Barry
Rosenberg 15,000 0.005% 0.01% 15,000 0.005% 0.01%
--------------------- ------------- ------------- ----------- ------------- ------------- -----------
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 13).
Another loan of USD 2.500m was made during the year, for the
acquisition of shares in the Company. Interest is payable on the
loan at 6 month US LIBOR plus 0.25% per annum and the loan is
secured on the shares acquired. The loan is repayable on the
earlier of the employee leaving the Company or April 2020. The loan
is included within trade and other receivables (note 13).
Interests of Directors in share options
No of options Date Exercise Exercise Vesting
at of grant price, Price*, period of
31 December GBP US $ options
2016
--------------- -------------- ---------- --------- --------- -----------
Richard Barry
Rosenberg 500,000 13/05/08 0.30 0.37 Vested
--------------- -------------- ---------- --------- --------- -----------
The options are exercisable up to 10 years after the date of
grant. No options were exercised during the year ended 31 December
2016.
* 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
2016.
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 36 of the consolidated financial statements.
Share Capital
There was no change in the authorised share capital during the
year to 31 December 2016. 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 2016 are disclosed in note 31 to the
consolidated financial statements.
By order of the Board of Directors
Chief Executive Officer
25 May 2017
Independent Auditor's Report to the Members of Livermore
Investments Group Limited
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the 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 2016, the consolidated statements of profit or loss,
comprehensive income, changes in equity, and cash flows for the
year then ended, and the notes to the consolidated financial
statements, including a summary of significant accounting
policies.
In our opinion, the accompanying consolidated financial
statements give a true and fair view of the consolidated financial
position of the Group as at 31 December 2016 and of its
consolidated financial performance and its consolidated cash flows
for the year then ended, in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union.
Basis for Opinion
We conducted our audit in accordance with International
Standards on Auditing (ISA). Our responsibilities under those
standards are further described in the Auditor's Responsibilities
for the Audit of the Consolidated Financial Statements section of
our report. We are independent of the Group in accordance with the
International Ethics Standards Board for Accountants' Code of
Ethics for Professional Accountants (IESBA Code) together with the
ethical requirements that are relevant to our audit of the
consolidated financial statements in Cyprus, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements and the IESBA Code. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Emphasis of Matter
We draw attention to note 33 to the consolidated financial
statements, which describes the existence of a 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 modified in respect of this matter.
Independent Auditor's Report to the Members of Livermore
Investments Group Limited (continued)
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters.
We have determined the matters described below to be the key
audit matters to be communicated in our report.
Key audit matter How the matter was addressed
Material uncertainty
over legal case (see
Emphasis of matter We obtained written
paragraph) updates on the status
As disclosed in note of the case as well
33, one of the custodian as the estimate for
banks that the Company the potential outcome
uses, faces a contingent of the legal case from
claim with regards the legal advisors of
to the redemption of the custodian bank.
shares which were bought We have also searched
in 2008 at the request public records over
of Livermore and on the internet to identify
its behalf. any developments in
relation to the case.
Due to the potential We have considered the
amount of exposure adequacy of disclosures
and the material uncertainty and discussed with Management
over the existence the developments and
of any obligation for surrounding uncertainties
the Company and its in relation to the case.
outcome, the legal
case has been identified
as a key audit matter.
Investments' existence
and activity For investments held
As presented on the through custodian banks
statement of financial we have confirmed the
position and in note existence and ownership
8, the Company has of investments by:
financial assets measured -- tracing significant
at fair value of $114m. investment activity
These financial assets to custodian statements.
are held either through -- requesting and obtaining
custodian banks or custodian letters confirming
directly by the Company. the holding of each
investment as at the
Since these investments reporting date.
make up the majority For other significant
of the financial assets investments we have
of the Company we considered requested and obtained
their existence and direct confirmations
activity as a key audit from fund managers for
matter. the Company's holding.
Independent Auditor's Report to the Members of Livermore
Investments Group Limited (continued)
Investments' valuation
-- Level 3 In assessing the valuation
The Company has financial of level 3 financial
assets of $28m classified assets we have:
within fair value hierarchy -- discussed the valuation
as level 3, as disclosed methodologies applied
in note 8. The fair with Management and
value of level 3 financial assessed their appropriateness
assets is generally for each investment.
determined either based
on third party valuations, -- where applicable,
or when not available, reviewed third party
based on adjusted Net valuations and assessed
Asset Value (NAV) calculations the method as well as
using inputs from third the qualifications and
parties. independence of the
valuer.
-- In a single case
Due to the use of where the valuation
judgement, the existence has been performed by
of unobservable inputs Management, evaluated
and the significant the reasonableness of
total value of financial the underlying assumptions
assets within the level and verified that the
3 hierarchy, we consider inputs used are from
the valuation of these reliable third- party
investments as a key sources.
audit matter. -- evaluated the adjusted
NAV calculations performed
by Management and assessed
the inputs used.
-- considered the adequacy
of disclosures in relation
to the valuation methodologies
used for each class
of level 3 financial
assets.
Implementation of IFRS9
"Financial Instruments" We have reviewed and
Livermore has elected assessed:
to apply IFRS 9 "Financial -- the appropriateness
Instruments" as issued and adequacy of the
in July 2014, earlier relevant accounting
than its effective policies.
date as described in -- the proper classification
note 3 of the consolidated and measurement of financial
financial statements. assets and liabilities.
The application of
IFRS 9 was considered -- the adequacy of
a key audit matter disclosures in relation
since it had a material to the application of
impact on the financial IFRS 9.
statements. We have also recalculated
the financial impact
on the transition to
IFRS 9.
Independent Auditor's Report to the Members of Livermore
Investments Group Limited (continued)
Disposal of Livermore
Investment AG We have evaluated whether
Following the disposal Management has properly
of Livermore Investment applied the requirements
AG (refer to note 23), of IFRS 5 "Non-current
the investment property Assets Held for Sale
activities of the Group and Discontinued Operations"
discontinued. by:
In addition to the -- recalculated the
above, upon the discontinuance gain on the disposal
of its investment property and verify that the
activities, Livermore calculation is in line
met the definition with the terms of sale
of an investment entity, contract.
as this is defined -- ensuring that the
in IFRS 10 "Consolidated results and cash flows
Financial Statements". of the discontinued
operations have been
Since the above disposal properly presented and
had a pervasive effect adequate disclosures
on the consolidated have been made.
financial statements We have evaluated whether
we considered it to Livermore meets the
be a key audit matter. definition of an investment
entity in accordance
with the criteria set
by IFRS 10.
We have also evaluated
the transition to an
investment entity by:
-- assessing relevant
accounting policies
applied and disclosures
made.
-- confirming that the
consolidation of subsidiaries
ceased upon the date
of change in status.
-- assessing the recognition
and measurement of the
investments in subsidiaries
as well as the amounts
receivable from or payable
to subsidiaries as at
the date of change in
status.
Other Information
The Board of Directors is responsible for the other information.
The other information comprises the information included in the
Highlights, Chairman's and Chief Executive's Review, Review of
Activities, Report of the Directors, Corporate Governance
Statement, Remuneration Report, Review of the Business and Risks,
the Shareholder Information, the Notice of Annual General Meeting
and the Corporate Directory but does not include the consolidated
financial statements and our auditor's report thereon.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of
assurance conclusion thereon.
Independent Auditor's Report to the Members of Livermore
Investments Group Limited (continued)
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements
or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report in this regard.
Responsibilities of the Board of Directors for the consolidated
Financial Statements
The Board of Directors is responsible for the preparation of
consolidated financial statements that give a true and fair view in
accordance with International Financial Reporting Standards as
adopted by the European Union, and for such internal control as the
Board of Directors determines is necessary to enable the
preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of
Directors is responsible for assessing the Group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the Board of Directors either intends to
liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
The Board of Directors is responsible for overseeing the Group's
financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated
Financial Statements
Our objectives are to obtain reasonable assurance about whether
the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue
an auditor's report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with ISA, we exercise
professional judgment and maintain professional scepticism
throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group's internal control.
Independent Auditor's Report to the Members of Livermore
Investments Group Limited (continued)
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the Board of Directors.
-- Conclude on the appropriateness of the Board of Directors'
use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on
the Group's ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw
attention in our auditor's report to the related disclosures in the
consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor's report.
However, future events or conditions may cause the Group to cease
to continue as a going concern.
-- Evaluate the overall presentation, structure and content of
the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves a true
and fair view.
-- Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for
our audit opinion.
We communicate with the Board of Directors regarding, among
other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide the Board of Directors with a statement that we
have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors, we
determine those matters that were of most significance in the audit
of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in
our auditor's report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Independent Auditor's Report to the Members of Livermore
Investments Group Limited (continued)
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.
The engagement partner on the audit resulting in this
independent auditor's report is Mr Nicos Mouzouris.
Nicos Mouzouris
Certified Public Accountant
and Registered Auditor
for and on behalf of
Grant Thornton (Cyprus) Ltd
Certified Public Accountants
and Registered Auditors
Limassol, 25 May 2017
Livermore Investments Group Limited
Consolidated Statement of Financial Position as at 31 December
2016
Note 2016 2015
Assets US $000 US $000
Non-current assets
Property, plant and equipment - 26
Available- for-sale financial
assets 4 - 78,464
Financial assets at fair value
through profit or loss 5 81,769 1,533
Financial assets at fair value
through other comprehensive income 6 5,634 -
Investment property 9 - 123,324
Investments in subsidiaries 11 5,252 -
Trade and other receivables 13 2,513 1,128
--------- ---------
95,168 204,475
Current assets --------- ---------
Trade and other receivables 13 5,427 4,490
Available- for-sale financial
assets 4 - 2,683
Financial assets at fair value
through profit or loss 5 20,318 8,268
Financial assets at fair value
through other comprehensive income 6 1,039 -
Current tax asset - 6
Cash at bank 14 60,383 25,770
--------- ---------
87,167 41,217
--------- ---------
Total assets 182,335 245,692
--------- ---------
Equity
Share capital 15 - -
Share premium and treasury shares 15 169,187 177,053
Other reserves (39,842) 2,631
Retained earnings 27,829 (31,047)
--------- ---------
Total equity 157,174 148,637
--------- ---------
Liabilities
Non-current liabilities
Bank loans 18 - 75,003
Deferred tax 12 - 3,937
Provisions 32 - 385
--------- ---------
- 79,325
Current liabilities --------- ---------
Bank loans 18 - 1,407
Bank overdrafts 19 1,160 13,208
Trade and other payables 20 8,616 2,770
Provisions 32 385 128
Dividend payable 21 15,000 -
Derivative financial instruments 17 - 217
--------- ---------
25,161 17,730
--------- ---------
Total liabilities 25,161 97,055
--------- ---------
Total equity and liabilities 182,335 245,692
--------- ---------
Net asset value per share
Basic and diluted net asset value
per share (US $) 22 0.90 0.77
--------- ---------
These consolidated Financial Statements were approved by the
Board of Directors on 25 May 2017. The notes 1 to 37 form part of
these consolidated financial statements.
Livermore Investment Group Limited
Consolidated Statement of Profit or Loss for the year ended 31
December 2016
Note 2016 2015
US $000 US $000
Continuing operations
Investment income
Interest and dividend income 25 26,334 25,675
Profit / (loss) on investments 26 1,695 (33,955)
------ ------
Gross profit / (loss) 28,029 (8,280)
Other income - 35
Administrative expenses 27 (7,888) (4,749)
------ ------
Operating profit / (loss) 20,141 (12,994)
Finance costs 28 (218) (1,114)
------ ------
Profit / (loss) before taxation 19,923 (14,108)
Taxation charge 29 (38) (15)
------ ------
Profit / (loss) for the year
from continuing operations 19,885 (14,123)
Discontinued operation
Profit for the year on discontinued
operations 23 14,091 9,364
------ ------
Profit / (loss) for the year 33,976 (4,759)
------ ------
Earnings per share
Basic and diluted earnings per
share ( US $)
* From continuing operations 30 0.11 (0.07)
* On discontinued operations 30 0.08 0.05
------ ------
0.19 (0.02)
------ ------
The profit / (loss) for the year (both from continuing and
discontinued operations) is wholly attributable to the owners of
the parent.
The notes 1 to 37 form part of these consolidated financial
statements.
Livermore Investment Group Limited
Consolidated Statement of Comprehensive Income for the year
ended 31 December 2016
Note 2016 2015
US $000 US $000
Profit / (loss) for the year 33,976 (4,759)
Other comprehensive income:
Items that will be reclassified
subsequently to profit or loss
Available for sale financial
assets - fair value losses - (34,906)
Foreign exchange gains / (losses)
from translation of subsidiaries 190 (314)
------ ------
34,166 (39,979)
------ ------
Items that are not reclassified
subsequently to profit or loss
Financial assets designated (4,301) -
at fair value through other
comprehensive income - fair
value losses
------ ------
Reclassification to profit or
loss
Available for sale financial
assets
- Reclassification to profit
or loss due to disposals 26 - 3,459
* Reclassification to profit or loss due to impairment 26 - 31,726
Foreign exchange losses reclassified
on disposal of subsidiary 23 1,538 -
------ ------
1,538 35,185
------ ------
Total comprehensive income for
the year 31,403 (4,794)
------ ------
The total comprehensive income for the year is wholly
attributable to the owners of the parent.
The notes 1 to 37 form part of these consolidated financial
statements.
Livermore Investment Group Limited
Consolidated Statement of Changes in Equity for the year ended
31 December 2016
Share Share Treasury Share Translation Investments Retained Total
capital premium Shares option reserve revaluation earnings
Note reserve reserve
US US $000 US $000 US US $000 US $000 US $000 US $000
$000 $000
Balance at 1
January 2015 - 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 16 - - - (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 26 - - - - - 3,459 - 3,459
* Reclassification to profit or loss due to impairment 26 - - - - - 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
Adjustment on
initial application
of IFRS 9 3.1 - - - - - (34,471) 34,471 -
------ ------ ------ ------ ------ ------ ------ ------
As restated - 215,499 (38,446) 5,506 (1,728) (35,618) 3,424 148,637
------ ------ ------ ------ ------ ------ ------ ------
Purchase of
own shares - - (7,866) - - - - (7,866)
Dividends - - - - - - (15,000) (15,000)
Transfer on
expiry of options 16 - - - (5,429) - - 5,429 -
------ ------ ------ ------ ------ ------ ------ ------
Transactions
with owners - - (7,866) (5,429) - - (9,571) (22,866)
------ ------ ------ ------ ------ ------ ------ ------
Profit for the
year - - - - - - 33,976 33,976
Other comprehensive
income:
Financial assets
at fair value
through OCI-
Fair value losses - - - - - (4,301) - (4,301)
Foreign exchange
gains arising
from translation
of subsidiaries - - - - 190 - - 190
Foreign exchange
losses reclassified
on disposal
of subsidiary 23 - - - - 1,538 - - 1,538
------ ------ ------ ------ ------ ------ ------ ------
Total comprehensive
income for the
year - - - - 1,728 (4,301) 33,976 31,403
------ ------ ------ ------ ------ ------ ------ ------
Balance at 31
December 2016 - 215,499 (46,312) 77 - (39,919) 27,829 157,174
------ ------ ------ ------ ------ ------ ------ ------
The notes 1 to 37 form part of these consolidated financial
statements.
Livermore Investments Group Limited
Consolidated Statement of Cash Flows for the year ended 31
December 2016
Note 2016 2015
US $000 US $000
Cash flows from operating activities
(Loss) / profit before tax 19,923 (13,731)
Adjustments for
Depreciation 7 16
Provision charge 32 - 513
Interest expense 28 216 267
Interest and dividend income 25 (26,334) (25,675)
Gain / (Loss) on investments 26 (1,695) 33,955
Exchange differences (243) 558
---------- ----------
(8,126) (4,097)
Changes in working capital
Decrease in trade and other
receivables* 24,486 17,053
Increase in trade and other
payables* 4,251 649
---------- ----------
Cash flows from operations 20,611 13,605
Interest and dividends received 26,561 25,969
Settlement of litigation 32 (128) -
Tax paid (39) (18)
---------- ----------
Net cash from operating activities 47,005 39,556
---------- ----------
Cash flows from investing activities
Proceeds from disposal of subsidiary
- net of cash and cash equivalents
disposed 23 31,752 -
Acquisition of investments (37,039) (32,415)
Proceeds from sale of investments 14,462 13,679
Settlement of derivative (148) 2,332
Acquisition of associate 10 - (7,500)
Capital return of associate - 8,183
---------- ----------
Net cash used for investing
activities 9,027 (15,721)
---------- ----------
Cash flows from financing activities
Purchase of own shares 15 (7,866) (1,544)
Interest paid (331) (390)
Dividends paid - (4,999)
---------- ----------
Net cash used for financing
activities (8,197) (6,933)
---------- ----------
Net increase / (decrease) in
cash and cash equivalents:
- from continuing operations 47,835 16,902
- of discontinued operations 23 826 2,332
Cash and cash equivalents at
the beginning of the year 12,562 (6,548)
Exchange differences on cash
and cash equivalents (245) (124)
Cash and cash equivalent of
subsidiaries, removed on change
in investment entity status 2.1 (1,755) -
---------- ----------
Cash and cash equivalents at
the end of the year 14 59,223 12,562
---------- ----------
*other than movements on change in investment entity status
The notes 1 to 37 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 Company changed to investment
activities on 1 January 2007. Before that the principal activity of
the Company was the provision of marketing services to the online
gaming industry and, since 1 January 2006, the operation of online
gaming.
1.4. The principal legislation under which the Company operates
is the BVI Business Companies Act, 2004.
1.5. The registered office of the Company is located at Trident
Chambers, PO Box 146, Road Town, Tortola, British Virgin
Islands.
2. Basis of preparation
The consolidated financial statements 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 an accrual basis (other than for
cash flow information) using the significant accounting policies
and measurement bases summarised in note 3, and also on a going
concern assumption.
The financial information is presented in US dollars because
this is the currency in which the Company primarily operates.
The Directors have reviewed the accounting policies used by the
Company and consider them to be the most appropriate.
2.1. Investment entity status
On 28 October 2016, Livermore disposed to a third party the 100%
of the shares of its subsidiary Livermore Investments AG in
Switzerland, and as a result discontinued its investment property
activities that constituted an operating segment of the Group
(notes 23 and 24). The Directors have determined that since the
discontinuance of its investment property activities, Livermore
meets the definition of an investment entity, as this is defined in
IFRS 10 "Consolidated Financial Statements". As per IFRS 10 an
investment entity is an entity that:
(a) obtains funds from one or more investors for the purpose of
providing those investors with investment management services;
(b) commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both; and
(c) measures and evaluates the performance of substantially all
of its investments on a fair value basis.
In accordance with IFRS 10, an investment entity is exempted
from consolidating its subsidiaries, unless any subsidiary which is
not itself an investment entity mainly provides services that
relate to the investment entity's investment activities.
In Livermore's situation, none of its subsidiaries provides such
services.
Given the above, these financial statements consolidate the
Company's subsidiaries up to 28 October 2016. As of that date, the
subsidiaries have been de-consolidated, and recognised as
Investments in subsidiaries at their fair value as at 28 October
2016 (note 11). No material gains or losses occurred on this
transition.
3. Accounting Policies
The significant accounting policies applied in the preparation
of the consolidated financial statements are as follows:
3.1. Adoption of new and revised IFRS
As from 1 January 2016, the Company adopted all the new or
revised IFRS and relevant amendments which became effective and
also were endorsed by the European Union, and are relevant to its
operations.
The adoption of the above did not have a material effect on the
consolidated financial statements.
In addition to the above, the Company has elected to apply IFRS
9 "Financial Instruments" as issued in July 2014, earlier than its
effective date, because the new accounting policies reflect better
the Company's business model and provide more reliable and relevant
information for its users to assess the amounts and timing of
future cash flows.
IFRS 9 replaces IAS 39 "Financial Instruments: Recognition and
Measurement". The new standard introduces extensive changes to IAS
39's guidance on the classification and measurement of financial
assets and introduces a new 'expected credit loss' model for the
impairment of financial assets.
The date of the initial application of IFRS 9 is 1 January 2016.
In accordance with the transitional provisions in IFRS 9 (par
7.2.15), comparative figures have not been restated, and therefore
are presented in accordance with the previously applied policies in
accordance with IAS 39.
The most significant impact of the adoption of IFRS 9, was on
the classification and measurement of the Company's financial
assets. The Directors have reviewed the classification and
measurement of the Company's financial assets based on the new
criteria that consider the assets' contractual cash flows and the
business model in which they are managed, and determined that:
-- Financial assets previously classified as "financial assets
at amortised cost", shall remain in this same category.
-- Financial assets previously classified as "financial assets
at fair value through profit or loss", shall remain in this same
category.
-- Financial assets previously classified as
"available-for-sale" shall be reclassified as "financial assets at
fair value through profit or loss". However, the Directors on
initial application date have made an irrevocable election to
designate certain equity investments that are not held for trading,
which were previously classified as "available-for-sale", as
"financial assets at fair value through other comprehensive
income".
The impact of the adoption of IFRS 9 is summarized as
follows:
31 December 1 January
2016 2016
US $000 US $000
Reclassification out of Available-for-sale
financial assets (95,566) (81,147)
Reclassification to Financial
assets at fair value through
profit or loss 85,429 67,196
Designated as Financial assets
at fair value through other comprehensive
income 10,137 13,951
------ ------
Net assets impact - -
------ ------
Adjustment to Retained earnings 34,832 34,471
Adjustment to Investments revaluation
reserve (34,832) (34,471)
------ ------
Equity impact - -
------ ------
Also, the profit or loss for the year 2016 is higher by USD
3.669m (representing an increase of USD 0.02 on basic and diluted
earnings per share for 2016) due to the adoption of IFRS 9. This is
mostly attributable to the fact that the additional fair value
losses recognised in profit or loss are less than the impairment
losses on available-for-sale financial assets that would have been
recognised based on IAS 39.
The adoption of IFRS 9 did not have any significant impact on
the Company's financial liabilities.
The following Standards, Amendments to Standards and
Interpretations had been issued by the date of authorisation of
these consolidated financial statements but are not yet effective
(nor early adopted), or have not yet been endorsed by the EU, for
the year ended 31 December 2016:
Endorsed Effective
by the (IASB) for
EU annual periods
beginning
on or after
No 1 January
* IFRS 14: "Regulatory Deferral Accounts" 2016
Yes 1 January
* IFRS 15: "Revenue from Contracts with Customers" 2018
No 1 January
* IFRS 16: "Leases" 2019
No 1 January
* IFRIC 22: "Foreign Currency Transactions and Advance 2018
Consideration"
No 1 January
* Annual Improvements to IFRS 2014-2016 Cycle 2017 / 2018
No 1 January
* Amendment to IFRS 2: "Classification and Measurement 2018
of Share--based Payment Transactions"
No 1 January
* Amendments to IFRS 4: "Applying IFRS 9 Financial 2018
Instruments with IFRS 4 Insurance Contracts"
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"
No 1 January
* Clarifications to IFRS 15: "Revenue from Contracts 2018
with Customers"
No 1 January
* Amendment to IAS 7: "Disclosure Initiative" 2017
No 1 January
* Amendment to IAS 12: "Recognition of Deferred Tax 2017
Assets for Unrealised Losses"
No 1 January
* Amendment to IAS 40: "Transfers of Investment 2018
Property"
The Board of Directors expects that when the above Standards or
Interpretations become effective in future periods, they will not
have a material effect on the financial statements.
3.2. Basis of consolidation (policy applied up to 28 October 2016 - refer to note 2.1)
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.
3.3. Investments in subsidiaries (policy applied since 28 October 2016 - refer to note 2.1)
Subsidiaries are entities controlled either directly or
indirectly by the Company.
Investments in subsidiaries are initially recognised at their
fair value and subsequently measured at fair value through profit
or loss. Subsequently, any gains or losses arising from changes in
their fair value are included in profit or loss for the year.
Dividends and other distributions from subsidiaries are
recognised as income when the Company's right to receive payment
has been established.
A subsidiary which provides services that relate to the
Company's investment activities is consolidated rather than
included within the investments in subsidiaries measured at fair
value through profit or loss.
3.4. Investments in associates and joint ventures
An associate is an entity over which the Company is able to
exert significant influence but not control.
A joint venture is an arrangement that the Company controls
jointly with one or more other investors, and over which the
Company has rights to a share of the arrangement's net assets
rather than direct rights to underlying assets and obligations for
underlying liabilities.
Investments in 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.
Dividends and other distributions from associates and joint
ventures are recognised as income when the Company's right to
receive payment has been established.
3.5. 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.
3.6. 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.
3.7. Interest and dividend income
-- Interest income is recognised based on the effective interest
method.
-- Dividend income is recognised on the date that the Company's
right to receive payment is established, which in the case of
quoted securities is the ex-dividend date.
3.8. 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.
3.9. 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.
3.10. Investment property
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.
3.11. 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 costs, and they are deducted from total equity
as treasury shares until they are sold or cancelled. Where such
shares are subsequently sold, any consideration received is
included 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
received.
3.12. 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 Company issues equity-settled share based payments to
certain employees. The fair value of share-based payments to
employees at grant date is measured using the Binomial pricing
model.
The fair value determined at the grant date is expensed on a
straight-line basis over the vesting period, based on the Company's
estimate of the shares that will eventually vest and adjusted for
the effect of non market-based vesting conditions. The
corresponding credit is taken to the share option reserve.
On exercise of the options any related amounts recognised in the
share option reserve are transferred to share premium.
On lapse of the options any related amounts recognised in the
share option reserve are transferred to retained earnings.
3.13. 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 2016 or
2015.
3.14. Financial assets (policy applied as from 1 January 2016 -
refer to note 3.1)
Financial assets are recognised when the Company becomes a party
to the contractual provisions of the financial instrument.
A financial asset is derecognised only where the contractual
rights to the cash flows from the asset expire or the financial
asset is transferred and that transfer qualifies for derecognition.
A financial asset is transferred if the contractual rights to
receive the cash flows of the asset have been transferred or the
Company retains the contractual rights to receive the cash flows of
the asset but assumes a contractual obligation to pay the cash
flows to one or more recipients. A financial asset that is
transferred qualifies for derecognition if the Company transfers
substantially all the risks and rewards of ownership of the asset,
or if the Company neither retains nor transfers substantially all
the risks and rewards of ownership but does transfer control of
that asset.
The Company classifies its financial assets in the following
measurement categories:
(a) those to be measured at fair value (either through other
comprehensive income, or through profit or loss), and
(b) those to be measured at amortised cost.
The classification depends on the entity's business model for
managing the financial assets and the contractual terms of the cash
flows. Financial assets with embedded derivatives are considered in
their entirety when determining whether their cash flows are solely
payment of principal and interest.
At initial recognition, the Company measures a financial asset
at its fair value plus, in the case of a financial asset not at
fair value through profit or loss, transaction costs that are
directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at fair value through
profit or loss are expensed in profit or loss.
Financial assets at fair value through profit or loss
The Company classifies the following financial assets at fair
value through profit or loss:
(a) equity investments that are held for trading;
(b) other equity investments for which the Directors have not
elected to recognise fair value gains and losses through other
comprehensive income; and
(c) debt investments that do not qualify for measurement at
either amortised cost or at fair value through other comprehensive
income.
All financial assets within this category are measured at their
fair value, with changes in value recognised in the profit or loss
when incurred.
Financial assets at fair value through other comprehensive
income
Financial assets at fair value through other comprehensive
income (OCI) comprise equity securities which are not held for
trading, and for which the Company has made an irrevocable election
at initial recognition to recognise changes in fair value through
OCI rather than profit or loss.
Where the Company's management has elected to present fair value
gains and losses on equity investments in other comprehensive
income, there is no subsequent reclassification of fair value gains
and losses to profit or loss. Dividends from such investments
continue to be recognised in profit or loss when the Company's
right to receive payments is established.
Financial assets at amortised cost
Assets that are held for collection of contractual cash flows
where those cash flows represent solely payments of principal and
interest are measured at amortised cost. A gain or loss on a
financial asset that is measured at amortised cost is recognised in
profit or loss when the asset is derecognised or impaired. Interest
income from these financial assets is recognised based on the
effective interest rate method.
Impairment
The Company assesses on a forward looking basis the expected
credit losses associated with its assets carried at amortised cost.
The impairment methodology applied depends on whether there has
been a significant increase in credit risk. For trade and other
receivables only, the Company applies the simplified approach
permitted by IFRS 9, which permits expected lifetime losses to be
recognised from initial recognition of the receivables.
Write offs
The Company writes off a financial asset when there is
information indicating that the counterparty is in severe financial
difficulty and there is no realistic prospect of recovery, e.g.
when the counterparty has been placed under liquidation or has
entered into bankruptcy proceedings. Financial assets written off
may still be subject to enforcement activities, taking into account
legal advice where appropriate. Any recoveries made are recognised
in profit or loss.
3.15. Financial assets (policy applied until 31 December 2015 -
refer to note 3.1)
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.
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.
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.
3.16. Financial liabilities
Financial liabilities are recognised when the Company becomes a
party to the contractual provisions of the financial
instrument.
A financial liability is derecognised when it is extinguished,
discharged, cancelled or expires.
Financial liabilities are measured initially at fair value plus
transaction costs, except for financial liabilities carried at fair
value through profit or loss, which are measured initially at fair
value.
Financial liabilities at amortised cost
After initial recognition financial liabilities are measured at
amortised cost using the effective interest rate method.
Derivative financial liabilities
The Company's financial liabilities also include financial
derivative instruments.
All derivative financial instruments which are not designated as
hedging instruments are measured at fair value through profit or
loss.
3.17. Cash and cash equivalents
Cash comprises cash in hand and on demand deposits with banks.
Cash equivalents are short term, highly liquid investments that are
readily convertible to known amounts of cash. They include
unrestricted short-term bank deposits originally purchased with
maturities of three months or less.
Bank overdrafts are considered to be a component of cash and
cash equivalents, since they form an integral part of the Company's
cash management.
3.18. Provisions
Provisions are recognised when the Company has a present legal
or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle
the obligation, and a reliable estimate of the amount can be made.
Where the Company expects a provision to be reimbursed, for example
under an insurance contract, the reimbursement is recognised as a
separate asset but only when the reimbursement is virtually
certain.
No provision is made for possible claims or where an obligation
exists but it is not possible to make a reliable estimate.
Costs associated with claims made by the Company are charged to
the profit or loss as they are incurred.
3.19. Discontinued operations
A discontinued operation is a component of the Group that either
has been disposed of, or is classified as held for sale, and:
(a) represents a separate major line of business or geographical
area of operations;
(b) is part of a single co--ordinated plan to dispose of a
separate major line of business or geographical area of operations;
or
(c) is a subsidiary acquired exclusively with a view to
resale.
The results from discontinued operations are presented in a
single amount in the profit or loss with further analysis in the
notes. This amount comprises the post--tax profit or loss of
discontinued operations and the post--tax gain or loss resulting
from the measurement and disposal of relevant assets. The
comparative disclosures for discontinued operations relate to the
operations that have been discontinued during the current reporting
period.
3.20. 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.
3.21. Critical accounting judgments and key sources of
estimation uncertainty
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates and
requires management to exercise its judgement in the process of
applying the Company's accounting policies. It also requires the
use of assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the 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 financial assets at amortised cost
The allowance for impairment on related party receivables (note
13) is based on assumptions about risk of default and expected loss
rates for expected lifetime losses. The Company uses judgement in
making these assumptions and selecting the inputs to the impairment
calculation, based on the Company's past history, existing market
conditions as well as forward looking estimates at the end of each
reporting period. For details of the key assumptions and inputs
used.
The Company assesses at each reporting date whether financial
assets at amortised cost are impaired. If impairment has occurred,
this loss is recognised in profit or loss.
(ii) Classification of financial assets
The Management exercises significant judgement in determining
the appropriate classification of the financial assets of the
Company. The Directors determine the appropriate classification of
the Company's financial assets based on Livermore's business model.
An entity's business model refers to how an entity manages its
financial assets in order to generate cash flows, considering all
relevant and objective evidence. The factors considered include the
contractual terms and characteristics which are very carefully
examined, and also the Company's intentions and expected needs for
realisation of the financial assets.
All investments (except from certain equity instruments that are
designated at fair value through other comprehensive income) are
classified as at fair value through profit or loss, because this
reflects more fairly the way these assets are managed by the
Company. The Company's business is investing in financial assets
with a view to profiting from their total return in the form of
income and capital growth. This portfolio of financial assets is
managed and its performance evaluated on a fair value basis, in
accordance with a documented investment strategy, and information
about the portfolio is provided internally on that basis to the
Company's Board of Directors and other key management
personnel.
Estimation uncertainty
Fair value of financial instruments
Management uses valuation techniques in measuring the fair value
of financial instruments, where active market quotes are not
available. Details of the bases used for financial assets and
liabilities are disclosed in note 8. 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.
3.22. Comparatives
The comparative figures in the consolidated statement of profit
or loss and the consolidated statement of cash flows have been
restated for the effect of discontinued operations.
4. Available-for-sale financial assets
2016 2015
US $000 US $000
Non-current assets
Fixed income investments
(CLO Income Notes) - 65,946
Private equities - 12,518
------ ------
- 78,464
------ ------
Current assets
Public equity investments - 1,619
Hedge funds - 1,064
------ ------
- 2,683
------ ------
For description of each of the above categories, refer to note
7.
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 are
included within loss on investments (note 26), and represent
impairment losses arising due to:
2016 2015
US $000 US $000
Significant fall in value - 11,119
Prolonged fall in value - 1,490
Significant and prolonged
fall in value - 19,117
------ ------
- 31,726
------ ------
5. Financial assets at fair value through profit or loss
2016 2015
US $000 US $000
Non-current assets
Fixed income investments 81,769 -
(CLO Income Notes)
Private equities - 330
Real estate entities - 1,203
------ ------
81,769 1,533
------ ------
Current assets
Fixed income investments 18,368 6,655
Public equity investments 1,950 1,613
------ ------
20,318 8,268
------ ------
For description of each of the above categories, refer to note
7.
The above investments represent financial assets that are
mandatorily measured at fair value through profit or loss.
The Company treats its investments in the loan market through
CLOs as non-current investments as the Company generally intends to
hold such investments over a period longer than twelve months.
6. Financial assets at fair value through other comprehensive income
2016 2015
US $000 US $000
Non-current assets
Private equities 5,634 -
------ ------
Current assets
Hedge funds 1,039 -
------ ------
For description of each of the above categories, refer to note
7.
The above investments are non-trading equity investments that
have been designated at fair value through other comprehensive
income.
7. Financial assets at fair value
The Company allocates its non-derivative financial assets at
fair value (notes 4, 5 and 6) as follows:
-- Fixed income investments relate to fixed and floating rate
bonds, perpetual bank debt, investments in the loan market through
CLOs, and investments in open warehouse facilities.
-- Private equities relate to investments in the form of equity
purchases in both high growth opportunities in emerging markets and
deep value opportunities in mature markets. The Company generally
invests directly in prospects where it can exert influence. Main
investments under this category are in the fields of real
estate.
-- Hedge funds relate to equity investments in funds managed by
sophisticated investment managers that pursue investment strategies
with the goal of generating absolute returns.
-- Public equity investments relate to investments in shares of
companies listed on public stock exchanges.
-- Real estate entities relate to investments in real estate projects.
8. 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 Company values the CLOs based on the valuation reports
provided by market makers. CLOs are typically valued by market
makers using discounted cash flow models. The key assumptions for
cash flow projections include default and recovery rates,
prepayment rates and reinvestment assumptions on the underlying
portfolios (typically senior secured loans) of the CLOs.
Default and recovery rates: The amount and timing of defaults in
the underlying collateral and the amount and timing of recovery
upon a default affect are key to the future cash flows a CLO will
distribute to the CLO equity tranche. All else equal, higher
default rates and lower recovery rates typically lead to lower cash
flows. Conversely, lower default rates and higher recoveries lead
to higher cash flows.
Prepayment rates: Senior loans can be pre-paid by borrowers.
CLOs that are within their reinvestment period may, subject to
certain conditions, reinvest such prepayments into other loans
which may have different spreads and maturities. CLOs that are
beyond their reinvestment period typically pay down their senior
liabilities from proceeds of such pre-payments. Therefore the rate
at which the underlying collateral prepays impacts the future cash
flows that the CLO may generate.
Reinvestment assumptions: A CLO within its reinvestment period
may reinvest proceeds from loan maturities, prepayments, and
recoveries into purchasing additional loans. The reinvestment
assumptions define the characteristics of the loans that a CLO may
reinvest in. These assumptions include the spreads, maturities, and
prices of such loans. Reinvestment into loans with higher spreads
and lower prices will lead to higher cash flows. Reinvestment into
loans with lower spreads will typically lead to lower cash
flows.
Discount rate: The discount rate indicates the yield that market
participants expect to receive and is used to discount the
projected future cash flows. Higher yield expectations or discount
rates lead to lower prices and lower discount rates lead to higher
prices for CLOs.
-- Private Equities are valued using market valuation techniques
as determined by the Directors, mainly on the basis of 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.
-- Investments in subsidiaries are valued at fair value as
determined on an adjusted net asset valuation basis.
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:
2016 2016 2016 2016 2015 2015 2015 2015
US US US US US US US US
$000 $000 $000 $000 $000 $000 $000 $000
Level Level Level Total Level Level Level Total
1 2 3 1 2 3
Assets
Fixed income
investments 1,117 81,769 17,251 100,137 1,634 65,946 5,021 72,601
Private equities - - 5,634 5,634 - - 12,848 12,848
Public equity
investments 1,951 - - 1,951 3,232 - - 3,232
Hedge funds - 1,038 - 1,038 - 1,064 - 1,064
Real estate
entities - - - - - - 1,203 1,203
Investments
in subsidiaries - - 5,252 5,252 - - - -
------ ------ ------ ------ ------ ------ ------ ------
3,068 82,807 28,137 114,012 4,866 67,010 19,072 90,948
------ ------ ------ ------ ------ ------ ------ ------
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, except from a certain equity instrument that was delisted
and therefore transferred from Level 1 to Level 3 in 2016.
Financial assets within level 3 can be reconciled from beginning
to ending balances as follows:
At fair Available-for-sale At fair value Derivative Investments
value through profit financial in
through or loss instruments subsidiaries
OCI
Private Private Other Real Private Fixed Total
equities equities investments estate equities Income return
investments swap Total
US $000 US $000 US $000 US $000 US $000 US $000 US $000 US $000 US $000
As at 1
January
2015 - 17,157 - 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 - (4,177) - 104 - 21 207 - (3,845)
-Other
comprehensive
income - (403) - - - - - - (403)
Exchange
difference - - - (377) - - - - (377)
------ ------ ------ ------ ------ ------ ------ ------ ------
As at 1
January
2016 - 12,518 - 1,203 330 5,021 - - 19,072
Transfer on
initial
application
of
IFRS 9 (note
3.1) 12,848 (12,518) - - (330) - - - -
Change in
investment
entity status
(note 2.1) - - - (1,288) - - - 5,567 4,279
Transfer from
Level 1 369 - - - - - - - 369
Purchases - - - - - 17,000 - - 17,000
Settlement (3,308) - - - - (6,062) - - (9,370)
(Losses) /
gains
recognised in:
-Profit or
loss - - - - - 1,292 - (315) 977
-Other
comprehensive
income (4,275) - - - - - - - (4,275)
Exchange
difference - - - 85 - - - - 85
------ ------ ------ ------ ------ ------ ------ ------ ------
As at 31
December
2016 5,634 - - - - 17,251 - 5,252 28,137
------ ------ ------ ------ ------ ------ ------ ------ ------
The above gains and losses recognised can be allocated as
follows:
At fair Available-for-sale At fair value Derivative Investments
value through profit financial in
through or loss instruments subsidiaries
OCI
Private Private Other Real Private Fixed Forward
equities equities investments estate equities Income contract
investments Total
2015 US $000 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 - (4,177) - 104 - 21 - - (4,052)
-Financial
assets
not held at
year-end - - - - - - 207 - 207
------ ------ ------ ------ ------ ------ ------ ------ ------
- (4,177) - 104 - 21 207 - (3,845)
------ ------ ------ ------ ------ ------ ------ ------ ------
Other
comprehensive
income
-Financial
assets
held at
year-end - (403) - - - - - - (403)
------ ------ ------ ------ ------ ------ ------ ------ ------
Total (losses)
/ gains for
2015 - (4,580) - 104 - 21 207 - (4,248)
------ ------ ------ ------ ------ ------ ------ ------ ------
2016 US $000 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 - - - - - 1,292 - (315) 977
------ ------ ------ ------ ------ ------ ------ ------ ------
Other
comprehensive
income
-Financial
assets
held at
year-end (4,275) - - - - - - - (4,275)
------ ------ ------ ------ ------ ------ ------ ------ ------
Total (losses)
/ gains for
2016 (4,275) - - - - 1,292 - (315) (3,298)
------ ------ ------ ------ ------ ------ ------ ------ ------
The Company has not developed any quantitative unobservable
inputs for measuring the fair value of its level 3 financial assets
at 31 December 2016 and 2015. Instead the Company 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.
9. Investment property
2016 2015
US $000 US $000
Valuation as at 1 January 123,324 116,609
Fair value (loss) / gain (102) 7,819
Additions 102 -
Exchange difference 1,439 (1,104)
Disposal (note 23) (124,763) -
------ ------
As at 31 December - 123,324
------ ------
The investment property relates to Wyler Park property in Bern,
Switzerland, which was used for earning rental income.
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 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 significant inputs and assumptions are developed in close
consultation with management.
The fair values of investment property were 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.
Future rental income
The future minimum rental income under non-cancellable rental
agreements, is receivable as follows:
2016 2015
US $000 US $000
- Less than 1 year - 5,629
- Between 1 and 5 years - 23,050
- Over 5 years - 36,879
------ ------
- 65,558
------ ------
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.
10. Investments in associate and joint venture
2016 2015
US $000 US $000
As at 1 January - -
Additions - 7,500
Capital return - (8,183)
Fair value gain - 683
------ ------
As at 31 December - -
------ ------
Name of Type of Place Proportion Principal
investee investment of incorporation of voting activity
rights
held
Silvermore Joint Cayman 50% Investment
Ltd venture Islands Holding
(dormant)
During 2015 , 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 Company.
11. Investments in subsidiaries
2016 2015
US $000 US $000
As at 1 January - -
Additions (note 2.1) 5,567 -
Fair value loss (315) -
------ ------
As at 31 December 5,252 -
------ ------
Details of the investments in which the Company has a
controlling interest as at 31 December 2016 are as follows:
Name of Subsidiary Place Holding Proportion Principal activity
of incorporation of voting
rights
and shares
held
Livermore Properties British Ordinary 100% Holding of investments
Limited Virgin shares
Islands
Mountview Holdings British Ordinary 100% Investment vehicle
Limited Virgin shares
Islands
Sycamore Loan Cayman Ordinary 100% Investment vehicle
Strategies Ltd Islands shares
Livermore Israel Israel Ordinary 100% Holding of investments
Investments shares
Ltd
Livermore Capital Switzerland Ordinary 100% Administration
AG shares services
Livermore Investments Cyprus Ordinary 100% Administration
Cyprus Limited shares services
Sandhirst Limited Cyprus Ordinary 100% Holding of investments
shares
Silvermore 2 Ltd and Enaxor S.a.r.l. were dissolved during the
year. The shares of Sandhirst Limited which were previously held by
Enaxor S.a.r.l. were transferred upon the liquidation of the latter
to the Company.
Livermore Investments AG was sold during 2016 (note 23).
There are no restrictions in receiving any amounts from any
subsidiary, including cash dividends or repayments of loans and
advances.
12. Deferred tax
The Company is a British Virgin Islands (BVI) international
business company and, under the BVI laws, is not subject to
taxation. Deferred taxes relate to temporary differences between
carrying amounts and corresponding tax base of its subsidiaries, in
Switzerland.
The deferred tax shown in the consolidated statement of
financial position relates to the following items:
2016 2015
US $000 US $000
Investment property - revaluation
surplus - 6,362
Tax losses - (2,425)
------ ------
Net deferred tax liability - 3,937
------ ------
The movement on the deferred taxation account is as follows:
Investment Derivative Tax Total
property financial losses
instruments
US $000 US $000 US $000 US $000
As at 1 January 2015 (5,805) 47 3,486 (2,272)
(Charged) / credited
to profit or loss (note
23)
- timing differences (895) (46) (913) (1,854)
Exchange difference 338 (1) (148) 189
------ ------ ------ ------
As at 1 January 2016 (6,362) - 2,425 (3,937)
(Charged) / credited
to profit or loss (note
23)
- timing differences - - (380) (380)
Exchange difference (77) - 28 (49)
Reversal on disposal
of subsidiary (note
23) 6,439 - (2,073) 4,366
------ ------ ------ ------
As at 31 December 2016 - - - -
------ ------ ------ ------
As at 31 December 2016 and 2015 there is no unrecognised
deferred tax asset.
13. Trade and other receivables
2016 2015
US $000 US $000
Financial items
Accrued interest and dividend
income 65 304
Amounts due by related
parties (note 31) 9,634 2,514
Other receivables - 272
Allowance for impairment (2,940) -
------ ------
6,759 3,090
Non-Financial items
Other assets (note 31) 1,128 2,256
Prepayments 53 272
------ ------
7,940 5,618
------ ------
Allocated as:
Current assets 5,427 4,490
Non-current assets (note
31(2) and 31(3)) 2,513 1,128
------ ------
7,940 5,618
------ ------
Allowance for impairment
The allowance relates to amounts due by subsidiaries (note 31),
which are regarded as credit-impaired and have been assessed on an
individual basis. The Directors in determining that these amounts
are credit-impaired have considered that the specific subsidiaries
are in net liability position without prospects currently of
generating adequate profits and cash flows to become able to repay
in full the amounts due to the Company. Their recoverable amount
has been determined based on an adjusted net asset valuation basis,
which the Directors regard as approximation to the present value of
the estimated future cash inflows from those subsidiaries.
2016 2015
US $000 US $000
As at 1 January - -
Addition (note 2.1) 2,818 -
Charge for the year 122 -
------ ------
As at 31 December 2,940 -
------ ------
For the remaining receivables of financial nature, there are no
lifetime expected losses. Therefore no corresponding allowance for
impairment has been recognised.
No receivable amounts have been written-off during either 2016
or 2015.
14. Cash and cash equivalents
Cash and cash equivalents included in the consolidated statement
of cash flows comprise the following at the reporting date:
2016 2015
US $000 US $000
Cash at bank 60,383 25,770
Bank overdrafts used for
cash management purposes (1,160) (13,208)
------ ------
Cash and cash equivalents 59,223 12,562
------ ------
15. 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 Share
of shares premium
arising
US $000
Ordinary shares with no
par value
As at 31 December 2015
and 31 December 2016 304,120,401 215,499
---------- ----------
Treasury shares Number US $000
of shares
As at 1 January 2015 108,830,818 36,902
Additions 3,000,000 1,544
---------- ---------
As at 1 January 2016 111,830,818 38,446
Additions 17,475,585 7,866
---------- ---------
As at 31 December 2016 129,306,403 46,312
---------- ----------
In the consolidated statement of financial position the amount
included as share premium and treasury shares comprises of:
2016 2015
US $000 US $000
Share premium 215,499 215,499
Treasury shares (46,312) (38,446)
-------- --------
169,187 177,053
-------- --------
16. 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 price*
GBP USD
As at 1 January 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
Options expired (10,150,000) 0.78 0.96
--------
As at 31 December 2016 500,000 0.30 0.37
----------
Exercisable options Number Average Average
of options exercise exercise
price price*
GBP USD
As at 1 January 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
Options expired (10,150,000) 0.78 0.96
----------
As at 31 December 2016 500,000 0.30 0.37
----------
Details of share options outstanding at 31 December 2016
Number Grant Vesting Earliest Expiry Exercise Exercise Fair
of options date date exercise date of price Price* value
date exercise GBP USD at grant
period date
USD
166,667 13/05/08 13/05/09 13/05/09 13/05/18 0.30 0.37 21,703
166,667 13/05/08 13/05/10 13/05/10 13/05/18 0.30 0.37 24,115
166,666 13/05/08 13/05/11 13/05/11 13/05/18 0.30 0.37 25,820
---------- ----------
500,000 71,638
---------- ----------
* The exercise prices as per the share option scheme are quoted
in British Pounds. The indicative equivalent USD amounts shown in
the table of details above as well as the average exercise prices
are based on the exchange rates as at 31 December 2016.
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.
17. Derivative financial instruments
2016 2015
US $000 US $000
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 Foreign exchange Contract exchange Contract termination
contract currency rate date
amount
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.
For the year ended 31 December 2016 a net fair value gain of USD
0.069m (2015: USD 0.991) has been recognised in the profit or loss
in relation to all derivative financial instruments.
18. Bank loans
2016 2015
US $000 US $000
-
As at 1 January 76,410 78,092
Additions - 78,822
Interest charge 923 1,278
Repayments of principal (1,138) (79,751)
Repayments of interests (923) (1,278)
Exchange difference 936 (541)
Refinancing fees - (212)
Amortization of refinancing
fees 79 -
Disposal (note 23) (76,287) -
------ ------
As at 31 December - 76,410
------ ------
Allocated as:
Current bank loans - 1,407
Non-current bank loans - 75,003
------ ------
- 76,410
------ ------
The bank loan relates to Wyler Park investment property purchase
(note 9) and was secured on this property.
19. Bank overdrafts
2016 2015
US $000 US $000
Bank overdrafts 1,160 13,208
------ ------
Bank overdrafts bear Libor + lender's margin and have an average
interest rate of 3.49% (2015: 1.78%).
The Company's bank overdraft facilities are secured by the
Company's financial assets portfolio up to an amount, as at 31
December 2016, of USD 31.8m.
The Company's bank overdraft undrawn facilities at 31 December
2016 amount to USD 30.6m.
20. Trade and other payables
2016 2015
US $000 US $000
Financial items
Trade payables 6 444
Amounts due to related
parties (note 31) 3,233 1,377
Accrued expenses 2,327 386
------ ------
5,566 2,207
Non-financial items
Employee benefits
accrued 3,050 -
Prepayment from tenants - 510
VAT payable - 53
------ ------
8,616 2,770
------ ------
21. Dividend payable
2016 2015
US $000 US $000
Dividend payable 15,000 -
------ ------
At 15 December 2016, the Board announced an interim dividend of
USD 15m (USD 0.0858 per share) to members on the register on 6
January 2017. The dividend was paid on 27 January 2017.
22. 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 2016 and 31 December 2015.
2016 2015
Net assets attributable to
ordinary shareholders (USD
000) 157,174 148,637
------------- -------------
Closing number of ordinary
shares in issue 174,813,998 195,289,583
------------- -------------
Basic net asset value per
share (USD) 0.90 0.77
------------- -------------
Net assets attributable to
ordinary shareholders (USD
000) 157,174 148,637
Dilutive share options - exercise
amount 185 221
------------- -------------
Net assets attributable to
ordinary shareholders including
the effect of potentially
diluted shares (USD 000) 157,359 148,858
------------- -------------
Closing number of ordinary
shares in issue 174,813,998 192,289,583
Dilutive share options 500,000 500,000
------------- -------------
Closing number of ordinary
shares including the effect
of potentially diluted shares 175,313,998 192,789,583
------------- -------------
Diluted net asset value per
share (USD) 0.90 0.77
------------- -------------
Number of Shares
Ordinary shares 304,120,401 304,120,401
Treasury shares (129,306,403) (111,830,818)
------------- -------------
Closing number of ordinary
shares in issue 174,813,998 192,289,583
------------- -------------
The Share options (note 16) 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 2016 and 2015. All other share options do not
impact the diluted net asset value per share for 2015 (expired in
2016) as their exercise price was higher than the net asset value
per share at 31 December 2015.
Repurchase of own shares
The Board believes that the ability of the Company to
re-purchase its own Ordinary shares in the market may potentially
benefit equity shareholders of the Company. The repurchase of
Ordinary shares at a discount to the underlying net asset value
enhances the net asset value per share of the remaining equity
shares.
In 2016, the Company bought an additional 17,475,585 of its
Ordinary shares at an average price of USD 0.45 per share. In 2015,
the Company bought 3,000,000 of its Ordinary shares at an average
price of USD 0.51 per share (note 31).
23. Discontinued operations
The discontinued operations relate to the investment property
(Wyler Park) activities that constituted an operating segment of
the Group (note 24). These activities were carried out through the
Group's subsidiary, Livermore Investments AG in Switzerland, of
which 100% of shares were disposed to a third party on 28 October
2016.
23.1 Profit or loss
Details of profit or loss items of the discontinued operations
are as follows:
2016 2015
US $000 US $000
Gross rental income 4,459 5,634
Direct expenses (423) (407)
Other operating expenses (278) (406)
Investment property
revaluation (102) 7,819
Bank interest on investment
property loan (1,004) (1,340)
Gain on disposal of
subsidiary (note 23.2) 7,563 -
------ ------
Profit before taxation
on discontinued operations 10,215 11,300
Taxation credit / (charge)
(note 23.3) 3,876 (1,936)
------ ------
Profit for the year
on discontinued operations 14,091 9,364
------ ------
23.2 Gain on disposal of subsidiary
2016 2015
US $000 US $000
Cash consideration received 31,758 -
Net assets at disposal
date
- investment property (124,763) -
- cash and cash equivalents (6) -
- other assets (1,075) -
- Bank loan 76,287 -
- other liabilities 26,900 -
Foreign exchange losses
reclassified from translation
reserve (1,538) -
------ ------
Gain on disposal of
subsidiary 7,563 -
------ ------
23.3 Taxation
Taxation credit / (charge) on the discontinued operations is
analysed as follows:
2016 2015
US $000 US $000
Tax on ordinary activities (110) (82)
Deferred taxation (note
12) 3,986 (1,854)
------ ------
Taxation credit / (charge) 3,876 (1,936)
------ ------
23.4 Cash flows
Details of the cash flows of the discontinued operations are as
follows:
2016 2015
US $000 US $000
Operating activities 2,975 4,831
Investing activities (102) -
Financing activities (2,061) (2,481)
Translation differences
on foreign operations'
cash and cash equivalents 14 (18)
------ ------
Net cash from discontinued
operations 826 2,332
------ ------
24. 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
debt instruments property financial
investment activities statements
activities (discontinued
- note23.1
)
2016 2015 2016 2015 2016 2015
Segment results US $000 US $000 US $000 US $000 US $000 US
$000
Investment income
Interest and dividend
income 26,334 25,675 - - 26,334 25,675
Investment property
income - - 4,036 5,227 4,036 5,227
Gain / (loss) on
investments 1,695 (33,955) (102) 7,819 1,593 (26,136)
------ ------ ------ ------ ------ ------
Gross profit / (loss) 28,029 (8,280) 3,934 13,046 31,963 4,766
Other income - 35 - - - 35
Administrative expenses (7,692) (4,510) (478) (645) (8,170) (5,155)
------ ------ ------ ------ ------ ------
Operating profit
/ (loss) 20,337 (12,755) 3,456 12,401 23,793 (354)
Finance costs (212) (1,109) (1,008) (1,345) (1,220) (2,454)
------ ------ ------ ------ ------ ------
Profit / (loss)
before taxation 20,125 (13,864) 2,448 11,056 22,573 (2,808)
Taxation (charge)
/ credit (5) - 3,844 (1,951) 3,839 (1,951)
------ ------ ------ ------ ------ ------
Profit / (loss)
for year 20,120 (13,864) 6,292 9,105 26,412 (4,759)
------ ------ ------ ------ ------ ------
Segment assets 182,335 121,104 - 124,588 182,335 245,692
------ ------ ------ ------ ------ ------
Segment liabilities 25,161 15,681 - 81,374 25,161 97,055
------ ------ ------ ------ ------ ------
The Group's investment income and its investments are divided
into the following geographical areas:
Equity and Investment Total per
debt instruments property financial
investment activities statements
activities (discontinued
- note 23.1)
2016 2015 2016 2015 2016 2015
Investment Income US $000 US $000 US $000 US $000 US $000 US
$000
Switzerland - - 3,884 13,046 3,884 13,046
Other European countries 330 (22) - - 330 (22)
United States 27,850 (5,950) - - 27,850 (5,950)
India 102 (2,235) - - 102 (2,235)
Asia (203) (73) (203) (73)
------ ------ ------ ------ ------ ------
28,079 (8,280) 3,884 13,046 31,963 4,766
------ ------ ------ ------ ------ ------
Investments
Switzerland 726 - 123,324 726 123,324
Other European countries 3,341 5,089 - - 3,341 5,089
United States 100,399 72,030 - - 100,399 72,030
India 2,022 10,004 - - 2,022 10,004
Asia 7,524 3,825 - - 7,524 3,825
------ ------ ------ ------ ------ ------
114,012 90,948 - 123,324 114,012 214,272
------ ------ ------ ------ ------ ------
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 2016, 81.6% of the Group's rent relates to rental income
from a single customer (SBB - Swiss national transport authority)
in the investment property activities segment (2015: 81.9%).
25. Interest and dividend income
2016 2015
US $000 US $000
Interest from investments 114 127
Dividend income 26,220 25,548
------ ------
26,334 25,675
------ ------
No dividend income has been recognised in 2016 in relation to
investments designated at fair value through other comprehensive
income.
26. Profit / (loss) on investments
2016 2015
US $000 US $000
Loss on sale of investments - (3,459)
Loss due to impairment
of available-for-sale
financial assets - (31,726)
Fair value profit/(losses)
on financial assets
through profit or loss 2,056 (320)
Fair value gain on
associate - 683
Fair value loss on
investment in subsidiaries (315) -
Fair value gains on
derivative instruments 69 991
Bank custody fees (115) (124)
------ ------
1,695 (33,955)
------ ------
The investments disposed of during the year resulted in the
following realised losses (i.e. in relation to their original
acquisition cost):
2016 2015
US $000 US $000
Available-for-sale - (5,723)
At fair value through
profit or loss (3,540) (303)
------ ------
(3,540) (6,026)
------ ------
27. Administrative expenses
2016 2015
US $000 US $000
Legal expenses 19 63
Directors' fees and
expenses 5,033 2,414
Other salaries and
expenses 149 176
Professional and consulting
fees 1,879 806
Office costs 172 254
Depreciation 7 13
Other operating expenses 388 414
Provision charge - 513
Audit fees 119 96
Impairment charge on
receivables 122 -
------ ------
7,888 4,749
------ ------
Throughout 2016 the Group employed 6 members of staff (2015: 7),
and the Company employed 2 members of staff (2015: 2).
Other salaries and expenses include USD 18,706 of social
insurance and similar contributions (2015: USD 21,640), as well as
USD 16,655 of defined contributions plan costs (2015: USD
6,593).
28. Finance costs
2016 2015
US $000 US $000
Finance costs
Other bank interest 216 267
Foreign exchange loss 2 847
------ ------
218 1,114
------ ------
29. Taxation
2016 2015
US $000 US $000
Current tax charge 38 15
------ ------
38 15
------ ------
The parent company is a British Virgin Islands (BVI)
international business company 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.
30. 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 2016 and the year ended 31 December
2015.
2016 2015
Continuing operations
Profit / (loss) for the year
attributable to ordinary
shareholders of the parent
(USD 000) 19,885 (14,123)
------------- -------------
Weighted average number of
ordinary shares outstanding 186,255,696 194,599,172
------------- -------------
Basic earnings per share
(USD) 0.11 (0.07)
------------- -------------
Weighted average number of
ordinary shares outstanding 186,255,696 194,599,172
Dilutive effect of share
options 24,715 59,005
--------- ---------
Weighted average number of
ordinary shares including
the effect of potentially
dilutive shares 186,280,411 194,658,177
------------- -------------
Diluted earnings per share
(USD) 0.11 (0.07)
------------- -------------
2016 2015
Discontinued operations
Profit / (loss) for the year
attributable to ordinary
shareholders of the parent
(USD 000) 14,091 9,364
------------- -------------
Weighted average number of
ordinary shares outstanding 186,255,696 194,599,172
------------- -------------
Basic earnings per share
(USD) 0.08 0.05
------------- -------------
Weighted average number of
ordinary shares outstanding 186,255,696 194,599,172
Dilutive effect of share
options 24,715 59,005
--------- ---------
Weighted average number of
ordinary shares including
the effect of potentially
dilutive shares 186,280,411 194,658,177
------------- -------------
Diluted earnings per share
(USD) 0.08 0.05
------------- -------------
The Share options (note 16) 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 2016 and 2015. All
other share options do not impact the diluted earnings per share
for 2015 (expired in 2016) as their exercise price was higher than
the average market price of the Company's shares during the year
ended 31 December 2015.
31. Related party transactions
The Company is controlled by Groverton Management Ltd, an entity
owned by Noam Lanir, which at 31 December 2016 held 76.62% (2015:
78.74%) of the Company's effective voting rights.
2016 2015
US $000 US $000
Amounts receivable from
subsidiaries
Livermore Properties Limited 3,103 - (1)
Sandhirst Limited 1,018 - (1)
Allowance for impairment (2,940) - (1)
------ ------
1,181 -
------- -------
Amounts receivable from
key management
Directors' current accounts 3,000 2,514 (1)
Other assets 1,128 2,256 (2)
Loan receivable 2,513 - (3)
------ ------
6,641 4,770
------- -------
Amounts payable to subsidiaries
Livermore Investments Cyprus
Limited (169) - (4)
Livermore Capital AG (687) - (4)
Livermore Israel Investments
Ltd (2,210) - (4)
------ ------
(3,066) -
------- -------
Amounts payable to other
related party
Loan payable (149) (499) (5)
------ ------
(149) (499)
------- -------
Amounts payable to key
management
Directors' current accounts (13) (35) (4)
Other key management personnel (5) (843) (6)
------ ------
(18) (878)
------- -------
Key management compensation
Short term benefits
Executive Directors' fees 795 795 (7)
Executive Directors' reward
payments 4,128 1,528
Non-executive Directors'
fees 60 69
Non-executive Directors'
reward payments 50 22
Other key management fees 1,092 383
------ ------
6,125 2,797
------- -------
(1) The amounts receivable from subsidiaries and the Director's
current accounts with debit balances are interest free, unsecured,
and have no stated repayment date.
(2) Loans of USD 5.523m were made to a key management employee
for the acquisition of shares in the Company. Interest was payable
on these loans at 6 month US LIBOR plus 0.25% per annum and the
loans were secured on the shares acquired. The loans were repayable
on the earlier of the employee leaving the Company or April 2013.
In December 2012 the Board decided to renew the outstanding amount
of these loans for a period of another five years. Based on the
Board's decision, the outstanding amount is reduced annually on a
straight line over five years, as long as the key management
employee remains with the Company. The relevant reduction in the
loan amount for the year was USD 1.128m. The loans are classified
as "other assets" and are included under trade and other
receivables (note 13).
(3) A loan of USD 2.500m was made to a key management employee,
during the year, for the acquisition of shares in the Company.
Interest is payable on the loan at 6 month US LIBOR plus 0.25% per
annum and the loan is secured on the shares acquired. The loan is
repayable on the earlier of the employee leaving the Company or
April 2020. The loan is included within trade and other receivables
(note 13).
(4) The amounts payable to subsidiaries and Director's current
accounts with credit balances are interest free, unsecured, and
have no stated repayment date.
(5) A loan with a balance at 31 December 2016 of USD 0.149m (31
December 2015: USD 0.499m) has been received from a related company
(under common control), 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 20).
(6) The amount payable to other key management personnel relates
to a payment made on behalf of the Company for investment purposes
and accrued consultancy fees.
(7) These payments were made directly to companies which are related to Directors.
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 2016 or
2015.
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 2016 held a total of 1.941m
shares at a value of USD 0.973m (2015: 1.941m shares at a value of
USD 0.931m) which represents 4% of its effective voting rights. The
investment in Babylon Ltd is held through the subsidiary Livermore
Israel Investments Ltd (2015: included within public equity
investments under financial assets at fair value through profit or
loss - note 5).
In 2016, the Company bought 17,475,585 (2015: 3,000,000) of its
Ordinary shares from Groverton Management Ltd, at an average price
of USD 0.45 per share (2015: USD 0.51 per share). These shares are
included in Treasury shares (note 15).
As at the reporting date Livermore had 335,816 number of shares
of Wanaka Capital Partners Mid-Tech Opportunity Fund registered in
its name but held for the absolute benefit of a related company
(other related party - under common control). These shares are not
included in the financial assets on the consolidated statement of
financial position.
During the year the Company received administrative services of
USD 0.048m (2015: 0.039m) in connection with investments from a
related company (other related party - under common control), Mash
Medical Life Tree Marketing Ltd.
32. Provisions
The movement in provisions for the year is as follows:
2016 2015
US $000 US $000
As at 1 January 513 -
Additions (note 33) - 513
Settlements (128) -
----- -----
As at 31 December 385 513
------ ------
Allocated as:
Current liability 385 128
Non-current liability - 385
------ ------
385 513
------ ------
33. Litigation
Fairfield Sentry Ltd vs custodian bank and beneficial owners
One of the custodian banks that the Company uses faces a
contingent claim up to USD 2.1m, and any interest as will be
decided by a US court and related legal fees, with regards to the
redemption of shares in Fairfield Sentry Ltd, which were bought in
2008 at the request of Livermore and on its behalf. The same case
was also filed in BVI where the Privy Council ruled against the
plaintiffs.
As a result of the surrounding uncertainties over the existence
of any obligation for Livermore, as well as for the potential
amount of exposure, the Directors cannot form an estimate of the
outcome for this case and therefore no provision has been made.
No further information is provided on the above case as the
Directors consider it could prejudice its outcome.
Ex employee vs Empire Online Ltd
In 2007 an ex employee of Empire Online Limited (the Company's
former name) filed a law suit against one of its Directors and the
Company in the Labor Court in Tel Aviv. According to the lawsuit
the plaintiff claimed compensation relating to the sale of all
commercial activities of Empire Online Limited until the end of
2006, and the dissolution of the company and the terms of
termination of his employment with Empire Online Limited.
Prior to the filing of the lawsuit in Israel, the Company filed
a claim against the plaintiff in the Court in Cyprus based upon
claims concerning breach of faith of the plaintiff towards his
employers. Litigation was completed in Israel.
On 5 March 2014, the Labor Court in Tel Aviv issued a ruling in
which the court denied most of the plaintiff's claims and accepted
only his claim for termination of employment. On 16 April 2014 the
plaintiff filed an appeal against the ruling. On 10 June 2015 the
court held a hearing of the appeal and suggested that both sides
settle the dispute by means of mediation. On 20 January 2016 the
parties reached an agreement for an out of court settlement, for
which a corresponding provision has been made (note 32).
34. Commitments
The Company has expressed its intention to provide financial
support to its subsidiaries, where necessary to enable them to meet
their obligations as they fall due.
Other than the above, the Company has no capital or other
commitments as at 31 December 2016.
35. Events after the reporting date
The three warehouse facilities that the Company invested in,
during 2016, were converted to CLOs in May 2017. For two out of the
three warehouses, with a carrying amount as at 31 December 2016 of
USD 11.185m, the Company invested an additional amount of USD 15.5m
during 2017 (before their conversion). For these two warehouses,
Livermore's investment amount plus net carry amounting to a total
of USD 28.1m became receivable in May 2017. For the other one, with
a carrying amount as at 31 December 2016 of USD 6.066m, the Company
invested an additional amount of USD 3m during 2017 (before its
conversion). For that warehouse, the amount to be received has not
yet been determined, however it is expected that it will exceed
Livermore's investment amount.
There were no other material events after the end of the
reporting year, which have a bearing on the understanding of these
consolidated financial statements.
36. 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 37.
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 2016 is the
following:
2016 2016 2016 2015 2015 2015
US US US US US US
$000 $000 $000 $000 $000 $000
Financial Liabilities Net Financial Liabilities Net
assets value assets value
British Pounds
(GBP) 1,754 (355) 1,399 1,611 (4,475) (2,864)
Euro 2,715 (284) 2,431 2,641 (253) 2,388
Swiss Francs
(CHF) 8,090 (1,966) 6,124 28,653 (9) 28,644
Indian Rupee
(INR) - - - 7,099 - 7,099
Israel Shekels
(ILS) 5,052 (2,212) 2,840 2,850 (90) 2,760
Others - (6) (6) - (5) (5)
------ ------ ------ ------ ------ ------
Total 17,611 (4,823) 12,788 42,854 (4,832) 38,022
------ ------ ------ ------ ------ ------
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 2016 would have the
following impact. A 10% decrease of the following currencies
against USD would have an approximately equal but opposite
impact.
2016 2016 2015 2015
US US $000 US US $000
$000 $000
Profit Other Profit Other
or comprehensive or loss comprehensive
loss income income
British Pounds
(GBP) 77 63 (445) 159
Euro 243 - 162 77
Swiss Francs
(CHF) 590 - 2,842 -
Indian Rupee
(INR) - - - 710
Israel Shekels
(ILS) 284 - 273 3
------ ------ ------ ------
Total 1,194 63 2,832 949
------ ------ ------ ------
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 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 these banking
facilities utilised at 31 December 2016 was USD 1.2m (2015: USD
13.2m).
As at 31 December 2016 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 through CLO equity
tranches as well as through warehousing facilities. An investment
in the CLO equity tranche or first loss tranche of a warehouse
represents a leveraged investment into such loans. As these loans
(assets of a CLO) and the liabilities of a CLO are floating rate in
nature (typically 3 month LIBOR as the base rate), the residual
income to CLO equity tranches and warehouse first loss tranches is
normally linked to the floating rate benchmark and thus normally do
not carry substantial interest rate risk.
The Group's interest bearing assets and liabilities are as
follows:
2016 2015
US US
$000 $000
Financial assets
- subject to:
- fair value changes 3,550 4,534
- interest changes 156,970 93,836
------ ------
Total 160,520 98,370
------ ------
Financial liabilities
- subject to:
- interest changes 1,160 89,618
------ ------
Total 1,160 89,618
------ ------
Changes in market interest rates will affect the valuation of
fixed rate interest bearing instruments. A 1% (100 basis points)
increase in market interest rates would result in an estimated
0.72% increase in the net asset value as at 31 December 2016 (2015:
-0.18%).
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.
2016 2016 2015 2016
US $000 US $000 US $000 US $000
Profit Other Profit Other comprehensive
or loss comprehensive or loss income
income
Financial assets
- fair value
changes (256) - (269) -
- interest
changes 1,397 - 888 -
Financial liabilities
- interest
changes (12) - (896) -
------ ------ ------ ------
1,129 - (277) -
------ ------ ------ ------
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 as well as first loss
tranches of warehouse facilities. These investments represent
leveraged exposure to typically senior secured loans. Investments
in CLOs are subject to many risks including market price risk,
liquidity, credit risk, interest rate, reinvestment and certain
other risks.
Prices of these CLO investments may be volatile and will
generally fluctuate due to a variety of factors that are inherently
difficult to predict, including but not limited to changes in
prevailing credit spreads and yield expectations, interest rates,
underlying portfolio credit quality and market expectations of
default rates on non-investment grade loans, general economic
conditions, financial market conditions, legal and regulatory
developments, domestic and international economic or political
events, developments or trends in any particular industry, and the
financial condition of the obligors that constitute the underlying
portfolio.
A 10% uniform change in the value of the Group's portfolio of
financial assets (excluding level 3 investments) would result in a
6.56% change in the net asset value as at 31 December 2016 (2015:
4.84%), and would have the following impact (either positive or
negative, depending on the corresponding sign of the change):
2016 2016 2015 2015
US $000 US $000 US $000 US $000
Profit Other Profit Other comprehensive
or loss comprehensive or loss income
income
Available-for-sale
financial assets - - - 6,721
Financial assets - 104 - -
at fair value
through other
comprehensive
income
Financial assets
at fair value
through profit
or loss 10,209 - 358 -
------ ------ ------ ------
10,209 104 358 6,721
------ ------ ------ ------
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 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) and to a lesser extend in
respect of its financial assets at amortised cost, and other
instruments held for trading (perpetual bonds).
The Group's maximum credit risk exposure at 31 December 2016 is
as follows:
2016 2015
US US
$000 $000
Financial assets:
At amortised cost:
Trade and other receivables 6,759 3,090
Cash at bank 60,383 25,770
------ ------
67,142 28,860
Available-for-sale financial
assets - 65,946
Financial assets at fair
value through profit or
loss 100,137 6,655
------ ------
167,279 101,461
------- -------
No collaterals are held by the Company itself in relation to the
Company's financial assets subject to credit risk.
The fair values of the above financial assets at fair value
through profit or loss are also affected by the credit risk of
those instruments. However, it is not practical to provide an
analysis of the changes in fair values due to the credit risk
impact for the year or previous periods, nor to provide any
relevant sensitivity analysis.
The Group has exposure to US senior secured loans and to a
lesser degree emerging market loans through CLO equity tranches as
well as warehouse first loss tranches. These loans are primarily
non-investment grade loans or interests in non-investment grade
loans, which are subject to credit risk among liquidity, market
value, interest rate, reinvestment and certain other risks. It is
anticipated that these non-investment grade loans generally will be
subject to greater risks than investment grade corporate
obligations.
A non-investment grade loan or debt obligation or an interest in
a non-investment grade loan is generally considered speculative in
nature and may become a defaulted security for a variety of
reasons. A defaulted security may become subject to either
substantial workout negotiations or restructuring, which may
entail, among other things, a substantial reduction in the interest
rate, a substantial write-down of principal, and a substantial
change in the terms, conditions and covenants with respect to such
defaulted security. In addition, such negotiations or restructuring
may be quite extensive and protracted over time, and therefore may
result in substantial uncertainty with respect to the ultimate
recovery on such defaulted security. Bank loans have historically
experienced greater default rates than has been the case for
investment grade securities.
The Group has no investment in sovereign debt as at 31 December
2016 or 2015.
At 31 December the credit rating distribution of the Group's
asset portfolio subject to credit risk was as follows:
Rating 2016 Percentage 2015 Percentage
Amount Amount
US $000 US $000
AA 30,870 18.5% 18,772 18.5%
A+ - - - -
A 82 - 976 1.0%
A- 29,495 17.6% 6,326 6.2%
BB 2,433 1.5% 2,900 2.9%
BB+ 1,117 0.7% 1,116 1.1%
BB- - - 518 0.5%
Not Rated 103,282 61.7% 70,853 69.8%
------ ------ ------ ------
167,279 100% 101,461 100%
------ ------ ------ ------
Included within "not rated" amounts are investments in loan
market through CLOs of USD 79.336m and open warehouses of USD
17.251m (2015: CLOs of USD 63.046m and open warehouses of USD
5.020m).
The modelled IRRs on the CLO portfolio as well as the warehouse
first loss tranches are in low teens percentage points.
Liquidity Risk
The following table summarizes the contractual cash outflows in
relation to the Group's financial liabilities according to their
maturity.
31 December 2016 Carrying Less Between Between Over
amount than 1 and 2 and 5 years
1 year 2 years 5 years
US $000 US $000 US $000 US $000 US
$000
Bank overdraft 1,160 1,160 - - -
Trade and other
payables 5,566 5,566 - - -
------ ------ ------ ------ ------
Total 6,726 6,726 - - -
------ ------ ------ ------ ------
31 December 2015 Carrying Less Between Between Over
amount than 1 and 2 and 5 years
1 year 2 years 5 years
Bank loan 76,410 2,477 2,557 75,531 -
Bank overdraft 13,208 13,208 - - -
Trade and other
payables 2,207 2,207 - - -
------ ------ ------ ------ ------
Total 91,825 17,892 2,557 75,531 -
------ ------ ------ ------ ------
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.
Warehouse facilities are private negotiated financing facilities
and are not traded and have no active market. The Company, however,
can opt to terminate such facility.
The management 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 2016, the Group had liquid investments totalling
USD 146.3m, comprising of USD 60.4m in cash and cash equivalents,
USD 81.8m in investments in loan market through CLOs, USD 1.1m in
other fixed income investments, USD 2.0m in public equities and USD
1.0m 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 total equity
(i.e. its 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:
2016 2015
US $000 US $000
Cash at bank (60,383) (25,770)
Bank overdrafts 1,160 13,208
Bank loans - 76,410
------ ------
Net Debt (59,223) 63,848
------ ------
Total equity 157,174 148,637
------ ------
Net debt to equity ratio (0.38) 0.43
------- -------
The significant improvement in the ratio is mainly due to the
disposal of investment property activities (note 23) and the bank
loan associated with it.
37. Financial assets and liabilities by class
Note 2016 2015
US US
$000 $000
Financial assets:
13,
Loans and receivables 14 - 28,860
Financial assets at amortised 13,
cost 14 67,142 -
Available-for-sale financial
assets 4 - 81,147
Financial assets at fair
value through profit or
loss 5 102,087 9,801
Financial assets designated
at fair value through
other comprehensive income 6 6,673 -
------- -------
175,902 119,808
------- -------
Financial liabilities:
18,
Financial liabilities 19,
at amortised cost 20 6,726 91,825
Financial liabilities
at fair value through
profit or loss:
Derivative financial instruments 17 - 217
------- -------
6,726 92,042
------- -------
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) Paradeplatz 6
Ltd CH-8098 Zürich
143, Spyrou Kyprianou Switzerland
Avenue
Limassol 3083 Bank Julius Baer & Co.
Cyprus Ltd.
Solicitors Bahnhofstrasse 36,
Travers Smith CH-8010 Zurich,
10 Snow Hill Switzerland
London
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 SEUFMIFWSEEI
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