TIDMLIV
RNS Number : 1624N
Livermore Investments Group Limited
30 May 2022
Highlights
-- Net profit for the year was USD 24.7m (2020: net profit of USD 0.845m).
-- Net Asset Value per share increased by 13.8% to USD 1.07
(2020 USD 0.94) after paying 8m interim dividend implying a total
return of 19%.
-- On 16 April 2021, the Company paid an interim dividend of USD
8m (USD 0.0488 per share) to members on the register on 19 March
2021.
-- During the year 2021, the Company distributed net USD 6.057m
to shareholders via share buyback.
-- On 05 January 2022, the Company announced an interim dividend
of USD 24m (USD 0.145 per share) to members on the register on 14
January 2022. The dividend was paid on 07 February 2022.
-- Collateralized Loan Obligations (CLO) portfolio and warehouse
generated USD 27.3m in cash distributions and a total return of USD
30.6m in 2021.
Chairman's and Chief Executive's Review
Introduction
We are pleased to announce the financial results for Livermore
Investments Group Limited ("Livermore" or "the Company") for the
year ended 31 December 2021. References to the Company hereinafter
also include its consolidated subsidiary (note 8 ). References to
financial statements hereinafter are to the Company's consolidated
financial statements.
2021 was a year of continued economic recovery from the COVID
pandemic. Despite bouts of new lockdowns and newer strains of the
coronavirus, effective vaccinations and ample monetary and fiscal
support provided the needed impetus for most developed economies to
recover to pre-pandemic GDP levels. Short and long-term rates
remained at low levels supporting public equity markets to reach
record levels. However, concerns about inflation due to strong
consumer and business demand straining already fragile global
supply-chains prompted a change in rates outlook by global central
banks later in the year.
Management was extremely active during the year optimizing the
existing portfolio and deploying capital in new investments. The
Company refinanced or reset seven of its CLOs and reduced their
cost of funding or extended their reinvestment period. In addition,
management led the pricing of three new issue CLOs with leading
managers including Blackstone Credit, Ares Management and MJX Asset
Management and had two new warehouses open as of year-end 2021.
Further, management traded certain BB and equity tranches on a
relative values basis. CLO equity distributions were very strong
due to the additional benefit of LIBOR floors and sustained high
loan spreads. Overall, the CLO portfolio generated exceptional
returns of 35.1% with USD 27.3m cash distribution from its CLO and
warehouse portfolio and an additional USD 3.3m in valuation gains
amounting to total gains of USD 30.6m.
Our net profit for the year was USD 24.7m (2020 net profit: USD
0.845m) and the year-end NAV was USD 1.07 per share (2020 NAV: USD
0.94 per share) after paying a dividend payment of USD 8m (USD
0.0488 per share). During the year, the Company bought back
10,888,577 shares and subsequently issued 1,430,000 shares out of
treasury, at a net cost of USD 6.057m.
The Company recorded net gains of USD 30.6m from its US CLO and
warehousing portfolio. Interest and distribution income from the
financial portfolio totalled USD 27.5m (2020: USD 22.0m). The
Company ended the year with over USD 45.1m in cash at hand. On 5
January 2022, the Board of the Company announced an interim
dividend of USD 24m (USD 0.145 per share) bringing the total
distribution to shareholders in the last twelve months to USD
38.057m, which represents 36.9% of the Company's average market
capitalization over that period.
Financial Review
The NAV of the Company on 31 December 2021 was USD 177.7m (2020:
USD 163.9m). Net profit, during the year was USD 24.7m, which
represents earnings per share of USD 0.15 . Operating expenses were
USD 8.6m (2020: USD 2.8m).
The overall change in the NAV is primarily attributed to the
following:
31 December 2021 31 December 2020
US $m US $m
----------------- -----------------
Shareholders' funds at beginning of year 163.9 173.1
----------------- -----------------
___________ ___________
----------------- -----------------
Income from investments 27.5 22.0
----------------- -----------------
Unrealised gains / (losses) on investments 9.4 (22.6)
----------------- -----------------
Unrealised exchange gains 0.1 -
----------------- -----------------
Operating expenses (8.6) (2.8)
----------------- -----------------
Net finance income (0.4) 0.3
----------------- -----------------
Tax charge (0.1) (0.1)
----------------- -----------------
___________ ___________
----------------- -----------------
Increase / (decrease) in net assets from operations 27.9 (3.2)
----------------- -----------------
Dividends paid (8.0) (6.0)
----------------- -----------------
Issuance / purchase of own shares (6.1) -
----------------- -----------------
___________ ___________
----------------- -----------------
Shareholders' funds at end of year 177.7 163.9
----------------- -----------------
------ ------
----------------- -----------------
Net Asset Value per share US $1.07 US $0.94
----------------- -----------------
Dividend & Buyback
At 16 April 2021, the Company paid an interim dividend of USD 8m
(USD 0.0488 per share) to members on the register on 19 March 2021,
as announced by the Board on 08 March 2021.
On 05 January 2022, the Company announced an interim dividend of
USD 24m (USD 0.145 per share) to members on the register on 14
January 2022. The dividend was paid on 07 February 2022.
The Board of Directors will decide future dividends based on
profitability, liquidity requirements, portfolio performance,
market conditions, and the share price of the Company relative to
its NAV.
During 2021, the Company bought back 10,888,577 shares to be
held in treasury for a total cost of USD 6.973m and re-issued
1,430,000 for a total USD 0.829m. As at 31 December 2021, the
Company held 9,458,577 shares in treasury.
Richard B Rosenberg Noam Lanir
Chairman Chief Executive Officer
27 May 2022
Review of Activities
Introduction and Overview
Effective vaccinations against COVID-19 and strong monetary and
fiscal stimulus in most developed economies supported a continued
economic recovery in 2021. Although the effects of the pandemic
continued in 2021, the disruptions to economic activity were
milder. Labour markets recovered strongly and became quite tight
especially in the US as demand for services outstripped supply.
Inflation trended higher and was boosted by supply-chain challenges
as well as low investment in commodity related sectors over the
last several years.
Risk assets were well bid most of the year with the S&P 500
Index continuing its winning streak to end the year at an all-time
high of 4766 - an increase of 207% from the pandemic low in 2020.
The NASDAQ Composite Index recorded a peak in November 2021 before
ending the year with a gain of 23.2% from the beginning of the
year. The Euro Stoxx 50 price Index also recorded impressive gains
of 20.6%. In emerging markets, India's NIFTY 50 outperformed its
peers with a gain of 23.8% versus losses for China's Hang Seng
Index of 14.8% and losses for Brazil's BOVESPA Index of 11.8%.
China's negative performance was a reflection of lingering default
issues in its large and leveraged property sector as well as
China's regulatory crackdown on the technology sector.
With inflation higher and expectations of eventual rate
increases in the US, the US Government yield increased from 0.91%
to 1.51%. Returns were low to negative in the global government
bond and investment grade market as yields increased steadily
though the year. The US Dollar gained against most currencies with
the DXY Dollar Index gaining 6.45% for the year.
Credit continued to tighten, though, as strong economic recovery
and liquid and yield-hungry markets kept default expectations at
very low levels. The Bloomberg US Corporate High Yield Total Return
Index gained 5.29% in 2021 despite a modest rise in US swap rates
and very high levels of new issuance. Similarly, the floating rate
leveraged loan market had a strong year with the Credit Suisse
Leverage Loan Index ("CSLLI") generating a total return of 5.4%.
Rating agencies were busy upgrading credits for most of the year
with the Upgrade/Downgrade ratio of 2:1. Default rates declined
sharply with the Leveraged Loan Index recording a multi-year low
and ending the year with the 12-month trailing default rate of
0.29%.
CLO's performed very well in 2021 and the Company's CLO equity
and warehouse portfolio had an excellent year generating over 35%
return with cash distributions contributing USD 27.3m out of the
total return of USD 30.6m. Management was proactive and busy in
2021. We refinanced or "reset" seven of our CLO transactions
reducing their cost of funding or extending their reinvestment
periods and thereby adding significant value to the existing
portfolio. In addition, management converted three of its
warehouses into new issue CLOs with leading CLO managers including
Blackstone Credit, Ares Management and MJX Asset Management at very
attractive equity arbitrage levels, and generated a net warehouse
carry of USD 2.9m. Further, management opened two new warehouses
with PGIM and Blackstone Credit. As of the day of publishing this
report, both of these warehouses have been converted to a new issue
CLO in 2022 generating USD 2.3m in net carry. In 2021, management
opportunistically took profits on some of its CLO BB and equity
positions.
During 2021, the Company invested USD 2.7m in technology-related
start-ups in Israel and the US. In addition, the Company invested
USD 4m in a digital assets focussed fund and generated gains of 52%
in 2021. As of April 2022, the fund is up 1.1% in 2022.
For 2021, the Company reported a NAV/share of USD 1.07 and net
profit of USD 24.7m. Interest and distribution income amounted to
USD 27.5m, of which, USD 27.3m was generated from the CLO and
warehousing portfolio. The net return of the CLO and warehousing
portfolio was USD 30.6m as mark-to-market changes contributed to a
gain of USD 3.3m. In addition, our investment in the digital assets
focussed fund grew by 52 % contributing USD 2.8m to the net profit.
Operating expenses amounted to USD 8.6m. The Company ended the year
with over USD 45m of cash at hand in advance of an interim dividend
of USD 24m that was declared in January 2022. Including the interim
dividend in January 2022, the Company has distributed USD 38.14 or
36.1% of its average market capitalization in 2021.
The Company does not have an external management company
structure and thus does not bear the burden of external management
and performance fees. Furthermore, the interests of Livermore's
management are aligned with those of its shareholders as management
has a large ownership interest in Livermore shares.
Considering the strong liquidity positions of Livermore,
together with its strong foothold in the US CLO markets as well as
the robustness of its investment portfolio and the alignment of the
management's interests with those of its shareholders, management
believes that the company is well positioned to benefit from
current conditions.
Global Investment Environment
In 2021, the global economy recovered from the sharp but short
COVID-19 lockdown-driven recession the year before amid progress on
vaccinations and supported by ample accommodative monetary and
fiscal policy. While the coronavirus pandemic continued in its
second year, the effects of the pandemic weighed less strongly on
economic activity than the year before and the periods of
re-opening in most economies saw strong demand from consumers.
Financial markets continued their late 2020 exuberant mood into
early 2021 and, despite small pull-backs, equity markets continued
to make new highs through the year supported by strong corporate
earnings and a low rate outlook. Inflation in developed economies
continued to pick up throughout the year, and as the year
progressed, the higher inflation narrative started to shift from
"transitory" to "structural" with strong consumer and rising
earnings increasing demand in the face of still-recovering supply
chain issues. Energy and commodity prices increased notably on
demand pressures and low supply due to persistently low investment
in prior years in these sectors. In advanced economies, government
yields started to increase since the first half of last year on
higher inflation and firming expectations for higher policy rates.
In November 2021, the US Federal Reserve acknowledged that
inflation in the US was much higher than anticipated and that
significant monetary tightening from the very accommodative levels
may be needed. The recent Russian invasion of Ukraine adds a
significant risk to the inflation and growth problem with both
countries being significant exporters of agricultural commodities
and given Europe's reliance of Russian energy imports. Looking
forward, we anticipate central banks in developed economies to
tighten financial conditions to reign in high inflation and
potentially doing so into an already slowing global economy.
USA: After the severe recession in 2020, the US economy
rebounded strongly in 2021 with its GDP growing by 5.7%. The US GDP
exceeded its pre-COVID level in the second quarter of 2021. The
recovery was attributable to progress of vaccinations leading to a
reopening of the economy and the significant monetary and fiscal
policy measures implemented since the outbreak of the pandemic.
However, supply bottlenecks weighed on industrial production in the
second half of the year. Labour market conditions improved
significantly with the unemployment rate in December 2021 reaching
3.9%, compared with 3.5% before the pandemic. The US Federal
Reserve kept the main interest rate near zero and continued its
bond buying program (Quantitative Easing) throughout 2021 to
support the economy. Inflation continued to tick-up during the
year. The personal consumption expenditures (PCE) price index rose
5.8% over the 12 months ending in December, and the index that
excludes food and energy items (so-called core inflation) was up
4.9%-the highest levels for both measures in roughly 40 years. In
November 2021, the US Federal Reserve acknowledged high inflation
as a potential problem and signalled an end of their bond buying
program while bringing forward their projections for interest rate
increases. With regard to fiscal policy, the Build Back Better Act
has been stalled in the Senate since November, and the fiscal
impulse to growth is expected to fade much faster than previously
anticipated.
Eurozone: The euro area economy also recovered and GDP returned
to its pre-crisis level by the year-end 2021. Economic activity
initially declined in the first quarter, before rebounding strongly
in the second and third quarters owing to the more favourable
development in the pandemic situation and a reopening of economies
in most member states. The recovery slowed down again thereafter
with supply bottlenecks negatively affecting industrial production
and renewed lockdowns in some member states to slow the advance of
a rapid spread coronavirus variant. Average GDP growth for the year
stood at 5.2%, following a 6.5% decline in 2020. The unemployment
rate fell significantly, and at 7.0% in December 2021 was below its
pre-crisis level. Headline inflation in the euro area rose to 2.6%
(2020: 0.3%) while core inflation was also higher at 1.5%.
Inflation rose markedly from the Spring onwards and by year-end had
reached 2.6%, the highest level in the euro area's history. In
Germany, VAT was restored to its previous level after having been
temporarily lowered in the second half of 2020. This also
contributed to the higher rate of inflation in addition to the
global factors mentioned above. In July, the ECB presented the
results of its monetary policy strategy review and announced that
it would aim for consumer price inflation of 2% over the medium
term. The previous inflation target had stood at below, but close
to, 2%. In addition, the ECB allowed itself the flexibility, under
certain circumstances, for a transitory period in which inflation
is moderately above target.
Japan: Japan's GDP grew by 1.7% compared to a decline of 4.5% in
2020. Economic activity fluctuated as a result of the repeated
waves of the pandemic and the corresponding responses to contain
them. Further, procurement issues in the automotive industry,
particularly in the second half of the year, affected the economic
activity in Japan. Against this backdrop, GDP remained below its
pre-crisis level through to the end of the year. The unemployment
rate stood at 2.7% in December, still around half a percentage
point higher than before the pandemic. Having stagnated in 2020,
consumer prices declined slightly for the 2021 year (- 0.3%). Core
inflation was significantly negative (- 0.8%) due to large price
reductions for mobile communications. Broader inflation fluctuated
significantly over the course of 2021, with higher energy prices
lifting it to 0.8% by the end of the year. The Bank of Japan (BoJ)
maintained its highly accommodative monetary policy throughout 2021
and left its short-term deposit rate at -0.10% and the target for
the 10-year government bond yields to 0%. However, In December, the
BoJ announced a scale-back of its corporate debt purchases to
pre-pandemic levels.
China: After historically low growth of 2.2% in 2020, China's
GDP expanded by 8.1% in 2021. The development through the year was
volatile. Strict regional containment measures per its zero-COVID
strategy repeatedly weighed on economic activity. In addition,
supply bottlenecks and temporary power outages adversely affected
its manufacturing sector. Urban unemployment rate was little
changed, which had returned to its pre-crisis level at the end of
2020 at 5.2%. The government's regulatory reforms, such as the
deleveraging in the real estate sector, also had a curbing effect
with several of its large property developers starting to teeter at
the edge of default. In 2021, China announced its focus on of
achieving more equal income distribution (termed "Common
Prosperity") and, amongst many internal changes, targeted large
technology platforms that it believed created wealth and
concentrated power in the hands of a few people. As a result,
investors pulled capital from Chinese technology companies
resulting in large declines in their market capitalization. In
response to the tighter financial conditions, the People's Bank of
China left its policy interest rates unchanged, but lowered the
reserve requirement rate in July and December by a total of one
percentage point.
Commodities: Commodity prices rose significantly as a result of
the global economic recovery coupled with tight supply and
persistently low investment in the sector in prior years. A strong
investor focus on ESG (Environment, Social, and Governance)
criteria also curtailed capital flow into fossil fuels and energy
intensive industries. Further, the member countries of the
Organization of the Petroleum Exporting Countries and Russia
(OPEC+) made only a moderate increase in output despite the strong
rise in demand for crude oil. In November, the price of Brent crude
temporarily reached its highest level since mid-2018 at over USD 85
per barrel. At the end of 2021, it still stood at just under USD
80, having started the year at USD 50. Oil and commodity prices
have continued to rise in 2022 due to Russia-Ukraine conflict as
both countries are significant exporters of agricultural
commodities and Russia is significant exporter of Oil and Natural
Gas especially to European countries. Prices for industrial metals
also ended the year higher.
Equities and Bonds: US equity markets continued their buoyant
move up from their 2020 lows as continued and plentiful monetary
and fiscal policy supported demand for financial assets. Large cap
stocks in the US led the charge ending 2021 near a record high. The
S&P 500 Index generated returns of 28.7% for the year buoyed by
a number of positive developments, including effective vaccinations
driving the reopening of the economy, strong corporate earnings and
increased consumer demand. Likewise, global markets continued to
rise alongside those in the US, despite some setbacks. Global
equities, as measured by the MSCI All Country World Index increased
18.54%. Developed international stocks, as represented by the MSCI
World ex USA Index, rose 12.62%, notably stronger than emerging
markets. The MSCI Emerging Markets Index fell -2.54% largely driven
by the property and technology sector losses in China. Exuberant
stock markets globally allowed a record number of new IPOs and
SPACs to enter the market in 2021. However, as inflation and rate
expectations increased in November with the US Federal Reserve
signalling an end to pandemic era highly accommodative monetary
policy, SPAC mergers and high-growth technology companies with very
high valuations quickly fell out of favour resulting in steep stock
price declines. Losses in this sector have accelerated into the
first quarter of 2022 as investors price in ever higher rates to
reign in high inflation.
Developed world bond markets faced a difficult 2021
characterized by rising inflation, continued but waning effects of
the pandemic, and the start of monetary policy tightening. US
government bond interest rates rose in the first quarter with a
steeper curve as investors anticipated strong growth with
transitorily high inflation with the 10-year government bond yield
rising 81 basis points to 1.74%. However, as the coronavirus
mutations spread, concerns over an uneven recovery but still high
inflation resulted in some reversal of the steepness with
short-term yields modestly higher and the 10-year government bond
falling to 1.52% as of year-end 2021. The Morningstar U.S. Core
Bond Index, a proxy for typical U.S. bond exposure, dropped by 1.6%
for the year - its worst annual return since the taper tantrum in
2013.
Foreign exchange : The U.S. dollar enjoyed a strong 2021,
gaining 6.7% for the year against a basket of developed-markets
currencies, driven by the US economy's relative strength and the US
Fed Reserve's tighter policy outlook. European Central Bank more
gradual approach to tightening and slower growth expectations in
part from continued supply chain issues caused the Euro to decline
6.9% against the US Dollar. With no end in sight to Japan's low
rate and highly accommodative monetary policy, the Japanese Yen
weakened from 103 to 115 versus the US Dollar. The Swiss Franc
fared relatively well against the Euro and the Japanese Yen but
fell a modest 3.7% against the US Dollar.
Loan Market: US Leveraged Loans continued their recovery from
their pandemic lows into 2021. For the full year, the Credit Suisse
Leveraged Loan Index ("CSLLI") generated a total return of 5.4% -
its 28(th) positive year return in its 30 years of existence.
Strong demand for yield in an otherwise low yield fixed income
world allowed the institutional loan market to eclipse its previous
new issuance record (including loans for refinancing and repricing)
to finish the year at USD 613 billion (2020: USD 287.8 billion),
with the total market size swelling to USD 1.35 trillion (2020: USD
1.2 trillion). During the year, net inflows into loan mutual funds
and ETFs amounts to USD 47 billion as compared to net outflows of
USD 27 billion in 2020. Strong corporate profits, loose financing
conditions, and a reopening of the US economy allowed ratings
upgrades to outpace downgrades by a 2:1 ratio.
The 12-month trailing par-weighted default rate as of December
2021 dropped to 0.29% (2020: 3.83%), its lowest level in a decade.
Looking ahead, we expect the default rate to increase somewhat from
the current very low levels but remain below the historical average
of 2.8% as the inflation and increasing rate expectations cloud the
economic outlook.
CLO Market: The CLO market was on fire in 2021 with demand for
absolute yield and floating rate investments exceeding any prior
time in history. In the US, 920 US CLOs priced totalling $421.1bn
(374/$183.7bn new issue and 546/$237.4bn refi/reset/re-issue) which
compares to the previous record in 2018 when 563 US CLOs priced
totalling $278.9bn (242/$129.3bn new issue and 321/$149.7bn
refi/reset/re-issue). CLO equity arbitrage was strong as plentiful
new issue loan supply and an expanded investor base balanced the
strong supply of new issue CLOs.
During the year, CLO debt spreads remained low and rangebound
with the average AAA spread inside of 120 basis points of LIBOR.
The extremely strong CLO refinancing and reset volumes are not
sustainable and we expect a marked decline in 2022 as most of the
refinancing and reset candidates were already executed in 2021.
CLO equity distributions were strong in 2021 as new loans
provided decent spread compensation and came with LIBOR floors that
boosted the pay-outs to equity investors. CLO equity valuations
were stable to slightly higher and our portfolio of mainly CLO
equity investments generated over 35% total return in 2021.
As we look ahead in 2022, the transition from LIBOR to SOFR is
expected to create some basis risk to equity distributions.
Further, rising rates are expected to erode the benefit of
LIBOR/SOFR floors leading to lower equity distributions as compared
to 2021.
Sources: Swiss National Bank, Bloomberg, Board of Governors of
the Federal Reserve System, European Central Bank (ECB),
Morningstar,JP Morgan, Credit Suisse
Livermore's Strategy
The financial portfolio is focused on fixed income instruments
which generate regular cash flows and include exposure mainly to
senior secured and usually broadly syndicated US loans and to a
limited extent emerging market debt through investments in CLOs.
This part of the portfolio is geographically focused on the US.
Strong emphasis is given to maintaining sufficient liquidity and
low leverage at the overall portfolio level and to re-invest in
existing and new investments along the economic cycle.
Financial portfolio
The Company manages a financial portfolio valued at USD 164.4m
as of 31 December 2021, which is composed mainly of cash and
investments in fixed income and credit related securities.
The following is a table summarizing the financial portfolio as
of year-end 2021.
2021 2020
Name US $m US $m
-------------------------------- -------- ------
Investment in the loan market
through CLOs 101.7 77.0
Open Warehouse facilities 7.6 10.1
Public Equities 10.0 12.5
-------------------------------- -------- ------
Invested total 119.3 99.6
-------------------------------- -------- ------
Cash 45.1 50.4
-------------------------------- -------- ------
Total 164.4 150.0
-------------------------------- -------- ------
Senior Secured Loans and Collateralized Loan Obligations
(CLO):
US senior secured loans are a floating rate asset class with a
senior secured claim on the borrower and with overall low
volatility and low correlation to the equity market. CLOs are
managed portfolios invested into diversified pools of senior
secured loans and financed with long term financing.
In 2021, the US senior secured loan market (leveraged loan
market) continued its strong recovery that started in the middle of
2020. Existing borrowers accessed the market to extend their
maturities or refinance the cost of margin and new borrowers came
to market on the back of strong merger and acquisitions and buyout
activity.
Strong demand for loans was supported by new issue CLO creation
as well as retail fund inflows. The resilient performance of CLO's
during the pandemic as well as previous credit cycles such as the
global financial crisis has cemented its position as a mainstream
asset class drawing in new capital seeking higher yields than
comparable risk assets and CLO debt spreads tightened across all
rated tranches. Improving fundamentals, yield hungry investors in a
low yield environment, and strong economic growth provided the
perfect backdrop for CLO market growth and performance. 920 new US
CLOs priced in 2021 for a total of $421.1bn (374/$183.7bn new issue
and 546/$237.4bn refi/reset/re-issue) which compares to the
previous record in 2018 when 563 US CLOs priced totalling $278.9bn
(242/$129.3bn new issue and 321/$149.7bn refi/reset/re-issue). CLO
equity arbitrage was strong as plentiful new issue loan supply and
an expanded investor base balanced the strong supply of new issue
CLOs. Defaults stayed low and hit a decade low in 2021 ending the
year at 0.29% on a trailing twelve-month rolling basis. Ample
demand and liquid markets allowed most borrowers to extend their
maturities further reducing near term default risk.
Our CLO portfolio and warehouse performed strongly generating
35.1% return over the 2021 starting valuation. The Company received
USD 27.3m in cash distributions, of which USD 2.9m were from
warehouse carry. CLO equity further benefitted from re-emergence of
LIBOR floors in new issue loans and better spread than average loan
spreads. Valuations for CLO equity increased somewhat but remained
steady all the while distributing cash returns of about 30% on 2020
valuations. Tighter debt spreads in the CLO debt market allowed
management to aggressively refinance several of its existing CLOs
and lower their cost of funding thereby increasing future
cash-flows and valuations. During the year, management refinanced
or reset about half of the CLO transactions where it has anchor
positions. During the year, management opened four new warehouses
(in addition to one open warehouse at the beginning of this year)
and converted three of them to new issue CLOs at very attractive
arbitrage levels. The remaining two open warehouses have been
converted to new issue CLOs by April 2022.
Management also took advantage of strong demand in the secondary
market and opportunistically took profits of some of its CLO BB and
equity positions.
As of the end of the year, all of the Company's US CLO equity
positions were passing their Junior Overcollateralization (OC)
tests. Management continues to actively monitor the CLO portfolio
and position it towards longer reinvestment periods through
recycling old CLOs into new or refinancing them with extended
reinvestment periods, as well as conducting relative value and
opportunistic trading.
As we look ahead in 2022, we expect the US Federal Reserve in
increase rates to reign in high inflation. Further, they may reduce
their bond holdings and remove liquidity from financial markets.
Higher rates will reduce the benefit of LIBOR floors over time and
we expect distributions to reduce in 2022 until LIBOR or SOFR reach
about 2%. The invasion of Ukraine by Russia is expected to add an
additional source of higher input costs of business and consumers
in the near-mid-term. Although leverage loan borrower fundamentals
are currently strong, we expect high rates to put more pressure on
their interest coverage covenants. Tighter financial conditions in
the future can increase refinancing and default risk for certain
borrowers. The counter-balance to this is most borrowers have
addressed their near-term financing needs and very few of them have
near-term maturities.
We expect loan default rates to moderately increase from the
very low 2021 levels but stay below their long-term averages.
The Company's CLO portfolio is divided into the following
geographical areas:
2021 Percentage 2020 Percentage
Amount Amount
US $000 US $000
US CLOs 101,667 100% 77,006 100%
------- ------ ------ ------
Fund Investments (previously described as Private Equities)
The fund investments held by the Company are mainly incorporated
in the form of Managed Funds (mostly closed end funds) in Israel
and the emerging economies. In addition, the Company has some
direct venture capital investments.
The following summarizes the book value of the private equity
funds as at 31 December 2021.
Name US $m
-------------------- -------
Cole Capital Fund 6.0
Fetcherr Ltd 3.3
Phytech (Israel) 1.9
Say2eat Inc 0.8
Other investments 0.4
Total 12.4
-------------------- -------
Cole Capital : Cole Capital is a fund that trades in digital
assets such as Bitcoin and it is advised by Frequants. The advisor
has developed automated trading algorithms that have outperformed
the underlying digital assets performance by consistently avoiding
large drawdowns. The Company invested USD 4m in Cole Capital on
March 10, 2021 and as of end of the year, the fund had generated
51.7% return.
Fetcherr Ltd : Fetcherr is the Israeli start-up that has
developed a proprietary AI-powered goal-based enterprise pricing
and workflow optimization system. Founded in 2019 by experts in
deep learning, Algo-trading, e-commerce, and digitization of legacy
architecture, Fetcherr aims to disrupt traditional rule-based
(legacy) revenue systems through reinforcement learning
methodologies, beginning with the airline industry. The Company
invested USD 2m in 2021.
Phytech : Phytech is an agriculture-technology company in Israel
providing end-to-end solutions for achieving higher yields on crops
and trees. Livermore continues to hold 12.2% in Phytech Global
Advisors Ltd, which in turns now holds 11.95% on a fully diluted
basis in Phytech Ltd.
Say2eat Inc : Say2eat is a company that has proved they can
disrupt the existing food delivery (3rd party) marketplace model,
with a first party, direct delivery model that is commission free.
The company has shown rapid growth in 2020 and is now active in
over 20 US states from the east coast all the way to Hawaii working
with 200 restaurants. The Company invested USD 0.750m in 2020.
The following table reconciles the review of activities to the
Company's financial assets as at 31 December 2021:
Name US $m
------------------------------------------------ -------
Financial Portfolio 119.3
Fund investments 12.4
------------------------------------------------ -------
Total 131.7
------------------------------------------------ -------
Financial assets at fair value through profit
or loss (note 4 ) 119.3
Financial assets at fair value through other
comprehensive income (note 5 ) 12.4
Total 131.7
------------------------------------------------ -------
Events after the reporting date
Details of materials events after the reporting date are
disclosed in note 27 to the financial statements.
Litigation
At the time of this Report, there is one matter in litigation
that the Company is involved in. Further information is provided in
note 23 to the financial statements. --
Report of the Directors
The Directors submit their annual report and audited financial
statements of the Company for the year ended 31 December 2021.
This report has been prepared on a voluntary basis and it does
not contain all of the information that would have been required
had it been prepared in accordance with the UK Companies Act 2006
guidance.
The Board's objectives
The Board's primary objectives are to supervise and control the
management activities, business development, and the establishment
of a strong franchise in the Company's business lines. Measures
aimed at increasing shareholders' value over the medium to
long-term, such as an increase in NAV are used to monitor
performance.
The Board of Directors
Richard Barry Rosenberg (age 66) independent, Non-Executive
Director, Chairman of the Board
Richard joined the Company in December 2004. He became
Non-Executive Chairman on 31 October 2006. He qualified as a
chartered accountant in 1980 and in 1988 co-founded the accountancy
practice SRLV. He has considerable experience in giving
professional advice to clients in the leisure and entertainment
sector. Richard is a director of a large number of companies
operating in a variety of business segments.
Noam Lanir (age 55), Founder and Chief Executive Officer
Noam founded the Company in July 1998, to develop a specialist
online marketing operation. Noam has led the growth and development
of the Company's operations over the last twenty years which
culminated in its IPO in June 2005 on AIM. Prior to 1998, Noam was
involved in a variety of businesses mainly within the online
marketing sector. He is also the major shareholder of Babylon Ltd,
an International Internet Company listed on the Tel Aviv Stock
Exchange. He is also a major benefactor of a number of charitable
organisations.
Ron Baron (age 54), Executive Director and Chief Investment
Officer
Ron was appointed as Executive Director and Chief Investment
Officer in August 2007. Ron has led the establishment and
development of Livermore's investment platform as a leading
specialized house in the credit space. Ron also has wide investment
and M&A experience. From 2001 to 2006 Ron served as a member of
the management at Bank Leumi, Switzerland and was responsible for
investment activity. Prior to this he spent five years as a
commercial lawyer advising banks and large corporations on
corporate transactions, including buyouts and privatisations. Ron
has over 18 years of experience as an investment manager with
particular focus on the US credit market and CLOs. He holds an MBA
from INSEAD Fontainebleau and an LLB (LAW) and BA in Economics from
Tel Aviv University. Ron is also the founder and owner of the
Israel Cycling Academy a non-profit professional cycling team.
Augoustinos Papathomas (age 59) independent, Non-Executive
Director
Augoustinos joined the Board in February 2019. He is a trained
and qualified UK Chartered Accountant. He is the senior Partner of
APP Audit and APP Advisory in Cyprus with over 30 years of
experience in assurance, taxation and advisory for local and
international clients. He is also an insolvency practitioner with
experience in many liquidations and receiverships. Augoustinos has
served as a director in various bodies and organisations and
currently he is the chairman of the Famagusta Chamber of Commerce
and Industry in Cyprus.
Directors' responsibilities in relation to the financial
statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
International Financial Reporting Standards as adopted by the
European Union.
The Directors are required to prepare financial statements for
each financial year which give a true and fair view of the
financial position of the Company, and its financial performance
and cash flows for that period. In preparing these financial
statements, the Directors are required to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgments and estimates that are reasonable and prudent;
-- State whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
-- Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Company's
transactions, and at any time enable the financial position of the
Company to be determined with reasonable accuracy and enable them
to ensure that the financial statements comply with the applicable
law and International Financial Reporting Standards as adopted by
the European Union. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the British Virgin Islands
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Disclosure of information to the Auditor
In so far as the Directors are aware:
-- there is no relevant audit information of which the Company's auditor is unaware; and
-- the Directors have taken all steps that they ought to have
taken to make themselves aware of any relevant audit information
and to establish that the auditor is aware of that information.
Substantial Shareholdings
As at 09 May 2022 the Directors are aware of the following
interests in 3 per cent or more of the Company's issued ordinary
share capital:
Number % of issued % of voting
of Ordinary ordinary rights*
Shares share capital
------------- --------------- ------------
Groverton Management Ltd 123,048,011 70.39 74.41
Ron Baron 25,456,903 14.56 15.40
* after consideration of the treasury shares.
Save as disclosed in this report and in the remuneration report,
the Company is not aware of any other person or entity that is
interested directly or indirectly in 3% or more of the issued share
capital of the Company or could, directly or indirectly, jointly or
severally, exercise control over the Company.
Details of transactions with Directors are disclosed in note 22
to the financial statements.
Corporate Governance Statement
Introduction
The Company recognises the importance of the principles of good
Corporate Governance and the Board is pleased to accept its
commitment to such high standards throughout the year.
The Board Constitution and Procedures
The Company is controlled through the Board of Directors, which
comprises of two independent Non-Executive Directors (one of which
is the Board's Chairman) and two Executive Directors. The Chief
Executive's responsibility is to focus on co-ordinating the
company's business and implementing Company strategy.
A formal schedule of matters is reserved for consideration by
the Board, which meets approximately four times each year. The
Board is responsible for implementation of the investing strategy
as described in the circular to shareholders dated 29 December 2006
and adopted pursuant to shareholder approval at the Company's EGM
on 17 January 2007. It reviews the strategic direction of the
Company, its codes of conduct, its annual budgets, its progress
towards achievement of these budgets and any capital expenditure
programmes. In addition, the Directors have access to advice and
services of the Company Secretary and all Directors are able to
take independent professional advice if relevant to their duties.
The Directors receive training and advice on their responsibilities
as necessary. All Directors submit themselves to re-election at
least once every three years.
Board Committees
The Board delegates clearly defined powers to its Audit and
Remuneration Committees. The minutes of each Committee are
circulated by the Board.
Remuneration Committee
The Remuneration Committee comprises of the Non-Executive
Chairman of the Board and a Non-Executive Director. The
Remuneration Committee considers the terms of employment and
overall remuneration of the Executive Directors and key members of
Executive management regarding share options, salaries, incentive
payments and performance related pay. The remuneration of
Non-Executive Directors is determined by the Board.
Audit Committee
The Audit Committee comprises of the Non-Executive Chairman of
the Board and a Non-Executive Director and is chaired by the
Chairman of the Board. The duties of the Committee include
monitoring the auditor's performance and reviewing accounting
policies and financial reporting procedures.
The Audit Committee's key objectives are the provision of
effective governance over the appropriateness of the Group's
financial reporting, including the adequacy of related disclosures,
the performance of external audit function, and the management of
the Group's systems of internal control and business risks.
The primary roles and responsibilities delegated to, and
discharged by, the Committee include:
-- Monitoring and challenging the effectiveness of internal control and associated functions
-- Approving and amending Group accounting policies
-- Reviewing, monitoring, and ensuring the integrity of interim
and annual financial statements, and any formal announcements
relating to the Company's financial performance
-- Providing advice (where requested by the Board) on whether
the Annual Report and Accounts, taken, is fair, balanced, and
understandable, and provides the information necessary for
shareholders to assess the Company's position and performance
-- Reviewing and monitoring the external auditor's independence,
objectivity, and effectiveness of the audit services
-- Monitoring and approving the scope and costs of audit
Board and committee meetings - 2021 attendance
Number of meetings attended Board Audit Remuneration
Richard Barry Rosenberg 4 of 4 2 of 2 1 of 1
-------- -------- ------------
Noam Lanir 4 of 4 - -
--------------------------- -------- -------- ------------
Ron Baron 4 of 4 - -
--------------------------- -------- -------- ------------
Augoustinos Papathomas 4 of 4 2 of 2 1 of 1
--------------------------- -------- -------- ------------
The Quoted Company Alliance (QCA) Code
The Directors recognise the importance of good corporate
governance and have chosen to apply the Quoted Companies Alliance
Corporate Governance Code (the 'QCA Code'). The QCA Code was
developed by the QCA in consultation with a number of significant
institutional small company investors, as an alternative corporate
governance code applicable to AIM companies. The underlying
principle of the QCA Code is that "the purpose of good corporate
governance is to ensure that the company is managed in an
efficient, effective and entrepreneurial manner for the benefit of
all shareholders over the longer term". The Directors anticipate
that whilst the Company will continue to comply with the QCA Code,
given the Group's size and plans for the future, it will also
endeavour to have regard to the provisions of the UK Corporate
Governance Code as best practice guidance to the extent appropriate
for a company of its size and nature. To see how the Company
addresses the key governance principles defined in the QCA Code
please refer to the table listed on the
Company's website, which was last reviewed and updated in April
2022.
A complete index of the disclosures required by the QCA Code,
including those on the Company's website, can be found at
http://www.livermore-inv.com/CorporateGovernance.
Communication with Investors
The Directors are available to meet with shareholders throughout
the year. In particular the Executive Directors prepare a general
presentation for analysts and institutional shareholders following
the interim and preliminary results announcements of the Company.
The chairman, Richard Rosenberg, is available for meetings with
shareholders throughout the year. The Board endeavours to answer
all queries raised by shareholders promptly.
Shareholders are encouraged to participate in the Annual General
Meeting at which the Chairman will present the key highlights of
the Company's performance. The Board will be available at the
Annual General Meeting to answer questions from shareholders.
Internal Control
The Board is responsible for ensuring that the Company has in
place a system of internal controls and for reviewing its
effectiveness. In this context, control is defined in the policies
and processes established to ensure that business objectives are
achieved cost effectively, assets and shareholder value
safeguarded, and that laws and regulations are complied with.
Controls can provide reasonable but not absolute assurance that
risks are identified and adequately managed to achieve business
objectives and to minimise material errors, frauds and losses or
breaches of laws and regulations.
The Company operates a sound system of internal control, which
is designed to ensure that the risk of misstatement or loss is kept
to a minimum.
Given the Company's size and the nature of its business, the
Board does not consider that it is necessary to have an internal
audit function. An internal audit function will be established as
and when the Company is of an appropriate size.
The Board undertakes a review of its internal controls on an
ongoing basis.
Going Concern
The Directors have reviewed the current and projected financial
position of the Company, making reasonable assumptions about
interest and distribution income, future trading performance,
valuation projections and debt requirements. On the basis of this
review, the Directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence
for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the Annual Report and
accounts.
Independence of Auditor
The Board undertakes a formal assessment of the auditor's
independence each year, which includes:
-- a review of non-audit related services provided to the Company and related fees;
-- discussion with the auditor of a written report detailing all
relationships with the Company and any other parties which could
affect independence or the perception of independence;
-- a review of the auditor's own procedures for ensuring
independence of the audit firm and partners and staff involved in
the audit, including the rotation of the audit partner;
-- obtaining written confirmation from the auditor that it is independent;
-- a review of fees paid to the auditor in respect of audit and non-audit services.
Remuneration Report
The remuneration report has been formed in accordance with the
requirements of AIM rule 19 and is not intended to comply with the
UK statutory requirements.
The Directors' emoluments, benefits and shareholdings during the
year ended 31 December 2021 were as follows:
Directors' Emoluments
Each of the Directors has a service contract with the
Company.
Total emoluments
------------------------- ------------ ------ --------- ----------
Date Fees Reward
of US Benefits payments 2021 2020
Director agreement $000 US $000 US $000 US $000 US $000
------------------------- ------------ ------ --------- ---------- --------- ---------
Richard Barry Rosenberg 10/06/05 73 - - 73 69
------------------------- ------------ ------ --------- ---------- --------- ---------
Noam Lanir 10/06/05 400 45 1,000 1,445 445
------------------------- ------------ ------ --------- ---------- --------- ---------
Ron Baron 01/09/07 350 - 2,000 2,350 350
------------------------- ------------ ------ --------- ---------- --------- ---------
Augoustinos Papathomas 01/02/19 35 - - 35 37
The dates are presented in day / month / year format.
Directors' Interests
Interests of Directors in ordinary shares
As at 31 December 2021 As at 31 December 2020
--------------- ------------------------------------------- -------------------------------------------
Number Percentage Percentage Number Percentage Percentage
of Ordinary of ordinary of voting of Ordinary of ordinary of voting
Shares share capital rights Shares share capital rights
* *
--------------- ------------- --------------- ----------- ------------- --------------- -----------
Noam Lanir 123,048,011 70.39% 74.41% 133,936,588 76.62% 76.62%
--------------- ------------- --------------- ----------- ------------- --------------- -----------
Ron Baron 25,456,903 14.56% 15.40% 25,456,903 14.56% 14.56%
--------------- ------------- --------------- ----------- ------------- --------------- -----------
Richard Barry
Rosenberg 15,000 0.01% 0.01% 15,000 0.01% 0.01%
--------------- ------------- --------------- ----------- ------------- --------------- -----------
* after consideration of the treasury shares
Noam Lanir has his interest in ordinary shares through direct or
indirect ownership of all of the issued share capital of Groverton
Management Limited. Further information is provided in note 22 to
the financial statements. --
Remuneration Policy
The Company's policy has been designed to ensure that the
Company has the ability to attract, retain and motivate executive
Directors and other key management personnel to ensure the success
of the organization.
The following key principles guide its policy:
-- policy for the remuneration of executive Directors will be
determined and regularly reviewed independently of executive
management and will set the tone for the remuneration of other
senior executives.
-- the remuneration structure will support and reflect the
Company's stated purpose to maximize long-term shareholder
value.
-- the remuneration structure will reflect a just system of rewards for the participants.
-- the overall quantum of all potential remuneration components
will be determined by the exercise of informed judgement of the
independent remuneration committee, taking into account the success
of the Company and the competitive global market.
-- a significant personal shareholding will be developed in
order to align executive and shareholder interests.
-- the assessment of performance will be quantitative and
qualitative and will include exercise of informed judgement by the
remuneration committee within a framework that takes account of
sector characteristics and is approved by shareholders.
-- the committee will be proactive in obtaining an understanding of shareholder preferences.
-- remuneration policy and practices will be as transparent as
possible, both for participants and shareholders
-- the wider scene, including pay and employment conditions
elsewhere in the Company , will be taken into account, especially
when determining annual salary increases.
Review of the Business and Risks
Risks
The Board considers that the risks the Shareholders face can be
divided into external and internal risks.
External risks to shareholders and their returns are those that
can severely influence the investment environment within which the
Company operates, and include economic recession, declining
corporate profitability, higher corporate default rates and lower
than historical recoveries, rising inflation and interest rates and
excessive stock-market speculation.
The Company's portfolio is exposed to interest rate changes,
credit risk, liquidity risk and volatility particularly in the US.
In addition, the portfolio is exposed to currency risks as some of
the underlying portfolio is invested in assets denominated in
non-US currencies while the Company's functional currency is USD.
Investments in certain emerging markets are exposed to governmental
and regulatory risks.
The mitigation of these risks is achieved by following micro and
macroeconomic trends and changes, regular monitoring of underlying
assets and price movements and investment diversification. The
Company also engages from time to time in certain hedging
activities to mitigate these risks.
As of the date of this report, large-scale vaccination programs
and huge fiscal and monetary stimulus seem to have been successful
in reducing the spread and health impact of the virus, as well as
put most developed countries on a strong recovery course. At the
same time, high inflation seems to be persisting as global supply
chain issues and the Russian invasion of Ukraine add further fuel
to fire. We anticipate a sharp interest rate tightening cycle in
the US as well as withdrawal of liquidity to slow the demand and
bring inflation under control. The Company is primarily exposed to
the US economy and has benefitted from the economic recovery. The
Company continues to be conservatively positioned with cash in
excess of USD 45.1m as of 31 December 2021 and plans to maintain
strong liquidity and stay debt free.
Internal risks to shareholders and their returns are related to
Portfolio risks (investment and geography selection and
concentration), balance sheet risk (gearing) and/or investment
mismanagement risks. The Company's portfolio has a significant
exposure to senior secured loans of US companies and therefore has
a concentration risk to this asset class.
A periodic internal review is performed to ensure transparency
of Company activities and investments. All service providers to the
Company are regularly reviewed. The mitigation of the risks related
to investments is effected by investment restrictions and
guidelines and through reviews at Board Meetings.
As the portfolio of the Company is currently invested in USD
denominated assets, movements in other currencies are expected to
have a limited impact on the business.
On the asset side, the Company's exposure to interest rate risk
is limited to the interest-bearing deposits and portfolio of bonds
and loans in which the Company invests. Currently, the Company is
primarily invested in sub-investment grade corporate loans through
CLOs, which exposes the Company to credit risk (defaults and
recovery rates, loan spreads over base rate) as well as liquidity
risks in the CLO market.
Management monitors liquidity to ensure that sufficient liquid
resources are available to the Company. The Company's credit risk
is primarily attributable to its fixed income portfolio, which is
exposed to corporate bonds with a particular exposure to the
financial sector and to US senior secured loans.
Further information on financial risk management is provided in
note 25 of the financial statements.
Share Capital
There was no change in the authorised share capital during the
year to 31 December 2021. The authorised share capital is
1,000,000,000 ordinary shares with no par value.
Related party transactions
Details of any transactions of the Company with related parties
during the year to 31 December 2021 are disclosed in note 22 to the
financial statements.
By order of the Board of Directors
Chief Executive Officer
27 May 2022
Independent Auditor's Report to the Members of Livermore
Investments Group Limited
Opinion
We have audited the consolidated financial statements of
Livermore Investments Group Limited and its subsidiary Livermore
Capital AG (the "Group"), which are presented in pages 25 to 54 and
comprise the Consolidated statement of financial position as at 31
December 2021, and the consolidated statement of profit or loss,
Consolidated statement of comprehensive income, Consolidated
statement of changes in equity and Consolidated statement of cash
flows for the year then ended, and notes to the consolidated
financial statements, including a summary of significant accounting
policies.
In our opinion, the accompanying consolidated financial
statements give a true and fair view of the consolidated financial
position of the Group as at 31 December 2021, and of its
consolidated financial performance and its consolidated cash flows
for the year then ended in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
Basis for Opinion
We conducted our audit in accordance with International
Standards on Auditing (ISAs). Our responsibilities under those
standards are further described in the "Auditor's Responsibilities
for the Audit of the Consolidated Financial Statements" section of
our report. We are independent of the Group in accordance with the
International Ethics Standards Board for Accountants' International
Code of Ethics for Professional Accountants (including
International Independence Standards) (IESBA Code) together with
the ethical requirements that are relevant to our audit of the
consolidated financial statements in Cyprus, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements and the IESBA Code. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Emphasis of Matter - Uncertain Outcome of a Legal Claim
We draw attention to note 23 of the consolidated financial
statements which describes the uncertainty outcome of a legal claim
against one of the custodian banks that the Group uses on its
behalf. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters. This is not a complete list of all risks identified by our
audit.
Investments' valuation Level 3
Refer to note 7 of the consolidated financial statements.
The key audit matter How the matter was addressed in our audit
Our audit work included, but was not
restricted to:
The Group has financial -- obtaining an understanding of the
assets of $27m (2020: $21m) valuation methodologies applied by the
classified within fair value Board of directors and assessing their
hierarchy at level 3, as appropriateness for each investment;
disclosed in note 7. The
fair value of level 3 financial -- obtaining third party confirmations
assets is generally determined indicating the NAV / fair value of the
either based on third party financial assets and comparing to clients'
valuations, or when not records; and evaluating the independent
available based on adjusted professional valuer's competence, capabilities
Net Asset Value (NAV) calculations and objectivity;
using inputs from third
parties. -- in cases where the valuations have
been performed by the Board of Directors,
Due to the use of significant evaluating the reasonableness of the
judgments by the Board of underlying assumptions and verifying
Directors, the existence the inputs used by checking them to third
of unobservable inputs and party sources; and
the significant total value
of financial assets within -- considering the adequacy of consolidated
the level 3 hierarchy, we financial statement disclosures in relation
consider the valuation of to the valuation methodologies used for
these investments as a key each class of level 3 financial assets.
audit matter. Key observations
We concluded that the judgements and
estimates used by the management in determining
the fair value of investments were reasonable
and the disclosures made in relation
to these matters in the consolidated
financial statements were appropriate.
Other Information
The Board of Directors is responsible for the other information.
The other information comprises the information included in the
Highlights, Chairman's and Chief Executive's Review, Review of
Activities, Report of the Directors, Corporate Governance
Statement, Remuneration report, Review of the Business and Risks,
but does not include the consolidated financial statements and our
auditor's report thereon.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements
or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report in this regard.
Responsibilities of the Board of Directors for the Consolidated
Financial Statements
The Board of Directors is responsible for the preparation of
consolidated financial statements that give a true and fair view in
accordance with International Financial Reporting Standards as
adopted by the European Union, and for such internal control as the
Board of Directors determines is necessary to enable the
preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of
Directors is responsible for assessing the Group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the Board of Directors either intends to
liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the
Group's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated
Financial Statements
Our objectives are to obtain reasonable assurance about whether
the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue
an auditor's report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional scepticism
throughout the audit. We also:
* Identify and assess the risks of material
misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform
audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the
override of internal control.
* Obtain an understanding of internal control relevant
to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness
of the Group's internal control.
* Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting estimates
and related disclosures made by the Board of
Directors.
* Conclude on the appropriateness of the Board of
Directors' use of the going concern basis of
accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to
events or conditions that may cast significant doubt
on the Group's ability to continue as a going
concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our
auditor's report to the related disclosures in the
consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence
obtained up to the date of our auditor's report.
However, future events or conditions may cause the
Group to cease to continue as a going concern.
* Evaluate the overall presentation, structure and
content of the consolidated financial statements,
including the disclosures, and whether the
consolidated financial statements represent the
underlying transactions and events in a manner that
achieves a true and fair view.
* Obtain sufficient appropriate audit evidence
regarding the financial information of the entities
or business activities within the Group to express an
opinion on the consolidated financial statements. We
are responsible for the direction, supervision and
performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements
of the current period and are therefore the key audit matters. We
describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Other Matter
This report, including the opinion, has been prepared for and
only for the Group's members as a body and for no other purpose. We
do not, in giving this opinion, accept or assume responsibility for
any other purpose or to any other person to whose knowledge this
report may come to.
The engagement partner on the audit resulting in this
independent auditor's report is Mrs Froso Yiangoulli.
Froso Yiangoulli
Certified Public Accountant and Registered
Auditor
for and on behalf of
Grant Thornton (Cyprus) Ltd
Certified Public Accountants and Registered
Auditors
Nicosia, 27 May 2022
Livermore Investments Group Limited
Consolidated Statement of Financial Position as at 31 December
2021
Note 2021 2020
Assets US $000 US $000
Non-current assets
Property, plant and equipment 52 32
Right-of-use assets 176 272
Financial assets at fair value through
profit or loss 4 101,667 77,006
Financial assets at fair value through
other comprehensive income 5 12,435 3,729
Investments in subsidiaries 8 7,196 6,813
--------- ---------
121,526 87,852
Current assets --------- ---------
Trade and other receivables 9 366 8,238
Financial assets at fair value through
profit or loss 4 17,553 22,577
Cash and cash equivalents 10 45,130 50,407
--------- ---------
63,049 81,222
--------- ---------
Total assets 184,575 169,074
--------- ---------
Equity
Share capital 11 - -
Share premium and treasury shares 11 163,130 169,187
Other reserves (18,026) (21,285)
Retained earnings 32,618 16,005
--------- ---------
Total equity 177,722 163,907
--------- ---------
Liabilities
Non-current liabilities
Lease liability 88 181
--------- ---------
Current liabilities
Trade and other payables 12 6,641 4,868
Lease liability - current portion 88 91
Current tax payable 36 27
--------- ---------
6,765 4,986
--------- ---------
Total liabilities 6,853 5,167
--------- ---------
Total equity and liabilities 184,575 169,074
--------- ---------
Net asset value per share
Basic and diluted net asset value per
share (US $) 14 1.07 0.94
--------- ---------
These financial statements were approved by the Board of
Directors on 27 May 2022.
The notes 1 to 27 form part of these consolidated financial
statements.
Livermore Investment Group Limited
Consolidated Statement of Profit or Loss for the year ended 31
December 2021
Note 2021 2020
US $000 US $000
Investment income
Interest and distribution income 16 27,495 22,010
Fair value changes of investments 17 6,250 (18,483)
------ ------
33,745 3,527
Operating expenses 18 (8,599) (2,808)
------ ------
Operating profit 25,146 719
Finance costs 19 (398) (40)
Finance income 19 18 293
------ ------
Profit before taxation 24,766 972
Taxation charge 20 (66) (127)
------ ------
Profit for the year 24,700 845
------ ------
Earnings per share
Basic and diluted earnings per share
(US $) 21 0.15 0.005
------ ------
The profit for the year is wholly attributable to the owners of
the parent.
The notes 1 to 27 form part of these consolidated financial
statements.
Livermore Investment Group Limited
Consolidated Statement of Comprehensive Income for the year
ended 31 December 2021
Note 2021 2020
US $000 US $000
Profit for the year 24,700 845
Other comprehensive income:
Items that will be reclassified subsequently
to profit or loss
Foreign exchange gains on translation
of consolidated subsidiary 59 4
Items that are not reclassified subsequently
to profit or loss
Financial assets designated at fair value
through other comprehensive income -
fair value gains / (losses) 5 3,200 (4,022)
------ ------
Total comprehensive income / (loss)
for the year 27,959 (3,173)
------ ------
The total comprehensive income / (loss) for the year is wholly
attributable to the owners of the parent.
The notes 1 to 27 form part of these consolidated financial
statements.
Livermore Investment Group Limited
Consolidated Statement of Changes in Equity for the year ended
31 December 2021
Share Treasury Translation Investments Retained
premium Shares reserve revaluation earnings Total
Note reserve
US $000 US $000 US $000 US $000 US $000 US $000
Balance at 1 January 2020 169,187 - 21 (20,619) 24,491 173,080
------- ------- ------ ------ ------ -------
Dividends - - - - (6,000) (6,000)
------- ------- ------ ------ ------ -------
Transactions with owners - - - - (6,000) (6,000)
------- ------- ------ ------ ------ -------
Profit for the year - - - - 845 845
Other comprehensive income:
Financial assets at fair
value through OCI - fair
value losses - - - (4,022) - (4,022)
Foreign exchange gains on
translation of consolidated
subsidiary - - 4 - - 4
Transfer of realised gains 17 - - - 3,331 (3,331) -
------- ------- ------ ------ ------ -------
Total comprehensive loss
for the year - - 4 (691) (2,486) (3,173)
------- ------- ------ ------ ------ -------
Balance at 31 December 2020 169,187 - 25 (21,310) 16,005 163,907
------- ------- ------ ------ ------ -------
Dividends 13 - - - - (8,000) (8,000)
Purchase of own shares 11 - (6,973) - - - (6,973)
Re-issue of shares 11 - 916 - - (87) 829
------- ------- ------ ------ ------ -------
Transactions with owners - (6,057) - - (8,087) (14,144)
------- ------- ------ ------ ------ -------
Profit for the year - - - - 24,700 24,700
Other comprehensive income:
Financial assets at fair
value through OCI - fair
value gains 5 - - - 3,200 - 3,200
Foreign exchange gains on
translation of consolidated
subsidiary - - 59 - - 59
------- ------- ------ ------ ------ -------
Total comprehensive income
for the year - - 59 3,200 24,700 27,959
------- ------- ------ ------ ------ -------
Balance at 31 December 2021 169,187 (6,057) 84 (18,110) 32,618 177,722
------- ------- ------ ------ ------ -------
The notes 1 to 27 form part of these consolidated financial
statements.
Livermore Investments Group Limited
Consolidated Statement of Cash Flows for the year ended 31
December 2021
Note 2021 2020
US $000 US $000
Cash flows from operating activities
Profit before tax 24,766 972
Adjustments for
Depreciation 109 102
Interest expense 19 35 40
Interest and distribution income 16 (27,495) (22,010)
Bank interest income 19 (18) (119)
Fair value changes of investments 17 (6,250) 18,483
Exchange differences 19 363 (174)
---------- ----------
(8,490) (2,706)
Changes in working capital
Decrease / (increase) in trade and other
receivables 7,817 (60)
Increase / (decrease) in trade and other
payables 1,774 (78)
---------- ----------
Cash flows from / (used in) operations 1,101 (2,844)
Interest and distributions received 27,512 22,204
Tax paid (50) (133)
---------- ----------
Net cash from operating activities 28,563 19,227
---------- ----------
Cash flows from investing activities
Acquisition of investments (119,905) (49,552)
Proceeds from sale of investments 100,629 30,201
---------- ----------
Net cash used in investing activities (19,276) (19,351)
---------- ----------
Cash flows from financing activities
Lease liability payments (109) (102)
Interest paid 19 (35) (40)
Dividends paid 13 (8,000) (6,000)
Purchases of own shares 11 (6,057) -
---------- ----------
Net cash used in financing activities (14,201) (6,142)
---------- ----------
Net decrease in cash and cash equivalents (4,914) (6,266)
Cash and cash equivalents at the beginning
of the year 50,407 56,499
Exchange differences on cash and cash
equivalents 19 (363) 174
---------- ----------
Cash and cash equivalents at the end
of the year 10 45,130 50,407
---------- ----------
The notes 1 to 27 form part of these consolidated financial
statements.
Notes on the Consolidated Financial Statements
1. General Information
1.1. The Company was incorporated as an international business
company and registered in the British Virgin Islands (BVI) on 2
January 2002 under IBC Number 475668. The principal legislation
under which the Company operates is the BVI Business Companies Act,
2004. The liability of the members of the Company is limited.
1.2. The principal activity of the Company is to carry out investment activities.
1.3. The Company is tax resident in the Republic of Cyprus.
1.4. The registered office of the Company is located at Trident
Chambers, PO Box 146, Road Town, Tortola, British Virgin
Islands.
2. Basis of preparation
The consolidated financial statements ("the financial
statements") of Livermore Investments Group Limited have been
prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union (EU). The
financial statements have been prepared on an accrual basis (other
than for cash flow information) using the significant accounting
policies and measurement bases summarised in note 3, and also on a
going concern basis.
The financial information is presented in US dollars because
this is the currency in which the Company primarily operates (i.e.,
the Company's functional currency).
References to the Company hereinafter also include its
consolidated subsidiary (note 8 ).
The Directors have reviewed the accounting policies used by the
Company and consider them to be the most appropriate.
3. Accounting Policies
The significant accounting policies applied in the preparation
of the financial statements are as follows:
3.1. Adoption of new and revised IFRS
As from 1 January 2021, the Company adopted any applicable new
or revised IFRS and relevant amendments and interpretations which
became effective, and also were endorsed by the EU.
The following IASB or IFRIC documents were issued by the date of
authorisation of these financial statements but are not yet
effective for the year ended 31 December 2021, or have not yet been
endorsed by the EU by 31 December 2021:
Endorsed IASB Effective
by EU date
Yes 1 January
* Amendments to IFRS 3: "Reference to the Conceptual 2022
Framework"
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
* IFRS 14: "Regulatory Deferral Accounts" 2016
Yes 1 April 2021
* Amendment to IFRS 16: "COVID-19 Related Rent
Concessions beyond 30 June 2021"
Yes 1 January
* IFRS 17: "Insurance Contracts", including amendments 2023
of 2020
No 1 January
* Amendment to IFRS 17: "Initial Application of IFRS 17 2023
and IFRS 9 - Comparative Information"
No 1 January
* Amendments to IAS 1: "Classification of Liabilities 2023
as Current or Non-current"
Yes 1 January
* Amendments to IAS 1 and IFRS Practice Statement 2: 2023
"Disclosure of Accounting policies"
Yes 1 January
* Amendments to IAS 8: "Definition of Accounting 2023
Estimates"
No 1 January
* Amendment to IAS 12: "Deferred Tax related to Assets 2023
and Liabilities arising from a Single Transaction"
Yes 1 January
* Amendments to IAS 16: "Property, Plant and Equipment: 2022
Proceeds before Intended Use"
Yes 1 January
* Amendments to IAS 37: "Onerous Contracts - Cost of 2022
Fulfilling a Contract"
Yes 1 January
* Annual Improvements to IFRS Standards 2018-2020 2022
The Board of Directors expects that when the above become
effective in future periods, they will not have any material effect
on the financial statements.
3.2. Investments in subsidiaries and basis of consolidation
Subsidiaries are entities controlled either directly or
indirectly by the Company.
Control is achieved where the Company is exposed, or has right,
to variable returns from its involvement with a subsidiary and has
the ability to affect those returns through its power over the
subsidiary.
The Directors have determined that Livermore meets the
definition of an investment entity, as this is defined in IFRS 10
"Financial Statements". As per IFRS 10 an investment entity is an
entity that:
(a) obtains funds from one or more investors for the purpose of
providing those investors with 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.
An investment entity is exempted from consolidating its
subsidiaries, unless any subsidiary which is not itself an
investment entity mainly provides services that relate to the
investment entity's investment activities.
The financial statements consolidate the Company and one of its
subsidiaries providing such services (note 8 shows further details
of the consolidated and unconsolidated subsidiaries).
Investments in unconsolidated subsidiaries are initially
recognised at their fair value and subsequently measured at fair
value through profit or loss. Subsequently, any gains or losses
arising from changes in their fair value are included in profit or
loss for the year.
Dividends and other distributions from unconsolidated
subsidiaries are recognised as income when the Company's right to
receive payment has been established.
A subsidiary that is not an investment entity itself and which
provides services that relate to the Company's investment
activities is consolidated rather than included within the
investments in subsidiaries measured at fair value through profit
or loss.
The financial statements of the consolidated subsidiary are
prepared using uniform accounting policies. Where necessary,
adjustments are made to the financial statements of consolidated
subsidiary to bring its accounting policies into line with those
used by the Company. The consolidated subsidiary has a reporting
date of 31 December.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
The results and cash flows of any consolidated subsidiary
acquired or disposed of during the year are consolidated from the
effective date of acquisition or up to the effective date of
disposal.
3.3. Interest and distribution income
-- Interest income is recognised based on the effective interest method.
-- Distribution income is recognised on the date that the
Company's right to receive payment is established, which in the
case of quoted securities is the ex-dividend date.
3.4. Foreign currency
The financial statements of the Company are presented in USD,
which is the currency of the primary economic environment in which
it operates (its functional currency).
Transactions in foreign currencies are recorded at the rates of
exchange prevailing on the dates of the transaction. Monetary
assets and liabilities denominated in non-functional currencies are
translated into functional currency using year-end spot foreign
exchange rates. Non-monetary assets and liabilities are translated
upon initial recognition using exchange rates prevailing at the
dates of the transactions. Non-monetary assets that are measured in
terms of historical cost in foreign currency are not subsequently
re-translated.
Gains and losses arising on the settlement of monetary items and
on the re-translation of monetary items are included in the profit
or loss for the year. Those that arise on the re-translation of
non-monetary items carried at fair value are included in the profit
or loss of the year as part of the fair value gain or loss except
for differences arising on the re-translation of non-monetary
financial assets designated at fair value through other
comprehensive income in respect of which gains and losses are
recognised in other comprehensive income. For such non-monetary
items any exchange component of that gain or loss is also
recognised in other comprehensive income.
The results and financial position of consolidated subsidiaries
that have a functional currency different from US dollars are
translated into the presentation currency as follows:
(a) assets and liabilities are translated at the closing rate at the reporting date;
(b) income and expenses and also cash flows are translated at an
average exchange rate (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case the items are translated at
the rates prevailing at the dates of the transactions); and
(c) 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.
3.5. Taxation
Current tax is the tax currently payable based on taxable profit
for the year in accordance with the applicable tax laws.
Current and deferred tax assets and liabilities are calculated
at tax rates that are expected to apply to their respective period
of realisation, provided they are enacted or substantively enacted
as at the reporting date.
3.6. Equity instruments
Equity instruments issued by the Company are recorded at
proceeds received, net of direct issue costs.
The share premium account includes any premiums received on the
initial issuing of the share capital. Any transaction costs
associated with the issuing of shares are deducted from the premium
received.
3.7. Financial assets
Financial assets are recognised when the Company becomes a party
to the contractual provisions of the financial instrument.
A financial asset is derecognised only where the contractual
rights to the cash flows from the asset expire or the financial
asset is transferred, and that transfer qualifies for
derecognition. A financial asset is transferred if the contractual
rights to receive the cash flows of the asset have been transferred
or the Company retains the contractual rights to receive the cash
flows of the asset but assumes a contractual obligation to pay the
cash flows to one or more recipients. A financial asset that is
transferred qualifies for derecognition if the Company transfers
substantially all the risks and rewards of ownership of the asset,
or if the Company neither retains nor transfers substantially all
the risks and rewards of ownership but does transfer control of
that asset.
The Company classifies its financial assets in the following
measurement categories:
(a) those to be measured at fair value through profit or loss;
(b) those to be measured at fair value through other comprehensive income; and
(c) those to be measured at amortised cost.
At initial recognition, the Company measures a financial asset
at its fair value plus, in the case of a financial asset not at
fair value through profit or loss, transaction costs that are
directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at fair value through
profit or loss are expensed in profit or loss.
Financial assets at fair value through profit or loss
The Company classifies the following financial assets at fair
value through profit or loss:
(a) equity investments that are held for trading;
(b) other equity investments for which the Directors have not
elected to recognise fair value gains and losses through other
comprehensive income; and
(c) debt investments that do not qualify for measurement at
either amortised cost or at fair value through other comprehensive
income.
All financial assets within this category are measured at their
fair value, with changes in value recognised in the profit or loss
when incurred.
Financial assets at fair value through other comprehensive
income
Financial assets at fair value through other comprehensive
income (OCI) comprise equity securities which are not held for
trading, and for which the Company has made an irrevocable election
at initial recognition to recognise changes in fair value through
OCI rather than profit or loss.
Where the Company's management has elected to present fair value
gains and losses on equity investments in other comprehensive
income, there is no subsequent reclassification of fair value gains
and losses to profit or loss. Dividends from such investments
continue to be recognised in profit or loss when the Company's
right to receive payments is established.
Financial assets at amortised cost
Assets that are held for collection of contractual cash flows
where those cash flows represent solely payments of principal and
interest are measured at amortised cost. A gain or loss on a
financial asset that is measured at amortised cost is recognised in
profit or loss when the asset is derecognised or impaired. Interest
income from these financial assets is recognised based on the
effective interest rate method.
The classification of debt instruments depends on the entity's
business model for managing the financial assets and the
contractual terms of the cash flows. Financial assets with embedded
derivatives are considered in their entirety when determining
whether their cash flows are solely payment of principal and
interest.
Impairment
The Company assesses the expected credit losses associated with
its assets carried at amortised cost, on a forward-looking basis.
The impairment methodology applied depends on whether there has
been a significant increase in credit risk. For trade and other
receivables only, the Company applies the simplified approach
permitted by IFRS 9, which permits expected lifetime losses to be
recognised from initial recognition of the receivables.
Write offs
The Company writes off a financial asset when there is
information indicating that the counterparty is in severe financial
difficulty and there is no realistic prospect of recovery, e.g.,
when the counterparty has been placed under liquidation or has
entered into bankruptcy proceedings. Financial assets written off
may still be subject to enforcement activities, taking into account
legal advice where appropriate. Any recoveries made are recognised
in profit or loss.
3.8. Financial liabilities
Financial liabilities are recognised when the Company becomes a
party to the contractual provisions of the financial
instrument.
A financial liability is derecognised when it is extinguished,
discharged, cancelled or expires.
Financial liabilities at amortised cost
Financial liabilities are measured initially at fair value plus
transaction costs.
After initial recognition financial liabilities are measured at
amortised cost using the effective interest rate method.
3.9. Cash and cash equivalents
Cash comprises cash in hand and on demand deposits with banks.
Cash equivalents are short term, highly liquid investments that are
readily convertible to known amounts of cash. They include
unrestricted short-term bank deposits originally purchased with
maturities of three months or less.
Any bank overdrafts are considered to be a component of cash and
cash equivalents, since they form an integral part of the Company's
cash management.
3.10. Segment reporting
In making investment decisions, Management assesses individual
investments and then, in analysing their performance, it receives
and uses information for each investment product separately rather
than based on any segmental information. Given that, Management
regards that all the Company's activities fall under a single
operating segment.
3.11. Critical accounting judgments and key sources of
estimation uncertainty
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates and
requires management to exercise its judgement in the process of
applying the Company's accounting policies. It also requires the
use of assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Although these
estimates are based on management's best knowledge of current
events and actions, actual results may ultimately differ from those
estimates.
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
Critical accounting judgements
(i) Classification of financial assets
Management exercises significant judgement in determining the
appropriate classification of the financial assets of the Company.
The Directors determine the appropriate classification of the
Company's financial assets based on Livermore's business model. An
entity's business model refers to how an entity manages its
financial assets in order to generate cash flows, considering all
relevant and objective evidence. The factors considered include the
contractual terms and characteristics which are very carefully
examined, and also the Company's intentions and expected needs for
realisation of the financial assets.
All investments (except from certain equity instruments that are
designated at fair value through other comprehensive income) are
classified as financial assets at fair value through profit or
loss, because this reflects more fairly the way these assets are
managed by the Company. The Company's business is investing in
financial assets with a view to profiting from their total return
in the form of income and capital growth. This portfolio of
financial assets is managed, and its performance evaluated on a
fair value basis, in accordance with a documented investment
strategy, and information about the portfolio is provided
internally on that basis to the Company's Board of Directors and
other key management personnel.
(ii) Consolidation of subsidiary
Management exercised significant judgment in determining which
of the subsidiaries that are not investment entities themselves,
provide services that relate to the Company's investment activities
and therefore need to be consolidated rather than included within
the investments in subsidiaries measured at fair value through
profit or loss.
Estimation uncertainty
Fair value of financial instruments
Management uses valuation techniques in measuring the fair value
of financial instruments, where active market quotes are not
available. Details of the bases used for financial assets and
liabilities are disclosed in note 7 . In applying the valuation
techniques management makes maximum use of market inputs, and uses
estimates and assumptions that are, as far as possible, consistent
with observable data that market participants would use in pricing
the instrument. Where applicable data is not observable (level 3),
management uses its best estimates which may vary from the actual
prices that would be achieved in an arm's length transaction at the
reporting date. Further information on level 3 valuations of
financial assets is provided in note 7.2.
4. Financial assets at fair value through profit or loss
2021 2020
US $000 US $000
Non-current assets
Fixed income investments (CLOs) 101,667 77,006
------ ------
Current assets
Fixed income investments 7,584 10,036
Public equity investments 9,969 12,541
------ ------
17,553 22,577
------ ------
For description of each of the above categories, refer to note 6
.
The above investments represent financial assets that are
mandatorily measured at fair value through profit or loss.
The Company treats its investments in the loan market through
CLOs as non-current investments as the Company generally intends to
hold such investments over a period longer than twelve months.
The movement in financial assets at fair value through profit or
loss during the year was as follows:
2021 2020
US $000 US $000
At 1 January 99,583 101,255
Purchases 114,399 47,892
Sales (28,408) (30,574)
Settlements (72,221) -
Fair value gains / (losses) 5,867 (18,990)
------ ------
At 31 December 119,220 99,583
------ ------
5. Financial assets at fair value through other comprehensive income
2021 2020
US $000 US $000
Non-current assets
Fund investments 12,435 3,729
------ ------
For description of each of the above categories, refer to note 6
.
The above investments are non-trading equity investments that
have been designated at fair value through other comprehensive
income.
The movement in financial assets at fair value through other
comprehensive income during the year was as follows:
2021 2020
US $000 US $000
At 1 January 3,729 6,204
Purchases 5,506 1,650
Settlements - (103)
Fair value gains / (losses) 3,200 (4,022)
------ ------
At 31 December 12,435 3,729
------ ------
Dividends of USD 0.128m were received in 2021 (2020: USD 0m), in
relation to financial assets at fair value through other
comprehensive income that are held at the reporting date.
6. Financial assets at fair value
The Company allocates its non-derivative financial assets at
fair value (notes 4 and 5 ) as follows:
-- Fixed income investments relate to fixed and floating rate
bonds, perpetual bank debt, investments in the loan market through
CLOs, and investments in open warehouse facilities.
-- Public equity investments relate to investments in shares of
companies listed on public stock exchanges.
-- Fund investments (previously described as Private equities)
relate to investments in the form of equity purchases in both high
growth opportunities in emerging markets and deep value
opportunities in mature markets. The Company generally invests
directly in prospects where it can exert influence. Main
investments under this category are in the fields of real
estate.
7. Fair value measurements of financial assets and liabilities
The table in note 7.2 presents financial assets and liabilities
measured at fair value in the consolidated statement of financial
position in accordance with the fair value hierarchy. This
hierarchy groups financial assets and liabilities into three levels
based on the significance of inputs used in measuring the fair
value of the financial assets and liabilities. The fair value
hierarchy has the following levels:
- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the
measurement date;
- Level 2: inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
or indirectly; and
- Level 3: unobservable inputs for the asset or liability.
The level within which the financial asset is classified is
determined based on the lowest level of significant input to the
fair value measurement.
7.1 Valuation of financial assets
-- Fixed Income Investments and Public Equity Investments are
valued per their closing market prices on quoted exchanges, or as
quoted by market maker. Investments in open warehouse facilities
that have not yet been converted to CLOs, are valued based on an
adjusted net asset valuation.
The Company values the CLOs based on the valuation reports
provided by market makers. CLOs are typically valued by market
makers using discounted cash flow models. The key assumptions for
cash flow projections include default and recovery rates,
prepayment rates and reinvestment assumptions on the underlying
portfolios (typically senior secured loans) of the CLOs.
Default and recovery rates: The amount and timing of defaults in
the underlying collateral and the amount and timing of recovery
upon a default are key to the future cash flows a CLO will
distribute to the CLO equity tranche. All else equal, higher
default rates and lower recovery rates typically lead to lower cash
flows. Conversely, lower default rates and higher recoveries lead
to higher cash flows.
Prepayment rates: Senior loans can be pre-paid by borrowers.
CLOs that are within their reinvestment period may, subject to
certain conditions, reinvest such prepayments into other loans
which may have different spreads and maturities. CLOs that are
beyond their reinvestment period typically pay down their senior
liabilities from proceeds of such pre-payments. Therefore, the rate
at which the underlying 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.
-- Fund investments are valued using market valuation techniques
as determined by the Directors, mainly on the basis of valuations
reported by third-party managers of such investments. Real Estate
entities are valued by independent qualified property valuers with
substantial relevant experience on such investments. Underlying
property values are determined based on their estimated market
values.
-- Investments in subsidiaries are valued at fair value as
determined on a net asset valuation basis. The Company has
determined that the reported net asset value of each subsidiary
represents its fair value at the end of the reporting period.
7.2 Fair value hierarchy
Financial assets measured at fair value are grouped into the
fair value hierarchy as follows:
2021 2021 2021 2021 2020 2020 2020 2020
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
Fixed income investments - 101,667 7,584 109,251 - 77,006 10,036 87,042
Fund investments - - 12,435 12,435 - - 3,729 3,729
Public equity
investments 9,969 - - 9,969 12,541 - - 12,541
Investments in
subsidiaries - - 7,255 7,255 - - 6,813 6,813
------ ------ ------ ------ ------ ------ ------ ------
9,969 101,667 27,274 138,910 12,541 77,006 20,578 110,125
------ ------ ------ ------ ------ ------ ------ ------
The Company has no financial liabilities measured at fair
value.
The methods and valuation techniques used for the purpose of
measuring fair value are unchanged compared to the previous
reporting year.
No financial assets have been transferred between different
levels.
Financial assets within level 3 can be reconciled from beginning
to ending balances as follows:
At fair value At fair Investments
through OCI value in subsidiaries
- Fund investments through
profit or
loss - Fixed
Income
investments Total
US $000 US $000 US $000 US $000
As at 1 January 2020 6,204 - 5,787 11,991
Purchases 1,650 25,000 - 26,650
Settlement (103) (15,000) - (15,103)
Gains / (losses) recognised
in:
- Profit or loss - 36 1,026 1,062
- Other comprehensive
income (4,022) - - (4,022)
------ ------ ------ ------
As at 1 January 2021 3,729 10,036 6,813 20,578
Purchases 5,506 69,805 - 75,311
Settlement - (72,221) - (72,221)
Gains recognised in:
- Profit or loss - (36) 442 406
- Other comprehensive
income 3,200 - - 3,200
------ ------ ------ ------
As at 31 December
2021 12,435 7,584 7,255 27,274
------ ------ ------ ------
The above gains and losses recognised can be allocated as
follows:
At fair At fair Investments
value value in subsidiaries
through through
OCI - Fund profit or
investments loss -
Fixed Income
investments Total
2020 US $000 US $000 US $000 US $000
Profit or loss
- Financial assets held
at year-end - 36 1,026 1,062
Other comprehensive
income
- Financial assets held
at year-end (4,022) - - (4,022)
------ ------ ------ ------
Total gains / (losses)
for 2020 (4,022) 36 1,026 (2,960)
------ ------ ------ ------
At fair At fair Investments
value value in subsidiaries
through Through
OCI - Fund profit or
investments loss -
Fixed Income
investments Total
2021 US $000 US $000 US $000 US $000
Profit or loss
- Financial assets held
at year-end - (36) 442 406
Other comprehensive
income
- Financial assets held
at year-end 3,200 - - 3,200
------ ------ ------ ------
Total gains / (losses)
for 2021 3,200 (36) 442 3,606
------ ------ ------ ------
The Company has not developed any quantitative unobservable
inputs for measuring the fair value of its level 3 financial assets
at 31 December 2021 and 2020. Instead, the Company used prices from
third-party pricing information without adjustment.
Fixed income investments within level 3 represent open
warehouses that have been valued based on their net asset value.
The net asset value of a warehouse is primarily driven by the fair
value of its underlying loan asset portfolio (as determined by the
warehouse's manager) plus received and accrued interest less the
nominal value of the financing and accrued interest on the
financing. In all cases, due to the nature and the short life of a
warehouse, the carrying amounts of the warehouses' underlying
assets and liabilities are considered as representative of their
fair values.
Fund investments within level 3 represent investments in private
equity funds. Their value has been determined by each fund manager
based on the funds' net asset value. Each fund's net asset value is
primarily driven by the fair value of its underlying investments.
In all cases, considering that such investments are measured at
fair value, the carrying amounts of the funds' underlying assets
and liabilities are considered as representative of their fair
values.
Investments in subsidiaries have been valued based on their net
asset position. The main assets of the subsidiaries represent
investments measured at fair value and receivables from the Company
itself as well as third parties. Their net asset value is
considered as a fair approximation of their fair value.
A reasonable change in any individual significant input used in
the level 3 valuations is not anticipated to have a significant
change in fair values as above.
8. Investments in subsidiaries
2021 2020
Unconsolidated subsidiaries US $000 US $000
As at 1 January 6,813 5,787
Fair value gains 383 1,026
------ ------
As at 31 December 7,196 6,813
------ ------
Details of the investments in which the Company has a
controlling interest as at 31 December 2021 are as follows:
Name of Subsidiary Place of Holding Voting Principal activity
incorporation rights
and shares
held
Consolidated subsidiary
Livermore Capital Switzerland Ordinary 100% Administration
AG shares services
Unconsolidated subsidiaries
Livermore Properties British Virgin Ordinary 100% Holding of investments
Ltd Islands shares
Mountview Holdings British Virgin Ordinary 100% Investment vehicle
Ltd Islands shares
Sycamore Loan Strategies Cayman Islands Ordinary 100% Investment vehicle
Ltd shares
Livermore Israel Israel Ordinary 100% Holding of investments
Investments Ltd shares
Sandhirst Ltd Cyprus Ordinary 100% Holding of investments
shares
9. Trade and other receivables
2021 2020
US $009 US $000
Financial items
Amounts due by related parties
(note 22 ) 289 8,151
Non-financial items
Prepayments 65 67
VAT receivable 12 20
------ ------
366 8,238
------ ------
For the Company's receivables of a financial nature, no lifetime
expected credit losses and no corresponding allowance for
impairment have been recognised, as their default rates have been
determined to be close to 0%.
No receivable amounts have been written-off during either 2021
or 2020.
10. Cash and cash equivalents
Cash and cash equivalents included in the consolidated statement
of cash flows comprise the following at the reporting date:
2021 2020
US $000 US $000
Demand deposits 45,130 50,407
------ ------
Cash at bank 45,130 50,407
------ ------
11. Share capital
Authorised share capital
The Company has authorised share capital of 1,000,000,000
ordinary shares with no par value, and no restrictions.
Issued share capital Number Share premium
of shares US $000
Ordinary shares with no par value
As at 31 December 2021 and 2020 174,813,998 169,187
---------- ----------
Treasury shares Number
of shares US $000
As at 1 January 2021 - -
Additions (note 22 ) 10,888,577 6,973
Re-issued 1,430,000 (916)
---------- ---------
As at 31 December 2021 9,458,577 6,057
---------- ----------
During the year 1,430,000 of the Company's treasury shares were
re-issued to a key management member (note 22 ) in full settlement
of an accrued amount of USD 0.7m. The re-issued shares had an
average cost of USD 0.916m and a fair value of USD 0.829m, as
determined based on their market price, resulting in the
recognition of a loss in retained earnings of USD 0.087m. The
difference between the fair value and the accrued amount is
included in professional fees (note 18 ).
In the consolidated statement of financial position, the amount
included as share premium and treasury shares comprises of:
2021 2020
US $000 US $000
Share premium 169,187 169,187
Treasury shares (6,057) -
-------- --------
163,130 169,187
-------- --------
12. Trade and other payables
2021 2020
US $000 US $000
Financial items
Trade payables 36 34
Amounts due to related parties (note
22 ) 6,193 4,464
Accrued expenses 412 370
------ ------
6,641 4,868
------ ------
13. Dividend
At 8 March 2021, the Company paid an interim dividend of USD 8m
(USD 0.0488 per share) to members on the register on 19 March 2021,
as announced by the Board on 08 March 2021. The dividend was paid
on 16 April 2021.
14. Net asset value per share
Net asset value per share has been calculated by dividing the
net assets attributable to ordinary shareholders by the closing
number of ordinary shares in issue during the relevant financial
periods.
2021 2020
Net assets attributable to ordinary
shareholders (USD 000) 177,722 163,907
------------- -------------
Closing number of ordinary shares
in issue 165,355,421 174,813,998
------------- -------------
Basic net asset value per share (USD) 1.07 0.94
------------- -------------
Number of Shares
Ordinary shares 174,813,998 174,813,998
Treasury shares (9,458,577) -
------------- -------------
Closing number of ordinary shares
in issue 165,355,421 174,813,998
------------- -------------
The diluted net asset value per share equals the basic net asset
value per share since no potentially dilutive shares exist as at 31
December 2021 and 2020.
15. Segment reporting
The Company's activities fall under a single operating
segment.
The Company's investment income and its investments are divided
into the following geographical areas:
2021 2020
Investment Income US $000 US $000
Other European countries 94 (486)
United States 33,109 3,384
Asia 542 629
------- -------
33,745 3,527
------- -------
Investments
Other European countries 3,435 3,102
United States 127,071 98,985
Asia 8,345 8,038
------- -------
138,851 110,125
------- -------
Investment income, comprising interest and distribution income
as well as fair value gains or losses on investments, is allocated
on the basis of the issuer's location. Investments are also
allocated based on the issuer's location.
The Company has no significant dependencies, in respect of its
investment income, on any single issuer.
16. Interest and distribution income
2021 2020
US $000 US $000
Interest from investments 669 782
Distribution income 26,826 21,228
------ ------
27,495 22,010
------ ------
Interest and distribution income is analysed between different
categories of financial assets, as follows:
2021 2020
Interest Distribution Total Interest Distribution Total
income income
Financial assets at US $000 US $000 US $000 US $000 US $000 US $000
fair value
through profit or
loss
Fixed income investments 669 26,632 27,301 782 21,195 21,977
Public equity investments - 194 194 - 33 33
------ ------ ------ ------ ------ ------
669 26,826 27,495 782 21,228 22,010
------ ------ ------ ------ ------ ------
The Company's distribution income derives from multiple issuers.
The Company does not have concentration to any single issuer.
17. Fair value changes of investments
2021 2020
US $000 US $000
Fair value gains / (losses) on financial
assets through profit or loss 5,867 (18,990)
Fair value gains on investments in subsidiaries 383 1,026
Fair value losses on derivatives - (519)
------ ------
6,250 (18,483)
------ ------
The investments disposed of had the following cumulative (i.e.,
from the date of their acquisition up to the date of their
disposal) financial impact in the Company's net asset position:
Disposed in 2021 Disposed in 2020
Realised Cumulative Total Realised Cumulative Total
(losses)/ distribution financial (losses)/ distribution financial
gains* or interest impact gains* or interest impact
US $000 US $000 US $000 US $000 US $000 US $000
Financial assets
at fair value through
profit or loss
Fixed income investments 1,099 2,237 3,336 324 2,683 3,007
Public equities 1,454 111 1,565 84 11 95
Derivatives - - - (519) - (519)
------ ------ ------ ------ ------ ------
2,553 2,384 4,901 (111) 2,694 2,583
------ ------ ------ ------ ------ ------
Financial assets
at fair value through
OCI
Private equities - - - (3,331) 752 (2,579)
------ ------ ------ ------ ------ ------
2,553 2,384 4,901 (3,442) 3,446 4
------ ------ ------ ------ ------ ------
* difference between disposal proceeds and original acquisition
cost
18. Operating expenses
2021 2020
US $000 US $000
Directors' fees and expenses 3,903 900
Other salaries and expenses 201 177
Professional fees 3,528 851
Legal expenses 53 9
Bank custody fees 102 99
Office costs 277 240
Depreciation 109 102
Other operating expenses 349 352
Audit fees 75 76
Tax fees 2 2
------ ------
8,599 2,808
------ ------
Professional fees include a share-based payment to a key
management member of USD 0.129m (notes 11 and 22).
Throughout 2021 the Company employed 4 members of staff (2020:
4). Two of those members are the Company's executive Directors.
Other salaries and expenses include USD 18,977 of social
insurance and similar contributions (2020: USD 16,527), as well as
USD 3,461 of defined contributions plan costs (2020: USD
3,148).
19. Finance costs and income
2021 2020
US $000 US $000
Finance costs
Bank interest expense 35 40
Foreign exchange loss 363 -
------ ------
398 40
------ ------
Finance income
Bank interest income 18 119
Foreign exchange gain - 174
------ ------
18 293
------ ------
20. Taxation
2021 2020
US $000 US $000
Current tax charge 66 127
------ ------
The Company is a tax resident in the Republic of Cyprus and is
subject to taxation under the tax laws and regulations in
Cyprus.
The current tax charge relates to the results of the Company for
2021, as explained above, and the Company's consolidated subsidiary
in Switzerland (note 8 ).
21. Earnings per share
The basic earnings per share has been calculated by dividing the
profit for the year attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares in issue
of the Company during the relevant financial year.
2021 2020
Profit for the year attributable to
ordinary shareholders of the parent
(USD 000) 24,700 845
------------- -------------
Weighted average number of ordinary
shares outstanding 165,327,512 174,813,998
------------- -------------
Basic earnings per share (USD) 0.15 0.005
------------- -------------
The diluted earnings per share equals the basic earnings per
share since no potentially dilutive shares were in existence during
2021 and 2020.
22. Related party transactions
The Company is controlled by Groverton Management Ltd, an entity
owned by Noam Lanir, which at 31 December 2021 held 74.41% (2020:
76.62%) of the Company's voting rights.
2021 2020
US $000 US $000
Amounts receivable from unconsolidated
subsidiary
Sandhirst Ltd 289 221 (1)
------ ------
Amounts receivable from key management
Loan receivable - 1,000 (2)
------ ------
Amounts receivable from parent company
Loan receivable - 6,930 (3)
------ ------
Amounts payable to unconsolidated subsidiary
Livermore Israel Investments Ltd (3,046) (3,522) (4)
------ ------
Amounts payable to other related party
Loan payable (149) (149) (5)
------ ------
Amounts payable to key management
Directors' current accounts (1,011) (93) (4)
Other key management personnel (1,987) (700) (6)
------ ------
(2,998) (793)
------ ------
Key management compensation
Short term benefits
Executive Directors' fees 795 795 (7)
Executive Directors' reward payments 3,000 -
Non-executive Directors' fees 108 105
Other key management fees 2,829 408 (8)
------ ------
6,732 1,308
------ ------
(1) The amounts receivable from unconsolidated subsidiary are
interest free, unsecured, and have no stated repayment date.
(2) A loan of USD 1m was made during 2019 to a key management
employee and a Company's Director. The loan was free of interest,
unsecured and was repayable on demand. The loan was fully settled
during 2021. This loan was included within trade and other
receivables (note 9 ).
(3) A loan of USD 6.93m was made to the Company's parent,
Groverton Management Ltd . The loan was free of interest, unsecured
and was repayable on demand. The loan was fully settled during
2021. This loan was included within trade and other receivables
(note 9 ).
(4) The amounts payable to unconsolidated subsidiary and
Director's current accounts with credit balances are interest free,
unsecured, and have no stated repayment date.
(5) A loan with a balance at 31 December 2021 of USD 0.149m has
been received from a related company (under common control),
Chanpak Ltd. The loan is free of interest, is unsecured and is
repayable on demand. This loan is included within trade and other
payables (note 12 ).
(6) The amount payable to other key management personnel relates
to payments made on behalf of the Company for investment purposes
and accrued consultancy fees. During the year, an accrued amount of
USD 0.7m was settled by re-issuing 1,207,624 of the Company's
treasury shares at their fair value as at the date of transfer.
(7) These payments were made directly to companies which are related to the Directors.
(8) During the year 222,376 of the Company's treasury shares
were re-issued to a key management member for no consideration and
no vesting conditions. The fair value of these shares at the date
of transfer was USD 0.129m. Other key management fees are included
within professional fees (note 18 ).
During 2021, the Company bought back 10,888,577 shares from
Groverton Management Ltd, to be held in treasury, for a total cost
of USD 6.973m, as determined based on the market price of the
shares.
No social insurance and similar contributions nor any other
defined benefit contributions plan costs were incurred for the
Company in relation to its key management personnel in either 2021
or 2020.
23. Litigation
Fairfield Sentry Ltd vs custodian bank and beneficial owners
One of the custodian banks that the Company used faces a
contingent claim up to USD 2.1m, and any interest as will be
decided by a US court and related legal fees, with regards to the
redemption of shares in Fairfield Sentry Ltd, which were bought in
2008 at the request of Livermore and on its behalf. If the claim
proves to be successful Livermore will have to compensate the
custodian bank since the transaction was carried on Livermore's
behalf. The same case was also filed in BVI where the Privy Council
ruled against the plaintiffs.
As a result of the surrounding uncertainties over the existence
of any obligation for Livermore, the Directors cannot form an
estimate of the outcome for this case and therefore no provision
has been made.
24. Commitments
The Company has expressed its intention to provide financial
support to its subsidiaries, where necessary, to enable them to
meet their obligations as they fall due.
Other than the above, the Company has no capital or other
commitments as at 31 December 2021.
25. Financial risk management objectives and policies
Background
The Company's financial instruments comprise financial assets at
fair value through profit or loss, financial assets at fair value
through other comprehensive income, and financial assets and
liabilities at amortised cost that arise directly from its
operations. For an analysis of financial assets and liabilities by
category, refer to note 26 .
Risk objectives and policies
The objective of the Company is to achieve growth of shareholder
value, in line with reasonable risk, taking into consideration that
the protection of long-term shareholder value is paramount. The
policy of the Board is to provide a framework within which the
investment manager can operate and deliver the objectives of the
Company.
Risks associated with financial instruments
Foreign currency risk
Foreign currency risks arise in two distinct areas which affect
the valuation of the investment portfolio, 1) where an investment
is denominated and paid for in a foreign currency; and 2) where an
investment has substantial exposure to non-US Dollar underlying
assets or cash flows denominated in a foreign currency. The Company
in general does not hedge its currency exposure. The Company
discretionally and partially hedges against foreign currency
movements affecting the value of the investment portfolio based on
its view on the relative strength of certain currencies. Any
hedging transactions represent economic hedges; the Company does
not apply hedge accounting in any case. Management monitors the
effect of foreign currency fluctuations through the pricing of the
investments. The Company's exposure to financial instruments
denominated in foreign currencies is the following:
2021 2021 2021 2020 2020 2020
US $000 US $000 US $000 US $000 US $000 US $000
Financial Financial Net Financial Financial Net value
assets liabilities value assets liabilities
British Pounds
(GBP) 1,677 (110) 1,567 1,911 (114) 1,797
Euro 417 (21) 396 367 (68) 299
Swiss Francs
(CHF) 22 (2,099) (2,077) 14 (27) (13)
Israel Shekels
(ILS) 6,203 (3,046) 3,157 6,175 (3,522) 2,653
------ ------ ------ ------ ------ ------
Total 8,319 (5,276) 3,043 8,467 (3,731) 4,736
------ ------ ------ ------ ------ ------
Also, some of the USD denominated investments are backed by
underlying assets which are invested in non-USD assets. For
instance, investments in certain emerging market private equity
funds are denominated in USD but the funds in turn have invested in
assets denominated in non-USD currencies.
A 10% increase of the following currency rates against the rate
of United States Dollar (USD) at 31 December would have the
following impact. A 10% decrease of the following currencies
against USD would have an approximately equal but opposite
impact.
2021 2021 2021 2020 2020 2020
US $000 US $000 US $000 US US $000 US $000
$000
Profit Other comprehensive Equity Profit Other comprehensive Equity
or loss income or loss income
British Pounds
(GBP) 157 - 157 180 - 180
Euro 40 - 40 30 - 30
Swiss Francs
(CHF) (208) - (208) (1) - (1)
Israel Shekels
(ILS) 316 - 316 265 - 265
------ ------ ------ ------ ------ ------
Total 305 - 305 474 - 474
------ ------ ------ ------ ------ ------
The above analysis assumes that all other variables in
particular, interest rates, remain constant.
Interest rate risk
The Company is exposed to interest rate risk on its
interest-bearing instruments which are affected by changes in
market interest rates.
As at 31 December 2021 and 31 December 2020, the Company had no
financial liabilities that bore an interest rate risk.
Interest rate changes will also impact equity prices. The level
and direction of changes in equity prices are subject to prevailing
local and world economics as well as market sentiment all of which
are very difficult to predict with any certainty.
The Company has fixed and floating rate financial assets
including bank balances that bear interest at rates based on the
banks floating interest rates. In particular, the fair value of the
Company's fixed rate financial assets is likely to be negatively
impacted by an increase in interest rates. The interest income of
the Company's floating rate financial assets is likely to be
positively impacted by an increase in interest rates.
The Company has exposure to US bank loans through CLO equity
tranches as well as through warehousing facilities. An investment
in the CLO equity tranche or first loss tranche of a warehouse
represents a leveraged investment into such loans. As these loans
(assets of a CLO) and the liabilities of a CLO are floating rate in
nature (typically 3-month LIBOR as the base rate), the residual
income to CLO equity tranches and warehouse first loss tranches is
normally linked to the floating rate benchmark and thus normally do
not carry substantial interest rate risk.
The Company's financial assets affected by interest rate changes
are as follows:
2021 2020
US $000 US $000
Financial assets - subject to:
- interest changes 45,130 50,407
------ ------
An increase of 1% (100 basis points) in interest rates would
have the following impact in profit or loss and consequently to
equity as well. An equivalent decrease would have an approximately
equal but opposite impact. There would be no impact in other
comprehensive income.
2021 2020
US $000 US $000
Profit Profit
or loss or loss
Financial assets
- interest changes 451 504
------ ------
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 Company's
investments are exposed to market price fluctuations. The Board
monitors the portfolio valuation on a regular basis and
consideration is given to hedging or adjusting the portfolio
against large market movements.
The Company had no single major financial instrument that in
absolute terms and as a proportion of the portfolio could result in
a significant reduction in the NAV and share price. Due to the very
low exposure of the Company to public equities, and having no
specific correlation to any market, the equity price risk is low.
The portfolio as a whole does not correlate exactly to any
Index.
Management of risks is primarily achieved by having a
diversified portfolio to spread the market price risk. The Company
mainly has investments in CLO equity tranches as well as first loss
tranches of warehouse facilities. Investments in the equity tranche
of US CLOs represent a levered exposure to senior secured corporate
loans in the US, and are thus subject to many risks including but
not limited to lack of liquidity, credit or default risk, and risks
related to movements in market prices as well as the variations of
risk premium in the market.
Prices of these CLO investments may be volatile and will
generally fluctuate due to a variety of factors that are inherently
difficult to predict, including but not limited to changes in
prevailing credit spreads and yield expectations, interest rates,
underlying portfolio credit quality and market expectations of
default rates on non-investment grade loans, general economic
conditions, financial market conditions, legal and regulatory
developments, domestic and international economic or political
events, developments or trends in any particular industry, and the
financial condition of the obligors that constitute the underlying
portfolio.
A 10% uniform change in the value of the Company's portfolio of
financial assets (excluding level 3 investments) would result in a
6.28% change in the net asset value as at 31 December 2021 (2020:
5.46%), and would have the following impact in profit or loss and
consequently to equity as well (either positive or negative,
depending on the corresponding sign of the change). There would be
no impact in other comprehensive income.
2021 2020
US $000 US $000
Profit Profit
or loss or loss
Financial assets at fair value through
profit or loss 11,163 8,955
------ ------
Derivatives
The Investment Manager may use derivative instruments in order
to mitigate market risk or to take a directional investment. These
provide a limited degree of protection and would not materially
impact the portfolio returns if a large market movement did
occur.
No derivatives were held either at 31 December 2021 or 2020.
Credit risk
The Company invests in a wide range of securities with various
credit risk profiles including investment grade securities and sub
investment grade positions. The investment manager mitigates the
credit risk via diversification across issuers. However, the
Company is exposed to a migration of credit rating, widening of
credit spreads and default of any specific issuer.
The Company only transacts with regulated institutions on normal
market terms which are trade date plus one to three days. The
levels of amounts outstanding from brokers are regularly reviewed
by the management. The duration of credit risk associated with the
investment transactions is the period between the date the
transaction took place, the trade date and the date the stock and
cash are transferred, the settlement date. The level of risk during
the period is the difference between the value of the original
transaction and its replacement with a new transaction.
The Company is mainly exposed to credit risk in respect of its
fixed income investments (mainly CLOs) and to a lesser extend in
respect of its financial assets at amortised cost, and other
instruments held for trading (perpetual bonds).
The Company's maximum credit risk exposure at 31 December is as
follows:
2021 2020
US $000 US $000
Financial assets:
At amortised cost:
Trade and other receivables 289 8,151
Cash at bank 45,130 50,407
------ ------
45,419 58,558
At fair value through profit or loss 109,251 87,042
------ ------
154,670 145,600
------- -------
No collaterals are held by the Company itself in relation to the
Company's financial assets subject to credit risk.
The fair values of the above financial assets at fair value
through profit or loss are also affected by the credit risk of
those instruments. However, it is not practical to provide an
analysis of the changes in fair values due to the credit risk
impact for the year or previous periods, nor to provide any
relevant sensitivity analysis.
The Company has exposure to US senior secured loans and to a
lesser degree emerging market loans through CLO equity tranches as
well as warehouse first loss tranches. These loans are primarily
non-investment grade loans or interests in non-investment grade
loans, which are subject to credit risk among liquidity, market
value, interest rate, reinvestment and certain other risks. It is
anticipated that these non-investment grade loans generally will be
subject to greater risks than investment grade corporate
obligations.
A non-investment grade loan or debt obligation or an interest in
a non-investment grade loan is generally considered speculative in
nature and may become a defaulted security for a variety of
reasons. A defaulted security may become subject to either
substantial workout negotiations or restructuring, which may
entail, among other things, a substantial reduction in the interest
rate, a substantial write-down of principal, and a substantial
change in the terms, conditions and covenants with respect to such
defaulted security. In addition, such negotiations or restructuring
may be quite extensive and protracted over time, and therefore may
result in substantial uncertainty with respect to the ultimate
recovery on such defaulted security. Bank loans have historically
experienced greater default rates than has been the case for
investment grade securities.
The Company has no investment in sovereign debt as at 31
December 2021 or 2020.
At 31 December the credit rating distribution of the Company's
asset portfolio subject to credit risk was as follows:
Rating 2021 2020
US $000 Percentage US $000 Percentage
AA 26,063 16.9% 31,415 21.6%
A 12,872 8.3% 16,350 11.2%
B 922 0.6% 3,998 2.7%
BBB 6,195 4.0% 2,642 1.8%
B- 4,576 3.0% 1,148 0.8%
BB- 5,280 3.4% 8,818 6.1%
Not Rated 98,762 63.8% 81,229 55.8%
------ ------ ------ ------
154,670 100% 145,600 100%
------ ------ ------ ------
Included within "not rated" amounts are investments in loan
market through CLOs (equity tranches) of USD 91.179m and open
warehouses of USD 7.583m (2020: CLOs of USD 77.006m and open
warehouses of USD 10.036m).
The modelled internal rates of return on the CLO portfolio as
well as the warehouse first loss tranches are in low teens
percentage points.
Liquidity risk
The following table summarizes the contractual cash outflows in
relation to the Company's financial liabilities according to their
maturity.
Carrying Less
31 December 2021 amount than 1
year
US $000 US $000
Trade and other payables 6,641 6,641
------ ------
Carrying Less
31 December 2020 amount than 1
year
US $000 US $000
Trade and other payables 4,868 4,868
------ ------
A small proportion of the Company's portfolio is invested in
mid-term private equity investments with low or no liquidity. The
investments of the Company in publicly traded securities are
subject to availability of buyers at any given time and may be very
low or non-existent subject to market conditions.
There is currently no exchange traded market for CLO securities
and they are traded over-the-counter through private negotiations
or auctions subject to market conditions. Currently the CLO market
is liquid, but in times of market distress the realization of the
investments in CLOs through sales may be below fair value.
Warehouse facilities are private negotiated financing facilities
and are not traded and have no active market. The Company, however,
can opt to terminate such facility.
Management takes into consideration the liquidity of each
investment when purchasing and selling in order to maximise the
returns to shareholders by placing suitable transaction levels into
the market.
At 31 December 2021, the Company had liquid investments
totalling USD 156.7m, comprising of USD 45.1m in cash and cash
equivalents, USD 101.7m in investments in loan market through CLOs,
USD 9.9m in public equities. Management structures and manages the
Company's portfolio based on those investments which are considered
to be long term, core investments and those which could be readily
convertible to cash, are expected to be realised within normal
operating cycle and form part of the Company's treasury
function.
Capital management
The Company considers its capital to be its total equity (i.e.,
its share capital and all of its reserves).
The Company manages its capital to ensure that it will be able
to continue as a going concern while maximising the return to
shareholders through the optimisation of the balance between its
net debt and equity. During 2021 and 2020, the Company's only
borrowing is a loan payable to a related party of USD 0.149m (note
22) and therefore to a significant extent it is capital funded.
Net debt to equity ratio is calculated using the following
amounts as included on the consolidated statement of financial
position, for the reporting periods under review:
2021 2020
US $000 US $000
Borrowings 149 149
Cash at bank (45,130) (50,407)
------ ------
Net Debt (44,981) (50,258)
------ ------
Total equity 177,722 163,907
------ ------
Net debt to equity ratio (0.25) (0.31)
------- -------
26. Financial assets and liabilities by class
Note 2021 2020
US $000 US $000
Financial assets:
Financial assets at amortised 9 ,
cost 10 45,419 58,558
Financial assets at fair value
through profit or loss 4 119,220 99,583
Financial assets designated
at fair value through other
comprehensive income 5 12,435 3,729
------- -------
177,074 161,870
------- -------
Financial liabilities:
Financial liabilities at amortised
cost 12 6,641 4,868
------- -------
The carrying amount of the financial assets and liabilities at
amortised cost approximates to their fair value.
27. Events after the reporting date
The following non-adjusting events occurred after 31 December
2021:
-- On 5 January 2022, the Board announced an interim dividend of
USD 24m (USD 0.145 per share) to members on the register on 13
January 2022. The dividend was paid on 07 February 2022.
-- The Company invested an additional amount of USD 8.9m to the
open warehouse facilities as at 31 December 2021, increasing its
total investment to USD 16.5m. Livermore's investment amount plus
net carry amounting to a total of USD 17.6m became receivable in
April and May 2022.
-- In February 2022, Russia attacked Ukraine and the ensuing
conflict has resulted in significant humanitarian losses for the
Ukrainian people. In response, the US, UK, Japan and European
member states have enacted significant sanctions against Russia
including exclusion of Russia from the SWIFT system and access to
hard currencies. Russia and Ukraine and significant exporters of
agricultural commodities and Russia is a significant export of Oil
and Gas, especially to Europe. The conflict has led to large
increases in commodity prices and loss of agricultural supply. This
is expected to have potentially significant and unexpected negative
impact to global growth and business performance. We expect the
most direct and significant impact to European member states and
less developed economies while US is expected to fare better with
somewhat delayed and muted affects. The Company does not have
direct exposure to European or emerging markets with most of the
portfolio exposed to US domestic market companies. Still, the
conflict has only recently begun and given the uncertain outcome,
it is difficult to quantify the impact on the Company's portfolio
at this stage. In response, the Company intends to be
conservatively positioned with sufficient cash balances and
cashflow to whether the uncertainty and position itself to take
advantage of potential dislocations in the market.
-- During 2022, the Board decided to waive the amount receivable
of USD: 0.289m from its unconsolidated subsidiary Sandhirst Limited
(note 22), as a means of capital contribution to the
subsidiary.
There were no other material events after the end of the
reporting year, which have a bearing on the understanding of these
financial statements.
Shareholder Information
Registrars
All enquiries relating to shares or shareholdings should be
addressed to:
Link Asset Services
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone: 0871 664 0300
Facsimile: 020 8639 2342
Change of Address
Shareholders can change their address by notifying Link Asset
Services in writing at the above address.
Website
www.livermore-inv.com
The Company's website provides, amongst other things, the latest
news and details of the Company's activities, share price details,
share price information and links to the websites of our
brands.
Direct Dividend Payments
Dividends can be paid automatically into shareholders' bank or
building society accounts. Two primary benefits of this service
are:
-- There is no chance of the dividend cheque going missing in the post; and
-- The dividend payment is received more quickly because the
cash sum is paid directly into the account on the payment date
without the need to pay in the cheque and wait for it to clear.
As an alternative, shareholders can download a dividend mandate
and complete and post to Link Asset Services.
Lost Share Certificate
If your share certificate is lost or stolen, you should
immediately contact Link Asset Services on 0871 664 0300who will
advise on the process for arranging a replacement.
Duplicate Shareholder Accounts
If, as a shareholder, you receive more than one copy of a
communication from the Company you may have your shares registered
in at least two accounts. This happens when the registration
details of separate transactions differ slightly. If you wish to
consolidate such multiple accounts, please call Link Asset Services
on 0871 664 0300.
Please note that the Directors of the Company are not seeking to
encourage shareholders to either buy or sell the Company's
shares.
Corporate Directory
Secretary Principal Bankers
Chris Sideras
Banque J. Safra Sarasin (Luxembourg)
Registered Office SA
Trident Chambers 17 - 21, Boulevard Joseph II
PO Box 146 L-1840
Road Town Luxembourg
Tortola
British Virgin Islands CBH Compagnie Bancaire Helvétique
SA
Company Number Löwenstrasse 29 Zurich
475668 8021
Switzerland
Registrars
Link Asset Services Credit Suisse AG
34 Beckenham Road Seeefldstrasse 1
Beckenham Zurich 8070
Kent BR3 4TU Switzerland
England
Auditor UBS AG
Grant Thornton (Cyprus) Ltd Paradeplatz 6
41-49, Agiou Nicolaou Street CH-8098 Zürich
Nemeli Court - Block C Switzerland
2408 Engomi Nicosia
P.O. Box 239071687 Bank Julius Baer & Co. Ltd.
1687 Nicosia Cyprus Bahnhofstrasse 36,
CH-8010 Zurich,
Solicitors Switzerland
Travers Smith
10 Snow Hill
London
EC1A 2AL
England
Broker
Arden Partners plc
125 Old Broad Street
London
EC2N 1AR
England
Nominated And Financial Adviser
Strand Hanson Limited
26 Mount Row
London
W1K 3SQ
England
For further information please contact:
+41 (0) 43 344
Livermore Investments Group Limited 3200
Gaurav Suri
Strand Hanson Limited (Financial and Nominated + 44 (0) 20 7409
Adviser) 3494
Richard Johnson, Ritchie Balmer, James Spinney
+44 (0) 20 7614
Arden Partners plc (Broker) 5900
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END
FR SEUFUUEESEDI
(END) Dow Jones Newswires
May 30, 2022 02:01 ET (06:01 GMT)
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