REG - Livermore Inv. Group - Annual Financial Report <Origin Href="QuoteRef">AUIV.L</Origin> - Part 4
26/05/2017 07:06
- Part 4: For the preceding part double click ID:nRSZ2915Gc
20. Trade and other payables
2016 2015
US $000 US $000
Financial items
Trade payables 6 444
Amounts due to related parties (note 31) 3,233 1,377
Accrued expenses 2,327 386
------ ------
5,566 2,207
Non-financial items
Employee benefits accrued 3,050 -
Prepayment from tenants - 510
VAT payable - 53
------ ------
8,616 2,770
------ ------
21. Dividend payable
2016 2015
US $000 US $000
Dividend payable 15,000 -
------ ------
At 15 December 2016, the Board announced an interim dividend of USD 15m (USD 0.0858 per share) to members on the register
on 6 January 2017. The dividend was paid on 27 January 2017.
22. Net asset value per share
Net asset value per share has been calculated by dividing the net assets attributable to ordinary shareholders by the
closing number of ordinary shares (net of treasury shares) in issue during the relevant financial periods.
Diluted net asset value per share is calculated after taking into consideration the potentially dilutive shares in
existence as at 31 December 2016 and 31 December 2015.
2016 2015
Net assets attributable to ordinary shareholders (USD 000) 157,174 148,637
------------- -------------
Closing number of ordinary shares in issue 174,813,998 195,289,583
------------- -------------
Basic net asset value per share (USD) 0.90 0.77
------------- -------------
Net assets attributable to ordinary shareholders (USD 000) 157,174 148,637
Dilutive share options - exercise amount 185 221
------------- -------------
Net assets attributable to ordinary shareholders including the effect of potentially diluted shares (USD 000) 157,359 148,858
------------- -------------
Closing number of ordinary shares in issue 174,813,998 192,289,583
Dilutive share options 500,000 500,000
------------- -------------
Closing number of ordinary shares including the effect of potentially diluted shares 175,313,998 192,789,583
------------- -------------
Diluted net asset value per share (USD) 0.90 0.77
------------- -------------
Number of Shares
Ordinary shares 304,120,401 304,120,401
Treasury shares (129,306,403) (111,830,818)
------------- -------------
Closing number of ordinary shares in issue 174,813,998 192,289,583
------------- -------------
The Share options (note 16) granted on 13 May 2008 have a dilutive effect on the net asset value per share, given that
their exercise price is lower than the net asset value per Company's share at 31 December 2016 and 2015. All other share
options do not impact the diluted net asset value per share for 2015 (expired in 2016) as their exercise price was higher
than the net asset value per share at 31 December 2015.
Repurchase of own shares
The Board believes that the ability of the Company to re-purchase its own Ordinary shares in the market may potentially
benefit equity shareholders of the Company. The repurchase of Ordinary shares at a discount to the underlying net asset
value enhances the net asset value per share of the remaining equity shares.
In 2016, the Company bought an additional 17,475,585 of its Ordinary shares at an average price of USD 0.45 per share. In
2015, the Company bought 3,000,000 of its Ordinary shares at an average price of USD 0.51 per share (note 31).
23. Discontinued operations
The discontinued operations relate to the investment property (Wyler Park) activities that constituted an operating segment
of the Group (note 24). These activities were carried out through the Group's subsidiary, Livermore Investments AG in
Switzerland, of which 100% of shares were disposed to a third party on 28 October 2016.
23.1 Profit or loss
Details of profit or loss items of the discontinued operations are as follows:
2016 2015
US $000 US $000
Gross rental income 4,459 5,634
Direct expenses (423) (407)
Other operating expenses (278) (406)
Investment property revaluation (102) 7,819
Bank interest on investment property loan (1,004) (1,340)
Gain on disposal of subsidiary (note 23.2) 7,563 -
------ ------
Profit before taxation on discontinued operations 10,215 11,300
Taxation credit / (charge) (note 23.3) 3,876 (1,936)
------ ------
Profit for the year on discontinued operations 14,091 9,364
------ ------
23.2 Gain on disposal of subsidiary
2016 2015
US $000 US $000
Cash consideration received 31,758 -
Net assets at disposal date
- investment property (124,763) -
- cash and cash equivalents (6) -
- other assets (1,075) -
- Bank loan 76,287 -
- other liabilities 26,900 -
Foreign exchange losses reclassified from translation reserve (1,538) -
------ ------
Gain on disposal of subsidiary 7,563 -
------ ------
23.3 Taxation
Taxation credit / (charge) on the discontinued operations is analysed as follows:
2016 2015
US $000 US $000
Tax on ordinary activities (110) (82)
Deferred taxation (note 12) 3,986 (1,854)
------ ------
Taxation credit / (charge) 3,876 (1,936)
------ ------
23.4 Cash flows
Details of the cash flows of the discontinued operations are as follows:
2016 2015
US $000 US $000
Operating activities 2,975 4,831
Investing activities (102) -
Financing activities (2,061) (2,481)
Translation differences on foreign operations' cash and cash equivalents 14 (18)
------ ------
Net cash from discontinued operations 826 2,332
------ ------
24. Segment reporting
The Group's monitoring and strategic decision making process in relation to its investments is separated into two activity
lines which are also identified as the Group's operating segments. These operating segments are monitored and strategic
decisions are made on the basis of segment operating results.
Segment information can be analysed as follows:
Equity and debt instruments investment activities Investment property activities(discontinued - note23.1 ) Total per financial statements
2016 2015 2016 2015 2016 2015
Segment results US $000 US $000 US $000 US $000 US $000 US $000
Investment income
Interest and dividend income 26,334 25,675 - - 26,334 25,675
Investment property income - - 4,036 5,227 4,036 5,227
Gain / (loss) on investments 1,695 (33,955) (102) 7,819 1,593 (26,136)
------ ------ ------ ------ ------ ------
Gross profit / (loss) 28,029 (8,280) 3,934 13,046 31,963 4,766
Other income - 35 - - - 35
Administrative expenses (7,692) (4,510) (478) (645) (8,170) (5,155)
------ ------ ------ ------ ------ ------
Operatingprofit / (loss) 20,337 (12,755) 3,456 12,401 23,793 (354)
Finance costs (212) (1,109) (1,008) (1,345) (1,220) (2,454)
------ ------ ------ ------ ------ ------
Profit / (loss) before taxation 20,125 (13,864) 2,448 11,056 22,573 (2,808)
Taxation (charge) / credit (5) - 3,844 (1,951) 3,839 (1,951)
------ ------ ------ ------ ------ ------
Profit / (loss) for year 20,120 (13,864) 6,292 9,105 26,412 (4,759)
------ ------ ------ ------ ------ ------
Segment assets 182,335 121,104 - 124,588 182,335 245,692
------ ------ ------ ------ ------ ------
Segment liabilities 25,161 15,681 - 81,374 25,161 97,055
------ ------ ------ ------ ------ ------
The Group's investment income and its investments are divided into the following geographical areas:
Equity and debt instrumentsinvestment activities Investment property activities(discontinued - note 23.1) Total per financial statements
2016 2015 2016 2015 2016 2015
Investment Income US $000 US $000 US $000 US $000 US $000 US $000
Switzerland - - 3,884 13,046 3,884 13,046
Other European countries 330 (22) - - 330 (22)
United States 27,850 (5,950) - - 27,850 (5,950)
India 102 (2,235) - - 102 (2,235)
Asia (203) (73) (203) (73)
------ ------ ------ ------ ------ ------
28,079 (8,280) 3,884 13,046 31,963 4,766
------ ------ ------ ------ ------ ------
Investments
Switzerland 726 - 123,324 726 123,324
Other European countries 3,341 5,089 - - 3,341 5,089
United States 100,399 72,030 - - 100,399 72,030
India 2,022 10,004 - - 2,022 10,004
Asia 7,524 3,825 - - 7,524 3,825
------ ------ ------ ------ ------ ------
114,012 90,948 - 123,324 114,012 214,272
------ ------ ------ ------ ------ ------
Investment income, comprising interest and dividend income, gains or losses on investments, and investment property income,
is allocated on the basis of the customer's geographical location in the case of the investment property activities segment
and the issuer's location in the case of the equity and debt instruments investment activities segment. Investments are
allocated based on the issuer's location.
During 2016, 81.6% of the Group's rent relates to rental income from a single customer (SBB - Swiss national transport
authority) in the investment property activities segment (2015: 81.9%).
25. Interest and dividend income
2016 2015
US $000 US $000
Interest from investments 114 127
Dividend income 26,220 25,548
------ ------
26,334 25,675
------ ------
No dividend income has been recognised in 2016 in relation to investments designated at fair value through other
comprehensive income.
26. Profit / (loss) on investments
2016 2015
US $000 US $000
Loss on sale of investments - (3,459)
Loss due to impairment of available-for-sale financial assets - (31,726)
Fair value profit/(losses) on financial assets through profit or loss 2,056 (320)
Fair value gain on associate - 683
Fair value loss on investment in subsidiaries (315) -
Fair value gains on derivative instruments 69 991
Bank custody fees (115) (124)
------ ------
1,695 (33,955)
------ ------
The investments disposed of during the year resulted in the following realised losses (i.e. in relation to their original
acquisition cost):
2016 2015
US $000 US $000
Available-for-sale - (5,723)
At fair value through profit or loss (3,540) (303)
------ ------
(3,540) (6,026)
------ ------
27. Administrative expenses
Legal expenses 19 63
Directors' fees and expenses 5,033 2,414
Other salaries and expenses 149 176
Professional and consulting fees 1,879 806
Office costs 172 254
Depreciation 7 13
Other operating expenses 388 414
Provision charge - 513
Audit fees 119 96
Impairment charge on receivables 122 -
------ ------
7,888 4,749
------ ------
7,888
4,749
------
------
Throughout 2016 the Group employed 6 members of staff (2015: 7), and the Company employed 2 members of staff (2015: 2).
Other salaries and expenses include USD 18,706 of social insurance and similar contributions (2015: USD 21,640), as well as
USD 16,655 of defined contributions plan costs (2015: USD 6,593).
28. Finance costs
2016 2015
US $000 US $000
Finance costs
Other bank interest 216 267
Foreign exchange loss 2 847
------ ------
218 1,114
------ ------
29. Taxation
2016 2015
US $000 US $000
Current tax charge 38 15
------ ------
38 15
------ ------
The parent company is a British Virgin Islands (BVI) international business company and, under the BVI laws, is not subject
to corporation tax. Corporation tax is calculated with reference to the results of the Company's subsidiaries in
Switzerland and Cyprus.
30. Earnings per share
Basic earnings per share has been calculated by dividing the profit for the year attributable to ordinary shareholders of
the parent Company by the weighted average number of ordinary shares in issue of the parent during the relevant financial
periods.
Diluted earnings per share is calculated after taking into consideration other potentially dilutive shares in existence
during the year ended 31 December 2016 and the year ended 31 December 2015.
2016 2015
Continuing operations
Profit / (loss) for the year attributable to ordinary shareholders of the parent (USD 000) 19,885 (14,123)
------------- -------------
Weighted average number of ordinary shares outstanding 186,255,696 194,599,172
------------- -------------
Basic earnings per share (USD) 0.11 (0.07)
------------- -------------
Weighted average number of ordinary shares outstanding 186,255,696 194,599,172
Dilutive effect of share options 24,715 59,005
--------- ---------
Weighted average number of ordinary shares including the effect of potentially dilutive shares 186,280,411 194,658,177
------------- -------------
Diluted earnings per share (USD) 0.11 (0.07)
------------- -------------
2016 2015
Discontinued operations
Profit / (loss) for the year attributable to ordinary shareholders of the parent (USD 000) 14,091 9,364
------------- -------------
Weighted average number of ordinary shares outstanding 186,255,696 194,599,172
------------- -------------
Basic earnings per share (USD) 0.08 0.05
------------- -------------
Weighted average number of ordinary shares outstanding 186,255,696 194,599,172
Dilutive effect of share options 24,715 59,005
--------- ---------
Weighted average number of ordinary shares including the effect of potentially dilutive shares 186,280,411 194,658,177
------------- -------------
Diluted earnings per share (USD) 0.08 0.05
------------- -------------
The Share options (note 16) granted on 13 May 2008 have a dilutive effect on the weighted average number of ordinary shares
only, given that their exercise price is lower than the average market price of the Company's shares on the London Stock
Exchange (AIM division) during the year ended 31 December 2016 and 2015. All other share options do not impact the diluted
earnings per share for 2015 (expired in 2016) as their exercise price was higher than the average market price of the
Company's shares during the year ended 31 December 2015.
31. Related party transactions
The Company is controlled by Groverton Management Ltd, an entity owned by Noam Lanir, which at 31 December 2016 held 76.62%
(2015: 78.74%) of the Company's effective voting rights.
2016 2015
US $000 US $000
Amounts receivable from subsidiaries
Livermore Properties Limited 3,103 - (1)
Sandhirst Limited 1,018 - (1)
Allowance for impairment (2,940) - (1)
------ ------
1,181 -
------- -------
Amounts receivable from key management
Directors' current accounts 3,000 2,514 (1)
Other assets 1,128 2,256 (2)
Loan receivable 2,513 - (3)
------ ------
6,641 4,770
------- -------
Amounts payable to subsidiaries
Livermore Investments Cyprus Limited (169) - (4)
Livermore Capital AG (687) - (4)
Livermore Israel Investments Ltd (2,210) - (4)
------ ------
(3,066) -
------- -------
Amounts payable to other related party
Loan payable (149) (499) (5)
------ ------
(149) (499)
------- -------
Amounts payable to key management
Directors' current accounts (13) (35) (4)
Other key management personnel (5) (843) (6)
------ ------
(18) (878)
------- -------
Key management compensation
Short term benefits
Executive Directors' fees 795 795 (7)
Executive Directors' reward payments 4,128 1,528
Non-executive Directors' fees 60 69
Non-executive Directors' reward payments 50 22
Other key management fees 1,092 383
------ ------
6,125 2,797
------- -------
(1) The amounts receivable from subsidiaries and the Director's current accounts with debit balances are interest free,
unsecured, and have no stated repayment date.
(2) Loans of USD 5.523m were made to a key management employee for the acquisition of shares in the Company. Interest was
payable on these loans at 6 month US LIBOR plus 0.25% per annum and the loans were secured on the shares acquired. The
loans were repayable on the earlier of the employee leaving the Company or April 2013. In December 2012 the Board decided
to renew the outstanding amount of these loans for a period of another five years. Based on the Board's decision, the
outstanding amount is reduced annually on a straight line over five years, as long as the key management employee remains
with the Company. The relevant reduction in the loan amount for the year was USD 1.128m. The loans are classified as "other
assets" and are included under trade and other receivables (note 13).
(3) A loan of USD 2.500m was made to a key management employee, during the year, for the acquisition of shares in the
Company. Interest is payable on the loan at 6 month US LIBOR plus 0.25% per annum and the loan is secured on the shares
acquired. The loan is repayable on the earlier of the employee leaving the Company or April 2020. The loan is included
within trade and other receivables (note 13).
(4) The amounts payable to subsidiaries and Director's current accounts with credit balances are interest free,
unsecured, and have no stated repayment date.
(5) A loan with a balance at 31 December 2016 of USD 0.149m (31 December 2015: USD 0.499m) has been received from a
related company (under common control), Chanpak Ltd. The loan is free of interest, it is unsecured and is repayable on
demand. This loan is included within trade and other payables (note 20).
(6) The amount payable to other key management personnel relates to a payment made on behalf of the Company for
investment purposes and accrued consultancy fees.
(7) These payments were made directly to companies which are related to Directors.
No social insurance and similar contributions nor any other defined benefit contributions plan costs were incurred for the
Group in relation to its key management personnel in either 2016 or 2015.
Noam Lanir, through an Israeli partnership, is the major shareholder of Babylon Limited, an Israel based Internet Services
Company. The Group as of 31 December 2016 held a total of 1.941m shares at a value of USD 0.973m (2015: 1.941m shares at a
value of USD 0.931m) which represents 4% of its effective voting rights. The investment in Babylon Ltd is held through the
subsidiary Livermore Israel Investments Ltd (2015: included within public equity investments under financial assets at fair
value through profit or loss - note 5).
In 2016, the Company bought 17,475,585 (2015: 3,000,000) of its Ordinary shares from Groverton Management Ltd, at an
average price of USD 0.45 per share (2015: USD 0.51 per share). These shares are included in Treasury shares (note 15).
As at the reporting date Livermore had 335,816 number of shares of Wanaka Capital Partners Mid-Tech Opportunity Fund
registered in its name but held for the absolute benefit of a related company (other related party - under common control).
These shares are not included in the financial assets on the consolidated statement of financial position.
During the year the Company received administrative services of USD 0.048m (2015: 0.039m) in connection with investments
from a related company (other related party - under common control), Mash Medical Life Tree Marketing Ltd.
32. Provisions
The movement in provisions for the year is as follows:
2016 2015
US $000 US $000
As at 1 January 513 -
Additions (note 33) - 513
Settlements (128) -
----- -----
As at 31 December 385 513
------ ------
Allocated as:
Current liability 385 128
Non-current liability - 385
------ ------
385 513
------ ------
33. Litigation
Fairfield Sentry Ltd vs custodian bank and beneficial owners
One of the custodian banks that the Company uses faces a contingent claim up to USD 2.1m, and any interest as will be
decided by a US court and related legal fees, with regards to the redemption of shares in Fairfield Sentry Ltd, which were
bought in 2008 at the request of Livermore and on its behalf. The same case was also filed in BVI where the Privy Council
ruled against the plaintiffs.
As a result of the surrounding uncertainties over the existence of any obligation for Livermore, as well as for the
potential amount of exposure, the Directors cannot form an estimate of the outcome for this case and therefore no provision
has been made.
No further information is provided on the above case as the Directors consider it could prejudice its outcome.
Ex employee vs Empire Online Ltd
In 2007 an ex employee of Empire Online Limited (the Company's former name) filed a law suit against one of its Directors
and the Company in the Labor Court in Tel Aviv. According to the lawsuit the plaintiff claimed compensation relating to the
sale of all commercial activities of Empire Online Limited until the end of 2006, and the dissolution of the company and
the terms of termination of his employment with Empire Online Limited.
Prior to the filing of the lawsuit in Israel, the Company filed a claim against the plaintiff in the Court in Cyprus based
upon claims concerning breach of faith of the plaintiff towards his employers. Litigation was completed in Israel.
On 5 March 2014, the Labor Court in Tel Aviv issued a ruling in which the court denied most of the plaintiff's claims and
accepted only his claim for termination of employment. On 16 April 2014 the plaintiff filed an appeal against the ruling.
On 10 June 2015 the court held a hearing of the appeal and suggested that both sides settle the dispute by means of
mediation. On 20 January 2016 the parties reached an agreement for an out of court settlement, for which a corresponding
provision has been made (note 32).
34. Commitments
The Company has expressed its intention to provide financial support to its subsidiaries, where necessary to enable them to
meet their obligations as they fall due.
Other than the above, the Company has no capital or other commitments as at 31 December 2016.
35. Events after the reporting date
The three warehouse facilities that the Company invested in, during 2016, were converted to CLOs in May 2017. For two out
of the three warehouses, with a carrying amount as at 31 December 2016 of USD 11.185m, the Company invested an additional
amount of USD 15.5m during 2017 (before their conversion). For these two warehouses, Livermore's investment amount plus
net carry amounting to a total of USD 28.1m became receivable in May 2017. For the other one, with a carrying amount as at
31 December 2016 of USD 6.066m, the Company invested an additional amount of USD 3m during 2017 (before its conversion).
For that warehouse, the amount to be received has not yet been determined, however it is expected that it will exceed
Livermore's investment amount.
There were no other material events after the end of the reporting year, which have a bearing on the understanding of these
consolidated financial statements.
36. Financial risk management objectives and policies
Background
The Group's financial instruments comprise available for sale financial assets, financial assets at fair value through
profit or loss, derivatives, cash balances and receivables and payables that arise directly from its operations. For an
analysis of financial assets and liabilities by category, refer to note 37.
Risk objectives and policies
The objective of the Group is to achieve growth of shareholder value, in line with reasonable risk, taking into
consideration that the protection of long-term shareholder value is paramount. The policy of the Board is to provide a
framework within which the investment manager can operate and deliver the objectives of the Group.
Risks associated with financial instruments
Foreign currency risk
Foreign currency risks arise in two distinct areas which affect the valuation of the investment portfolio, 1) where an
investment is denominated and paid for in a foreign currency; and 2) where an investment has substantial exposure to non-US
Dollar underlying assets or cash flows denominated in a foreign currency. The Group in general does not hedge its currency
exposure. The Group discretionally and partially hedges against foreign currency movements affecting the value of the
investment portfolio based on its view on the relative strength of certain currencies. Any hedging transactions represent
economic hedges; the Group does not apply hedge accounting in any case. Management monitors the effect of foreign currency
fluctuations through the pricing of the investments. The level of financial instruments denominated in foreign currencies
held by the Group at 31 December 2016 is the following:
2016 2016 2016 2015 2015 2015
US $000 US $000 US $000 US $000 US $000 US $000
Financial assets Liabilities Netvalue Financial assets Liabilities Net value
British Pounds (GBP) 1,754 (355) 1,399 1,611 (4,475) (2,864)
Euro 2,715 (284) 2,431 2,641 (253) 2,388
Swiss Francs (CHF) 8,090 (1,966) 6,124 28,653 (9) 28,644
Indian Rupee (INR) - - - 7,099 - 7,099
Israel Shekels (ILS) 5,052 (2,212) 2,840 2,850 (90) 2,760
Others - (6) (6) - (5) (5)
------ ------ ------ ------ ------ ------
Total 17,611 (4,823) 12,788 42,854 (4,832) 38,022
------ ------ ------ ------ ------ ------
Also, some of the USD denominated investments are backed by underlying assets which are invested in non-USD assets. For
instance, investments in certain emerging market private equity funds are denominated in USD but the funds in turn have
invested in assets denominated in non-USD currencies.
A 10% increase of the following currency rates against the rate of United States Dollar (USD) at 31 December 2016 would
have the following impact. A 10% decrease of the following currencies against USD would have an approximately equal but
opposite impact.
2016 2016 2015 2015
US $000 US $000 US $000 US $000
Profit or loss Other comprehensive income Profit or loss Other comprehensive income
British Pounds (GBP) 77 63 (445) 159
Euro 243 - 162 77
Swiss Francs (CHF) 590 - 2,842 -
Indian Rupee (INR) - - - 710
Israel Shekels (ILS) 284 - 273 3
------ ------ ------ ------
Total 1,194 63 2,832 949
------ ------ ------ ------
The above analysis assumes that all other variables in particular, interest rates, remain constant. The analysis does not
include the impact arising from the translation of foreign operations from their functional to the presentation currency.
Interest rate risk
The Group is exposed to interest rate risk on its interest-bearing instruments which are affected by changes in market
interest rates.
The Group has banking credit lines which are available on short notice for the Group to use in its investment activities,
the costs of which are based on variable rates plus a margin. When an investment is made utilising the facility,
consideration is given to the financing costs which would impact the returns. The level of banking facilities used is
monitored by both the Board and the management on a regular basis. The level of these banking facilities utilised at 31
December 2016 was USD 1.2m (2015: USD 13.2m).
As at 31 December 2016 the Group had no financial liabilities that bore an interest rate risk, other than the previously
disclosed bank facilities.
Interest rate changes will also impact equity prices. The level and direction of changes in equity prices are subject to
prevailing local and world economics as well as market sentiment all of which are very difficult to predict with any
certainty.
The Group has fixed and floating rate financial assets including bank balances that bear interest at rates based on the
banks floating interest rates. In particular, the fair value of the Group's fixed rate financial assets is likely to be
negatively impacted by an increase in interest rates. The interest income of the Group's floating rate financial assets is
likely to be positively impacted by an increase in interest rates.
The Group has exposure to US bank loans through CLO equity tranches as well as through warehousing facilities. An
investment in the CLO equity tranche or first loss tranche of a warehouse represents a leveraged investment into such
loans. As these loans (assets of a CLO) and the liabilities of a CLO are floating rate in nature (typically 3 month LIBOR
as the base rate), the residual income to CLO equity tranches and warehouse first loss tranches is normally linked to the
floating rate benchmark and thus normally do not carry substantial interest rate risk.
The Group's interest bearing assets and liabilities are as follows:
2016 2015
US $000 US $000
Financial assets - subject to:
- fair value changes 3,550 4,534
- interest changes 156,970 93,836
------ ------
Total 160,520 98,370
------ ------
Financial liabilities - subject to:
- interest changes 1,160 89,618
------ ------
Total 1,160 89,618
------ ------
Changes in market interest rates will affect the valuation of fixed rate interest bearing instruments. A 1% (100 basis
points) increase in market interest rates would result in an estimated 0.72% increase in the net asset value as at 31
December 2016 (2015: -0.18%).
An increase of 1% (100 basis points) in interest rates would have the following impact. An equivalent decrease would have
an approximately equal but opposite impact.
2016 2016 2015 2016
US $000 US $000 US $000 US $000
Profit or loss Other comprehensive income Profit or loss Other comprehensive income
Financial assets
- fair value changes (256) - (269) -
- interest changes 1,397 - 888 -
Financial liabilities
- interest changes (12) - (896) -
------ ------ ------ ------
1,129 - (277) -
------ ------ ------ ------
The above analysis assumes that all other variables, in particular currency rates, remain constant.
Market price risk
By the nature of its activities, most of the Group's investments are exposed to market price fluctuations. The Board
monitors the portfolio valuation on a regular basis and consideration is given to hedging or adjusting the portfolio
against large market movements.
The Group had no single major financial instrument that in absolute terms and as a proportion of the portfolio could result
in a significant reduction in the NAV and share price. Due to the very low exposure of the Group to public equities, and
having no specific correlation to any market, the equity price risk is low. The portfolio as a whole does not correlate
exactly to any Index.
Management of risks is primarily achieved by having a diversified portfolio to spread the market price risk. The Group has
investments in CLO equity tranches as well as first loss tranches of warehouse facilities. These investments represent
leveraged exposure to typically senior secured loans. Investments in CLOs are subject to many risks including market price
risk, liquidity, credit risk, interest rate, reinvestment and certain other risks.
Prices of these CLO investments may be volatile and will generally fluctuate due to a variety of factors that are
inherently difficult to predict, including but not limited to changes in prevailing credit spreads and yield expectations,
interest rates, underlying portfolio credit quality and market expectations of default rates on non-investment grade loans,
general economic conditions, financial market conditions, legal and regulatory developments, domestic and international
economic or political events, developments or trends in any particular industry, and the financial condition of the
obligors that constitute the underlying portfolio.
A 10% uniform change in the value of the Group's portfolio of financial assets (excluding level 3 investments) would result
in a 6.56% change in the net asset value as at 31 December 2016 (2015: 4.84%), and would have the following impact (either
positive or negative, depending on the corresponding sign of the change):
2016 2016 2015 2015
US $000 US $000 US $000 US $000
Profit or loss Other comprehensive income Profit or loss Other comprehensive income
Available-for-sale financial assets - - - 6,721
Financial assets at fair value through other comprehensive income - 104 - -
Financial assets at fair value through profit or loss 10,209 - 358 -
------ ------ ------ ------
10,209 104 358 6,721
------ ------ ------ ------
Derivatives
The Investment Manager may use derivative instruments in order to mitigate market risk or to take a directional investment.
These provide a limited degree of protection and would not materially impact the portfolio returns if a large market
movement did occur.
Credit Risk
The Group invests in a wide range of securities with various credit risk profiles including investment grade securities and
sub investment grade positions. The investment manager mitigates the credit risk via diversification across issuers.
However, the Group is exposed to a migration of credit rating, widening of credit spreads and default of any specific
issuer.
The Group only transacts with regulated institutions on normal market terms which are trade date plus one to three days.
The levels of amounts outstanding from brokers are regularly reviewed by the management. The duration of credit risk
associated with the investment transactions is the period between the date the transaction took place, the trade date and
the date the stock and cash are transferred, the settlement date. The level of risk during the period is the difference
between the value of the original transaction and its replacement with a new transaction.
The Group is mainly exposed to credit risk in respect of its fixed income investments (mainly CLOs) and to a lesser extend
in respect of its financial assets at amortised cost, and other instruments held for trading (perpetual bonds).
The Group's maximum credit risk exposure at 31 December 2016 is as follows:
2016 US $000 2015 US $000
Financial assets:
At amortised cost:
Trade and other receivables 6,759 3,090
Cash at bank 60,383 25,770
------ ------
67,142 28,860
Available-for-sale financial assets - 65,946
Financial assets at fair value through profit or loss 100,137 6,655
------ ------
167,279 101,461
------- -------
No collaterals are held by the Company itself in relation to the Company's financial assets subject to credit risk.
The fair values of the above financial assets at fair value through profit or loss are also affected by the credit risk of
those instruments. However, it is not practical to provide an analysis of the changes in fair values due to the credit
risk impact for the year or previous periods, nor to provide any relevant sensitivity analysis.
The Group has exposure to US senior secured loans and to a lesser degree emerging market loans through CLO equity tranches
as well as warehouse first loss tranches. These loans are primarily non-investment grade loans or interests in
non-investment grade loans, which are subject to credit risk among liquidity, market value, interest rate, reinvestment and
certain other risks. It is anticipated that these non-investment grade loans generally will be subject to greater risks
than investment grade corporate obligations.
A non-investment grade loan or debt obligation or an interest in a non-investment grade loan is generally considered
speculative in nature and may become a defaulted security for a variety of reasons. A defaulted security may become subject
to either substantial workout negotiations or restructuring, which may entail, among other things, a substantial reduction
in the interest rate, a substantial write-down of principal, and a substantial change in the terms, conditions and
covenants with respect to such defaulted security. In addition, such negotiations or restructuring may be quite extensive
and protracted over time, and therefore may result in substantial uncertainty with respect to the ultimate recovery on such
defaulted security. Bank loans have historically experienced greater default rates than has been the case for investment
grade securities.
The Group has no investment in sovereign debt as at 31 December 2016 or 2015.
At 31 December the credit rating distribution of the Group's asset portfolio subject to credit risk was as follows:
Rating 2016 Amount Percentage 2015 Amount Percentage
US $000 US $000
AA 30,870 18.5% 18,772 18.5%
A+ - - - -
A 82 - 976
- More to follow, for following part double click ID:nRSZ2915GeRecent news on Livermore Investments
See all newsREG - Livermore Inv. Group - Directorate Change
AnnouncementREG - Livermore Inv. Group - Interim dividend exchange rate
AnnouncementREG - Livermore Inv. Group - Interim Dividend
AnnouncementREG - Livermore Inv. Group - Interim Results
AnnouncementREG - Livermore Inv. Group - Result of AGM
Announcement