REG - Livermore Inv. Group - Final Results
30/05/2022 07:15
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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 Amount Percentage 2020 Amount Percentage
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 Ordinary Shares % of issued ordinary share capital % of voting rights*
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
(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.
Director Date of Fees Benefits Reward payments Total emoluments
agreement US $000 US $000 US $000
2021 2020
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 of Ordinary Shares Percentage of ordinary share capital Percentage of voting rights * Number of Ordinary Shares Percentage of ordinary share capital Percentage of voting 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 assets of $27m (2020: $21m) classified within fair • obtaining an understanding of the valuation methodologies applied by the
value hierarchy at level 3, as disclosed in note 7. The fair value of level 3 Board of directors and assessing their appropriateness for each investment;
financial assets is generally determined either based on third party
valuations, or when not available based on adjusted Net Asset Value (NAV)
• obtaining third party confirmations indicating the NAV / fair value of the
calculations using inputs from third parties. financial assets and comparing to clients' records; and evaluating the
independent professional valuer's competence, capabilities and objectivity;
Due to the use of significant judgments by the Board of Directors, the
existence of unobservable inputs and the significant total value of financial
• in cases where the valuations have been performed by the Board of
assets within the level 3 hierarchy, we consider the valuation of these Directors, evaluating the reasonableness of the underlying assumptions and
investments as a key audit matter. verifying the inputs used by checking them to third party sources; and
• considering the adequacy of consolidated financial statement disclosures
in relation to the valuation methodologies used for each class of level 3
financial assets.
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 - 3,200 (4,022)
fair value gains / (losses)
5
------ ------
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 27form part of these consolidated financial statements.
Livermore Investment Group Limited
Consolidated Statement of Changes in Equity for the year ended 31 December 2021
Note Share Treasury Shares Translation Investments Retained
premium reserve revaluation earnings Total
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 - - 3,200 - 3,200
5 -
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 by EU IASB Effective date
· Amendments to IFRS 3: "Reference to the Conceptual Framework" Yes 1 January 2022
· Amendment to IFRS 10, and IAS 28: "Sale or Contribution of Assets No to be determined
between an Investor and its Associate or Joint Venture"
· IFRS 14: "Regulatory Deferral Accounts" No 1 January 2016
· Amendment to IFRS 16: "COVID-19 Related Rent Concessions beyond 30 Yes 1 April 2021
June 2021"
· IFRS 17: "Insurance Contracts", including amendments of 2020 Yes 1 January 2023
· Amendment to IFRS 17: "Initial Application of IFRS 17 and IFRS 9 - No 1 January 2023
Comparative Information"
· Amendments to IAS 1: "Classification of Liabilities as Current or No 1 January 2023
Non-current"
· Amendments to IAS 1 and IFRS Practice Statement 2: "Disclosure of Yes 1 January 2023
Accounting policies"
· Amendments to IAS 8: "Definition of Accounting Estimates" Yes 1 January 2023
· Amendment to IAS 12: "Deferred Tax related to Assets and Liabilities No 1 January 2023
arising from a Single Transaction"
· Amendments to IAS 16: "Property, Plant and Equipment: Proceeds before Yes 1 January 2022
Intended Use"
· Amendments to IAS 37: "Onerous Contracts - Cost of Fulfilling a Yes 1 January 2022
Contract"
· Annual Improvements to IFRS Standards 2018-2020 Yes 1 January 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 $000 US $000 US $000 US $000 US $000 US $000 US $000 US $000
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
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 value Investments Total
through OCI - Fund investments through in subsidiaries
profit or loss - Fixed Income
investments
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 value At fair value Investments Total
through OCI - Fund investments through profit or loss - in subsidiaries
Fixed Income investments
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 value At fair value Investments Total
through OCI - Fund investments Through profit or loss - in subsidiaries
Fixed Income
investments
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 incorporation Holding Voting rights and shares held Principal activity
Consolidated subsidiary
Livermore Capital AG Switzerland Ordinary shares 100% Administration services
Unconsolidated subsidiaries
Livermore Properties Ltd British Virgin Islands Ordinary shares 100% Holding of investments
Mountview Holdings Ltd British Virgin Islands Ordinary shares 100% Investment vehicle
Sycamore Loan Strategies Ltd Cayman Islands Ordinary shares 100% Investment vehicle
Livermore Israel Investments Ltd Israel Ordinary shares 100% Holding of investments
Sandhirst Ltd Cyprus Ordinary shares 100% Holding of investments
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 of shares Share premium
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 income Total Interest Distribution income Total
Financial assets at fair value US $000 US $000 US $000 US $000 US $000 US $000
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 (losses)/ gains* Cumulative distribution or interest Total financial impact Realised (losses)/ gains* Cumulative distribution or interest Total financial 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 24,700 845
000)
------------- -------------
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 assets Financial Net Financial assets Financial Net value
liabilities value 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 $000
US $000
US $000
Profit or loss Other comprehensive income Equity Profit or loss Other comprehensive income Equity
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 or loss Profit 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 or loss Profit 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 US $000 2020 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 amount Less than 1 year
31 December 2021
US $000 US $000
Trade and other payables 6,641 6,641
------ ------
Carrying amount Less than 1 year
31 December 2020
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 US $000 2020 US $000
Financial assets:
Financial assets at amortised cost 9, 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) SA
Registered Office 17 - 21, Boulevard Joseph II L-1840
Trident Chambers Luxembourg
PO Box 146
Road Town CBH Compagnie Bancaire Helvétique SA
Tortola Löwenstrasse 29 Zurich 8021
British Virgin Islands Switzerland
Company Number Credit Suisse AG
475668 Seeefldstrasse 1
Zurich 8070
Registrars Switzerland
Link Asset Services
34 Beckenham Road UBS AG
Beckenham Paradeplatz 6
CH-8098 Zürich
Kent BR3 4TU
Switzerland
England
Auditor Bank Julius Baer & Co. Ltd.
Grant Thornton (Cyprus) Ltd Bahnhofstrasse 36,
41-49, Agiou Nicolaou Street CH-8010 Zurich,
Nemeli Court - Block C Switzerland
2408 Engomi Nicosia
P.O. Box 239071687
1687 Nicosia Cyprus
Solicitors
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:
Livermore Investments Group Limited +41 (0) 43 344 3200
Gaurav Suri
Strand Hanson Limited (Financial and Nominated Adviser) + 44 (0) 20 7409 3494
Richard Johnson, Ritchie Balmer, James Spinney
Arden Partners plc (Broker) +44 (0) 20 7614 5900
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