REG - Livermore Inv. Group - Final Results
22/05/2023 07:00
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RNS Number : 0794A Livermore Investments Group Limited 22 May 2023
Highlights
· Net loss for the year was USD 24.4m (2021: net profit of USD
24.7m).
· Net Asset Value per share declined to USD 0.77 (2021 USD 1.07) after
paying USD 24m interim dividend implying a net return of -16.7% for the year.
· The Company is conservatively positioned with over USD 43.9m of
cash deposits and Government bonds.
· On 5 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 7 February 2022.
· Collateralized Loan Obligations (CLO) portfolio and warehouse
generated USD 23.2m in cash distributions and a total net negative return of
USD 19.8m in 2022.
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
2022. 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.
2022 was a challenging year for the global economy. Inflation across most
developed countries rose to multi-decade highs and geopolitical tensions
increased with Russia's attack on Ukraine. Sanctions applied to Russia and
loss of production in Ukraine further increased energy and agricultural
commodity prices. Developed economy central banks were forced to apply the
economic breaks and increase interest rates in order to contain inflation.
Financial markets declined with both fixed income and equity markets recording
significant losses in 2022. The US Dollar rallied sharply against most
currencies in the first three quarters as the US Federal Reserve led the
monetary policy tightening race.
In anticipation of sharp interest rate increases and the potential for higher
default and credit losses, management positioned the Company to be able to
reduce risk, and rapidly and successfully converted its two open warehouses
into new issue CLOs at amongst the lowest financing costs in 2022. Over the
year, the Company increased its cash, deposit, and government bond position
from USD 21.1m after paying a USD 24m interim dividend in January 2022 to USD
43.9m by year-end. Management believes that a high liquidity position will
allow the Company to benefit from opportunistic trading and price dislocations
as and when they appear during the process of inflation normalisation.
The US senior secured loan and CLO market is directly exposed to rising
interest rates. Management anticipates higher borrowing costs for loan
issuers, higher default rates and potentially significant rating downgrades -
all of which are negative for the Company's CLO equity portfolio. This was
also reflective in the valuation declines of USD 42.7m during the year.
Overall, the Company received USD 23.2m in cash distributions from its CLO and
warehousing portfolio resulting in a net negative contribution of USD 19.8m to
the financial statements. Most of these declines occurred in the first half of
the year.
Our net loss for the year was USD 24.4m (2021 net profit: USD 24.7m) and the
year-end NAV was USD 0.77 per share (2021 NAV: USD 1.07 per share) after
paying a dividend payment of USD 24m (USD 0.145 per share).
The Company ended the year with over USD 43.9m of cash invested mainly in
deposits and US government debt.
Financial Review
The NAV of the Company on 31 December 2022 was USD 127.7m (2021: USD 177.7m).
Net loss, during the year was USD 24.4m, which represents loss per share of
USD 0.15. Operating expenses were USD 3.0m (2021: USD 8.6m).
The overall change in the NAV is primarily attributed to the following:
31 December 2022 31 December 2021
US $m US $m
Shareholders' funds at beginning of year 177.7 163.9
___________ ___________
Income from investments 23.7 27.5
Unrealised (losses) / gains on investments (46.3) 9.4
Unrealised exchange gains - 0.1
Operating expenses (3.0) (8.6)
Net finance costs (0.2) (0.4)
Tax charge (0.2) (0.1)
___________ ___________
(Decrease) / increase in net assets from operations (26.0) 27.9
Dividends paid (24.0) (8.0)
Issuance / purchase of own shares - (6.1)
___________ ___________
Shareholders' funds at end of year 127.7 177.7
------ ------
Net Asset Value per share US $0.77 US $1.07
Dividend & Buyback
On 5 January 2022, the Company announced an interim dividend of USD 24m (USD
0.145 per share) to members on the register as at 14 January 2022. The
dividend was paid on 7 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.
Richard B
Rosenberg
Noam Lanir
Chairman
Chief Executive Officer
19 May 2023
Review of Activities
Introduction and Overview
High and rising inflation coupled with Russia's attack on Ukraine and the
resulting disruptions to energy and commodity markets drove central banks in
developed economies to rapidly tighten monetary policy in 2022. Strong
economic momentum from 2021 slowed down in 2022 and financial markets declined
sharply in the first half of the year. The safe government bond markets also
suffered their largest declines in decades as record low yields collided with
the sharpest increases.
During the year, the S&P 500 Index declined by 18.1%, marking its largest
fall since the global financial crisis, and the 10-year US Treasury note
generated negative returns of 16.9%. European markets were particularly hard
hit as energy prices skyrocketed due the Russia's war on Ukraine. Chinese
markets continued to decline as the Chinese government continued their
"Covid-zero" lockdown policies until October 2022. The Hang Seng Index
declined by 15.6% in 2022, but was down over 35% before recovering sharply
after the government announced they would loosen their lockdown policy. The US
Dollar increased in value against most currencies as investors sought safety
and the US Federal Reserve was the most aggressive in raising rates amongst
the developed market economies.
Fixed Income markets fared poorly on account of higher interest rates and
concerns about the economic outlook. The Bloomberg US Corporate Total Return
index lost 15.76% and the High Yield Total Return lost 11.19% in 2022. The US
leveraged loan market performed much better losing only 1.06% as their
floating rate characteristics protected investors from interest rate risk. At
the same time, the future outlook for leveraged loan borrowers is concerning
as they face rising interest burdens in the near term. We expect higher
default rates and potentially lower recoveries from weaker borrowers if the US
economy enters a recessionary environment.
CLOs equity had a poor year as anticipation of higher default rates due to
higher interest rates affected prices significantly, especially those
positions that were out of or close to their reinvestment end dates. CLO debt
tranche spreads also widened sharply. Management anticipated this reaction and
promptly converted its two open warehouses into new issue CLOs. Over the
course of the year, management did not reinvest the dividends received from
CLOs and increased its cash and marketable securities position significantly.
Cashflows from CLO equity remained strong but were lower on account of loss of
the Libor floor benefit and also the increased basis between 1-month and
3-month Libor. Over the past few years, most CLO assets (loans) have switched
to pay on a monthly basis with a 1-month Libor base rate setting whereas CLO
liabilities pay on a quarterly basis with a 3-month Libor base rate setting.
In 2022, the basis between 1-month and 3-month Libor widened to very high
levels as the market priced in larger than normal rate increases by the US
Federal Reserve resulting in CLO liabilities being paid at higher base rates
than the income received from CLO assets and therefore CLO equity received
smaller distributions than anticipated in early 2022. Further, CLO equity
received higher than normal distributions in 2021 as most assets came with a
Libor floor whereas CLO liabilities did not have this benefit. When 3m Libor
turned higher than the average floor on the assets in 2022, this benefit to
CLO equity was eroded. While credit spreads have widened and loan prices have
declined, defaults in the loan market stayed low in 2022. However, we expect
higher default and stressed situations in 2023. At the same time, lower loan
prices allowed CLO managers to build excess par which should offset some
losses from defaults in the future. We are positioned conservatively with
mostly recent vintage CLOs with long reinvestment periods that are expected to
perform better. Further, our high cash position should enable us to take
advantage of opportunities in the secondary markets in the near to mid-term.
During the year, the CLO and warehouse portfolio generated USD 23.2m in cash
distributions.
For the 2022 year-end, the Company reported a NAV/share of USD 0.77 after a
dividend payment of USD 24m (USD 0.145 per share) and net loss of USD 24.4m.
Interest and distribution income amounted to USD 23.7m, of which, USD 23.2m
was generated from the CLO and warehousing portfolio. The net loss of the CLO
and warehousing portfolio was USD 19.8m as mark-to-market changes offset
distributions from the portfolio. Management redeemed USD 2.0m from the
digital assets focussed fund in 2022. Operating expenses amounted to USD 3.0m.
The Company ended the year with over USD 43.9m of cash, deposits, and
investments in US treasury bills after paying an interim dividend of USD 24m
in February 2022.
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
The global economy slowed down in 2022, and inflation in advanced economies
continued to rise. This was due to a combination of factors, including supply
bottlenecks, renewed waves of the pandemic, and Russia's attack on Ukraine.
The resulting decline in consumer and business sentiment led to weakened
demand and purchasing power, and financial conditions became more restrictive
as central banks tightened monetary policy. Bond yields rose, and stock
markets suffered losses. Differences in the scale and pace of monetary policy
tightening by central banks led to larger movements on foreign exchange
markets, with the US dollar strengthening against most currencies. While
international supply chain problems eased gradually, global demand momentum
declined in the second half of the year, weighing on global trade. Commodity
prices fluctuated strongly, especially for energy sources.
USA: In 2022, the US economy slowed due to high inflation, tighter monetary
policy, and less expansionary fiscal policy. Real GDP fell in the first half
of 2022, however rose at a 3% pace in the second half. Consumer spending
endured to rise, supported by savings accumulated during the pandemic. Despite
the slowdown, the labour market remained strong, with above-average growth in
employment and low unemployment rates at 3.5%. Inflation in advanced
economies, including the US, continued to rise, with energy and food prices
being key drivers due to war in Ukraine. In the US, inflation stood at 8.0% in
contrast to 4.7% in 2021, the highest seen in around 40 years. The personal
consumption expenditures (PCE) price index rose to 6.2% over the 12 months
ending in December, and the index that excludes food and energy items
(so-called core inflation) was up 5.0%. Due to high inflation and a strong
labour market, the Federal Reserve significantly tightened its monetary
policy, raising its policy rate by a total of 4.25 percentage points ending
the year at 4.25 - 4.50%. Further, the Federal Reserve started reducing
its balance sheet and signalled additional interest rate hikes to curb
inflation.
Eurozone: In 2022, the euro area's GDP grew by 3.5%, although growth slowed
down over the year due to higher inflation caused by Russia's attack on
Ukraine and reduced gas deliveries. The labour market remained favourable, and
the unemployment rate reached a historical low of 6.6% in December. Headline
inflation rose to 8.4%, driven by higher energy and food prices, while core
inflation reached 5.2%, reflecting higher inflation in services and price
increases for various goods. The ECB raised its key rates gradually from July,
and in December, its deposit facility rate reached 2.0%. The ECB discontinued
its net asset purchases under the Pandemic Emergency Purchase Program in
March, and under the Asset Purchase Program in July, with plans to gradually
reduce the asset portfolio in 2023. However, the ECB approved the Transmission
Protection Instrument in July to combat a tightening in financing conditions
not warranted by fundamentals that impedes the transmission of monetary
policy.
Japan: Japan's GDP grew by 1.1% in 2022 due to the expansionary monetary and
fiscal policy. Economic activity fluctuated as a result of the repeated waves
of the pandemic and procurement problems in the automotive industry in the
first half of the year. Rising inflation led to a loss in real income and
dampened the recovery in consumption. The unemployment rate declined
marginally and stood at 2.5% in December, still higher than before the
pandemic. Consumer prices rose by 2.5%. Inflation fluctuated significantly
over the course of 2022, being slightly positive (0.2%) in the first half of
the year but rose again and stood at 1.5% in December. 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 decided to expand
the range of fluctuation for long-term bond yields to improve market
functioning.
China: In 2022, China's GDP growth was modest at 3.0% due to the impact of the
coronavirus pandemic and containment measures taken as part of zero-COVID
policy. Ongoing crisis in the residential real estate market weight on the
economy, hence increasing unemployment. To support the economy, the Chinese
government announced measures such as infrastructure investment, tax relief
for companies, and support for the real estate market. Inflation in China
stood at 2.0%, with higher food prices being the primary driver. Core
inflation remained essentially unchanged at 0.9%. The People's Bank of China
lowered policy interest rates slightly in January and August, including a 0.2
percentage point reduction in the reverse repo rate to 2.0%, lowered reserve
requirement ratio for banks and used targeted monetary policy instruments to
support the economy.
Commodities: Commodity prices were affected by the war in Ukraine and the
sanctions imposed on Russia. At the beginning of the year, a barrel of Brent
crude cost just under USD 80, rose to USD 130 per barrel in March; and at the
end of the second quarter 2022, the price of Brent crude hovered around USD
110 per barrel, thus remaining considerably higher than at the beginning of
the year. As the global supply of oil increased thereafter and demand weakened
in the wake of the economic slowdown, the oil price fell again and stood at
slightly over USD 80 at the end of 2022. In Europe, natural gas and
electricity prices rose strongly, in particular due to a reduction in the
supply of gas from Russia. Energy-saving measures and well-stocked gas storage
facilities contributed to the situation easing again somewhat towards the end
of the year. Industrial metal prices also fluctuated strongly over the course
of 2022, closing slightly lower than at the beginning of the year.
Equities and Bonds: In 2022, global financial markets experienced volatility
and decline due to several factors, including the ongoing COVID-19 pandemic,
supply chain issues, inflation, political instability, and energy price
concerns following Russia's invasion of Ukraine. A midterm US election shifted
more power to Republicans but left Democrats in a stronger position than some
had expected. Despite some rallies, the S&P 500 Index fell by 18.1%, its
worst annual return since 2008, and global stock markets ended with their
largest declines since the financial crisis. Global equities, as measured by
the MSCI All Country World Index, fell 18.4%. Developed international stocks,
as represented by the MSCI World ex USA Index, lost 14.3%, while emerging
markets declined even further, with the MSCI Emerging Markets Index down
20.1%. Small capitalization stocks performed slightly better than large cap
stocks. Cryptocurrencies and technology stocks were hit hard, with bitcoin
falling to about 75% lower than its high in November 2021 and the large
mega-cap tech stocks losing trillions in market value. Benchmark US Treasuries
also posted their worst annual returns in decades, with 10-year Treasury notes
losing 16.3%, reflecting the rare occurrence of tandem declines for equities
and fixed income. The yield curve was inverted at year's end, with the 2-year
yield just above 4.4%, being higher than the 10-year yield just below 3.9%,
reflecting the higher short-term rates. The Morningstar U.S. Corporate Bond
Index had its worst decline in the 23-year history of the benchmark with a
15.7% loss.
Foreign exchange: The broad dollar index-a measure of the trade-weighted value
of the dollar against foreign currencies-continued to rise over the summer and
through the beginning of the fourth quarter. Widening yield differentials
between the U.S. and the rest of the world and concerns around foreign growth
pushed the dollar higher through October of last year, prompting several
central banks, especially in Asia, to intervene in foreign exchange markets to
support their currencies. Since peaking in October, the dollar has largely
retraced those gains, reflecting softer inflation data in the U.S., tighter
monetary policy abroad, and better prospects for foreign economic growth.
Still, the broad dollar index remains stronger than it was in early 2021.
After reaching multidecade lows against the dollar in October, the Japanese
yen rebounded following the adjustment of the Bank of Japan's yield curve
control policy.
Loan Market: The Credit Suisse Leverage Loan Index (CSLLI) generated a
negative total return of -1.06% in 2022, which is only the third negative year
for the CSLLI in its 31-year history. However, the loan asset class has shown
greater resilience and outperformance compared to other risk assets such as
equities, high-yield, and investment grade. The loan market experienced
significant price volatility due to inflation, recessionary fears, and rate
hikes, with lower-rated loans underperforming their higher quality peers.
Retail loan funds experienced regular net outflows throughout the year, as
mutual funds and ETF investors rotated out of risk assets. During the year,
net inflows into loan mutual funds and ETFs amounts to net outflows of USD 13
billion, compared to net inflows of USD 47 billion in 2021. Institutional loan
issuance totalled USD 225 billion in 2022, down from a record USD 614 billion
in 2021, with the total market size swelling to USD 1.41 trillion. Loan
refinancing activity meaningfully increased in the fourth quarter. The
twelve-month trailing default rate fell to 0.72% at year-end, and the loan
prepayment rate remained in the mid-teens throughout 2022, allowing CLOs to
reinvest those proceeds into attractive loans at higher spreads and lower
prices, creating significant value within a CLO.
CLO Market: The CLO market was not immune to the broader investment
environment. CLO debt tranche spreads widened significantly during the year
impeding what would have been a record year of issuance after a record
breaking 2021. Still, the CLO market saw USD 129bn of new issuance - the
second highest of record. This despite poor arbitrage (difference between
spread of loan assets and the spread of CLO debt tranches). Most of the
issuance was due to investors stuck in warehouses open prior to the Russian
attack on Ukraine and the remaining from investors attempting to capture loan
price discounts during period of volatility. The refinancing and reset market
remained on pause as debt spreads were wider than on existing tranches.
CLO equity distributions stayed consistent in 2022 but were lower on account
of loss of Libor floor benefit and the abnormally large difference between
1-month and 3-month Libor due to large anticipated rate increases by the US
Federal Reserve.
As we look ahead in 2022, we expect higher stress from the loan universe
continuing to pressure CLO equity and lower mezzanine positions. At the same
time, we expect to see significant opportunities in the secondary market.
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 117.4m as of 31
December 2022, 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
2022.
2022 2021
Name US $m US $m
Investment in the loan market through CLOs 66.6 101.7
Open Warehouse facilities - 7.6
Public equities 2.3 10.0
Short term government bonds 24.6
Long term government bonds 8.3 -
Corporate bonds 4.6
Invested total 106.4 119.3
Cash 11.0 45.1
Total 117.4 164.4
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 2022, US leveraged loans were the best performer in the fixed income asset
class. The Credit Suisse Leverage Loan Index ("CSLLI") generated a total
return of -1.06% in 2022, its third negative year in its 30+ years of
existence. The floating-rate characteristics of leveraged loans protected
investors from rising interest rates. Although leveraged loans typically have
low volatility, 2022 was an outlier experiencing significant swings during the
course of the year.
Institutional loan issuance was USD 225 billion (2021: USD 614 billion) as
capital markets remained muted in the face of significant rate and credit
spread volatility. While new issue activity was relatively low, the fourth
quarter saw higher quality issuers refinancing and extending maturities of
their outstanding loans. As a result, most of the maturities are in 2025 and
beyond.
Institutional loan issuance totalled USD 225 billion in 2022, compared to a
record USD 614 billion in 2021. Total institutional loans outstanding stood at
$1.41 trillion as of December 31, 2022, up slightly from USD 1.35 trillion at
the beginning of the year. While primary issuance remained limited in the
fourth quarter, loan refinancing activity meaningfully increased as U.S.
corporates rushed to address upcoming maturities before year-end, including
large par repayments from higher quality issuers
Loan defaults stayed relatively low in 2022, but the twelve-month trailing
default rate increased to 0.72% as at year end 2022 from the 0.29% at the
beginning of the year. The historical long-term default rate is around 2.7%.
As interest rates rise higher, we anticipate the default rate to increase
towards historical averages over the near to mid-term.
Despite declining loan issuance and widening CLO liabilities, the CLO market
ended 2022 with its second highest annual new issuance on record, at a total
volume of USD 129 billion. Most of this activity was driven by warehouses open
coming into the year as investors contended with very low returns to term out
their financing, as well as opportunistic issuance to take advantage of
significant loan price drops during certain periods.
With a significant share of high-quality issuers trading at discounted prices,
CLO collateral managers were well positioned to improve underlying loan
portfolios through relative value credit selection in the secondary market, as
well as take advantage of a high-quality primary market, at discounted prices.
Despite the loan price volatility and widening credit spreads, CLO equity
distributions were not disrupted. However, the distributions were lower than
initially anticipated at the beginning of the year on account of loss of Libor
floor benefit and the rising basis between 1-month and 3-month Libor. Many
loan borrowers took advantage of a lower 1-month rate, while CLO liabilities
pay at the 3-month rate. As this mismatch resolves with slowing pace of rate
increases, we believe equity distributions will increase for many CLOs over
the coming quarters.
Our CLO portfolio was also negatively affected during 2022. Despite
significant and consistent cashflow, valuations of CLO equity positions
declined meaningfully due to wider spreads, higher anticipated defaults and
low liquidity. During the year, the CLO and warehouse portfolio generated USD
23.2m in cash distributions but valuations declined by USD 42.7m resulting in
a negative return of USD 19.8m. Management anticipated a negative reaction
from the expected inflation fight and promptly converted its two open
warehouses into new issue CLOs in the first four months of the year. This
transaction recorded the lowest cost of debt for 2022 vintage CLOs. Over the
course of the year, management did not reinvest the dividends received from
CLOs and increased its cash and marketable securities position significantly.
While credit spreads have widened and loan prices have declined, defaults in
the loan market stayed low in 2022. However, we expect higher default and
stressed situations in 2023. At the same time, lower loan prices allowed CLO
managers to build excess par (i.e. buying CLO eligible loans at prices below
par but receive par treatment for the purposes of CLO over-collateralization
tests) which should offset some losses from defaults in the future. We are
positioned conservatively with mostly recent vintage CLOs with long
reinvestment periods that are expected to perform better. Further, our high
cash position should enable us to take advantage of opportunities in the
secondary markets in the near to mid-term.
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.
From July 2023, Libor is expected to cease to exist. In the US, SOFR (Secured
Overnight Funding Rate) will be the base rate for most floating rate
contracts. Most US CLOs are expected to transition their liabilities to term
SOFR plus a credit spread adjustment as per the Libor transition language in
their respective documents. Most US Leveraged Loans are also expected to
transition to SOFR but the timing of such transitions may not match the
transition of CLO liabilities. This may introduce a Libor-SOFR basis for a
short period of time.
As we look ahead, we expect the interest rates staying high to combat high
inflation. Although leverage loan borrower fundamentals are currently
satisfactory, 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 counterbalance 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 2022
levels towards their long-term averages.
The Company's CLO portfolio is divided into the following geographical areas:
2022 Amount Percentage 2021 Amount Percentage
US $000 US $000
US CLOs 66,576 100% 101,667 100%
------- ------ ------ ------
Fund Investments
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. Also, the Company has some direct venture capital investments.
The following summarizes the book value of the private equity funds at 31
December 2022.
Name US $m
Cole Capital Fund 2.0
Fetcherr Ltd 1.8
Phytech (Israel) 2.6
Say2eat Inc 0.8
Other investments 0.4
Total 7.6
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 10 March 2021 and in 2022 we redeemed and received from
the fund 3.5m. The residual value of the Company's investment as of year-end
2022 in the fund was USD 2m. Post year-end, the Company has redeemed the
remaining USD 2m.
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 (3(rd) 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 at 31 December 2022:
Name US $m
Financial Portfolio 106.4
Fund investments 7.6
Total 114.0
Financial assets at fair value through profit or loss (note 4) 106.4
Financial assets at fair value through other comprehensive income (note 5) 7.6
Total 114.0
Investments in Subsidiaries
The subsidiaries include investments in public equity investments and
investments in the fields of real estate. The resulting fair value changes
are mainly attributed to changes in quoted share prices of the underlying
investments.
Events after the reporting date
Details of material events after the reporting date are disclosed in note 28
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 2022.
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 67) 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 56), 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 55), 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 60) independent, Non-Executive Director
Augoustinos joined the Board in February 2019. He is a trained and qualified
UK Chartered Accountant. He is a Partner of FRP Advisory Cyprus and 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; and
· 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 02 May 2023, 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
Livermore Management Limited 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; and
• monitoring and approving the scope and costs of audit.
Board and committee meetings - 2022 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; and
· 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 2022 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
2022 2021
US $000 US $000
Richard Barry Rosenberg 10 June 2005 55 - 35 90 73
Noam Lanir 10 June 2005 400 45 - 445 1,445
Ron Baron 1 September 2007 350 - - 350 2,350
Augoustinos Papathomas 1 February 2019 31 - 15 46 35
Directors' Interests
Interests of Directors in ordinary shares
At 31 December 2022 At 31 December 2021
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% 123,048,011 70.39% 74.41%
Ron Baron 25,456,903 14.56% 15.40% 25,456,903 14.56% 15.40%
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 the whole issued share capital of Groverton Management Limited.
Further information is provided in note 22 to the financial statements. --
Ron Baron has his interest in ordinary shares through ownership of the whole
issued share capital of Livermore Management Limited.
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 COVID-19 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 43.9m of cash, deposits, and
investments in US treasury bills as of 31 December 2022 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 26 of the
financial statements.
Share Capital
There was no change in the authorised share capital during the year to 31
December 2022. 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 2022 are disclosed in note 22 to the financial statements.
By order of the Board of Directors
Chief Executive Officer
19 May 2023
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 26 to 53 and comprise the Consolidated statement of
financial position as at 31 December 2022, 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 2022, 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' Code
of Ethics for Professional Accountants (IESBA Code) together with the ethical
requirements that are relevant to our audit of the consolidated financial
statements in Cyprus, and we have fulfilled our other ethical responsibilities
in accordance with these requirements and the IESBA Code. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Emphasis of Matter - Uncertain Outcome of a Legal Claim
We draw attention to note 23 of the consolidated financial statements which
describes the uncertain 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.
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 $14m (2021: $27m) classified within the fair Fund Investments:
value hierarchy at level 3, as disclosed in note 7, where $7,5m relates to
fund investments and $6,5m to investments in subsidiaries. The fair value of
level 3 financial assets is generally determined on a basis of either third
party valuations, or when not available, adjusted Net Asset Value (NAV) • obtaining an understanding of the valuation methodologies applied by the
calculations using inputs from third parties. Board of directors and assessing their appropriateness for each investment.
Due to the use of significant judgments by the Board of Directors, the • obtaining third party confirmations indicating either the NAV or fair
existence of unobservable inputs and the significant total value of financial value of the financial assets and comparing to clients' records and fund's
assets within the level 3 hierarchy, we consider the valuation of these financial statements.
investments as a key audit matter.
• evaluating the independent professional valuer's competence, capabilities
and objectivity.
• in cases where the valuations were performed by the Board of Directors,
evaluating the reasonableness of the methodology applied and verifying the
inputs used by comparing 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.
Investments in Subsidiaries:
• obtaining management accounts of the subsidiaries to identify their NAV;
and evaluating any significant change in the fair value of investment.
• assessing the management accounts of the subsidiaries to determine whether
the disclosed NAV is fairly stated by obtaining portfolio statements and land
valuations from independent valuers.
• evaluating and assessing the valuers' competence, capabilities and
objectivity.
• evaluating the methodology used and assessing its adequacy; 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, 19 May 2023
Livermore Investments Group Limited
Consolidated Statement of Financial Position at 31 December 2022
Note 2022 2021
Assets US $000 US $000
Non-current assets
Property, plant and equipment 43 52
Right-of-use assets 87 176
Financial assets at fair value through profit or loss 4 66,576 101,667
Financial assets at fair value through other comprehensive income 5 7,596 12,435
Investments in subsidiaries 8 6,546 7,196
--------- ---------
80,848 121,526
Current assets --------- ---------
Trade and other receivables 9 72 366
Financial assets at fair value through profit or loss 4 39,800 17,553
Cash and cash equivalents 10 10,971 45,130
--------- ---------
50,843 63,049
--------- ---------
Total assets 131,691 184,575
--------- ---------
Equity
Share capital 11 - -
Share premium and treasury shares 11 163,130 163,130
Other reserves (21,214) (18,026)
Accumulated (losses) / retained earnings (14,191) 32,618
--------- ---------
Total equity 127,725 177,722
--------- ---------
Liabilities
Non-current liabilities
Lease liability - 88
--------- ---------
Current liabilities
Trade and other payables 12 3,733 6,641
Lease liability - current portion 87 88
Current tax payable 146 36
--------- ---------
3,966 6,765
--------- ---------
Total liabilities 3,966 6,853
--------- ---------
Total equity and liabilities 131,691 184,575
--------- ---------
Net asset value per share
Basic and diluted net asset value per share (US $) 14 0.77 1.07
--------- ---------
These financial statements were approved by the Board of Directors on 19 May
2023.
The notes 1 to 28 form part of these consolidated financial statements.
Livermore Investment Group Limited
Consolidated Statement of Profit or Loss for the year ended 31 December 2022
Note
2022 2021
US $000 US $000
Investment income
Interest and distribution income 16 23,665 27,495
Fair value changes of investments 17 (44,637) 6,250
------ ------
(20,972) 33,745
Operating expenses 18 (3,000) (8,599)
------ ------
Operating (loss) / profit (23,972) 25,146
Finance costs 19 (265) (398)
Finance income 19 42 18
------ ------
(Loss) / profit before taxation (24,195) 24,766
Taxation charge 20 (167) (66)
------ ------
(Loss) / profit for the year (24,362) 24,700
------ ------
(Loss) / earnings per share
Basic and diluted (loss) /earnings per share (US $) 21 (0.15) 0.15
------ ------
The (loss) / profit for the year is wholly attributable to the owners of the
parent.
The notes 1 to 28 form part of these consolidated financial statements.
Livermore Investment Group Limited
Consolidated Statement of Comprehensive Income for the year ended 31 December 2022
Note
2022 2021
US $000 US $000
(Loss) / profit for the year (24,362) 24,700
Other comprehensive income:
Items that will be reclassified subsequently to profit or loss
Foreign exchange (losses) / gains on translation of consolidated subsidiary (29) 59
Items that are not reclassified subsequently to profit or loss
Financial assets designated at fair value through other comprehensive income - (1,606) 3,200
fair value (losses) / gains
5
------ ------
Total comprehensive (loss) /income for the year (25,997) 27,959
------ ------
The total comprehensive (loss) / income for the year is wholly attributable to
the owners of the parent.
The notes 1 to 28 form part of these consolidated financial statements.
Livermore Investment Group Limited
Consolidated Statement of Changes in Equity for the year ended 31 December 2022
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 2021 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
-
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
------- ------- ------ ------ ------ -------
Dividends 13 - - - - (24,000) (24,000)
------- ------- ------ ------ ------ -------
Transactions with owners - - - - (24,000) (24,000)
------- ------- ------ ------ ------ -------
Loss for the year - - - - (24,362) (24,362)
Other comprehensive income:
Financial assets at fair value through OCI - fair value losses - - (1,606) - (1,606)
5 -
Foreign exchange losses on translation of consolidated subsidiary - (29) - - (29)
-
Transfer of realised gains - - - (1,553) 1,553 -
------- ------- ------ ------ ------ -------
Total comprehensive loss for the year - - (29) (3,159) (22,809) (25,997)
------- ------- ------ ------ ------ -------
Balance at 31 December 2022 169,187 (6,057) 55 (21,269) (14,191) 127,725
------- ------- ------ ------ ------ -------
The notes 1 to 28 form part of these consolidated financial statements.
Livermore Investments Group Limited
Consolidated Statement of Cash Flows for the year ended 31 December 2022
Note 2022 2021
US $000 US $000
Cash flows from operating activities
(Loss) / profit before tax (24,195) 24,766
Adjustments for
Depreciation 18 102 109
Interest expense 19 36 35
Interest and distribution income 16 (23,665) (27,495)
Bank interest income 19 (42) (18)
Fair value changes of investments 17 44,637 (6,250)
Exchange differences 19 229 363
---------- ----------
(2,898) (8,490)
Changes in working capital
Decrease in trade and other receivables (62) 7,817
(Decrease) / Increase in trade and other payables (2,928) 1,774
---------- ----------
Cash flows (used in) / from operations (5,888) 1,101
Interest and distributions received 23,707 27,512
Tax paid (32) (50)
---------- ----------
Net cash from operating activities 17,787 28,563
---------- ----------
Cash flows from investing activities
Acquisition of investments (74,283) (119,905)
Proceeds from sale of investments 46,729 100,629
---------- ----------
Net cash used in investing activities (27,554) (19,276)
---------- ----------
Cash flows from financing activities
Lease liability payments (127) (109)
Interest paid 19 (36) (35)
Dividends paid 13 (24,000) (8,000)
Purchases of own shares 11 - (6,057)
---------- ----------
Net cash used in financing activities (24,163) (14,201)
---------- ----------
Net decrease in cash and cash equivalents (33,930) (4,914)
Cash and cash equivalents at the beginning of the year 45,130 50,407
Exchange differences on cash and cash equivalents 19 (229) (363)
---------- ----------
Cash and cash equivalents at the end of the year 10 10,971 45,130
---------- ----------
The notes 1 to 28 form part of these consolidated financial statements.
Notes to 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 registered office of the Company is located at Trident Chambers,
PO Box 146, Road Town, Tortola, British Virgin Islands.
1.3. The Company is tax resident in the Republic of Cyprus.
1.4. The principal activity of the Company is to carry out investment
activities.
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 2022, 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 2022, or have not yet been endorsed by the EU by 31 December 2022:
Endorsed by EU IASB Effective date
· Amendments to IFRS 16: "Lease Liability in a Sale and Leaseback" No 1 January 2024
· Amendments to IAS 1: "Classification of Liabilities as Current or No 1 January 2024
Non-current"
· Amendments to IAS 1: "Non-current Liabilities with Covenants" No 1 January 2024
· IFRS 17: "Insurance Contracts", including amendments of 2020 Yes 1 January 2023
· Amendment to IFRS 17: "Initial Application of IFRS 17 and IFRS 9 - Yes 1 January 2023
Comparative Information"
· 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 Yes 1 January 2023
arising from a Single Transaction"
· Amendment to IFRS 10, and IAS 28: "Sale or Contribution of Assets No postponed indefinitely
between an Investor and its Associate or Joint Venture"
· IFRS 14: "Regulatory Deferral Accounts" No 1 January 2016
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 transactions between the Company and its consolidated subsidiary and all
resulting 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 the consolidated subsidiary, which has a
functional currency of Swiss Francs, 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.
Own equity instruments purchased by the Company, or its consolidated
subsidiary are recorded as treasury shares at the consideration paid,
including transaction costs, and they are deducted from total equity until
they are sold or cancelled. Where such shares are subsequently sold, any
consideration received is included in total equity.
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 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 disclosures at the reporting date 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.
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
Management, in preparing these financial statements, has not made any
significant estimates with a risk of material change in value in the next
financial period.
4. Financial assets at fair value through profit or loss
2022 2021
US $000 US $000
Non-current assets
Fixed income investments (CLOs) 66,576 101,667
------ ------
Current assets
Fixed income investments 37,519 7,584
Public equity investments 2,281 9,969
------ ------
39,800 17,553
------ ------
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:
2022 2021
US $000 US $000
At 1 January 119,220 99,583
Purchases 73,963 114,399
Sales (19,662) (28,408)
Settlements (23,514) (72,221)
Fair value (losses) / gains (43,631) 5,867
------ ------
At 31 December 106,376 119,220
------ ------
5. Financial assets at fair value through other comprehensive
income
2022 2021
US $000 US $000
Non-current assets
Fund investments 7,596 12,435
------ ------
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:
2022 2021
US $000 US $000
At 1 January 12,435 3,729
Purchases 320 5,506
Settlements (3,553) -
Fair value (losses) / gains (1,606) 3,200
------ ------
At 31 December 7,596 12,435
------ ------
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 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:
2022 2022 2022 2022 2021 2021 2021 2021
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 37,519 66,576 - 104,095 - 101,667 7,584 109,251
Fund investments - - 7,596 7,596 - - 12,435 12,435
Public equity investments 2,281 - - 2,281 9,969 - - 9,969
Investments in subsidiaries - - 6,546 6,546 - - 7,196 7,196
------ ------ ------ ------ ------ ------ ------ ------
39,800 66,576 14,142 120,518 9,969 101,667 27,215 138,851
------ ------ ------ ------ ------ ------ ------ ------
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
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 / (losses) recognised in:
- Profit or loss - (36) 383 347
- Other comprehensive income 3,200 - - 3,200
------ ------ ------ ------
At 1 January 2022 12,435 7,584 7,196 27,215
Purchases 320 15,930 356 16,606
Settlement (3,553) (23,514) - (27,067)
Losses recognised in:
- Profit or loss - - (1,006) (1,006)
- Other comprehensive income (1,606) - - (1,606)
------ ------ ------ ------
At 31 December 2022 7,596 - 6,546 14,142
------ ------ ------ ------
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
2021 US $000 US $000 US $000 US $000
Profit or loss
- Financial assets held at year-end - (36) 383 347
Other comprehensive income
- Financial assets held at year-end 3,200 - - 3,200
------ ------ ------ ------
Total gains / (losses) for 2021 3,200 (36) 383 3,547
------ ------ ------ ------
At fair value At fair value Investments Total
through OCI - Fund investments Through profit or loss - in subsidiaries
Fixed Income
investments
2022 US $000 US $000 US $000 US $000
Profit or loss
- Financial assets held at year-end - - (1,006) (1,006)
Other comprehensive income
- Financial assets held at year-end (1,606) - - (1,606)
------ ------ ------ ------
Total losses for 2022 (1,606) - (1,006) (2,612)
------ ------ ------ ------
The Company has not developed any quantitative unobservable inputs for
measuring the fair value of its level 3 financial assets at 31 December 2022
and 2021. 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
2022 2021
Unconsolidated subsidiaries US $000 US $000
At 1 January 7,196 6,813
Additions 356 -
Fair value (losses) / gains (1,006) 383
------ ------
At 31 December 6,546 7,196
------ ------
Additions relate to the fair value of the receivable amount from the Company's
unconsolidated subsidiary Sandhirst Ltd, that was waived by the Company (note
22).
Details of the investments in which the Company has a controlling interest at
31 December 2022 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
2022 2021
US $009 US $000
Financial items
Amounts due by related parties (note 22) - 289
Non-financial items
Prepayments 66 65
VAT receivable 6 12
------ ------
72 366
------ ------
For the Company's receivables of a financial nature, no allowance for
impairment has been recognised for their lifetime expected credit losses, as
their default rates have been determined to be close to 0%.
No receivable amounts have been written-off during either 2022 or 2021.
10. Cash and cash equivalents
Cash and cash equivalents included in the consolidated statement of cash flows
comprise the following at the reporting date:
2022 2021
US $000 US $000
Demand deposits 10,971 45,130
------ ------
Cash at bank 10,971 45,130
------ ------
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
At 31 December 2022 and 2021 174,813,998 169,187
---------- ----------
Treasury shares Number of shares
US $000
At 1 January 2021 - -
Additions (note 22) 10,888,577 6,973
Re-issued (1,430,000) (916)
---------- ---------
At 31 December 2021 and 2022 9,458,577 6,057
---------- ----------
During 2021, 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:
2022 2021
US $000 US $000
Share premium 169,187 169,187
Treasury shares (6,057) (6,057)
-------- --------
163,130 163,130
-------- --------
12. Trade and other payables
2022 2021
US $000 US $000
Financial items
Trade payables 63 36
Amounts due to related parties (note 22) 3,283 6,193
Accrued expenses 387 412
------ ------
3,733 6,641
------ ------
13. Dividend
On 5 January 2022, the Company announced an interim dividend of USD 24m (USD
0.145 per share) to members on the register as at 14 January 2022. The
dividend was paid on 7 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.
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.
2022 2021
Net assets attributable to ordinary shareholders (USD 000) 127,725 177,722
------------- -------------
Closing number of ordinary shares in issue 165,355,421 165,355,421
------------- -------------
Basic net asset value per share (USD) 0.77 1.07
------------- -------------
Number of Shares
Ordinary shares 174,813,998 174,813,998
Treasury shares (9,458,577) (9,458,577)
------------- -------------
Closing number of ordinary shares in issue 165,355,421 165,355,421
------------- -------------
The diluted net asset value per share equals the basic net asset value per
share since no potentially dilutive shares exist at 31 December 2022 and 2021.
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:
2022 2021
Investment (losses) / income US $000 US $000
Other European countries (2,956) 94
United States (16,320) 33,109
Asia (1,696) 542
------- -------
(20,972) 33,745
------- -------
Investments
Other European countries 6,850 3,435
United States 105,577 127,071
Asia 8,091 8,345
------- -------
120,518 138,851
------- -------
Investment (losses) / 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
2022 2021
US $000 US $000
Interest from investments 1,207 669
Distribution income 22,458 26,826
------ ------
23,665 27,495
------ ------
Interest and distribution income is analysed between different categories of
financial assets, as follows:
2022 2021
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 1,207 22,282 23,489 669 26,632 27,301
Public equity investments - 176 176 - 194 194
------ ------ ------ ------ ------ ------
1,207 22,458 23,665 669 26,826 27,495
------ ------ ------ ------ ------ ------
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
2022 2021
US $000 US $000
Fair value (losses) / gains on financial assets through profit or loss (43,782) 5,867
Fair value (losses) / gains on investments in subsidiaries (1,006) 383
Fair value gains on derivatives 151 -
------ ------
(44,637) 6,250
------ ------
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 2022 Disposed in 2021
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 (5) 524 519 1,099 2,237 3,336
Public equities 1,430 62 1,492 1,454 111 1,565
Derivatives 151 - 151 - - -
------ ------ ------ ------ ------ ------
1,576 586 2,162 2,553 2,384 4,901
------ ------ ------ ------ ------ ------
Financial assets at fair value through OCI
Private equities 1,553 - 1,553 - - -
------ ------ ------ ------ ------ ------
3,129 586 3,715 2,553 2,384 4,901
------ ------ ------ ------ ------ ------
* difference between disposal proceeds and original acquisition cost
18. Operating expenses
2022 2021
US $000 US $000
Directors' fees and expenses 932 3,903
Other salaries and expenses 237 201
Professional fees 822 3,528
Legal expenses 13 53
Bank custody fees 139 102
Office costs 237 277
Depreciation 102 109
Other operating expenses 441 349
Audit fees 75 75
Tax fees 2 2
------ ------
3,000 8,599
------ ------
Professional fees for 2021 include a share-based payment to a key management
member of USD 0.129m (notes 11 and 22).
Throughout 2022 the Company employed 4 members of staff (2021: 4). Two of
those members are the Company's executive Directors.
Other salaries and expenses include USD 18,802 of social insurance and similar
contributions (2021: USD 18,977), as well as USD 4,508 of defined
contributions plan costs (2021: USD 3,461).
19. Finance costs and income
2022 2021
US $000 US $000
Finance costs
Bank interest expense 36 35
Foreign exchange loss 229 363
------ ------
265 398
------ ------
Finance income
Bank interest income 42 18
------ ------
20. Taxation
2022 2021
US $000 US $000
Current tax charge 167 66
------ ------
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 2022, as
explained above, and the Company's consolidated subsidiary in Switzerland
(note 8).
21. (Loss) / earnings per share
The basic (loss) / earnings per share has been calculated by dividing the
(loss) / 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.
2022 2021
(Loss) / profit for the year attributable to ordinary shareholders of the (24,362) 24,700
parent (USD 000)
------------- -------------
Weighted average number of ordinary shares outstanding 165,355,421 165,372,512
------------- -------------
Basic (loss) / earnings per share (USD) (0.15) 0.15
------------- -------------
The diluted (loss) / earnings per share equals the basic (loss) / earnings per
share since no potentially dilutive shares were in existence during 2022 and
2021.
22. Related party transactions
The Company is controlled by Groverton Management Ltd, an entity owned by Noam
Lanir, which at 31 December 2022 held 74.41% (2021: 74.41%) of the Company's
voting rights.
2022 2021
US $000 US $000
Amounts receivable from unconsolidated subsidiary
Sandhirst Ltd - 289 (1)
------ ------
Amounts payable to unconsolidated subsidiary
Livermore Israel Investments Ltd (3,046) (3,046) (2)
------ ------
Amounts payable to other related party
Loan payable (149) (149) (3)
------ ------
Amounts payable to key management
Directors' current accounts (88) (1,011) (2)
Other key management personnel - (1,987) (4)
------ ------
(88) (2,998)
------ ------
Key management compensation
Short term benefits
Executive Directors' fees 795 795 (5)
Executive Directors' reward payments - 3,000
Non-executive Directors' fees 87 108
Non-executive Directors' reward payments 50 -
Other key management fees 385 2,829 (6)
------ ------
1,317 6,732
------ ------
(1) The amounts receivable from unconsolidated subsidiary are interest
free, unsecured, and have no stated repayment date.
During 2022, the Company waived a receivable amount of USD 0.356m from its
subsidiary Sandhirst Ltd, as a means of capital contribution to the subsidiary
(note 8).
(2) The amounts payable to unconsolidated subsidiary and Directors current
accounts with credit balances are interest free, unsecured, and have no stated
repayment date.
(3) A loan with a balance at 31 December 2022 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).
(4) 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 2021, 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.
(5) These payments were made directly to companies which are related to
the Directors.
(6) During 2021, 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 2022 or 2021.
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 out 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 outcome of the case and
the existence of any obligation for Livermore, 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 at 31
December 2022.
25. Impact of war in Ukraine
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 are 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.
26. 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 27.
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:
2022 2022 2022 2021 2021 2021
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) 2,624 (122) 2,502 1,677 (110) 1,567
Euro 127 (89) 38 417 (21) 396
Swiss Francs (CHF) 1,509 (70) 1,439 22 (2,099) (2,077)
Israel Shekels (ILS) 5,451 (3,046) 2,405 6,203 (3,046) 3,157
------ ------ ------ ------ ------ ------
Total 9,711 (3,327) 6,384 8,319 (5,276) 3,043
------ ------ ------ ------ ------ ------
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 2022 would have the following impact. A 10%
decrease of the following currencies against USD would have an approximately
equal but opposite impact.
2022 2022 2022 2021 2021 2021
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) 250 - 250 157 - 157
Euro 4 - 4 40 - 40
Swiss Francs (CHF) 144 - 144 (208) - (208)
Israel Shekels (ILS) 240 - 240 316 - 316
------ ------ ------ ------ ------ ------
Total 638 - 638 305 - 305
------ ------ ------ ------ ------ ------
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.
At 31 December 2022 and 31 December 2021, 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:
2022 2021
US $000
US $000
Financial assets - subject to:
- fair value changes 4,616 -
- interest changes 10,971 45,130
------ ------
Total 15,587 45,130
------ ------
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.
2022 2021
US $000
US $000
Profit or loss Profit or loss
Financial assets
- fair value changes (657) -
- interest changes 110 451
------ ------
Total 547 451
------ ------
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 6.07% change in the
net asset value at 31 December 2022 (2021: 6.28%), 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.
2022 2021
US $000
US $000
Profit or loss Profit or loss
Financial assets at fair value through profit or loss 7,758 11,163
------ ------
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 2022 or 2021.
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 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 at 31 December 2022 or 2021.
No collaterals are held by the Company itself in relation to the Company's
financial assets subject to credit risk.
The Company's maximum credit risk exposure at 31 December 2022 and 2021 is as
follows:
2022 US $000 2021 US $000
Financial assets:
At amortised cost:
Trade and other receivables - 289
Cash at bank 10,971 45,130
------ ------
10,971 45,419
At fair value through profit or loss 104,099 109,251
------ ------
115,070 154,670
------- -------
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.
At 31 December 2022 and 2021 the credit rating distribution of the Company's
asset portfolio subject to credit risk was as follows:
Rating 2022 2021
US $000 Percentage US $000 Percentage
AA+ 28,800 25.0%
AA 9,812 8.5% 26,063 16.9%
A 446 0.5% 12,872 8.3%
B 5,347 4.6% 922 0.6%
B+ 735 0.6% - -
BB 6,108 5.3% - -
BB+ 842 0.7%
BBB 908 0.8% 6,195 4.0%
B- - - 4,576 3.0%
BB- 805 0.7% 5,280 3.4%
BBB- 618 0.6%
Not Rated 60,649 52.7% 98,762 63.8%
------ ------ ------ ------
115,070 100% 154,670 100%
------ ------ ------ ------
Included within "not rated" amounts are investments in loan market through
CLOs (equity tranches) of USD 60.649m and no open warehouses (2021: CLOs of
USD 91.179m and open warehouses of USD 7.583m).
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 2022
US $000 US $000
Trade and other payables 3,733 3,733
------ ------
Carrying amount Less than 1 year
31 December 2021
US $000 US $000
Trade and other payables 6,641 6,641
------ ------
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 2022, the Company had liquid investments totalling USD 117.4m,
comprising of USD 11m in cash and cash equivalents, USD 66.6m in investments
in loan market through CLOs, USD 37.5m in other fixed income investments, USD
2.3m 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 2022 and
2021, 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:
2022 2021
US $000 US $000
Borrowings 149 149
Cash at bank (10,971) (45,130)
------ ------
Net Debt (10,822) (44,981)
------ ------
Total equity 127,725 177,722
------ ------
Net debt to equity ratio (0.08) (0.25)
------- -------
27. Financial assets and liabilities by class
Note 2022 US $000 2021 US $000
Financial assets:
Financial assets at amortised cost 9, 10 10,971 45,419
Financial assets at fair value through profit or loss 4 106,376 119,220
Financial assets designated at fair value through other comprehensive income
5 7,596 12,435
------- -------
124,943 177,074
------- -------
Financial liabilities:
Financial liabilities at amortised cost 12 3,733 6,641
------- -------
The carrying amount of the financial assets and liabilities at amortised cost approximates to their fair value.
28. Events after the reporting date
The following non-adjusting events occurred after 31 December 2022:
· Credit Suisse, the second-largest bank in Switzerland, collapsed in
March 2023 and Switzerland's regulatory authorities approved its takeover by
the largest Swiss bank UBS. At that time Livermore owned USD 0.8m nominal of
Credit Suisse Additional Tier 1 bonds purchased at a cost of USD 0.675m. The
fair value of the bonds at 31 December 2022 was USD 0.578, included within
Fixed income investments under Financial assets at fair value through profit
or loss (note 4). As a result of the takeover, the bonds were permanently
written down and the Company suffered a loss in 2023 of USD 0.578m.
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 0300 who will advise on the process for
arranging a replacement.
Duplicate Shareholder Accounts
If, as a shareholder, you receive more than one copy of a communication from
the Company you may have your shares registered in at least two accounts. This
happens when the registration details of separate transactions differ
slightly. If you wish to consolidate such multiple accounts, please call
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
Solicitors
Travers Smith
10 Snow Hill
London
EC1A 2AL
England
Broker
Zeus Capital Limited
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 43 344 3200
Gaurav Suri
Strand Hanson Limited (Nominated Adviser) +44 (0)20 7409 3494
Richard Johnson / Ritchie Balmer
Zeus Capital Limited (Broker) +44 (0)20 3829 5000
Louisa Waddell
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. END FR FLFSVESIALIVRecent news on Livermore Investments
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