TIDMLIV
RNS Number : 7982Z
Livermore Investments Group Limited
26 May 2021
Highlights
-- Net profit for the year was USD 0.845m (2019: net loss of USD 1.1m).
-- Net Asset Value per share remains stable at USD 0.94 (2019: USD 0.99).
-- On 08 March 2021, the Company announced an interim dividend
of USD 8m (USD 0.0488 per share) to members on the register on 19
March 2021. The dividend was paid on 16 April 2021.
-- CLO portfolio and warehouse generated USD 21.9m in
distributions and USD 1.8m in net gains in 2020.
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 2020. 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.
The COVID-19 outbreak across the world has triggered tremendous
human and economic hardship. Since February 2020, protective
measures taken to contain spread of COVID-19 (lockdown) supressed
demand in many sectors of the global economy and resulted in supply
chain constraints globally. This led to immense job losses and
exceptional turbulence in financial markets. In light of the
extra-ordinary situation, the Company focussed on protecting its
capital, maintaining continuous operations, and ensuring well-being
of its employees and consultants.
Management cut warehousing risk before the COVID-19 related
market sell-off took hold and maintained a high cash positions of
over USD 60m through the end of the first half of the year. This
conservative positioning helped the Company navigate the tremendous
volatility and uncertainty that ensued and allowed the Company to
participate in the recovery phase by deploying capital
opportunistically.
We are pleased to report that the Company was successful in
achieving all of the above objectives. Our net profit for the year
was USD 0.845m (2019 net loss: USD 1.1m) and the year-end NAV was
USD 0.94 per share (2019 NAV: USD 0.99 per share) after a dividend
payment of USD 6m (USD 0.0343 per share).
The Company recorded net gains of USD 1.8m from its US CLO and
warehousing portfolio. Interest and distribution income from the
financial portfolio totalled USD 22.0m (2019: USD 29.0m). The
Company ended the year with over USD 50.4m in cash at hand. During
the second half of the year, the Company added exposure to US
equity index ETFs as well as profitably traded some CLO BB
tranches.
Financial Review
The NAV of the Company on 31 December 2020 was USD 163.9m (2019:
USD 173.1m). Net profit, during the year was USD 0.845m, which
represents earnings per share of USD 0.005.
Operating expenses were USD 2.8m (2019: USD 5.1m).
The overall change in the NAV is primarily attributed to the
following:
31 December 2020 31 December 2019
US $m US $m
----------------- -----------------
Shareholders' funds at beginning of year 173.1 174.3
----------------- -----------------
___________ ___________
----------------- -----------------
Income from investments 22.0 29.0
----------------- -----------------
Unrealised losses on investments (22.6) (25.5)
----------------- -----------------
Operating expenses (2.8) (5.1)
----------------- -----------------
Net finance income 0.3 0.5
----------------- -----------------
Tax charge (0.1) (0.1)
----------------- -----------------
___________ ___________
----------------- -----------------
Decrease in net assets from operations (3.2) (1.2)
----------------- -----------------
Dividends paid (6.0) -
----------------- -----------------
___________ ___________
----------------- -----------------
Shareholders' funds at end of year 163.9 173.1
----------------- -----------------
------ ------
----------------- -----------------
Net Asset Value per share US $0.94 US $0.99
----------------- -----------------
Dividend & Buyback
At 21 February 2020, the Company paid an interim dividend of USD
6m (USD 0.0343 per share) to members on the register on 24 January
2020, as announced by the Board on 30 December 2019.
The Board of Directors will decide future dividends based on
profitability, liquidity requirements, portfolio performance,
market conditions, and the share price of the Company relative to
its NAV.
During 2021, the Company bought back 10,888,577 shares to be
held in treasury for a total cost of USD 6.9m. The Company had no
shares in treasury as at 31 December 2020.
Richard B Rosenberg Noam Lanir
Chairman Chief Executive Officer
25 May 2021
Review of Activities
Introduction and Overview
2020 will forever be etched in our minds. The COVID-19 pandemic,
its immense economic and human devastation, and humanity's fight to
survive - through medical and scientific breakthroughs,
unparalleled monetary and fiscal stimulus, and individual stories
of courage and sacrifice - will all go down in the annals of world
history.
Although the year started well for most asset classes and ended
even better, only their movements through the year tell the whole
story. Once the virus spread out from China, equity and credit
markets collapsed globally and developed nation bond yields
declined sharply with safe-haven currencies such as the Swiss Franc
and US Dollar appreciating, as country after country enforced
lockdowns to protect its citizens and prevent their healthcare
systems from complete collapse. Central banks and governments
across the world responded swiftly and in good measure and seem to
have saved the world from a deep economic depression. Global equity
markets recovered sharply on these steps taken and hope for
effective vaccines against COVID-19 propelled risk markets to
further highs.
Floating rate loans in the US declined in line with the broader
credit assets but were slower to recover on expectations of very
low rates for very long. Rating agencies also acted quickly and
downgraded a significant portion of the leveraged loan and
high-yield market. The downgrades and a handful of defaults eroded
over-collateralization cushions in most CLOs and resulted in steep
decline in market valuations of CLO tranches. However, there were
almost no forced sales. In April, over 25% of CLO equity in the
market (especially short reinvestment period deals) tripped key
tests and as expected, diverted some cash away from equity
investors to bolster the CLO structure. By October, most CLO deals
had recovered, and distributions were made to equity tranches.
Although the Company's CLO portfolio suffered mark-to-market
declines, our CLO portfolio received distributions from almost all
of our positions as we were positioned with stronger deals with
longer reinvestment periods. Further, management had taken a very
conservative approach focussed on capital preservation and retained
a very high cash position of over USD 50m, allowing us to weather
this storm and opportunistically add value through trading
secondary CLO positions. For the 2020 year, our CLO and warehouse
portfolio generated cash distributions of USD 21.9m. Management had
one warehouse open pre-COVID-19 and swiftly converted it to a CLO
prior to the market declines. Although the CLO market started to
heal towards the end of the year, the mark-to-market declines did
not fully recover and adjusted for the valuations, the net gain on
the CLO and warehousing portfolio was USD 1.8m (2019: USD 3.35m).
Our conservative approach resulted in gains in a year that saw most
CLO equity investors experience losses.
For 2020, the Company reported NAV/share of USD 0.94 and net
profit of USD 0.845m. Interest and distribution income amounted to
USD 22.0m, of which, USD 21.9m was generated from the CLO and
warehousing portfolio. The net return of the CLO and warehousing
portfolio was USD 1.8m as mark-to-market changes contributed to a
loss of USD 19m. Operating expenses amounted to USD 2.8m. In
addition, the Company wrote down its investment in Evolution
Venture and Elephant Capital. These write downs contributed to USD
3.7m in NAV decline.
During 2020 management added exposure to equity index ETFs
mostly in the US to capture some market beta in light of the
immense liquidity injected by Central Banks globally. In December
2020, the Company invested USD 10m in a new warehouse that has
since been converted to a CLO, in April 2021, and generated a gain
of USD 1.8m for 2021. The Company reduced its cash position
somewhat ending the year with over USD 50.4m of cash at hand.
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
An already weak global economy on account of trade tensions
between the US and China as well as the uncertainty over the UK's
exit from the European Union, was plunged sharply into a recession
as the COVID-19 outbreak spread rapidly across the world.
Preventive measures to slow the infection rate shut down several
businesses sectors, disrupted global supply chains, and movement of
people across borders was also restricted which varied from country
to country. The resulting jobs losses, especially in the travel,
entertainment and retail sectors, inflicted significant economic
damage in addition to the health crisis. Due to lower global
production capacity utilization and lower oil prices, consumer
price inflation declined in advanced economies. In the second
quarter of 2020, GDP in most countries was 10% to 20% lower than at
the end of 2019. Unemployment levels rose in most countries and are
still above pre crisis levels.
Thankfully, central Banks across the world acted swiftly to
lower rates substantially and injected unprecedented amounts of
liquidity to ensure orderly functioning of the global markets. In
addition, governments responded quickly to provide stimulus, such
as forgivable business financing, generous unemployment benefits
and short-term work schemes, to blunt the impact of the crisis.
These aggressive measures helped stabilize markets and supported
household spending which in turn improved sentiments on financial
markets by end of March. The decline in new infections, easing of
the containment measures in the Summer months, and hopes for an
effective vaccine to prevent COVID-19, increasingly allowed a
strong recovery of the global economy in the third quarter.
USA: COVID-19 restrictions imposed by governments and the
resulting behavioural changes by consumers and businesses resulted
in GDP decline of 10% over the first half of 2020, and the
unemployment rate spiked to a high of 14.8% in April. To counter
the economic decline, the US Federal Reserve (the Fed) eased
monetary policy significantly and cuts its policy rate by 1.5%,
announced purchase of Treasury and mortgage-backed securities, and
introduced various credit facilities to support the flow of credit
to households and businesses and support functioning of financial
markets. The US government also launched several fiscal measures to
support the economy. Still, overall GDP declined 2.5% in 2020. The
unemployment rate rose from 3.6% at the beginning of the year to
nearly 15% but recovered to 6.3%. Headline inflation fell to 1.2%,
from 1.8% in 2019 and remained below pre-COVID-19 levels. In August
2020, the Fed announced that it would seek to achieve inflation
that averages 2% over time and is on track to moderately exceed 2%
for some time.
Eurozone: COVID-19 spread throughout Europe from mid-February
2020 and most countries introduced restrictive public health
measures to limit the spread of the pandemic. Although the measures
were eased in May 2020, new strains and colder temperatures caused
COVID-19 cases to spread again later in the year. Overall, GDP
declined by 6.8% on average for the year. The unemployment rate in
the Eurozone area increased, although the rapid expansion of
short-time work schemes curtailed the rise. Unemployment rate in
the Eurozone was 8.3% in December compared with 7.3% at the
beginning of 2020. Eurozone countries and the European Central Bank
(ECB) provided extensive fiscal policy support from March 2020
onwards. The ECB eased the conditions and increased the volume of
its asset purchase programme. In addition to the short-time work
schemes, member states provided liquidity support and loan
guarantees for businesses, tax relief and investment in
infrastructure. By the end of the year, the ECB had increased the
programme to about 15% of GDP and planned to continue it until
March 2022. The ECB signalled that it would not raise its key
interest rates until inflation had sufficiently firmed.
Headline inflation in the Eurozone area fell to 0.3% in 2020,
down from 1.2% in 2019. Core inflation was dampened in particular
by declining prices for tourism services owing to the pandemic and
a temporary reduction in value added tax in Germany.
Japan: In Japan, GDP declined by 4.9% as a result of the
pandemic. In the first quarter, the public health measures were
still moderate, but a six-week state of emergency declared in
mid-April 2020 had a strong impact on economic activity. With the
easing of measures in May2020, supported by fiscal policy and
global demand, the economy recovered quickly although GDP had still
not returned to pre-crisis levels by the end of the year. Labour
market conditions remained difficult despite employment subsidies
to avoid redundancies. Unemployment rose by almost 1% within the
year and stood at 2.9% in December. In Japan, core inflation was
slightly negative as prices for tourism services, in particular,
declined sharply in the second half of December 2020.
Since 2016, the Bank of Japan (BoJ) has placed yield curve
control at the centre of its monetary policy. In 2020, it
maintained the target for 10-year government bond yields at around
0% and its short-term deposit rate at - 0.1%. Further, it announced
purchasing Japanese government bonds without an upper limit to
stabilise the yield curve across all maturities. It also introduced
measures to facilitate banks' lending to small and medium-sized
enterprises in particular and increased its purchases of corporate
bonds and equity exchange-traded funds (ETFs).
China: China recorded positive GDP growth of 2.3% despite the
pandemic. Stringent containment measures put in place in January
2020 resulted in a decline in new infections. The measures were
relaxed again in March 2020. After a historic contraction in the
first quarter, economic activity recovered quickly, and China's GDP
surpassed its pre-crisis level in the third quarter. The recovery
was supported by public spending, financial assistance and
temporary duty relief for companies. Exports benefited from the
increased global demand for medical protective equipment and
technical equipment for working from home. The labour market
recovered significantly by the end of the year and in urban areas
the unemployment rate in December 2020 was back in line with the
2019 levels of 5.2%. Headline inflation was slightly lower at 2.5%,
while core inflation hit its lowest level in more than ten years at
0.8%.
To support the recovery, the People's Bank of China lowered its
key rates, including its seven-day reverse repo rate by 0.3% to
2.2%, and reduced the reserve requirement ratio for smaller
banks.
Brazil, India and Russia were severely affected by the COVID-19
crisis. In India, strict containment measures had a particularly
severe impact on economic activity whereas Russia's economy
suffered due to the weak global demand for oil. With the easing of
containment measures from June 2020, economic activity recovered
gradually in all three countries. Headline inflation initially
declined in Brazil to 3.2% and Russia to 3.4% but rose in both
countries towards the end of the year. In India, however, headline
inflation rose to 6.6% as disrupted supply chains caused price
increases. The central banks of Brazil, India and Russia also eased
their monetary policies. In Brazil, the policy rate was reduced by
2.5% to 2%, in India by 1.15% to 4%, and in Russia by 2% to
4.25%.
Commodities: Commodity prices declined in the first half of the
year on account of lower demand. The price of WTI oil futures for
May 2020 futures fell temporarily to negative levels on concerns
over delivery of physical barrels of oil when storage sites were
reaching full maximisation. The oil price recovered as the global
economy revived again in the second half of 2020 and output cuts
made by OPEC. Industrial metals prices also recovered from the
decline in the first half of the year, supported by increased
demand from China, and closed 2020 significantly higher than at the
beginning of the year. Gold finished the year up 24.6%.
Equities and Bonds: Swift and plentiful monetary policy support
helped financial markets recover and hopes for efficient vaccine
eventually propelled US equity markets to record highs. Global
equity prices also recovered and sovereign credit spreads in
emerging market economies and in the European periphery narrowed.
In major developed economies, government yields remained near
historical low levels amid continued monetary policy accommodation.
Technology and work-from-home related stocks soared with the NASDAQ
composite gaining a monstrous 43.6% (compared to 16.3% for the
S&P 500). Small cap stocks in the Russell 2000 outpaced the
S&P 500 by 3%, but also saw a steeper drawdown during times of
volatility. US equities continued to outperform the European
markets.
US government and corporate bonds had a positive year; however,
their returns were primarily driven by support from the Federal
Reserve's monetary policy. The Federal Reserve increased its
portfolio of Treasury notes and bonds by 79% since March 2020, with
its total assets reaching $7.3 trillion at the end of 2020.
Foreign exchange: At the onset of the COVID-19 pandemic and the
ensuing flight-to-safety, the US Dollar and the Swiss Franc gained
against most major currencies. However, as recovery took hold, the
US Dollar depreciated, more than reversing its appreciation as
policy easing by the Fed resulted in the US Dollar losing its
interest-rate advantage. Further fiscal stimulus expectations in
the US are likely to weigh on the dollar in the long term. The
Swiss Franc was one of the most resilient currencies and also one
of the best performers at the end of the year alongside the Euro
and Australian Dollar with gains of 9% or more.
Loan Market: US Leveraged Loans fully recovered towards the end
of 2020 despite a turbulent start. In light of the COVID-19
pandemic, rating agencies downgraded about 47% of the issuers (USD
550 billion), the highest ever in a year (640 companies or $550
billion, or 47% of issuers) as reported by J.P. Morgan.
Subsequently about 13.6% of the issuers were upgraded and the rate
of loan defaults slowed towards end of 2020. The Credit Suisse
Leverage Loan Index ("CSLLI") generated a return of 2.78%, while
the Merrill Lynch High Yield Master II Index ("MLHYI") generated
returns of 6.17%. According to S&P Capital IQ, total
institutional loan issuance was $287.8 billion, down 7% from 2019,
while total institutional loans outstanding stood at $1.2 trillion
as of 31 December 2020. In 2020, mutual funds and ETFs investing in
US leveraged loans withdrew $27 billion from the asset class,
compared to a withdrawal of $38 billion in 2019. However, we expect
this trend to reverse in 2021.
The 12-month trailing par-weighted default rate as of December
2020 was at 3.83% versus expectations of around 10% by rating
agencies and bank analysts. This compares to 1.39% in 2019 and the
long- term average default rate of 2.9%. Looking into 2021, we
expect the default rate to moderate from 2020 levels but remain
somewhat elevated.
CLO Market: The CLO market began 2020 strongly after a
lacklustre 2019 with lower mezzanine tranches rally leading the
way. However, the momentum quickly turned negative in the wake of
the pandemic and the freezing of the credit markets. The new issue
market was effectively shut down as CLO AAA spreads in the
secondary market traded at over 400dm. By June, the market
recovered somewhat with CLO AAAs in the mid-190s, and the CLO AAA
spreads more or less fully recovered and ended the year close to
2019-year end levels.
Given the challenging environment, the refinancing and reset
market option was out-of-the-money as liability spreads were higher
than locked-in for existing CLOs. However, with the pace of
tightening late in the year as well as the demand for yield in an
otherwise yield-less fixed income universe, we expect strong demand
to return in 2021 and CLO refinancing and reset market to
reopen.
Against this backdrop, CLO equity had a challenging year as
higher defaults and significantly higher downgrades eroded the
over-collateralization cushion resulting in over 25% of CLOs
diverting cash from CLO equity tranche to either buying additional
loans or pay down liabilities. By October 2020, however, this
number had declined sharply in line with the improvement in the
loan market as well as active management and trading by CLO
managers to reposition the loan portfolios. Although the loan
market default rate remained at an elevated level, our CLOs
experienced a much lower default rate due to active management and
credit selection by CLO managers.
Sources: Board of Governors of the Federal Reserve System,
European Central Bank (ECB), Swiss National Bank, Bloomberg, 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 99.6m as
of 31 December 2020, which is invested mainly in fixed income and
credit related securities.
The following is a table summarizing the financial portfolio as
of year-end 2020.
Name 2020 2019
Book Value Book Value US
US $m $m
---------------------------- ------------- --------------
Investment in the
loan market through
CLOs 77.0 98.4
Open Warehouse facilities 10.1 -
Perpetual Bonds - 1.1
Other Public Equities 12.5 1.7
---------------------------- ------------- --------------
Invested Total 99.6 101.2
---------------------------- ------------- --------------
Cash 50.4 56.5
---------------------------- ------------- --------------
Total 150.0 157.7
---------------------------- ------------- --------------
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.
Evaluating the late cycle behaviour in the credit and loan
market, the Company had already started cutting down risk in late
2019. The Company started 2020 with over USD 56m in cash and one
warehouse open. The CLO market performed strongly until the end of
February and CLO tranches continued their late 2019 rally.
Management took advantage of this tightening and refinanced one CLO
to lower its cost of funding. However, as soon as COVID-19 started
spreading outside China, management further cut down risk and
exiting its open warehouse position with a net carry of USD
1.6m.
The spread of COVID-19 across Europe and US from early March
2020 caused widespread concern for health and markets declined
sharply. The US Central Bank and government responded quickly and
in good measure, stemming the decline in broader risk markets. This
assistance, however, was not extended to borrowers in the leveraged
loan market and the rating agencies quickly downgraded several
credits causing significant declines in buffers for most CLOs. As a
result, market values across CLO equity positions declined sharply.
However, there were almost no forced sales. In April 2020, over 25%
of CLO equity in the market (especially short reinvestment period
deals) tripped key tests, and as expected, diverted some cash away
from equity investors to improve the CLO structure. Our CLO
portfolio, however, continued to receive distributions from almost
all of our positions as we were positioned with stronger long
reinvestment deals. 91% of the portfolio by market value was
invested in CLOs with over two years of reinvestment period
remaining at January 2020.
The loan market lagged initially but rallied strongly in the
last quarter of 2020. Most IG rated CLO tranches recovered to prior
year levels and BB and CLO equity valuations were also catching up.
As the loan market re-opened, new loans were issued with wider
spreads and LIBOR floors. LIBOR floors are very accretive to CLO
equity as CLO liabilities do not have a positive LIBOR floor. The
positive effect of LIBOR floors in the loan market already resulted
in higher cash flows in the fourth quarter payments.
Management also took advantage of depressed and dislocated
pricing levels in CLO BB tranches and opportunistically traded them
in the second half of the year. In 2020, we received about USD
21.9m in cash distributions from the CLO and warehouse portfolio
and we expect to receive strong distributions in the near future.
Further, with CLO liability spreads tightening into the year-end
and expectations for further tightening in 2021, management opened
a new warehouse. As of the date of this report, management have
converted this warehouse into a new issue CLO with the tightest
liability spreads since 2018. This warehouse generated USD 1.6m in
net carry.
As of the end of the year, all of the Company's US CLO equity
positions were passing their Junior Overcollateralization (OC)
tests. Management continues to actively monitor the CLO portfolio
and position it towards longer reinvestment periods through
recycling old CLOs into new or refinancing them with extended
reinvestment periods, as well as conducting relative value and
opportunistic trading. As of the date of this report, management
has already refinanced four of its CLOs to lower their cost of
funding and reset one 2017 CLO extending its reinvestment period by
5 years and also reduced its cost of funding.
We expect loan default rates to be moderate from 2020 levels but
to continue to stay somewhat elevated. Management expects credit
markets to remain benign in the near future given the amount of
liquidity and lack of yield in investment grade fixed income.
The Company's CLO portfolio is divided into the following
geographical areas:
2020 Percentage 2019 Amount Percentage
Amount
US $000 US $000
US CLOs 77,006 100.00% 98,418 100.00%
------ ------ ------ ------
77,006 100% 98,418 100%
------ ------ ------ ------
Private Equity Funds
The other private equity investments held by the Company are
incorporated in the form of Managed Funds (mostly closed end funds)
mainly in Israel and the emerging economies. The investments of
these funds into their portfolio companies were mostly done in 2008
and 2009. The Company expects material exits of portfolio companies
from funds to materialize over the next couple of years.
The following summarizes the book value of the private equity
funds as at year-end 2020.
Name Book Value
US $m
-------------------- ------------
Phytech (Israel) 1.9
Other investments 1.8
Total 3.7
-------------------- ------------
Phytech: Phytech is an agriculture-technology company in Israel
providing end-to-end solutions for achieving higher yields on crops
and trees. In September 2020, Phytech raised USD 25m at a pre-money
valuation of USD 105m. As part of the capital raise, the manager of
the investment reduced its holding in Phytech and distributed USD
471k (versus our investment of USD 394k) in cash. Following these
transactions, 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.
The following table reconciles the review of activities to the
Company's financial assets as of 31 December 2020:
Name Book Value
US $m
----------------------------------------- ------------
Financial Portfolio 99.6
Private Equity Funds 3.7
----------------------------------------- ------------
Total 103.3
----------------------------------------- ------------
Financial assets at fair value through
profit or loss (note 4) 99.6
Financial assets at fair value through
other comprehensive income (note
5) 3.7
Total 103.3
----------------------------------------- ------------
Events after the reporting date
Details of materials 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 2020.
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 65) 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 54), 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 53), 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 58) independent, Non-Executive
Director
Augoustinos joined the Board in February 2019. He is a trained
and qualified UK Chartered Accountant. He is the senior Partner of
APP Audit and APP Advisory in Cyprus with over 30 years of
experience in assurance, taxation and advisory for local and
international clients. He is also an insolvency practitioner with
experience in many liquidations and receiverships. Augoustinos has
served as a director in various bodies and organisations and
currently he is the chairman of the Famagusta Chamber of Commerce
and Industry in Cyprus.
Directors' responsibilities in relation to the financial
statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
International Financial Reporting Standards as adopted by the
European Union.
The Directors are required to prepare financial statements for
each financial year which give a true and fair view of the
financial position of the Company, and its financial performance
and cash flows for that period. In preparing these financial
statements, the Directors are required to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgments and estimates that are reasonable and prudent;
-- State whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
-- Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Company's
transactions, and at any time enable the financial position of the
Company to be determined with reasonable accuracy and enable them
to ensure that the financial statements comply with the applicable
law and International Financial Reporting Standards as adopted by
the European Union. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the British Virgin Islands
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Disclosure of information to the Auditor
In so far as the Directors are aware:
-- there is no relevant audit information of which the Company's auditor is unaware; and
-- the Directors have taken all steps that they ought to have
taken to make themselves aware of any relevant audit information
and to establish that the auditor is aware of that information.
Substantial Shareholdings
As at 19 March 2021 the Directors are aware of the following
interests in 3 per cent or more of the Company's issued ordinary
share capital:
Number % of issued % of voting
of Ordinary ordinary rights*
Shares share capital
------------- --------------- ------------
Groverton Management Ltd 123,048,011 70.39 75.06
Ron Baron 25,456,903 14.56 15.53
* after consideration of the treasury shares bought during
2021.
Save as disclosed in this report and in the remuneration report,
the Company is not aware of any person who is interested directly
or indirectly in 3% or more of the issued share capital of the
Company or could, directly or indirectly, jointly or severally,
exercise control over the Company.
Details of transactions with Directors are disclosed in note 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 6 February 2007
and adopted pursuant to shareholder approval at the Company's EGM
on 28 February 2007. It reviews the strategic direction of the
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 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 February 2021.
A complete index of the disclosures required by the QCA Code,
including those on the Company's website, can be found at
http://www.livermore-inv.com/CorporateGovernance.
Communication with Investors
The Directors are available to meet with shareholders throughout
the year. In particular the Executive Directors prepare a general
presentation for analysts and institutional shareholders following
the interim and preliminary results announcements of the Company.
The chairman, Richard Rosenberg, is available for meetings with
shareholders throughout the year. The Board endeavours to answer
all queries raised by shareholders promptly.
Shareholders are encouraged to participate in the Annual General
Meeting at which the Chairman will present the key highlights of
the Company's performance. The Board will be available at the
Annual General Meeting to answer questions from shareholders.
Internal Control
The Board is responsible for ensuring that the Company has in
place a system of internal controls and for reviewing its
effectiveness. In this context, control is defined in the policies
and processes established to ensure that business objectives are
achieved cost effectively, assets and shareholder value
safeguarded, and that laws and regulations are complied with.
Controls can provide reasonable but not absolute assurance that
risks are identified and adequately managed to achieve business
objectives and to minimise material errors, frauds and losses or
breaches of laws and regulations.
The Company operates a sound system of internal control, which
is designed to ensure that the risk of misstatement or loss is kept
to a minimum.
Given the Company's size and the nature of its business, the
Board does not consider that it is necessary to have an internal
audit function. An internal audit function will be established as
and when the Company is of an appropriate size.
The Board undertakes a review of its internal controls on an
ongoing basis.
Going Concern
The Directors have reviewed the current and projected financial
position of the Company, making reasonable assumptions about
interest and distribution income, future trading performance,
valuation projections and debt requirements. On the basis of this
review, the Directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence
for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the Annual Report and
accounts.
Independence of Auditor
The Board undertakes a formal assessment of the auditor's
independence each year, which includes:
-- a review of non-audit related services provided to the Company and related fees;
-- discussion with the auditor of a written report detailing all
relationships with the Company and any other parties which could
affect independence or the perception of independence;
-- a review of the auditor's own procedures for ensuring
independence of the audit firm and partners and staff involved in
the audit, including the rotation of the audit partner;
-- obtaining written confirmation from the auditor that it is independent;
-- a review of fees paid to the auditor in respect of audit and non-audit services.
Remuneration Report
The Directors' emoluments, benefits and shareholdings during the
year ended 31 December 2020 were as follows:
Directors' Emoluments
Each of the Directors has a service contract with the
Company.
Total emoluments
--------------- ------------ --------- --------- ----------
Reward
Date of Fees Benefits payments 2020 2019
Director agreement US $000 US $000 US $000 US $000 US $000
--------------- ------------ --------- --------- ---------- --------- ---------
Richard Barry
Rosenberg 10/06/05 69 - - 69 82
--------------- ------------ --------- --------- ---------- --------- ---------
Noam Lanir 10/06/05 400 45 - 445 745
--------------- ------------ --------- --------- ---------- --------- ---------
Ron Baron 01/09/07 350 - - 350 1,450
--------------- ------------ --------- --------- ---------- --------- ---------
Augoustinos
Papathomas 01/02/19 37 - - 37 30
The dates are presented in day / month / year format.
Directors' Interests
Interests of Directors in ordinary shares
As at 31 December As at 31 December
Notes 2020 2019
--------------- ------- ----------------------------- -----------------------------
Number of Percentage Number of Percentage
Ordinary of ordinary Ordinary of ordinary
Shares share capital Shares share capital
--------------- ------- ------------ --------------- ------------ ---------------
Noam Lanir a) 133,936,588 76.620% 133,936,588 76.620%
--------------- ------- ------------ --------------- ------------ ---------------
Ron Baron 25,456,903 14.560% 25,456,903 14.560%
------------------------ ------------ --------------- ------------ ---------------
Richard Barry
Rosenberg 15,000 0.01% 15,000 0.01%
------------------------ ------------ --------------- ------------ ---------------
Notes:
a) Noam Lanir has his interest in ordinary shares by virtue of
the fact that he owns directly or indirectly all of the issued
share capital of Groverton Management Limited. Further information
is provided in note 22 to the financial statements. --
Remuneration Policy
The Company's policy has been designed to ensure that the
Company has the ability to attract, retain and motivate executive
Directors and other key management personnel to ensure the success
of the organization.
The following key principles guide its policy:
-- policy for the remuneration of executive Directors will be
determined and regularly reviewed independently of executive
management and will set the tone for the remuneration of other
senior executives.
-- the remuneration structure will support and reflect the
Company's stated purpose to maximize long-term shareholder
value.
-- the remuneration structure will reflect a just system of rewards for the participants.
-- the overall quantum of all potential remuneration components
will be determined by the exercise of informed judgement of the
independent remuneration committee, taking into account the success
of the Company and the competitive global market.
-- a significant personal shareholding will be developed in
order to align executive and shareholder interests.
-- the assessment of performance will be quantitative and
qualitative and will include exercise of informed judgement by the
remuneration committee within a framework that takes account of
sector characteristics and is approved by shareholders.
-- the committee will be proactive in obtaining an understanding of shareholder preferences.
-- remuneration policy and practices will be as transparent as
possible, both for participants and shareholders
-- the wider scene, including pay and employment conditions
elsewhere in the Company, will be taken into account, especially
when determining annual salary increases.
Review of the Business and Risks
Risks
The Board considers that the risks the Shareholders face can be
divided into external and internal risks.
External risks to shareholders and their returns are those that
can severely influence the investment environment within which the
Company operates, and include economic recession, declining
corporate profitability, higher corporate default rates and lower
than historical recoveries, rising inflation and interest rates and
excessive stock-market speculation.
The Company's portfolio is exposed to interest rate changes,
credit risk, liquidity risk and volatility particularly in the US.
In addition, the portfolio is exposed to currency risks as some of
the underlying portfolio is invested in assets denominated in
non-US currencies while the Company's functional currency is USD.
Investments in certain emerging markets are exposed to governmental
and regulatory risks.
The mitigation of these risks is achieved by following micro and
macroeconomic trends and changes, regular monitoring of underlying
assets and price movements and investment diversification. The
Company also engages from time to time in certain hedging
activities to mitigate these risks.
As of the date of this report, large-scale vaccination programs
and huge fiscal and monetary stimulus seem to have been successful
in reducing the spread and health impact of the virus, as well as
put most developed countries on a strong recovery course.
Unfortunately, the virus continues to spread in less developed
regions such as India and the risk of a vaccine-resistant mutated
virus remains. The Company is primarily exposed to the US economy
and is benefiting from the economic recovery as tighter credit
spreads and reduced distressed credits increase the value of the
Company's CLO portfolio. While the Company continues to be
conservatively positioned with cash in excess of USD 45m as of 13
May 2021, the Company plans to increase its investments in the CLO
market in the near-mid term. At the same time, the Company 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 2020. 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 2020 are disclosed in note 22 to the
financial statements.
By order of the Board of Directors
Chief Executive Officer
25 May 2021
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 (the "Company") and its
subsidiary Livermore Capital AG (the "Group"), which are presented
in pages 24 to 51 and comprise the consolidated statement of
financial position as at 31 December 2020, and the consolidated
statements 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 2020, and of its
consolidated financial performance and its consolidated cash flows
for the year then ended in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
Basis for Opinion
We conducted our audit in accordance with International
Standards on Auditing (ISAs). Our responsibilities under those
standards are further described in the "Auditor's Responsibilities
for the Audit of the Consolidated Financial Statements" section of
our report. We are independent of the Group in accordance with the
International Ethics Standards Board for Accountants' International
Code of Ethics for Professional Accountants (including
International Independence Standards) (IESBA Code) together with
the ethical requirements that are relevant to our audit of the
consolidated financial statements in Cyprus, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements and the IESBA Code. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Emphasis of Matter - Uncertain Outcome of a Legal Claim
We draw attention to note 23 of the consolidated financial
statements which describes the uncertainty outcome of a legal claim
against one of the custodian banks that the Group and the Company
uses on its behalf. Our opinion is not modified in respect of this
matter.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters. This is not a complete list of all risks identified by our
audit.
Investments' valuation Level 3
Refer to note 7 of the consolidated financial statements.
The key audit matter How the matter was addressed in our audit
Our audit work included, but was not
restricted to:
The Group has financial -- discussing and obtaining an understanding
assets of $21m (2019: $12m) of the valuation methodologies applied
classified within fair value by the directors and assessing their
hierarchy at level 3, as appropriateness for each investment;
disclosed in note 7. The
fair value of level 3 financial -- obtaining third party confirmations
assets is generally determined indicating the NAV/Fair Value of the
either based on third party investments and comparing to clients'
valuations, or when not records; and evaluating the independent
available based on adjusted professional valuer's competence, capabilities
Net Asset Value (NAV) calculations and objectivity;
using inputs from third
parties. -- in cases where the valuations have
been performed by the Board of directors,
Due to the use of significant evaluating the reasonableness of the
judgments by the Board of underlying assumptions and verifying
Directors, the existence the inputs used by checking them to reliable
of unobservable inputs and third party sources; and
the significant total value
of financial assets within -- considering the adequacy of consolidated
the Level 3 hierarchy, we financial statement disclosures in relation
consider the valuation of to the valuation methodologies used for
these investments as a key each class of level 3 financial assets.
audit matter. Key observations
We concluded that the judgements and
estimates used by the management in determining
the Fair Value of investments were reasonable
and the disclosures made in relation
to these matters in the consolidated
financial statements were appropriate.
Other Information
The Board of Directors is responsible for the other information.
The other information comprises the information included in the
Highlights, Chairman's and Chief Executive's Review, Review of
Activities, Report of the Directors, Corporate Governance
Statement, Remuneration report, Review of the Business and Risks,
but does not include the consolidated financial statements and our
auditor's report thereon.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements
or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report in this regard.
Responsibilities of the Board of Directors for the Consolidated
Financial Statements
The Board of Directors is responsible for the preparation of
consolidated financial statements that give a true and fair view in
accordance with International Financial Reporting Standards as
adopted by the European Union, and for such internal control as the
Board of Directors determines is necessary to enable the
preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of
Directors is responsible for assessing the Group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the Board of Directors either intends to
liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the
Group's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated
Financial Statements
Our objectives are to obtain reasonable assurance about whether
the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue
an auditor's report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional scepticism
throughout the audit. We also:
* Identify and assess the risks of material
misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform
audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the
override of internal control.
* Obtain an understanding of internal control relevant
to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness
of the Group's internal control.
* Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting estimates
and related disclosures made by the Board of
Directors.
* Conclude on the appropriateness of the Board of
Directors' use of the going concern basis of
accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to
events or conditions that may cast significant doubt
on the Group's ability to continue as a going
concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our
auditor's report to the related disclosures in the
consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence
obtained up to the date of our auditor's report.
However, future events or conditions may cause the
Group to cease to continue as a going concern.
* Evaluate the overall presentation, structure and
content of the consolidated financial statements,
including the disclosures, and whether the
consolidated financial statements represent the
underlying transactions and events in a manner that
achieves a true and fair view.
* Obtain sufficient appropriate audit evidence
regarding the financial information of the entities
or business activities within the Group to express an
opinion on the consolidated financial statements. We
are responsible for the direction, supervision and
performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements
of the current period and are therefore the key audit matters. We
describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Other Matter
This report, including the opinion, has been prepared for and
only for the Group's members as a body and for no other purpose. We
do not, in giving this opinion, accept or assume responsibility for
any other purpose or to any other person to whose knowledge this
report may come to.
The engagement partner on the audit resulting in this
independent auditor's report is Mrs Froso Yiangoulli.
Froso Yiangoulli
Certified Public Accountant and Registered
Auditor
for and on behalf of
Grant Thornton (Cyprus) Ltd
Certified Public Accountants and Registered
Auditors
Nicosia, 25 May 2021
Livermore Investments Group Limited
Consolidated Statement of Financial Position as at 31 December
2020
Note 2020 2019
Assets US $000 US $000
Non-current assets
Property, plant and equipment 32 45
Right-of-use assets 272 329
Financial assets at fair value through
profit or loss 4 77,006 98,418
Financial assets at fair value through
other comprehensive income 5 3,729 6,204
Investments in subsidiaries 8 6,813 5,787
--------- ---------
87,852 110,783
Current assets --------- ---------
Trade and other receivables 9 8,238 8,251
Financial assets at fair value through
profit or loss 4 22,577 2,837
Cash and cash equivalents 10 50,407 56,499
--------- ---------
81,222 67,587
--------- ---------
Total assets 169,074 178,370
--------- ---------
Equity
Share capital 11 - -
Share premium 11 169,187 169,187
Other reserves (21,285) (20,598)
Retained earnings 16,005 24,491
--------- ---------
Total equity 163,907 173,080
--------- ---------
Liabilities
Non-current liabilities
Lease liability 181 248
--------- ---------
Current liabilities
Trade and other payables 12 4,868 4,907
Lease liability - current portion 91 83
Current tax payable 27 52
--------- ---------
4,986 5,042
--------- ---------
Total liabilities 5,167 5,290
--------- ---------
Total equity and liabilities 169,074 178,370
--------- ---------
Net asset value per share
Basic and diluted net asset value per
share (US $) 14 0.94 0.99
--------- ---------
These financial statements were approved by the Board of
Directors on 25 May 2021.
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 2020
Note 2020 2019
US $000 US $000
Investment income
Interest and distribution income 16 22,010 29,028
Fair value changes of investments 17 (18,483) (25,358)
------ ------
3,527 3,670
Operating expenses 18 (2,808) (5,132)
------ ------
Operating profit / (loss) 719 (1,462)
Finance costs 19 (40) (18)
Finance income 19 293 550
------ ------
Profit / (loss) before taxation 972 (930)
Taxation charge 20 (127) (151)
------ ------
Profit / (loss) for the year 845 (1,081)
------ ------
Earnings / (loss) per share
Basic and diluted earnings / (loss) per
share (US $) 21 0.005 (0.006)
------ ------
The profit / (loss) 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 2020
Note 2020 2019
US $000 US $000
Profit / (loss) for the year 845 (1,081)
Other comprehensive income:
Items that will be reclassified subsequently
to profit or loss
Foreign exchange gains on translation
of subsidiary 8 4 9
Items that are not reclassified subsequently
to profit or loss
Financial assets designated at fair value
through other comprehensive income -
fair value losses 5 (4,022) (181)
------ ------
Total comprehensive loss for the year (3,173) (1,253)
------ ------
The total comprehensive loss 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 2020
Share Translation Investments Retained Total
premium reserve revaluation earnings
Note reserve
US $000 US $000 US $000 US $000 US $000
Balance at 1 January 2019 169,187 12 (20,291) 25,425 174,333
------- ------ ------ ------ -------
Loss for the year - - - (1,081) (1,081)
Other comprehensive income:
Financial assets at fair
value through OCI - fair
value losses - - (181) - (181)
Foreign exchange gains on
translation of subsidiary - 9 - - 9
Transfer of realised gains 17 - - (147) 147 -
------- ------ ------ ------ -------
Total comprehensive loss
for the year - 9 (328) (934) (1,253)
------- ------ ------ ------ -------
Balance at 31 December 2019 169,187 21 (20,619) 24,491 173,080
------- ------ ------ ------ -------
Dividends 13 - - - (6,000) (6,000)
------- ------ ------ ------ -------
Transactions with owners - - - (6,000) (6,000)
------- ------ ------ ------ -------
Profit for the year - - - 845 845
Other comprehensive income:
Financial assets at fair
value through OCI - fair
value losses - - (4,022) - (4,022)
Foreign exchange gains on
translation of subsidiary - 4 - - 4
Transfer of realised gains 17 - - 3,331 (3,331) -
------- ------ ------ ------ -------
Total comprehensive loss
for the year - 4 (691) (2,486) (3,173)
------- ------ ------ ------ -------
Balance at 31 December 2020 169,187 25 (21,310) 16,005 163,907
------- ------ ------ ------ -------
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 2020
Note 2020 2019
US $000 US $000
Cash flows from operating activities
Profit / (loss) before tax 972 (930)
Adjustments for
Depreciation 102 98
Interest expense 19 40 18
Interest and distribution income 16 (22,010) (29,028)
Bank interest income 19 (119) (437)
Fair value changes of investments 17 18,483 25,358
Exchange differences 19 (174) (113)
---------- ----------
(2,706) (5,034)
Changes in working capital
Increase in trade and other receivables (60) (5,391)
Decrease in trade and other payables (78) (1,020)
---------- ----------
Cash flows from operations (2,844) (11,445)
Interest and distributions received 22,204 29,756
Tax paid (133) (98)
---------- ----------
Net cash from operating activities 19,227 18,213
---------- ----------
Cash flows from investing activities
Acquisition of investments (49,552) (50,200)
Proceeds from sale of investments 30,201 62,273
---------- ----------
Net cash (used in) / from investing activities (19,351) 12,073
---------- ----------
Cash flows from financing activities
Lease liability payments (102) (96)
Interest paid (40) (18)
Dividends paid 13 (6,000) -
---------- ----------
Net cash used in financing activities (6,142) (114)
---------- ----------
Net (decrease) / increase in cash and
cash equivalents (6,266) 30,172
Cash and cash equivalents at the beginning
of the year 56,499 26,214
Exchange differences on cash and cash
equivalents 174 113
---------- ----------
Cash and cash equivalents at the end
of the year 10 50,407 56,499
---------- ----------
The notes 1 to 28 form part of these consolidated financial
statements.
Notes on the Consolidated Financial Statements
1. General Information
Incorporation, principal activity and status of the Company
1.1. The Company was incorporated as an international business
company and registered in the British Virgin Islands (BVI) on 2
January 2002 under IBC Number 475668 with the name Clevedon
Services Limited. The liability of the members of the Company is
limited.
1.2. The Company changed its name to Empire Online Limited on 5
May 2005 and then to Livermore Investments Group Limited on 28
February 2007.
1.3. The principal activity of the Company changed to investment
activities on 1 January 2007. Before that the principal activity of
the Company was the provision of marketing services to the online
gaming industry and, since 1 January 2006, the operation of online
gaming.
1.4. The principal legislation under which the Company operates
is the BVI Business Companies Act, 2004.
1.5. The Company is tax resident in the Republic of Cyprus.
1.6. The registered office of the Company is located at Trident
Chambers, PO Box 146, Road Town, Tortola, British Virgin
Islands.
2. Basis of preparation
The consolidated financial statements ("the financial
statements") of Livermore Investments Group Limited have been
prepared in accordance with International Financial Reporting
Standards ("IFRS") adopted pursuant to Regulation (EC) No 1606/2002
as it applies in 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 2020, the Company adopted any applicable new
or revised IFRS and relevant amendments and interpretations which
became effective, and also were endorsed pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union.
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 2020, or have not yet been
endorsed either pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union by 31 December 2020, or by the UK
Endorsement Board (UKEB) after 31 December 2020:
Endorsed Effective
by EU date
/ UKEB (IASB)
No 1 January
* Amendments to IFRS 3: "Reference to the Conceptual 2022
Framework"
Yes 1 January
* Amendments to IFRS 4: "Extension of the Temporary 2021
Exemption from Applying IFRS 9"
Yes 1 January
* Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 2021
16: "Interest Rate Benchmark Reform - Phase 2"
No to be determined
* Amendment to IFRS 10, and IAS 28: "Sale or
Contribution of Assets between an Investor and its
Associate or Joint Venture"
No 1 January
* IFRS 14: "Regulatory Deferral Accounts" 2016
Yes 1 June 2020
* Amendment to IFRS 16: "COVID-19-Related Rent
Concessions"
No 1 April 2021
* Amendment to IFRS 16: "COVID -19-Related Rent
Concessions beyond 30 June 2021"
No 1 January
* IFRS 17: "Insurance Contracts" 2023
No 1 January
* Amendments to IFRS 17 2023
No 1 January
* Amendment to IAS 1: "Classification of Liabilities as 2023
Current or Non-current"
No 1 January
* Amendments to IAS 1 and IFRS Practice Statement 2: 2023
"Disclosure of Accounting policies"
No 1 January
* Amendments to IAS 8: "Definition of Accounting 2023
Estimates"
No 1 January
* Amendments to IAS 16: "Property, Plant and Equipment: 2022
Proceeds before Intended Use"
No 1 January
* Amendments to IAS 37: "Onerous Contracts - Cost of 2022
Fulfilling a Contract"
No 1 January
* Annual Improvements to IFRS Standards 2018-2020 2022
The Board of Directors expects that when the above become
effective in future periods, they will not have any material effect
on the financial statements.
3.2. Investments in subsidiaries and basis of consolidation
Subsidiaries are entities controlled either directly or
indirectly by the Company.
Control is achieved where the Company is exposed, or has right,
to variable returns from its involvement with a subsidiary and has
the ability to affect those returns through its power over the
subsidiary.
The Directors have determined that Livermore meets the
definition of an investment entity, as this is defined in IFRS 10
"Financial Statements". As per IFRS 10 an investment entity is an
entity that:
(a) obtains funds from one or more investors for the purpose of
providing those investors with investment management services;
(b) commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both; and
(c) measures and evaluates the performance of substantially all
of its investments on a fair value basis.
An investment entity is exempted from consolidating its
subsidiaries, unless any subsidiary which is not itself an
investment entity mainly provides services that relate to the
investment entity's investment activities.
The financial statements consolidate the Company and one of its
subsidiaries providing such services (note 8 shows further details
of the consolidated and unconsolidated subsidiaries).
Investments in unconsolidated subsidiaries are initially
recognised at their fair value and subsequently measured at fair
value through profit or loss. Subsequently, any gains or losses
arising from changes in their fair value are included in profit or
loss for the year.
Dividends and other distributions from unconsolidated
subsidiaries are recognised as income when the Company's right to
receive payment has been established.
A subsidiary that is not an investment entity itself and which
provides services that relate to the Company's investment
activities is consolidated rather than included within the
investments in subsidiaries measured at fair value through profit
or loss.
The financial statements of the consolidated subsidiary are
prepared using uniform accounting policies. Where necessary,
adjustments are made to the financial statements of consolidated
subsidiary to bring its accounting policies into line with those
used by the Company. The consolidated subsidiary has a reporting
date of 31 December.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
The results and cash flows of any consolidated subsidiary
acquired or disposed of during the year are consolidated from the
effective date of acquisition or up to the effective date of
disposal.
3.3. Interest and distribution income
-- Interest income is recognised based on the effective interest method.
-- Distribution income is recognised on the date that the
Company's right to receive payment is established, which in the
case of quoted securities is the ex-dividend date.
3.4. Foreign currency
The financial statements of the Company are presented in USD,
which is the currency of the primary economic environment in which
it operates (its functional currency).
Transactions in foreign currencies are recorded at the rates of
exchange prevailing on the dates of the transaction. Monetary
assets and liabilities denominated in non-functional currencies are
translated into functional currency using year-end spot foreign
exchange rates. Non-monetary assets and liabilities are translated
upon initial recognition using exchange rates prevailing at the
dates of the transactions. Non-monetary assets that are measured in
terms of historical cost in foreign currency are not subsequently
re-translated.
Gains and losses arising on the settlement of monetary items and
on the re-translation of monetary items are included in the profit
or loss for the year. Those that arise on the re-translation of
non-monetary items carried at fair value are included in the profit
or loss of the year as part of the fair value gain or loss except
for differences arising on the re-translation of non-monetary
financial assets designated at fair value through other
comprehensive income in respect of which gains and losses are
recognised in other comprehensive income. For such non-monetary
items any exchange component of that gain or loss is also
recognised in other comprehensive income.
The results and financial position of consolidated subsidiaries
that have a functional currency different from US dollars are
translated into the presentation currency as follows:
(a) assets and liabilities are translated at the closing rate at the reporting date;
(b) income and expenses and also cash flows are translated at an
average exchange rate (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case the items are translated at
the rates prevailing at the dates of the transactions); and
(c) exchange differences arising are recognised in other
comprehensive income within the translation reserve. Such
translation exchange differences are reclassified to profit or loss
in the period in which the foreign operation is disposed of.
3.5. Taxation
Current tax is the tax currently payable based on taxable profit
for the year in accordance with the applicable tax laws.
Current and deferred tax assets and liabilities are calculated
at tax rates that are expected to apply to their respective period
of realisation, provided they are enacted or substantively enacted
as at the reporting date.
3.6. Equity instruments
Equity instruments issued by the Company are recorded at
proceeds received, net of direct issue costs.
The share premium account includes any premiums received on the
initial issuing of the share capital. Any transaction costs
associated with the issuing of shares are deducted from the premium
received.
3.7. Financial assets
Financial assets are recognised when the Company becomes a party
to the contractual provisions of the financial instrument.
A financial asset is derecognised only where the contractual
rights to the cash flows from the asset expire or the financial
asset is transferred, and that transfer qualifies for
derecognition. A financial asset is transferred if the contractual
rights to receive the cash flows of the asset have been transferred
or the Company retains the contractual rights to receive the cash
flows of the asset but assumes a contractual obligation to pay the
cash flows to one or more recipients. A financial asset that is
transferred qualifies for derecognition if the Company transfers
substantially all the risks and rewards of ownership of the asset,
or if the Company neither retains nor transfers substantially all
the risks and rewards of ownership but does transfer control of
that asset.
The Company classifies its financial assets in the following
measurement categories:
(a) those to be measured at fair value (either through other
comprehensive income, or through profit or loss), and
(b) those to be measured at amortised cost.
At initial recognition, the Company measures a financial asset
at its fair value plus, in the case of a financial asset not at
fair value through profit or loss, transaction costs that are
directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at fair value through
profit or loss are expensed in profit or loss.
Financial assets at fair value through profit or loss
The Company classifies the following financial assets at fair
value through profit or loss:
(a) equity investments that are held for trading;
(b) other equity investments for which the Directors have not
elected to recognise fair value gains and losses through other
comprehensive income; and
(c) debt investments that do not qualify for measurement at
either amortised cost or at fair value through other comprehensive
income.
All financial assets within this category are measured at their
fair value, with changes in value recognised in the profit or loss
when incurred.
Financial assets at fair value through other comprehensive
income
Financial assets at fair value through other comprehensive
income (OCI) comprise equity securities which are not held for
trading, and for which the Company has made an irrevocable election
at initial recognition to recognise changes in fair value through
OCI rather than profit or loss.
Where the Company's management has elected to present fair value
gains and losses on equity investments in other comprehensive
income, there is no subsequent reclassification of fair value gains
and losses to profit or loss. Dividends from such investments
continue to be recognised in profit or loss when the Company's
right to receive payments is established.
Financial assets at amortised cost
Assets that are held for collection of contractual cash flows
where those cash flows represent solely payments of principal and
interest are measured at amortised cost. A gain or loss on a
financial asset that is measured at amortised cost is recognised in
profit or loss when the asset is derecognised or impaired. Interest
income from these financial assets is recognised based on the
effective interest rate method.
The classification of debt instruments depends on the entity's
business model for managing the financial assets and the
contractual terms of the cash flows. Financial assets with embedded
derivatives are considered in their entirety when determining
whether their cash flows are solely payment of principal and
interest.
Impairment
The Company assesses the expected credit losses associated with
its assets carried at amortised cost, on a forward-looking basis.
The impairment methodology applied depends on whether there has
been a significant increase in credit risk. For trade and other
receivables only, the Company applies the simplified approach
permitted by IFRS 9, which permits expected lifetime losses to be
recognised from initial recognition of the receivables.
Write offs
The Company writes off a financial asset when there is
information indicating that the counterparty is in severe financial
difficulty and there is no realistic prospect of recovery, e.g.,
when the counterparty has been placed under liquidation or has
entered into bankruptcy proceedings. Financial assets written off
may still be subject to enforcement activities, taking into account
legal advice where appropriate. Any recoveries made are recognised
in profit or loss.
3.8. Financial liabilities
Financial liabilities are recognised when the Company becomes a
party to the contractual provisions of the financial
instrument.
A financial liability is derecognised when it is extinguished,
discharged, cancelled or expires.
Financial liabilities at amortised cost
Financial liabilities are measured initially at fair value plus
transaction costs.
After initial recognition financial liabilities are measured at
amortised cost using the effective interest rate method.
3.9. Cash and cash equivalents
Cash comprises cash in hand and on demand deposits with banks.
Cash equivalents are short term, highly liquid investments that are
readily convertible to known amounts of cash. They include
unrestricted short-term bank deposits originally purchased with
maturities of three months or less.
Any bank overdrafts are considered to be a component of cash and
cash equivalents, since they form an integral part of the Company's
cash management.
3.10. Segment reporting
In making investment decisions, Management assesses individual
investments and then, in analysing their performance, it receives
and uses information for each investment product separately rather
than based on any segmental information. Given that, Management
regards that all the Company's activities fall under a single
operating segment.
3.11. Critical accounting judgments and key sources of
estimation uncertainty
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates and
requires management to exercise its judgement in the process of
applying the Company's accounting policies. It also requires the
use of assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Although these
estimates are based on management's best knowledge of current
events and actions, actual results may ultimately differ from those
estimates.
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
Critical accounting judgements
(i) Classification of financial assets
Management exercises significant judgement in determining the
appropriate classification of the financial assets of the Company.
The Directors determine the appropriate classification of the
Company's financial assets based on Livermore's business model. An
entity's business model refers to how an entity manages its
financial assets in order to generate cash flows, considering all
relevant and objective evidence. The factors considered include the
contractual terms and characteristics which are very carefully
examined, and also the Company's intentions and expected needs for
realisation of the financial assets.
All investments (except from certain equity instruments that are
designated at fair value through other comprehensive income) are
classified as financial assets at fair value through profit or
loss, because this reflects more fairly the way these assets are
managed by the Company. The Company's business is investing in
financial assets with a view to profiting from their total return
in the form of income and capital growth. This portfolio of
financial assets is managed, and its performance evaluated on a
fair value basis, in accordance with a documented investment
strategy, and information about the portfolio is provided
internally on that basis to the Company's Board of Directors and
other key management personnel.
(ii) Consolidation of subsidiary
Management exercised significant judgment in determining which
of the subsidiaries that are not investment entities themselves,
provide services that relate to the Company's investment activities
and therefore need to be consolidated rather than included within
the investments in subsidiaries measured at fair value through
profit or loss.
Estimation uncertainty
Fair value of financial instruments
Management uses valuation techniques in measuring the fair value
of financial instruments, where active market quotes are not
available. Details of the bases used for financial assets and
liabilities are disclosed in note 7 . In applying the valuation
techniques management makes maximum use of market inputs, and uses
estimates and assumptions that are, as far as possible, consistent
with observable data that market participants would use in pricing
the instrument. Where applicable data is not observable (level 3),
management uses its best estimates which may vary from the actual
prices that would be achieved in an arm's length transaction at the
reporting date. Further information on level 3 valuations of
financial assets is provided in note 7.2.
4. Financial assets at fair value through profit or loss
2020 2019
US $000 US $000
Non-current assets
Fixed income investments (CLOs) 77,006 98,418
------ ------
77,006 98,418
------ ------
Current assets
Fixed income investments 10,036 1,127
Public equity investments 12,541 1,710
------ ------
22,577 2,837
------ ------
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.
5. Financial assets at fair value through other comprehensive income
2020 2019
US $000 US $000
Non-current assets
Private equities 3,729 6,204
------ ------
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.
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.
-- Private equities relate to investments in the form of equity
purchases in both high growth opportunities in emerging markets and
deep value opportunities in mature markets. The Company generally
invests directly in prospects where it can exert influence. Main
investments under this category are in the fields of real
estate.
7. Fair value measurements of financial assets and liabilities
The table in note 7.2 presents financial assets and liabilities
measured at fair value in the consolidated statement of financial
position in accordance with the fair value hierarchy. This
hierarchy groups financial assets and liabilities into three levels
based on the significance of inputs used in measuring the fair
value of the financial assets and liabilities. The fair value
hierarchy has the following levels:
- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the
measurement date;
- Level 2: inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
or indirectly; and
- Level 3: unobservable inputs for the asset or liability.
The level within which the financial asset is classified is
determined based on the lowest level of significant input to the
fair value measurement.
7.1 Valuation of financial assets
-- Fixed Income Investments and Public Equity Investments are
valued per their closing market prices on quoted exchanges, or as
quoted by market maker. Investments in open warehouse facilities
that have not yet been converted to CLOs, are valued based on an
adjusted net asset valuation.
The Company values the CLOs based on the valuation reports
provided by market makers. CLOs are typically valued by market
makers using discounted cash flow models. The key assumptions for
cash flow projections include default and recovery rates,
prepayment rates and reinvestment assumptions on the underlying
portfolios (typically senior secured loans) of the CLOs.
Default and recovery rates: The amount and timing of defaults in
the underlying collateral and the amount and timing of recovery
upon a default are key to the future cash flows a CLO will
distribute to the CLO equity tranche. All else equal, higher
default rates and lower recovery rates typically lead to lower cash
flows. Conversely, lower default rates and higher recoveries lead
to higher cash flows.
Prepayment rates: Senior loans can be pre-paid by borrowers.
CLOs that are within their reinvestment period may, subject to
certain conditions, reinvest such prepayments into other loans
which may have different spreads and maturities. CLOs that are
beyond their reinvestment period typically pay down their senior
liabilities from proceeds of such pre-payments. Therefore, the rate
at which the underlying collateral prepays impacts the future cash
flows that the CLO may generate.
Reinvestment assumptions: A CLO within its reinvestment period
may reinvest proceeds from loan maturities, prepayments, and
recoveries into purchasing additional loans. The reinvestment
assumptions define the characteristics of the loans that a CLO may
reinvest in. These assumptions include the spreads, maturities, and
prices of such loans. Reinvestment into loans with higher spreads
and lower prices will lead to higher cash flows. Reinvestment into
loans with lower spreads will typically lead to lower cash
flows.
Discount rate: The discount rate indicates the yield that market
participants expect to receive and is used to discount the
projected future cash flows. Higher yield expectations or discount
rates lead to lower prices and lower discount rates lead to higher
prices for CLOs.
-- Private Equities 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 in the consolidated
statement of financial position are grouped into the fair value
hierarchy as follows:
2020 2020 2020 2020 2019 2019 2019 2019
US US US US $000 US US US US $000
$000 $000 $000 $000 $000 $000
Level Level Level Total Level Level Level Total
1 2 3 1 2 3
Fixed income investments - 77,006 10,036 87,042 1,127 98,418 - 99,545
Private equities - - 3,729 3,729 - - 6,204 6,204
Public equity investments 12,541 - - 12,541 1,710 - - 1,710
Investments in
subsidiaries - - 6,813 6,813 - - 5,787 5,787
------ ------ ------ ------ ------ ------ ------ ------
12,541 77,006 20,578 110,125 2,837 98,418 11,991 113,246
------ ------ ------ ------ ------ ------ ------ ------
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
through OCI through in subsidiaries
- Private profit or
equities loss - Fixed
Income
investments Total
US $000 US $000 US $000 US $000
As at 1 January 2019 6,387 38,490 5,205 50,082
Purchases - 23,000 - 23,000
Settlement (33) (60,500) - (60,533)
Gains / (losses) recognised
in:
- Profit or loss - (990) 582 (408)
- Other comprehensive
income (150) - - (150)
------ ------ ------ ------
As at 1 January 2020 6,204 - 5,787 11,991
Purchases 1,650 25,000 - 26,650
Settlement (103) (15,000) - (15,103)
Gains / (losses) recognised
in:
- Profit or loss - 36 1,026 1,062
- Other comprehensive
income (4,022) - - (4,022)
------ ------ ------ ------
As at 31 December
2020 3,729 10,036 6,813 20,578
------ ------ ------ ------
The above gains and losses recognised can be allocated as
follows:
At fair value At fair value Investments
through OCI through in subsidiaries
- Private profit or
equities loss - Fixed
Income
investments Total
2019 US $000 US $000 US $000 US $000
Profit or loss
- Financial assets held
at year-end - - 582 582
- Financial assets not
held at year-end - (990) - (990)
Other comprehensive income
- Financial assets held
at year-end (150) - - (150)
------ ------ ------ ------
Total gains / (losses)
for 2019 (150) (990) 582 (558)
------ ------ ------ ------
At fair value At fair value Investments
through OCI through in subsidiaries
- Private profit or
equities loss - Fixed
Income
investments Total
2020 US $000 US $000 US $000 US $000
Profit or loss
- Financial assets held
at year-end - 36 1,026 1,062
Other comprehensive income
- Financial assets held
at year-end (4,022) - - (4,022)
------ ------ ------ ------
Total gains / (losses)
for 2020 (4,022) 36 1,026 (2,960)
------ ------ ------ ------
The Company has not developed any quantitative unobservable
inputs for measuring the fair value of its level 3 financial assets
at 31 December 2020 and 2019. 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.
Private equities 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
2020 2019
Unconsolidated subsidiaries US $000 US $000
As at 1 January 5,787 5,205
Fair value gain 1,026 582
------ ------
As at 31 December 6,813 5,787
------ ------
Details of the investments in which the Company has a
controlling interest as at 31 December 2020 are as follows:
Name of Subsidiary Place of Holding Voting Principal activity
incorporation rights
and shares
held
Consolidated subsidiary
Livermore Capital Switzerland Ordinary 100% Administration
AG shares services
Unconsolidated subsidiaries
Livermore Properties British Virgin Ordinary 100% Holding of investments
Ltd Islands shares
Mountview Holdings British Virgin Ordinary 100% Investment vehicle
Ltd Islands shares
Sycamore Loan Strategies Cayman Islands Ordinary 100% Investment vehicle
Ltd shares
Livermore Israel Israel Ordinary 100% Holding of investments
Investments Ltd shares
Sandhirst Ltd Cyprus Ordinary 100% Holding of investments
shares
9. Trade and other receivables
2020 2019
US $009 US $000
Financial items
Accrued interest and distribution
income - 80
Amounts due by related parties
(note 22) 8,151 8,091
------ ------
8,151 8,171
Non-financial items
Prepayments 67 71
VAT receivable 20 9
------ ------
8,238 8,251
------ ------
For the Company's receivables of a financial nature, no lifetime
expected credit losses and no corresponding allowance for
impairment have been recognised, as their default rates have been
determined to be close to 0%.
No receivable amounts have been written-off during either 2020
or 2019.
10. Cash and cash equivalents
Cash and cash equivalents included in the consolidated statement
of cash flows comprise the following at the reporting date:
2020 2019
US $000 US $000
Demand deposits 50,407 41,499
Short-term fixed deposits - 15,000
------ ------
Cash at bank 50,407 56,499
------ ------
11. Share capital
Authorised share capital
The Company has authorised share capital of 1,000,000,000
ordinary shares with no par value, and no restrictions.
Issued share capital Number Share premium
of shares US $000
Ordinary shares with no par value
As at 31 December 2020 and 2019 174,813,998 169,187
---------- ----------
12. Trade and other payables
2020 2019
US $000 US $000
Financial items
Trade payables 34 23
Amounts due to related parties (note
22) 4,464 4,468
Accrued expenses 370 416
------ ------
4,868 4,907
------ ------
13. Dividend
At 21 February 2020, the Company paid an interim dividend of USD
6m (USD 0.0343 per share) to members on the register on 24 January
2020, as announced by the Board on 30 December 2019.
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.
2020 2019
Net assets attributable to ordinary
shareholders (USD 000) 163,907 173,080
------------- -------------
Closing number of ordinary shares
in issue 174,813,998 174,813,998
------------- -------------
Basic net asset value per share (USD) 0.94 0.99
------------- -------------
The diluted net asset value per share equals the basic net asset
value per share since no potentially dilutive shares exist as at 31
December 2020 and 2019.
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:
2020 2019
Investment Income US $000 US $000
Other European countries (486) (463)
United States 3,384 5,096
India - (171)
Asia 629 (792)
------- -------
3,527 3,670
------- -------
Investments
Other European countries 3,102 2,215
United States 98,985 100,235
India - 716
Asia 8,038 10,080
------- -------
110,125 113,246
------- -------
Investment income, comprising interest and distribution income
as well as fair value gains or losses on investments, is allocated
on the basis of the issuer's location. Investments are also
allocated based on the issuer's location.
The Company has no significant dependencies, in respect of its
investment income, on any single issuer.
16. Interest and distribution income
2020 2019
US $000 US $000
Interest from investments 782 695
Distribution income 21,228 28,333
------ ------
22,010 29,028
------ ------
Interest and distribution income is analysed between different
categories of financial assets, as follows:
2020 2019
Interest Distribution Total Interest Distribution Total
income income
Financial assets at US $000 US $000 US $000 US $000 US $000 US $000
fair value
through profit or loss
Fixed income investments 782 21,195 21,977 695 28,002 28,697
Public equity investments - 33 33 - 331 331
------ ------ ------ ------ ------ ------
782 21,228 22,010 695 28,333 29,028
------ ------ ------ ------ ------ ------
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
2020 2019
US $000 US $000
Fair value losses on financial assets through
profit or loss (18,990) (25,940)
Fair value gain on investment in subsidiaries 1,026 582
Fair value losses on derivatives (519) -
------ ------
(18,483) (25,358)
------ ------
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 2020 Disposed in 2019
Realised Cumulative Total Realised Cumulative Total
(losses)/ distribution financial (losses)/ distribution financial
gains* or interest impact gains* or interest impact
US $000 US $000 US $000 US $000 US $000 US $000
Financial assets
at fair value through
profit or loss
Fixed income investments 324 2,683 3,007 (9,926) 19,839 9,913
Public equities 84 11 95 - - -
Derivatives (519) - (519) - - -
------ ------ ------ ------ ------ ------
(111) 2,694 2,583 (9,926) 19,839 9,913
------ ------ ------ ------ ------ ------
Financial assets
at fair value through
OCI
Private equities (3,331) 752 (2,579) 147 301 448
------ ------ ------ ------ ------ ------
(3,442) 3,446 4 (9,779) 20,140 10,361
------ ------ ------ ------ ------ ------
* difference between disposal proceeds and original acquisition
cost
18. Operating expenses
2020 2019
US $000 US $000
Directors' fees and expenses 900 2,307
Other salaries and expenses 177 202
Professional fees 851 1,360
Legal expenses 9 18
Bank custody fees 99 111
Office costs 240 221
Depreciation 102 98
Other operating expenses 352 726
Audit fees 78 89
------ ------
2,808 5,132
------ ------
Throughout 2020 the Company employed 4 members of staff (2019:
4). Two of those members are the Company's executive Directors.
Other salaries and expenses include USD 16,527 of social
insurance and similar contributions (2019: USD 10,708), as well as
USD 3,148 of defined contributions plan costs (2019: USD
4,898).
19. Finance costs and income
2020 2019
US $000 US $000
Finance costs
Bank interest expense 40 18
------ ------
Finance income
Bank interest income 119 437
Foreign exchange gain 174 113
------ ------
293 550
------ ------
20. Taxation
2020 2019
US $000 US $000
Current tax charge 127 151
------ ------
The Company is a British Virgin Islands (BVI) international
business company and until early 2019 was not subject to
corporation tax, under the BVI laws. During 2019 the Company became
a tax resident in the Republic of Cyprus and since then it is
subject to taxation under the tax laws and regulations in
Cyprus.
The current tax charge relates to the results of the Company for
2020, as explained above, and the Company's consolidated subsidiary
in Switzerland (note 8).
21. Earnings / (loss) per share
The basic earnings / (loss) per share has been calculated by
dividing the profit / (loss) 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.
2020 2019
Profit / (loss) for the year attributable
to ordinary shareholders of the parent
(USD 000) 845 (1,081)
------------- -------------
Weighted average number of ordinary
shares outstanding 174,813,998 174,813,998
------------- -------------
Basic earnings / (loss) per share (USD) 0.005 (0.006)
------------- -------------
The diluted earnings / (loss) per share equals the basic
earnings / (loss) per share since no potentially dilutive shares
were in existence during 2020 and 2019.
22. Related party transactions
The Company is controlled by Groverton Management Ltd, an entity
owned by Noam Lanir, which at 31 December 2020 held 76.62% (2019:
76.62%) of the Company's voting rights.
2020 2019
US $000 US $000
Amounts receivable from unconsolidated
subsidiaries
Sandhirst Ltd 221 161 (1)
------ ------
Amounts receivable from key management
Loan receivable 1,000 1,000 (2)
------ ------
Amounts receivable from parent
company
Loan receivable 6,930 6,930 (3)
------ ------
Amounts payable to unconsolidated
subsidiaries
Livermore Israel Investments Ltd (3,522) (3,522) (4)
------ ------
Amounts payable to other related
party
Loan payable (149) (149) (5)
------ ------
Amounts payable to key management
Directors' current accounts (93) (7) (4)
Other key management personnel (700) (790) (6)
------ ------
(793) (797)
------ ------
Key management compensation
Short term benefits
Executive Directors' fees 795 795 (7)
Executive Directors' reward payments - 1,400
Non-executive Directors' fees 105 87
Non-executive Directors' reward
payments - 25
Other key management fees 408 890 (8)
------ ------
1,308 3,197
------ ------
(1) The amounts receivable from unconsolidated subsidiaries and
any Director's current accounts with debit balances are interest
free, unsecured, and have no stated repayment date.
(2) A loan with a balance at 31 December 2020 of USD 1m was made
during 2019 to a key management employee and a Company's Director.
The loan is free of interest, is unsecured and is repayable on
demand. This loan is included within trade and other receivables
(note 9 ).
(3) A loan with a balance at 31 December 2020 of USD 6.93m was
made to the Company's parent, Groverton Management Ltd. The loan is
free of interest, is unsecured and is repayable on demand. This
loan is included within trade and other receivables (note 9 ).
(4) The amounts payable to unconsolidated subsidiaries and
Director's current accounts with credit balances are interest free,
unsecured, and have no stated repayment date.
(5) A loan with a balance at 31 December 2020 of USD 0.149m has
been received from a related company (under common control),
Chanpak Ltd. The loan is free of interest, is unsecured and is
repayable on demand. This loan is included within trade and other
payables (note 12 ).
(6) The amount payable to other key management personnel relates
to payments made on behalf of the Company for investment purposes
and accrued consultancy fees.
(7) These payments were made directly to companies which are related to the Directors.
(8) Other key management fees are included within professional fees (note 18).
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 2020
or 2019.
Noam Lanir, through an Israeli partnership, was the major
shareholder of Babylon Ltd, an Israel based Internet Services
Company. Noam Lanir sold his interest in Babylon during the first
half of 2020. Babylon Ltd changed its name to ABRA INFO TECH BR
immediately after the sale. The Company as of 31 December 2020 held
a total of 1.941m shares at a value of USD 2.224m (2019: 1.941m
shares at a value of USD 1.199m) which represents 4% of its
effective voting rights. The investment in ABRA INFO TECH BR is
held through the Company's subsidiary Livermore Israel Investments
Ltd.
23. Litigation
Fairfield Sentry Ltd vs custodian bank and beneficial owners
One of the custodian banks that the Company used faces a
contingent claim up to USD 2.1m, and any interest as will be
decided by a US court and related legal fees, with regards to the
redemption of shares in Fairfield Sentry Ltd, which were bought in
2008 at the request of Livermore and on its behalf. If the claim
proves to be successful Livermore will have to compensate the
custodian bank since the transaction was carried on Livermore's
behalf. The same case was also filed in BVI where the Privy Council
ruled against the plaintiffs.
As a result of the surrounding uncertainties over the existence
of any obligation for Livermore, as well as for the potential
amount of exposure, the Directors cannot form an estimate of the
outcome for this case and therefore no provision has been made.
No further information is provided on the above case as the
Directors consider it could prejudice its outcome.
24. Commitments
The Company has expressed its intention to provide financial
support to its subsidiaries, where necessary, to enable them to
meet their obligations as they fall due.
Other than the above, the Company has no capital or other
commitments as at 31 December 2020.
25. Impact of COVID-19
As of the date of this report, large-scale vaccination programs
and huge fiscal and monetary stimulus seem to have been successful
in reducing the spread and health impact of the virus, as well as
put most developed countries on a strong recovery course.
Unfortunately, the virus continues to spread in less developed
regions such as India and the risk of a vaccine-resistant mutated
virus remains. The Company is primarily exposed to the US economy
and is benefiting from the economic recovery as tighter credit
spreads and reduced distressed credits increase the value of the
Company's CLO portfolio. While the Company continues to be
conservatively positioned with cash in excess of USD 45m as of 13
May 2021, the Company plans to increase its investments in the CLO
market in the near-mid term. At the same time, the Company plans to
maintain strong liquidity and stay debt free.
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:
2020 2020 2020 2019 2019 2019
US $000 US $000 US $000 US $000 US $000 US $000
Financial Financial Net Financial Financial Net value
assets liabilities value assets liabilities
British Pounds
(GBP) 1,911 (114) 1,797 2,850 (138) 2,712
Euro 367 (68) 299 537 (62) 475
Swiss Francs
(CHF) 14 (27) (13) 3,592 (129) 3,463
Israel Shekels
(ILS) 6,175 (3,522) 2,653 5,153 (3,522) 1,631
------ ------ ------ ------ ------ ------
Total 8,467 (3,731) 4,736 12,132 (3,851) 8,281
------ ------ ------ ------ ------ ------
Also, some of the USD denominated investments are backed by
underlying assets which are invested in non-USD assets. For
instance, investments in certain emerging market private equity
funds are denominated in USD but the funds in turn have invested in
assets denominated in non-USD currencies.
A 10% increase of the following currency rates against the rate
of United States Dollar (USD) at 31 December would have the
following impact. A 10% decrease of the following currencies
against USD would have an approximately equal but opposite
impact.
2020 2020 2020 2019 2019 2019
US $000 US $000 US $000 US US $000 US $000
$000
Profit Other comprehensive Equity Profit Other comprehensive Equity
or loss income or loss income
British Pounds
(GBP) 180 - 180 200 72 272
Euro 30 - 30 47 - 47
Swiss Francs
(CHF) (1) - (1) 346 - 346
Israel Shekels
(ILS) 265 - 265 163 - 163
------ ------ ------ ------ ------ ------
Total 474 - 474 756 72 828
------ ------ ------ ------ ------ ------
The above analysis assumes that all other variables in
particular, interest rates, remain constant.
Interest rate risk
The Company is exposed to interest rate risk on its
interest-bearing instruments which are affected by changes in
market interest rates.
As at 31 December 2020 and 31 December 2019, 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:
2020 2019
US $000 US $000
Financial assets - subject to:
- fair value changes - 1,128
- interest changes 50,407 56,499
------ ------
Total 50,407 57,627
------ ------
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.
2020 2019
US $000 US $000
Profit Profit
or loss or loss
Financial assets
- fair value changes - (2)
- interest changes 504 565
------ ------
504 563
------ ------
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
5.46% change in the net asset value as at 31 December 2020 (2019:
5.85%), 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.
2020 2019
US $000 US $000
Profit Profit
or loss or loss
Financial assets at fair value through
profit or loss 8,955 10,125
------ ------
Derivatives
The Investment Manager may use derivative instruments in order
to mitigate market risk or to take a directional investment. These
provide a limited degree of protection and would not materially
impact the portfolio returns if a large market movement did
occur.
Credit risk
The Company invests in a wide range of securities with various
credit risk profiles including investment grade securities and sub
investment grade positions. The investment manager mitigates the
credit risk via diversification across issuers. However, the
Company is exposed to a migration of credit rating, widening of
credit spreads and default of any specific issuer.
The Company only transacts with regulated institutions on normal
market terms which are trade date plus one to three days. The
levels of amounts outstanding from brokers are regularly reviewed
by the management. The duration of credit risk associated with the
investment transactions is the period between the date the
transaction took place, the trade date and the date the stock and
cash are transferred, the settlement date. The level of risk during
the period is the difference between the value of the original
transaction and its replacement with a new transaction.
The Company is mainly exposed to credit risk in respect of its
fixed income investments (mainly CLOs) and to a lesser extend in
respect of its financial assets at amortised cost, and other
instruments held for trading (perpetual bonds).
The Company's maximum credit risk exposure at 31 December is as
follows:
2020 2019
US $000 US $000
Financial assets:
At amortised cost:
Trade and other receivables 8,151 8,172
Cash at bank 50,407 56,499
------ ------
58,558 64,671
Financial assets at fair value through
profit or loss 87,042 99,545
------ ------
145,600 164,126
------- -------
No collaterals are held by the Company itself in relation to the
Company's financial assets subject to credit risk.
The fair values of the above financial assets at fair value
through profit or loss are also affected by the credit risk of
those instruments. However, it is not practical to provide an
analysis of the changes in fair values due to the credit risk
impact for the year or previous periods, nor to provide any
relevant sensitivity analysis.
The Company has exposure to US senior secured loans and to a
lesser degree emerging market loans through CLO equity tranches as
well as warehouse first loss tranches. These loans are primarily
non-investment grade loans or interests in non-investment grade
loans, which are subject to credit risk among liquidity, market
value, interest rate, reinvestment and certain other risks. It is
anticipated that these non-investment grade loans generally will be
subject to greater risks than investment grade corporate
obligations.
A non-investment grade loan or debt obligation or an interest in
a non-investment grade loan is generally considered speculative in
nature and may become a defaulted security for a variety of
reasons. A defaulted security may become subject to either
substantial workout negotiations or restructuring, which may
entail, among other things, a substantial reduction in the interest
rate, a substantial write-down of principal, and a substantial
change in the terms, conditions and covenants with respect to such
defaulted security. In addition, such negotiations or restructuring
may be quite extensive and protracted over time, and therefore may
result in substantial uncertainty with respect to the ultimate
recovery on such defaulted security. Bank loans have historically
experienced greater default rates than has been the case for
investment grade securities.
The Company has no investment in sovereign debt as at 31
December 2020 or 2019.
At 31 December the credit rating distribution of the Company's
asset portfolio subject to credit risk was as follows:
Rating 2020 2019
US $000 Percentage US $000 Percentage
AA 31,415 21.6% 48,143 29.3%
A 16,350 11.2% 6,433 3.9%
A- - - - -
B 3,998 2.7% 874 0.5%
BB+ - - 1,127 0.7%
BBB 2,642 1.8% 1,936 1.2%
B- 1,148 0.8% 4,239 2.6%
BB- 8,818 6.1% - -
Not Rated 81,229 55.8% 101,464 61.8%
------ ------ ------ ------
145,600 100% 164,216 100%
------ ------ ------ ------
Included within "not rated" amounts are investments in loan
market through CLOs (equity tranches) of USD 77.006m and open
warehouses of USD 10.036m (2019: CLOs of USD 98.417m and open
warehouses of USD 0.0m).
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.
31 December 2020 Carrying Less than
amount 1 year
US $000 US $000
Trade and other payables 4,868 4,868
------ ------
Total 4,868 4,868
------ ------
31 December 2019 Carrying Less than
amount 1 year
Trade and other payables 4,907 4,907
------ ------
Total 4,907 4,907
------ ------
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 2020, the Company had liquid investments
totalling USD 137.9m, comprising of USD 50.4m in cash and cash
equivalents, USD 77.0m in investments in loan market through CLOs,
USD 12.5m 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 2020 and 2019 the Company had no
borrowings and therefore it is wholly 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:
2020 2019
US $000 US $000
Cash at bank (50,407) (56,499)
------ ------
Net Debt (50,407) (56,499)
------ ------
Total equity 163,907 173,080
------ ------
Net debt to equity ratio (0.31) (0.33)
------- -------
27. Financial assets and liabilities by class
Note 2020 2019
US $000 US $000
Financial assets:
Financial assets at amortised cost 9, 10 58,558 64,670
Financial assets at fair value through
profit or loss 4 99,583 101,255
Financial assets designated at fair
value through other comprehensive
income 5 3,729 6,204
------- -------
161,870 172,129
------- -------
Financial liabilities:
Financial liabilities at amortised
cost 12 4,868 4,907
------- -------
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 in 2021:
-- On 8 March 2021, the Board announced an interim dividend of
USD 8m (USD 0.0488 per share) to members on the register on 19
March 2021. The dividend was paid on 16 April 2021.
-- The Company bought back 10,888,577 shares to be held in
treasury for a total cost of USD 6.9m.
-- The Company invested an additional amount of USD 10m to the
open warehouse facility as at 31 December 2020, increasing its
total investment to USD 20m. Livermore's investment amount plus net
carry amounting to a total of USD 1.6m became receivable in April
2021.
-- The loans receivable from the Company's parent and a
Director, with a total carrying amount of USD 7.9m (note 22), were
fully settled during 2021.
There were no other material events after the end of the
reporting year, which have a bearing on the understanding of these
financial statements.
Shareholder Information
Registrars
All enquiries relating to shares or shareholdings should be
addressed to:
Link Asset Services
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone: 0871 664 0300
Facsimile: 020 8639 2342
Change of Address
Shareholders can change their address by notifying Link Asset
Services in writing at the above address.
Website
www.livermore-inv.com
The Company's website provides, amongst other things, the latest
news and details of the Company's activities, share price details,
share price information and links to the websites of our
brands.
Direct Dividend Payments
Dividends can be paid automatically into shareholders' bank or
building society accounts. Two primary benefits of this service
are:
-- There is no chance of the dividend cheque going missing in the post; and
-- The dividend payment is received more quickly because the
cash sum is paid directly into the account on the payment date
without the need to pay in the cheque and wait for it to clear.
As an alternative, shareholders can download a dividend mandate
and complete and post to Link Asset Services.
Lost Share Certificate
If your share certificate is lost or stolen, you should
immediately contact Link Asset Services on 0871 664 0300who will
advise on the process for arranging a replacement.
Duplicate Shareholder Accounts
If, as a shareholder, you receive more than one copy of a
communication from the Company you may have your shares registered
in at least two accounts. This happens when the registration
details of separate transactions differ slightly. If you wish to
consolidate such multiple accounts, please call Link Asset Services
on 0871 664 0300.
Please note that the Directors of the Company are not seeking to
encourage shareholders to either buy or sell the Company's
shares.
Corporate Directory
Secretary Principal Bankers
Chris Sideras
Registered Office Banque J. Safra Sarasin (Luxembourg)
Trident Chambers SA
PO Box 146
Road Town 17 - 21, Boulevard Joseph II
Tortola L-1840
British Virgin Islands Luxembourg
Company Number CBH Compagnie Bancaire Helvétique
475668 SA
Registrars Löwenstrasse 29 Zurich
Link Asset Services 8021
34 Beckenham Road Switzerland
Beckenham
Kent BR3 4TU Credit Suisse AG
England Seeefldstrasse 1
Auditor Zurich 8070
Grant Thornton (Cyprus) Ltd Switzerland
41-49, Agiou Nicolaou Street
Nemeli Court - Block C UBS AG
2408 Engomi Nicosia Paradeplatz 6
P.O. Box 239071687 CH-8098 Zürich
1687 Nicosia Cyprus Switzerland
Solicitors
Travers Smith Bank Julius Baer & Co. Ltd.
10 Snow Hill Bahnhofstrasse 36,
London CH-8010 Zurich,
EC1A 2AL Switzerland
England
Nominated Adviser & Broker
Arden Partners plc
125 Old Broad Street
London
EC2N 1AR
England
Enquiries
Livermore Investments Group Limited +41 43 344 3200
Gaurav Suri
Nominated Adviser and Broker +44 (0)207 614 5900
Arden Partners plc
Richard Johnson
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