TIDMLIV
RNS Number : 0794A
Livermore Investments Group Limited
22 May 2023
Highlights
-- Net loss for the year was USD 24.4m (2021: net profit of USD 24.7m).
-- Net Asset Value per share declined to USD 0.77 (2021 USD
1.07) after paying USD 24m interim dividend implying a net return
of -16.7% for the year.
-- The Company is conservatively positioned with over USD 43.9m
of cash deposits and Government bonds.
-- On 5 January 2022, the Company announced an interim dividend
of USD 24m (USD 0.145 per share) to members on the register on 14
January 2022. The dividend was paid on 7 February 2022.
-- Collateralized Loan Obligations (CLO) portfolio and warehouse
generated USD 23.2m in cash distributions and a total net negative
return of USD 19.8m in 2022.
Chairman's and Chief Executive's Review
Introduction
We are pleased to announce the financial results for Livermore
Investments Group Limited ("Livermore" or "the Company") for the
year ended 31 December 2022. References to the Company hereinafter
also include its consolidated subsidiary (note 8 ). References to
financial statements hereinafter are to the Company's consolidated
financial statements.
2022 was a challenging year for the global economy. Inflation
across most developed countries rose to multi-decade highs and
geopolitical tensions increased with Russia's attack on Ukraine.
Sanctions applied to Russia and loss of production in Ukraine
further increased energy and agricultural commodity prices.
Developed economy central banks were forced to apply the economic
breaks and increase interest rates in order to contain inflation.
Financial markets declined with both fixed income and equity
markets recording significant losses in 2022. The US Dollar rallied
sharply against most currencies in the first three quarters as the
US Federal Reserve led the monetary policy tightening race.
In anticipation of sharp interest rate increases and the
potential for higher default and credit losses, management
positioned the Company to be able to reduce risk, and rapidly and
successfully converted its two open warehouses into new issue CLOs
at amongst the lowest financing costs in 2022. Over the year, the
Company increased its cash, deposit, and government bond position
from USD 21.1m after paying a USD 24m interim dividend in January
2022 to USD 43.9m by year-end. Management believes that a high
liquidity position will allow the Company to benefit from
opportunistic trading and price dislocations as and when they
appear during the process of inflation normalisation.
The US senior secured loan and CLO market is directly exposed to
rising interest rates. Management anticipates higher borrowing
costs for loan issuers, higher default rates and potentially
significant rating downgrades - all of which are negative for the
Company's CLO equity portfolio. This was also reflective in the
valuation declines of USD 42.7m during the year. Overall, the
Company received USD 23.2m in cash distributions from its CLO and
warehousing portfolio resulting in a net negative contribution of
USD 19.8m to the financial statements. Most of these declines
occurred in the first half of the year.
Our net loss for the year was USD 24.4m (2021 net profit: USD
24.7m) and the year-end NAV was USD 0.77 per share (2021 NAV: USD
1.07 per share) after paying a dividend payment of USD 24m (USD
0.145 per share).
The Company ended the year with over USD 43.9m of cash invested
mainly in deposits and US government debt.
Financial Review
The NAV of the Company on 31 December 2022 was USD 127.7m (2021:
USD 177.7m). Net loss, during the year was USD 24.4m, which
represents loss per share of USD 0.15 . Operating expenses were USD
3.0m (2021: USD 8.6m).
The overall change in the NAV is primarily attributed to the
following:
31 December 2022 31 December 2021
US $m US $m
----------------- -----------------
Shareholders' funds at beginning of year 177.7 163.9
----------------- -----------------
___________ ___________
----------------- -----------------
Income from investments 23.7 27.5
----------------- -----------------
Unrealised (losses) / gains on investments (46.3) 9.4
----------------- -----------------
Unrealised exchange gains - 0.1
----------------- -----------------
Operating expenses (3.0) (8.6)
----------------- -----------------
Net finance costs (0.2) (0.4)
----------------- -----------------
Tax charge (0.2) (0.1)
----------------- -----------------
___________ ___________
----------------- -----------------
(Decrease) / increase in net assets from operations (26.0) 27.9
----------------- -----------------
Dividends paid (24.0) (8.0)
----------------- -----------------
Issuance / purchase of own shares - (6.1)
----------------- -----------------
___________ ___________
----------------- -----------------
Shareholders' funds at end of year 127.7 177.7
----------------- -----------------
------ ------
----------------- -----------------
Net Asset Value per share US $0.77 US $1.07
----------------- -----------------
Dividend & Buyback
On 5 January 2022, the Company announced an interim dividend of
USD 24m (USD 0.145 per share) to members on the register as at 14
January 2022. The dividend was paid on 7 February 2022.
The Board of Directors will decide future dividends based on
profitability, liquidity requirements, portfolio performance,
market conditions, and the share price of the Company relative to
its NAV.
Richard B Rosenberg Noam Lanir
Chairman Chief Executive Officer
19 May 2023
Review of Activities
Introduction and Overview
High and rising inflation coupled with Russia's attack on
Ukraine and the resulting disruptions to energy and commodity
markets drove central banks in developed economies to rapidly
tighten monetary policy in 2022. Strong economic momentum from 2021
slowed down in 2022 and financial markets declined sharply in the
first half of the year. The safe government bond markets also
suffered their largest declines in decades as record low yields
collided with the sharpest increases.
During the year, the S&P 500 Index declined by 18.1%,
marking its largest fall since the global financial crisis, and the
10-year US Treasury note generated negative returns of 16.9%.
European markets were particularly hard hit as energy prices
skyrocketed due the Russia's war on Ukraine. Chinese markets
continued to decline as the Chinese government continued their
"Covid-zero" lockdown policies until October 2022. The Hang Seng
Index declined by 15.6% in 2022, but was down over 35% before
recovering sharply after the government announced they would loosen
their lockdown policy. The US Dollar increased in value against
most currencies as investors sought safety and the US Federal
Reserve was the most aggressive in raising rates amongst the
developed market economies.
Fixed Income markets fared poorly on account of higher interest
rates and concerns about the economic outlook. The Bloomberg US
Corporate Total Return index lost 15.76% and the High Yield Total
Return lost 11.19% in 2022. The US leveraged loan market performed
much better losing only 1.06% as their floating rate
characteristics protected investors from interest rate risk. At the
same time, the future outlook for leveraged loan borrowers is
concerning as they face rising interest burdens in the near term.
We expect higher default rates and potentially lower recoveries
from weaker borrowers if the US economy enters a recessionary
environment.
CLOs equity had a poor year as anticipation of higher default
rates due to higher interest rates affected prices significantly,
especially those positions that were out of or close to their
reinvestment end dates. CLO debt tranche spreads also widened
sharply. Management anticipated this reaction and promptly
converted its two open warehouses into new issue CLOs. Over the
course of the year, management did not reinvest the dividends
received from CLOs and increased its cash and marketable securities
position significantly. Cashflows from CLO equity remained strong
but were lower on account of loss of the Libor floor benefit and
also the increased basis between 1-month and 3-month Libor. Over
the past few years, most CLO assets (loans) have switched to pay on
a monthly basis with a 1-month Libor base rate setting whereas CLO
liabilities pay on a quarterly basis with a 3-month Libor base rate
setting. In 2022, the basis between 1-month and 3-month Libor
widened to very high levels as the market priced in larger than
normal rate increases by the US Federal Reserve resulting in CLO
liabilities being paid at higher base rates than the income
received from CLO assets and therefore CLO equity received smaller
distributions than anticipated in early 2022. Further, CLO equity
received higher than normal distributions in 2021 as most assets
came with a Libor floor whereas CLO liabilities did not have this
benefit. When 3m Libor turned higher than the average floor on the
assets in 2022, this benefit to CLO equity was eroded. While credit
spreads have widened and loan prices have declined, defaults in the
loan market stayed low in 2022. However, we expect higher default
and stressed situations in 2023. At the same time, lower loan
prices allowed CLO managers to build excess par which should offset
some losses from defaults in the future. We are positioned
conservatively with mostly recent vintage CLOs with long
reinvestment periods that are expected to perform better. Further,
our high cash position should enable us to take advantage of
opportunities in the secondary markets in the near to mid-term.
During the year, the CLO and warehouse portfolio generated USD
23.2m in cash distributions.
For the 2022 year-end, the Company reported a NAV/share of USD
0.77 after a dividend payment of USD 24m (USD 0.145 per share) and
net loss of USD 24.4m. Interest and distribution income amounted to
USD 23.7m, of which, USD 23.2m was generated from the CLO and
warehousing portfolio. The net loss of the CLO and warehousing
portfolio was USD 19.8m as mark-to-market changes offset
distributions from the portfolio. Management redeemed USD 2.0m from
the digital assets focussed fund in 2022. Operating expenses
amounted to USD 3.0m. The Company ended the year with over USD
43.9m of cash, deposits, and investments in US treasury bills after
paying an interim dividend of USD 24m in February 2022.
The Company does not have an external management company
structure and thus does not bear the burden of external management
and performance fees. Furthermore, the interests of Livermore's
management are aligned with those of its shareholders as management
has a large ownership interest in Livermore shares.
Considering the strong liquidity positions of Livermore,
together with its strong foothold in the US CLO markets as well as
the robustness of its investment portfolio and the alignment of the
management's interests with those of its shareholders, management
believes that the Company is well positioned to benefit from
current conditions.
Global Investment Environment
The global economy slowed down in 2022, and inflation in
advanced economies continued to rise. This was due to a combination
of factors, including supply bottlenecks, renewed waves of the
pandemic, and Russia's attack on Ukraine. The resulting decline in
consumer and business sentiment led to weakened demand and
purchasing power, and financial conditions became more restrictive
as central banks tightened monetary policy. Bond yields rose, and
stock markets suffered losses. Differences in the scale and pace of
monetary policy tightening by central banks led to larger movements
on foreign exchange markets, with the US dollar strengthening
against most currencies. While international supply chain problems
eased gradually, global demand momentum declined in the second half
of the year, weighing on global trade. Commodity prices fluctuated
strongly, especially for energy sources.
USA: In 2022, the US economy slowed due to high inflation,
tighter monetary policy, and less expansionary fiscal policy. Real
GDP fell in the first half of 2022, however rose at a 3% pace in
the second half. Consumer spending endured to rise, supported by
savings accumulated during the pandemic. Despite the slowdown, the
labour market remained strong, with above-average growth in
employment and low unemployment rates at 3.5%. Inflation in
advanced economies, including the US, continued to rise, with
energy and food prices being key drivers due to war in Ukraine. In
the US, inflation stood at 8.0% in contrast to 4.7% in 2021, the
highest seen in around 40 years. The personal consumption
expenditures (PCE) price index rose to 6.2% over the 12 months
ending in December, and the index that excludes food and energy
items (so-called core inflation) was up 5.0%. Due to high inflation
and a strong labour market, the Federal Reserve significantly
tightened its monetary policy, raising its policy rate by a total
of 4.25 percentage points ending the year at 4.25 - 4.50%. Further,
the Federal Reserve started reducing its balance sheet and
signalled additional interest rate hikes to curb inflation.
Eurozone: In 2022, the euro area's GDP grew by 3.5%, although
growth slowed down over the year due to higher inflation caused by
Russia's attack on Ukraine and reduced gas deliveries. The labour
market remained favourable, and the unemployment rate reached a
historical low of 6.6% in December. Headline inflation rose to
8.4%, driven by higher energy and food prices, while core inflation
reached 5.2%, reflecting higher inflation in services and price
increases for various goods. The ECB raised its key rates gradually
from July, and in December, its deposit facility rate reached 2.0%.
The ECB discontinued its net asset purchases under the Pandemic
Emergency Purchase Program in March, and under the Asset Purchase
Program in July, with plans to gradually reduce the asset portfolio
in 2023. However, the ECB approved the Transmission Protection
Instrument in July to combat a tightening in financing conditions
not warranted by fundamentals that impedes the transmission of
monetary policy.
Japan: Japan's GDP grew by 1.1% in 2022 due to the expansionary
monetary and fiscal policy. Economic activity fluctuated as a
result of the repeated waves of the pandemic and procurement
problems in the automotive industry in the first half of the year.
Rising inflation led to a loss in real income and dampened the
recovery in consumption. The unemployment rate declined marginally
and stood at 2.5% in December, still higher than before the
pandemic. Consumer prices rose by 2.5%. Inflation fluctuated
significantly over the course of 2022, being slightly positive
(0.2%) in the first half of the year but rose again and stood at
1.5% in December. The Bank of Japan (BoJ) maintained its highly
accommodative monetary policy throughout 2021 and left its
short-term deposit rate at -0.10% and the target for the 10-year
government bond yields to 0%. However, In December, the BoJ decided
to expand the range of fluctuation for long-term bond yields to
improve market functioning.
China: In 2022, China's GDP growth was modest at 3.0% due to the
impact of the coronavirus pandemic and containment measures taken
as part of zero-COVID policy. Ongoing crisis in the residential
real estate market weight on the economy, hence increasing
unemployment. To support the economy, the Chinese government
announced measures such as infrastructure investment, tax relief
for companies, and support for the real estate market. Inflation in
China stood at 2.0%, with higher food prices being the primary
driver. Core inflation remained essentially unchanged at 0.9%. The
People's Bank of China lowered policy interest rates slightly in
January and August, including a 0.2 percentage point reduction in
the reverse repo rate to 2.0%, lowered reserve requirement ratio
for banks and used targeted monetary policy instruments to support
the economy.
Commodities: Commodity prices were affected by the war in
Ukraine and the sanctions imposed on Russia. At the beginning of
the year, a barrel of Brent crude cost just under USD 80, rose to
USD 130 per barrel in March; and at the end of the second quarter
2022, the price of Brent crude hovered around USD 110 per barrel,
thus remaining considerably higher than at the beginning of the
year. As the global supply of oil increased thereafter and demand
weakened in the wake of the economic slowdown, the oil price fell
again and stood at slightly over USD 80 at the end of 2022. In
Europe, natural gas and electricity prices rose strongly, in
particular due to a reduction in the supply of gas from Russia.
Energy-saving measures and well-stocked gas storage facilities
contributed to the situation easing again somewhat towards the end
of the year. Industrial metal prices also fluctuated strongly over
the course of 2022, closing slightly lower than at the beginning of
the year.
Equities and Bonds: In 2022, global financial markets
experienced volatility and decline due to several factors,
including the ongoing COVID-19 pandemic, supply chain issues,
inflation, political instability, and energy price concerns
following Russia's invasion of Ukraine. A midterm US election
shifted more power to Republicans but left Democrats in a stronger
position than some had expected. Despite some rallies, the S&P
500 Index fell by 18.1%, its worst annual return since 2008, and
global stock markets ended with their largest declines since the
financial crisis. Global equities, as measured by the MSCI All
Country World Index, fell 18.4%. Developed international stocks, as
represented by the MSCI World ex USA Index, lost 14.3%, while
emerging markets declined even further, with the MSCI Emerging
Markets Index down 20.1%. Small capitalization stocks performed
slightly better than large cap stocks. Cryptocurrencies and
technology stocks were hit hard, with bitcoin falling to about 75%
lower than its high in November 2021 and the large mega-cap tech
stocks losing trillions in market value. Benchmark US Treasuries
also posted their worst annual returns in decades, with 10-year
Treasury notes losing 16.3%, reflecting the rare occurrence of
tandem declines for equities and fixed income. The yield curve was
inverted at year's end, with the 2-year yield just above 4.4%,
being higher than the 10-year yield just below 3.9%, reflecting the
higher short-term rates. The Morningstar U.S. Corporate Bond Index
had its worst decline in the 23-year history of the benchmark with
a 15.7% loss.
Foreign exchange: The broad dollar index-a measure of the
trade-weighted value of the dollar against foreign
currencies-continued to rise over the summer and through the
beginning of the fourth quarter. Widening yield differentials
between the U.S. and the rest of the world and concerns around
foreign growth pushed the dollar higher through October of last
year, prompting several central banks, especially in Asia, to
intervene in foreign exchange markets to support their currencies.
Since peaking in October, the dollar has largely retraced those
gains, reflecting softer inflation data in the U.S., tighter
monetary policy abroad, and better prospects for foreign economic
growth. Still, the broad dollar index remains stronger than it was
in early 2021. After reaching multidecade lows against the dollar
in October, the Japanese yen rebounded following the adjustment of
the Bank of Japan's yield curve control policy.
Loan Market: The Credit Suisse Leverage Loan Index (CSLLI)
generated a negative total return of -1.06% in 2022, which is only
the third negative year for the CSLLI in its 31-year history.
However, the loan asset class has shown greater resilience and
outperformance compared to other risk assets such as equities,
high-yield, and investment grade. The loan market experienced
significant price volatility due to inflation, recessionary fears,
and rate hikes, with lower-rated loans underperforming their higher
quality peers. Retail loan funds experienced regular net outflows
throughout the year, as mutual funds and ETF investors rotated out
of risk assets. During the year, net inflows into loan mutual funds
and ETFs amounts to net outflows of USD 13 billion, compared to net
inflows of USD 47 billion in 2021. Institutional loan issuance
totalled USD 225 billion in 2022, down from a record USD 614
billion in 2021, with the total market size swelling to USD 1.41
trillion. Loan refinancing activity meaningfully increased in the
fourth quarter. The twelve-month trailing default rate fell to
0.72% at year-end, and the loan prepayment rate remained in the
mid-teens throughout 2022, allowing CLOs to reinvest those proceeds
into attractive loans at higher spreads and lower prices, creating
significant value within a CLO.
CLO Market: The CLO market was not immune to the broader
investment environment. CLO debt tranche spreads widened
significantly during the year impeding what would have been a
record year of issuance after a record breaking 2021. Still, the
CLO market saw USD 129bn of new issuance - the second highest of
record. This despite poor arbitrage (difference between spread of
loan assets and the spread of CLO debt tranches). Most of the
issuance was due to investors stuck in warehouses open prior to the
Russian attack on Ukraine and the remaining from investors
attempting to capture loan price discounts during period of
volatility. The refinancing and reset market remained on pause as
debt spreads were wider than on existing tranches.
CLO equity distributions stayed consistent in 2022 but were
lower on account of loss of Libor floor benefit and the abnormally
large difference between 1-month and 3-month Libor due to large
anticipated rate increases by the US Federal Reserve.
As we look ahead in 2022, we expect higher stress from the loan
universe continuing to pressure CLO equity and lower mezzanine
positions. At the same time, we expect to see significant
opportunities in the secondary market.
Sources: Swiss National Bank, Bloomberg, Board of Governors of
the Federal Reserve System, European Central Bank (ECB),
Morningstar, JP Morgan, Credit Suisse
Livermore's Strategy
The financial portfolio is focused on fixed income instruments
which generate regular cash flows and include exposure mainly to
senior secured and usually broadly syndicated US loans and to a
limited extent emerging market debt through investments in CLOs.
This part of the portfolio is geographically focused on the US.
Strong emphasis is given to maintaining sufficient liquidity and
low leverage at the overall portfolio level and to re-invest in
existing and new investments along the economic cycle.
Financial Portfolio
The Company manages a financial portfolio valued at USD 117.4m
as of 31 December 2022, which is composed mainly of cash and
investments in fixed income and credit related securities.
The following is a table summarizing the financial portfolio as
of year-end 2022.
2022 2021
Name US $m US $m
-------------------------------- -------- ------
Investment in the loan market
through CLOs 66.6 101.7
Open Warehouse facilities - 7.6
Public equities 2.3 10.0
-------------------------------- -------- ------
Short term government bonds 24.6
-------------------------------- -------- ------
Long term government bonds 8.3 -
-------------------------------- -------- ------
Corporate bonds 4.6
-------------------------------- -------- ------
Invested total 106.4 119.3
-------------------------------- -------- ------
Cash 11.0 45.1
-------------------------------- -------- ------
Total 117.4 164.4
-------------------------------- -------- ------
Senior Secured Loans and Collateralized Loan Obligations
(CLO):
US senior secured loans are a floating rate asset class with a
senior secured claim on the borrower and with overall low
volatility and low correlation to the equity market. CLOs are
managed portfolios invested into diversified pools of senior
secured loans and financed with long term financing.
In 2022, US leveraged loans were the best performer in the fixed
income asset class. The Credit Suisse Leverage Loan Index ("CSLLI")
generated a total return of -1.06% in 2022, its third negative year
in its 30+ years of existence. The floating-rate characteristics of
leveraged loans protected investors from rising interest rates.
Although leveraged loans typically have low volatility, 2022 was an
outlier experiencing significant swings during the course of the
year.
Institutional loan issuance was USD 225 billion (2021: USD 614
billion) as capital markets remained muted in the face of
significant rate and credit spread volatility. While new issue
activity was relatively low, the fourth quarter saw higher quality
issuers refinancing and extending maturities of their outstanding
loans. As a result, most of the maturities are in 2025 and
beyond.
Institutional loan issuance totalled USD 225 billion in 2022,
compared to a record USD 614 billion in 2021. Total institutional
loans outstanding stood at $1.41 trillion as of December 31, 2022,
up slightly from USD 1.35 trillion at the beginning of the year.
While primary issuance remained limited in the fourth quarter, loan
refinancing activity meaningfully increased as U.S. corporates
rushed to address upcoming maturities before year-end, including
large par repayments from higher quality issuers
Loan defaults stayed relatively low in 2022, but the
twelve-month trailing default rate increased to 0.72% as at year
end 2022 from the 0.29% at the beginning of the year. The
historical long-term default rate is around 2.7%. As interest rates
rise higher, we anticipate the default rate to increase towards
historical averages over the near to mid-term.
Despite declining loan issuance and widening CLO liabilities,
the CLO market ended 2022 with its second highest annual new
issuance on record, at a total volume of USD 129 billion. Most of
this activity was driven by warehouses open coming into the year as
investors contended with very low returns to term out their
financing, as well as opportunistic issuance to take advantage of
significant loan price drops during certain periods.
With a significant share of high-quality issuers trading at
discounted prices, CLO collateral managers were well positioned to
improve underlying loan portfolios through relative value credit
selection in the secondary market, as well as take advantage of a
high-quality primary market, at discounted prices.
Despite the loan price volatility and widening credit spreads,
CLO equity distributions were not disrupted. However, the
distributions were lower than initially anticipated at the
beginning of the year on account of loss of Libor floor benefit and
the rising basis between 1-month and 3-month Libor. Many loan
borrowers took advantage of a lower 1-month rate, while CLO
liabilities pay at the 3-month rate. As this mismatch resolves with
slowing pace of rate increases, we believe equity distributions
will increase for many CLOs over the coming quarters.
Our CLO portfolio was also negatively affected during 2022.
Despite significant and consistent cashflow, valuations of CLO
equity positions declined meaningfully due to wider spreads, higher
anticipated defaults and low liquidity. During the year, the CLO
and warehouse portfolio generated USD 23.2m in cash distributions
but valuations declined by USD 42.7m resulting in a negative return
of USD 19.8m. Management anticipated a negative reaction from the
expected inflation fight and promptly converted its two open
warehouses into new issue CLOs in the first four months of the
year. This transaction recorded the lowest cost of debt for 2022
vintage CLOs. Over the course of the year, management did not
reinvest the dividends received from CLOs and increased its cash
and marketable securities position significantly. While credit
spreads have widened and loan prices have declined, defaults in the
loan market stayed low in 2022. However, we expect higher default
and stressed situations in 2023. At the same time, lower loan
prices allowed CLO managers to build excess par (i.e. buying CLO
eligible loans at prices below par but receive par treatment for
the purposes of CLO over-collateralization tests) which should
offset some losses from defaults in the future. We are positioned
conservatively with mostly recent vintage CLOs with long
reinvestment periods that are expected to perform better. Further,
our high cash position should enable us to take advantage of
opportunities in the secondary markets in the near to mid-term.
As of the end of the year, all of the Company's US CLO equity
positions were passing their Junior Overcollateralization (OC)
tests. Management continues to actively monitor the CLO portfolio
and position it towards longer reinvestment periods through
recycling old CLOs into new or refinancing them with extended
reinvestment periods, as well as conducting relative value and
opportunistic trading.
From July 2023, Libor is expected to cease to exist. In the US,
SOFR (Secured Overnight Funding Rate) will be the base rate for
most floating rate contracts. Most US CLOs are expected to
transition their liabilities to term SOFR plus a credit spread
adjustment as per the Libor transition language in their respective
documents. Most US Leveraged Loans are also expected to transition
to SOFR but the timing of such transitions may not match the
transition of CLO liabilities. This may introduce a Libor-SOFR
basis for a short period of time.
As we look ahead, we expect the interest rates staying high to
combat high inflation. Although leverage loan borrower fundamentals
are currently satisfactory, we expect high rates to put more
pressure on their interest coverage covenants. Tighter financial
conditions in the future can increase refinancing and default risk
for certain borrowers. The counterbalance to this is most borrowers
have addressed their near-term financing needs and very few of them
have near-term maturities.
We expect loan default rates to moderately increase from the
very low 2022 levels towards their long-term averages.
The Company's CLO portfolio is divided into the following
geographical areas:
2022 Percentage 2021 Percentage
Amount Amount
US $000 US $000
US CLOs 66,576 100% 101,667 100%
------- ------ ------ ------
Fund Investments
The fund investments held by the Company are mainly incorporated
in the form of Managed Funds (mostly closed end funds) in Israel
and the emerging economies. Also, the Company has some direct
venture capital investments.
The following summarizes the book value of the private equity
funds at 31 December 2022.
Name US $m
-------------------- -------
Cole Capital Fund 2.0
Fetcherr Ltd 1.8
Phytech (Israel) 2.6
Say2eat Inc 0.8
Other investments 0.4
Total 7.6
-------------------- -------
Cole Capital : Cole Capital is a fund that trades in digital
assets such as Bitcoin and it is advised by Frequants. The advisor
has developed automated trading algorithms that have outperformed
the underlying digital assets performance by consistently avoiding
large drawdowns. The Company invested USD 4m in Cole Capital on 10
March 2021 and in 2022 we redeemed and received from the fund 3.5m.
The residual value of the Company's investment as of year-end 2022
in the fund was USD 2m. Post year-end, the Company has redeemed the
remaining USD 2m.
Fetcherr Ltd : Fetcherr is the Israeli start-up that has
developed a proprietary AI-powered goal-based enterprise pricing
and workflow optimization system. Founded in 2019 by experts in
deep learning, Algo-trading, e-commerce, and digitization of legacy
architecture, Fetcherr aims to disrupt traditional rule-based
(legacy) revenue systems through reinforcement learning
methodologies, beginning with the airline industry. The Company
invested USD 2m in 2021.
Phytech : Phytech is an agriculture-technology company in Israel
providing end-to-end solutions for achieving higher yields on crops
and trees. Livermore continues to hold 12.2% in Phytech Global
Advisors Ltd, which in turns now holds 11.95% on a fully diluted
basis in Phytech Ltd.
Say2eat Inc : Say2eat is a company that has proved they can
disrupt the existing food delivery (3(rd) party) marketplace model,
with a first party, direct delivery model that is commission free.
The company has shown rapid growth in 2020 and is now active in
over 20 US states from the east coast all the way to Hawaii working
with 200 restaurants. The Company invested USD 0.750m in 2020.
The following table reconciles the review of activities to the
Company's financial assets at 31 December 2022:
Name US $m
------------------------------------------------ -------
Financial Portfolio 106.4
Fund investments 7.6
------------------------------------------------ -------
Total 114.0
------------------------------------------------ -------
Financial assets at fair value through profit
or loss (note 4 ) 106.4
Financial assets at fair value through other
comprehensive income (note 5 ) 7.6
Total 114.0
------------------------------------------------ -------
Investments in Subsidiaries
The subsidiaries include investments in public equity
investments and investments in the fields of real estate. The
resulting fair value changes are mainly attributed to changes in
quoted share prices of the underlying investments.
Events after the reporting date
Details of material events after the reporting date are
disclosed in note 28 to the financial statements.
Litigation
At the time of this Report, there is one matter in litigation
that the Company is involved in. Further information is provided in
note 23 to the financial statements.
Report of the Directors
The Directors submit their annual report and audited financial
statements of the Company for the year ended 31 December 2022.
This report has been prepared on a voluntary basis and it does
not contain all of the information that would have been required
had it been prepared in accordance with the UK Companies Act 2006
guidance.
The Board's objectives
The Board's primary objectives are to supervise and control the
management activities, business development, and the establishment
of a strong franchise in the Company's business lines. Measures
aimed at increasing shareholders' value over the medium to
long-term, such as an increase in NAV are used to monitor
performance.
The Board of Directors
Richard Barry Rosenberg (age 67) independent, Non-Executive
Director, Chairman of the Board
Richard joined the Company in December 2004. He became
Non-Executive Chairman on 31 October 2006. He qualified as a
chartered accountant in 1980 and in 1988 co-founded the accountancy
practice SRLV. He has considerable experience in giving
professional advice to clients in the leisure and entertainment
sector. Richard is a director of a large number of companies
operating in a variety of business segments.
Noam Lanir (age 56), Founder and Chief Executive Officer
Noam founded the Company in July 1998, to develop a specialist
online marketing operation. Noam has led the growth and development
of the Company's operations over the last twenty years which
culminated in its IPO in June 2005 on AIM. Prior to 1998, Noam was
involved in a variety of businesses mainly within the online
marketing sector. He is also the major shareholder of Babylon Ltd,
an International Internet Company listed on the Tel Aviv Stock
Exchange. He is also a major benefactor of a number of charitable
organisations.
Ron Baron (age 55), Executive Director and Chief Investment
Officer
Ron was appointed as Executive Director and Chief Investment
Officer in August 2007. Ron has led the establishment and
development of Livermore's investment platform as a leading
specialized house in the credit space. Ron also has wide investment
and M&A experience. From 2001 to 2006 Ron served as a member of
the management at Bank Leumi, Switzerland and was responsible for
investment activity. Prior to this, he spent five years as a
commercial lawyer advising banks and large corporations on
corporate transactions, including buyouts and privatisations. Ron
has over 18 years of experience as an investment manager with
particular focus on the US credit market and CLOs. He holds an MBA
from INSEAD Fontainebleau and an LLB (LAW) and BA in Economics from
Tel Aviv University. Ron is also the founder and owner of the
Israel Cycling Academy a non-profit professional cycling team.
Augoustinos Papathomas (age 60) independent, Non-Executive
Director
Augoustinos joined the Board in February 2019. He is a trained
and qualified UK Chartered Accountant. He is a Partner of FRP
Advisory Cyprus and of APP Audit and APP Advisory in Cyprus with
over 30 years of experience in assurance, taxation and advisory for
local and international clients. He is also an insolvency
practitioner with experience in many liquidations and
receiverships. Augoustinos has served as a director in various
bodies and organisations and currently he is the chairman of the
Famagusta Chamber of Commerce and Industry in Cyprus.
Directors' responsibilities in relation to the financial
statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
International Financial Reporting Standards as adopted by the
European Union.
The Directors are required to prepare financial statements for
each financial year which give a true and fair view of the
financial position of the Company, and its financial performance
and cash flows for that period. In preparing these financial
statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Company's
transactions, and at any time enable the financial position of the
Company to be determined with reasonable accuracy and enable them
to ensure that the financial statements comply with the applicable
law and International Financial Reporting Standards as adopted by
the European Union. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the British Virgin Islands
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Disclosure of information to the Auditor
In so far as the Directors are aware:
-- there is no relevant audit information of which the Company's auditor is unaware; and
-- the Directors have taken all steps that they ought to have
taken to make themselves aware of any relevant audit information
and to establish that the auditor is aware of that information.
Substantial Shareholdings
As at 02 May 2023, the Directors are aware of the following
interests in 3 per cent or more of the Company's issued ordinary
share capital:
Number % of issued % of voting
of Ordinary ordinary rights*
Shares share capital
------------- --------------- ------------
Groverton Management Ltd 123,048,011 70.39 74.41
Livermore Management Limited 25,456,903 14.56 15.40
* after consideration of the treasury shares.
Save as disclosed in this report and in the remuneration report,
the Company is not aware of any other person or entity that is
interested directly or indirectly in 3% or more of the issued share
capital of the Company or could, directly or indirectly, jointly or
severally, exercise control over the Company.
Details of transactions with Directors are disclosed in note 22
to the financial statements.
Corporate Governance Statement
Introduction
The Company recognises the importance of the principles of good
Corporate Governance and the Board is pleased to accept its
commitment to such high standards throughout the year.
The Board Constitution and Procedures
The Company is controlled through the Board of Directors, which
comprises of two independent Non-Executive Directors (one of which
is the Board's Chairman) and two Executive Directors. The Chief
Executive's responsibility is to focus on co-ordinating the
company's business and implementing Company strategy.
A formal schedule of matters is reserved for consideration by
the Board, which meets approximately four times each year. The
Board is responsible for implementation of the investing strategy
as described in the circular to shareholders dated 29 December 2006
and adopted pursuant to shareholder approval at the Company's EGM
on 17 January 2007. It reviews the strategic direction of the
Company, its codes of conduct, its annual budgets, its progress
towards achievement of these budgets and any capital expenditure
programmes. In addition, the Directors have access to advice and
services of the Company Secretary and all Directors are able to
take independent professional advice if relevant to their duties.
The Directors receive training and advice on their responsibilities
as necessary. All Directors submit themselves to re-election at
least once every three years.
Board Committees
The Board delegates clearly defined powers to its Audit and
Remuneration Committees. The minutes of each Committee are
circulated by the Board.
Remuneration Committee
The Remuneration Committee comprises of the Non-Executive
Chairman of the Board and a Non-Executive Director. The
Remuneration Committee considers the terms of employment and
overall remuneration of the Executive Directors and key members of
Executive management regarding share options, salaries, incentive
payments and performance related pay. The remuneration of
Non-Executive Directors is determined by the Board.
Audit Committee
The Audit Committee comprises of the Non-Executive Chairman of
the Board and a Non-Executive Director and is chaired by the
Chairman of the Board. The duties of the Committee include
monitoring the auditor's performance and reviewing accounting
policies and financial reporting procedures.
The Audit Committee's key objectives are the provision of
effective governance over the appropriateness of the Group's
financial reporting, including the adequacy of related disclosures,
the performance of external audit function, and the management of
the Group's systems of internal control and business risks.
The primary roles and responsibilities delegated to, and
discharged by, the Committee include:
-- monitoring and challenging the effectiveness of internal control and associated functions;
-- approving and amending Group accounting policies;
-- reviewing, monitoring, and ensuring the integrity of interim
and annual financial statements, and any formal announcements
relating to the Company's financial performance;
-- providing advice (where requested by the Board) on whether
the Annual Report and Accounts, taken, is fair, balanced, and
understandable, and provides the information necessary for
shareholders to assess the Company's position and performance;
-- reviewing and monitoring the external auditor's independence,
objectivity, and effectiveness of the audit services; and
-- monitoring and approving the scope and costs of audit.
Board and committee meetings - 2022 attendance
Number of meetings attended Board Audit Remuneration
--------------------------- --------- --------- ------------
Richard Barry Rosenberg 4 of 4 2 of 2 1 of 1
--------------------------- --------- --------- ------------
Noam Lanir 4 of 4 - -
--------------------------- --------- --------- ------------
Ron Baron 4 of 4 - -
--------------------------- --------- --------- ------------
Augoustinos Papathomas 4 of 4 2 of 2 1 of 1
--------------------------- --------- --------- ------------
The Quoted Company Alliance (QCA) Code
The Directors recognise the importance of good corporate
governance and have chosen to apply the Quoted Companies Alliance
Corporate Governance Code (the 'QCA Code'). The QCA Code was
developed by the QCA in consultation with a number of significant
institutional small company investors, as an alternative corporate
governance code applicable to AIM companies. The underlying
principle of the QCA Code is that "the purpose of good corporate
governance is to ensure that the company is managed in an
efficient, effective and entrepreneurial manner for the benefit of
all shareholders over the longer term". The Directors anticipate
that whilst the Company will continue to comply with the QCA Code,
given the Group's size and plans for the future, it will also
endeavour to have regard to the provisions of the UK Corporate
Governance Code as best practice guidance to the extent appropriate
for a company of its size and nature. To see how the Company
addresses the key governance principles defined in the QCA Code
please refer to the table listed on the Company's website, which
was last reviewed and updated in April 2022.
A complete index of the disclosures required by the QCA Code,
including those on the Company's website, can be found at
http://www.livermore-inv.com/CorporateGovernance.
Communication with Investors
The Directors are available to meet with shareholders throughout
the year. In particular the Executive Directors prepare a general
presentation for analysts and institutional shareholders following
the interim and preliminary results announcements of the Company.
The chairman, Richard Rosenberg, is available for meetings with
shareholders throughout the year. The Board endeavours to answer
all queries raised by shareholders promptly.
Shareholders are encouraged to participate in the Annual General
Meeting at which the Chairman will present the key highlights of
the Company's performance. The Board will be available at the
Annual General Meeting to answer questions from shareholders.
Internal Control
The Board is responsible for ensuring that the Company has in
place a system of internal controls and for reviewing its
effectiveness. In this context, control is defined in the policies
and processes established to ensure that business objectives are
achieved cost effectively, assets and shareholder value
safeguarded, and that laws and regulations are complied with.
Controls can provide reasonable but not absolute assurance that
risks are identified and adequately managed to achieve business
objectives and to minimise material errors, frauds and losses or
breaches of laws and regulations.
The Company operates a sound system of internal control, which
is designed to ensure that the risk of misstatement or loss is kept
to a minimum.
Given the Company's size and the nature of its business, the
Board does not consider that it is necessary to have an internal
audit function. An internal audit function will be established as
and when the Company is of an appropriate size.
The Board undertakes a review of its internal controls on an
ongoing basis.
Going Concern
The Directors have reviewed the current and projected financial
position of the Company, making reasonable assumptions about
interest and distribution income, future trading performance,
valuation projections and debt requirements. On the basis of this
review, the Directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence
for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the Annual Report and
accounts.
Independence of Auditor
The Board undertakes a formal assessment of the auditor's
independence each year, which includes:
-- a review of non-audit related services provided to the Company and related fees;
-- discussion with the auditor of a written report detailing all
relationships with the Company and any other parties which could
affect independence or the perception of independence;
-- a review of the auditor's own procedures for ensuring
independence of the audit firm and partners and staff involved in
the audit, including the rotation of the audit partner;
-- obtaining written confirmation from the auditor that it is independent; and
-- a review of fees paid to the auditor in respect of audit and non-audit services.
Remuneration Report
The remuneration report has been formed in accordance with the
requirements of AIM rule 19 and is not intended to comply with the
UK statutory requirements.
The Directors' emoluments, benefits and shareholdings during the
year ended 31 December 2022 were as follows:
Directors' Emoluments
Each of the Directors has a service contract with the
Company.
Total emoluments
------------------------ -------------- ------ --------- ----------
Fees Reward
Date of US Benefits payments 2022 2021
Director agreement $000 US $000 US $000 US $000 US $000
------------------------ -------------- ------ --------- ---------- --------- ---------
Richard Barry
Rosenberg 10 June 2005 55 - 35 90 73
------------------------ -------------- ------ --------- ---------- --------- ---------
Noam Lanir 10 June 2005 400 45 - 445 1,445
------------------------ -------------- ------ --------- ---------- --------- ---------
1 September
Ron Baron 2007 350 - - 350 2,350
------------------------ -------------- ------ --------- ---------- --------- ---------
1 February
Augoustinos Papathomas 2019 31 - 15 46 35
Directors' Interests
Interests of Directors in ordinary shares
At 31 December 2022 At 31 December 2021
--------------- ------------------------------------------- -------------------------------------------
Number Percentage Percentage Number Percentage Percentage
of Ordinary of ordinary of voting of Ordinary of ordinary of voting
Shares share capital rights Shares share capital rights
* *
--------------- ------------- --------------- ----------- ------------- --------------- -----------
Noam Lanir 123,048,011 70.39% 74.41% 123,048,011 70.39% 74.41%
--------------- ------------- --------------- ----------- ------------- --------------- -----------
Ron Baron 25,456,903 14.56% 15.40% 25,456,903 14.56% 15.40%
--------------- ------------- --------------- ----------- ------------- --------------- -----------
Richard Barry
Rosenberg 15,000 0.01% 0.01% 15,000 0.01% 0.01%
--------------- ------------- --------------- ----------- ------------- --------------- -----------
* after consideration of the treasury shares
Noam Lanir has his interest in ordinary shares through direct or
indirect ownership of the whole issued share capital of Groverton
Management Limited. Further information is provided in note 22 to
the financial statements. --
Ron Baron has his interest in ordinary shares through ownership
of the whole issued share capital of Livermore Management
Limited.
Remuneration Policy
The Company's policy has been designed to ensure that the
Company has the ability to attract, retain and motivate executive
Directors and other key management personnel to ensure the success
of the organization.
The following key principles guide its policy:
-- Policy for the remuneration of executive Directors will be
determined and regularly reviewed independently of executive
management and will set the tone for the remuneration of other
senior executives.
-- The remuneration structure will support and reflect the
Company's stated purpose to maximize long-term shareholder
value.
-- The remuneration structure will reflect a just system of rewards for the participants.
-- The overall quantum of all potential remuneration components
will be determined by the exercise of informed judgement of the
independent remuneration committee, taking into account the success
of the Company and the competitive global market.
-- A significant personal shareholding will be developed in
order to align executive and shareholder interests.
-- The assessment of performance will be quantitative and
qualitative and will include exercise of informed judgement by the
remuneration committee within a framework that takes account of
sector characteristics and is approved by shareholders.
-- The committee will be proactive in obtaining an understanding of shareholder preferences.
-- Remuneration policy and practices will be as transparent as
possible, both for participants and shareholders
-- The wider scene, including pay and employment conditions
elsewhere in the Company, will be taken into account, especially
when determining annual salary increases.
Review of the Business and Risks
Risks
The Board considers that the risks the Shareholders face can be
divided into external and internal risks.
External risks to shareholders and their returns are those that
can severely influence the investment environment within which the
Company operates, and include economic recession, declining
corporate profitability, higher corporate default rates and lower
than historical recoveries, rising inflation and interest rates and
excessive stock-market speculation.
The Company's portfolio is exposed to interest rate changes,
credit risk, liquidity risk and volatility particularly in the US.
In addition, the portfolio is exposed to currency risks as some of
the underlying portfolio is invested in assets denominated in
non-US currencies while the Company's functional currency is USD.
Investments in certain emerging markets are exposed to governmental
and regulatory risks.
The mitigation of these risks is achieved by following micro and
macroeconomic trends and changes, regular monitoring of underlying
assets and price movements and investment diversification. The
Company also engages from time to time in certain hedging
activities to mitigate these risks.
As of the date of this report, large-scale vaccination programs
and huge fiscal and monetary stimulus seem to have been successful
in reducing the spread and health impact of the COVID-19 virus, as
well as put most developed countries on a strong recovery course.
At the same time, high inflation seems to be persisting as global
supply chain issues and the Russian invasion of Ukraine add further
fuel to fire. We anticipate a sharp interest rate tightening cycle
in the US as well as withdrawal of liquidity to slow the demand and
bring inflation under control. The Company is primarily exposed to
the US economy and has benefitted from the economic recovery. The
Company continues to be conservatively positioned with 43.9m of
cash, deposits, and investments in US treasury bills as of 31
December 2022 and plans to maintain strong liquidity and stay debt
free.
Internal risks to shareholders and their returns are related to
Portfolio risks (investment and geography selection and
concentration), balance sheet risk (gearing) and/or investment
mismanagement risks. The Company's portfolio has a significant
exposure to senior secured loans of US companies and therefore has
a concentration risk to this asset class.
A periodic internal review is performed to ensure transparency
of Company activities and investments. All service providers to the
Company are regularly reviewed. The mitigation of the risks related
to investments is effected by investment restrictions and
guidelines and through reviews at Board Meetings.
As the portfolio of the Company is currently invested in USD
denominated assets, movements in other currencies are expected to
have a limited impact on the business.
On the asset side, the Company's exposure to interest rate risk
is limited to the interest-bearing deposits and portfolio of bonds
and loans in which the Company invests. Currently, the Company is
primarily invested in sub-investment grade corporate loans through
CLOs, which exposes the Company to credit risk (defaults and
recovery rates, loan spreads over base rate) as well as liquidity
risks in the CLO market.
Management monitors liquidity to ensure that sufficient liquid
resources are available to the Company. The Company's credit risk
is primarily attributable to its fixed income portfolio, which is
exposed to corporate bonds with a particular exposure to the
financial sector and to US senior secured loans.
Further information on financial risk management is provided in
note 26 of the financial statements.
Share Capital
There was no change in the authorised share capital during the
year to 31 December 2022. The authorised share capital is
1,000,000,000 ordinary shares with no par value.
Related party transactions
Details of any transactions of the Company with related parties
during the year to 31 December 2022 are disclosed in note 22 to the
financial statements.
By order of the Board of Directors
Chief Executive Officer
19 May 2023
Independent Auditor's Report to the Members of Livermore
Investments Group Limited
Opinion
We have audited the consolidated financial statements of
Livermore Investments Group Limited and its subsidiary Livermore
Capital AG (the "Group"), which are presented in pages 26 to 53 and
comprise the Consolidated statement of financial position as at 31
December 2022, and the consolidated statement of profit or loss,
Consolidated statement of comprehensive income, Consolidated
statement of changes in equity and Consolidated statement of cash
flows for the year then ended, and notes to the consolidated
financial statements, including a summary of significant accounting
policies.
In our opinion, the accompanying consolidated financial
statements give a true and fair view of the consolidated financial
position of the Group as at 31 December 2022, and of its
consolidated financial performance and its consolidated cash flows
for the year then ended in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
Basis for Opinion
We conducted our audit in accordance with International
Standards on Auditing (ISAs). Our responsibilities under those
standards are further described in the "Auditor's Responsibilities
for the Audit of the Consolidated Financial Statements" section of
our report. We are independent of the Group in accordance with the
International Ethics Standards Board for Accountants' Code of
Ethics for Professional Accountants (IESBA Code) together with the
ethical requirements that are relevant to our audit of the
consolidated financial statements in Cyprus, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements and the IESBA Code. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Emphasis of Matter - Uncertain Outcome of a Legal Claim
We draw attention to note 23 of the consolidated financial
statements which describes the uncertain outcome of a legal claim
against one of the custodian banks that the Group uses on its
behalf. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters.
Investments' valuation Level 3
Refer to note 7 of the consolidated financial statements.
The key audit matter How the matter was addressed in our audit
Our audit work included, but was not
restricted to:
The Group has financial Fund Investments:
assets of $14m (2021: $27m)
classified within the fair -- obtaining an understanding of the
value hierarchy at level valuation methodologies applied by the
3, as disclosed in note Board of directors and assessing their
7, where $7,5m relates to appropriateness for each investment.
fund investments and $6,5m
to investments in subsidiaries. -- obtaining third party confirmations
The fair value of level indicating either the NAV or fair value
3 financial assets is generally of the financial assets and comparing
determined on a basis of to clients' records and fund's financial
either third party valuations, statements.
or when not available, adjusted
Net Asset Value (NAV) calculations -- evaluating the independent professional
using inputs from third valuer's competence, capabilities and
parties. objectivity.
Due to the use of significant -- in cases where the valuations were
judgments by the Board of performed by the Board of Directors,
Directors, the existence evaluating the reasonableness of the
of unobservable inputs and methodology applied and verifying the
the significant total value inputs used by comparing them to third
of financial assets within party sources; and
the level 3 hierarchy, we
consider the valuation of -- considering the adequacy of consolidated
these investments as a key financial statement disclosures in relation
audit matter. to the valuation methodologies used for
each class of level 3 financial assets.
Investments in Subsidiaries:
-- obtaining management accounts of the
subsidiaries to identify their NAV; and
evaluating any significant change in
the fair value of investment.
-- assessing the management accounts
of the subsidiaries to determine whether
the disclosed NAV is fairly stated by
obtaining portfolio statements and land
valuations from independent valuers.
-- evaluating and assessing the valuers'
competence, capabilities and objectivity.
-- evaluating the methodology used and
assessing its adequacy; and
-- considering the adequacy of consolidated
financial statement disclosures in relation
to the valuation methodologies used for
each class of level 3 financial assets.
Key observations
We concluded that the judgements and
estimates used by the management in determining
the fair value of investments were reasonable
and the disclosures made in relation
to these matters in the consolidated
financial statements were appropriate.
Other Information
The Board of Directors is responsible for the other information.
The other information comprises the information included in the
Highlights, Chairman's and Chief Executive's Review, Review of
Activities, Report of the Directors, Corporate Governance
Statement, Remuneration report, Review of the Business and Risks,
but does not include the consolidated financial statements and our
auditor's report thereon.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements
or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report in this regard.
Responsibilities of the Board of Directors for the Consolidated
Financial Statements
The Board of Directors is responsible for the preparation of
consolidated financial statements that give a true and fair view in
accordance with International Financial Reporting Standards as
adopted by the European Union, and for such internal control as the
Board of Directors determines is necessary to enable the
preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of
Directors is responsible for assessing the Group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the Board of Directors either intends to
liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the
Group's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated
Financial Statements
Our objectives are to obtain reasonable assurance about whether
the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue
an auditor's report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional scepticism
throughout the audit. We also:
* Identify and assess the risks of material
misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform
audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the
override of internal control.
* Obtain an understanding of internal control relevant
to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness
of the Group's internal control.
* Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting estimates
and related disclosures made by the Board of
Directors.
* Conclude on the appropriateness of the Board of
Directors' use of the going concern basis of
accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to
events or conditions that may cast significant doubt
on the Group's ability to continue as a going
concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our
auditor's report to the related disclosures in the
consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence
obtained up to the date of our auditor's report.
However, future events or conditions may cause the
Group to cease to continue as a going concern.
* Evaluate the overall presentation, structure and
content of the consolidated financial statements,
including the disclosures, and whether the
consolidated financial statements represent the
underlying transactions and events in a manner that
achieves a true and fair view.
* Obtain sufficient appropriate audit evidence
regarding the financial information of the entities
or business activities within the Group to express an
opinion on the consolidated financial statements. We
are responsible for the direction, supervision and
performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements
of the current period and are therefore the key audit matters. We
describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Other Matter
This report, including the opinion, has been prepared for and
only for the Group's members as a body and for no other purpose. We
do not, in giving this opinion, accept or assume responsibility for
any other purpose or to any other person to whose knowledge this
report may come to.
The engagement partner on the audit resulting in this
independent auditor's report is Mrs Froso Yiangoulli.
Froso Yiangoulli
Certified Public Accountant and Registered
Auditor
for and on behalf of
Grant Thornton (Cyprus) Ltd
Certified Public Accountants and Registered
Auditors
Nicosia, 19 May 2023
Livermore Investments Group Limited
Consolidated Statement of Financial Position at 31 December
2022
Note 2022 2021
Assets US $000 US $000
Non-current assets
Property, plant and equipment 43 52
Right-of-use assets 87 176
Financial assets at fair value through
profit or loss 4 66,576 101,667
Financial assets at fair value through
other comprehensive income 5 7,596 12,435
Investments in subsidiaries 8 6,546 7,196
--------- ---------
80,848 121,526
Current assets --------- ---------
Trade and other receivables 9 72 366
Financial assets at fair value through
profit or loss 4 39,800 17,553
Cash and cash equivalents 10 10,971 45,130
--------- ---------
50,843 63,049
--------- ---------
Total assets 131,691 184,575
--------- ---------
Equity
Share capital 11 - -
Share premium and treasury shares 11 163,130 163,130
Other reserves (21,214) (18,026)
Accumulated (losses) / retained earnings (14,191) 32,618
--------- ---------
Total equity 127,725 177,722
--------- ---------
Liabilities
Non-current liabilities
Lease liability - 88
--------- ---------
Current liabilities
Trade and other payables 12 3,733 6,641
Lease liability - current portion 87 88
Current tax payable 146 36
--------- ---------
3,966 6,765
--------- ---------
Total liabilities 3,966 6,853
--------- ---------
Total equity and liabilities 131,691 184,575
--------- ---------
Net asset value per share
Basic and diluted net asset value per
share (US $) 14 0.77 1.07
--------- ---------
These financial statements were approved by the Board of
Directors on 19 May 2023.
The notes 1 to 28 form part of these consolidated financial
statements.
Livermore Investment Group Limited
Consolidated Statement of Profit or Loss for the year ended 31
December 2022
Note 2022 2021
US $000 US $000
Investment income
Interest and distribution income 16 23,665 27,495
Fair value changes of investments 17 (44,637) 6,250
------ ------
(20,972) 33,745
Operating expenses 18 (3,000) (8,599)
------ ------
Operating (loss) / profit (23,972) 25,146
Finance costs 19 (265) (398)
Finance income 19 42 18
------ ------
(Loss) / profit before taxation (24,195) 24,766
Taxation charge 20 (167) (66)
------ ------
(Loss) / profit for the year (24,362) 24,700
------ ------
(Loss) / earnings per share
Basic and diluted (loss) /earnings per
share (US $) 21 (0.15) 0.15
------ ------
The (loss) / profit for the year is wholly attributable to the
owners of the parent.
The notes 1 to 28 form part of these consolidated financial
statements.
Livermore Investment Group Limited
Consolidated Statement of Comprehensive Income for the year
ended 31 December 2022
Note 2022 2021
US $000 US $000
(Loss) / profit for the year (24,362) 24,700
Other comprehensive income:
Items that will be reclassified subsequently
to profit or loss
Foreign exchange (losses) / gains on
translation of consolidated subsidiary (29) 59
Items that are not reclassified subsequently
to profit or loss
Financial assets designated at fair value
through other comprehensive income -
fair value (losses) / gains 5 (1,606) 3,200
------ ------
Total comprehensive (loss) /income for
the year (25,997) 27,959
------ ------
The total comprehensive (loss) / income for the year is wholly
attributable to the owners of the parent.
The notes 1 to 28 form part of these consolidated financial
statements.
Livermore Investment Group Limited
Consolidated Statement of Changes in Equity for the year ended
31 December 2022
Share Treasury Translation Investments Retained
premium Shares reserve revaluation earnings Total
Note reserve
US $000 US $000 US $000 US $000 US $000 US $000
Balance at 1 January 2021 169,187 - 25 (21,310) 16,005 163,907
------- ------- ------ ------ ------ -------
Dividends 13 - - - - (8,000) (8,000)
Purchase of own shares 11 - (6,973) - - - (6,973)
Re-issue of shares 11 - 916 - - (87) 829
------- ------- ------ ------ ------ -------
Transactions with owners - (6,057) - - (8,087) (14,144)
------- ------- ------ ------ ------ -------
Profit for the year - - - - 24,700 24,700
Other comprehensive income:
Financial assets at fair
value through OCI - fair
value gains - - - 3,200 - 3,200
Foreign exchange gains on
translation of consolidated
subsidiary - - 59 - - 59
------- ------- ------ ------ ------ -------
Total comprehensive income
for the year - - 59 3,200 24,700 27,959
------- ------- ------ ------ ------ -------
Balance at 31 December 2021 169,187 (6,057) 84 (18,110) 32,618 177,722
------- ------- ------ ------ ------ -------
Dividends 13 - - - - (24,000) (24,000)
------- ------- ------ ------ ------ -------
Transactions with owners - - - - (24,000) (24,000)
------- ------- ------ ------ ------ -------
Loss for the year - - - - (24,362) (24,362)
Other comprehensive income:
Financial assets at fair
value through OCI - fair
value losses 5 - - - (1,606) - (1,606)
Foreign exchange losses on
translation of consolidated
subsidiary - - (29) - - (29)
Transfer of realised gains - - - (1,553) 1,553 -
------- ------- ------ ------ ------ -------
Total comprehensive loss
for the year - - (29) (3,159) (22,809) (25,997)
------- ------- ------ ------ ------ -------
Balance at 31 December 2022 169,187 (6,057) 55 (21,269) (14,191) 127,725
------- ------- ------ ------ ------ -------
The notes 1 to 28 form part of these consolidated financial
statements.
Livermore Investments Group Limited
Consolidated Statement of Cash Flows for the year ended 31
December 2022
Note 2022 2021
US $000 US $000
Cash flows from operating activities
(Loss) / profit before tax (24,195) 24,766
Adjustments for
Depreciation 18 102 109
Interest expense 19 36 35
Interest and distribution income 16 (23,665) (27,495)
Bank interest income 19 (42) (18)
Fair value changes of investments 17 44,637 (6,250)
Exchange differences 19 229 363
---------- ----------
(2,898) (8,490)
Changes in working capital
Decrease in trade and other receivables (62) 7,817
(Decrease) / Increase in trade and other
payables (2,928) 1,774
---------- ----------
Cash flows (used in) / from operations (5,888) 1,101
Interest and distributions received 23,707 27,512
Tax paid (32) (50)
---------- ----------
Net cash from operating activities 17,787 28,563
---------- ----------
Cash flows from investing activities
Acquisition of investments (74,283) (119,905)
Proceeds from sale of investments 46,729 100,629
---------- ----------
Net cash used in investing activities (27,554) (19,276)
---------- ----------
Cash flows from financing activities
Lease liability payments (127) (109)
Interest paid 19 (36) (35)
Dividends paid 13 (24,000) (8,000)
Purchases of own shares 11 - (6,057)
---------- ----------
Net cash used in financing activities (24,163) (14,201)
---------- ----------
Net decrease in cash and cash equivalents (33,930) (4,914)
Cash and cash equivalents at the beginning
of the year 45,130 50,407
Exchange differences on cash and cash
equivalents 19 (229) (363)
---------- ----------
Cash and cash equivalents at the end
of the year 10 10,971 45,130
---------- ----------
The notes 1 to 28 form part of these consolidated financial
statements.
Notes to the Consolidated Financial Statements
1. General Information
1.1. The Company was incorporated as an international business
company and registered in the British Virgin Islands (BVI) on 2
January 2002 under IBC Number 475668. The principal legislation
under which the Company operates is the BVI Business Companies Act,
2004. The liability of the members of the Company is limited.
1.2. The registered office of the Company is located at Trident
Chambers, PO Box 146, Road Town, Tortola, British Virgin
Islands.
1.3. The Company is tax resident in the Republic of Cyprus.
1.4. The principal activity of the Company is to carry out investment activities.
2. Basis of preparation
The consolidated financial statements ("the financial
statements") of Livermore Investments Group Limited have been
prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union (EU). The
financial statements have been prepared on an accrual basis (other
than for cash flow information) using the significant accounting
policies and measurement bases summarised in note 3, and also on a
going concern basis.
The financial information is presented in US dollars because
this is the currency in which the Company primarily operates (i.e.,
the Company's functional currency).
References to the Company hereinafter also include its
consolidated subsidiary (note 8 ).
The Directors have reviewed the accounting policies used by the
Company and consider them to be the most appropriate.
3. Accounting Policies
The significant accounting policies applied in the preparation
of the financial statements are as follows:
3.1. Adoption of new and revised IFRS
As from 1 January 2022, the Company adopted any applicable new
or revised IFRS and relevant amendments and interpretations which
became effective, and also were endorsed by the EU.
The following IASB or IFRIC documents were issued by the date of
authorisation of these financial statements but are not yet
effective for the year ended 31 December 2022, or have not yet been
endorsed by the EU by 31 December 2022:
Endorsed IASB Effective
by EU date
No 1 January
* Amendments to IFRS 16: "Lease Liability in a Sale and 2024
Leaseback"
No 1 January
* Amendments to IAS 1: "Classification of Liabilities 2024
as Current or Non-current"
No 1 January
* Amendments to IAS 1: "Non-current Liabilities with 2024
Covenants"
Yes 1 January
* IFRS 17: "Insurance Contracts", including amendments 2023
of 2020
Yes 1 January
* Amendment to IFRS 17: "Initial Application of IFRS 17 2023
and IFRS 9 - Comparative Information"
Yes 1 January
* Amendments to IAS 1 and IFRS Practice Statement 2: 2023
"Disclosure of Accounting policies"
Yes 1 January
* Amendments to IAS 8: "Definition of Accounting 2023
Estimates"
Yes 1 January
* Amendment to IAS 12: "Deferred Tax related to Assets 2023
and Liabilities arising from a Single Transaction"
No postponed
* Amendment to IFRS 10, and IAS 28: "Sale or indefinitely
Contribution of Assets between an Investor and its
Associate or Joint Venture"
No 1 January
* IFRS 14: "Regulatory Deferral Accounts" 2016
The Board of Directors expects that when the above become
effective in future periods, they will not have any material effect
on the financial statements.
3.2. Investments in subsidiaries and basis of consolidation
Subsidiaries are entities controlled either directly or
indirectly by the Company.
Control is achieved where the Company is exposed, or has right,
to variable returns from its involvement with a subsidiary and has
the ability to affect those returns through its power over the
subsidiary.
The Directors have determined that Livermore meets the
definition of an investment entity, as this is defined in IFRS 10
"Financial Statements". As per IFRS 10 an investment entity is an
entity that:
(a) obtains funds from one or more investors for the purpose of
providing those investors with investment management services;
(b) commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both; and
(c) measures and evaluates the performance of substantially all
of its investments on a fair value basis.
An investment entity is exempted from consolidating its
subsidiaries, unless any subsidiary which is not itself an
investment entity mainly provides services that relate to the
investment entity's investment activities.
The financial statements consolidate the Company and one of its
subsidiaries providing such services (note 8 shows further details
of the consolidated and unconsolidated subsidiaries).
Investments in unconsolidated subsidiaries are initially
recognised at their fair value and subsequently measured at fair
value through profit or loss. Subsequently, any gains or losses
arising from changes in their fair value are included in profit or
loss for the year.
Dividends and other distributions from unconsolidated
subsidiaries are recognised as income when the Company's right to
receive payment has been established.
A subsidiary that is not an investment entity itself and which
provides services that relate to the Company's investment
activities is consolidated rather than included within the
investments in subsidiaries measured at fair value through profit
or loss.
The financial statements of the consolidated subsidiary are
prepared using uniform accounting policies. Where necessary,
adjustments are made to the financial statements of consolidated
subsidiary to bring its accounting policies into line with those
used by the Company. The consolidated subsidiary has a reporting
date of 31 December.
All transactions between the Company and its consolidated
subsidiary and all resulting balances, income and expenses are
eliminated on consolidation.
The results and cash flows of any consolidated subsidiary
acquired or disposed of during the year are consolidated from the
effective date of acquisition or up to the effective date of
disposal.
3.3. Interest and distribution income
-- Interest income is recognised based on the effective interest method.
-- Distribution income is recognised on the date that the
Company's right to receive payment is established, which in the
case of quoted securities is the ex-dividend date.
3.4. Foreign currency
The financial statements of the Company are presented in USD,
which is the currency of the primary economic environment in which
it operates (its functional currency).
Transactions in foreign currencies are recorded at the rates of
exchange prevailing on the dates of the transaction. Monetary
assets and liabilities denominated in non-functional currencies are
translated into functional currency using year-end spot foreign
exchange rates. Non-monetary assets and liabilities are translated
upon initial recognition using exchange rates prevailing at the
dates of the transactions. Non-monetary assets that are measured in
terms of historical cost in foreign currency are not subsequently
re-translated.
Gains and losses arising on the settlement of monetary items and
on the re-translation of monetary items are included in the profit
or loss for the year. Those that arise on the re-translation of
non-monetary items carried at fair value are included in the profit
or loss of the year as part of the fair value gain or loss except
for differences arising on the re-translation of non-monetary
financial assets designated at fair value through other
comprehensive income in respect of which gains and losses are
recognised in other comprehensive income. For such non-monetary
items any exchange component of that gain or loss is also
recognised in other comprehensive income.
The results and financial position of the consolidated
subsidiary, which has a functional currency of Swiss Francs, are
translated into the presentation currency as follows:
(a) assets and liabilities are translated at the closing rate at the reporting date;
(b) income and expenses and also cash flows are translated at an
average exchange rate (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case the items are translated at
the rates prevailing at the dates of the transactions); and
(c) exchange differences arising are recognised in other
comprehensive income within the translation reserve. Such
translation exchange differences are reclassified to profit or loss
in the period in which the foreign operation is disposed of.
3.5. Taxation
Current tax is the tax currently payable based on taxable profit
for the year in accordance with the applicable tax laws.
Current and deferred tax assets and liabilities are calculated
at tax rates that are expected to apply to their respective period
of realisation, provided they are enacted or substantively enacted
as at the reporting date.
3.6. Equity instruments
Equity instruments issued by the Company are recorded at
proceeds received, net of direct issue costs.
The share premium account includes any premiums received on the
initial issuing of the share capital. Any transaction costs
associated with the issuing of shares are deducted from the premium
received.
Own equity instruments purchased by the Company, or its
consolidated subsidiary are recorded as treasury shares at the
consideration paid, including transaction costs, and they are
deducted from total equity until they are sold or cancelled. Where
such shares are subsequently sold, any consideration received is
included in total equity.
3.7. Financial assets
Financial assets are recognised when the Company becomes a party
to the contractual provisions of the financial instrument.
A financial asset is derecognised only where the contractual
rights to the cash flows from the asset expire or the financial
asset is transferred, and that transfer qualifies for
derecognition. A financial asset is transferred if the contractual
rights to receive the cash flows of the asset have been transferred
or the Company retains the contractual rights to receive the cash
flows of the asset but assumes a contractual obligation to pay the
cash flows to one or more recipients. A financial asset that is
transferred qualifies for derecognition if the Company transfers
substantially all the risks and rewards of ownership of the asset,
or if the Company neither retains nor transfers substantially all
the risks and rewards of ownership but does transfer control of
that asset.
The Company classifies its financial assets in the following
measurement categories:
(a) those to be measured at fair value through profit or loss;
(b) those to be measured at fair value through other comprehensive income; and
(c) those to be measured at amortised cost.
At initial recognition, the Company measures a financial asset
at its fair value plus, in the case of a financial asset not at
fair value through profit or loss, transaction costs that are
directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at fair value through
profit or loss are expensed in profit or loss.
Financial assets at fair value through profit or loss
The Company classifies the following financial assets at fair
value through profit or loss:
(a) equity investments that are held for trading;
(b) other equity investments for which the Directors have not
elected to recognise fair value gains and losses through other
comprehensive income; and
(c) debt investments that do not qualify for measurement at
either amortised cost or at fair value through other comprehensive
income.
All financial assets within this category are measured at their
fair value, with changes in value recognised in the profit or loss
when incurred.
Financial assets at fair value through other comprehensive
income
Financial assets at fair value through other comprehensive
income (OCI) comprise equity securities which are not held for
trading, and for which the Company has made an irrevocable election
at initial recognition to recognise changes in fair value through
OCI rather than profit or loss.
Where the Company's management has elected to present fair value
gains and losses on equity investments in other comprehensive
income, there is no subsequent reclassification of fair value gains
and losses to profit or loss. Dividends from such investments
continue to be recognised in profit or loss when the Company's
right to receive payments is established.
Financial assets at amortised cost
Assets that are held for collection of contractual cash flows
where those cash flows represent solely payments of principal and
interest are measured at amortised cost. A gain or loss on a
financial asset that is measured at amortised cost is recognised in
profit or loss when the asset is derecognised or impaired. Interest
income from these financial assets is recognised based on the
effective interest rate method.
The classification of debt instruments depends on the entity's
business model for managing the financial assets and the
contractual terms of the cash flows. Financial assets with embedded
derivatives are considered in their entirety when determining
whether their cash flows are solely payment of principal and
interest.
Impairment
The Company assesses the expected credit losses associated with
its assets carried at amortised cost, on a forward-looking basis.
The impairment methodology applied depends on whether there has
been a significant increase in credit risk. For trade and other
receivables only, the Company applies the simplified approach
permitted by IFRS 9, which permits expected lifetime losses to be
recognised from initial recognition of the receivables.
Write offs
The Company writes off a financial asset when there is
information indicating that the counterparty is in severe financial
difficulty and there is no realistic prospect of recovery, e.g.,
when the counterparty has been placed under liquidation or has
entered into bankruptcy proceedings. Financial assets written off
may still be subject to enforcement activities, taking into account
legal advice where appropriate. Any recoveries made are recognised
in profit or loss.
3.8. Financial liabilities
Financial liabilities are recognised when the Company becomes a
party to the contractual provisions of the financial
instrument.
A financial liability is derecognised when it is extinguished,
discharged, cancelled or expires.
Financial liabilities at amortised cost
Financial liabilities are measured initially at fair value plus
transaction costs.
After initial recognition financial liabilities are measured at
amortised cost using the effective interest rate method.
3.9. Cash and cash equivalents
Cash comprises cash in hand and on demand deposits with banks.
Cash equivalents are short term, highly liquid investments that are
readily convertible to known amounts of cash. They include
unrestricted short-term bank deposits originally purchased with
maturities of three months or less.
Any bank overdrafts are considered to be a component of cash and
cash equivalents, since they form an integral part of the Company's
cash management.
3.10. Segment reporting
In making investment decisions, Management assesses individual
investments and then, in analysing their performance, it receives
and uses information for each investment product separately rather
than based on any segmental information. Given that, Management
regards that all the Company's activities fall under a single
operating segment.
3.11. Critical accounting judgments and key sources of
estimation uncertainty
The preparation of financial statements in conformity with IFRS
requires the use of accounting estimates and requires management to
exercise its judgement in the process of applying the Company's
accounting policies. It also requires the use of assumptions that
affect the reported amounts of assets and liabilities and
disclosures at the reporting date and the reported amounts of
revenues and expenses during the reporting period. Although these
estimates are based on management's best knowledge of current
events and actions, actual results may ultimately differ.
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
Critical accounting judgements
(i) Classification of financial assets
Management exercises significant judgement in determining the
appropriate classification of the financial assets of the Company.
The Directors determine the appropriate classification of the
Company's financial assets based on Livermore's business model. An
entity's business model refers to how an entity manages its
financial assets in order to generate cash flows, considering all
relevant and objective evidence. The factors considered include the
contractual terms and characteristics which are very carefully
examined, and also the Company's intentions and expected needs for
realisation of the financial assets.
All investments (except from certain equity instruments that are
designated at fair value through other comprehensive income) are
classified as financial assets at fair value through profit or
loss, because this reflects more fairly the way these assets are
managed by the Company. The Company's business is investing in
financial assets with a view to profiting from their total return
in the form of income and capital growth. This portfolio of
financial assets is managed, and its performance evaluated on a
fair value basis, in accordance with a documented investment
strategy, and information about the portfolio is provided
internally on that basis to the Company's Board of Directors and
other key management personnel.
(ii) Consolidation of subsidiary
Management exercised significant judgment in determining which
of the subsidiaries that are not investment entities themselves,
provide services that relate to the Company's investment activities
and therefore need to be consolidated rather than included within
the investments in subsidiaries measured at fair value through
profit or loss.
Estimation uncertainty
Management, in preparing these financial statements, has not
made any significant estimates with a risk of material change in
value in the next financial period.
4. Financial assets at fair value through profit or loss
2022 2021
US $000 US $000
Non-current assets
Fixed income investments (CLOs) 66,576 101,667
------ ------
Current assets
Fixed income investments 37,519 7,584
Public equity investments 2,281 9,969
------ ------
39,800 17,553
------ ------
For description of each of the above categories, refer to note 6
.
The above investments represent financial assets that are
mandatorily measured at fair value through profit or loss.
The Company treats its investments in the loan market through
CLOs as non-current investments as the Company generally intends to
hold such investments over a period longer than twelve months.
The movement in financial assets at fair value through profit or
loss during the year was as follows:
2022 2021
US $000 US $000
At 1 January 119,220 99,583
Purchases 73,963 114,399
Sales (19,662) (28,408)
Settlements (23,514) (72,221)
Fair value (losses) / gains (43,631) 5,867
------ ------
At 31 December 106,376 119,220
------ ------
5. Financial assets at fair value through other comprehensive income
2022 2021
US $000 US $000
Non-current assets
Fund investments 7,596 12,435
------ ------
For description of each of the above categories, refer to note 6
.
The above investments are non-trading equity investments that
have been designated at fair value through other comprehensive
income.
The movement in financial assets at fair value through other
comprehensive income during the year was as follows:
2022 2021
US $000 US $000
At 1 January 12,435 3,729
Purchases 320 5,506
Settlements (3,553) -
Fair value (losses) / gains (1,606) 3,200
------ ------
At 31 December 7,596 12,435
------ ------
6. Financial assets at fair value
The Company allocates its non-derivative financial assets at
fair value (notes 4 and 5 ) as follows:
-- Fixed income investments relate to fixed and floating rate
bonds, perpetual bank debt, investments in the loan market through
CLOs, and investments in open warehouse facilities.
-- P ublic equity investments relate to investments in shares of
companies listed on public stock exchanges.
-- Fund investments relate to investments in the form of equity
purchases in both high growth opportunities in emerging markets and
deep value opportunities in mature markets. The Company generally
invests directly in prospects where it can exert influence. Main
investments under this category are in the fields of real
estate.
7. Fair value measurements of financial assets and liabilities
The table in note 7.2 presents financial assets and liabilities
measured at fair value in the consolidated statement of financial
position in accordance with the fair value hierarchy. This
hierarchy groups financial assets and liabilities into three levels
based on the significance of inputs used in measuring the fair
value of the financial assets and liabilities. The fair value
hierarchy has the following levels:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the
measurement date;
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly; and
-- Level 3: unobservable inputs for the asset or liability.
The level within which the financial asset is classified is
determined based on the lowest level of significant input to the
fair value measurement.
7.1 Valuation of financial assets
-- Fixed Income Investments and Public Equity Investments are
valued per their closing market prices on quoted exchanges, or as
quoted by market maker. Investments in open warehouse facilities
that have not yet been converted to CLOs, are valued based on an
adjusted net asset valuation.
The Company values the CLOs based on the valuation reports
provided by market makers. CLOs are typically valued by market
makers using discounted cash flow models. The key assumptions for
cash flow projections include default and recovery rates,
prepayment rates and reinvestment assumptions on the underlying
portfolios (typically senior secured loans) of the CLOs.
Default and recovery rates: The amount and timing of defaults in
the underlying collateral and the amount and timing of recovery
upon a default are key to the future cash flows a CLO will
distribute to the CLO equity tranche. All else equal, higher
default rates and lower recovery rates typically lead to lower cash
flows. Conversely, lower default rates and higher recoveries lead
to higher cash flows.
Prepayment rates: Senior loans can be pre-paid by borrowers.
CLOs that are within their reinvestment period may, subject to
certain conditions, reinvest such prepayments into other loans
which may have different spreads and maturities. CLOs that are
beyond their reinvestment period typically pay down their senior
liabilities from proceeds of such pre-payments. Therefore, the rate
at which the underlying collateral prepays impacts the future cash
flows that the CLO may generate.
Reinvestment assumptions: A CLO within its reinvestment period
may reinvest proceeds from loan maturities, prepayments, and
recoveries into purchasing additional loans. The reinvestment
assumptions define the characteristics of the loans that a CLO may
reinvest in. These assumptions include the spreads, maturities, and
prices of such loans. Reinvestment into loans with higher spreads
and lower prices will lead to higher cash flows. Reinvestment into
loans with lower spreads will typically lead to lower cash
flows.
Discount rate: The discount rate indicates the yield that market
participants expect to receive and is used to discount the
projected future cash flows. Higher yield expectations or discount
rates lead to lower prices and lower discount rates lead to higher
prices for CLOs.
-- Fund investments are valued using market valuation techniques
as determined by the Directors, mainly on the basis of valuations
reported by third-party managers of such investments. Real Estate
entities are valued by independent qualified property valuers with
substantial relevant experience on such investments. Underlying
property values are determined based on their estimated market
values.
-- Investments in subsidiaries are valued at fair value as
determined on a net asset valuation basis. The Company has
determined that the reported net asset value of each subsidiary
represents its fair value at the end of the reporting period.
7.2 Fair value hierarchy
Financial assets measured at fair value are grouped into the
fair value hierarchy as follows:
2022 2022 2022 2022 2021 2021 2021 2021
US US US US US US US US
$000 $000 $000 $000 $000 $000 $000 $000
Level Level Level Total Level Level Level Total
1 2 3 1 2 3
Fixed income investments 37,519 66,576 - 104,095 - 101,667 7,584 109,251
Fund investments - - 7,596 7,596 - - 12,435 12,435
Public equity
investments 2,281 - - 2,281 9,969 - - 9,969
Investments in
subsidiaries - - 6,546 6,546 - - 7,196 7,196
------ ------ ------ ------ ------ ------ ------ ------
39,800 66,576 14,142 120,518 9,969 101,667 27,215 138,851
------ ------ ------ ------ ------ ------ ------ ------
The Company has no financial liabilities measured at fair
value.
The methods and valuation techniques used for the purpose of
measuring fair value are unchanged compared to the previous
reporting year.
No financial assets have been transferred between different
levels.
Financial assets within level 3 can be reconciled from beginning
to ending balances as follows:
At fair value At fair Investments
through OCI value in subsidiaries
- Fund investments through
profit or
loss - Fixed
Income
investments Total
US $000 US $000 US $000 US $000
At 1 January 2021 3,729 10,036 6,813 20,578
Purchases 5,506 69,805 - 75,311
Settlement - (72,221) - (72,221)
Gains / (losses) recognised
in:
- Profit or loss - (36) 383 347
- Other comprehensive
income 3,200 - - 3,200
------ ------ ------ ------
At 1 January 2022 12,435 7,584 7,196 27,215
Purchases 320 15,930 356 16,606
Settlement (3,553) (23,514) - (27,067)
Losses recognised
in:
- Profit or loss - - (1,006) (1,006)
- Other comprehensive
income (1,606) - - (1,606)
------ ------ ------ ------
At 31 December 2022 7,596 - 6,546 14,142
------ ------ ------ ------
The above gains and losses recognised can be allocated as
follows:
At fair At fair Investments
value value in subsidiaries
through through
OCI - Fund profit or
investments loss -
Fixed Income
investments Total
2021 US $000 US $000 US $000 US $000
Profit or loss
- Financial assets held
at year-end - (36) 383 347
Other comprehensive
income
- Financial assets held
at year-end 3,200 - - 3,200
------ ------ ------ ------
Total gains / (losses)
for 2021 3,200 (36) 383 3,547
------ ------ ------ ------
At fair At fair Investments
value value in subsidiaries
through Through
OCI - Fund profit or
investments loss -
Fixed Income
investments Total
2022 US $000 US $000 US $000 US $000
Profit or loss
- Financial assets held
at year-end - - (1,006) (1,006)
Other comprehensive
income
- Financial assets held
at year-end (1,606) - - (1,606)
------ ------ ------ ------
Total losses for 2022 (1,606) - (1,006) (2,612)
------ ------ ------ ------
The Company has not developed any quantitative unobservable
inputs for measuring the fair value of its level 3 financial assets
at 31 December 2022 and 2021. Instead, the Company used prices from
third-party pricing information without adjustment.
Fixed income investments within level 3 represent open
warehouses that have been valued based on their net asset value.
The net asset value of a warehouse is primarily driven by the fair
value of its underlying loan asset portfolio (as determined by the
warehouse's manager) plus received and accrued interest less the
nominal value of the financing and accrued interest on the
financing. In all cases, due to the nature and the short life of a
warehouse, the carrying amounts of the warehouses' underlying
assets and liabilities are considered as representative of their
fair values.
Fund investments within level 3 represent investments in private
equity funds. Their value has been determined by each fund manager
based on the funds' net asset value. Each fund's net asset value is
primarily driven by the fair value of its underlying investments.
In all cases, considering that such investments are measured at
fair value, the carrying amounts of the funds' underlying assets
and liabilities are considered as representative of their fair
values.
Investments in subsidiaries have been valued based on their net
asset position. The main assets of the subsidiaries represent
investments measured at fair value and receivables from the Company
itself as well as third parties. Their net asset value is
considered as a fair approximation of their fair value.
A reasonable change in any individual significant input used in
the level 3 valuations is not anticipated to have a significant
change in fair values as above.
8. Investments in subsidiaries
2022 2021
Unconsolidated subsidiaries US $000 US $000
At 1 January 7,196 6,813
Additions 356 -
Fair value (losses) / gains (1,006) 383
------ ------
At 31 December 6,546 7,196
------ ------
Additions relate to the fair value of the receivable amount from
the Company's unconsolidated subsidiary Sandhirst Ltd, that was
waived by the Company (note 22).
Details of the investments in which the Company has a
controlling interest at 31 December 2022 are as follows:
Name of Subsidiary Place of 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
2022 2021
US $009 US $000
Financial items
Amounts due by related parties
(note 22 ) - 289
Non-financial items
Prepayments 66 65
VAT receivable 6 12
------ ------
72 366
------ ------
For the Company's receivables of a financial nature, no
allowance for impairment has been recognised for their lifetime
expected credit losses, as their default rates have been determined
to be close to 0%.
No receivable amounts have been written-off during either 2022
or 2021.
10. Cash and cash equivalents
Cash and cash equivalents included in the consolidated statement
of cash flows comprise the following at the reporting date:
2022 2021
US $000 US $000
Demand deposits 10,971 45,130
------ ------
Cash at bank 10,971 45,130
------ ------
11. Share capital
Authorised share capital
The Company has authorised share capital of 1,000,000,000
ordinary shares with no par value, and no restrictions.
Issued share capital Number Share premium
of shares US $000
Ordinary shares with no par value
At 31 December 2022 and 2021 174,813,998 169,187
---------- ----------
Treasury shares Number
of shares US $000
At 1 January 2021 - -
Additions (note 22 ) 10,888,577 6,973
Re-issued (1,430,000) (916)
---------- ---------
At 31 December 2021 and 2022 9,458,577 6,057
---------- ----------
During 2021, 1,430,000 of the Company's treasury shares were
re-issued to a key management member (note 22 ) in full settlement
of an accrued amount of USD 0.7m. The re-issued shares had an
average cost of USD 0.916m and a fair value of USD 0.829m, as
determined based on their market price, resulting in the
recognition of a loss in retained earnings of USD 0.087m. The
difference between the fair value and the accrued amount is
included in professional fees (note 18 ).
In the consolidated statement of financial position, the amount
included as share premium and treasury shares comprises of:
2022 2021
US $000 US $000
Share premium 169,187 169,187
Treasury shares (6,057) (6,057)
-------- --------
163,130 163,130
-------- --------
12. Trade and other payables
2022 2021
US $000 US $000
Financial items
Trade payables 63 36
Amounts due to related parties (note
22 ) 3,283 6,193
Accrued expenses 387 412
------ ------
3,733 6,641
------ ------
13. Dividend
On 5 January 2022, the Company announced an interim dividend of
USD 24m (USD 0.145 per share) to members on the register as at 14
January 2022. The dividend was paid on 7 February 2022.
The Board of Directors will decide future dividends based on
profitability, liquidity requirements, portfolio performance,
market conditions, and the share price of the Company relative to
its NAV.
14. Net asset value per share
Net asset value per share has been calculated by dividing the
net assets attributable to ordinary shareholders by the closing
number of ordinary shares in issue during the relevant financial
periods.
2022 2021
Net assets attributable to ordinary
shareholders (USD 000) 127,725 177,722
------------- -------------
Closing number of ordinary shares
in issue 165,355,421 165,355,421
------------- -------------
Basic net asset value per share (USD) 0.77 1.07
------------- -------------
Number of Shares
Ordinary shares 174,813,998 174,813,998
Treasury shares (9,458,577) (9,458,577)
------------- -------------
Closing number of ordinary shares
in issue 165,355,421 165,355,421
------------- -------------
The diluted net asset value per share equals the basic net asset
value per share since no potentially dilutive shares exist at 31
December 2022 and 2021.
15. Segment reporting
The Company's activities fall under a single operating
segment.
The Company's investment income and its investments are divided
into the following geographical areas:
2022 2021
Investment (losses) / income US $000 US $000
Other European countries (2,956) 94
United States (16,320) 33,109
Asia (1,696) 542
------- -------
(20,972) 33,745
------- -------
Investments
Other European countries 6,850 3,435
United States 105,577 127,071
Asia 8,091 8,345
------- -------
120,518 138,851
------- -------
Investment (losses) / income, comprising interest and
distribution income as well as fair value gains or losses on
investments, is allocated on the basis of the issuer's location.
Investments are also allocated based on the issuer's location.
The Company has no significant dependencies, in respect of its
investment income, on any single issuer.
16. Interest and distribution income
2022 2021
US $000 US $000
Interest from investments 1,207 669
Distribution income 22,458 26,826
------ ------
23,665 27,495
------ ------
Interest and distribution income is analysed between different
categories of financial assets, as follows:
2022 2021
Interest Distribution 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 1,207 22,282 23,489 669 26,632 27,301
Public equity investments - 176 176 - 194 194
------ ------ ------ ------ ------ ------
1,207 22,458 23,665 669 26,826 27,495
------ ------ ------ ------ ------ ------
The Company's distribution income derives from multiple issuers.
The Company does not have concentration to any single issuer.
17. Fair value changes of investments
2022 2021
US $000 US $000
Fair value (losses) / gains on financial
assets through profit or loss (43,782) 5,867
Fair value (losses) / gains on investments
in subsidiaries (1,006) 383
Fair value gains on derivatives 151 -
------ ------
(44,637) 6,250
------ ------
The investments disposed of had the following cumulative (i.e.,
from the date of their acquisition up to the date of their
disposal) financial impact in the Company's net asset position:
Disposed in 2022 Disposed in 2021
Realised 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 (5) 524 519 1,099 2,237 3,336
Public equities 1,430 62 1,492 1,454 111 1,565
Derivatives 151 - 151 - - -
------ ------ ------ ------ ------ ------
1,576 586 2,162 2,553 2,384 4,901
------ ------ ------ ------ ------ ------
Financial assets
at fair value through
OCI
Private equities 1,553 - 1,553 - - -
------ ------ ------ ------ ------ ------
3,129 586 3,715 2,553 2,384 4,901
------ ------ ------ ------ ------ ------
* difference between disposal proceeds and original acquisition
cost
18. Operating expenses
2022 2021
US $000 US $000
Directors' fees and expenses 932 3,903
Other salaries and expenses 237 201
Professional fees 822 3,528
Legal expenses 13 53
Bank custody fees 139 102
Office costs 237 277
Depreciation 102 109
Other operating expenses 441 349
Audit fees 75 75
Tax fees 2 2
------ ------
3,000 8,599
------ ------
Professional fees for 2021 include a share-based payment to a
key management member of USD 0.129m (notes 11 and 22).
Throughout 2022 the Company employed 4 members of staff (2021:
4). Two of those members are the Company's executive Directors.
Other salaries and expenses include USD 18,802 of social
insurance and similar contributions (2021: USD 18,977), as well as
USD 4,508 of defined contributions plan costs (2021: USD
3,461).
19. Finance costs and income
2022 2021
US $000 US $000
Finance costs
Bank interest expense 36 35
Foreign exchange loss 229 363
------ ------
265 398
------ ------
Finance income
Bank interest income 42 18
------ ------
20. Taxation
2022 2021
US $000 US $000
Current tax charge 167 66
------ ------
The Company is a tax resident in the Republic of Cyprus and is
subject to taxation under the tax laws and regulations in
Cyprus.
The current tax charge relates to the results of the Company for
2022, as explained above, and the Company's consolidated subsidiary
in Switzerland (note 8 ).
21. (Loss) / earnings per share
The basic (loss) / earnings per share has been calculated by
dividing the (loss) / profit for the year attributable to ordinary
shareholders of the Company by the weighted average number of
ordinary shares in issue of the Company during the relevant
financial year.
2022 2021
(Loss) / profit for the year attributable
to ordinary shareholders of the parent
(USD 000) (24,362) 24,700
------------- -------------
Weighted average number of ordinary
shares outstanding 165,355,421 165,372,512
------------- -------------
Basic (loss) / earnings per share (USD) (0.15) 0.15
------------- -------------
The diluted (loss) / earnings per share equals the basic (loss)
/ earnings per share since no potentially dilutive shares were in
existence during 2022 and 2021.
22. Related party transactions
The Company is controlled by Groverton Management Ltd, an entity
owned by Noam Lanir, which at 31 December 2022 held 74.41% (2021:
74.41%) of the Company's voting rights.
2022 2021
US $000 US $000
Amounts receivable from unconsolidated
subsidiary
Sandhirst Ltd - 289 (1)
------ ------
Amounts payable to unconsolidated subsidiary
Livermore Israel Investments Ltd (3,046) (3,046) (2)
------ ------
Amounts payable to other related party
Loan payable (149) (149) (3)
------ ------
Amounts payable to key management
Directors' current accounts (88) (1,011) (2)
Other key management personnel - (1,987) (4)
------ ------
(88) (2,998)
------ ------
Key management compensation
Short term benefits
Executive Directors' fees 795 795 (5)
Executive Directors' reward payments - 3,000
Non-executive Directors' fees 87 108
Non-executive Directors' reward payments 50 -
Other key management fees 385 2,829 (6)
------ ------
1,317 6,732
------ ------
(1) The amounts receivable from unconsolidated subsidiary are
interest free, unsecured, and have no stated repayment date.
During 2022, the Company waived a receivable amount of USD
0.356m from its subsidiary Sandhirst Ltd, as a means of capital
contribution to the subsidiary (note 8).
(2) The amounts payable to unconsolidated subsidiary and
Directors current accounts with credit balances are interest free,
unsecured, and have no stated repayment date.
(3) A loan with a balance at 31 December 2022 of USD 0.149m has
been received from a related company (under common control),
Chanpak Ltd. The loan is free of interest, is unsecured and is
repayable on demand. This loan is included within trade and other
payables (note 12 ).
(4) The amount payable to other key management personnel relates
to payments made on behalf of the Company for investment purposes
and accrued consultancy fees. During the year 2021, an accrued
amount of USD 0.7m was settled by re-issuing 1,207,624 of the
Company's treasury shares at their fair value as at the date of
transfer.
(5) These payments were made directly to companies which are related to the Directors.
(6) During 2021, 222,376 of the Company's treasury shares were
re-issued to a key management member for no consideration and no
vesting conditions. The fair value of these shares at the date of
transfer was USD 0.129m. Other key management fees are included
within professional fees (note 18 ).
During 2021, the Company bought back 10,888,577 shares from
Groverton Management Ltd, to be held in treasury, for a total cost
of USD 6.973m, as determined based on the market price of the
shares.
No social insurance and similar contributions nor any other
defined benefit contributions plan costs were incurred for the
Company in relation to its key management personnel in either 2022
or 2021.
23. Litigation
Fairfield Sentry Ltd vs custodian bank and beneficial owners
One of the custodian banks that the Company used faces a
contingent claim up to USD 2.1m, and any interest as will be
decided by a US court and related legal fees, with regards to the
redemption of shares in Fairfield Sentry Ltd, which were bought in
2008 at the request of Livermore and on its behalf. If the claim
proves to be successful, Livermore will have to compensate the
custodian bank since the transaction was carried out on Livermore's
behalf. The same case was also filed in BVI where the Privy Council
ruled against the plaintiffs.
As a result of the surrounding uncertainties over the outcome of
the case and the existence of any obligation for Livermore, no
provision has been made.
24. Commitments
The Company has expressed its intention to provide financial
support to its subsidiaries, where necessary, to enable them to
meet their obligations as they fall due.
Other than the above, the Company has no capital or other
commitments at 31 December 2022.
25. Impact of war in Ukraine
In February 2022, Russia attacked Ukraine and the ensuing
conflict has resulted in significant humanitarian losses for the
Ukrainian people. In response, the US, UK, Japan and European
member states have enacted significant sanctions against Russia
including exclusion of Russia from the SWIFT system and access to
hard currencies. Russia and Ukraine are significant exporters of
agricultural commodities and Russia is a significant export of Oil
and Gas, especially to Europe. The conflict has led to large
increases in commodity prices and loss of agricultural supply. This
is expected to have potentially significant and unexpected negative
impact to global growth and business performance. We expect the
most direct and significant impact to European member states and
less developed economies while US is expected to fare better with
somewhat delayed and muted affects. The Company does not have
direct exposure to European or emerging markets with most of the
portfolio exposed to US domestic market companies. Still, the
conflict has only recently begun and given the uncertain outcome,
it is difficult to quantify the impact on the Company's portfolio
at this stage. In response, the Company intends to be
conservatively positioned with sufficient cash balances and
cashflow to whether the uncertainty and position itself to take
advantage of potential dislocations in the market.
26. Financial risk management objectives and policies
Background
The Company's financial instruments comprise financial assets at
fair value through profit or loss, financial assets at fair value
through other comprehensive income, and financial assets and
liabilities at amortised cost that arise directly from its
operations. For an analysis of financial assets and liabilities by
category, refer to note 27 .
Risk objectives and policies
The objective of the Company is to achieve growth of shareholder
value, in line with reasonable risk, taking into consideration that
the protection of long-term shareholder value is paramount. The
policy of the Board is to provide a framework within which the
investment manager can operate and deliver the objectives of the
Company.
Risks associated with financial instruments
Foreign currency risk
Foreign currency risks arise in two distinct areas which affect
the valuation of the investment portfolio:
1) where an investment is denominated and paid for in a foreign
currency; and
2) where an investment has substantial exposure to non-US Dollar
underlying assets or cash flows denominated in a foreign
currency.
The Company in general does not hedge its currency exposure. The
Company discretionally and partially hedges against foreign
currency movements affecting the value of the investment portfolio
based on its view on the relative strength of certain currencies.
Any hedging transactions represent economic hedges; the Company
does not apply hedge accounting in any case. Management monitors
the effect of foreign currency fluctuations through the pricing of
the investments. The Company's exposure to financial instruments
denominated in foreign currencies is the following:
2022 2022 2022 2021 2021 2021
US $000 US $000 US $000 US $000 US $000 US $000
Financial Financial Net Financial Financial Net value
assets liabilities value assets liabilities
British Pounds
(GBP) 2,624 (122) 2,502 1,677 (110) 1,567
Euro 127 (89) 38 417 (21) 396
Swiss Francs
(CHF) 1,509 (70) 1,439 22 (2,099) (2,077)
Israel Shekels
(ILS) 5,451 (3,046) 2,405 6,203 (3,046) 3,157
------ ------ ------ ------ ------ ------
Total 9,711 (3,327) 6,384 8,319 (5,276) 3,043
------ ------ ------ ------ ------ ------
Also, some of the USD denominated investments are backed by
underlying assets which are invested in non-USD assets. For
instance, investments in certain emerging market private equity
funds are denominated in USD but the funds in turn have invested in
assets denominated in non-USD currencies.
A 10% increase of the following currency rates against the rate
of United States Dollar (USD) at 31 December 2022 would have the
following impact. A 10% decrease of the following currencies
against USD would have an approximately equal but opposite
impact.
2022 2022 2022 2021 2021 2021
US $000 US $000 US $000 US US $000 US $000
$000
Profit Other comprehensive Equity Profit Other comprehensive Equity
or loss income or loss income
British Pounds
(GBP) 250 - 250 157 - 157
Euro 4 - 4 40 - 40
Swiss Francs
(CHF) 144 - 144 (208) - (208)
Israel Shekels
(ILS) 240 - 240 316 - 316
------ ------ ------ ------ ------ ------
Total 638 - 638 305 - 305
------ ------ ------ ------ ------ ------
The above analysis assumes that all other variables in
particular, interest rates, remain constant.
Interest rate risk
The Company is exposed to interest rate risk on its
interest-bearing instruments which are affected by changes in
market interest rates.
At 31 December 2022 and 31 December 2021, the Company had no
financial liabilities that bore an interest rate risk.
Interest rate changes will also impact equity prices. The level
and direction of changes in equity prices are subject to prevailing
local and world economics as well as market sentiment all of which
are very difficult to predict with any certainty.
The Company has fixed and floating rate financial assets
including bank balances that bear interest at rates based on the
banks floating interest rates. In particular, the fair value of the
Company's fixed rate financial assets is likely to be negatively
impacted by an increase in interest rates. The interest income of
the Company's floating rate financial assets is likely to be
positively impacted by an increase in interest rates.
The Company has exposure to US bank loans through CLO equity
tranches as well as through warehousing facilities. An investment
in the CLO equity tranche or first loss tranche of a warehouse
represents a leveraged investment into such loans. As these loans
(assets of a CLO) and the liabilities of a CLO are floating rate in
nature (typically 3-month LIBOR as the base rate), the residual
income to CLO equity tranches and warehouse first loss tranches is
normally linked to the floating rate benchmark and thus normally do
not carry substantial interest rate risk.
The Company's financial assets affected by interest rate changes
are as follows:
2022 2021
US $000 US $000
Financial assets - subject to:
- fair value changes 4,616 -
- interest changes 10,971 45,130
------ ------
Total 15,587 45,130
------ ------
An increase of 1% (100 basis points) in interest rates would
have the following impact in profit or loss and consequently to
equity as well. An equivalent decrease would have an approximately
equal but opposite impact. There would be no impact in other
comprehensive income.
2022 2021
US $000 US $000
Profit Profit
or loss or loss
Financial assets
- fair value changes (657) -
- interest changes 110 451
------ ------
Total 547 451
------ ------
The above analysis assumes that all other variables, in
particular currency rates, remain constant.
Market price risk
By the nature of its activities, most of the Company's
investments are exposed to market price fluctuations. The Board
monitors the portfolio valuation on a regular basis and
consideration is given to hedging or adjusting the portfolio
against large market movements.
The Company had no single major financial instrument that in
absolute terms and as a proportion of the portfolio could result in
a significant reduction in the NAV and share price. Due to the very
low exposure of the Company to public equities, and having no
specific correlation to any market, the equity price risk is low.
The portfolio as a whole does not correlate exactly to any
Index.
Management of risks is primarily achieved by having a
diversified portfolio to spread the market price risk. The Company
mainly has investments in CLO equity tranches as well as first loss
tranches of warehouse facilities. Investments in the equity tranche
of US CLOs represent a levered exposure to senior secured corporate
loans in the US, and are thus subject to many risks including but
not limited to lack of liquidity, credit or default risk, and risks
related to movements in market prices as well as the variations of
risk premium in the market.
Prices of these CLO investments may be volatile and will
generally fluctuate due to a variety of factors that are inherently
difficult to predict, including but not limited to changes in
prevailing credit spreads and yield expectations, interest rates,
underlying portfolio credit quality and market expectations of
default rates on non-investment grade loans, general economic
conditions, financial market conditions, legal and regulatory
developments, domestic and international economic or political
events, developments or trends in any particular industry, and the
financial condition of the obligors that constitute the underlying
portfolio.
A 10% uniform change in the value of the Company's portfolio of
financial assets (excluding level 3 investments) would result in a
6.07% change in the net asset value at 31 December 2022 (2021:
6.28%), and would have the following impact in profit or loss and
consequently to equity as well (either positive or negative,
depending on the corresponding sign of the change). There would be
no impact in other comprehensive income.
2022 2021
US $000 US $000
Profit Profit
or loss or loss
Financial assets at fair value through
profit or loss 7,758 11,163
------ ------
Derivatives
The Investment Manager may use derivative instruments in order
to mitigate market risk or to take a directional investment. These
provide a limited degree of protection and would not materially
impact the portfolio returns if a large market movement did
occur.
No derivatives were held either at 31 December 2022 or 2021.
Credit risk
The Company invests in a wide range of securities with various
credit risk profiles including investment grade securities and sub
investment grade positions. The investment manager mitigates the
credit risk via diversification across issuers. However, the
Company is exposed to a migration of credit rating, widening of
credit spreads and default of any specific issuer.
The Company only transacts with regulated institutions on normal
market terms which are trade date plus one to three days. The
levels of amounts outstanding from brokers are regularly reviewed
by the management. The duration of credit risk associated with the
investment transactions is the period between the date the
transaction took place, the trade date and the date the stock and
cash are transferred, the settlement date. The level of risk during
the period is the difference between the value of the original
transaction and its replacement with a new transaction.
The Company is mainly exposed to credit risk in respect of its
fixed income investments (mainly CLOs) and to a lesser extend in
respect of its financial assets at amortised cost, and other
instruments held for trading (perpetual bonds).
The Company has exposure to US senior secured loans and to a
lesser degree emerging market loans through CLO equity tranches as
well as warehouse first loss tranches. These loans are primarily
non-investment grade loans or interests in non-investment grade
loans, which are subject to credit risk among liquidity, market
value, interest rate, reinvestment and certain other risks. It is
anticipated that these non-investment grade loans generally will be
subject to greater risks than investment grade corporate
obligations.
A non-investment grade loan or debt obligation or an interest in
a non-investment grade loan is generally considered speculative in
nature and may become a defaulted security for a variety of
reasons. A defaulted security may become subject to either
substantial workout negotiations or restructuring, which may
entail, among other things, a substantial reduction in the interest
rate, a substantial write-down of principal, and a substantial
change in the terms, conditions and covenants with respect to such
defaulted security. In addition, such negotiations or restructuring
may be quite extensive and protracted over time, and therefore may
result in substantial uncertainty with respect to the ultimate
recovery on such defaulted security. Bank loans have historically
experienced greater default rates than has been the case for
investment grade securities.
The Company has no investment in sovereign debt at 31 December
2022 or 2021.
No collaterals are held by the Company itself in relation to the
Company's financial assets subject to credit risk.
The Company's maximum credit risk exposure at 31 December 2022
and 2021 is as follows:
2022 2021
US $000 US $000
Financial assets:
At amortised cost:
Trade and other receivables - 289
Cash at bank 10,971 45,130
------ ------
10,971 45,419
At fair value through profit or loss 104,099 109,251
------ ------
115,070 154,670
------- -------
The fair values of the above financial assets at fair value
through profit or loss are also affected by the credit risk of
those instruments. However, it is not practical to provide an
analysis of the changes in fair values due to the credit risk
impact for the year or previous periods, nor to provide any
relevant sensitivity analysis.
At 31 December 2022 and 2021 the credit rating distribution of
the Company's asset portfolio subject to credit risk was as
follows:
Rating 2022 2021
US $000 Percentage US $000 Percentage
AA+ 28,800 25.0%
AA 9,812 8.5% 26,063 16.9%
A 446 0.5% 12,872 8.3%
B 5,347 4.6% 922 0.6%
B+ 735 0.6% - -
BB 6,108 5.3% - -
BB+ 842 0.7%
BBB 908 0.8% 6,195 4.0%
B- - - 4,576 3.0%
BB- 805 0.7% 5,280 3.4%
BBB- 618 0.6%
Not Rated 60,649 52.7% 98,762 63.8%
------ ------ ------ ------
115,070 100% 154,670 100%
------ ------ ------ ------
Included within "not rated" amounts are investments in loan
market through CLOs (equity tranches) of USD 60.649m and no open
warehouses (2021: CLOs of USD 91.179m and open warehouses of USD
7.583m).
The modelled internal rates of return on the CLO portfolio as
well as the warehouse first loss tranches are in low teens
percentage points.
Liquidity risk
The following table summarizes the contractual cash outflows in
relation to the Company's financial liabilities according to their
maturity.
Carrying Less
31 December 2022 amount than 1
year
US $000 US $000
Trade and other payables 3,733 3,733
------ ------
Carrying Less
31 December 2021 amount than 1
year
US $000 US $000
Trade and other payables 6,641 6,641
------ ------
A small proportion of the Company's portfolio is invested in
mid-term private equity investments with low or no liquidity. The
investments of the Company in publicly traded securities are
subject to availability of buyers at any given time and may be very
low or non-existent subject to market conditions.
There is currently no exchange traded market for CLO securities
and they are traded over-the-counter through private negotiations
or auctions subject to market conditions. Currently the CLO market
is liquid, but in times of market distress the realization of the
investments in CLOs through sales may be below fair value.
Warehouse facilities are private negotiated financing facilities
and are not traded and have no active market. The Company, however,
can opt to terminate such facility.
Management takes into consideration the liquidity of each
investment when purchasing and selling in order to maximise the
returns to shareholders by placing suitable transaction levels into
the market.
At 31 December 2022, the Company had liquid investments
totalling USD 117.4m, comprising of USD 11m in cash and cash
equivalents, USD 66.6m in investments in loan market through CLOs,
USD 37.5m in other fixed income investments, USD 2.3m in public
equities. Management structures and manages the Company's portfolio
based on those investments which are considered to be long term,
core investments and those which could be readily convertible to
cash, are expected to be realised within normal operating cycle and
form part of the Company's treasury function.
Capital management
The Company considers its capital to be its total equity (i.e.,
its share capital and all of its reserves).
The Company manages its capital to ensure that it will be able
to continue as a going concern while maximising the return to
shareholders through the optimisation of the balance between its
net debt and equity. During 2022 and 2021, the Company's only
borrowing is a loan payable to a related party of USD 0.149m (note
22) and therefore to a significant extent it is capital funded.
Net debt to equity ratio is calculated using the following
amounts as included on the consolidated statement of financial
position, for the reporting periods under review:
2022 2021
US $000 US $000
Borrowings 149 149
Cash at bank (10,971) (45,130)
------ ------
Net Debt (10,822) (44,981)
------ ------
Total equity 127,725 177,722
------ ------
Net debt to equity ratio (0.08) (0.25)
------- -------
27. Financial assets and liabilities by class
Note 2022 2021
US $000 US $000
Financial assets:
Financial assets at amortised 9 ,
cost 10 10,971 45,419
Financial assets at fair value
through profit or loss 4 106,376 119,220
Financial assets designated
at fair value through other
comprehensive income 5 7,596 12,435
------- -------
124,943 177,074
------- -------
Financial liabilities:
Financial liabilities at amortised
cost 12 3,733 6,641
------- -------
The carrying amount of the financial assets and liabilities at
amortised cost approximates to their fair value.
28. Events after the reporting date
The following non-adjusting events occurred after 31 December
2022:
-- Credit Suisse, the second-largest bank in Switzerland,
collapsed in March 2023 and Switzerland's regulatory authorities
approved its takeover by the largest Swiss bank UBS. At that time
Livermore owned USD 0.8m nominal of Credit Suisse Additional Tier 1
bonds purchased at a cost of USD 0.675m. The fair value of the
bonds at 31 December 2022 was USD 0.578, included within Fixed
income investments under Financial assets at fair value through
profit or loss (note 4). As a result of the takeover, the bonds
were permanently written down and the Company suffered a loss in
2023 of USD 0.578m.
There were no other material events after the end of the
reporting year, which have a bearing on the understanding of these
financial statements.
Shareholder Information
Registrars
All enquiries relating to shares or shareholdings should be
addressed to:
Link Asset Services
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone: 0871 664 0300
Facsimile: 020 8639 2342
Change of Address
Shareholders can change their address by notifying Link Asset
Services in writing at the above address.
Website
www.livermore-inv.com
The Company's website provides, amongst other things, the latest
news and details of the Company's activities, share price details,
share price information and links to the websites of our
brands.
Direct Dividend Payments
Dividends can be paid automatically into shareholders' bank or
building society accounts. Two primary benefits of this service
are:
-- There is no chance of the dividend cheque going missing in the post; and
-- The dividend payment is received more quickly because the
cash sum is paid directly into the account on the payment date
without the need to pay in the cheque and wait for it to clear.
As an alternative, shareholders can download a dividend mandate
and complete and post to Link Asset Services.
Lost Share Certificate
If your share certificate is lost or stolen, you should
immediately contact Link Asset Services on 0871 664 0300 who will
advise on the process for arranging a replacement.
Duplicate Shareholder Accounts
If, as a shareholder, you receive more than one copy of a
communication from the Company you may have your shares registered
in at least two accounts. This happens when the registration
details of separate transactions differ slightly. If you wish to
consolidate such multiple accounts, please call Link Asset Services
on 0871 664 0300.
Please note that the Directors of the Company are not seeking to
encourage shareholders to either buy or sell the Company's
shares.
Corporate Directory
Secretary Principal Bankers
Chris Sideras
Banque J. Safra Sarasin (Luxembourg)
Registered Office SA
Trident Chambers 17 - 21, Boulevard Joseph II
PO Box 146 L-1840
Road Town Luxembourg
Tortola
British Virgin Islands CBH Compagnie Bancaire Helvétique
SA
Company Number Löwenstrasse 29 Zurich
475668 8021
Switzerland
Registrars
Link Asset Services Credit Suisse AG
34 Beckenham Road Seeefldstrasse 1
Beckenham Zurich 8070
Kent BR3 4TU Switzerland
England
Auditor UBS AG
Grant Thornton (Cyprus) Ltd Paradeplatz 6
41-49, Agiou Nicolaou Street CH-8098 Zürich
Nemeli Court - Block C Switzerland
2408 Engomi Nicosia
Bank Julius Baer & Co. Ltd.
Bahnhofstrasse 36,
Solicitors CH-8010 Zurich,
Travers Smith Switzerland
10 Snow Hill
London
EC1A 2AL
England
Broker
Zeus Capital Limited
125 Old Broad Street
London
EC2N 1AR
England
Nominated And Financial Adviser
Strand Hanson Limited
26 Mount Row
London
W1K 3SQ
England
For further information please contact:
Livermore Investments Group Limited +41 43 344 3200
Gaurav Suri
Strand Hanson Limited (Nominated
Adviser) +44 (0)20 7409 3494
Richard Johnson / Ritchie Balmer
Zeus Capital Limited (Broker) +44 (0)20 3829 5000
Louisa Waddell
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END
FR FLFSVESIALIV
(END) Dow Jones Newswires
May 22, 2023 02:00 ET (06:00 GMT)
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