Highlights

·      Net Asset Value per share - USD 0.77 after payment of interim dividend of USD 0.0256 per share (December 2014: USD 0.82).

·      In addition to the USD 5m dividend, the Company bought back 3,000,000 shares during the year at an average price of GBP 0.34.

·      Wyler Park property in Bern, Switzerland was refinanced for a minimum term of 5 years. Lease with SBB was extended by another 10 years until 2029.

·      No material developments in the private equity portfolio.

Chairman's and Chief Executive's Review

Introduction

We are pleased to announce the consolidated financial results for Livermore Investments Group Limited ("Livermore" or "the Company") and its subsidiaries (together "the Group") for the year ended 31 December 2015. 

The year-end NAV was USD 0.77 per share after payment of a USD 5m dividend, USD 0.0256 per share (2014 NAV: USD 0.82 per share). Further, the Company bought back 3,000,000 shares for a total cost of USD 1.54m. Net loss for the year was USD 4.7m (2014 Net Profit: USD 7.2m).

Wyler Park, our investment property in Bern, Switzerland performed well, generating over CHF 5.4m (USD 5.6m) in net rent during the year.  All of the 39 apartments and commercial spaces are fully rented. The loan against Wyler Park was successfully refinanced in January 2015 for a minimum term of 5 years and annual interest expense was reduced to CHF 1.1m from circa CHF 3.3m in prior years. Further, management successfully extended the lease with SBB by another 10 years until 2029.

The portfolio recorded gains from revaluation as well as increased income from the Wyler Park project. These gains were offset by administration expenses, negative mark-to-market on the CLO portfolio on account of lower loan prices and credit concerns in the high-yield market, as well as certain impairments on legacy private equity positions. Interest and dividend income from the financial portfolio totalled USD 25.7m (2014: USD 26.6m).

Financial Review

The NAV of the Group at 31 December 2015 was USD 148.6m. Net loss during the year was USD 4.7m, which represents earnings per share of USD (0.02).

Administrative expenses excluding provisions were USD 4.6m (2014: USD 7.2m).

The overall change in the NAV is primarily attributed to the following:

Dividend & Buyback

For the year ended 31 December 2015, the Company paid a dividend of USD 5m (USD 0.0256 per share).

During 2015, the Company bought back 3,000,000 shares to be held in treasury for a total cost of USD 1.54m.  As at 31 December 2015, the Company held 111,830,818 shares in treasury.

In addition since 1 January 2016 to date, the Company has purchased 17,475,585 shares to be held in treasury for a total cost of USD 7.86m.

Richard B Rosenberg                                                                                        Noam Lanir

Chairman                                                                                                           Chief Executive Officer

20 May 2016

Review of Activities

Introduction and Overview

2015 was a challenging year for financial markets as investors fretted over several issues ranging from slow global economic growth, persistently low inflation, low productivity growth, the length of the current business cycle, further slowdown in China, falling energy and commodity prices, and policy tools remaining with central banks to manage a potential downturn. The main issue, however, was the strength of the US Dollar on the back of monetary policy divergence between the US and the rest of the developed world. The strength of the US Dollar created significant monetary policy tightening via the currency route in the rest of the world and especially in emerging markets. In the US, cutbacks in spending from the energy and mining sector offset gains from lower oil prices. Corporate earnings declined as exporters and multinational companies struggled with the stronger currency and energy and mining sector faced lower prices for their products. Indicators in the high yield and credit market flashed warning signs in the latter half of the year and gave up a significant part of their first half gains.

During the year, significant effort was put into first, refinancing the Wyler Park property at good terms, and second, to extend the lease with SBB. Both efforts were successful. The new financing has reduced the interest burden from CHF 3.3m per annum in prior years to about CHF 1.1m per annum going forward, and the lease extension until 2029 has contributed to the increase of the value of the property from CHF 115.8m in 2014 to CHF 123.3m in 2015.

The Group financial portfolio continued to generate strong cash flows despite mark-to-market losses on the CLO portfolio as concerns over the health of speculative grade credit markets and forced liquidations significantly affected investor sentiment.

In 2015, the Group generated interest and dividend income of USD 25.7m and investment property income of USD 5.2m. The Group reported NAV/share of USD 0.77 after a dividend of USD 0.0256/share (2014: USD 0.82) and net loss of USD 4.7m. Administrative expenses amount to USD 5.2m (2014: USD 7.2m) and finance costs were USD 2.5m (2014: USD 7.3m), of which USD 1.3m relates to the loan against the Wyler Park property.

The Group 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 members have a large ownership interest in Livermore shares.

Considering the strong liquidity position of Livermore, together with its strong foothold in the US CLO market as well as the robustness of its investment portfolio and the alignment of management's interests with those of its shareholders, management believes that the Group is well positioned to benefit from current market conditions.

Global Investment Environment

The global economy continued to recover in 2015, however, contrary to expectations, growth did not strengthen and stayed at anaemic levels. While the economies of Euro area and US grew moderately driven by services sector on the back of domestic demand, industrial activity was lacklustre as growth in China slowed. The economic environment continued to be dominated by considerable uncertainty including that from the Greek debt crisis, geopolitical tensions such as Ukraine, and military conflict in the Middle East.

Energy and commodity prices continued to fall in 2015 amid slow growth and the Chinese efforts to transition to a services oriented economy. Low oil commodity prices negatively affected growth in several emerging market countries dependent on commodity exports. Low prices further contributed to low inflation rates in many countries.

In the US, GDP grew by a modest 2.4% in 2015 but labour market conditions continued to improve towards full employment levels supported by robust services sector growth and unemployment rate fell to 5% by the end of the year. This prompted a sharp divergence in expected monetary policy between the US and rest of the developed world and the US Dollar strengthened against most currencies. A stronger US Dollar had the effect of creating tighter monetary conditions across the world further depressing growth. Concerned about potential inflation due to high employment levels, the US Federal Reserve indeed raised its main interest rate by 0.25% in December 2015 for the first time since 2008.

In the Euro area, GDP grew by 1.6% in 2015 as compared to 0.9% in 2014. This moderate recovery was supported by the highly expansionary monetary policy of the European Central Bank (ECB) and the associated weakening of the Euro. The ECB started purchasing securities at the rate of EUR 60 billion per month in March and by December announced extending these purchases until March 2017 in addition to lowering its deposit rate by another 0.10% to -0.30%. Credit conditions gradually improved and business confidence picked up. Low energy prices also improved household purchasing power. Although the unemployment rate continued to decline in the Euro area, it remained at elevated levels with a reading of 10.4% as of year-end 2015.

The Swiss economy faced several challenges in 2015, mainly emanating from sharp appreciation of the Swiss franc following discontinuation of minimum exchange rate versus the Euro in mid-January 2015 as well as weakening of the global economy in the second half of the year. Against a backdrop of increasingly divergent monetary policy between the US and Euro zone, the Swiss National Bank (SNB) could no longer support the minimum exchange rate regime and its discontinuation caused a sharp increase in the value of the Swiss franc. To discourage safe haven inflows in the Swiss Franc, the SNB cut the deposit rates further into negative territory to -0.75%.  GDP declined in the first quarter and recovered only marginally by year end 2015. Overall, GDP increased by 0.9% in 2015 vs 1.9% in 2014. Sales and profit margins came under severe pressure in several industries and the tough business environment left an impact on the labour market with unemployment rate increasing to 3.4% in December 2015. Inflation as measured by the Swiss consumer price index was -1.1% in 2015.

Growth in emerging economies presented an uneven picture. Economic growth in China slowed slightly to 6.9% reflecting robust growth in services sector. However, momentum in industrial activity slowed perceptibly dampened by overcapacity in heavy industry and construction. Recession in Brazil and Russia deepened further as a result of the slump in commodity prices. The People's Bank of China (PBOC) eased monetary policy significantly in 2015. While in the first half of the year the PBOC focussed on stimulating the economy, further easing in the second half was driven by turbulence in China's stock market and the PBOC's efforts to make its currency exchange rate more flexible.

Financial markets faced significant volatility in 2015 as investors braced for slow global growth, a long structure transition of the Chinese economy, cut backs in investment due to low energy and commodity prices, a stronger US Dollar and potentially higher short term rates in the US amidst geopolitical tensions and conflict in the Middle East.

The S&P 500 Index managed to generate a positive total return of 1.38% in 2015 including dividends while the EuroSTOXX 50 Index generated a net return of 6.4% driven by aggressive monetary and a lower exchange rate.  The US Dollar was up 9.25% against international currencies as measured by the DXY Index. The Euro on the other hand ended the year at 1.086 as compared to 1.21 versus the US Dollar at the start of 2015.

Against widely held expectations of higher longer term rates, the US and German 10 year treasury yields were only marginally changed yielding 2.26% and 0.629% respectively at the end of the year as compared to 2.17% and 0.54% respectively at the beginning of 2015. 2015 was a challenging year for US credit as concerns over potential rate increases in the US as well as declining earnings growth and low energy and commodity prices raised the specter of higher default rates in 2016 with potentially lower recoveries if commodity prices stay low. Both investment grade and high yield finished 2015 with negative returns. Total returns for investment grade and high yield were -0.75% and -5.56%, respectively. Spreads widened on the year (+32bp for investment grade, +168bp for high yield), resulting in excess returns of -1.64% and -7.15% for investment grade and high yield, respectively. Loans outperformed high yield, but still had only the second negative return (-0.69%) in 19 years of data.  

Sources: Board of Governors of the Federal Reserve System, European Central Bank (ECB), Swiss National Bank, Bloomberg, Morgan Stanley

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 with some exposure to Europe and emerging markets.  

The remaining portfolio is focused on Switzerland and Asia with investments primarily in real estate and select private equity opportunities.  Investments are focused on sectors that Management believes will provide superior growth over the mid to long term with relatively low downside risk. 

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. 

Review of Significant Investments

* Net of related loan.

Wyler Park - Switzerland

Wyler Park is a top quality mixed-use property located in Bern, Switzerland. It has over 16,800 square meters of commercial space, 4,100 square meters of residential space, and another 7,800 square meters available for additional commercial development. The commercial part is leased entirely to SBB (AAA rated), the Swiss national transport authority wholly owned by the Swiss Confederation, and serves as the headquarters of their Passenger Traffic division. The annual rental income from the commercial area of the project is CHF 4.43m (USD 4.61m).

Following the successful development of 39 residential apartments, management rented out all of them. The entire property is fully rented and the annual rental income from the residential area is about CHF 0.98m (USD 1.02m).

Livermore is the sole owner of Wyler Park through its wholly owned Swiss subsidiary, Livermore Investments AG. The loan outstanding on the project as of 31 December 2015 is CHF 76.6m (USD 76.4m), which is a non-recourse loan to Livermore Investments AG backed only by this property. In January 2015, management successfully refinanced the loan against Wyler Park with a Swiss bank. The principal amount of the new loan facility is CHF 78.0m. The facility is committed until at least 30 June 2019 at a margin of CHF Libor + 1.4%.

In September 2015, management successfully negotiated a lease extension with SBB for an additional 10 years. The lease now extends until 2029. As part of the agreement, Livermore will invest up to a maximum of CHF 3.95m to upgrade the ventilation and cooling systems and to increase capacity. SBB is expected to invest CHF 9m.

The valuation of the property on current-use basis, as of year-end 2015 is CHF 123.3m (USD 123.3m).

Management continues to evaluate the potential development of the additional commercial development rights of 7,800 square meters attached to the property.

SRS Charminar - India

Livermore invested USD 20m in 2008 in a leading Indian Real Estate company, in association with SRS Private and other investors as part of a total investment of USD 132.1m. In 2009, the promoters of the investee company were arrested on charges of criminal conspiracy, cheating, and misappropriation of funds. Later it was discovered that the investee company had breached the terms of the investment agreement resulting in a default. On 13 January 2011 the Company Law Board ("CLB") passed an order and allowed Infrastructure Leasing & Financial Services Limited ("IL&FS") to become an 80% shareholder and control the management of the company. SRS Charminar and other investors have agreed to a settlement with IL&FS wherein the settlement amount will be paid in four tranches over five years.  

In November 2015, Livermore received the first tranche of the settlement in the amount of USD 2.9m. The next tranche is expected in late 2016.

The carrying amount of the investment is based on discounted expected cash flows and as of year-end was USD 7.1m (2014: USD 9.1m). 

Financial portfolio and trading activity               

The Group manages a financial portfolio valued at USD 90.3m (net of leverage) as at 31 December 2015, which is invested mainly in fixed income and credit related securities.

The following is a table summarizing the financial portfolio as of year-end 2015

* this figure includes USD 5m which the Company invested during the period in the first loss tranche of a warehouse facility for accumulating loans with the intention to transfer these loans to a CLO.

** this figure includes USD 16m which the Company invested during the period in the first loss tranche of warehouse facilities for accumulating loans with the intention to transfer these loans to a CLO.

Senior Secured Loans and Collateralized Loan Obligations (CLO):

2015 was a volatile year in the US Leveraged Loan market. Although the US Leveraged Loan market generated a total return of -0.70% as measured by the S&P LSTA Total Return Index, the market experienced significant intra-year volatility. Earlier in the year, conditions in the Leveraged Loan market continued to stay difficult much alike the fourth quarter of 2014. Concerns were driven by declines in the high yield market, continued withdrawals from retail funds, and intensified pressure on the Energy and Metals/Mining sector as oil and commodity prices stayed low and new issue CLO issuance was muted. Late in the first quarter and the second quarter, however, saw a sharp recovery as oil prices bounced back and loan prices recovered sharply further helped by strong new issue CLO creation. CLO equity prices increased in tandem and management reduced exposure to short reinvestment period CLO equity positions at high levels. Further, management took advantage of lower loan prices by pricing a new CLO in the first quarter and also accumulating loans for another CLO which was priced in July 2015 when liability costs were near the lows for the year. Both these new issue CLOs ramped well and generated strong first payments. In the third quarter, however, oil and commodity prices took another step down bringing significant stress into the high yield and leveraged loan market. Outflows from retail funds accelerated and loan prices fell on concerns of higher default and risks in the credit market as well as serious lack of liquidity. CLO equity prices suffered one of their worst mark-to-market declines. According to estimates, the total return in 2015 for USD CLO equity issued after 2010 was between -13.4% to -15%¹.

The Group's CLO portfolio, however, continued to generate strong cash flows aggregating USD 21.3m in 2015. Also, warehousing for CLO's generated net cash income of USD 1.6m during the year. Management reinvested proceeds into long new issue CLOs with clean collateral. As of the end of the year 2015, all of the Group's US CLO equity positions were comfortably passing their Overcollateralization (OC) tests and remain in healthy shape. CLO Managers also took the opportunity of loan price volatility and wide new issue loan spreads to trade out of some credit risk loans and purchase better quality loans at low prices. Management continues to actively monitor the CLO portfolio and position it towards longer reinvestment period and better quality collateral CLOs.

While default rates stayed low at 1.5% on a trailing twelve month basis, management expects the default rate to tick up as energy and metals/mining related companies run out of liquidity in 2016 and idiosyncratic situations arise in other sectors if the US high yield and leveraged loan markets deteriorate further. Management is also focused and engaged with CLO managers to actively manage exposure to Caa/CCC rated loans in the underlying CLO portfolios ahead of rating agency downgrades of credit risk loans.

1. Morgan Stanley, in its written January 2016 CLO market commentary, estimated total returns for 2015 to be -15%; Citi Research, in a report published in January 2016, estimated total returns for 2015 to be -14.1%; and the total return of J.P. Morgan's PricingDirect, a pricing source for CLO 2.0 equity that is published annually, was -13.4% for 2015.

The Group's CLO portfolio is divided into the following geographical areas:

Private Equity Funds  

The other private equity investments held by the Group are incorporated in the form of Managed Funds (mostly closed end funds) mainly in the emerging economies of India and China. The investments of these funds into their portfolio companies were mostly done in 2008 and 2009. Blue Ridge fund was unwound during the year and all distributions paid. The Group expects material exits of portfolio companies from other funds to materialize between 2016 and 2018.  During the reporting period distributions of USD 0.22m from SRS Private and USD 0.06m Blue Ridge fund were received.

The following summarizes the book value of the private equity funds as at year-end 2015

SRS Private Fund: SRS Private is a private equity fund focused on real estate in India. The fund has invested in residential and mixed use projects in India as well as directly in certain real estate companies. The assets are primarily located in and around major cities of India such as Mumbai and Hyderabad. Approximately 58% of the net asset value of the fund is invested in mixed-use assets (commercial and residential combined), 20% is in SRS Charminar, 10.6% is in land primarily for residential assets, 3.5% is invested at the entity level of real estate developers, and 8% in net cash and receivables. In 2015, the fund distributed USD 0.22m from proceeds of partial sale of a mixed use property in Mumbai. As of year-end 2015, the investment was valued at USD 1.7m.

Evolution Venture: Evolution is an Israel focused Venture Capital fund. It invests in early stage technology companies. Its investments include a carrier-class Mobile Broadband Wireless (MBW) Wi-Fi solutions company, a mobile keyboard and language correction software company, a software company operating in the digital radio market, a software test tool developer, and a virtualization technology company. The keyboard and language correction software company and the virtualization technology company have been performing well. The Wi-Fi solutions company has not recovered from a failed launch and has been written down.

India Blue Mountains: India Blue Mountains was a fund developing 4 star hotels in India. In September 2015, the fund was restructured into three separate SPV's holding the Mumbai, Pune, and Goa assets and liabilities. Livermore now holds the same percentage in each of the SPV's as it held in India Blue Mountains.

Given the high debt load on the individual assets, as well as delays and underperformance, net asset values for the properties held under the SPVs have declined. As of year-end 2015, the Group's investment in India Blue Mountain properties were valued at USD 0.7m.

Elephant Capital: India-focused private equity fund, which is listed on the AIM exchange (Ticker: ECAP).  The fund has realized some of its investments and remains with its unlisted portfolio of investments in Amar Chitra Katha (offline and digital content company), Air Works India (aircraft maintenance company), and Global Cricket Ventures (online venture to distribute cricket content).

As of August 2015, the audited NAV of the fund was GBP 5.44m or 36 pence per share. The fund returned GBP 1m to shareholders via its buy-back programme in March 2015. Further details on Elephant Capital and its portfolio companies is available at www.elephantcapital.com.

On 26 February 2016, the Board announced its intention to delist from the AIM exchange in order to reduce expenses relative to the value of its remaining assets. The delisting has been completed and Elephant Capital is now a private company.

Da Vinci: The fund is primarily focused on Russia and CIS countries and is primarily invested in the Moscow Exchange and a Ukrainian coal company. The Moscow Exchange performed well in local currency terms increasing turnover in derivative and spot markets. The coal company is located in Western Ukraine. The fund is building a club of investors to support and facilitate this investment. The Group's investment in the fund was valued at USD 0.3m as of 31 December 2015.

Panda Capital: Panda Capital is a China-based private equity fund focused on early-stage industrial operations in China. The fund's main investment is in a bamboo flooring company in China, which provides an innovative low cost alternative to hardwood flooring in shipping containers.  The manager is in the process of building up operational capacity for product manufacturing.

Blue Ridge: Blue Ridge is a China focused private equity fund. The fund was dissolved on 30 December 2015. To date, the fund has distributed USD 1.7m (77.9% of investment).

The following table reconciles the review of activities to the Group's financial assets and investment property as of year-end 2015               

Events after the reporting date

There were no material events after the end of the reporting year, which have a bearing on the understanding of these consolidated financial statements.

Litigation

At the time of this Report, there is one matter in litigation that the Group is involved in. Further information is provided in note 32 to the consolidated financial statements.

Report of the Directors

The Directors submit their annual report and audited consolidated financial statements of the Group for the year ended 31 December 2015.

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 Group'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 60), Non-Executive Director, Chairman of the Board

Richard joined the Group 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 49), Founder and Chief Executive Officer

Noam founded the Group in July 1998, to develop a specialist online marketing operation. Noam has led the growth and development of the Group's operations over the last sixteen 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 48), Executive Director and Chief Investment Officer

Ron was appointed as Executive Director and Chief Investment Officer on 10 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's activity. Prior to this he spent five years as a commercial lawyer advising banks and large corporations on corporate transactions, including buy-outs and privatisations. Ron has over 16 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 a LLB (LAW) and BA in Economics from Tel Aviv University.

Directors' responsibilities in relation to the consolidated financial statements

The Directors are responsible for preparing the Annual Report and the consolidated financial statements in accordance with applicable law and International Financial Reporting Standards as adopted by the European Union.

The Directors are required to prepare consolidated financial statements for each financial year which give a true and fair view of the financial position of the Group, and its financial performance and cash flows for that period.  In preparing these consolidated financial statements, the Directors are required to:

·      Select suitable accounting policies and then apply them consistently;

·      Make judgments and estimates that are reasonable and prudent;

·      State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

·      Prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Group's transactions, and at any time enable the financial position of the Group to be determined with reasonable accuracy and enable them to ensure that the consolidated 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 Group 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 Group'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 28 April 2016 the Directors are aware of the following interests in 3 per cent or more of the Company's issued ordinary share capital:

* after consideration of treasury shares (note 14).

Save as disclosed in this report and in the remuneration report, the Company is not aware of any person who is interested directly or indirectly in 3% or more of the issued share capital of the Company or could, directly or indirectly, jointly or severally, exercise control over the Company.

Details of transactions with Directors are disclosed in note 30 to the consolidated 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.  As an AIM quoted company, Livermore is not required to follow the provisions of the UK Corporate Governance Code - September 2012 (the "Code").  

The Board Constitution and Procedures

The Company is controlled through the Board of Directors, which currently comprises one Non-Executive Director and two Executive Directors.  The Chief Executive's responsibility is to focus on co-ordinating the company's business and implementing group strategy. 

A formal schedule of matters is reserved for consideration by the Board, which meets approximately four times each year.  The Board is responsible for implementation of the investing strategy as described in the circular to shareholders dated 6 February 2007 and adopted pursuant to shareholder approval at the Company's EGM on 28 February 2007.  It reviews the strategic direction of the Group, 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.  Following the resignation of one of the Non-Executive Directors, this committee has one member until a new Non-Executive Director is appointed.  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.  Following the resignation of one of the Non-Executive Directors, this committee has one member until a new Non-Executive Director is appointed. The duties of the Committee include monitoring the auditor's performance and reviewing accounting policies and financial reporting procedures. 

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 Group'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 Group 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 Group operates a sound system of internal control, which is designed to ensure that the risk of mis-statement or loss is kept to a minimum.

Given the Group'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 Group 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 Group, making reasonable assumptions about interest and dividend income, future trading performance, valuation projections and debt requirements. On the basis of this review, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and accounts.

Independence of Auditor

The Board undertakes a formal assessment of the auditor's independence each year, which includes:

·      a review of non-audit related services provided to the Company and related fees;

·      discussion with the auditor of a written report detailing all relationships with the Company and any other parties which could affect independence or the perception of independence;

·      a review of the auditor's own procedures for ensuring independence of the audit firm and partners and staff involved in the audit, including the rotation of the audit partner;

·      obtaining written confirmation from the auditor that it is independent;

·      a review of fees paid to the auditor in respect of audit and non-audit services.

Remuneration Report

The Directors' emoluments, benefits and shareholdings during the year ended 31 December 2015 were as follows:

Directors' Emoluments

Each of the Directors has a service contract with the Company.

The dates are presented in day / month / year format.

Directors' Interests

Interests of Directors in ordinary shares 

Notes:

a) Noam Lanir is interested in his ordinary shares by virtue of the fact that he owns directly or indirectly all of the issued share capital of Groverton Management Limited.

b) In 2007, loans of USD 5.523m were made to RB Investments GMBH, a company owned by Ron Baron, for the acquisition of shares in the Company. Interest was payable on these loans at 6 month US LIBOR plus 0.25% per annum and the loans were secured on the shares acquired. The loans were repayable on the earlier of the employee leaving the Company or April 2013. In December 2012 the Board decided to renew the outstanding amount of these loans for a period of another five years. Based on the Board's decision, the outstanding amount will be reduced annually on a straight line over five years, as long as the key management employee remains with the Company. The relevant reduction in the loan amount for the year was USD 1.128m. The loans together with their related accrued interest of USD 0.117m were classified as "other assets" and are included under trade and other receivables (note 12).

Interests of Directors in share options

The options are exercisable up to 10 years after the date of grant. No options were exercised during the year ended 31 December 2015.

* The exercise prices as per the share option scheme are quoted in British Pounds.  The indicative equivalent USD amounts shown in the table above are based on the exchange rates as at 31 December 2015.

Share Option Scheme

The Company's remuneration committee (the "Committee") is responsible for administering the Share Option Scheme.  Options to acquire Shares in the Company may be granted under the Share Option Scheme to any employee or director of the Company or of other Group entities. 

The option exercise price per Ordinary Share is determined by the Committee but will be no less than market value of the Ordinary Shares on the dealing day immediately preceding the date of grant. The options are subject to continuous service conditions but are not subject to any performance criteria.

The Share Option Scheme will terminate ten years after it was adopted by the Company, or earlier in certain circumstances.

Remuneration Policy

The Group's policy has been designed to ensure that the Group has the ability to attract, retain and motivate executive directors and 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 Group'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 Group 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 Group, 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 Group operates, and include economic recession, declining corporate profitability, rising inflation and interest rates and excessive stock-market speculation.

The Group's portfolio is exposed to interest rate changes, credit risk, liquidity risk and volatility particularly in the US, EU, Switzerland and India. 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 countries such as India and China are exposed to governmental and regulatory risks.  The SRS Charminar investment is specifically subject to regulatory and legal risks as well as currency risk.

The mitigation of these risks is achieved by investment diversification, both by sector and by geography. The Group also engages from time to time in certain hedging activities to mitigate these risks.

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 Group's portfolio has a significant exposure to senior secured loans of US companies and emerging market countries therefore has a concentration risk to this asset class.

A periodic internal review is performed to ensure transparency of Group activities and investments. All service providers to the Group 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 invested in non USD currencies (mainly EUR, CHF and INR), it is exposed to movements in these currencies.

On the asset side, the Group's exposure to interest rate risk is limited to the interest bearing deposits and portfolio of bonds and loans in which the Group invests. 

Management monitors liquidity to ensure that sufficient liquid resources are available to the Group. The Group'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 35 of the consolidated financial statements.   

Share Capital

There was no change in the authorised share capital during the year to 31 December 2015. The authorised share capital is 1,000,000,000 ordinary shares with no par value.

Related party transactions

Details of any transactions of the Group with related parties during the year to 31 December 2015 are disclosed in note 30 to the consolidated financial statements.

By order of the Board of Directors

Chief Executive Officer

20 May 2016

Report of the independent auditor to the members of Livermore Investments Group Limited

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Livermore Investments Group Limited (the ''Company'') and its subsidiaries (together with the Company, ''the Group''), which comprise the consolidated statement of financial position as at 31 December 2015 and the consolidated statements of profit or loss, comprehensive income, changes in equity, and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Board of Directors' Responsibility 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 (EU) 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.

Auditor's Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the consolidated financial statements that give a true and fair view 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2015 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU.

Emphasis of Matters

We draw attention to Note 4 to the consolidated financial statements which describes the existence of material uncertainty of the future cash flows relating to the investment of the Group through SRS Charminar Investments Ltd, an Indian Real Estate company.

We also draw attention to Note 32 to the consolidated financial statements which describes the existence of material uncertainty over the outcome of a legal case against one of the custodian banks that the Group uses and Livermore as the beneficial owner.

Our opinion is not qualified in respect of these matters.

Other Matter

This report, including the opinion, has been prepared for and only for the Company'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.

Augoustinos Papathomas

Certified Public Accountant and Registered Auditor for and on behalf of

Grant Thornton (Cyprus) Ltd

Certified Public Accountants and Registered Auditors

Limassol

Date: 20 May 2016

Livermore Investments Group Limited

Consolidated Statement of Financial Position as at 31 December 2015

These consolidated Financial Statements were approved by the Board of Directors on 20 May 2016.

The notes 1 to 36 form part of these consolidated financial statements.

Livermore Investment Group Limited

Consolidated Statement of Profit or Loss for the year ended 31 December 2015

The profit for the year is wholly attributable to the owners of the parent.

The notes 1 to 36 form part of these consolidated financial statements.

Livermore Investment Group Limited

Consolidated Statement of Comprehensive Income for the year ended 31 December 2015

The total comprehensive income for the year is wholly attributable to the owners of the parent.

The notes 1 to 36 form part of these consolidated financial statements.

Livermore Investment Group Limited

Consolidated Statement of Changes in Equity for the year ended 31 December 2015

The notes 1 to 36 form part of these consolidated financial statements.

Livermore Investments Group Limited

Consolidated Statement of Cash Flows for the year ended 31 December 2015 

The notes 1 to 36 form part of these consolidated financial statements.

Notes on the Financial Statements

1.     General Information

Incorporation, principal activity and status of the Company

1.1. The Company was incorporated as an international business company and registered in the British Virgin Islands (BVI) on 2 January 2002 under IBC Number 475668 with the name Clevedon Services Limited. The liability of the members of the Company is limited. 

1.2.   The Company changed its name to Empire Online Limited on 5 May 2005 and then to Livermore Investments Group Limited on 28 February 2007.

1.3.   The principal activity of the Group changed to investment activities on 1 January 2007. Before that the principal activity of the Group was the provision of marketing services to the online gaming industry and, since 1 January 2006, the operation of online gaming.

1.4.   The principal legislation under which the Company operates is the BVI Business Companies Act, 2004.

1.5.   The registered office of the Company is located at Trident Chambers, PO Box 146, Road Town, Tortola, British Virgin Islands.

2.     Accounting Policies

The significant accounting policies applied in the preparation of the consolidated financial statements are as follows:

2.1.   Basis of preparation

The consolidated financial statements of Livermore Investments Group Limited have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and on a going concern basis.  The consolidated financial statements have been prepared on the historical cost basis except for the following:

·      Financial instruments at fair value through profit or loss (including derivatives) are measured at fair value.

·      Available- for- sale financial assets are measured at fair value.

·      Investment property is measured at fair value.

·      Investments in associates and joint ventures are measured at fair value.

The financial information is presented in US dollars because this is the currency in which the Group primarily operates.

The Directors have reviewed the accounting policies used by the Group and consider them to be the most appropriate.

2.2.   Adoption of new and revised IFRS 

As from 1 January 2015, the Group adopted all the new or revised IFRS and relevant amendments which became effective and also were endorsed by the European Union, and are relevant to its operations.

The adoption of the above did not have a material effect on the consolidated financial statements.

All IFRS issued by the International Accounting Standards Board (IASB) which are effective for the year ended 31 December 2015, have been adopted by the EU through the endorsement procedure established by the European Commission, with the exception of certain provisions of IAS 39: "Financial Instruments: Recognition and Measurement" relating to portfolio hedge accounting.

The following Standards, Amendments to Standards and Interpretations had been issued by the date of authorisation of these consolidated financial statements but are not yet effective, or have not yet been endorsed by the EU, for the year ended 31 December 2015:

The Board of Directors expects that when the above Standards or Interpretations become effective in future periods, they will not have a material effect on the consolidated financial statements, other than for IFRS 9.

IFRS 9 ''Financial Instruments'' replaces IAS 39 ''Financial Instruments: Recognition and Measurement''. The new standard introduces extensive changes to IAS 39's guidance on the classification and measurement of financial assets and introduces a new 'expected credit loss' model for the impairment of financial assets. IFRS 9 also provides new guidance on the application of hedge accounting.

Management is not yet in a position to provide quantified information regarding the impact of IFRS 9. At this stage the main areas of expected impact are as follows:

·    the classification and measurement of the Company's financial assets will need to be reviewed based on the new criteria that consider the assets' contractual cash flows and the business model in which they are managed

·    an expected credit loss‑based impairment will need to be recognised on the Company's financial assets at amortised cost and any investments in debt‑type assets, unless classified as at fair value through profit or loss in accordance with the new criteria

2.3.   Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and all of its subsidiaries. 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 financial statements of all the Group companies are prepared using uniform accounting policies.  Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Group.  All subsidiaries have a reporting date of 31 December.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

The results and cash flows of any subsidiaries acquired or disposed of during the year are included in the consolidated financial statements from the effective date of acquisition or up to the effective date of disposal.

2.4.   Investments in associates and joint ventures

An associate is an entity over which the Group is able to exert significant influence but not control.

A joint venture is an arrangement that the Group controls jointly with one or more other investors, and over which the Group has rights to a share of the arrangement's net assets rather than direct rights to underlying assets and obligations for underlying liabilities.

Investments in associates and joint ventures are measured at fair value through profit or loss in accordance with IAS 39, based on the exemption available by IAS 28 "Investments in Associates and Joint Ventures" for entities that are venture capital organisations or similar entities.

2.5.   Current assets are those which, in accordance with IAS 1 Presentation Of Financial Statements are:

 • expected to be realised within normal operating cycle, via sale or consumption, or

• held primarily for trading, or

• expected to be realised within 12 months from the reporting date, or 

• cash and cash equivalent not restricted in their use.

All other assets are non-current.

2.6.   Investment property income

Rental income is recognised on a straight line basis over the lease term.  Service charges and management fees are recognised as the related costs are incurred and charged.  Changes to rental income that arise from reviews to open market rental values or increases that are indexed linked on a periodic basis are recognised from the date on which the adjustment becomes due.  Lease incentives granted are recognised as an integral part of the net consideration for the use of the property.  Lease incentives are allocated evenly over the life of the lease.  Rental income and services charged are stated net of VAT and other related taxes.

2.7.   Interest and dividend income

·  Interest income is recognised based on the effective interest method. 

·  Dividend income is recognised on the date that the Group's right to receive payment is established, which in the case of quoted securities is the ex-dividend date. 

2.8.   Foreign currency

The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency).  For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in USD, which is the functional currency of the Company and the presentation currency for the consolidated financial statements.  

Transactions in foreign currencies other than each group entity's functional currency 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 equivalents 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 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 except for differences arising on the re-translation of non-monetary available-for-sale financial assets 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 all Group entities that have a functional currency different from US dollars are translated into the presentation currency as follows:

(i)        assets and liabilities are translated at the closing rate at the reporting date; and

(ii)       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

(iii)      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. 

2.9.   Taxation

Current tax is the tax currently payable based on taxable profit for the year in accordance with the tax laws applicable in jurisdictions where the Group operates.

Deferred taxes are calculated using the liability method on temporary differences.  Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases.  However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit.  Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the group and it is probable that reversal will not occur in the foreseeable future.  In addition, tax losses available to be carried forward as well as other income tax credits to the group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are provided in full, with no discounting.  Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income.  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.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense within profit or loss, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.

2.10. Investment property

Certain of the Group's properties are classified as investment property, being held for long term investment gains and to earn rental income. 

Investment properties are measured initially at cost, and thereafter are stated at fair value, which reflects market conditions at the reporting date.  Gains or losses arising from changes in the fair values of investment properties are included in the profit or loss in the year in which they arise. 

Investment property is valued at fair value based on valuations provided by a certified external valuer.   

2.11. Equity instruments

Equity instruments issued by the Company are recorded at proceeds received, net of direct issue costs.

Own equity instruments purchased by the Company or its subsidiaries are recorded at the consideration paid, including directly associated assets, and they are deducted from total equity as treasury shares until they are sold or cancelled.  Where such shares are subsequently sold, any consideration received is included in total equity.

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 paid.

2.12. Share Options

IFRS 2 "Share-based Payment" requires the recognition of equity settled share based payments at fair value at the date of grant.

The Group issues equity-settled share based payments to certain employees. The fair value of share-based payments to employees at grant date is measured using the Binomial pricing model.

The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. The corresponding credit is taken to the share option reserve.

On exercise of the options any related amounts recognised in the share option reserve are transferred to share premium.

On lapse of the options any related amounts recognised in the share option reserve are transferred to retained earnings.

2.13. Borrowing costs

Borrowing costs primarily comprise interest on the Group's borrowings.  Any borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of the corresponding assets until such time as the assets are substantially ready for their intended use or sale.  All other borrowing costs are expensed in the period in which they are incurred and reported within "finance costs".

No borrowing costs have been capitalised for either 2015 or 2014.

2.14. Financial assets

Financial assets are recognised when the Group 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 Group 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 Group transfers substantially all the risks and rewards of ownership of the asset, or if the Group neither retains nor transfers substantially all the risks and rewards of ownership but does transfer control of that asset.

Financial assets are measured initially at fair value plus transaction costs, except for financial assets carried at fair value through profit or loss, which are measured initially at fair value.

Financial assets are measured subsequently as described below.

All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at each reporting date. Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are also described below.

Loans and receivables

·      Trade and other receivables

Trade and other receivables are initially recognised at their fair value which normally is their original transaction value, and are subsequently measured at their amortised cost.  An estimate for doubtful debts is made when collection of the full amount is no longer probable.  Bad debts are written off when identified.  Where the time value of money is significant receivables are discounted to present value. 

·      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.

Bank overdrafts are considered to be a component of cash and cash equivalents, since they form an integral part of the Group's cash management.  

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets that are either classified as held for trading or are designated by the Group to be carried at fair value through profit or loss upon initial recognition.  All assets within this category are measured at their fair value, with changes in value recognised in the profit or loss when incurred.  Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred.

Available-for-sale financial assets

Available-for-sale financial assets include non-derivative financial assets that are either designated as such or do not qualify for inclusion in any of the other categories of financial assets.  Financial assets within this category are measured at fair value, with changes in fair value recognised in other comprehensive income, within the investments revaluation reserve.  Unquoted equity investments for which the fair value cannot be reliably measured are stated at cost less impairment.  Gains and losses arising from investments classified as available-for-sale are recognised in the profit or loss when they are sold or when the investment is impaired.

In the case of impairment of available-for-sale financial assets, the cumulative loss previously recognised in other comprehensive income is reclassified to profit or loss.  Impairment losses recognised in the profit or loss on equity instruments are not subsequently reversed through the profit or loss.  Impairment losses recognised previously on debt securities are reversed through the profit or loss when the increase in fair value can be related objectively to an event occurring after the impairment loss was recognised in the profit or loss.

An assessment for impairment is undertaken at least at each reporting date, following the IAS 39 guidance.

2.15. Financial liabilities

Financial liabilities are recognised when the Group 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 are measured initially at fair value plus transaction costs, except for financial liabilities carried at fair value through profit or loss, which are measured initially at fair value.

Financial liabilities at amortised cost

After initial recognition financial liabilities are measured at amortised cost using the effective interest rate method.

Derivative financial liabilities

The Group's financial liabilities also include financial derivative instruments. 

All derivative financial instruments which are not designated as hedging instruments are measured at fair value through profit or loss. 

2.16. Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Company expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

No provision is made for possible claims or where an obligation exists but it is not possible to make a reliable estimate.

Costs associated with claims made by the Group are charged to the profit or loss as they are incurred.

2.17. Segment reporting

In identifying its operating segments, management generally follows the Group's investment activity lines. Each of these operating segments is managed separately as each of these investment activity lines requires different monitoring and strategic decision making process as well as allocation of resources.

The measurement policies the Group uses for segment reporting under IFRS 8 are the same as those used in its consolidated financial statements. Any inter-segment transfers are carried out at arm's length prices.

2.18. Critical accounting judgments and key sources of estimation uncertainty

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and requires management to exercise its judgement in the process of applying the Group's accounting policies. It also requires the use of assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting judgements

(i)        Impairment of available-for-sale financial assets

The Group follows the guidance in IAS 39 on determining when an investment is impaired.  This determination requires significant judgments.  In making this judgment, the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost and the financial health and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and financing cash flow. The management regards a fall in fair value below cost of 30% or more, or for 12 months or more, to be significant.  

The Group assesses at each reporting date whether financial assets are impaired.  If impairment has occurred, this loss is recognised to profit or loss.

If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the current market rate of return of similar financial assets.  

(ii)      Classification of financial assets

The Management exercises significant judgement in determining the appropriate classification of the financial assets of the Group, especially for its investments and the identification of any embedded derivatives.  The factors considered include the contractual terms and characteristics which are very carefully examined, and also the Group's intentions and expected needs for the realisation of the financial assets.

Investments in loan markets through CLOs are classified as available-for-sale. All other investments are classified as at fair value through profit or loss upon initial recognition, because this reflects more fairly the way these assets are managed by the Group. The Group'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 Group's Board of Directors and other key management personnel.

(iii)         Deferred tax assets

The tax rules applicable for the relevant Company's operations are carefully taken into consideration for the recognition of a deferred tax asset. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances.

Estimation uncertainty

The following are the significant estimates that have the most significant effect on recognition and measurement of relevant items. 

(i)            Fair value of financial instruments

Management uses valuation techniques in measuring the fair value of financial instruments, where active market quotes are not available. Details of the bases used for financial assets and liabilities are disclosed in note 7.  In applying the valuation techniques management makes maximum use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.

Refer also to note 4 for estimation uncertainty over the fair value determination of the investment in SRS Charminar.

(ii)           Fair value of investment property

Investment property is stated at fair value.  The fair valuation is based on discounted cash-flow (DCF) method. Under this method, the current market value of the property is determined as the total of all projected future net earnings (before interest, taxes, depreciation and amortization) discounted to present-day equivalents. These net earnings are discounted individually for property with due allowance for specific opportunities and threats, and with adjustment in line with market conditions and risks.  A one-period DCF model was adopted under which the valuation period extends for 100 years from the valuation date, with an implicit residual value in the 11th period. Discounting is based on a risk-adjusted interest rate and a gross yield determined individually for each property on the basis of appropriate benchmarks derived from arm's-length transactions. The weighted average discount rate used is 4.09% and the weighted average gross yield used is 4.68%. The valuations assume 1% annual inflation for income and all expenditure.

Further details are disclosed in note 8.

3.     Property, plant and equipment

4.     Available-for-sale financial assets

For description of each of the above categories, refer to note 6.

The Group treats its investments in the loan market through CLOs as non-current investments as the Group generally intends to hold such investments over a longer period.

During 2015, due to market conditions, management considered the impairment of certain available-for- sale financial assets. Impairment testing indicated that for those financial assets their carrying amount may not be recoverable.

The related impairment charges in 2015, of USD 31.726m (2014 USD 8.861m), are included within loss on investments (note 25), and represent impairment losses arising due to:
 

Investment in SRS Charminar

Included in the Financial and minority holdings is the investment in SRS Charminar Investments Ltd ("SRS Charminar"), a private company incorporated in the Republic of Mauritius.  Livermore invested USD 20m in SRS Charminar acquiring a 15% ownership stake. SRS Charminar through its wholly owned subsidiaries invested INR 5.2b (USD 132.1m at date of investment) which is equivalent to USD 82.5m as at 31 December 2014 (2013: 83m) in a real estate company in India ("investee company").

In 2009, the promoters of the investee company were arrested on charges of criminal conspiracy, cheating, and misappropriation of funds. Later it was discovered that the investee company had breached the terms of the investment agreement resulting in a default.

On January 13, 2011 the Company Law Board ("CLB") passed an order and allowed Infrastructure Leasing & Financial Services Limited ("IL&FS") to become an 80% shareholder and control the management of the company.

SRS Charminar and other investors have agreed to a settlement with IL&FS wherein the settlement amount will be paid in four tranches over five years. The last two tranches are not guaranteed by IL&FS and the significant uncertainty of these payments has been considered in the discount rates used of 35% and 30% respectively in contrast to the 8% used for discounting the first two tranches. Also, all regulatory and court approvals were received and the effective date of the settlement was fixed.

The Group received the first tranche of USD 2.9m in late 2015. The carrying amount of the investment is based on discounted expected cash flows and was USD 7.1m (2014: USD 9.1m), which represents its estimated fair value. SRS Charminar's only holding is its investment in the investee company (through its wholly owned subsidiaries) and thus its fair value is wholly attributable to the above mentioned investment. 

Also included in Private equities is the investment in SRS Private Investments, L.P. ("SRS Private") with a carrying amount at reporting date of USD 1.7m (2014: USD 3.7m) which is based on a net asset valuation (NAV). SRS Private through a fund has invested in various real estate projects in India as well as in SRS Charminar, and its investment in SRS Charminar as at 31 December 2015 amounts approximately to 20% (2014: 17%) of its net assets.

5.         Financial assets at fair value through profit or loss

For description of each of the above categories, refer to note 6.

6.         Financial assets at fair value

The Group 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, and investments in the loan market through CLOs.

·      Private equities relate to investments 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 significant influence.

·      Financial and minority holdings relate to significant investments (of over USD 5m) which are strategic for the Company and are done in the form of equity purchases or convertible loans.  Main investments under this category are in the fields of real estate. 

·      Hedge funds relate to investments in funds managed by sophisticated investment managers that pursue investment strategies with the goal of generating absolute returns.

·      Public equity investments relate to investments in shares of companies listed on public stock exchanges.

·      Real estate entities relate to investments in real estate projects.

·      Other investments are investments not otherwise included in the categories above. 

7.         Fair value measurements of financial assets and liabilities

The following table presents financial assets 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.

Valuation of financial assets and liabilities

·      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 Group 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 affect are key to the future cash flows a CLO will distribute to the CLO equity tranche. All else equal, higher default rates and lower recovery rates typically lead to lower cash flows. Conversely, lower default rates and higher recoveries lead to higher cash flows.

Prepayment rates: Senior loans can be pre-paid by borrowers. CLOs that are within their reinvestment period may, subject to certain conditions, reinvest such prepayments into other loans which may have different spreads and maturities. CLOs that are beyond their reinvestment period typically pay down their senior liabilities from proceeds of such pre-payments. Therefore the rate at which the underlying collateral prepays impacts the future cash flows that the CLO may generate.

Reinvestment assumptions: A CLO within its reinvestment period may reinvest proceeds from loan maturities, prepayments, and recoveries into purchasing additional loans. The reinvestment assumptions define the characteristics of the loans that a CLO may reinvest in. These assumptions include the spreads, maturities, and prices of such loans. Reinvestment into loans with higher spreads and lower prices will lead to higher cash flows. Reinvestment into loans with lower spreads will typically lead to lower cash flows.

Discount rate: The discount rate indicates the yield that market participants expect to receive and is used to discount the projected future cash flows. Higher yield expectations or discount rates lead to lower prices and lower discount rates lead to higher prices for CLOs.  

·      Private Equities are valued using market valuation techniques as determined by the Directors, mainly on the basis of discounted cash flow techniques or valuations reported by third-party managers of such investments. 

·      Financial and Minority holdings are valued using market valuation techniques as determined by the Directors, mainly on the basis of discounted cash flow techniques or valuations reported by third-party managers of such investments.  

·      Hedge Funds are valued per reports provided by the funds on a periodic basis, and if traded, per their closing bid market prices on quoted exchanges, or as quoted by market maker.

·      Real Estates 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.     

·      Derivative instruments are valued at fair value as provided by counter parties (banks) of the derivative agreement. 

Financial assets and financial liabilities measured at fair value in the consolidated statement of financial position are grouped into the fair value hierarchy as follows:              

The methods and valuation techniques used for the purpose of measuring fair value are unchanged compared to the previous reporting period.

No financial assets or liabilities have been transferred between levels.

Financial assets within level 3 can be reconciled from beginning to ending balances as follows:

The above gains and losses recognised can be allocated as follows:

The Group has not developed any quantitative unobservable inputs for measuring the fair value of its level 3 financial assets at 31 December 2015 and 2014.  Instead the Group used prices from third-party pricing information without adjustment.

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.         Investment property

The investment property relates to Wyler Park property in Bern, Switzerland, which is used for earning rental income. The Group has no restriction on the realizability of the property or the remittance of income and any proceeds of disposal.

Wyler Park investment property loan (note 17) is secured on the property itself.

Fair valuation

The investment property is the Group's only non-financial asset measured at fair value on a recurring basis, and its fair value is classified within the fair value hierarchy as level 3.

The investment property was valued by the independent professional valuers Wüest & Partners as at 31 December 2015 and 2014 on the basis of open market value in accordance with the appraisal and valuation guidelines of the Royal Institute of Certified Surveyors, and the European Group of Valuers' Associations. The investment property is revalued annually on 31 December.

The significant inputs and assumptions are developed in close consultation with management. The valuation processes and fair value changes are reviewed by the Board of Directors at each reporting date.

The fair values of investment property are estimated using the discounted cash-flow (DCF) method. With this method, the current market value of a property is determined as the total of all projected future net earnings (before interest, taxes, depreciation and amortization) discounted to present-day equivalents. These net earnings are discounted individually for each property with due allowance for specific opportunities and threats, and with adjustment in line with market conditions and risks. All projected cash flows are presented to ensure maximum transparency.

The valuations are based on the following assumptions:

- The property has been appraised as continuation scenario. That means, that no change of use scenarios have been calculated as well that would result to a higher value.

- A one-period DCF model was adopted. The valuation period extends for 100 years from the valuation date, with an implicit residual value in the 11th period.

- Discounting is based on a risk-adjusted interest rate. Rates are determined on the basis of appropriate benchmarks derived from arm's-length transactions. These are broken down as follows: risk-free interest rate + property risk (immobility of capital) + premium for macro-location + premium for micro-location depending on use + premium for property quality and income risk + any other specific premiums.

- The valuations assume 1% annual inflation for income and all expenditure. Where a nominal discount rate is applied, this is adjusted accordingly.

- Credit risks posed by specific tenants are not explicitly factored into the valuation.

- Allowance is made for the specific indexing provisions in existing leases. An indexing factor of 80% (Swiss average) is assumed for the period following lease expiry.

- For existing tenancies, the timing of individual payments is assumed to comply with the terms of the lease.

Following lease expiry, cash flows for commercial premises are taken to be quarterly in advance, for housing monthly in advance.

- In terms of running costs, entirely separate service charge accounts are assumed, with no tenancy-related ancillary costs to be borne by the owner.

- The maintenance (repair and upkeep) costs were calculated by means of a lifecycle analysis of the individual building elements. The building structure's remaining lifespan was estimated and periodic refurbishments modelled on the basis of the general condition of the fabric as determined during the property inspection.

Appropriate annual reserves were calculated accordingly and plausibility tested using comparables and Wüest & Partner's own benchmarks. The calculation factors in 100% of repair costs in the first 10 years; the proportion applied from year 11 onwards is limited to the value-preserving investments (recoverable share).

The valuations are sensitive to the above inputs, all of which are unobservable. 

Future rental income

The future minimum rental income under non-cancellable rental agreements, is receivable as follows:

Rental agreements are quoted in Swiss Francs.  The equivalent USD amounts shown in the table above are based on the exchange rates as at 31 December 2015 and 31 December 2014 respectively.

9.     Investments in associate and joint venture

As at 31 December 2014 Silvermore had ceased to be a contractual party to a Total Return Swap (ISDA) agreement with Citibank N.A. and had no other assets or liabilities. Silvermore Ltd is dormant since January 2015.

During the year, the Group invested in a 25% interest in Highbridge Loan Management Warehouse 7-2015 Ltd (a company incorporated in Cayman Islands), through its subsidiary Mountview Holdings Ltd, until Highbridge was converted into a CLO. After the conversion into a CLO the entity ceased to be an associate of the Group. 

10.  Details of subsidiaries

Details of the investments in which the Group has a controlling interest are as follows:

* Held by Enaxor S.a.r.l.

Silvermore 2 Ltd was dissolved in 2016.

Blackline Investments Inc. was dissolved during the year.

11.  Deferred tax 

The Company is an international business company based in the British Virgin Islands (BVI) and, under its laws, is not subject to taxation.  Deferred taxes relate to the temporary differences between carrying amounts and corresponding tax base of its subsidiaries, in Switzerland.

The deferred tax shown in the consolidated statement of financial position relates to the following items:

The movement on the deferred taxation account is as follows:

The Group expects that future taxable profits will be available in the jurisdiction where the deferred tax assets occurred (Switzerland) so as to utilise the carrying amount of the deferred tax assets recognised as at the end of the year.

As at 31 December 2015 and 2014 there is no unrecognised deferred tax asset.

12.  Trade and other receivables

Other receivables at 31 December 2014 include:

(a)       an amount of USD 15m that the Company invested during the period in the first loss tranche of a warehouse facility for accumulating loans with the intention to transfer these loans to a CLO. In December 2014, the said CLO was priced and the loans accumulated in the warehouse were agreed to be transferred at purchase price to the CLO on 10 January, 2015. Consequently, Livermore's investment amount plus net carry earned became receivable as of the end of December 2014. On 16 January 2015 Livermore received a net amount of USD 16.3m.

(b)       an amount of USD 1m that the Company invested during the period in the first loss tranche of a warehouse facility for accumulating loans with the intention to transfer these loans to a CLO. In December 2014, the said CLO was priced and the loans accumulated in the warehouse were agreed to be transferred at purchase price to the CLO on 15 January, 2015. Consequently, Livermore's investment amount plus net carry earned became receivable as of the end of December 2014. On 16 January 2015 Livermore received a net amount of USD 1.039m.

13.  Cash and cash equivalents

Cash and cash equivalents included in the consolidated statement of cash flows comprise the following at the reporting date:

14.  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.

In the consolidated statement of financial position the amount included as share premium and treasury   shares comprises of:        

15.  Share options

The Company has a share option scheme for acquiring ordinary shares of the Company. 

Details of share options outstanding at 31 December 2015

The fair value of options granted to employees was determined using the Binomial valuation model.  The model takes into account a volatility rate of 41-45% calculated using the historical volatility of a peer group of similar companies and a risk free interest rate of 4.0-4.4% and it has been assumed the options have an expected life of two years post date of vesting.

The options lapse at the earliest of the expiry date of exercise period or the termination of the corresponding employee's service.

* The exercise prices as per the share option scheme are quoted in British Pounds.  The indicative equivalent USD amounts shown in the table of details above as well as the average exercise prices are based on the exchange rates as at 31 December 2015.

16.  Derivative financial instruments

Forward contracts

The Group uses forward foreign exchange contracts to mitigate exchange rate exposure arising from forecast transactions between USD and CHF. As at the reporting date the outstanding forward agreements are as follows:

Forward contracts are considered by the Management as economic hedge arrangements but have not been designated as hedging instruments for accounting purposes and their fair value changes are recognised in the profit or loss. The calculation of the fair value of forward contracts is based on the contractual cash flows of future anticipated net settlement using the foreign exchange rates prevailing at the reporting date.

During 2014 the Group used forward currency contracts; however, no such derivatives were open at 31 December 2014.

Total Return Swaps

As at 31 December 2014 the Group was a contractual party to a Total Return Swap (ISDA) agreement with Macquarie bank.  Based on the swap agreement the Group is entitled to receive the total returns arising from a portfolio of loan assets (referenced assets), and is obliged to pay interest at a floating rate on the facility amount (warehouse facility):

The swap was entered as a means for accumulating loans with the intention to transfer these loans to a CLO. In December 2014, the said CLO was priced and the loans accumulated in the warehouse were agreed to be transferred to the CLO on 10 January, 2015. Consequently, on 16 January 2015 the swap was terminated.

The calculation of the fair value of the swap is based on discounted cash flows of future anticipated interest payments compared with the discounted cash flows of anticipated total returns receivable.

For the year ended 31 December 2015 a net fair value gain of USD 990,787 (2014: gain USD 3,133,381) has been recognised in the profit or loss in relation to all derivative financial instruments.

17.  Bank loans

The bank loan relates to Wyler Park investment property purchase (note 8) and is secured on this property.  The loan was refinanced during the year. The principal amount of the loan facility as of 31 December 2015 is CHF 76.6 million. The facility is committed until at least 30 June 2019. The loan facility maybe extended up to 30 June 2029, unless terminated by either party. 

The loan bears interest at 3-Month CHF Libor (with a floor rate at zero) plus 1.40% margin. The effective Interest rate of the loan as at 31 December 2015 is 1.40%. 

18.  Bank overdrafts

Short term bank overdrafts bear Libor + lender's margin and have an average interest rate of 1.78% (2014 1.49%).

The Group's bank overdraft facilities are secured by the Group's financial assets portfolio up to an amount, as at 31 December 2015, of USD 31.5m.

The Group's bank overdraft undrawn facilities at 31 December 2015 amount to USD 18.3m.

19.  Trade and other payables

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.  All amounts fall due within one year. 

20.  Current tax (asset) / payable

21.  Net asset value per share

Net asset value per share has been calculated by dividing the net assets attributable to ordinary shareholders by the closing number of ordinary shares (net of treasury shares) in issue during the relevant financial periods. 

Diluted net asset value per share is calculated after taking into consideration the potentially dilutive shares in existence as at 31 December 2015 and 31 December 2014.

The Share options (note 15) granted on 13 May 2008 have a dilutive effect on the net asset value per share, given that their exercise price is lower than the net asset value per Company's share at 31 December 2015 and 2014.  All other share options do not impact the diluted net asset value per share for 2015 and 2014 as their exercise price was higher than the net asset value per share at 31 December 2015 and 2014.

Repurchase of own shares

The Board believes that the ability of the Company to re-purchase its own Ordinary shares in the market may potentially benefit equity shareholders of the Company. The repurchase of Ordinary shares at a discount to the underlying net asset value enhances the net asset value per share of the remaining equity shares.

In 2015, the Company bought 3,000,000 of its Ordinary shares at an average price of USD 0.51 per share.

In 2014 the Company did not buy any own shares.

22.  Segment reporting

The Group's monitoring and strategic decision making process in relation to its investments is separated into two activity lines which are also identified as the Group's operating segments. These operating segments are monitored and strategic decisions are made on the basis of segment operating results.

Segment information can be analysed as follows: