LOM 2023 Annual Report - Report - Page 49
LOM
2021 ANNUAL REPORT
7. ASSETS UNDER MANAGEMENT
Cash, securities and properties held in the Company’s role as
custodian for customers are not included in the consolidated
balance sheet as they are not the property of the Company.
The Company is licensed by the Bermuda Monetary Authority
under the Investment Business Act of 2003 and approved to
hold client assets. The assets under management include
LOM’s investments, the LOM Sponsored Funds and the clients’
investments which are included in the LOM Sponsored Funds.
The fair value of assets under management as of December
31, 2021 is approximately $1.62 billion (2020 - $1.27 billion).
8. RELATED PARTY TRANSACTIONS
During the year, the Company earned broking fee revenue from
accounts in which related parties have an interest of $422,569
(2020 - $315,505). The Company also paid interest of
$14,804 (2020 - $19,220) and received interest of $225,596
(2020 - $272,643) from these same accounts.
During the year, the Company had transactions with
shareholders who are also directors and employees of the
Company. These transactions consisted of commission
expenses of $3,320,897 (2020 - $2,489,772).
During the year, the Company earned rent and service charge
income from related parties of $202,400 (2020 - $204,988).
In addition, the Company also earned $203,175 (2020 $174,114) for information technology services, accounting
and administration services recorded in other income, of which
$60,360 (2020 - $46,181) is still outstanding at year end.
During the year, the Company paid $46,260 (2020 - $48,099)
for corporate services, recorded in professional fees, provided
by St Georges Services Limited. However, $10,131 (2020
– $11,975) of this amount, related to payments for annual
government fees.
During the year, the Company earned management and
performance fees of $3,194,307 (2020 -$2,464,070) from the
LOM Sponsored Funds, of which $881,967 (2020 - $640,471)
was included in accounts receivable at year end. The Company
is also the custodian for the LOM Sponsored Funds and
received a custodial fee, recorded in administrative and custody
fees, of $73,376 (2020 -$59,819) for these services, of
which $18,686 (2020 - $16,791) was included in accounts
receivable at year end. The Company also earned director fees
of $60,000 (2020 - $60,000) from the LOM Sponsored Funds,
with the balance outstanding at year end.
9. OFF-BALANCE SHEET AND OTHER RISKS
In the normal course of trading, the Company is party to certain
financial instruments with off-balance sheet risk, where the risk
of potential loss due to changes in the market (“market risk”)
or failure of the other party to the transaction to perform (credit
risk) exceeds the related amounts recorded. The Company
attempts to manage these risks on an aggregate basis along
with the risks associated with its investing activities as part of
its overall risk management policies. Refer to Note 13 for client
related off-balance sheet risks.
Credit Risk
The Company is potentially subject to credit risk associated
with its cash and cash equivalents and securities owned. The
Company’s credit risk is equal to the replacement cost at the
then-estimated fair value of the instrument, less recoveries.
As the Company places its cash and cash equivalents
and securities with major international and local financial
institutions, management believes that the risk of incurring
losses on these financial instruments is remote and that losses,
if any, would not be material.
Liquidity Risk
The Company is potentially subject to liquidity risk on some of
its non-marketable or illiquid securities owned. As a result, the
Company may be unable to realize the full fair value of these
securities since it may not be able to liquidate its positions in a
timely manner.
Market Risk
The Company is subject to market risk on its securities owned.
As a result of changes in market conditions, the values of these
financial instruments will fluctuate.
Currency Risk
From time to time, the Company holds positions that are
exposed to changes in foreign exchange rates (currency
risk) whose gains or losses may exceed the related amounts
recorded. The fair value may change based on the fluctuations
in the value of these underlying currencies.
10. BANK LOAN
This loan with FirstCaribbean International Bank (Bahamas)
Limited was to assist in the purchase of an office building in
The Bahamas. The initial loan of $900,000 USD carries an
interest rate of USD 3Month Libor plus 4.50%. The loan is
to be amortized over 10 years but repayable in a term of 5
years with monthly repayments of $7,500 plus interest and a
balloon payment of $450,000 due at maturity plus any other
outstanding amounts owing. A paydown of $400,000 was
made against the loan in May 2020. Total interest expense
in relation to the bank loan was $8,937 for the year ended
December 31, 2021 (2020 - $15,416). The bank loan is
secured by a registered First Demand Mortgage over the
property located at #3 Pineapple Grove, Old Fort Bay, Nassau,
Bahamas.
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