Livermore Regulatory News (LIV)

Livermore Investments Group Limited

Annual Report & Consolidated Financial Statements for the year ended 31 December 2014

Highlights

· Net Asset Value per share - USD 0.82 after payment of interim dividend of USD 0.0256 per share (December 2013: USD 0.86).

· Performance driven by profitable activity in the US loan market and exit from Montana Tech Components offset by adverse currency movements and further declines in the share price of Babylon.

· Wyler Park property in Bern, Switzerland fully let.

· 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 2014. 

The year-end NAV was USD 0.82 per share after payment of a USD 5m dividend, USD 0.0256 per share (2013 NAV: USD 0.86 per share). Net profit for the year was USD 7.2m (2013 Net Profit: USD 2.5m).

The portfolio recorded gains from exit of Montana Tech Components as well as from the CLO portfolio offset by losses from currency movements and Babylon, loss on impairment of investments and one-off administrative expenses. Interest and dividend income from the financial portfolio totalled USD 26.6m (2013: USD 29.1m).

Wyler Park, our investment property in Bern, Switzerland performed well, generating over CHF 5.4m (USD 5.2m) 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.

There were no significant developments in the private equity portfolio during the year.

Financial Review

The NAV of the Group at 31 December 2014 was USD 160.0m. Net profit during the year was USD 7.2m, which represents earnings per share of USD 0.04.

Administrative expenses were USD 7.2m (2013: USD 12.3m).

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

Dividend & Buyback

During 2014, the Company did not repurchase any additional shares to be held in treasury. As at 31 December 2014, the Company held 108,830,818 shares in treasury. For the year ended 31 December 2014, the Company paid a dividend of USD 5m (USD 0.0256 per share).

To date, the Company has not repurchased any additional shares to be held in treasury.

Richard B Rosenberg Noam Lanir

Chairman Chief Executive Officer

26 May 2015

Review of Activities

Introduction and Overview

2014 will likely leave its mark on history as the year where geopolitical risk raised its ugly head, Oil prices tumbled, and the US Federal Reserve brought about an end to its open-ended Quantitative Easing (QE) program without significant volatility. Russia annexed Crimea and Ukraine fell into civil war, ISIS was formed and significantly increased its presence in Iraq and Syria, and conflict escalated in the sensitive Israel-Gaza region. Crude Oil prices fell over 50% as record production in the US met weaker demand and a worried OPEC unwilling to adjust production fearing loss of market share and influence. Central bank actions were divergent - the US Federal Reserve ended its QE program and signalled monetary tightening in 2015 whereas the European Central Bank loosened monetary policy and considered QE in 2015, and the Bank of Japan bumped its target for asset purchases.

The Group portfolio held up reasonably well helped by income gains from its US loan exposure and a successful exit from Montana Tech Components. In 2014, the Group generated interest and dividend income of USD 26.6m and investment property income of USD 5.2m. However, a further decline in the share price of Babylon, unrealized losses on CHF versus the USD, and an adverse impact of Ukraine and certain defaults in Latin America on the Group's emerging market exposure through CLOs offset these gains. The Group reported NAV/share of USD 0.82 after a dividend of USD 0.0256/share (2013: USD 0.86) and net income of USD 7.2m. Administrative expenses amount to USD 7.2m (2013: USD 12.3m) and finance costs were USD 7.3m (2013: USD 5.2m), of which USD 3.0m relates to the loan against the Wyler Park property and USD 3.5m reflects unrealized losses on currency movements. In January 2015, some of the unrealized currency losses have reversed following removal of the CHF floor against the EUR by the Swiss National Bank.

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 expanded moderately in 2014, amid widening divergence both across and within regions. The modest growth momentum that had started in late 2013 continued in 2014, albeit with a pause in the first quarter attributed largely to temporary and one-off factors such as unusually cold weather in the US and the shutdown of heavy-industry plants in China for environmental reasons. Whereas the US economy increasingly gathered momentum, growth in Japan and Europe was sluggish. Advanced economies increasingly benefited from waning private sector deleveraging, improved labour markets, rising confidence and accommodative policies. By contrast, in several emerging market economies, structural impediments and tightened financial conditions persisted, weighing on their growth prospects. Geopolitical risks, relating mostly to the conflict between Ukraine and Russia and tensions in major oil producing countries, persisted throughout the year. Inflation rates around the world declined as a result of the sharp drop in oil prices.

In the US, real GDP increased at an annual rate of 3.75% in the second half of 2014 after a reported increase of just 1.25% in the first half. The second-half gains in GDP reflected solid advances in consumer spending, modest gains in business investment spending as well as subdued gains in housing. GDP growth was supported by accommodative financial conditions, including declines in the cost of borrowing for many households and businesses; by a reduction in the restraint from fiscal policy relative to 2013; and by increases in spending spurred by continuing job gains. Employment rose appreciably and the unemployment rate fell in 2014 declining from 6.7% to 5.7% by the end of the year. Wage growth, however, remained tepid. Core inflation remained subdued standing at a little over 1.25% in 2014. In response to improving employment conditions, the US Federal Reserve brought an end to their bond buying program and hinted at possible monetary tightening in 2015 subject to continued improvement in employment.

Following two years of negative GDP growth in the wake of the sovereign debt crisis, the Euro area economy averaged 0.9% growth in 2014, albeit unevenly throughout the year, reflecting a positive and increasing contribution from domestic demand. The return to growth was supported by very accommodative monetary policy and a much weaker Euro. A high level of unemployment, sizeable unutilized capacity, and ongoing adjustments in private and public sector balance sheets, however, dampened the growth trend. Labour markets showed signs of improvement with the unemployment rate declining modestly, although with large variances across the region. Headline inflation continued its downward trend and averaged 0.4% in 2014 on account of lower oil prices as well as weak demand and significant slack in the labour market. In response, the European Central Bank (ECB) introduced negative interest rates, announced a series of longer-term refinancing operations, and subsequently in January 2015 announced purchases of sovereign debt and asset-backed securities.

The Swiss economy performed well in a difficult environment. At 2.0%, the expansion in real GDP in 2014 was slightly higher than in 2013, and unemployment decreased slightly. While exports gained momentum, growth in private consumption and investment was moderate. The mortgage and real estate markets remained a focus of attention for the Swiss National Bank (SNB). An increase in the sectoral countercyclical capital buffer together with other measures helped dampen momentum on the mortgage and real estate markets and stabilize lending growth. Monetary policy in 2014 operated in an environment where inflation was close to zero and interest rates were very low. Against this background, the minimum exchange rate of CHF 1.20 per euro continued to be the key instrument for ensuring appropriate monetary conditions in Switzerland. However, with growing signs of divergence between the US and the Euro area, the minimum exchange rate came under substantial pressure prompting the SNB to introduce negative interest rates. Subsequently, with continued pressure on the exchange rate, the SNB decided to abandon the minimum exchange rate and further lower the negative interest rates to -0.75% in January 2015, which caused significant volatility in the currency markets.

Supported by central bank activity, financial markets moved higher in general. Volatility remained low except early in the year when the US Federal Reserve began to wind down its QE program, and then in October when concerns of weaker global demand as well as a sharp drop in oil prices spooked the markets.

The S&P 500 Index generated total returns of 13.7% in 2014 and the EuroSTOXX 50 Index returned 4% while India's Nifty Index total return was 33% as Indians voted out the incumbent government and gave a majority mandate to the Bharatiya Janata Party on hopes of economic reform and a crackdown on corruption.

Stronger economic performance in the US and expectations of future monetary tightening versus sluggish growth and looser monetary policy in Europe and Japan were reflected in the currency markets. The Euro fell 12% against the US Dollar and dragged down the Swiss Franc with it as the SNB maintained its minimum exchange rate against the Euro. The Japanese Yen continued its weakness in 2014 falling a further 12%.

Against widely held expectations of higher longer term rates, the US 10 year treasury yields fell from around 3% at the start of the year to 2.17% as inflation expectations dimmed and expectations of lower rates for much longer in Europe began to take hold with German 10 year bund yields falling from 1.93% to 0.54%.

During the first half of the year, US high yield and leveraged loans benefited from a varying combination of accommodative global central banks, stagnant growth trends, low market volatility, and resilient stocks. US loans also benefitted from record new issue Collateralized Loan Obligations (CLO) volume while lower Treasury yields supported the high yield market. High yield bonds returned 5.74% in the first half while leveraged loans returned 2.4%. Conditions in the second half of the year, however, proved far more difficult, driven by broader market volatility, growing retail withdrawals, and later in the year, by intensified pressure on the Energy sector as oil prices plunged. This backdrop drove high yield bond and loan yields significantly higher. Loans outperformed high yield bonds substantially in the second half as the loan market has a much lower exposure to the Energy sector and also because loans have higher recovery rates given default due to their seniority in the capital structure. All in all, leveraged loans returned 2.05% for the year versus 2.17% for high-yield bonds. Default rates edged somewhat higher during the year with the issuer-weighted loan default rate at 1.49%, up from 1.32% at the start of the year.

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

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 commercial lease is Swiss inflation rate-adjusted and ends in 2019 with two 5 year extension periods thereafter. The annual rental income from the commercial area of the project is CHF 4.43m (USD 4.85m).

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 1.07m).

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 2014 is CHF 77.5m (USD 78.1m), 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 68m. The facility is committed until at least 30 June 2019. Upon successful extension of the lease with SBB from 2019 to 2029, an additional CHF 10m would be available under this facility.

The valuation of the property on current-use basis (highest and best use), as of year-end 2014 is CHF 115.8m (USD 116.6m) and of year end 2013 was CHF 115.7m (USD 129.9m).

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.

The carrying amount of the investment is based on discounted expected cash flows and as of year-end was USD 9.1m (2013: USD 8.9m). 

Montana Tech Components ("MTC") - Europe

Montana Tech Components AG is a leading components manufacturer in the fields of Aerospace & Industrial Components, Metal Tech and Micro Batteries.

In January 2014, MTC and Livermore entered into an agreement whereby MTC bought back its shares from Livermore at EUR 4.56 per share. The sale was completed in June 2014 for a total consideration of EUR 6.9m (USD 9.4m).

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. Overall, during 2014 the investment environment relating to most funds was challenging and the Group expects that material exits of portfolio companies should materialize between 2016 and 2018. During the reporting period a distribution of USD 1.4m from SRS Private and Blue Ridge fund were carried out.

The following summarizes the book value of the private equity funds as at year-end 2014

SRS Private Fund: SRS Private is a private equity fund focused on real estate in India. The fund has invested in residential and commercial projects 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 56.6% of the net asset value of the fund is invested in mixed-use assets (commercial and residential combined), 17% is in SRS Charminar, 14.5% is in land primarily for residential assets, 3.2% is invested at the entity level of real estate developers, and 8.7% in cash and receivables. In 2014, the fund distributed USD 0.67m. As of year-end 2014, the investment was valued at USD 3.7m.

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 language enhancement products company, a software company operating in the digital radio market, a software test tool developer, and a virtualization technology company. The Wi-Fi solutions company, language enhancements product company and the virtualization technology company have been performing well.

India Blue Mountains: India Blue Mountains is a hotel development fund that is developing 4 star and 5 star hotels in India. The fund plans to develop three hotels in prime areas of Mumbai, Pune and Goa. All hotels will be managed by the Accor Group (Novotel brands). Accor has also invested equity and holds a 26% stake in all of the hotels.

The Pune hotel is a Novotel brand hotel with 223 rooms built on a land area of 70,200 sq. ft. with a total built-up area of approximately 373,043 sq. ft. which includes 37,248 sq. ft. of commercial area. The hotel opened for business in December 2013 and is generating cash flow to cover operating costs. However, to fund interest and amortizations, India Blue Mountains raised equity capital in 2014. Given the debt load and outlook of hospitality in Pune, Livermore decided not to participate in the capital raise.

The Mumbai hotel is on a 82,609 sq. ft. land site with a gross area of approximately 573,960 sq. ft. The hotel will be a Novotel brand hotel with 543 rooms. The property location is in close proximity to the Mumbai International Airport and Domestic Airport.

For the Goa hotel, land measuring 20 acres was purchased at Majorda beach in Goa having 200 meters of sea front with a white sandy beach from nearly 40 parcels of land. Notification of the land for settlement is a government process and it has not been concluded so far despite expectations and is currently pending with the Town Planning department.

The investment is being carried at a valuation of USD 0.8m as of December 2014.

Elephant Capital: India-focused private equity fund, which is AIM quoted (Ticker: ECAP). Its portfolio investments include a leading tiles manufacturer in India, a media business with an exclusive content library, and an online venture to distribute cricket related content. 

As of August 2014, the audited NAV of the fund was 35 pence per share. Additional information about the fund and its portfolio is available at www.elephantcapital.com.

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 revenues, EBITDA and Net Income as well as EBITDA margins and Net Income margins. The coal company is located in Western Ukraine. The European Bank for Reconstruction and Development (EBRD) is assessing the company for investment. 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 2014.

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 is mostly wound down. To date, the fund has distributed USD 1.5m (73.5% of investment).

Financial portfolio and trading activity

The Group manages a financial portfolio valued at USD 99.1m (net of leverage) as at 31 December 2014, which is invested mainly in fixed income and credit related securities.

The following is a table summarizing the financial portfolio as of year-end 2014

* 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):

During 2014 the Group continued to re-invest distributions from its CLO portfolio into new issue CLO transactions albeit at a reduced pace. CLOs are managed portfolios invested into diversified pools of senior secured loans and financed with long term financing pre-fixed at the time of issuance. The Group also provided first loss investments into credit facilities to secure and warehouse collateral for its upcoming CLO transactions.

The US senior secured loan market continued to offer good risk adjusted returns as an inflation linked asset class with a senior secured claim on the borrower and with overall low volatility and low correlation to the equity market.

The US leveraged loan market performed well during the first half of 2014 supported by record new CLO volume, accommodative global central banks, low growth trends, low market volatility and resilient stocks. Demand from retail, however, was weak as prospects of rate increases diminished with lower inflation and growth expectations. Conditions in the second half of the year, however, proved far more difficult, driven by broader market volatility, growing retail withdrawals, and later in the year, by intensified pressure on the Energy sector as oil prices plunged. Defaults also ticked up ending the year at 1.49% on an issuer-weighted basis versus 1.32% at the start of the year. Total return from leveraged loans in 2014 was 2.05%. New issue loans registered their second highest annual volume with USD 467bn of institutional loan pricing in 2014 (2013: USD 670bn) driven by re-financings as well as a global backdrop for M&A activity.

The US CLO portfolio continued to perform well on account of low current default rates, a benign default outlooks and relatively stable credit fundamentals of their underlying loans. At the end of the reporting period all of our CLO investments were passing their coverage tests (thereby making dividend distributions). During the year, the CLO portfolio generated USD 21.7m in cash distributions, as well as earning USD 2.7m on warehousing facilities. Cash payments to CLO equity remained strong although cash distributions from pre-crisis CLOs declined further due to amortization of the cheapest liabilities and diversion of cash-flow to pay manager incentive fees. While new issue CLOs also face lower excess spreads, they have longer reinvestment periods which should enable them to weather a downturn, and benefit from wider spreads or any volatility in loan prices in the future. The Group has continued to reduce exposure to CLOs with shorter reinvestment periods and focus on new issue CLOs. As at 31 December 2014, over 82% of the Group CLO portfolio is invested in post-crisis CLOs.

Secondary market prices for CLOs rose in the first half of 2014 but subsequently fell as the market re-assessed loans with exposure to oil as well as a drop in loan prices in general. While the Group's US CLO portfolio performed better than market, its global and emerging market credit CLO portfolio was severely impacted by defaults in Mexico and Brazil, conflict in Ukraine, as well as the drop in oil prices. Livermore reduced a part of its emerging markets CLO exposure at levels much higher than year end and management continues to monitor developments in this portfolio.

As US interest rates are expected to remain low until mid-2015 or longer and very few loans mature in the near term, corporate defaults are expected to remain low in the near-medium term, with the exception of certain energy related companies. Management believes that the environment should remain attractive for investments in CLO income notes. In 2014, Livermore launched three new issue cash-flow CLOs as an anchor investor and participated in additional new issue CLOs of leading managers.

While management maintains a positive view on the CLO portfolio, mid-long term performance may be negatively impacted by a pull back into a substantial recession in the US or Europe or a geo-political event that could result in a spike in defaults. Despite positive developments in the overall health of the US economy, we acknowledge the continued EU sovereign debt issues as well as the headwinds the US economy may face relating to the potential monetary tightening and geopolitical risks.

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

Babylon Ltd ("Babylon"): Babylon is an International Internet Company based in Israel and listed on the Tel-Aviv Stock Exchange (TASE: BBYL). It is a leading translation and language tools provider. In Q1 2014, Livermore sold approximately half of its shareholding in Babylon at an average price of USD 1.98 and now holds approximately 4% of Babylon's issued share capital.

Noam Lanir, the majority shareholder of the Group, is also a major shareholder in Babylon (note 32).

The following table reconciles the review of activities to the Group's financial assets and investment property as of year-end 2014

Events after the reporting date

Events after the reporting date are described in note 36 of the consolidated financial statements.

Litigation

At the time of this Report, there are two matters in litigation against the Group. Further information is provided in note 34 to the consolidated financial statements.

Report of the Directors

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 59), 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 48), 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 47), Executive Director and Chief Investment Officer

Ron was appointed as Executive Director and Chief Investment Officer on 10 August 2007. Ron 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 portfolio management 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 thirteen 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.

The Directors submit their annual report and audited consolidated financial statements of the Group for the year ended 31 December 2014.

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 30 April 2015 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 32 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"). However, the Company is keen to adopt and promote the provisions of that Code. Up to 31 December 2014 the Board has adopted several provisions of the Code, some of which have not yet been fully implemented. 

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, in accordance with the Code, 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 2014 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 normally vest in three equal tranches, on the first, second and third anniversary of the grant.

The options are exercisable up to 10 years after the date of grant. No options were exercised during the year ended 31 December 2014.

** 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 2014.

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.

Share Capital

There was no change in the authorised share capital during the year to 31 December 2014. 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 2014 are disclosed in note 32 to the consolidated financial statements.

By order of the Board of Directors

Chief Executive Officer

26 May 2015

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 2014 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 2014 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 34 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: 26 May 2015

Livermore Investments Group Limited

Consolidated Statement of Financial Position as at 31 December 2014

These consolidated Financial Statements were approved by the Board of Directors on 26 May 2015.

Notes 1 to 38 form part of these consolidated financial statements.

Livermore Investment Group Limited

Consolidated Statement of Profit or Loss for the year ended 31 December 2014

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

Notes 1 to 38 form part of these consolidated financial statements.

Livermore Investment Group Limited

Consolidated Statement of Comprehensive Income for the year ended 31 December 2014

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

Notes 1 to 38 form part of these consolidated financial statements.

Livermore Investment Group Limited

Consolidated Statement of Changes in Equity for the year ended 31 December 2014

Notes 1 to 38 form part of these consolidated financial statements.

Livermore Investments Group Limited

Consolidated Statement of Cash Flows for the year ended 31 December 2014

Notes 1 to 38 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 2014, the Company 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 financial statements.

All IFRS issued by the International Standards Board (IASB) which are effective for the year ended 31 December 2014, 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 financial statements but are not yet effective for the year ended 31 December 2014:

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 financial statements of the Company.

In relation to IFRS 9, the Management has not yet assessed the likely impact of the application of this Standard, since the Management has not yet determined its accounting policy to be followed under the new Standard.

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 became 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 income 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. Property, plant and equipment

Property, plant and equipment is stated at historical cost less accumulated depreciation. Carrying amounts are reviewed at each reporting date for impairment indications.

Depreciation is calculated using the straight-line method, at annual rates estimated to write off the cost of the assets less any estimated residual values over their expected useful lives. The annual depreciation rates used are as follows:

Computer Hardware - 33.3%

Fixtures and Fittings - 10%

Office Renovation - 25%

Motor Vehicles - 25%

2.11. 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.

2.12. 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.

2.13. 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.

2.14. Leases

Leases where a significant portion of the risk and rewards of ownership are retained by the lessor are classified as operating leases and rentals are recognised to profit or loss on a straight-line basis over the term of the lease.

2.15. 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 2014 or 2013.

2.16. 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 and carried 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 balances 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.

2.17. 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. The Group's derivative instruments consist of interest rate swaps and forward currency contracts. 

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

2.18. 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.

2.19. 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.

During 2014, 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 2014, of USD 8.861m (2013 USD 2.499m), are included within loss on investments (note 26), 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 45% and 50% respectively in contrast to the 10% 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 carrying amount of the investment is based on discounted expected cash flows and was USD 9.1m (2013: USD 8.9m), 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. The fair value is based on discounted cash flow expectations and approximates the 15% share of the original investment in the real estate company as translated to USD.

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 3.7m (2013: USD 3.6m) 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 2014 amounts approximately to 17% (2013: 13.1%) 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

· Public Equities, and Fixed Income Investments are valued per their closing bid market prices on quoted exchanges, or as quoted by market maker.

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.

· Hedge Funds and Private Equity 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.

· Private Equities and unlisted investments 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. 

· Derivative instruments are valued at fair value as provided by counter parties 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 2014 and 2013. 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 property investment 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 2014 and 2013 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 individually for each property on the basis of appropriate benchmarks derived from arm's-length transactions. They may be 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.

- Unless otherwise stated, 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 2014 and 31 December 2013 respectively.

9. Investments in associate and joint venture

*Held by the subsidiary Blackline Investments Inc. Covenant Credit Partners is no longer an associate as at 31 December 2014.

The joint venture does not prepare any financial information. 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 was dissolved in January 2015.

10. Details of subsidiaries

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

* Mountview Holdings Limited, Silvermore 2 Ltd, Sycamore Loan Strategies Ltd and Sycamore Loan Funding Ltd were established during the year.

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

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 2014 and 2013 there is no unrecognised deferred tax asset.

12. Trade and other receivables

Other receivables 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 1.39m.

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 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 2014