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Livermore Investments Group Limited02 May 2008 2 May 2008 LIVERMORE INVESTMENTS GROUP LIMITED PRELIMINARY RESULTS FOR YEAR ENDED 31 DECEMBER 2007 Livermore Investments Group Limited (the "Group" or "Livermore") today announces its preliminary results for the year ended 31 December 2007. HIGHLIGHTS: • Successfully completed restructuring and established operations as an investment company • Net Asset Value per share USD 0.97 (0.49 pence) after payout of 3.3 cents per share during the year; total payout of 6.1 cents per share in 2007, which includes a cash dividend of 3.3 cents per share and share buy-back for USD 7.2m • Net Asset Value growth of USD 19.1m before payment of dividend and share buy back • Major investments during the year include: - Atlas Estates, Eastern Europe: diversified real estate company - Wyler Park, Switzerland: sale and leaseback of commercial buildings, land, and residential development due for completion in July 2008 - DTH Television Grup SA, BOOM, Romania: Direct-to-Home satellite television service - SRS Charminar, India: top real estate owner and developer • Gross income from investment activities USD 25.8m • Earnings before interest, tax, depreciation, amortization and non recurring items of USD 22.7m • Net income after tax of USD 20.7m • Final dividend of 3.5 cents per share Commenting on the results, Noam Lanir, CEO of Livermore Investments GroupLimited, said: "We are pleased to report the results of our first year as an investmentcompany. During 2007 the Group was successful in deploying a significant part ofits capital in a few outstanding opportunities mainly in Europe and Asia. Theseinvestments are consistent with our strategy to establish a diversifiedportfolio with income generating and growth opportunities. Each of ourinvestments is expected to generate above average returns over the mid to longterm." For further investor information please go to www.livermore-inv.com.Enquiries: Livermore Investments Group Limited + 41 43 3443200Doron Yassur, Chief Financial Officer Numis Securities +44 (0) 20 7260 1000Jag Mundi Hudson Sandler +44 (0) 20 7796 4133Jessica Rouleau/ Fran Read Highlights • Successfully completed restructuring and established operations as an investment company • Net Asset Value per share USD 0.97 (49 pence) after payout of 3.3 cents per share during the year • Net Asset Value growth of USD 19.1m before payment of dividend and treasury share buy back • Gross income from investment activities USD 25.8m • Earnings before Interest, Tax, Depreciation, Amortization and non recurring items - USD 22.7m • Net Income after tax of - USD 20.7m • Dividend distributed during the year (for 2006) - USD 9.7m • 2007 total payout of 6.1 cents per share which include a cash dividend of USD 10.0m and treasury shares purchased for USD 7.2m. Chairman's and Chief Executive's Review Introduction We are pleased to report the results of Livermore's first year as an investmentcompany. At the beginning of the year, we concluded the disposal of the Group'sold activities, its change of name and change of purpose. This transaction wascompleted on 19 January 2007 (see note 13). Following these initial actions,the Group 's primary focus was on building up a robust portfolio managementinfrastructure and recruiting an investment management team. During 2007 the Group was successful in deploying a significant part of itscapital in a few outstanding deep value opportunities mainly in Europe and Asia.These investments are consistent with Livermore's strategy to establish adiversified portfolio with income generating and growth opportunities. Each ofthe investments presents a strong value proposition and is expected to generateabove average returns over the mid-term period. Management aims for the overall investment portfolio to generate annualizedgrowth of over 15% over time with a relatively conservative risk profile. Financial Review The NAV of the Group at 31 December 2007 was approximately USD 276.4m followingdividend payment of USD 9.7m, and a share buy back of USD 7.2m. This representsan increase of USD 19.1m over the NAV at 31 December 2006, Net profit was USD20.7m, which represents a return on equity (ROE) of 7.3%. Operational expenses (excluding amortisation and non-recurring items) were USD3.2m, representing 1.2% of the NAV. The increase in the NAV is primarily attributed to the following: - Gains from associated companies - USD 8.8m. - Gains from investments in private equity and hedge funds - USD 4.7m. - Gains from real estate investments (rental income, changes in fair value and exchange rate gain) - USD 5.0m. - Net gains due to trading activities (not including hedge funds and private equity investments), and exchange rate differences on investments in the portfolio at year end - USD 2.9m the Company distributed dividends totalling USD 9.7m during the year, for theresults of 2006. Dividend The Board is pleased to recommend a final cash dividend payment for 2007 of USD10.0m or 3.5 cents ( 1.8 pence) per share. Going forward, the Board intends todistribute discretionary dividends based on the net performance of the Group'sinvestment portfolio. In addition, over the last financial year the Companypurchased 8,750,000 shares to be held in treasury, for total proceeds of USD7.2m. In 2008, the Company purchased an additional 1,808,262 shares. The totalnumber of shares held in treasury at 30 April 2008 was 10,558,262. Annual General Meeting The Group's Annual General Meeting will be held on 25 June 2008. Richard B Rosenberg Noam LanirChairman Chief Executive Officer30 April 2008 Review of activities Principal activities Following the agreement of the disposal of the Group's online marketingoperations on 29 December 2006, the change of name and change of purpose, theGroup commenced activity as an investment company in January 2007. The principal activities of the Group for the year ended 31 December 2007 werefinancial and strategic oriented investments in real estate, private equity,hedge funds and capital markets. Introduction and Overview In 2007, we began our journey as an investment company. Having completed oneyear, we are pleased to report that 2007 was a successful first year ofoperations for Livermore, despite challenging market conditions. Over the courseof the year, Livermore built up a solid management team, set up an advisoryoffice in Zurich, Switzerland, and deployed most of its capital in a robust andwell diversified portfolio. The portfolio has a mixture of yielding and growthassets with a geographical focus on Europe and India. The NAV at 31 December2007 was USD 0.97 ( 49 pence) per share. The gross income for 2007 was USD 25.8m which includes investment income of USD13.0m and income from the purchase of an associate of USD 8.8m. The net profitfor 2007 amounted to USD 20.7m, which represents a ROE of 7.3%. The Group ispleased to announce a final dividend for 2007 of USD 10.0m which equates to a3.6% return on capital to investors. Considering the high liquidity position of Livermore together with therobustness and diversification of its investment portfolio, the Board believethe Group is well positioned to withstand the current volatile market conditionsand continue to generate superior value for its shareholders. The Board continueto review a high volume of potential deal flow and are well positioned to takeadvantage of adverse market conditions. Global Investment Environment The global economy grew strongly in the first half of 2007 with growth runningabove 5%, although turbulence in financial markets clouded prospects in thesecond half of 2007 and for 2008. China's economy gained further momentumthrough 2007, growing by 11.5%, while India and Russia continued their stronggrowth. These three countries alone accounted for half of global growth over thepast year. Among the advanced economies, growth in the euro zone and Japanslowed in the second quarter of 2007 after two quarters of strong gains. In theUnited States, growth averaged 2.25% in the first half of 2007 as the housingdownturn continued to create considerable drag(1). Inflation seemed to be contained in the advanced economies, but rose in manyemerging markets and developing countries, reflecting higher energy and foodprices. In the United States, core inflation gradually eased to below 2%. In theeuro zone, inflation generally remained below 2% in 2007, but energy and foodprice increases contributed to an increase in September. Some emerging marketsand developing countries saw more inflation pressures, reflecting strong growthand the greater weight of rising food prices in their consumer price indices.The acceleration in food prices reflected pressure from the rising use of cornand other food items for bio-fuel production and poor weather conditions in somecountries. Strong demand kept oil and other commodity prices high(1). Financial market conditions became more volatile in the third quarter of 2007.Credit conditions tightened as concerns about the fallout from strains in theU.S. subprime mortgage market increased and led to a spike in yields onsecurities collateralized with subprime mortgage loans as well as otherhigher-risk securities. Uncertainty about the distribution of losses and risingconcerns about counterparty risk saw liquidity dry up in segments of thefinancial markets. Equity markets retreated, led by falling valuations offinancial institutions and long-term government bond yields declined asinvestors looked for safe havens. Emerging markets were also affected, althoughthe impact was less pronounced than in previous episodes of global financialmarket turbulence(1). Prior to the recent market turbulence, central banks around the world weregenerally tightening monetary policy to head off nascent inflation pressures. InAugust however, faced by mounting market disruptions, major central banksinjected liquidity into money markets to stabilize short-term interest rates.The Federal Reserve cut the federal funds rate by 50 basis points in Septemberand another 25 basis points in December with expectations of further reductionsin coming months. Expectations of monetary policy tightening by the Bank ofEngland, Bank of Japan, and the European Central Bank have been rolled backsince the onset of the financial market turmoil. Major emerging markets on theother hand faced the principal challenge of addressing increasing inflationconcerns(1). The major currencies largely continued trends observed since early 2006. TheU.S. dollar continued to weaken. The Euro and the Swiss Franc appreciated butcontinued to trade in a range broadly consistent with recent fundamentals. TheIndian Rupee appreciated sharply against the U.S. dollar on account of largeinflows of foreign capital(1). US: Following a weak start to 2007, the U.S. economy rebounded strongly in thesecond quarter, growing by 3.8% on an annualised basis. Net exports and businessinvestment provided a significant boost to growth, although private consumptiongrowth slowed markedly in the face of rising gasoline prices, and residentialinvestment continued to exert a significant drag on growth. In the latter half,however, the U.S. economy and financial markets were affected by the creditcrisis and falling home prices together with rising foreclosures. The S&P 500index rose 10% to an all time high at the beginning of October, before falling6% by December 2007. Credit spreads widened significantly despite aggressiverate cuts by the Federal Reserve. The US Dollar depreciated significantlyagainst the Euro, ending the year at 1.46 versus 1.33 at the beginning of theyear. EURO ZONE: The financial market turbulence came at a time when Western Europehad been enjoying its best economic performance for a decade. A long spell ofrobust global growth, healthy corporate balance sheets, accommodative financingconditions, and past reforms laid the foundation for a strong upswing. The euroarea economy expanded at approximately 3% per annum from mid 2006, althoughgrowth eased in the second quarter of 2007. Growth has been driven by abroad-based acceleration in investment spending, especially in Germany, inresponse to high regional and global demand for machinery and equipment, apickup in construction, and robust exports. Private consumption softened in thefirst half of 2007, but consumer confidence remained fairly robust until June,when it began to weaken. In the United Kingdom, the expansion continued at astrong and steady pace, with growth of 3% (year on year) in the second quarterof 2007, led by consumption. In Norway, Sweden, and Switzerland, growth was alsosustained above potential long term rates in the second quarter. SWITZERLAND: Switzerland experienced strong growth in 2007, achieving GDP growthof 2.9% year on year. The economy benefited from a lower exchange rate withrespect to the euro. Unemployment in 2007 was low and an increasing number offoreign nationals were employed in Switzerland. The financial turbulence of theUS markets affected the Swiss equity markets, with the SMI index closing 4.8%below where it opened at the beginning of the year. Increased oil and commodityprices contributed to a surge in inflation, which climbed to 2% year on year inDecember - the highest level since October 1995. INDIA: GDP growth in India was stronger than expected over the past year, but isexpected to moderate to 8.5% in 2007-08, from a high of 9.5% last fiscal year.Headline inflation (WPI), at around 3 %, was below the Reserve Bank of India's(RBI) near-term projections, although CPI inflation was higher. The rupeeappreciated significantly against the dollar, but export growth remained strong.The external current account deficit is expected to widen to about 2% of GDP in2007-08 against the backdrop of the strengthened rupee and slowing globalgrowth. The deficit is comfortably financed by private inflows. Reserves exceed$260 billion (over 10 times short-term external debt), and external debt remainslow (about 17% of GDP, as of end 2006-07). India's financial markets largelyrecovered from corrections during the summer's credit-market turbulence, withthe Indian stock indices reaching near record highs. Large inflows of foreigncapital and excess liquidity remain a concern for the RBI and measures such ascredit tightening and changes to regulate inflows into the capital markets wereimplemented. Livermore's Investment strategy in light of the global economy trends Livermore's investment strategy is to establish a diversified portfolio of valueinvestments with a relatively low risk profile and a geographic focus on Europeand Asia. Investments are also focused on sectors which Management believe willprovide superior growth over the mid to long term. In Emerging Markets the Groupinvests alongside local partners with relevant expertise and proven trackrecord. Up to 10% of the portfolio is allocated to trading opportunities. During2007, this part of the portfolio was primarily invested in a few stocks in theenergy sector and in specific growth opportunities in Asia. The Board viewed 2007 in two distinct parts. During first half of the year therecontinued to be significant appetite for risk . This changed in the second halfof the year, during which the credit market turmoil, together with the liquiditycrunch and a sharp correction in the US housing market, caused severe marketdislocations, which further deteriorated during the first quarter of 2008. Incontrast emerging markets, such as India, continued to grow, demonstrating thestrength of their respective domestic markets. The Board continued to implement its strategy of building a diversifiedportfolio which will generate stable above market returns for investors over themid to long term. Through a top down investment approach and partnerships withtop tier management and investment partners, Livermore has invested in acombination of high growth and deep value opportunities over the course of theyear. This process was further accelerated in the second half of 2007 as therisk-return profile of certain long term opportunities in private equity andreal estate was far superior to that of short term opportunities in the equitymarkets. The Board believe that its flexible, though conservative investmentapproach, and the investment and currency allocation it has established willshield the Group's shareholders from the current volatility in financial marketsand generate sustainable returns for investors. Review of Significant Investments Atlas Estates ("Atlas") - Central and Eastern Europe In December 2007, Livermore acquired a 21% stake in Atlas, a diversified realestate company prominent in East Europe, and became its largest shareholder.Since floating on the UK Alternative Investment Market in 2006, Atlas hasinvested in top quality residential and commercial properties primarily locatedin Poland, Romania, and Hungary. These properties include the Warsaw Hilton andPlatinum Towers in Poland. Rationale for investment: Value Investment: As at 31 December 2007 Atlas' NAV was EUR 4.98 per share. Theadjusted NAV, after taking into account the revaluation of land assets heldunder operating lease, was EUR 6.36 per share. Livermore's average purchaseprice of Atlas shares represents a 14.7% discount to NAV and a 33% discount tothe adjusted NAV. Atlas enjoys both solid earnings from its high qualityyielding assets and upside potential in its development projects, which wereacquired at attractive valuations. Access to Eastern Europe: The Board believe that Eastern European real estatewill continue to benefit from the ongoing regeneration of the region as morecountries (including Romania and Bulgaria) become members of the European Unionand the region experiences increased foreign investment in infrastructure andbusiness and residential accommodation. The region is already experiencing highGDP growth rates and rising per capita income, further boosting the real estatesector. Upside potential: Given that Atlas is trading at a significant discount to itsNAV and due to short term catalysts, such as its recent dual listing on theWarsaw exchange, Atlas has the potential to close part of this discount. TheBoard believe that over time, as value is realised, Atlas' share price shouldconverge with its NAV. Following Livermore's acquisition, Atlas has entered intoan agreement to sell the Millennium Plaza in Warsaw at a profit of approximatelyEUR 15m. The Board believe that through closing the NAV gap, maximizing the potential ofthe existing assets in Atlas' portfolio as well as certain enhancements relatingto the structure of the Investment Manager, this investment will generatesignificant value for Livermore with very little downside risk. Wyler Park - Switzerland In July 2007 the Group finalized its first real estate investment through thepurchase and leaseback of Wyler Park from SBB, the Swiss national railwaycompany. The purchase followed a bid process of over 6 months in which over 20parties participated. The property was purchased for CHF 93m through a newlyestablished Swiss special purchase vehicle. Non recourse finance of some CHF 80mwas provided by Merrill Lynch. As part of this commercial investment, theCompany is developing a residential project including 39 residential apartmentsto be completed in July 2008. The total cost of the residential developmentproject is approximately CHF 15m. The project includes additional developmentrights, which the Company expects to utilize in the future. This high profileinvestment has positioned the Company well in the Swiss market and has generatedsignificant deal flow opportunities in the property sector. Some of theseprojects are currently under various stages of review and negotiation. During 2007 the Wyler Park property contributed some USD 4.1m to the Group'sannual profit before tax, derived from operating income, revaluation gains, andexchange rate differences due to the appreciation of the CHF. Construction of the residential part of the project is progressing in line withexpectations and there is strong demand for the apartments. Construction isexpected to be complete in the summer of 2008. Following completion of theresidential part, we foresee further appreciation in the property valuation. DTH Television Grup SA, BOOM - Romania Livermore invested in Boom in October 2007 and acquired a 15% minority stake forapproximately EUR 9.5m. Boom is a Direct-To-Home multi channel satellitetelevision service in Romania which started operations during the third quarterof 2006. The company plans to leverage on the growth of the Romanian economy,increased spending by its expanding middle class and the low penetration ofdigital television service in the country. Romanians watch television for 306minutes per day on average, making Romania one of the highest televisionconsumer nations in Europe and therefore an attractive destination fortelevision related services. Boom's competitive advantage lies in providing exclusive content and hi-techservices including High Definition, Dolby Surround, and ITV to its subscribers.Boom plans to reach 600,000 subscribers by 2012 and capture some 20% of thedigital TV market in Romania. With a market potential of 7.6m homes andregulatory encouragement to switch from analogue to digital reception, Boom iswell placed to capitalize on this tremendous window of opportunity. As at 31December 2007, Boom had 107,000 subscribers (versus some 70,000 subscribers atthe time of Livermore's acquisition), which was ahead of its target for theyear. This represents a monthly growth rate in new subscribers of 10%. Boomexpects to breakeven in 2009 and make significant profits in the years ahead. InMarch 2008 Boom won the bid for the exclusive rights for the Romanian FootballChampions League in the 2009-12 seasons. Livermore invested in Boom at an attractive valuation, following thorough duediligence, after closely following the development of the subscriber base andbeing satisfied with the Company's key performance indicators. Although Boom'sshareholders have been approached by a few international media entities thatexpressed an interest in acquiring Boom, Livermore as well as the foundingshareholders expect to realise this investment in 2009-2010. Montana Tech Components ("Montana") - Europe Montana, based in Austria, is a leading components manufacturer in the fields ofAerospace Components, Metal Tech and Varta Micro Power. Montana is the marketleader in these defined niches and Livermore believes it has solid growthpotential. Montana pursues a sustainable growth strategy by focusing on growthsectors featuring advanced components, smart technologies and by outsourcinglabour-intensive processes to Eastern Europe and Asia as well as by makingadd-on acquisitions. The Aerospace components business has a 50% market share inan industry with very high barriers to entry. Montana's Metal Technologybusiness is also well positioned with over 50% market share in an otherwisehighly fragmented market. This business produces tools for identification andmarking of Steel products. In their Micro battery business, Montana is theleader in rechargeable hearing aid batteries, with strong growth potentialcoming from their Lithium Polymer batteries division. Livermore invested EUR 5min Montana, following which, Montana completed a further round of funding at ahigher valuation. Livermore expects to exit via an IPO during 2008-2009. Montanareported net income of EUR 29.2m for 2007, which represents year-on-year growthof 15.2%. CALS refinery - India In December 2007, Livermore entered into a Total Swap Agreement (TSA) withrespect to a Global Depositary Receipt (GDR) issued by an Indian refinerycompany - CALS Refinery. CALS is promoted by Spice group to setup refineries inIndia. Spice is a USD 2 billion group with interests in Oil & Gas, Aviation,Hotels, and Heavy engineering in India and Africa. The company aspires to becomea world-class oil and gas company specializing in the integrated energybusiness. CALS plans to relocate a refinery from Germany to India and the GDRwas issued to part-finance the relocation and setup of this refinery in India.CALS expects the refinery to have a capacity of 4.8 Million Metric Tons PerAnnum with expected gross refinery margins of 12%. The TSA has a capitalprotection structure and enhances the attractiveness of the GDR, which was alimited issue to an exclusive set of investors at attractive valuations. Other Private Equity Investments The other private equity investments held by the Group, are mainly in theemerging economies of India and China. India Blue Mountains: A leading hotel and hospitality development fund thatdevelops and acquires hotels in India. The fund has acquired land and is in theprocess of developing hotels in Mumbai, Chennai, Pune, Gurgaon, and Goa. Sinceour investment, the NAV per share has increased by 27.05% for the year ended 31December 2007. The fund recently acquired a highly rated hotel in Mumbai whichhas yet to be re-valued. The fund plans to exit via an IPO in 2008 - 2009. Promethean India: India-focused private equity fund, which is AIM quoted(Ticker: PTHI IN). It operates a hybrid investment strategy, enabling it toinvest in private and quoted equities. Some of its portfolio investments includea leading tiles manufacturer in India, an established automotive componentsmanufacturer, a hospitality company with luxury hotels located in primelocations in top Indian cities, and an m-commerce player. SRS Partners, JM Financial: Real estate-focused exclusive private equity fundpartnered with JM Financial that has established a successful portfolio of realestate in India. A significant portion of the investments are in residentialreal estate in the highest growth cities in India. Panda Capital: China-based Private Equity Fund focused on early-stage industrialoperations in China and Taiwan, which represent strong growth opportunities. Thefund is invested in manufacturing, media, healthcare, and emerging technologyindustries. Alternative Investment Managers During 2007, Livermore constructed a globally diversified portfolio of exclusivemanagers. All managers have a proven track record and are led by outstandingindividuals or teams whom Livermore management personally know. This combinationof managers and investment strategies focused on absolute returns generatedsuperior returns during the year in comparison to market peers. The investmentstrategies include long/short equities, merger arbitrage, credit opportunitiesand multi-strategies. The overall performance of this portfolio in 2007 was growth of approximately20% (annualised). The Group reviews talented managers on an on going basis withthe aim to source suitable managers that can enhance the performance of theportfolio and reduce its volatility. Livermore's portfolio construction and allocation strategy is based on hedgefund strategy and sector diversification, internal correlations, macro-economicconditions, market cycles, and fund strategy risk considerations. In itsselection process Livermore places special focus on qualitative traits of theinvestment manager. Livermore has access to top hedge fund managers, some ofwhom are not available to the public, as well as outstanding emerging hedge fundmanagers. The Group closely monitors the managers and continually adjusts theportfolio. Livermore's management believe that its approach and access totalented managers will generate higher risk adjusted returns. In addition, during 2007 the Group invested in a diversified portfolio ofexclusive managers in the credit arena, mainly through investments in equitytranches of Collateralized Loan Obligations. These investments were made with aview to taking advantage of the tight financing terms for these deals and thestrong fundamentals of leveraged loans as an asset class, namely high recoveryrates and strong cash flows. The total credit portfolio as at year end amountedto USD 29.1m. Post balance sheet events and investments The following post balance sheet events and investments were recorded: SRS Charminar In January 2008, Livermore invested in a leading Indian Real Estate company, inassociation with SRS Private and other investors. The target company is a topreal estate player in South India, with a land bank of over USD 1.3bn spreadacross the city of Hyderabad and the state of Andhra Pradesh. The investment in the target company was conducted via a fund structure (SRSCharminar) set up by SRS Private Invest. The fund will in turn invest in thetarget company in the form of compulsorily convertible debentures. The proceedswill be used by the target company for development of residential and commercialreal estate on the land bank owned by them. The exit is expected to be via an IPO within 36 months of the date ofinvestment. Investors are guaranteed a minimum of 12.5% discount on the IPOprice. The deal structure includes a put option for investors, which can beexercised if the IPO does not take place within 3 years. The put option issecured by land valued at USD 1.3bn and guarantees a minimum return ofapproximately 30% IRR if exercised. Blue Ridge China The Group committed to invest in Blue Ridge China, a Limited Partnership whosemain business will be running a fund of Portfolio Investments in companiesprincipally engaged in business in China. The Partnership shall generally havesignificant influence on the management, operations and strategic direction ofinvestee companies. The intention of the fund is to raise USD 1.4bn, of whichthe committed capital of the limited Partnership is some USD 150m. Change of Name The Company changed its name to Livermore Investments Group Limited followingthe EGM held on 28 February 2007. Discontinued operations The Group disposal of the remainder of its operating activities to PartyGamingPlc for a net consideration of $38m, was completed on 19 January 2007 and wasincluded in the 2006 financial accounts. Details and full disclosure of this canbe found in Note 13 to the financial statements. Litigation In Q3 2007, an ex-employee of Empire Online Limited (the Company's previousname), filed a law suit against the Company, one of its directors, and one ofits former subsidiaries, in the Labour Court of Tel Aviv. According to thelawsuit, the plaintiff claims compensation relating to the event of the sale ofall commercial activities of Empire Online Limited until the end of 2006, andfor terms relating to the termination of his employment with Empire OnlineLimited. The Company has taken a conservative approach and made a provision ofUSD 750k for all settlement costs and the potential related legal expenses ofthis case. Report of the Directors The Board's objectives The Board's primary objectives are to supervise and control the managementactivities, business development, and the establishment of a strong franchise inthe Group's business lines. Measures aimed at increasing shareholders value overthe medium to long-term, such as an increase in NAV and dividends paid are usedto monitor performance. The Board of Directors Richard Barry Rosenberg (age 52), Non-Executive Director, Chairman of the Board Richard joined the Group in December 2004. He became Non-Executive Chairman on31 October 2006, following the resignation of Lord Leonard Steinberg. Hequalified as a chartered accountant in 1980 and in 1988 co-founded theaccountancy practice Sedley Richard Laurence Voulters. He has considerableexperience in giving professional advice to clients in the leisure andentertainment sector. Richard is a director of a large number of companiesoperating in a variety of business segments. Noam Lanir (age 41), Founder and Chief Executive Officer Noam founded the Group in July 1998, to develop a specialist online marketingoperation. Noam has led the growth and development of the group's operationsover the last nine years which culminated in its IPO in June 2005 on AIM. He isalso a major benefactor of a number of charitable organisations. Prior to 1998,Noam was involved in a variety of businesses mainly within the leisure andentertainment sector. Ron Baron (age 40), Executive Director and Chief Investment Officer Ron was appointed as Executive Director and Chief Investment Officer on 10August 2007. Ron has wide investment and M&A experience. From 2001 to 2006 Ronserved as a member of the management at Bank Leumi, Switzerland and wasresponsible for portfolio management activity. Prior to this he spent five yearsas a commercial lawyer at Kantor, Elhanani, Tal & Co. Law Offices in Tel Aviv,Israel, advising banks and large corporations on corporate transactions,including buy-outs and privatisations. He holds an MBA from INSEAD Fontainebleauand a LLB (LAW) and BA in Economics from Tel Aviv University. The Directors shall retire from office at the third Annual General Meeting afterthat at which they were last elected, and if they so wish, offer themselves upfor re-election to the Board. Subject to the Companies Act and the Articles, theDirectors to retire by rotation at the Annual General Meeting in every yearshall be in addition to any Director who wishes to retire and not to offerhimself for reappointment and any Director to retire under the Company'sArticles. The interests of the Directors and their related companies in theshares and options over shares in the Company are as shown on page 2. Details ofthe Directors' remuneration and service contracts also appear on page 2. The Directors submit their annual report and audited financial statements of theGroup for the year ended 31 December 2007. Directors responsibilities in relation to the accounts The Directors are responsible for preparing the Annual Report and the financialstatements in accordance with applicable law and International FinancialReporting Standards as adopted by the European Union. The Directors are required to prepare financial statements for each financialyear which give a true and fair view of the state of affairs of the Group and ofthe profit or loss of the Group for that period. In preparing these financialstatements, the Directors are required to: • Select suitable accounting policies and then apply them consistently; • Make judgments and estimates that are reasonable and prudent; • State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; • Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The Directors are responsible for keeping proper accounting records thatdisclose with reasonable accuracy at any time the financial position of theGroup and enable them to ensure that the financial statements comply with theapplicable law. They are also responsible for safeguarding the assets of theGroup and hence for taking reasonable steps for the prevention and detection offraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporateand financial information included on the Group's website. Legislation in theBritish Virgin Islands governing the preparation and dissemination of financialstatements 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 25 March 2008 the following interests in 3 per cent or more of theCompany's existing ordinary share capital had been reported: Number of Ordinary % of issued ordinary share Shares capitalGroverton Management Ltd 146,540,923 50.05Sidmore Holdings Ltd 24,578,931 8.40Artemis Investment Management 14,328,327 4.89Israel Discount Bank 13,277,568 4.54Ron Baron 13,055,510 4.46New Star Asset Management 11,349,144 3.88Livermore Investments Ltd 10,558,262 3.61(treasury)Bank Hapoalim Luxemburg 10,033,309 3.43Deutsche Bank 9,725,776 3.32 Save as disclosed in this report and in the remuneration report, the Company isnot aware of any person who is interested directly or indirectly in 3 per centor more of the issued share capital of the Company or could, directly orindirectly, jointly or severally, exercise control over the Company. Details of transactions with Directors are disclosed in note 30 to the financialstatements. Corporate Governance Introduction The Company recognises the importance of the principles of good corporategovernance and the Board is pleased to report its commitment to such highstandards throughout the year. As an AIM quoted Company Livermore is notrequired to follow the provisions of the 2006 FRC Combined Code (the "Code"). The Board Constitution and Procedures The Company is controlled through the Board of Directors, which currentlycomprises 1 Non-Executive Director and 2 Executive Directors. The ChiefExecutive's responsibilities focus on coordinating the Company's business andimplementing Group strategy. A formal schedule of matters is reserved for consideration by the Board, whichmeets approximately six times each year. The Board is responsible forimplementation of the investing strategy described in the circular toshareholders dated 29 December 2006 and adopted pursuant to shareholder approvalat the Company's EGM on 17 January 2007. It reviews the strategic direction ofthe Group, its codes of conduct, its annual budgets, its progress towardsachievement of these budgets and any capital expenditure programmes. Inaddition, the Directors have access to the advice and services of the CompanySecretary and all Directors are able to take independent professional advice inthe furtherance of their duties if necessary. The Directors receive training andadvice on their responsibilities as necessary. All Directors, in accordance withthe Code, submit themselves for re-election at least once every three years. Board Committees Due to the fact that there is currently only one Non Executive Director on theboard of Directors, the Company does not employ the powers of its Audit,Remuneration and Nomination Committees. The Company is evaluating therecruitment of an additional Non-Executive Director, and once such appointmentis made, it will employ the full powers of its Board committees. In addition,the board is evaluating the establishment of an advisory panel to assist in thedevelopment and implementation of investment strategy and policy. a) Remuneration Committee Until 31 October 2006 the Remuneration Committee comprised of two Non-ExecutiveDirectors and was chaired by Richard Rosenberg. The Remuneration Committee considers the terms of employment and overallremuneration of the Executive Directors and key members of executive managementregarding share options, salaries, incentive payments and performance relatedpay. The remuneration of Non-Executive Directors is determined by the Board. b) Audit Committee Until 31 October 2006 the Audit Committee comprised two Non-Executive Directorsand was chaired by the then senior independent Non Executive Director. Theduties of the Committee include monitoring the auditor's performance andreviewing accounting policies and financial reporting procedures. The Committeeprepares a summary of its work, which is included each year in the Company'sAnnual Report. c) Communication with Investors The Directors are available to meet with shareholders throughout the year. Inparticular the Executive Directors prepare a general presentation for analystsand institutional shareholders following the interim and preliminary resultsannouncements of the company. The Chairman, Richard Rosenberg, was available formeetings with shareholders throughout the year. The Board endeavours to answerall queries raised by shareholders promptly. Shareholders are encouraged to participate in the Annual General Meeting atwhich the Chairman will present the key highlights of the Group's performance.The Board will be available at the Annual General Meeting to answer questionsfrom shareholders. Internal Control The Board is responsible for ensuring that the Company has in place a system ofinternal control and for reviewing its effectiveness. In this context, controlis defined as the policies and processes established to ensure that businessobjectives are achieved cost effectively, assets and shareholder valuesafeguarded and that laws and regulations are complied with. Controls canprovide reasonable but not absolute assurance that risks are identified andadequately managed to achieve business objectives and to minimise materialerrors, frauds and losses or breaches of laws and regulations. The Group operates a sound system of internal control, which is designed toensure that the risk of misstatement or loss is kept to a minimum. Given the Group's size and the nature of its business, the Board does notconsider that it is necessary to have an internal audit function. An internalaudit function will be established as and when the Group is of an appropriatesize. The Board will undertake a review of its internal control on an on going basis. Independence of Auditor The Board undertakes a formal assessment of the auditor's independence eachyear, 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 auditors that they are 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 31December 2007 were as follows: Directors' Emoluments Each of the Directors has a service contract with the Company. Director Notes Date of Salary/Fees Benefits Total Emoluments Total Emoluments agreement $000 $000 2007, $000 2006, $000Richard Barry Rosenberg 10/06/05 151 - 151 94Noam Lanir a 10/06/05 400 - 400 1,000Ron Baron 01/09/07 94 - 94 -Andrew Rae Burns b 01/09/05 131 - 131 337 The dates are presented in day / month / year format. Notes: a) Service contract terminable on either party to the agreement giving to the other 12 months' notice; b) Andrew Rae Burns resigned on 31 August 2007. Directors' Interests Interests of Directors in ordinary shares Notes As at 31.12.2007 As at 31.12.2006 Number of Percentage of Number of Percentage of Ordinary ordinary Ordinary ordinary issued Shares issued share Shares share capital capitalNoam Lanir a 138,840,923 48.883% 95,616,837 32.659%Ron Baron b 13,055,510 4.597% - -Richard Barry Rosenberg 15,000 0.005% 15,000 0.005%Andrew Rae Burns - - 20,000 0.007% Notes: a) Noam Lanir is interested in his ordinary shares by virtue of the fact that heowns directly or indirectly all of the issued share capital of GrovertonManagement Limited. b) On 16 April 2007, a loan of USD 5m was provided to Ron Baron to purchaseLivermore shares. The loan bears an annual interest rate of 6 month USD Libor +25bp, and is payable 3 years from grant. Interests of Directors in share options No of options at 31 Date of Exercise Exercise Vesting period of options December 2007 grant price, £ Price, $Noam Lanir 10,000,000 19/07/06 0.7775 1.41786 19/07/06-19/07/09Richard Barry Rosenberg 150,000 19/07/06 0.7775 1.41786 19/07/06-19/07/09 75,000 07/12/05 0.71 1.22 07/12/05-07/12/08 The options are exercisable up to 10 years after the date of grant. No optionswere exercised during the year 2007. Share Option Scheme The Company's remuneration committee (the "Committee") is responsible foradministering the Share Option Scheme. Options to acquire Shares in the Companymay be granted under the Share Option Scheme to any employee or director of theCompany or member of the Group. The option exercise price per Ordinary Share is determined by the Committee butwill be no less than market value of the Ordinary Shares on the dealing dayimmediately preceding the date of grant. The options are not subject to anyperformance criteria. An option is normally exercisable in three equal tranches, on the first, secondand third anniversary of the grant. The Share Option Scheme will terminate ten years after it is adopted by theCompany, or earlier in certain circumstances. Remuneration Policy The Group's policy has been designed to ensure that the Group has the ability toattract, retain and motivate executive directors and key management personnel toensure 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 Company and the competitive global market •a significant personal shareholding will be developed in order to align executive and shareholder interests •the assessment of performance will be quantitative and qualitative and will include exercise of informed judgement by the remuneration committee within a framework that takes account of sector characteristics and is approved by shareholders •the committee will be proactive in obtaining an understanding of shareholder preferences •remuneration policy and practices will be as transparent as possible, both for participants and shareholders •the wider scene, including pay and employment conditions elsewhere in the Group, will be taken into account, especially when determining annual salary increases. Review of the business and risks The Company is now an investment company, a more detailed review of the businessis given in the Chairman's and Chief Executive's review. Risks The Board considers that the risks the Shareholders face can be divided intoexternal and internal risks. External risks to shareholders and their returns are those that can severelyinfluence the investment environment within which the Group operates, andinclude economic recession, declining corporate profitability, rising inflationand interest rates and excessive stock-market speculation. Current portfolio risks include interest rate increases, a global economiceffect on Emerging markets (mainly India), a global credit shortage caused bythe US credit market crisis, and instability in the Private Equity and HedgeFund sectors. The mitigation of these risks is achieved by investmentdiversification, both by sector and by location. Internal risks to shareholders and their returns are: Portfolio (investment and location selection and concentration), balance sheet(gearing) and/or investment mismanagement. In particular the Board hasidentified the exposure to Atlas Estates Ltd. as a notably large singleinvestment risk. In respect of the risks associated with investments, the board is evaluating theestablishment of an external investment advisory board. In addition, a periodicinternal review is performed to ensure transparency of Group activities andinvestments. All service providers to the Group are regularly reviewed. Themitigation of the risks related to investments is effected by investmentrestrictions and guidelines and through reviews at Board Meetings. As the portfolio is invested mostly in non USD currencies (mainly EURO, CHF andINR), it is exposed to movements in these currencies. On the asset side, the Group's exposure to interest rate risk is limited to theinterest bearing deposits and portfolio of bonds in which the Group investssurplus funds. On the liability side, the Group's exposure to rising interestrates is minimal as it has limited borrowings correlated to variable interestrates. Management monitors liquidity to ensure that sufficient liquid resources areavailable to the Group. The Group's credit risk is primarily attributable toreceivables from its CDO / CLO and bond portfolio. Generally the Group's maximumcredit exposure is the carrying amount of trade and other receivables shown onthe face of the Balance Sheet. Share Capital There was no change in the authorised share capital during the year to 31December 2007. The authorised share capital is 1,000,000,000 ordinary shareswith no par value. Related party transactions Details of any transactions of the Group with related parties during the year to31 December 2007 are disclosed in Note 30 to the Financial Statements. Report of the independent auditor to the members of Livermore Investments GroupLimited We have audited the consolidated financial statements of Livermore InvestmentsGroup Limited for the year ended 31 December 2007 which comprise theConsolidated Income Statement, the Consolidated Balance Sheet, the ConsolidatedStatement of Changes in Equity, the Consolidated Statement of Cash Flows andnotes 1 to 34. The consolidated financial statements have been prepared underthe accounting policies set out therein. This report is made solely to the Company's members, as a body. Our audit workhas been undertaken so that we might state to the Company's members thosematters we are required to state to them in an auditor's report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the Company and the Company's members as abody, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor The directors' responsibilities for preparing the Annual Report and theconsolidated financial statements in accordance with International FinancialReporting Standards (IFRSs) as adopted by the European Union are set out in thestatement of Directors' Responsibilities. Our responsibility is to audit the consolidated financial statements inaccordance with relevant legal and regulatory requirements and InternationalStandards on Auditing (UK and Ireland). We report to you our opinion as to whether the consolidated financial statementsgive a true and fair view. In addition we report to you if, in our opinion, wehave not received all the information and explanations we require for our audit,or if information specified by IFRS regarding directors' remuneration and othertransactions is not disclosed. We read other information contained in the Annual Report, and consider whetherit is consistent with the audited consolidated financial statements. This otherinformation comprises only the Highlights, the Chairman's and Chief Executive'sReview, the Review of Activities, the Report of the Directors, the CorporateGovernance statement, the Remuneration Report and the Review of the Business andRisks. We consider the implications for our report if we become aware of anyapparent misstatements or material inconsistencies with the consolidatedfinancial statements. Our responsibilities do not extend to any otherinformation. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing(UK and Ireland) issued by the Auditing Practices Board. An audit includesexamination, on a test basis, of evidence relevant to the amounts anddisclosures in the consolidated financial statements. It also includes anassessment of the significant estimates and judgments made by the directors inthe preparation of the consolidated financial statements, and of whether theaccounting policies are appropriate to the Company's circumstances, consistentlyapplied and adequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the consolidated financialstatements are free from material misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion we also evaluated the overalladequacy of the presentation of information in the consolidated financialstatements. Opinion In our opinion the consolidated financial statements give a true and fair view,in accordance with IFRSs as adopted by the European Union, of the state of thegroup's affairs as at 31 December 2007 and of its profit for the year thenended. GRANT THORNTON UK LLPREGISTERED AUDITORCHARTERED ACCOUNTANTSLONDON Date: 30 April 2008 Livermore Investment Group Limited Consolidated Income Statement for the year ended 31 December 2007 Note Discontinued Operations 2007 2006 2006 $000 $000 $000 Revenue from discontinued operations - 59,850 -Investment incomeInterest / dividend income 4 16,573 - 12,085Property revenue 5 1,822 - -Gains / losses on investments 6 (1,433) - 108Gain on acquisition of associate 7 8,827 - -Cost of sales - (30,256) - ------ ------ ------Gross profit 25,789 29,594 12,193 Amortisation and non recurring items 8 (134) (11,054) -Administrative expenses 9 (3,172) (3,483) (995) ------ ------ ------Operating profit 22,483 15,057 11,198Finance expenditure 10 (1,398) - (170) ------ ------ ------Profit before taxation 21,085 15,057 11,028Taxation 11 (368) (7) - ------Profit after taxation from discontinued - 15,050 -operationsProfit from disposal of discontinued 13 - 36,642 -operations ------Profit from discontinued operations - 51,692 51,692 ------ ------Profit for period 20,717 62,720 ====== ======Earnings per shareBasic earnings per share ($) 14 0.07 0.18 0.21 ====== ====== ======Diluted earnings per share ($) 14 0.07 0.17 0.21 ====== ======DividendsProposed final dividend per share ($) $0.035 $0.034 ====== ======Proposed final dividend ($000) 10,000 10,000 ====== ======Dividends paid during the year per share ($) $0.033 $0.085 ====== ======Dividends paid during the year ($000) 16 9,657 24,887 ====== ====== The notes on pages 2 to 2 form part of these financial statements.Livermore Investments Group Limited Consolidated Balance Sheet as at 31 December 2007 Note 2007 2006 $000 $000AssetsNon-current assetsProperty, plant and equipment 17 405 49Intangible assets 18 45 73Available- for-sale financial assets 19 217,763 124,491Financial assets designated at fair value through 20 729profit or lossInvestment in property 21 97,632 -Investment in associate 22 69,639 - --------- --------- 386,213 124,613 --------- ---------Current assetsTrade and other receivables 23 1,850 50,795Cash and cash equivalents 24 9,917 137,715 --------- --------- 11,767 188,510 --------- ---------Total assets 397,980 313,123 ========= =========EquityShare capital 25 - -Share premium 202,635 209,807Other reserves 767 2,676Retained earnings 73,041 61,763 --------- ---------Total equity 276,443 274,246 --------- ---------LiabilitiesNon current liabilitiesBank loan 26 69,411 -Deferred tax 258 - --------- --------- 69,669 - --------- ---------Current liabilitiesBank overdrafts 27 15,825 4,960Trade and other payables 28 35,934 33,910Current tax payable 29 109 7 --------- --------- 51,868 38,877 --------- ---------Total liabilities 121,537 38,877 --------- ------Total equity and liabilities 397,980 313,123 ========= =========Net asset valuation per shareBasic net asset valuation per share ($) 0.97 0.94 ========= =========Diluted net asset valuation per share ($) 0.97 0.94 ========= ========= These Financial Statements were approved by the Board of Directors on 30 April2008.The notes on pages 2 to 2 form part of these financial statements. Livermore Investments Group LimitedConsolidated Statement of Changes in Equity for the year ended 31 December 2007 Share Share Share Investments Retained capital premium option revaluation earnings Total Note reserve reserve $000 $000 $000 $000 $000 $000 Balance at 1 January 2006 - 209,807 277 - 22,297 232,381 Changes in equity for the year ended 31 December 2006 Available-for-sale investments Valuation gains/(losses) taken to - - - 990 - 990 equity Transferred to profit or loss on - - - (108) - (108) sale ------ ------ ------ ------ ------ ------ Net income recognised directly in - - - 882 - 882 equity Profit for the year - - - - 62,720 62,720 ------ ------ ------ ------ ------ ------ Total recognised income and - - - 882 62,720 63,602 expense for the year Dividends paid 16 - - - - (24,887) (24,887) Share option charge - - 3,150 - - 3,150 Share options forfeited - - (1,633) - 1,633 - ------ ------ ------ ------ ------ ------ Balance at 31 December 2006 - 209,807 1,794 882 61,763 274,246 Changes in equity for the year ended 31 December 2007 Available-for-sale investments Valuation gains/(losses) taken to - - - (7,679) - (7,679) equity Transferred to profit or loss on - - - 3,331 - 3,331 sale ------ ------ ------ ------ ------ ------ Net income recognised directly in - - - (4,348) - (4,348) equity Profit for the year - - - - 20,717 20,717 ------ ------ ------ ------ ------ ------ Total recognised income and - - - (4,348) 20,717 16,369 expense for the year Dividends paid 16 - - - - (9,657) (9,657) Purchases of own shares - (7,172) - - - (7,172) Share option charge - - 2,657 - - 2,657 Share options forfeited - - (218) - 218 - ------ ------ ------ ------ ------ ------ Balance at 31 December 2007 - 202,635 4,233 (3,466) 73,041 276,443 ------ ------ ------ ------ ------ ------ The notes on pages 2 to 2 form part of these financial statements. Livermore Investments Group LimitedConsolidated Statement of Cash Flows for the year ended 31 December 2007 Note 2007 2006 $000 $000Cash flows from operating activitiesProfit before tax 21,085 62,727Adjustments forDepreciation and amortisation 17/18 93 3,298Goodwill fair value adjustment - 797Interest expense 10 1,398 170Equity settled share options 8 2,657 3,150Profit on disposal of business - (36,642)Loss on sale of property, plant and equipment 13 - ---------- ---------- 25,246 33,500 ---------- ----------Changes in working capitalDecrease in trade and other receivables 48,945 8,612Increase / (Decrease) in trade and other payables 2,024 (11,830)Tax paid (8) (7) ---------- ---------- 50,961 (3,225) ---------- ----------Net cash generated from operating activities 76,207 30,275 ---------- ----------Cash flows from investing activitiesPurchase of property, plant and equipment 17 (418) (113)Purchase of intangible assets 18 (16) (916)Acquisition of investments (98,349) (123,609)Acquisition of investment property (97,632) -Acquisition of associate (69,639) -Disposal of business assets - 235.878 ---------- ----------Net cash (used in)/from investing activities (266,054) 111,240 ---------- ----------Cash flows from financing activitiesDividends paid (9,657) (24,887)Purchase of own shares (7,172) -Proceeds from bank loan 69,411 -Interest paid (1,398) (170) ---------- ----------Net cash from/(used in) financing activities 51,184 (25,057) ---------- ----------Net (decrease)/increase in cash and cash (138,663) 116,458equivalentsCash and cash equivalents at the beginning of the 132,755 16,297year ---------- ----------Cash and cash equivalents at the end of the year (5,908) 132,755 ---------- ---------- The notes on pages 2 to 2 form part of these financial statements. Notes on the Financial Statements 1. General Information 1.1. Incorporation, principal activity and status of the CompanyThe Company was incorporated as an international business company and registeredin the British Virgin Islands (BVI) on 2 January 2002 under IBC Number 475668with the name Clevedon Services Limited. The liability of the members of theCompany is limited. 1.2. The Company changed its name to Empire Online Limited on 5 May 2005 andthen changed to Livermore Investments Group Limited on 28 February 2007. 1.3. The principal activity of the Group changed to investment services on 1January 2007. Before that the principal activity of the Group was the provisionof 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 BVIBusiness Companies Act (2004.). 1.5. The registered office and head office of the Company is located atTrident Chambers, PO Box 146, Road Town, Tortola, British Virgin Islands. 2. Accounting Policies 2.1. The significant accounting policies applied in the preparation of thefinancial information are as follows: a) Basis of preparation The audited financial statements of Livermore Investments Group Limited havebeen prepared in accordance with International Financial Reporting Standards("IFRS") as adopted by the European Union and on a going concern basis. Thefinancial statements have been prepared on the historical cost except for thefollowing: • Derivative financial instruments are measured at fair value. • Financial instruments at fair value through profit or loss are measured at fair value. • Available- for- sale financial assets are measured at fair value. • Investment property is measured at fair value. • Share- based payments are fair valued at the date of grant. The financial information is presented in US dollars because that is thecurrency in which the Group primarily operates. The directors have reviewed the accounting policies used by the Group andconsider them to be the most appropriate. A new standard, IFRS 7 - Financial Instruments: Disclosure was introduced foraccounting periods beginning on or after 1 January 2007. IFRS 7 introduces new disclosures to improve the information about financialinstruments. It requires the disclosure of qualitative and quantitativeinformation about exposure to risks arising from financial instruments,including specified minimum disclosures about credit risk, liquidity risk andmarket risk, including sensitivity to market risk. It replaces the disclosurerequirements in IAS 32 "Financial Instruments: Disclosure and Presentation". b) New standards and interpretations not yet adopted The following standards, issued by the IASB, have not been adopted by the Groupand the Group is currently assessing the impact these standards will have on thepresentation of the consolidated results in future periods: IFRS 8 - Operating segments (effective for accounting periods beginning on orafter 1 January 2009) IFRS 8 contains requirements for the disclosure of information about an entity'soperating segments and also about the entity's products and services, thegeographical areas in which it operates, and its major customers. The standardis concerned only with disclosure and replaces IAS 14 "Segment reporting". IAS 1 - Presentation of financial statements (revised 2007) This standard is applicable for accounting periods beginning on or after 1January 2009. The main changes triggered by this standard result in a separatepresentation of changes in equity that arise from transactions with owners intheir capacity as owners from other changes in equity. The amended version ofthis standard also changes the terminology and presentation of the primaryfinancial statements. Other standards which will become effective in future periods, but which are notexpected to impact on the Group are: • Revised IAS 23 - Borrowing Cost• IFRIC 11 - IFRS 2 - Group and Treasury Shares Transactions• IFRIC 12 - Service Concession Agreements• IFRIC 13 - Customer Loyalty Programmes• IFRIC 14 - IAS 19 - The Limit on a Defined Asset, Minimum funding Requirements and Other Interactions • IFRS 3 - Business Combinations (revised 2008)• IAS 27 Consolidated and Separate Financial Statements (revised 2008)• Amendment to IFRS 2 Share-Based Payment Vesting Conditions and Cancellations c) Basis of Consolidation The consolidated results incorporate the results of Livermore Investments GroupLimited and all of its subsidiaries undertakings as at 31 December 2007 usingthe acquisition method of accounting as required. Profits or losses on intragroup transactions are eliminated on consolidation. The results for thesubsidiary undertakings acquired during the year have been included from thedate of acquisition. On acquisition of a subsidiary all of the subsidiary'sassets and liabilities which exist at the date of acquisition are recorded atfair value. The excess of the fair value of the consideration given over thefair value of the identifiable net assets acquired, is capitalised net of anyprovision for any impairment. d) Investment in associates The Group's interest in associates, being those entities over which it holdssignificant influence and which are neither subsidiaries nor joint ventures, areaccounted for using the equity method. Under the equity method, the investment in an associate is carried in thebalance sheet at cost plus post acquisition changes in the Group's share of thenet assets of the associate and less any impairment in the value of individualinvestments. The Group income statement reflects the share of the associate'sresults after tax. The Group statement of recognized income and expensesreflects the Group's share of any income and expenses recognized by theassociate outside profit or loss. Any goodwill arising on the acquisition of an associate, representing the excessof the cost of investment compared to the Group's share of the net fair value ofthe associate's identifiable assets, liabilities and contingent liabilities, isincluded in the carrying amount of the associate and is not amortized. To theextent that the net fair value of the associate's identifiable assets,liabilities and contingent liabilities is greater then the cost of theinvestment, a gain is recognized and added to the Group's share of the associateprofit and loss in the period in which the investment is acquired. Financial statements of associates are prepared for the same period as theGroup's. Adjustments are made to bring the associate's accounting policies intoline with those of the Group. e) Revenue recognition Revenue from discontinued operations is recognised in the accounting period inwhich the transaction occurs. Revenue from discontinued operations comprises commissions earned from clients,net of rebates and chargebacks deducted at source. Commissions are calculatedbased on a percentage of the net amount earned by the Group's clients on theirinternet websites from players introduced to the websites by the Group. Wherethe Company acted as operator, casino net revenue represented commission chargedor tournament entry fees where the player had concluded their participation inthe tournament. f) Investment Income Investment income comprises interest income on funds invested, dividend income,and investment property income. Interest and investment property income isrecognised as it accrues. Dividend income is recognised on the date that theGroup's right to receive payment is established, which in the case of quotedsecurities is the ex-dividend date. g) Foreign currency Monetary assets and liabilities denominated in non-US dollar currencies aretranslated into US dollar equivalents using year-end spot foreign exchangerates. Non-monetary assets and liabilities are translated using exchange ratesprevailing at the dates of the transactions. Exchange rate differences onforeign currency transactions are included in net finance income.The results and financial position of all Group entities that have a functionalcurrency different from US dollars are translated into the presentation currencyas follows: (i) assets and liabilities for each balance sheet itempresented are translated at the closing rate at the date of that balance sheet; and (ii) income and expenses for each income statement item aretranslated at an average exchange rate (unless this average is not a reasonableapproximation of the cumulative effect of the rates prevailing on thetransaction dates, in which case income and expenses are translated at the datesof the transactions). Exchange differences arising are recognised through theIncome Statement; and (iii) exchange differences on the net investment in subsidiaryentities with a different functional currency to the group are recognisedthrough equity. h) TaxationProvision is made for corporation tax on the taxable profits for the year at theappropriate rate in force. Deferred tax is accounted for using the balance sheet liability method inrespect of temporary differences arising from differences between the carryingamount of assets and liabilities in the financial statements and thecorresponding tax bases used in the computation of taxable profit. In principle,deferred tax liabilities are recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Deferred tax liabilities are provided in full with nodiscounting. i) Goodwill Goodwill, being the excess of the fair value of cost of an acquisition over thefair value attributed to the net assets at acquisition, is capitalised. Goodwill is not being amortised through the income statement; however, it issubject to annual impairment reviews. Impairment of the goodwill is evaluated bycomparing the present value of the future expected cash flows, (the"value-in-use") to the carrying value of the underlying net assets and goodwill.If the net assets and goodwill were to exceed the value-in-use, an impairmentwould be deemed to have occurred and the resulting write down in the goodwillwould be charged to the income statement immediately. j) Property, plant and equipment Property, plant and equipment is stated at historical cost less accumulateddepreciation. Carrying amounts are reviewed at each balance sheet date forimpairment. Depreciation is calculated using the straight-line method, at annual ratesestimated to write off the cost of the assets less their estimated residualvalues over their expected useful lives. The annual depreciation rates used areas follows: Computer hardware - 33.3%Fixtures and Fittings - 10%Office renovation - 2.5% k) Intangible assets Intangible assets comprise website design costs and computer software and arestated at historic cost less accumulated amortisation. Carrying amounts arereviewed at each balance sheet date for indications of impairment. Amortisation is calculated using the straight-line method, at annual ratesestimated to write off the cost of the assets over their expected useful lives.The annual amortisation rates are as follows: Computer software - 33.3% l) Investment property Certain of the Group's properties are classified as investment property, beingheld for long term investment and to earn rental income. Investment properties are measured initially at cost, and thereafter are statedat fair value, which reflects market conditions at the balance sheet date. Gainsor losses arising from changes in the fair values of investment properties areincluded in the income statement in the year in which they arise. m) Development property Investment property under development is stated at cost incurred to date, and isnot depreciated. On completion of development, this asset is transferred toinvestment property. n) Equity Equity issued by the Company is recorded as the proceeds are received, net ofdirect issue costs. Equity purchased by the Company is recorded as the consideration paid, includingdirectly associated assets and is deducted from total equity as treasury sharesuntil they are sold or cancelled. Where such shares are subsequently sold orreissued, any consideration received is included in total equity. The share premium account includes any premiums received on the initial issuingof the share capital. Any transaction costs associated with the issuing ofshares are deducted from the premium paid. Equity-settled share-based employee remuneration is credited to the share optionreserve until related stock options are exercised. On exercise or lapse amountsrecognised in the share option reserve are taken to retained earnings. Unrealised gains and losses on available for sale financial assets are taken tothe investment revaluation reserve. When these gains/losses are realised, theyare taken to the income statement. o) Leases All leases are classified as operating leases and rentals are charged to incomeon a straight-line basis over the term of the lease. p) Financial instruments The carrying amounts of cash and cash equivalents, related party creditors,trade receivables, other accounts receivable, trade payables, customer depositsand other accounts payable approximate to their fair value. The Group does not issue derivative financial instruments for trading purposes. The Group holds derivative financial instruments for trading purposes. Trade and other receivables Trade and other receivables are recognised and carried at the originaltransaction value. An estimate for doubtful debts is made when collection of thefull amount is no longer probable. Bad debts are written off when identified.Where the time value of money is significant receivables are carried atamortized cost. Cash and cash equivalents Cash comprises cash in hand and balances with banks. Cash equivalents are shortterm, highly liquid investments that are readily convertible to known amounts ofcash. They include unrestricted short-term bank deposits originally purchasedwith maturities of twelve months or less. Trade and other payables Trade and other payables are recognised and carried at the original transactionvalue. Financial assets at fair value through profit or loss From 1 January 2008 all new financial assets acquired will be designated at fairvalue through profit or loss upon initial recognition, because managementconsider this to more fairly reflect the way these assets are managed by theGroup. The Group's business is investing in financial assets with a view toprofiting from their total return in the form of income and capital growth. Thisportfolio of financial assets is managed and its performance evaluated on a fairvalue basis, in accordance with a documented investment strategy, andinformation about the portfolio is provided internally on that basis to theGroup's Board of directors and other key management personnel. Financial Assets at fair value through profit and loss include financial assetsthat are either classified as held for trading or are designated by the Group tobe carried at fair value through profit and loss upon initial recognition. Bydefinition, all derivative financial instruments that do not qualify for hedgeaccounting fall into this category. All assets within this category are measuredat their fair value, with changes in value recognised in the income statementwhen incurred. Upon initial recognition attributable transactions costs arerecognised in profit or loss when incurred. Available-for-sale assets During the year ended 31 December 2007, all financial assets (other thanderivatives) were classified as available for sale on initial recognition.Available for sale financial assets are recognised when the Company becomes aparty to the contractual provisions of the instrument. Available for salefinancial assets are recognised at fair value plus transaction costs. Available-for-sale financial assets include non-derivative financial assets thatare either designated as such or do not qualify for inclusion in any of theother categories of financial assets. All financial assets within this categoryare measured, with changes in value recognised in equity, through the statementof changes in equity. Gains and losses arising from investments classified asavailable-for-sale are recognised in the income statement when they are sold orwhen the investment is impaired. In the case of impairment of available-for-sale assets, any loss previouslyrecognised in equity is transferred to the income statement. Impairment lossesrecognised in the income statement on equity instruments are not reversedthrough the income statement. Impairment losses recognised previously on debtsecurities are reversed through the income statement when the increase can berelated objectively to an event occurring after the impairment loss wasrecognised in the income statement. An assessment for impairment is undertaken at least at each balance sheet date. A financial asset is derecognised only where the contractual rights to the cashflows from the asset expire or the financial asset is transferred and thattransfer qualifies for derecognition. A financial asset is transferred if thecontractual rights to receive the cash flows of the asset have been transferredor the Group retains the contractual rights to receive the cash flows of theasset but assumes a contractual obligation to pay the cash flows to one or morerecipients. A financial asset that is transferred qualifies for derecognition ifthe Group transfers substantially all the risks and rewards of ownership of theasset, or if the Group neither retains nor transfers substantially all the risksand rewards of ownership but does transfer control of that asset. Valuation of financial assets • Cash and deposits are evaluated per holdings in banks. • Public equities, Credit Notes and Bonds are valued per their bid market prices on quoted exchanges, or as quoted by market maker. • Hedge Funds and Private Equity funds are valued per reports provided by the funds on a periodic basis. • Private Equities and Unlisted Investments are valued using market valuation techniques as determined by the directors. • Investment property is valued at fair value based on valuations provided by a certified external appraiser. Development projects are valued at cost until completion. • Derivative instruments are valued at close-out cost as provided by counter parties of the derivative agreement. q) Share Options IFRS 2 "Share-based Payment" requires the recognition of equity settled sharebased payments at fair value at the date of grant. The Group issues equity-settled share based payments to certain employees andother advisors. The fair value of share-based payments to employees at grantdate is measured using the Binomial pricing model. The fair value of share-basedpayments to other advisors, are measured directly at the fair value of theservices provided. The fair value determined at the grant date is expensed on a straight-line basisover the vesting period, based on the Group's estimate of the shares that willeventually vest and adjusted for the effect of non market-based vestingconditions. The corresponding credit is taken to the share option reserve. r) Legal and other disputes Provision is made where a reliable estimate can be made of the likely outcome oflegal and other disputes against the Group. In addition, provision is made forlegal and other expenses arising from claims received or other disputes. Noprovision is made for other possible claims or where an obligation exists but itis not possible to make a reliable estimate. Costs associated with claims madeby the Group are charged to the Income Statement as they are incurred. s) Critical accounting judgements and key sources of estimationuncertainty Impairment of financial assets The group assesses at each balance sheet date whether financial assets areimpaired. If an impairment has occurred, this loss is taken to the incomestatement. Assets carried at cost If there is objective evidence that an impairment loss on unquoted equityinstrument that is not carried at fair value because its fair value cannot bereliably measured, or on a derivative asset that is linked to and must besettled by delivery of such a unquoted equity instrument, has been incurred, theamount of the loss is measured as the differences between the asset's carryingamount and the present value of estimated future cash flows discounted at thecurrent market rate of return of similar financial assets. Provision for legal and other disputes Determining whether provisions for legal and other disputes is required requiresthe Group to assess the likelihood of an economic outflow occurring as a resultof past events. Where an economic outflow is considered probable, a provisionhas been made for the estimated outflow. Where an outflow is consideredpossible, but not probable it has only been disclosed. Where the information required by IAS 37 "Provisions, Contingent Liabilities andContingent Assets" is expected to prejudice the outcome of legal and otherdisputes, it has not been disclosed on these grounds.Further details of contingent liabilities and provisions are provided in notes31 and 33. t) Discontinued operations A discontinued operation is a cash-generating unit, or group of cash-generatingunits, that either has been disposed of, or is classified as held for sale, and: • Represents a separate major line of business or geographical area of operations • Is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or • Is a subsidiary exclusively with the view to resale The disclosures for discontinued operations in the prior year relate to alloperations that have been discontinued by the balance sheet date for the latestperiod presented. 3. Segment Information Management consider investment activity to be a single class of business. Business segments The Groups' performance as it is analysed by its business segments is givenbelow: Revenue by segments 2007 2006 $000 $000Discontinued operations - 59,850Investments 25,789 12,193 ------ ------ 25,789 72,043 ------ ------Cost of sales - (30,256)Amortization and non recurring items (134) (11,054)Administration expenses (3,172) (4,478)Finance expenditure (1,398) (170) ------ ------Profit before taxation 21,085 26,085 ====== ======4. Interest / dividend income 2007 2006 $000 $000Interest from available for sale investments 9,187 2,193Interest on Bank deposits and current accounts 4,332 9,660Exchange income 2,498 232Dividend income 556 - ------ ------ 16,573 12,085 ====== ======5. Investment property revenue 2007 2006 $000 $000 Rental income 1,822 - ------ ------ 1,822 - ====== ======6. Gain / losses on investments 2007 2006 $000 $000Gain on sale of available for sale investments 3,331 108Property revaluation 1,244 -Loss on derivative instruments (414) -Loss on impairment (5,594) - ------ ------ (1,433) 108 ====== ======7. Gains on acquisition of associate 2007 2006 $000 $000 Atlas Estates Ltd. 8,827 - ------ ------ 8,827 - ====== ====== The investment in associate forms part of the Group's investment portfolio andtherefore has been included within investment income. 8. Amortisation and non recurring items Amortisation and non-recurring items refer to: 2007 2006 $000 $000Amortisation of intangible assets 63 2,315Amortisation of share options 2,657 3,150Non recurring expenses 32 1,144Compensation to third parties - 4,445Income related to discontinued operations (2,618) - ------ ------ 134 11,054 ====== ====== 9. Administrative expenses 2007 2006 $000 $000 Operational expenses 316 357Directors fees and expenses 985 1,737Consultants fees and expenses 503 357Other salaries and expenses 258 299Office cost 407 532Plc costs 425 396Custody fees 143 -Administration services 135 800 ------ ------ 3,172 4,478 ====== ====== At 31 December 2007 the Group employed 8 staff (31 December 2006: 28). 10. Finance expenditure 2007 2006 $000 $000 Bank interest and fees 550 170Financing investment property 848 - ------ ------ 1,398 170 ====== ====== 11. Taxation 2007 2006 $000 $000 Tax charge 368 7 ------ ------ 368 7 ====== ======The tax charge for the year can be reconciled to the accountingprofit as follows:Profit before tax 21,085 62,727 ------ ------Tax effect of domestic corporation tax - -Tax effect of share of subsidiaries 110 7Deferred tax 258 - ------ ------Tax for the year 368 7 ====== ====== The Company is an international business company based in the British VirginIslands (BVI) and, under its laws is not subject to corporation tax. Corporationtax is calculated with reference to the profit of the Company's subsidiaries. Since the Group trades in a number of jurisdictions, there is a risk thatcertain tax authorities consider that it should be subject to tax in thosecountries. The directors have considered these risks and concluded that nofurther tax provision is required. 12. Discontinued operations On 14 February 2006 certain trade assets were disposed of for $250m. The assetsincluded in the disposal were certain domain names and the brand names "EmpirePoker" and "Ace Club". These brands and domain names were used by the Group todirect online poker and casino players to PartyGaming's websites, creating netgaming revenue for the Group. On 29 December 2006, the Company agreed to dispose of its remaining operationsto PartyGaming Plc. This agreement was validated by the EGM held on 19 January 2007. 2007 2006 $000 $000Cash flows from discontinued operationsNet cash from operating activities - (2,010)Net cash from investing activities - 234,849Net cash from financing activities - (24,887) ------ ------Net cash from discontinued operations - 207,952 ====== ======= 13. Disposal of business assets Total Total Empire Poker Disposal of business 2007 2006 2006 2006 $000 $000 $000 $000Disposal proceeds received - 287,972 250,000 37,972Legal and professional - (944) - (944)expensesCompensations to third - (26,827) (14,122) (12,705)partiesWarranties provision - (2,000) (2,000)Assets written off - (221,559) (221,559) ------ ------ ------ ------Profit from disposal to - 36,642 235,878 (199,236)PartyGaming Plc ====== ====== ======= ====== On 14 February 2006 the Group sold certain business assets to PartyGaming Plcpursuant to a settlement agreement for a total consideration of $250m. Businessassets included in the disposal were certain domain names and brand names. Theconsideration represented $250m, which was all in the form of cash. On 19 January 2007, the Group completed the sale to PartyGaming plc of itsremaining operating business. This agreement was signed on 28 December 2006 andwas subject to certain conditions including approval of the Company'sshareholders at an EGM on 17 January 2007. Between signing and completion theCompany continued to operate the business, however during this periodrestrictions were placed on the operation of the business by PartyGaming plc.Business assets included in the disposal were certain domain names, players'data and brand names. Assets written off, principally, comprises of acquiredintangible goodwill relating to the acquisition of business of Tradal Limited inMay 2005 and the acquisition of Club Dice casinos in September 2005. The Group received a consideration for the disposal of the business of83,325,934 PartyGaming shares representing a gross value of $47.9m. As part ofthe agreement 17,374,637 PartyGaming shares were transferred to agents ascompensation resulting in net disposal proceeds to the Group of $37.9m. Thetransaction was conditional on a further payment to a marketing service providerof $10m. 14. Earnings per share Basic earnings per share has been calculated by dividing the net profitattributable to ordinary shareholders (profit for the year) by the weightedaverage number of shares in issue during the relevant financial periods. Diluted earnings per share is calculated after taking into consideration thepotentially dilutive shares in existence as at the year ended 31 December 2007and the year ended 31 December 2006. Discontinued Operations 2007 2006 2006Net profit attributable to ordinary 20,717 51,692 62,720shareholders ($000) ============= =========== ===========Weighted average number of ordinary 286,944,439 292,777,772 292,777,772shares in issue ============= =========== ===========Basic earnings per share ($) 0.07 0.18 0.21 ============= =========== ===========Weighted average number of ordinary 286,944,439 299,723,327 299,723,327shares including the effect ofpotentially diluted shares ============= =========== ===========Diluted earnings per share ($) 0.07 0.17 0.21 ============= =========== ===========Number of SharesWeighted average number of ordinary 286,944,439 292,777,772 292,777,772shares in issueEffect of dilutive potential ordinaryshares:Share options - 6,945,555 6,945,555 ------------- ------------- -------------Weighted average number of ordinary 286,944,439 299,723,327 299,723,327shares including the effect ofpotentially dilutive shares ============= =========== =========== 15. Net asset value per share Net asset value per share has been calculated by dividing the net assetsattributable to ordinary shareholders by the weighted average number of sharesin issue during the relevant financial periods. Diluted net asset value per share is calculated after taking into considerationthe potentially dilutive shares in existence as at the year ended 31 December2007 and the year ended 31 December 2006. 2007 2006 Net assets attributable to ordinary shareholders 276,643 274,246($000) ============= ============= Weighted average number of ordinary shares in issue 284,027,772 292,777,772 ============= ============= Basic net asset value per share ($) 0.97 0.94 ============= ============= Weighted average number of ordinary shares including 284,027,772 292,777,772the effect of potentially diluted shares ============= ============= Diluted NAV per share ($) 0.97 0.94 ============= ============= Number of Shares Weighted average number of ordinary shares in issue 284,027,772 292,777,772Effect of dilutive potential ordinary shares: Share options - - ------------- ------------- Weighted average number of ordinary shares including 284,027,772 299,777,772the effect of potentially dilutive shares ============= ============= 16. Dividends 2007 2006 $000 $000 Dividends paid 9,657 24,887 ====== ====== The final dividend for 2006 was paid on 8 June 2007. Dividends for 2007 will bepaid on 31.7.2008. 17. Property, plant and equipment Office Computer Hardware Fixtures and Fittings Total Renovation $000 $000 $000CostAs at 1 January 2006 - 131 - 131Additions - 104 9 113Disposal - (156) - (156) ------ ------ ------ ------As at 1 January 2007 - 79 9 88Additions 281 66 71 418Disposal - (20) - (20) ------ ------ ------ ------As at 31 December 281 125 80 4862007 ------ ------ ------ ------AccumulateddepreciationAs at 1 January 2006 - (12) - (12)Charge for the year - (78) (1) (79)Disposal - 52 - 52 ------ ------ ------ ------As at 1 January 2007 - (38) (1) (39)Charge for the year (7) (34) (8) (49)Disposal - 7 - 7 ------ ------ ------ ------As at 31 December (7) (65) (9) (81)2007 ------ ------ ------ ------Net book valueAs at 31 December 274 60 71 4052007 ====== ====== ====== ======As at 31 December - 41 8 492006 ====== ====== ====== ====== 18. Intangible assets Goodwill Website Design Costs Domains Player data Computer Software Total $000 $000 $000 $000 $000 $000CostAs at 1 221,192 1,371 575 4,486 63 227,687January 2006Additions - 848 - - 68 916Adjustment (797) - - - - (797)in fairvalueDisposal (220,395) (2,219) (575) (4,486) - (227,675) ------ ------ ------ ------ ------ --------As at 1 - - - - 131 131January 2007Additions - - - - 16 16 ------ ------ ------ ------ ------ --------As at 31 - - - - 147 147December2007 ------ ------ ------ ------ ------ --------AccumulatedamortisationAs at 1 - (744) (130) (2,171) (14) (3,059)January 2006Charge for - (860) - (2,315) (44) (3,219)the yearDisposal - 1,604 130 4,486 - 6,220 ------ ------ ------ ------ ------ --------As at 1 - - - - (58) (58)January 2007Charge for - - - - (44) (44)the year ------ ------ ------ ------ ------ --------As at 31 - - - - (102) (102)December2007 ------ ------ ------ ------ ------ --------Net bookvalueAs at 31 - - - - 45 45December2007 ====== ====== ====== ====== ====== =========As at 31 - - - - 73 73December2006 ====== ====== ====== ====== ====== ========= 19. Available-for-sale financial assets 2007 2006 $000 $000Fixed income investments 96,000 100,975Public Equities investments 40,940 23,516Private equities 25,246 -Hedge funds 25,120 -Financial and minority holdings 24,628 -Other investments 5,829 - ------ ------ 217,763 124,491 ====== ======= Financial assets relate to investments in bonds and equity classified asavailable for sale. Financial assets are held in the balance sheet at the yearend at fair value. Fair value is measured by reference to the market value ofthe assets at the balance sheet date as they are openly traded on a publicmarket. 20. Financial assets designated at fair value through profit or loss 2007 2006 $000 $000 Derivatives 729 - ------ ------ 729 - ====== ====== 21. Investment and development property Investment Development 2007 2006 property Property $000 $000 Valuation as at 1 January 2007 - - - -Additions 85,040 11,348 96,388 -Change in fair value 1,244 - 1,244 - ------ ------ ------ ------Valuation as at 31 December 2007 86,284 11,348 97,632 - ====== ====== ====== ====== An investment property, Wylerpark, in Switzerland was purchased on 1 July 2007. The investment property was valued by Wuest & Partners as at 31 December 2007 onthe basis of open market value in accordance with the appraisal and valuationguidelines of the Royal Institute of Certified Surveyors, and the European Groupof Valuers' Associations. 22. Investments 2007 2006 $000 $000 Investment in associates 69,639 - ------ ------Investments accounted for using the equity method 69,639 - ====== ====== (a) Investment in associates - The group has 21.28% interest in Atlas EstatesLimited, an AIM - quoted real estate investment and Development Company.The following table illustrates summarised financial information of the group'sinvestment in Atlas Estates Ltd: 2007 2006 $000 $000Share of the associates Balance SheetNon-current assets 112,606 -Current assets 52,546 - ------ ------Share of gross assets 165,152 - ------ ------Current liabilities (25,274) -Non-current liabilities (70,239) - ------ ------Share of gross liabilities (95,513) - ------ ------Share of net assets 69,639 - ====== ====== Atlas Estates Limited became an associate investment on 31 December 2007,following the Group's acquisition of 9.1% of Atlas's issued share capital.Therefore the Group has not recognised any share of Atlas's results in itsincome statement for the year ended 31 December 2007. The excess of net fair value of the associate's identifiable assets andliabilities over the cost of investment of $8,827,000 has been recognised in theincome statement. (b) Details of group undertakings Details of the investments in which the group holds 20% or more of the nominalvalue of any class of share capital are as follows: Name of Subsidiary Place Holding Proportion of Principal of incorporation voting rights and activity shares heldLivermore Capital British Virgin Ordinary 100% FundLimited Islands shares management DormantLivermore Fund I British Virgin Ordinary 100%* Hedge Fund,Limited Islands shares DormantLivermore Capital AG Switzerland Ordinary 100% Administration shares servicesLivermore Switzerland Ordinary 100%* Real EstateInvestments AG shares managementLivermore Real Switzerland Ordinary 100% Real EstateEstate I AG shares management, DormantLivermore Enaxor Luxemburg Ordinary 100% Real EstateS.a.r.l shares OwnerLivermoreInvestments Cyprus Ordinary 100% AdministrationCyprus Limited shares servicesLivermore United Kingdom Ordinary 100% DormantInvestments Limited shares companyEmpire Payments Ltd St. Kitts Ordinary 100% Dormant shares companySandhirst Ltd Cyprus Ordinary 100% Dormant shares company AssociatesAtlas Estates Ltd Guernsey Ordinary 21.28% Real Estates shares Investments* Held by a Subsidiary undertaking. All cash transactions between the 100% subsidiaries and the Group during theyear were eliminated on consolidation. 23. Trade and other receivables 2007 2006 $000 $000 Trade receivables 286 1,548Other debtors and prepayments 1,564 49,247 ------ ------ 1,850 50,795 ===== ====== The carrying value of trade and other receivables approximates to their fairvalue. Included in other debtors and prepayments at 31 December 2006 is $47,967,000 duefrom PartyGaming Plc on sale of the business as described in note 13. 24. Cash and cash equivalents Cash and cash equivalents included in the cash flow statement comprise thefollowing at the balance sheet date: 2007 2006 $000 $000 Short term deposits 500 136,522Cash at bank 9,417 1,193 ------ ------ 9,917 137,715Bank overdrafts used for cash management purposes (15,825) (4,960) ------ ------Cash and cash equivalents in the statement of cash flows (5,908) 132,755 ====== ====== 25. Shareholders equity Share capital comprises the following: $0 shares Share premium arising Number $000 As at 1 January 2006 and 31 December 2006 292,777,772 209,807Re-purchased and held in treasury (8,750,000) (7,172) ---------- ---------As at 31 December 2007 284,027,772 202,635 8,750,000 shares (2006: Nil) were held in treasury at the year end. The Company has authorised share capital of 1,000,000,000 ordinary shares withno par value, and no restrictions. The Company has a share option scheme. The outstanding share options to acquireordinary shares as at 31 December 2007 were as follows: Outstanding Date Exercise Exercise Earliest Expiry of exercise Share options Granted price price exercise date £ $ dateAs at 1 12,989,840January2006Issued on 5 1,500,000 05/04/06 1.50 2.62 05/04/07 5/04/16April 2006Issued on 10,950,000 19/07/06 0.78 1.42 19/07/07 5/04/1619 July2006Share (12,494,285)optionsforfeitedonterminationofemployment ----------As at 1 12,945,555January2007Share (1,400,000)optionsforfeitedonterminationofemployment ----------As at 31 11,545,555December2007 ========== The fair value of options granted to employees were determined using theBinomial valuation model. The model takes into account a volatility rate ofbetween 41-45% calculated using the historical volatility of a peer group ofsimilar gaming companies and a risk free interest rate of 4.0-4.4% and it hasbeen assumed the options have a expected life of two years post date of vesting. The expense for the period has been included in amortisation and non-recurringexpenses (see note 8). 26. Bank Loans 2007 2006 $000 $000 Long term bank loan 69,411 - ------ ------ 69,411 - ====== ====== The long term bank loan is related to Wyler park property investment purchaseand is secured on this property. Interest is payable at 4.15% and the loanbalance is repayable on 12 July 2014. 27. Bank Overdrafts 2007 2006 $000 $000 Short term bank overdrafts 15,825 4,960 ------ ------ 15.825 4,960 ====== ====== 28. Trade and other payablesAmounts falling due within one year 2007 2006 $000 $000 Trade payables 1,607 3,405Other payables and accrued expenses 34,327 30,505 ------ ------ 35,934 33,910 ====== ====== The Directors consider that the carrying value of trade and other payablesapproximates to their fair value. Included in other payables and accrued expenses is $28,794,000 relating toamounts due on the purchase of associate. Included in other payables and accruedexpenses at 31 December 2006 is $10,004,000 relating to amounts due to agents aspart of the PartyGaming Plc transaction in December 2006. 29. Current tax payable 2007 2006 $000 $000 Corporation tax payable 109 7 ====== ======30. Related party transactions 2007 2006 $000 $000 Amounts owed by key management 5,500 - ====== ====== Interest receivable on key management balances 190 - ====== ====== Amounts owed to Directors 94 391 ====== ====== Administration services provided by Tradal Limited 193 660 ====== ====== Paid in respect of services * 688 1,562 ====== ====== * These payments were made in respect of members of key management eitherdirectly to them or to companies to which they are related. Tradal Ltd is a related party by virtue of common ownership with LivermoreInvestments Group Limited. Loans of $5,500,000 were made to key management during the period for theacquisition of shares in the Company. Interest is payable on these loans at USLIBOR plus 0.25% and the loans are secured on the shares acquired. The loans arerepayable on the earlier of the employee leaving the Company or November 2010. 31. Contingent liabilities The agreement with PartyGaming Plc relating to the disposal of the remainingonline gaming operations which was completed in January 2007, could potentiallygive rise to a liability arising from warranties and indemnities included withinthe sale and purchase agreement. No further information is provided as the directors consider it could prejudicethe outcome of any claim. 32. Other commitments and contingencies 2007 2006 $000 $000Future minimum lease commitments under property operating leases:Less than one year - 27Committed real estate development expenditure 6,266 - ------ ------Total commitments falling due within one year 6,266 27 ====== ======33. Litigation A trademark dispute with La Societe des Bains de Mer et du Circle des Etrangersa Monaco was settled in January 2007 when the Group agreed to an out of courtsettlement of USD 3.4m. During the year the Group was made aware of a possible litigation in relation toa former employee relating to the termination of his contract following the saleof the operating business to PartyGaming in December 2006. This litigationprocedure is taking place and the Group has made a provision of USD 750k for theDirectors' best estimate of the potential liability and expenses arising. Other than the above no member of the Group is or has been involved in any legalor arbitration proceedings which may have, or have had during the 12 monthspreceding the date of this document, a significant effect on the Group'sfinancial position nor are the Directors aware of such proceedings pending orthreatened against any member of the Group. The Group has provided for litigation claims in line with its accounting policyas set out in note 1. 34. Financial risk management objectives and policies Background The Group's financial instruments comprise available for sale investments,derivatives, cash balances and receivables and payables that arise directly fromits operations. Risk Objectives and Policies The objective of the Group is to achieve growth of shareholder value, yet inline with reasonable risk, taking into consideration that the protection oflong-term shareholder value is paramount. The policy of the Board is to providea framework within which the Investment Manager can operate and deliver theobjectives of the Group. Risks Associated with Financial Instruments Foreign currency risk Foreign currency risks arise in two distinct areas which affect the valuation ofthe investment portfolio, 1) where an investment is denominated and paid for ina currency other than US Dollars; and 2) where an investment has substantialexposure to non US Dollars underlying assets or cash flows. Although the Companyreports in USD, most of the Company's assets are in non USD currencies and theCompany in general does not hedge its currency exposure. The investment managerdiscretionally partially hedges against foreign currency movements affecting thevalue of the investment portfolio based on his view on the relative strength ofcertain currencies. The Investment Managers monitor the effect of foreigncurrency fluctuations through the pricing of the investments by the variousmarkets. The level of investments denominated in foreign currencies held by theGroup at 31 December 2007 is the following: 2007 2007 2007 2006 2006 2006 $m $m $m $m $m $m Financial assets Liabilities Net value Financial assets Liabilities Net valueUS 156.8 23.3 133.5 306.3 38.9 267.4DollarBritish 45.3 - 45.3 0.2 - 0.2PoundsEuro 66.3 28.9 37.4 2.5 - 2.5Swiss 105.5 69.4 36.1 4.1 - 4.1FrancsIndian 16.8 - 16.8 - - -RupeeOthers 7.3 - 7.3 - - - Some of the USD denominated investments are backed by underlying assets whichare invested in non USD assets. Interest rate risk The Group is exposed to market price risk on its interest-bearing instrumentswhich are affected by changes in market interest rates and expectations. TheGroup has borrowings of USD 69.4m (2006: 0) which have been fixed through theuse of an interest rate swap. The Group has banking credit lines which are available on short notice for theInvestment Managers to use in their investment activities, the costs of whichare based on variable rates plus a margin. When an investment is made utilisingthe facility, consideration is given to the financing costs which would impactthe returns. The level of banking facilities used is monitored by both the Boardand the Investment Manager on a regular basis. If fully drawn, the credit linescould form up to 40% of the current value of the investment portfolio. The levelof banking facilities utilised at 31 December 2007 was USD 15.8m (2006: USD5.0m). Interest rate changes will also impact equity prices. The level and direction ofchange in equity prices is subject to prevailing local and world economics aswell as market sentiment all of which are very difficult to predict with anycertainty. At 31 December 2007 and 2006 the Group had no financial liabilitiesthat bore an interest rate risk, other than the previously disclosed bankfacilities. The Group has floating rate financial assets consisting of bank balances thatbear interest at rates based on the banks floating interest rate. During theperiod the average rate of interest earned on cash balances was 5.39%. TheGroup's interest bearing assets and liabilities are as follows: 2007 2006 $m $mFinancial assetsSubject to Interest rate changes 29.1 10.9Not Subject to interest rate changes 29.2 54.0Total 58.3 64.9Financial liabilities subject to interest rate changes 15.8 5.0Financial liabilities not subject to interest rate changes 69.4 -Total 85.2 5.0 Changes in market interest rates will affect the valuation of fixed rateinterest bearing instruments. A 1% change in market interest rates would resultin an estimated $1.5m change in the value of fixed rate financial assets. Market price risk By the nature of its activities, most of the Group's investments are exposed tomarket price fluctuations. The Board monitors the portfolio valuation on aregular basis and consideration is given to hedging or adjusting the portfolioagainst large market movements. Other than Atlas Estates, which represents some 20% of its portfolio, the Grouphad no single major investments that in absolute terms and as a proportion ofthe portfolio that could result in a significant reduction in the NAV and shareprice. The portfolio as a whole does not correlate exactly to any Stock ExchangeIndex. As the Group is now an investment company, many of the market risks are new.Management of risks is primarily achieved by having a diversified portfolio tospread the market risk. A 10% change in the value of the Group's portfolio offinancial instruments would result in a 12% change in equity. Derivatives The Investment Manager may use derivative instruments in order to mitigatemarket risk or to take a directional investment. At the year end there were someUSD 0.7m of interest rate derivatives. These provide a limited degree ofprotection against a rise in interest rates and would not materially impact theportfolio returns if a large market movement did occur. Credit Risk The group invests in a wide range of securities with various credit riskprofiles including investment grade securities, sub investment grade and equitypositions. The investment in debt instruments is usually in investment gradesecurities, however, the Group may invest also in sub investment grade orunrated debt instruments. The investment manager mitigates the credit risk viadiversification across issuers. However, the Group is exposed to a migration ofcredit rating, widening of credit spreads and default of any specific issuer. The Group has a relatively high exposure to the Global and US credit market inits portfolio of CDOs/CLOs which totals some USD 29.1m. The Group only transacts with regulated institutions on normal market termswhich are trade date plus one to three days. The levels of amounts outstandingfrom brokers are regularly reviewed by the Investment Manager. The duration ofcredit risk associated with the investment transactions is the period betweenthe date the transaction took place, the trade date and the date the stock andcash are transferred, the settlement date. The level of risk during the periodis the difference between the value of the original transaction and itsreplacement with a new transaction. The amounts due to brokers at 31 December2007 are USD 50k. The Group is exposed to credit risk in respect of its interestbearing investments of $58.3m. At 31.12.2007, the credit rating distribution of the Group's bond portfolio wasas follows: Rating Amount, $000 PercentageAAA 8,021 13.8%AA 13,779 23.6%A 2,087 3.6%A- 6,451 11.0%BBB+ 13,126 22.5%Bbe 2,022 3.5%Not Rated 12,796 22.0%Total 58,282 100.0% In the prior year the portfolio of interest bearing financial assets wasprimarily short term and held with highly rated institutions. Liquidity Risk The only significant financial liability of the Group is the bank loan of $69million used for purchase of a real estate property, which has a maturity of 7years and is fully financed by the rental income from that same property. A large proportion of the Group's portfolio is invested in mid term privateequity investments with low or no liquidity. The investments of the Company inpublicly traded securities are subject to availability of buyers at any giventime and may be very low or non existent subject to market conditions. The Investment Managers take into consideration the liquidity of each investmentwhen purchasing and selling in order to maximise the returns to Shareholders byplacing suitable transaction levels into the market. Special consideration isgiven to investments that represent more than 5% of the investee. Capital Management The Group considers its capital to be its issued share capital and reserves. TheBoard regularly monitors its share discount policy and the level of discountsand whilst it has the option to re-purchase shares, it considers that the bestmeans of attaining a good rating for the shares is to concentrate on goodshareholder returns. However, the Board believes that the ability of the Company to re-purchase itsown Ordinary shares in the market may potentially enable it to benefit allequity shareholders of the Company. The re-purchase of Ordinary shares at adiscount to the underlying net asset value would enhance the net asset value pershare of the remaining equity shares. Under this policy, in 2007, the Company bought 8,750,000 of its Ordinary shares. Financial assets by category: 2007 2006 $000 $000Non current assetsAvailable-for-sale financial assets 217,763 124,491Financial assets designated at fair value through Profit and Loss 729 -Current assetsloans and other receivables:Trade and receivables 1,850 50,795Cash and cash equivalents 9,917 137,715 Financial liabilities by category: 2007 2006 $000 $000Current liabilitiesBorrowingsBank overdrafts 15,825 4,960Trade payablesTrade and other payables 35,394 33,910Current tax payable 109 7Non current liabilitiesBorrowingsBank loan 69,411 - --------------------------(1) *Source: World Economic Outlook 2007, IMF This information is provided by RNS The company news service from the London Stock Exchange
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Livermore Information
Share Price Information for Livermore (LIV)
Share Price is delayed by 15 minutes
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Share Price:
29.00
Bid:
28.00
Ask:
30.00
Change:
0.00 (0.00%)
Spread:
2.00 (7.143%)
Open:
0.00
High:
0.00
Low:
0.00
Prev. Close:
29.00
Last checked at -
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