Mobile Streams Regulatory News (MOS)

10 October 2014

Mobile Streams plc ("Mobile Streams", the "Group" or the "Company")

Audited Final Results

The Company today announces its audited final results for the year ended 30 June 2014

Financial and operational highlights:

· Revenues of £48.6m (2013: £53.9m)

· Revenues in Argentina (which represent 83% of Group revenues) increased 16% year-on-year in local currency.

· EBITDA of £0.7m (2013: £5.2m)

· Profit before tax £0.2m (2013: £4.8m)

· Basic earnings per share of (1.52)p per share (2013: 7.13p per share)

· Approximately £3.2m in cash on hand at the end of August 2014, of which 17% is held in Argentina, with no debt

· Stable local currency revenues in Latin America with live services in Argentina, Colombia, Mexico and Brazil and plans to expand into mobile markets in Africa

· Active presence in 6 countries with more than 50 employees around the world

Key Financials

The final audited numbers reflect approximately £1m of foreign exchange losses. Of this exchange loss, a portion of the adjustment equates to a £240k cash item incurred when moving money out of Argentina earlier in the year. The majority of approximately £750k is a non-cash item caused by the revaluation of Argentina-based assets and liabilities into GBP as a result of that country's currency devaluation during the period. The full report and accounts for the year ended 30 June 2014 will be sent to shareholders today.

Outlook

The Company continues with its strategy of diversifying its revenues into new markets beyond Argentina. Other Latin American markets in particular are expected to contribute to this diversification. Any further devaluation of the Argentinian peso would have a negative impact on the Company's future performance. Additionally, the Company continues to launch its mobile internet services into new emerging markets, such as Africa, Asia and India. The Company has to date executed five agreements covering various African markets. These diversification plans will require investment during the rest of the year which will be reflected in reduced short term profitability.

Simon Buckingham, founder and CEO, said:

"Mobile Streams had another solid year of revenues, most notably from Latin America. However, this progress was severely impacted by the devaluation of the Argentinian Peso, from where we derive the majority of our revenue. We continued to work to further scale our mobile internet services in new markets, in particular in Brazil and Mexico, to supplement our longer established operations in Argentina and Colombia. We are delivering mobile entertainment content across a wide range of devices to an expanding customer base. We are positive about the Company's future prospects as we are seeing opportunities for long-term growth particularly in emerging markets across Latin America and further afield in Africa, India and Asia."

Enquiries

About Mobile Streams

Mobile Streams licenses and distributes a wide range of mobile content including games, apps, ebooks, music, pictures and videos that are retailed around the world. The Company's main customer portal is its Appitalism site, which is the largest app store by number of apps available in the world and provides direct content for smartphones, tablets, pcs and ebook readers. The Company's main operations are in Latin America and in particular Argentina. Its shares are traded on the AIM market of the London Stock Exchange under the symbol MOS LN.

Chairman's Statement

The Board of Mobile Streams plc presents its audited accounts for the financial year ended 30 June 2014.

The past 12 months has seen Mobile Streams plc (the "Group" or the "Company") continue with its strategy to develop a content offering across a wide range of mobile devices in a number of markets direct to consumers. This is in addition to our original business of providing content to mobile network operators and other business partners. The operating performance of the business reflects our substantial positioning in Argentina and Latin America. It also reflects the cost of working with Argentinean exchange control rules and the sudden and significant devaluation of the Argentinean peso in January 2014.

Group revenue for the year ended 30 June 2014 was £48.6m (2013: £53.9m). Trading EBITDA* was £0.7m for year (2013: £5.2m). Profit before tax was £0.2m (2013 £4.8m). Much of the reduction in revenues and profits are attributable to the devaluation of the Argentinean peso. Revenue in Argentina (which equates to 83% of our revenue) on a constant currency basis increased by 16% from AR$380m to AR$440m.

Our operations outside Europe represent more than 99% of the overall revenues for the period. Latin America represents 98% (see note 22) of the total revenues for the year. Of this some 83% was in Argentina.

During 2012, Argentina modified its regulations regarding international transfer of funds which restricted the Group's ability to transfer cash out of the country. As of 30 June 2013, more than 73% of the Group's cash was in Argentina. Following a strategic decision to mitigate capital risk and diversify our sources of cash generation (principally to states with more appropriate capital controls such as Mexico and Colombia), Mobile Streams has reduced the proportion of its capital reserves within Argentina to 16% as of 30 June 2014. 

Mobile Streams enters the new financial year with a clear focus on continuing to expand its operating base in Latin America and in open mobile Internet services including Appitalism for apps and games in new developing markets including in Africa. The Directors do not propose a payment of a dividend (2013: £Nil). In the new financial year, revenue is once again expected to be largely generated in Latin America.

Despite the challenges in Argentina, the Board believes that the Company is well positioned to deliver growth in shareholder returns with established products and strong trading relationships, complemented by broader market growth in developing markets, which represent our key targets for future growth. We are long established experts in mobile content.

Roger ParryChairman

*Calculated as profit before tax, interest, amortisation, depreciation, share compensation expense and impairment of assets.

STRATEGIC REPORT

Mobile Streams PLC (AIM: MOS), the global mobile media company, is pleased to provide an update to its shareholders on its performance for the 12 months ended 30 June 2014.

BUSINESS REVIEW

Operating Review

Mobile Streams' performance during the financial year ended 30 June 2014 was driven primarily from Mobile Internet sales in Latin America.

Group revenue for the year ended 30 June 2014 was £48.6m. The gross profit was £14.2m and decreased by 19% during the year (year ended 30 June 2013: £17.6m). The gross profit margin decreased from 33% to 29% due to increased marketing (Direct to Consumer) costs related to Mobile Internet.

Selling, marketing and administrative expenses were £14.2m, an 11% increase on the year ended 30 June 2013. Revenues are generated from two principal business activities: the sale of mobile content through mobile operators (Mobile Operator Sales) and the sale of mobile content over the internet (Mobile Internet Sales). Additionally, the Group is engaged in the provision of consulting and technical services (Other Service Fees).

During the period, both the Group's Mobile Internet revenues and its Mobile Operator revenues decreased. As consumers steadily update their phones from legacy feature and flip phone models to smartphones, they have generally used the operator content portals less. Consumers generally use independent portals, as well as the open mobile internet, more actively.

The Argentine peso suffered a big devaluation against the British Pound during the year (23% during January 2014 and 67.6% for the 12 months ended on June 30 2014). The financial results and balances of all group entities that have a functional currency different from the presentation currency, are translated into the presentation currency, and these exchange differences are recognised in the income statement or as a separate component of equity (cumulative translation reserve), which will be converted to results in the future.

Mobile Internet Sales

The Group anticipated the shift to the open Mobile Internet business model several years ago and added new products at new price points in new markets.

As a result, the Group experienced rapid growth and a stabilisation in 2013-2014 in Mobile Internet sales as consumers used their mobile devices to purchase mobile content subscriptions. The decrease in revenue is due to the big devaluation effect of the Argentine peso compared to the British pound.

Latin America, primarily Argentina, accounted for the majority of revenues.

Mobile Streams continued to show solid revenues for the most recent financial year, driven primarily by Argentina, Mexico and Colombia. Whilst Latin America has remained stable, we are pleased that we have also successfully leveraged our Appitalism (http://www.appitalism.com) expertise and market positioning and won new apps business in Asia Pacific, with the announcement of Optus App Store deal.

Mobile Operator Sales

The Group has several contracts with mobile operators that allow the distribution of content through their mobile portals, although the revenue has been reduced by more than 50% year on year partially due to the devaluation of the Argentinian peso in January 2014.

There was a reduction in the number of consumer visitors to these portals, which has been a continuing trend for the past couple of years. Our teams share and implement the best retailing practices in order to increase the conversion of visitors into customers to mitigate the natural decline in this revenue stream as the market changes.

Mobile Streams maintains direct operator relationships in several markets around the world including Australia, Singapore, Argentina, Mexico and Colombia, as well as partnerships with well-known telecoms companies around the world.

Financial Review

Group revenue for the year ended 30 June 2014 was £48.6m, a 9.8% decrease on the previous year (2013: £53.9m).

Gross profit was £14.2m, a decrease of 19% during the year (2013: £17.6m). The gross profit margin decreased from 33% to 29% due to increased marketing (Direct to Consumer) costs related to Mobile Internet.

Selling, marketing and administrative expenses were £14.2m, an 11% increase on the year ended 30 June 2013 (2013: £12.8m).

The Group recorded a loss after tax of £0.6m for the year ended 30 June 2014 (2013: profit £2.6m). Basic earnings per share decreased to a loss of 1.52pence per share (2013: profit of 7.1 pence per share). Adjusted earnings per share (excluding interest, depreciation, amortisation, impairments and share compensation expense) decreased to 0.499 pence per share (2013: 8.2 pence per share).

The Group had cash of £3.0m at 30 June 2014, with no debt (£2.9m of cash with no debt as at 30 June 2013).

Going Concern

The Group had cash balances of £3.0m at the year end (2013:£2.9m) and no borrowings. Having reviewed cash flow forecasts and budgets for the year ahead the Directors have a reasonable expectation that the Group has sufficient resources to continue in operational existence for the foreseeable future. During the year ended 30 June 2012, Argentina modified its laws on the cross border intercompany transfer of funds. Management have made the proper changes to mitigate this risk and have moved the finance operations to Argentina to help ensure stability and continuity. The risk is also mitigated by the launch of similar businesses in markets such as Colombia and Mexico where the cross border transfer of funds is not restricted. For these reasons, the Board consider Mobile Streams to be a going concern. No material uncertainties or events that may cast significant doubt about the ability of the Group to continue as a going concern have been identified by the Directors.

Financial performance

* Calculated as profit before tax, interest, amortisation, depreciation, share compensation expense and impairment of assets.

Key performance indicators ("KPI's")

The KPIs used by the Group are trading EBITDA*, growth in revenue and gross profit. Management review these on a regular basis, largely by reference to budgets and reforecasts. Trading EBITDA was £0.7m for the year ended on June 2014, and it was £5.2m for the year ended in June 2013.

Earnings before tax, interest, amortisation, depreciation, share compensation expense and impairment of assets (Trading EBITDA*) is a non-GAAP metric that is measured exactly as stated. All tax, interest, amortisation, depreciation, share compensation expense and impairment of assets entries in the income statement are added back to profit after tax in calculating this measure.

Growth in revenue is a measure of how we are building our business. Our goal is to achieve year-on-year growth. Although revenue decreased 10% during the year, like for like revenue on a constant currency basis actually increased by 16%. Revenues measured in local currency terms have increased, while measured in British pounds have a decrease, due to the local currencies devaluation to the British pound.

Gross profit as a percentage of revenue is a measure of our profitability. Gross profit was £14.2m for the period ended in June 2014, a decrease from the £17.6m booked in 2013.

Strategy

Our business model is generating revenues though relationships with mobile operators and content aggregators and retailing directly to the consumer. Mobile Streams have developed expertise in selling content to consumers in developing markets. We enjoyed great success in gaining market share in Argentina but out results have suffered from the currency issues described. We now plan to seek new market opportunities in Latin America and in Africa which will enable us to use our existing content assets, or technical expertise and our relationships with mobile operators to develop new, profitable streams of revenues.

Argentina Division

The Argentina Division delivered a solid revenue performance in line with expectations. The division represented the 83% of the revenues of the Group.

Argentina revenue rose 16% in Argentine Pesos terms; from AR$379 Million to AR$440 M; but the reported British Pound figures show a 17% decrease in revenue; from £49M to £40.5M. The actual increase in underlying AR$ revenues reflects the revenue growth measured in local currency. The decrease in British pounds is due to the big devaluation of the argentine peso through the Sterling Pound (67% in a year).

Future Developments

The Company is continuing to further develop its mobile content and mobile Internet services in the markets that it has launched in such as Brazil and Mexico. The Company is also exploring the launch of its services in new emerging markets, focusing in particular on Asia, Africa and India.

The Strategic Reportwas approved by the Board and signed on its behalf by:

Enrique Benasso

Chief Financial Officer

8 October 2014

Principal risks and uncertainties

The nature of the Group's business and strategy makes it subject to a number of risks.

The Directors have set out below the principal risks facing the business.

Contracts with Mobile Network Operators (MNOs)

While Mobile Streams maintains relationships with numerous MNOs in the various territories, a small number of operators account for a high portion of the Group's business.

As the Group grows, management are using geographic and product diversity to counter this risk.

Contracts with rights holders

The majority of content provided by Mobile Streams is licensed from rights holders. While Mobile Streams is not dependent on any single rights holder for its entertainment content, termination, non-renewal or significant renegotiation of a contract could result in lower revenue.

The Group continues to enter into new content licensing arrangements to mitigate these risks.

Competition

Competition from alternative providers could adversely affect operating results through either price pressures, or lost custom. Products and pricing of competitors are continuously monitored to ensure the Group is able to react quickly to changes in the market.

* Calculated as profit before tax, interest, amortisation, depreciation, share compensation expense and impairment of assets.

Fluctuations in currency exchange rates

Approximately 99% of the Group's revenue relates to operations outside the UK. The Group is therefore exposed to foreign currency fluctuations and the financial condition of the Group may be adversely impacted by foreign currency fluctuations. See note on "Financial risk management objectives and policies".

The Group has operations in Europe, Asia Pacific, North America and Latin America. As a result, it faces both translation and transaction currency risks.

Currency exposure is not currently hedged, though the Board is taking steps to review its foreign currency risk exposure and potential means of combating this risk.

Dependencies on key executives and personnel

The success of the business is substantially dependent on the Executive Directors and senior management team.

The Group has incentivised all key and senior personnel with share options and has taken out a Key Man insurance policy on its Chief Executive Officer, Simon Buckingham.

Intellectual property rights

The protracted and costly nature of litigation, particularly in North America, may make it difficult to take a swift or decisive action to prevent infringement of the Group's intellectual property rights.

Although the Directors believe that the Group's content and technology platform and other intellectual property rights do not infringe the IP rights of others, third-parties may assert claims of infringement which could be expensive to defend or settle. The Group holds suitable insurance to reduce the risk and extent of financial loss.

Technology risk

A significant portion of the future revenues are dependent on the Group's technology platforms. Instability or interruption of availability for an extended period could have an adverse impact on the Group's financial position.

Mobile Streams has invested in resilient hardware architecture and continues to maintain software control processes to minimise this risk.

Management controls and reporting procedures and execution

The ability of the Group to implement its strategy in a competitive market requires effective planning and management control systems. The Group's future growth will depend upon its ability to expand whilst improving exposure to operational, financial and management risk.

Going concern risk

The current uncertain economic climate and changing market place may impact the Group's cash flows and thereby its ability to pay its creditors as they fall due.

A principal responsibility of management is to manage liquidity risk, as detailed in Note 26 to the financial statements. The Group uses annual budgeting, forecasting and regular performance reviews to assess the longer term profitability of the Group and make strategic and commercial changes as required ensuring cash resources are maintained.

Argentina's Government imposed currency controls at the beginning of 2012 which continue to inhibit the repatriation of funds to the parent company. Management made the appropriate actions to mitigate this risk and has moved its finance operations to Argentina to help ensure stability and continuity.

Financial risk management objectives and policies

The Group uses various financial instruments. These include cash and various items, such as trade receivables and trade payables that arise directly from its operations. The numerical disclosures relating to these policies are set out in notes to the financial statements.

The existence of these financial instruments exposes the Group to a number of financial risks, which are described in more detail below. The Group does not currently use derivative products to manage foreign currency or interest rate risks.

The main risks arising from the Group's financial instruments are market risk, currency risk, liquidity risk and credit risk. The Directors review and agree policies for managing each of these risks and they are summarised below. These policies have remained unchanged from previous periods.

Market risk

Market risk encompasses three types of risk, being currency risk, fair value interest rate risk and price risk. In this review interest rate and price risk have been ignored as they are not considered material risks to the business. The

Liquidity risk

The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably.

The aforementioned capital flow restrictions imposed by the Argentinian government severely restrict the Argentina subsidiary from transferring funds to the Group´s parent company for the payment of dividends or for services rendered. This risk is being mitigated by the launch of similar businesses to Argentina in Colombia and Mexico where the cross border transfer of funds is not restricted. Vendor related payments can be made from Argentina on behalf of other subsidiaries.

The Group currently has no borrowing arrangements in place and prepares cash flow forecasts which are reviewed at Board meetings to monitor liquidity.

Credit risk

The Group's principal financial assets are bank deposits, cash and trade receivables. The credit risk associated with the bank deposits and cash is limited as the counterparties have high credit ratings assigned by international credit-rating agencies. The principal credit risk arises therefore from the Group's trade receivables. Most of the Group's trade receivables are large mobile network operators or media groups. Whilst historically credit risk has been low management continuously monitors its financial assets and performs credit checks on prospective partners.

CONSOLIDATED INCOME STATEMENT

* Administrative expenses include Depreciation, Amortisation and Impairment £0.41 m (2013: £0.36m); Share Based Compensation £ 328k (2013: £13k).

Total comprehensive (loss) / income for the period

Consolidated STATEMENT OF FINANCIAL POSITION

The financial statements were authorised by the Board of Directors and were signed on its behalf by:

Enrique Benasso

Chief Financial Officer

8 October 2014

Company number: 03696108

consolidated CASH FLOW statement

nOTES TO THE FINANCIAL STATEMENTS

1. General information

Mobile Streams Plc (the Company) and its subsidiaries (together 'the Group') sell digital content, primarily for distribution on wireless devices. The Group has subsidiaries in Europe, Asia, North America and Latin America. The Group has made various strategic acquisitions to build its market share in these regions.

The Company is a public limited company incorporated and domiciled in the United Kingdom. The address of its registered office is Abacus House, 33 Gutter Lane, London, EC2V 8AR.

The Company is listed on the London Stock Exchange's Alternative Investment Market.

In the current year, the Germany subsidiary was dissolved, so it is no longer included in the consolidated financial statement, with effect from the date of liquidation.

These consolidated financial statements have been approved for issue by the Board of Directors on October 8, 2014.

2. Critical accounting estimates and judgements

Estimates and judgements are evaluated on a regular basis and are based on historical experience and other factors, such as expectations of future events that are believed to be reasonable under the circumstances.

2.1 Critical accounting estimates, judgements and assumptions

The Group makes estimates and assumptions concerning the future. These estimates, by definition, will rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Estimates

(a) Goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy. The recoverable amount of cash-generating units has been determined based on value-in-use calculations. These calculations require estimates to be made. Refer to note 13.

(b) Accrued revenue and accrued content costs

Estimation is required by management to determine the value of accrued revenue and accrued content cost liability which is based on the content delivery to its customers. Due to the timing of confirmation of delivery of content to its customers from the service providers, management estimation is applied to determine the level of accrued revenue and accrued content liability to be recognised within the financial statements until confirmation is received.

Judgement

(c) Risk of currency

As mentioned before, the Argentinian government has imposed restrictions on certain cross border transactions, including the remitting of cash back to the Group's parent company in the UK. While the Argentinian subsidiary is currently unable to freely transfer cash back to its parent company, there are mechanisms by which cash can be transferred indirectly, albeit at a discount on the official exchange rate. Restrictions on currency controls haven't changed along the year, although the Government has allowed some derivative transactions that can be used to remit cash out of the country.

The results and financial position of the Argentinian subsidiary are translated into Sterling at official exchange rates for inclusion in the Group's consolidated financial statements. The directors have considered whether dual exchange rates might exist, with a second 'effective' exchange rate arising from the mechanism through which cash can be remitted, and whether the results and position of the Argentinian subsidiary should be translated at this second rate on consolidation. The directors are of the opinion that using the official exchange rate is most appropriate because:

• the Group has no requirement to transfer cash from Argentina to the UK and is not projected to have any such requirement for the foreseeable future;

• the directors do not expect the currency restrictions to remain in place indefinitely and it is unlikely that the Group would remit cash to its parent unless this could be achieved at the official exchange rate; and

• the Group is currently able to utilise the cash held in Argentina to support the trading activities of certain other companies within the Group without restriction.

 (d) Income taxes

The Group is subject to income taxes in various jurisdictions. Judgement is required in determining the worldwide provision for income taxes. There are many transactions/calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome is different to what is initially recorded, such differences will impact the income tax and deferred tax provisions. 

e) Deferred taxation

Judgement is required by management in determining whether the Group should recognise a deferred tax asset. Management consider whether there is sufficient certainty its tax losses available to carry forward will ultimately be offset against future earnings, this judgement impacts on the degrees to which deferred tax assets are recognised (see note 17).

3. Services provided by the group's auditor and network firms

4. Depreciation, amortisation and impairment

5. Finance income

6. Finance EXPENSE

7. Directors' and Officers' remuneration

The Directors are regarded as the key management personnel of Mobile Streams Plc.

Charges in relation to remuneration received by key management personnel for services in all capacities during the Year ended 30 June 2014 are as follows:

8. Directors and employees

Staff costs during the year were as follows:

The average number of employees during the year to June 2014 was as follows:

9. EARNINGS PER SHAREBasic earnings per share is calculated by dividing the (loss) or profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

Weighted average number of shares

The adjusted EPS has been calculated to reflect the underlying profitability of the business by excluding non-cash charges for depreciation, amortisation, impairments and share compensation charges.

10. income tax expense

The tax charge is based on the loss for the year and represents:

11. DIVIDENDS

No dividends were paid or proposed during the current year or prior year.

12. Property, plant and equipment

13. Goodwill AND INTANGIBLE ASSETS

The Group has impaired in full the remaining value of goodwill attributable to Mobile Streams (Hong Kong) Limited and its subsidiaries in Singapore and Australia which make up the Asia Pacific operating segment. Following an impairment review at the balance sheet date the recoverable amount of this cash generating unit was found to be negligible so an impairment of ₤380k has been charged. The current business projection cannot support the value of the goodwill recorded. The recoverable amount was determined based on value-in-use calculations, based on budgets for the next seven years prepared by senior management. These budgets are for longer than the standard five year period suggested by IFRS because new contracts have been signed by existing customers extending over this period. These budgets have been extrapolated over a ten year forecast using a growth rate of 2.5%. A discount rate of 13.7% (2013: 13.7%), based on WACC of the group, is used in the valuation of cash-generating units. There was no change in the method of estimation during the year.

Other intangible assets

Mobile Streams' other intangible assets comprised acquired customer relationships, technology based assets and non-compete agreements. These assets are fully amortised.

14. Trade and other receivables

The carrying value of trade receivables is considered a reasonable approximation of fair value.

Trade and other receivables have been reviewed for indicators of impairment. Certain trade receivables, on the basis of age and collectability, were found to be impaired and a provision for doubtful debts of £177,000 (year ended 30 June 2013: £136,000) has been recorded.

In addition, some of the unimpaired trade receivables are past due as at the reporting date. The profile of financial assets past due but not impaired is as follows:

Provision for doubtful debts reconciliation

Trade and other receivables that are not past due or impaired are considered to be collectible within the Group's normal payment terms.

15. Cash and cash equivalents

Cash and cash equivalents include the following components:

*See note 2.1(c) for details of restrictions. The amount restricted is £453k (2013: £2,084k)

16. Trade and other payables

All amounts are current. The carrying values are considered to be a reasonable approximation of fair value.

17. Deferred TAX ASSETS AND liabilities

18. SHARE CAPITAL

The Company only has one class of share. The total number of shares in issue as at 30 June 2014 is 37,075,083 (30 June 2013: 36,632,292) with a par value of £0.002 per share. All issued shares are fully paid.

The Group's main source of capital is the parent company's equity shares. The policy which is met by the Group is to retain sufficient authorised share capital so as to be able to issue further shares to fund acquisitions, settle share based transactions and raise new funds. Share based payments relate to employee share options schemes. The schemes have restrictions on headroom so as not to dilute the value of issued shares of the Company. The Group has not raised debt financing in the past and expects not to do so in the future.

Allotted, called up and fully paid

Other Reserves

Share Premium Account

The balance in the share premium account represents the proceeds received above the nominal value on the issue of the Company's equity share capital.

Translation Reserve

The Translation reserve contains the exchange differences arising on translating foreign operations.

19. Share based payments

The Group operates three share option incentive plans - an Enterprise Management Incentive Scheme, a Global Share Option Plan and an ISO Sub Plan - in order to attract and retain key staff. The remuneration committee can grant options over shares in the Company to employees of the Group. Options are granted with a fixed exercise price equal to the market price of the shares under option at the date of grant and are equity settled, the contractual life of an option is 10 years. Exercise of an option is subject to continued employment. Options are valued at date of grant using the Black-Scholes option pricing model.

On 12 July 2013, 2.383.594 options were granted to Company personnel. Strike value was 0.70 per option.

The fair value per option of options granted during the year 2014 and the assumptions used in the calculation are shown below:

The volatility of the Company's share price on the date of grant was calculated as the average of volatilities of share prices of companies in the Peer Group on the corresponding date. The volatility of share price of each company in the Peer Group was calculated as the average of annualised standard deviations of daily continuously compounded returns on the Company's stock, calculated over 1, 2, 3, 4 and 5 years back from the date of grant, where applicable. The risk-free rate is the yield to maturity on the date of grant of a UK Gilt Strip, with term to maturity equal to the life of the option. The expected life of an employee share option is 5 years.

Share options in issue at the year-end under the various schemes are:

1. Personal to the Option Holder and are not transferable, or assignable.

2. Shall not be exercisable on or after the tenth anniversary of the grant date.

3. Subject to the rules of the Plans, the Options shall Vest as follows - Options vest at 33.3% per year:

l 33.3% vest on the First Anniversary of the grant of option;

l A second 33.3% vest on the Second Anniversary of the grant of option; and

l The last 33.33% vest on the Third Anniversary of the grant of option.