LIVERMORE INVESTMENTS GROUP LIMITED

AUDITED RESULTS FOR YEAR ENDED 31 DECEMBER 2008

Livermore Investments Group Limited (the "Group" or "Livermore") today announces its preliminary results for the year ended 31 December 2008.

Highlights

• Net Asset Value per share - USD 0.63 (GBP 0.43).

• Cash, cash equivalents and marketable securities at 31 December 2008 - USD 39.8m.

• Revenues from operations - USD 17.5m. 

• Successfully completed the construction of the residential units in Wylerpark, Bern, of which 75% are already let. 

• Total administrative expenses (excluding amortisation and non-recurring items) were USD 3.3m, representing 1.5% of the average NAV

• Loss before Interest, Tax, Depreciation, Amortization and non recurring items - USD 58.6m mainly attributed to unrealized loss on holdings in associated company (Atlas Estates Ltd.) USD 22.7m and additional unrealized losses of USD 15.4m.

• Net loss after tax - USD 61.9m.

• Total pay out during the year of 4.1 cents per share, attributed to 2007 dividend (USD 4.1m cash, and USD 5.7m scrip), and share buy back for USD 1.8m

Commenting on the results, Noam Lanir, CEO of Livermore Investments Group Limited, said:

"2008 was a challenging year, characterised by unprecedented levels of turmoil in financial markets and deteriorating global economic conditions. In 2008 the company maintained a strong liquidity position which enables us to consider  investment opportunities in 2009.  I am pleased with the progress of our Wylerpark investment in Switzerland, with almost all of the residential units now occupied.  The company is well positioned to take advantage of market conditions and I am confident that our diversified portfolio will generate value to our shareholders."

Enquiries:

Chairman's and Chief Executive's Review

Introduction

We are pleased to report the audited financial results for Livermore Investments Group Limited ("Livermore" or "the Company") for the year ended 31 December 2008.  

In the first half of the year, the Company performed well and maintained its NAV level thanks to its robust and diversified portfolio. As global markets and economic conditions deteriorated rapidly in the second half, management resolved to systematically improve its cash position and reduce its trading portfolio and overall exposure to capital markets. The crippling knock-on effects of the global crisis had an adverse effect on the NAV reflected in mark to market adjustments in valuations of the portfolio companies and losses on the trading portfolio. In addition, the NAV as measured in USD decreased due to the appreciation of the USD partially offset by successful currency hedging activity for underlying currency investments, which are not in USD. 

During 2008 the Company implemented a defensive investment approach and prepared itself for a deteriorating investment environment. The Company holds certain significant value investments of over USD 10m each, which form the portfolio's cornerstone investments over the mid term. In addition, the Company holds yielding investments, which cover its operational cash requirements. Overall the Company is well positioned to withstand a lengthy economic downturn as its cash position is strong and it holds a few core assets such as Wyler Park in Switzerland, which have limited downside risk.

Financial Review

The NAV of the Group at 31 December 2008 was approximately USD 179.9m following a dividend payment of USD 9.8m (USD 4.1m cash and USD 5.7m scrip), and a share buy back of USD 1.8m. This represents a decrease of USD 96.5m over the NAV at 31 December 2007. Net loss was USD 61.9m, which represents a loss per share of USD 0.22. 

Administrative expenses (excluding amortisation and non-recurring items) were USD 3.3m, representing 1.5% of the average NAV. The Company intends to maintain its lean infrastructure and cost structure, and to achieve further cost savings in 2009.

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

Dividend

On 25 June 2008, the Board announced that it had resolved to pay to shareholders a dividend of USD 0.35 per share for the year ended 31 December 2007 at a total cost of USD 9.8m. As approved by shareholders at the EGM held on 12 August 2008, the Board offered to shareholders the choice of receiving the dividend in new fully paid ordinary shares in the Company instead of cash (the "Scrip Dividend Offer"). The Board received acceptances of the Scrip Dividend Offer from holders of 162,653,267 ordinary shares in the Company, which resulted in the issue of 11,342,629 new ordinary shares (representing 3.7% per cent of the currently issued share capital of the Company, excluding shares held in treasury) having a value of USD 5.7m. The balance of USD 4.1m was paid in cash. These new shares have been admitted to trading on AIM.

During 2008, the Company purchased 3,391,961 shares to be held in treasury for a total cost of USD1.8m. In 2009, the Company purchased an additional 211,000 shares. The total number of shares held in treasury at 30 April 2009 was 12,352,961.

Due to the global economy, the financial crisis, and its effect on the Company portfolio, the Board decided not to declare dividends for the year ended 31 December 2008. Future dividend payments will be considered based on the net performance of the Group's investment portfolio. 

27 May 2009

Review of Activities 

Introduction and Overview

2008 was a tough year for financial markets. Global economic conditions deteriorated rapidly, demand declined sharply, and equity and credit markets were decimated across the world. The knock-on effects of Lehman Brothers' bankruptcy in September are well documented in financial literature now and this event may well prove to be a turning point in financial and political history. 2008 saw significant central bank and government intervention in markets and in the economy to provide a safety net against systemic risk. While the deleveraging of the private sector continues, government balance sheets are being levered up to provide fiscal stimulus and jump start growth. While there are some "green shoots" of stabilization in the financial system and signs that the sharp decline in global economic activity is slowing, the overall outlook for growth in 2009 looks bleak. However we are hopeful that the powerful monetary and fiscal impetus so far and the political will to emerge from the crisis will stimulate the global economies to recover sometime in 2010.

The year-end NAV was USD 0.63 per share (mid-year NAV: USD 0.97, Dec 2007 NAV: USD 0.97). The portfolio remains well diversified across sectors and geographies with reduced exposure to capital markets and has a mixture of yielding and growth assets in Europe and Asia. The short term main driver of NAV is movements in currencies as the underlying assets are invested in EUR, CHF, USD, INR and other currencies.  

The Company results include interest and dividend income of USD 14.0m, property income of USD 3.5m and realised losses of USD 20.5m. The latter relates mainly to losses on disposal of public equities. The Company made an impairment loss of USD 14.2m relating to non - performing positions in its fixed income portfolio. In addition the Company recorded a loss totalling USD 22.7m on its holding of 21.21% in Atlas Estates limited at year end. The Company recorded a loss of USD 6.8m relating to unrealized valuation of interest rate swap agreements, mainly in connection with hedging the loans granted to a subsidiary in connection with the acquisition of Wyler Park in Switzerland. The maturity of such loans and of the respective hedging agreement is 2014. As the Company is expected to hold these loans to maturity, it expects to regain the above loss by the time the loan matures.

Administrative expenses amounted to USD 3.3m and interest payable amounted to USD 4.9m, of which USD 3.1m relate to the debt facility of the Real Estate SPV (Wylerpark, Bern) that generated gross income of USD 4.0m.

The resulting loss before tax for the year was USD 63.8m (2007: USD 21.0m profit).

The Company does not have an external management company structure and thus does not bear the burden of external management and performance fees. Further, the interests of Livermore's management are aligned with those of its shareholders as management members have a large ownership interest in Livermore shares. 

Considering the strong liquidity position of Livermore, together with the robustness and diversification of its investment portfolio and the alignment of management's interest with those of its shareholders, the Board believes the Company is well positioned to withstand the current market conditions and generate long term returns for its shareholders. 

Global Investment Environment

The international economy deteriorated sharply during 2008, especially in the second half of the year. Economic output dropped in all three major economic regions (US, euro area, Japan), while the emerging economies also lost momentum. Consumer and producer confidence indices witnessed sharp declines, new orders fell off dramatically, capacity utilization dropped significantly and job losses accelerated. Financial markets were in turmoil and volatility peaked to its highest levels in October and November. Following the bankruptcy of Lehman Brothers in mid-September, the crisis spread across the world. Credit risk premiums shot up to the highest levels attained since the beginning of the financial crisis. In view of the uncertain balance sheet position of banks and the massive loss of trust among money market participants, central banks took unprecedented measures designed to increase liquidity and kick start the credit markets. The MSCI World index plummeted by over 40% during the year. Exchange rates became considerably more volatile. 

To reduce systemic risk and prevent what could be a chain reaction of defaults, the Governments of most major economies recapitalized their banks and guaranteed bank debt and transactions. Aggressive fiscal measures have now been designed to provide stimulus to the economies. The Federal Reserve and other central banks deployed traditional and non-traditional monetary policy measures to support the credit markets with target interest rates between 0% - 2% in most developed economies.  

The meteoric rise of the oil price to $140+ per barrel in the first half of 2008 was short lived. As economic slowdown spread from developed to emerging economies, oil prices along with other commodity prices witnessed sharp declines with the oil price ending the year around $46 per barrel. 

EURO ZONE: In the euro area, GDP declined by 0.8% in the third quarter, following a drop of 0.7% in the second quarter. Capital expenditure declined again, due to the poor economic outlook, and the growth in exports lost momentum. A sharper decline was only prevented by a solid increase in government consumption. While the smaller economies proved resilient, Germany and Italy experienced the biggest drop in growth. Spain recorded its first decline in GDP since 1993. Employment plans in manufacturing deteriorated markedly and the sector experienced a period of cyclical weakness. Consumer fears about the future labour market situation are also likely to slow momentum. Car production is particularly hard hit. The situation in the credit markets remained tense. The extent to which the increasing tightness of credit conditions is affecting commercial bank lending is still unclear. Decreasing commodity prices, a weaker euro and the measures taken by a number of governments as well as the European Central Bank may, however, stabilize the economic situation in the medium term. 

CENTRAL & EASTERN EUROPE: GDP growth slowed across the region, especially during the latter half of 2008. The group of Central and Eastern European countries (CEE, including Bulgaria, Poland, Romania, and the middle-income Baltic states but excluding Turkey), saw growth ease from 6.6 percent to 5.5 percent in the year. In Hungary, the economy contracted by 1% quarter on quarter in the fourth quarter of 2008, following a decline of 0.1% in the third quarter. Real GDP growth decelerated slightly in the third quarter in the Czech Republic and Poland, to 0.9% and 1.2% respectively. Short-term indicators point to a weakening of economic activity in both countries. In Romania, real GDP growth was still strong in the third quarter of 2008, partly driven by good harvests in the agricultural sector; however, a marked deceleration has been experienced in recent months. Slowing demand in the Euro Area dampened export performance, while overheating in several countries required a mix of fiscal and monetary tightening to stem inflationary pressures. The global financial crisis disrupted Hungary's slow recovery of domestic demand and led the country to accept an emergency €15 billion loan from the International Monetary Fund. By year end, the Polish zloty had lost a third of its value against the euro since last summer, with Hungary's forint down over 16% in the same period. 

SWITZERLAND: Switzerland was also affected by the slowdown but much less than the US or Euro zone. In particular, consumer spending was more dynamic than in other countries because the labour market was still in good shape. From September on, the worsening crisis of confidence increasingly made itself felt with both producer and consumer sentiment deteriorating substantially. Although initial signs of a slackening of demand had been observed, the speed with which order intake dropped off from mid-September came as a surprise. Exports were particularly badly affected. In contrast, construction, retail and hospitality demand was still robust. In view of the deterioration in the economic outlook, the Swiss Confederation adopted a package of measures in early November totaling CHF 1.5 billion (around 0.3% of GDP) to support the economy.

INDIA: The Indian economy, after exhibiting strong growth during the second quarter of 2008, experienced moderation in the wake of the global economic slowdown. Industrial growth decelerated sharply especially in basic, capital and intermediate goods categories, while growth in consumer goods accelerated. The services sector, which has been the primary growth engine, slowed as well. Trade deficit widened, initially due to high oil import bills, and later due to a reversal of portfolio investment inflows. The Indian Rupee depreciated over 20% during the year. Financial markets in India suffered in line with emerging markets with the NIFTY (stock index) falling over 50% from the beginning of the year. There are downside risks for economic growth due to global economic slowdown, deterioration in financial markets and domestic demand. On a positive note, there is an expected increase in consumption demand due to increased disposable income from higher tax slabs and exemption limits, Sixth Pay Commission awards, debt waiver for farmers and pre-election expenditure. Further, easing of international oil and commodity prices and a high base effect has helped in softening the inflationary pressure.

Sources: International Monetary Fund (IMF), Swiss National Bank (SNB), European Central Bank (ECB), Reserve Bank of India (RBI), Bloomberg

Livermore's Strategy 

Livermore's investment strategy is to establish a diversified portfolio of value investments with a low - medium risk profile and a geographic focus on Europe and Asia. Investments are also focused on sectors, which Management believes will provide superior growth over the mid to long term. In Emerging Markets the Group invests alongside local partners with relevant expertise and proven track record. The credit and housing crisis that began in 2007 exploded into a global crisis with historical asset price declines leading to a vicious deleveraging cycle. Unprecedented monetary and fiscal interventions seem to have provided some stability but systemic risks remain until the asset price declines are stemmed and financial system stability is restored. 

In light of worsening economic conditions, Management significantly reduced during 2008 its leverage and exposure to global markets.  Livermore suspended its dividend payment and cut costs to retain maximum cash. The foremost objective to maintain a strong liquidity position had been achieved by year end with the Company now in a comfortable cash and marginal debt position. Although most of the portfolio companies are cash flow positive and do not require additional capital, a few became capital constrained as credit markets shut down during 2008. In these cases Management closely reviewed, with the respective management teams, alternative financing arrangements. Livermore Management set as a priority to keep hold of capital reserves to support certain portfolio companies, which exhibited good growth but were restrained by the lack of bank credit. Such was the case with DTH Boom TV, which exhibited above expectations growth in 2008 but as access to bank credit became more limited the shareholders were requested to make additional capital injections to support the growth strategy of the company. Supported by the equity contribution by shareholders, DTH was successful in securing a credit line of €18.5m in September 2008. 

During the year management decided to structure and manage the Group's portfolio based on those investments which are considered to be long term, core investments and those which could be readily convertible to cash, are expected to be realised within the normal operating cycle and form part of the Group's treasury function.  As of year end the Company had over USD 39.8m in cash, cash equivalent and marketable securities. 

The Board believes that its conservative investment approach and robust portfolio will provide downside protection in the near-mid term and upside potential in the mid-longer term.  

Review of Significant Investments

Wyler Park - Switzerland

Management was successful in completing in time the development of the residential part of the Wyler Park project in Bern, Switzerland. Construction of the 39 modern residential apartments was completed in August. Rental off-take of the apartments has been ahead of expectations with over 25 rental contracts signed to date, with the remaining expected to be rented by H1 2009. The additional annual rental income expected from the residential development is CHF 1.1m.  

The rental income from the commercial components of the project was stable with an increment in the rental income expected in Jan 2009 due to the indexation of rent. The Company reduced the leverage position on the project by reducing the LTV from 85% to 72% as the residential project was financed with equity without Bank loans. 

The final fit out of the Wyler II commercial building is at a very high standard and above expectations. As of 2008 over 800 SBB employees occupy the Wyler I and Wyler II commercial buildings. The investment in Wyler Park was made through a fully owned Swiss subsidiary, Livermore Investments AG. The loan outstanding on the project is CHF 79m, which is a non-recourse loan to Livermore Investments AG backed only by this property. The valuation of the property as of year end 2008 is CHF 110.4m.

During 2008, the Wyler Park property contributed some USD 2.1m to the Group's annual profit before tax, derived from operating income, revaluation losses, and exchange rate differences due to the appreciation of the CHF. 

As the commercial property is rented to the Swiss SBB with a lease until 2019 and there is strong demand for the residential apartments, the Company expects this property to continue to perform well, regardless of the global slowdown, and maintain its value looking forward. In addition, the Company expects to add value to this property by utilizing the additional commercial development rights of 7800sqm attached to the property in the coming years. 

Atlas Estates ("Atlas") - Central and Eastern Europe

The global economic crisis has had a significant impact on the Central and Eastern European region resulting in depreciation of local currencies, a sharp reduction in availability of credit, and low transactional volumes in real estate. Hungary, where Atlas has 13% of its assets, has had to seek financial support from the International Monetary Fund ("IMF"). However, Poland, where 64% of Atlas' assets are located, appears the most resilient economy in the region. According to Atlas's management, demand fundamentals, particularly for quality office, residential and retail space, remain intact despite the challenging environment.

For the year, revenue increased to €51.9m (2007: €27.4m). Loss from operations was €3.9m (2007: profit from operations €17.1m), predominantly due to an unrealised foreign exchange loss of €24.5m (2007: gain €1.9m) resulting from the depreciating currencies in the CEE region. Net Asset Value declined to €173.8m (31 December 2007: €224.1m) with NAV per share at €3.68 (31 December 2007: €4.98) and Adjusted NAV per share at €4.42 (31 December 2007: €6.36). Atlas had bank loans at 31 December 2008 of €247.7m (31 December 2007: €218.5m). During the period, Atlas refinanced the Hilton Hotel in Warsaw and secured a new construction loan at Platinum Towers, Warsaw. The company reported covenant breaches on two loans granted to subsidiaries and announced that the banks are aware of the technical breaches and have not asked for repayment of the loans. In relation to the most material loan, the Group has received a written covenant waiver from its lender after the year end and the lender will continue to extend the €63.1m facility.

On the operational side, Atlas delivered Stage 1 of the Capital Art Apartments residential development in Warsaw on time and to budget. 165 apartments have been handed over to new owners to date and a further 30 are expected to be completed in the coming months. The Hilton Hotel in Warsaw performed ahead of expectations in 2008, proving to be among the strongest performing five-star hotel and conference centres in the CEE region.

The developments in the region generally and at Atlas specifically have been disappointing and below expectations. The share price of Atlas declined in 2008 by 90%. The Company received from Atlas a dividend payment of USD 2.6m on 22 July 2008. During the year, Livermore management was actively involved in discussions with the Atlas Board and Management on issues relating to cost reduction, currency hedging, and measures to close the NAV gap such as the future of the Atlas Management Company. 

Livermore believes that the fee burden of Atlas Management Company (AMC) is excessive and the performance fee allocation unjustified. These concerns have been actively voiced to the Atlas Board and suggestions to terminate the Property Management Contract were made when there was a change of control at AMC.  Livermore continues to urge action by the Atlas Board on this issue. 

Although liquidity was a concern during the second half of the year, Atlas management has taken measures to retain cash within the company and slashed dividends, cut costs, and refinanced some properties. Further, some management fees due to Atlas Management Company have been accrued and not paid out in cash. Over the next three to five years, taking account of more uncertain market conditions, the company will be seeking to realise value through property disposals and the completion of its ongoing development projects. 

Given current conditions, we believe that certain development properties may face refinancing risk and may be subject to forced sales. In light of this, we have concluded an impairment review and have estimated Atlas Estates at €2.9 per share instead of €3.68 per share. Please see note 19 for details.  

DTH Television Grup SA, BOOM - Romania 

Livermore invested in Boom in October 2007 and acquired a 15% minority stake for approximately €9.5m. During 2008, the Company increased its holding to 18.23% and made follow-on investments of €2.8m in the form of Convertible Loans. 

Boom is a Direct-To-Home multi channel satellite television service in Romania, which started operations during the third quarter of 2006. Despite the global economic situation, Boom continued to demonstrate significant growth during 2008 and doubled its size reaching over 225,000 subscribers at year end. This was achieved while maintaining the highest ARPU (average revenue per unit) amongst the DTH players in the Romanian market. Boom managed to do so by using unique sales approaches, and by offering its customers premium exclusive content, and the best TV experience in the Romanian market. 

The company plans to continue its growth while leveraging on its premium content, enjoying the high penetration of TV to local households, and increasing migration from analogue to digital TV services. In addition, during 2009 Boom will introduce added value services, such as High Definition, Dolby Surround, and ITV to its subscribers. Boom plans to reach 550,000-600,000 subscribers by 2012 and capture some 20% of the digital TV market in Romania. With a market potential of 7.6m homes and regulatory encouragement to switch from analogue to digital reception, Boom is well placed to capitalize on this tremendous window of opportunity.  

Boom met its planned growth targets and expects to break even from operations in 2009 and make significant profits in the years ahead. From summer 2009 and for a period of 3 seasons, Boom will exclusively broadcast the UEFA Champions league, which is considered to be Europe's best sports event.  

While the global economy may affect the exit timing, Boom is becoming more and more attractive to market players and industry related funds, as it nears profitability. Livermore Management continues to expect realise this investment within the next 24 months.  

SRS Charminar - India

As noted in our 2007 Annual Report, Livermore has invested in 2008 USD 20m in a leading Indian Real Estate company, in association with SRS Private and other investors as part of a total investment of USD 154m. The target company is a top 10 real estate developer in India by land bank value and size. It controls over 5000 acres across Southern India, with over 650 acres in Hyderabad. The target company is the world's first property development company to have been certified as per four international standards - ISO 9001 - 2000, ISO 14001 - 2004, OHSAS 18001 - 1999 and SA 8000 - 2001.

The deal structure included a put option, which could be exercised if the IPO does not take place within 3 years or if certain terms in the agreement are not met. The put option is secured by land valued at around USD 1.3 Billion at the time of investment and guarantees a minimum return of approximately 30% IRR if exercised.

Infinite India Limited, the manager for this investment, informed Livermore on 25 February 2009 that following discussions with the promoters of the real estate company on 20 January 2009 the fund served a put option notice in accordance with the investment agreement demanding the return of capital and 30% interest on the investment. As there was a dispute between the founders and the fund as to the grounds for exercising the put option, the parties agreed to invoke arbitration to be held in Mumbai, arbitrated by the retired chief justice of the supreme court of India, the country's supreme judicial body. The outcome of this arbitration should become clear over the coming months.  

Montana Tech Components ("Montana") - Europe

Montana, based in Austria, is a leading components manufacturer in the fields of Aerospace Components, Metal Tech and Micro Batteries. 

The Aerospace Components business segment manufactures specialized components for Airbus and Boeing and is the market leader. The facilities are currently located in the US and in Switzerland with a new low cost facility in Romania under construction. The company has over 50% market share in the US with Boeing and is expected to have over 45% in Europe with Airbus after the completion of the Romanian facility. The Aerospace Components business performed well during 2008 despite poor economic conditions. Both Airbus and Boeing have large order back logs that have assisted in maintaining the volumes.  

Metal Tech business segment operates in a niche area with 60%-70% of world market share in an otherwise highly fragmented industry. This business segment produces tools for identification and marking of Steel products and has performed to expectations due to a large order backlog. This order backlog, however, has been declining as new sales have been low in the last half of 2008.  

The Micro Batteries business segment has 3 business units. 2 business units are excellent with a strong brand (VARTA Micro Power) and market share in their defined niches - Hearing Aid Batteries and Rechargeable Batteries. The revenues and net incomes have been stable in these business units. The third business unit is based on Lithium Polymer batteries and has recently been restructured to an R&D only organization due to high fixed costs of production. 

In 2008, the group had net revenues of €348m and an EBITDA of €26.6m. The group expects to increase net revenues to €431m by 2011 and increase EBITDA margins from 7.6% to 15% during this time.

In September 2008, the company raised €24m through a convertible bond issue of Montana maturing in 2011, yielding 8% with option to convert to common equity at €5 per share. Livermore invested €1.24m in the bond. Earlier in 2007, Livermore had invested €5m at a valuation of €7.6 per share. Given that the primary equity markets are more or less closed at the moment and based on discussions with the Management of Montana, Livermore now expects that an exit via IPO is likely before 2011. Montana's management will seek a trade sell of the underlying businesses in 2011 in the event that an IPO is not feasible. As all three businesses have a strong franchise value it could be expected that a trade sale should generate significant market interest. 

Livermore has decided to mark the investment down to an equity valuation of €3 per share in line with the decline in market value of peer companies. The valuation is the median of the worst case valuation range suggested by Erste Bank in an evaluation report dated February 2009. The median valuation based on Management business plans, which already assumes a significant slowdown in sales across all business lines, is €5 per share. 

CALS refinery - India 

In December 2007, Livermore entered into a Total Swap Agreement (TSA) with respect to a Global Depositary Receipt (GDR) issued by an Indian refinery company - CALS Refinery. CALS is promoted by Spice group to set up refineries in India. Spice is a USD 2 billion turnover group with interests in Oil & Gas, Aviation, Hotels, and Heavy engineering in India and Africa. CALS is relocating a refinery from Germany to India and the GDR was issued to part finance the relocation and set up of this refinery in India. CALS expects the refinery to have a capacity of 4.8 Million Metric Tons Per Annum. During the period, CALS signed an off-take agreement with BP to purchase crude and sell refinery output.  

The TSA has a capital protection structure through a put option on the promoters. The put option exercise notice has been sent to CALS promoters and negotiations for a structured payment schedule, and possibly additional collateral to be provided by the promoters, are underway.

Other Private Equity Investments 

The other private equity investments held by the Group are incorporated in the form of Managed Funds, mainly in the emerging economies of India and China. 

India Blue Mountains: A leading hotel and hospitality development fund that develops and acquires hotels in India. The fund has acquired land and is in the process of developing four 4-star hotels in Mumbai, Chennai, Pune and Goa. All four hotels will be managed by the Accor Group, who have also invested equity and hold a 26% stake in all of the hotels.  

The Indian hospitality sector has had mixed fortunes in recent months. In particular occupancy rates and average room rates ("ARR") declined sharply in the 5-star segment following the terrorist attacks on the Taj Palace Hotel and the Oberoi in Mumbai on 26 November, 2008. However, demand for the 4-star hotels, which is the relevant segment for India Blue Mountains, continues to be robust with the National Capital Region reporting occupancy levels of 85% and Mumbai reporting occupancy levels of 77.2% in 2008. There continues to be a significant shortage of 4-star hotel rooms across India and domestic travellers who would usually stay in 5-star hotels are trading down to 4 star hotels. Concerns regarding availability of construction finance reduced as the Reserve Bank of India reclassified the hospitality sector to Infrastructure rather than real estate. Infrastructure is a priority lending sector for state owned banks and, therefore, construction finance is now available for hotels.

For the Chennai project, the fund has negotiated a reduction in purchase price by 34% in USD terms. Excavation is underway for the Pune project and is expected to be completed in H1 2009. Excavation for the Mumbai project is expected to commence in H1 2009. The fund is awaiting land reclassification on the Goa project.

The NAV per share as of 31 December 2008 was USD 137.9 (31 December 2007: USD 127.05)  

Elephant Capital plc: India-focused private equity fund, which is AIM quoted (formerly called Promethean India plc). (Ticker: ECAP). The fund executes a value activist strategy in both public and private businesses in India, building a concentrated portfolio of investments in which the fund can act as a catalyst for change and value creation. Its portfolio investments to date include a leading tiles manufacturer in India, an established automotive components manufacturer, a hospitality company with luxury hotels located in prime locations in top Indian cities, and an m-commerce player. The fund has been conservative and diligent in its investment approach, investing only 60% of its capital to date, which positions it to capitalize on lower valuations in attractive opportunities.

Panda Capital: China-based Private Equity Fund focused on early-stage industrial operations in China and Taiwan, which represent strong growth opportunities. The fund has invested in a bamboo based flooring manufacturer, a lens moulding company, an electronic components manufacturer, an FDA approved wound healing cream producer, and an outdoor media company. During 2008, Livermore management visited the main portfolio companies of the fund and were impressed with the quality of the investee companies and the investment team.

The fund has reported a drop of 37% in its NAV from cost on account of write downs of some portfolio companies, especially in the media segment. The fund has a 100% interest in an exciting bamboo flooring company in China, which provides a low cost alternative to hardwood flooring in shipping containers. This investment is expected to generate very attractive returns once the shipping industry recovers from the current downturn.

Alternative Investment Managers     

During 2008, given the deteriorating market and economic conditions, Livermore reduced exposure to capital markets and redeemed or drastically reduced its investments in most of the hedge funds, barring those which performed exceedingly well in 2008 and are well positioned to capitalize the relative value opportunities that arise in 2009. As of year end the portfolio of hedge funds totals USD 9.6m. All funds that were redeemed have honoured the redemption. 

Livermore's portfolio construction and allocation strategy is based on hedge fund strategy and sector diversification, internal correlations, macro-economic conditions, market cycles, and fund strategy risk considerations. The Company closely monitors the managers and continually adjusts the portfolio. 

In addition, during 2008 the Group invested in a diversified portfolio of exclusive managers in the credit arena, mainly through investments in Collateralized Loan Obligations ("CLOs"). These investments were made with a view to taking advantage of the tight financing terms secured in these deals and the strong fundamentals of bank loans as an asset class, namely high recovery rates and strong cash flows. In light of the credit crunch in 2008 the portfolio suffered significant mark to market losses as default rates as well as expectations for default rates rose and as a result loan prices deteriorated to 60-70c. At the same time the dividend income on the portfolio was in line with expectations. 

The total dividend/interest income generated by this portfolio in 2008 was USD 14.0m. The company recognised an impairment of USD14.1m at year end relating mainly to non performing positions. The total CLO portfolio (at market value) as at 2008 year end amounted to USD 10.4m. 

Post balance sheet events and investments

Since the year end Atlas Estates has reported a drop of 20.1% in its IFRS NAV to EUR 2.94 per share as at 31 March 2009. The drop is attributed primarily to unrealised currency losses due to further deterioration of local currencies. Atlas has cited challenging credit and refinancing conditions, possibly leading to asset sales and other measures.  

Other than the above there have been no significant post balance sheet events or investments. In assessing investments for impairment, the directors have conducted a review of post balance sheet events and are satisfied that no further adjustments to valuations are required.  

Litigation

At the time of this Report, there are two litigation matters that the Company is involved in. Management believes that each poses minimal to no exposure to the Company and to its financial situation. Further information is provided in note 0 - Litigation.

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

We have audited the consolidated financial statements of Livermore Investments Group Limited for the year ended 31 December 2008, which comprise the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and notes 1 to 0. The consolidated financial statements have been prepared under the accounting policies set out therein. 

This report is made solely to the Company's members, as a body. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, 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 the consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the statement of Directors' Responsibilities.

Our responsibility is to audit the consolidated financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the consolidated financial statements give a true and fair view. In addition we report to you if, in our opinion, we have not received all the information and explanations we require for our audit, or if information, specified by IFRS regarding directors' remuneration and other transactions, is not disclosed.

We read other information contained in the Annual Report, and consider whether it is consistent with the audited consolidated financial statements. This other information comprises only the Highlights, the Chairman's and Chief Executive's Review, the Review of Activities, the Report of the Directors, the Corporate Governance Statement, the Remuneration Report and the Review of the Business and Risks. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the consolidated financial statements. Our responsibilities do not extend to any other information.

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 includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the consolidated financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the consolidated financial statements, and of whether the accounting policies are appropriate to the Company's circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations, which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the consolidated financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the consolidated financial statements.

Opinion

In our opinion the consolidated financial statements give a true and fair view, in accordance with IFRS's as adopted by the European Union, of the state of the group's affairs as at 31 December 2008 and of its result for the year then ended.

GRANT THORNTON UK LLP
CHARTERED ACCOUNTANTS

LONDON

Date: 27 May 2009

Livermore Investment Group Limited 

Consolidated Income Statement for the year ended 31 December 2008

The notes form part of these financial statements.

Livermore Investments Group Limited 

Consolidated Balance Sheet as at 31 December 2008

These Financial Statements were approved by the Board of Directors on 27 May 2008.

The notes form part of these financial statements.

Livermore Investments Group Limited 

Consolidated Statement of Changes in Equity for the year ended 31 December 2008

The notes form part of these financial statements.

Livermore Investments Group Limited 

Consolidated Statement of Cash Flows for the year ended 31 December 2008  

The notes form part of these financial statements.

Notes on the Financial Statements

 1.    General Information

Incorporation, principal activity and status of the Company

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

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

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

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

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

  2.    Accounting Policies

2.1    The significant accounting policies applied in the preparation of the financial information are as 
         follows:

a)    Basis of preparation

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

• 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 this is the currency in which the Group primarily operates in.

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

b)    New standards and interpretations currently in issue but not effective for     accounting periods 
       commencing on 1 January 2008 are:

• IAS 1 Presentation of Financial Statements (revised 2007) (effective 1     January 2009)

• IAS 23 Borrowing Costs (revised 2007) (effective 1 January 2009)

• Amendment to IAS 32 Financial Instruments: Presentation and IAS 1     Presentation of Financial Statements - Puttable Financial Instruments and     Obligations Arising on Liquidation (effective 1 January 2009)

• IAS 27 Consolidated and Separate Financial Statements (Revised 2008)     (effective 1 July 2009)

• Amendment to IFRS 2 Share-based Payment - Vesting Conditions and     Cancellations (effective 1 January 2009)

• Amendments to IFRS 1 First-time Adoption of International Financial     Reporting Standards and IAS 27 Consolidated and Separate Financial     Statements - Costs of Investment in a Subsidiary, Jointly Controlled Entity or     Associate (effective 1 January 2009)

• Amendment to IAS 39 Financial Instruments: Recognition and Measurement     - Eligible Hedged Items (effective 1 July 2009)

• Amendment to IFRS 7 Financial Instruments: Disclosures - Improving     Disclosures About Financial Instruments (effective 1 January 2009)

• Improvements to IFRSs (effective 1 January 2009 other than certain     amendments effective 1 July 2009)

• IFRS 3 Business Combinations (Revised 2008) (effective 1 July 2009)

• IFRS 8 Operating Segments (effective 1 January 2009)

• IFRIC 13 Customer Loyalty Programmes (effective date 1 July 2008)

• IFRIC 15 Agreements for the Construction of Real Estate (effective 1 January     2009)

• IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective 1     October 2008)

• IFRIC 17 Distributions of Non-cash Assets to Owners (effective 1 July 2009)

• IFRIC 18 Transfers of Assets from Customers (effective prospectively for t    ransfers on or after 1 July 2009)

These Standards are not expected to have a material effect on the group's accounts but will result in presentation and disclosure changes.

c)    Basis of Consolidation

The consolidated results incorporate the results of Livermore Investments Group Limited and all of its subsidiaries undertakings as at 31 December 2008 using the acquisition method of accounting as required. Subsidiaries are those entities that are controlled by the group. Control is achieved where the group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Profits or losses on intra group transactions are eliminated on consolidation. The results for the subsidiary undertakings have been included from the date of acquisition. On acquisition of a subsidiary, all of the subsidiary's assets and liabilities, which exist at the date of acquisition, are recorded at fair value. The excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired, is capitalised net of any provision for any impairment.

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

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

• held primarily for trading, or

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

• cash and cash equivalent not restricted in their use.

All other assets are non-current.

e)    Investment in associates 

The Group's interest in associates, being those entities over which it holds significant influence and which are neither subsidiaries nor joint ventures, are accounted for using the equity method.  

Under the equity method, the investment in an associate is carried in the balance sheet at cost plus post acquisition changes in the Group's share of the net assets of the associate and less any impairment in the value of individual investments. The Group income statement reflects the share of the associate's results after tax. The Group Statement Of Changes in Equity reflects the Group's share of any income and expenses recognised by the associate outside the income statement.  

Any goodwill arising on the acquisition of an associate, representing the excess of the cost of investment compared to the Group's share of the net fair value of the associate's identifiable assets, liabilities and contingent liabilities, is included in the carrying amount of the associate and is not amortized. To the extent that the net fair value of the associate's identifiable assets, liabilities and contingent liabilities is greater than the cost of the investment, a gain is recognised and added to the Group's share of the associate profit and loss in the period in which the investment is acquired. Distributions received from an investee reduce the carrying amount of the investment. 

Financial statements of associates are prepared for the same period as the Group's. Adjustments are made to bring the associate's accounting policies in line with those of the Group.

f)    Property revenue

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

g)    Investment Income

Investment income comprises interest income on funds invested, dividend income, and investment property income. Interest and investment property income is recognised as it accrues. Dividend income is recognised on the date that the Group's right to receive payment is established, which in the case of quoted securities is the ex-dividend date.  

 h)    Foreign currency

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

Transactions in foreign currencies other than the groups' functional currency are recorded at the rates of exchange prevailing on the dates of the transaction. Monetary assets and liabilities denominated in non-US dollar currencies are translated into US dollar equivalents using year-end spot foreign exchange rates. Non-monetary assets and liabilities are translated using exchange rates prevailing at the dates of the transactions. Non-monetary assets that are measured in terms of historical cost in foreign currency are not re-translated.  

Gains and losses arising on the settlement of monetary items and on the re-translation of monetary items are included in the income statement for the year. Those that arise on the re-translation on non-monetary items carried at fair value are included in the income statement of the year except for differences arising on the re-translation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items any exchange component of that gain or loss is also recognised directly in equity.  

The results and financial position of all Group entities that have a functional currency different from US dollars are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet item presented are translated at the closing rate at the date of that balance sheet; and

• income and expenses for each income statement item are translated at an average exchange rate (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions). Exchange differences arising are recognised through the Income Statement; and

• exchange differences on the net investment in subsidiary entities with a different functional currency to the group are recognised through equity.

i)    Taxation

Current tax is the tax currently payable based on taxable profit for the year.

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

Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity (such as the revaluation of land) in which case the related deferred tax is also charged or credited directly to equity.

j)    Goodwill

Goodwill, being the excess of the fair value of cost of an acquisition over the fair value attributed to the net assets at acquisition, is capitalised.  

Goodwill is not being amortised through the income statement; however, it is subject to annual impairment reviews. Impairment of the goodwill is evaluated by comparing 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 impairment would be deemed to have occurred and the resulting write down in the goodwill would be charged to the income statement immediately.

k)    Property, plant and equipment

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

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

Computer hardware    -    33.3%

Fixtures and Fittings  -    10%

Office renovation        -    25%

l)    Intangible assets

Intangible assets comprise website design costs and computer software and are stated at historic cost less accumulated amortisation. Carrying amounts are reviewed at each balance sheet date for indications of impairment.

Amortisation is calculated using the straight-line method, at annual rates estimated to write off the cost of the assets over their expected useful lives. The annual amortisation rates are as follows:

Computer software        -    33.3%

m)    Investment property

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

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

n)    Development property

Investment property under development is stated at cost incurred to date, and is not depreciated. On completion of development, this asset is transferred to investment property.

o)    Equity and reserves 

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

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

The share premium account includes any premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from the premium paid.

Equity-settled share-based employee remuneration is credited to the share option reserve until related stock options are exercised. On exercise or lapse amounts recognised in the share option reserve are taken to retained earnings.

Unrealised gains and losses on available for sale financial assets are taken to the investment revaluation reserve. When these gains/losses are realised, they are taken to the income statement.

Retained earnings include all current and prior period retain profits.  

p)    Leases

Leases were a significant portion of the risk and rewards of ownership are retained by the lessor are classified as operating leases and rentals are charged to income on a straight-line basis over the term of the lease. 

q)    Borrowing costs 

Borrowing costs primarily comprise interest on the Group's borrowings. All borrowing costs, including borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, are expensed in the period in which they are incurred and reported within "finance costs"

r)    Financial instruments

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.

Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. 

A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

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

Financial assets and financial liabilities are measured subsequently as described below.

Financial assets 

For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the following categories upon initial recognition: 

• loans and receivables; 

• cash and cash equivalents;

• trade and other payables;

• financial assets at fair value through profit or loss; and

• available-for-sale financial assets. 

The category determines subsequent measurement and whether any resulting income and expense are recognised in profit or loss or in other comprehensive income.

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

Trade and other receivables

Trade and other receivables are recognised and carried at the original transaction value. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified. Where the time value of money is significant receivables are carried at amortized cost.  

Cash and cash equivalents

Cash comprises cash in hand and balances with banks. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash. They include unrestricted short-term bank deposits originally purchased with maturities of twelve months or less. 

Trade and other payables

Trade and other payables are recognised and carried at the original transaction value.

Financial assets at fair value through profit or loss

From 1 January 2008 all new financial assets acquired have been designated at fair value through profit or loss upon initial recognition, because management considers this to more fairly reflect the way these assets are managed by the Group. The Group's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy, and information about the portfolio is provided internally on that basis to the Group's Board of directors and other key management personnel.  

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

Available-for-sale assets

During the year ended 31 December 2007, all financial assets (other than derivatives) were classified as available for sale on initial recognition. Available for sale financial assets are recognised when the Company becomes a party to the contractual provisions of the instrument. Available for sale financial assets are recognised at fair value plus transaction costs. 

Available-for-sale financial assets include non-derivative financial assets that are either designated as such or do not qualify for inclusion in any of the other categories of financial assets. All financial assets within this category are measured, with changes in value recognised in equity, through the statement of changes in equity. Gains and losses arising from investments classified as available-for-sale are recognised in the income statement when they are sold or when the investment is impaired.

In the case of impairment of available-for-sale assets, any loss previously recognised in equity is transferred to the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. Impairment losses recognised previously on debt securities are reversed through the income statement when the increase can be related objectively to an event occurring after the impairment loss was recognised 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 cash flows from the asset expire or the financial asset is transferred and that transfer qualifies for derecognition. A financial asset is transferred if the contractual rights to receive the cash flows of the asset have been transferred or the Group retains the contractual rights to receive the cash flows of the asset but assumes a contractual obligation to pay the cash flows to one or more recipients. A financial asset that is transferred qualifies for derecognition if the Group transfers substantially all the risks and rewards of ownership of the asset, or if the Group neither retains nor transfers substantially all the risks and rewards of ownership but does transfer control of that asset.

Valuation of financial assets

s)    Financial liabilities

The group's financial liabilities include financial derivative instruments. Derivative instruments consist of interest rate swaps and forward currency contracts.  

Financial liabilities are measured subsequently at amortised cost using the effective interest rate method, except for financial liabilities held for trading or designated at fair value through profit and loss, that are carried subsequently at fair value with gains or losses recognised in profit or loss.  

All derivative financial instruments that are not designed and effective as hedging instruments are accounted for at fair value through profit and loss.

t)    Share Options

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

The Group issues equity-settled share based payments to certain employees and other advisors. The fair value of share-based payments to employees at grant date is measured using the Binomial pricing model. The fair value of share-based payments to other advisors, are measured directly at the fair value of the services provided.

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

u)    Legal and other disputes

Provision is made where a reliable estimate can be made of the likely outcome of legal and other disputes against the Group. In addition, provision is made for legal and other expenses arising from claims received or other disputes. No provision is made for other possible claims or where an obligation exists, but it is not possible to make a reliable estimate. Costs associated with claims made by the Group are charged to the Income Statement as they are incurred.

v)    Critical accounting judgments and key sources of estimation uncertainty.

The following areas are subject to judgment and uncertainty. 

Fair value of financial instruments 

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

Impairment

An impairment loss is recognised for the amount by which the asset's or cash generating unit's carrying amount exceeds its recoverable amount. Recoverable amount is based on estimated expected future cash flows from each cash-generating unit and discounted using a suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows assumptions are required about future gross profits. These assumptions relate to future events and circumstances. The actual results may vary, and may cause significant adjustments to the Group's assets within the next financial year. In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to asset specific factors.  

The group assesses at each balance sheet date, whether financial assets are impaired. If an impairment has occurred, this loss is taken to the income statement.

Assets carried at cost

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

Provision for legal and other disputes

Determining whether provisions for legal and other disputes is required requires the Group to assess the likelihood of an economic outflow occurring as a result of past events. Where an economic outflow is considered probable, a provision has been made for the estimated outflow. Where an outflow is considered possible, but not probable it has only been disclosed. 

Where the information required by IAS 37 "Provisions, Contingent Liabilities and Contingent Assets" is expected to prejudice the outcome of legal and other disputes, it has not been disclosed on these grounds.  

Further details of contingent assets, liabilities and provisions are provided in note 0.

3.    Segment Information 

Management consider investment activity to be the Group's only material class of business. 

4.    Interest / dividend income

5.    Investment property revenue

6.    (Losses) / gains on investments

7.     (Losses) / gains from investment in associate

8.    Amortisation and non recurring items

Amortisation and non-recurring items refer to:

Non recurring expenses relate to discontinued operations. No such expenses incurred for the year of 2008.

9.    Administrative expenses

At 31 December 2008 the Group employed 8 staff (31 December 2007: 8).

10.    Finance expenditure

11.    Taxation

The Company is an international business company based in the British Virgin Islands (BVI) and, under its laws is not subject to corporation tax. Corporation tax is calculated with reference to the result of the Company's subsidiaries.

12.    (Loss) / earnings per share

Basic earnings per share has been calculated by dividing the net (loss) / profit attributable to ordinary shareholders ((loss) / profit for the year) by the weighted average number of shares in issue during the relevant financial periods.  

Diluted (loss) / earnings per share is calculated after taking into consideration the potentially dilutive shares in existence as at the year ended 31 December 2008 and the year ended 31 December 2007.

13.    Net asset value per share

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

Diluted net asset value per share is calculated after taking into consideration the potentially dilutive shares in existence as at the year ended 31 December 2008 and the year ended 31 December 2007.

14.    Property, plant and equipment

15.    Intangible assets

16.    Available-for-sale financial assets*

* * Financial assets relate to investments in bonds and equity classified as available for sale. Financial assets are held in the balance sheet at the year end at fair value. Fair value is measured by reference to the market value of the assets at the balance sheet date as they are openly traded on a public market.

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

During the year management decided to structure and manage the Group's portfolio based on those investments which are considered to be long term, core investments and those which could be readily convertible to cash, are expected to be realised within normal operating cycle and form part of the Group's treasury function.

During 2008 for the purpose of annual impairment and due to market conditions, management considered the impairment of certain available for sale financial assets. Impairment testing indicated that the financial assets carrying amount may not be recoverable.  

The related impairment charges in 2008, of USD 14,176m (2007 USD 5,594m), are included within loss on investments.

17.    Financial assets designated at fair value through profit or loss

During the year management decided to structure and manage the Group's portfolio based on those investments which are considered to be long term, core investments and those which could be readily convertible to cash, are expected to be realised within normal operating cycle and form part of the Group's treasury function.

18.    Investment and development property

A real estate investment property - Wyler Park - in Bern, Switzerland was purchased on 1 July 2007.

The investment property was valued by Wuest & Partners as at 31 December 2008 on the basis of open market value in accordance with the appraisal and valuation guidelines of the Royal Institute of Certified Surveyors, and the European Group of Valuers' Associations. Development property was transferred to investment property at year end, as, by the end of the year, the construction was completed.

  19.    Investment in associate

(a) Investment in associates - The group has 21.21% (2007: 21.28%) interest in Atlas Estates Limited, an AIM - quoted real estate investment and Development Company.  

The following table illustrates summarised financial information of the group's investment in Atlas Estates Ltd: 

At the year end, the share price of Atlas Estates Limited was € 0.30 giving a market value of the group's interest of USD 4.2m. The directors have carried out an impairment review and have estimated that the recoverable amount is USD 11.0m less than the Group's share of net assets. The impairment has been assessed based on the risk that certain development properties may be subject to forced sale. Accordingly, these properties have been written down to between 50%-70% of their disclosed market value according to stage of development.  

The directors recognise that such assumptions represent critical judgements that are subject to uncertainty. In making such judgements, the directors have assessed the exposure of each category of financial asset to market and re-financing risk and the timeframe over which recoverable amount could be achieved.  

(b) Details of group undertakings 

Details of the investments in which the group holds 20% or more of the nominal value of any class of share capital are as follows: