Annual Financial Report

RNS Number : 2875O

Livermore Investments Group Limited

27 May 2015

 

Livermore Investments Group Limited

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

Highlights

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

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

·      Wyler Park property in Bern, Switzerland fully let.

·      No material developments in the private equity portfolio.

Chairman's and Chief Executive's Review

Introduction

We are pleased to announce the consolidated financial results for Livermore Investments Group Limited ("Livermore" or "the Company") and its subsidiaries (together "the Group") for the year ended 31 December 2014. 

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

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

Wyler Park, our investment property in Bern, Switzerland performed well, generating over CHF 5.4m (USD 5.2m) in net rent during the year.  All of the 39 apartments and commercial spaces are fully rented. The loan against Wyler Park was successfully refinanced in January 2015.

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

Financial Review

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

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

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

	31 December 2014		31 December 2013
	US $m		US $m
Shareholders' funds at beginning of year	168.4		173.0
	___________		___________
Income from investments	31.8		34.5
Other income	0.5		0.1
Realised losses on investments	(1.6)		(0.6)
Loss on impairment of investments	(8.9)		(2.5)
Unrealised losses on investments	(9.4)		(16.0)
Unrealised exchange (losses) / gains	(0.6)		0.1
Administration costs	(7.2)		(12.3)
Net finance costs	(7.2)		(4.3)
Tax charge	(0.8)		(1.9)
	___________		___________
Decrease in net assets from operations	(3.4)		(2.9)
Purchase of own shares	-		(1.7)
Dividends paid	(5.0)		-
	___________		___________
Shareholders' funds at end of year	160.0		168.4
	===========		=============
Net Asset Value per share	US $0.82		US $0.86

Dividend & Buyback

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

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

Richard B Rosenberg                                                                                        Noam Lanir

Chairman                                                                                                           Chief Executive Officer

26 May 2015

Review of Activities

Introduction and Overview

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

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

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

Considering the strong liquidity position of Livermore, together with its strong foothold in the US CLO market as well as the robustness of its investment portfolio and the alignment of management's interests with those of its shareholders, management believes that the Group is well positioned to benefit from current market conditions.

Global Investment Environment

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

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

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

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

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

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

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

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

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

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

Livermore's Strategy

The financial portfolio is focused on fixed income instruments which generate regular cash flows and include exposure mainly to senior secured and usually broadly syndicated US loans and to a limited extent emerging market debt through investments in CLOs. This part of the portfolio is geographically focused on the US with some exposure to Europe and emerging markets.  

The remaining portfolio is focused on Switzerland and Asia with investments primarily in real estate and select private equity opportunities.  Investments are focused on sectors that Management believes will provide superior growth over the mid to long term with relatively low downside risk. 

Strong emphasis is given to maintaining sufficient liquidity and low leverage at the overall portfolio level and to re-invest in existing and new investments along the economic cycle. 

Review of Significant Investments

Name	Book Value US $m
Wyler Park*	38.5
SRS Charminar	9.1
Other Real Estate Assets	1.5
Montana Tech Components	-
Total	49.1

* Net of related loan.

Wyler Park - Switzerland

Wyler Park is a top quality mixed-use property located in Bern, Switzerland. It has over 16,800 square meters of commercial space, 4,100 square meters of residential space, and another 7,800 square meters available for additional commercial development. The commercial part is leased entirely to SBB (AAA rated), the Swiss national transport authority wholly owned by the Swiss Confederation, and serves as the headquarters of their Passenger Traffic division. The commercial lease is Swiss inflation rate-adjusted and ends in 2019 with two 5 year extension periods thereafter. The annual rental income from the commercial area of the project is CHF 4.43m (USD 4.85m).

Following the successful development of 39 residential apartments, management rented out all of them. The entire property is fully rented and the annual rental income from the residential area is about CHF 0.98m (USD 1.07m).

Livermore is the sole owner of Wyler Park through its wholly owned Swiss subsidiary, Livermore Investments AG. The loan outstanding on the project as of 31 December 2014 is CHF 77.5m (USD 78.1m), which is a non-recourse loan to Livermore Investments AG backed only by this property. In January 2015, management successfully refinanced the loan against Wyler Park with a Swiss bank. The principal amount of the new loan facility is CHF 68m. The facility is committed until at least 30 June 2019. Upon successful extension of the lease with SBB from 2019 to 2029, an additional CHF 10m would be available under this facility.

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

Management continues to evaluate the potential development of the additional commercial development rights of 7,800 square meters attached to the property.

SRS Charminar - India

Livermore invested USD 20m in 2008 in a leading Indian Real Estate company, in association with SRS Private and other investors as part of a total investment of USD 132.1m. In 2009, the promoters of the investee company were arrested on charges of criminal conspiracy, cheating, and misappropriation of funds. Later it was discovered that the investee company had breached the terms of the investment agreement resulting in a default. On 13 January 2011 the Company Law Board ("CLB") passed an order and allowed Infrastructure Leasing & Financial Services Limited ("IL&FS") to become an 80% shareholder and control the management of the company. SRS Charminar and other investors have agreed to a settlement with IL&FS wherein the settlement amount will be paid in four tranches over five years.  

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

Montana Tech Components ("MTC") - Europe

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

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

Private Equity Funds  

The other private equity investments held by the Group are incorporated in the form of Managed Funds (mostly closed end funds) mainly in the emerging economies of India and China. The investments of these funds into their portfolio companies were mostly done in 2008 and 2009. Overall, during 2014 the investment environment relating to most funds was challenging and the Group expects that material exits of portfolio companies should materialize between 2016 and 2018.  During the reporting period a distribution of USD 1.4m from SRS Private and Blue Ridge fund were carried out.

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

Name	Book Value US $m
SRS Private (India)	3.7
Evolution Venture (Israel)	2.6
India Blue Mountains (India)	0.8
Elephant Capital (India)	0.4
Da Vinci (Russia)	0.3
Panda Capital (China)	0.3
Blue Ridge Capital (China)Other investments	0.5
Total	8.7

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

Evolution Venture: Evolution is an Israel focused Venture Capital fund. It invests in early stage technology companies. Its investments include a carrier-class Mobile Broadband Wireless (MBW) Wi-Fi solutions company, a language enhancement products company, a software company operating in the digital radio market, a software test tool developer, and a virtualization technology company. The Wi-Fi solutions company, language enhancements product company and the virtualization technology company have been performing well.

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

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

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

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

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

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

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

Da Vinci: The fund is primarily focused on Russia and CIS countries and is primarily invested in the Moscow Exchange and a Ukrainian coal company. The Moscow Exchange performed well in local currency terms increasing revenues, EBITDA and Net Income as well as EBITDA margins and Net Income margins. The coal company is located in Western Ukraine. The European Bank for Reconstruction and Development (EBRD) is assessing the company for investment. The fund is building a club of investors to support and facilitate this investment. The Group's investment in the fund was valued at USD 0.3m as of 31 December 2014.

Panda Capital: Panda Capital is a China-based private equity fund focused on early-stage industrial operations in China. The fund's main investment is in a bamboo flooring company in China, which provides an innovative low cost alternative to hardwood flooring in shipping containers.  The manager is in the process of building up operational capacity for product manufacturing.

Blue Ridge: Blue Ridge is a China focused private equity fund. The fund is mostly wound down. To date, the fund has distributed USD 1.5m (73.5% of investment).

Financial portfolio and trading activity               

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

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

Name	2014 Book Value US $m	2013 Book Value US $m
Investment in the loan market through CLOs	82.2	91.9
Babylon	0.9	9.2
Hedge Funds	1.1	2.2
Corporate bonds	2.0	1.9
Other Public Equities	1.9	2.8
Total	88.1	108.0
Total net of leverage	99.1*	98.0

* this figure includes USD 16m which the Company invested during the period in the first loss tranche of warehouse facilities for accumulating loans with the intention to transfer these loans to a CLO.

Senior Secured Loans and Collateralized Loan Obligations (CLO):

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

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

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

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

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

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

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

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

	2014 Amount	Percentage	2013 Amount	Percentage
	US $000		US $000
US CLOs	68,704	83.6%	64,874	70.6%
Global Credit CLOs	12,008	14.6%	25,021	27.2%
European CLOs	1,505	1.8%	1,986	2.2%
	------	------	------	------
	82,217	100%	91,881	100%
	------	------	------	------

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

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

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

Name	2014 Book Value US $m
Significant Investments	49.1
Private Equity Funds	8.7
Financial Portfolio	88.1
Total	145.9
Available- for-sale financial assets (note 4)	101.9
Financial assets at fair value through profit or loss (note 5)	5.5
Net Investment property (note 8 & 17)	38.5
Total	145.9

Events after the reporting date

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

 

Litigation

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

Report of the Directors

The Board's objectives

The Board's primary objectives are to supervise and control the management activities, business development, and the establishment of a strong franchise in the Group's business lines. Measures aimed at increasing shareholders' value over the medium to long-term, such as an increase in NAV are used to monitor performance.

The Board of Directors

Richard Barry Rosenberg (age 59), Non-Executive Director, Chairman of the Board

Richard joined the Group in December 2004. He became Non-Executive Chairman on 31 October 2006.  He qualified as a chartered accountant in 1980 and in 1988 co-founded the accountancy practice SRLV.  He has considerable experience in giving professional advice to clients in the leisure and entertainment sector. Richard is a director of a large number of companies operating in a variety of business segments.

Noam Lanir (age 48), Founder and Chief Executive Officer

Noam founded the Group in July 1998, to develop a specialist online marketing operation. Noam has led the growth and development of the Group's operations over the last sixteen years which culminated in its IPO in June 2005 on AIM. Prior to 1998, Noam was involved in a variety of businesses mainly within the online marketing sector.  He is also the major shareholder of Babylon Ltd, an International Internet Company listed on the Tel Aviv Stock Exchange. He is also a major benefactor of a number of charitable organisations.

Ron Baron (age 47), Executive Director and Chief Investment Officer

Ron was appointed as Executive Director and Chief Investment Officer on 10 August 2007. Ron has wide investment and M&A experience. From 2001 to 2006 Ron served as a member of the management at Bank Leumi, Switzerland and was responsible for portfolio management activity. Prior to this he spent five years as a commercial lawyer advising banks and large corporations on corporate transactions, including buy-outs and privatisations. Ron has over thirteen years of experience as an investment manager with particular focus on the US credit market and CLOs.  He holds an MBA from INSEAD Fontainebleau and a LLB (LAW) and BA in Economics from Tel Aviv University.

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

Directors' responsibilities in relation to the consolidated financial statements

The Directors are responsible for preparing the Annual Report and the consolidated financial statements in accordance with applicable law and International Financial Reporting Standards as adopted by the European Union.

The Directors are required to prepare consolidated financial statements for each financial year which give a true and fair view of the financial position of the Group, and its financial performance and cash flows for that period.  In preparing these consolidated financial statements, the Directors are required to:

·      Select suitable accounting policies and then apply them consistently;

·      Make judgments and estimates that are reasonable and prudent;

·      State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

·      Prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Group's transactions, and at any time enable the financial position of the Group to be determined with reasonable accuracy and enable them to ensure that the consolidated financial statements comply with the applicable law and International Financial Reporting Standards as adopted by the European Union.  They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website.  Legislation in the British Virgin Islands governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Disclosure of information to the Auditor

In so far as the Directors are aware:

·      there is no relevant audit information of which the Company's auditor is unaware; and

·      the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

Substantial Shareholdings

As at 30 April 2015 the Directors are aware of the following interests in 3 per cent or more of the Company's issued ordinary share capital:

	Number of Ordinary Shares		% of issued ordinary share capital		% of voting rights*
Groverton Management  Ltd	154,412,173		50.77		79.07
RB Investments GmbH	13,915,419		4.58		7.13
Merrill Lynch Pierce, Fenner & Smith, Inc	9,329,051		3.07		4.78

* after consideration of treasury shares (note 14).

Save as disclosed in this report and in the remuneration report, the Company is not aware of any person who is interested directly or indirectly in 3% or more of the issued share capital of the Company or could, directly or indirectly, jointly or severally, exercise control over the Company.

Details of transactions with Directors are disclosed in note 32 to the consolidated financial statements.

Corporate Governance Statement

Introduction

The Company recognises the importance of the principles of good Corporate Governance and the Board is pleased to accept its commitment to such high standards throughout the year.  As an AIM quoted company, Livermore is not required to follow the provisions of the UK Corporate Governance Code - September 2012 (the "Code").  However, the Company is keen to adopt and promote the provisions of that Code.  Up to 31 December 2014 the Board has adopted several provisions of the Code, some of which have not yet been fully implemented. 

The Board Constitution and Procedures

The Company is controlled through the Board of Directors, which currently comprises one Non-Executive Director and two Executive Directors.  The Chief Executive's responsibility is to focus on co-ordinating the company's business and implementing group strategy. 

A formal schedule of matters is reserved for consideration by the Board, which meets approximately four times each year.  The Board is responsible for implementation of the investing strategy as described in the circular to shareholders dated 6 February 2007 and adopted pursuant to shareholder approval at the Company's EGM on 28 February 2007.  It reviews the strategic direction of the Group, its codes of conduct, its annual budgets, its progress towards achievement of these budgets and any capital expenditure programmes.  In addition, the Directors have access to advice and services of the Company Secretary and all Directors are able to take independent professional advice if relevant to their duties.  The Directors receive training and advice on their responsibilities as necessary.  All Directors, in accordance with the Code, submit themselves to re-election at least once every three years.

Board Committees

The Board delegates clearly defined powers to its Audit and Remuneration Committees. The minutes of each Committee are circulated by the Board. 

Remuneration Committee

The Remuneration Committee comprises of the Non-Executive Chairman of the Board and a Non-Executive Director.  Following the resignation of one of the Non-Executive Directors, this committee has one member until a new Non-Executive Director is appointed.  The Remuneration Committee considers the terms of employment and overall remuneration of the Executive Directors and key members of Executive management regarding share options, salaries, incentive payments and performance related pay.  The remuneration of Non-Executive Directors is determined by the Board.

Audit Committee

The Audit Committee comprises of the Non-Executive Chairman of the Board and a Non-Executive Director and is chaired by the Chairman of the Board.  Following the resignation of one of the Non-Executive Directors, this committee has one member until a new Non-Executive Director is appointed. The duties of the Committee include monitoring the auditor's performance and reviewing accounting policies and financial reporting procedures. 

Communication with Investors

The Directors are available to meet with shareholders throughout the year.  In particular the Executive Directors prepare a general presentation for analysts and institutional shareholders following the interim and preliminary results announcements of the Company.  The chairman, Richard Rosenberg, is available for meetings with shareholders throughout the year.  The Board endeavours to answer all queries raised by shareholders promptly.

Shareholders are encouraged to participate in the Annual General Meeting at which the Chairman will present the key highlights of the Group's performance.  The Board will be available at the Annual General Meeting to answer questions from shareholders.

Internal Control

The Board is responsible for ensuring that the Group has in place a system of internal controls and for reviewing its effectiveness.  In this context, control is defined in the policies and processes established to ensure that business objectives are achieved cost effectively, assets and shareholder value safeguarded and that laws and regulations are complied with.  Controls can provide reasonable but not absolute assurance that risks are identified and adequately managed to achieve business objectives and to minimise material errors, frauds and losses or breaches of laws and regulations.

The Group operates a sound system of internal control, which is designed to ensure that the risk of mis-statement or loss is kept to a minimum.

Given the Group's size and the nature of its business, the Board does not consider that it is necessary to have an internal audit function.  An internal audit function will be established as and when the Group is of an appropriate size.

The Board undertakes a review of its internal controls on an ongoing basis.

Going Concern

The Directors have reviewed the current and projected financial position of the Group, making reasonable assumptions about interest and dividend income, future trading performance, valuation projections and debt requirements. On the basis of this review, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and accounts.

Independence of Auditor

The Board undertakes a formal assessment of the auditor's independence each year, which includes:

·      a review of non-audit related services provided to the Company and related fees;

·      discussion with the auditor of a written report detailing all relationships with the Company and any other parties which could affect independence or the perception of independence;

·      a review of the auditor's own procedures for ensuring independence of the audit firm and partners and staff involved in the audit, including the rotation of the audit partner;

·      obtaining written confirmation from the auditor that it is independent;

·      a review of fees paid to the auditor in respect of audit and non-audit services.

Remuneration Report

The Directors' emoluments, benefits and shareholdings during the year ended 31 December 2014 were as follows:

Directors' Emoluments

Each of the Directors has a service contract with the Company.

Director	Date of agreement	Fees US $000	Benefits US $000	Reward payments US $000	Share options expense US $000	Total emoluments
						2014 US $000	2013 US $000
Richard Barry Rosenberg	10/06/05	74	-	25	-	99	71
Noam Lanir	10/06/05	400	45	-	-	445	2,245
Ron Baron	01/09/07	350	-	2,628	-	2,978	6,762

The dates are presented in day / month / year format.

Directors' Interests

Interests of Directors in ordinary shares 

	Notes	As at 31 December 2014				As at 31 December 2013
		Number of Ordinary Shares	Percentage of ordinary share capital		Percentage of voting rights	Number of Ordinary Shares	Percentage of ordinary share capital	Percentage of voting rights
Noam Lanir	a)	154,412,173	50.773%	79.068%		154,412,173	50.773%	79.068%
Ron Baron	b)	13,915,419	4.576%	7.126%		13,915,419	4.576%	7.126%
Richard Barry Rosenberg		15,000	0.005%	0.008%		15,000	0.005%	0.008%

Notes:

a) Noam Lanir is interested in his ordinary shares by virtue of the fact that he owns directly or indirectly all of the issued share capital of Groverton Management Limited.

b) In 2007, loans of USD 5.523m were made to RB Investments GMBH, a company owned by Ron Baron, for the acquisition of shares in the Company. Interest was payable on these loans at 6 month US LIBOR plus 0.25% per annum and the loans were secured on the shares acquired. The loans were repayable on the earlier of the employee leaving the Company or April 2013. In December 2012 the Board decided to renew the outstanding amount of these loans for a period of another five years. Based on the Board's decision, the outstanding amount will be reduced annually on a straight line over five years, as long as the key management employee remains with the Company. The relevant reduction in the loan amount for the year was USD 1.128m. The loans together with their related accrued interest of USD 0.117m were classified as "other assets" and are included under trade and other receivables (note 12).

Interests of Directors in share options

	No of options at 31 December  2014	Date of grant	Exercise price, GBP	Exercise Price**, US $	Vesting period of options
Noam Lanir	10,000,000	19/07/06	0.78	1.22	One to three years*
Richard Barry Rosenberg	500,000 150,000 75,000	13/05/08 19/07/06 07/12/05	0.30 0.78 0.71	0.47 1.22 1.11	One to three years* One to three years* One to three years*

* The options normally vest in three equal tranches, on the first, second and third anniversary of the grant.

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

** The exercise prices as per the share option scheme are quoted in British Pounds.  The indicative equivalent USD amounts shown in the table above are based on the exchange rates as at 31 December 2014.

Share Option Scheme

The Company's remuneration committee (the "Committee") is responsible for administering the Share Option Scheme.  Options to acquire Shares in the Company may be granted under the Share Option Scheme to any employee or director of the Company or of other Group entities. 

The option exercise price per Ordinary Share is determined by the Committee but will be no less than market value of the Ordinary Shares on the dealing day immediately preceding the date of grant. The options are subject to continuous service conditions but are not subject to any performance criteria.

The Share Option Scheme will terminate ten years after it was adopted by the Company, or earlier in certain circumstances.

Remuneration Policy

The Group's policy has been designed to ensure that the Group has the ability to attract, retain and motivate executive directors and key management personnel to ensure the success of the organization.

The following key principles guide its policy:

·      policy for the remuneration of executive directors will be determined and regularly reviewed independently of executive management and will set the tone for the remuneration of other senior executives

·      the remuneration structure will support and reflect the Group's stated purpose to maximize long-term shareholder value

·      the remuneration structure will reflect a just system of rewards for the participants

·      the overall quantum of all potential remuneration components will be determined by the exercise of informed judgement of the independent remuneration committee, taking into account the success of the Group and the competitive global market

·      a significant personal shareholding will be developed in order to align executive and shareholder interests

·      the assessment of performance will be quantitative and qualitative and will include exercise of informed judgement by the remuneration committee within a framework that takes account of sector characteristics and is approved by shareholders

·      the committee will be proactive in obtaining an understanding of shareholder preferences

·      remuneration policy and practices will be as transparent as possible, both for participants and shareholders

·      the wider scene, including pay and employment conditions elsewhere in the Group, will be taken into account, especially when determining annual salary increases.

Review of the Business and Risks

Risks

The Board considers that the risks the Shareholders face can be divided into external and internal risks.

External risks to shareholders and their returns are those that can severely influence the investment environment within which the Group operates, and include economic recession, declining corporate profitability, rising inflation and interest rates and excessive stock-market speculation.

The Group's portfolio is exposed to interest rate changes, credit risk, liquidity risk and volatility particularly in the US, EU, Switzerland and India. In addition, the portfolio is exposed to currency risks as some of the underlying portfolio is invested in assets denominated in non-US currencies while the Company's functional currency is USD. Investments in certain countries such as India and China are exposed to governmental and regulatory risks.  The SRS Charminar investment is specifically subject to regulatory and legal risks as well as currency risk.

The mitigation of these risks is achieved by investment diversification, both by sector and by geography. The Group also engages from time to time in certain hedging activities to mitigate these risks.

Internal risks to shareholders and their returns are related to Portfolio risks (investment and geography selection and concentration), balance sheet risk (gearing) and/or investment mismanagement risks. The Group's portfolio has a significant exposure to senior secured loans of US companies and emerging market countries therefore has a concentration risk to this asset class.

A periodic internal review is performed to ensure transparency of Group activities and investments. All service providers to the Group are regularly reviewed. The mitigation of the risks related to investments is effected by investment restrictions and guidelines and through reviews at Board Meetings.

As the portfolio of the Company is invested in non USD currencies (mainly EUR, CHF and INR), it is exposed to movements in these currencies.

On the asset side, the Group's exposure to interest rate risk is limited to the interest bearing deposits and portfolio of bonds and loans in which the Group invests. 

Management monitors liquidity to ensure that sufficient liquid resources are available to the Group. The Group's credit risk is primarily attributable to its fixed income portfolio, which is exposed to corporate bonds with a particular exposure to the financial sector and to US senior secured loans.

Share Capital

There was no change in the authorised share capital during the year to 31 December 2014. The authorised share capital is 1,000,000,000 ordinary shares with no par value.

Related party transactions

Details of any transactions of the Group with related parties during the year to 31 December 2014 are disclosed in note 32 to the consolidated financial statements.

By order of the Board of Directors

Chief Executive Officer

26 May 2015

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

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Livermore Investments Group Limited (the ''Company'') and its subsidiaries (together with the Company, ''the Group''), which comprise the consolidated statement of financial position as at 31 December 2014 and the consolidated statements of profit or loss, comprehensive income, changes in equity, and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Board of Directors' Responsibility for the Consolidated Financial Statements

The Board of Directors is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union (EU) and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2014 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU.

Emphasis of Matters

We draw attention to Note 4 to the consolidated financial statements which describes the existence of material uncertainty of the future cash flows relating to the investment of the Group through SRS Charminar Investments Ltd, an Indian Real Estate company.

We also draw attention to Note 34 to the consolidated financial statements which describes the existence of material uncertainty over the outcome of a legal case against one of the custodian banks that the Group uses and Livermore as the beneficial owner.

Our opinion is not qualified in respect of these matters.

Other Matter

This report, including the opinion, has been prepared for and only for the Company's members as a body and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to.

Augoustinos Papathomas

Certified Public Accountant and Registered Auditor for and on behalf of

Grant Thornton (Cyprus) Ltd

Certified Public Accountants and Registered Auditors

Limassol

Date: 26 May 2015

Livermore Investments Group Limited

Consolidated Statement of Financial Position as at 31 December 2014

	Note	2014	2013
Assets		US $000	US $000
Non-current assets
Property, plant and equipment	3	42	23
Available- for-sale financial assets	4	99,374	116,846
Financial assets at fair value through profit or loss	5	1,806	2,157
Investment property	8	116,609	129,916
Investments in associate and joint venture	9	-	5,524
Other assets	12	2,538	3,384
		---------	---------
		220,369	257,850
		---------	---------
Current assets
Trade and other receivables	12	20,890	3,399
Available- for-sale financial assets	4	2,561	3,242
Financial assets at fair value through profit or loss	5	3,704	13,244
Current tax asset	21	-	6
Derivative financial instruments	16	1,125	-
Cash at bank	13	3,807	4,150
		---------	---------
		32,087	24,041
		---------	---------
Total assets		252,456	281,891
		---------	---------
Equity
Share capital	14	-	-
Share premium and treasury shares	14	178,597	178,597
Other reserves		2,937	13,539
Retained earnings		(21,560)	(23,765)
		---------	---------
Total equity		159,974	168,371
		---------	---------
Liabilities
Non-current liabilities
Deferred tax	11	2,272	1,956
		---------	---------
		2,272	1,956
		---------	---------
Current liabilities
Bank loans	17	78,092	87,974
Bank overdrafts	18	10,355	15,188
Short term bank loans	19	-	3,475
Trade and other payables	20	1,758	2,776
Provisions	33	-	26
Current tax payable	21	5	-
Derivative financial instruments	16	-	2,125
		---------	---------
		90, 210	111,564
		---------	---------
Total liabilities		92,482	113,520
		---------	---------
Total equity and liabilities		252,456	281,891
		---------	---------
Net asset value per share
Basic and diluted net asset value per share (US $)	22	0.82	0.86
		---------	---------

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

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

Livermore Investment Group Limited

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

	Note	2014		2013
		US $000		US $000
Investment income
Interest and dividend income	24	26,619		29,068
Investment property income	25	5,159		5,473
Loss on  investments	26	(9,885)		(13,652)
		------		------
Gross profit		21,893		20,889
Other income	27	462		55
Administrative expenses	28	(7,219)		(12,259)
		------		------
Operating profit		15,136		8,685
Finance costs	29	(7,286)		(5,242)
Finance income	29	109		906
		------		------
Profit before taxation		7,959		4,349
Taxation charge	30	(755)		(1,875)
		------		------
Profit for the year		7,204		2,474
		------		------
Earnings per share
Basic and diluted earnings per share ( US $)	31	0.04		0.01
		------		------

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

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

Livermore Investment Group Limited

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

	Note	2014		2013
		US $000		US $000
Profit for the year		7,204		2,474
Other comprehensive income:
Items that will be reclassified subsequently to the profit or loss
Available for sale financial assets - fair value losses		(17,128)		(8,840)
Foreign exchange (losses) / gains from translation of subsidiaries		(626)		92
		------		------
		(10,550)		(6,274)
		------		------
Reclassification to profit or loss
Available for sale financial assets
- Reclassification to profit or loss due to disposals	26	(1,709)		892
- Reclassification to profit or loss due to impairment	26	8,861		2,499
		------		------
		7,152		3,391
		------		------
Total comprehensive income for the year		(3,398)		(2,883)
		------		------

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

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

Livermore Investment Group Limited

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

	Note	Share capital	Share premium	Treasury Shares	Share option reserve	Translation reserve	Investments revaluation reserve	Retained earnings	Total
		US $000	US $000	US $000	US $000	US $000	US $000	US $000	US $000
Balance at 1 January 2013		-	215,499	(35,180)	5,777	(880)	13,999	(26,239)	172,976
Purchase of own shares	14	-	-	(1,722)	-	-	-	-	(1,722)
		------	------	------	------	------	------	------	------
Transactions with owners		-	-	(1,722)	-	-	-	-	(1,722)
		------	------	------	------	------	------	------	------
Profit for the year		-	-	-	-	-	-	2,474	2,474
Other comprehensive income:
Available-for-sale financial assets
- Fair value losses		-	-	-	-	-	(8,840)	-	(8,840)
- Reclassification to profit or loss due to disposals	26	-	-	-	-	-	892	-	892
- Reclassification to profit or loss due to impairment	26	-	-	-	-	-	2,499	-	2,499
Foreign exchange gains arising from translation of subsidiaries		-	-	-	-	92	-	-	92
		------	------	------	------	------	------	------	------
Total comprehensive income for the year		-	-	-	-	92	(5,449)	2,474	(2,883)
		------	------	------	------	------	------	------	------
Balance at 31 December 2013		-	215,499	(36,902)	5,777	(788)	8,550	(23,765)	168,371
Dividends		-	-	-	-	-	-	(4,999)	(4,999)
		------	------	------	------	------	------	------	------
Transactions with owners		-	-	-	-	-	-	(4,999)	(4,999)
		------	------	------	------	------	------	------	------
Profit for the year		-	-	-	-	-	-	7,204	7,204
Other comprehensive income:
Available-for-sale financial assets
- Fair value losses		-	-	-	-	-	(17,128)	-	(17,128)
- Reclassification to profit or loss due to disposals	26	-	-	-	-	-	(1,709)	-	(1,709)
- Reclassification to profit or loss due to impairment	26	-	-	-	-	-	8,861	-	8,861
Foreign exchange gains arising from translation of subsidiaries		-	-	-	-	(626)	-	-	(626)
		------	------	------	------	------	------	------	------
Total comprehensive income for the year		-	-	-	-	(626)	(9,976)	7,204	(3,398)
		------	------	------	------	------	------	------	------
Balance at 31 December 2014		-	215,499	(36,902)	5,777	(1,414)	(1,426)	(21,560)	159,974
		------	------	------	------	------	------	------	------

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

Livermore Investments Group Limited

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

	Note	2014	2013
		US $000	US $000
Cash flows from operating activities
Profit before tax		7,959	4,349
Adjustments for
Depreciation	3	13	32
Provisions for legal and other cases	33	-	(274)
Interest expense	29	3,780	4,739
Interest and dividend income	24	(26,619)	(29,068)
Loss on investments	26	9,885	13,652
Exchange differences	29	3,506	503
		----------	----------
		(1,476)	(6,067)
Changes in working capital
Increase in trade and other receivables		(16,292)	(817)
Decrease in trade and other payables		(1,050)	(3,539)
		----------	----------
Cash flows from operations		(18,818)	(10,423)
Interest and dividends received		25,773	28,821
Tax paid		(167)	(572)
		----------	----------
Net cash from operating activities		6,788	17,826
		----------	----------
Cash flows from investing activities
Purchase of property, plant and equipment		(32)	-
Acquisition of investments		(27,340)	(43,597)
Proceeds from sale of investments		33,262	28,850
Acquisition of  joint venture	9	-	(5,000)
Capital return of  joint venture		5,000	-
		----------	----------
Net cash used for investing activities		10,890	(19,747)
		----------	----------
Cash flows from financing activities
Purchase of own shares	14	-	(1,722)
Proceeds from bank loans		7,242	48,374
Repayments of bank loans		(11,547)	(45,605)
Interest paid		(3,884)	(4,739)
Settlement of litigation		(26)	-
Dividends paid		(4,999)	-
		----------	----------
Net cash used for financing activities		(13,214)	(3,692)
		----------	----------
Net increase / (decrease) in cash and cash equivalents		4,464	(5,613)
Cash and cash equivalents at the beginning of the year		(11,038)	(5,254)
Exchange differences on cash and cash equivalents		93	(182)
Translation differences on foreign operations' cash and cash equivalents		(67)	11
		----------	----------
Cash and cash equivalents at the end of the year	13	(6,548)	(11,038)
		----------	----------

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

Notes on the Financial Statements

1.     General Information

Incorporation, principal activity and status of the Company

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

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

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

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

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

2.     Accounting Policies

The significant accounting policies applied in the preparation of the consolidated financial statements are as follows:

2.1.   Basis of preparation

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

·      Financial instruments at fair value through profit or loss (including derivatives) are measured at fair value.

·      Available- for- sale financial assets are measured at fair value.

·      Investment property is measured at fair value.

·      Investments in associates and joint ventures are measured at fair value.

The financial information is presented in US dollars because this is the currency in which the Group primarily operates.

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

2.2.   Adoption of new and revised IFRS 

As from 1 January 2014, the Company adopted all the new or revised IFRS and relevant amendments which became effective and also were endorsed by the European Union, and are relevant to its operations.

The adoption of the above did not have a material effect on the financial statements.

All IFRS issued by the International Standards Board (IASB) which are effective for the year ended 31 December 2014, have been adopted by the EU through the endorsement procedure established by the European Commission, with the exception of certain provisions of IAS 39: "Financial Instruments: Recognition and Measurement" relating to portfolio hedge accounting.

The following Standards, Amendments to Standards and Interpretations had been issued by the date of authorisation of these financial statements but are not yet effective for the year ended 31 December 2014:

	Endorsed by the EU	Effective for annual periods beginning on or after
·      IFRS 9: "Financial Instruments"	No	1 January 2018
·      IFRS 14: "Regulatory Deferral Accounts"	No	1 January 2016
·      IFRS 15: "Revenue from Contracts with Customers"	No	1 January 2017
·      Annual Improvements 2010-2012 Cycle	Yes	1 July 2014
·      Annual Improvements 2011-2013 Cycle	Yes	1 July 2014
·      Annual Improvements 2012-2014 Cycle	No	1 January 2016
·      Amendment to IFRS 10, IFRS 12, and IAS 28: "Investment Entities: Applying the Consolidation Exception"	No	1 January 2016
·      Amendment to IFRS 10, and IAS 28: "Sale or Contribution of Assets between an Investor and its Associate or Joint Venture"	No	1 January 2016
·      Amendment to IFRS 11: "Accounting for Acquisitions of Interests in Joint Operations"	No	1 January 2016
·      Amendment to IAS 1: "Disclosure Initiative"	No	1 January 2016
·      Amendment to IAS 16 and IAS 38: "Clarification of Acceptable Methods of Depreciation and Amortisation"	No	1 January 2016
·      Amendments to IAS 16 and IAS 41: "Bearer Plants"	No	1 January 2016
·      Amendment to IAS 19: "Defined Benefit Plans: Employee Contributions"	Yes	1 July 2014
·      Amendment to IAS 27: "Equity Method in Separate Financial Statements"	No	1 January 2016

The Board of Directors expects that when the above Standards or Interpretations become effective in future periods, they will not have a material effect on the financial statements of the Company.

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

2.3.   Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and all of its subsidiaries. Control is achieved where the Company is exposed, or has right, to variable returns from its involvement with a subsidiary and has the ability to affect those returns through its power over the subsidiary.  

The financial statements of all the Group companies are prepared using uniform accounting policies.  Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Group.  All subsidiaries have a reporting date of 31 December.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

The results and cash flows of any subsidiaries acquired or disposed of during the year are included in the consolidated financial statements from the effective date of acquisition or up to the effective date of disposal.

2.4.   Investments in associates and joint ventures

An associate is an entity over which the Group is able to exert significant influence but not control.

A joint venture is an arrangement that the Group controls jointly with one or more other investors, and over which the Group has rights to a share of the arrangement's net assets rather than direct rights to underlying assets and obligations for underlying liabilities.

Investments in associates and joint ventures are measured at fair value through profit or loss in accordance with IAS 39, based on the exemption available by IAS 28 "Investments in Associates and Joint Ventures" for entities that are venture capital organisations or similar entities.

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

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

• held primarily for trading, or

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

• cash and cash equivalent not restricted in their use.

All other assets are non-current.

2.6.   Investment property income

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

2.7.   Interest and dividend income

·  Interest income is recognised based on the effective interest method. 

·  Dividend income is recognised on the date that the Group's right to receive payment is established, which in the case of quoted securities is the ex-dividend date. 

2.8.   Foreign currency

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

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

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

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

(i)        assets and liabilities are translated at the closing rate at the reporting date; and

(ii)       income and expenses and also cash flows are translated at an average exchange rate (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case the items are translated at the rates prevailing at the dates of the transactions); and

(iii)      exchange differences arising are recognised in other comprehensive income within the translation reserve.  Such translation exchange differences are reclassified to profit or loss in the period in which the foreign operation is disposed of. 

2.9.   Taxation

Current tax is the tax currently payable based on taxable profit for the year in accordance with the tax laws applicable in jurisdictions where the Group operates.

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

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

Changes in deferred tax assets or liabilities are recognised as a component of tax expense within profit or loss, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.

2.10. Property, plant and equipment

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

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

Computer Hardware                      -              33.3%

Fixtures and Fittings                      -              10%

Office Renovation                          -              25%

Motor Vehicles                                               -              25%

2.11. Investment property

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

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

Investment property is valued at fair value based on valuations provided by a certified external valuer.   

2.12. Equity instruments

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

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

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

2.13. Share Options

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

The Group issues equity-settled share based payments to certain employees. The fair value of share-based payments to employees at grant date is measured using the Binomial pricing model.

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

On exercise of the options any related amounts recognised in the share option reserve are transferred to share premium.

On lapse of the options any related amounts recognised in the share option reserve are transferred to retained earnings.

2.14. Leases

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

2.15. Borrowing costs

Borrowing costs primarily comprise interest on the Group's borrowings.  Any borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of the corresponding assets until such time as the assets are substantially ready for their intended use or sale.  All other borrowing costs are expensed in the period in which they are incurred and reported within "finance costs".

No borrowing costs have been capitalised for either 2014 or 2013.

2.16. Financial assets

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

A financial asset is derecognised only where the contractual rights to the cash flows from the asset expire or the financial asset is transferred and that transfer qualifies for derecognition.  A financial asset is transferred if the contractual rights to receive the cash flows of the asset have been transferred or the Group retains the contractual rights to receive the cash flows of the asset but assumes a contractual obligation to pay the cash flows to one or more recipients.  A financial asset that is transferred qualifies for derecognition if the Group transfers substantially all the risks and rewards of ownership of the asset, or if the Group neither retains nor transfers substantially all the risks and rewards of ownership but does transfer control of that asset.

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

Financial assets are measured subsequently as described below.

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

Loans and receivables

·      Trade and other receivables

Trade and other receivables are initially recognised and carried at their fair value which normally is their original transaction value, and are subsequently measured at their amortised cost.  An estimate for doubtful debts is made when collection of the full amount is no longer probable.  Bad debts are written off when identified.  Where the time value of money is significant receivables are discounted to present value. 

·      Cash and cash equivalents

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

Bank overdrafts are considered to be a component of cash and cash equivalents, since they form an integral part of the Group's cash management.  

Financial assets at fair value through profit or loss

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

Available-for-sale financial assets

Available-for-sale financial assets include non-derivative financial assets that are either designated as such or do not qualify for inclusion in any of the other categories of financial assets.  Financial assets within this category are measured at fair value, with changes in fair value recognised in other comprehensive income, within the investments revaluation reserve.  Unquoted equity investments for which the fair value cannot be reliably measured are stated at cost less impairment.  Gains and losses arising from investments classified as available-for-sale are recognised in the profit or loss when they are sold or when the investment is impaired.

In the case of impairment of available-for-sale financial assets, the cumulative loss previously recognised in other comprehensive income is reclassified to profit or loss.  Impairment losses recognised in the profit or loss on equity instruments are not subsequently reversed through the profit or loss.  Impairment losses recognised previously on debt securities are reversed through the profit or loss when the increase in fair value can be related objectively to an event occurring after the impairment loss was recognised in the profit or loss.

An assessment for impairment is undertaken at least at each reporting date, following the IAS 39 guidance.

2.17. Financial liabilities

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

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

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

Financial liabilities at amortised cost

After initial recognition financial liabilities are measured at amortised cost using the effective interest rate method.

Derivative financial liabilities

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

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

2.18. Segment reporting

In identifying its operating segments, management generally follows the Group's investment activity lines. Each of these operating segments is managed separately as each of these investment activity lines requires different monitoring and strategic decision making process as well as allocation of resources.

The measurement policies the Group uses for segment reporting under IFRS 8 are the same as those used in its consolidated financial statements. Any inter-segment transfers are carried out at arm's length prices.

2.19. Critical accounting judgments and key sources of estimation uncertainty

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and requires management to exercise its judgement in the process of applying the Group's accounting policies. It also requires the use of assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting judgements

(i)        Impairment of available-for-sale financial assets

The Group follows the guidance in IAS 39 on determining when an investment is impaired.  This determination requires significant judgments.  In making this judgment, the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost and the financial health and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and financing cash flow. The management regards a fall in fair value below cost of 30% or more, or for 12 months or more, to be significant.  

The Group assesses at each reporting date whether financial assets are impaired.  If impairment has occurred, this loss is recognised to profit or loss.

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

(ii)      Classification of financial assets

The Management exercises significant judgement in determining the appropriate classification of the financial assets of the Group, especially for its investments and the identification of any embedded derivatives.  The factors considered include the contractual terms and characteristics which are very carefully examined, and also the Group's intentions and expected needs for the realisation of the financial assets.

Investments in loan markets through CLOs are classified as available-for-sale. All other investments are classified as at fair value through profit or loss upon initial recognition, because this reflects more fairly the way these assets are managed by the Group. The Group's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy, and information about the portfolio is provided internally on that basis to the Group's Board of Directors and other key management personnel.

(iii)         Deferred tax assets

The tax rules applicable for the relevant Company's operations are carefully taken into consideration for the recognition of a deferred tax asset. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances.

Estimation uncertainty

The following are the significant estimates that have the most significant effect on recognition and measurement of relevant items. 

(i)            Fair value of financial instruments

Management uses valuation techniques in measuring the fair value of financial instruments, where active market quotes are not available. Details of the bases used for financial assets and liabilities are disclosed in note 7.  In applying the valuation techniques management makes maximum use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.

Refer also to note 4 for estimation uncertainty over the fair value determination of the investment in SRS Charminar.

(ii)           Fair value of investment property

Investment property is stated at fair value.  The fair valuation is based on discounted cash-flow (DCF) method. Under this method, the current market value of the property is determined as the total of all projected future net earnings (before interest, taxes, depreciation and amortization) discounted to present-day equivalents. These net earnings are discounted individually for property with due allowance for specific opportunities and threats, and with adjustment in line with market conditions and risks.  A one-period DCF model was adopted under which the valuation period extends for 100 years from the valuation date, with an implicit residual value in the 11th period. Discounting is based on a risk-adjusted interest rate and a gross yield determined individually for each property on the basis of appropriate benchmarks derived from arm's-length transactions. The weighted average discount rate used is 4.09% and the weighted average gross yield used is 4.68%. The valuations assume 1% annual inflation for income and all expenditure.

Further details are disclosed in note 8.

3.     Property, plant and equipment

	Office Renovation	Computer Hardware	Fixtures and Fittings	Motor Vehicles		Total
	US $000	US $000	US $000	US $000		US $000
Cost
As at 1 January 2013	367	163	111	26		667
Additions	10	13	2	-		25
	------	------	------	------		------
As at 1 January 2014	377	176	113	26		692
Additions	-	-	-	32		32
Disposals	-	-	-	(26)		(26)
	------	------	------	------		------
As at 31 December 2014	377	176	113	32		698
Accumulated depreciation
As at 1 January 2013	(367)	(154)	(95)	(21)		(637)
Charge for the year	(10)	(10)	(7)	(5)		(32)
	------	------	------	------		------
As at 1 January 2014	(377)	(164)	(102)	(26)		(669)
Charge for the year	-	(8)	(5)	-		(13)
On disposals	-	-	-	26		26
	------	------	------	------		------
As at 31 December 2014	(377)	(172)	(107)	-		(656)
	------	------	------	------		------
Net book value
As at 31 December 2014	-	4	6	32		42
	------	------	------	------		------
As at 31 December 2013	-	12	11	-		23
	------	------	------	------		------

4.     Available-for-sale financial assets

	2014 US $000	2013 US $000
Non-current assets
Fixed income investments (CLO Income Notes)	82,217	91,881
Private equities	7,891	15,897
Financial and minority holdings	9,266	9,068
	------	------
	99,374	116,846
	------	------
Current assets
Public equity investments	1,491	2,214
Hedge funds	1,070	1,026
Other investments	-	2
	------	------
	2,561	3,242
	------	------

For description of each of the above categories, refer to note 6.

During 2014, due to market conditions, management considered the impairment of certain available-for- sale financial assets. Impairment testing indicated that for those financial assets their carrying amount may not be recoverable.

The related impairment charges in 2014, of USD 8.861m (2013 USD 2.499m), are included within loss on investments (note 26), and represent impairment losses arising due to:

	2014	2013
	US $000	US $000
Significant fall in value	5,693	1,707
Prolonged fall in value	1,328	-
Significant and prolonged fall in value	1,840	792
	------	------
	8,861	2,499
	------	------

Investment in SRS Charminar

Included in the Financial and minority holdings is the investment in SRS Charminar Investments Ltd ("SRS Charminar"), a private company incorporated in the Republic of Mauritius.  Livermore invested USD 20m in SRS Charminar acquiring a 15% ownership stake. SRS Charminar through its wholly owned subsidiaries invested INR 5.2b (USD 132.1m at date of investment) which is equivalent to USD 82.5m as at 31 December 2014 (2013: 83m) in a real estate company in India ("investee company").

In 2009, the promoters of the investee company were arrested on charges of criminal conspiracy, cheating, and misappropriation of funds. Later it was discovered that the investee company had breached the terms of the investment agreement resulting in a default.

On January 13, 2011 the Company Law Board ("CLB") passed an order and allowed Infrastructure Leasing & Financial Services Limited ("IL&FS") to become an 80% shareholder and control the management of the company.

SRS Charminar and other investors have agreed to a settlement with IL&FS wherein the settlement amount will be paid in four tranches over five years. The last two tranches are not guaranteed by IL&FS and the significant uncertainty of these payments has been considered in the discount rates used of 45% and 50% respectively in contrast to the 10% used for discounting the first two tranches. Also, all regulatory and court approvals were received and the effective date of the settlement was fixed.

The carrying amount of the investment is based on discounted expected cash flows and was USD 9.1m (2013: USD 8.9m), which represents its estimated fair value. SRS Charminar's only holding is its investment in the investee company (through its wholly owned subsidiaries) and thus its fair value is wholly attributable to the above mentioned investment.  The fair value is based on discounted cash flow expectations and approximates the 15% share of the original investment in the real estate company as translated to USD.

Also included in Private equities is the investment in SRS Private Investments, L.P. ("SRS Private") with a carrying amount at reporting date of USD 3.7m (2013: USD 3.6m) which is based on a net asset valuation (NAV). SRS Private through a fund has invested in various real estate projects in India as well as in SRS Charminar, and its investment in SRS Charminar as at 31 December 2014 amounts approximately to 17% (2013: 13.1%) of its net assets.

5.         Financial assets at fair value through profit or loss

	2014	2013
	US $000	US $000
Non-current assets
Private equities	330	569
Real estate entities	1,476	1,588
	------	------
	1,806	2,157
	------	------
Current assets
Fixed income investments	1,623	1,609
Public equity investments	1,717	10,137
Hedge funds	65	1,209
Other investments	299	289
	------	------
	3,704	13,244
	------	------

For description of each of the above categories, refer to note 6.

6.         Financial assets at fair value

The Group allocates its non-derivative financial assets at fair value (notes 4 and 5) as follows:

·      Fixed income investments relate to fixed and floating rate bonds, perpetual bank debt, and investments in the loan market through CLOs.

·      Private equities relate to investments in both high growth opportunities in emerging markets and deep value opportunities in mature markets. The company generally invests directly in prospects where it can exert significant influence.

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

·      Hedge funds relate to investments in funds managed by sophisticated investment managers that pursue investment strategies with the goal of generating absolute returns.

·      Public equity investments relate to investments in shares of companies listed on public stock exchanges.

·      Real estate entities relate to investments in real estate projects.

·      Other investments are investments not otherwise included in the categories above. 

7.         Fair value measurements of financial assets and liabilities

The following table presents financial assets measured at fair value in the consolidated statement of financial position in accordance with the fair value hierarchy.  This hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels:

-       Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

-       Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

-       Level 3: unobservable inputs for the asset or liability.

The level within which the financial asset is classified is determined based on the lowest level of significant input to the fair value measurement.

Valuation of financial assets and liabilities

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

The Group values the CLOs based on the valuation reports provided by market makers. CLOs are typically valued by market makers using discounted cash flow models. The key assumptions for cash flow projections include default and recovery rates, prepayment rates and reinvestment assumptions on the underlying portfolios (typically senior secured loans) of the CLOs.

Default and recovery rates: The amount and timing of defaults in the underlying collateral and the amount and timing of recovery upon a default affect are key to the future cash flows a CLO will distribute to the CLO equity tranche. All else equal, higher default rates and lower recovery rates typically lead to lower cash flows. Conversely, lower default rates and higher recoveries lead to higher cash flows.

Prepayment rates: Senior loans can be pre-paid by borrowers. CLOs that are within their reinvestment period may, subject to certain conditions, reinvest such prepayments into other loans which may have different spreads and maturities. CLOs that are beyond their reinvestment period typically pay down their senior liabilities from proceeds of such pre-payments. Therefore the rate at which the underlying collateral prepays impacts the future cash flows that the CLO may generate.

Reinvestment assumptions: A CLO within its reinvestment period may reinvest proceeds from loan maturities, prepayments, and recoveries into purchasing additional loans. The reinvestment assumptions define the characteristics of the loans that a CLO may reinvest in. These assumptions include the spreads, maturities, and prices of such loans. Reinvestment into loans with higher spreads and lower prices will lead to higher cash flows. Reinvestment into loans with lower spreads will typically lead to lower cash flows.

Discount rate: The discount rate indicates the yield that market participants expect to receive and is used to discount the projected future cash flows. Higher yield expectations or discount rates lead to lower prices and lower discount rates lead to higher prices for CLOs.  

·      Hedge Funds and Private Equity Funds are valued per reports provided by the funds on a periodic basis, and if traded, per their closing bid market prices on quoted exchanges, or as quoted by market maker.

·      Private Equities and unlisted investments are valued using market valuation techniques as determined by the Directors, mainly on the basis of discounted cash flow techniques or valuations reported by third-party managers of such investments. 

·      Derivative instruments are valued at fair value as provided by counter parties of the derivative agreement. 

Financial assets and financial liabilities measured at fair value in the consolidated statement of financial position are grouped into the fair value hierarchy as follows:               

	2014 US $000	2014 US $000	2014 US $000	2014 US $000	2013 US $000	2013 US $000	2013 US $000	2013 US $000
	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Assets
Fixed income investments	1,623	82,217	-	83,840	1,609	91,881	-	93,490
Private equities	-	-	8,221	8,221	6,816	-	9,650	16,466
Financial and minority holdings	-	-	9,266	9,266	-	-	9,068	9,068
Public equity investments	3,208	-	-	3,208	12,351	-	-	12,351
Hedge funds	-	1,135	-	1,135	-	2,235	-	2,235
Real estate entities	-	-	1,476	1,476	-	-	1,588	1,588
Investment in associate and joint venture	-	-	-	-	-	5,524	-	5,524
Other investments	299	-	-	299	289	-	2	291
Total return swaps	-	-	1,125	1,125	-	-	-	-
	------	------	------	------	------	------	------	------
	5,130	83,352	20,088	108,570	21,065	99,640	20,308	141,013
	------	------	------	------	------	------	------	------
Liabilities
Interest rate swaps	-	-	-	-	-	2,125	-	2,125
	------	------	------	------	------	------	------	------
	-	-	-	-	-	2,125	-	2,125
	------	------	------	------	------	------	------	------

The methods and valuation techniques used for the purpose of measuring fair value are unchanged compared to the previous reporting period.

No financial assets or liabilities have been transferred between levels.

Financial assets within level 3 can be reconciled from beginning to ending balances as follows:

		Available-for-sale			At fair value through  profit or loss		Derivative financial instruments
	Financial and minority holdings		Private equities	Other investments	Real estate	Private equities	Total return swap	Total
	US $000		US $000	US $000	US $000	US $000	US $000	US $000
As at 1 January 2013	10,469		10,352	5	1,752	1,965	-	24,543
Purchases	-		263	-	-	-	-	263
Losses recognised in:							-
-Profit or loss	(1,401)		(517)	(3)	(603)	(671)	-	(3,195)
-Other comprehensive income	-		(1,017)	-	-	-	-	(1,017)
Exchange difference	-		-	-	439	-	-	439
	------		------	------	------	------	------	------
As at 1 January 2014	9,068		9,081	2	1,588	569	-	20,308
Sales	-		-	-	-	-	-	-
Purchases	-		323	-	-	-	-	323
(Losses) / gains recognised in:
-Profit or loss	-		(1,470)	-	68	(239)	1,125	(516)
-Other comprehensive income	198		(43)	(2)	-	-	-	153
Exchange difference	-		-	-	(180)	-	-	(180)
	------		------	------	------	------	------	------
As at 31 December 2014	9,266		7,891	-	1,476	330	1,125	20,088
	------		------	------	------	------	------	------

The above gains and losses recognised can be allocated as follows:

		Available-for-sale			At fair value through  profit or loss		Derivative financial instruments
	Financial and minority holdings		Private equities	Other investments	Real estate	Private equities	Total return swap	Total
2013	US $000		US $000	US $000	US $000	US $000	US $000	US $000
Profit or loss
-Financial assets held at year-end	(1,401)		(517)	(3)	(603)	(671)	-	(3,195)
	------		------	------	------	------	------	------
	(1,401)		(517)	(3)	(603)	(671)	-	(3,195)
	------		------	------	------	------	------	------
Other comprehensive income
-Financial assets held at year-end	-		(1,017)	-	-	-	-	(1,017)
	------		------	------	------	------	------	------
	-		(1,017)	-	-	-	-	(1,017)
	------		------	------	------	------	------	------
Total gains / (losses) for 2013	(1,401)		(1,534)	(3)	(603)	(671)	-	(4,212)
	------		------	------	------	------	------	------
2014	US $000		US $000	US $000	US $000	US $000	US $000	US $000
Profit or loss
-Financial assets held at year-end	-		(1,470)	-	68	(239)	1,125	(516)
	------		------	------	------	------	------	------
	-		(1,470)	-	68	(239)	1,125	(516)
	------		------	------	------	------	------	------
Other comprehensive income
-Financial assets held at year-end	198		(43)	(2)	-	-	-	153
	------		------	------	------	------	------	------
	198		(43)	(2)	-	-	-	153
	------		------	------	------	------	------	------
Total gains / (losses) for 2014	198		(1,513)	(2)	68	(239)	1,125	(363)
	------		------	------	------	------	------	------

The Group has not developed any quantitative unobservable inputs for measuring the fair value of its level 3 financial assets at 31 December 2014 and 2013.  Instead the Group used prices from third-party pricing information without adjustment.

A reasonable change in any individual significant input used in the level 3 valuations is not anticipated to have a significant change in fair values as above.

8.         Investment property

	2014	2013
	US $000	US $000
Valuation as at 1 January	129,916	126,543
Fair value gain / (loss) - recognised in profit or loss	61	(179)
Exchange difference	(13,368)	3,552
	------	------
As at 31 December	116,609	129,916
	------	------

The investment property relates to Wyler Park property in Bern, Switzerland, which is used for earning rental income. The Group has no restriction on the realizability of the property or the remittance of income and any proceeds of disposal.

Wyler Park property investment loan (note 17) is secured on the property itself.

Fair valuation

The investment property is the Group's only non-financial asset measured at fair value on a recurring basis, and its fair value is classified within the fair value hierarchy as level 3.

The investment property was valued by the independent professional valuers Wüest & Partners as at 31 December 2014 and 2013 on the basis of open market value in accordance with the appraisal and valuation guidelines of the Royal Institute of Certified Surveyors, and the European Group of Valuers' Associations. The investment property is revalued annually on 31 December.

The significant inputs and assumptions are developed in close consultation with management. The valuation processes and fair value changes are reviewed by the Board of Directors at each reporting date.

The fair values of investment property are estimated using the discounted cash-flow (DCF) method. With this method, the current market value of a property is determined as the total of all projected future net earnings (before interest, taxes, depreciation and amortization) discounted to present-day equivalents. These net earnings are discounted individually for each property with due allowance for specific opportunities and threats, and with adjustment in line with market conditions and risks. All projected cash flows are presented to ensure maximum transparency.

The valuations are based on the following assumptions:

- The property has been appraised as continuation scenario. That means, that no change of use scenarios have been calculated as well that would result to a higher value.

- A one-period DCF model was adopted. The valuation period extends for 100 years from the valuation date, with an implicit residual value in the 11th period.

- Discounting is based on a risk-adjusted interest rate. Rates are determined individually for each property  on the basis of appropriate benchmarks derived from arm's-length transactions. They may be broken down as follows: risk-free interest rate + property risk (immobility of capital) + premium for macro-location + premium for micro-location depending on use + premium for property quality and income risk + any other specific premiums.

- Unless otherwise stated, the valuations assume 1% annual inflation for income and all expenditure. Where a nominal discount rate is applied, this is adjusted accordingly.

- Credit risks posed by specific tenants are not explicitly factored into the valuation.

- Allowance is made for the specific indexing provisions in existing leases. An indexing factor of 80% (Swiss average) is assumed for the period following lease expiry.

- For existing tenancies, the timing of individual payments is assumed to comply with the terms of the lease.

Following lease expiry, cash flows for commercial premises are taken to be quarterly in advance, for housing monthly in advance.

- In terms of running costs, entirely separate service charge accounts are assumed, with no tenancy-related ancillary costs to be borne by the owner.

- The maintenance (repair and upkeep) costs were calculated by means of a lifecycle analysis of the individual building elements. The building structure's remaining lifespan was estimated and periodic refurbishments modelled on the basis of the general condition of the fabric as determined during the property inspection.

Appropriate annual reserves were calculated accordingly and plausibility tested using comparables and Wüest & Partner's own benchmarks. The calculation factors in 100% of repair costs in the first 10 years; the proportion applied from year 11 onwards is limited to the value-preserving investments (recoverable share).

The valuations are sensitive to the above inputs, all of which are unobservable. 

Future rental income

The future minimum rental income under non-cancellable rental agreements, is receivable as follows:

	2014	2013
	US $000	US $000
- Less than 1 year	5,923	5,851
- Between 1 and 5 years	21,186	26,105
	------	------
	27,109	31,956
	------	------

Rental agreements are quoted in Swiss Francs.  The equivalent USD amounts shown in the table above are based on the exchange rates as at 31 December 2014 and 31 December 2013 respectively.

9.     Investments in associate and joint venture

				2014	2013
				US $000	US $000
As at 1 January				5,524	-
Additions				-	5,000
Capital return				(5,000)	-
Fair value (loss) / gain				(524)	524
				------	------
As at 31 December				-	5,524
				------	------
Name of investee	Type of investment	Place of incorporation	Principal activity			Proportion of voting rights held		Fair value
								2014 US $000	2013 US $000
Silvermore Ltd	Joint venture	Cayman Islands	Investment holding (dormant)			50%		-	5,524
Covenant Credit Partners LLC*	Associate	Delaware, US	Investment holding			52.5%		-	-
								-----	------
								-	5,524
								-----	-----

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

The joint venture does not prepare any financial information. As at 31 December 2014 Silvermore had ceased to be a contractual party to a Total Return Swap (ISDA) agreement with Citibank N.A. and had no other assets or liabilities. Silvermore Ltd was dissolved in January 2015.

10.  Details of subsidiaries

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

Name of Subsidiary	Place of incorporation	Holding	Proportion of voting rights and shares held	Principal activity
Livermore Properties Limited	British Virgin Islands	Ordinary shares	100%	Holding of investments
Mountview Holdings Limited*	British Virgin Islands	Ordinary shares	100%	Investment vehicle
Silvermore 2 Ltd*	Cayman Islands	Ordinary shares	100%	Investment vehicle
Sycamore Loan Strategies Ltd*	Cayman Islands	Ordinary shares	100%	Investment vehicle
Sycamore Loan Funding Ltd*	Cayman Islands	Ordinary shares	100%	Investment vehicle
Livermore Israel Investments Ltd	Israel	Ordinary shares	100%	Holding of investments
Blackline Investments Inc.	USA	Ordinary shares	52.5%	Holding of investments (Dormant)
Livermore Capital AG	Switzerland	Ordinary shares	100%	Administration services
Livermore Investments AG**	Switzerland	Ordinary shares	100%	Real Estate owner and management
Enaxor S.a.r.l	Luxembourg	Ordinary shares	100%	Holding of investment
Livermore Investments Cyprus Limited	Cyprus	Ordinary shares	100%	Administration services
Sandhirst Limited	Cyprus	Ordinary shares	100%	Holding of investments

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

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

11.  Deferred tax 

The Company is an international business company based in the British Virgin Islands (BVI) and, under its laws, is not subject to taxation.  Deferred taxes relate to the temporary differences between carrying amounts and corresponding tax base of its subsidiaries, in Switzerland.

The deferred tax shown in the consolidated statement of financial position relates to the following items:

	2014	2013
	US $000	US $000
Investment property - revaluation surplus	(5,805)	(5,845)
Derivative financial instruments - recognised carrying amount	47	344
Tax losses	3,486	3,545
	------	------
Net deferred tax (liability)	(2,272)	(1,956)
	------	------

The movement on the deferred taxation account is as follows:

	Investment property	Derivative financial instruments	Tax losses	Total
	US $000	US $000	US $000	US $000
As at 1 January 2013	(4,503)	916	3,068	(519)
(Charged) / credited to profit or loss  (note 30)
- timing differences	(1,211)	(596)	390	(1,417)
Exchange difference	(131)	24	87	(20)
	------	------	------	------
As at 1 January 2014	(5,845)	344	3,545	(1,956)
(Charged) / credited to profit or loss  (note 30)
- timing differences	(329)	(294)	166	(457)
Exchange difference	369	(3)	(225)	141
	------	------	------	------
As at 31 December 2014	(5,805)	47	3,486	(2,272)
	------	------	------	------

The Group expects that future taxable profits will be available in the jurisdiction where the deferred tax assets occurred (Switzerland) so as to utilise the carrying amount of the deferred tax assets recognised as at the end of the year.

As at 31 December 2014 and 2013 there is no unrecognised deferred tax asset.

12.  Trade and other receivables

	2014	2013
	US $000	US $000
Financial items
Accrued interest and dividend income	514	79
Amounts due by related parties (note 32)	2,497	1,339
Other receivables	16,757	654
	------	------
	19,768	2,072
Non-Financial items
Other assets (note 32)	3,384	4,512
Prepayments	276	199
	------	------
	23,428	6,783
	------	------
Allocated as:
Current assets	20,890	3,399
Non-current assets	2,538	3,384
	------	------
	23,428	6,783
	------	------

Other receivables include:

(a)       an amount of USD 15m that the Company invested during the period in the first loss tranche of a warehouse facility for accumulating loans with the intention to transfer these loans to a CLO. In December 2014, the said CLO was priced and the loans accumulated in the warehouse were agreed to be transferred at purchase price to the CLO on 10 January, 2015. Consequently, Livermore's investment amount plus net carry earned became receivable as of the end of December 2014. On 16 January 2015 Livermore received a net amount of USD 16.3m.

(b)       an amount of USD 1m that the Company invested during the period in the first loss tranche of a warehouse facility for accumulating loans with the intention to transfer these loans to a CLO. In December 2014, the said CLO was priced and the loans accumulated in the warehouse were agreed to be transferred at purchase price to the CLO on 15 January, 2015. Consequently, Livermore's investment amount plus net carry earned became receivable as of the end of December 2014. On 16 January 2015 Livermore received a net amount of USD 1.39m.

13.  Cash and cash equivalents

Cash and cash equivalents included in the consolidated statement of cash flows comprise the following at the reporting date:

	2014	2013
	US $000	US $000
Cash at bank	3,807	4,150
Bank overdrafts used for cash management purposes	(10,355)	(15,188)
	------	------
Cash and cash equivalents for the purposes of the consolidated statement of cash flows	(6,548)	(11,038)
	------	------

14.  Share capital

Authorised share capital

The Company has authorised share capital of 1,000,000,000 ordinary shares with no par value, and no restrictions.

Issued share capital	Number of  shares	Share premium arising US $000
Ordinary shares with no par value
As at 31 December 2013 and 31 December 2014	304,120,401	215,499
	----------	----------

Treasury shares	Number of  shares	US $000
As at 1 January 2013	105,385,063	35,180
Additions	3,445,755	1,722
	----------	---------
As at 1 January 2014	108,830,818	36,902
	----------	---------
As at 31 December 2014	108,830,818	36,902
	----------	----------

  In the consolidated statement of financial position the amount included comprises of:      

	2014	2013
	US $000	US $000
Share premium	215,499	215,499
Treasury shares	(36,902)	(36,902)
	--------	--------
	178,597	178,597
	--------	--------

15.  Share options

The Company has a share option scheme for acquiring ordinary shares of the Company. 

Outstanding options	Number of  options	Average exercise price GBP	Average exercise price* USD
As at 31 December 2013 and 31 December 2014	11,340,000	0.75	1.18
	----------

Exercisable options	Number of  options	Average exercise price GBP	Average exercise price* USD
As at 31 December 2013 and 31 December 2014	11,340,000	0.75	1.18
	----------

Details of share options outstanding at 31 December 2014

Number of options	Grant date	Vesting date	Earliest exercise date	Expiry date of exercise period	Exercise price GBP	Exercise Price* USD	Fair value at grant date USD
230,000	07/12/05	07/12/06	07/12/06	07/12/15	0.71	1.11	82,739
230,000	07/12/05	07/12/07	07/12/07	07/12/15	0.71	1.11	94,333
230,000	07/12/05	07/12/08	07/12/08	07/12/15	0.71	1.11	103,948
3,383,334	19/07/06	19/07/07	19/07/07	19/07/16	0.78	1.22	1,608,710
3,383,333	19/07/06	19/07/08	19/07/08	19/07/16	0.78	1.22	1,824,133
3,383,333	19/07/06	19/07/09	19/07/09	19/07/16	0.78	1.22	2,001,774
166,667	13/05/08	13/05/09	13/05/09	13/05/18	0.30	0.47	21,703
166,667	13/05/08	13/05/10	13/05/10	13/05/18	0.30	0.47	24,115
166,666	13/05/08	13/05/11	13/05/11	13/05/18	0.30	0.47	25,820
----------							----------
11,340,000							5,787,275
----------							----------

The fair value of options granted to employees was determined using the Binomial valuation model.  The model takes into account a volatility rate of 41-45% calculated using the historical volatility of a peer group of similar companies and a risk free interest rate of 4.0-4.4% and it has been assumed the options have an expected life of two years post date of vesting.

The options lapse at the earliest of the expiry date of exercise period or the termination of the corresponding employee's service.

* The exercise prices as per the share option scheme are quoted in British Pounds.  The indicative equivalent USD amounts shown in the table of details above as well as the average exercise prices are based on the exchange rates as at 31 December 2014.

16.  Derivative financial instruments

	2014	2013
	US $000	US $000
Current assets
Total return swap	1,125	-
	------	------
Current liabilities
Interest rate swaps	-	2,125
	------	------

During 2014 and 2013 the Group used forward currency contracts; however, no such derivatives were open at 31 December 2014 or 2013.

As at year end the Group was a contractual party to a Total Return Swap (ISDA) agreement with Macquarie bank.  Based on the swap agreement the Group is entitled to receive the total returns arising from a portfolio of loan assets (referenced assets), and is obliged to pay interest at a floating rate on the facility amount (warehouse facility):

Referenced assets amount	Total returns	Facility amount	Floating rate	Maturity date
USD 300,000,000	Interest payments, fees, repayment premiums or penalties, and other distributions	USD 270,000,000	3M USD Libor + 1.9%	18 Sept. 2015

The swap was entered as a means for accumulating loans with the intention to transfer these loans to a CLO. In December 2014, the said CLO was priced and the loans accumulated in the warehouse were agreed to be transferred to the CLO on 10 January, 2015. Consequently, on 16 January 2015 the swap was terminated.

The calculation of the fair value of the swap is based on discounted cash flows of future anticipated interest payments compared with the discounted cash flows of anticipated total returns receivable.

The Group uses interest rate swaps to manage its exposure to interest rate movements on its bank borrowings by swapping a proportion from floating rates to fixed rates as follows:

Notional contract amount	Underlying floating rate	Contract  fixed  rate	Contract termination date
CHF 78,029,509 (2013: CHF 78,353,556)	3M CHF Libor	3.30%	30 July  2014
CHF 10,000,000	6M CHF Libor	3.255%	17 June 2014
CHF 10,000,000	6M CHF Libor	3.1675%	17 November 2014

The calculation of the fair value of the swaps is based on discounted cash flows of future anticipated interest payments on the swap agreements in place compared with the discounted cash flows of anticipated interest payments at market swap interest rates at the reporting date.

For the year ended 31 December 2014 a fair value gain of USD 3,131,381 (2013: gain USD 3,524,094) has been recognised in the profit or loss in relation to all derivative financial instruments.

17.  Bank loans

	2014	2013
	US $000	US $000
As at 1 January	87,974	86,258
Repayment	(830)	(706)
Exchange difference	(9,052)	2,422
	------	------
As at 31 December	78,092	87,974
	------	------
Allocated as:
Current bank loans	78,092	87,974
Non-current bank loans	-	-
	------	------
	78,092	87,974
	------	------

The bank loan relates to Wyler Park investment property purchase (note 8) and is secured on this property.  The loan balance was fully repayable on 12 July 2014.  The bank loan was extended for a six month period and became fully repayable on 31 January 2015.  Additionally in January 2015, the Group successfully refinanced the loan with a new bank loan. The principal amount of the new loan facility is CHF 68 million (USD 73 million). The facility is committed until at least 30 June 2019. Upon successful extension of the lease with SBB from 2019 to 2029, an additional CHF 10 million (USD 10.7 million) would be available under this facility. 

The weighted average effective Interest for the loan was 3.71% (2013: 3M CHF Libor + 0.85%). 

18.  Bank overdrafts

	2014	2013
	US $000	US $000
Short term bank overdrafts	10,355	15,188
	------	------

Short term bank overdrafts bear Libor + lender's margin and have an average interest rate of 1.49% (2013 1.77%).

The Group's bank overdraft facilities are secured by the Group's financial assets portfolio up to an amount, as at 31 December 2014, of USD 31.5m.

The Group's bank overdraft undrawn facilities at 31 December 2014 amount to USD 21.2m.

19.  Short term bank loans

	2014	2013
	US $000	US $000
Short term bank loans	-	3,475
	------	------

Short term bank loans bear Libor + lender's margin and at 31 December 2013 had an average interest rate of 2.66%.

The Group's short term bank loan facilities were secured by the Group's financial assets portfolio.

20.  Trade and other payables

		2014	2013
		US $000	US $000
Financial items
Trade payables		727	532
Amounts due to related parties (note 32)	579		1,212
Accrued expenses	430		964
	------		------
	1,736		2,708
Non-financial items
VAT payable	22		68
	------		------
	1,758		2,776
	------		------

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.  All amounts fall due within one year. 

21.  Current tax payable / (asset)

	2014	2013
	US $000	US $000
Corporation tax	5	(6)
	------	------

22.  Net asset value per share

Net asset value per share has been calculated by dividing the net assets attributable to ordinary shareholders by the closing number of ordinary shares (net of treasury 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 31 December 2014 and 31 December 2013.

	2014	2013
Net assets attributable to ordinary shareholders (USD 000)	159,974	168,371
	-------------	-------------
Closing number of ordinary shares in issue	195,289,583	195,289,583
	-------------	-------------
Basic net asset value per share (USD)	0.82	0.86
	-------------	-------------
Net assets attributable to ordinary shareholders (USD 000)	159,974	168,371
Dilutive share options - exercise amount	234	247
	-------------	-------------
Net assets attributable to ordinary shareholders including the effect of potentially diluted shares (USD 000)	160,208	168,618
	-------------	-------------
Closing number of ordinary shares in issue	195,289,583	195,289,583
Dilutive share options	500,000	500,000
	-------------	-------------
Closing number of ordinary shares including the effect of potentially diluted shares	195,789,583	195,789,583
	-------------	-------------
Diluted net asset value per share (USD)	0.82	0.86
	-------------	-------------
Number of Shares
Ordinary shares	304,120,401	304,120,401
Treasury shares	(108,830,818)	(108,830,818)
	-------------	-------------
Closing number of ordinary shares in issue	195,289,583	195,289,583
	-------------	-------------

The Share options (note 15) granted on 13 May 2008 have a dilutive effect on the net asset value per share, given that their exercise price is lower than the net asset value per Company's share at 31 December 2014 and 2013.  All other share options do not impact the diluted net asset value per share for 2014 and 2013 as their exercise price was higher than the net asset value per share at 31 December 2014 and 2013.

Repurchase of own shares

The Board believes that the ability of the Company to re-purchase its own Ordinary shares in the market may potentially benefit equity shareholders of the Company. The repurchase of Ordinary shares at a discount to the underlying net asset value enhances the net asset value per share of the remaining equity shares.

In 2014 the company has not bought any own shares.

In 2013, the Company bought 3,445,755 of its Ordinary shares at an average price of USD 0.50 per share.

23.  Segment reporting

The Group's monitoring and strategic decision making process in relation to its investments is separated into two activity lines which are also identified as the Group's operating segments. These operating segments are monitored and strategic decisions are made on the basis of segment operating results.

Segment information can be analysed as follows: 

	Equity and debt instruments investment activities		Investment property activities		Total per financial statements
	2014	2013	2014	2013	2014	2013
Segment results	US $000	US $000	US $000	US $000	US $000	US $000
Investment income
Interest and dividend income	26,619	29,068	-	-	26,619	29,068
Investment property income	-	-	5,159	5,473	5,159	5,473
(Loss) / gain on  investments	(9,946)	(16,324)	61	2,672	(9,885)	(13,652)
	------	------	------	------	------	------
Gross profit	16,673	12,744	5,220	8,145	21,893	20,889
Other income	462	55	-	-	462	55
Administrative expenses	(5,417)	(11,122)	(1,802)	(1,137)	(7,219)	(12,259)
	------	------	------	------	------	------
Operating profit	11,718	1,677	3,418	7,008	15,136	8,685
Finance costs	(4,254)	(1,680)	(3,032)	(3,562)	(7,286)	(5,242)
Finance income	109	906	-	-	109	906
	------	------	------	------	------	------
Profit before taxation	7,573	903	386	3,446	7,959	4,349
Taxation charge	-	(411)	(755)	(1,464)	(755)	(1,875)
	------	------	------	------	------	------
Profit for year	7,573	492	(369)	1,982	7,204	2,474
	------	------	------	------	------	------
Segment assets	134,815	150,875	117,641	131,016	252,456	281,891
	------	------	------	------	------	------
Segment liabilities	11,278	20,798	81,204	92,722	92,482	113,520
	------	------	------	------	------	------

The Group's investment income and its investments are divided into the following geographical areas:

	Equity and debt instruments investment activities			Investment property activities			Total per financial statements
	2014	2013	2014		2013	2014		2013
Investment Income	US $000	US $000	US $000		US $000	US $000		US $000
Switzerland	-	-	6,732		8,145	6,732		8,145
Other European countries	(723)	(888)	-		-	(723)		(888)
United States	18,400	18,941	-		-	18,400		18,941
India	(1,729)	(3,749)	-		-	(1,729)		(3,749)
Asia	(787)	(1,560)				(787)		(1,560)
	------	------	------		------	------		------
	15,161	12,744	6,732		8,145	21,893		20,889
	------	------	------		------	------		------
Investments
Switzerland	-	-	116,609		129,916	116,609		129,916
Other European countries	6,225	14,521	-		-	6,225		14,521
United States	83,843	98,406	-		-	83,843		98,406
India	14,219	14,887	-		-	14,219		14,887
Asia	4,283	13,199	-		-	4,283		13,199
	------	------	------		------	------		------
	108,570	141,013	116,609		129,916	225,179		270,929
	------	------	------		------	------		------

Investment income, comprising interest and dividend income, gains or losses on investments, and investment property income, is allocated on the basis of the customer's geographical location in the case of the investment property activities segment and the issuer's location in the case of the equity and debt instruments investment activities segment. Investments are allocated based on the issuer's location.

During 2014, 89% of the Group's rent relates to rental income from a single customer (SBB - Swiss national transport authority) in the investment property activities segment (2013: 89%).

24.  Interest and dividend income

	2014		2013
	US $000		US $000
Interest from investments	434		663
Dividend income	26,185		28,405
	------		------
	26,619		29,068
	------		------

25.  Investment property income

	2014		2013
	US $000		US $000
Gross rental income	5,923		5,846
Direct expenses	(764)		(373)
	------		------
	5,159		5,473
	------		------

All direct expenses relate to the generation of rental income.

26.  Loss on investments

	2014		2013
	US $000		US $000
Gain / (loss) on sale of investments	1, 709		(892)
Investment property revaluation	61		(179)
Foreign exchange (loss) / gain	(232)		81
Loss due to impairment of available-for-sale  financial assets	(8,861)		(2,499)
Fair value losses on financial assets through profit or loss	(5,067)		(13,985)
Fair value (loss) / gains on investment in joint venture	(524)		524
Fair value gains on derivative instruments	3,133		3,519
Bank custody fees	(104)		(221)
	------		------
	(9,885)		(13,652)
	------		------

The investments disposed of during the year resulted in the following realised (losses) / gains (i.e. in relation to their original acquisition cost):

	2014		2013
	US $000		US $000
Available-for-sale	(2,682)		(3,953)
At fair value through profit or loss	(2,374)		898
	------		------
	(5,056)		(3,055)
	------		------

27.  Other income

	2014		2013
	US $000		US $000
Disposal gain	462		-
Gain on liquidation of subsidiaries	-		55
	------		------
	462		55
	------		------

Disposal gain relates to the sale of a fully amortized domain name. 

28.  Administrative expenses

	2014		2013
	US $000		US $000
Legal expenses	118		57
Directors' fees and expenses	3,522		9,078
Professional and consulting fees	1,299		1,667
Other salaries and expenses	1,152		769
Office cost	299		284
Depreciation	13		32
Other operating expenses	657		512
Provisions for legal and other cases - reversal	-		(274)
Audit fees	159		134
	------		------
	7,219		12,259
	------		------

Throughout 2014 the Group employed 6 members of staff (2013: 7).

Other salaries and expenses include USD 82,632 of social insurance and similar contributions (2013: USD 40,694), as well as USD 19,499 of defined contributions plan costs (2013: USD 15,255).

29.  Finance costs and income

	2014	2013
	US $000	US $000
Finance costs
Bank interest on investment property loan*	3,032	3,555
Other swap interest cost	496	689
Other bank interest	252	495
Foreign exchange loss	3,506	503
	------	------
	7,286	5,242
	------	------
Finance income
Foreign exchange gain	109	906
	------	------
Net finance costs	7,177	4,336
	------	------

*Includes interest payments on a related swap (note 16).

30.  Taxation

	2014	2013
	US $000	US $000
Current tax charge	298	458
Deferred tax charge	457	1,417
	------	------
	755	1,875
	------	------
The tax charge for the year can be reconciled to the accounting profit as follows:
Profit before tax	7,959	4,349
	------	------
Effect of applicable corporation tax rates	177	706
Effect of income not subject to tax	(131)	(702)
Effect of expenses not deductible for tax purposes	232	61
Effect of current year losses	(87)	(38)
Interest withholding tax	-	411
Property tax	107	20
Deferred tax charge	457	1,417
	------	------
Tax for the year	755	1,875
	------	------

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

31.  Earnings per share

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

Diluted earnings per share is calculated after taking into consideration other potentially dilutive shares in existence during the year ended 31 December 2014 and the year ended 31 December 2013.

	2014	2013
Profit for the year attributable to ordinary shareholders of the parent (USD 000)	7,204	2,474
	-------------	-------------
Weighted average number of ordinary shares outstanding	195,289,583	196,692,363
	-------------	-------------
Basic earnings per share (USD)	0.04	0.01
	-------------	-------------
Weighted average number of ordinary shares outstanding	195,289,583	196,692,363
Dilutive effect of share options	84,418	83,102
	---------	---------
Weighted average number of ordinary shares including the effect of potentially dilutive shares	195,374,001	196,775,465
	-------------	-------------
Diluted earnings per share (USD)	0.04	0.01
	-------------	-------------

The Share options (note 15) granted on 13 May 2008 have a dilutive effect on the weighted average number of ordinary shares only, given that their exercise price is lower than the average market price of the Company's shares on the London Stock Exchange (AIM division) during the year ended 31 December 2014 and 2013.  All other share options do not impact the diluted earnings per share for 2014 and 2013 as their exercise price was higher than the average market price of the Company's shares during the year ended 31 December 2014 and 2013. 

32.  Related party transactions

The Group is controlled by Groverton Management Ltd, an entity owned by Noam Lanir, which at 31 December 2014 held 79.06% (2013: 79.06%) of the Company's effective voting rights.

	2014	2013
	US $000	US $000
Amounts receivable from key management
Other assets	3,384	4,512	(1)
Directors' current accounts	2,497	425
	------	------
	5,881	4,937
	-------	-------
Amounts receivable from associate
Promissory notes	-	914	(2)
	------	------
	-	914
	-------	-------
Amounts payable to other related party
Loan payable	(499)	(1,212)	(3)
	------	------
	(499)	(1,212)
	-------	-------
Amounts payable to key management
Directors' current accounts	(80)	-
	------	------
	(80)	-
	-------	-------
Key management compensation
Short term benefits
Executive directors' fees	795	795	(4)
Executive directors' reward payments	2,628	8,212
Non-executive directors' fees	74	71
Non-executive directors' reward payments	25	-
	------	------
	3,522	9,078
	-------	-------

(1)   Loans of USD 5.523m were made to a key management employee for the acquisition of shares in the Company. Interest was payable on these loans at 6 month US LIBOR plus 0.25% per annum and the loans were secured on the shares acquired. The loans were repayable on the earlier of the employee leaving the Company or April 2013. In December 2012 the Board decided to renew the outstanding amount of these loans for a period of another five years. Based on the Board's decision, the outstanding amount will be reduced annually on a straight line over five years, as long as the key management employee remains with the Company. The relevant reduction in the loan amount for the year was USD 1.128m. The loans together with their related accrued interest of USD 0.117m were classified as "other assets" and are included under trade and other receivables (note 12).

(2)   Demand promissory notes of USD 0.914m were made from Covenant Credit Partners LLC (maker) to Blackline Investments Inc. (holder).   Interest on these notes was at 2.0% per annum and was fully repaid in June 2014.     

(3)   A loan with a balance at 31 December 2014 of USD 0.499m (31 December 2013: USD 1.2m) has been received from a related company Chanpak Ltd. The loan is free of interest, it is unsecured and is repayable on demand. This loan is included within trade and other payables (note 20).

(4)   These payments were made directly to companies to which they are related.  

No social insurance and similar contributions nor any other defined benefit contributions plan costs were incurred for the Group in relation to its key management personnel in either 2014 or 2013.

Noam Lanir, through an Israeli partnership, is the major shareholder of Babylon Limited, an Israel based Internet Services Company. The Group as of 31 December 2014 held a total of 1.941m shares at a value of USD 0.922m (2013: 3.915m shares at a value of USD 9.3m) which represents 4% of its effective voting rights. The investment in Babylon Ltd is included within public equity investments under financial assets at fair value through profit or loss (note 5).

During the year the Group received administrative services of USD 0.103m (2013: nil) in connection with investments from another related company Mash Medical Life Tree Marketing Ltd.   

33.  Provisions

The movement in provisions for the year is as follows:

	2014	2013
	US $000	US $000
As at 1 January	26	300
Amounts reversed	-	(274)
Settlements	(26)	-
	-----	-----
As at 31 December	-	26
	------	------

34.  Litigation

Fairfield Sentry Ltd vs custodian bank and beneficial owners

One of the custodian banks that the Group uses faces a contingent claim up to USD 2.1m, and any interest as will be decided by a US court and related legal fees, with regards to the redemption of shares in Fairfield Sentry Ltd, which were brought in 2008 at the request of Livermore and on its behalf. The same case was also filed in BVI where the Privy Council ruled against the plaintiffs.

As a result of the surrounding uncertainties over the existence of any obligation for Livermore, as well as for the potential amount of exposure, the Directors cannot form an estimate of the outcome for this case and therefore no provision has been made.

Ex employee vs Empire Online Ltd

In 2007 an ex employee of Empire Online Limited (the Company's former name) filed a law suit against one of its Directors and the Company in the Labor Court in Tel Aviv. According to the lawsuit the plaintiff claimed compensation relating to the sale of all commercial activities of Empire Online Limited until the end of 2006, and the dissolution of the company and the terms of termination of his employment with Empire Online Limited.  

Prior to the filing of the lawsuit in Israel, the Company filed a claim against the plaintiff in the Court in Cyprus based upon claims concerning breach of faith of the plaintiff towards his employers.  Litigation was completed in Israel.

On 5 March 2014, the Labor Court in Tel Aviv issued a ruling in which the court denied most of the plaintiff's claims and accepted only his claim for termination of employment.  On 16 April 2014 the plaintiff filed an appeal against the ruling. 

No further information is provided on the above case as the Directors consider it could prejudice the outcome of the appeal.

35.  Commitments

The Group has no capital or other commitments as at 31 December 2014.  

36.  Events after the reporting date

After the reporting period, the Group has successfully refinanced its investment property loan with a new bank loan (note 17).

In March 2015, the Company announced an interim dividend of USD 5m (USD 0.0256 per ordinary share).

37.  Financial risk management objectives and policies

Background

The Group's financial instruments comprise available for sale financial assets, financial assets at fair value through profit or loss, derivatives, cash balances and receivables and payables that arise directly from its operations.  For an analysis of financial assets and liabilities by category, refer to note 38.

Risk objectives and policies

The objective of the Group is to achieve growth of shareholder value, in line with reasonable risk, taking into consideration that the protection of long-term shareholder value is paramount. The policy of the Board is to provide a framework within which the investment manager can operate and deliver the objectives of the Group.

Risks associated with financial instruments

Foreign currency risk

Foreign currency risks arise in two distinct areas which affect the valuation of the investment portfolio, 1) where an investment is denominated and paid for in a foreign currency; and 2) where an investment has substantial exposure to non-US Dollar underlying assets or cash flows denominated in a foreign currency. The Group in general does not hedge its currency exposure. The Group discretionally and partially hedges against foreign currency movements affecting the value of the investment portfolio based on its view on the relative strength of certain currencies.  Any hedging transactions represent economic hedges; the Group does not apply hedge accounting in any case.  Management monitors the effect of foreign currency fluctuations through the pricing of the investments. The level of investments denominated in foreign currencies held by the Group at 31 December 2014 is the following:

	2014 US $000	2014 US $000	2014 US $000	2013 US $000	2013 US $000	2013 US $000
	Financial assets	Liabilities	Net value	Financial assets	Liabilities	Net value
British Pounds (GPB)	1,485	(6,982)	(5,497)	2,160	(12,273)	(10,113)
Euro	3,947	(228)	3,719	5,106	(203)	4,903
Swiss Francs (CHF)	31,109	(8)	31,101	41,097	(1,646)	39,451
Indian Rupee (INR)	9,142	-	9,142	8,944	-	8,944
Israel Shekels (ILS)	2,892	(90)	2,802	9,989	(4,204)	5,785
Others	-	(5)	(5)	-	(2,350)	(2,350)
	------	------	------	------	------	------
Total	48,575	(7,313)	41,262	67,296	(20,676)	46,620
	------	------	------	------	------	------

Also, some of the USD denominated investments are backed by underlying assets which are invested in non-USD assets. For instance, investments in certain emerging market private equity funds are denominated in USD but the funds in turn have invested in assets denominated in non-USD currencies.

A 10% increase of the following currency rates against the rate of United States Dollar (USD) at 31 December 2014 would have the following impact.  A 10% decrease of the following currencies against USD would have an approximately equal but opposite impact.

	2014 US $000	2014 US $000	2013 US $000	2013 US $000
	Profit or loss	Other comprehensive income	Profit or loss	Other comprehensive income
British Pounds (GPB)	(550)	-	(1,011)	-
Euro	371	-	490	-
Swiss Francs (CHF)	3,110	-	3,945	-
Indian Rupee (INR)	914	-	894	-
Israel Shekels (ILS)	280	-	579	-
	------	------	------	------
Total	4,125	-	4,897	-
	------	------	------	------

The above analysis assumes that all other variables in particular, interest rates, remain constant.  The analysis does not include the impact arising from the translation of foreign operations from their functional to the presentation currency.  

Interest rate risk

The Group is exposed to interest rate risk on its interest-bearing instruments which are affected by changes in market interest rates. The Group has borrowings of USD 78.0m (2013: USD 88.0m) related to a real estate asset (Wylerpark, Bern), the interest rate of which was fixed through the use of an interest rate swap until 30 July 2014.

The Group has banking credit lines which are available on short notice for the Group to use in its investment activities, the costs of which are based on variable rates plus a margin. When an investment is made utilising the facility, consideration is given to the financing costs which would impact the returns. The level of banking facilities used is monitored by both the Board and the management on a regular basis. The level of banking facilities utilised at 31 December 2014 was USD 10.3m (2013: USD 18.6m).

As at 31 December 2014 the Group had no financial liabilities that bore an interest rate risk, other than the previously disclosed bank facilities.

Interest rate changes will also impact equity prices. The level and direction of changes in equity prices are subject to prevailing local and world economics as well as market sentiment all of which are very difficult to predict with any certainty.

The Group has fixed and floating rate financial assets including bank balances that bear interest at rates based on the banks floating interest rates.  In particular, the fair value of the Group's fixed rate financial assets is likely to be negatively impacted by an increase in interest rates.  The interest income of the Group's floating rate financial assets is likely to be positively impacted by an increase in interest rates.

The Group has exposure to US bank loans and to a lesser degree emerging market loans through CLO equity tranches. An investment in the CLO equity tranche represents a leveraged investment into such loans. As these loans (assets of a CLO) and the liabilities of a CLO are floating rate in nature (typically 3 month LIBOR as the base rate), the residual income to CLO equity tranches is normally linked to the floating rate benchmark and thus normally do not carry substantial interest rate risk. In the current low rate environment, however, most loans feature a LIBOR floor. The presence of LIBOR floors creates an interest rate risk to CLO equity distributions as long as the benchmark rate is below the weighted average LIBOR floor level on the CLO loan portfolio. Thus, an increase in the benchmark floating rate up to the weighted average LIBOR floor level is expected to cause distributions to CLO equity to reduce whereas a decrease in the benchmark floating rate is expected to increase such distributions.

The Group's interest bearing assets and liabilities are as follows:            

	2014 US $000	2013 US $000
Financial assets - subject to:
- fair value changes	4,903	1,609
- interest changes	83,869	96,030
	------	------
Total	88,772	97,639
	------	------
Financial liabilities - subject to:
- interest changes	88,447	106,637
- both fair value and interest changes	-	2,125
	------	------
Total	88,447	108,762
	------	------

Changes in market interest rates will affect the valuation of fixed rate interest bearing instruments. A 1% (100 basis points) change in market interest rates would result in an estimated -0.23% change in the net asset value as at 31 December 2014 (2013: 0.91%).

An increase of 1% (100 basis points) in interest rates would have the following impact.  An equivalent decrease would have an approximately equal but opposite impact.

	2014 US $000	2014 US $000	2013 US $000	2013 US $000
	Profit or loss	Other comprehensive income	Profit or loss	Other comprehensive income
Financial assets
- fair value changes	(322)	-	(137)	-
- interest changes	839	-	960	-
Financial liabilities
- fair value changes	-	-	669	-
- interest changes	(884)	-	38	-
	------	------	------	------
	(367)	-	1,530	-
	------	------	------	------

The above analysis assumes that all other variables, in particular currency rates, remain constant.  

Market price risk

By the nature of its activities, most of the Group's investments are exposed to market price fluctuations. The Board monitors the portfolio valuation on a regular basis and consideration is given to hedging or adjusting the portfolio against large market movements.

The Group had no single major financial instrument that in absolute terms and as a proportion of the portfolio could result in a significant reduction in the NAV and share price.  Due to the very low exposure of the Group to public equities, and having no specific correlation to any market, the equity price risk is low.  The portfolio as a whole does not correlate exactly to any Index.

Management of risks is primarily achieved by having a diversified portfolio to spread the market price risk. The Group has investments in CLO equity tranches and a total return swap referencing a portfolio of senior secured loans (note 9). These investments represent leveraged exposure to typically senior secured loans. Investments in CLOs are subject to many risks including market price risk, liquidity, credit risk, interest rate, reinvestment and certain other risks.

Prices of these CLO investments may be volatile and will generally fluctuate due to a variety of factors that are inherently difficult to predict, including but not limited to changes in prevailing credit spreads and yield expectations, interest rates, underlying portfolio credit quality and market expectations of default rates on non-investment grade loans, general economic conditions, financial market conditions, legal and regulatory developments, domestic and international economic or political events, developments or trends in any particular industry, and the financial condition of the obligors that constitute the underlying portfolio.

A 10% uniform change in the value of the Group's portfolio of financial instruments (excluding private equities and financial and minority holdings) would result in a 5.55% change in the net asset value as at 31 December 2014 (2013: 6.80%), and would have the following impact (either positive or negative, depending on the corresponding sign of the change):

	2014 US $000	2014 US $000	2013 US $000	2013 US $000
	Profit or loss	Other comprehensive income	Profit or loss	Other comprehensive income
Available-for-sale financial assets	801	6,876	8	9,490
Financial assets at fair value through profit or loss	403	-	1,484	-
Investment in joint venture	-	-	552	-
	------	------	------	------
	1,204	6,876	2,044	9,490
	------	------	------	------

Derivatives

The Investment Manager may use derivative instruments in order to mitigate market risk or to take a directional investment. These provide a limited degree of protection against a rise in interest rates and would not materially impact the portfolio returns if a large market movement did occur.

Credit Risk

The Group invests in a wide range of securities with various credit risk profiles including investment grade securities and sub investment grade positions. The investment in debt instruments is both in investment grade securities and in sub investment grade or unrated debt instruments. The investment manager mitigates the credit risk via diversification across issuers. However, the Group is exposed to a migration of credit rating, widening of credit spreads and default of any specific issuer.

The Group only transacts with regulated institutions on normal market terms which are trade date plus one to three days. The levels of amounts outstanding from brokers are regularly reviewed by the management. The duration of credit risk associated with the investment transactions is the period between the date the transaction took place, the trade date and the date the stock and cash are transferred, the settlement date. The level of risk during the period is the difference between the value of the original transaction and its replacement with a new transaction. The Group is mainly exposed to credit risk in respect of its investments subject to credit risk (mainly CLOs) of USD 83.8m (2013: USD 93.5m). The Group's maximum credit risk exposure at 31 December 2014 is as follows:

	2014     US $000	2013     US $000
Financial assets:
Loans and receivables:
Trade and other receivables	19,768	2,072
Cash at bank	3,807	4,150
	------	------
	23,575	6,222
Available-for-sale financial assets	82,217	91,880
Financial assets at fair value through profit or loss	1,623	1,609
Investments in associate and joint venture	-	5,524
Derivatives	1,125	-
	------	------
	108,540	105,235
	-------	-------

The fair values of the Group's investments in bonds and other debt instruments are also affected by the credit risk of those instruments.  However, it is not practical to provide an analysis of the changes in fair values due to the credit risk impact for the year or previous periods, nor to provide any relevant sensitivity analysis.

The Group has exposure to US senior secured loans and to a lesser degree emerging market loans through CLO equity tranches and a total return swap facility (note 16). These loans are primarily non-investment grade loans or interests in non-investment grade loans, which are subject to credit risk among liquidity, market value, interest rate, reinvestment and certain other risks. It is anticipated that these non-investment grade loans generally will be subject to greater risks than investment grade corporate obligations.

A non-investment grade loan or debt obligation or an interest in a non-investment grade loan is generally considered speculative in nature and may become a defaulted security for a variety of reasons. A defaulted security may become subject to either substantial workout negotiations or restructuring, which may entail, among other things, a substantial reduction in the interest rate, a substantial write-down of principal, and a substantial change in the terms, conditions and covenants with respect to such defaulted security. In addition, such negotiations or restructuring may be quite extensive and protracted over time, and therefore may result in substantial uncertainty with respect to the ultimate recovery on such defaulted security. Bank loans have historically experienced greater default rates than has been the case for investment grade securities. 

The Group has no investment in sovereign debt as at 31 December 2014 or 2013.

At 31 December the credit rating distribution of the Group's asset portfolio subject to credit risk (CLOs, bonds and other debt instruments, bank balances and receivables) was as follows:

Rating	2014 Amount	Percentage	2013 Amount	Percentage
	US $000		US $000
A+	1,000	0.9%	337	0.3%
A	16,125	14.9%	-	-
A-	4,321	4.0%	-	-
BBB+	-	-	3,892	3.7%
BB	3,280	3.0%	3,440	3.3%
BB+	1,111	1.0%	1,090	1.0%
BB-	512	0.5%	519	0.5%
Not Rated	82,191	75.7%	95,957	91.2%
	------	------	------	------
	108,540	100%	105,235	100%
	------	------	------	------

Included within "not rated" amounts are investments in loan market through CLOs of USD 78.936m (2013: USD 88.440m). 

The modelled IRRs on the CLO portfolio are in the high single digit to low teens percentage points with current cash distributions of over 20%.

Liquidity Risk

The major financial liability of the Group is the bank loan of CHF 77.5m (USD 78.0m) used for purchase of a real estate property, which has a maturity in 2014.  The loan is collateralized by property valued at CHF 115.7m (USD 116.7m) at 31 December 2014.  The loan is non-recourse, i.e. the holding company and its assets (apart from the Wyler Park property) are neither pledged for this loan nor liable for recovery in case of default.  The following table summarizes the contractual cash outflows in relation to the Group's financial liabilities according to their maturity.

31 December 2014	Carrying amount	Less than 1 year	Between 1 and 2 years	Between 2 and 5 years	Over 5 years
	US $000	US $000	US $000	US $000	US $000
Bank loan	78,092	78,143	-	-	-
Bank overdraft	10,355	10,355	-	-	-
Other financial liabilities	1,736	1,736	-	-	-
	------	------	------	------	------
Total	90,183	90,234	-	-	-
	------	------	------	------	------

31 December 2013	Carrying amount	Less than 1 year	Between 1 and 2 years	Between 2 and 5 years	Over 5 years
	US $000	US $000	US $000	US $000	US $000
Bank loan	91,449	92,121	-	-	-
Bank overdraft	15,188	15,188
Derivative financial instruments	2,125	2,125	-	-	-
Other financial liabilities	2,708	2,708	-	-	-
	------	------	------	------	------
Total	111,470	112,142	-	-	-
	------	------	------	------	------

A significant proportion of the Group's portfolio is invested in mid-term private equity investments with low or no liquidity. The investments of the Group in publicly traded securities are subject to availability of buyers at any given time and may be very low or non-existent subject to market conditions.

There is currently no exchange traded market for CLO securities and they are traded over-the-counter through private negotiations or auctions subject to market conditions.  Currently the CLO market is liquid, but in times of market distress the realization of the investments in CLOs through sales may be below fair value. The Group treats its investments in the loan market through CLOs as non-current investments as the Group generally intends to hold such investments over a longer period.

The management take into consideration the liquidity of each investment when purchasing and selling in order to maximise the returns to shareholders by placing suitable transaction levels into the market.

At 31 December 2014, the Group had liquid investments totalling USD 91.6m, comprising of USD 3.8m in cash and cash equivalents, USD 82.2 in investments in loan market through CLOs, USD 1.6m in fixed income investments, USD 2.8m in public equities and USD 1.2m in hedge funds. Management structures and manages 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.

Capital Management

The Group considers its capital to be its issued share capital and all of its reserves.

The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the balance between its net debt and equity.

Net debt to equity ratio is calculated using the following amounts as included on the consolidated statement of financial position, for the reporting periods under review:

	2014	2013
	US $000	US $000
Cash at bank	(3,807)	(4,150)
Bank overdrafts	10,355	15,188
Bank loans	78,092	87,974
Short term bank loans	-	3,475
	------	------
Net Debt	84,640	102,487
	------	------
Total equity	159,974	168,371
	------	------
Net debt to equity ratio	0.53	0.61
	-------	-------

The Board believes that the ratio remains at an acceptable and manageable level.

38.  Financial assets and liabilities by IAS 39 category

	Note	2014     US $000	2013     US $000
Financial assets:
Loans and receivables:
Trade and other receivables	12	19,768	2,072
Cash at bank	13	3,807	4,150
		------	------
		23,575	6,222
Available-for-sale financial assets	4	101,935	120,088
Financial assets at fair value through profit or loss	5,9	5,510	20,925
Derivative financial instruments	16	1,125	-
		------	------
		132,145	147,235
		-------	-------
Financial liabilities:
Financial liabilities at amortised cost:
Bank loan	17	78,092	87,974
Bank overdrafts	18	10,355	15,188
Short term bank loans	19	-	3,475
Other financial liabilities	20	1,736	2,708
		------	------
		90,183	109,345
Financial liabilities at fair value through profit or loss:
Derivative financial instruments	16	-	2,125
		------	------
		90,183	111,470
		-------	-------

 

The carrying amount of the financial assets and liabilities at amortised cost approximates to their fair value.

 

END

 

 

FR SESFMMFISEDI