Livermore Investments Group Limited
Annual Report 2006

Plain-text annual report

Annual Report 2006 Welcome Livermore is an investment company, incorporated in the British Virgin Islands (BVI), which is listed on the London Stock Exchange's Alternative Investment Market. www.livermore-inv.com Highlights l Change of purpose to Investment Company approved by shareholders on 18 January 2007. l Sale of remaining operating activities to PartyGaming plc for $48m. l Final dividend of US3.4cents per Ordinary Share. l Profit after tax $62.7m (2005 : $41.2m). l Earnings before Interest, Tax, Depreciation, Amortisation and non recurring items from discontinued operations $27.1m (2005 : $45.7m). LivermoreInvestments plc Annual Report 2006 1 Chairman’s and Chief Executive’s Review The year to 31 December 2006 has been another period October 2006 and the Company’s immediate withdrawal of great change for Livermore Investments Group from the US market, the operating activity of the Limited*. Following the settlement with PartyGaming Plc Company had become sub-critical and a sale to a larger in February 2006 and the exit from its remaining operating operator who could realise synergy benefits from the business in January 2007, shareholders unanimously remaining operation represented the best value to approved the creation of an investment company at the shareholders. Extraordinary General Meeting (EGM) held on 17 January 2007. Livermore’s investment policies were set out in the circular sent to shareholders on 29 December 2006. In summary, Livermore will invest in public and private equities, real estate and credit products through separate divisions, which will engage specialist teams that will focus on each investment category. Livermore’s investment strategy will have a global remit with a focus on value added opportunities in emerging markets. Through this structure Livermore will aim to achieve superior returns for its shareholders. Sale of operating business to PartyGaming Plc On 17 January 2007, shareholders approved the sale by the Company of its remaining operating business to This transaction was completed on 19 January 2007. See note 11. Financial Review As a consequence of the sale to PartyGaming Plc, the Company’s operating activities have been included within discontinued items within the Consolidated Income Statement. Profit before interest, taxation, amortisation and non-recurring items for continuing operations for year ended 31 December 2006 was $26.1m (2005: $45.0m). The principal reasons for this reduction were; the disposal of the Empire Poker assets following the settlement agreement reached with Partygaming Plc in February 2006 and the withdrawal from the US market in October 2006. PartyGaming Plc. The gross consideration was $48.0m, Profit from disposal of discontinued operations is detailed which included $10m payable to an employee trust. in note 11. In summary, an exceptional gain of $235.9m Following the introduction of the Unlawful Internet was made on the sale of Empire Poker to PartyGaming Gambling Enforcement Act by the US government in Plc and an exceptional loss of $199.2m was incurred on 2 the disposal of the remaining operating activities to Dividend PartyGaming Plc. This loss was after deducting a write- The Board is pleased to recommend a final dividend with down of intangible goodwill and other assets to their respect to 2006 of $10m or US 3.4 cents (1.8 pence) per realisable value. Other non-recurring and amortisation share. This dividend will be paid on 29 June 2007 to charges were $11.1m (2005: $4.6m). These charges shareholders on the register at 8 June 2007. Together relate to intellectual property and share option with the interim dividend of $5m or US1.7cents amortisation and non-recurring payments made in respect (0.9pence) per share, this takes the total dividend for 2006 of liabilities not transferred to PartyGaming Plc. to US5.1cents per share (2.7 pence per share). Richard Rosenberg Chairman 30 March 2007 Noam Lanir Chief Executive * Livermore Investments Group Limited was formerly known as Empire Online Limited. Shareholders approved a special resolution to change the Company’s name at the EGM held on 28 February 2007. See note 5. The Company received investment income of $12.2m (2005: $1.2m) on its financial assets and cash resources held during the year. This excludes unrealised capital gains of $0.9m (2005: nil), which are not recognised through the Consolidated Income Statement until realised. Earnings per share, including discontinued operations, for 2006 were $0.21 (2005: $0.16). Profit before tax for the year to 31 December 2006 was $62.7m (2005: $41.2m) At 31 December 2006 the Company held financial assets and cash of $257.2m. This excludes the consideration due on the sale of the operating assets to PartyGaming plc. LivermoreInvestments plc Annual Report 2006 3 Directors Richard Barry Rosenberg (51), Non-Executive Chairman Andrew Rae Burns (44), Chief Financial Officer Richard joined the Group in December 2004. Richard Andrew joined the Group in May 2005 as a Non-Executive became Non-Executive Chairman on 31 October 2006, director. On the 1st of September 2005 he was appointed following the resignation of Lord Leonard Steinberg. He as the Group’s Chief Financial Officer and Chief Operating qualified as a chartered accountant in 1980 and in 1988 Officer. Prior to that he was Finance Director of Luminar co-founded the accountancy practice Sedley Richard plc. He qualified as a chartered accountant with Price Laurence Voulters. Richard has considerable experience in Waterhouse (London) in 1989 and then he moved to the giving professional advice to clients in the leisure and Rank Group in 1990 where he later became Finance and entertainment industries. Richard is a director of a large number of companies operating in a variety of businesses. Commercial Director for Rank Video Services Europe. Andrew was also a Non-Executive Director of Inflexion Plc, a private equity fund formerly listed on AIM. Andrew is also the Company Secretary. Noam Lanir (40), Founder and Chief Executive Officer Noam founded the Group in July 1998, to develop a specialist online marketing operation. Noam has the led the growth and development of the group’s operations over the last nine years which culminated in its IPO in June 2005 on the AIM market operated by the London Stock Exchange plc. Noam is also a major benefactor to many charitable organisations. Prior to 1998, Noam was involved in a variety of businesses mainly within the leisure and entertainment sector. 4 Directors’ Report The Directors submit their annual report and audited financial statements of the Group for the year ended on 31 December 2006. interests of the Directors and their related companies in the shares of the Company and options for such shares are as shown on page 8. Details of the Directors’ remuneration and service contracts appear on page 8. Principal activities Following the agreement for the disposal of the company’s operations on 29 December 2006, the Company became an investment company. The principal activity of the Company for the year ended 31 December 2006 was the provision of marketing services to the online gaming industry, and the operation of online gaming. Results and dividends The results of the Group for the year ended 31 December 2006 are set out on page 14 and show a profit after tax for the year of $62.7m (2005: $41.2m). The Directors recommend a final dividend of US 3.4 cents per share. Review of the business and future development The Company is now an investment Company, a more detailed review of the business is given in the Chairman’s and Chief Executive’s Review. Directors and their interests The Directors holding office during the year: Richard Barry Rosenberg Noam Lanir Andrew Rae Burns Lord Leonard Steinberg Non-Executive Chairman Executive Director Executive Director Non-Executive Director (resigned 31 October 2006) Andrew Rae Burns will retire by rotation at this General Meeting, and being eligible, will seek re-election. The Share Capital There was no change in the authorised share capital during the year to 31 December 2006. The authorised share capital is 1,000,000,000 ordinary shares with no par value. Related party transactions The details of any transactions of the Group with related parties during the year to 31 December 2006 are as disclosed in Note 23 to the Financial Statements. Corporate Governance The Board’s statement on Corporate Governance is on pages 10 and 11 together with the details of the Groups’ board committees. Substantial Shareholdings As at 1 March 2007 the following interests in 3 per cent. or more of the Company’s existing ordinary share capital had been reported: Number of Ordinary Shares 103,116,837 14,737,796 24,601,204 % of issued ordinary share capital 35.22 14.9 8.4 Groverton Ltd Sidmore Holdings Ltd. Awen International Corp LivermoreInvestments plc Annual Report 2006 5 Directors’ Report (continued) l 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 per cent. or more of the issued share capital of the Company or could, directly or indirectly, jointly or severally, exercise control over the Company. l No Director has any interest in any transactions which are or were unusual in their nature or conditions or which are or were significant to the business of the Group and which were effected by any member of the Group in the current or immediately preceding financial year or which were effected during an earlier financial year and which remain in any respect outstanding or unperformed. Change of Name The Company changed its name to Livermore Investments Group Limited following the EGM held on 28 February 2007. Discontinued operations On 14 February 2006 the Group sold certain business assets to PartyGaming Plc pursuant to a settlement agreement for a total consideration of $250m. Details of this can be found in Note 11. In addition to the above, the Group disposal of the remainder of its operating activities to PartyGaming Plc for a net consideration of $38m was completed on 19 January 2007. Details and full disclosure of this can be found in Note 11. Post balance sheet events Following the agreement for the disposal of the Company’s remaining operations on 28 December 2006, the Board proposed that the Company : l change its principal activities and become an investment company subject to the approval of shareholders at the EGM held on 17 January 2007. l change its name to Livermore Investments Group Limited subject to the approval of shareholders at the EGM held on 28 February 2007. l grant the Directors the authority to make market purchases of the existing ordinary shares in the capital of the Company of up to 10% of the issued share capital of the Company. Litigation On 10 January 2007 the company settled a trademark dispute with La Societe Des Bains de Mer et du Circle des Etrangers A Monaco. Close to the end of the year 2005 the Group initiated legal action against PartyGaming Plc, due to the breach of a contract that had a material negative impact on the Group’s revenue. The litigation proceedings came to an end in February 2006 following settlement, details of which are set out in Note 27. After the year end the Company was made aware of possible litigation in relation to a former consultant. 6 Annual General Meeting The Group’s Annual General Meeting will be held on 15 May 2007. The Notice for the meeting is on pages 39 and 40 of this report. Directors’ responsibilities in relation to the accounts The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and International Financial Reporting Standards as adopted by the European Union. Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to: the BVI International Business Companies Act 1984 (as amended). 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: l select suitable accounting policies and then apply l there is no relevant audit information of which the them consistently; company’s auditor is unaware; and l make judgments and estimates that are reasonable l the Directors have taken all steps that they ought to and prudent; l state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. l prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. 30 March 2007 The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with LivermoreInvestments plc Annual Report 2006 7 Remuneration Report The Directors’ emoluments, benefits and shareholdings during the year ended 31 December 2006 were as follows: 1. Directors’ Emoluments 1.1 Each of the Directors has a service contract with the Company. Notes a Director Noam Lanir Richard Barry Rosenberg Andrew Rae Burns Lord Leonard Steinberg The dates are presented in day/month/year format. Date of agreement 10/06/05 10/06/05 01/09/05 10/06/05 a b Salary/Fees $000 1,000 94 337 306 Benefits $000 — — — — Total Emoluments 2006 $000 1,000 94 337 306 Total Emoluments 2005 $000 364 39 319 197 Notes: a) Service contract terminable on either party to the agreement giving to the other 12 months’ notice; b) Lord Leonard Steinberg resigned on 31 of October 2006. 1. Directors’ Interests 2.1 Interests of Directors in ordinary shares Noam Lanir Andrew Rae Burns Richard Barry Rosenberg As at 31.12.2006 As at 31.12.2005 Notes a Number of Ordinary Shares 95,616,837 20,000 15,000 Percentage of ordinary issued share capital 32.6% 0.007% 0.005% Number of Ordinary Shares 62,971,837 — — Percentage of ordinary issued share capital 21.5% — — 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. 2.2 Interests of Directors in share options Noam Lanir Richard Barry Rosenberg Andrew Rae Burns No of options at 31 December 2006 10,000,000 150,000 75,000 800,000 600,000 Date of grant 19/07/06 19/07/06 7/12/05 19/07/06 7/12/05 Exercise price £ 0.7775 0.7775 0.71 0.7775 0.71 Exercise price $ 1.41786 1.41786 1.22 1.41786 1.22 Period of option 19/07/06-19/07/09 19/07/06-19/07/09 7/12/05-7/12/15 19/07/06-19/07/09 7/12/05-7/12/15 No options were exercised during the year 2006. 8 Share Option Scheme l 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 member of the Group. l 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 not subject to any performance criteria. l An option is normally exercisable in three equal tranches, on the first, second and third anniversary of the grant. l The Share Option Scheme will terminate ten years after it is 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 organisation. The following key principles guide its policy: l the 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 l the remuneration structure will support and reflect the Company’s stated purpose to maximize long-term shareholder value l the remuneration structure will reflect a just system of rewards for the participants l the overall quantum of all potential remuneration components will be determined by the exercise of informed judgement of the independent remuneration committee, taking into account the success of the Company and the competitive global market l a significant personal shareholding will be developed in order to align executive and shareholder interests l 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 l the committee will be proactive in obtaining an understanding of shareholder preferences l remuneration policy and practices will be as transparent as possible, both for participants and the shareholders l the wider scene, including pay and employment conditions elsewhere in the Group, will be taken into account, especially when determining annual salary increases. 30 March 2007 LivermoreInvestments plc Annual Report 2006 9 Corporate Governance Introduction The Company recognises the importance of the principles of good corporate governance and the Board is pleased to report its commitment to such high standards throughout the year. As an AIM listed company Livermore Investments Group Limited is not required to follow the provisions of the 2003 FRC Combined Code (the “Code”) as set out in the Financial Services Authority Listing Rules. The Board Constitution and Procedures The Company is controlled through the Board of Directors, which currently comprises 2 Executive Directors and 1 Non-Executive Director. As the Chairman is primarily responsible for the running of the Board, he ensures that all Directors receive sufficient relevant information on financial, business and corporate issues prior to meetings. The Chief Executive’s responsibilities focus on coordinating the Company’s business and implementing Group strategy. A formal schedule of matters is reserved for consideration by the Board, which meets approximately six times each year. The Board is responsible for implementation of the investment strategy described in the circular to shareholders dated 29 December 2006 and adopted pursuant to shareholder approval at the Company’s EGM on 17 January 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 the advice and services of the Company Secretary and all Directors are able to take independent professional advice in the furtherance of their duties if necessary. The Directors receive training and advice on their responsibilities as necessary. All Directors, in accordance with the Code, submit themselves for re- election at least once every three years. Board Committees The Board delegates clearly defined powers to its Audit, Remuneration and Nomination Committees. The minutes of each Committee are circulated to and reviewed by the Board. Following the resignation of Lord Steinberg on 31 October 2006 and the change in strategy of the Group following the EGM on 17 January 2007, the Board is currently looking to recruit a further Non-Executive director with relevant experience and to establish an advisory panel to assist in the development and implementation of investment strategy and policy. Audit Committee Until 31 October 2006 the Audit Committee comprised of two Non-Executive Directors and was chaired by the then senior independent Non Executive Director. Following the resignation of Lord Steinberg on 31 October 2006 and Richard Rosenberg’s appointment as Chairman of the Board, the Group is seeking to appoint a senior Non- Executive Director who will chair the audit committee. The Audit Committee met twice during 2006 to consider the publication of the preliminary statement and annual report for 2005 and the interim statement for 2006. At least once a year the Committee meets with representatives of the external auditors of the Company without any Executive Directors being present, except by invitation of the Committee. The Company’s Chairman, the Chief Executive Officer and the Chief Financial Officer have the right to attend and speak at meetings, with the exception of any meeting with the external auditors as referred to above. The duties of the Committee include monitoring the auditor’s performance and reviewing accounting policies and financial reporting procedures. The Committee prepares a summary of its work, which is included each year in the Company’s Annual Report. 10 Remuneration Committee Until 31 October 2006 the Remuneration Committee comprised two Non-Executive Directors and was chaired by Richard Rosenberg. The Committee met once in 2006. The Committee will meet whenever necessary during the year, and at least once a year. A further Non-Executive Director is being sought to join this committee. 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. 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 announcements. Both the Chairman and the then Senior Independent Non-Executive Director, Richard Rosenberg, were 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 Company’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 Company has in place a system of internal control and for reviewing its effectiveness. In this context, control is defined as 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 Company operates a sound system of internal control, which is designed to ensure that the risk of misstatement or loss is kept to a minimum. Given the Company’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 will undertake a review of its internal controls following the recent change of strategy to an investment Company. Independence of Auditor The Board undertakes a formal assessment of the auditor’s independence each year, which includes: l a review of non-audit related services provided to the Company and related fees; l 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; l 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; l obtaining written confirmation from the auditor that they are independent; l a review of fees paid to the auditor in respect of audit and non-audit services. 30 March 2007 LivermoreInvestments plc Annual Report 2006 11 Report of the Independent Auditor to the Members of Livermore Investments Group Limited We have audited the consolidated financial statements of Livermore Investments Group Limited for the year ended 31 December 2006 which comprise the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and notes 1 to 29. The consolidated financial statements have been prepared under the accounting policies set out therein. This report is made solely to the company’s members, as a body, in accordance with the BVI International Business Companies Act 1984 (as amended). Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor The directors’ responsibilities for preparing the Annual Report and the consolidated financial statements in accordance with BVI law and International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the statement of Directors’ Responsibilities. Our responsibility is to audit the consolidated financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the consolidated financial statements give a true and fair view and whether they are properly prepared in accordance with the BVI International Business Companies Act 1984 (as amended) and Article 4 of the IAS Regulation. In addition we report to you if, in our opinion, we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and other transactions is not disclosed. We read other information contained in the Annual Report, and consider whether it is consistent with the audited consolidated financial statements. This other information comprises only the Chairman’s and Chief Executive’s Review, Board of Directors, the Remuneration Report and the Corporate Governance Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the consolidated financial statements. Our responsibilities do not extend to any other information. 12 We also report to you whether in our opinion the information given in the Director’s Report is consistent with the financial statements. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the consolidated financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the consolidated financial statements, and of whether the accounting policies are appropriate to the company’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the consolidated financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the consolidated financial statements. Opinion In our opinion: l the consolidated financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the group’s affairs as at 31 December 2006 and of its profit for the year then ended; and l the consolidated financial statements have been properly prepared in accordance with the BVI International Business Companies Act 1984 (as amended) and Article 4 of the IAS regulation; and l the information given in the Directors’ Report is consistent with the consolidated financial statements for the year ended 31 December 2006. Grant Thornton UK LLP Registered Auditors Chartered Accountants London Thames Valley Office Slough 30 March 2007 LivermoreInvestments plc Annual Report 2006 13 Consolidated Income Statement for the year ended 31 December 2006 Discontinued Operations 2006 $000 Note 59,850 — (30,256) 29,594 (11,054) (3,483) 15,057 — — 15,057 (7) 15,050 36,642 51,692 $0.18 $0.17 Net gaming revenue Investment revenue Cost of sales Gross profit Amortisation and non recurring items Administrative expenses Operating profit/(loss) Finance expenditure Finance income Profit before taxation Taxation 3 4 3 5 6 7 8 9 Profit for the year after taxation from continuing operations Profit after taxation from discontinued operations Profit from disposal of discontinued operations 11 Profit for discontinued operation Profit for period Earnings per share Basic earnings per share ($) Diluted earnings per share ($) 12 12 Dividends Proposed final dividend per share ($) Proposed final dividend ($000) Dividends paid during the year per share ($) Dividends paid during the year ($000) 13 The notes on pages 18 to 37 form part of these financial statements. 14 Discontinued Operations 2005 $000 97,389 (49,644) 47,745 (4,581) (2,705) 40,459 — 1,246 41,705 (10) 41,695 — 41,695 $0.16 $0.16 2006 $000 — 2,301 — 2,301 — (995) 1,306 (170) 9,892 11,028 — — — 51,692 62,720 $0.21 $0.21 $0.034 10,000 $0.034 24,887 2005 $000 — — — — (466) (466) (55) — (521) — — — 41,695 41,174 $0.16 $0.16 $0.068 20,000 $0.034 49,043 Consolidated Balance Sheet as at 31 December 2006 Assets Non-current assets Property, plant and equipment Intangible assets Finaancial assets Current assets Trade and other receivables Cash and cash equivalents Total assets Equity Share capital Reserves Retained earnings Total equity Liabilities Current liabilities Bank overdrafts Trade and other payables Current tax payable Total liabilities Total equity and liabilities Note 14 15 16 17 18 19 20 21 22 2006 $000 49 73 124,491 124,613 50,795 137,715 188,510 313,123 — 212,483 61,763 274,246 4,960 33,910 7 38,877 313,123 2005 $000 119 224,628 — 224,747 11,431 16,297 27,728 252,475 — 210,084 22,297 232,381 — 20,088 6 20,094 252,475 These Financial Statements were approved by the Board of Directors on 30 March 2007. Director The notes on pages 18 to 37 form part of these financial statements. LivermoreInvestments plc Annual Report 2006 15 Consolidated Statement of Changes in Equity Share Investments revaluation option reserve reserve $000 $000 for the year ended 31 December 2006 Balance at 1 January 2005 Net profit for the year Issue of new share capital IPO expenses Share option reserve Dividends paid Balance at 31 December 2005 Net profit for the year Share option reserve Share options forfeited Revaluation reserve Dividends paid Note 13 13 2006 $000 1 — (1) 2006 $000 604 — 222,601 — (13,398) — — — — — 209,807 — — — — — — — — — — — — — — 277 — 277 — 3,150 (1,633) — — Retained earnings $000 30,166 Total $000 30,771 41,174 41,174 — 222,600 — (13,398) — 277 — — — — — — (49,043) (49,043) — — — — 882 22,297 232,381 62,720 62,720 — 3,150 1,633 — — 882 — (24,887) (24,887) Balance at 31 December 2006 — 209,807 1,794 882 61,763 274,246 The notes on pages 18 to 37 form part of these financial statements. 16 Consolidated Statement of Cash Flows for the year ended 31 December 2006 Cash flows from operating activities Profit after tax Adjustments for Depreciation and amortisation Goodwill fair value adjustment Investment revenue Finance income Interest expense Equity settled share options Profit on disposal Changes in working capital Decrease in trade and other receivables (Decrease)/increase in trade and other payables Net cash generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment Purchase of intangible assets Acquisition of business Acquisition of investments Disposal of business assets Interest revenue received Finance income received Net cash used in investing activities Cash flows from financing activities Dividends paid Proceeds from issue of shares Interest paid Net cash from/(used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year The notes on pages 18 to 37 form part of these financial statements. Note 2006 $000 2005 $000 62,720 41,174 14/15 15 4 8 7 5 11 14 15 15 11 4 8 13 19 7 3,298 797 (2,301) (9,660) 170 3,150 (36,642) 21,532 8,612 (11,830) (3,218) 18,314 (113) (916) — (123,609) 235,878 2,301 9,660 2,898 — — (1,159) 55 277 — 43,245 6,900 16,910 23,810 67,055 (131) (5,528) (221,192) — — — 1,159 123,201 (225,692) (24,887) — (170) (25,057) 116,458 16,297 132,755 (49,043) 209,202 (55) 160,104 1,467 14,830 16,297 LivermoreInvestments plc Annual Report 2006 17 Notes to 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 to Livermore Investments Group Limited on 28 February 2007. 1.3 The principal activity of the Group changed to investment services on 28 February 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 International Business Companies Act. 1.5 The registered office and head office of the Company is located at Trident Chambers, PO Box 146, Road Town, Tortola, British Virgin Islands. 2. Accounting Policies The significant accounting policies applied in the preparation of the financial information are as follows: (a) Basis of preparation The audited financial statements of Livermore Investments Group Limited have been prepared on the historical cost basis except that they have been modified to include revaluation of certain non current financial assets and in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union. The significant accounting policies applied in the Financial Statements of the Group in prior years have been applied consistently in these Financial Statements. The financial information is presented in US dollars because that 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. No changes have been made from the prior year. The following standards, issued by the IASB, have not been adopted by the Group and the Group is currently assessing the impact these standards will have on the presentation of the consolidated results in future periods: IFRS 7 — Financial Instruments: Disclosure (effective for accounting periods beginning on or after 1 January 2007) IFRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity to market risk. It replaces the disclosure requirements in IAS 32 “Financial Instruments: Disclosure and Presentation”. IFRS 8 — Operating segments (effective for accounting periods beginning on or after 1 January 2009) 18 IFRS 8 contains requirements for the disclosure of information about an entity’s operating segments and also about the entity’s products and services, the geographical areas in which it operates, and its major customers. The standard is concerned only with disclosure and replaces IAS 14 “Segment reporting”. (b) Basis of consolidation The consolidated results incorporate the results of Livermore Investments Group Limited and all of its subsidiary undertakings as at 31 December 2006 using the acquisition method of accounting as required. Profits or losses on intra group transactions are eliminated on consolidation. The results for the subsidiary undertakings acquired during the year have been included from the date of acquisition. On acquisition of a subsidiary all of the subsidiary’s assets and liabilities which exist at the date of acquisition are recorded at fair value. The excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired, is capitalised net of any provision for impairment. (c) Business combinations The acquisition of subsidiaries is accounted for using the purchase or acquisition method of accounting. The cost of acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately as profit or loss. (d) Revenue recognition Revenue is recognised in the accounting period in which the transaction occurs. Net gaming revenue comprises commissions earned from clients, net of rebates and chargebacks deducted at source. Commissions are calculated based on a percentage of the net amount earned by the Group’s clients on their internet websites from players introduced to the websites by the Group. Where the company acts as gaming operator, casino net gaming revenue represents gaming receipts less payments to clients. Poker net gaming revenue represents the commission charged or tournament entry fees where the player has concluded their participation in the tournament. (e) Investment income Investment income comprises interest income on funds invested, dividend income, gains on the disposal of available for sale assets, gains on hedging instruments and foreign currency gains. Interest income is recognised as it accrues. Dividend income is recognised on the date that the Group’s right to received payment is established, which in the case of quoted securities is the ex-dividend rate LivermoreInvestments plc Annual Report 2006 19 Notes to the financial statements continued (f) Foreign currency Monetary assets and liabilities denominated in non-US dollar currencies are translated into US dollar equivalents using year- end spot foreign exchange rates. Non-monetary assets and liabilities are translated using exchange rates prevailing at the dates of the transactions. Exchange rate differences on foreign currency transactions are included in net finance 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 for each balance sheet item presented are translated at the closing rate at the date of that balance sheet; and (ii) income and expenses for each income statement item are translated at an average exchange rate (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions). Exchange differences arising are taken to translation reserve, a component of equity. The exchange differences arising from retranslation of the investments in subsidiaries are directly taken to translation reserve. All other exchange differences are dealt with through the Income Statement. (g) Taxation Provision is made for corporation tax on the taxable profits for the year at the appropriate rate in force. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax liabilities are provided in full with no discounting. (h) Goodwill Goodwill being the excess of the cost of an acquisition over the fair value attributed to the net assets at acquisition is capitalised. Goodwill is not being amortised through the income statement; however, it is subject to annual impairment reviews. Impairment of the goodwill is evaluated by comparing the present value of the future expected cash flows, (the “value-in- use”) to the carrying value of the underlying net assets and goodwill. If the net assets and goodwill were to exceed the value-in-use, an impairment would be deemed to have occurred and the resulting write down in the goodwill would be charged to the income statement immediately. (i) Property, plant and equipment Property, plant and equipment is stated at historical cost less accumulated depreciation. Carrying amounts are reviewed at each balance sheet date for impairment. 20 Depreciation is calculated using the straight-line method, at annual rates estimated to write off the cost of the assets less their estimated residual values over their expected useful lives. The annual depreciation rates used are as follows: Computer hardware Fixtures and fittings — 331⁄3% — 10% (j) Intangible assets Intangible assets comprise website design costs and computer software and are stated at historic cost less accumulated amortisation. Carrying amounts are reviewed at each balance sheet date for indications of impairment. Costs that are directly attributable to the development of websites are recognised as intangible assets provided that the intangible asset will generate probable benefits and income streams through external use in line with SIC 32 “Intangible assets website costs”. Content development and operating costs are expensed as incurred. Amortisation is calculated using the straight-line method, at annual rates estimated to write off the cost of the assets over their expected useful lives. The annual amortisation rates are as follows: Website design costs — 50% Domains Player data Computer software — 10%–20% — 100% — 331⁄3% (k) Equity Equity issued by the Company is recorded as the proceeds are received, net of direct issue costs. Equity purchased by the Company is recorded as the consideration paid, including directly associated assets and is deducted from total equity as treasury shares until they are sold or cancelled. Where such shares are subsequently sold or reissued, any consideration received is included in total equity. (l) Leases All leases are classified as operating leases and rentals payable are charged to income on a straight-line basis over the term of the lease. (m) Financial instruments The carrying amounts of cash and cash equivalents, related party creditors, trade receivables, other accounts receivable, trade payables, customer deposits and other accounts payable approximate to their fair value. The Group does not issue derivative financial instruments for trading purposes. The Group holds derivative financial instruments for trading purposes. LivermoreInvestments plc Annual Report 2006 21 Notes to the financial statements continued Trade receivables Trade receivables are recognised and carried at the original transaction value and principally comprise amounts due from credit card and e-payment companies. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified. Cash and cash equivalents Cash comprises cash in hand and balances with banks. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash. They include unrestricted short-term bank deposits originally purchased with maturities of twelve months or less. Trade and other payables Trade and other payables are recognised and carried at the original transaction value. Available for sale assets Available for sale financial assets are recognised when the company becomes a party to the contractual provisions of the instrument. Available for sale financial assets are recognised at fair value plus transaction costs. Available-for-sale financial assets include non-derivative financial assets that are either designated as such or do not qualify for inclusion in any of the other categories of financial assets. All financial assets within this category are measured subsequently at fair value, with changes in value recognised in equity, through the statement of changes in equity. Gains and losses arising from investments classified as available-for-sale are recognised in the income statement when they are sold or when the investment is impaired. In the case of impairment of available-for-sale assets, any loss previously recognised in equity is transferred to the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. Impairment losses recognised previously on debt securities are reversed through the income statement when the increase can be related objectively to an event occurring after the impairment loss was recognised in the income statement. An assessment for impairment is undertaken at least at each balance sheet date. A financial asset is derecognised only where the contractual rights to the cash flows from the asset expire or the financial asset is transferred and that transfer qualifies for de-recognition. 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 de-recognition 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 if ownership but does transfer control of that asset. (n) Segment information A business segment is a distinguishable component of the Group that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of the Group that is engaged in providing products or services within a particular environment and that is subject to risks and returns that are different from those of components operating in other economic environments. 22 (o) Research and development Any expenditure incurred on development activities, including the Group’s software development, is capitalised only where the expenditure will lead to new or substantially improved products or processes, the products or processes are technically and commercially feasible and the Group has sufficient resources to complete the development. All other development expenditure is expensed as incurred. (p) Share options IFRS 2 “Share-Based Payment” requires the recognition of equity settled share based payments at fair value at the date of grant and the recognition of liabilities for cash settled share based payments at the current fair value at each balance sheet date. The Group issues equity-settled share based payments to certain employees and other advisors. The fair value of share- based payments to employees at grant date is measured using the Trinomial pricing model. The fair value of share-based payments to other advisors, are measured directly at the fair value of the services provided. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. The corresponding credit is taken to the share option reserve. (q) Legal and other disputes Provision is made where a reliable estimate can be made of the likely outcome of legal and other disputes against the Group. In addition, provision is made for legal and other expenses arising from claims received or other disputes. No provision is made for other possible claims or where an obligation exists but it is not possible to make a reliable estimate. Costs associated with claims made by the Group are charged to the Income Statement as they are incurred. (r) Critical accounting judgements and key sources of estimation uncertainty Impairment of goodwill and intangible assets Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value. An estimation of the value of separately identifiable net assets, such as domain names and player data, acquired as part of the Group’s business combinations during the year has been made by management. The estimated values are disclosed in note 26. Provision for legal and other disputes Determining whether provisions for legal and other disputes is required requires the company to assess the likelihood of an economic outflow occurring as a result of past events. Where an economic outflow is considered probable, a provision has been made for the estimated outflow. Where an outflow is considered possible but not probable, it has only been disclosed. Where the information required by IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” is expected to prejudice the outcome of legal and other disputes, it has not been disclosed on these grounds. Further details of contingent liabilities and provisions are provided in notes 24 and 27. LivermoreInvestments plc Annual Report 2006 23 Notes to the financial statements continued (s) Discontinued operations A discontinued operation is a cash-generating unit, or group of cash-generating units, that either has been disposed of, or is classified as held for sale, and: lRepresents a separate major line of business or geographical area of operations lIs part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or lIs a subsidiary exclusively with the view to resale The disclosures for discontinued operations in the prior year relate to all operations that have been discontinued by the balance sheet date for the latest period presented. 3. Segment Information — Discontinued operations (Also see notes 10,11) On 14 February 2006 certain trade assets were disposed for $250m. The assets included in the disposal were certain domain names and the brand names. These brands and domain names were used by Livermore Investments Group to direct online poker and casino players to PartyGaming’s websites, creating net gaming revenue for the Group. On 29 December 2006, the Company agreed to dispose of its remaining operations to PartyGaming Plc. Business segments The Group’s performance analysed by its two business segments is given below: Revenue by business segment Casino Net gaming revenue Segmental result Poker Net gaming revenue Segmental result Consolidated Net gaming revenue Segmental results Central costs Gross profit Amortisation and non recurring items Administrative expenses Operating profit It is not possible to provide a split of assets by segment due to the nature of the Group’s business. 24 2006 $000 48,616 27,667 11,234 4,128 59,850 31,795 (2,201) 29,594 (11,054) (3,483) 15,057 2005 $000 23,635 12,719 73,754 38,274 97,389 50,993 (3,248) 47,745 (4,581) (2,705) 40,459 3. Segment Information — Discontinued operations (Also see notes 10,11) continued Geographical segments The Group’s performance can also be reviewed by considering the geographical markets and geographical locations within which the Group operates. Geographical information is based on the geographic location of gaming operators, not players. This information is outlined below: Revenue by geographical market Europe Rest of World Net gaming revenue Segment result by geographical market Europe Rest of World Segment results Central costs Gross profit Amortisation and non recurring items Administrative expenses Operating profit 4. Investment revenue Interest revenue Available for sale investments Gain on sale of shares 2006 $000 15,728 44,122 59,850 2006 $000 12,915 18,880 31,795 (2,201) 29,594 (11,054) (3,483) 15,057 2006 $000 2,193 108 2,301 2005 $000 84,126 13,263 97,389 2005 $000 46,931 4,062 50,993 (3,248) 47,745 (4,581) (2,705) 40,459 2005 $000 — — — LivermoreInvestments plc Annual Report 2006 25 Notes to the financial statements continued 5. Amortisation and non recurring items Amortisation and non-recurring items refer to: Amortisation of intangible assets Amortisation of share options IPO related expenses Non recurring expenses Compensation to third parties 6. Operating profit on continuing operations Operating profit is stated after charging: Administration services Depreciation Amortisation Operating leases Auditors’ remuneration Auditor’s remuneration is analysed as: Audit fees At 31 December 2006 the Group employed 28 staff (2005: 40). 7. Finance expenditure Sundry finance expenses 26 2006 $000 2,315 3,150 — 1,144 4,445 11,054 2006 $000 800 — — — 195 195 2006 $000 170 170 2005 $000 2,266 277 587 1,451 — 4,581 2005 $000 936 12 2,886 18 90 90 2005 $000 55 55 8. Finance income Interest revenue Bank deposits and current accounts Exchange income Interest received on shareholder balances 9. Taxation Corporation tax — current year The tax charge for the year can be reconciled to the accounting profit as follows: Profit before tax Tax effect of domestic corporation tax Tax effect of share of subsidiaries Tax for the year 2006 $000 9,660 232 — 9,892 2006 $000 7 7 2005 $000 564 87 595 1,246 2005 $000 10 10 62,727 41,184 7 7 — 10 10 The Company is an international business company based in the British Virgin Islands (BVI) and, under its laws is not subject to corporation tax. Corporation tax is calculated with reference to the profit of the Company’s subsidiaries. Since the group trades in a number of jurisdictions, there is a risk that certain tax authorities could consider that it should be subject to tax in those countries. The directors have considered these risks and concluded that no further tax provision is required. LivermoreInvestments plc Annual Report 2006 27 Notes to the financial statements continued 10. Discontinued operations On 14 February 2006 certain trade assets were disposed for $250m. The assets included in the disposal were certain domain names and the brand names “Empire Poker” and “Ace Club”. These brands and domain names were used by the Company to direct online poker and casino players to PartyGaming’s websites, creating net gaming revenue for the Group. On 29 December 2006, the Company agreed to dispose of its remaining operations to PartyGaming Plc. This agreement was validated by the EGM held on 19 January 2007. Cash flows from discontinued operations Net cash from operating activities Net cash from investing activities Net cash from financing activities Net cash from/(used in) discontinued operations 2006 $000 2005 $000 (2,010) 234,849 (24,887) 207,952 23,810 (225,692) 160,104 (41,778) 28 11. Disposal of business assets Disposal proceeds received Legal and professional expenses Compensations to third parties Warranties provision Assets written off Profit from disposal to PartyGaming Plc Empire Poker 2006 $000 250,000 — (14,122) — — 235,878 Disposal of business 2006 $000 37,972 (944) (12,705) (2,000) (221,559) (199,236) Total 2006 $000 287,972 (944) (26,827) (2,000) (221,559) 36,642 2005 $000 — — — — — On 14 February 2006 the Group sold certain business assets to PartyGaming Plc pursuant to a settlement agreement for a total consideration of $250m. Business assets included in the disposal were certain domain names and brand names. The consideration represented $250m, which was all in the form of cash. On 19 January 2007, the Company completed the sale to PartyGaming plc of its remaining operating business. This agreement was signed on 28 December 2006 and was subject to certain conditions including approval of the Company’s shareholders at an EGM on 17 January 2007. Between signing and completion the Company continued to operate the business, however during this period restrictions were placed on the operation of the business by PartyGaming plc. Business assets included in the disposal were certain domain names, players’ data and brand names. Assets written off, principally comprises of acquired intangible goodwill relating to the acquisition of the business of Tradal Limited in May 2005 and the acquisition of Club Dice casinos in September 2005. The Group received a consideration for the disposal of the business of 83,325,934 PartyGaming shares representing a gross value of $47.9m. 17,374,637 PartyGaming shares were transferred to agents as compensation resulting in net disposal proceeds to the Group of $37.9m. The transaction was conditional on a further payment to a marketing service provider of $10m. LivermoreInvestments plc Annual Report 2006 29 Notes to the financial statements continued 12. Earnings per share Basic earnings per share has been calculated by dividing the net profit attributable to ordinary shareholders (profit for the year) by the weighted average number of shares in issue during the relevant financial periods. Diluted earnings per share is calculated after taking into consideration the potentially diluted shares in existence as at the year ended 31 December 2006 and the year ended 31 December 2005. Net profit attributable to ordinary shareholders ($000) Discontinued Operations 2006 51,692 2006 62,720 2005 41,174 Weighted average number of ordinary shares in issue 292,777,772 292,777,772 260,689,492 Basic earnings per share ($) Weighted average number of ordinary shares 0.18 0.21 0.16 including the effect of potentially diluted shares 299,723,327 299,723,327 261,862,570 Diluted earnings per share ($) Number of Shares 0.17 0.21 0.16 Weighted average number of ordinary shares in issue 292,777,772 292,777,772 260,689,492 Effect of dilutive potential ordinary shares: Share options Weighted average number of ordinary shares 6,945,555 6,945,555 1,173,078 including the effect of potentially diluted shares 299,723,327 299,723,327 261,862,570 13. Dividends Dividends paid 2006 $000 24,887 2005 $000 49,043 The dividends were paid during the year in September 2006 and in November 2006. 30 14. Property, plant and equipment Computer Hardware Fixtures and Fittings $000 $000 Cost As at 1 January 2006 Additions Disposal As at 31 December 2006 Accumulated depreciation As at 1 January 2006 Charge for the year Disposal As at 31 December 2006 Net book value As at 31 December 2006 As at 31 December 2005 15. Intangible assets Cost As at 1 January 2006 Additions Adjustment in fair value Disposal As at 31 December 2006 Accumulated amortisation As at 1 January 2006 Charge for the year Disposal As at 31 December 2006 Net book value As at 31 December 2006 131 104 (156) 79 (12) (78) 52 (38) 41 119 — 9 — 9 — (1) — (1) 8 — Goodwill $000 Website Design Costs $000 Domains $000 Player data $000 Computer Software $000 221,192 — (797) 1,371 848 — (220,395) (2,219) — — — — — — — (744) (860) 1,604 — — 627 575 — — (575) — (130) — 130 — — 445 4,486 — — (4,486) — (2,171) (2,315) 4,486 — — 2,315 63 68 — — 131 (14) (44) — (58) 73 49 Total $000 131 113 (156) 88 (12) (79) 52 (39) 49 119 Total $000 227,687 916 (797) (227,675) 131 (3,059) (3,219) 6,220 (58) 73 224,628 As at 31 December 2005 221,192 Note: The adjustment in fair value arose during the year 2006 since the final payment settling the balance due for the acquisition of related assets was actually less than the original contract price. LivermoreInvestments plc Annual Report 2006 31 Notes to the financial statements continued 16. Financial assets Fixed return bond investments Equity shares investments 2006 $000 100,975 23,516 124,491 2005 $000 — — — Financial assets relate to investments in bonds and equity classified as available for sale. Financial assets are held in the balance sheet at the year end at fair value. Fair value is measured by reference to the market value of the assets at the balance sheet date as they are openly traded on a public market. 17. Trade and other receivables Trade receivables Other debtors and prepayments 2006 $000 1,548 49,247 50,795 2005 $000 11,360 71 11,431 The carrying value of trade and other receivables approximates to their fair value. Included in other debtors and prepayments is $47,976,000 relating to amounts due from PartyGaming Plc on sale of the business as disclosed in note 11. 18. Cash and cash equivalents Cash and cash equivalents included in the balance sheet comprises the following: Short term deposits Cash at bank 2006 $000 136,522 1,193 137,715 2005 $000 14,607 1,690 16,297 32 19. Shareholders’ equity Share capital comprises the following: As at 1 January 2005 15 June 2005 share capital issue 15 June 2005 I.P.O issue 1 January 2006 Issue during 2006 As at 31 December 2006 $0 shares Number — 222,222,216 70,555,556 292,777,772 — 292,777,772 $0.01 shares Number 107,550 (107,550) — — — — Nominal value $000 Share premium arising $000 1 (1) — — — — 604 1 209,202 209,807 — 209,807 The company has authorised share capital of 1,000,000,000 ordinary shares with no restrictions of no par value. as at 31 December 2006 were as follows: As at 1 January 2005 Issued on 8 June 2005 Issued on 8 June 2005 Outstanding Share options $000 — 114,285 705,555 Issued on 7 December 2005 12,170,000 Share options exercised Share options lapsed As at 1 January 2006 Issued on 5 April 2006 Issued on 19 July 2006 Share options exercised Share options forfeited As at 31 December 2006 — — 12,989,840 1,500,000 10,950,000 — (12,494,285) 12,945,555 Date granted $000 Exercise price £ Exercise price $ Earliest exercise date Expiry of exercise date 08/06/05 08/06/05 07/12/05 — — 05/04/06 19/07/06 — — 1.75 1.90 0.71 — — 1.50 0.78 — — 3.01 3.27 1.22 — — 2.62 1.42 — — 15/06/05 15/06/05 07/12/06 — — 15/06/10 15/06/10 07/12/15 — — 05/04/07 19/07/07 05/04/16 05/04/16 — — — — The fair value of options granted to employees during the year was determined using the Binomial valuation model. The model takes into account a volatility rate of between 41–45% calculated using the historical volatility of a peer group of similar gaming 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 expense for the period has been included in amortisation and non-recurring expenses (see note 5). LivermoreInvestments plc Annual Report 2006 33 Notes to the financial statements continued 20. Bank overdrafts Short term bank overdrafts 21. Trade and other payables Amount falling due within one year Trade payables Other payables and accrued expenses 2006 $000 4,960 4,960 2006 $000 3,405 30,505 33,910 2005 $000 — — 2005 $000 19,594 494 20,088 The Directors consider that the carrying value of trade and other payables approximates to their fair value. Included in other payables and accrued expenses is $10,004,000 relating to amounts due to agents as part of the PartyGaming Plc transaction in December 2006. 22. Current tax payable Corporation tax payable 23. Related party transactions Amounts (owed to)/by shareholders Amounts owed to Directors Interest received on shareholder balances Administration services provided by Tradal Ltd Paid in respect of services * 2006 $000 7 2006 $000 — 391 — 660 2005 $000 6 2005 $000 (459) 347 595 936 1,562 1,139 * These payments were made in respect of members of key management either directly to them or to companies to which they are related. Tradal Ltd is a related party by virtue of common ownership with Livermore Investments Group Limited. 34 24. Contingent liabilities The agreement with PartyGaming Plc relating to the disposal of the remaining operations which was completed in January 2007, could potentially give rise to a liability arising from warranties and indemnities included within the sale and purchase agreement. No further information is provided as the Directors consider it could prejudice the outcome of any claim. 25. Other commitments and contingencies Future minimum lease commitments under property operating leases: Less than one year Other commitments: Less than one year Total commitments falling due within one year 26. Acquisitions There were no material acquisitions during the year 2006 by the Group. Cash consideration Analysed as: Domain names Players lists Goodwill arising The gross result of the acquired businesses since the date of acquisition is as follows: 2006 $000 — — — — — — 2006 $000 27 — 27 2005 Casino On Net $000 Noble Poker $000 2005 $000 48 22 70 Total $000 3,627 175,826 226,078 50 — 3,577 3,627 200 2,085 173,541 175,826 400 4,486 221,192 226,078 Club Dice Casinos $000 46,625 150 2,401 44,074 46,625 3,152 910 7,848 11,910 LivermoreInvestments plc Annual Report 2006 35 Notes to the financial statements continued 27. Litigation A legal dispute with PartyGaming plc came to an end after the two parties reached an agreement on the 14 of February 2006. See note 10. A trademark dispute with La Societe des Bains de Mer et du Circle des Etrangers a Monaco was settled in January 2007 when the Group agreed to an out of court settlement of $3.4m. After the year end the Company was made aware of a possible litigation in relation to a former consultant relating to the termination of his contract following the sale of the operating business to PartyGaming in December 2006. Other than the above no member of the Group is or has been involved in any legal or arbitration proceedings which may have, or have had during the 12 months preceding the date of this document, a significant effect on the Group’s financial position nor are the Directors aware of such proceedings pending or threatened against any member of the Group. The Group has provided for litigation claims in line with its accounting policy as set out in note 2. 28. Subsidiaries As at 31 December 2006 the Company had the five following wholly-owned subsidiaries: Name of Subsidiary Poltroon Limited Livermore Investments Limited Place of incorporation Date of acquisition Principal activity Cyprus 7 April 2005 Administration services (formerly Empire Online Limited) United Kingdom Empire Payments Ltd Empire Online D.O.O Sandhirst Ltd St. Kitts Serbia Cyprus 13 October 2004 20 October 2005 1 August 2005 4 November 2005 Winner Summit Limited British Virgin Islands 27 December 2006 Dormant company Dormant company I.T. services Dormant company Dormant company Any cash transactions between the subsidiaries and the Group during the year were eliminated on consolidation. 36 29. Financial risk management objectives and policies The Directors see the overall financial risk arising from exchange rate fluctuations to the Group as minimal since all receipts and the majority of payments are transacted in US dollars. The Group’s exposure to interest rate risk is limited to the interest bearing deposits and portfolio of bonds in which the Group invests surplus funds. Downside interest rate risk is minimal as the Group has minimal borrowings. Management monitors liquidity to ensure that sufficient liquid resources are available to the Group. The Group’s credit risk is primarily attributable to receivables from payment service providers and to its bond portfolio. Generally the Group’s maximum credit exposure is the carrying amount of trade and other receivables shown on the face of the Balance Sheet. LivermoreInvestments plc Annual Report 2006 37 Shareholder Information UK Transfer Agent All enquiries relating to shares or shareholdings should be addressed to: Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Telephone: 0870 162 3100 Facsimile: 020 8639 2342 Website www.livermore-inv.com The Company’s website provides, amongst other things, the latest news and details of the Company’s activities, share price details, share price information and links to the websites of our brands. Change of Address Shareholders can change their address by notifying Capita Registrars in writing at the above address. Lost Share Certificate If your share certificate is lost or stolen, you should immediately contact Capita Registrars on 0870 162 3100 who will advise on the process for arranging replacement. Duplicate Shareholder Accounts If, as a shareholder, you receive more than one copy of a communication from the Company you may have your shares registered in at least two accounts. This happens when the registration details of separate transactions differ slightly. If you wish to consolidate such multiple accounts, please call Capita Registrars on 0870 162 3100. Please note that the Directors of the Company are not seeking to encourage shareholders to either buy or sell the Company’s shares. 38 Notice of Annual General Meeting Notice is hereby given that the Annual General Meeting of the Company will be held at 10 Snow Hill, London, EC1A 2AL on 15 May 2007 at 10am for the purposes of the following: so that all previous authorities of the Directors pursuant to the said article 5.1 be and are hereby revoked. Ordinary business To consider and if thought fit, to pass the following resolutions which will be proposed as ordinary resolutions: 1. 2. 3. 4. to receive and adopt the Report of Directors, the financial statements and the report of the auditor for the year ended 31 December 2006. to authorise the Directors to determine the auditor remuneration. to re-appoint Andrew Rae Burns, who retires by rotation under the Company’s articles of association as a Director of the Company. to re-appoint Grant Thornton UK LLP as auditor of the Company to hold office from the conclusion of this meeting until the conclusion of the next general meeting at which financial statements are laid before the Company. 5. That the dividend recommended by the Directors of 3.4 US cents per ordinary share for the year ended 31 December 2006 be declared payable on 29 June 2007 to holders of ordinary shares registered at the close of business on 8 June 2007 subject to the directors confirming the solvency of the Company in accordance with applicable laws. 6. That for the purposes of article 5.1 of the Articles of Association of the Company: 6.1. the Directors be and are generally and unconditionally authorised to allot up to a maximum aggregate amount of 87,333,331 new ordinary shares of no par value of the Company to such persons and at such times and on such terms as they think proper during the period expiring at the end of the Annual General Meeting of the Company in 2008 (unless previously revoked or varied by the Company in general meeting); and 6.2 the Company be and is hereby authorised to make prior to the expiry of such period any offer or agreement which would or might require such ordinary shares to be issued in pursuance of any such offer or agreement notwithstanding the expiry of the authority given by this resolution; Special business As special business to consider and, if thought fit, pass the following resolutions which will be proposed as special resolutions: 7. THAT, subject to the passing of resolution 6 set out in the Notice convening this Meeting, the Directors be and are empowered in accordance with article 5.2 of the Articles of Association of the Company to allot new ordinary shares of no par value of the Company for cash, pursuant to the authority conferred on them to allot such shares by that resolution 6 as if the pre- emption provisions contained in article 5.2 did not apply to any such allotment, provided that the power conferred by this resolution shall be limited to: 7.1 the allotment of ordinary shares in connection with an issue or offering in favour of holders of ordinary shares and any other persons entitled to participate in such issue or offering where the shares respectively attributable to the interests of such holders and persons are proportionate (as nearly as may be) to the respective number of ordinary shares held by or deemed to be held by them on the record date of such allotment, subject only to such exclusions or other arrangements as the Directors may consider necessary or expedient to deal with fractional entitlements or legal or practical problems under the laws or requirements of any recognised regulatory body or stock exchange in any territory; and 7.2 the allotment (otherwise than pursuant to paragraph 9.1 above) of up to an aggregate amount of 14,638,888 of such ordinary shares; and this power, unless renewed, shall expire at the end of the Annual General Meeting of the Company to be held in 2008 but shall extend to the making, before such expiry, of an offer or agreement which would or might require ordinary shares to be allotted after such expiry and the Directors may allot such shares in pursuance of such offer or agreement as if the authority conferred hereby had not expired. 8 That, in accordance with its articles of association, the Company be and is hereby generally and unconditionally authorised to make market purchases LivermoreInvestments plc Annual Report 2006 39 Notice of Annual General Meeting continued (within the meaning of section 163 of the Companies Act 1985 (as amended)) on the AIM market of the London Stock Exchange plc of ordinary shares of no par value (“ordinary shares”) in the capital of the Company provided that: 8.1 the maximum number of ordinary shares hereby authorised to be purchased is 29,277,777; 8.2 the authority hereby conferred (unless previously renewed or revoked) shall expire at the conclusion of the annual general meeting of the Company next following the meeting at which this resolution is passed; and 8.3 the Company may, under the authority hereby conferred and prior to the expiry of that authority, make a contract to purchase its own shares which will or may be executed wholly or partly after the expiry of that authority and may make a purchase of its own shares in pursuance of such contract. 9 THAT Article 37.1 of the Company’s Articles of Association be deleted in its entirety and the following be substituted in lieu thereof: 37.1 Notwithstanding the provisions of the Companies Acts, the provisions of Chapter 5 of the Disclosure Rules and Transparency Rules published by the UK Financial Services Authority (“DTR 5”) which apply to UK companies whose securities are admitted to trading on AIM, as amended or re-enacted from time to time (the current wording of which is annexed to these Articles), insofar as those provisions relate to the requirement of the Members to disclose the percentage of voting rights held (as set out in DTR 5), shall be deemed to be incorporated into these Articles and shall bind the Company and the Members, and references to “an issuer” in such provisions shall be deemed to be references to the Company. 10 THAT: (i) all references to “section 212” in Articles 37.2, 37.3, 38, 39 and 40.1.2 be amended so as to refer to “section 793”; (ii) the reference to “section 212” in Article 40.1.1 be amended so as to referrer to “sections 820 to 825”; and (iii) the reference to “section 428(1)“ in Article 40.1.3 be amended so as to refer to “section 974”. 11 THAT, pursuant to the above resolutions, the Annexures to the Articles of Association of the 40 Company be amended: (i) by the removal of the following sections of the UK Act (as defined therein): Section 198; Section 199; Section 200; Section 202; Section 203; Section 204; Section 205; Section 208; and Section 212; and (ii) by the addition as an Annexure of DTR 5. By order of the Board Andrew Rae Burns Company Secretary Trident Chambers PO Box 146 Road Town Tortola British Virgin Islands 30 March 2007 Notes: (i) A member entitled to attend and vote at the Meeting convened by the above Notice is entitled to appoint one or more proxies to attend and, on a poll, to vote in his place. A proxy need not be a member of the Company. Completion of the Form of Proxy will not prevent you from attending and voting in person. (ii) To appoint a proxy you should complete the Form of Proxy enclosed with this Notice of Annual General Meeting. To be valid, the Form of Proxy, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified or office copy of the same, must be delivered to Proxy Processing Centre, Telford Road, Bicester, OX26 4LD, by no later than 48 hours before the time fixed for the meeting or any adjourned meeting. (iii) (iv) In the case of joint holders, the vote of the senior holder who tenders a vote whether in person or by proxy shall be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the relevant joint holding. In the case of holders of depositary interests representing ordinary shares in the Company, a form of direction must be completed in order to appoint Capita IRG Trustees Limited, the Depositary, to vote on the holder's behalf at the meeting or, if the meeting is adjourned, at the adjourned meeting. To be effective, a completed and signed form of direction (and any power of attorney or other authority under which it is signed) must be delivered to Proxy Processing Centre, Telford Road, Bicester, OX26 4LD by no later than 72 hours before the time fixed for the meeting or any adjourned meeting. Corporate Directory Secretary Andrew Rae Burns Registered Office Trident Chambers PO Box 146 Road Town Tortola British Virgin Islands Company Number 475668 UK Transfer Agent Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Auditor Grant Thornton UK LLP Churchill House Chalvey Road East Slough Berkshire SL1 2LS Solicitors Travers Smith 10 Snow Hill London EC1A 2AL Corporate Advisors & Stockbrokers Numis Securities Limited Cheapside House 138 Cheapside London EC2V 6LH Principal Bankers Bank Hapoalim 18 Boulevard Royal BP 703 L-2017 Luxembourg Leumi Bank Claridenstrasse 34 8022 Zurich Switzerland FIBI Bank Seestrasse 61 Zurich Switzerland LivermoreInvestments plc Annual Report 2006 41 Trident Chambers PO Box 146 Road Town Tortola British Virgin Islands 

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