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Case 1:11-md-02275-SAS Document 4 Filed 10/26/11 of 60

TABLE OF CONTENTS

NATURE OF THE ACTION ......................................................................................................... 1

JURISDICTION ............................................................................................................................. 4

PARTIES ........................................................................................................................................ 5

A. Plaintiffs ..................................................................................................................................5

B. Defendants ..............................................................................................................................5

SUBSTANTIVE ALLEGATIONS ................................................................................................ 8

A. Chronology of Gerova From Its Inception Through Revelation of the Fraud ........................8

1. History of Gerova Through December 2009 ................................................................ 8

2. The January 2010 Transactions .................................................................................... 9

3. Gerova’s Purported Business Model .......................................................................... 10

4. Events Subsequent to the January 20 Transactions .................................................... 12

B. Capitalization, Insider Holdings, and Trading History .........................................................15

C. The Amalphis/Allied Provident and Wimbledon Transactions Involved Undisclosed Related Parties..................................................................................................17

1. The Amalphis/Allied Provident Transaction Involved Gerova Insiders ..................... 18

2. The Wimbledon Transaction Also Involved Insider Dealing ..................................... 19

D. Concealment of Stillwater’s Distress and Omissions Concerning the Value of Its Assets ....................................................................................................................................21

E. Gerova Transferred Assets to an Entity Controlled by Affiliated Individuals Involved in Prior Investment Frauds ....................................................................................25

F. Gerova’s Financial Distress ..................................................................................................26

G. The Rapid Resignations of Non-Insiders and Termination of Third-Party Deals ................28

MATERIALLY MISLEADING STATEMENTS AND OMISSIONS ....................................... 31

The January 7, 2011 Proxy Statement ................................................................................. 32

The January 2010 Investor Presentation .............................................................................. 34

The May 2010 Investor Presentation ................................................................................... 34

The June 2, 2010 Form 20-F ................................................................................................ 36

The June 16, 2010 Form 20-F/A .......................................................................................... 39


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THE FRAUD IS REVEALED ...................................................................................................... 42

CLASS ACTION ALLEGATIONS ............................................................................................. 43

CLAIMS FOR RELIEF ................................................................................................................ 46

COUNT I ...................................................................................................................................... 46

For Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Promulgated Thereunder (Against the Gerova Defendants) ..............................................46

COUNT II ..................................................................................................................................... 49

For Violations of Section 20(a) of the Exchange Act (Against the Individual Gerova Defendants) ..........................................................................................49

COUNT III .................................................................................................................................... 51

For Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Promulgated Thereunder (Against the Stillwater Defendants) ..........................................51

COUNT IV.................................................................................................................................... 54

For Violations of Section 20(a) of the Exchange Act (Against Defendants Doueck and Rudy) .............................................................................................................54

PRAYER FOR RELIEF ............................................................................................................... 55

DEMAND FOR TRIAL BY JURY .............................................................................................. 56

Exhibits

Excerpts of Proxy Statement, Ex. 99.1 to Form 6-K, filed Jan. 7, 2010 ......................................... A

January 2010 Investor Presentation, Ex. 99.1 to Form 6-K, filed Jan. 7, 2010 .............................. B

May 2010 Investor Presentation, Ex. 99.2 to Form 6-K, filed May 14, 2010 ................................ C

Letter, dated June 1, 2010, from the Securities and Exchange Commission to Counsel for the Stillwater Funds ........................................................................................... D

Neil Weinberg, NYSE-Listed Gerova Financial Has Close Ties To Westmoore Ponzi Scamsters, Forbes.com, Jan. 5, 2011 ........................................................................... E

Keith Dalrymple, Gerova Financial Group (GFC): An NYSE-listed Shell Game, Dalrymple Finance LLC, Jan. 10, 2011 ................................................................................. F

Declaration of Jack Doueck in Opposition to Plaintiffs’ Motion for a Preliminary Injunction, filed in Goldberg v. GEROVA Fin. Group, Ltd., No. 1:11 Civ. 7107 (SAS) ............................................................................................................................ G


Lead Plaintiffs Rutland Baker, Bruce Henry, and Eleanore Kram, and Plaintiffs Ali Arar

and Xianhua Xu (collectively, “Plaintiffs”), individually and on behalf of all other persons

similarly situated, by their undersigned attorneys, for their Amended Class Action Complaint

against the above-named defendants (collectively, “Defendants”), allege the following upon

personal knowledge as to themselves and their own acts, and upon information and belief as to

all other matters, based on, inter alia, the investigation conducted by and through their attorneys,

which included, among other things: review of Securities and Exchange Commission (“SEC”)

filings; media and investigative reports; trading records published by the Bloomberg news

service; press releases and other public statements published by GEROVA Financial Group, Ltd.

(“Gerova” or the “Company”); and other publicly-available information.

NATURE OF THE ACTION

1. This is a securities fraud class action on behalf of all persons who purchased or

otherwise acquired Gerova securities from January 8, 2010 through and including February 23,

2011 (the “Class Period”). This class action is brought under Sections 10(b) and 20(a) of the

Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78j(b) and 78t(a); and SEC

Rule 10b-5, 17 C.F.R. § 240.10b-5.

2. On January 7, 2010, Gerova – then a publicly-traded “blank check” company

holding $115 million in proceeds from its 2008 initial public offering (“IPO”) – announced a

series of related stock-based acquisitions that would purportedly transform it into an

“international reinsurance company . . . focused on the life and annuity reinsurance markets”

with assets exceeding $1.5 billion, and a business model “differentiated” from other insurers

through a strategy of “aggregating permanent regulatory capital by exchanging our publicly

traded stock for performing unquoted financial assets at discounts to their intrinsic value.” Ex. C,


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Gerova Form 6-K, filed May 14, 2010, Ex. 99.2 (“May Investor Presentation”), at 5; Ex. B,

Gerova Form 6-K, filed Jan. 7, 2010, Ex. 99.1 (“January Investor Presentation”), at 16.

3. In fact, however, the assets Gerova acquired were purchased from a deeply

distressed family of asset-based investment funds managed by Stillwater Capital Partners, LLC

and Stillwater Capital Partners, Inc. (the “Stillwater Funds” or “Stillwater”), and from a second

fund family managed by Wimbledon Financing Master Fund Ltd. and Wimbledon Real Estate

Financing Fund Ltd. (the “Wimbledon Funds”), that was secretly controlled by Gerova insiders.

4. Moreover, as part of the January 20 Transactions, Gerova acquired an operating

entity, Allied Provident Insurance Company Ltd. (“Allied Provident”), a Barbados-licensed

reinsurance company, also from an entity secretly controlled by Gerova insiders.

5. The attorney and advisory fees reported in connection with the January 20

Transactions totaled a staggering $23.5 million – far out of proportion to the size and nature of

the transactions. The Company did not disclose the recipients of these fees, or offer any

justification for their size.

6. Subsequent to the January 20 Transactions, Gerova engaged in a series of

suspicious asset transfers, including the transfer of the real estate assets it acquired from

Stillwater to an entity, Net Five Holdings, LLC (“Net Five”) that was partially owned by two

individuals, Robert Willison (“Willison”) and Jason Galanis (“Galanis”). Galanis had a pre-

existing relationship with one of Gerova’s sponsors, Defendant van Roon and in 2007 the SEC

barred him from acting as a director or officer of a public company for five years, as a result of

his engaging in accounting fraud and financial reporting violations. According to allegations in a

short-seller report, Willison handled investor relations for Westmoore Capital, a Ponzi scheme

closed by the SEC in June 2010.


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7. While the stock issued by Gerova as currency for the January 20 Transactions was

unregistered and therefore could not be traded, the fictitious, inflated value of restricted stock

issued for the Stillwater and Wimbledon assets and Allied Provident gave the Company a market

capitalization in excess of $1 billion, qualifying it for inclusion in the Russell 3000 Index and

enabling the Company to obtain a listing on the New York Stock Exchange (“NYSE”).

8. At the same time, the Company’s public float increased from the approximately

300,000 shares trading immediately after the January 20 Transactions, to approximately 11.8

million shares. Given the absence of a registration statement or any disclosed public stock sales

by the Company during the Class Period, almost the entire public float, now held by members of

the Class (as defined below), thus came from sales of shares held, or privately issued by, insiders

at inflated prices.

9. Beginning in early January 2011, a series of negative reports by a Forbes

columnist, a short seller firm named Dalrymple Finance LLC, and other sources, as well as a

series of resignations from the Company prompted a rapid sell-off, driving the Company’s share

price from $29.00 at the start of January to $5.28 on February 23, when the NYSE halted trading.

10. Reflecting the deeply distressed nature of the Company – despite its purported

billion-dollar balance sheet reported just the prior year – Gerova was subjected to eviction

proceedings for nonpayment of rent in June 2011; attorneys defending it in a suit by a former

executive sought to withdraw in May 2011 on the grounds of non-payment of fees; and a

Stillwater principal disclosed in a court filing in June 2011 that “many of the life settlement

policies” acquired by Gerova from Stillwater in January 2010 had been lost because “Gerova

simply did not have cash available to pay the premiums.”


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11. On May 9, 2011, the Company announced the “voluntary” delisting of its

securities, and on June 15, 2011, announced that it would “go dark” – i.e., terminate the

registration of its securities and reporting obligations under the Exchange Act. As of the date of

this Amended Complaint, Gerova has not published any financial statements regarding its

operations since June 2010.

12. On May 20, 2011, trading for Gerova common stock resumed on the pink sheets,

with its shares closing at $1.02 that day. The Company’s shares are currently traded over the

counter, and their last quoted price, as of October 25, was $0.08 per share.

13. Briefly stated, Gerova was an audacious pump-and-dump market manipulation

scheme that relied on secret related-party transactions, undisclosed insider selling, and the use of

assets whose distressed nature was concealed to justify inclusion in the Russell 3000 index,

driving compulsory buying from index investors, and later, an NYSE listing. The Class is

comprised of the victims of this egregious fraud.

JURISDICTION

14. The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange

Act, 15 U.S.C. §§ 78j(b) and 78t(a), and SEC Rule 10b-5 promulgated thereunder by the SEC,

17 C.F.R. § 240.10b-5.

15. This Court has jurisdiction over the subject matter of this action pursuant to 28

U.S.C. §§ 1331 and 1337 and Section 27 of the Exchange Act, 15 U.S.C. § 78aa.

16. Venue is proper in this District pursuant to Section 27 of the Exchange Act, 15

U.S.C. § 78aa, and 28 U.S.C. § 1391(b). During the Class Period, Gerova common stock traded

on the NYSE Amex Exchange, and beginning on September 8, 2010, the NYSE.

17. In connection with the challenged conduct, Defendants, directly or indirectly,

used the means and instrumentalities of interstate commerce, including, but not limited to, the


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United States mails, interstate telephone communications and the facilities of the national

securities markets.

PARTIES

A. Plaintiffs

18. Lead Plaintiff Rutland Baker, as set forth in his previously filed certification,

purchased ordinary shares of Gerova during the Class Period, and was damaged when disclosure

of the fraud caused the price of Gerova’s shares to decline.

19. Lead Plaintiff Elenore Kram, as set forth in her previously filed certification,



20. Lead Plaintiff Bruce Henry, as set forth in his previously filed certification,



21. Plaintiff Ali Arar, as set forth in his previously filed certification, purchased

Gerova warrants and ordinary shares during the Class Period, and was damaged when disclosure

of the fraud caused the price of Gerova securities to decline.

22. Plaintiff Xianhua Xu, as set forth in his previously filed certification, purchased

Gerova warrants during the Class Period, and was damaged when disclosure of the fraud caused

the price of Gerova securities to decline.

B. Defendants

23. Defendant Gerova is incorporated in Bermuda as of August 30, 2010. Prior to

that date the Company was incorporated in the Cayman Islands. During the Class Period,

Gerova’s principal executive offices were located in Grand Cayman, Cayman Islands until May

2010, and were subsequently located in Hamilton, Bermuda. From its January 2008 IPO until


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January 29, 2010, the Company’s publicly-traded ordinary shares, warrants, and units traded on

the NYSE Alternext US Exchange (later named the NYSE Amex Exchange) under the ticker

symbols CIO, CIO.WS, and CIO.U. In connection with the Company’s change of name to

Gerova in January 2010, its ticker symbols were changed to GFC, GFC.WS, and GFC.U, and the

Company’s securities were transferred to the main NYSE in September 2010. Upon delisting

after the close of the Class Period, Gerova’s securities began trading on the pink sheets under the

ticker symbols GVFG, GVFG.WS, and GVFG.U.

24. Defendant Gary T. Hirst (“Hirst”) was one of the sponsors who formed the

Company and was appointed President of Gerova in October 2007. He was Chairman of the

Company’s Board of Directors (“Board”) from April 13, 2010 until his announced resignation in

February 2011. Hirst, along with Defendant Arie Jan van Roon, is a principal of Allius Ltd.

(“Allius”), one of the initial sponsors of Gerova, and owns or owned shares of Gerova both

directly and through Allius.

25. Defendant Arie Jan van Roon (“van Roon”) was a member of the Company’s

Board from its inception in 2007 until at least February 2011. He was one of the Company’s

sponsors and owns or owned shares of Gerova both directly and through Allius, Noble

Investment Fund Limited, and Ho Capital Management LLC.

26. Defendant Michael Hlavsa (“Hlavsa”) was the Company’s Chief Financial

Officer (“CFO”) from inception until at least February 2011.

27. Defendant Joseph J. Bianco (“Bianco”) was CEO of Gerova from June 2010 until

his resignation in February 2011.


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28. Defendant Keith Laslop (“Laslop”) was the Company’s Chief Operating Officer

from June 2010 until at least February 2011, and was a director of the Company from May 2008

until his resignation in February 2011.

29. Defendant Stillwater Capital Partners, Inc. (“Stillwater Inc.”) is a New York

corporation with its principal place of business in New York. Stillwater Inc. has served as the

Investment Manager for the Stillwater Funds since their inception. As the Investment Manager

of the funds, Stillwater, Inc. had control and authority over the publication of the $541.25 million

valuation of the Funds provided to Gerova at the onset of the Class Period.

30. Defendant Stillwater Capital Partners, LLC (“Stillwater LLC”) is a Delaware

limited liability company, with its principal place of business in New York. Stillwater LLC has

managed the business affairs of the Stillwater Funds since their inception. As the business

manager of the funds, Stillwater LLC had control and authority over the publication of the

$541.25 million valuation of the Stillwater Funds provided to Gerova at the onset of the Class

Period.

31. Defendant Jack Doueck (“Doueck”) served as a director of Gerova from January

2010 until at least February 2011. Defendant Doueck was also a principal of Stillwater, and

during the Class Period served on a three-person investment committee as part of Stillwater’s

engagement as investment manager for the Stillwater Funds after their acquisition by Gerova.

As a principal of Stillwater, Doueck had control and authority over the publication of the

$541.25 million valuation of the Stillwater Funds provided by Stillwater to Gerova at the outset

of the Class Period.

32. Defendant Richard Rudy (“Rudy”) is a principal of Stillwater. Defendant Rudy

sits on a three-person investment committee as part of Stillwater Inc.’s engagement as


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investment manager for the Stillwater Funds now under Gerova’s control. As a principal of

Stillwater, Rudy had control and authority over the publication of the $541.25 million valuation

of the Stillwater Funds provided by Stillwater to Gerova at the outset of the Class Period.

33. Gerova and the individuals identified in paragraphs 24-28 and 31 are referred to

herein as the “Gerova Defendants.” The individuals identified in paragraphs 24-28 and 31 are

referred to herein as the “Individual Gerova Defendants.”

34. Stillwater Inc., Stillwater LLC, Doueck and Rudy are referred to herein as the

“Stillwater Defendants.”

SUBSTANTIVE ALLEGATIONS

A. Chronology of Gerova From Its Inception Through Revelation of the Fraud

1. History of Gerova Through December 2009

35. Gerova was formed in March 2007 as a “blank check” company – a company

organized for the purpose of acquiring one or more operating businesses to be identified after

formation – under the name Asia Special Situation Acquisition Corp. (“ASSAC”). It raised $115

million through its January 2008 IPO, and was also capitalized with $5,725,000, paid by

affiliates of its sponsors in exchange for Company warrants. Gerova Form 20-F/A, filed June 16,

2010 (“2009 20-F/A”), at 28. ASSAC’s sponsors were Noble Investment Fund Limited and

Allius Ltd., entities owned and controlled by Defendants van Roon and Hirst.

36. Under the terms of Gerova’s governing documents, it was required to use the IPO

proceeds to acquire an operating entity within two years after the IPO, or immediately liquidate.

See Gerova Form 20-F, filed Apr. 1, 2009, at 9. In November 2009, the latest of several

attempted acquisitions failed, creating the prospect of imminent liquidation in late January 2010.

Gerova Form 6-K, filed Nov. 12, 2009.


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2. The January 2010 Transactions

37. Shortly before the end of 2009, however, Gerova entered into discussions to

acquire the Stillwater Funds (the “Stillwater Transaction”), a family of hedge funds whose

“portfolios consisted of mostly illiquid short and medium term loans and other asset backed

obligations for various types of borrowers (consisting of lines of credit to attorneys, real estate

investments and life insurance settlement and premium finance loans) and also included

participations in loans and loan portfolios of other lenders, undervalued real estate, distressed

real estate and real estate sold at foreclosure sales, and a portfolio of hedge funds with diversified

investment strategies.” 2009 Form 20-F/A, at 67. As Defendant Doueck, one of Stillwater’s

principals, later stated, the Stillwater Funds faced severe impairment at the time, and he viewed a

merger with Gerova as providing a means of liquidity without a forced disposition of assets at a

time of severe market dislocation. Ex. G ¶¶ 8, 16.

38. Concurrently with the Stillwater negotiations, Gerova negotiated two other

substantial transactions: (1) an 81.5% interest in Amalphis Group Inc. (“Amalphis”), the parent

company of Allied Provident Insurance Inc. (“Allied Provident”), a “specialty insurance

company” domiciled in Barbados, which it valued at $57,000,000 (collectively, the

“Amalphis/Allied Provident Transaction”). Ex. A, Proxy Statement, at iv; 2009 Form 20-F/A, at

F-16; and (2) the assets and investments held by the Wimbledon Funds, which were managed by

an entity named Weston Capital Asset Management LLC (“Weston”), and valued in the

transaction at $114,000,000 (the “Wimbledon Transaction”). See Id. at i, 13. See also 2009

Form 20-F/A, at 8, F-16.

39. As detailed below, the counterparties in both the Amalphis/Allied Provident and

Wimbledon Transactions – Rineon Group, Inc. (“Rineon”) and Weston, respectively – were

managed by Gerova insiders, and these related-party relationships were not disclosed in the


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proxy statement that Gerova issued for the January 20 Transactions (the “January Proxy

Statement”), see Ex. A, at F-17 through F-19 (purporting to list related party transactions but

omitting these matters), or in other public filings by the Company throughout the Class Period.

40. The currency for each of the January 20 Transactions was restricted, preferred

stock that the Company anticipated later converting into ordinary shares. Ex. A, January Proxy

Statement, at i–iv, 1.

41. The attorney and advisory fees reported in connection with the January 20

Transactions totaled an extraordinary $23.5 million – an amount that bears no relation to the size

of the entities or assets involved. The Company did not disclose the recipients of these fees, or

proffer any explanation for their unusual size. See 2009 Form 20-F/A, at 50, 67, F-16.

42. Under the terms of the Company’s governing documents, the January 20

Transactions triggered the original IPO investors’ right to demand return of the capital they had

invested (at the IPO price); approximately 97.4% of them did so, resulting in the return of $112.4

million of the $115 million raised in the IPO. 2009 Form 20-F/A, at 8. At that point,

immediately before the closing of the January 20 Transactions, Gerova’s total assets consisted of

less than $4 million. See 2009 Form 20-F/A, at F-2 (reflecting total assets as of December 31,

2009 of $116,088,000, inclusive of the $115 million IPO proceeds).

3. Gerova’s Purported Business Model

43. In its annual report issued June 16, 2010 on Form 20-F/A (at 5), Gerova described

itself as:

an international reinsurance company focused on the life and annuity reinsurance markets, in addition to a niche property and casualty business. Through our insurance subsidiaries, we underwrite annuity and life insurance risks that we believe will produce favorable long-term returns on shareholder equity. The investment portfolio derived from our insurance reserves, or our float, is allocated across traditional fixed income and equity investments, as well as asset classes where we believe we can


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achieve yield enhancement opportunities, including engaging in active investment strategies such as directly making secured loans to middle market companies in select industries underserved by banks. We believe the active origination of secured loans and equity interests as part of our investment strategy is differentiated from many traditional insurance companies’ portfolio management approach.

44. Its strategy was further explained in its May Investor Presentation (Ex. C, at 5):

45. Gerova thus presented itself as holding assets worth nearly $1.5 billion, and as

conducting a large-scale, sophisticated, international reinsurance business.

46. These statements followed Gerova’s presentation of a pro forma balance sheet

and income statement in January 2010 that similarly reflected assets worth $1.524 billion

(including cash and equivalents of $104 million) and projected annual 2010 net income of $138

million on revenues of $439 million. Ex. B, at 16.


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47. In fact, as discussed below, Gerova concealed the deeply distressed nature of the

assets acquired, and appears to have been cash flow insolvent from the closing of the January 20

Transactions.

4. Events Subsequent to the January 20 Transactions

48. In early January 2010, the Company hired Marshall Manley as its Chairman and

CEO, and prominently featured him in its public disclosures concerning the January 20

Transactions. See Ex. B, at 15; Ex. A, at 2, 22, 87, 176. According to the Company’s investor

presentation filed January 7, 2010 (the “January Investor Presentation”), “Mr. Manley has had a

long and distinguished career in business, including serving as President and CEO of City

Investing Co., a Fortune 200, New York Stock Exchange listed conglomerate with 400

subsidiaries . . . .” Ex. B, at 15.

49. Just three months after he was hired, however, on April 8, 2010, Manley resigned.

50. The January Investor Presentation and other materials also prominently featured

Mickey Kantor, former United States Secretary of Commerce and a partner at the Mayer Brown

law firm. See Ex. B, at 15; Ex. A, at 2, 22, 87, 177. After a January 26, 2010 Form 6-K filing

citing his appointment as a director “[e]ffective immediately upon the consummation of the

January 20 Transactions,” Gerova Form 6-K, filed Jan. 26, 2010, however, Kantor’s name was

quietly dropped, with the Company never disclosing or acknowledging his subsequent departure

as a director. (Kantor’s silent departure was possible only because Gerova was a foreign issuer

and therefore not subject to the disclosure requirements imposed on U.S. issuers.)

51. As detailed below and summarized in Section G below, the departures of Manley

and Kantor were the first in a series of quick resignations and deal terminations over the

following months by non-insider executives and counterparties.


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52. In the months following the January 20 Transactions, the Company’s public float

consisted only of the 300,000 IPO shares that were not redeemed in January, with a

correspondingly small daily trading volume, as further detailed in Section G below. On March 1,

2010, Gerova announced that it had received a delisting notice from the NYSE Amex Exchange,

on which its shares then traded, based on its failure to comply with the exchange’s minimum

shareholder requirement. Gerova Form 6-K, filed Mar. 1, 2010.

53. On April 30, 2010, Gerova issued a proxy statement for a May 12 shareholder

meeting, at which shareholders would be asked to vote on resolutions providing for conversion

of the preferred shares issued in the January 20 Transactions to ordinary shares. Gerova Form 6-

K, filed May 3, 2010. The conversion was approved at the meeting, and the preferred shares

issued in connection with the January 20 Transactions were immediately converted into

(unregistered) ordinary shares. Gerova Form 6-K, filed May 14, 2010.

54. On May 13, 2010, Gerova issued the May Investor Presentation discussed above.

As it explained, the preferred share conversion was intended to “[i]ncrease the aggregate market

capitalization of the listed class of GEROVA ordinary shares which may qualify the Company’s

shares for inclusion in certain indexes and may attract consideration from a broader range of

institutional investors and equity analysts.” Ex. C.

55. The May Investor Presentation also prominently featured Stuart LR Solomons as

Gerova’s new Managing Director, listing him first among the three named members of the

Company’s leadership team. Ex. C, at 16. Solomons had been appointed Managing Director on

April 8, 2010, upon the departure of Manley. By the middle of June, however, the Company

mentioned in its Form 20-F/A that Solomons had resigned as Managing Director. 2009 Form

20-F/A, at 54.


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56. Apparently in anticipation of the preferred stock conversion, the Company’s share

price increased from $7.42 on May 3 to $15.96 on May 18. Daily volume increased from an

average of 3,231 shares/day in April to 25,565 shares/day in May and 167,132 shares/day in

June. At its peak, on June 14, the Company’s shares closed at $17.25, implying a market

capitalization for the Company of $2.3 billion (including restricted shares).

57. On June 25, 2010, the Company announced that it would join the Russell 3000

Index.1 Share volume spiked to 1,395,687 for the day.

58. As discussed below, however, this trading volume far exceeded the 300,000

shares outstanding as of January 20, and none of the ordinary shares created through conversion

of the preferred stock in May were registered or, therefore, available to trade. Accordingly,

substantially all of the damaged shares in the Class were previously-restricted insider shares or

were privately issued by the Company without a registration statement and sold into the market

by the recipients.

59. On September 8, 2010, the Company’s shares and other securities (warrants and

“units” consisting of both shares and warrants) became listed and began trading on the NYSE –

the “Big Board” – moving from the smaller NYSE Amex Exchange on which they had

previously traded. Gerova Form 6-K, filed Sept. 7, 2010.

60. On December 3, 2010, the Company announced that the registration of the shares

issued in connection with the January 20 Transactions would be delayed due to difficulties in

obtaining audited net asset values for the Stillwater and Wimbledon Funds. Gerova Form 6-K,

filed Dec. 3, 2010.

1 See http://www.prnewswire.com/news-releases/gerova-set-to-join-russell-3000-index-97178689.html.


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61. On December 7, 2010, the Company announced plans to merge with Seymour

Pierce Holdings Limited, a London-based investment and merchant banking firm, and

announced that Keith R. Harris, the former CEO of HSBC Investment Bank PLC, would become

Gerova’s Chairman and CEO on January 1, 2011. The Company also announced a planned

merger with a New York-based institutional broker dealer named Ticonderoga Securities LLC.

Gerova Form 6-K, filed Dec. 7, 2010.

B. Capitalization, Insider Holdings, and Trading History

62. Gerova (then known as ASSAC) was initially capitalized with the proceeds of the

Company’s January 2008 IPO, which raised $115 million from the issuance of 11,500,000

“units” (each comprised of one ordinary share and one warrant), together with $5,725,000 paid

by affiliates of Hirst and van Roon to acquire 5,725,000 insider warrants. In addition, 2,500,000

founder shares were issued for nominal consideration. Gerova Form 20-F, filed April 1, 2009, at

64.

63. As noted above, approximately 11.2 million of the IPO shares were redeemed in

January 2010, leaving 300,000 IPO shares outstanding.

64. In the months after the January 20 Transactions, ordinary share trading volume

was very low – averaging just 4,524 shares per day. While the announced conversion of the

preferred shares issued in connection with the January 20 Transactions did not increase the

number of shares available to trade, volume increased sharply after the share conversion in May,

reaching 167,000 shares per day in June and a peak of 1,395,000 shares on June 25 – the day the

Company announced its addition to the Russell 3000 index.

65. The trading volume thus far exceeds the plausible volume based on an

outstanding float of 300,000 shares. Indeed, a Form 6-K later issued by Gerova in late


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November confirmed that an additional approximately 11.5 million shares had entered the

market since January 2010. See Gerova Form 6-K, filed Nov. 22, 2010.2

66. Because the Company made no public offering subsequent to the closing of the

January 20 Transactions, however, all such shares had to originate from private stock issuances

authorized by Company insiders, or the removal of restrictions on previously-issued insider

shares, and substantially all of the damaged shares in the Class thus came from these sources.

However, no such issuances or removal of restrictions were disclosed to investors.

67. The trading price and volume in Gerova ordinary shares during the Class Period

was as follows, on a split-adjusted basis3:

2 The 11.5 million additional shares were calculated as follows:

Ordinary shares outstanding after redemption or repurchase of IPO shares (including restricted shares issued to insiders) .................................................................................................................. 2,800,000 Ordinary shares issued in payment for certain fees incurred in connection with the January 20 Transactions .................................................................................................................................. 1,391,667 Restricted ordinary shares issued through conversion of preferred shares issued in connection with the January 20 Transactions ........................................................................................... 123,708,334 Total ............................................................................................................................................................. 127,900,001

Stated total (pre-split) ordinary shares outstanding as of November 21, 2011, per Gerova Form 6-K dated November 22, 2011 .......................................................................................................... 139,376,650

Unaccounted-for ordinary shares outstanding ............................................................................................... 11,476,649 3 Closing prices and transaction volume subsequent to the 1:5 reverse split effected on November 22, 2010 are adjusted to allow presentation on an economically-consistent basis by dividing the reported closing prices and multiplying reported volume by 5.


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68. On an as-reported (unadjusted) basis, the trading price and volume in Gerova

ordinary shares during the Class Period was as follows:

69. Thus, the only plausible explanation for this discrepancy is that Gerova’s insiders

were dumping shares of stock into an inflated market, without disclosing such sales to investors.

As Forbes columnist Neil Weinberg explained in his January 5, 2011 post, “[t]he story line is

that Gerova and dozens of satellite companies are secretly being manipulated as part of a bid

to pump up share prices and dump them on unsuspecting investors – many of whom are

effectively required to own Gerova because of its inclusion in the Russell 2000 and 3000 value

indexes.” Ex. E, at 3.

C. The Amalphis/Allied Provident and Wimbledon Transactions Involved Undisclosed Related Parties

70. The acquisitions of both Allied Provident and the Wimbledon Funds were

undisclosed, related-party transactions, tainted by fraud.


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1. The Amalphis/Allied Provident Transaction Involved Gerova Insiders

71. With respect to the Amalphis/Allied Provident Acquisition, the Company

represented that Amalphis was the parent company of Allied, a “specialty reinsurance company”

domiciled in Barbados, valued at $57 million. The Company disclosed that Amalphis was

purchased from Rineon, an inactive holding Company.

72. Absent from the Company’s Class Period statements, however, was the fact that

Gerova director de Waal, and Gerova CFO Hlavsa were two of the five directors of Rineon at the

time, and that Hlavsa was thereafter Rineon’s “sole director and the Company’s Principal

Executive Officer and Principal Financial Officer” until late 2010. Rineon Form 10-K, filed

May 24, 2010, at 58; Rineon Form 8-K, filed Nov. 8, 2010.

73. In addition, Gerova Chairman and President Hirst controlled Rineon through

Intigy Absolute Return Ltd. (“Intigy”), an investment fund managed by Axiat, Inc., of which

Hirst was President and CEO. See Rineon Form 8-K, filed May 14, 2009, at 4, Ex. 10.2, at 20.

74. According to a Form 8-K filed by Rineon, Intigy’s $36 million investment was

used by Rineon to acquire Amalphis/Allied Provident from NatProv Holdings Inc. in May 2009.

Prior to Intigy’s investment in Rineon, Rineon was “an inactive publicly traded Delaware

corporation” whose stock traded over the counter. Rineon Form 8-K, filed May 14, 2009, at 4,

Ex. 10.2, at 20. Simply put, Hirst and his fellow Gerova insiders had Gerova pay $57 million to

a Company he controlled for an asset that he had purchased a mere six months before for $36

million, reaping a $21 million profit for himself and his investors.

75. In addition, the public accounting firm that conducted the valuation of the assets

acquired by Gerova through the Amalphis/Allied Provident Transaction was Jewett, Schwartz,


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Wolfe & Associates (“Jewett Schwartz”), a six-member CPA firm based in Hollywood, Florida.4

Hlavsa resides in the neighboring community of Fort Lauderdale, and previously lived in the

neighboring community of Hallandale Beach. See In re Stillwater Capital Partners, Inc.

Litigation, No. 11 Civ. 2737-SAS (S.D.N.Y.), doc. no. 5.

76. The bona fides of the Amalphis/Allied Transaction are further suspect by reason

of the failure of any party to assert claims arising from the later failure of Gerova. Strikingly,

while numerous Stillwater investors and Class members have stepped forward to seek recovery

for their losses, and the undersigned counsel have received more than two dozen separate

inquiries from investors in Stillwater and Gerova, no litigation has been initiated by Rineon or

any other party – despite their receipt of the same, now worthless, restricted stock received by

Stillwater investors.

2. The Wimbledon Transaction Also Involved Insider Dealing

77. The Wimbledon Transaction similarly involved a related party transaction, which

secretly benefited Gerova’s insiders. As noted above, according to the January Proxy Statement,

the Wimbledon Funds were “managed by Weston Capital Asset Management LLC, a Delaware

limited liability company.” Ex. A, at i.

78. Undisclosed in the January Proxy Statement˗˗as well as the Company’s other

Class Period statements˗˗in November 2009, a publicly-traded company named Fund.com Inc.

(“Fund.com”) had “entered into a non-binding letter of intent to acquire an equity interest in

Weston Capital Management LLC.” Fund.com Form 8-K, filed Jan. 26, 2010.5 Gerova director

van Roon, one of Gerova’s sponsors, held a controlling interest in Fund.com. According to the

4 See http://www.jsw-cpa.com/contact.html. 5 Fund.com later reported that its acquisition of Weston was completed on March 29, 2010. Fund.com Form 8-K, filed July 30, 2010.


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Fund.com Form 10-K/A filed November 30, 2009, Equities Media Acquisition Corp Inc.

(“Equities Media”) held 59.43% of the voting power in Fund.com, and “[t]he name of the party

who has the power to vote and share power to dispose of the shares held by Equities Media

Acquisition Corp Inc. is Arne van Roon.” Fund.com Form 10-K/A, filed Nov. 30, 2009, at 55.

79. In addition, Fund.com’s CFO at the time of the transaction was Gerova’s CFO,

Defendant Hlavsa. Fund.com Form 10-Q, filed May 24, 2010. Moreover, Defendant Bianco, a

Gerova Director, served as the Chairman of Fund.com at the time of the acquisition, and

Defendant Laslop served as a Director of both companies during the Class Period. Pursuant to

the acquisition agreement, Gerova would continue to pay Weston a management fee for its

services as the investment manager of the Wimbledon Funds. Thus, Gerova’s insiders arranged

a transaction whereby Gerova would pay lucrative management fees to an entity they controlled,

thereby earning themselves undisclosed profits.

80. Fund.com was a penny-stock company that lost 98% of its market capitalization

between mid-2010 and June 2011, when trading was halted. On December 3, 2010, Fund.com

announced the restatement of its financial statements for 2007, 2008 and 2009. Fund.com Form

8-K/A, filed Dec. 3, 2010. For 2008 and 2009, Fund.com’s auditor was Jewett Schwartz, see

Fund.com Form 10-K, filed Nov. 30, 2009, which was the same six-member CPA firm that also

audited the assets acquired by Gerova in the Amalphis/Allied Provident Transaction and is based

in Hollywood, Florida, close to Hlavsa’s residence.

81. As with the Amalphis/Allied Transaction, the bona fides of the Wimbledon

Transaction are further called into doubt by the failure of Weston or any investor in the

Wimbledon Funds to assert claims arising from the later failure of Gerova, despite their receipt

of restricted, now-worthless Gerova shares.


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D. Concealment of Stillwater’s Distress and Omissions Concerning the Value of Its Assets

82. Defendants also deceived Gerova investors by concealing that the Stillwater

Funds were deeply distressed at the time they were acquired by Gerova, that the funds were

unable to honor redemption requests received by it prior to the acquisition by Gerova, and that

the $541.25 million valuation assigned to the Stillwater assets contradicted a substantially lower

valuation by Stillwater itself just weeks earlier.

83. In the Company’s January Proxy Statement (Ex. A, at 3), Defendants represented

to investors that the Stillwater Funds were a collection of Delaware limited partnerships and

Cayman Island exempt companies, which:

finance portfolios of mostly illiquid and privately offered short and medium term loans and other asset backed obligations for various types of borrowers, and participate in loans and loan portfolios of other lenders. There are three Delaware based funds which are primarily engaged in the purchase of undervalued real estate, distressed real estate and real estate sold at foreclosure sales. Lastly, there are two Delaware based and two Cayman Islands based funds (with additional sub-funds) which invest in a portfolio of hedge funds with diversified investment strategies.

84. The $541.25 million valuation for the assets were provided to Gerova by the

Stillwater Defendants, and were confirmed by Gerova’s Board of Directors prior to the January

20 Acquisition.

85. However, neither the January Proxy Statement nor subsequent Class Period

filings disclosed that at the time of the Stillwater Transaction, the Stillwater Funds were deeply

distressed and insolvent, and were unable to honor the numerous redemption requests made by

its investors.

86. The true financial condition of the Stillwater Funds was revealed only after the

Class Period, in court filings by Defendant Doueck.


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87. In his declaration dated May 26, 2011, filed in Goldberg v. GEROVA Fin. Group,

Ltd., No. 1:11 Civ. 7107 (SAS), Doueck admitted that the Stillwater Funds’ investments

“became illiquid at the very end of 2008 and, more intensely, in 2009 as a result of the financial

crisis, the drying up of lending facilities and the collapse of the real estate and other markets.”

Ex. G ¶ 8. As Doueck’s declaration makes clear, the alternative to the merger with Gerova was

liquidation of the Stillwater Funds. Id. ¶¶ 15-17. Indeed, the Funds were in such distress, that

the funds were unable to honor the tens of millions worth in redemption requests received by

their investors. As admitted by Doueck, in 2009 “we found ourselves, like all Fund investors,

unable to redeem our investments.” Id. ¶ 11.

88. Despite the highly material nature of this fact, neither the January Proxy

Statement nor other public filings ever disclosed the Funds’ distress and its inability to honor its

investors’ redemption requests.

89. Defendants also failed to disclose that the methodology used for valuing

Stillwater’s assets was deeply flawed, according to an SEC investigation first disclosed by

Forbes columnist Neil Weinberg in early 2011, shortly before the NYSE halted trading in

Gerova securities.

90. According to a June 1, 2010 letter from the SEC to Stillwater’s counsel (the

“Wells Notice”), the staff of the SEC was “considering recommending that the Commission

institute enforcement action against your client . . . based upon allegations that, among other

things, [an executive participated] in Stillwater’s dissemination of materially misleading

statements regarding the Stillwater Asset Backed Funds (‘the Funds’) to both existing and

prospective investors in the Funds.” Ex. D. The Wells Notice cited the specific matters at issue

as being, inter alia, (i) that the Stillwater executive “failed to disclose that . . . Stillwater’s


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determination of whether a loan was ‘performing’ was based not on whether the borrower made

required payments of principal and interest, but rather on [a] determination of whether the Funds

would eventually be repaid” and (ii) that disclosures with respect to average maturity dates

“failed to disclose that . . . Stillwater calculated that average maturity using only the original

intended term of each loan, and did not account for loan extensions or loans that had passed their

original maturity dates . . . .” Id.

91. In addition, other substantial deficiencies in valuation methodology casting

serious doubt on the true worth of the Stillwater assets were not disclosed to investors.

According to the Dalrymple Report, PricewaterhouseCoopers (“PwC”) performed an audit of

Stillwater for a major Stillwater investor, the Matrix Group, and concluded that they could not

issue an audit opinion for Stillwater as of year-end 2009, based on insufficient audit evidence

and doubt as to Stillwater’s solvency. Ex. F, at 6-8. The Dalrymple Report further states that

PwC was unable to obtain sufficient evidence concerning $136 million of 2009 year-end fair

value; recoverability of $20.5 million of receivable balances; or ability to repay $97 million in

debt. Id. at 6-8. The lack of confirmatory information was so troubling that PwC actually issued

an adverse opinion on the Stillwater Funds’ financial statements for 2008. Neither the absence

of confirmatory information cited by PwC, nor PwC’s refusal to issue an audit opinion, were

disclosed until cited in the Dalrymple Report.

92. As further stated in the Dalrymple Report (Ex. F, at 6-8):

It is impossible for us to understand why management purchased these assets given the uncertainty around value. It is doubly mysterious . . . why GFC would pay 90% for the Matrix assets for which Stillwater’s own auditors refused to sign an audit.

93. By Doueck’s own statement, the Stillwater assets had been valued at a

substantially lower amount for purposes of Stillwater investor redemptions completed just weeks


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earlier – in mid-December 2009. In the declaration filed in the Goldberg action, Doueck

explained that “[o]n December 18, 2009, Stillwater issued ‘Distributions-in-Kind’ (the ‘DIKs’)

to satisfy the redemption requests of certain investors in the Offshore Funds. Stillwater and the

Offshore Fund’s independent directors determined to value the Funds’ assets that were included

in the DIKs at the mid-point of the Houlihan Smith fair value range for each asset.” Goldberg v.

GEROVA Fin. Group, Ltd., No. 1:11 Civ. 7107 (SAS), doc. no. 73, Doueck Aff. ¶ 37. Such

DIKs were issued by Stillwater because they were unable to satisfy investor redemption requests

in cash.

94. By contrast, “when the Gerova Deal closed in January 2010, the Funds’ assets

were valued for that deal at the high-end of the Houlihan Smith valuation, as provided for in the

ASSAC Purchase Agreement.” Id. ¶ 38. The spread between the high-end and mid-point

valuations was, according to Doueck, approximately $87 million. As such, Stillwater valued the

Funds at $454 million for the DIKs. Id. ¶ 40.

95. Under U.S. generally accepted accounting principles (“GAAP”), the price used by

Stillwater itself to value its assets for purposes of redemptions on December 18, 2009 constituted

a level 1 valuation under SFAS 157, and as such could not be replaced by an alternate valuation.

Thus, Gerova and Stillwater simply had no basis under GAAP to value the Funds at the high end

of the Houghlian Smith range for purposes of the January 20 Transactions. Consistent with

GAAP, this lower valuation was material to Gerova investors, and failure to disclose it was a

material omission. According to Doueck, as a result of this valuation discrepancy, Marcum LLP,

the auditor selected by Stillwater to perform an independent audit of the valuation, refused to

sign off on the $514.25 million valuation as compliant with GAAP. Id. ¶ 39.


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E. Gerova Transferred Assets to an Entity Controlled by Affiliated Individuals Involved in Prior Investment Frauds

96. On May 26, 2010, the Company entered into a real estate joint venture, Net Five

Holdings, LLC (“Net Five”), to which it contributed “all of the owned real estate properties and

real estate loan assets acquired in connection with the January 2010 acquisition of the Stillwater

Funds” in exchange for a minority interest in the venture. 2009 Form 20-F/A, at 45. Among the

parties owning and managing Net Five were Robert Willison and Jason Galanis. See Gerova

Form 6-K filed Feb. 10, 2011; Gerova Form 6-K filed June 2, 2010, at 22; 2009 Form 20-F/A.

97. According to sources cited in the Dalrymple Report, Willison previously handled

investor relations for an entity named Westmoore Capital (“Westmoore”). Ex. F, at 10, 17.

Westmoore was a Ponzi scheme halted in mid-2010 by the SEC. See SEC Litigation Release

No. 21561, June 17, 2010, available at http://www.sec.gov/litigation/litreleases/2010/

lr21561.htm.

98. Galanis has personally been the subject of an enforcement action by the SEC. In

May 2007, the SEC announced it settled an action against Galanis for engaging in accounting

fraud and financial reporting violations at Penthouse International, Inc. Galanis was ordered to

pay civil penalties of $60,000 and was barred for a period of five years from serving as an officer

or director of any public company. See SEC Litigation Release No. 20110, May 10, 2007,

available at http://www.sec.gov/litigation/litreleases/2007/lr20110.htm.

99. In December 2010, Galanis was also cited extensively for his role in an

investment fraud in a complaint by former Red Hat, Inc. (NYSE:RHT) Chairman and CEO

Matthew Szulik (“Szulik”). See Szulik v. TAG Virgin Islands, Inc., No. 5:10-cv-00585-D

(E.D.N.C.), doc. no. 1, Complaint ¶ 4.


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100. The Szulik complaint also references news reports stating that Galanis has been

associated in business with his father, John Galanis – a white-collar felon who was sentenced to

27 years in prison for racketeering activities and who disappeared in 2001 while on a prison

work-release program. Id. ¶ 64.

101. Galanis’ involvement with Gerova apparently stemmed from his affiliation with

Defendant van Roon, one of Gerova’s original sponsors and the controlling shareholder of failed

penny-stock company Fund.com – which had agreed to acquire the manager of the Wimbledon

Funds shortly before they were acquired by Gerova. See ¶¶ 77-81 above. According to a filing

with the Nevada Secretary of State, Galanis is the President, Secretary, Treasurer and sole

Director of the van Roon entity that controlled Fund.com – Equities Media. See

http://nvsos.gov/sosentitysearch/CorpSearch.aspx → Equities Media Acquisition Corp Inc.

F. Gerova’s Financial Distress

102. In addition to the extensive self-dealing underlying the January 20 Transactions

and substantial insider trading detailed above, Gerova’s financial distress and apparent

insolvency from the closing of the January 20 Transactions provide further strong evidence that

Gerova deceived investors during the Class Period, and that its purported business model was a

non-starter.

103. In the January Investor Presentation, Gerova detailed its business strategy and

operating model and presented projected financial statements, including a pro-forma balance

sheet and income statements for 2010 through 2014. The balance sheet reflected total assets of

$1.52 billion, including cash of $104 million. The income statement reflected net income for

2010 of $139 million on revenues of $440 million. Ex. B, at 16, 18.

104. In the May Investor Presentation, the Company again detailed its business

strategy and operating model, and referenced its “consolidated assets of approximately $1.42


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billion . . . , as well as control of a profitable reinsurance company.” Ex. C, at 5, 12. While

touting its business model, the May Investor Presentation omitted actual or projected financial

statements. In fact, subsequent disclosures establish that the Company at the time was in dire

financial condition.

105. In his declaration in the Goldberg action, Stillwater principal Jack Doueck makes

perhaps the most significant admission regarding Gerova’s financial distress. Addressing

allegations of mismanagement by the plaintiffs there, he states (Ex. G ¶ 43 (emphasis added)):

To my knowledge, Gerova’s assets are being actively managed, and not neglected or mismanaged. Stillwater has been managing those former Fund assets for which it is still the investment manager as best it can in a very difficult and challenging economic environment. Those assets include the law firm and life settlement loans. For example, I know that Gerova injected cash into some of the life settlement loans to ensure that the insurance policies did not lapse. While many of the life settlement policies have lapsed since the merger, the lapses of these policies occurred, not as a result of Stillwater's neglect or mismanagement, but due to the fact that Gerova simply did not have cash available to pay the premiums.

106. Thus, Gerova’s financial condition was so severe that it was unable to make the

payments necessary to preserve the value of a major class of its investments.

107. The materiality of the Class Period omissions is further established by Gerova’s

near-total lack of resources as of early 2011.

108. According to a June 7, 2011 news article appearing on the website of a Bermuda

newspaper, The Royal Gazette, the Company “has been served notice for the termination of its

lease after failing to pay $49,083.40 in rent and service charges. The company, whose offices

are located on the fifth floor of Cumberland House, also owes $2,719.36 in land tax and was

served with the notice by maintenance managers Kitson & Company’s lawyers King &

Associates on behalf of the building’s owners Park Properties last month.” Alex Wright,


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Troubled Gerova Hit with Lease Termination Notice, available at

http://www.royalgazette.com/article/20110607/BUSINESS04/706079990/0/NEWS.

109. The “fifth floor of Cumberland House” was the address of Gerova’s principal

executive offices. 2009 Form 20-F/A (cover page).

110. Gerova was also the subject of a lawsuit by an entity affiliated with its former

CEO, Manley, in which Manley was granted summary judgment in May 2011. See Marseilles

Capital, LLC v. GEROVA Financial Group, Ltd., No. 10-81294-CIV (S.D. Fla.), doc. no. 48.

Instructively, shortly before the entry of summary judgment, Gerova’s counsel sought to

withdraw on the grounds of non-payment of fees. See Marseilles Capital, doc. no. 39.

111. In another case pending in the Southern District of New York, Gerova was sued

by the Katten Muchin law firm for nonpayment of $189,468 in fees. Katten Muchin Rosenman

LLP v. GEROVA Financial Group Ltd., No. 11-cv-867 (PGG) (S.D.N.Y.).

G. The Rapid Resignations of Non-Insiders and Termination of Third-Party Deals

112. In the thirteen months between the closing of the January 20 Transactions and the

halt of trading on February 23, 2011, Gerova was the subject of a series of rapid resignations and

deal terminations by non-insider executives and counterparties.

113. First, Marshall Manley, who was appointed CEO and Chairman in January 2010,

resigned approximately three months later. Gerova Form 6-K, filed Apr. 13, 2010. For his three

months of service, he was awarded an unprecedented $4 million severance package. The

Company proffered no explanation for such an outsize package.

114. Second, former U.S. Secretary of Commerce Mickey Kantor was prominently

featured in Gerova’s public disclosures surrounding the January 20 Transactions, but his name

was then quietly dropped, with the Company never disclosing or acknowledging his departure.


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115. Third, Gerova prominently announced Stuart LR Solomons as Gerova’s new

Managing Director in its May Investor Presentation, but he then resigned within two months of

joining the Company. Ex. C, at 16; 2009 Form 20-F/A, at 54.

116. Fourth, Keith R. Harris, who the Company reported on December 17, 2010 would

become Gerova’s Chairman and CEO on January 1, 2011, later elected to “defer his

appointment” and did not ultimately assume the position. Gerova Form 6-K, filed Dec. 7, 2010.

117. Fifth, Dennis L. Pelino, whose appointment as President and Chairman of the

Gerova board of directors was announced by the Company on February 10, 2011 “subject to

confirmation of certain conditions.” Such conditions apparently never materialized, as a few

days later he “withdrew his name from consideration as the Chairman and President of the

Company.” Gerova Form 6-K, filed Feb. 10, 2011; Gerova Form 6-K, filed Feb. 15, 2011.

118. Relatedly, Gerova failed to consummate a series of major transactions.

119. First, while it prominently discussed the acquisition of a reinsurance company

named Northstar Group Holdings, Ltd. (“Northstar”) in the January Proxy Statement and the

January Investor Presentation, see Ex. B, at 8, 9, 23, 25; Ex. A, at i-vi, 4, 31-32, Gerova later

failed to complete the Northstar acquisition – a fact it never directly disclosed. Instead, it

obtained only the minority interest in Northstar previously held by the Stillwater Funds. 2009

Form 20-F/A, at 5.

120. Second, Gerova’s planned mergers with Seymour Pierce Holdings Limited, a

London-based investment and merchant banking firm, and Ticonderoga Securities LLC, a New

York-based institutional broker dealer, were terminated in late February 2011.

121. In lieu of directors knowledgeable about Gerova’s business or experienced in the

turnaround of distressed firms, Gerova appears to now be under the control of an individual


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without relevant experience, Eugene Scher (“Scher”). Scher has submitted sworn statements on

behalf of Gerova in the Goldberg litigation and in a state court case brought on behalf of former

Stillwater investors, Eden Rock Finance Fund, L.P. v. GEROVA Financial Group, Ltd., No.

650613/11 (N.Y. Sup. Ct. N.Y. County), and has held himself out to be the Chief Operating

Officer of Gerova and a member of its Board. The Company has provided no disclosure

regarding Scher, or how he came to be an officer and director of Gerova.

122. Scher, reported to be both a director and the Company’s Chief Operating Officer,

has operated a number of small businesses in the marketing field, and has been the subject of

numerous negative reports by the Better Business Bureau and consumer-oriented websites. See

http://www.la.bbb.org/business-reviews/Lead-Sales/Kingsbridge-Marketing-Partners-Inc-in-

Calabasas-CA-100054393; http://www.la.bbb.org/business-reviews/Marketing-Consulting-

Services/Modern-Vision-Media-in-Calabasas-CA-100089931; http://www.la.bbb.org/business-

reviews/Prize-Promotion-Services/HollywoodPartnerscom-in-Los-Angeles-CA-13143458;

http://www.scam.com/showthread.php?t=54068; http://www.ripoffreport.com/directory/

Sharewell-Group.aspx; http://www.ripoffreport.com/internet-marketing-companies/sharewell-

group-mode/sharewell-group-modern-visio-4c43z.htm.

123. In addition, a Form 8-K issued by Cascade Technologies Corp. (“Cascade”) on

June 16, 2011 announced Scher’s appointment as a Director and Chief Operating Officer of

Cascade – and cited Scher’s affiliation with Gerova, which it falsely described as “an NYSE

publicly listed financial service company . . . .” Cascade is a penny-stock company that has lost

84% of its market capitalization since August 2010 and currently trades for $0.0185 per share.


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MATERIALLY MISLEADING STATEMENTS AND OMISSIONS

124. As detailed below, throughout the Class Period, Defendants omitted the following

material facts from Gerova’s public statements:

(a) contrary to the projected financial statements presented in January 2010,

the Company was unprofitable and in dire financial condition during the Class Period (see

¶¶ 102-111 above);

(b) the Stillwater Funds were deeply distressed at the time they were acquired

by Gerova, the Funds could not honor redemption requests in cash, and that the $541.25 million

valuation assigned to the Stillwater assets was premised on highly questionable assumptions and

was substantially higher than the valuation that the Company itself assigned to the Stillwater

assets just weeks earlier (see ¶¶ 82-95 above);

(c) the Amalphis/Allied Provident Transaction was a related-party transaction

with an entity secretly controlled by Gerova insiders;

(d) the Wimbledon Transaction was a related-party transaction with an entity

secretly controlled by Gerova insiders;

(e) Gerova was the subject of a market manipulation scheme that allowed

insiders to sell the Company’s securities at inflated prices (see ¶¶ 62-69 above);

(f) shares were secretly introduced into the market by or with the approval of

Company insiders, increasing the Company’s public float from the approximately 300,000 shares

trading immediately after January 20 Transactions, to approximately 11.8 million shares (based

on the shares outstanding that the Company reported as of November 22, 2010) (see ¶¶ 62-69

above); and

(g) Net Five, the entity to which Gerova transferred the substantial real estate

assets it acquired from Stillwater, was partially owned and/or controlled by two individuals,


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Robert Willison and Jason Galanis, who have been accused of involvement in other financial

frauds (see ¶ 6 above).

The January 7, 2011 Proxy Statement

125. On January 7, 2011, Gerova’s Board issued the January Proxy Statement seeking

shareholder approval for the proposed January 2010 Transactions. At the time that the January

Proxy Statement was issued, Defendants Hlavsa, Hirst, Laslop and van Roon were Directors of

the Company. Regarding the transactions, the Company stated, in relevant part:

Our business plan contemplates the acquisition of performing but largely illiquid financial assets at discounted and appraised net asset values, and contributing such assets to our insurance company subsidiaries as additional regulatory capital.

**** Our ‘proof of concept’ is that we have, within the past two months, been able to executed agreements for the acquisition, through merger and asset purchase, of nine pools of financial assets from Stillwater and Weston, two established hedge fund managers, totaling in excess of $650.0 million. These assets will be contributed as regulatory capital to the insurance subsidiaries.

****

Our board of directors concluded that the Transactions are fair to, and in the best interests of, the Company and that the consideration to be paid in the Transactions is fair to the Company. The Company’s management conducted a due diligence review of the Targets that included an industry analysis, an evaluation of the existing business and operations of the Targets, a valuation analysis and financial projections in order to enable the board of directors to evaluate the business and financial condition and prospects of the Targets.

**** The fair market value of the Targets was determined by our board of directors based upon standards generally accepted by the financial community, such as actual and potential revenues, investment returns, net asset values, earnings and cash flow. We did not obtain an opinion from an investment banking firm or appraiser as to the fair market value of the Targets or an opinion as to the fairness from a financial point of view to ASSAC or our shareholders of such acquisitions. Instead, our board of directors


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independently determined that the Targets have sufficient fair market value.

Ex. A at 1, 51-53 (emphases added).

126. With respect to the Stillwater Transaction, the Company stated, in relevant part:

The estimated total net asset value (or “NAV”) of all of the Stillwater Funds as of December 31, 2009, is expected to be approximately $588 million. The pro-forma financial statements assume that the appraised value of the net assets acquired will be approximately $541 million.

**** ASSC will simultaneously acquire approximately $588 million of the net assets of certain funds (comprised of certain asset backed lending funds, real estate funds and hedge funds), subject to appraisal, managed by Stillwater Capital Partners, Inc. and its affiliates in exchange for 541,275 of ASSAC Preferred Shares (the “Stillwater Asset Purchase”), which shares are assumed to be converted into 72,170,000 Ordinary Shares of ASSAC based on an assumed appraised net value of approximately $541.3 million.

Ex. A, at P-10, P-2.

127. The $541 million valuation attributed to the Stillwater Funds was provided by the

Stillwater Defendants to Gerova, and independently verified by Gerova’s Board.

128. Regarding the Amalphis/Allied Provident Transaction, the January Proxy

Statement stated that the Company would exchange 57,000 Preferred Shares in consideration for

an 81.5% interest in the company, thereby valuing Gerova’s stake in the Company at $57

million. The January Proxy Statement further disclosed that Amalphis would be acquired from

Rineon.

129. With respect to the Wimbledon Transaction, the January Proxy Statement stated

the Wimbledon Funds were managed by Weston, and would be continued to be managed by

Weston after the transaction. According to the January Proxy Statement, the Wimbledon Funds

invested in “secured and unsecured loans and convertible and non-convertible notes and other


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debt instruments.” Ex. A, at 3. The January Proxy Statement valued the Wimbledon Funds at

$114 million.

130. The January Proxy Statement made the following representation regarding related

party transactions:

When you consider the recommendation of our board of directors that you vote in favor of adoption of the Acquisition Proposal, you should keep in mind that our directors and executive officers have interests in the Transactions that are different from, or in addition to, your interest as a shareholder. These interests include the matters set forth below.

Ex. A, at 9. None of the listed related party transactions referenced the Wimbledon or

Amalphis/Allied Provident Transactions.

131. The foregoing statements omitted material facts and information for the reasons

set forth in Par. 124, above.

The January 2010 Investor Presentation

132. In the January Investor Presentation, Gerova detailed its business strategy and

operating model and presented projected financial statements, including a pro-forma balance

sheet and income statements for 2010 through 2014. The balance sheet reflected total assets of

$1.52 billion, including cash of $104 million. The income statement reflected net income for

2010 of $139 million on revenues of $440 million. Ex. B, at 16, 18.



The May 2010 Investor Presentation

134. As referenced above, on May 13, 2010, the Company filed a Form 6-K

announcing the conversion of the 742,250 preferred shares issued as part of the January 20

Transactions into 123.7 million ordinary shares. The Form 6-K included the May 2010 Investor

Presentation.


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135. With respect to the January 2010 Transactions, the May Investor Presentation

made nearly identical representations as to the acquisitions as set forth in ¶¶ 125-129, with the

exception that such presentation valued the Stillwater assets at $535 million, and not the

previously stated $541 million.

136. Regarding the Company’s newfound business model, the May Investor

Presentation touted the Company as a sophisticated “international reinsurance company,” with a

“niche” business of using the “unquoted” assets purchased in the January 20 Transactions as

regulatory capital for its insurance subsidiaries. In the Company’s own words:

Gerova Financial Group is an international reinsurance company currently focused on the life and annuity reinsurance markets, in addition to niche property and casualty business

We were established in January 2010 explicitly to take advantage of

opportunities arising from financial market dislocations, including aggregating permanent regulatory capital by exchanging our publicly traded stock for performing unquoted financial assets at discounts to their intrinsic value

We successfully executed nine simultaneous acquisitions from three selling

parties resulting in our acquisition of consolidated assets of approximately $1.42 billion and approximately $720 million in new equity capital (subject to audit and appraisal adjustments), as well as control of a profitable reinsurance company

We believe that our business model of acquiring new equity capital by

exchanging our stock for unquoted financial assets and utilizing these financial assets as regulatory capital, where permitted, differentiates us from other insurance carriers

We also believe that this capital structure has the advantage of potentially

achieving a superior return on equity arising from the relatively large amount of assets that insurance carriers are permitted to take on balance sheet relative to their equity capital


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Hundreds of billions in ‘stranded’ assets continue to persist on global balance sheets post-crisis during the great credit unwind, and our differentiated business model puts those financial assets back to work without inefficient or damaging liquidation

Ex. C, at 5.



The June 2, 2010 Form 20-F

138. On June 2, 2010, Gerova filed its Form 20-F for the year ended December 31,

2009. The Form 20-F was signed by Defendant Hirst. With respect to the January 20

Transactions, the Company stated, in relevant part:

Our goal is to take advantage of opportunities arising from financial market dislocations, including by aggregating permanent regulatory capital by exchanging our shares for performing assets at discounts to their intrinsic value. We believe that our business model of acquiring new equity capital by exchanging our shares for unquoted financial assets and utilizing these financial assets as regulatory capital, where permitted, differentiates us from other insurance carriers.

**** On January 20, 2010, the Company consummated the Business Combinations pursuant to which it acquired (a) an 81.5% interest in Amalphis, the parent company of Allied Provident, and (b) what was estimated to be approximately $655 million of the net assets of the Stillwater Funds and the Wimbledon Funds (subject to assumed liabilities as well as valuation and audit adjustments), in exchange for the issuance of 742,250 Preferred Shares.

Gerova Form 20-F, filed June 2, 2010, at 6, 65.


As part of our January 2010 acquisition of the assets and liabilities of various pooled investment vehicles (the Stillwater Funds) then managed by Stillwater, the purchase price for those assets was based upon approximately $541.25 million of estimated net asset values as of December 31, 2009 (the “Estimated Asset Values”) which were provided to us by Stillwater. Such Estimated Asset Values are subject to a post-acquisition adjustment based upon an


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independent audit of approximately 90% of those assets. Although the independent audit has not yet been completed, such audit may conclude that the final net asset values of the Stillwater Funds are materially lower than the Estimated Asset Value.

Gerova Form 20-F, filed June 2, 2010, at 8 (emphasis added).

140. Regarding the Amalphis/Allied Provident Transaction, the Form 20-F stated, in

relevant part:

In January 2010, we acquired an 81.5% interest in Amalphis Group Inc., the parent company of Allied Provident Insurance Inc., a specialty insurance company domiciled in Barbados.

**** Consideration paid for the business combination is as follows: (a) 57,000 Series A Preferred Shares in consideration of shares in Amalphis equal to an 81.5% interest in the equity of Amalphis, and 30,000 Series A Preferred Shares for other assets contributed to Allied Provident (a subsidiary of Amalphis), which shares are to be converted into 11.6 million Ordinary Shares at $7.50 and are valued at approximately $87,000,000.

Gerova Form 20-F, filed June 2, 2010, at F-11, F-16.

141. With respect to the Wimbledon Transaction, the Company represented that:

The Wimbledon Funds were master funds in a master-feeder structure which invested in investment pools managed by investment managers, such as secured and unsecured loans and convertible and non-convertible notes and other debt instruments, including investments coupled with warrants or other equity securities issued by small capitalization and private companies.

Gerova Form 20-F, filed June 2, 2010, at 66. The Form 20-F further represented that it had entered into a management agreement with

Weston whereby “Weston agreed to manage such assets in consideration for the payment of

certain management and incentive fees.” Gerova Form 20-F, filed June 2, 2010, at 6.


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142. Item 7 of the Form 20-F contained a listing of “Related Party Transactions”

involving Gerova. Neither the Amalphis/Allied Provident nor Wimbledon Transactions were

listed as involving related parties.

143. With respect to the Net Five transaction, the Form 20-F stated, in relevant part:

On May 26, 2010, we entered into a real estate joint venture transaction with Planet Five Development Group, LLC (“Planet Five”) and Robert V. Willison. Planet Five and Mr. Willison (collectively, the “Operating Members”) formed with us a new Florida limited liability company called Net Five Holdings, LLC (the “JV Company”). We intend to contribute to the JV Company all of the owned real estate properties and real estate loan assets we acquired in connection with our January 2010 acquisition of the Stillwater Funds, and Planet Five and its affiliates will contribute to the JV Company not less than $100.0 million in net asset value of seven income producing operating properties and four undeveloped commercial and residential properties located in Florida (collectively, the “Contributed Assets”).

Gerova Form 20-F, filed June 2, 2010, at 45.

144. The Form 20-F contained certifications executed by defendants Hirst and Hlavsa

pursuant to the Sarbanes-Oxley Act of 2002 (“Sarbanes Oxley”), representing that the financial

information contained therein was accurate, and that they had “designed such internal control

over financial reporting to provide reasonable assurance regarding the reliability of financial

reporting,” and that they had identified “[a]ny fraud, whether or not material, that involves

management or other employees who have a significant role in the registrant’s internal control

over financial reporting” (the “Sarbanes-Oxley Certifications”). Gerova Form 20-F, filed June 2,

2010, at Exhibits 12.A, 12.B.


set forth in Pars. 124, above.


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The June 16, 2010 Form 20-F/A

146. On June 16, 2010, Gerova filed a Form 20-F/A for the fiscal year ended

December 31, 2009, making certain amendments to its previously filed Form 20-F. The Form

20-F/A was signed by Defendant Bianco.

147. With respect to the January 20 Transactions, the Company stated, in relevant part:

Our goal is to take advantage of opportunities arising from financial market dislocations, including by aggregating permanent regulatory capital by exchanging our shares for performing assets at discounts to their intrinsic value. We believe that our business model of acquiring new equity capital by exchanging our shares for unquoted financial assets and utilizing these financial assets as regulatory capital, where permitted, differentiates us from other insurance carriers.

**** On January 20, 2010, the Company consummated the Business Combinations pursuant to which it acquired (a) an 81.5% interest in Amalphis, the parent company of Allied Provident, and (b) what was estimated to be approximately $655 million of the net assets of the Stillwater Funds and the Wimbledon Funds (subject to assumed liabilities as well as valuation and audit adjustments), in exchange for the issuance of 742,250 Preferred Shares.

2009 Form 20-F/A, at 6, 67.


As part of our January 2010 acquisition of the assets and liabilities of various pooled investment vehicles (the Stillwater Funds) then managed by Stillwater, the purchase price for those assets was based upon approximately $541.25 million of estimated net asset values as of December 31, 2009 (the “Estimated Asset Values”) which were provided to us by Stillwater. Such Estimated Asset Values are subject to a post-acquisition adjustment based upon an independent audit of approximately 90% of those assets. Although the independent audit has not yet been completed, such audit may conclude that the final net asset values of the Stillwater Funds are materially lower than the Estimated Asset Value.

2009 Form 20-F/A (emphasis added).


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149. Regarding the Amalphis/Allied Provident Transaction, the Form 20-F/A stated, in

relevant part:

In January 2010, we acquired an 81.5% interest in Amalphis Group Inc., the parent company of Allied Provident Insurance Inc., a specialty insurance company domiciled in Barbados.

**** Consideration paid for the business combination is as follows: (a) 57,000 Series A Preferred Shares in consideration of shares in Amalphis equal to an 81.5% interest in the equity of Amalphis, and 30,000 Series A Preferred Shares for other assets contributed to Allied Provident (a subsidiary of Amalphis), which shares are to be converted into 11.6 million Ordinary Shares at $7.50 and are valued at approximately $87,000,000.

2009 Form 20-F/A, at 5, F-16.

150. With respect to the Wimbledon Transaction, the Company represented that:

The Wimbledon Funds were master funds in a master-feeder structure which invested in investment pools managed by investment managers, such as secured and unsecured loans and convertible and non-convertible notes and other debt instruments, including investments coupled with warrants or other equity securities issued by small capitalization and private companies.

2009 Form 20-F/A, at 67.

151. The Form 20-F/A further represented that it had entered into a management

agreement with Weston whereby “Weston agreed to manage such assets in consideration for the

payment of certain management and incentive fees.” 2009 Form 20-F/A, at 6.

152. Regarding the Net Five transaction, the Form 20-F/A stated:

On May 26, 2010, we entered into a real estate joint venture transaction with Planet Five Development Group, LLC (“Planet Five”) and Robert V. Willison. Planet Five and Mr. Willison (collectively, the “Operating Members”) formed with us a new Florida limited liability company called Net Five Holdings, LLC (the “JV Company”). We intend to contribute to the JV Company all of the owned real estate properties and real estate loan assets we acquired in connection with our January 2010 acquisition of the


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Stillwater Funds, and Planet Five and its affiliates will contribute to the JV Company not less than $100.0 million in net asset value of seven income producing operating properties and four undeveloped commercial and residential properties located in Florida (collectively, the “Contributed Assets”). We will own a 49% Class A equity percentage interest in the JV Company, Planet Five will own a 38% Class A equity percentage interest, Mr. Willison and a third party will own in the aggregate a 12% Class B equity percentage interest in the JV Company. The Class B equity interests only share in earning and profits of the JV Company after each of Gerova and Planet Five recoup in cash the net asset values of the respective properties contributed by them to the JV Company. **** Messrs. Paul Rohan and Gregory Laubach, principal owners of Planet Five, and Robert Willison will constitute a majority of the members of the board of managers of the JV Company.

2009 Form 20-F/A, at 45.

153. Note 8 of the Form 20-F/A contained a listing of “Relating Party Transactions”

involving Gerova and its officers and directors. Neither the Amalphis/Allied Provident nor

Wimbledon Transactions were included in the listing.

154. The Form 20-F/A contained Sarbanes-Oxley certifications executed by defendants

Bianco (as the newly installed Chief Executive Officer) and Hlvasa representing that the

financial information contained therein was accurate, and that they had “designed such internal

control over financial reporting to provide reasonable assurance regarding the reliability of

financial reporting,” and that they had identified “Any fraud, whether or not material, that

involves management or other employees who have a significant role in the registrant’s internal

control over financial reporting.” 2009 Form 20-F/A, at Exhibits 12.A, 12.B.




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THE FRAUD IS REVEALED

156. On January 10, 2011, a short seller firm named Dalrymple Finance LLC issued a

report (the “Dalrymple Report”) that detailed an array of related party transactions, cited

insiders’ relationships to other failed companies and investment vehicles, and questioned the

valuation of the Company’s assets. Ex. F. The Dalrymple Report asserted that the Stillwater

assets had been grossly overvalued and concluded that Gerova “has many hallmarks of a classic

fraud.” Over the next two trading days, Gerova’s ordinary shares declined from $28.04 to

$26.25, or 6.4%, its warrants declined 41.9% and its units declined 13%.

157. On January 18, 2011, before the market opened, the Company responded to the

Dalrymple Report, announcing it had hired Kroll to investigate Dalrymple and other unnamed

“short-sellers.” This had the unintended consequence of further publicizing the earlier reports

about the Company, and Gerova’s ordinary shares declined 19.4%, from $27.30 to $22.00 over

the next three trading days. Over the same period, its warrants declined 8.3% and its units

declined 11.2%.

158. On February 10, 2011, after the close of the market, the Company announced the

resignation of its acting CEO, Joseph Bianco, the resignation of three other directors, the

decision of Harris to “defer his appointment” as Chairman and CEO, and the appointment of

Dennis L. Pelino as President and Chairman of the Company’s board of directors. Gerova Form

6-K, filed Feb. 10, 2011. The Company also announced “the resignation of Dr. Gary Hirst as

Chairman and President . . . .” Gerova Form 6-K, filed Feb. 10, 2011. Over the next three

trading days, Gerova’s ordinary shares declined 40.8%, from $15.70 to $9.30, its warrants

declined 25% and its units declined 20.2%.

159. In the Company’s final public announcement, after the close of the market on

February 15, 2011, it reported that Pelino had withdrawn his name from consideration. Over the


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next trading day, Gerova’s ordinary shares declined an additional 31.3%, from $9.30 to $6.39,

its warrants declined 13.4% and its units declined 20.2%.

160. The NYSE halted trading in Gerova the following week, on February 23, 2011.

The last trading price of Gerova prior to the trading halt was $5.28. On May 9, the Company

announced its “voluntary” delisting, and on June 15, 2011, announced that it would “go dark” –

terminate the registration of its securities and reporting obligations under the Exchange Act.

Gerova Form 25, filed May 9, 2011; Gerova Form 15F-12B, filed June 15, 2011. Gerova

securities subsequently began trading over-the-counter; the last quoted price for the Company’s

ordinary shares as of October 25 was $0.08.

CLASS ACTION ALLEGATIONS

161. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all persons who purchased or

otherwise acquired Gerova securities in open market transactions during the Class Period (the

“Class”); and were damaged thereby. Excluded from the Class are Defendants herein, the

officers and directors of the Company, at all relevant times, members of their immediate families

and their legal representatives, heirs, successors or assigns, and any entity in which Defendants

have or had a controlling interest.

162. The members of the Class are so numerous that joinder of all members is

impracticable. Throughout the Class Period, Gerova securities were actively traded on the

NYSE or NYSE Amex Exchange. While the exact number of Class members is unknown to

Plaintiffs at this time and can be ascertained only through appropriate discovery, Plaintiffs

believe that there are hundreds or thousands of members in the proposed Class. Record owners

and other members of the Class may be identified from records maintained by Gerova or its


- 44 -

transfer agent and may be notified of the pendency of this action by mail, using the form of

notice similar to that customarily used in securities class actions.

163. Plaintiffs’ claims are typical of the claims of the members of the Class as all

members of the Class are similarly affected by Defendants’ wrongful conduct in violation of

federal law, as complained of herein.

164. Plaintiffs will fairly and adequately protect the interests of the members of the

Class and have retained counsel competent and experienced in class and securities litigation.

Plaintiffs have no interests antagonistic to or in conflict with those of the Class.

165. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

(a) whether the federal securities laws were violated by Defendants’ acts as

alleged herein;

(b) whether statements made by Defendants to the investing public during the

Class Period misrepresented material facts about the business, operations and management of

Gerova;

(c) whether the Individual Defendants caused Gerova to issue false and

misleading financial statements during the Class Period;

(d) whether Defendants acted knowingly or recklessly in issuing false and

misleading financial statements;

(e) whether the prices of Gerova securities during the Class Period were

artificially inflated because of the Defendants’ conduct complained of herein; and


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(f) whether the members of the Class have sustained damages and, if so, what

is the proper measure of damages.

166. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as

the damages suffered by individual Class members may be relatively small, the expense and

burden of individual litigation make it impossible for members of the Class to individually

redress the wrongs done to them. There will be no difficulty in the management of this action as

a class action.

167. Plaintiffs will rely, in part, upon the presumption of reliance established by the

fraud-on-the-market doctrine in that:

(a) Defendants made public misrepresentations or failed to disclose material

facts during the Class Period;

(b) the omissions and misrepresentations were material;

(c) Gerova securities traded in efficient markets;

(d) the Company’s shares were liquid and traded with moderate to heavy

volume during the Class Period;

(e) the Company traded on the NYSE Amex Exchange and later, the NYSE;

(f) the misrepresentations and omissions alleged would tend to induce a

reasonable investor to misjudge the value of the Company’s securities; and

(g) Plaintiffs and other members of the Class purchased and/or sold Gerova

securities between the time Defendants failed to disclose or misrepresented material facts and the

time the true facts were disclosed, without knowledge of the omitted or misrepresented facts.


- 46 -

168. Based upon the foregoing, Plaintiffs and the members of the Class are entitled to a

presumption of reliance upon the integrity of the market.

169. Alternatively, Plaintiffs and the members of the Class are entitled to the

presumption of reliance established by the Supreme Court in Affiliated Ute Citizens of the State

of Utah v. United States, 406 U.S. 128, 92 S. Ct. 2430 (1972), as Defendants omitted material

information in their Class Period statements in violation of a duty to disclose such information,

as detailed above.

CLAIMS FOR RELIEF

COUNT I

For Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Promulgated Thereunder

(Against the Gerova Defendants)

170. Plaintiffs repeat and reallege each and every allegation contained in the foregoing

paragraphs as if fully set forth herein.

171. This Count is asserted against the Gerova Defendants and is based upon Section

10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder by the

SEC.

172. During the Class Period, the Gerova Defendants engaged in a plan, scheme,

conspiracy and course of conduct, pursuant to which they knowingly or recklessly engaged in

acts, transactions, practices and courses of business which operated as a fraud and deceit upon

Plaintiffs and the other members of the Class; made various untrue statements of material facts

and omitted to state material facts necessary in order to make the statements made, in light of the

circumstances under which they were made, not misleading; and employed devices, schemes and

artifices to defraud in connection with the purchase and sale of securities. Such scheme was

intended to, and, throughout the Class Period, did: (i) deceive the investing public, including


- 47 -

Plaintiffs and other Class members, as alleged herein; (ii) artificially inflate and maintain the

market price of Gerova securities; and (iii) cause Plaintiffs and other members of the Class to

purchase Gerova securities at artificially inflated prices. In furtherance of this unlawful scheme,

plan and course of conduct, Defendants, and each of them, took the actions set forth herein.

173. Pursuant to the above plan, scheme, conspiracy and course of conduct, each of the

Gerova Defendants participated directly or indirectly in the preparation and/or issuance of the

quarterly and annual reports, SEC filings, press releases and other statements and documents

described above, including statements made to securities analysts and the media that were

designed to influence the market for Gerova securities. Such reports, filings, releases and

statements were materially false and misleading in that they failed to disclose material adverse

information and misrepresented the truth about Gerova’s finances and business prospects.

174. By virtue of their positions at Gerova, the Gerova Defendants had actual

knowledge of the materially false and misleading statements and material omissions alleged

herein and intended thereby to deceive Plaintiffs and the other members of the Class, or, in the

alternative, the Gerova Defendants acted with reckless disregard for the truth in that they failed

or refused to ascertain and disclose such facts as would reveal the materially false and

misleading nature of the statements made, although such facts were readily available to such

Defendants. Said acts and omissions of Defendants were committed willfully or with reckless

disregard for the truth. In addition, each Defendant knew or recklessly disregarded that material

facts were being misrepresented or omitted as described above.

175. The Individual Gerova Defendants were personally motivated to make false

statements and omit material information necessary to make the statements not misleading in

order to personally benefit from the sale of Gerova securities from their personal portfolios.


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176. Information showing that Defendants acted knowingly or with reckless disregard

for the truth is peculiarly within Defendants’ knowledge and control. As the senior managers

and/or directors of Gerova, the Individual Gerova Defendants had knowledge of the details of

Gerova internal affairs.

177. The Gerova Defendants are liable both directly and indirectly for the wrongs

complained of herein. Because of their positions of control and authority, the Individual Gerova

Defendants were able to and did, directly or indirectly, control the content of the statements of

Gerova. As officers and/or directors of a publicly-held company, the Individual Gerova

Defendants had a duty to disseminate timely, accurate, and truthful information with respect to

Gerova’s businesses, operations, future financial condition and future prospects. As a result of

the dissemination of the aforementioned false and misleading reports, releases and public

statements, the market price of Gerova securities was artificially inflated throughout the Class

Period. In ignorance of the adverse facts concerning Gerova’s business and financial condition

which were concealed by the Gerova Defendants, Plaintiffs and the other members of the Class

purchased Gerova securities at artificially inflated prices and relied upon the price of the

securities, the integrity of the market for the securities, and/or upon statements disseminated by

Defendants, and were damaged thereby.

178. During the Class Period, Gerova securities were traded on an active and efficient

market. Plaintiffs and the other members of the Class, relying on the materially false and

misleading statements described herein, which the Defendants made, issued or caused to be

disseminated, or relying upon the integrity of the market, purchased shares of Gerova securities

at prices artificially inflated by the Gerova Defendants’ wrongful conduct. Had Plaintiffs and the

other members of the Class known the truth, they would not have purchased said shares, or


- 49 -

would not have purchased them at the inflated prices that were paid. At the time of the

purchases by Plaintiffs and the Class, the true value of Gerova securities was substantially lower

than the prices paid by Plaintiffs and the other members of the Class. The market price of

Gerova securities declined sharply upon public disclosure of the facts alleged herein to the injury

of Plaintiffs and Class members.

179. By reason of the conduct alleged herein, the Gerova Defendants knowingly or

recklessly, directly or indirectly, have violated Section 10(b) of the Exchange Act and Rule 10b-

5 promulgated thereunder.

180. As a direct and proximate result of the Gerova Defendants’ wrongful conduct,

Plaintiffs and the other members of the Class suffered damages in connection with their

respective purchases and sales of the Company’s securities during the Class Period.

COUNT II

For Violations of Section 20(a) of the Exchange Act (Against the Individual Gerova Defendants)



182. During the Class Period, the Individual Gerova Defendants participated in the

operation and management of Gerova, and conducted and participated, directly and indirectly, in

the conduct of Gerova’s business affairs. Because of their senior positions, they knew the

adverse non-public information about Gerova’s financial condition and the January 20

Transactions.

183. As officers and/or directors of a publicly owned company, the Individual Gerova

Defendants had a duty to disseminate accurate and truthful information with respect to Gerova’s


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financial condition, as well as the January 20 Transactions, and to promptly correct any public

statements issued by Gerova which had become materially false or misleading.

184. Because of their positions of control and authority as senior officers, the

Individual Gerova Defendants were able to, and did, control the contents of the various reports,

press releases and public filings which Gerova disseminated in the marketplace during the Class

Period concerning Gerova’s financial condition and business prospects. Throughout the Class

Period, the Individual Gerova Defendants exercised their power and authority to cause Gerova to

engage in the wrongful acts complained of herein. The Individual Gerova Defendants therefore,

were “controlling persons” of Gerova within the meaning of Section 20(a) of the Exchange Act.

In this capacity, they participated in the unlawful conduct alleged which artificially inflated the

market price of Gerova securities.

185. Each of the Individual Gerova Defendants, therefore, acted as a controlling person

of Gerova. By reason of their senior management positions and/or being directors of Gerova,

each of the Individual Gerova Defendants had the power to direct the actions of, and exercised

the same to cause Gerova to engage in the unlawful acts and conduct complained of herein.

Each of the Individual Gerova Defendants exercised control over the general operations of

Gerova and possessed the power to control the specific activities which comprise the primary

violations about which Plaintiffs and the other members of the Class complain.

186. By reason of the above conduct, the Individual Gerova Defendants are liable

pursuant to Section 20(a) of the Exchange Act for the violations committed by Gerova.


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COUNT III

For Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Promulgated Thereunder

(Against the Stillwater Defendants)



188. This Count is asserted against the Stillwater Defendants and is based upon Section

10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder by the

SEC.

189. During the Class Period, the Stillwater Defendants engaged in a plan, scheme,

conspiracy and course of conduct, pursuant to which they knowingly or recklessly engaged in

acts, transactions, practices and courses of business which operated as a fraud and deceit upon

Plaintiffs and the other members of the Class; made various untrue statements of material facts

and omitted to state material facts necessary in order to make the statements made, in light of the

circumstances under which they were made, not misleading; and employed devices, schemes and

artifices to defraud in connection with the purchase and sale of securities. Such scheme was

intended to, and, throughout the Class Period, did: (i) deceive the investing public, including

Plaintiffs and other Class members, as alleged herein; (ii) artificially inflate and maintain the

market price of Gerova securities; and (iii) cause Plaintiffs and other members of the Class to

purchase Gerova securities at artificially inflated prices. In furtherance of this unlawful scheme,

plan and course of conduct, Defendants, and each of them, took the actions set forth herein.

190. Pursuant to the above plan, scheme, conspiracy and course of conduct, each of the

Stillwater Defendants made material misrepresentations and omissions regarding the valuation of

the Stillwater funds, as well as their liquidity, which they knew would influence the market for

Gerova securities. Such statements were materially false and misleading in that they failed to


- 52 -

disclose material adverse information and misrepresented the truth about the Stillwater Funds’

finances and level of impairment.

191. By virtue of their positions at Stillwater, the Stillwater Defendants had actual

knowledge of the materially false and misleading statements and material omissions alleged

herein and intended thereby to deceive Plaintiffs and the other members of the Class, or, in the

alternative, Defendants acted with reckless disregard for the truth in that they failed or refused to

ascertain and disclose such facts as would reveal the materially false and misleading nature of

the statements made, although such facts were readily available to Defendants. Said acts and

omissions of Defendants were committed willfully or with reckless disregard for the truth. In

addition, each Defendant knew or recklessly disregarded that material facts were being

misrepresented or omitted as described above.

192. Defendants were personally motivated to make false statements and omit material

information necessary to make the statements not misleading in order to personally benefit from

the sale of Stillwater Funds to Gerova, as well as the sale of Gerova securities from their

personal portfolios.

193. Information showing that Defendants acted knowingly or with reckless disregard

for the truth is peculiarly within Defendants’ knowledge and control. As the senior managers

and/or the investment managers of the Stillwater Funds, the Stillwater Defendants had

knowledge of the details of the Stillwater Funds’ internal affairs.

194. The Stillwater Defendants are liable both directly and indirectly for the wrongs

complained of herein. Because of their positions of control and authority, the Stillwater

Defendants were able to and did, directly or indirectly, control the content of the statements of

Stillwater. As the officers and managers of the Stillwater Funds who knew that their valuation of


- 53 -

the Stillwater Funds would be relayed to Gerova’s investors, the Stillwater Defendants had a

duty to disseminate timely, accurate, and truthful information with respect to the Stillwater

Funds’ valuation and financial condition. As a result of the dissemination of the aforementioned

false and misleading reports, releases and public statements, the market price of Gerova

securities was artificially inflated throughout the Class Period. In ignorance of the adverse facts

concerning the Stillwater Funds’ financial condition which were concealed by Defendants,

Plaintiffs and the other members of the Class purchased Gerova securities at artificially inflated

prices and relied upon the price of the securities, the integrity of the market for the securities,

and/or upon statements disseminated by Defendants, and were damaged thereby.

195. During the Class Period, Gerova securities were traded on an active and efficient

market. Plaintiffs and the other members of the Class, relying on the materially false and

misleading statements described herein, which the Defendants made, issued or caused to be

disseminated, or relying upon the integrity of the market, purchased shares of Gerova securities

at prices artificially inflated by Defendants’ wrongful conduct. Had Plaintiffs and the other

members of the Class known the truth regarding the financial condition of the Stillwater assets,

they would not have purchased said shares, or would not have purchased them at the inflated

prices that were paid. At the time of the purchases by Plaintiffs and the Class, the true value of

Gerova securities were substantially lower than the prices paid by Plaintiffs and the other

members of the Class. The market price of Gerova securities declined sharply upon public

disclosure of the facts alleged herein to the injury of Plaintiffs and Class members.

196. By reason of the conduct alleged herein, Defendants knowingly or recklessly,

directly or indirectly, have violated Section 10(b) of the Exchange Act and Rule 10b-5

promulgated thereunder.


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197. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiffs and

the other members of the Class suffered damages in connection with their respective purchases

and sales of the Company’s securities during the Class Period.

COUNT IV

For Violations of Section 20(a) of the Exchange Act (Against Defendants Doueck and Rudy)



199. During the Class Period, Defendants Doueck and Rudy participated in the

operation and management of the Stillwater Funds, and conducted and participated, directly and

indirectly, in the conduct of Stillwaters’ business affairs. Because of their positions as officers

and managers of the Funds, they knew the adverse non-public information about the Stillwater

Funds’ financial condition and asset valuation.

200. Knowing that their statements regarding the Stillwater Funds’ valuation would be

disseminated to Gerova’s investors, Defendants Doueck and Rudy had a duty to disseminate

accurate and truthful information with respect to the Stillwater Funds’ financial condition and

value, and to promptly correct any public statements issued by Stillwater or Gerova regarding the

Funds which had become materially false or misleading.

201. Because of their positions of control and authority as senior officers and managers

of the Funds, Defendants Doueck and Rudy were able to, and did, control the contents of the

various reports, and public statements which Gerova disseminated in the marketplace during the

Class Period regarding the Stillwater Funds’ financial condition and valuation. Throughout the

Class Period, Defendants Doueck and Rudy exercised their power and authority to cause

Stillwater to engage in the wrongful acts complained of herein. Defendants Doueck and Rudy


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therefore, were “controlling persons” of Stillwater within the meaning of Section 20(a) of the

Exchange Act. In this capacity, they participated in the unlawful conduct alleged which

artificially inflated the market price of Gerova securities.

202. Each of Defendants Doueck and Rudy, therefore, acted as a controlling person of

Stillwater. By reason of their positions as officers and managers of the Stillwater Funds, each of

Defendants Doueck and Rudy had the power to direct the actions of, and exercised the same to

cause Stillwater to engage in the unlawful acts and conduct complained of herein. Each of

Defendants Doueck and Rudy exercised control over the general operations of Stillwater and

possessed the power to control the specific activities with respect to Stillwater which comprise

the violations about which Plaintiffs and the other members of the Class complain.

203. By reason of the above conduct, Defendants Doueck and Rudy are liable pursuant

to Section 20(a) of the Exchange Act for the violations committed by Stillwater.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs demand judgment against Defendants as follows:

A. Determining that the instant action may be maintained as a class action under

Rule 23 of the Federal Rules of Civil Procedure, and certifying Plaintiffs as Class

representatives;

B. Requiring Defendants to pay damages sustained by Plaintiffs and the Class by

reason of the acts and transactions alleged herein;

C. Awarding Plaintiffs and the other members of the Class prejudgment and post-

judgment interest, as well as their reasonable attorneys’ fees, expert fees and other costs; and

D. Awarding such other and further relief as this Court may deem just and proper.


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SADIS & GOLDBERG LLP Samuel J. Lieberman Charles H. Dufresne 551 Fifth Avenue New York, New York 10176 Telephone: (212) 573-8164 Facsimile: (212) 573-8149

Additional Attorneys for Plaintiffs


EXHIBIT A

Case 1:11-md-02275-SAS Document 4-1 Filed 10/26/11 Page 1 of 69

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUERPURSUANT TO SECTION 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For January 7, 2010

Commission File Number: 001-33916

ASIA SPECIAL SITUATION ACQUISITION CORP.

c/o M&C Corporate Services LimitedP.O. Box 309 GT, Ugland House

South Church StreetGeorge Town, Grand Cayman

Cayman Islands(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F � Form 40-F � Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): � Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): � Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing theinformation to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes � No ⌧ If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-___.

Source: Gerova Financial Group Ltd, 6-K, January 07, 2010 Powered by Morningstar® Document Research℠


C/O MAPLES CORPORATE SERVICES LIMITEDP.O. BOX 309, UGLAND HOUSE

GRAND CAYMAN, KY 1-1104CAYMAN ISLANDS

PROXY STATEMENTFOR

THE EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERSTO BE HELD ON JANUARY 19, 2010

TO THE SHAREHOLDERS OFASIA SPECIAL SITUATION ACQUISITION CORP.:

You are cordially invited to attend an extraordinary general meeting of the shareholders of Asia Special SituationAcquisition Corp. (“ASSAC”, “we”, “us”, “our”, or the “Company”) to be held on January 19, 2010 (the “Meeting”).

At the Meeting, you will be asked to consider and vote on the following proposals:

1. To approve the acquisition by ASSAC of up to three insurance companies and over approximately $650.0 million of theassets and liabilities of certain asset backed lending funds, real estate funds and hedge funds including:

(a) various pooled investment vehicles (the “Stillwater Funds”) managed by Stillwater Capital Partners, Inc., a NewYork corporation (“Stillwater”), and/or its affiliates, in accordance with the terms of various merger and asset purchaseagreements, each effective as of December 31, 2009, by and among ASSAC, Stillwater, the Stillwater Funds, and certainrecently formed acquisition subsidiaries of ASSAC (the “Stillwater Agreements”);

(b) an 81.5% controlling equity interest in Amalphis Group, Inc., a British Virgin Islands company (“Amalphis”), and itswholly-owned subsidiary, Allied Provident Insurance Company Ltd., a Barbados company (“Allied Provident” and, togetherwith Amalphis, the “Allied Provident Organization”), together with convertible preferred stock of an unrelated publiccompany owned by Amalphis, in accordance with the terms of a Share Exchange Agreement, effective as of December 31,2009, by and among ASSAC, Amalphis and the other shareholders of Amalphis (the “Amalphis Agreement”);

(c) investments and other assets various pooled investment vehicles (the “Wimbledon Funds”) managed by WestonCapital Asset Management LLC, a Delaware limited liability company (“Weston”), in accordance with the terms of assetpurchase agreements, effective as of December 31, 2009, by and among ASSAC, Amalphis, Allied Provident, Weston, theWimbledon Funds, and a recently formed acquisition subsidiary of Allied Provident (the “Wimbledon Agreements”); and

(d) Northstar Group Holdings, Ltd., a Bermuda company (“Northstar”), and its wholly-owned subsidiaries, NorthstarReinsurance, Ltd., a Bermuda company (“Northstar Bermuda”), and Northstar Reinsurance Ireland Ltd., an Ireland company(“Northstar Ireland” and, together with Northstar and Northstar Bermuda, the “Northstar Companies”), generally inaccordance with the terms of a non-binding letter of intent, dated as of December 22, 2009, by and among ASSAC,Northstar, Commerzbank AG and the other equity holders of Northstar (the “Northstar Agreement”);

2. To approve the potential repurchase of ASSAC ordinary shares from, or entry into one or more purchase or similaragreements with, any one or more of our shareholders in connection with the acquisition and related transactions;



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3. To approve the issuance of ordinary shares, preferred shares, options, warrants and/or convertible securities in connectionwith the acquisition and related transactions that would result in an increase in the number of our potentially outstandingordinary shares by more than 20%;

4. To approve an increase in the number of our authorized ordinary shares to 350,000,000 and an increase in the number ofour authorized preferred shares to 10,000,000;

5. To ratify and approve the election of Dr. Gary Hirst, Arie Jan van Roon, Leonard de Waal, Arie Bos, Keith Laslop,Marshall Manley, Michael Kantor and Jack Doueck as members of the board of directors of ASSAC upon consummation of thetransactions described in this proxy statement;

6. To approve the change of ASSAC’s name to “Gerova Financial Group, Ltd.”;

7. To adopt the Second Amended and Restated Memorandum and Articles of Association of ASSAC, to be effective uponcompletion of the acquisitions of the Allied Provident Organization, the Wimbledon Funds and some or all of the StillwaterFunds, which among other things: (a) provides for our perpetual existence; (b) provides for the election of directors to serve forstaggered three year terms; and (c) removes other blank check company restrictions;

8. To adopt a proposal to authorize the adjournment of the special meeting to a later date or dates, including, if necessary, tosolicit additional proxies in favor of the foregoing proposals if there are not sufficient votes in favor of any of these proposals;and

9. To adopt a proposal to authorize the transaction of such other business as may properly come before the Meeting or anyadjournment or postponement thereof.

Your vote is very important. The acquisitions contemplated by proposal 1 cannot be completed unless ASSACshareholders approve and adopt proposals 1 through 4 above. In addition, the acquisitions cannot be completed if publicshareholders of ASSAC owning 35% or more of the ordinary shares issued by ASSAC in its initial public offering vote againstthe acquisition and exercise their rights to have their shares converted into the right to receive cash from ASSAC’s trust account(the “Trust Account”), in the manner described herein. Information about the Meeting, the acquisition and other business to beconsidered by ASSAC shareholders is contained in this Proxy Statement.

The ASSAC board of directors unanimously recommends that you vote: FOR the proposal to adopt and approve theacquisitions contemplated by the Stillwater Agreements, the Amalphis Agreement, the Wimbledon Agreements and theNorthstar Agreement, and our acquisition of Northstar, the Stillwater Funds, the Allied Provident Organization and theWimbledon Funds; FOR the proposal to permit the redemption and repurchase of securities from certain of ourshareholders; FOR the proposal to allow for the additional issuance of ordinary shares, preferred shares, options,warrants and/or convertible securities; FOR the proposal to increase the number of our authorized ordinary shares to350,000,000 and the number of our authorized preferred shares to 10,000,000; FOR ratification of the appointment of theproposed persons to serve as members of our board of directors; FOR the proposal to approve the change of the name ofour company to “Gerova Financial Group, Ltd.”; FOR the proposal to approve the Amended Articles to, among otherthings, provide for our perpetual existence and remove other blank check company restrictions; and FOR the proposalto authorize the adjournment of the special meeting to a later date or dates, if necessary.

The transactions contemplated by the Northstar Agreement are also subject to the approval and consent of the holders of66.7% of the voting shares of Northstar (which has been obtained) and of the Northstar senior lender, as well as certaininsurance regulatory approvals in Ireland. The transactions contemplated by the Stillwater Agreements are subject to theapproval of the general partner, and a majority in interest, of the limited partners of the Stillwater Funds domiciled in Delaware(the “Stillwater Delaware Funds”) and a majority of the directors of the Stillwater Funds domiciled in the Cayman Islands (the“Stillwater Cayman Funds”). The transactions contemplated by the Wimbledon Agreements are subject to the approval of amajority of the directors of the Wimbledon Funds. The general partner of the Stillwater Delaware Funds and the directors of theStillwater Cayman Funds and the Wimbledon Funds have approved or are expected to approve the relevant StillwaterAgreements and the Wimbledon Agreements.



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The Meeting will be held at 10:00 a.m., New York time, on January 19, 2010, at the offices of Hodgson Russ LLP, counselfor the Company, at 1675 Broadway, 24 th Floor, New York, New York 10036. We urge you to read this Proxy Statementcarefully. You should also carefully consider the risk factors beginning on page 133. Whether or not you plan onattending the Meeting, your vote is important. Please submit your proxy as soon as possible and sign, date and return theenclosed proxy card in the envelope provided as soon as possible to make sure that your ordinary shares are representedat the Meeting.

Dr. Gary T. HirstPresidentAsia Special Situation Acquisition Corp.

NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIESCOMMISSION HAS REVIEWED THIS PROXY STATEMENT, APPROVED OR DISAPPROVED OF THETRANSACTIONS CONTEMPLATED BY THE STILLWATER AGREEMENTS, THE AMALPHIS AGREEMENT,THE WIMBLEDON AGREEMENTS, THE NORTHSTAR AGREEMENT, OR ANY OTHER TRANSACTIONDESCRIBED IN THIS PROXY STATEMENT, OR PASSED UPON THE MERITS OR FAIRNESS OF THETRANSACTIONS CONTEMPLATED THEREBY OR HEREBY, OR REVIEWED OR PASSED UPON THEADEQUACY OR ACCURACY OF THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY ISA CRIMINAL OFFENSE.

IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOURSHARES WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS. IN THAT EVENT, YOU WILL NOT BEELIGIBLE TO HAVE YOUR SHARES REDEEMED FOR A PRO RATA PORTION OF THE TRUST ACCOUNTINTO WHICH A SUBSTANTIAL PORTION OF THE NET PROCEEDS OF THE COMPANY’S INITIAL PUBLICOFFERING WERE DEPOSITED. IN ORDER TO EXERCISE REDEMPTION RIGHTS, YOU MUST VOTE AGAINSTTHE BUSINESS COMBINATION PROPOSAL AND DEMAND THAT THE COMPANY REDEEM YOUR PUBLICSHARES FOR A PRO RATA PORTION OF THE TRUST ACCOUNT NO LATER THAN THE CLOSE OF THEVOTE ON THE BUSINESS COMBINATION. IN ORDER TO REDEEM YOUR SHARES, YOU MUST TENDERYOUR SHARES TO THE COMPANY’S TRANSFER AGENT PRIOR TO THE EXTRAORDINARY GENERALMEETING OF SHAREHOLDERS. YOU MAY TENDER SHARES BY EITHER DELIVERING THE SHARECERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING THE SHARES ELECTRONICALLY THROUGHTHE DEPOSITORY TRUST COMPANY. GIVEN THE RELATIVELY SHORT SOLICITATION PERIOD, IT ISADVISABLE FOR SHAREHOLDERS TO USE ELECTRONIC DELIVERY OF THE PUBLIC SHARES. IF THETRANSACTION IS NOT CONSUMMATED, THEN THESE SHARES WILL NOT BE REDEEMED FOR A PRORATA PORTION OF THE TRUST ACCOUNT. IF YOU HOLD THE SHARES THROUGH A BROKERAGE FIRMOR BANK, YOU MUST INSTRUCT YOUR ACCOUNT EXECUTIVE TO WITHDRAW THE SHARES FROM YOURACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. SEE “OUR EXTRAORDINARY GENERALMEETING — REDEMPTION RIGHTS” BEGINNING ON PAGE 41 OF THE PROXY STATEMENT FOR MORESPECIFIC INSTRUCTIONS.

THE COMPANY AND ITS DIRECTORS AND EXECUTIVE OFFICERS MAY BE DEEMED TO BE PARTICIPANTSIN THE SOLICITATION OF PROXIES FOR THE SPECIAL MEETINGS OF ASSAC’S SHAREHOLDERS TO BEHELD TO APPROVE THE PROPOSED TRANSACTIONS. THE UNDERWRITERS OF ASSAC’S INITIAL PUBLICOFFERING AND SUBSEQUENTLY RETAINED ADVISORS MAY PROVIDE ASSISTANCE TO ASSAC AND ITSDIRECTORS AND EXECUTIVE OFFICERS, AND MAY BE DEEMED TO BE PARTICIPANTS IN THESOLICITATION OF PROXIES. A SUBSTANTIAL PORTION OF THE UNDERWRITERS’ FEES RELATING TOASSAC’S INITIAL PUBLIC OFFERING WERE DEFERRED PENDING SHAREHOLDER APPROVAL OFASSAC’S INITIAL BUSINESS COMBINATION, AND SHAREHOLDERS ARE ADVISED THAT THEUNDERWRITERS AND ADVISORS HAVE A FINANCIAL INTEREST IN THE SUCCESSFUL OUTCOME OF THEPROXY SOLICITATION AND TRANSACTIONS. INFORMATION ABOUT ASSAC’S DIRECTORS ANDEXECUTIVE OFFICERS IS AVAILABLE IN ITS ANNUAL REPORT. ADDITIONAL INFORMATION REGARDINGTHE INTERESTS OF POTENTIAL PARTICIPANTS IS INCLUDED IN THE PROXY STATEMENT.



This Proxy Statement is dated January 5, 2010 and is being mailed to shareholders of ASSAC on or aboutJanuary 8, 2010.

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C/O MAPLES CORPORATE SERVICES LIMITEDP.O. BOX 309, UGLAND HOUSE

GRAND CAYMAN, KY 1-1104CAYMAN ISLANDS

NOTICE OF EXTRAORDINARY GENERAL MEETING OFSHAREHOLDERS TO BE HELD ON JANUARY 19, 2010

TO THE SHAREHOLDERS OFASIA SPECIAL SITUATION ACQUISITION CORP.:

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “Meeting”) of the shareholders of Asia SpecialSituation Acquisition Corp., a Cayman Islands exempted company (“ASSAC”, “we”, “us”, “our”, or the “Company”), will beheld at 10:00 a.m. New York time, on January 19, 2010, at the offices of Hodgson Russ LLP, counsel for the Company, at 1675Broadway, 24th Floor, New York, New York 10036, for the purpose of considering and, if thought fit, passing and approving thefollowing resolutions:

1. by ordinary resolution that the following acquisitions by ASSAC be approved (“Proposal 1” or the “AcquisitionProposal”):

(a) in exchange for up to approximately 541,250 ASSAC Series A Fixed Price Mandatory Convertible Preferred Shares(the “Preferred Shares”) plus additional consideration payable to Stillwater for the provision of certain services, the assetsand liabilities or equity interests of various pooled investment vehicles (the “Stillwater Funds”) managed by StillwaterCapital Partners, Inc., a New York corporation (“Stillwater”), and/or its affiliates, in accordance with the terms of variousmerger and asset purchase agreements, each effective as of December 31, 2009, by and among ASSAC, Stillwater, theStillwater Funds, and certain recently formed acquisition subsidiaries of ASSAC (the “Stillwater Agreements”);

(b) in exchange for 57,000 Preferred Shares, an 81.5% controlling interest in Amalphis Group, Inc., a British VirginIslands company (“Amalphis”), and its wholly-owned subsidiary, Allied Provident Insurance Company Ltd., a Barbadoscompany (“Allied Provident” and with Amalphis, the “Allied Provident Organization”), through the purchase of 57,000shares of Amalphis Series B convertible preferred stock, and in exchange for 30,000 Preferred Shares, $40.0 million ofconvertible preferred stock of an unrelated public company owned by Amalphis, all in accordance with the terms of a ShareExchange Agreement, effective as of December 31, 2009, by and among ASSAC, Amalphis and the other shareholders ofAmalphis (the “Amalphis Agreement”);

(c) in exchange for 114,000 Preferred Shares, the assets and investments held by Wimbledon Financing Master FundLtd., a Cayman Islands exempted company, and Wimbledon Real Estate Financing Fund Ltd., a Cayman Islands exemptedcompany (collectively, the “Wimbledon Funds”), each managed by Weston Capital Asset Management LLC, a Delawarelimited liability company (“Weston”), in accordance with the terms of asset purchase agreements, effective as of December31, 2009, by and among ASSAC, Amalphis, Allied Provident, Weston, the Wimbledon Funds, and a recently formedacquisition subsidiary of Allied Provident (the “Wimbledon Agreements”); and

(d) for a purchase price of $7.0 million and security for the release of certain collateral, all of the equity of NorthstarGroup Holdings, Ltd., a Bermuda company (“Northstar”), and its wholly-owned subsidiaries, Northstar Reinsurance, Ltd., aBermuda company (“Northstar Bermuda”), and Northstar Reinsurance Ireland Ltd., an Ireland company (“Northstar Ireland”and, together with Northstar and



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SUMMARY

This summary discusses our proposed business and the business of Amalphis, Allied Provident and the NorthstarCompanies, which are described in greater detail elsewhere in this proxy statement. This summary also provides information onthe Stillwater Funds and the Wimbledon Funds. This summary is qualified in its entirety by the detailed information andfinancial statements and other financial information appearing elsewhere in this proxy statement, including the annexes. Youshould carefully read this entire proxy statement and the other documents to which it refers. See “Where You Can Find MoreInformation.”

Asia Special Situation Acquisition Corp.

We were formed as a special purpose acquisition corporation under Cayman Islands law on March 22, 2007. We wereformed for the purpose of acquiring control of one or more unidentified operating businesses, through a capital stock exchange,asset acquisition, stock purchase, or other similar transaction, including obtaining a majority interest through contractualarrangements. In January 2008, we consummated an initial public offering of equity securities from which $115 million of netproceeds was placed in the Trust Account. Our units of securities, consisting of ordinary shares and warrants trade separately onthe NYSE Amex Exchange (NYSE Amex US: CIO.U, CIO and CIO.WS). For a summary of how the funds deposited in theTrust Account will be distributed upon the Closing, please see “— Transaction Expenses” below.

We intend to acquire significant assets in the financing and financial services industries, through the acquisition of one ormore offshore specialty insurance companies and approximately $650.0 million of net assets of a series of investment funds;which assets we will consolidate with one or more of our insurance companies. ASSAC has identified what it believes is asignificant opportunity to take advantage of the dislocation in the financial markets and the associated de-leveraging of financialcompanies, most notably including hedge funds. Management believes that we have identified a significant structural arbitrageopportunity to acquire hedge fund assets in consideration for restricted publicly traded stock and to redeploy the acquiredperforming assets into a more suitable longer-term capital structure through the use of insurance company subsidiaries.

Our Strategic Plan

Hedge funds have experienced acute liquidity issues arising from a confluence of factors including leverage providersde-leveraging and fundamental risk management lapses in asset/liability duration matching by hedge fund managers. Manyhedge funds continue to hold long dated assets and have significant short-term liabilities in the form of client redemptions. As aresult, many are constructively insolvent. However, unlike other financial companies, hedge funds generally have the legal rightto suspend redemptions at their discretion. Similar circumstances with banks and insurance companies result in regulatoryaction, including receivership. Notwithstanding, investors are applying significant pressure to force hedge fund redemptions.

Our business plan contemplates the acquisition of performing but largely illiquid financial assets at discounted and appraisednet asset values, and contributing such assets to our insurance company subsidiaries as additional regulatory capital. Based onmarket research, ASSAC management believes that approximately 10% of hedge fund assets are either subject to suspendedredemption or are “side pocketed” and therefore illiquid, which represents an opportunity in excess of $130 billion. ASSACbelieves there is an opportunity to acquire as much as $10.0 billion in performing assets over the next 12 to 24 months. Our‘proof of concept’ is that we have, within the past two months, been able to execute agreements for the acquisition, throughmerger and asset purchase, of nine pools of financial assets from Stillwater and Weston, two established hedge fund managers,totaling in excess of $650.0 million. These assets will be contributed as regulatory capital to the insurance subsidiaries.

As part of its business plan, ASSAC has executed an agreement and a non-binding letter of intent to collectively acquirecontrol of two insurance holding companies with three operating insurance company subsidiaries. The acquisitions of theNorthstar Companies are subject to satisfaction of a number of conditions. ASSAC’s operating plan is to expand the regulatorycapital base of the insurance companies and to thereafter use this expanded regulatory capital to grow the size and scope of its inforce insurance policies. ASSAC believes that a prudent leverage on insurance regulatory capital ratio (depending on the type ofproduct being sold and the insurance regulations in the applicable jurisdictions) can be high as 10 to 1. Accordingly, we



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believe upon consummation of the transactions described below ASSAC will have legal regulatory capacity to expand assetssubstantially in excess of its present capital base.

As we grow the base of our investable assets, we intend to selectively leverage the expertise of certain investment managersand advisors, including Stillwater and its credit origination management team. Our initial business plan is to expand thealternative fixed income operations managed by Stillwater by increasing our exposure to directly originated credit facilities. Webelieve alternative fixed income investments are prudent for our insurance company targets. Stillwater has generally producednet rates of return in excess of 10% per annum on senior secured loans made by the Stillwater Funds. Based on the dislocation inthe credit markets, the near term expectation is that demand for credit will outstrip supply and, therefore, pricing may continue tobe favorable to non-bank lenders like us. Of course, past performance is not a guarantee of future performance.

Our business plan contemplates an expansion of existing lending activities to the energy, legal and insurance sectors. If weare able to expand our activities and still maintain historical net margins, we believe that our investment strategies willcontribute significantly to the return on equity in our insurance businesses given the low cost of capital of insurance “float” oravailable reserve, which is the amount of money at hand at any given moment that an insurer has collected in insurancepremiums but has not been paid out in claims. In expectation of the ultimate recovery in the global economy and commercialand residential real estate markets, we will also consider selective investments in portfolios of real estate assets which we believehave bottomed out and which can be acquired at prices significantly below their original cost.

Our business model seeks to emulate certain attributes of Berkshire Hathaway as a long term value-based investmentcompany that benefits from the investment of money that is held in reserve for the payment of future claims when they arise. Webelieve that the marginal return on equity derived from the difference between our insurance cost of funds and our fixed incomereturns is significant. In practice, we are able to achieve the beneficial effects of significant leverage without any of the risksassociated with debt facilities.

Our insurance-based strategy is also suited to our views of trends in taxation rates in the United States. We generally have astrong bias that tax rates will need to be raised. Accordingly, we believe that investors are likely to increasingly seektax-advantaged investments, including insurance products. We believe that the increased demand for insurance products thatsave or defer tax consequences are favorably positioned and will benefit our business plan.

In addition, for purposes of U.S. taxation, offshore insurance companies are free from U.S. taxes provided, generally, that theinsurance company is engaged in the bonafide business of insurance. Through the Northstar Companies and Allied Provident,we expect to be actively in the business of insurance with over $800 million in in-force business across 110,000 insurancepolicies. We believe the tax efficient structure will materially enhance the effective year-over-year yield of fixed incomeinvestment portfolio through the effects of compound interest.

Our Competitive Advantages

• Highly experienced management team. Marshall Manley, our new Chief Executive Officer, and Tore Nag, our newChief Operating Officer, have had long and successful careers in insurance, finance and the law, and have held seniorpositions in large institutional insurance and banking organizations. In addition, Michael Kantor, our new independentdirector, is recognized worldwide as a leader in government and brings to us a wealth of experience, contacts and accessto capital that we believe many of our competitors cannot match.

• Strong initial capital base. We expect to have, upon completion of the transactions, a net capital base in excess of$752.0 million which will we believe will enable us to significant increase our insurance, investment and lendingactivities.

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• Focused acquisition strategy. We intend to seek to acquire additional investment managers or registered investmentadvisors and, where appropriate, the investment funds they manage at prices which we believe will be at discounts fromtheir current carrying values, for the purpose of growing our legal regulatory capacity. We believe that such acquisitionscan be made at attractive prices in exchange for a combination of cash, deferred payments tied to future performance andequity in our company.

The Allied Provident Organization

The Allied Provident Organization is a specialty insurance company that offers reinsurance products. It directly sells avariety of property and casualty insurance products to businesses through Allied Provident.

Allied Provident holds an insurance license in Barbados and is authorized to conduct a general insurance business, includingthe sale of property, general liability, business interruption and political risk insurance, as well as compensation bonds, directorsand officers insurance, errors and omissions insurance, structured transactions insurance wraps, and reinsurance. AlliedProvident commenced its insurance business in Barbados in November 2007. It has primarily issued quota share policies thatreinsure automobile insurance policies in the United States. It has also directly written a number of directors’ and officers’liability policies and a financial guaranty policy.

Casualty insurance is primarily concerned with the losses caused by injuries to persons other than the policyholder and theresulting legal liability imposed on the policyholder. This includes workers’ compensation, automobile liability, and generalliability. A greater degree of unpredictability is generally associated with casualty risks known as “long-tail risks,” where lossestake time to become known and a claim may be separated from the circumstances that caused it by several years. An example ofa long-tail casualty risk includes the use of certain drugs that may cause cancer or birth defects. There tends to be greater delayin the reporting and settlement of casualty reinsurance claims due to the long-tail nature of the underlying casualty risks andtheir greater potential for litigation.

The Allied Provident Organization’s direct insurance business includes a suite of business property and casualty insuranceproducts, such as directors and officers liability insurance, financial guarantee insurance, excess and umbrella liability insurance,business income insurance, and inland marine and product liability insurance.

Stillwater Funds

The Stillwater Funds are a collection of Delaware limited partnerships and Cayman Islands exempt companies, all of whichare pooled investment vehicles commonly referred to as “hedge funds” and “private equity funds”. The Stillwater Funds aremanaged by Stillwater or its affiliates. There are three Delaware based and four Cayman Islands based funds which financeportfolios of mostly illiquid and privately offered short and medium term loans and other asset backed obligations for varioustypes of borrowers, and participate in loans and loan portfolios of other lenders. There are three Delaware based funds which areprimarily engaged in the purchase of undervalued real estate, distressed real estate and real estate sold at foreclosure sales.Lastly, there are two Delaware based and two Cayman Islands based funds (with additional sub-funds) which invest in aportfolio of hedge funds with diversified investment strategies. See “Our Extraordinary General Meeting — Proposal 1: TheAcquisition Proposal — Material Terms of the Acquisition Proposal” below.

Wimbledon Funds

The Wimbledon Funds are master funds in a master-feeder structure which invest in investment pools managed byinvestment managers. These managers may invest in secured and unsecured loans and convertible and non-convertible notes andother debt instruments. These investments may be coupled with warrants or other equity securities and generally will be issuedby, or will be made to, small-cap and private companies. Amalphis (through a subsidiary of Allied Provident) will acquire theassets of the Wimbledon Funds. See “Our Extraordinary General Meeting — Proposal 1: The Acquisition Proposal — MaterialTerms of the Acquisition Proposal” below.



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The Northstar Companies

Northstar Group Holdings, Ltd. is a Bermuda-based insurance holding company with a 100% interest in two licensedreinsurance companies in Ireland and Bermuda, Northstar Reinsurance Ireland Ltd. and Northstar Reinsurance, Ltd. Theinsurance operating subsidiaries are life and annuity specialist reinsurers that commenced operations on July 1, 2004. They wereorganized by Stillwater and Argus Insurance, together with management. As a result of the exercise of warrants, CommerzbankAG is a holder of non-voting equity and has representation on the board of directors. Commerzbank AG also issued theoutstanding letters of credit to ceding companies that have entered into reinsurance agreements with Northstar in an aggregateamount of $45 million, which are secured by its assets and a $10 million line of credit.

In Bermuda, Northstar holds a Class 3 license as a reinsurer and is a licensed life and annuity reinsurer in Ireland. TheNorthstar Subsidiaries have approximately $800 million in assets and $120 million in capital, with approximately 110,000in-force policies. In connection with the acquisition of Northstar, ASSAC intends to return the existing $120 million in capital tothe Northstar shareholders who contributed the same and replace such capital with the assets of certain of the Stillwater Funds.

Northstar’s current insurance activities are represented by two reinsurance treaties in force. The first treaty reinsuresequity-indexed annuities (EIA) on a co-insurance, funds withheld basis. This treaty was effective April 1, 2005, and Northstarcontinued to accept new business under this agreement until the end of February, 2008. The second treaty reinsures in force,fixed premium, fixed cash value, whole life insurance policies. Northstar reinsures on a coinsurance basis various pieces of inforce life insurance policies that were issued from 1996 through 2004

Our Company after the Transactions

The following chart sets forth our organizational structure assuming we consummate the acquisition of the NorthstarCompanies following the Closing and prior to June 30, 2010. If for any reason we do not consummate the proposed transactionwith the Northstar Companies, ASSAC will contribute the equity of its subsidiaries owning the assets of the Stillwater Funds toAllied Provident. Pending the acquisition of the Northstar Companies, ASSAC may, at its option, retain the equity of itssubsidiaries owning the assets of the Stillwater Funds or contribute such equity to Allied Provident and thereafter (uponconsummation of the acquisition of the Northstar Companies), transfer all or a portion of such equity interests to NorthstarIreland and/or Northstar Bermuda.

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Share Ownership

At the close of business on the January 4, 2010 record date, our executive officers and directors beneficially own and areentitled to vote, in the aggregate, 2,500,000 of our ordinary shares, representing approximately 17.9% of the 14,000,000 ordinaryshares issued and outstanding and entitled to vote at the Meeting. These outstanding shares do not include warrants to purchase(i) 5,725,000 additional ordinary shares held by our insider shareholders, (ii) warrants to purchase 11,500,000 ordinary sharesheld by our Public Stockholders, (iii) warrants to purchase 475,000 additional ordinary shares held by Maxim Group LLC andCRT Capital Group, LLC, (iv) warrants to purchase 200,000 ordinary shares held by a consultant who performed due diligenceon potential ASSAC acquisitions, and (v) warrants to purchase 100,000 ordinary shares issuable upon the Closing in partialsettlement of a third party claim for a finders’ fee; in all cases at an exercise price of $7.50 per share. The foregoing does notinclude any ordinary shares which may be issued at the Closing to any newly appointed directors or officers. See“Management — Executive Officers and Directors — Director and Executive Officer Compensation” below.

Recommendation of Our Board of Directors

After careful consideration, our board of directors has determined that, in the exercise of their business judgment, the termsand conditions of the Acquisition Proposal, the Repurchase Proposal, the Securities Issuance Proposal, the Increased CapitalProposal, the Board of Directors Proposal, the Name Change Proposal, the Amendment Proposal, the Adjournment andPostponement Proposal and the Other Matters Proposal are fair and in the best interests of ASSAC from a business standpoint,and fair and in the best interests of all of our shareholders, from a financial point of view. However, in making thisdetermination, our board of directors has NOT obtained a fairness opinion from any third party banker or other person statingthat the consideration to be paid was fair to our shareholders, from a financial point of view. Our board of directors believes that,since our public shareholders have the right to elect their redemption option and receive a refund of their initial investment in ourordinary shares, such fairness opinion in not required in these circumstances.

Our board of directors has approved the Transactions, the issuance of additional ASSAC securities, the increase in ourauthorized share capital, and the Amended Articles. Our board of directors therefore recommends that you vote or instruct yourvote to be cast “FOR” the approval of the Acquisition Proposal, “FOR” the approval of the Repurchase Proposal, “FOR” theapproval of the Securities Issuance Proposal, “FOR” the approval of the Increased Capital Proposal, “FOR” the approval of theBoard of Directors Proposal, “ FOR” the approval of the Name Change Proposal, “FOR” the approval of the AmendmentProposal, “FOR” the approval of the Adjournment and Postponement Proposal, and “FOR” the approval of the Other MattersProposal.

In the event that the transactions contemplated by Proposal 1 are not approved and adopted by our publicshareholders at the Meeting, or the Transactions are abandoned and terminated for any reason (including redemptionsby our public shareholders), the composition and number of members constituting our entire board of directors will notchange.

Interests of Our Directors and Executive Officers in the Transactions Contemplated by the AcquisitionProposal

When you consider the recommendation of our board of directors that you vote in favor of adoption of the AcquisitionProposal, you should keep in mind that our directors and executive officers have interests in the Transactions that are differentfrom, or in addition to, your interest as a shareholder. These interests include the matters set forth below.

• Our sponsor Ho Capital Management LLC and all of our officers and directors or their affiliates own ordinary shareswhich will be released from escrow after three years from the date of our prospectus only if we consummate a businesscombination and with respect to which they are waiving their redemption and liquidation distribution rights if weliquidate.

• Ho Capital Management, which is co-managed and jointly owned by Angela Ho, our former chief executive officer andformer chairman of our board of directors, and Noble Investment Fund



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and requirements as a special purpose acquisition corporation. Except for the Northstar acquisition, which is subject to anumber of closing conditions, including the approval and consent of the holders of 66.7% of the voting shares of Northstar(which has been obtained) and of the Northstar senior lender, as well as certain insurance regulatory approvals in Ireland, weanticipate that all of the Transactions contemplated by the Acquisition Proposal will be consummated by January 23, 2010,subject to certain rescission rights in favor of ASSAC with respect to the Stillwater Agreements. We will undertake toconsummate the Northstar acquisition on or about March 31, 2010, although it is possible the closing may not occur untilJune 30, 2010. Assuming shareholder approval of the Acquisition Proposal on or before January 23, 2010, we willconsummate the acquisitions of the Allied Provident Organization, the Wimbledon Funds and some or all of the StillwaterFunds and other securities contemplated by the Amalphis Agreement, the Wimbledon Agreements and the relevant StillwaterAgreements, provided that the aggregate net asset value of all of the consummated acquisitions equals or exceeds theMinimum Acquisition. However, it is possible that factors outside ASSAC’s control could cause it to not occur at all.

Q: What is the purpose of our approving the election of new directors?

A: Marshall Manley has had a long and very successful career in running and managing, at the highest executive levels, majorinsurance businesses, including Home Insurance Co. Michael Kantor is recognized as a leader in government and brings to usa wealth of experience, contacts and access to capital. Jack Doueck has managed the assets of the Stillwater Funds throughchallenging economic times. The members of our current board of directors believe that such persons bring significantexperience and expertise to assist us in both our internal and external future growth and in achieving our strategic plansfollowing consummation of our contemplated acquisitions.

Q. What vote is required to approve each of Proposals 1 through 7?

A. The approval of the Acquisition Proposal (Proposal 1) requires the affirmative vote of the holders of a majority ofour 11,500,000 publicly traded shares (the “Public Shares”) that are present in person or by proxy and entitled tovote at the Meeting. Notwithstanding the foregoing, if public shareholders holding 4,025,000 or more shares (or35% of the total number of shares sold in our initial public offering) vote against the Transactions contemplatedby the Acquisition Proposal and demand that we redeem their shares into cash, none of the above proposals willbe adopted and the Closing will not occur.

The approval by ordinary resolution of the Repurchase Proposal (Proposal 2), the Securities Issuance Proposal (Proposal 3),the Increased Capital Proposal (Proposal 4) and the Board of Directors Proposal (Proposal 5) requires the affirmative vote ofholders of a majority of all of our outstanding ordinary shares who vote in person or by proxy at the Meeting on suchproposals, including the Insiders Shares.

The approval by special resolution of the Name Change Proposal (Proposal 6) and the Amendment Proposal (Proposal 7)requires the affirmative vote of the holders of two-thirds of our outstanding ordinary shares who vote in person or by proxyat the Meeting on such proposal, including the Insiders Shares.

Q. What vote is required to approve the Adjournment and Postponement Proposal and the Other Matters Proposal?

A. The approval of the Adjournment and Postponement Proposal (Proposal 8) and the Other Matters Proposal (Proposal 9) willrequire the affirmative vote of the holders of a majority of our shares that are present in person or by proxy and entitled tovote at the Meeting on such proposals, including the Insiders Shares.

Q. What is the recommendation of the ASSAC board of directors concerning the proposals which are being presented tothe shareholders?



A. Our board of directors unanimously recommends to the ASSAC shareholders that they vote to adopt and approve ALL of theproposals, including, without limitation, the Acquisition Proposal, the Repurchase Proposal, the Securities Issuance Proposal,the Increased Capital Proposal, the Board of Directors Proposal, the Name Change Proposal, the Amendment Proposal, theAdjournment and Postponement Proposal and the Other Matters Proposal.

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SELECTED HISTORICAL FINANCIAL INFORMATION OFALLIED PROVIDENT ORGANIZATION

You are being provided the following financial information to assist you in your analysis of the financial aspects of theacquisition of the Allied Provident Organization. The financial results set forth below for the nine months ended September 30,2009 are consolidated with the consolidated financial statements of Rineon Group, Inc, a Nevada corporation (“Rineon”). BothRineon and Amalphis are inactive holding companies whose only operating assets and business is Allied Provident, awholly-owned subsidiary of Amalphis, which in turn is owned by Rineon.

Set forth below are unaudited consolidated balance sheet and statement of operations data of the Allied ProvidentOrganization as of September 30, 2009 and for the nine months then ended (unaudited) and as of and for the fiscal years endedDecember 31, 2007 and 2008 (audited). The selected financial information is only a summary and should be read in conjunctionwith Amalphis’ historical financial statements and related notes and “Management’s Discussion and Analysis of FinancialCondition and Results of Operations of Allied Provident Organization” contained elsewhere in this proxy statement. Theinformation presented may not be indicative of future performance of the Allied Provident Organization or the combinedcompany resulting from the Transactions.

Balance Sheet Data As of

September 30,2009

(unaudited)

As ofDecember 31,

2008(audited)

As of

December 31,2007

(audited)

Working capital $ 41,060,590 $ 29,851,191 $ 24,017,321 Total assets $ 63,835,707 $ 33,177,815 $ 24,384,925 Total liabilities $ 6,253,617 $ 3,326,624 $ 367,604 Shareholders’ equity $ 54,407,381 $ 29,851,191 $ 24,017,321

Statement of Operations Data

Nine MonthsEnded

September 30,2009

(unaudited)

Year ended

December 31,2008

(audited)

From inception(November 9, 2007)

to December 31,2007

(audited)

Net underwriting income $ 10,297,802 $ 9,197,489 $ 450,000 Investment income $ 11,167,904 $ 5,809,338 $ 35,000 Total income $ 21,465,706 $ 15,006,827 $ 485,000 Incurred losses and policy acquisition costs $ 10,016,668 $ 9,111,327 $ 320,703 General and administrative expenses $ 239,640 $ 102,770 $ 46,976 Income from operations $ 11,209,399 $ 5,792,730 $ 117,321

Net income $ 9,135,660 $ 5,833,870 $ 117,321

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SELECTED HISTORICAL FINANCIAL INFORMATION OF NORTHSTAR

You are being provided the following financial information to assist you in your analysis of the financial aspects of theacquisition of Northstar.

Set forth below are unaudited consolidated balance sheet and statement of operations data of Northstar Group Holdings, Ltd.as of September 30, 2009 and for the six months then ended (unaudited) and as of and for the fiscal years ended March 31, 2009(unaudited) and March 31, 2008 and 2007 (audited). The selected financial information of Northstar is only a summary andshould be read in conjunction with Northstar’s historical financial statements and related notes and “Management’s Discussionand Analysis of Financial Condition and Results of Operations of Northstar” contained elsewhere in this proxy statement. Theinformation presented may not be indicative of future performance of Northstar or the combined company resulting from theconsummation of the Transactions.

Northstar Group Holdings, Ltd.Consolidated Balance Sheet

(expressed in United States Dollars)

As of

September 30,2009

(unaudited)

As ofMarch 31,

2009(unaudited)

As of

March 31,2008

(audited)

As ofMarch 31,

2008(audited)

Assets Cash and cash equivalents $ 1,769,920 $ 877,920 $ 14,949,502 $ 13,014,545 Restricted cash balances $ 8,117,602 $ 26,552,464 $ 13,700,332 $ 2,142,502 Tracking stock investments $ 133,120,286 $ 135,444,664 $ 170,359,093 $ 208,568,879 Investments supporting insurance liabilities $ 37,662,142 $ 34,052,939 $ 101,845,243 $ 58,063,502 Funds withheld $ 489,410,257 $ 487,923,351 $ 498,688,678 $ 364,648,583 Unrealised gain (loss) on SWAP transactions — — $ 7,856,036 $ (726,267 ) Reinsurance balances receivable — $ 75,319 $ 21,744,516 $ 12,747,586 Deferred acquisition costs $ 110,214,271 $ 120,845,945 $ 142,345,172 $ 116,135,121 Other assets $ 2,027,883 $ 2,424,317 $ 3,189,339 $ 5,145,260

Total assets $ 782,322,361 $ 808,196,919 $ 974,677,911 $ 779,739,711

Liabilities and shareholders’ equity Future policy benefits $ 51,917,188 $ 89,005,531 $ 198,333,285 $ 109,175,660 Interest sensitive contract liabilities $ 576,663,839 $ 575,778,117 $ 594,135,959 $ 439,065,085 Short term debt $ 10,000,000 $ 10,000,000 $ 8,000,000 $ 8,000,000 Reinsurance balances payable $ 21,240,051 $ 28,591,419 $ 25,014,305 $ 21,352,167 Due to shareholders $ 218,777 $ 218,778 $ 632,217 $ 16,851,923 Accounts payable and accrued liabilities $ 699,118 $ 2,317,077 $ 1,295,264 $ 2,165,265

Total liabilities $ 660,738,973 $ 705,910,922 $ 827,411,030 $ 596,610,100 Shareholders’ equity Common shares $ 2,132,845 $ 2,132,845 $ 2,154,511 $ 2,129,313 Additional paid in capital $ 153,410,987 $ 153,410,987 $ 153,410,987 $ 150,873,908 Retained earnings (deficit) $ (33,960,444) $ (53,257,835) $ (8,298,617) $ 30,126,390 Total shareholders’ equity $ 121,583,388 $ 102,285,997 $ 147,266,881 $ 183,129,611

Total liabilities and shareholders’ equity $ 782,322,361 $ 808,196,919 $ 974,677,911 $ 779,739,711

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Northstar Group Holdings, Ltd.Consolidated Statement of Earnings(expressed in United States Dollars)

Six months ended

September 30,2009

(unaudited)

Year endedMarch 31,

2009(unaudited)

Year endedMarch 31,

2008(audited)

Year endedMarch 31,

2007(audited)

Revenues Net premiums earned $ 11,027,742 $ 59,571,749 $ 262,903,202 $ 272,928,325 Investment gains (loss) on tracking

stock investments $ 1,579,477 $ (31,249,156) $ (27,044,639) $ 20,664,215

Investment gains (loss) onavailable-for-sale investments $ 3,228,047 $ (8,849,512) $ (362,410) $ 4,072

Gain (loss) on SWAP derivatives — $ 1,767,458 $ 9,757,834 $ (666,225) Interest and fees on policyholder

contracts $ 23,258,708 $ 20,869,814 $ 20,184,230 $ 19,762,442

Other Income $ 600,785 $ 1,231,915 $ 1,638,698 $ 630,050 Total revenue $ 39,694,759 $ 43,342,268 $ 267,076,915 $ 313,322,879

Benefits and Expenses Change in benefit reserves $ (47,580,903) $ (141,569,753) $ 241,630,812 $ 256,112,834 Claims and other policy benefits $ 25,687,262 $ 49,706,988 $ 41,334,268 $ 28,855,949 Letter of credit charges $ 220,725 $ 1,153,960 $ 962,231 $ 533,682 Insurance Expenses $ 39,991,575 $ 158,277,913 $ 8,602,457 $ 6,492,348 Losses (gains) on foreign exchange $ 1,669 $ 14,394,715 $ 8,151,305 $ (59,560) Operating expenses $ 2,077,040 $ 6,337,663.00 $ 4,820,849 $ 4,861,587 Total benefits & expenses $ 20,397,368 $ 88,301,486 $ 305,501,922 $ 296,796,840

Net income (loss) $ 19,297,391 $ (44,959,218) $ (38,425,007) $ 16,526,039

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SELECTED PRO FORMA FINANCIAL INFORMATION

We have presented below the selected unaudited pro forma condensed consolidated financial data that reflects the result ofthe Transactions and is intended to provide you with a better picture of what our businesses might have looked like had theyactually been combined. The condensed consolidated financial data may have been different had the companies actually beencombined. The selected unaudited pro forma condensed consolidated financial data do not reflect the effect of asset dispositions,if any, or cost savings that may result from the Transactions, and assumes that all of the assets of the Stillwater Funds will beacquired. The selected pro forma financial information is only a summary and should be read in conjunction with the unauditedpro forma condensed combined financial statements contained elsewhere in this proxy statement. The information presentedmay not be indicative of future performance of ASSAC or the combined company resulting from the Transactions. You shouldnot rely on the selected unaudited pro forma condensed consolidated financial data as being indicative of the historical resultsthat would have occurred had the companies been combined or the future results that may be achieved after the Transactions.

The following unaudited pro forma summary financial information has been prepared assuming that the Transactions haveoccurred at the beginning of the applicable period for pro forma statements of operations data and at the respective date for proforma balance sheet data. The assets and liabilities of the Stillwater Funds and the Wimbledon Funds are estimates which aresubject to appraisal and audit after the Closing.

Selected Unaudited Pro Forma Condensed Combined Balance Sheet Data(In United States Dollars)

June 30, 2009

MaximumApproval

ReflectsRedemption/Buy Back of

7,475,000Ordinary Shares

Total assets $ 1,524,542,000 $ 1,449,044,000 Total liabilities $ 691,968,000 $ 691,968,000 Shareholders’ equity $ 832,574,000 $ 757,076,000

Selected Unaudited Pro Forma Condensed Combined Statement of Operations Data(In United States Dollars)

For the six months ended June 30, 2009

Total revenues $ 52,095,000 $ 52,095,000 Total expenses $ 33,520,000 $ 33,520,000 Net income (loss) $ 18,575,000 $ 18,575,000 Loss Per Share: Basic and Diluted $ 0.15 $ 0.16 Weighted Average Shares Outstanding: Basic and Diluted 119,653,000 112,178,000

For the year ended December 31, 2008

Total revenues $ 60,811,000 $ 60,811,000 Total expenses $ 110,110,000 $ 110,110,000 Net income (loss) $ (49,299,000) $ (49,299,000) Loss Per Share: Basic and Diluted $ (0.41) $ (0.44) Weighted Average Shares Outstanding: Basic and Diluted 118,931,000 111,456,000



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Trust Account. If the acquisition is not consummated, such directors, officers and affiliates could potentially be liable forany claims against the Trust Account. If the costs related to the acquisition incurred by ASSAC exceed the available cashoutside of the Trust Account, these costs would be subject to the potential indemnification obligations of the directors,executive officers and affiliates of ASSAC to the Trust Account if the acquisition is not consummated and accordinglythe directors, executive officers and affiliates have a personal interest in recommending the approval of Proposals 1though 4.

• An entity affiliated with Marshall Manley, our Chief Executive Officer will purchase 5,333,333 of our restricted ordinaryshares, at a purchase price of $3.75 per share. Michael Kantor, a candidate for director, will purchase 80,000 of ourrestricted ordinary shares, at a purchase price of $3.75 per share See “Management — Executive Officers andDirectors — Director and Executive Officer Compensation” below.

Our board of directors was at all times aware of these interests during its deliberations on the merits of the transactionscontemplated by the Acquisition Proposal and in making its decision to recommend approval by our shareholders of theAcquisition Proposal.

Our Reasons for the Acquisitions and Our Recommendation

Our board of directors concluded that the Transactions are fair to, and in the best interests of, the Company and that theconsideration to be paid in the Transactions is fair to the Company. The Company’s management conducted a due diligencereview of the Targets that included an industry analysis, an evaluation of the existing business and operations of the Targets, avaluation analysis and financial projections in order to enable the board of directors to evaluate the business and financialcondition and prospects of the Targets.

Our board of directors considered various industry and financial data, including certain financial analyses developed by theCompany and metrics compiled by the Company’s management in evaluating the consideration to be paid by the Company inthe Transactions.

Our board of directors considered a wide variety of factors in connection with its evaluation of the Transactions. In light ofthe complexity of those factors, the board of directors did not consider it practicable to, nor did it attempt to, quantify orotherwise assign relative weights to the specific factors it considered in reaching its decision. Furthermore, individual membersof the board may have given different weight to different factors.

In considering the Transactions, our board of directors gave considerable weight to the following favorable factors:

• Experienced Northstar and Allied Provident management team — entrepreneurial management team with proven trackrecord of launching, growing, and operating innovative financial institutions in highly regulated environments;

• Experienced Stillwater and Weston principals — management team with experience investing and lending across avariety of business niches and economic circumstances;

• Historic entry point — historic dislocation and capital constraints in the industry create unprecedented opportunity toproviders of capital through reinsurance products;

• Additional growth opportunities — the potential to take advantage of opportunities to acquire established insurancecompanies in the current economic environment;

• Income from Stillwater Funds and Wimbledon Funds — the ability to use the income generated from the assets of theStillwater Funds and the Wimbledon Funds to provide a steady and constant stream of regulatory and other capital to theNorthstar Subsidiaries and/or Allied Provident;



• Favorable long term growth characteristics — steady long-term growth trajectory of life insurance policies in forcecreates opportunities to re-insure additional blocks of policies as global insurance companies remain capital constrainedto underwrite new policies;

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• Middle-Market focus — although concentrated at the top end of the market, the annuity market consists of many smallwriters. The extremely fragmented variable annuity market creates an opportunity to provide reinsurance to manyunderserved and capital constrained middle-market insurance companies;

• Barriers to entry — considerable regulatory compliance requirements and highly specialized skill sets required, providesignificant obstacles to entry and competition; and

• Favorable domicile; tax advantages — domiciles in favorable tax jurisdictions and tax advantages from offshoreincome-producing activities.

Our board of directors believes the above factors strongly supported its determination and recommendation to approve theTransactions. Our board of directors did, however, consider the following potentially negative factors, among others, includingthe risk factors set forth elsewhere in this proxy statement, in its deliberations concerning the Transactions:

• Shareholder redemptions and reduction of trust funds — the potential for current holders of Public Shares to vote againstthe Transactions and demand to redeem their shares for cash upon consummation of the Transactions, reducing theamount of cash available to us following the Closing;

• Uncertain regulatory environment — the potential for industry scrutiny or increased regulation including hedgingactivity regulation;

• Interests of officers and directors — interests in the Transactions that certain officers and directors of the Company mayhave which are different from, or in addition to, the interests of our shareholders generally;

• Regulatory issues — the impact of changes in or additional registration, licensing or other regulations affecting thereinsurance business or hedging activities related thereto;

• Offshore operational risks — potential for tax law changes, currency fluctuations, and difficulties enforcing legal rights;

• Actuarial and mortality risk — the effect of differences in mortality rates, policyholder behavior, claims and lapse ratesfrom those assumed; and

• Competitive climate — potential adverse changes in pricing and capacity through unexpected reduction of barriers toentry or favorable changes in regulatory climate and availability of capital.

Management

We believe that the Northstar and Allied Provident management teams have specialized knowledge of the insurance marketswithin which they operate, the ability to lead Northstar and Allied Provident in a rapidly changing environment, the desire tochange its business practices and adopt an integrated and balanced planning process as necessary, and the passion for thebusinesses in which they are engaged. We believe that Northstar’s and Allied Provident’s management has demonstrated thatability by addressing critical issues that have arisen in these challenging economic times. We believe that the Stillwater andWeston principals have a proven record in alternative investing through various periods of their history and have generatedreturns for many years in their respective funds. We believe this may translate into substantial returns for Northstar and AlliedProvident and, ultimately, our shareholders, though we can provide no assurances to that effect.



Satisfaction of 80% Test

It is a requirement that any business acquired by ASSAC have a fair market value equal to at least 80% of its net assets heldin the Trust Account (net of taxes) at the time of acquisition, which assets shall include the amount in the Trust Account. Basedon the financial analysis of the Targets generally used to approve the Transactions, our board of directors believes that thisrequirement will be met and exceeded. The fair market value of the Targets was determined by our board of directors basedupon standards generally accepted by the financial community, such as actual and potential revenues, investment returns, netasset values, earnings and cash flow. We did not obtain an opinion from an investment banking firm or appraiser as to the fairmarket

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value of the Targets or an opinion as to the fairness from a financial point of view to ASSAC or our shareholders of suchacquisitions. Instead, our board of directors independently determined that the Targets have sufficient fair market value.

Conclusion of Our Board of Directors

After careful consideration of all relevant factors, our board of directors determined that the Acquisition Proposal is fair toand in the best interests of our company and our shareholders. They have approved and declared advisable such proposal andrecommend that you vote or give instructions to vote “FOR” such proposal.

The foregoing discussion of the information and factors that our board of directors has considered is not meant to beexhaustive, but includes the material information and factors that it has considered. In view of the wide variety of factorsconsidered in connection with its evaluation of the transactions contemplated by the Acquisition Proposal and the complexity ofthese matters, our board of directors did not find it useful to and did not attempt to quantify, rank or otherwise assign relativeweights to these factors, and they did not undertake to make any specific determination as to whether a particular factor, oraspect of a particular factor, was favorable or unfavorable to his ultimate determination. Our board of directors conducted anoverall analysis of the factors described above, including discussions with our outside consultants, legal counsel and otheradvisors, any of whom may have given different weight to different factors.

Appraisal or Dissenters Rights

No appraisal or dissenters rights are available under the Cayman Islands law for our shareholders in connection with theAcquisition Proposal. However, redemption rights are available as described elsewhere in this proxy statement.

Material U.S. Federal Income Tax Consequences of the Acquisition Proposal

The following is a general summary of certain United States federal income tax considerations, under current U.S. law,generally applicable to a U.S. Holder (as defined below). This summary does not address all potentially relevant U.S. federalincome tax matters and it does not address consequences to persons subject to special provisions of U.S. federal income tax law,such as those described below as excluded from the definition of a U.S. Holder. United States alternative minimum taxconsiderations are not addressed in this summary. In addition, this summary does not cover any state, local or foreign taxconsequences, nor any U.S. federal gift, estate or generation-skipping transfer tax consequences.

This summary is based on interpretations of the Internal Revenue Code of 1986, as amended (the “Code”), regulations issuedthereunder, and rulings and decisions currently in effect (or in some cases proposed), all of which are subject to change. Anysuch change may be applied retroactively and may adversely affect the U.S. federal income tax consequences described herein.This summary addresses only U.S. Holders that purchased shares prior to or contemporaneously with the Closing Date, and thatbeneficially own shares as capital assets and not as part of a “straddle,” “hedge,” “synthetic security,” or a “conversiontransaction” for U.S. federal income tax purposes, or as part of some other integrated investment. This summary does not discusstax consequences of an investor that is not a U.S. Holder, or all of the tax consequences that may be relevant to particularinvestors or to investors subject to special treatment under the U.S. federal income tax laws (such as banks, thrifts, or otherfinancial institutions; insurance companies; tax-exempt persons or organizations; securities dealers or brokers, or traders insecurities electing mark-to-market treatment; mutual funds or real estate investment trusts; small business investmentcompanies; S corporations; investors that hold their notes through a partnership or other entity treated as a partnership for U.S.federal income tax purposes; persons who acquire shares as compensation or on exercise of an option; investors whosefunctional currency is not the U.S. dollar; certain former citizens or residents of the United States; persons subject to thealternative minimum tax; retirement plans or persons holding the shares in tax-deferred or tax-advantaged accounts; or“controlled foreign corporations” or “passive foreign investment companies” for U.S. federal income tax purposes).

This summary is for general information only and it is not intended to be, nor should it be construed to be, legal ortax advice to any U.S. Holder and no opinion or representation with respect to

53Source: Gerova Financial Group Ltd, 6-K, January 07, 2010 Powered by Morningstar® Document Research℠


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In addition, for purposes of U.S. taxation, offshore insurance companies are free from U.S. taxes provided, generally, that theinsurance company is engaged in the bonafide business of insurance. Through the Northstar Companies and Allied Provident,we expect to be actively in the business of insurance with over $800 million in in-force business across 110,000 insurancepolicies. We believe the tax efficient structure will materially enhance the effective year-over-year yield of fixed incomeinvestment portfolio through the effects of compound interest.

Our Competitive Advantages

• Highly experienced management team. Marshall Manley, our new Chief Executive Officer, and Tore Nag, our newChief Operating Officer, have had long and successful careers in insurance, finance and the law, and have held seniorpositions in large institutional insurance and banking organizations. In addition, Michael Kantor, our new independentdirector, is recognized worldwide as a leader in government and brings to us a wealth of experience, contacts and accessto capital that we believe many of our competitors cannot match.

• Strong initial capital base. We expect to have, upon completion of the transactions, a net capital base in excess of$752.0 million which will we believe will enable us to significant increase our insurance, investment and lendingactivities.

• Focused acquisition strategy. We intend to seek to acquire additional investment managers or registered investmentadvisors and, where appropriate, the investment funds they manage at prices which we believe will be at discounts fromtheir current carrying values, for the purpose of growing our legal regulatory capacity. We believe that such acquisitionscan be made at attractive prices in exchange for a combination of cash, deferred payments tied to future performance andequity in our company.

Offering Proceeds Held in Trust

A total of approximately $115.0 million, including $108.525 million from the net proceeds from our initial public offering,$5.725 million from the sale of the Insiders Warrants, together with $750,000 interest earned on such proceeds and notpreviously released to us are being held in the Trust Account at the London, England branch of Morgan Stanley. The proceedsheld in the Trust Account will not be released until the earlier of the consummation of the Transactions or the liquidation ofASSAC. A total of $2.0 million of interest income, subject to adjustment, may be released to ASSAC to fund ASSAC’s workingcapital requirements, subject to availability. If the Transactions are consummated, the Trust Account will be released to ASSAC,less amounts to be paid to shareholders of ASSAC who do not approve the Acquisition Proposal and properly elect to redeemtheir ordinary shares for their pro rata share of the Trust Account. As of December 31, 2009, the balance in the trust account wasapproximately $115.0 million.

Fair Market Value of Target Business

The initial target business that ASSAC acquires must have a fair market value equal to at least 80% of the balance of theTrust Account (excluding any funds held for the benefit of any of the underwriters) at the time of such acquisition. The fairmarket value of the Northstar Companies and the Stillwater Funds was determined by our board of directors based uponstandards generally accepted by the financial community, such as actual and potential revenues, investment returns, net assetvalues, earnings and cash flow. We did not obtain an opinion from an investment banking firm or appraiser as to the fair marketvalue of the Targets or an opinion as to the fairness from a financial point of view to ASSAC or our shareholders of suchacquisitions. Instead, our board of directors independently determined that the Targets had fair market value equal to at least80% of the balance in the Trust Account (excluding any funds held for the benefit of any of the underwriters).

Shareholder Approval of Initial Business Combination

Prior to the consummation of the Transactions, we are submitting the transaction and related transactions to our shareholdersfor approval. In connection with seeking shareholder approval, we are furnishing our shareholders with proxy solicitationmaterials which, among other matters, will include descriptions of the business and assets of the Targets and certain requiredfinancial information. As a foreign private issuer, we



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DIRECTORS AND MANAGEMENT

Executive Officers and Directors

At Closing, Michael Hlavsa and Stuart A. Sundlun will be removed as members of our board of directors and, if approved bythe shareholders, will be replaced by Marshall Manley, Michael Kantor and Jack Doueck. Dr. Gary Hirst, Arie Jan van Roon,Leonard de Waal, Arie Bos and Keith Laslop will, if approved by the shareholders, continue to serve as members of our board ofdirectors. The following are the age, position and biographical information of Messrs. Manley, Kantor and Doueck as well as allof the continuing members of our board of directors and executive officers upon consummation of the Transactions. Each ofthese individuals, if appointed, will serve in their respective positions until their successors are duly elected or appointed andqualified.

Name Age Position

Marshall Manley 69 Chief Executive Officer and Chairman of the Board of DirectorsDr. Gary T. Hirst 56 President and DirectorTore Nag 54 Chief Operating OfficerMichael Kantor 71 DirectorArie Jan van Roon 64 DirectorLeonard de Waal 62 DirectorArie Bos 61 DirectorJack Doueck 46 DirectorKeith Laslop 38 DirectorMichael Hlavsa 55 Chief Financial Officer and Secretary

Marshall Manley will be appointed to the board of directors of ASSAC immediately upon the Closing. Since December 1,2009, Mr. Manley has served as an executive vice president of ASSAC. From and after the Closing, Mr. Manley will serve asour Chief Executive Officer as well as the Chairman of our board of directors. Mr. Manley has had a long and distinguishedcareer in business, including serving as President and CEO of City Investing Co., a Fortune 200, New York Stock Exchangelisted conglomerate with 400 subsidiaries doing business in all 50 states and in 35 countries (“City Investing”). Included amongthe major and better known subsidiaries of City Investing were Home Insurance Company, then the 16th largest property andcasualty insurance company in the USA, Motel 6, a leading chain of budget motels in the United States, Rheem ManufacturingCompany, a world wide manufacturer of steel drums, air conditioners and water heaters, World Color Press, the largest printer ofmagazines in the world, Servomation, then the third largest food feeder in the United States, Wood Brothers Homes, then theseventh largest home builder in the U.S., General Development, then the largest real estate developer in the southeastern UnitedStates, Hayes International, a major refurbisher of jet aircraft, and Guerdon, a major manufacturer of mobile homes. While atCity Investing, Mr. Manley undertook one of the largest voluntary tax-free corporate liquidations in U.S. history ultimatelydelivering over $8.0 billion to City Investing public shareholders. Mr. Manley also served as Chairman of Wood BrothersHomes and President and CEO of Home Group (which later changed its name to AmBase Corp.), and Chairman of HomeInsurance Co., a subsidiary of Home Group. Home Group was a NYSE listed diversified financial services company whichprovided property and casualty insurance and reinsurance, capital market, wealth management, real estate development, banking,insurance premium financing, venture capital investing and mortgage services. Usi Re, a subsidiary of Home Group, was at thattime the 13th largest reinsurance company in the United States. Mr. Manley helped take the company from a loss (before taxes)of $282 million in 1985 to income (before taxes) of $714 million from 1986 to 1989 prior to its sale to a foreign insurancecompany for over $1.0 billion. Prior to his corporate career, Mr. Manley was a prominent practicing attorney and served as aname partner at two major Los Angeles law firms. He has served on the boards of directors of General Development Co.,Minoco Oil and Gas Co, and DeLaurentiis Entertainment Group. He was also a chairman or trustee of numerous civic,educational, cultural, charitable and historical foundations and organizations. Mr. Manley has received many honors and awards,including The Horatio Alger Award.



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Dr. Gary T. Hirst, originally appointed as our Co-Chief Executive Officer on an interim basis, was appointed as ourPresident in October 2007. He has been a director of our company since our inception. Dr. Hirst has been responsible for thedevelopment and investment management of both offshore and domestic hedge funds, including global macro funds,funds-of-funds, currency funds, and a number of structured investment products (synthetic investment instruments, typicallycreated by combining securities, such as notes or common stock, with derivatives such as options, that are specially created tomeet specific needs that cannot be met from the standard financial instruments available in the markets) including for principalprotected notes issued by Zurich Capital Markets and Rabobank which invested in diversified global portfolios of hedge funds.From 1991 to 2006, Dr. Hirst was Chairman and Chief Investment Officer of Hirst Investment Management. In his roles withHirst Investment Management, Dr. Hirst managed over $600 million in assets on behalf of multi-national banks, pension plans,insurance companies, foundations and endowments, public companies, family offices and high net worth investors. Under hisleadership, the firm established itself as a developer of innovative financial products and services, with a focus on maximizingthe risk-adjusted return on its clients’ investments. From 1976 to 1991, Dr. Hirst was Investment Manager for the Hirst FamilyOffice where he managed allocation and trading for all investment portfolios of the Hirst family and its associates. Theseinvestments included traditional asset portfolios, real estate, and a range of alternate investment strategies including hedge funds,private equity, futures trading and physical commodities. From 2003 to 2005, Dr. Hirst was a director of Alpine Select A.G., apublicly traded (Swiss Exchange) investment company based in Zug, Switzerland.

Tore Nag will serve as Chief Operating Officer of ASSAC immediately upon the Closing. Mr. Nag has held various seniorexecutive positions at Nordea Bank and its predecessor, Christiania Bank, with full P&L responsibilities for twenty-four years(1982 – 2006). The bank assigned him to manage strategic turn-arounds where he was responsible for restructuring severalbanking units in varied jurisdictions and restoring them to profitability. For the five years ending in September 2006, Mr. Nagmanaged the New York City branch of Christiania Bank. During his tenure in New York, he merged three US bankingoperations successfully with fundamental business/administrative/system changes, and turned operating losses in 2001 intoprofits of approximately $50.0 million by 2005. Christiania Bank og Kreditkasse was founded in 1848 in Norway and in 2000 itmerged with MeritaNordbanken and became Nordea Bank. The bank was Norway’s second largest bank at the time of themerger with approximately 10 million customers, approximately 1,400 branch offices and a leading net-banking position with5.2 million e-customers. Nordea shares are listed on the NASDAQ OMX, and the exchanges in Copenhagen, Helsinki andStockholm. Christiania Bank operated branch offices in London, Singapore and New York. Mr. Nag received his BSc. (withHonors) from the School of Management, University of Bath, United Kingdom, and finalized the first part (of three) of theNorwegian law degree at the University of Oslo.

Michael Kantor will be appointed to the board of directors of ASSAC immediately upon the Closing. Since 1997, Mr.Kantor has been a partner at Mayer Brown LLP, a leading international law firm. Mr. Kantor concentrates his practice oncorporate and financial international transactions. He has extensive experience in market access issues, as well as the expansionof client activities in foreign markets through trade, direct investment, joint ventures, and strategic business alliances. Prior tojoining Mayer Brown, Mr. Kantor was the United States Secretary of Commerce (1996 – 1997) and the United States TradeRepresentative (1993 – 1996). He served as National Chairman of the Clinton/Gore 1992 Presidential Campaign. Mr. Kantorserves on the Board of Directors of CB Richard Ellis, the US Advisory Board of ING Americas, the International AdvisoryBoard of Fleishman-Hillard and the Board of Advisors of Drug Strategies and Oilspace, and as a senior advisor to MorganStanley. Previously, he served on the Board of Directors of Monsanto and Korea First Bank. He is also a chairman or boardmember of numerous civic, educational, cultural, charitable and historical foundations and organizations and a member of theCouncil on Foreign Relations. Mr. Kantor has received many honors and awards, including The Thomas Jefferson DistinguishedPublic Service Medal from the Center for the Study of the Presidency. Mr. Kantor received a Bachelor of Arts Degree fromVanderbilt University in 1961 and a Juris Doctor Degree from Georgetown University Law Center in 1968.

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements give effect to the following proposedtransactions which collectively comprise the Business Combination, which are expected to be consummated pursuant to theTransaction Documents by and between the parties set out below:

• ASSAC will issue to Amalphis 57,000 Preferred Shares in consideration of shares in Amalphis equal to an 81.5%controlling interest in the equity of Amalphis (the “Amalphis Acquisition”), which shares are assumed to be convertedinto 7.6 million Ordinary Shares of ASSAC.

• ASSAC will simultaneously acquire all of the outstanding share capital and capital stock of Northstar Group Holdings,Inc. in consideration of $7 million in cash (the “Northstar Acquisition”).

• ASSAC will simultaneously acquire approximately $588 million of the net assets of certain funds (comprised of certainasset backed lending funds, real estate funds and hedge funds), subject to appraisal, managed by Stillwater CapitalPartners, Inc and its affiliates in exchange for 541,275 of ASSAC Preferred Shares (the “Stillwater Asset Purchase”),which shares are assumed to be converted into 72,170,000 Ordinary Shares of ASSAC based on an assumed appraisednet value of approximately $541.3 million.

• ASSAC will simultaneously acquire approximately $114 million of the net assets of certain funds managed byWimbledon Financing Master Fund Ltd in exchange for 114,000 of ASSAC Preferred Shares, which are assumed to beconverted into 15,200,000 of Ordinary shares, assuming no appraisal and audit adjustments and 30,000 of ASSACPreferred Shares (based on 75% of the value of the $40 million of “other securities”) which are assumed to be convertedinto 4,000,000 of ASSAC Ordinary Shares (the “Wimbledon Asset Purchase).

The Amalphis Acquisition

The Amalphis Acquisition will be accounted for under the purchase method of accounting in accordance with InternationalFinancial Reporting Standard 3R, “Business Combinations (Revised)” (IFRS 3R). Under the purchase method of accounting, thetotal estimated purchase price, calculated as described in Note 4 to these unaudited pro forma condensed combined financialstatements, is allocated to the net tangible and intangible assets acquired and liabilities assumed in connection with thetransaction, based on their estimated fair values as of the completion of the transaction. Any excess of the purchase price overthe estimated fair value of the net assets acquired (including both tangible and identifiable intangible assets) is allocated togoodwill.

The Northstar Acquisition

The Northstar Acquisition will be accounted for under the purchase method of accounting in accordance with IFRS 3R.Under the purchase method of accounting, the total estimated purchase price, calculated as described in Note 5 to theseunaudited pro forma condensed combined financial statements, is allocated to the net tangible and intangible assets acquired andliabilities assumed in connection with the transaction, based on their estimated fair values as of the completion of the transaction.Any excess of the purchase price over the estimated fair value of the net assets acquired (including both tangible and identifiableintangible assets) is allocated to goodwill.

****

The unaudited pro forma condensed combined financial statements presented below have been prepared in accordance withInternational Financial Reporting Standards (“IFRS”) and include adjustments to give effect to the Amalphis Acquisition,Northstar Acquisition and the Stillwater and Wimbledon asset purchases. The pro forma adjustments are described in theaccompanying notes presented on the following pages. There were no significant intercompany balances or transactions between



ASSASC, Amalphis or Northstar as of or for any of the periods presented. Certain reclassification adjustments have been madeto conform the historical accounting policies of Amalphis and ASSAC to the basis of presentation and accounting policies to beused by combined entities following the Business Combination.

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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

NOTE 5 — ADJUSTMENTS FOR THE NORTHSTAR ACQUISITION – (continued)

The preliminary determination and allocation of purchase price, which is subject to further management review and maychange materially between the preliminary valuation date and the closing date of the Business Combination. The final allocationof purchase price will be based on appraisals of the fair value of assets and liabilities acquired. The preliminary allocation is asfollows:

Amount

(‘000)

Purchase price(a) $ 7,000 Historical book value of net assets as of June 30, 2009 $ 121,583 Less: Investment assets not acquired in transaction(e) $ (120,000) Adjusted net assets required $ 1,583 Estimated goodwill(d) $ 5,417

(a) Reflects the $7.0 million in consideration for the purchase of Northtar equity.

(b) Reflects the costs related to professional fees to attorneys, accountants and other advisors in connection with theNorthstar Acquisition.

(c) Reflects the elimination of all components of the historical shareholders’ equity of the Northstar.

(d) Reflects the excess of the purchase price over the estimated fair value of the net assets acquired (including bothtangible and identifiable intangible assets).

(e) Reflects the reduction of $120 million in investments not acquired.

NOTE 6 — ADJUSTMENTS FOR THE STILLWATER FUNDS AND WIMBLEDON FUNDS ASSET PURCHASE

ASSAC has entered into a series of agreements to acquire the assets of a number of investment funds formed in Delaware(the “Stillwater Domestic Funds”) and the Cayman Islands (the “Stillwater Offshore Funds” and with the Stillwater DomesticFunds, the “Stillwater Funds”), that make investments in asset backed loans, real estate and diverse investments in other hedgefunds (sometimes referred to as “fund of funds”). Stillwater Capital Partners, Inc. (“Stillwater”) is the investment manager and,through an affiliated entity, the general partner of the Stillwater Funds. ASSAC will acquire, through merger transactions, 100%of the equity of the Stillwater Domestic Funds and, through asset purchase agreements, substantially all of the assets, subject toassumption of the liabilities, of the Stillwater Offshore Funds. The estimated total net asset value (or “NAV”) of all of theStillwater Funds as at December 31, 2009, is expected to be approximately $588 million. The pro forma financial statementsassume that the appraised value of the net assets acquired will be approximately $541 million. The term “NAV” is defined tomean (a) the aggregate fair market values of the assets of the applicable Stillwater Fund(s) (including loan participations),calculated (i) as to the Stillwater lending funds and the Stillwater real estate funds (both Delaware and Cayman) at the lower oforiginal investment cost or market value, and (ii) as to the Stillwater fund of funds (both Delaware and Cayman) at the marketvalue of the portfolios of the investee-Funds, as at December 31 2009, less (b) any liabilities or obligations of such StillwaterFund(s) as at December 31, 2009.



The sole consideration for the acquisition of the Stillwater Funds will be the issuance of approximately 542,045 additionalASSAC Preferred Shares, having the same terms and conditions as the ASSAC Preferred Shares being issued for the controllingequity in Allied Provident. However, the number of Conversion Shares (based on the $7.50 per share conversion price) that willbe issuable on July 31, 2010 to the partners of the Stillwater Domestic Funds and to the Stillwater Offshore Funds (or theirshareholders) will be based upon the audited and appraised NAV of each of the Stillwater Funds and subject to a post closingadjustment. It is anticipated that the estimated $588 million NAV of the Stillwater Funds, following such NAV appraisals will bereduced to approximately $541 million, and the aggregate number of Conversion Shares will be approximately 72,170,000ASSAC ordinary shares.

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ASIA SPECIAL SITUATION ACQUISITION CORP.(a corporation in the development stage)

Notes to Financial Statements

NOTE 7 — INITIAL PUBLIC OFFERING

On January 23, 2008, the Company consummated the sale of 10,000,000 units (“Units”) at a price of $10.00 per unit. EachUnit consists of one of the Company’s $.0001 par value ordinary shares and one Redeemable Ordinary Share Purchase Warrant(“Warrant”). On January 30, 2008, an additional 1,500,000 Units were sold pursuant to a 45-day option granted to theunderwriters to cover any over-allotments. Each Warrant entitles the holder to purchase from the Company one ordinary share atan exercise price of $7.50 commencing on the later of: (i) the completion of business combination with a target, or (ii) January16, 2009, and expiring on January 16, 2012. The Warrants may be redeemed by the Company, at a price of $0.01 per Warrant,upon thirty (30) days notice after the Warrants become exercisable, only in the event that the average sale price of the ordinaryshare is at least $14.25 per share for any twenty (20) trading days within a thirty (30) trading-day period ending on the third dayprior to date on which notice of redemption is given. If the Company is unable to deliver registered ordinary shares to the holderupon exercise of warrants during the exercise period, there will be no cash settlement of the warrants and the warrants willexpire worthless.

In connection with the Offering, the Company paid an underwriting discount of $4,600,000 (4.0%) and a non-accountablecorporate finance fee of $1,150,000 (1%). An additional fee of $3,450,000 (3.0%) is payable upon the Company’sconsummation of a business combination. The underwriters are not entitled to any interest accrued on the deferred fee and haveagreed to forfeit their share of the deferred fee due them to the extent of shares redeemed by Public Shareholders.

In connection with the Offering, the Company has also sold to the underwriter, for $100 as additional compensation, anoption to purchase up to a total of 475,000 units at a price of $12.50 per unit. The 475,000 units to be issued upon exercise ofthese options are identical to those sold in the Company’s Offering. The Company has accounted for this purchase option as acost of raising capital and has included the instrument as equity in its financial statements. Accordingly, there is no net impact onthe Company’s financial position or results of operations, except for the recording of the $100 proceeds from the sale.

The Company has estimated, based upon a Black Scholes model, that the fair value of the purchase option on the date of saleis approximately $0.78 per unit (a total value of $368,525), using an expected life of five years, volatility of 9.45% and arisk-free rate of 4.17%. The volatility calculation is based on the average volatility of 16 business combination companies thathave completed their public offerings in amounts ranging from $75,000,000 to $150,000,000, but have not yet announced anacquisition, during the period from January 1, 2002 to September 26, 2007. Because the Company does not have a tradinghistory, it needed to estimate the potential volatility of the unit price, which will depend on a number of factors which could notbe ascertained at the time. The Company used these companies because management believes that the volatility of thesecompanies is a reasonable benchmark to use in estimating the expected volatility for the Company’s units. Although an expectedlife of five years was used in the calculation, if the Company does not consummate a business combination within the prescribedtime period and the Company is liquidated, the option will become worthless.

NOTE 8 — RELATED PARTY TRANSACTIONS

At December 31, 2008, the Company was obligated to its former chief executive officer for approximately $264,000consisting of amounts advanced to pay certain costs on behalf of the Company in February 2008, together with approximately$12,000 of accrued interest at 5% per year as approved by the Board of Directors.

On March 23, 2007, the Company sold 2,500,000 ordinary shares to the Initial Shareholders for proceeds of $25,000.

On March 23, 2007, the Company entered into an unsecured $500,000 line of credit (the “Line”) with the majorityshareholder of the Company, which is an entity whose chief executive officer is a director of the Company. The Line bore nointerest and was due, and paid in full, on the closing date of the Offering.



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NOTE 8 — RELATED PARTY TRANSACTIONS – (continued)

On January 16, 2008, immediately prior to the Offering, the Company’s sponsor, Ho Capital Management, LLC, an entityco-managed and jointly owned by Angela Ho, the Company’s former chief executive officer and chairman, and NobleInvestment Fund Limited, purchased an aggregate of 5,725,000 warrants, or “insider warrants,” at a price of $1.00 per warrant ina Private Placement. Ho Capital Management LLC and Noble Investment Fund Limited will each have a 50% beneficialownership interest in the insider warrants. So long as the insider warrants are owned by Ho Capital Management LLC, NobleInvestment Fund Limited or Angela Ho, the insider warrants may be exercised on a cashless basis and will not be subject toredemption. The insider warrants may not be sold, assigned or transferred by Ho Capital Management LLC (nor may themembers interest in Ho Capital Management LLC be sold, assigned or transferred) until the Company has consummated abusiness combination or (if the Company fails to consummate such business combination) liquidates. The insider warrantstransfer restriction expires on the earlier of (i) a business combination or (ii) the Company’s liquidation.

The sale of the warrants to the Company’s sponsor did not result in the recognition of any stock-based compensation expensebecause they were sold above fair market value. The Company has granted the holders of such warrants demand and “piggyback” registration rights with respect to the 5,725,000 warrants and the 2,862,500 ordinary shares underlying the warrants (aftergiving effect to the share cancellations discussed above under “Summary — Repurchase/Restructuring of Warrants and InsiderShares”) at any time commencing on the date the Company announces that it has entered into a letter of intent with respect to aproposed business combination, provided, however, any such registration shall not become effective until the businesscombination has been completed. The demand registration may be exercised by the holders of a majority of such warrants.Insider warrants will not be subject to redemption if held by the initial holder thereof or its permitted assigns. Permitted assignsinclude transfers to Nobel Investment Fund Limited, as partial consideration for the $5,725,000 loan provided to Ho CapitalManagement LLC by Noble to purchase the insider warrants immediately prior to the Offering, or to Angela Ho, a member ofHo Capital Management LLC; provided that, the insider warrants may not be sold, assigned or transferred until the Companyconsummates a business combination. The Company will bear the expenses incurred in connection with the filing of any suchregistration statements. If the Company does not complete a business combination, then the $5,725,000 proceeds will be part ofthe liquidating distribution to Public Shareholders and the warrants issued under the transaction will expire worthless.

The holders of the Company’s initial 2,500,000 issued and outstanding ordinary shares (See Note 11, “Subsequent Events”,for the terms of a repurchase of a portion of such shares) are entitled to registration rights pursuant to an agreement. The holdersof the majority of these shares are entitled to make up to two demands that the Company register these shares. The holders of themajority of these shares can elect to exercise these registration rights at any time after the date on which these ordinary sharesare released from escrow. In addition, these shareholders have certain “piggy-back” registration rights on registration statementsfiled subsequent to the date on which these ordinary shares are released from escrow. The Company will bear the expensesincurred in connection with the filing of any such registration statements. It is a condition to Closing that the Company deliver toWhite Energy a fully executed copy of an amendment to this registration rights agreement in form and substance mutuallysatisfactory to White Energy and the Company. The holders of the Company’s initial 250,000 issued and outstanding ordinaryshares (after giving effect to the share cancellations discussed above under “Summary — Repurchase/Restructuring of Warrantsand Insider Shares”) at the time of the Offering placed their initial shares purchased by them into an escrow account maintainedby Continental Transfer and Trust Company, acting as escrow agent. The initial shares will not be released from escrow untilthree years from the date of the Offering, except that following the consummation of a business combination, such shares andmembers interests may be transferred to family members and trusts of permitted assignees for estate planning purposes, or uponthe death of any such person, to an estate or beneficiaries or permitted assignees; in each case, such transferee will be subject tothe same transfer restrictions as the Company’s Initial Shareholders until after the shares and members interests are releasedfrom escrow.



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NOTE 9 — COMMITMENTS

In December 2008, the Company entered into an investment banking agreement (“Banking Agreement”) with two bankscalling for financial advisory and investment banking services for a period ending with the completion of a transaction orJanuary 23, 2010. The Banking Agreement calls for a monthly fee of $50,000 commencing on December 15, 2008 plus asuccess fee as defined in the Banking Agreement of 3% of transaction consideration and a financing fee of 6% of any financingof the Company or the acquisition target in connection with an acquisition or merger transaction. In addition, if the Companybecomes entitled to any break up fee in connection with a proposed transaction, then the investment bankers would be entitled toreceive 10% of any such fee or payment received by the Company. In addition, the Banking Agreement calls for the issuance offive year warrants for 10% of the amount of the Company or target shares or securities at a per share price of 110% of theoffering price in the financing. The investment banks are entitled to reimbursement of their reasonable expenses under theBanking Agreement subject to prior approval of amounts individually or aggregating in excess of $50,000.

NOTE 10 — NEW ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS No 141R, “Business Combinations” (“SFAS 141R”). SFAS 141R replaces SFAS141 and establishes principles and requirements for how an acquirer recognizes and measures in its financial statements theidentifiable assets acquired, the liabilities assumed, any non controlling interest in the acquiree and the goodwill acquired. SFAS141R also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the businesscombination. Acquisition costs associated with the business combination will generally be expensed as incurred. SFAS 141R iseffective for business combinations occurring in fiscal years beginning after December 15, 2008, which will require theCompany to adopt these provisions for business combinations occurring in fiscal 2009 and thereafter. The adoption of SFAS141R will not have a material impact on the Company’s financial statements; however, it could impact future transactionsentered into by the Company.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements — anamendment of ARB No. 51. SFAS 160 requires that ownership interests in subsidiaries held by parties other than the parent, andthe amount of consolidated net income, be clearly identified, labeled and presented in the consolidated financial statements. Italso requires once a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary beinitially measured at fair value. Sufficient disclosures are required to clearly identify and distinguish between the interests of theparent and the interests of the noncontrolling owners. It is effective for fiscal years beginning after December 15, 2008, andrequires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All otherrequirements are applied prospectively. The Company cannot determine whether SFAS 160 will have any impact until itcompletes its first business combination.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adoptedwould have a material effect on the accompanying financial statements.

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EXHIBIT B


1

Gerova Financial Group Ltd.

January 2010

A publicly traded specialty insurance group generating shareholder value by acquiring low cost equity capital and investing in high yield secured credit

Source: Gerova Financial Group Ltd, 6-K, January 07, 2010 Powered by Morningstar ® Document Research℠


Asia Special Situation Acquisition Corp. (“ASSAC” or the “Company”) has filed a copy of its proxy statement with the Securities and Exchange Commission (“SEC”) in connection with the proposed business combination. Shareholders, warrantholders and other interested persons are urged to read the proxy statement and any other relevant documents filed, or to be filed, by the Company with the SEC when such documents become available because they contain and will contain important information. Such persons can also read the Company’s final prospectus dated January 16, 2008, its Annual Report on Form 20-F for the fiscal year ended December 31, 2008 and other reports as filed with the SEC, for a description of the security holdings of the Company’s officers and directors and their affiliates and their respective interests in the successful consummation of the proposed business combination. The definitive proxy statement will be mailed to shareholders and warrantholders, as the case may be, as of July 4, 2010 for voting on the proposed business combination and related transactions. Shareholders, warrantholders and other interested persons will also be able to obtain a copy of the definitive proxy statement, without charge, by directing a request to Asia Special Situation Acquisition Corp., c/o Hodgson Russ LLP, 1540 Broadway, 24th Floor, New York, NY 10036. Free copies of these documents can also be obtained, when available, at the SEC’s internet site (http://www.sec.gov).

This presentation does not constitute an offer of any securities for sale or a solicitation of an offer to buy any securities, nor shall there be any sale of the securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or jurisdiction. Any offer of the securities will be made solely by means of a prospectus included in the registration statement and any prospectus supplement that may be issued in connection with such offering.

2

Disclaimer



The statements contained in this presentation that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1999.The forward-looking statements include, but are not limited to, statements regarding the Company’s, Stillwater, Northstar, Allied Provident, Wimbledon or their respective management’sexpectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events orcircumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,”“might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words doesnot mean that a statement is not forward-looking. Forward-looking statements in this presentation may include, for example, statements about the Company’s, Stillwater’s, Northstar’s,Allied Provident’s or Wimbledon’s:

ability to complete the Transaction;the benefits of the Transaction;the impairment of other financial institutions and its effect on our business;requirements to post collateral or make payments due to declines in market value of assets subject to our collateral arrangements;the fact that the adverse change in mortality, morbidity, lapsation or claims experience; determination of allowances and impairments taken on our investments is highly subjective;adverse changes in mortality, morbidity, lapsation or claims experience;adverse capital and credit market conditions and their impact on our liquidity, access to capital and cost of capital;changes in our financial strength and credit ratings and the effect of such changes on our future results of operations and financial condition;inadequate risk analysis and underwriting;general economic conditions or a prolonged economic downturn affecting the demand for insurance and reinsurance in our current and planned markets;the availability and cost of collateral necessary for regulatory reserves and capital;market or economic conditions that adversely affect the value of our investment securities or result in the impairment of all or a portion of the value of certain of our investment securities;market or economic conditions that adversely affect our ability to make timely sales of investment securities;risks inherent in our risk management and investment strategy, including changes in investment portfolio yields due to interest rate or credit quality changes;fluctuations in U.S. or foreign currency exchange rates, interest rates, or securities and real estate markets;adverse litigation or arbitration results;the adequacy of reserves, resources and accurate information relating to settlements, awards and terminated and discontinued lines of business;the stability of and actions by governments and economies in the markets in which we operate;competitive factors and competitors’ responses to our initiatives;the success of our clients;successful execution of our entry into new markets;successful development and introduction of new products and distribution opportunities;our ability to successfully integrate and operate reinsurance businesses that the Company acquires;regulatory action that may be taken by state or foreign departments of insurance with respect to the Company, or any of its subsidiaries;our dependence on third parties, including those insurance companies and reinsurers to which we cede some reinsurance, third-party investment managers and others;the threat of natural disasters, catastrophes, terrorist attacks, epidemics or pandemics anywhere in the world where we or our clients do business;changes in laws, regulations, and accounting standards applicable to the Company, its subsidiaries, or its business;the effect of our status as an holding company and regulatory restrictions on our ability to pay principal of and interest on its debt obligations; andother risks and uncertainties described in this document or the proxy statement of the Company filed with the SEC, including under the caption “Risk Factors” and in our other filings with the SEC.

3

Forward Looking Statements



The forward-looking statements contained in this presentation are based on the Company’s current expectations and beliefs concerning future developments and their potential effects. There can be no assurance that future developments affecting the Company will be those that they have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the Company’s control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include those factors described under the heading “Risk Factors.” Specifically, some factors that could cause actual results to differ include:

the Company’s ability to complete its initial business combination within the specified time limits;officers and directors allocating their time to other businesses or potentially having conflicts of interest with the Company’s business or in approving the Transaction;success in retaining or recruiting, or changes required in, the Company’s officers, key employees or directors following the Transaction;the potential liquidity and trading of the Company’s public securities;the Company’s revenues and operating performance;changes in overall economic conditions;changes in insurance or tax regulations;anticipated business development activities of the Company following the Transaction;risks and costs associated with regulation of corporate governance and disclosure standards (including pursuant to Section 404 of the Sarbanes-Oxley Act of 2002); andother risks referenced from time to time in the Company’s filings with the SEC.

Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

All forward-looking statements included herein attributable to the Company or any person acting on either party’s behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

4

Forward Looking Statements



5

Acquire low cost equity by swapping ASSAC preferred with hedge funds looking to solve short term liquidityconcerns

Balance sheet strength and growth accelerated through Gerova’s strategy of acquiring low cost equity capital by acquiring unquoted securities at a discount from illiquid hedge fund forced sellers for unregistered public stockPrimary targets are hedge funds target that are the most dysfunctional, for example funds holding long dated performing credits but exposed to short term redemption liabilitiesFocus on enhancing or expanding near term shareholder value through valuation differential of unquoted financial assets (c. 0.8x) and publicly quoted price-to-book of specialty reinsurers (c. 1.3-1.4x, like Greenlight Re, NASDAQ: GLRE; Enstar Group, NASDAQ: ESGR)

Utilize equity capital to generate proven returns of 10% in direct commercial lending to niche markets energy,legal and insurance (premium finance)Higher yielding fixed income returns achievable through directly originated commercial credits to select markets -

energy, legal and insurance (premium finance)Traditional insurance company portfolio management is sub-optimal with overweighting in low yielding fixed income instrumentsOur direct commercial credit origination capacity generates higher yielding portfolio (net 10%+)Generate sustainable long term shareholder value through robust cash generation of proven alternative fixed income portfolio strategy

Exploit the advantage of a non-US reinsurance carrier’s tax and low cost of leverage created through free float on premiums

Higher yield has magnified ROE effects on insurance company balance sheets given low cost of float from structural gearing

Insurance structure is inherently highly efficient - tax free compound return and customarily not bound by Investment Company restrictions on portfolio allocations

We are a Cayman Islands holding company acquiring up to three specialty reinsurers with a differentiated investment strategy and capital formation strategy

Investment proposition



6

We use our insurance platform to expand a proven strategy

Capital Aggregation Income Production Scale-Up

Use public stock to acquire unquoted assets from hedge funds at a discount and capitalize balance sheet

Maximize return on equity through fixed income strategy using commercial lending platformExploit under-supply of commercial credit to obtain higher rates of return

Increase investable asset base by using new regulatory capital to write new insurance business (up to 10:1 capital to assets - no debt)

Acquired unquoted assets contributed to insurance company subsidiaries as regulatory capital

Liquidate non-cash flow producing financial assets and redeploy to cash generative commercial lending

Deploy low cost insurance float from premiums into higher yielding commercial credit

Pillars of Activity

Our Plan of Operation

1. 2. 3.

Up to $130 billion in gated, suspendedor side-pocketed hedge fund assets

Market Opportunity

ASSAC believes there is an opportunity to acquire as much as $10 billion in unquoted financial assets to generate shareholder value as well as increase regulatory capital

Business Model



7

Inaugural $832 million transaction is proof of concept and provides core credit origination business for insurance company investment portfolio management

Stillwater Wimbledon

Stillwater has been investing in direct loan origination strategies since 2003

Nine Delaware limited partnerships and five Cayman Island exempt companies

Wimbledon Funds are primarily an asset backed lending fund of funds established by Weston Capital Management

Finance portfolios of senior secured loans10% target net rate of return without need for leverageSenior secured credit facilities to manage portfolio riskIn-house underwriting, origination and servicingPrimary target markets – life insurance, legal and energy

The Fund invests in third party funds providing credit to a range of industries

These investments may be coupled with warrants or other equity securities

Generally issued by or made to small cap companies

Acquired portfolio is approximately $535 million Acquired portfolio is approximately $114 million

Descriptionof

Operations

Portfolio

Value / Size of Portfolio

Discounted financial assets and commercial credit platform acquired



8

Portfolio management and asset growth will be accomplished through up to three insurance company operations

Northstar Amalphis / Allied Provident

Owner of two separate reinsurance businesses in Ireland and BermudaAlternative Asset Focus (like Greenlight Re)Founded in 2004 by Dresdner (now Commerzbank), Argus Insurance and Stillwater’s US Funds of Funds

Owner of reinsurance business in BarbadosSpecialty reinsurance company in markets where reinsurance options are limitedFY ‘09 $12 million net income

Opportunistic acquisition of a book of reinsurance portfolios available at a discount as a result of the existing owners statutory constraints

Authorized to conduct general insurance business, including sale of property, general liability, business interruption and political riskStrategy is to build a portfolio of frequency and severity reinsurance agreements that fills a gap in the market where traditional companies don’t play

Primary cedent is Reinsurance Group of America, with $2.2 trillion of life reinsurance in force and assets of more than $22 billionOver 117,000 policies, $812M in assets, $120M in capital, with post transaction group net equity increased to over $800MFor the 6 months of fiscal ‘09, $19.3 million net income on revenue of $39.7 million

For 9-months ending 30 Sept ’09, generated revenues of $21.5M and net income of $9.1MApproximately $87 million acquisition price

Descriptionof

Operations

Portfolio Strategy

FinancialQuick Facts

Insurance company acquisitions



9

Quality assets have been identified by ASSAC for acquisition

Gerova Financial Group Ltd.(f/k/a ASSAC)

Northstar Group Holdings Ltd

Northstar Re Ireland

Northstar ReBermuda

Amalphis Group

Stillwater Fund Assets

(Delaware)

Stillwater Fund Assets

(Cayman)

Allied Provident Insurance Companies

Wimbledon Fund Assets

(Cayman)

100%

100%

100% 100%

81.5%

100%

100% 100%

Listed on the NYSE Amex - (eligible for big board subject to number of

shareholder requirement)

Grow insurance policies in force and invest ‘float’ funds in cash flow generating fixed

income assets

Focus on senior secured credit origination and the reallocation of any equity

investments to fixed income

Transaction assets



10

Our legal structure and capital structure together with our investment strategy all combine to enhance shareholder value

Virtuous Cycle

Public Securities

Equity Capital

Regulatory Capital

Investment Portfolio

Grow ROE

Favorable discounted investment entry point

Liquidity solution for ‘trapped’ investorsAverage purchase price 0.8x adjusted book value

Investment vehicle unlocks shareholder value

New equity counts towards regulatory capitalAbility to generate cash though direct lending

Repositioning of assets provides significant valuation arbitrage opportunity

Specialty reinsurance companies trade at 1.3 -1.4x price-to-book value (eg. GLRE; ESGR)Creates a 50%+ premium on acquisition

Enhance shareholder value by growing ROAAbility to generate cash though direct lendingPrioritization of asset investment strategy

Our investment thesis exploits an immediate valuation arbitrage between discounted asset values and public company premiums, enables significant leverage via a 10:1 lending ratio and attracts advantageous tax treatment due to the offshore nature of our assets

Differentiated Product Offering



11

Fixed Income Track Record

Historically generated average of 10% net returns on direct lending portfolio with primary exposure to three distinct target markets - energy, legal and insurance (without giving effect to leverage)

Stillwater Capital Partners has been investing in direct loan origination strategies since 2002 (firm manages about $1.0 billion)

Generated a net annualized return of approximately 10% with very low volatility (direct lending portfolio)The fund boasts one of the highest risk-adjusted returns worldwide in its class

HFM Week nominated the Stillwater Asset Backed Fund as Fund of the Year in 2008HedgeFund.Net named the Stillwater Asset Backed Fund the #1 Risk Adjusted fund in its asset class for 2006, 2007 and 2008Barclays ranked the Stillwater Asset Backed Fund as the sixth best-performing fixed income fund over the three years ending September 30th 2008 world-wide



12

The advantages that are attributed to an insurance company which can invest from its own balance sheet are well established

……“the insurance group delivered an underwriting gain for the sixth consecutive year. This means that our $58.5 billion of insurance “float” – money that doesn’t belong to us but that we hold and invest for our own benefit – cost us less than zero. In fact, we were paid $2.8 billion to hold our float during 2008. Charlie and I find this enjoyable”…….

Insurance companies manage money that is not theirs yet they retain the

investment gains for their shareholders

The insurance float is totally non-dilutive to equity holders and can

dramatically increase Return on Equity

…….“Our smaller insurers [at Berkshire] are just as outstanding in their own way as the “big three”, regularly delivering valuable float to us at a negative cost. We aggregate their results below under “Other Primary.” For space reasons, we don’t discuss these insurers individually. But be assured that Charlie and I appreciate the contribution of each.”

Established benefits of investing from an insurance company’s balance sheet

Warren Buffett attests to this in Berkshire Hathaway’s Annual Report, FY 2008

Advantages of Insurance Company



13

This model allows insurance companies to capture a positive pricing mechanism and provide a defined liquidity pathway for hedge funds or lenders that hold illiquidassets or may be in breach of regulatory capital ratios

New Business ModelSystemic Mismatch

Structural asset – liability mismatch

Long duration assets with short duration liabilities

Suspension of redemptions

Breach of regulatory conditions and risk of insolvency

Illiquid assets moved to ‘side-pockets’

Favorable Macro

Tax Treatment

Non-US insurance companies accumulate investment earnings tax free

US Fiscal Deficit

US fiscal debt may result in an increase in taxes – improving appeal of tax advantaged investments

Monetary Policy

Rising interest rates will have negative effect on bond prices and insurance capital

Real EstateWe believe commercial real estate is ‘next shoe to drop’ and will create liquidity demands

Insurance Companies competing in asset classes such as asset backed lending

Ability to:

Acquire at discount

Provide liquidity

Fixed income investing

Sustainable Advantage of Insurance Platform



14

The offshore nature of the acquisitions will ensure that the transaction will attract advantageous US tax treatment. This will lead to significant value arbitrage when compared to a domestic based investment scheme

Notes: (1) Shown for tax impact illustrative purposes only (2) Illustrative EPS calculated from $700m assets, earning 10% a year, and 110m shares. (3) Market capitalization illustration assumes P/E multiple of 15

Beneficial tax treatment

NorthstarRe and Allied Provident are offshore insurance businesses, and therefore exempt from US taxation

Incremental EPS – 35% tax rate

Incremental EPS – 0% tax rate

Market Cap – 35% tax rate

Market Cap – 0% tax rate

Effect of Tax Efficiency - earnings per share and market-cap growth

EPS US$ Market-capUS$ billion

14



15

Marshall Manley, Chairman and CEO. Mr. Manley has had a long and distinguished career in business, including serving as President and CEO of City Investing Co., a Fortune 200,New York Stock Exchange listed conglomerate with 400 subsidiaries, including Motel 6, Rheem Manufacturing Company, World Color Press, Servomation, Wood Brothers Homes,General Development, Hayes International and Guerdon. While at City Investing, Mr. Manley undertook one of the largest voluntary tax-free corporate liquidations in U.S. historyultimately delivering over $8.0 billion to public shareholders. Mr. Manley also served as Chairman of Wood Brothers Homes. Included among the major and better known subsidiaries ofCity Investing was Home Insurance Company, then the 16th largest property and casualty insurance company in the USA. Manley was President and CEO of the Home Group (whichlater changed its name to AmBase Corp.), a NYSE-listed diversified financial services company that provides property and casualty insurance and reinsurance, capital market, wealthmanagement, real estate development, banking, insurance premium financing, venture capital investing and mortgage services. Manley also served as Chairman of Home InsuranceCo., a subsidiary of Home Group. Mr. Manley helped take Home Group from a loss (before taxes) of $282 million in 1985 to income (before taxes) of $714 million from 1986 to 1989prior to its sale to a foreign insurance company for over $1.0 billion. Mr Manley was also responsible for Usi Re, a reinsurance subsidiary of Home Group that was during his tenure the13th largest reinsurance company in the United States. Prior to his corporate career, Manley was a prominent practicing attorney and served as a named partner at two major LosAngeles law firms.

Dr. Gary T. Hirst, President. Dr. Hirst was previously Chief Investment Officer of Hirst Investment Management, manager of Hirst Metastrategy Fund, a fund of hedge funds (rankedno. 3 risked adjusted FoFs by MARHedge – ‘03). Former Director of Alpine Select A.G., a publicly traded (Swiss Exchange) investment company based in Zug, Switzerland. Investor inGreenlight Re at organizational private placement round (pre-IPO). Dr. Hirst was also a former director of offshore reinsurance company and is currently a director of Floridadomiciled property and casualty carrier. Dr. Hirst holds a Bachelor of Science (B.S.) Magna Cum Laude, 1975, University of Miami, and a Juris Doctor (J.D.) Cum Laude, 1979,University of Miami School of Law, and a Doctor of Medicine (M.D.), 1990, University of Texas Health Science Center at San Antonio. He is admitted to the Bar of the State of Florida.

Tore Nag, COO. Mr. Nag held various senior executive positions at Nordea Bank and its predecessor, Christiania Bank og Kreditkasse, with full P&L responsibilities for twenty-four years (1982-2006. The bank assigned him to manage strategic turn-arounds where he was responsible for restructuring several banking units in varied jurisdictions and restoring them to profitability. For the five years ending in September 2006, Mr. Nag managed the New York City branch of Christiania Bank as CEO the Americas.During his tenure in New York, he merged three US banking operations successfully with fundamental business/administrative/system changes, and turned operating losses in 2001 intoprofits of approximately $50.0 million by 2005. Christiania Bank og Kreditkasse was founded in 1848 in Norway and in 2000 at the time of the merger with MeritaNordbanken the bank wasNorway's second largest bank approximately 10 million customers, approximately 1,400 branch offices and a leading net-banking position with 5.2 million e-customers. Nordea shares arelisted on the NASDAQ OMX, and the exchanges in Copenhagen, Helsinki and Stockholm.Michael Kantor, Director. Since 1997, Mr. Kantor has been a partner at Mayer Brown LLP, a leading international law firm. He has extensive experience in market access issues, as well as the expansion of client activities in foreign markets through trade, direct investment, joint ventures, and strategic business alliances. Prior to joining Mayer Brown, Mr. Kantor was the United States Secretary of Commerce (1996-1997) appointed by President Clinton and prior to that he served as United States Trade Representative (1993-1996). He served as National Chairman of the Clinton/Gore 1992 Presidential Campaign. Mr. Kantor serves on the Board of Directors of CB Richard Ellis, the US Advisory Board of ING Americas, the International Advisory Board of Fleishman-Hillard and as a senior advisor to Morgan Stanley. Previously, he served on the Board of Directors of Korea First Bank and Monsanto. Jack Doueck, Director. Co-founder of the Stillwater family of funds, a $1.0 billion asset management firm based in New York. Stillwater funds were a founding shareholder of Northstar Group Holdings, parent of Northstar Re. Several Stillwater products have been recognized by various leading hedge fund industry tracking services. Mr. Doueck was the sponsor for one of the first convertible bond arbitrage hedge funds in January 1992. He is a published author and has been a featured speaker at alternative investment conferences around the world on hedge fund dues diligence and asset backed lending. He currently serves on the Board of Directors of several charitable organizations. Mr. Doueck graduated Valedictorian, Summa Cum Laude, from Yeshiva University in 1985 and has attended the Bernard Revel Graduate School.

Experienced team



1616

Historical pro-forma balance sheet and income statement

* Most recent 6 months of insurance operationsNotes: (1) Balance sheet figures summarized from the unaudited pro forma condensed combined balance sheet figures, as detailed in the proxy statement (2) Income statement listed above does not include ASSAC operations or income expenses from Stillwater and Wimbledon assets

$000s

Assets

Cash & Equivalents 104,019

Investments 800,448

Contracted / Other assets 509,861

Deferred acquisition costs 110,214

Total Assets 1,524,542

Liabilities

Trade Payables 2,102

Borrowings 10,000

Contracted Liabilities 679,866

Total Liabilities 691,968

Equity

Total shareholders equity 832,574

Total shareholders equity & liability 1,524,542

$000s

Revenues

Policy premiums, interest, fees 41,191

Investment income 10,303

Other income 601

Total Revenues 52,095

Expenses

Loss and Loss adjustment expenses 23,778

Policy acquisition costs 1,017

Other expenses 2,510

Total Expenses 27,305

Net Income 24,790

Pro-forma Balance Sheet Pro-forma Six Month Statement of Insurance Operations *



1717

Gerova Financial will match low cost, long term liabilities with higher yielding, long term assets

Financial projection assumptions

Assets

Liabilities

Capitalization

High quality fixed income securities, complemented by investments with more limited liquidityMaturities greater than 5 yearsIndividual asset yields targeted at 6-10%

Life reinsurance contracts with maturities greater than 5 yearsImplied costs of insurance float targeted at 3–4%

Assumes $833M starting equity, subject to final asset valuations, transaction fees and possible redemptionsNo additional capital raises or exercise of warrants assumedInvested asset leverage grows to ~6.5x shareholders equity



1818

Projected financial statements highlight the attractiveness of the proposed transaction

Pro-forma 2010 2011 2012 2013 2014

Income Statement

Revenues

Reinsurance revenues 292,490 550,780 925,525 1,365,298 1,837,921

Net investment income 147,051 241,487 379,929 547,586 735,439

Total revenues 439,541 792,268 1,305,454 1,912,884 2,573,360

Expenses

Reinsurance expenses 296,096 557,993 938,144 1,383,087 1,861,907

Other expenses 4,456 8,833 16,206 24,600 35,719

Total expenses 300,553 566,826 954,350 1,407,687 1,897,626

Net Income 138,989 225,442 351,104 505,197 675,734

Balance Sheet

Assets 1,524,542 3,330,296 5,829,378 9,576,040 13,158,925 17,453,096

Liabilities 691,968 2,358,733 4,632,272 8,027,932 11,105,619 14,724,057

Equity 832,574 971,563 1,197,005 1,548,109 2,053,305 2,729,039

Projected financials

Notes: (1) Opening balance sheet numbers derived from unaudited pro forma condensed combined balance sheet, as detailed in the proxy statement (2) Asset leverage as modelled increases to a maximum of 6.4x equity in 2013



1919

Earnings per Share Return on Equity Book value per share

CAGR49%

CAGR15%

CAGR29%

Financial metrics

Notes: (1) Book value per share calculated as shareholder’s equity divided by common shares outstanding. (2) Return on Equity calculated as net income for the year divided by shareholder’s equity. (3) Earnings per share calculated as net income for the year divided by common shares outstanding.

Key financial metrics reinforce management’s positive outlook



2020

Gerova Financial is forecast to have a significant enterprise value

Enterprise value creation

Enterprise Valuation Summary at Closing

Estimated Price Per Share (1) $9.94

Total Basic Shares Outstanding 119,872,867

Warrants Outstanding 17,550,000

Fully Diluted Shares Outstanding 137,422,867

Fully Diluted Equity Value $1,365,983,298

Less: Estimated Cash (2) $95,901,000

Enterprise Value $1,270,082,298

2010E Net Income $138,988,935

2011E Net Income $225,442,106

2010 P/E Multiple 9.8x

2011 P/E Multiple 6.1x

Notes: (1) Current market price as at January 4, 2010 (2) Estimated cash derived from the unaudited pro forma condensed combined balance sheet, as detailed in the proxy statement



21

Investors are looking for… Supporting Gerova Financial Metrics

Transparent investment ASSAC is a fully reporting company with the SEC and complies with public company disclosure regime

Compounded investment returns Non-US insurance companies are generally tax exemptEnhance ROE by growing portfolio through acquired insurance reserves at ratio of 10:1

Proven management team Exceptional management team, responsible for building successful financial and asset management businessesIdeal vehicle for proven financial market executives

Focused acquisition & growth strategy Strategy to acquire investment funds at prices that are a discount to current carrying valuesDistressed pricing for a sound business and a unleveraged b/s

Low cost growth that is non dilutive ‘Float’ money is low cost cash to fuel growthInsurance ‘float’ is totally non-dilutive to equity holders

Well timed investment Identified the right place and the right time to take advantage of dislocation in the financial markets and industry wide de-leveraging

Innovative investment model Utilize an insurance core to take advantages of intrinsic benefitsUtilize direct lending strategies to enhance fixed income portfolio

Flexible investment strategy Insurance companies are exempt from Investment Company Act maintaining investment strategy flexibility

Investment in Gerova Financial offers a compelling opportunity for current and future shareholders

Attractive investment opportunity



22

Appendix



23

ASSAC has entered into merger agreements and asset purchase agreements to consummate the proposed transaction

Northstar Agreement

Amalphis Agreement

Stillwater Agreement

Wimbledon Agreement

Acquire Northstar HoldingsAcquire shareholders equity in Northstar Insurance

$7M cash$120M performance note

Acquire 81.5% controlling interest $57M in the form of 57,000 Pref Shares, to convert to 7.6M ordinary shares

Merger agreements 100% of Domestic Stillwater FundsAsset purchase agreements substantially all the assets of the Offshore Stillwater Funds

Cash fee of $12M, and approx. 650,000 Pref Shares based on NAV of $650M, converting to 66.7M ordinary shares based on an audited NAV of $500M

Newly formed acquisition subsidiary Allied Provident will acquire all of the net assets through an asset purchase agreement

106,000 Pref Shares based on ~NAV of $106M, converting to 10.7M ordinary shares based on an audited NAV of $80M

Nature of Transaction Consideration to be Paid

Notes: (1) Preference Shares have a liquidation value of $1,000 per share. Ordinary Shares have a conversion price of $7.50 per share commencing on 31 July 2010, at a rate of 1/6th of the Conversion Shares per month through to December 31, 2010

Transaction Terms



24

Asia Special Situation Acquisition Corp (ASSAC) is a special purpose investment company with a mandate to invest in a non-American operating company with exposure to the Asian market

ASSAC is a blank check company domiciled in the Cayman Islands and listed on the NYSE Amex: CIO. ASSAC’s core asset is $US115 million cash held in trust, raised via an IPO in January 2008

ASSAC is mandated to invest in a hospitality business or a financial services business that is principally in Asia, through either an asset acquisition or share purchase transaction

In November 2009, ASSAC terminated its merger agreement with its prior Asian target and negotiated payment of a break-fee following the target’s independent placement of $315 million in debt and equity.

Following the termination, ASSAC identified an exciting opportunity for its shareholders centered on the acquisition and consolidation of discounted financial assets

In December 2009 ASSAC executed merger agreements with new targets in this industry, and is targeting an ASSAC shareholder meeting on January 19, 2010 to vote on the proposed transaction

ASSAC’s corporate existence terminates on January 23, 2010

ASSAC history



Created by Morningstar® Document Research℠http://documentresearch.morningstar.com

Identify Macro Opportunity

Identify Attractive Segment of Market

Align Investment with Key Trends

Investment to Fit ASSAC Mandate

25

ASSAC has identified a significant opportunity to take advantage of the dislocationof financial markets and the associated de-leveraging of financial companies by acquiring financial assets in exchange for restricted publicly traded stock

ASSAC Investment Process Identified Assets

Structural asset to liability mismatch

in the financial industry

Insurance companies have positive tax and

leverage implications

Asset in the financial services

sector with exposure to Asian market

Defined liquidity

pathway for funds with

significant short term liabilities

Northstar Insurance Companies

Stillwater Funds

Allied Provident Group

ASSAC investment process



http://documentresearch.morningstar.com

EXHIBIT C


Source: Gerova Financial Group Ltd, 6-K, May 14, 2010 Powered by Morningstar® Document Research℠


EXHIBIT D


[downloaded from: http://www.forbes.com/sites/neilweinberg/2011/01/25/gerova-financial-

units-assets-were-questioned-in-sec-wells-notice/3/]


EXHIBIT E


MY PROFILE MY HEADLINE GRABS MY RSS FEED

37

Neil WeinbergINVESTOR ADVOCATE

P E R S O N A L F I N A N C E

NYSE-Listed Gerova Financial Has Close Ties To Westmoore Ponzi ScamstersJan. 5 2011 - 6:30 pm | 14,146 views | 0 recommendations | 50 comments

On first blush Gerova Financial Group is the epitome of respectability. The company boasts a New York Stock

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Exchange listing, a share price of $28 and a market value of $750 million. Last month it announced plans to acquire broker-dealers Ticonderoga Securities of New York and Seymour Pierce Holdings Ltd. of London. This week it announced the purchase of life insurance policies and loans on policies for $105 million.

Below the surface things don’t look so good at Gerova. A self-described reinsurer, the Bermuda-based, Cayman Islands-registered company was set up three years ago as Asia Special Situation Acquisition Corp., a blank-check company with a mandate to go out and buy assets.

Among the assets Gerova has acquired are those managed by an outfit called Stillwater Capital Partners, Inc. Gerova reported in its December 31, 2009 annual report that Stillwater’s assets were valued at $541.25 million, meaning they represented 72% of Gerova’s entire market value.

Stillwater’s assets are those of a troubled slumlord that got taken by mortgage scamsters for $30 million in Columbus and other Ohio towns, according to the Columbus Dispatch. Its problems are far from over. In fact “a substantial majority of the [Stillwater] real estate loans were experiencing interest payment delinquencies of 90 days or more,” according to Gerova’s 2009 annual report. How much are these bum loans worth now? That’s hard to say. Audits that were supposed to be completed last March are yet to be filed. Gerova says it received Stillwater audited financials last November and will release them with its annual report by June.

One certainty is that Chief Executive Officer Marshall Manley didn’t stick around for the results. Manley left Gerova last April, after just three months on the job. He is now suing Gerova for allegedly failing to provide him with $4 million in pay under a severance agreement. Gerova declines comment.

Gerova itself hasn’t issued a financial statement since December 2009 (the Securities and Exchange Commission permits foreign issuers to

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disclose such data only annually, although the NYSE encourages them to do so more frequently). Last February it received notice from the NYSE that it was at risk of being delisted for failing to meet the minimum public shareholder requirements . It’s still trading.

A paucity of public shareholders and a failure to write down assets has the potential, at least temporarily, to artificially prop up the price of a company’s stock, the value of its currency (stock) for making acquisitions and the amounts for which early investors can potentially cash out.

All this adds up to sinister forces at play, if stock message boards and an anonymous tipster are to be believed. The story line is that Gerova and dozens of satellite companies are secretly being manipulated as part of a bid to pump up share prices and dump them on unsuspecting investors—many of whom are effectively required to own Gerova because of its inclusion in the Russell 2000 and 3000 value indexes. Supposedly behind this complex fraud: graduates of Westmoore Capital. Westmoore is a $53 million Ponzi scheme that the SEC shut down in June.

Also allegedly involved in the Gerova scam: Jason Galanis. Longtime Forbes readers will recall that Galanis, born in 1970, is the son of John Peter Galanis, the California con artist who bilked the likes of Eddie Murphy and Sammy Davis Jr. and then drew serious prison time for orchestrating a $400 million Ponzi scheme. Jason, who received a

Ferrari for his 16th birthday, focused his early enterprises on the Internet porn business and included Internet Billing, or iBill, a large web-porn collections outfit.

Galanis, the father, apparently had a big influence from prison on at least some of Jason’s early ventures. Incubator Capital, one of Jason’s early companies, was the subject of wild price swings and self-dealing, similar to that of the companies his father had controlled. Gerova has likewise been extremely volatile of late, posting both one of the NYSE’s ten largest daily increases and decreases in the past two weeks alone.

Jason was arrested, but not charged or prosecuted, in a drug-dealing case that landed his brother and sometime business partner Derek an 11-year sentence.

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In 2004, Jason Galanis told Forbes he was “part of the investment banking team” at Robert Guccione’s Penthouse magazine. Three years later Galanis himself was fined $60,000 and barred by the Securities and Exchange Commission from serving as an officer or director of a public company for five years for his role in “knowingly and recklessly preparing false financial statements for Penthouse International” and for electronically forging Guccione’s signature.

So what’s the evidence that Galanis and his alleged Westmoore cronies have moved on to Gerova? Galanis, for one, is listed as a member of Gerova’s real estate board in an SEC filing by Net Five Development Group.

Net Five is a joint venture Gerova entered into last May with an outfit called Planet Five. Net Five is 10% controlled by Robert V. “Robbie” Willison. His previous job: Handling investor relations for Westmoore Capital, according to Cheryl Booth a San Diego, Calif. investor who lost 100% of her investment in Westmoore’s Ponzi fraud. Separately, William Reimold, an administrator for a Pennsylvania pension plan, confirms that Willison represented Westmoore early last year amid the pension fund’s futile efforts to redeem money that had been invested with Westmoore affiliates. Willison is now a major shareholder in the Gerova-Planet Five joint venture, according to Gerova’s most recent filings.

Willison did not respond to calls to his office and his cell phone (the same number he used at Westmoore). Gerova says in a written statement that Willison is the only person who worked both for Westmoore and Gerova and that he was employed in a non-executive capacity in a real estate joint venture. In an interview, Gerova CEO Joseph Bianco stated that he was unaware of Willison’s role in the now defunct Westmoore.

The anonymous tipster forwarded a Planet Five memo dated April 17, 2010. In it, Planet Five seeks permission from Gerova to raise $5 million for real estate investments. The memo is addressed to Gerova CEO Bianco and Jason Galanis.

Bianco says he met Galanis a year and a half ago and that Galanis is working for Gerova Advisors LLC, a wholly owned subsidiary of the NYSE-listed parent company. Bianco describes Galanis as a “very smart


guy and as far as I can see an honest guy.” Bianco doesn’t believe the SEC’s fraud charges would have stuck if the name Galanis weren’t involved.

Galanis did not respond to requests for comment left via email, phone and cell phone.

Gerova describes Galanis’ role this way in a written statement:

“Jason Galanis is chief executive of Gerova Advisors LLC, a wholly-owned subsidiary of Gerova Financial that reports to the Board and Officers of Gerova Financial, advising them on merger-and-acquisition strategy. He is neither an officer nor a director of Gerova Financial. Jason was also one of three members of a committee of a subsidiary of Gerova.”

The tipster also forwarded a presentation made by an NYSE Euronext listings official in a bid to attract new business. It is dated April 16, 2010 and this title:

GEROVA Financial Group Ltd.•

Presentation to Mr. Jason Galanis•

Partnership Opportunities with NYSE•

The NYSE declined comment.

Westmoore and Gerova have other connections. The now defunct Westmoore acquired a stake in China Tel Group Inc. (OTCBB: CHTL) on July 29, 2008. That same month Gerova entered into an agreement to acquire China Tel. The Gerova-China Tel deal was unwound three months later. China Tel’s chief executive, George Alvarez, served as a Director of Westmoore Holdings, Inc. until September 25, 2009.

Another Westmoore-Gerova link is Fund.com (OTC: FNDM.PK), a publicly listed outfit whose business is to “develop a diverse range of ‘actively managed’ ETFs together with established third party asset managers, and to list these ETFs on the New York Stock Exchange, or a similar national or international securities exchange.” In 2008, Fund.com agreed to raise $1.5 million from Westmoore.


Bianco, Gerova’s chief executive officer, also served as chairman of Fund.com. Bianco is also chairman of Weston Capital Management, a hedge fund business based in West Palm Beach Fla. that Fund.com acquired last March. Gerova chief financial officer and director Michael Hlvasa is listed in his 2009 Gerova bio as having spent over 18 years in the gaming industry and as having acted as Fund.com’s chief financial officer. Fund.com recently stated that its previous financials are not to be trusted.

Who is behind Fund.com? Jason Galanis, it appears. The company’s latest annual report names Equities Media Acquisition Corp Inc. as the largest shareholder with 28% voting stake. Says a footnote:

“The name of the party who has the power to vote and share power to dispose of the shares held by Equities Media Acquisition Corp Inc. is Arne van Roon. He disclaims beneficial ownership of the securities held by such entity, except to the extent of his pecuniary interest therein. The address Equities Media Acquisition Corp Inc. is World Trade Centre Lugano-Agno Switzerland.”

Jason Galanis, it turns out, is Equities Media Acquisition Corp.’s president, secretary, treasurer and a director, according to a company record filed with the Nevada Secretary of State. The company is headquartered in Beverly Hills, Calif., not far from Galanis’ home. That means a guy who has been barred by the SEC from acting as an officer or director of a public company is actually the largest shareholder in a company (Fund.com) that’s in the business of listing exchange traded funds on the NYSE and heavily involved in another (Gerova) that, pending regulatory approval, will become a trans-Atlantic broker-dealer and investment bank.

Gerova’s latest would-be partners clearly want to make a clean break with its past. Gerova has retained the crisis-management PR firm Sitrick and Co. to handle incoming queries. Sitrick put on the phone Joel Plasco, head of Ticonderoga Securities, which is hoping to become part of Gerova. Plasco acknowledges that Gerova has retained Galanis to search for investment opportunities but insists if Gerova’s acquisitions of


Ticonderoga and Seymour Pierce receive regulatory approval that new management intends to bring in a fresh slate of actors.

Says Plasco of Galanis: “He’s a smart guy with a lot of connections and a desire to try and build a company with a reputation. He wants to associate himself with people who have extremely blue-chip reputations to make sure it’s done in a public company environment in an appropriate fashion.”

One sure thing is that Galanis isn’t sitting around waiting for his SEC time-out to expire in two years. In addition to his Gerova and Fund.com roles, Galanis is listed by the Nevada Secretary of State as an officer and/or a director in the following non-public enterprises: Carolus Capital Management, Devermont Communications Ltd., Emerging Markets Global Hedge Ltd., Furst REIT Partners LLC, Hettinger Media Ltd., IP Global Investors Ltd., Jamsfield Investments Inc., Mulsanne Enterprises Ltd., Life Investment Co. LLC, Pacific Rim Assurance Co. Ltd and Stanwich Absolute Return Ltd.

Galanis is also a partner in Holmby Companies. The name is apparently a reference to Holmby Hills, a ritzy area adjacent to Beverly Hills not far from where Galanis owns a $5.7 million home.

Update: Jason Galanis failed to return my calls and email seeking comment, but his attorney, Aaron McClennan, did respond in writing to those inquiries late today (Jan. 11). Mr. McClennan said that his client was not involved in the drug-dealing ring which resulted in the prison sentence for his client’s brother. (Above is a link to the Forbes story detailing Jason Galanis’ arrest in connection with the drug-dealing ring and the subsequent dropping of the charges against him.) Mr. McClennan also said that the SEC fraud charges and sanctions against his client were civil and not criminal. That is correct, as evidenced in the SEC litigation release linked to above. My comment below on the charges has been revised.

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EXHIBIT F


DALRYMPLE FINANCE LLC Protect Then Grow

This report and the conclusions are the opinion of the author. See important information and disclosures on last page

DF

Company Overview

January 10, 2011

Price $28.04 Market Cap $900 M Shares Out 32.12 M Debt N/A EBITDA N/A EPS N/A

Gerova Financial Group (GFC): An NYSE-listed Shell Game

Summary:

Gerova Financial Group is nominally a Bermuda-based insurer; although the company compares itself to Berkshire Hathaway, in reality we believe it is a repository for impaired,

illiquid hedge fund assets, which are used for regulatory

capital. We think that the bevy of insider and related-party transactions is indicative of a firm operated for the benefit of insiders and affiliates, rather than GFC shareholders. We

believe GFC is likely fraudulent and the firm’s assets, hence the shares, worth a fraction of current stated value.

Key Points:

� Complete lack of financial disclosure. GFC has not filed financial statements since becoming public a year ago. Consequently, there is no publicly available information available to shareholders. We believe this is intentional.

� Impaired and overvalued assets. The acquired assets were likely impaired and overvalued at purchase; quality has eroded in 2010. In our opinion, critical information on asset quality, performance and a long history of audit problems has been kept from GFC shareholders.

� Undisclosed related-party transactions and affiliations. An examination of numerous transactions indicates self-dealing to us. Moreover, we believe these relationships have been carefully edited from GFC documentation to give the illusion of arms length transactions.

� Strong ties to the investment underworld. GFC insiders exhibit strong ties to individuals and entities that have been sanctioned, sued or shut-down by regulators, including Jason Galanis, Matthew Jennings and Westmoore Capital.

� A deeply troubled company. GFC has many hallmarks of a classic fraud. In our opinion, GFC exhibits: a lack of financial disclosure, insider dealing, and obfuscation of both relationships and transactions. When this information is widely disseminated, we expect the stock to trade at a fraction of the current price.

Company Description

Gerova Financial is nominally a reinsurance company; the company owns a small provider of sub-prime auto reinsurance. Company assets, however, consist primarily of illiquid asset-backed lending hedge fund portfolios.

Company Statistics:

Keith Dalrymple

[email protected]


Gerova Financial Group Dalrymple Finance, LLC.

Dalrymple Finance, LLC

1

Summary

While nominally a reinsurance company, we believe a key purpose of

GFC is to allow certain parties to swap illiquid and impaired hedge

fund assets for GFC shares and other economic benefits. GFC, in turn,

keeps the assets on the books at inflated values and can pledge them

as regulatory capital for businesses such as insurance and stock

brokerage. GFC management said on the recent conference call, “GFC

is the engine to use the fuel of the capital”. Yes, you read that

correctly; they actually said that. We interpret this less than eloquent

statement to mean that the contributed assets (RE loans in default, for

example) are used to meet capital requirements of other businesses.

We believe GFC is a game of smoke and mirrors in which over-valued,

illiquid and severely impaired assets are pooled to create the illusion of

a large capital base. The only beneficiaries of the business model

appear to be management and the affiliated parties. Critically, our

research shows that GFC management is likely well aware of problems

with some contributed assets, but does not share that information

with its public shareholders, the majority of which (around 90%) own

restricted shares and can not sell or liquidate their holdings.

Our information regarding the dire state of acquired assets comes

from none other than Stillwater, the firm GFC purchased assets from

and subsequently re-hired to manage them. Despite the availability of

returns and outlook for Stillwater assets, GFC management has not

provided shareholders with any information, neither qualitative nor

quantitative.

We consider the recently acquired life insurance assets another phase

in the shell-game - more impaired, illiquid overvalued assets for the

company to pledge as regulatory capital for businesses such as the

proposed transactions of securities/brokerage firms.

In the best-case scenario, we think GFC management is negligent and

incompetent; more likely, though, is that GFC is engaged in fraudulent

activity. To dispel our suspicions, however, we invite management to

fully disclose all information available about the valuation of assets,

origin of assets, previous relationships and affiliations, and cease

shifting GFC assets to non-consolidated, off balance sheet affiliates.

We cannot predict when GFC will unwind. However, we are firmly

convinced that either through investor knowledge or regulatory action,

the story will end in scandal and a deflated stock.

This stunning story of a big-board listed shell game begins with an

acquisition by a SPAC (Special Purpose Acquisition Company):

“The engine to use the fuel of

the capital”?

GFC is an NYSE-listed shell-

game, in our opinion.

We think information

regarding asset quality and

performance is deliberately

kept from shareholders.

Is GFC negligent or

fraudulent?




2

A SPAC “Purchases” an Insurance Company

and some Hedge Fund Assets GFC started as a SPAC called Asia Special Situations Acquisition Corp.,

a blank check company with a trust account of some $115M looking

for an Asia-related acquisition. After two failed attempts and just two

weeks prior to the liquidation deadline, the company announced the

series of acquisitions that would become GFC. The acquisitions

included a reinsurance company and the illiquid assets of a few

troubled hedge funds and funds of funds (FoFs). The total deal was

valued at over $650 million.

Most of the SPAC investors did not want to participate in the deal.

Consequently, in keeping with SPAC rules that allow shareholders to

swap shares for cash when voting against proposed mergers, the

company paid out the majority of its $115M to buy out “no” votes,

leaving the company with precious little operating capital. The

acquisitions were made entirely with shares.

To speak plainly, a company with almost no cash and no assets simply

printed shares and exchanged the paper for $650 million of assets. It

paid over $23M in consulting and legal fees (again in cash and shares)

for the privilege. Either GFC is a fairytale come true or something

other than what meets the eye is going on. We believe it is the latter.

To understand how GFC works, it is helpful to look at the origins of the

acquisitions.

The Acquired Insurance Company: Amalphis/Allied Provident

Allied, the Bermuda-based insurer was established in 2007. GFC

documents state that Allied Provident currently provides reinsurance

to only one provider, a US insurance company that offers auto

insurance to high risk or “rated” drivers. That is, the company

provides sub-prime auto insurance.

According to SEC filings the shareholder’s of a company called NatProv

contributed $29 million in cash and securities to capitalize Allied,

which became Amalphis. According the GFC’s 1/7/2010 6-K,

Amalphis’ assets consisted of likely illiquid securities, each of which is

connected to current GFC insiders. The table below notes the assets

and values as of December 2008 from the 6-K along with our

commentary.

$23 million in consulting and

legal fees is excessive and

sadly indicative, we think, of

GFC priorities.

Amalphis/Allied was

established in 2007 by two

GFC insiders.




3

Source: GFC 6-K January 2010.

Note that both Codrington Partners and Global Asset fund are related

to GFC President Gary Hirst. The Taurus fund is related to James

Tagliaferri, GFC advisory board member. We don’t know what is held

in these funds, but we suspect they are illiquid and the valuation

assigned is likely optimistic.

As a side note, a law suit was filed against James Tagliaferri and his

TAG (formerly Taurus Advisory) in December 2010 for fraud by

Matthew Szulik, former Chairman of Red Hat (RHT). In the complaint,

plaintiffs allege that “TAG, in combination with Jason Galanis,

defrauded the Szuliks”, used the money to “fund loans to persons

involved in illicit or potentially illicit activities…with millions in

kickbacks paid to the defendants. There is a link to both the article

and a the full complaint on Exhibit A, Document Links at the end of

this report. This is as fascinating a read as any legal document can

be.

The complaint may well give clues as to how GFC insiders can profit

via deals with acquired companies and joint ventures. The complaint

details how defendants profited via consulting fees and kick-backs paid

from companies in which they invested.

If the origins of Amalphis are interesting, the subsequent events are

doubly so.

In 2009, the owner of Amalphis, NatProv (of which Mr. Hirst is a

shareholder), sold 81.5% of the company to Rineon (RIGI.PK) for $36

million. Current GFC CFO Michael Hvalsa was the CFO of RIGI at the

time. According to RIGI filings, the company purchased Amalphis with

$36 million in cash. RIGI raised the cash to make the acquisition

through the sale of preferred shares to Intigy Absolute Return Fund.

Intigy is a company controlled by current GFC President Gary Hirst. In

this case, Mr. Hirst was, in essence, both the buyer and seller via

different entities apparently using limited partners money to monetize

an investment. A tangled web, indeed.

The NatProv/RIGI/GFC transaction is one of numerous related-party

transactions. To help connect the dots of who is who in the GFC

constellation, at the end of the report we provide Exhibit B, a list of

companies and affiliations to help illuminate this complex scheme.

This GFC insider is in deep

legal trouble.

Opaque investments hide

consulting fees and kick-backs

to the investment manager.

Did Hirst use LP cash to

monetize an investment? It

sure looks that way.

Exhibit B – who’s who in the

GFC constellation.

Asset Cost Fair Value CommentaryCodrington Partners 12,125,000 14,550,000 The Bermuda listed company later became M2 Global

Ltd. Appears to have 1 trade of 1,000 shares in 2010. Contact person is Darren Rennick, co-founder of Hirst Investment Management, a firm controlled by GFC President Gary Hirst.

Global Asset Fund 1,785,000 1,860,026 Global Asset Fund is managed by Axiat Inc. a firm controlled by Gary Hirst.

Taurus Global Fund 9,770,000 12,843,313 A fund managed by Taurus Advisory (now TAG), a firm controlled by James Tagliaferri, a member of the advisory board of GFC




4

A year later in 2010, RIGI sold 81.5% of Amalphis to GFC for

approximately $50-80 million depending on the share price used;

NatProv, the firm in which Mr. Hirst is still a shareholder, owns all the

common shares of Amalphis, as far as we can gather from regulatory

filings. As a result of the transaction, RIGI owns approximately 1.8

million shares of GFC.

If our count is correct, the GFC purchase marks the third time Mr.

Hirst has conducted an Amalphis transaction. Of course, none of

these existing and previous relationships between the management

staff and the assets GFC purchased has been disclosed as far as we

can tell.

In our opinion, the Amalphis series of transactions illustrates several

key points:

• It shows how illiquid assets can be and offloaded for use by

businesses that require regulatory capital, in this case

insurance.

• It shows a strong pattern of related-party transactions

where assets are shuffled to and fro at different valuations.

• It shows how insiders can potentially profit by shuffling the

assets. Note that Hirst used Intigy cash to finance RIGI’s

purchase of Amalphis, a company he owned.

• It demonstrates the obfuscation of important facts and

relationships. To our knowledge the previous and current

ownership of Amalphis by GFC’s management has not been

disclosed in GFC filings. We consider the Amalphis story a

series of related-party, self-dealing transactions. We also

consider the lack of disclosure alarming.

Importantly, we think the Amalphis series of transactions shows the

genesis of GFC’s current business model and demonstrates a pattern

that is being continued with the hedge fund assets GFC acquired along

with Amalphis. However, with the Stillwater assets the process is

being conducted on a much larger scale.

The Stillwater Assets: Inflated Values, Impaired Assets, and

Obfuscation

In addition to Amalphis, GFC acquired hedge fund and FoF assets. The

majority of assets came from Stillwater funds, a family of asset-

backed lending (ABL) funds. Stillwater assets represent over 70% of

the acquisition transaction’s value.

How many times can GFC

President Gary Hirst shuffle

around Amalphis?

Obfuscate and opaque are the

watchwords.

The Amalphis insider deals

show the genesis of the GFC

“business model”.




5

Gerova also acquired assets of Wimbledon, which were ABL funds

managed by Weston Capital Asset Management. Interestingly,

according to Fund.com (FNDM.PK) SEC filings, Weston Capital was

acquired by FNDM and current GFC CEO Joseph Bianco became a

director of Weston. Mr. Bianco resigned as FNDM Chairman in June

2010; other GFC managers are FNDM alumni as well. FNDM is

another company with strong ties to Jason Galanis.

Shortly after Bianco moved to GFC and resigned, FNDM released an 8-

K stating that various financial statements from 2007-2009 were not

reliable and do not accurately present certain financial information.

We mention this to show a pattern of management negligence (or

worse) and related-party transactions that remain undisclosed in GFC

documents. However, for the purposes of the discussion on values,

we will focus on the Stillwater assets.

Stillwater has generated some controversy, most visibly related to

fraud regarding the origination of its real estate loans in Ohio. There

have been several convictions of people involved with the Stillwater

loans, though as far as we know no one directly associated with

Stillwater has been implicated. For a detailed analysis of the problems,

please review Ohio Dispatch articles listed in our document links in

Exhibit A. Needless to say, this type of coverage makes us doubt the

actual value of the real estate portfolio, which GFC values at $79

million.

The problems have not abated over the last year. Since acquisition,

several law suits have been filed in Ohio courts naming Stillwater,

Gerova and a Gerova-related entity as defendants. You can search

for the cases with the link given in Exhibit A.

Anyone familiar with ABL hedge funds knows that many, perhaps most

have shut down due to the combination of illiquid troubled assets with

leverage, fraud and a flood of redemptions that began during the

financial crisis. Yet, despite industry fire-sales, GFC acquired the

hedge fund assets at a price of 65-100% of NAV, with an average

discount of approximately 10%. We consider the discount stunningly

low given the carnage that devastated the ABL business over the last

few years.

As illustration of the difficulties with Stillwater assets, GFC’s 2009 20-F

notes that as of December 2009 “a substantial majority of our real

estate loans were experiencing payment delinquencies of 90 days or

more…” Additionally, the funds’ insurance policy investments were

likewise impaired because, “we have not made a substantial number

of these (policy) payments primarily due to our lack of liquidity, as

well as other factors including rate of return considerations, collateral

adequacy and life expectancy estimates. Since December 2009, over

GFC CEO Bianco’s Fund.com

recently issued a “non-

reliance” statement on

previous financials.

The Ohio Dispatch details

allegations of fraud

surrounding Stillwater’s Ohio

RE investments.

Who buys ABL assets at 90%

of NAV with no appraisal?

GFC only hints at how badly

impaired the purchased assets

are.




6

50% of the original face amount of these life insurance policies has

lapsed.”

The information detailed above from GFC’s documents is indicative of

significant asset impairment. However, as bad as this may seem, the

problems with asset valuation and lack of disclosure are even worse

than initially apparent.

Material information on the quality and performance of the Stillwater

assets has been withheld from GFC shareholders, despite availability.

The Matrix Group, a UK asset manager is a significant investor in

Stillwater Matrix Fund, a lot of the assets of which were purchased by

GFC. We consider the independent auditor’s report to Matrix is a

scathing indictment of Stillwater valuation practices and reported NAV.

Pricewaterhousecoopers disclaimed their opinion on Stillwater. We

paraphrase their reasoning as follows:

• Inability to obtain sufficient audit evidence in relation to $136

million of fair value as of December 2009.

• Inability to determine the recoverability of receivable balances

due (from sub-fund managers that have suspended

redemptions) of $20.5 million as of December 2009.

• Uncertainty in relation to Stillwater’s ability to repay $95.7

million in leverage

• The auditors of Stillwater concluded that since the evidence

over the valuation of a significant portion of the option is

unavailable and they were not able to apply other auditing

procedures to satisfy themselves as to the valuation of the

option, the scope of their work was not sufficient to enable

them to express an opinion on the financial statements of

Stillwater at 31 December 2009.

• The auditors of Stillwater issued an adverse opinion on the

financial statements for the year ended 31 December 2008.

This information tells us that the Stillwater assets were known to be

impaired and extremely difficult to value; importantly, Stillwater still

has unresolved disputes with auditors over valuation. So difficult is the

process that Stillwater’s auditors issued an adverse opinion on 2008

financial statements because of their inability to verify stated values.

Within the context of auditors refusing to sign off on financial

statements, Stillwater reported returns of -32.9% for 2009 on the

fund discussed above. For the first six months of 2010 the losses were

-15.83%. We can only imagine what the losses would be if valuations

acceptable to the auditors were used. In its letter to the Matrix’ fund

GFC shareholders are left in

the dark regarding significant

problems with Stillwater.

PwC destroys Stillwater’s

“valuation” of assets.

Why doesn’t management

publish Stillwater returns?




7

shareholders, Stillwater assures them that “the Stillwater Pricing

Committee meets monthly to discuss proper valuation of the

underlying funds”. Well, that certainly gives us comfort given PwC’s

opinion on the Pricing Committee’s acumen.

It is impossible for us to understand why management purchased

these assets given the uncertainty around value. It is doubly

mysterious to us why GFC would pay 90% of NAV for the Matrix assets

for which Stillwater’s own auditors refused to sign an audit.

In another incident, the CFTC (US Commodity Futures Trading

Commission) accused Stillwater of failing to file annual reports in

timely manner between 2004 and 2007. Stillwater paid the CFTC

without admitting or denying wrongdoing to extricate itself from the

matter. A link to the CTFC document detailing the incidents is available

Exhibit A. We think that this is likely more evidence of issues with

valuation; it certainly demonstrates a strong pattern of failing to

provide investors with credible information on asset values. Financial

statements became available in November 2010 according to GFC

filings. However, they have not been made public.

Along with the acquisition of the assets, GFC also re-hired Stillwater to

manage them. Thus, Stillwater gets to continue accruing and

collecting fees which are to be based on a quarterly independently

appraised NAV. If the company is indeed conducting such independent

appraisals, it is not sharing them with its public shareholders. Further,

Stillwater is first in line (after a 8% distribution to Gerova) to get any

cash the portfolio generates and recoup over $24M of accrued fees.

It’s a great deal for Stillwater, the general partner; not so great for

GFC shareholders or Stillwater limited partners.

Lastly, despite the availability of strong evidence indicating the

Stillwater assets were deeply troubled, management did not make this

information available to GFC shareholders. In our view, this goes

beyond a lack of disclosure to obfuscation. Were the history of the

Stillwater assets disclosed we find it difficult to believe that anyone

with a modicum of fiduciary sense would purchase the assets; we

further believe that if information on the assets were widely known,

the GFC would be accorded a valuation significantly lower than it is

today.

Asset Appraisal and Restricted Shares

At the time of GFC’s purchase, Stillwater had not been able to

complete an audit on at least some of the assets GFC purchased since

2007. Yet knowing this, SEC filings show GFC committed to have the

assets appraised as of December 2009 by March 31, 2010 and provide

quarterly appraisals following. Of course none of the appraisal

commitments have been met. From the PWC audit information we

Stillwater paid the CFTC for

failing to file financial

statements.

A sweetheart deal for

Stillwater general partners;

terrible for GFC shareholders

and Stillwater LPs.

Management obfuscation: the

assets are likely worth a

fraction of stated NAV.

Did GFC management make a

commitment they knew they

wouldn’t keep?




8

detailed above, we think know why this is the case: it is apparent to

us that auditors do not believe the assets are worth what Stillwater

says they are worth.

It is unclear whether the limited partners in these hedge funds

consented to the GFC deal. We believe the onshore Delaware funds

require majority consent with no appraisal rights afforded to limited

partners who dissent from the merger transactions. However, the

majority of the assets sit in the Cayman funds which we think require

no consent of approval of the shareholders of the funds. Next time,

before you consider investing in anything, read the docs carefully.

While the lack of third party valuation is shocking, in our opinion it is

actually a convenient benefit for GFC management (if not for

shareholders). Approximately 88% (prior to the recent acquisition) of

GFC shares outstanding are currently restricted. We believe the

majority of those shares are supposed to go to Stillwater and

Wimbledon limited partners as compensation for the sale of the

underlying funds to GFC. However, according to regulatory filings, the

shares cannot be registered until an appraisal of the assets has been

completed. Very convenient as there are at least $30M of unmet

redemptions pending for which according to the company’s admission

“former investors may take legal action”.

Delaying asset appraisal benefits GFC management and insiders in a

number of ways, in our opinion, including:

• Obfuscate GFC value. A current appraisal of assets would

allow investors to evaluate current company valuation. By our

calculations, at $900 million market cap, GFC trades at an

approximate $100-$150 million premium to stated NAV. We

believe an audit would show the assets to be worth a fraction

of stated value. The stock price would likely tumble were the

information public.

• Prevent stock sell-off. With an appraisal, GFC would have to

register the restricted shares. We believe registration would

likely result in an avalanche of selling as long suffering hedge

fund LPs race for the exits.

• Use inflated currency. It allows the company to take

advantage of what we believe is an inflated valuation and

conduct other transactions, such as the recently proposed

acquisitions of Ticonderoga Securities and Seymour Pierce.

• Accrue fees. The managers of the assets (i.e. Stillwater) are

able to collect or accrue management fees based on appraised

NAV. Clearly, Stillwater GPs benefit; more clearly, GFC

shareholders and Stillwater LPs pay the price.

Stillwater locks-up LPs, likely

without consent.

Insiders benefit from audit

problems and opacity, in our

opinion.

Bad news for shareholders,

good news for insiders.




9

• Asset shuffle. When shareholders do not know what assets

they own, it is easer for management to transfer assets out of

GFC to related-party entities. This is already happening.

As a result of the lack of asset audits, GFC has never published

financial statements post merger. Therefore, there is no public

financial information available on this company. It is incredible that

an NYSE-listed company could go an entire year without releasing any

financial information.

You Are the Company You Keep…and Don’t Keep

GFC’s associations are disturbing on a number of levels. First, the

company hired well-known insurance executive Marshall Manley to run

operations. However, Mr. Manley didn’t stay with GFC long. He

resigned as CEO in April 2010 shortly after the acquisition closed, after

a little more than 3 months on the job. Following his very short

tenure, Mr. Manley was awarded a very generous severance package,

which included a $4 million payoff to be paid in $100,000 monthly

installments. The only thing required of him – sign an air-tight

confidentiality agreement.

In an interesting twist of fox outfoxes fox, according to documents

filed with the US District Court, Southern District of Florida, Mr.

Manley is suing GFC, alleging that the company failed to pay him his

first payment which was due November 8,, 2010.

Why would a cash-strapped company promise to pay such a large

severance for such a short tenure? This is interesting given that as

the former CEO of Ambase – an insurance company famous for going

bankrupt on investments in “junk bonds” - he does not seem one to

shy away from a little controversy and aggressive insurance company

investment practices. It appears that even Mr. Manley held his nose

at this series of transactions.

GFC management has a history of involvement with some of the

darker elements of the “investment underworld”. First, Jason Galanis

is CEO of Gerova Advisors, a GFC subsidiary. Of course this is not

disclosed in GFC filings. According to SEC litigation releases Mr.

Galanis was sanctioned for accounting irregularities while at Penthouse

and barred from being an officer or director of a US public company

for five years. The SEC litigation release is available in Exhibit A

GFC Director Arie Jan Van Roon is a partner of both GFC President

Gary Hirst and Jason Galanis. He is a partner with Hirst in Noble

Investment Fund. In a Fund.com (a company associated with

numerous GFC insiders) footnote, Roon is noted to have the power to

vote Equities Media Acquisitions 28% position in the company.

Equities is a Galanis company.

GFC is the only NYSE-listed

entity we know of with no

financial information available.

Why pay someone over $4

million for a few months

work?

GFC’s affiliates reads like a

who’s who of “investment

world undesirables”.




10

Galanis’ connections to GFC management apparently run very deep.

He is mentioned in the aforementioned fraud law suit against Taurus

(TAG) as an associate of GFC advisory board member James

Tagliaferri.

Additionally, prior to the current acquisitions, GFC had tried to

purchase ChinaTel (CHTL). Matthew Jennings and Westmoore Capital

have a significant stake, many would say controlling, in the company.

Jennings and Westmoore were shut down by the SEC in June 2010.

The SEC litigation release describing the $53 million ponzi scheme is

available in Exhibit A.

Additionally, Robert Willison, listed as a Gerova joint venture partner,

is reported to have been the contact/IR person for Jennings’

Westmore.

Lastly, Jennings affiliated company was apparently a Fund.com

(FNDM.PK) investor. Current GFC managers Joseph Bianco, Michael

Hvalsa, and Keith Laslop are all former employees or directors of

Fund.com.

According to a FNDM 13-D filed in September 2010, Jennings

transferred a purchase option for FNDM stock to a third party in

January 2010. Interestingly, the transaction also included the ability

of the third party to put the FNDM stock to RIGI. Mr. Hvalsa was the

CFO of RIGI at the time and Mr. Bianco was the Chairman of FNDM.

Of course, there is nothing illegal about management’s and GFC’s

associations with Galanis, Jennings and Westmoore. However, they

seem to have been pretty careful to keep these associations out of

GFC documents. In our opinion, GFC management clearly has deep

ties with these individuals and groups, and it illustrates with whom

GFC management chooses to conduct business.

Given what we consider is mounting evidence that GFC is more a

smoke screen than an operating company, we find these associations

profoundly troubling and in the best case scenario indicative of poor

judgment.

The Game Continues: the Asset Shuffle

Insiders now own around 9.5% of GFC according to its only 20F filing

which at current valuation levels equates to more than $75M, which

gives an additional “haircut” to the hedge funds’ limited partners.

Unfortunately, the dilution and transfer of assets does not stop there.

In GFC’s 20-F, the company states that it entered into a real estate

joint venture with Planet Five Development Group, Robert Willison (of

Westmoore) and an undisclosed third party to form Net Five Holdings.

GFC contributed all of the real estate acquired with Stillwater funds for

a 49% interest in the JV. The partners are supposed to contribute

GFC insiders have strong ties

to Westmoore’s ponzi scheme.

GFC’s ties with the investment

“underworld” appear sadly

representative of company

practices.

GFC’s deal with Westmoore

Ponzi scheme alum.




11

$100 million NAV of properties. I don’t know how shareholders can

verify the contribution. My guess is they cannot. Gregory Laubach is

noted as a member of the board of managers for the company. Mr.

Laubach is also the CEO of WMLG Holding, a company part of what we

consider another related-party transaction discussed below.

It is difficult to determine the economic benefit of the Planet Five

transaction for GFC shareholders. It appears as if management traded

100% ownership in the assets for a 49% non-controlling interest. Not

only does this dilute GFC shareholder interest, but as a non-

consolidated entity, it puts the operational and financial management

of the assets beyond shareholder view.

GFC recently completed another slightly disguised related party

transaction of questionable economic benefit to GFC shareholders.

GFC purchased shares in nearly bankrupt WMLG Holding (WHLX.OB)

for $500,000. WHLX then used the cash to purchase a piece of real

estate in Florida. The transaction is detailed a WHLX SEC filing,

though not in a GFC filing. However, what the filing does not disclose

is the seller. According to the online database of Osceola County, FL,

Stillwater is the owner of the real estate being purchased, hence the

seller to WHLX. Mr. Laubach of GFC JV Net Five was installed as

WHLX CEO when the transaction occurred.

This transaction is similar to RIGI’s purchase of Amalphis. With the

Amalphis transaction, a Hirst entity provided financing to RIGI so RIGI

could purchase Amalphis from another Hirst related entity. In this

case, GFC financed WHLX’s real estate purchase from either GFC or

Stillwater. We consider this a related-party transaction thinly veiled

by an intermediary. How GFC shareholders benefit from this

admittedly small transaction is unclear. It appears to us that these

relationships are used to shift assets out of GFC to related, but not

consolidated, entities. Neither of the discussed transactions are what

we could consider “arms-length” transactions.

The Proposed Transactions

On December 7th, GFC announced the proposed acquisition of

Ticonderoga Securities and Seymour Pierce, a UK based brokerage.

Not surprisingly, the businesses require regulatory capital. The terms

of the deals were not disclosed, though according to the Financial

Times, Seymour Pierce is valued at approximately $60 million with

GFC’s stock price around $27. Interestingly, Seymour Pierce was

rumored to have issues with regulatory capital prior to the

announcement.

Needless to say, given GFC has little if any cash, both of these will be

all stock transactions.

Pushing assets off the books –

but why?

Yet another undisclosed

related-party transaction.

Did GFC just purchase real

estate…from itself?

A use for bad assets:

regulatory capital.




12

On January 4, 2011, GFC announced that it acquired $1.2 billion life

settlements portfolio of the HM Ruby fund for $94 million in stock and

$11 million cash, which was obtained through a credit facility. Life

settlements has been another extremely difficult ABL field.

Additonally, the area is rife with controversy as discussed in the

Boston Globe article that is linked in Exhibit A.

To give an example of just how bad the insurance finance industry is

we quote Stillwater Capital’s June letter to shareholders, which was

published as part of the Matrix Structured Products Limited’s letter.

Sadly, this information was not made available to GFC shareholders.

Stillwater more or less confesses that the sector is a disaster. Here

we quote:

As in 2009, the severely negative performance in this sector is due to write downs in the Insurance Premium Finance (IPF) and Life Settlement markets as a result of

two actuarially companies (AVS and 21st Services)

having increased their life expectancy expectations. These increases in life expectancy estimates suggest that market participants will factor in longer premium

payment periods, which in turn lowers the value of

related collateral. Additionally a completely dysfunctional secondary market has resulted in

complete illiquidity and further reduction in

values. Finally, the Funds that held life insurance policies (the majority of Multi-Strategy ABL Funds

unfortunately did Insurance Finance as well) did not have the liquidity to pay premiums, were forced to

have their policies lapse and have incurred

permanent losses.

It is impossible to determine the economic benefits of these

transactions for GFC shareholders with publicly available information.

However, Stillwater’s reports to other fund investors indicate that

Stillwater assets and the life settlements areas are unmitigated

disasters. Unfortunately, though GFC recently hosted a conference

call on the (Seymour Pierce and Ticonderoga) acquisitions,

management did not allow a Q&A session; additionally, our request for

a private conference call with management to discuss these and other

issues has gone unanswered.

Connecting the Dots: Corporate Ties,

Personal Profits The complex web that makes up GFC and affiliates makes one

question who profits and how. There seem to be a number of recurring

patterns:

1. Salaries – although there is no public information except for

Mr. Manley’s golden (if unpaid) handshake, directors (other

Per Stillwater: Life settlement

are an unmitigated disaster.

Management stonewalling and

obfuscation.




13

than Manley and Doueck) are paid $150K a year and Mr.

Hensley was hired in April for a salary of $400K plus a targeted

bonus of 100%. Not bad for a cash-strapped entity.

2. Shares. GFC management has received shares and has an

unpublished but approved stock incentive plan that allows up to

4 million shares to be issued (that’s over $100M at current

prices). Additionally, the general partners or managers of the

funds, i.e. Stillwater and Weston, receive shares for putting the

deals together.

3. Consulting fees. We expect GFC management has varied and

sundry contract to extract fees from various entities.

Obviously, this becomes a great deal easier when assets are

moved off the books into unconsolidated entities, such as GFC’s

real estate JV. We give an example of how this might work

below. It is also conceivable that at least part of the

staggering $23.5M that the company paid to close the

acquisitions in attorney, accountant and other advisors’ fees

were somehow directed to benefit the insiders. One would think

that for $23.5M one can get a decent set of audited statements

these days.

4. Locking in investors and extracting fees. The limited partners

of Stillwater and Wimbledon funds are locked in until their

shares in GFC are released. In the meantime, the general

partners have negotiated favorable management contracts with

GFC where they are first in the waterfall of funds (after an 8%

payment to Gerova) and are allowed to extract current fees

based on appraised NAV plus $24 million in accrued fees.

Thus, the value to both the fund limited partners and GFC

shareholders erodes steadily.

Fund.com’s 2009 10-K shows how fees can be funneled to insiders and

related parties. We use FNDM as an example because at least five

GFC insiders and affiliates were been paid by the company in 2009.

The 10-K notes that:

• Fund.com purchased Joseph Bianco’s Whyte Lyon

Socratic for 500,000 shares and $250,000 for working

capital and subsequently made Mr. Bianco Chairman.

Whyte provides online educational programs for

investors. We were unable to locate any information on

Whyte.

• Fund.com paid Chairman Joseph Bianco’s firm $300,000

base fee for strategic consulting.




14

• Weston Capital, which was purchased by Fund.com,

pays Joseph Bianco $100,000 for consulting services.

• Fund.com paid a firm owned by Darren Rennick, a Hirst

associate, $12,500 a month for consulting services.

• Issuing shares. Fund.com has issues shares to various

insiders for a variety of reasons, including to satisfy

accounts payable (Bianco) and notes payable (Jason

Galanis’ company Equities Media.

We expect similar consulting and share arrangements to be present in

GFC. However, it is difficult to determine exactly what goes where

and to whom because of the lack of transparency. The company can

easily dispel these suspicions by opting to disclose the information.

An important aspect to GFC and its workings lies in the structure. As

a foreign private issuer, the company is exempt from a number of

critical disclosures US investors take for granted. The most obvious is

the exemption from quarterly filings. As a foreign private issuer, GFC

must only file a 20-F in June for the prior year. Thus, GFC

shareholders will theoretically get financial statements long after the

year has ended. But that is not all. GFC’s 20-F notes that the

company is:

• Exempt from filing forms 3, 4, and 5. These forms are required

filings for 10% owners of US corporations that require public

filings stating ownership and changes of ownership.

• May disclose much less regarding executive compensation than

US corporations.

• Exempt from US requirements detailing the content of proxy

statements. This is likely how the company approved the share

incentive, because if it was published to be put to a vote, we

couldn’t find it.

• Exempt from most NYSE rules surrounding corporate

governance.

GFC notes ominously in the 20-F that because of the exemptions

above, “our public shareholders may have more difficulty in protecting

their interests in the face of actions taken by management, members

of the board of directors or controlling shareholders than they would

as public shareholders of a U.S. company.” I have no doubt.

SEC has already inquired about the foreign private issuer status of the

company. We hope they keep up with their efforts in protecting the

public shareholders.

Why doesn’t the company

disclose affiliations, payments,

salaries, etc?

Large owners can sell GFC

stock without filing with the

SEC.

Shareholders beware: it is

difficult to protect your

interests!




15

GFC’s trading patterns over the last year have been another

interesting phenomenon to observe. Given the large percentage of

restricted shares, its tightly held float tended to move up and down

rather conveniently with acquisition events. It has ranked as the

largest percentage gainer/loser on NYSE on a number of occasions.

The worst part is that following the addition to the Russell 3000 at the

end of June paved the way for a whole new class of ETF and pension

fund investors to enjoy the wonderful investment management

services of Gerova and its team.

Conclusion: When Will GFC Fall and How

Hard? GFC is a long and sometimes difficult story to digest. The detective-

work required to begin to unravel the complicated scheme is

extensive; information can only pieced together via a web of

connected companies and individuals. However, the more one digs,

the more it becomes apparent to us that GFC is a company of smoke

and mirrors.

We believe asset values and information regarding historical problems

with assets are being deliberately kept from public shareholders.

Additionally, the lack of disclosure regarding what we consider a bevy

of related-party transactions is highly problematic. Importantly, we

suspect management and affiliates are able to profit as assets are sold

and contributed to related entities and JVs.

To us, GFC looks like a pink-sheet stock scam writ large. It has a

market value of almost $1 billion and an NYSE listing to give the cover

of respectability, but we do not believe the story.

We have no idea how long the shell game can continue to fool

investors as well as the regulatory authorities in Bermuda, the US and

if the acquisitions close, the UK. However, at some point we believe

that the light of day will shine on GFC’s activities and the story will

unwind in a spectacular fashion and the stock will collapse. The only

question we have is whether or not the insiders will unload their

shares prior to fall and laugh all the way to the bank.

How long can regulators

ignore GFC?


16

Exhibit A The hyperlinks below lead to texts referenced to in the body of this report. They are presented in the order mentioned.

Article regarding allegations of fraud with Tagliaferri:

http://www.paulickreport.com/news/ray-s-paddock/ieah-investor-tagliaferri-sued-for-fraud/

Complaint against James Tagliaferri

https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0BwOmWr6p2atROTBhMjA1ZGQtNjM0MC00OWZiLTk4MDEtNDQxZjk4OTUxYTJl&hl=en

Ohio Dispatch Articles on Stillwater’s problematic real estate loans

http://www.dispatch.com/live/content/local_news/stories/2007/08/23/flipped.ART_ART_08-23-07_A1_PK7MLGN.html

http://www.dispatch.com/live/content/local_news/stories/2008/12/13/FIREFOLO.ART_ART_12-13-08_B4_5IC7LCK.html

http://mobile.dispatch.com/articles/190040317 Ohio Court Document Search

http://fcdcfcjs.co.franklin.oh.us/CaseInformationOnline/acceptDisclaimer?-6o18g1g3hip0c CTFC’s Sanction of Stillwater for failure to file financial statements

http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfstillwaterorder092408.pdf

SEC press release sanctioning Jason Galanis

http://www.sec.gov/litigation/litreleases/2007/lr20110.htm SEC press release shutting down Matthew Jennings’ Westmoore Capital

http://www.sec.gov/litigation/litreleases/2010/lr21561.htm

Boston Globe article on Life Settlements

http://www.boston.com/business/personalfinance/articles/2009/09/13/despite_their_growing_p

opularity_ghoulish_life_settlements_are_ripe_for_fraud/


17

Exhibit B Putting the Puzzle Together: Who’s Who in the GFC Galaxy One aspect of the GFC story that is impressive is the sheer scope and complexity of the scheme. Given the highly selective disclosure and outright obfuscation in GFC documentation, it is difficult to keep all the parties and companies straight. In effort to clarify the relationships, we have constructed the table below detailing, in part, who is who in the constellation of GFC affiliated companies and people

Rineon Group (RIGI.PK)CEO Gerova Financial Joseph Bianco Affilliates: Michael HlavsaPresident Gerova Financial Gary Hirst Keith LaslopCFO Gerova Financial Michael Hlavsa Gary Hirst

CEO Gerova Advisors Jason Galanis Action 1Purchased Amalphis from NatProv

COO Gerova Financial Keith Laslop How: Gary Hirst financed transactionJV Partner Robert Willison Action 2 Sold Amalphis to GFCJV Partner Gregory Laubach How: Share dealGFC Director Jack DoueckBoard of Advisors James Tagliaferri Fund.com (FNDM.PK)Director Arie Jan Van Roon Affilliates: Joseph Bianco

Michael HlavsaNatProv Keith Laslop

Affilliates: Gary Hirst Jason GalanisJames Tagliaferri Darren Rennick

What:Both contributed assets to finance Amalphis What:

Purchased Weston Capital as such is a GFC shareholder

Amalphis Allied Provident Weston Capital

What: GFC insurance subsidiary Affilliates: Joseph Bianco

Financed, bought and sold several times in related-party transactions Fund.com

What: Sold funds to GFC, itself to Fund.com

Net Five Holdings Westmoore CapitalAffilliates: Robert Willison Affilliates: Robert Willison

Gregory Laubach Matthew JenningsWhat: 49% owned GFC real estate company What: Shut down by SEC as a ponzi scheme

WMLG Holding (WHLX.OB)Affilliates: Gregory Laubach

GFCWhat: Purchased FL property from Stillwater/GFC

How:

GFC purchased stock of WMLG, WMLG purchased property

Taurus Advisors (TAG)Who: James TagliaferriWhat: NatProv shareholder, sued for $60M fraud

Stillwater CapitalWho: Jack DoueckWhat: Sold funds to GFC

Currently manages funds for GFC

Equities Media AcquisitionWho: Jason Galanis

Arie Jan Van RoonWhat: Significant owner of Fund.com

Noble Investment FundWho: Arie Jan Van Roon

Gary HirstWhat: Owner of GFC stock

GFC

.


18

Disclosures

Position

Dalrymple Finance and/or its principals have a short position in Gerova Financial. Dalrymple

Finance and its principals may change its position and is under no obligation to update our research and/or issue a note with a change of opinion.

Opinion

The conclusions drawn by this report constitute the opinion of its author. Many of the terms

and phrases used in this report are utilized to indicate expression of opinion. These phrases include but are not limited to “We believe”, “we think”, and “we consider”, “is apparent to us”,

etc.

Compensation

Neither Dalrymple Finance nor its principals or employees have been compensated in any

way for writing this report.

Information only

This Information Document is for informational purposes only and is for personal use.

Neither the information nor any opinion contained in this document constitutes a solicitation or offer by Dalrymple Finance or its affiliates and partners to buy or sell any units in a Fund, investment advice or service. The information is not intended to be used as the primary basis of

investment decisions. This Information Document does not provide specific investment advice to

any individual and does not represent that the services described herein are suitable for any specific investor.

Disclaimer

Dalrymple Finance has made every effort to ensure the accuracy of information contained in this Information Document, however Dalrymple Finance makes no representations as to, and

takes no responsibility for, the accuracy, reliability or completeness of the information contained herein and disclaims all liability that may otherwise arise due to any information contained in this Information Document being inaccurate or due to information being omitted, except to the extent that liability cannot be lawfully excluded. Nothing in this information document should be

construed as investment, legal, tax, regulatory or accounting advice.

About Us

Dalrymple Finance is an independent alternative investment advisory. We provide impartial research and advice to institutions, funds of funds, family offices and individuals.


19

For Further Information:


[email protected]


EXHIBIT G


Case 1:11-cv-01385-CBA -JO Document 73 Filed 07/01/11 Page 1 of 18

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ------------------------------------X

MARGIE GOLDBERG, MAURICE HANAN, AND RENEE SALAM HANAN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITU A TED,

Plaintiffs,

-against-

GEROVA FINANCIAL GROUP LTD., STILLWATER CAPITAL PARTNERS, LLC; STILLWATER CAPITAL PARTNERS, INC., NET FIVE HOLDINGS, LLC, GARY T. HIRST, MICHAEL HLA VSA, JACK DOUECK, CHRISTOPHER HOLMES, ANDEW TSE, LOU HENSLEY, ARIE JAN VAN ROON, STUART L. R. SOLOMONS, TORE NAG, KEITH LASLOP, RICHARD RUDY AND ROBERT WILLISON,

Defendants.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X

Index No. 1: 11-cv-1385 (CBA)

DECLARATION OF JACK DOUECK IN OPPOSITION TO PLAINTIFFS' MOTION FOR A PRELIMINARY INJUNCITON

JACK DOUECK declares the truth of the following under penalty ofpetjury

pursuant to 28 U.S.C. § 1746:

I. This affidavit is based on my personal knowledge, as weii as infom1ation that I

have obtained from other executives and employees of Stillwater Capital Partners, LLC and

Stiilwater Capital Pminers, Inc., and I submit it in opposition to Plaintiffs' Motion for a

Preliminary Injunction.

BACKGROUND

2. I, together with my pminer Richard Rudy, are the principals of Defendant

Stillwater Capital Pminers, Inc. ("Stillwater").

HF 6507620v.4 II I 06561006 7



3. Stillwater is an investment manager. The funds managed by Stillwater (all of

which are collectively refened to herein as the "Funds"), concentrate mainly on fund of funds

(funds that invest in other funds), asset based lending (investing in loans and other asset-based

obligations for various types ofborrowers) and real estate funds.

4. Mr. Rudy and I are also the principals of Defendant Stillwater Capital Partners,

LLC, which was the general pm1ner of the Funds, responsible for their day-to-day operation and

administration.

5. Approximately 78% of Stillwater's capital base comes from institutional

investors, and 22% comes from High Net Worth individuals ("HNW"). Many of our HNW

investors, unlike retail investors who buy securities in the open market, consulted with their

accountants, lawyers or other financial consultants before they invested with Stillwater. In fact,

many of our HNW investors were themselves investment advisors, or "full time investors," 1 and

were directly involved in either the real estate industry or lending or were professional

accountants or lawyers.

THE PLAINTIFFS' INVESTMENTS

6. Plaintiff Goldberg invested $300,000 in 2006 in two onshore Stillwater funds, the

Stillwater Asset Backed Fund LP (the "LP Fund") and the Stillwater Market Neutral Fund II, LP

- New Finance (the "New Finance Fund"). Beginning at the end of April 2006, Plaintiff

Goldberg began receiving qum1erly redemption payments of $6,000. Due to a lack of liquidity

in these funds, Plaintiff Goldberg's qum1erly payments from the LP Fund ceased after the

October 2009 payment. Thereafter, all redemptions from the LP Fund were officially suspended

as of December 31, 2009. The New Finance Fund, which paid Plaintiff Goldberg quarterly

"Full time investors" dedicate their time to trading and investing their own money. When investing their money in a hedge fund, they do due diligence on the fund, as well as the investment manager of the fund.

2 HF 6507620v.4 #I 0656/0067



redemptions until October 2007, also redeemed a portion of her investment, wmng

approximately $59,000 to her on May 1, 2008 before suspending redemptions in October 2008.

Plaintiff Goldberg had a remaining balance of approximately $109,000 that would have been

exchanged for shares pursuant to the Gerova Deal (after audit adjustments).

7. Plaintiff Hanan invested $1.7 5 million in three onshore Stillwater funds, the

Stillwater Asset Backed Fund II, L.P. (the "Onshore Fund"), Stillwater Market Neutral Fund II,

LP -- Advantage-20 (the "Advantage Fund") and New Finance Fund. Plaintiff Hanan's

investment in the Onshore Fund was pmiially redeemed through quarterly payments of cash in

December 2008 and March 2009. The balance of Plaintiff Hanan's investment was redeemed on

June 30, 2009 through a payment in-kind (a "PIK"), as specifically permitted by the Onshore

Fund's Limited Pminership Agreement. Ex. A. 2 A portion of Plaintiff Hanan's investments in

the Advantage and New Finance Funds, totaling approximately $510,000, was paid in cash on

May 16, 2008. Plaintiff Hanan had a remaining balance of approximately $723,000 that would

have been exchanged for shares pursuant to the Gerova Deal (after audit adjustments).

THE LIQUIDITY CRUNCH

8. Many of our investments became illiquid at the very end of 2008 and, more

intensely, in 2009 as a result of the financial crisis, the drying up of lending facilities and the

collapse of the real estate and other markets. Sadly, this was true of virtually every funds of

funds, real estate and asset based lending fund in the industry. In fact, almost every asset based

lending fund that Stillwater invested in through Stillwater's own fund of funds suffered

significant losses similar to those suffered by the Stillwater asset based lending Funds, suspended

redemptions, and the investments became illiquid.

References to "Ex." are to the Exhibits annexed to the Declaration of David M. Rosenfield dated May 26, 2011.

3 HF 6507620v.4 li' I 0656/006 7



9. Although we disclosed to investors the substantial risks of an investment in the

Funds, we at Stillwater believed in our Funds and believed that they were good investments.

Most of my own net worth is invested in the Funds. I also put most of my immediate family

members' money into the Funds (this included my wife, my five children, my parents, my in

laws, my cousins, my best friends, my neighbors and even my grandmother). Similar

investments were made by Mr. Rudy's family and by many of the employees of Stillwater.

Unfortunately, we, along with vitiually every other fund manager, did not see the looming

economic downtum that occuned in 2009, and virtually all funds have suffered severe liquidity

problems.

10. The illiquidity in our Funds and the other funds were caused primarily by one and

only one fact: by late 2008 and 2009 our economy was in the worst recession since the Great

Depression, and it was recognized that any economic recovery, unlike recoveries from past

recessions, would be very slow in materializing. This wasn't just a short economic slump: this

was a full-fledged, disastrous and prolonged liquidity crisis that has come to be known as the

"Great Recession."

11. In 2009, when many of our asset based lending fund competitors abandoned their

investors and simply went on to raise new money and create new hedge funds in order to invest

in distressed assets, we spent the entire year working hard in an effort to help our investors. In

fact, a significant amount of Stillwater's management fees went unpaid at the first sign of

liquidity problems -- even though during the early months the Funds were liquid enough to pay

the fees due to us. We simply thought at the time that we should put investor concems ahead of

our own, and we anticipated that we could pay ourselves the defened fees when the markets

improved. That improvement, of course, never happened. In addition to not taking full

4 I IF 6507620v.4 It l 0656/0067



management fees during that period, we also found ourselves, like all Fund investors, unable to

redeem our investments.

12. By the time of the Funds' merger with Gerova Financial Group, Ltd. (the "Gerova

Deal") in January 2010, Stillwater had allowed more than $17 million in management fees due

from the Funds to accrue, well aware that, until the underlying investments became liquid, we

would not be able to collect the amounts contractually owed to us. We did this willingly, and

this was initiated by us and not because anyone asked us to do so. Stillwater's fund of funds

invested in other asset based lending funds, and although those investments also became illiquid

and severely depreciated in value, we did not see the managers of those funds voluntarily make

similar sacrifices and agree to not take fees that were contractually due and owed to them.

13. Moreover, as for the fees which Stillwater did take in 2008 and 2009, we used

most of the money to pay operating expenses, legal fees and other costs of running Stillwater's

business, e.g., rent, employee salaries.

THE GEROV A DEAL

14. Rather than sitting back in 2009, as many fund managers did, and simply telling

investors that there was nothing we could do about the liquidity problems they were suffering,

my partner Rick and I travelled the world attempting to find an institutional investor to either

purchase the Funds' underlying loans in order to take out our investors or to provide a source of

liquidity to maintain the loans until economic conditions improved. There were several instances

when we thought we were close to finding such an investor, since several of the potential

investors with whom we met were very satisfied with our underwriting standards, the quality of

the collateral securing our loans and the niche strategies we were in. Unfotiunately, however,

during 2009 we were ultimately unable to secure such an investor.

5 HF 6507620v.4 #I 0656/0067



15. We were concemed in late 2009 that a voluntary wind-down of the Funds would

result in limited proceeds being received from forced sales of the Funds' loans at distressed

prices, particularly given the illiquid nature of these loans and the fragile state of the economy

and the real estate market. We bel.ieved in late 2009 that a liquidation was not in the best

interests of most investors. In fact, it can be argued that a simple liquidation would have

advantaged the interests of myself and the others at Stillwater, as Stillwater would have been

paid its past due$ 17 million in accrued fees.

16. In late 2009 we first held discussions with Asia Special Situations Acquisition

Corp. ("ASSAC"), a "special purpose acquisition company" which was the public entity which

ultimately became Gerova, about a possible merger. ASSAC was prepared to offer our investors

stock in their public company in exchange for the illiquid assets, and this became the basis for

what is known as the "Gerova Deal" ..

1 7. We realized from the beginning that the Gerova Deal would not necessarily be a

panacea for the Funds' investors, and we did not know whether investors would one day recoup

their losses, but, unlike many other funds that virtually walked away from their investors,

through our hard work and dedication, we were able to offer our investors at least the possibility,

through the Gerova Deal, of a better financial result for them than otherwise would have been

possible. Gerova offered the possibility of ongoing monetary support for the Funds' underlying

assets, and an investment in a public company that would potentially be able to use the illiquid

assets on its balance sheet in implementing a reinsurance business. A company like Gerova that

would hopefully be able to carry the assets until the economy recovered seemed like an

alternative that would give our investors a better chance to recoup their capital. Obviously, this

was not the original target or goal that we expected or our investors expected when the

6 HF 6507620v.4 ft I 0656/0067



investments were first made, but due to the severe collapse of the U.S. economy, this was the

best that we could offer the Funds' investors in late 2009.

18. Despite Plaintiffs' allegations to the contrary, the real motivator, from our point of

view, for the Gerova Deal was potential liquidity for the Funds' investors, not fees for ourselves.

We believed that investors would benefit from exchanging their Fund shares and interests, which

were illiquid, for publically traded and potentially liquid securities. We thought that a public

company listed on a major stock exchange such as the AMEX (where Gerova was listed at the

time of the merger), or the NYSE (where Gerova was listed later in 2010) might successfully

accomplish this objective.

19. In connection with the proposed merger with Gerova, in mid-December 2009, we

prepared and provided to investors a 36-page PowerPoint entitled "Management Plan to Enhance

Liquidity and Shareholder Value" (the "Management Plan PowerPoint") summarizing the terms

of the proposed merger. This PowerPoint included 12 full pages of questions and answers, and

discussed both the potential advantages and disadvantages of the merger. Ex. B.

20. In connection with the proposed merger we also provided the shareholders of the

Onshore Fund and the other Stillwater U.S. funds with a 17-page "Consent Solicitation Letter"

(the "Consent Letter") dated December 23, 2009, with an attached 9-page overview of ASSAC,

its business plan, and its directors and officers. The Consent Letter outlined the terms of the

proposed merger in great detail, and included many of the same points discussed in the

Management Plan PowerPoint. Ex. C.

21. The Consent Letter (page 2) explained that the Gerova Deal involved ASSAC's

acquisition of (a) Nmihstar Group Holdings, Inc., a Bermuda reinsurance group, (b) a controlling

interest in Allied Provident Insurance Co., Ltd., a Barbados property and casualty insurance and

7 I JF 6507620v.4 If I 0656/0067



remsurance company, and (c) the Funds' assets. The Consent Letter also explained that the

Funds' assets, upon their acquisition by AS SAC, "will be used as 'regulatory capital' by the

post-Business Combination company to acquire large blocks of reinsurance assets and capital to

manage." In exchange, as more fully described below, the Funds' investors were to receive

ASSAC preferred stock.

22. The Consent Letter (at pages 11-12) also discussed both the potential advantages

and disadvantages of the Gerova Deal for the Funds' investors. Among the potential advantages

listed were the following:

• Potentially greater liquidity of ordinary shares compared to Interests in the Funds; No prospect of shmi-tenn liquidity in cunent structure.

• Additional capital will be required to realize full value on some of the assets contained in the Funds that invest in direct loans and real estate. As these cash needs arise, such Funds may be in position to fund those payments, the failure of which could result in potential losses to such Funds. It is believed, though not assured, that, postBusiness Combination, the Funds may more easily obtain the financings or capital needed to meet those cash requirements.

* * *

• Public company status may create a higher valuation for earnings and assets than a private one.

• Staggered conversion of Series A Preferred Stock may help maintain a higher stock price in light of market overhang and public float.

On the other hand, among the potential disadvantages listed in the Consent Letter were the

following:

• Liquidity of ordinary shares is never ce1iain.

8 HF 6507620v.4 #I 0656/006 7



• Volatility of the stock price; Risk of stock decline even if portfolio performs well.

* * *

• Dilution of interests in ASSAC due to probable future capital raises.

• Need to evaluate Business Combination in light of potential and actual conflicts of interests.

23. With respect to the Offshore Fund, it was the Fund's directors, and not the Fund's

shareholders, who had the obligation to vote on the merger. As a result, Stillwater provided the

Offshore Fund's directors with the necessary information, including, among other material, the

Management Plan PowerPoint, to enable them to decide whether to vote in favor of the merger

or to oppose it. At the request of the Offshore Fund's directors, each Fund shareholder was

polled by Stillwater to detennine whether or not the shareholders approved the merger plan. We

voluntarily undertook this poll of the Offshore Fund's investors because the Fund's directors had

requested it, even though such a poll was not required by either the Fund's policies and

procedures or by Cayman law. In connection with this poll, we provided the Offshore Fund's

investors with material conceming the Gerova Deal, including the Management Plan

PowerPoint. See Ex. B. As we advised the Fund's directors, the vast majority of the Offshore

Fund's investors also supported the merger.

24. Investors in the Onshore Fund voted overwhelmingly in favor of the merger and

the directors of the Offshore Fund ·unanimously approved the merger, which took place on

January 20,2010.

25. The total value of the Fund's assets that were provided to Gerova at the time of

the merger was estimated to be about $540 million. In late 2010, following the completion of the

9 HF 6507620v.4 fi I 0656/0067



Funds' audits, it was retroactively determined that the net exchange value of the Funds' assets at

the time of the merger was about $486 million.

STILL \VATER'S COMPENSATION AS A RESULT OF THE GEROV A DEAL

26. I want to emphasize the fact that Stillwater, myself and Mr. Rudy would have

done far better financially had there not been a merger with Gerova. We would likely have

liquidated the Funds, taken our more than $17 million in accrued but unpaid fees, earned

additional management fees during the time (possibly several years) that it took to liquidate, and

taken our share of the $24 million in equity that we had invested in the Funds as a result of our

own personal investments, and then moved on to stmi a new business.

27. Instead, as a result of the Gerova merger, we did not receive any of our past due

fees, and our $24 million in equity is worth less now than it was at the time.

28. It should also be recognized that Stillwater has received limited fees and

compensation since the Gerova merger. As noted in Plaintiffs' Memorandum of Law on page 8,

the Consent Letter disclosed that Stillwater was to receive a fee of 2% of the purchase price paid

by Gerova at closing (the "deal fee"). However, we never received the deal fee (which would

have been over $9 million), at closing, and we ultimately agreed to waive it completely. Ex. D.

Thus, the claims in Plaintiffs Memorandum of Law, as well as paragraphs 16, 23, 86 of the

Complaint, that Stillwater received the deal fee, are demonstrably false. Plaintiffs are making

these allegations without any knowledge of the facts.

29. The Consent Letter also disclosed that, as a result of the merger, Stillwater was to

receive 266,666 tradable shares of ASSAC stock. However, Stillwater never received these

shares after the merger. Stillwater never even requested these shares, as its singular focus was to

work hard trying to help make Gerova successful.

10 !IF 6507620v.4 # J 0656!006 7



30. In addition, and contrary to Plaintiffs' contentions in their Memorandum of Law

in pages I6-I7 and I9, the Consent Letter also disclosed that Stillwater would receive a three-

year management agreement from Gerova to manage the assets acquired from the Funds, at the

standard fees then in effect under the relevant Fund documents. These fees consisted of a I%

management fee and an incentive fee of 20% of profits earned.

31. It is important to recognize that all of the anticipated and potential fees due to

Stillwater as a result of the Gerova Deal were fully disclosed at pages 10-11 of the Consent

Letter, within the section entitled "Are there any potential conflicts of interest with Stillwater in

effecting the Business Combination?"

32. Although Plaintiffs strenuously argue that Stillwater concealed the fact that the

"high-water mark" would be reset with the merger (which we did not conceal), Plaintiffs have

not infonned the Court that Stillwater waived any perfonnance fee for the first year after the

merger (as confirmed in the January 20, 20IO "Investment Management Agreement" between

Stillwater and Gerova), and that to date, Stillwater has not earned a performance fee, and does

not anticipate earning a perfonnance fee anytime in the foreseeable future.

AT THE TIME OF THE MERGER THE FUNDS' INVESTORS RECEIVED MARKET VALUE IN EXCHANGE

FOR THE ASSETS TRANSFERRED TO GEROV A

33. In exchange for the Funds' assets, the Funds' investors received prefened shares

of ASSAC, 1/6th of which shares were to be conve1iible into freely tradable ASSAC (later

Gerova) shares beginning on July 3I, 20 I 0, pending the filing of the AS SAC registration

statement with the SEC. Each month after July 31 sr, an additional 1 /6th of the preferred shares

were to automatically convert into tradable shares, with all shares to be tradable as of December

31, 2010. At the time of the merger in January 2010 ASSAC shares were trading at a price

11 HF 6507620v.4 # l 0656/006 7



above the conversion rate to be given the preferred shares on July 31. Finally, the ASSAC

prefened shares included a 5% coupon, payable in kind, which was to be provided to the Funds'

shareholders until the shares were freely tradable. The number of ASSAC preferred shares, and

the number of Gerova common shares that these preferred shares would have converted to, were

based on an independent valuation of the Funds' assets prepared by Houlihan Smith &

Company, Inc. ("Houlihan Smith"), a nationally recognized independent asset valuation finn.

THE INDEPENDENT AUDIT AND THE GAAP ISSUE

34. In about August 2009, Stillwater hired Houlihan Smith to conduct an independent

faimess opinion of the Funds' assets, including all loan positions. Houlihan Smith was

specifically asked to provide its professional opinion as to the high-low range of fair values of

the Funds' assets.

35. Houlihan Smith completed its "Opinion of Faimess" report in December 2009,

and the report did include a high-low valuation range for each of the Funds' assets.

36. The Funds' Purchase Agreement with ASSAC provided that ASSAC would

accept an asset valuation at the high-end of a fair value range that was independently verified by

a third patiy (such as Houlihan Smith) subject to audit.

37. On December 18, 2009, Stillwater issued "Distributions-in-Kind" (the "DIKs") to

satisfy the redemption requests of certain investors in the Offshore Funds. Stillwater and the

Offshore Fund's independent direct01:s determined to value the Funds' assets that were included

in the DIKs at the mid-point of the Houlihan Smith fair value range for each asset. Stillwater

and the Offshore Fund's independent directors deemed it to be in the best interests of the Funds'

shareholders to value the D IK assets at the mid-point of the Houlihan Smith valuation range.

12 HF 6507620vA #1065610067



38. On the other hand, when the Gerova Deal closed in January 2010, the Funds'

assets were valued for that deal at the high-end of the Houlihan Smith valuation, as provided for

in the ASSAC Purchase Agreement.

39. In 2010 Stillwater retained the auditing fim1 of Marcum LLP to audit the Funds

and to issue an opinion as to the value of each Fund as of December 31, 2009. During mid-20 10,

as the Funds' audits were proceeding, Marcum informed Stillwater that U.S. generally accepted

accounting principles ("GAAP") required that the Funds had to value their assets (as of

December 31, 2009), at the mid-point of the Houlihan Smith price range, not the high-end. This

valuation was required under GAAP, according to Marcum, because the assets in the DIKs had

been valued at the mid-point of the price range, and the DIKs were issued on December 18,

2009, just days prior to the 2009 year-end, whereas the Gerova Deal, in which the assets were

sold at the high-end of the range, did'not close until January 20, 2010, days after the 2009 year

end.

40. Accordingly, the Funds and Stillwater faced a dilemma: they could either revalue

the Funds' assets and take an approximately $87 million paper loss on the Funds' 2009 financial

statements (that would immediately be made up in January 2010 with the Gerova Deal) in order

to be in technical compliance with GAAP, or not revalue the assets and be forced to accept an

audit opinion containing a caveat concerning non-GAAP asset values. Stillwater and the Funds

followed what they considered to be a common sense approach, and chose to value the assets at

the high-end of the Houlihan Smith valuation -- which was the price at which they were sold -

and accept the GAAP non-compliance language in the audit opinion, rather than valuing the

assets at the mid-point (for 30 days), which would have resulted in a "clean" audit opinion on the

GAAP issue.

13 HF 6507620v.4 #I 0656/0067



41. It should also be recognized, however, that as a result of the Marcum audit

Stillwater did cause the Funds to take asset write-downs of about $5 million, and these write-

downs were reflected in both the final exchanged value for the Gerova shares and in the adjusted

capital balances for all ofthe Funds' shareholders as ofDecember 31,2009.

STILLWATER'S MARCH 15,2011 LETTER TO THE FUNDS' INVESTORS

42. A 13-page letter dated March 15, 2011 from Stillwater to the Funds' fonner

investors, who had become Gerova shareholders or creditors, is very instructive when

considering the issues sunounding this case. Stillwater explained in great detail what had

occuned with respect to the Funds and Gerova that resulted in the situation that we face today.

We discussed the 2009 financial crisis, explained why we felt that the Gerova Deal was

worthwhile when we originally entered into it, and discussed our options going forward. Ex. E.

TO MY KNO\VLEDGE GEROVA'S ASSETS HAVE NOT BEEN NEGLECTED OR MISMANAGED

43. To my knowledge, Gerova's assets are being actively managed, and not neglected

or mismanaged. Stillwater has been managing those former Fund assets for which it is still the

investment manager as best it can in a very difficult and challenging economic environment.

Those assets include the law firm and life settlement loans. For example, I know that Gerova

injected cash into some of the life settlement loans to ensure that the insurance policies did not

lapse. While many of the life settlement policies have lapsed since the merger, the lapses of

these policies occurred, not as a result of Stillwater's neglect or mismanagement, but due to the

fact that Gerova simply did not have eash available to pay the premiums.

44. Additionally, we have had numerous meetings and discussions with Net Five

Development Group ("Net Five"), the joint venture to which Gcrova contributed the Funds' real

14 HF 6507620v.4 iiI 0656/006 7



estate assets, and Net Five has explained to us that they are actively managing the Funds' fom1er

real estate loans.

45. Plaintiffs allege, as evidence that "Defendants have been unable to pay

acknowledged debts to several creditors," that Stillwater has failed to pay a $30 million debt "to

a hedge fund that opted to become a creditor of Stillwater." Pl. Br. at p. 15. This allegation

relates to the lawsuit commenced in the Supreme Court of the County of New York by Eden

Rock Finance Fund, L.P., Eden Rock Finance Master Limited and Eden Rock Unleveraged

Finance Master Limited (collectively "Eden Rock"). Eden Rock redeemed their investments in

the Funds in 2008 and 2009. Due to the above referenced liquidity issues, Eden Rock (pursuant

to the operative documents for the Funds) was redeemed through payments in-kind, rather than

in cash. Eden Rock's lawsuit stems from its unhappiness that it was not paid in cash. Eden

Rock is not a creditor of Stillwater, despite its claims to the contrary. This litigation is ongoing,

although I believe it is meritless and that Stillwater will ultimately be exonerated. All of the

defendants in the case brought by Eden Rock have filed motions to dismiss.

THE PROPOSED AGREEMENT TO UNWIND THE GEROV A DEAL AND THE FORMATION OF

AN INVESTOR ADVISORY COMMITTEE

46. Since the stock of Gerova has been delisted, Stillwater and Gerova have been in

the process of attempting to unwind or otherwise undo the Gerova Deal (the "Gerova Deal

Unwind"), and, in fact, on May 5, 2011, signed a Letter of Intent to complete the Gerova Deal

Unwind.

47. As pmi of the Gerova Deal Unwind, the fonner assets of the Funds that were

transfened to Gerova in January 2010 -- and have not been sold, transfened or disposed of-- are

expected to be transfened to Special Purpose V chicles ("SPV s") for the benefit of the former

15 HF 6507620v.4 ill 0656/006 7



Stillwater Funds' investors. It is also expected that, as part of the deal, Gerova's stake in the Net

Five joint venture will go to the SPVs. It is also anticipated that the only assets that Gerova will

retain are the remaining life settlement related assets, but the former Funds' investors are to

receive 50% of the death benefits or sales proceeds relating to these life settlement assets. In

exchange for the foregoing, the Gerova shares held by the Funds' investors will be cancelled.

48. At the same time that Stillwater is attempting to unwind the Gerova Deal,

Stillwater has formed an Independent Investor Advisory Committee (the "Advisory

Committee"). The Advisory Committee consists of a majority of the 20 largest former Fund

investors who are cuiTently either Gerova shareholders or fonner Stillwater investors who are

now direct asset participation owners. It is anticipated that the Advisory Committee will play an

important advisory role in the Gerova Deal Unwind, and the expected liquidation or realization

of the assets fonnerly owned by the· Funds that are received back as part of the Gerova Deal

Unwind.

49. It is expected that the Advisory Committee will provide advice concerning the

following functions, among others:

• Advising on and providing suggestions regarding the appointment of an independent manager, if any, to manage the asset realization after completion ofthe Gerova Deal Unwind.

• In lieu of or in conjunction with the activities of the independent manager, advising on the disposition and distribution of assets.

• Overseeing the continued role, if any, of Stillwater in the realization process.

• Reviewing and advising on a plan of realization of the assets that provides for fair and equitable treatment of the various constituencies,

• Commenting on the hiring of any other necessary advisors to assist in the process, such as valuation, audit, investment banking or consulting firms.

16 !IF 6507620v.4 #I 0656/0067



• Reviewing and advising on any other major decisions affecting the assets or realization process, including any changes to the composition of the Advisory Committee.

50. On May 6, 2011, Stillwater conducted an investor conference call, in which

approximately 301 Fund investors listened to (either on May 6, or by listening to a taped copy of

the telephone call at a later date), during which a recorded statement was given, discussing,

among other things, the proposed Gerova Deal Unwind, the Advisory Committee and the

disposition and management of the assets that were contributed to Gerova. Stillwater polled the

investors that pmiicipated in the call regarding the Gerova Deal Unwind. Of the 301 investors,

149 expressed support for the Georva Deal Unwind, 2 investors opposed the Gerova Deal

Unwind, and the remaining 152 investors did not provide any response. On a capital-basis,

investors representing $270 million worth of investments expressed support, $11 million

opposed, and $211 million did not express any opinion.

51. To date, 16 of the 20 htrgcst investors in the Funds, with capital balances of more

than $260 million as of the completion of the Gerova Deal in January 2010, have agreed to join

the Advisory Committee. The Advisory Committee had its first meeting (via conference call) on

May 19, 2011.

52. Given the anticipated 'oerova Deal Unwind and the fonnation of the Advisory

Committee to liquidate the remaining assets received back from Gerova, I believe it would be

completely inappropriate to freeze the defendants' assets or have a receiver appointed over

Gcrova and its assets based upon the request of Plaintitrs herein, a small group of investors who

are not representative of the Stillwater investor base, and who account for a very small

percentage of the total investment in the Funds. After all, I believe that the vast majority of the

Funds' largest investors are in favor of the Gerova Deal Unwind and the formation of the

Advisory Committee to help deal with the situation we face.

17 !IF 6507620v.4 #10656/0067



53. I declare under penalty of pe1jury that the foregoing is true and correct.

Executed on thisl/ day of May 201 t

18 I-IF 6507620v .4 Ill 0656/0067
