Private Media Group (PRVT)

Foreign Currency

The financial statements of the Company’s operations based outside of the euro area have been translated into euro in accordance with SFAS 52. Management has determined that the functional currency for each of the Company’s foreign operations is its applicable local currency. When translating functional currency financial statements into euro, year-end exchange rates are applied to the balance sheet accounts, while average annual rates are applied to income statement accounts. Translation gains and losses are recorded in other comprehensive income as a component of shareholders’ equity.

Transactions involving foreign currencies are translated into euro or functional currencies using exchange rates in effect at the time of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at period end exchange rates and the resulting gain or loss is charged to income in the period.

Should the Company choose to pay dividends, although the Company’s current intention is to re-invest the un-remitted earnings of its foreign subsidiaries, dividends would be declared and paid in euro.

The was no aggregate exchange impact included in determining net income for the year ended December 31, 2006. For the year ended December 31, 2007, the aggregate exchange loss included in determining net income amounted to EUR 33 thousand and for the year ended December 31, 2008, the aggregate exchange gain included in determining net income amounted to EUR 222 thousand.

F - 6

PRIVATE MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Foreign Currency

The financial statements of the Company’s operations based outside of the euro area have been translated into euro in accordance
with SFAS 52. Management has determined that the functional currency for each of the Company’s foreign operations is its applicable local currency. When translating functional currency financial statements into euro, year-end exchange rates are
applied to the balance sheet accounts, while average annual rates are applied to income statement accounts. Translation gains and losses are recorded in other comprehensive income as a component of shareholders’ equity.

Foreign Currency

The financial statements of the Company’s operations based outside of the euro area have been translated into euro in accordance with SFAS 52. Management has determined that the functional currency for each of the Company’s foreign operations is its applicable local currency. When translating functional currency financial statements into euro, year-end exchange rates are applied to the balance sheet accounts, while average annual rates are applied to income statement accounts. Translation gains and losses are recorded in other comprehensive income as a component of shareholders’ equity.

Transactions involving foreign currencies are translated into euro or functional currencies using exchange rates in effect at the time of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at period end exchange rates and the resulting gain or loss is charged to income in the period.

Should the Company choose to pay dividends, although the Company’s current intention is to re-invest the un-remitted earnings of its foreign subsidiaries, dividends would be declared and paid in euro.

The aggregate exchange gain included in determining net income amounted to EUR 229 thousand for the year ended December 31, 2005. For the year ended December 31, 2006 there was no impact on net income from exchange gains or losses. For the year ended December 31, 2007, the aggregate exchange loss included in determining net income amounted to EUR 33 thousand.

F - 5

PRIVATE MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Foreign Currency

Foreign Currency

The financial statements of the Company’s operations based outside of the euro area have been translated into euro in accordance with SFAS 52. Management has determined that the functional currency for each of the Company’s foreign operations is its applicable local currency. When translating functional currency financial statements into euro, year-end exchange rates are applied to the balance sheet accounts, while average annual rates are applied to income statement accounts. Translation gains and losses are recorded in other comprehensive income as a component of shareholders’ equity.

Transactions involving foreign currencies are translated into euro or functional currencies using exchange rates in effect at the time of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at period end exchange rates and the resulting gain or loss is charged to income in the period.

Should the Company choose to pay dividends, although the Company’s current intention is to re-invest the un-remitted earnings of its foreign subsidiaries, dividends would be declared and paid in euro.

The aggregate exchange gain included in determining net income amounted to EUR 374 thousand and EUR 229 thousand for the years ended December 31, 2004 and 2005, respectively. In 2006 there was no impact on net income from exchange gains or losses.

Foreign Currency

The financial statements of the Company’s operations based outside of the euro area have been translated into euro in accordance with SFAS 52. Management has determined that the functional currency for each of the Company’s foreign operations is its applicable local currency. When translating functional currency financial statements into euro, year-end exchange rates are applied to the balance sheet accounts, while average annual rates are applied to income statement accounts. Translation gains and losses are recorded in other comprehensive income as a component of shareholders’ equity.

Transactions involving foreign currencies are translated into euro or functional currencies using exchange rates in effect at the time of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at period end exchange rates and the resulting gain or loss is charged to income in the period.

Should the Company choose to pay dividends, although the Company’s current intention is to re-invest the un-remitted earnings of its foreign subsidiaries, dividends would be declared and paid in euro.

The aggregate exchange gain included in determining net income amounted to EUR 265 thousand, EUR 374 thousand and EUR 229 thousand for the years ended December 31, 2003, 2004 and 2005, respectively

Foreign Currency

The financial statements of the Company’s operations based outside of the euro area have been translated into euro in accordance with SFAS 52. Management has determined that the functional currency for each of the Company’s foreign operations is its applicable local currency. When translating functional currency financial statements into euro, year-end exchange rates are applied to the balance sheet accounts, while average annual rates are applied to income statement accounts. Translation gains and losses are recorded in other comprehensive income as a component of shareholders’ equity.

Transactions involving foreign currencies are translated into euro or functional currencies using exchange rates in effect at the time of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at period end exchange rates and the resulting gain or loss is charged to income in the period.

Should the Company choose to pay dividends, although the Company’s current intention is to re-invest the un-remitted earnings of its foreign subsidiaries, dividends would be declared and paid in euro.

The aggregate exchange gain/(loss) included in determining net income amounted to EUR (1,297) thousand, EUR 265 thousand and EUR 374 thousand for the years ended December 31, 2002, 2003 and 2004, respectively

F - 5

PRIVATE MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS