15657WEBISHOLcover:Layout 1 21/10/08 11:27 Page 1 (cid:2)(cid:1)(cid:1)(cid:3) Annual report and accounts webisholdings plc 15657 20/10/08 Proof 7 15657WEBISHOLcover:Layout 1 21/10/08 11:27 Page 2 Welcome to Webis Holdings plc Webis Holdings plc has a growing global customer base, placing bets on a wide variety of sports, through fixed odds and pari-mutuel, as well as wagering in our casinos and games suites. webisholdings plc Our subsidiaries are: betinternet.com (IOM) Limited European Wagering Services Limited – the operator of the betinternet.com sportsbook – the operator of the link2bet.com pari-mutuel portal, which provides opportunities for our website and a provider of pari-mutuel technology customers to wager on an expanding variety of services to our global client base, utilising our Isle of sporting events, combined with casinos, slots and Man-based totalisator hub. fixed-odds games. 15657 20/10/08 Proof 7 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 1 webisholdings plc Webis Holdings plc Annual report and accounts 2008 01 Our customers place bets on all the major global sports — football, US sports, golf, tennis, formula 1, greyhound and horse racing. Our growing range of wagering opportunities reflects the diversity of sports played around the world. Contents Operational Overview Chairman’s Statement Operational Review Directors and Advisers Directors’ Report Corporate Governance Statement of Directors’ Responsibilities Report of the Remuneration Committee Report of the Independent Auditors Consolidated Income Statement Consolidated and Company Balance Sheets 02 04 06 08 09 12 14 15 17 18 19 Statement of Changes in Shareholders’ Equity 20 Consolidated Statement of Cash Flows Notes to the Accounts Notice of Meeting 21 22 45 (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 2 02 Operational Overview Sportsbook Portal Fixed odds sports betting (cid:1) UK and Irish horse racing introduced Increasing Football offering (cid:1) Casinos and games suites 15657 21/10/08 Proof 8 15657 (cid:1) (cid:1) 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 3 webisholdings plc webisholdings plc Webis Holdings plc Webis Holdings plc Annual report and accounts 2008 Annual report and accounts 2008 3 03 Pari-Mutuel (cid:1) Offers pari-mutuel (tote) account wagering on US content (cid:1) Develops white label solutions for third parties, e.g. www.totebet.com (cid:1) Operates its own AmTote hub, call-centre (cid:1) Growth strategy through developing and newly developed website, new distribution channels www.link2bet.com (cid:1) Contracts with over 75 tracks worldwide for international wagering (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 4 04 Chairman’s Statement Introduction I am pleased to report that the Company has achieved a 33% growth in earnings at EBITDA level and an operating profit of £34,000 (2007: £33,000 loss) for the full financial period. As anticipated in my Interim Statement, the second half proved considerably stronger and both European Wagering Services (“EWS”) and our sportsbook portal betinternet.com (“betinternet”) have seen an improved trading performance for the period as a whole, with both EWS and betinternet achieving strong turnover growth of 23% and 40% respectively compared with 2007. betinternet betinternet (www.betinternet.com) has seen a positive effect on revenues from the increased spend on marketing the website within Europe. The Company sponsored horse races at Newmarket and Ascot racecourses during April and May 2008, some of which received live coverage on terrestrial TV in the UK. As a brand-building exercise, the board believes this initial marketing activity has successfully promoted betinternet to its target audience and given it great exposure to a clientele that previously would have been unfamiliar with our offering. The board is committed to continuing with similar types of sponsorship during the new financial year. Notwithstanding this, the Company remains fully committed to serving new and existing customers in the Far East by ongoing enhancement of its football related product offering. The Company has, for example, expanded the number of leagues covered as well as increasing the level of “in-running” content that customers can access. The marketing spend has also had a positive impact on the revenues achieved by our two on-line casinos and fixed-odds games. These products accounted for 66% of the sportsbook’s total revenues for the full period and continue to show strong growth. The board anticipates adding further similar products to the portal during the forthcoming year. Technology continues to play an ever-increasing role within our sportsbook business, both for the creation of new content and as a risk management tool. As a direct result, we have again been able to reduce our sportsbook operating costs and it is these savings which we have re-invested in marketing spend. We also committed to upgrading our sportsbook hardware environment and the relocation of this at a cost of £80,000 to a purpose-built, third-party, hosting facility on the Isle of Man. I am pleased to report that this project was completed in July 2008 and will further enhance the security and resilience of our sportsbook portal as well as generate further cost-savings. European Wagering Services EWS has shown the anticipated improvement in turnover in the second half of the financial period, following the resolution in November 2007 of the previously notified banking issue. For the full period, whilst turnover increased, our net margin reduced as the impact of this issue had a greater effect on the betting turnover of the higher margin ‘leisure players’ rather than the lower margin ‘high rollers’. In addition, at a limited number of racetracks, we also experienced an increase in the ‘host track fee’ (a percentage of turnover that we pay the racetrack) and this has also had a small impact on our net margin. The board is pleased to report that the re-designed link2bet.com website, which covers a variety of events in the USA including horse and greyhound racing, was launched in September 2008. We are also committed to making our racetrack settlement process more cost effective and I am pleased to report that we entered into a contract with a new settlement agent during the first half of the current financial period. The cost savings generated will provide us with the opportunity to increase our marketing spend, with an expectation of a higher return on our investment. We would also expect that this marketing will attract more ‘leisure players’ and this will help address the imbalance of player demographics as mentioned above. During the period, in co-operation with one of our industry partners, we also completed the development of and received regulatory approval for a white- label website at www.totebet.com, which has now gone live. 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 5 webisholdings plc Webis Holdings plc Annual report and accounts 2008 05 “. . . the Company has achieved a 33% growth in earnings at EBITDA level . . .” One of our other current areas of focus is to increase the amount of quality content that our customers can wager on. This process takes considerable time and requires a commitment to ongoing relationship-building at a high level within the pari-mutuel industry. We remain in negotiations with a view to achieving this. Overview of Results The results for the full period ended 25 May 2008 show Group turnover was £117m (2007: £87m) and gross profit was £2.8m (2007: £2.7m). Earnings at EBITDA level increased to £215,000 (2007: £162,000), of which £171,000 was achieved in the second half. The Company recorded an operating profit of £34,000 (2007: £33,000 loss). Consolidation of roles and the further introduction of new IT systems helped reduce administration expenses by 3.1% to £2.54m (2007: £2.62m). It is anticipated that similar operational reductions will be achieved during the current financial year, although in view of our commitment to the long-term development of the Company, we expect to use a proportion of these cost-savings to fund further increases in our overall marketing spend. Further analysis of the results is presented in the Operational Review on page 6. Fund Raising In January 2008, the Company raised £425,000 before costs by placing 9,848,888 Ordinary Shares of 1 pence each with our main shareholder, Burnbrae Limited. These funds have been allocated to investment in the ongoing development of the Company’s websites, marketing initiatives and working capital. Regulatory Changes The regulatory environment governing gaming companies in the Isle of Man was streamlined during the financial period and as a result, both betinternet and EWS now each operate under a licence issued by the Isle of Man Gambling Supervision Commission pursuant to the Online Gaming Regulation Act 2001. The Company complies with all aspects of the updated regulatory environment, which includes the requirement for Client funds to be fully protected against default. Company Reorganisation During the period, the Company completed its change of name from betinternet.com plc to Webis Holdings plc and reorganised its internal structure, with betinternet and EWS now operating as separate subsidiaries of Webis Holdings plc. Summary The progress made this period is pleasing to report. The performance has given the executive a new opportunity to instigate projects that had previously been limited by the Company’s restricted cash position. Importantly, the increase in our marketing spend has helped build the betinternet brand in previously unpenetrated geographical markets such as the UK, Ireland and mainland Europe. It is expected that an increase in marketing for EWS’ newly redesigned link2bet.com website will yield similar positive benefits. I would like to take this opportunity to thank all our staff, whose hard work and commitment have contributed towards the Company’s improved results. Denham Eke Chairman (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 6 06 Operational Review The period proved to be encouraging for the Company. The revenues of both betinternet and European Wagering Services increased significantly. The much improved results in the second half of the period are a good indicator that the strategies previously established by the management team are having a sustained positive effect on the Company’s performance. As a result of the improved performance, the Company has now been able to commit to a significant increase in marketing expenditure. This has initially been focused on betinternet, where we have sponsored a number of horse races at Newmarket and Ascot and this promotional activity has continued into the current financial year with further race sponsorship at Chepstow, Newmarket and Sandown Park. Association with the leading racetracks has proved to be a cost-effective way of building our brand in the UK and Irish markets, where customer awareness of our product has historically been relatively low. This promotion has helped generate an increase in turnover through betinternet’s fixed odds sportsbook as well as within our casino and games products. Outside the UK, our Live Dealer Casino continues to attract a growing number of players based in the Far East and we are now also generating good levels of play through our Real Time Gaming Casino, mostly from European based customers. Online fixed-odds sports betting remains highly competitive. We continue to be innovative with our in-house trading systems, which we design to ensure that the content and prices available at betinternet are always competitive. Importantly, these systems also keep our traders in touch in “real-time” with global market changes, especially on the more volatile Asian Handicap football markets and we have experienced a reduction in arbitrage play as a result. Asian Handicaps remain our most popular type of bet and we have again increased the number of football leagues that we cover. The theoretical profit margin on this type of bet is lower than most of the other products that we offer, but the fact that we provide such a wide coverage enables us to maximise the number of wagers placed and build up a volume business. During the latter part of the financial period, our IT technical team concentrated on the preparation of our sportsbook hardware environment for its upgrade and relocation to a purpose-built hosting facility and this project was completed in July 2008. We plan to carry out a similar upgrade and relocation of EWS’ totalisator hub and the associated hardware systems that run our pari-mutuel operation and expect to complete this during the current financial year. These projects reduce the amount of office space required and, once completed, we anticipate that we will be able to generate further significant cost savings in this area in addition to those already made following the relocation of the sportsbook hardware environment. EWS’ turnover increased steadily in the second half of the period as we made good progress in increasing the availability of payment systems to our customers. However, the net margin has reduced as a limited number of racetracks have increased their percentage-based fees. We anticipate that the ongoing impact of this will remain at a low level and expect that further cost-savings planned for the early part of the current financial year, especially regarding our race track settlement processes, will exceed any impact from these margin reductions. Looking forward, our ability to grow the scale of this operation will be significantly enhanced with the launch in September 2008 of the new link2bet.com website. This new website will 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 7 webisholdings plc Webis Holdings plc Annual report and accounts 2008 07 “. . . the Company has now been able to commit to a significant increase in marketing expenditure.” provide the platform to support an increased level of trading and we now intend to increase our marketing spend to drive new business to this site. The European Championship finals proved a successful tournament for the Company and we realised an overall net margin of 4.3% on business from the tournament. Results The results show a 32.7% increase in profit at EBITDA level against last year, buoyed by a much improved performance in the second half of the period. The Group operating profit was £34,000 (2007: loss of £33,000). As previously announced, during the period, we wrote off our investment of £321,000 in Global Coresports. Current trading and outlook As mentioned above, there are a number of key projects that we are currently working on within both betinternet and EWS. The board is confident that the implementation of these projects will continue to generate increased revenues and further cost savings, similar to those which we realised during the previous period. The current financial year has seen a further increase in group turnover, with the sportsbook portal in particular showing sustained growth. Both of our on-line casinos have continued to deliver a strong revenue stream, particularly during the summer months when, aside from the European Championship, the level of football content was reduced. Going forward, our plans for EWS are to take advantage of the opportunities that now present themselves with our updated website. As mentioned above, we have scheduled an upgrade to the hardware that operates our totalisator hub and its related components and this will enable us to integrate our payment systems into the new website, as well as offering an improved level of service for our B2B customers. It has been a very encouraging start to the new financial year for the Company, with the first quarter results significantly ahead of the board’s expectations. We have developed and followed clear strategies and objectives for both betinternet and EWS and it is this discipline that is now providing the platform for the considerably improved performance of the Company. The board anticipates that the remainder of the new financial year will continue to show advances across a number of business areas, the majority of which will be focused on further enhancing our customers’ experience and growing revenues. Garry Knowles Managing Director (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 8 08 Directors and advisers D H N Eke, aged 57 Non-Executive Chairman Denham Eke began his career in Stockbroking before moving into Corporate Planning for a major UK Insurance Broker. He is a director of many years’ standing of both Public and Private companies involved in the retail, manufacturing and financial services sectors. Mr Eke was appointed Chairman in April 2003. G Knowles, aged 41 Managing Director Garry Knowles has 20 years’ experience in the gaming industry having worked for the William Hill Organisation for 15 years, most recently as Deputy Manager for their International Call Centre in the Isle of Man. Latterly, Garry held the position of Director of Customer Relations for MGM Mirage Online before joining betinternet as Head of Trading Operations in November 2003. Mr Knowles joined the board in June 2005. J Mellon, aged 51 Non-Executive Director Jim Mellon is the founding and principal shareholder and non- executive director of Regent Pacific Group Limited. In addition, he is the founding and principal shareholder and director of Charlemagne Capital Limited. Earlier in his career he worked for GT Management in the United States and in Hong Kong and later became the co-founder and managing director of Tyndall Holdings plc. He is currently a director of Fixed Odds Group Limited and a variety of other investment companies. Mr Mellon joined the board in July 2004. D Waddington, aged 37 Finance Director Damon Waddington FCCA joined the Group in February 2006 as Financial Controller. He previously held the position of Financial Controller within the Fortis Group. Prior to that Damon worked for a London-based firm of Chartered Accountants. Mr Waddington joined the board in September 2006. Directors D H N Eke, Chairman G Knowles, Managing Director J Mellon, Non-Executive Director D Waddington, Finance Director Secretary D Waddington Registered Office Viking House, Nelson Street Douglas, Isle of Man, IM1 2AH Principal Bankers Barclays Bank, Barclays House Victoria Street, Douglas Isle of Man, IM1 1HN Auditors KPMG Audit LLC Chartered Accountants Heritage Court, 41 Athol Street Douglas, Isle of Man, IM99 1HN Nominated Adviser and Broker Evolution Securities, Kings House 1 Kings Street, Leeds, LS1 2HH UK Transfer Agent Capita Registrars The Registry, 34 Beckenham Road Beckenham, Kent, BR3 4TU 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 9 webisholdings plc Webis Holdings plc Webis Holdings plc Annual report and accounts 2008 Annual report and accounts 2008 09 Directors’ Report The directors present their annual report and the audited financial statements for the period ended 25 May 2008. Principal activities The Group operates as a licensed sports bookmaker providing a worldwide internet service. The Group also operates a pari- mutuel service to individual and business customers, utilising its totalisator facility in the Isle of Man. On 1 November 2007, betinternet.com plc was renamed Webis Holdings plc. On 6 November 2007, a subsidiary, betinternet.com (IoM) Limited was incorporated to operate the betinternet.com sportsbook portal. Financial risks Details relating to financial risk management are shown in note 23 to the accounts. Directors and directors’ interests The directors who held office during the period were as follows: D H N Eke G Knowles J Mellon D Waddington Chairman Managing Director Non-executive Finance Director The director retiring by rotation is Mr D H N Eke who, being eligible, offers himself for re-election. Business review The Group operates on a worldwide basis and provides internet facilities in respect of a wide variety of sporting events. The directors who held office at the end of the period had the following interests in the ordinary shares of the Company and options to purchase such shares arising from incentive schemes. A more detailed review of the business, its results and future developments is given in the Chairman’s Statement and Operational Review on pages 4 and 6, respectively. Proposed dividend The directors do not propose the payment of a dividend (2007: nil). Policy and practice on payment of creditors It is the policy of the Group to agree appropriate terms and conditions for its transactions with suppliers by means of standard written terms to individually negotiated contracts. The Group seeks to ensure that payments are always made in accordance with these terms and conditions. At the year end there were 54 days (2007: 33 days) purchases in trade creditors. (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 10 10 Directors’ Report continued Directors’ interests D H N Eke G Knowles J Mellon D Waddington Ordinary Shares Options Interest at end of period — 200,000 108,359,465 18,290 Interest at start of period — — 98,510,577 18,290 Interest at end of period — 14,000,000 — 3,000,000 Interest at start of period — 14,000,000 — — Mr Mellon’s interests are more fully described in the note below (Substantial interests). Further details of the options issued to the executive directors are contained in the Report of the Remuneration Committee on pages 15 to 16. Substantial interests On 6 August 2008 the following interests in 3% or more of the Company’s ordinary share capital had been reported: Burnbrae Limited Mill Properties Limited Vincent Caldwell Merrion Stockbrokers Nominees Limited a/c 900741 Rock Holding Limited % 52.38 4.06 5.30 3.67 4.46 Number of ordinary shares 108,341,465 8,399,450 10,964,967 7,580,727 9,228,357 The board has been informed that Mr J Mellon is a beneficiary of a trust that holds the entire share capital of Burnbrae Limited. Separately, Mr Mellon is also interested in 18,000 ordinary shares in the Company. The shares held by Mill Properties Limited represent a family related shareholding of the Caldwell family. 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 11 webisholdings plc Webis Holdings plc Annual report and accounts 2008 11 Annual General Meeting Shareholders will be asked to approve at the Annual General Meeting certain resolutions as special business. Some of these resolutions have become routine business at the Annual General Meetings of most public companies, including your Company, and relate to the renewal of the authority for the directors to allot relevant securities and the renewal of the powers for the directors to allot equity securities for cash. Employees The Group is committed to a policy of equal opportunity in matters relating to employment, training and career development of employees and is opposed to any form of less favourable treatment afforded on the grounds of disability, sex, race or religion. The Group recognises the importance of ensuring employees are kept informed of the Group’s performance, activities and future plans. Political and charitable contributions The Group made no political contributions nor donations to charities during the year. Auditors KPMG Audit LLC, being eligible, have expressed their willingness to continue in office in accordance with Section 12(2) of the Isle of Man Companies Act 1982. By order of the board D Waddington Company Secretary 15 October 2008 (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 12 12 Corporate Governance The Company is committed to high standards of corporate governance. The board is accountable to the Company’s shareholders for good corporate governance. This statement describes how the principles of corporate governance are applied to the Company. 1. Directors The Company is controlled through the board of directors which comprises two executive and two non-executive directors. The Chairman is mainly responsible for the conduct of the board, and he, together with the Managing Director, seeks to ensure that all directors receive sufficient relevant information on financial, business and corporate issues prior to meetings. The Managing Director, in conjunction with his executive colleague, is responsible for co-ordinating the Company’s business and implementing strategy. None of the non-executive directors are deemed to be independent, although the board intends to appoint at least one independent director at an appropriate time. Shareholders are encouraged to contact the Chairman should they require clarification on any aspect of the Company’s business. All directors are able to take independent professional advice in furtherance of their duties if necessary. The board has a formal schedule of matters reserved for it and meets six times per year. It is responsible for overall Group strategy, acquisition and divestment policy, approval of major capital expenditure projects and consideration of significant financing matters. It monitors the exposure to key business risks including legislative, jurisdictional and major liability management issues. The board approves the annual budget and the progress towards achievement of the budget. The board also considers employee issues and key appointments. It also seeks to ensure that all directors receive appropriate training on appointment and then subsequently as appropriate. All directors will submit themselves for re-election at least once every three years. The board has established two standing committees, both of which operate within defined terms of reference. The committees established are the Audit Committee and the Remuneration Committee. The board does not consider it necessary for a Company of its size to establish a standing Nominations Committee. Instead the board’s policy in relation to board appointments is for the Chairman to agree selection criteria with all board members and use independent recruitment consultants to initiate the search for candidates. The final decision on appointments rests with the full board. 2. Directors’ Remuneration The Report of the Remuneration Committee is set out on pages 15 to 16 of the report and accounts. 3. Relations with Shareholders The Company encourages two-way communication with both its institutional and private investors and attempts to respond quickly to all queries received verbally or in writing. The board has sought to use the Annual General Meeting to communicate with private investors and encourages their participation. 4. Financial Reporting The performance and financial position of the Company are provided in the Chairman’s Statement on pages 4 and 5, the Operational Review on pages 6 and 7 and the Directors’ Report on pages 9 to 11. These enable the board to present a balanced and understandable assessment of the Company’s position and prospects. The directors’ responsibilities for the financial statements are described on page 14. Internal Control The board believes it has controls in place which have established an ongoing process for identifying, evaluating and managing the significant risks faced by the Group. In this regard, the board seeks to work closely with the Company’s auditors. The board also acknowledges that it has overall responsibility for reviewing the effectiveness of internal control. It believes that senior management within the Group’s operating businesses should also contribute in a substantial way and this has been built into the process. 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 13 webisholdings plc Webis Holdings plc Annual report and accounts 2008 13 There are inherent limitations in any system of internal control and, accordingly, even the most effective system can provide only reasonable, and not absolute, assurance with respect to the preparation of financial information and the safeguarding of assets. The system adopted by the board manages rather than eliminates the risk of failure to achieve business objectives. In carrying out its review of the effectiveness of internal control in the Group the board takes into consideration the following key features of the risk management process and system of internal control: Audit Committee The Audit Committee comprises the non-executive directors and is chaired by Mr D H N Eke. The committee acts in an advisory capacity to the board and meets not less than twice a year. Its terms of reference require it to take an independent view of the appropriateness of the Group’s accounting controls, policies and procedures. The committee also reviews and approves the reports, appointment and fees of the external auditors, and meets its external auditors at least once a year. Additional meetings may be requested by the auditors. Going Concern As more fully explained in note 1 to the accounts on page 23, and after making enquiries, the directors have formed a judgement, at the time of approving the financial statements, that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the directors continue to adopt the going concern basis in preparing the financial statements. Internal Audit The directors have reviewed the need for an internal audit function and believe that the Group is not of sufficient size and complexity to require such a function. Risks are identified which are relevant to the Group as a whole and encompass all aspects of risk including operational, compliance, financial and strategic. The board seeks to identify, monitor and control the significant risks to an acceptable level throughout the Group. In order to do so the Audit Committee, acting on behalf of the board, reviews risk matters at each meeting of the Audit Committee. The Group operates a comprehensive budgeting and financial reporting system which, as a matter of routine, compares actual results with budgets. Management accounts are prepared for each operating activity and the Group on a monthly basis. Material variances from budget are thoroughly investigated. In addition, the Group’s profitability forecast is regularly updated based on actual performance as the year progresses. A thorough reforecast exercise is undertaken following production of the half-year accounts. Cash flow forecasts are regularly prepared to ensure that the Group has adequate funds and resources for the foreseeable future. Risks are identified and appraised through the annual process of preparing these budgets. Steps have been taken to embed internal control and risk management into the operations of the business and to deal with areas of improvement which come to management’s and the board’s attention. This process is continuing to increase risk awareness throughout the Group. (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 14 14 Statement of Directors’ Responsibilities in respect of the Directors’ Report and the Financial Statements The directors are responsible for preparing the Directors’ Report and the accounts in accordance with applicable law and regulations. Company law requires the directors to prepare accounts for each financial year, which meet the requirements of Isle of Man Company law. In addition, the directors have elected to prepare the accounts in accordance with International Financial Reporting Standards. The accounts are required by law to give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss of the Group for that period. In preparing these accounts, the directors are required to: select suitable accounting policies and then apply them consistently; (cid:1) make judgements and estimates that are reasonable and prudent; state whether applicable International Financial Reporting Standards have been followed, subject to any material departures disclosed and explained in the accounts; and prepare the accounts on the going concern basis unless it is inappropriate to presume that the Group and Parent Company will continue in business. The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Parent Company and to enable them to ensure that the financial statements comply with the Isle of Man Companies Acts 1931 to 2004. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. 15657 21/10/08 Proof 8 15657 (cid:1) (cid:1) (cid:1) 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 15 webisholdings plc Webis Holdings plc Annual report and accounts 2008 15 Report of the Remuneration Committee Introduction This report has been prepared to accord as far as possible with the Directors’ Remuneration Report Regulations 2002 which introduced new statutory requirements for UK public companies in relation to the disclosure of directors’ remuneration in respect of periods ending on or after 31 December 2002. This report also attempts to meet, as far as is practicable for a Company of Webis Holdings’ size, the relevant requirements of the Listing Rules of the UK Financial Services Authority and describes how the board has applied the Principles of Good Governance relating to directors’ remuneration. As required by the Regulations, a resolution to approve the report will be proposed at the Annual General Meeting of the Company at which the financial statements will be approved. Remuneration Committee The Company has an established Remuneration Committee which has a formal constitution and is composed of the non- executive directors of the Company under the Chairmanship of D H N Eke. No director plays a part in any discussion about his own remuneration. Remuneration Policy The Remuneration Committee’s policy is to ensure that the remuneration packages offered are competitive and designed to attract, retain and motivate executive directors of the right calibre. The major elements of the remuneration package for the executive directors are: Basic annual salary and benefits. Eligibility to participate in an annual bonus scheme, when such scheme operates. Share option incentives. Contribution to a pension plan. The committee seeks to ensure that bonus and share option incentives have a strong link with individual performance. (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com Basic Salary The level of basic annual salary and benefits is determined by the Committee, taking into account the performance of the individual and information from independent sources on the rates of salary for similar jobs in comparable companies. Annual Bonus Payments Although no bonus scheme operated during the period under review, it is anticipated that a scheme will operate when Group profitability and cash flow allow. Bonuses for the executive directors are calculated with reference to the profit before tax as disclosed in the audited financial statements of the Group, together with an assessment by the Committee of the director’s performance against agreed personal targets. Bonus payments are not pensionable. Share Options The Committee believes that share ownership by executives strengthens the link between their personal interests and those of shareholders. The Company currently operates four share option schemes, although it is intended that following the adoption of the 2005 Share Option Plan, no further options will be issued under these schemes. Options are granted to executives periodically at the discretion of the Remuneration Committee. The grant of share options is not subject to fixed performance criteria. This is deemed to be appropriate as it allows the Committee to consider the performance of the Group and the contribution of the individual executives and, as with annual bonus payments, illustrates the relative importance placed on performance related remuneration. Pensions The Group does not intend to contribute to the personal pension plans of directors in the forthcoming period. Service Contracts During the period under review, the service contract of Mr G R Knowles provided for a notice period of six months by all parties and that of Mr D Waddington for a notice period of three months by all parties. 15657 21/10/08 Proof 8 (cid:1) (cid:1) (cid:1) (cid:1) 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 16 16 Report of the Remuneration Committee continued Aggregate Directors’ Remuneration The total amounts for directors’ remuneration were as follows: Emoluments — salaries, bonus and taxable benefits — fees Contributions to pension plans Directors’ Emoluments Executive D Waddington (appointed 20 September 2006) G R Knowles (appointed 3 June 2005) S I Nicholls (resigned 21 August 2006) Non-Executive D H N Eke* J Mellon Aggregate emoluments * paid to Burnbrae Limited Basic Salary £000 Termination payments £000 Fees £000 Taxable benefits £000 77 96 — — — 173 — — — 24 — 24 — — — — — — — — —— — —— — 2008 £000 173 24 — 197 2008 Total £000 77 96 24 197 2007 £000 156 24 2 182 2007 Total £000 48 92 18 24 — 182 Details of the options outstanding at 25 May 2008 are as follows: Name of director G R Knowles (a) 2005 Share Option Plan (b) 2005 Share Option Plan (c) 2005 share Option Plan D Waddington (a) 2005 Share Option Plan (Lapsed)/ 28 May 2007 granted in period 25 May 2008 Exercise price Date from which exercisable Expiry date 1,500,000 9,000,000 3,500,000 — 1,500,000 — 9,000,000 — 3,500,000 10.4p 5p 6.0565p 18 March 2008 30 March 2009 20 September 2009 18 March 2015 30 March 2016 20 September 2016 — 3,000,000 3,000,000 14,000,000 3,000,000 17,000,000 4.775p 7 November 2010 7 November 2017 The market price of the shares at 25 May 2008 (the last closing price prior to the period end) was 2.75p. The range during the period was 1.875p to 5.625p. Approval The report was approved by the board of directors and signed on behalf of the board. D H N Eke Chairman 15 October 2008 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 17 webisholdings plc Webis Holdings plc Annual report and accounts 2008 17 Report of the Independent Auditors, KPMG Audit LLC, to the Members of Webis Holdings plc KKPPMMGG We have audited the Group and Parent Company accounts (the “accounts”) of Webis Holdings plc for the period ended 25 May 2008 which comprise the Group Income Statement, the Group and Parent Company Balance Sheets, the Group Statement of Cash Flows, the Group and Parent Company Statements of Changes in Equity, and the related notes. These accounts have been prepared under the accounting policies set out therein. This report is made solely to the Company’s members, as a body, in accordance with section 15 of the Companies Act 1982. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and Auditors The Directors’ responsibilities for preparing the accounts in accordance with applicable Isle of Man Company law and International Financial Reporting Standards are set out in the Statement of Directors’ Responsibilities on page 14. Our responsibility is to audit the accounts in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the accounts give a true and fair view and are properly prepared in accordance with Isle of Man Companies Acts 1931 to 2004. We also report to you whether in our opinion, the information given in the Directors’ Report is consistent with the accounts. In addition, we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ transactions with the Company is not disclosed. We read the Directors’ Report and any other information accompanying the accounts and consider the implications for our report if we become aware of any apparent misstatements or inconsistencies within it. Basis of opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the UK Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the accounts, and of whether the accounting policies are appropriate to the Group and Company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the accounts are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the accounts. Opinion In our opinion: the accounts give a true and fair view, in accordance with International Financial Reporting Standards, of the state of the Group and Parent Company’s affairs as at 25 May 2008 and of the Group’s loss for the period then ended; the accounts have been properly prepared in accordance with the Isle of Man Companies Acts 1931 to 2004; and the information given in the Directors’ Report is consistent with the accounts. KPMG Audit LLC Chartered Accountants Heritage Court, 41 Athol Street Douglas, Isle of Man, IM99 1HN 15 October 2008 (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 (cid:1) (cid:1) (cid:1) 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 18 18 Consolidated Income Statement for the period ended 25 May 2008 Turnover Cost of sales Betting duty paid Gross profit Administration expenses Other operating income Earnings before interest, tax, depreciation Depreciation Share-based costs Total operating profit/(loss) Investments written off Net finance (cost)/income Tax Loss for the period Basic loss per share (pence) Diluted loss per share (pence) The notes on pages 22 to 44 form part of these financial statements. Note 2 2008 £000 2007 £000 117,185 86,903 (114,402) (84,157) (25) 2,758 (2,543) — 215 (161) (20) 34 (321) (60) — (347) (0.17) (0.17) (17) 2,729 (2,617) 50 162 (166) (29) (33) — 7 — (26) (0.01) (0.01) 3 5 13, 4 6 8 5 9 9 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 19 webisholdings plc Webis Holdings plc Annual report and accounts 2008 19 Consolidated and Company Balance Sheets as at 25 May 2008 Non-current assets Intangible Assets — goodwill Intangible Assets — other Property and equipment Investments Current assets Trade and other receivables Cash and cash equivalents Total assets Current liabilities Bank overdraft Trade and other payables Convertible loan notes Non-current liabilities Convertible loan notes Total liabilities Net assets/(liabilities) Shareholders’ equity Called up share capital Share premium account Share option reserve Profit and loss account Total shareholders’ equity 2008 Group £000 2008 Company £000 2007 Group £000 2007 Company £000 Note 10 11 12 13 15 23 16 17 17 18 43 231 119 — 393 647 1,018 1,665 (59) (1,492) (300) (1,851) — (1,851) 207 2,068 9,927 49 — 14 40 701 755 28 257 285 — (901) (300) 43 170 114 313 640 812 455 1,267 (224) (1,274) — — 23 81 1,014 1,118 170 325 495 (224) (812) — (1,201) (1,498) (1,036) — (1,201) (161) 2,068 9,927 49 (300) (1,798) 109 1,970 9,600 29 (300) (1,336) 277 1,970 9,600 29 (11,837) (12,205) (11,490) (11,322) 207 (161) 109 277 The financial statements were approved by the board of directors on 15 October 2008. D H N Eke Director G R Knowles Director The notes on pages 22 to 44 form part of these financial statements. (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 20 20 Statement of Changes in Shareholders’ Equity for the period ended 25 May 2008 Group Called up Share Share option Retained shareholders’ Total Balance as at 28 May 2006 Issue of ordinary shares Share based payments — share options Lapsed share warrants Loss for the period Balance as at 27 May 2007 Issue of ordinary shares Share based payments — share options Loss for the period Balance as at 25 May 2008 Company Balance as at 28 May 2006 Issue of ordinary shares Share based payments — share options Lapsed share warrants Loss for the period Balance as at 27 May 2007 Issue of ordinary shares Share based payments — share options Loss for the period Balance as at 25 May 2008 share capital premium reserve earnings £000 1,969 £000 9,550 1 — — — 1,970 98 — — — — 50 — 9,600 327 — — 2,068 9,927 £000 — — 29 — — 29 — 20 — 49 £000 (11,464) — — — (26) (11,490) — — (347) (11,837) equity £000 55 1 29 50 (26) 109 425 20 (347) 207 Total Called up Share Share option Retained shareholders’ share capital premium reserve earnings £000 1,969 £000 9,550 1 — — — 1,970 98 — — — — 50 — 9,600 327 — — 2,068 9,927 £000 — — 29 — — 29 — 20 — 49 £000 (10,841) — — — (481) (11,322) — — (883) (12,205) equity £000 678 1 29 50 (481) 277 425 20 (883) (161) The notes on pages 22 to 44 form part of these financial statements. 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 21 webisholdings plc Webis Holdings plc Annual report and accounts 2008 21 Consolidated Statement of Cash Flows for the period ended 25 May 2008 2008 £000 598 5 (8) (163) (64) (230) 425 — — (65) 360 728 231 959 1,018 (59) 959 34 161 20 165 218 598 2007 £000 (197) 25 (42) (180) (46) (243) 1 50 300 (18) 333 (107) 338 231 455 (224) 231 (33) 166 29 (263) (96) (197) Net cash inflow/(outflow) from operating activities Cash flows from investing activities Interest received Acquisition of investment Purchase of intangible assets Purchase of property and equipment Net cash outflow from investing activities Cash flows from financing activities Issue of equity shares Cancelled share warrants Issue of convertible loan note Interest paid Net cash inflow from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Net cash and cash equivalents at end of period Cash and cash equivalents comprise Cash and deposits Bank overdraft Cash generated from operations Profit/(loss) from operations Adjusted for: Depreciation Share based payment charge Decrease/(increase) in receivables Increase/(decrease) in payables Net cash inflow/(outflow) from operating activities The notes on pages 22 to 44 form part of these financial statements. (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 22 22 Notes to the Accounts for the period ended 25 May 2008 1 Reporting entity Webis Holdings plc (formerly betinternet.com plc) is a company domiciled in the Isle of Man. The address of the Company’s registered office is Viking House, Nelson Street, Douglas, Isle of Man, IM1 2AH. The Group’s consolidated financial statements as at and for the period ended 25 May 2008 consolidate those of the Company and its subsidiaries (together referred to as “the Group”). 1.1 Basis of preparation (a) Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) and its interpretations adopted by the International Accounting Standards Board (“IASB”). These are the Group’s first financial statements prepared under IFRS, and IFRS 1 “First-time Adoption of International Reporting Standards” has been applied. The last financial statements under UK Generally Accepted Accounting Principles (“UK GAAP”) were prepared for the period ended 27 May 2007. The date of transition to IFRS for the Group was 29 May 2006. A summary of the accounting policies applied in the preparation of the new financial statements is given below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The impact of the transition from UK GAAP to IFRS is explained in note 24 to the financial statements. This note includes reconciliation of equity and profit or loss for the comparative period reported under UK GAAP to those reported under IFRS. New significant standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are not yet effective for the period ended 25 May 2008, and have not been applied in preparing these consolidated financial statements: IFRS 8 Operating Segments introduces the “management approach” to segment reporting. IFRS 8, which becomes mandatory for the Group’s 2009 financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by the Group’s directors in order to assess each segment’s performance and to allocate resources to them. Currently, the Group presents segment information in respect of its business units. Under the management approach, the Group will present information in respect of the Sportsbook and Pari-mutuel activities. Other standards which will become effective in future periods, but which are not expected to impact on the Group are: Revised IAS 23 Borrowing Costs IFRIC 11 IFRS 2 — Group and Treasury Share Transactions (b) Basis of measurement and functional currency The Group consolidated financial statements are presented in Pounds Sterling, rounded to the nearest thousand. They are prepared under the historical cost convention except where assets and liabilities are required to be stated at their fair value. 15657 21/10/08 Proof 8 15657 (cid:1) (cid:1) 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 23 webisholdings plc Webis Holdings plc Annual report and accounts 2008 23 Notes to the Accounts continued for the period ended 25 May 2008 1.1 Basis of preparation continued 1.2 Accounting policies (c) Use of estimates and judgement The preparation of Group financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Although these estimates are based on management’s best knowledge and experience of current events and expected economic conditions, actual results may differ from these estimates. The directors believe the models and assumptions used to calculate the fair value of the share based payments, outlined in note 18, are the most appropriate for the Group. The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. They have also been applied in preparing an opening IFRS balance sheet as at 29 May 2006 for the purposes of the transition to IFRSs, as required by IFRS 1. The impact of the transition from previous UK GAAP to IFRSs is explained in note 24. Certain comparative amounts have been reclassified to conform with the current year’s presentation. Going concern The directors have prepared projected cash flow information for the next 12 months and are satisfied that the Group has adequate resources to meets its obligations as they fall due. The directors consider that it is appropriate that these financial statements are prepared on the going concern basis. Basis of consolidation (i) The consolidated financial statements incorporate the results of Webis Holdings plc and its subsidiaries. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue until the date that such control ceases. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. (ii) Intra-Group balances and transactions, and any unrealised income and expenses arising intra-Group transactions, are eliminated in preparing the consolidated financial statements and income and expenses arising from intra-Group transactions, are eliminated in preparing the consolidated financial statements. Foreign currency translation The Group’s financial statements are presented in Pounds Sterling, which is the Company’s functional and presentational currency. All subsidiaries of the Group have Pounds Sterling as their functional currency. Foreign currency transactions are translated into the functional currency using the approximate exchange rate prevailing at the dates of transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at the period end exchange rate of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 24 24 Notes to the Accounts continued for the period ended 25 May 2008 1.2 Accounting policies continued Non-monetary assets and liabilities that are measured in terms of historical costs in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into the functional currency using the exchange rates ruling at the date fair value was determined. Revenue recognition and turnover Turnover represents the amounts staked in respect of bets placed by customers on events which occurred during the period. Cost of sales represents payouts to customers, together with commissions and royalties payable to agents and suppliers of software. Open betting positions are carried at fair market value. Segmental reporting Segmental reporting is based on a two segment format, of which the primary format is the business areas in accordance with the Group’s internal reporting structure and the secondary format is for geographical areas. Financing costs Interest payable on borrowings is calculated using the effective interest method. Deferred income tax Deferred taxation is provided in full, using the liability method, on timing differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax is realised. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Intangible assets — Goodwill Goodwill represents the excess of fair value consideration over the fair value of the identifiable assets and liabilities acquired, arising on the acquisition of subsidiaries. Goodwill is included in non-current assets. Goodwill is reviewed annually for impairment and is carried at costs less accumulated impairment losses. Goodwill arising on acquisitions before the transition date of 29 May 2006 has been retained at the previous UK GAAP value and is no longer amortised but is tested annually for impairment. Intangible assets — Other Other intangible assets comprise website design and development costs and software licences and are stated at acquisition cost less accumulated amortisation. Carrying amounts are reviewed at each balance sheet date for impairment. Costs that are directly attributable to the development of websites are recognised as intangible assets provided that the intangible asset will generate probable economic benefits and income streams through external use in line with SIC 32 “Intangible assets — website costs”. Content development and operating costs are expensed as incurred. Careful judgement by the directors is applied when deciding whether recognition requirements for development costs have been met and whether the assets will generate probable future economic benefit. Amortisation is calculated using the straight line method, at annual rates estimated to write off the assets over their expected useful lives as follows: Website design & development Software licences 33.33% 33.33% 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 25 webisholdings plc Webis Holdings plc Annual report and accounts 2008 25 Notes to the Accounts continued for the period ended 25 May 2008 1.2 Accounting policies continued Property, plant and equipment Items of property and equipment are stated at historical cost less accumulated depreciation (see below) and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Assets are depreciated over their expected useful lives as follows: Equipment Fixtures & fittings 33.33% 33.33% Impairment of assets Goodwill arising on acquisitions and other assets that have an indefinite useful life and are not subject to amortisation are reviewed at least annually for impairment. Other intangible assets, property and equipment are reviewed for impairment whenever there is an indication that the carrying amount of the asset may not be recoverable. If the recoverable amount of an asset is less than its carrying amount, an impairment loss is recognised. Recoverable amount is the higher of fair value less costs to sell and value in use. Where the asset does not generate cash flows that are independent from other assets the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. For tangible and intangible assets excluding goodwill, the cash generating unit is considered to be a business segment. For goodwill, the cash generating unit is considered to be the business on which the goodwill arose. If at the Balance Sheet date there is any indication that an impairment recognised in prior periods for an asset, other than goodwill, no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount. An impairment charge is recognised in the income statement in the period in which it occurs. Where an impairment loss, other than an impairment loss on goodwill, subsequently reverses due to a change in its original estimate, the carrying amount of the asset is increased to the revised estimate of its recoverable amount. The increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Share-based payments The Company granted employee share options under an equity-settled share-based payments scheme. For all the employee share options granted after 7 November 2002 and vesting on or after 29 May 2006, an expense is recognised in the income statement with a corresponding credit to equity. The equity-settled share based payment is measured at fair value at the date of the grant. Fair value is determined by reference to option pricing models, principally the Black-Scholes model. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Leasing Payments made under operating leases are charged to the income statement on a straight line basis over the period of the lease. Equity Share capital is determined using the nominal value of shares that have been issued. (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 26 26 Notes to the Accounts continued for the period ended 25 May 2008 1.2 Accounting policies continued Equity continued The share premium account includes any premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from the premium paid. Equity settled share-based employee remuneration is credited to the share option reserve until related stock options are exercised. On exercise or lapse amounts recognised in the share option reserve are taken to the profit and loss account. Financial Instruments Non-derivative financial instruments include trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables. Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes party to the contractual terms of the instrument. Transaction costs are included in the initial measurement of financial instruments, except financial instruments classified as at fair value through profit and loss. The subsequent measurement of financial instruments is dealt with below. Trade and other receivables Trade and other receivables do not carry any interest and are stated at their amortised cost as reduced to equal the estimated present value of the future cash flows. Cash and cash equivalents Cash and cash equivalents defined as cash in bank and in hand as well as bank deposits and money held for processors. Cash equivalents are held for the purpose of meeting short term cash commitments rather than for investment or other purposes. Bank borrowings Interest bearing bank borrowings are recorded at the proceeds received net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs are charged on an accrual basis using the effective interest method and are added to the carrying amount of the instrument to the extent they are not settled in the period in which they arise. Trade and other payables Trade and other payables are non-interest bearing and are stated at amortised cost. Convertible loans Convertible loan notes are interest bearing and are stated at amortised cost. The convertible loan note has been classified fully as a liability in the balance sheet, as in the view of the directors it does not meet the definition under International Reporting Standard 32 for an element to be disclosed under equity. Equity instruments Equity instruments issued by the Group are recorded at proceeds received, net of direct costs. Ante-post sports bets The Group may have at any point in time, an exposure on ante-post sports bets. These bets meet the definition of a financial liability under International Accounting Standard 32 “Financial Instruments: Disclosure and Presentation”, and therefore are recorded initially at fair value, and subsequently at amortised cost using the effective interest method. 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 27 webisholdings plc Webis Holdings plc Annual report and accounts 2008 27 Notes to the Accounts continued for the period ended 25 May 2008 2 Segmental Analysis Turnover Sportsbook Pari-mutuel (Loss)/profit before tax Sportsbook Pari-mutuel Net assets Sportsbook Pari-mutuel 3 Share-based costs Share options Far East UK & Ireland Europe Rest of the World United States 2008 £000 66,714 9,253 8,319 2,476 30,423 117,185 (740) 393 (347) (379) 586 207 2008 £000 20 20 2007 £000 42,292 7,094 10,220 2,547 24,750 86,903 (483) 457 (26) (82) 191 109 2007 £000 29 29 4 Amounts written off investments In November 2007, the Group wrote off its investment in Global Coreports Limited, an Isle of Man based gaming software developer. In the absence of further funding, the Company was unable to continue trading. (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 28 28 Notes to the Accounts continued for the period ended 25 May 2008 5 Total operating profit/(loss) Group operating profit/(loss) is stated after charging: Auditors’ remuneration: Group — audit — other services Company — audit Depreciation of property and equipment Exchange losses Operating lease rentals — other than plant and equipment Directors’ fees 6 Net finance (costs)/income Bank interest receivable Bank interest payable Loan interest payable Net finance (costs)/income 2008 £000 73 — 52 161 53 108 24 2008 £000 5 5 (24) (41) (65) (60) 2007 £000 67 5 58 166 64 140 24 2007 £000 25 25 (18) — (18) 7 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 29 webisholdings plc Webis Holdings plc Annual report and accounts 2008 29 Notes to the Accounts continued for the period ended 25 May 2008 7 Staff numbers and cost Average number of employees (including directors) The aggregate payroll costs of these persons were as follows: Wages and salaries Social security costs Other pension costs Share-based costs 2008 36 2008 £000 997 100 — 20 1,117 2007 41 2007 £000 1,021 94 6 29 1,150 8 Tax on loss on ordinary activities No provision for tax is required for either the current or previous periods, due to the zero per cent corporate tax regime in the Isle of Man. Unprovided deferred tax was £nil (2007: £nil). 9 Earnings per ordinary share The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period. The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares, on the assumed conversion of all dilutive share options. An adjustment for the dilutive effect of share options and convertible debt in the period has not been reflected in the calculation of the diluted loss per share as the effect would have been anti-dilutive. 2008 £000 (347) 2007 £000 (26) No. No. 200,674,485 196,958,908 200,674,485 196,958,908 (0.01) (0.01) (0.17) (0.17) Loss for the period Weighted average number of ordinary shares in issue Diluted number of ordinary shares Basic loss per share Diluted loss per share (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 30 30 Notes to the Accounts continued for the period ended 25 May 2008 10 Intangible assets — Goodwill Group Cost Balance at 28 May 2007 Reclassified from amortisation Balance at 25 May 2008 Amortisation and impairment At 28 May 2007 (as previously stated) Adjustment to goodwill on adoption of IFRS (note 24) At 28 May 2007 (restated) Reclassified to cost At 25 May 2008 Net book value At 28 May 2007 and 25 May 2008 Goodwill £000 1,435 (1,392) 43 1,435 (43) 1,392 (1,392) — 43 The above goodwill relates to the acquisition of the pari-mutuel business which is both a cash generating unit and a reportable segment. The recoverable amount of goodwill on the pari-mutuel business unit has been determined based on a value in use calculation using cash flow projections based on financial budgets approved by the directors. 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 31 webisholdings plc Webis Holdings plc Annual report and accounts 2008 31 Notes to the Accounts continued for the period ended 25 May 2008 11 Intangible assets — Other Cost Balance at 28 May 2007 Additions during the period Balance at 25 May 2008 Amortisation and impairment At 28 May 2007 Amortisation for the period At 25 May 2008 Net book value At 25 May 2008 At 27 May 2007 Cost Balance at 29 May 2006 Additions during the period Reclassified from property and equipment Balance at 27 May 2007 Amortisation and impairment At 29 May 2006 Amortisation for the period Reclassified from property and equipment At 27 May 2007 Net book value At 27 May 2007 At 29 May 2006 (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 Software & development costs Group £000 Company £000 1,907 163 2,070 1,737 102 1,839 231 170 29 — 29 6 9 15 14 23 Software & development costs Group £000 Company £000 1,739 147 21 1,907 1,650 83 4 1,737 170 89 — — 29 29 — — 6 6 23 — 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 32 32 Notes to the Accounts continued for the period ended 25 May 2008 12 Property and equipment Group Cost At 28 May 2007 Additions Disposals At 25 May 2008 Depreciation At 28 May 2007 Charge for the period At 25 May 2008 Net book value At 25 May 2008 At 27 May 2007 Company Cost At 28 May 2007 Additions Disposals At 25 May 2008 Depreciation At 28 May 2007 Charge for the period Disposals At 25 May 2008 Net book value At 25 May 2008 At 27 May 2007 Computer Fixtures & equipment £000 fittings £000 1,117 54 — 1,171 1,019 51 1,070 101 98 250 10 — 260 234 8 242 18 16 Computer Fixtures & equipment £'000 fittings £'000 262 1 — 263 182 41 — 223 40 80 79 — — 79 78 1 — 79 — 1 Total £000 1,367 64 — 1,431 1,253 59 1,312 119 114 Total £'000 341 1 — 342 260 42 — 302 40 81 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 33 webisholdings plc Webis Holdings plc Annual report and accounts 2008 33 Notes to the Accounts continued for the period ended 25 May 2008 Computer Fixtures & equipment £000 fittings £000 1,068 70 (21) 1,117 956 67 (4) 1,019 98 112 241 9 — 250 218 16 — 234 16 23 Computer Fixtures & equipment £000 fittings £000 229 62 (29) 262 137 51 (6) 182 80 92 79 — — 79 76 2 — 78 1 3 Total £000 1,309 79 (21) 1,367 1,174 83 (4) 1,253 114 135 Total £000 308 62 (29) 341 213 53 (6) 260 81 95 12 Property and equipment continued Group Cost At 29 May 2006 Additions Reclassified to software & developments costs At 27 May 2007 At 29 May 2006 Charge Reclassified to software & developments costs At 27 May 2007 Net book value At 27 May 2007 At 28 May 2006 Company Cost At 29 May 2006 Additions Reclassified to software & developments costs At 27 May 2007 At 29 May 2006 Charge Reclassified to software & developments costs At 27 May 2007 Net book value At 27 May 2007 At 28 May 2006 (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 34 34 Notes to the Accounts continued for the period ended 25 May 2008 13 Investments Group At 28 May 2007 Addition Investment written off during period At 25 May 2008 Company At 28 May 2007 Addition Investment written off during period At 25 May 2008 Total £000 313 8 (321) — Total £000 1,014 8 (321) 701 Investment in subsidiary Other companies investments £000 701 — — 701 £000 313 8 (321) — Details of investments at 25 May 2008 are as follows: Subsidiaries Country of incorporation Activity Holding (%) European Wagering Services Limited Isle of Man Technical Facilities & Services Limited Isle of Man betinternet.com (IOM) Limited* betinternet UK.com Limited Isle of Man England * see Restructure note 14. Operation of interactive wagering totaliser hub Provision of IT & betting systems to Group companies Sportsbook trading company Holder of UK bookmaker’s permit non-trading 100 100 100 100 In November 2007, the Group wrote off its 17.32% investment in Global Coreports Limited, an Isle of Man based gaming software developer. In the absence of further funding from its shareholders, this company was unable to continue trading. 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 35 webisholdings plc Webis Holdings plc Annual report and accounts 2008 35 Notes to the Accounts continued for the period ended 25 May 2008 14 Restructure On 1 November 2007, betinternet.com plc was renamed Webis Holdings plc, in order to more accurately reflect its role in the Group, that of a holding company with subsidiaries operating in the gaming and technology sectors. As part of this reorganisation, betinternet.com (IOM) Limited was incorporated to operate the betinternet.com Sportbook portal. The ongoing operations of the business were unaffected by this restructuring. 15 Trade and other receivables Trade receivables Amount due from Group undertakings VAT recoverable Other receivables and prepayments Due within one year Due after more than one year Group Company 2007 £000 727 — 4 81 812 2008 £000 4 — 2 22 28 Group Company 2007 £000 812 — 812 2008 £000 28 — 28 2007 £000 10 112 — 48 170 2007 £000 58 112 170 2008 £000 581 — 12 54 647 2008 £000 647 — 647 Amounts due from Group undertakings are unsecured, interest free and repayable in more than year. (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 36 36 Notes to the Accounts continued for the period ended 25 May 2008 16 Trade and other payables Trade payables Amounts due to Group undertakings Deferred income Income tax and national insurance Accruals and other payables Group Company 2008 £000 1,145 — 31 36 280 1,492 2007 £000 1,056 — 33 20 165 1,274 2008 £000 140 595 — — 166 901 2007 £000 565 — 33 — 214 812 The amounts due to Group undertakings are unsecured, interest free and repayable on demand. 17 Convertible loan note Convertible loan note Group and Company 2008 £000 300 2007 £000 300 The Group issued a £300,000 secured convertible loan note to Burnbrae Limited on 23 February 2007. The loan note is secured over all the assets and undertakings of the Company and bears interest at the rate of LIBOR plus 4%. The loan note will be repayable on 23 February 2009. 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 37 webisholdings plc Webis Holdings plc Annual report and accounts 2008 37 Notes to the Accounts continued for the period ended 25 May 2008 18 Share Capital Authorised Ordinary shares of 1p each Allotted, issued and fully paid At 28 May 2007: ordinary shares of 1p each Issued during the period At 25 May 2008: ordinary shares of 1p each No. 400,000,000 196,977,779 9,848,888 206,826,667 2008 £000 4,000 1,970 98 2,068 2007 £000 4,000 1,969 1 1,970 On 30 January 2008, 9,848,888 ordinary 1p shares were issued at 4.315p to Burnbrae Limited. Options Movements in share options during the period ended 25 May 2008 were as follows: At 27 May 2007 — 1p ordinary shares Options granted Options lapsed Options exercised At 25 May 2008 — 1p ordinary shares No. 14,588,000 3,000,000 — — 17,588,000 Details of options at 25 May 2008 were as follows: Price per share Options granted 1998 Share Option Plan 1998 Share Option Plan 1998 Share Option Plan 2005 Share Option Plan 2005 Share Option Plan 2005 Share Option Plan 2005 Share Option Plan 1p 23.15p 23.15p 10.4p 5.0p 6.0565p 4.775p 500,000 56,000 32,000 1,500,000 9,000,000 3,500,000 3,000,000 17,588,000 Exercisable between April 2002 and April 2009 September 2003 and September 2010 April 2003 and April 2010 March 2008 and March 2015 March 2009 and March 2016 September 2009 and September 2016 November 2010 and November 2017 In November 2007, options to subscribe for 3,000,000 Ordinary 1p shares, which are exercisable from 7 November 2010 to 7 November 2017, have been granted under the terms of the 2005 Share Option Plan, with an exercise price of 4.775p per share. (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 38 38 Notes to the Accounts continued for the period ended 25 May 2008 18 Share Capital continued The fair value of services received in return for share options granted is based on the fair value of share options granted, measured using the Black–Scholes model with the following inputs: Share price at date of grant Option exercise price at date of grant Expected volatility Option life Expected dividends Risk-free interest rate 2005 Share Option Plan varies from 0.04775 to 0.104p varies from 0.04775 to 0.104p 20% 3.5 years 0% 4.60% Expected volatility was determined by calculating the historical volatility of the Company’s weighted average share price over the period. The expected life used has been adjusted based on management's best estimate for the effects of non- transferability, exercise restrictions and behavioural considerations. IFRS 2 has not been applied to share options granted on or before 7 November 2002. Expense in profit and loss account: Share options 2008 £000 20 20 2007 £000 29 29 19 Contingent Liabilities By the nature of the business, a stake can be received from a customer in respect of some event happening in the future, and hence the level of any actual liability to the Group cannot be assessed until after that event has occurred, although the maximum potential liability can be determined. As at the balance sheet date, there were £31,410 (2007: £32,692) of such stakes that had been received where the event to which they related was after the balance sheet date. Accordingly, such amount has been reflected as deferred income in the balance sheet (see note 16). All stakes that have been settled are recognised in the income statement. Stakes are settled once the event has occurred. The maximum possible liability on deferred bets is £5.16m (2007: £2.67m). 20 Capital Commitments As at 25 May 2008, the Group had no capital commitments (2007: £nil). 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 39 webisholdings plc Webis Holdings plc Annual report and accounts 2008 39 Notes to the Accounts continued for the period ended 25 May 2008 21 Operating lease commitments At 25 May 2008, the Group was committed to making the following payments period in respect of operating leases: Leases which expire between one and two years Leases which expire between two and five years 2008 £000 171 — 2007 £000 — 279 22 Related party transactions Rental and service charges of £107,369 (2007: £139,847) and loan interest of £41,101 (2007: £5,481) were charged by Burnbrae Limited during the period. 23 Financial risk management Capital structure The Group’s capital structure is as follows: Cash and cash equivalents Loans and similar income Net (funds)/debt Shareholders' equity Capital employed 2008 £000 (959) 300 (659) 207 (452) 2007 £000 (231) 300 69 109 178 The Group’s principal financial instruments comprise cash and cash equivalents, trade and other receivables and payables that arise directly from its operations. The Group also has a bank overdraft facility and convertible loan note. The main purpose of these financial instruments is to finance the Company’s operations. The existence of the financial instruments exposes the Group to a number of financial risks, which are described in more detail below. The principal risks which the Group is exposed to relate to liquidity risks, credit risks, interest rate risks and foreign exchange risks. (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 40 40 Notes to the Accounts continued for the period ended 25 May 2008 23 Financial risk management continued Liquidity risks Liquidity risk is the risk that the Company will be unable to meet its financial obligations as they fall due. The Group’s objective is to maintain continuity of funding through trading and share issues but to also retain flexibility through the use of an overdraft facility and short term loans. Management controls and monitors the Group’s cash flow on a regular basis, including forecasting future cash flow. Banking facilities are kept under review and renegotiated where necessary to meet the Group’s requirements. In order to provide customers with the reassurance that repayment requests are immediately met, the Group seeks to ensure that its cash balances plus amounts held by host tracks on behalf of customers exceed the balances due to customers. On this measure there was a surplus of £548,000 (2007: deficit of £81,000) at the period end. The directors anticipate that the business will continue to generate positive cash flow in the forthcoming period to meet any of its obligations to customers. At the period end, the Group had an ongoing overdraft facility, at an interest rate of base plus 1% of £400,000 (2007: £400,000). The following are the contractual maturities of financial liabilities: 2008 Financial liabilities Trade payables Income tax and national insurance Bank overdraft Other creditors Convertible loan note 2007 Financial liabilities Trade payables Income tax and national insurance Bank overdraft Other creditors Convertible loan note Carrying Contractual cash flow amount £000 £000 6 months or less £000 1,145 (1,145) (1,145) 36 59 166 300 (36) (61) (166) (329) (36) (61) (166) (14) 1,706 (1,737) (1,422) Carrying Contractual cash flow amount £000 £000 (1,056) 1,056 6 months or less £000 (1,056) 20 224 60 300 (20) (239) (60) (357) (20) (232) (60) (14) 1,660 (1,732) (1,382) Up to 1 year £000 — — — — (329) (329) Up to 1 year £000 — — (7) — (28) (35) 1-5 years £000 — — — — — — 1-5 years £000 — — — — (329) (329) 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 41 webisholdings plc Webis Holdings plc Annual report and accounts 2008 41 Notes to the Accounts continued for the period ended 25 May 2008 23 Financial risk management continued Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Classes of financial assets — carrying amounts Cash and cash equivalents Trade and other receivables 2008 £000 1,018 647 1,665 2007 £000 455 812 1,267 Generally, the maximum credit risk exposure of financial assets is the carrying amount of the financial assets as shown on the face of the balance sheet (or in the notes to the accounts). Credit risk, therefore, is only disclosed in circumstances where the maximum potential loss differs significantly from the financial asset’s carrying amount. The maximum exposure to credit risks for trade receivables any business segment: Pari-mutuel Sportsbook 2008 £000 580 67 647 2007 £000 733 79 812 Of the above receivables, £578,000 (2007: £718,000) relates to amounts owed from US horse racing tracks. These receivables are actively monitored to avoid significant concentration of credit risk and the directors consider there to be no significant concentration of credit risk. The directors consider that all the above financial assets that are not impaired for each of the reporting dates under review are of good credit quality. No amounts were considered past due at the year end (2007: £nil). The credit risk for liquid funds and other short term financial assets is considered negligible, since the counterparties are reputable banks with high quality external credit ratings. Interest rate risk The Group finances its operations mainly through capital with limited levels of borrowings. Cash at bank and in hand earns interest at floating rates, based principally on short term inter bank rates. The Group is exposed to downside interest rate risk on its overdraft facility, where the Group is charged Base rate +1%, but this is only a temporary facility caused by timing differences associated with cash in transit. Any movement in interest rates would not be considered to have any significant impact on the profit or loss during the period and on net assets at the balance sheet date. (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 42 42 Notes to the Accounts continued for the period ended 25 May 2008 23 Financial risk management continued Foreign Currency risks The Group operates internationally and is subject to transactional foreign currency exposures primarily with respect to the Euro, US Dollar and Singapore Dollar. The Group does not actively manage the exposures but regularly monitors the Group’s currency position and exchange rate movements and makes decisions as appropriate. At the balance sheet date, the Group had the following exposure: 2008 Current assets Current liabilities Short term exposure 2007 Current assets Current liabilities Non-current liabilities Short term exposure HKD £000 GBP Euro £000 £000 USD £000 35 (19) 16 HKD £000 34 (34) — — 216 (968) (752) GBP £000 185 (579) (300) (694) 48 1,090 (164) (116) Euro £000 16 (100) — (84) (433) 657 USD £000 886 (552) — 334 SGD £000 193 (82) 111 SGD £000 99 (67) — 32 NOK £000 DKK £000 SEK £000 Total £000 22 (16) 6 2 (3) (1) 8 1,614 (21) (1,706) (13) (92) NOK £000 DKK £000 SEK £000 Total £000 1 (15) — (14) 1 (3) — (2) — 1,222 (10) (1,360) — (10) (300) (438) 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 43 webisholdings plc Webis Holdings plc Annual report and accounts 2008 43 Notes to the Accounts continued for the period ended 25 May 2008 23 Financial risk management continued The following table illustrates the sensitivity of the net result for the period and equity in regards to the Group’s financial assets and financial liabilities and the Sterling – US Dollar exchange rate, Sterling – Euro exchange rate and Sterling – Singapore Dollar exchange rate. A 5% weakening of Sterling against the following currencies at the reporting date would have increased equity and profit or loss by the amounts shown below: 2008 Current assets Current liabilities Net assets 2007 Current assets Current liabilities Net assets USD £000 55 (22) 33 USD £000 44 (28) 16 EUR £000 2 (8) (6) EUR £000 1 (5) (4) SGD £000 10 (4) 6 SGD £000 5 (3) 2 Total £000 67 (34) 33 Total £000 50 (36) 14 A 5% strengthening of Sterling against the above currencies would have had the equal but opposite effect on the above currencies to the amounts shown above on the basis that all other variables remain constant. (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 44 44 Notes to the Accounts continued for the period ended 25 May 2008 24 Reporting under International Financial Reporting Standards The Group previously reported its financial statements under UK GAAP up until the period ended 27 May 2007. The analysis below shows a reconciliation of the Group's results and equity reported under UK GAAP to that reported under IFRS for the period to 27 May 2007. The transition does not change any of the cash flows. Transition to IFRS Reconciliation of net income and equity for the period ended 27 May 2007. Income Statement Amortisation of goodwill Loss for the period after taxation Balance sheet items Intangible assets — goodwill Profit and loss account Total equity Transition UK GAAP adjustment £000 £000 43 (69) (43) 43 Transition UK GAAP adjustment £000 — (11,533) 66 £000 43 43 43 IFRS £000 — (26) IFRS £000 43 (11,490) 109 IFRS 3 Business combinations does not permit the amortisation of goodwill, instead, goodwill is carried at cost and is subject to annual impairment reviews. The impact in the period to 27 May 2007 is the reversal of the amortisation charge of £43,000. There are no associated tax impacts. There were no equity adjustments at 28 May 2006. 25 Controlling party and ultimate controlling party The directors consider the ultimate controlling party to be Burnbrae Limited and its beneficial owner, Jim Mellon, by virtue of their combined shareholding of 52.4%. 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 45 webisholdings plc Webis Holdings plc Annual report and accounts 2008 45 Notice of Meeting NOTICE IS HEREBY GIVEN that the tenth Annual General Meeting of Webis Holdings plc (“the Company”) will be held at The Claremont Hotel, 18/19 Loch Promenade, Douglas, Isle of Man, on 25 November 2008 at 11 am for the purpose of transacting the following business: Ordinary Business 1 To receive and adopt the report of the directors and the accounts for the period ended 25 May 2008. As a Special Resolution 5 The directors of the Company be and they are hereby empowered pursuant to Article 8 of the Articles of Association of the Company (the “Articles”) to allot equity securities (as defined in Article 7(H) of the Articles) pursuant to the authority conferred on the directors to allot relevant securities by Resolution 4 above as if Article 7(A) of the Articles did not apply to such allotment PROVIDED THAT this power shall be limited to: 2 To re-elect as a director Mr D H N Eke who retires by rotation and, being eligible, offers himself for re-election in accordance with the Company’s Articles of Association. (i) 3 To reappoint KPMG Audit LLC as auditors and to authorise the directors to determine their remuneration. the allotment of equity securities in connection with a rights issue in favour of ordinary shareholders where the equity securities are issued proportionally (or as nearly as may be) to the respective number of ordinary shares held by such shareholders (but subject to such exclusions or other arrangements as the directors may deem necessary or expedient to deal with issues arising under the laws of any territory or the requirements of any regulatory body or any stock exchange in any territory or the fixing of exchange rates applicable to any such equity securities where such equity securities are to be issued to shareholders in more than one territory, or legal or practical problems in respect of overseas shareholders, fractional entitlements or otherwise howsoever); (ii) the allotment of equity securities to holders of any options under any share option scheme of the Company for the time being in force, on the exercise by them of any such options; and (iii) the allotment (otherwise than pursuant to paragraphs (i) or (ii) above) of equity securities up to a maximum aggregate nominal value equal to 15% of the issued ordinary share capital of the Company for the time being. The power hereby conferred shall expire at the conclusion of the next Annual General Meeting of the Company after the date of passing of this Resolution unless such power shall be renewed in accordance with and subject to the provisions of the said Article 8, save that the Company may Special Business To consider and, if thought fit, to pass the following resolutions: As an Ordinary Resolution 4 That the authority granted by special resolution to the directors of the Company to allot relevant securities up to an amount equal to but not exceeding the authorised but unissued share capital of the Company for the time being by a special resolution which was passed at the Annual General Meeting of the Company held on 9 December 2002 be renewed pursuant to the power provided by Article 6(C) of the Company’s Articles of Association, that such renewal of authority be for the exercise of that power generally and unconditionally and in all respects in the same terms as originally granted, and that such authority shall expire at the conclusion of the next Annual General Meeting of the Company after the date of passing of this Resolution unless renewed, varied or revoked by the Company in General Meeting. (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 46 46 Notice of Meeting continued before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the directors may allot equity securities pursuant to such offer or agreement as if the power conferred hereby had not expired. As Ordinary Resolutions 6 That in accordance with Article 12 of the Company’s Articles of Association and with Section 13 of the Companies Act 1992 the Company be generally and unconditionally authorised to make market purchases (as defined by Section 13(2) of the Companies Act 1992) of ordinary shares of 1 pence each in its capital, provided that: (a) the maximum number of shares that may be acquired is 20,683,000; (b) the minimum price that may be paid for the shares is 1 pence; (c) the maximum price that may be paid is, for a share the Company contracts to purchase on any day, a sum equal to 105% of the average of the upper and lower quotations on the Daily Official List of the London Stock Exchange for the ordinary shares of the Company on the five business days immediately preceding that day; and (d) the authority conferred by this resolution shall expire at the conclusion of the next Annual General Meeting of the Company after the date of the passing of this Resolution unless renewed, varied or revoked by the Company in General Meeting, but not so as to prejudice the completion of a purchase contracted before that date. 7 That the Report of the remuneration committee be received and adopted. By order of the Board D Waddington Secretary 15 October 2008 Registered Office: Viking House, Nelson Street, Douglas, Isle of Man, IM1 2AH Notes 1. Members are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at the meeting. A proxy need not be a shareholder of the Company. A shareholder may appoint more than one proxy in relation to the Annual General Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. Should you wish to appoint more than one proxy please return this form and attach to it a schedule detailing the names of the proxies you wish to appoint, the number of shares each proxy will represent and the way in which you wish them to vote on the resolutions that are to be proposed. To be valid, the form of proxy and the power of attorney or other authority (if any) under which it is signed or a certified copy of such power or authority must be lodged at the offices of the Company’s registrars, Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU by hand, or sent by post, so as to be received not less than 48 hours before the time fixed for the holding of the meeting or any adjournment thereof (as the case may be). 15657 21/10/08 Proof 8 15657 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 47 webisholdings plc Webis Holdings plc Annual report and accounts 2008 47 2. Any member entitled to attend and vote at the meeting 6. A copy of the contracts of service between each of the current directors of the Company and the Company will be available for inspection at the Meeting from 15 minutes prior to and until the conclusion of the Meeting. 7. The register of directors’ interests and particulars of directors’ transactions in the share capital of the Company and its subsidiary companies will be available for inspection at the Meeting from 15 minutes prior to and until the conclusion of the Meeting. Otherwise they will be open for inspection at the Registered Office of the Company during normal business hours on any weekday (Saturdays and Isle of Man public holidays excluded) from the date of this notice until the date of the Meeting. 3. may appoint one or more proxies to attend and, on a poll, vote instead of him. A proxy need not also be a member. In order to facilitate voting by corporate representatives at the meeting, arrangements will be put in place at the meeting so that (i) if a corporate shareholder has appointed the Chairman of the meeting as its corporate representative with instructions to vote on a poll in accordance with the directions of all of the other corporate representatives for that shareholder at the meeting, then on a poll those corporate representatives will give voting directions to the Chairman and the Chairman will vote (or withhold a vote) as corporate representative in accordance with those directions; and (ii) if more than one corporate representative for the same corporate shareholder attends the meeting but the corporate shareholder has not appointed the Chairman of the meeting as its corporate representative, a designated corporate representative will be nominated, from those corporate representatives who attend, who will vote on a poll and the other corporate representatives will give voting directions to that designated corporate representative. 4. The completion and return of a form of proxy will not preclude a member from attending in person at the meeting and voting should he wish to do so. 5. Pursuant to regulation 22 of the Uncertificated Securities Regulations 2005, the Company has specified that only those members entered on the register of members at 6 pm on 23 November 2008 shall be entitled to attend and vote at the meeting. Changes to the register after 6 pm on 23 November 2008 shall be disregarded in determining the rights of any person to attend and vote at the meeting. (cid:3)(cid:2)(cid:2)(cid:4) www.webisholdingsplc.com 15657 21/10/08 Proof 8 15657WEBISHOL:Layout 1 21/10/08 11:26 Page 48 48 15657 21/10/08 Proof 8 15657WEBISHOLcover:Layout 1 21/10/08 11:27 Page 3 (cid:2)(cid:1)(cid:1)(cid:3) www.webisholdingsplc.com 15657 20/10/08 Proof 7 15657WEBISHOLcover:Layout 1 21/10/08 11:27 Page 4 4 Chairman’s Statement webisholdings plc Webis Holdings plc Viking House, Nelson Street Douglas, Isle of Man IM1 2AH, British Isles Tel: +44 (0) 1624 698141 Fax: +44 (0) 1624 698134 Email: info@betinternet.com Website: wwwwebisholdingsplc.com 15657 20/10/08 Proof 7