Corporate Governance Statement

Compliance
The Company recognises the importance of the principles of good corporate governance and the Board is pleased to report its continued commitment to achieving such high standards throughout the year. As an AIM listed company, Sportingbet is not required to follow the provisions of the 2003 FRC Combined Code (the ‘Code’) as set out in the Financial Services Authority Listing Rules. Nonetheless, the Company voluntarily complies with the principles as set out in Section 1 of the Code.

The Board is accountable to the Company’s shareholders for good governance and the statement set out below describes how the principles identified in the Code are applied by the Group.

The Board constitution and procedures
The Company is controlled through the Board of Directors which, during the financial year, comprised four Executive and four Non-Executive Directors. All Non-Executive Directors (other than the Chairman pursuant to the Code) are considered by the Board to be independent of management and free of any relationship which could materially interfere with the exercise of their independent judgement. On 9 November 2005 the appointment of a further Executive Director meant that the Company did not comply with section A.3.2 of the Code, which states that at least half the Board, excluding the Chairman, should comprise Non-Executive Directors determined by the Board to be independent. The Board was then equally split between Non-Executive and Executive Directors. As the Chairman is primarily responsible for the running of the Board, he ensures that all Directors receive sufficient relevant information on financial, business and corporate issues prior to meetings. The Group Chief Executive’s responsibilities focus on coordinating the Company’s business and implementing Group strategy.

Peter Dicks resigned as Non-Executive Chairman and Director of the Company on 14 September 2006, after the end of the financial year.

A formal schedule of matters is reserved for consideration by the Board, which met 12 times during year. The Board is responsible for overall Group strategy, acquisition and investment policy, approval of major capital expenditure projects and consideration of significant financing matters. It reviews the strategic direction of individual trading subsidiaries, their codes of conduct, their annual budgets, their progress towards achievement of these budgets and their capital expenditure programmes. In addition, the Directors have access to the advice and services of the Company Secretary and all Directors are able to take independent professional advice in the furtherance of their duties if necessary. The Directors receive training and advice on their responsibilities as necessary. All Directors, in accordance with the Code, submit themselves for re-election at least once every three years and new Directors are subject to a transparent and rigorous appointment process.

The Company Secretary is responsible for ensuring Board processes and procedures are appropriately followed and support effective governance and decision making.

Board committees
The Board delegates clearly defined powers to its Audit, Remuneration and Nomination Committees whilst the Company’s Social Responsibility Committee (SRC), as reported in the Corporate Social Responsibility section, is responsible for reviewing the Company’s policies on corporate social responsibility and making appropriate recommendations to the Board. The minutes of each committee are circulated to and reviewed by the Board.

Audit Committee
The Audit Committee is chaired by Bob Holt (who has recent and relevant financial experience for this role, as indicated in the Board of Directors section). During the financial year, its other members were Peter Dicks and Sean O’Connor. Peter Dicks and Sean O’Connor were first appointed to the Committee on 30 January 2001. Bob Holt was appointed to the Committee on 4 October 2004 taking up the Chairmanship of the Committee from Peter Dicks on the same date. Peter Dicks resigned as a member of the Committee on 14 September 2006. The Committee’s Secretary is Daniel Talisman, the Company Secretary.

The Audit Committee meets at least twice a year (and met three times during the last financial year) and normally invites a representative of both the auditors and the Executive Directors, the latter usually being the Group Finance Director. At the end of each meeting the auditors are invited to meet with the Committee with no Executive or staff member present. The terms of reference of the Committee include monitoring the auditors’ performance and relationship, and reviewing accounting policies and financial reporting procedures. The Committee also has responsibility for reviewing the effectiveness of the Group’s internal control and risk management systems, described in more detail below. During the year, the Committee received presentations from senior executives on the management of key risks and control issues in their respective business areas and reviewed risk mitigation plans for critical risks. Terms of Reference for the
Committee can be viewed on the Company’s website and are available in writing on request.

Remuneration Committee
During the financial year, the Remuneration Committee was chaired by Peter Dicks and its other members were Brian Harris and Sean O’Connor. The Committee’s Secretary is Daniel Talisman, the Company Secretary. Peter Dicks resigned as a member of the Committee on 14 September 2006. The Remuneration Committee meets when necessary during the year (and met eight times during the last financial year) and considers the terms of employment and overall remuneration for the Executive Directors and key members of senior management. In particular, the Committee makes decisions regarding grants under share plans, salaries and incentive compensation. Terms of Reference for the Committee can be viewed on the Company’s website and are available in writing on request. The remuneration of Non-Executive Directors is determined by the Board.

Nomination Committee
During the financial year, the Nomination Committee was chaired by Sean O’Connor and its other
members were Peter Dicks and Brian Harris. The Committee’s Secretary is Daniel Talisman, the Company Secretary. Peter Dicks resigned as a member of the Committee on 14 September 2006. The Committee sits formally at least twice a year (and met 13 times during the last financial year). Terms of Reference for  the Committee can be viewed on the Company’s website and are available in writing on request.

The Committee is responsible for monitoring and formally reviewing the performance, composition, balance and expertise of the Board as a whole and making an appraisal of the contribution of individual Directors, including a review of their time commitment and attendance records. The Committee also considers succession planning for the Board and Group senior management. When necessary the Committee prepares a description of the role to be filled and engages external consultants to administer a detailed search and the generation of a shortlist.

Any recommendations for appointments or replacements are brought before the Board.

Evaluation
The Board continued its ongoing evaluation processes of itself and its committees to assess their performance and identify areas in which their effectiveness, policies and processes might be enhanced. As part of this process the Board continues to comply with the Institute of Chartered Secretaries and Administrators’ Code of Good Boardroom Practice. The performance of individual Directors has been considered by the Chairman and Group Chief Executive in discussion with other Non-Executive Directors. The Non-Executive Directors considered the performance of the Chairman, taking into account the views of the Executive Directors.

Communication with investors
The Group places a great deal of importance on communication with its institutional and private shareholders and responds quickly to all queries received. There is regular dialogue with institutional shareholders as well as general presentations after each quarter end and the issue of preliminary results.

All shareholders have at least 20 working days’ notice of the Annual General Meeting at which all Directors are introduced and available for questions. The Executive Directors endeavour to meet the Company’s larger institutional shareholders at the time of the Company’s quarterly results announcements and both the Chairman and Sean O’Connor, as the Company’s Senior Independent Director, are available to such shareholders throughout the year. Reports of such meetings are shared with the Board.

Accountability and Audit
(a) Internal control
The Group has fully complied with provision C.2.1 of the Code and the Turnbull Guidance for the year ended 31 July 2006 and up to the date of approval of the Annual Report and Accounts. The Board has ensured that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group. This process, which is regularly reviewed by the Board, is carried out in conjunction with business planning and is documented in a risk register that was developed up to the date of approval of the Annual Report and Accounts.

Whilst acknowledging the overall responsibility for the system of internal control and for reviewing its effectiveness, the Board is aware that the system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable, but not absolute, assurance against material misstatement or loss.

The Group’s internal control procedures continue to be reviewed, progressively developed and formalised to ensure that they sufficiently meet the requirements of the Group. Executive members of the Board are involved daily in all aspects of the business and they attend the regular management meetings at which performance against plan and business prospects are reviewed. Additionally, the Board seeks to continually strengthen the internal control system where this is consistent with improving the relationship between risk and reward.  

Other key features and the processes for reviewing effectiveness of the internal control system are described below:

• Monthly management information, including financial accounts and key performance indicators, have been defined and are produced on a timely basis for review by the Board.
• A detailed formal budgeting process for all Group businesses culminates in an annual budget which is reviewed and approved by the Board. Results for the Group and for its main constituent businesses are reported monthly against the budget to the Board and revised forecasts for the financial year are considered each quarter.
• A comprehensive financial and accounting package sets out the principles of the minimum standards required by the Board for effective financial control. This package sets out the financial and accounting policies and procedures to be applied throughout the Group. Compliance with the policies and procedures set out in this package is reviewed regularly. Formal reports for the Board are prepared by the senior executives on the operation of those elements of the system for which they are responsible.
• The Company has clearly defined guidance for capital expenditure.

These include annual budgets, detailed appraisal and review procedures, levels of authority and stringent due diligence requirements where businesses are being acquired.

(b) (i) External Audit
The Audit Committee meets periodically to review the adequacy of the Group’s internal control systems, accounting policies and compliance with applicable accounting standards and for considering the appointment of external auditors and audit fees. The Group’s auditors are invited to attend its meetings. The Audit Committee is authorised by the Board to investigate any activity within its terms of reference and obtain outside legal or other independent professional advice as necessary. The auditors and individual Board members are afforded the opportunity for separate meetings with the Audit Committee. The Audit Committee consists wholly of Non-Executive Directors.

The award of non-audit work to the auditors is subject to pre-clearance by the Audit Committee if the fee exceeds specified thresholds. As a matter of best practice and in accordance with the International Standard of Auditing 260, the auditors have held discussions with the Audit Committee on the subject of auditor independence and have confirmed their independence in writing.

(b) (ii) Internal Audit
The Internal Audit department reviews the extent to which systems of internal control are effective; are adequate to manage the Group’s significant risks; safeguard the Group’s assets; and with the
General Counsel and Group Company Secretary, ensure compliance with relevant legal and regulatory requirements. It provides independent and objective assurance on risks and controls to the Board and senior management.

Internal Audit’s work is focused on the areas of greatest risk to the Group, as determined by a risk assessment process involving Executive Directors and senior management. The output from this process forms part of the annual audit plan. The Director of Audit Internal Control & Compliance reports regularly to the Group Finance Director and the Audit Committee.

The role of the Internal Audit Department and scope of its work continues to evolve in order to take account of changes within the business and emerging best practice.