LEADING THE FUTURE OF ONLINE GAMING

888 HOLDINGS PLC

ANNUAL REPORT & ACCOUNTS 2015 WELCOME TO 888 HOLDINGS PLC

888 Holdings plc Innovation driven, customer focused

888 is one of the world’s most popular online gaming entertainment and solutions providers. More than a million customers enjoy our online gaming entertainment across more than 100 countries.

At the heart of 888’s business is its 888’s mission is to exceed its customers’ proprietary gaming technology and expectations and provide the most enjoyable highly sophisticated marketing, customer online gaming experience possible, even relationship management and business in the fast growing and dynamic online analytics. Together, these enable 888 to gaming industry. 888 is mindful of the deliver to customers and B2B partners alike complex regulatory environment in which market-leading and continually innovative it operates and the social responsibility online gaming entertainment products and that comes hand-in-hand with the online solutions. gaming industry. 888 always invests time and resources in caring for and protecting its customers and, by successfully doing this, 888’s business will continue to grow and prosper.

OVERVIEW OF 888

Overarching 888 brand 888’s B2C offering 888’s B2B brand

This Annual Report may contain statements which are not based on current or historical fact and which are forward looking in nature. These forward looking statements reflect knowledge and information available at the date of preparation of this Annual Report and 888 undertakes no obligation to update these forward looking statements. Such forward looking statements are subject to known and unknown risks and uncertainties facing 888 including, without limitation, those risks described in this Annual Report and other unknown future events and circumstances which can cause results and developments to differ materially from those anticipated. Nothing in this Annual Report should be construed as a profit forecast. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

01 24 01 02 04 06 06 08 12 19 20 27 28 32 34 39 40 46 61 75 76 77 65 73 73 74 IFC IBC 108 109 110 111 113

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STATEMENTS

rowth market rowth t a glance ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL man’s statement man’s

’s strategy report strategy ’s VERNANCE es to the consolidated es to the Company es to ectors’ remuneration ectors’ ectors’ report ectors’ statement ectors’ For more information see our website: see our website: information more For corporate.888.com arket review: focus on regulated markets arket review: on regulated focus Viability Statement Viability Clear growth strategy Clear growth model business Focused orporate responsibility orporate governance orporate isk management strategy isk management egulation and general regulatory and general egulation onsolidated income statement income onsolidated statement onsolidated sheet balance onsolidated statement onsolidated sheet balance ompany statement ompany of cash flows statement ompany information ompany STRATEGIC REPORT STRATEGIC GO report report Committee Audit developments of Directors Board C Dir 888 Overview 2015 a of responsibilities statement Global g Chair CEO 2015 business and financial r M R R C Dir Dir FINANCIAL of comprehensive income of comprehensive of changes in equity of cash flows statement Consolidated financial statements C of changes in equity Not financial statements information Shareholder C Independent auditors’ report Independent auditors’ Not C C C C C C 1 1 888 HOLDINGS PLC HOLDINGS 888

up 14% on for a like basis like reported revenue up 3% up 51% on for a like basis like reported revenue up 38% 45 like like 444 2015 2015 down 39% down up 28% like for for like like for for like 41 59 128 403 2015 2015 2015 2015 reported reported 97 30 391 100 2014 2014 2014 2014 First Time Depositors (FTDs) Depositors Time First % EBITDA EBITDA US$ million Revenue – B2C Emerging Offering – B2C Emerging Revenue US$ million Revenue – B2C Revenue US$ million 1 1 up 18% on for a like basis like reported revenue up 5% up 12% on for a like basis like reported revenue up 2%

like like 261 508 2015 2015 up 15% down down 20% like for for like like for for like

3

2 81 231 462 20.5 2015 2015 2015 2015 reported reported s defined in table set out on page 12. asino, Poker and Sport. Poker asino, A A C 101 221 17.9 455

2014 2014 2014 2014 Real money registered Real registered money accounts customer US$ million US$ million 3 1 2 onpage05. footnote s definedin Adjusted EBITDA Adjusted – B2C Casino Revenue US$ million A very successful year for 888 for year successful A very Revenue US$ million 2015 AT A GLANCE GLANCE A AT 2015 STRATEGIC REPORT – GLOBAL GROWTH MARKET

02 GLOBAL GROWTH MARKET

The global online gaming industry is fast-growing and dynamic, supported by technological developments and government regulation.

CAGR of 8.7%

$48.6bn 2014 ESTIMATED GLOBAL ONLINE GAMING MARKET*

$34.8bn 2014 2018 $34.8bn

2018 ESTIMATED GLOBAL ONLINE GAMING MARKET* $48.6bn

GLOBAL ONLINE MARKET FORECAST

The online gaming industry has New regulation, whilst increasing experienced rapid growth since its duties and costs for online gaming inception during the mid-1990s and operators, also creates opportunities continues to have clear and significant for incumbent operators with strong growth potential. Consistent growth brands and significant scale, such as remains supported by product 888, to access new customers in new innovation, customers’ ever greater markets and expand by exploiting access to high-speed and reliable marketing opportunities. internet connections, the spread of smart mobile devices, and government Mobile devices continue to have regulation. a transformational impact on the online gaming industry. Increasingly With the growth of the online gaming sophisticated devices with ever- market many governments have improving displays enable customers adopted and are continuing to adopt to enjoy high-quality online gaming specific regulatory frameworks for entertainment on the move, wherever the industry. they are. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 03

% CAGR 7.4 % 10.3 % 10.3 4.3% $22.2bn ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

size by product* by size 2018 forecast market market forecast 2018 888 HOLDINGS PLC HOLDINGS 888 bn $16.7 $11.2bn S Market value based on estimated Gross Gaming Revenue. Gross Market based on estimated value

* H2Gambling June2015. Capital ource: bn bn $7.6 $4.7 bn $2.4 SPORT CASINO POKER BINGO $3.2bn bn $2.0 USA OUR MARKETS AROUND THE WORLD THE AROUND MARKETS OUR EUROPE AND UK 888 is the only online gaming in all three licensed operator of Nevada, US states regulated and New Jersey. Delaware its develop to 888 continues as well in these states brands as as enhancing its offering one of the leading providers poker and casino of regulated US software in the regulated market. 888’s strong performance strong 888’s UK market in the core continued as in key regulated as well markets in Spain and Italy. a During 2015, 888 received sports in Ireland betting licence poker and as casino, as well sports in both betting licences Denmark and Romania. 2014 estimated market market estimated 2014 product* by size STRATEGIC REPORT – CHAIRMAN’S STATEMENT

04 DELIVERING LONG-TERM GROWTH

The 888 team has delivered another strong BRIAN MATTINGLEY operational result in a year when we successfully Chairman confronted a number of external challenges. On behalf of the Board, I would like to thank each of my colleagues across the world for their commitment during the year.

47% OUR MOBILE OFFERING Mobile is having a transformational impact on our business. Revenue from mobile devices continued to surge and represented 47% of B2C revenue in the UK.

See page 08 for more on In my first report as Chairman of 888, Clearly this could have been distracting our mobile offering. I am delighted to update you on what for our business. However, I am has been a very successful year. The delighted to say that throughout the 888 team has delivered another strong year 888 continued to deliver for all our operational result in a year when we stakeholders by improving our customer successfully confronted a number of offering, adapting to regulatory changes external challenges which impacted in new markets and growing the business. profitability, including a new point of This speaks volumes for the strength, consumption gaming tax in the UK, newly depth and dedication of our people introduced EU VAT charges, and currency throughout 888. I am confident that their movement headwinds. This success passion, skill and drive will ensure that again demonstrates the strengths of 888 remains at the forefront of the online 888’s customer proposition and business gaming industry for years to come and, model. 888’s ability to continue to grow on behalf of the Board, I would like to thank its core brands, launch its services in new each of my colleagues across the world for regulated markets and develop exciting their commitment during the year. new ways to thrill and entertain our customers is testament to the quality of this business and, of course, 888’s exceptional team. I am delighted to say that throughout the year 888 continued to deliver for 888’S WINNING TEAM all our stakeholders by improving 2015 was a very busy year for 888 and at times, as shareholders will be aware, our customer offering, adapting to the Board and members of the senior regulatory changes in new markets management team devoted significant time to exploring potential M&A and growing the business. opportunities for 888. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 05

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

made strong progress progress made strong are we where markets in 2015 in regulated in regulated in 2015 full marketing expertise expertise full marketing able to leverage our leverage able to In line with our focused focused In line with our OUTLOOK OUTLOOK growth strategy we we strategy growth Brian Mattingley Chairman 2016 22 March The online gaming marketThe is dynamic and grow develop and will continue to will be driven primarilyThis by globally. marketing new regulation, channels, adoption and and the increasing sophistication of mobile devices, making our gaming entertainment accessible and enjoyable. more ever planned ahead of the carefully We introduction of the new point of consumption gaming tax in the UK to impact some of the financial mitigate on 888 whilst ensuring continued we that gaming the most enjoyable provide to experience our customers. to take continued to advantage have We of new opportunities by created regulatory such as in Denmark, change, our own With Romania and Ireland. and significant gaming platforms experience of launching successfully in markets, continue we newly regulated see opportunities to 888 as more for regulatory introduce governments online gaming. frameworks for to duringyear the financial Trading daily with average has been strong date year. the previous 20% above revenue in operational momentum strong With be will continue to the business our focus on delivering a truly satisfying experience and delivering strong, our customers for sustainable long term earnings growth our shareholders. for to grow the 888 brands. grow to

888 HOLDINGS PLC HOLDINGS 888

BOARD GOVERNANCE REGULATION A number of Board changes took place place changes took A number of Board during our 2015, and it is a tribute to succession planning that the transition has been carried out smoothly and the Board’s without interruption to the 2015 AGM, Following business. as his role from Richard Kilsby retired as CEO and Chairman, down I stepped our Chairman role, up the Executive took during 2015) ItaiCEO (COO Frieberger and John Anderson joined the Board, as Non-executive Director. retired recruit continues its effortto Board The additional Non-executive Directors. was 2016, ItaiOn 2 March Frieberger and I consequently as CEO, appointed Itai’s role. the Chairman transitioned into development exciting an is appointment is confident that this and the Board our ability to appointment reinforces all 888’s value for deliver continue to come. stakeholders to in the years The Board is fully committed to complying to is fully committed Board The with the principles UK Corporate of the regulatory required The Governance Code. set out in are disclosures and governance this Annual Report and in the Compliance on page 40. Statement New regulation, including the new New regulation, tax in point of consumption gaming the UK, an impact is having on the shape of the global e-gaming market. In the UK, smaller e-gaming some brands are onerous finding the new cost burden are we the same time, At closing. and are in the industrywitnessing consolidation All of this scale. on an unprecedented alongside the additional gaming creates, duty opportunities cost, potential for operator 888 as an established and large with proprietary and market-leading relationship customer technology, management expertise and marketing capabilities all working together. is confident that despite Board The the financial impactregulation that new positioned well 888 remains can have, capitalise on opportunitiesto presented regulatory the onlineby changes across gaming industry. Lik US dollar in 2015, reported the strong Due to using other currencies. customers from of its revenue the newly excluding by has been calculated like Like impacted. revenue for was adversely revenue revenue to rates applying 2014 exchange by of Poker, with the exception in 2015 and, VAT EU introduced US dollar but only a small impacted the strong by was also adversely duringgenerated 2015. Poker of the reduction in the purchasing impact the indirect due to on revenue adjustment has been made, of local currencies. power

STRATEGIC PROGRESS STRATEGIC * like themajority inthisdocument:888reportsresults inUSdollarsbutgenerates e for itsfinancial In line with our focused growth strategy, strategy, In growth with our focused line in 2015 in progress made strong we able markets are we regulated where our full marketing leverage to expertise included This the 888 brands. grow to successful launches in the Danish market where in the second half of the year performedthe 888 brands have very Revenue from date. to encouragingly account markets to regulated grew (2014: 55%) revenue 59% of Group for as these launches as well aided by performancesnotably strong in the UK and Spain. Our core B2C business continued to B2C business continued to Our core in active with a 13% increase grow driven primarily by customers, performances strong exceptionally in and SportCasino on our offer and also by represent to which grew mobile devices, in the UK (2014: 33%). 47% of B2C revenue 888 rapidly for Sport grow continues to a clear opportunityand represents for both in terms of revenue our business, have now We acquisition. and customer sportsa premier betting product and in marketing significantly invested we helped This the 888sport brand in 2015. in Sport 74% growth revenue deliver to on a like for (94% growth the year for accelerate like plan to basis*) and we we in 2016 as investment this efficient in this major e-gaming grow continue to vertical. Dragonfish, our B2B business, and its proposition develop continued to to ‘skins’ added a number of new bingo during the year. the platform Customer focus, technology leadership technology focus, Customer central are and continuous innovation Our proprietary continued success. our to gaming and associated technology alongside leading-edgeplatforms analytical expertise the bedrock provide advantage. of our business and competitive leverage continued to During we the year engaging new, these skills create to gaming secure and safe all, above and, and entertainment our customers for Together drive efficient marketing. to add new customers this helps us to way and 888 in a cost efficient to entertain longer. them for STRATEGIC REPORT – CLEAR GROWTH STRATEGY

06 CEO’S STRATEGY REPORT

I am pleased to present 888’s Strategic ITAI FRIEBERGER Report to shareholders following my recent Chief Executive Officer appointment as Chief Executive Officer.

In my new role, I expect to bring to bear my operational experience from both within and outside 888, as well as my personal relationships and insights to the online gaming industry as a whole. I am entering this role at a time when 888 is at the top of its game, and I look forward to further developing the Company’s strategy and business, and delivering exceptional value to shareholders.

CLEAR GROWTH THE KEY PILLARS OF 888’S GROWTH STRATEGY STRATEGY Development of Driving margin growth through The 888 Group has a core B2C brands operational efficiencies clear strategy for long 1 2 term growth across OUR STRATEGY IN ACTION its business. 888 will continue to exploit 888’s B2C offering remains at the core of 888 and is the foundation Management will remain steadfastly focused on organic growth of our success. We will continue to innovate, invest in and develop improving margins by maximising operational potential as well as our proposition to ensure that we deliver an unrivalled gaming efficiencies, including by constantly developing experience that our customers enjoy. our marketing approach and driving increased evaluating attractive volumes. M&A opportunities to 888 has established leading brands in Casino, Poker and Bingo and deliver long-term value is focused on growing these brands as well as on delivering the for our shareholders. significant opportunities available to the fast-growing and rapidly developing 888sport brand.

WHAT WE DELIVERED – KEY HIGHLIGHTS IN 2015:

»» Like for like B2C revenue growth of 14% to US$444.2 million »» Successful, innovative, return on (2014: US$390.8 million) and reported revenue* of US$412.5 investment marketing campaigns million (2014: US$390.8 million) increased first time depositors by 28% »» Active B2C customers up 13% »» Maintained control on costs »» Like for like Casino revenue up 18% to US$261.4 million (2014: US$220.6 million) and reported Casino revenue* of US$238.7 million (2014: US$220.6 million) aided by development of new games and functionalities across mobile and desktop devices »» Launch of new Casino brand, 777.com, in the second half of the year »» Poker maintained second position in the global poker liquidity rankings according to Pokerscout »» Exceptionally strong Sport revenue growth of 74% (94% like for like) supported by increased marketing investment and intensified Sport presence across 888’s brands, which will accelerate in 2016 as 888 seeks to capitalise on clear and significant growth opportunities in this vertical »» Leading mobile proposition and efficient marketing helping to drive bingo first time depositors up by 41% »» ‘Mobile first’ strategy continued to reap rewards and revenue from Mobile devices in the UK rose to represent 47% of UK B2C revenue (2014: 33%) STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 07

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

Continue to protect our protect to Continue responsibly and act customers Bef Monitored environmental performance environmental and Monitored identified opportunities consumption for energy reduction and waste in staff training and investment Continued identify instances of problem to procedures gambling and fraudulent behaviour and optimisation of responsible review Continued and take such as self-limits, a break gaming tools self-exclusion Close partnership with major helping agencies and support centres » » » »

In 888 is always operating in the online gaming industry, as well mindful of the complex regulatory environment which includes protecting social responsibilities, as 888’s time and invest 888 will continue to our customers. the protecting our customers, in caring for resources entertain continue to and ensuring that we vulnerable, with 888. play and delight those who choose to * VAT. deductionore ofEU » » » » 5 888 HOLDINGS PLC HOLDINGS 888 B2B partner of choice B2B partner of choice Dragonfish through 33 new bingo ‘skin’ arrangements added ‘skin’ 33 new bingo the Dragonfish Bingo networkto on the Dragonfish innovation Continued with furtherplatform product including enhanced development and shared bonus management features jackpots Bingo brands across progressive » » » » We will continue to invest in and innovate in and innovate invest will continue to We as the to establish ourselves our B2B offer partner and of choice in both regulated markets.newly regulating 4

Expansion in regulated Expansion in regulated markets New licences acquired in regulated in regulated New licences acquired markets in Denmark, Romania and Ireland poker Successful launch of shared of liquidity the states across player a key and Nevada, creating Delaware both 888 and our B2B advantage for operating partners Strong performance Strong UK market in core driven primarily and Sport Casino by Maintained leading position in Spain supported launch of 888sport.es by in H2 2014 and slot games during 2015 » » » » 3 » We will remain focused on growing our on growing focused will remain We marketsbusiness in locally regulated exploit marketing able to are we where opportunities 888 has the our brands. for skills successfully agility to and proven in grow and efficiently launch and markets. attractive regulated » » » WHAT WE DELIVERED – KEY HIGHLIGHTS IN 2015: IN HIGHLIGHTS KEY – DELIVERED WE WHAT THE KEY PILLARS OF 888’S GROWTH STRATEGY GROWTH 888’S OF PILLARS KEY THE ACTION IN STRATEGY OUR

STRATEGIC REPORT – FOCUSED BUSINESS MODEL

08 FOCUSED BUSINESS MODEL

888 is structured into two lines of business: B2C, under the 888 brands, and B2B, conducted through Dragonfish.

B2C »» Innovative, driven marketing 888’s core B2C line of business succeeds 888 is resolutely focused on return by efficiently recruiting customers and on investment driven marketing providing them with engaging online campaigns. The business continually gaming entertainment services. The develops innovative marketing drivers behind the success of our B2C techniques and channels, both business are: online (including online advertising, affiliate programmes, search engine 1. increasing the number of new players optimisation) and offline (including (first time depositors) enjoying 888’s TV and print media advertising, gaming entertainment products; sponsorships) to support its brands and increase customer loyalty. 2. reducing the cost per acquisition The return on investment of all of those new players to 888; and marketing campaigns are rigorously tested against 888’s strict criteria 3. maximising the lifetime value before being rolled out to their (measured as net gaming revenue less target markets. This ensure that cost of sales) to 888 of each customer. 888’s marketing spend is both cost efficient and highly effective. Underpinning 888’s ability to deliver these three drivers are 888’s proprietary »» Product innovation gaming technology and leading-edge and leadership business analytics expertise. 888 The ability to successfully develop employs an extensive team of highly “in-house” proprietary and innovative trained and experienced business games on mobile and desktop analytics and data-mining professionals platforms that customers are excited who have been analysing and learning to play as well as fresh new features from customer behaviour since 888’s that enhance the enjoyment of foundation in 1997. By leveraging this existing games are key competitive extensive and continually evolving advantages for 888 and help to data and by applying robust statistical differentiate 888 from competitors models, teams across 888 from product in the eyes of the customer. 888 development to marketing to customer combines exclusive content with third support are able to successfully party games and branded content to influence the above three drivers ensure that we constantly offer a fresh of 888’s success. Influencing factors and enjoyable customer proposition include, but are not limited to, the in the online gaming market. following: »» A seamless customer »» Maintaining our strong experience and trusted brand 888 delivers its gaming entertainment A strong brand is a key advantage in products seamlessly and responsively what is a competitive global online across mobile and desktop platforms. gaming market. 888’s consistently On mobile devices, 888’s brands are innovative and engaging customer available on free-to-download IOS offer, focused customer support and and Android ‘apps’. The flexibility and heritage in pure online gaming have consistent experience of the 888 offer meant that the 888 brand is amongst across platforms and devices means the most trusted and recognised in that customers are able to enjoy the industry. 888’s focus on product unrivalled gaming entertainment development, customer service and however and wherever they choose. marketing continue to support the strength and appeal to customers of the 888 brand. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 09

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

B2B – DRAGONFISH DRAGONFISH – B2B Itai Frieberger Officer Executive Chief 2016 22 March Under the Dragonfish brand, 888 offers 888 offers brand, Under the Dragonfish B2B gaming partners comprehensive Total Gaming Services and flexible vigorously tested are solutions that the regulatory meet requirements to jurisdictions where of the different platform Dragonfish’s involved. they are to its partners comprehensive offers a end-to-end service spanning the use operations software, of technology, marketing tools. and advanced is primarily an B2B revenue 888’s of the net gaming revenue share agreed its B2B gaming partners. by generated focus has an ongoing Dragonfish and rich content on developing entertaining mobile and games across division is one The platforms. desktop of bingo providers of the largest such major brands powering software, Cheeky Bingo and Foxy Bingo, Wink as brand, the Casinoflex Through Bingo. its partnersthe division also offers a than 300 Casino of more leading range including video choose from, games to jackpots, progressives, classic slots, slots, table games video poker, Dealer, Live Dragonfish games. and leading branded of regulated is also a leading provider poker and casino software in the US market. regulated focused on remains Dragonfish its customer and innovating developing 888’s and service, leveraging offering in developing investment continuous means This leading gaming platforms. positioned as the 888 remains that e-gaming partner in both of choice markets. and newly regulating regulated 888 HOLDINGS PLC HOLDINGS 888 Dedicated VIP Support Dedicated is there B2C brands 888’s Across of role The VIP Support. dedicated VIP Support provide is to teams the roller” “high first class supportto their loyalty and increase players analytics sophisticated 888. 888’s to enables modelling and predictive value high identify effectively 888 to early in their lifecycle customers VIP Support teams enabling the engage with those proactively to the they have and ensure customers gaming experience most enjoyable possible with 888. processing Payment leading proprietary payment 888’s capabilities supportprocessing a wide variety of languages and than 40 with more currencies It methods. is vital that payment efficient fast, offer able to are we processing, use payment and easy to customer a positive ensure both to maximise but also to experience into browsers and convert revenue options payment 888’s players. include a cashier interface available desktop both for in 18 languages, with and on mobile/tablet devices, methods payment the most relevant for and emphasised identified according customers different their market. to protection Customer our duty take as a responsible We veryoperator seriously and take minimise to steps comprehensive gaming and eliminate problem fraud, using our services. minors from and timely rigorous Through as ongoing checks as well customer tracking real-time of customer monitors 888 continually activity, activity irregular be an may for that or compulsive of fraud indication and prevention fraud 888’s gaming. service and customer are teams developed and have highly trained to proactive methods and efficient issues and notify and protect identify our customers. » » »

» » » Excellent customer support customer Excellent partAs supply of our mission to online gaming the most enjoyable we entertainment experience, on the strength pride ourselves and relationships of our customer a cost- providing to committed are customer and efficient effective support class customer service. First for each of our brands is offered telephone, labels through and white functionsemail and online chat to in nine the world around customers languages. different Cross-selling customer 888 has market-leading major online in four propositions Sport Poker, gaming verticals: Casino, the strength Leveraging and Bingo. and customer of the 888 brand each of these verticals in proposition predictive using proven and by enhance 888 is able to modelling, promoting by value lifetime customer existing product to each relevant and in a targeted customers way. attractive Customer relationship relationship Customer management leadership and robust Underpinned by models, statistical sophisticated predict effectively 888 is able to of a new customer value the lifetime within a short period time of helps This of them joining 888. direct to deliver enable 888 to relevant personalised and customers channels across communications and activity. loyalty increase that analytical 888’s Underpinned by range a broad offers 888 approach, and appealing bonuses of targeted country localised from to are that product, product to from country, the individual to and according Furthermore, profile. customer’s skills apply these 888 is able to potential identify accurately to to according players “churning” certain interact characteristics, accordingly, with those players longer. for them and retain » » » » » » STRATEGIC REPORT – FOCUSED BUSINESS MODEL CONTINUED

10

KEY DRIVERS OF B2C SUCCESS

REDUCING COST PER INCREASING ACQUISITION MAXIMISING FIRST TIME PLAYER DEPOSITORS LIFETIME VALUE

Maintaining our strong and trusted brand

Product innovation and leadership across platforms

Customer protection

Innovative, return on investment driven marketing

Payment processing

Entering new markets

Customer relationship management leadership

Excellent customer support

Dedicated VIP support

Cross-selling

Proprietary gaming technology

Leading-edge business analytics STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 11

* ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

HOW WE GENERATE REVENUE GENERATE WE HOW Online casinos replicate the real-life casino experience casino experience the real-life Online casinos replicate online across “the house” against playing with players casino table games such as roulette of classic versions In these as slot and video games. and blackjack as well “edge”. or advantage the house has a statistical games, the by is represented gaming revenue Casino of bets placed the amounts between difference won. less amounts customers by the actsas the host for the operator In online poker, enables customers that a platform game and provides of poker against each other. various forms play to the represents gaming revenue online Poker each poker from charged “rake”) (or commission participation and entryhand in ring for games, fees tournaments. in Poker online bingo rooms bingo halls, with traditional As by of winning prizes the chance customers offer their bingo format and playing tickets purchasing of choice. the by is represented Bingo online gaming revenue of tickets purchased the amounts between difference won. less amounts customers by Sportsbook comprises online gaming revenue less pay-outs customers. bets placed to to of net gaming revenue a share 888 pays partyits third sports provider. betting platform sports is reported betting revenue 888’s Offering. under Emerging 888 HOLDINGS PLC HOLDINGS 888 OUR OFFER OUR 888casino aims to provide the most enjoyable online the most enjoyable provide 888casino aims to in-house exclusive offering by available experience slots and video alongside branded games developed high- exceptional which offer games, Casino “Live” casino games with a range quality video streamed dealers. of professional a leading-edge 888poker offers poker platform a variety enjoy of innovative to enabling players features. Card 7 Omaha Hi’Lo, Hold’em, Texas 888poker offers Limit, Razz in Pot and other poker variations Stud, Limit and No Limit formats. Fixed engaging each have leading bingo brands 888’s sense of a variety of games and a strong themes, of traditional the experience replicating community, also benefit bingo brands Group’s The bingo halls. of 888-developed range games, slot an extensive from offered are that cards casino games and scratch bingo formats. alongside traditional sports888sport live scores betting odds for provides players allowing as they happen everyof events day, as they unfold. bet on the outcomes to SPORT BINGO POKER CASINO R

OUR CORE GAMING PRODUCTS GAMING CORE OUR PRODUCT * 79inthefinancialstatements. asdefinedonpage evenue STRATEGIC REPORT – 2015 BUSINESS AND FINANCIAL REVIEW

12 2015 BUSINESS AND FINANCIAL REVIEW

888’s financial performance in 2015 reflects its AVIAD KOBRINE success in attracting new customers, retaining Chief Financial Officer them and increasing their overall spend. 888’s underlying financial results for the year were strong despite being adversely impacted by several external factors.

Financial Summary 2015 1 2014 1 US$ million US$ million Change Revenue (including EU VAT) – B2C Casino 238.7 220.6 8% Poker 88.5 93.7 (6%) Bingo 44.0 46.6 (6%) Emerging Offerings 41.3 29.9 38% Total B2C 412.5 390.8 6% B2B 59.8 63.9 (7%) Revenue (including EU VAT) 472.3 454.7 4% EU VAT2 (10.2) — Revenue 462.1 454.7 2% Operating expenses3 (127.4) (130.3) (2%) Gaming duties4 (50.0) (15.8) 216% Research and Development expenses (36.8) (40.7) (10%) Selling and Marketing expenses (138.9) (133.8) 4% Administrative expenses5 (28.4) (33.4) (15%) Adjusted EBITDA3,4,5 80.6 100.7 (20%) Depreciation, amortisation and impairment charges (18.6) (19.0) Share benefit charges, finance and other (6.4) (6.1) Share of Joint Venture and associates loss (0.1) (7.7) Adjusted profit before tax 55.5 67.9 (18%) Exceptional acquisition costs: Legal and professional costs (17.5) — Reimbursement of acquisition costs 8.8 — Exceptional acquisition finance costs (5.9) — (14.6) — Exceptional retroactive duties and associated charges (8.4) — Profit before tax 32.5 67.9 (52%) Adjusted basic earnings per share 6 15.9¢ 19.2¢ (17%) Basic earnings per share 8.3¢ 16.1¢ (49%)

Reconciliation of Operating Profit to Adjusted EBITDA 20151 20141 US$ million US$ million Operating profit 40.8 80.0 Depreciation 8.9 9.0 Amortisation 9.7 8.3 EBITDA 59.4 97.3 Exceptional legal and professional costs 17.5 — Exceptional reimbursement of acquisition costs (8.8) — Exceptional retroactive duties and associated charges 8.4 — Impairment charges — 1.7 Share benefit charges 4.1 1.7 Adjusted EBITDA 80.6 100.7

1 Totals may not sum due to rounding. 2 From 1 January 2015, 888 is liable to VAT in respect of some of its electronically supplied gaming services in certain EU Member States (EU VAT). This VAT, which is a deduction from revenue, has been presented separately to allow for a like for like comparison with 2014. 3 Excluding depreciation of US$8.9 million (2014: US$9.0 million), amortisation of US$9.7 million (2014: US$8.3 million) and impairment charges of nil (2014: US$1.7 million). 4 Excluding exceptional retroactive duties and associated charges of US$8.4 million (2014: nil) in respect of gaming taxes relating to activity in prior years in Austria and Romania. 5 Excluding share benefit charges of US$4.1 million (2014: US$1.7 million). 6 As defined in note 9 to the financial statements. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 13

B2C OVERVIEW B2C of EU VAT), revenue was 6% higher year revenue VAT), of EU reflecting the at US$412.5 million, on year currency adverse movements. Like for like B2C revenue during likeLike the year B2C revenue for a 14% was US$444.2 million, representing the prior (2014: US$390.8 on year increase (2014: revenue million) and 87% of total was driven primarily growth This 86%). veryby performances strong in Casino and Sport. deductionOn a reported basis (before Adjusted EBITDA for the year was US$80.6 was US$80.6 the year for EBITDA Adjusted million) and million (2014: US$100.7 to decreased margin EBITDA Adjusted is a resilient This 17.4% (2014: 22.1%). that during we the year given outcome costs of US$27.6 incremental incurred UK to related million (2014: US$2.1 million) newly duty, point of consumption gaming gaming duties in Denmark,introduced RomaniaAustria, and Ireland of US$4.6 deduction VAT as the EU million, as well of US$10.2 million (2014: nil) and currency adverse incurred movements. adjusted of these factors, a result As to by 18% tax decreased before profit US$55.5 million (2014: US$67.9 million). In net exceptional incurred addition we and finance acquisition professional legal, the aborted to acquisition costs related of bwin.party entertainment digital plc of US$14.6 million (2014: nil) and exceptional gaming duties and associated retroactive of US$8.4 million (2014: nil). charges tax was US$32.5 before profit a result As million (2014: US$67.9 million). Adjusted (2014: was 15.9¢ basic earnings per share was 19.2¢) and basic earnings per share 8.3¢ (2014: 16.1¢). cash be strongly 888 continued to from with net cash generated generative operating activities at US$85.0 million at in 2015 (2014: US$111.9 million). As position financial December31 888’s 2015, with cash and cash strong remains equivalents of US$178.6 million (2014: US$163.1 million) and US$82.4 million of deposits (2014: US$67.5 million). customer performance strong and 888’s Given continued confidence in the the Board’s a finaloutlook, is recommending the Board in accordance dividend of 4¢ per share dividend policy plus an with 888’s additional one-off which 8¢ per share, with the interim dividend of 3.5¢together the for equals 15.5¢ (2014: 15.0¢) per share of 3.3%. an increase year, ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 by 12% to 12% to by performance million like revenue revenue like B2C business. driven by by driven Like for for Like increased increased of our core of our core US$507.7 US$507.7 the continued the continued strong strong INTRODUCTION Financial results and dividend Financial results for results underlying financial 888’s being despite strong were the year external impacted several by adversely impactfactors the full year including of point of consumption gaming duty in the UK, new gaming duties in respect of and Denmarkoperations in Austria well as newlyas Romania introduced and Ireland, costs currency movements, VAT, EU with an abortedassociated acquisition, gaming exceptional and retroactive by increased like Like revenue duties. for US$454.7 US$507.7 million (2014: 12% to the continued strong million) driven by performance B2C business, of our core in particular and Sport. in Casino Reported US$462.1 million 2% to increased revenue being (2014: US$454.7 million) despite of US$10.2 VAT EU impacted by adversely million (2014: nil), which is deducted from in certain generated revenue European markets, as weaker currencies as well against the US dollar when compared the priorto year. 888’s success is built on its technological built on its technological success is 888’s efficient in combination with the strength by directed utilisation of this technology, goals of 888’s The extensive data analytics. maximise simple: to business analytics are customer increase recruitment, customer the cost per value and minimise lifetime optimising acquisition, thereby customer on marketing return investment. financial performance in 2015 888’s reflects its success in attracting new them and increasing retaining customers, spend. their overall

%

Sport revenue up 74%, reflecting increasing 888sport’s as a recognition leading sports betting destination. 74 STRATEGIC REPORT – 2015 BUSINESS AND FINANCIAL REVIEW CONTINUED

14

Active B2C players and first time depositors, B2C – Product segmentation two of the core metrics of our B2C 2015 2014 business, increased by 13% and 28% US$ million US$ million Change respectively, driven in particular by strong Revenue – B2C performances in Casino and impressive Casino 238.7 220.6 8% growth in Sport. This strong operational Poker 88.5 93.7 (6%) momentum reflects the quality of our Bingo 44.0 46.6 (6%) B2C brands as well as the success of our Emerging Offerings 41.3 29.9 38% customer relationship management Total B2C 412.5 390.8 6% activity and innovative, return on B2B 59.8 63.9 (7%) investment driven marketing coupled with Total revenue (including EU VAT) 472.3 454.7 4% the introduction of Sport in Spain during EU VAT (10.2) — — the third quarter of 2014 and re-launch in Revenue 462.1 454.7 2% Denmark during the third quarter of 2015. Revenue by geographic market Mobile devices continue to be a key driver of growth in our B2C business in terms of 2015 2014 Growth (decline) % from Total both revenue and customer acquisition US$ million US$ million from previous year Revenue across product verticals. B2C revenue from UK 212.7 201.6 6% 46% Mobile devices in the UK increased to Europe (excluding UK) 178.4 170.1 5% 39% 47% (2014: 33%). Continuous innovation Americas 48.5 55.2 (12%) 10% is central to 888’s progress and our ‘mobile Rest of world 22.5 27.8 (19%) 5% first’ approach to product development Revenue 462.1 454.7 2% 100% is reaping rewards. 888 previously fully embedded a mobile product offering across all product verticals and took the CASINO strategic decision to develop our own Results overview proprietary mobile solution and games. 888casino continued its excellent This approach has given 888 full control momentum in 2015, building on a record over innovation and developing our offer year in 2014, with like for like revenue ahead of competitors, allowing 888 to growth of 18% to US$261.4 million (2014: create ever richer and more engaging US$220.6 million) and a 37% increase content for our customers. In 2015, we in active players compared to the prior continued to add new games across year. Casino revenue on a reported platforms as well as new features to our basis (before deduction of EU VAT) was product offering, ensuring we remain US$238.7 million (2014: US$220.6 million). differentiated in our customers’ eyes. The strong Casino performance reflects further progress in our core UK market Management’s strategic focus has been as well as in Spain, where the 888 brand on growing the Group’s presence in continues to gain traction supported by regulated jurisdictions, which has been the introduction of slot games to that demonstrated by growth of 6% and 5% market halfway through the year. in the UK and Europe (excluding UK), respectively. Other regions continue 37% Product overview to represent a smaller comparative 888 aims to provide the most entertaining proportion of the Group and as such 37% increase and engaging online casino experience fewer resources have been dedicated in active casino available across both desktop and mobile to them, which has seen a consequent players compared platforms. 888casino offers classic table decline in revenues. to the prior year. games, such as blackjack and roulette, alongside exclusive in-house developed proprietary games, such as the hugely successful Millionaire Genie and Snack Time Jackpot slot games, as well as branded video slots and innovative ‘Live Casino’ games.

The success of 888casino remains underpinned by our heritage as an online casino operator and innovative customer proposition alongside effective customer relationship management and marketing. In 2015, 888casino continued to develop its offer with a total of more than 40 new games introduced across STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

15

% 41 Bingo first time significantly depositors 41%. by increased ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 BINGO An increase in B2C Bingo revenue on a in B2C Bingo revenue An increase likelike a pleasing basis of 2% was for strong and was driven by outcome activity in customer on mobile growth like Revenue on a likedevices. basis for on a reported was US$47.6 million and, on year year was 6% lower revenue basis, at US$44.0 million (2014: US$46.6 million) currency of adverse impactas a result with the vast majority of Bingo revenue in GBP. denominated overview Product B2C Bingo first time depositors by 41% against increased significantly reflecting both 888’s year the previous efficient marketing well as the impact as of UK point of consumption gaming UK bingo duty on the highly fragmented market some smaller to that has led marketingbrands reducing activity and, closing. in some cases, online bingo entertainment888 offers range of branded bingo a wide across theme engaging each with its own sites, bingo and rich All of 888’s content. classic 90-ball and 75-ball brands offer unique format bingo games in their own supported are These our by and theme. slot machine games and online exciting 888’s during the year, and, cards scratch benefit from bingo brands continued to new content of fresh the constant flow developed ‘in-house’ including exclusive games. Results overview Results appeal. 888’s Poker also continues to also continues to Poker 888’s appeal. casino a fully integrated benefit from enabling poker players gaming suite, range of casino games 888’s enjoy to and supporting its ability cross-sell to effectively. NUMBER 2 position 888poker’s in the PokerScout global poker liquidity rankings. POKER 888poker as has established a reputation recreational the destination of choice for range of a broad and offers poker players Hold’em, Texas poker variations such as Stud and Razz in Pot 7 Card Omaha Hi/Lo, Limit and No Limit formats Limit, Fixed that the brand has universal ensure to 888poker prides itself on delivering an incomparable gaming experience with the widest possible range of games and develop continued to We tournaments. our leading-edge poker in platform a enjoy to 2015 and enable players Successful variety features. of innovative include offer our Poker to developments enjoy to players which allows PokerCam, available pokersecure games that are webcam streaming via 888’s time in real tournaments, TeamsPoker and technology, can set up their own players whereby their personal poker games and invite at scheduled times. friends play to 888’s Poker remained relatively resilient resilient relatively remained Poker 888’s in 2015 against a backdrop of the negative the wider online across witnessed trends poker industry 888’s and cemented position at number two in the global poker rankings, as reported PokerScout. by Product overview Product 888poker outperform continued to what online poker a highly competitive remains bymarket, increasing with active players revenue Poker 1% against the prior year. was US$90.1 million (2014: US$93.7 million) likeon a like on a reported basis and for US$88.5 VAT) deduction of EU basis (before million (2014: US$93.7 million). mobile and desktop platforms alongside platforms mobile and desktop to and product upgrades new features and make established favourites improve and engaging intuitive more them ever included the debut This our customers. for that of a new Immersive feature Roulette experience on this enhances the player multiple offering classic table game by angles of the high definition camera motion views wheel and slow roulette of the ball landing in the pockets. were we In the second half of the year, a new brand introduce also pleased to with the launch of offer our Casino to themed 777.com. 777.com has the retro a unique theme based on the swing, of 1950s sophistication and nostalgia confident this Americana are and we new brand will supportby our offer new customer appealing to helping to demographics. Results overview Results STRATEGIC REPORT – 2015 BUSINESS AND FINANCIAL REVIEW CONTINUED

16

EMERGING OFFERINGS from our UK bingo partners. B2B revenue Results overview from our US business was also lower Revenue from our Emerging Offerings when compared to the prior year as we was 38% higher year on year at US$41.3 implemented operational changes in million (2014: US$29.9 million). our US operations in the first half of the year aimed at increasing the long term $402.6m This was a result of continued exceptional sustainability of the business. growth from Sport, which increased revenue by 74% against very strong Operational overview comparatives in the prior year. In 2015 our B2B bingo platform expanded further with 33 new skins added to the Product overview Dragonfish Bingo network. Our partners B2C revenue by product On the back of a transformational year continue to benefit from ongoing for 888sport in the prior year, during 2015 innovation on the platform including Casino $230.6m we delivered outstanding continued the further enhancements to bonus Poker $86.7m progress in our fastest growing product management functionality and the Bingo $44.0m vertical. This was again driven by highly development of shared progressive Emerging $41.3m effective marketing efforts, the increasing jackpots across bingo brands on the Offerings quality of our offer with ever more platform. Dragonfish launched the markets and live bets for customers to Casinoflex brand towards the end of enjoy, and increasing penetration on the year, clearly positioning 888’s B2C mobile devices, including in Spain where Casino offering in the market, and more we launched on mobile in the second than 200 new games were added to the half of 2014, and Denmark, where we B2B platform during the year. In the US, launched in the second half of 2015. our operating partners in the states of Delaware and New Jersey benefited from The 888sport brand is increasingly the launch in February of our unique recognised by customers as a compelling platform enabling the pooling of poker sports betting destination. The site is players across the two regulated states. consistently adding new functionality, such as Cash-In, which puts betting in the EXPENSES OVERVIEW hands of the player, and TipsNewsViews, Gaming duties increased considerably which is 888sport’s content microsite reflecting the full year impact of point that provides insightful betting previews, of consumption gaming duty in the UK, news and opinion for our customers. first time recognition of gaming taxes in During the year we increased marketing Austria, Denmark, Romania and Ireland investment to support the development and increased gaming duties driven by of the 888sport brand and attract growth in revenue from Italy and Spain as new customers. This acceleration of a result of our new slots games offering. marketing increased in Q4 of the year Overall operating expenses, research and we anticipate this trend of marketing and development and administrative investment to continue into 2016 as we expenses decreased due to more see clear further growth opportunities favourable exchange rates and a one-off for 888sport both in terms of revenue special cash bonus to employees in 2014. and customer acquisition. There remains a significant growth opportunity in this Operating expenses major e-gaming vertical for 888 and Operating expenses*, which mainly further developing Sport will be a major comprise employee related costs, driver of 888’s overall strategy in the commissions and royalties payable to coming years. third parties, chargebacks, payment service providers’ (PSP) commissions B2B REVIEW and costs related to operational risk Results overview management services, totalled US$127.4 Revenue from Dragonfish, 888’s B2B million (2014: US$130.3 million). This offering, was stable at US$63.5 million represented a decreased proportion of on a like for like basis (2014: US$63.9 revenues (before deduction of EU VAT) million) whilst reported revenue (before at 27.0% (2014: 28.7%) as a result of deduction of EU VAT) decreased by 7% to continued operating efficiencies, strict US$59.8 million (2014: US$63.9 million). cost control and the effect of weaker This was in part driven by the weaker currencies against the US dollar, partially GBP impacting the reported revenue offset by increased costs associated with Sport content and higher commissions and royalties required to support 888’s * As defined in the table set out on page 12. improved Sport performance and Live STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 17

NEW NEW SKINS ADDED Our B2B bingo platform Our B2B bingo platform with grow to continues 33 new skins added to Bingo the Dragonfish network during the period. Our partners continue our benefit from to on ongoing innovation the – such as the platform liquidity pooling of player bingo skinsacross – that the makes Dragonfish B2B partner of choice. 33 ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 Share benefit charges Share benefit charges Equity settled share US$2.4 million (2014: US$1.3 million). were mainly attributed to are charges year’s This granted equitylong-term incentive awards employees. eligible to Selling and marketing expenses and marketing Selling Selling and marketing expenses during US$138.9 million reached the year (2014: US$133.8 million) reflecting 888’s markets in the European led investments the newly offered by 888casino boosted by 777 Brand and Sport be which continue to with the launch engine growth a significant of Sport in Spain in the second half offering of 2014 and Denmark in the second half (before marketingThe revenue to of 2015. stable ratio remained VAT) deduction of EU at 29% (2014: 29%). expenses Administrative expenses* decreased Administrative US$28.4 million (2014: US$33.4 15% to 6% of revenue million) representing (2014: 7%). VAT deduction of EU before the previous to compared decrease The foreign is mainly attributed to year impact on salaries, movement exchange of expenses associated level reduced the costs arising from with professional a one-offUK gaming licence, to bonus to in 2014 and expenses related employees national insurance obligations employers’ expenses in 2014. Administrative incurred US$32.5 million (2014: to amounted US$35.1 million). Research and development and development Research expenses expenses and development research The 8% slightly to ratio decreased revenue to expense totalled year’s This (2014: 9%). million), US$36.8 million (2014: US$40.7 being mainly attributed to the decrease weaker of against the effect currencies of a one-offthe US dollar and the effect in 2014, employees special cash bonus to in whilst continuing with the investment highly skilled in order teams development leading position sustain the Group’s to during 2015 in the market. Additionally, associated invested efforts were significant new regulated with introduction to offering. markets and improved expenses and development Research do not include capitalised in-house US$5.3 costs which totalled development decrease The million (2014: US$6.4 million). the launch of is attributed mainly to late gaming in the UK licensed regulated in 2014 as the majority of the investment place duringtook that year. benefit from benefit from innovation. our ongoing continue to to continue Our partners Our partners A

* s definedinthetablesetoutonpage12. Gaming taxes and duties Gaming taxes Gaming duties* levied in regulated markets considerably to increased US$50.0 million (2014: US$15.8 million). year impact the full of point reflected This of consumption gaming duty in the UK of US$29.7 million (2014: US$2.1 million, commencing December 2014), increased revenues greater gaming duties driven by in Spain, primarily the launch of due to primarily slots in 2015, and Italy, due to 2014 as well the launch of mobile in late marketsas gaming duty in new regulated which commenced activity during the second half of 2015, namely Denmark, in addition to Romania and Ireland, the first time of gaming for recognition and duties Gaming in Austria. taxes taxes US$58.4 million (2014: to amounted US$15.8 million). The chargebacks ratio slightly increased ratio slightly increased chargebacks The during 0.7% (2014: 0.6%) of revenue to by higher deposit affected the year continued use of 888’s 2015 saw volumes. risk detection management and fraud mechanisms which enhance internal alertmonitoring systems and processes reporting including the continued use These verification systems. of 3DSecure in an optimised balance all resulted and between maintaining revenues reducing whilst deposits inflow increased transactions with high risk profiles. Staff costs as a percentage of revenues revenues of Staff costs as a percentage ratio compared was 12%, a slightly lower of currency 2014, mainly as a result to of a one-off and the effect differences in 2014. employees special cash bonus to Casino offering. Operating expenses offering. Casino US$146.0 million (2014: to amounted US$149.3 million). STRATEGIC REPORT – 2015 BUSINESS AND FINANCIAL REVIEW CONTINUED

18

Cash settled share benefit charges increased to US$1.7 million (2014: US$0.4 million) due to the increased fair value of the long term incentive plan which was settled during the year. Further details are given in the Director’s remuneration report on page 46.

Finance income and expenses Finance income of US$0.3 million (2014: US$0.3 million) less finance expenses of US$2.6 million (2014: US$4.8 million), excluding exceptional items, resulted in an expense of US$2.3 million (2014: expense of US$4.5 million). The change compared to the previous year is attributable to the fair value of operational hedging Exceptional costs Earnings per share instruments. During 2015, 888 incurred exceptional Basic earnings per share was 8.3¢ (2014: legal and professional costs of US$17.5 16.1¢). Adjusted basic earnings per 888 continually monitors foreign currency million associated with the proposed share was 15.9¢ (2014: 19.2¢). The Board risk and takes steps, where practical, to acquisition of bwin.party digital believes that adjusted basic earnings ensure that the net exposure is kept to an entertainment plc. Following the per share - excluding exceptional items acceptable level. This has resulted in an termination of the proposed acquisition, (as described in note 5 to the financial expense of US$0.1 million in respect of 888 received reimbursement income statements), share benefit charges, the ILS/US$ forward hedge. An additional of US$8.8 million from bwin.party movement in contingent consideration, expense of US$2.3 million is attributable digital entertainment plc, in line with its impairment charges and share of joint to the valuation of assets and liabilities contractual agreement and exceptional venture and associates loss – better denominated in currencies other than finance costs of US$5.9 million were reflects the underlying business and 888’s functional currency. incurred in connection with the proposed assists in providing a clearer view of acquisition. The costs represent fair value 888’s performance. Adjusted EBITDA movements on derivatives entered into to Adjusted EBITDA for the year was US$80.6 hedge the currency exposure associated Dividend million (2014: US$100.7 million) impacted with the transaction. Exceptional costs Given the strong cash generation during by a combination of external factors associated with the proposed acquisition the year the Board of Directors declared including newly introduced gaming duties of bwin.party digital entertainment plc an interim dividend of 3.5¢ per share that during 2015 of US$32.2 million*, US$10.2 totalled at net US$14.6 million. was paid on 30 September 2015. Taking million EU VAT and adverse currency into account the strong performance the movements. This is a very resilient Separately, 888 incurred exceptional Board is recommending a final dividend outcome that was achieved as a result of retroactive duties and associated charges of 4¢ per share plus an additional one-off the strong revenue increase coupled with relating to prior years of US$8.4 million 8¢ per share (which together with the strict costs control. The Adjusted EBITDA in respect of gaming taxes in Austria interim dividend equals 15.5¢ per share margin was 17.4% (2014: 22.1%). EBITDA and Romania. for the year in accordance with 888’s for the year was US$59.4 million (2014: dividend policy). US$97.3 million). In total, 888 recorded during the year US$23.0 million (2014: nil) of exceptional Cash flow Equity accounted joint ventures costs and charges. The Group’s outstanding performance and associates and operating efficiency led to substantial 888’s investment in the US joint ventures Adjusted profit before tax free cash with net cash generated from had reduced to nil as at 31 December Adjusted profit before tax for the year was operating activities of US$85.0 million 2014 due to the US joint ventures’ US$55.5 million (2014: US$67.9 million). (2014: US$111.9 million). The net increase cumulative losses exceeding 888’s Profit before tax for the year was US$32.5 in cash and cash equivalents in 2015 was investment. In 2015, the US joint ventures million (2014: US$67.9 million) impacted US$16.8 million (2014: US$48.0 million), incurred further losses and, as a result, by exceptional costs and charges of after cash dividend payments during the these losses were not included in 888’s US$23.0 million (2014: nil). year of US$53.5 million (2014: US$51.2 income statement and 888’s investment million). remained at nil. Taxation The tax charge for 2015 was US$3.0 million Balance sheet (2014: US$11.0 million). The lower rate 888’s balance sheet remains strong, with was mainly attributed to tax adjustments no debt and ample liquid resources. 888’s in respect of prior years as well as the cash position as at 31 December 2015 was decrease in 888’s profit before tax. US$178.6 million (2014: US$163.1 million). Balances owed to customers were * Excluding US$2.1 million UK POC US$82.4 million (2014: US$67.5 million). incurred in December 2014. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 19

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 UNITED STATES UNITED Revenue from our Italian Revenue from regulated well as Sport,Casino as which is offering, periodwhich launched post the end in January will believe 2016 and which we be an important in 888’s development market, in this 13% by increased progress continue We currency despite headwinds. opportunities growth see in the Italianto penetration market the growing driven by was launched in the which of mobile, as our flow second half of 2014, as well and games that of new casino content and fresh keephelps to proposition our differentiated. a sportsIn Q3, 888 received betting as casino, licence in Ireland as well poker and sports in betting licences Denmark, poker and sports and casino, betting temporary permits in Romania. in these marketsPerformances date to particularly been encouraging, have in Denmark, further demonstrating ability successfully capitalise to 888’s on opportunities regulatory by created developments. on the regulatory maintain a close eye We and are Europe across environment in a number monitoring developments in consideringof countries or are that are their regulatory of reforming the process landscapes. Trading in the US market during 2015 Trading expectations. was in line with the Board’s our develop to continuing are We understanding of the US market as and, in all with a presence the only operator the opportunities states, regulated three vast. potentially 888 remain in the US for this market addressing to Our approach us with the flexibility and has provided gain unique experience to and resources strengthen keydevelop to relationships our position in the US market as further occurs. regulation successfully launched we In February, liquidity the poker across shared player and Nevada, creating of Delaware states a key both 888 and our advantage for interstate This B2B operating partners. a key in the milestone launch represented US online of the regulated development gaming market confident are we and that pooled liquidity arrangements will states future for become a major feature online gaming. as and when they regulate

EUROPE (EXCLUDING UK) (EXCLUDING EUROPE UK Europe (excluding UK) (excluding increased Europe revenue US$178.4 million (2014: US$170.1 5% to 39% of Group million), representing continued our We (2014: 37%). revenue performance strong we in Spain where market in partgrew share the thanks to launch of 888sport.es in the second half of of slot games as the launch 2014 as well the end of the first half of 2015. towards in Spain with a full product suite Now we platforms and desktop mobile across capitalise on cross-sell able to better are opportunities and with the 888 brand in popularityincreasing in that market, confident of further are we growth. 888 continued to enjoy a strong a strong enjoy 888 continued to performance UK market in our core in 6% by increasing 2015 with revenue US$212.7 million (2014: to on year year 46% of US$201.6 million), representing was This (2014: 44%). revenue Group supported multi-channel innovative by marketing as our as well initiatives management relationship customer drive to helped capabilities that together particularly performances impressive in performanceThe and Sport.both Casino against the of Bingo in the UK improved prior as our established portfolio year of brands capitalised on the impact of the new point of consumption gaming tax UK bingo in the UK on the fragmented on mobile success of our offer The market. devices continued in the UK market across of overall product verticals, with the share on mobile devices generated B2C revenue rising 47% (2014: 33%). to UK witnessed a newThe regulatory the in 2015, following environment introduction of the new point of consumption gaming tax in the UK in December 2014. During we the year of this new tax the cost burden saw on some smaller e-gaming brands that to forced were in some cases, were, exit the market. the the same time, At industry has seen an unprecedented period of consolidation with a number acquisitions. and mergers of high-profile continue Amidst these changes we opportunities see strong 888 as to for with our established operator a large, marketing and proven technology own expertise and grow win new customers to our market share.

MARKET REVIEW: FOCUS FOCUS REVIEW: MARKET ON REGULATED MARKETS REGULATED ON COUNTRY COUNTRY SPECIFIC HIGHLIGHTS Sport betting obtained licence in Ireland. Casino, poker and Casino, sport betting licences obtained in Denmark. Further progress progress Further US in regulated market with launch Poker of Multistate Nevada Network across and Delaware. Continued progress progress Continued in Italy fresh by driven and content Casino of mobile introduction in H2 2014. Market share increased Market increased share by in Spain driven to response positive slots newly introduced successful following launch of Sport in H2 2014. IRELAND DENMARK USA ITALY SPAIN STRATEGIC REPORT – RISK MANAGEMENT STRATEGY

20 RISK MANAGEMENT STRATEGY

The Board acknowledges that there is no return without risk. However, key risks must be identified, evaluated and where possible quantified in order for the Board to rationally determine how to harness risk to generate optimal return.

In 2015, the Board and senior The Board considers that 888 complies management re-focused 888’s risk with the requirements of the Financial management strategy, explicitly Reporting Council’s Guidance on Risk identifying and evaluating key risks Management, Internal Control and underlying its core business strategy. Related Financial and Business Reporting A Risk Management Policy is being dated September 2014, and specifically developed which the Board expects to confirms that: be fully implemented in 2016, which serves to standardise the approach to »» it is responsible for 888’s risk risk prioritisation and management management systems and for across 888’s operations, and which in reviewing their effectiveness; turn means that effective controls can be put in place to ensure 888 is able to »» there is an on-going process for manage its operations effectively now identifying, evaluating and managing and into the future. A risk register was the principal risks faced by 888; developed which served as a springboard for discussion at Board and management »» the systems have been in place during level of the role of risk in 888’s business. 2015 and up to the date of approval of The risk register is a living document the annual report and accounts; and which will be regularly reviewed on an ongoing basis, will serve as a record of »» they are regularly reviewed by the the high-level challenges faced by the Board (please see page 43 for further business over time, and will also serve details of the review conducted in as an action plan. The Board furthermore 2015). discussed its approach and response to 888’s various risks with a view to setting a clear boundary between acceptable and unacceptable types and levels of risk.

888’s culture emphasises the need for employees to take responsibility for managing the risks in their own areas and to transparently and timely report “bad news” and “near miss” incidents, with a willingness to constantly learn and improve. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 21

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

What happened in 2015 What in regulated strategy with its growth Consistent markets, 888 obtained additional licences in Denmark, Romania and Ireland (sports betting). the risk is managed How and procedures Cutting-edge technologies technology 888’s throughout implemented are its networks protect to operations and designed attacks and other such risks. malicious from anti- include traffic filtering, measures These from protection DDoS devices and Anti-Virus network and logical Physical leading vendors. and protect isolate is also used to segmentation networks and restrict malicious activities. 888’s independent by is audited IT environment The such as PCI DSS securityauditors, audit and part audits form These of 888’s audit. eCOGRA and IT procedures ensuring to proper approach systems ensure In to order of security. a high level external and effectively, properly protected are security carried scans and assessments are out recovery 888 has a disaster basis. on a regular full recovery of in the event ensure to site the disaster to All critical data is replicated disaster. on a daily basis. off-site recovery and stored site critical In of loss of functionality event the of 888’s services, can be fully recovered the business at the disaster available resources the through minimise dependence In to recovery order site. How the risk is managed the How 888 manages its regulatory risk routinely by consulting with legal advisers in the jurisdictions accessible, or are its serviceswhere offered are necessarywhere opinions legal obtaining formal 888 obtains Furthermore, local counsel. from regarding updates and routine frequent its be applicable to that may changes in the law workingoperations, assess with local counsel to 888 the impact changes on its operations. of any its servicesconstantly adapts and moderates to comply with legal and regulatory requirements. “blocked certain from players 888 blocks Finally, using multiple technological jurisdictions” methods as appropriate. obligations. The holding and processing of holding and processing The obligations. manner and robust data in a lawful sensitive analytics-based is furthermore 888’s central to also key are These business strategy. customer of the impressive maintenance to loyalty is entrusted. with which 888 online gaming, seeking to block access to 888’s seeking 888’s online gaming, access to block to in such jurisdiction. located by players offering and regulatory understanding of the legal A robust position in key locations worldwide is crucial to mitigating this risk. 888 HOLDINGS PLC HOLDINGS 888 Decreased Relevance to strategy to Relevance the integrity an online B2C and B2B business, As the supply of IT infrastructure is crucial to of 888’s regulatory and compliance with its its offerings The risk The be impacted unauthorised by may IT systems cyber DDoSaccess, (Distributed Denial attacks, of Service) theft or misuse of data by attacks, internal or external parties, by or disrupted natural hazards human error, in usage, increases a large 888 processes or other events. or disasters quantity data including of personal customer bank age, address, data such as name, sensitive details and gaming / betting history as part of its accessed business; such data could be wrongfully suppliers of customers, employees, or used by parties, third or lost or disclosed or processed Cyber regulation. of data protection in breach attack and data theft expose 888 to incidents may physical of repairing demands and costs “ransom” of IT systems, Failure damage. and reputational party / third infrastructure or telecommunications cost and cause significant infrastructure may the business and harmdisruption to revenues. 888 could also face liability under data protection action and could be exposed to by laws agencies or private litigation and loss government Lengthy goodwill and confidence. of customer (including in transitioning of the site down-time recovery activated disaster to servers) could also regulatory breach obligations. cause 888 to Relevance to strategy to Relevance and with regulatoryCompliance requirements of regulatory in the maintenance relationships multiple jurisdictions is key maintaining 888’s to critical to online gaming licences which are of its online gaming the operation and growth In to be exposed business. addition, 888 may claims in jurisdictions which do not regulate The risk The regulatoryThe framework of online gaming is Change in the regulatorydynamic and complex. in a specific jurisdiction a can have regime volume on business effect material adverse and financial performance in that jurisdiction. In addition, a number of jurisdictions have of those and in several online gaming, regulated in jurisdictions However, holds licences. 888 lack of claritysome cases, in the regulations, regulatory and or conflicting legislative risk mean that 888 may failing to developments, existing having licence, obtain an appropriate or being subjectto affected, licences adversely legal and other regulatory sanctions. Furthermore, other action be taken gaming may incumbent by in jurisdictions seekingproviders which are to frustrate to in an attempt online gaming, regulate 888. licences to of online gaming the grant Remained stable Increased KEY OF CHANGE OF KEY INFORMATION INFORMATION TECHNOLOGY RISKS CYBER AND REGULATORY RISK REGULATORY 888 faces the following significant risks: significant 888 faces the following STRATEGIC REPORT – RISK MANAGEMENT STRATEGY CONTINUED

22

INFORMATION on telecommunication service providers, 888 is built accordingly. System-wide availability and TECHNOLOGY invests in network infrastructure redundancies business-level availability is measured and logged AND CYBER RISKS whilst regularly reviewing its service providers. in the IT information systems. CONTINUED 888 has two Internet service providers in Gibraltar in order to minimise reliance on one What happened in 2015 provider. As a part of its monitoring system, 888 Several high profile cyber attacks brought the deploys set user experience tests which measure issue of IT security into the headlines in 2015. performance from different locations around At 888, IT security is deeply embedded within the world. Network-related performance issues the organisation, and security projects are are addressed by rerouting traffic using different implemented on a constant ongoing basis. routes or providers. 888 operates a 24/7 Network Awareness training is carried out for Group Operations Centre (NOC). The NOC’s role is to personnel at all office locations by the CISO. conduct real time monitoring of production Software development personnel are trained activities using state-of-the-art systems. These in IT security and computerised systems monitor systems are designed to identify and provide coding vulnerabilities in real time and provide alerts regarding problems related to systems, timely notifications to management. Various IT key business indicators and issues surrounding security projects were implemented by 888’s IT customer usability experience. The IT environment Department under the guidance of its IT Security tracks changes, incidents and SLA KPIs in order Committee. 888 continued to undergo regular IT to ensure that client experience is consistent security audits, including reviews by the internal IT and well managed. As part of these procedures, compliance team, internal audit by 888’s internal capacity planning takes place and infrastructure auditor and external audit by gaming regulators.

TAXATION RISK The risk Relevance to strategy Heightened attention to matters of cross- In addition to the financial consequences of a border taxation, including through the G20/ challenge to 888’s tax structure, tax compliance – OECD Base Erosion and Profit Shifting (BEPS) and being seen to be paying the “right amount” project, as well as in other public forums and the of tax – is becoming a serious reputational issue media, has increased the likelihood of scrutiny as well as being a regulatory compliance issue. of tax practices by tax authorities in relevant As such, it is crucial that 888 has a solid basis for jurisdictions. A finding of taxable presence of its tax positions taken in relevant jurisdictions. the 888 Group in one or more jurisdictions (including pursuant to revised interpretations How the risk is managed of the permanent establishment concept as 888 aims to ensure that each legal entity within considered in the BEPS reports), a transfer its Group is a tax resident of the jurisdiction pricing adjustment with respect to attribution in which it is incorporated and has no taxable of profit to such jurisdiction(s), or the revision of presence in any other jurisdiction. In addition, VAT rules regarding marketing costs incurred in certain jurisdictions impose tax by reference to major customer markets, may have a substantial customers’ activity, regardless of whether 888 impact on the amount of income tax or VAT has a taxable presence in such jurisdiction. In this paid by 888. The introduction of the UK Diverted respect, 888 incurred VAT in certain EU countries Profits Tax also gives rise to a risk that, whilst 888 in which certain of its online gaming offerings carries out its operations from Gibraltar and has are considered electronically supplied services a considerable presence there, elements of its subject to VAT. Furthermore, jurisdictions in which business carried out from the UK may be found online gaming is regulated impose gaming duties to consistute an “avoided PE” giving rise to tax on licensed operators and in some cases even on at a rate of 25% of the profit attributed to such unlicensed operators. In this respect, 888 monitors avoided PE. Uncertainties with regard to the and seeks to comply with its legal obligations in application of EU VAT to certain of 888’s offerings various jurisdictions, whilst taking such action as and the tax base to be applied thereto also gives is necessary to prevent the improper imposition rise to the risk of disputes with tax authorities, as of unlawful or double taxation. do the imposition of gaming taxes in jurisdictions in which 888 has customers but does not hold What happened in 2015 a local licence. Furthermore, the imposition in 888 entered into discussions with relevant tax certain jurisdictions of taxation of player winnings authorities in order to regularise its tax position and/or imposition of a withholding obligation on and mitigate exposures. In addition, it reviewed foreign operators may make 888’s offerings less its structure in light of the BEPS recommendations attractive to players in relevant jurisdictions. and consulted with tax and legal advisers to determine the manner and timing of their implementation in relevant jurisdictions, in order to ensure compliance with increased STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 23

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

What happened in 2015 What in staff training and invest 888 continued to identify instances of problem to procedures as as well gambling and fraudulent behaviour, gaming and optimising responsible reviewing and self- take a break such as self-limits, tools the effectiveness monitor continuing to exclusion, and continuing gaming measures, of responsible its close partnerships agencies with major helping and support 888 furthermore its centers. updated comply with specific business practices to in order imposed in its major new regulatory requirements gaming markets, including responsible regulated UK Gambling under the required measures and Codes Licensing Conditions Commission’s of Practice. 2015 happened in What 888 maintained its ongoing During the year, dialogue with major B2B partners, with a view of contracts continued renewal aligned to and mitigation of the risk strategy, with 888’s of termination of contracts changes due to in partner circumstances. in the appropriate jurisdictions, whilst reservingin the appropriate its position concerning its liability contesting cases. in appropriate functionality of the B2B platform and technology maintaining an pricing, competitive offered, with B2B partners,ongoing relationship and ensuring that 888 has a good understanding of the needs of its B2B partners and their owners. to recognise and take actions appropriate if recognise to or underage activity. they identify compulsive guidelines to 888 also complies with eCOGRA professional links to Web customers. protect money real on 888’s provided help agencies are website and 888 has a dedicated gaming sites, responsible regarding information which provides pattern can also limit their play Players gaming. 888 furthermore be self-excluded. to or request – directly or via industry ensure bodies – seeks to provided are and regulators that legislators regarding and useful information with accurate and underage against problem protections gaming. 888 HOLDINGS PLC HOLDINGS 888 tax reporting 888 furthermore obligations. took and gaming duty VAT to advice with regard in such taxes for obligations and registered timely jurisdictions ensure to relevant in order reporting on the correct and payment basis Relevance to strategy to Relevance 888’s business. B2B is a material part of 888’s keyB2B contracts in terms of financial impact Bingo B2B contracts; its major are in addition, importance strategic its US B2B contracts have the longer term. for the risk is managed How itself contractuallyWhilst 888 generally protects in this respect, it is often not commercially practicable compel B2B partners to continue to in the long-term. utilizing the Dragonfish platform to main method of mitigation is therefore The in terms of the relevance maintain commercial How the risk is managed How putting in place to resources 888 devotes coupled with strict measures prevention customers, protect to internal procedures to their procedures and update and monitor access their unable to minors are that ensure a to provide trained Staff are gaming sites. and gaming experience customers to safe risk The rationalised its B2B years 888 has in recent higher-value on fewer, contracts focus to termination to exposes 888 more This contracts. under existing B2B or reduction of volume contracts. Relevance to strategy to Relevance risks gaming are Underage and problem business, with an online gaming associated and ensuring with regulatory compliance of vulnerable the protection for requirements online people is critical maintaining 888’s to gaming licences. The risk The of by the profile is affected of 888 reputation The both other online gaming and betting operators, as the gaming and betting industryas well as a develop could therefore perception The whole. not are that minors and vulnerable players could also be and there protected, adequately gambling. compulsive damages due to claims for It that affiliate to ensure marketers is also difficult marketing data for reliable ethically source purposes such that advertising be codes can age strictly and only appropriate to adhered targeted. are or demographics groups PARTNERSHIP RISK RISK PARTNERSHIP REPUTATIONAL REPUTATIONAL RISK TAXATION RISK TAXATION CONTINUED STRATEGIC REPORT – REGULATION AND GENERAL REGULATORY DEVELOPMENTS

24 REGULATION AND GENERAL REGULATORY DEVELOPMENTS

The regulatory framework for the online gambling industry continues to evolve, with many jurisdictions developing regulatory regimes specifically designed to address online gambling. We monitor the regulatory environment closely as countries adapt their approaches. 888’s significant regulatory experience and operational scale means we are able to manage the impact of these developments and to take advantage of opportunities that regulatory change opens up.

Like most of the preceding years, 2015 saw further changes in the dynamic legal and regulatory landscape pertaining to online gambling. 888 has continued to adapt to these changes (some of which were rapid or unexpected) and continues to seek out ways to capitalise on the opportunities presented by regulation. In tandem, and with a growing portfolio of online gaming licences (which saw the addition of Denmark, Ireland and Romania in 2015 alone), 888 has continued to build on its capacity for growth in locally regulated markets. We continue to believe that the development of robust regulatory regimes has strengthened the industry and that it continues to generate significant value for leading, responsible the course of 2015, the 888 Group was and compliant operators such as 888. granted an Irish remote bookmaker’s POINT OF We continue licence, as well as a Romanian interim CONSUMPTION TAX to believe As an inevitable response to its growing licence (888’s application for a permanent list of regulatory and compliance licence is pending) – both jurisdictions The UK witnessed a new that the obligations, 888 has also strengthened whose regulatory regime changed in regulatory environment development its internal compliance and control 2015. 888 also returned to the Danish in 2015 following the of robust mechanisms to ensure that it adheres market in 2015, having renewed its introduction of a new to the various requirements applicable licence in that jurisdiction (where it had point of consumption tax regulatory under its many licences. This is a growing previously been licensed until voluntarily in December 2014. During challenge, given the disparity between relinquishing its licence for commercial the year, the industry saw regimes has some smaller e-gaming the various regulatory regimes under reasons). brands exit the market as strengthened which 888 operates. 888’s ability to well as an unprecedented 2015 saw a licensing regime adopted in the industry. weather this challenge successfully is a period of consolidation. test and a testament to 888’s adeptness Portugal (though its implementation has at living up to the highest standards of not yet been fully realised). A licensing regulatory excellence. regime was also adopted in Lithuania during 2015, coming into force on Various member states of the European 1 January 2016. Union continued the trend of adopting local regulatory regimes based on place- As expected, the UK’s move to a place- of-consumption. Some of the regimes of-consumption based regulatory regime adopted have reflected ECJ jurisprudence continued to have a dramatic impact regarding compliance with the principles on 888, given the prominence of 888’s of EU law, while others have ignored these UK-facing operations. 888’s adaptation principles (with the result being regulatory to the new metrics of the UK market and regimes that are non-compliant with EU to its array of regulatory requirements law and may therefore be impossible to necessitated significant efforts and the implement or unenforceable). During implementation of changes in a very broad spectrum of areas. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 25

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 The Greek Government has announced Greek The put in place a licensing regime plans to as a revenue-generating measure. Options include auctioning a limited number of licences or an open tender bill has been No concrete process. published however. Poland amended its online sports Poland to in an attempt betting regime in line with EU law. bring it more Romania and Portugal, Ireland, the for regimes Lithuania adopted and licensing of online regulation gambling. passed gaming legislation Having restricting gambling its online severely market 2014, Hungary in late took actions against various enforcement the online industry during 2015 (issuing fines and fighting online gambling in courts).operators Early in 2016, the country the very for issued regulations licensing of online gambling limited twoactivities land-based to available casinos in the country. Switzerland published a draft bill the country’s allow three that would The bill online gaming. offer casinos to under public consultation and now is likely be lengthy. process to legislative » » » » » opportunities as they emerge. an playing with regulation Naturally, in defining dominant role increasingly 888 continues and framing our business, closely legal and regulatory monitor to worldwide and to developments operations. assess their impact on 888’s support continue to regulation We of the industry work with our and to partners in the industry and with our shaping a regulatory towards regulators landscape that is business-friendly while the objectives of regulation. safeguarding summarise the paragraphs following The regulatorymain relevant developments of 2015 and our expectations regarding changes that will impact 888 in 2016. Several European jurisdictionsSeveral European in 2015: regulatoryimplemented reforms » » » » » EUROPE The European Commission’s involvement involvement Commission’s European The of online gaming in the regulation be fairly keycontinued to low in 2015. Otheraction than minimal with respect whose gaming laws member states to the infringe to EU law, considered are very took Commission little European the regulation to action directly related online gambling. in EU developments Notwithstanding, an impact on the online did have law changes example, For gambling industry. and data protection with respect to to as changes related as well privacy, impacted resolution, consumer dispute online gambling companies (as they a businesses). As did other European business incorporated and licensed in various EU member jurisdictions, 888 is directly impacted these changes and by be impacted future by will continue to of changes (such as the entry force into Directive). the 4th AML Economic in 2015, twentyLate European an agreement countries (EEA) signed Area establishing a voluntary framework of illegal to related of information exchange Some online gambling. cross-border (including major EU member states signed not yet have Germany and France) which is not per se linked the agreement, action. EU legislative to 888’s prominence in the UK market in the prominence speaks 888’s success of that process, overall the to adapt work to continue to we however our operations and working modalities to with the various our full adherence ensure our applicable to requirements UK operations. of internet regulation over debate The gambling continued in the US in 2015, on prominently more though it focused in the Sports” “Fantasy of the regulation Whilst it is unlikely partlatter of the year. that 2016 will see dramatic developments or federal on either the state in this regard, that 2016 is an election (given level closely follow 888 continues to year), in this area, the possible developments capitalise on position itself to so as to regulatory regulatory developments. continues to to continues monitor closely The Group Group The STRATEGIC REPORT – REGULATION AND GENERAL REGULATORY DEVELOPMENTS CONTINUED

26

EUROPE CONTINUED

The regulatory landscape in Germany finding that it is not compliant with continued to be mired by uncertainty in EU law. The impact of this ruling more 2015 with courts in various German states broadly with respect to the validity of the issuing conflicting rulings with respect entire German regulatory regime, is likely to the validity and interpretation of the to become clearer during 2016. German Inter-State Gambling Treaty. The issuance of 20 federal sports-betting Regulatory reform has still not occurred licences did not progress due to orders in The Netherlands, though debate by various courts calling the process into on the matter continued to take place question. In fact, it seems unlikely that during 2015. 888 continued to conduct such licences will ever be issued. Early its operations in The Netherlands in in 2016, the European Court of Justice accordance with interim guidelines (in its judgment on the INCE matter) issued by the local authorities and awaits effectively struck down the German developments in this important market. regime regulating online sports betting,

THE UNITED STATES

888 continued to operate in the US online It is not unlikely that this debate will lead to Positive gaming market with activity in all three a broader debate regarding the regulation states in which commercial internet of online sports betting, however changes developments gaming is operational – Nevada, New in this regard (or, more generally with in these large Jersey and Delaware. 888 continues to respect to internet gambling) are less likely be the only online gaming operator in an election year. 888 continues to closely scale markets authorised to conduct business in each monitor discussions and initiatives in the could present of these jurisdictions. various jurisdictions, with the knowledge tremendous that positive developments in these large- Despite debates in the legislatures of scale markets could present tremendous opportunities various states regarding online gaming (in opportunities for 888. for 888. some cases – online poker) during 2015, no significant legislative changes occurred. Simultaneously, the opponents of internet During the latter half of the year, regulatory gaming continued to promote federal and legislative focus seemed to shift to the legislation to ban internet gaming. The contentious issue of “daily fantasy sports”, a “Reform of the American Wire Act” Bill multi-billion dollar industry whose legality (RAWA) was the subject of various hearings has been called into question. during the 2015 sessions of both houses of Congress, but it was not advanced by either chamber. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 27

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 The Directors confirm Directors their viewThe that a assessment of the principal risksrobust facing 888, including those that would future its business model, threaten performance, solvency and liquidity, has been carried out. the Directors In light of the foregoing, reasonable a confirm they have expectation that 888 will be able to continue in operation and meet its the liabilities as they fall due over period. year three risk management strategy Details of 888’s its it manages and mitigates and how set out in the Riskrisks Management are on page 20. Strategy introducing a centralised online gambling a centralised online gambling introducing Lotto under the auspices of the offering these follow 888 continues to Quebec. assess their impact to developments on opportunities identify potential 888 and to growth. for 888’s resilience to threats to its viability to threats to resilience 888’s but plausible scenarios; in severe and quantitative Both qualitative the combined including analyses, impact of the crystallisation of multiple as stress as well risks simultaneously, and testing stress reverse testing, sensitivity which the Directors analyses, to make robust consider sufficiently and a sound statement; that matters of relevant range A broad viability. 888’s threaten may Management currently prepares a Management prepares currently an on forecast detailed bottom-up long range plans of up to annual basis, using a top- prepared are years three and capital investment approach, down a period of planned over projects are years. five to three The Directors are mindful that the mindful are Directors The in the online operates Company gaming sector whilst having which, substantially since the early matured a fast- of the internet, remains days industrymoving subject ongoing to change in the global regulatory and landscape; and competitive » » » » » VIABILITY STATEMENT VIABILITY With respect to the period assessed, the period respect to assessed, With considered: have the Directors The Directors have carefully considered considered carefully have Directors The principal position and current risks, 888’s assessed the prospects of 888 and have Directors The years. period a of three over for consider this period appropriate the assessment of viability of an online circumstances, in 888’s gaming company factors:taking account the following into » » » » » FURTHER AFIELD FURTHER 2016 could see regulatory reform coming 2016 could see regulatory reform various to jurisdictions the world, around particularly in Latin America. Examples Brazil and Mexico, include may there of province Canadian The Colombia. also take towards Quebec may steps STRATEGIC REPORT – CORPORATE RESPONSIBILITY

28 CORPORATE RESPONSIBILITY

As global leaders in online gaming entertainment, we are committed to a pro-active policy of corporate and social responsibility that reflects the high professional and ethical standards we have set for ourselves.

ENVIRONMENTAL IMPACT As an online business, 888’s activities have a relatively small impact on the environment. However, we remain committed to ensuring that wherever possible we minimise what little effect we have with the following areas being the key focus points:

»» Energy consumption: We continuously monitor our energy consumption to help us ensure we are being as energy efficient as possible.

»» Water: We use only ecological detergents in our offices and use water saving devices in most of our locations.

»» Travel: To minimise the impact of travel on the environment we encourage Whilst 888 is committed to complying employees to either cycle to work and, with UK disclosure requirements in certain locations, provide buses for and appropriately managing its To minimise commuters. We also continue to invest Greenhouse Gas emissions, given the impact of in the state-of-the-art technology to 888 has low emissions and in light of help meetings occur remotely. the costs involved in monitoring and travel on the measuring such emissions, the Board has environment 888 commissioned a study by AVIV AMCG concluded that a review will be carried we encourage regarding FY 2015 to provide quantitative out once every several years rather information regarding its environmental than annually; figures are therefore not employees to impact, as reflected through 888’s provided regarding FY 2014. The Board cycle to work. Greenhouse Gas emissions for the period acknowledges its overall responsibility for 1 January to 31 December 2015, and to environmental issues and monitors 888’s assist it in finding ways to further reduce environmental performance in light of its Greenhouse Gas emissions. internal targets.

GLOBAL GREENHOUSE GAS EMISSIONS FOR PERIOD 1 JANUARY TO 31 DECEMBER 2015

Scope Emission sub GHG emission Contribution to category (metric ton CO2 eq) scope (%)

1 Direct GHG emissions 367 5 2 Indirect GHG emissions 6,121 83.5 associated with energy 3 Other indirect GHG emissions 843 11.5 Total 7,331 100 Corporate metric Corporate Performance Indicator (per scope 1 and scope 2) STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 29

EXCELLENCE EXCELLENCE CLUB Our “Excellence Our “Excellence is an employee Club” program development of a group which sent selected employees their divisions for by in a number excellence exciting to an of fields trip in adventure China. ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 We continued our effortsto extend our We “refer including channels, recruitment social networks and internet a friend”, channels. should that employees believe We year, This success. partshare of 888’s and achievements our great due to various granted we business success, performance some bonuses to of 888. employees in various involved were 888 employees office charity to according initiatives location. carried efforts were retention Specific keyout with respect to employees. We ran a number of management skills ran a number of management We both senior managers and for programs all divisions. leaders from team building had team During we the year better create activities to intended connections members team among including a fun day and managers, each department,for event overnight combining engagement activities and as holiday as well lectures, professional sites. celebrations on all Company continued our annual have We which is based on evaluation process and getting the principle that giving is key each employee’s feedback to and that and development growth evaluatingregularly on the job performance success helps achieve of the well-being and is essential for all employees. » » » » » » » » » » » » » » in developing in developing their personal their personal so that they they that so always invest invest always our employees aspirations. We must We can achieve achieve can It of our year has been the third employee our Club”, “Excellence which sent a program development selected their by of employees group in a number excellence divisions for trip adventure to an exciting of fields, continue this hope to We in China. come with trips to in years program other locations planned. to » EMPLOYEES Direct GHG emissions come from fuels Direct GHG emissions come from in use of passenger vehicles consumed, and of the Company operational control of cooling agents in or refill replacement Indirect air conditioning units. emissions, office energy come mainly from heating and lighting, consumption for Other cooling. emissions are indirect and leased assets. air travel from The reported emissions come from our reportedThe come from emissions and servers data centre owned offices, party but co-located at third us, by data “operational the 888 has adopted centres. where sites to limited approach, control” all equipment and activities controlled are and the subsidiariesby of the Company, must emissions therefore the associated be consolidated. We have used the Intergovernmental used the Intergovernmental have We (IPCC) Change on Climate Panel Gas National Greenhouse Guidelines for from (2006) and data gathered Inventories operations. our own Although not legally required to do to Although not legally required is incorporated as 888 in Although so, do so as 888 to not legally required have we is incorporated in Gibraltar, reported on all the emissions sources under the UK Companies stipulated ReportAct 2006 (Strategic and Reports) Regulations 2013. Directors’ fall within our sources emissions These We do financial statements. consolidated emissions any responsibility for not have not included in our that are sources financial statements. consolidated Some highlights from 2015 include Some highlights from the following: 888’s success depends on the quality and 888’s take our We commitment of its people. the our staff around to responsibilities world very seriously provide and aim to where work environment an enjoyable challenged and motivated are employees rewarded, flair is where excel, to compensation is fair and the balance between work and family is respected. » STRATEGIC REPORT – CORPORATE RESPONSIBILITY CONTINUED

30

888 takes its employees’ health and safety seriously and has written policies in place PROTECTING with regard to occupational health and MINORS safety issues in its major offices. The Board will consider setting targets We encourage with regard to occupational health responsible gaming and safety issues in order to monitor practices to avoid the performance. The Board acknowledges dangers of problem its overall responsibility for human gambling, and we have resources issues, including for human taken rigorous steps resources and labour standards, at all our online sites implementing management structures to prevent underage and systems to monitor and evaluate gambling. employee performance and satisfaction, promoting diversity at all levels of 888 and within 888’s supplier base, providing employees with the opportunity to have formal input into matters that affect them, oversee and allocate resources Responsible gaming to employee training, and to monitor Our values place the community and Our values key health and safety performance the customer at the centre of all our goals and indicators. During 2015, endeavours. We aim to provide our place the there were no material labour disputes, customers with the best online gaming community entertainment experience. However, litigation, or health and safety related and the fines or sanctions imposed on 888. we acknowledge that gaming poses 888 does not have a written policy a potential risk to a small minority of customer at people. We are constantly revising our for the employment, training, career the centre development and promotion of disabled innovative procedures to ensure minors persons, but in certain of its locations are unable to access our gaming sites. of all our is subject to statutory requirements We also continuously train all our endeavours. in this respect. During 2015, steps staff in how to provide a safe gaming were taken to maintain and develop experience to our customers. Our arrangements to provide information training programme incorporates to employees regarding financial methods and techniques to help and economic factors affecting 888’s our employees recognise and take performance, including divisional appropriate actions if they identify and company-wide seminars, email compulsive or underage activity. communications and publication We continue to innovate in this area of pertinent public financial information including the development of our on the 888 internal portal. proprietary sophisticated Observer System to help identify and prevent compulsive activity. SOCIAL, COMMUNITY AND HUMAN RIGHTS ISSUES Protecting customers Our values »» As a responsible, regulated gaming At 888 we are fully committed to group we comply with the eCOGRA maintaining a high standard of corporate guidelines. eCOGRA ensures that and social responsibility. This ethos is part approved online casinos are properly of our culture and permeates throughout and transparently monitored to provide our business into the everyday business player protection. decisions we make on a day-to-day basis.

»» Our sites include links to professional We also recognise that a responsible help agencies and we have placed approach is not only the correct way to many safeguards for those who need do business but one that enhances our help with controlling their gaming. credibility amongst all our stakeholders and thereby supports the development »» Self-assessment test: For players who of 888. The Board acknowledges its overall are worried about their gaming habits responsibility for social, community and and want to know more about the human rights issues. Our dedicated website signs of compulsive gambling. is available at: 888responsible.com STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 31 0% 43% 28% 29% Number

7 2 0 563 Women ercentage P

57% 72% 71% 100% Number

5 5 ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

18 755 Men ercentage P 888 HOLDINGS PLC HOLDINGS 888 DIVERSITY Brian Mattingley Brian Mattingley Chairman 2016 22 March The Board acknowledges Board The that the lack is a major on the Board of women 888, and that it is the Board’s challenge for In this. seeking address responsibility to new to Non-executive Directors recruit to the Nominations Committee the Board, female to include specifically seeks amongst the list of candidates candidates its consideration. for presented On behalf of the Board: Diversity is important believe us as we to the most access to that only through and recruit pool of talent will we diverse to individuals the most talented retain actively seek We serve our customers. our into and advance women recruit to management. A summarytop of the across of men and women breakdown 888 as of 31 December 2015, is as follows: are expected to adhere, including as adhere, expected to are ethical and environmental social, regards In 888 is guided by this respect, matters. principles Nations the ten of the United (UN) Global Compact, which encourages makecompanies to labour human rights, responsibility environmental standards, and anti-corruption part of their business agenda.

% enior Vice Presidents Vice enior

BREAKDOWN OF MEN AND WOMEN ACROSS ACROSS WOMEN AND MEN OF BREAKDOWN 2015 DECEMBER 31 OF AS GROUP THE All Employees All Vice Presidents Vice Board of Directors Board 43% of 888 employees 43% of 888 employees actively We female. are and recruit seek to into women advance management. our top S 43 Self exclusion: A player can request to to can request A player Self exclusion: period, a chosen for be self excluded Based on concerns. different due to increase to decided internal studies we clients to time periods for available can choose from Customers off”. “cool one periods from exclusion six different During this six months or more. to day 888 blocks the account and period, the sent to emails are no promotional customer. Controlling deposit limits: Should deposit Controlling they can to, the need clients feel self pattern by their play control limiting the amounts they deposit per or per month. per week day, » » HUMAN RIGHTS RIGHTS HUMAN COMMUNITY 888 ensures that its policies comply with 888 ensures 888’s reflecting in addition to local law, policies set clear standards These values. personnel which all Group to of behaviour 888 is committed to supporting to 888 is committed both the various local communities in which global and also the broader it operates Our community investment community. includes charitable programme donations and long-standing community the in our key across areas involvement Inworld. the past 888 supported the International Medical Corps in their efforts Typhoon by assist people affected to Haiyan which struck the Philippines. 888RESPONSIBLE a Since 2007, 888 has made available www.888responsible. website, dedicated all regarding information com, providing aspects gaming. of responsible We train our staff to be highly sensitive to be highly sensitive train our staff We the possibilityto of underage activity account any suspend and make we sure be an underage account. suspected to Underage activity is strictly on our sites and 888 takes of matter the prohibited underage gaming extremely seriously. to attract designed is not Our offering make everyWe effortto prevent minors. and use on our sites playing minors from well as systems verification sophisticated partyas a third to verification supplier identify and track minors if they log into process verification The our software. consists of two independent today by GB ID3 Global verification systems, Credit. and Call Group Protecting minors Protecting » » GOVERNANCE – BOARD OF DIRECTORS

32 BOARD OF DIRECTORS

NAME NAME NAME Brian Mattingley Itai Frieberger Aviad Kobrine POSITION POSITION POSITION Chairman Chief Executive Officer Chief Financial Officer AGE 64 AGE 45 AGE 52

EXPERIENCE EXPERIENCE EXPERIENCE Brian Mattingley was Executive Itai Frieberger was appointed Chief Aviad Kobrine has been Chief Financial Chairman from 13 May 2015 until Executive Officer of 888 on 2 March Officer of 888 since June 2005, and 2 March 2015, when he was appointed 2016. He was previously Chief was appointed to the Board in August Chairman. Previously, he was Chief Operating Officer since April 2011, 2005. From October 2004 he was a Executive Officer since March 2012, and was appointed to the Board consultant to 888. Previously, he was and Deputy Chairman of 888 and as an Executive Director on 13 May a banker with the Media Telecoms Senior Independent Non-executive 2015. He also serves as Managing Investment Banking Group of Lehman Director since March 2006. He joined Director of 888’s Israeli subsidiary, Brothers and prior to that, he was a the Board in August 2005. He was Random Logic Ltd. He has worked senior associate with Slaughter and previously Chief Executive of Gala for the 888 Group since 2003, and May. He holds a Masters in Finance Regional Developments Limited until previously served as Senior Vice from the London Business School 2005. From 1997 to 2003 he was Group President of Product Technologies, (Distinction), a BA in Economics Finance and Strategy Director of Gala as well as leading various parts of and an LLB from Tel Aviv University. Group Plc, prior to which he was Chief the business such as marketing, Executive of Ritz Bingo Limited. He has product and business development. Aviad brings with him extensive held senior executive positions with Prior to joining the 888 Group, finance, economic and analytical Kingfisher Plc and Dee Corporation Plc. he held several management experience, in-depth knowledge positions at Orange, one of the of the Group and detailed knowledge In his capacity as Chairman of the world’s leading telecommunications of the City’s workings. UK Bingo Association, Brian spent operators. a great deal of time with regulators, which has assisted in the Board’s Itai brings to the role operational understanding of UK gaming experience both from within and regulation and laws. Brian has been outside the online gaming sector, in the gaming industry since 1993, as well as personal relationships and launched one of the UK’s first and valuable insight into the online Bingo sites whilst at Gala. industry as a whole. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 33

Member of Commitee Chairman of Commitee Gaming Committee Compliance Nominations Committee Remuneration Committee Audit Committee Audit R N A G COMMITTEE KEY COMMITTEE ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 G

N R A COMMITTEES AGE 49 POSITION NAME NAME Amos Pickel was appointed in March in March appointed was Amos Pickel Chairman of the Board 2006. Formerly Chief Residential Limited, of Berggruen Officer AtlasExecutive of Management Chief Executive Limited, Company Officer of of the Board and member and of Red Ltd., SeaDirectors Hotels of Gresham a Non-executive Director is a non-practising he Plc, Group Hotel from in Law holding a Master’s solicitor University an LLB from and York New serves He currently University. Aviv Tel of Swiftstake Director as an Executive SA. Amos is the Chairman Technologies Remuneration Committee of 888’s and and Nominations Committee, Committee is a member of the Audit and Gaming Committee. Compliance experience as a CEO of Amos’ multinational companies enables support challenge, provide him to on strategy executives and advice to and decision making. Independent Director Non-executive Amos Pickel Amos G

N R A COMMITTEES EXPERIENCE AGE 63 POSITION NAME NAME Having worked in PWC’s assurance workedHaving in PWC’s Ron brings to 38 years, business for a deep understanding of the Board reporting financial regulatoryauditing, and corporate governance. matters Ron McMillan was the Global PricewaterhouseCoopers Northern Regional Partner, Finance Chairman of the UK firm and Deputy for ChairmanAssurance and Head of the Middle East firm,to in addition serving as audit engagement leader on companies. a number of major listed He is the Senior Independent and ChairmanDirector of the Audit Plc Group of N Brown Committee Chairman of the Audit and SCS Plc, Value of B&M European Committee Welcome Retail SA and Chairman of Ron is the Chairman of Yorkshire. to and a member Committee Audit 888’s of the Remuneration Committee, and Gaming Nominations Committee Committee. Compliance Independent Non-executive Independent Non-executive Director Ron McMillan Ron GOVERNANCE

34 DIRECTORS’ REPORT

The Directors submit to the members their Annual Report and Accounts At the Annual General Meeting held in May 2015, the Board was of 888 for the year ended 31 December 2015. The Strategic Report, empowered to allot equity securities of 888 for cash without application Corporate Governance Statement and Directors’ Remuneration Report of pre-emptive rights under 888’s Articles, provided that such power on pages 6, 40 and 46 respectively, form part of this Directors’ Report. is limited:

Results (a) to the allotment of equity securities in connection with a rights issue 888’s profit after tax for the financial year of US$29.5 million (2014: in favour of holders of Ordinary Shares where the equity securities US$56.9 million) is reported in the consolidated income statement on respectively attributable to the interests of all holders of Ordinary page 73. The Board is recommending a final dividend of 4¢ per share Shares are proportionate (as nearly as may be) to the respective plus an additional one-off 8¢ per share (which together with the interim numbers of Ordinary Shares held by them; dividend equals 15.5¢ per share for the year (2014: 15.0¢ per share) in accordance with 888’s dividend policy). (b) to the allotment (otherwise than pursuant to sub-paragraphs (a) above and (c) below) of equity securities up to an aggregate nominal Directors and their interests value of £88,644.65 (approximately 5% of 888’s Ordinary Share capital Biographical details of the current Board of Directors, setting out their in issue as at 31 March 2015); and relevant skills and experience and their professional commitments, are shown on page 32. The Directors who served during the year are (c) to the allotment (otherwise than pursuant to sub-paragraphs (a) shown below. All Directors retire at each Annual General Meeting and, and (b) above) of equity securities in connection with an acquisition being eligible, offer themselves for re-election on an annual basis. or specified capital investment up to an aggregate nominal value of £88,644.65. This authority expires at the conclusion of the next Brian Mattingley (first appointed 30 August 2005). Annual General Meeting of 888.

Itai Frieberger (first appointed 13 May 2015). In 2015, 888 did not exercise any of the foregoing powers and authorities.

Aviad Kobrine (first appointed 30 August 2005). The Directors do not have any power in relation to the buy back by 888 Holdings plc of its own Ordinary Shares. In 2015, 888 did not seek Ron McMillan (first appointed 15 May 2014). authority to and did not purchase any of its own shares.

Amos Pickel (first appointed 14 March 2006). Rights attaching to Ordinary Shares in 888 The rights and obligations attaching to Ordinary Shares are set out Richard Kilsby (first appointed 30 August 2005). Mr Kilsby retired from in the Memorandum & Articles of Association of 888 Holdings plc. the Board as of the 2015 Annual General Meeting. Holders of Ordinary Shares are entitled to attend and speak at general John Anderson (first appointed 30 August 2005). Mr Anderson retired meetings, to appoint one or more proxies and to exercise voting rights. from Board as of the 2015 Annual General Meeting. Holders of Ordinary Shares may receive a dividend and on liquidation may share in 888’s assets. Holders of Ordinary Shares are entitled to The beneficial and non-beneficial interests of the Directors in shares of receive the Annual Report. Subject to meeting certain thresholds, 888 are set out in the Directors’ Remuneration Report on pages 46 to 60. holders of Ordinary Shares may requisition a general meeting or the There has been no change in the interests of Directors in shares of 888 proposal of resolutions at general meetings. between 31 December 2015 and the date of this Report. Memorandum & Articles of Association Except as noted above, none of the Directors had any interests The Memorandum & Articles of Association of 888 can only be amended in the shares of 888 or in any material contract or arrangement by a special resolution at a general meeting of shareholders. with 888 or any of its subsidiaries. 888 adopted a new memorandum & articles of association at Share capital its Extraordinary General Meeting held on 29 September 2015 Changes in share capital of 888 Holdings plc during the financial year (the Memorandum & Articles of Association). The previous are given in the Consolidated Statement of Changes in Equity. As at 31 memorandum & articles of association of 888, adopted pursuant December 2015, the issued share capital of 888 Holdings plc comprised to a special resolution of 888 passed on 14 September 2005 and 357,081,283 Ordinary Shares of GBP £0.005 each (Ordinary Shares). amended pursuant to special resolutions of 888 passed on 24 May 2011 and 14 May 2014, respectively, were constructed under the provisions of the Gibraltar Companies Act 1930. A new Gibraltar Companies Act came into force on 1 November 2014 and replaced the Gibraltar Companies Act 1930 almost in its entirety. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 35

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

om the Nevada Gaming as the sole Commission tional waiver from the New Jersey from Division of Gamingtional waiver aming Vendor Licence from the Delaware Department the Delaware Licence from of Vendor aming 888 HOLDINGS PLC HOLDINGS 888 Enforcement permitting it to be the sole shareholder of a Casino of a Casino permitting be the sole shareholder it to Enforcement Service Industry holder of a Enterprise licence applicant (presently conduct it to transactional allowing online gaming related waiver business in New Jersey), and as such is subject the New Jersey to the licensing and regulatory Act and to control Control Casino and of the New Jersey Division of Gaming Enforcement; holds a G Title 29 of the Lottery State Office, and as such is subject to Finance, the licensing and regulatory of the and to Code control Delaware Lottery State Office. DepartmentDelaware of Finance, holds a licence fr of an Interactive shareholder Gaming licencee, Service Provider Actand as such is subject and to the Nevada Gaming to Control Gamingthe licensing and regulatory of the Nevada State control and the Nevada Gaming Board Commission; Control holds a transac

share dealing code. dealing code. share Ordinary its to a code of securities888 has adopted dealings in relation the model code as, at least as rigorous which is based on, and is Shares published in the UK Listing Rules. (iii) be also in the future may 888 and holders of Ordinary therein Shares subject similar restrictions to in other jurisdictions it secures where a gaming licence. regulatory criteria relevant The used by authorities make to varies licensure suitabilitydeterminations as to of an applicant for jurisdiction the submission from jurisdiction, to but generally require by a thorough followed of detailed personal and financial information Gaming very in authorities discretion have investigation. broad or individual) qualifies determining whether an applicant (corporate suitable. licensing or should be found for beneficial acquires person who any jurisdictionsMany require than a certain of more (typicallyownership percent) percentage five report to the gaming authorities securities, the acquisition to of 888’s gaming authorities an allow Many a finding of suitability. and apply for such institutional that allows a waiver apply for to investor” “institutional a certain up to of securities acquire without to percentage investor subjectto the fulfillment of certain a finding of suitability, applying for In require conditions. some jurisdictions, may suitability investigations such of any The failure extensive personal and financial disclosure. checks and provide such background submit to individuals or entities to a required eligibility for 888’s jeopardise could disclosure the required licence or approval. Restrictions on transfer of shares and limitations and limitations of shares on transfer Restrictions on holdings on the holding or limitations no restrictions on transfer are There of Ordinary other than under restrictions law imposed by Shares 888’s or pursuant to insider trading laws) example, (for or regulation of gaming regulations Requirements 888: Amongst others, (i) (ii) Deadlines for exercising voting rights voting exercising for Deadlines instructions appointment and voting must Electronic and paper proxy a general than 48 hours before not later registrars 888’s by be received persons holding 888 depository of Direction from Forms meeting. received in uncertificated CREST must be form through interests a general meeting. than 72 hours before not later registrars 888’s by Additional changes appearing changes in the MemorandumAdditional and Articles of refuse able to is Board (a) the 888 the following: included Association but in the not fully paid up, (i) which are of share(s): a transfer register to the Official to which has been admitted List, not case of a class of shares taking from dealings in those shares place on an open prevent so as to case the 888 basis; or (ii) on which 888 has a lien, in which and proper such transfer; register to refusing for reasons give to will have Board the appointment compliance with LR9.2.2AR(2)(b), ensure to (b) in order of both of 888 will be subject the approval of an independent Director to shareholders” “independent as a whole and the the 888 shareholders in accordance Shareholders” “Controlling not that are shareholders (i.e. not passed, are resolutions with the UK Listing Rules). If the required a further elect propose to 888 may or re-elect resolution the proposed such further Any (i) must not be voted resolution: independent Director. (ii) must vote; of the original the date on within a period from of 90 days the end of the period set on within a period from of 30 days be voted an ordinary be passed by without the out in (i); and (iii) may resolution of the Independent (c) resolution Shareholders; separate any need for a casting the right of the Chairman have of 888 to of a general meeting notify that the 888 Board the requirement (d) has been removed; vote has age if such Director general meeting of 888 of a Director’s any election or re-election for be proposed and is to of age attained 70 years the (e) at such general meeting has been removed; the 888 Board to of the 888 the approval acquisition of non-cash 888 requires assets by valued at a particular those assets are where amount and shareholders been have approval obtaining such shareholder for the thresholds (f)lowered; the making to relating of loans or quasi- the provisions details of the more require has been amended to Director any loans to their for the 888 shareholders to arrangement be provided to proposed prior the loan or quasi-loan being made; to consideration and approval by the passing of written resolutions to relating and (g) the provisions has been removed. 888 shareholders Under the Gibraltar Companies Act, there is no longer a requirement is no longer a requirement Act, there Under the Gibraltar Companies a summaryfor in its be included of the objects to of a company sectionpursuant to 16(3) and (4) as, memorandum of association is deemed capable of Act, a company of the Gibraltar Companies restricted functions in any all and any unless these are exercising articles in 888’s manner (and such restrictions be contained would new Memorandum and Articles reflects this of association); and 888’s capital of 888 in the authorised share as the increase as well change, 426,387,500 limit of £2,131,937.50 divided into its previous from of £5,131,937.50 Ordinary the new figure of £0.005 each to Shares Ordinary 1,026,387,500 the divided into each by of £0.005 Shares of 600,000,000 new Ordinary creation of £0.005 each beyond Shares at 888’s of 888, which was also approved capital the registered Extraordinary General Meeting 2015. held on 29 September The substantive changes contained in the Memorandum changes contained substantive Articles and The primarily the constitutional documents update to were of Association including updating of 888 and bring law, them in line with the current the new sections to in the new Gibraltar certain refer to provisions Act as relevant. Companies GOVERNANCE

36 DIRECTORS’ REPORT continued

Any person who is found unsuitable by a relevant gaming authority may Shareholder agreements and consent requirements be prohibited by applicable gaming laws or regulations from holding, There are no known arrangements under which financial rights are held directly or indirectly, the beneficial ownership of any of 888’s securities. by a person other than the holder of the shares.

888’s new Memorandum and Articles of Association include provisions Relationship Agreement to ensure that 888 has the required powers to continue to comply with Any person who exercises or controls, on their own or together with applicable gaming regulations. any person with whom they are acting in concert, 30% or more of the votes able to be cast at general meetings of a company is known as These provisions include providing 888, in the event of a Shareholder a “Controlling Shareholder” for the purposes of the UK Listing Rules. Regulatory Event (as defined in the Articles), with the right to: The UK Listing Rules require companies with Controlling Shareholders to enter into an agreement which is intended to ensure that the (a) suspend certain rights of its members who do not comply with Controlling Shareholders comply with certain independence provisions the provisions of the gaming regulations (the Affected Members); in the UK Listing Rules. Sinitus Nominees Limited in trust on behalf of Dalia Shaked, O Shaked Shares Trust and Ben-Yitzhak Family Shares (b) require such Affected Members to dispose of their Ordinary Shares; Trust (together, the Principal Shareholder Trusts) are “Controlling and Shareholders” of 888.

(c) subject to (b) above, dispose of the Ordinary Shares of such 888 Holdings plc entered into a relationship agreement with the Affected Members. Principal Shareholder Trusts on 14 September 2005 which was amended on 28 August 2015 (the Amended Relationship Agreement). 888 considers that these rights are required in order to mitigate the risk that an interest in Ordinary Shares held by a particular person could The Amended Relationship Agreement includes the following provisions lead to action being taken by a relevant Regulatory Authority which in in respect of the independence of 888 Holdings plc (in accordance turn could lead to the withdrawal of existing licences held by 888 or the with the UK Listing Rules) which provide that each of the Principal exclusion of being awarded further licences in other jurisdictions that Shareholder Trusts shall, and shall procure as far as it is legally able, 888 seeks to pursue. This potential Regulatory Authority action could that each of their respective associates: therefore cause substantial damage to 888’s business or prospects. » will conduct all transactions and relationships with 888 Holdings plc Entities holding company shares on behalf and any member of the 888 Group on an arm’s length basis and of group employees on a normal commercial basis; At 31 December 2015, Virtual Share Services Limited held 3,333,240 Ordinary Shares, and the 888 Holdings plc Share Plan Trust held 46,432 » will not take any action which precludes or inhibits 888 Holdings Ordinary Shares in 888, all on behalf of various group personnel who plc, or any member of the 888 Group, from carrying on its business have received equity grants under the 888 All-Employee Share Plan and independently of them; under the 888 Holdings plc Long Term Incentive Plan 2015. Full details are set out on page 50. » will not take any action that would have the effect of preventing 888 Holdings plc, or any member of the 888 Group, from complying with Substantial shareholdings its obligations under the UK Listing Rules; and As at 31 December 2015, 888 had been notified of the following interests in 5% or more of its share capital under DTR Rule 5 of the » will not propose or procure the proposal of any shareholder resolution UK Listing Authority: which is intended, or appears to be intended, to circumvent any proper application of the UK Listing Rules. % issued Number of share It further provides that each of the Principal Shareholder Trusts will not Principal shareholders shares capital solicit 888 Group employees without consent, that only Independent Directors can vote on proposals to amend the Relationship Agreement, Sinitus Nominees Limited in trust that the Principal Shareholder Trusts will consult the Group prior to on behalf of Dalia Shaked 86,283,534 24.2% disposing of a significant number of shares in order to maintain an O Shaked Shares Trust 86,283,534 24.2% orderly market and shall not disclose confidential information unless Ben-Yitzhak Family Shares Trust 37,122,358 10.4% required to do so by law or relevant regulation or having first received Majedie Asset Management Limited 26,249,148 7.4% 888’s consent.

No notifications pursuant ot DTR Rule 5 have been received by 888 The Amended Relationship Agreement also includes restrictions on the between 31 December 2015 and the date of this Annual Report. Principal Shareholder Trusts’ power to appoint Directors and includes Information provided to 888 pursuant to the DTRs is publicly available obligations on the trusts to exercise their voting rights to ensure that via the regulatory information services and 888’s corporate website the majority of the Board, excluding the Chairman, is independent. corporate.888.com. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 37

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 Change of control Change of control fulfill to of failure in the event in 888 may, A change of control rise certain to give revocation applicable consent requirement, any gaming licences or certain contracts or termination rights under 888’s which 888 is a party. to Amendment to Relationship Agreement Agreement Relationship Amendment to of the entire 2015, in connection with the transfer On 22 November to Trust E Shaked held by in 888 Holdings plc Shares shareholding Shaked, a deed in trust on behalf of Dalia Sinitus Nominees Limited was Trust which E Shaked pursuant to Shares was executed of novation the Amended Relationship Agreement from and discharged released and Sinitus Trust Shares Family Ben-Yitzhak Trust, and O Shaked Shares in trust on behalf of Dalia Shaked be Nominees Limited continued to its provisions. bound by Agreement Shareholders’ Trusts Shareholder that the Principal has been informed Company The agreement a shareholders’ into and certain entered other shareholders Agreement). 2005 (the Shareholders’ on 14 September imposed on restrictions are Agreement, the Shareholders’ to Pursuant of the partiessubstantial disposals of Ordinary any by the Shares to Ordinary such without first offering Shares Agreement Shareholders’ the Principal respect to With Trusts. Shareholder the other Principal to than 1% a substantial disposal is a disposal of more Trusts, Shareholder provision This of the issued ordinary capital of the Company. share in the context (i) disposal does not apply to: of a recommended another Principal the Company; to for public takeover or (ii) transfers Trust. or a party Shareholder a Principal to associated Trust Shareholder that the Principal requires Agreement In addition, the Shareholders’ proposed resolution(s) of any in favour all vote Trusts Shareholder failing or, against such resolution(s) at a general meeting or all vote in vote Trusts, Shareholder amongst the Principal agreement other partiesThe the to such manner as maintains the status quo. cast or act with the vote in accordance will vote Agreement Shareholders’ Trusts. Shareholder or action the Principal by taken be, may as the case that: (i) the in the event shall terminate Agreement Shareholders’ The their respective and Trust, and the O Shaked Shares Trust E Shaked Shares in less than 5% of the issued share an interest collectively have associates, and its Trust Shares Family and the Ben-Yitzhak capital of the Company in less than 5% of the issued share an interest collectively have associates capital of the Company; or (ii) all the parties of the and the associates an interest have in aggregate, collectively, Trusts Shareholder Principal capital of the Company. in less than 10% of the issued share of the entire 2015, in connection with the transfer On 22 November to Trust E Shaked in 888 Holdings plc held by Shares shareholding in trust on behalf of Dalia Shaked, a deed Sinitus Nominees Limited which Sinitus Nominees Limited pursuant to was executed of adherence in trust on behalf of Dalia Shaked undertook observe, to be bound it as a applicable to and comply in all respects with the provisions by assume and to Agreement, the Shareholders‘ pursuant to shareholder the as if it had executed Agreement, the benefits of the Shareholders‘ and was named as a party Agreement it. to Shareholders‘ ware, none of the Principal Shareholder Trusts or any or any Trusts Shareholder none of the Principal ware, ware, none of the Principal Shareholder Trusts or any or any Trusts Shareholder none of the Principal ware, ted independently of the Principal Shareholder Trusts and did Trusts Shareholder independently of the Principal ted not enter into any transactions any or arrangements into with the Principal not enter their associates; of or any Trusts Shareholder of the proposal or procured proposed associates of their respective application proper the circumvented which resolution shareholder any of the UK Listing Rules. as far as it is a 888 action any which prevented took associates of their respective Rules; complying with its obligations under the UK Listing from as far as it is a 888 ac

» » » Since 16 May 2014 (when the UK Listing Rules were updated), 888 updated), Since 16 May 2014 (when the UK Listing Rules were who transactions shareholder any with any into has not entered would and which Shareholder” “Controlling be a be deemed to would the pursuant to shareholders of 888’s the approval required have UK Listing Rules. From 16 May 2014 (when the updated rules came into force) force) rules came into 16 May 2014 (when the updated From the Amended Relationship of 2015, being the date until 28 August 888 was not in compliance with LR9.2.2AR(2). 888 did not Agreement, disclose this non-compliance in its Annual Report 2014, which it was LR 9.8.4R(14)(b). do pursuant to to required The Amended Relationship Agreement entered into between 888 into entered Amended RelationshipThe Agreement 2015 on 28 August Trusts Shareholder Holdings plc and the Principal made to comply with the updates to in order included provisions certain as partiesLR9.2.2AR(2), and removed historic shareholders agreement. relationship the original to Historical non-compliance non-compliance Historical to 16 2014 May from with effect updated UK Listing Rules were The include certain of the independence of 888 from in respect provisions its “Controlling Shareholders”. There were no instances in which an Independent no instances in which of 888 did Director were There compliance with the regarding statements not support the Board’s independence criteria. aforementioned Confirmation of independence of independence Confirmation confirms that during LR 9.8.4(14)R, the Board pursuant to required As year 2015: the financial The obligations of the parties to the Amended Relationship Agreement obligations of the partiesThe the Amended Relationship Agreement to legal and regulatory at all times subject relevant all requirements are to and obligations of the parties Kingdom, in the United Gibraltar thereto or elsewhere. Such restrictions of the O Shaked and obligations apply in respect Shares in trust on behalf of Dalia Shakedand Sinitus Nominees Limited Trust capital whilst they collectively hold not less than 7.5% of the issued share whilst it Trust Shares Family of 888, and in respect of the Ben-Yitzhak capital of 888. share individually holds not less than 7.5% of the issued The Principal Shareholder Trusts can nominate a Non-executive Director a Non-executive Director can nominate Trusts Shareholder Principal The In that this right the event is exercised the Board. appointment to for the Chairman of (excluding than half the Board in fewer and it results such appointment shall only being Independentthe Board) Directors, of an additional to the Board upon the appointment become effective Independent the Nominations Committee. acceptable to Director at present. Directors no such nominated are There GOVERNANCE

38 DIRECTORS’ REPORT continued

Donations Research and development activities The Company did not make any donations to any political party In 2015, 888 maintained its focus on delivery of its offerings to regulated (including any non-EU political party) or organisation or independent markets, expansion of its mobile platform strategy and expansion of the election candidate or incurred any political expenditure during the year. capabilities of its gaming platform and offerings.

Financial instruments Some relevant achievements during the year in the field of research 888 considers its exposure to financial risks, including and exposure to & development included: specific countries and trading counterparties, to be low. During 2015, hedging of 888’s foreign currency risks was carried out solely with » Launch of shared liquidity of our Poker offering between Nevada leading banks including Barclays plc. Further information on 888’s use and Delaware customer bases; of financial instruments is set out in Note 24 to the annual accounts on page 103. » Further development of our slots and sports offerings in Spain, which delivered impressive growth; Directors’ indemnities 888’s Articles of Association permit 888 to indemnify its Directors in » Launch of attractive Casino, Poker and Sport propositions over Mobile certain circumstances, as well as to provide insurance for the benefit and PC in Denmark; of its Directors. 888 has undertaken to indemnify certain of its Non- executive Directors: (a) in defending any proceedings, whether civil » Optimisation of our gaming systems aimed at mitigating the effect of or criminal, in which judgment is given in favour of such Non-executive the UK point of consumption gaming tax and EU VAT on electronically Director or in which such Non-executive Director is acquitted; or (b) supplied services; in connection with any application under Section 378 (now Section 477) of the Gibraltar Companies Act (pursuant to which the court may provide » Development of customer relationship management and relief to such Non-executive Director in any proceedings for negligence, communication tools allowing us to react to customer behaviour in default, breach of duty or breach of trust on grounds that such Non- real time, as well as developing these tools over our Mobile platform; executive Director has acted honestly and reasonably, and that, having regard to all circumstances of the case, including those connected with » Improvement of user experience, including with regard to the Cashier his appointment, he ought fairly to be excused from liability on such and through our Bingo offering; terms as the court thinks fit). 888 also undertook in favour of Aviad Kobrine to indemnify him to the fullest extent permitted by applicable » Launch of the 777 Casino brand and client; law and 888’s Articles of Association in connection with the execution of his duties and/or exercise of his powers, authorities and discretions » Development of our CasinoFlex offering, raising the profile of side pursuant to his employment agreement. In addition, certain special games on our Bingo platform as fully functional Casino games; indemnities were provided to the Executive Directors in connection with the compliance and licensing procedures relating to 888’s » Simplification of our infrastructure and source code, improving business in the United States, details of which were provided in 888’s our systems’ ability to cope with higher levels of user traffic and 2011 Annual Report. supporting real-time communications with customers; and

Corporate governance » Addition of dozens of new games to our offering, both internally The corporate governance statement is on pages 40 to 45 and is developed and licensed. incorporated in this Directors’ Report by reference. Greenhouse gas emissions Going concern and viability statements Details of 888’s greenhouse gas emissions are set out in the Corporate The going concern and viability statements required to be included Responsibility section of the Business Review on page 28. in the annual pursuant to the UK Corporate Governance Code are on pages 27 and 45 and are incorporated in this Directors’ Report by reference.

Principal subsidiary undertakings The principal subsidiary undertakings are listed on page 99. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 39

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

ements, prepared in accordance with International in accordance prepared ements, egic reportegic of the development review includes a fair 888 HOLDINGS PLC HOLDINGS 888 the strat the financial stat a true and give Reporting the EU, by as adopted Financial Standards or loss financial position and profit liabilities, fair view of the assets, of 888 and the undertakings included in the consolidation taken as a whole; and and performanceand the position of 888 and of the business the undertakings in the consolidation taken included as a whole, with a descriptiontogether of the principal risks uncertainties and that they face.

Itai Frieberger Officer Executive Chief 2016 22 March Financial statements are published on 888’s website in accordance in accordance website published on 888’s are statements Financial and dissemination the preparation in the UK governing with legislation vary which may in other legislation of financial statements, from is the website and integrity of 888’s maintenance The jurisdictions. also extends responsibility Directors’ The responsibility of the Directors. contained therein. ongoing integrity the of the financial statements to the annual report preparing and the for responsible are Directors The financial to prepare required are The Directors financial statements. Reporting with International 888 in accordance Financial for statements statements financial prepare also chosen to (IFRSs) and have Standards with IFRSs. 888 in accordance for consider that the annual report taken Directors The and accounts, the balanced and understandable and provides fair, is as a whole, performance, assess 888’s necessary to information shareholders for business model and strategy. to the best of his confirms, Each of the Directors knowledge: (a) (b) taken that they ought to all the steps have Directors All of the current the needed by information of any taken make aware to have themselves the purposes establish that of their audit, and to for auditors Company’s of not aware are Directors The of that information. aware are the auditors unaware. are of which the auditors audit information relevant any On behalf of the Board: ently select accounting policies; and apply appropriate esent information, including accounting policies, in a manner including accounting policies, esent information, with the specific when compliance additional disclosures ovide ing the year ended 31 December 2015, Ernst and Young LLP LLP Young ended 31 December 2015, Ernsting the year and that provides relevant, reliable, comparable and understandable reliable, relevant, that provides and information; pr to understand to enable members in IFRSs is insufficient requirements the impact of particular and conditions on transactions, other events financial position and financial performance.the entity’s consist pr

» » » The Directors are responsible for keeping proper accounting records keeping accounting records proper for responsible are Directors The accuracy time the financial which disclose with reasonable at any taking steps for reasonable the assets, safeguarding position of 888, for and detection of fraud and other irregularities for and the prevention for reportGibraltar which complies with the of a Directors’ the preparation Act 2014. Companies International Accounting Standard 1 requires that financial statements that financial statements 1 requires International Standard Accounting financial Company’s year 888 and each financial fairly for present the faithful requires This position, financial performance cash flows. and and conditions of transactions, other of the effects events representation assets, for criteria recognition with the definitions and in accordance income and expenses set out in the International liabilities, Accounting of and presentation the preparation for “Framework Board’s Standards will In virtually a fair presentation all circumstances, financial statements”. A fair presentation with all applicable IFRSs. compliance by be achieved to: the Directors also requires Directors’ statement of responsibilities statement Directors’ financial statements prepare to the Directors requires law Company Act 2014. with the Gibraltar Companies in accordance

During 2015, EY charged 888 US$0.4 million in audit fees and in audit fees 888 US$0.4 million During 2015, EY charged of which US$3.3 million was (out US$3.4 million in non-audit fees of bwin.party acquisition with the proposed associated digital entertainment 888 US$0.4 million during plc), and 2014, EY charged fees. and US$0.1 million in non-audit in audit fees were reappointed auditors for the purposes financial 888 preparing of for auditors reappointed were Limited, EY Rules. the UK Listing pursuant to as required statements under the Gibraltar auditor as a registered is approved which Gibraltar, Services Act 2009, is the statutoryFinancial of 888 (Auditors) auditor the purposes of issuing an audit reportincluding for the pursuant to Act 2014. Gibraltar Companies Dur Auditors LLP and EY Young of Ernst and the reappointment for A resolution EY), (together, 888 will be proposed of as auditors Gibraltar, Limited, at the 2016 Annual General Meeting. GOVERNANCE

40 CORPORATE GOVERNANCE STATEMENT

888 Holdings plc is admitted to the UK Official List and its shares are Leadership traded on the London Stock Exchange under a Premium Listing. As such, The Directors consider it essential that 888 should be both led despite being incorporated in Gibraltar, the UK Corporate Governance and controlled by an effective Board. Code as published in September 2014 (the “Code”) applies to 888 pursuant to the UK Listing Rules and is available at www.frc.org.uk. Board responsibilities and procedures The Board focuses upon 888’s long term objectives, strategic The Board remains committed to the principles of corporate governance and policy issues and formally and transparently considers the in the UK Corporate Governance Code which it considers to be central management of key risks facing 888, as well as determining the to the effective management of the business and to maintaining the nature and extent of significant risks it will take in achieving its confidence of investors. This report explains how 888 has applied the strategic objectives, maintaining sound risk management and internal main principles of the UK Corporate Governance Code. control systems and reviewing annually the effectiveness of 888’s risk management and internal control systems. The Board is responsible The statement contained in this section explains the key features of the for acquisitions and divestments, major capital expenditure projects Company’s governance structure and compliance with the UK Corporate and considering 888’s budgets and dividend policy. The Board also Governance Code. Where 888 has not complied with UK Corporate determines key appointments. The Board receives regular updates Governance Code, explanations are given below. on shareholders’ views.

This statement also includes items required by the UK Listing Rules and Board-level responsibilities of the Chairman are clearly and formally the Disclosure Rules and Transparency Rules, including how the “Main defined, with the Chairman being responsible for the effective operation Principles” of the UK Corporate Governance Code have been applied. of the Board as a whole, leadership of the Board in achieving a culture of constructive challenge by Non-executive Directors, regularly agreeing The Board remains committed to the principles of corporate governance and reviewing each Director’s training and development needs, and in the UK Corporate Governance Code which it considers to be central supporting key external relationships; the CEO has the overall executive to the effective and efficient management of 888’s business and to responsibility for the running of the Company’s business; and the maintaining the confidence of investors for its long term success. Non-executive Directors are responsible to constructively challenge This report explains how 888 has applied the main principles of the and help develop proposals on strategy; no one individual has UK Corporate Governance Code. unfettered powers of decision.

Statement of compliance with the UK Corporate The Board has an established calendar of business. This covers the Governance Code financial calendar, strategic planning, annual budgets and performance During 2015, the Company was in material compliance with the self-assessments, as well as the conduct of standing business. The UK Corporate Governance Code, other than as regards the following: calendar forms the basis for effective integration of business activities as between the Board and its principal committees (see pages 40 to 45), » The roles of Chairman and Chief Executive have been exercised which individually consider their own operating frameworks against the by the same individual, Brian Mattingley, from 13 May 2015 until Board’s business programme. the appointment of Itai Frieberger as Chief Executive Officer of the Company and Brian Mattingley as Chairman, on 2 March 2016. The Directors have wide-ranging business experience, and no individual, As Brian acted as Executive Chairman for part of the year, he did or group of individuals, dominates the Board’s decision making. not meet the independence criteria for chairmen as set out in the UK Corporate Governance Code. Reserved powers and delegation A schedule of matters reserved to the Board has been adopted and its » Less than half of the Directors of 888 Holdings plc, excluding the content is reviewed to align it with operational needs and the Board’s Chairman, were Non-executive Directors who were determined by preference to monitor and, where appropriate, approve matters of the Board to be independent for the purposes of the UK Corporate substance to 888 as a whole. Senior executives have given written Governance Code following the retirement of John Anderson as a undertakings to ensure compliance within their business operations Non-Executive Director on 13 May 2015. with the Board’s formal schedule of matters reserved to it for decision or approval. » The Company did not have a Senior Independent Director serving on the Board of Directors during 2015. The functions Chairman and Chief Executive Officer of a Senior Independent Director were fulfilled during 2015 by the Brian Mattingley transitioned from the role of Chief Executive Officer Non-executive Directors. to Executive Chairman on 13 May 2015, and continued to fulfil such role during an interim period until the appointment of Itai Frieberger as » As there are only two Independent Non-executive Directors serving Chief Executive Officer on 2 March 2016, at which time Brian Mattingley on the Board, it has not been possible for the Board to appoint three was appointed as Chairman. As Brian acted as Executive Chairman for Independent Non-executive Directors to the Audit and Remuneration part of the year, he did not meet the independence criteria for chairmen Committees. as set out in the UK Corporate Governance Code. The Board consulted with 888’s major shareholders in 2015 with regard to these succession » Board evaluations were conducted internally by facilitation of the planning matters. Chairman in coordination with the Company’s legal adviser, Herzog Fox & Neeman, who may not be considered an external facilitator. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 41

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 Appointments to the Board the Board Appointments to on an ongoing basis, considers succession planning matters Board The as well the CEO role with particular for on succession planning focus has prioritised the Board the level, Board senior management. At as for of experienced Non-executive Directors. recruitment lead the process to has established a nomination committee Board The the Board to make appointments and to recommendations Board for (the Nominations Committee). comprised two the Nominations Committee During the year, and Independent (Chair) Amos Pickel Non-executive Directors: Ron McMillan. its in discharging assists the Board Nominations Committee The NominationsThe the Board. the composition of to relating responsibilities the structure time, time to from reviewing, for is responsible Committee the Chairman and Chief determining succession plans for of the Board, suitable candidates recommending and identifying and Officer, Executive In the Nominations with accordance appointment as Directors. for Chairman does not Committee the terms of reference, Committee’s chair the Nomination Committee when it is dealing with the appointmentis dealing with it when chair the Nomination Committee the Nomination Committee and the chairmanship, of a successor to is tasked and the capabilities a description with preparing of the role particular for roles. required on the available are terms of reference Nominations Committee’s The corporate.888.com. website, Company’s will continue its efforts and the Board Nominations Committee The suitable and experienced Independent recruit in 2016 to Non-executive including a Senior IndependentDirectors, Director. implementing the for is also responsible Nominations Committee The policy including on diversity within the scope of its mandate, Board’s on achieving setting measurable objectives and monitoring progress In diversitysuch objectives. considering appointments, new Board the (including gender diversity) by is one of the criteria considered diversity is regarding statement Company’s The Nominations Committee. Responsibilityset out in the Corporate section of the Business Reviewon 31. pages 28 to executive did not engage any During 2015, the Nominations Committee in connection consultants appointments. search with new Board At present, there is no Senior Independent Director on the Board. is no Senior Independent there on the Board. Director present, At for identify candidates seek to continued to During 2015, the Board no suitable yet, As appointment as new Non-executive Directors. During 2015, the Non-executive had been appointed. candidates fulfilled the functionsDirectors of a Senior Independent Director. candidates that appropriate hopeful are Board the Going forward, to act as appointed can be identified and Independent Directors, including a Senior Independent Director. EFFECTIVENESS EFFECTIVENESS The role of the Senior Independent Director is to provide a sounding of the Senior Independent provide role is to The Director performance and the Chairman’s the Chairman, evaluate to for board serve and to succession planning, as an intermediary lead the Board’s necessary. where the other Directors for Less than half of the Directors, excluding the Chairman, were the Chairman, were excluding than half of the Directors, Less independent be to the Board determined by Non-executive Directors following the purposes Governance Code of the UK Corporate for of John on Anderson as a Non-executive Director the retirement 13 May 2015. Independent Directors Independent Directors The biographical details of all of the Directors, setting out their relevant setting out their relevant details of all of the Directors, biographical The given are skills commitments, and experience and their professional on page 32. From 13 May 2015 and following the resignation of John Anderson, resignation the 13 May 2015 and following From as six Directors), (prior Directors thereto, of five consisted the Board two Independent (being Amos Pickel Non-executivefollows: Directors and Ron McMillan), a Chairman (being Brian Mattingley who was (being Chairman Directors during 2015), and twoExecutive Executive Officer (Chief Operating as the Chief Executive Itai Officer Frieberger Officer). Kobrineduring 2015) and Aviad the Chief Financial as Diversity policy Diversity of women diversity policy and involvement Details of the Company’s Responsibility set out in the Corporate are in management of the Group section of the Business Review 31. pages 28 to on Directors’ insurance cover insurance Directors’ a Directors’ at its expense, has arranged and maintains, Company The liability insurance policy respect in of legal actions against its and officers’ To Governance Code. the UK Corporate by as recommended Directors, also indemnify may the Company the extent Gibraltar law, permitted by cover nor the indemnity Neither the insurance provides the Directors. has acted fraudulently or dishonestly. a Director where Amos Pickel has servedAmos Pickel 888 since March of as a Non-executive Director of length whether Amos’ considered has carefully Board The 2006. service he his independence and concluded that has compromised no are independent in character and judgement and that there remains likely or could appear affect, which are to or circumstances relationships review carried the rigorous out from judgement. his affect, Moreover, to performance, it has concluded that Amos of its members’ the Board by and to experience the Board bring and insight to continues to invaluable Board The deliberations. and committee Board to contribute positively performance and continued to Amos’ satisfied as entirely is therefore benefit business will continue to that 888’s independence and believes his experience and knowledge.from Non-executive Director independence Director Non-executive Itai Frieberger was appointed as Chief Executive Officer 2016. as Chief Executive on 2 was appointed March Itai Frieberger Brian and Itai integrity the of a close workingensure to have relationship and the successful deliverythe decision making of the Board process of has taken of the division of responsibilities Board note The strategy. 888’s between the Chairman an and CEO and considers this clear separation important part of its corporate governance. Board composition Board GOVERNANCE

42 CORPORATE GOVERNANCE STATEMENT continued

Re-election and appointment of Directors Meetings and attendance The Board has established a Nominations Committee to lead the process The Board plans to meet six times a year. When urgent decision making for Board appointments and to make recommendations to the Board, is required between meetings on matters reserved to the Board, there further details of which are set out at page 41 of this report. is a process in place to facilitate discussion and decision making. The Directors regularly communicate and exchange information irrespective All Directors are subject to reappointment by shareholders on an of the timing of meetings. annual basis in accordance with the provisions of the UK Corporate Governance Code. During 2015, the Board met ten times. Set out below are details of the Directors’ attendance record at Board and Committee meetings in 2015. When proposing Directors for re-election, the Board rigorously reviews Certain additional meetings of the Board were arranged at short notice the performance of each Director and assess whether the individual’s and some of the Directors were not able to physically attend. performance continues to be effective and that he or she continues to demonstrate commitment to the role, taking into account the need for Itai Frieberger was appointed to the Board on 13 May 2015, and attended progressive refreshing of the Board. all Board meetings subsequent to that date.

The Board may appoint any person to be a Director of the Company and The Chairman has responsibility for ensuring that agendas for Board such Director shall hold office only until the next AGM, when he or she meetings are set in advance. Board papers are issued to Directors shall be eligible for reappointment by the shareholders. sufficiently in advance of meetings to facilitate both informed debate and timely decisions. Commitment The opportunity to hold office as Non-executive Directors of other None of the Directors (including John Anderson who stepped down companies enables the Directors of 888 to broaden their experience as a Non-executive Director of the Company on 13 May 2015) have raised and knowledge, which benefits the Company. Executive Directors may any concerns about the running of the Company or a proposed action be allowed to accept Non-executive appointments with the Board’s which needed to be recorded in the Board minutes of the Company prior permission, so long as these are not likely to lead to any conflict of or in a statement to the Chairman for circulation to the Board. interest. Executive Directors may be required to account for fees received from such other companies. Non-executive Directors are required to Meetings with Non-executive Directors allocate sufficient time to perform all applicable roles and to both disclose The Chairman holds meetings at least once per year with the Non- any external appointments and consult with the Company prior to executive Directors without the Executive Directors being present. accepting any new major external appointments. The Board considered Amos Pickel’s executive role with Swiftstake Technologies S.A. and The Non-executive Directors meet once per year without the Chairman concluded that it did not derogate from his commitment of sufficient present in order to appraise the performance of the Chairman and time to commit to his Non-executive Director role with 888. take into account the views of the Executive Directors. Under the UK Corporate Governance Code, it is part of the role of the Senior The Chairman has disclosed details of his other significant commitments to Independent Director to lead this process and, as noted above, the Board the Board during 2015 and these are detailed in his biography on page 32. is currently in the process of identifying and appointing a new Senior Independent Director. During 2015, the Non-executive Directors fulfilled The Board considers that Mr Mattingley’s other commitments do not the functions of a Senior Independent Director. interfere with the discharge of his responsibilities to the Group and is satisfied that he makes sufficient time available to serve 888 effectively. Non-executive review and performance appraisal The Board has established a formal process for the annual evaluation of The terms of appointment for each Non-Executive Director, including its performance, its committees and individual Directors. The evaluation expected time commitment are available for inspection at the process covers a range of issues such as Board processes, Board roles Company’s registered office during normal business hours and and responsibilities, Board agendas and committee processes. at the AGM.

Total number of meetings held during the year ended December 2015 and the number of meetings attended by each Director Audit Remuneration Nominations Board committee committee committee Total held in year 10 5 3 — Brian Mattingley 10 N/A N/A N/A Itai Frieberger 7 N/A N/A N/A Aviad Kobrine 8 N/A N/A N/A Ron McMillan 8 5 3 — Amos Pickel 10 5 3 — STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 43

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

nificant risk and control areas of relevance to relevance of areas nificant risk and control 888 HOLDINGS PLC HOLDINGS 888 ontrols to monitor the consolidated accounting process and its process accounting the consolidated monitor to ontrols reventative control measures in the finance and accounting systems in the finance and accounting systems measures control reventative results at the level of the Board and at the level of the companies and at the level of the Board level at the results financial statements; included in the consolidated P Identification of sig accounting processes; group-wide C and of the companies included in the consolidated of the 888 Group performance-oriented and in the operative, financial statements for the preparation information significant that generate processes management including the financial statements of the consolidated report, including a separation of functions and pre-defined approval areas; in relevant processes

» » » ACCOUNTABILITY ACCOUNTABILITY Conflicts of interest Conflicts with dealt with in accordance are of the Directors Conflicts of interest Memorandum & Articles of set out in the Company’s the procedures a Director the Chairman. by Specifically, monitored and are Association which he or in resolutions or Committee on Board does not vote virtue than by (other an interest persons connected with him have his knowledge plc) which is to in 888 Holdings of a shareholding Such procedures circumstances. in specific limited except material, duringyear. the effectively operated system 888’s for acknowledge Directors The responsible that they are setting policy and risk for on internal control of internal control, of internal control the effectiveness reviewing management, and for and risk management. and risk of internal control systems 888’s monitor Directors The evaluating including identifying, management on an ongoing basis, The Board Company. by the risks faced the significant and managing with the 2014 UK accords that its riskbelieves management process and carries Governance Code Corporate out carries annual review out an including financial, all material controls, covering of its effectiveness operational and compliance controls. responsibilities, considers individual risk annual review The control Such a risks. reporting assessments of residual lines and qualitative in place was carried that were review processes out in respect of the of the Annual Report approval of 2015 up until the date throughout weaknesses identified failings or were No significant and Accounts. in the review. policies on risk and control, implement Board to role It is management’s to is designed of internal control system The including reporting. business achieve to the riskmanage rather than eliminate of failure assurance and not absolute, reasonable, objectives and can only provide or loss. against material misstatement and adequacy the appropriateness also reviews Committee Audit The to and risk management in relation of internal control of systems reportingthe financial on an ongoing basis and makes process based on its findings. the Board to recommendations the to and risk in relation management systems internal control 888’s accounts include the following: consolidated preparing of process Risk management and internal control Risk management and internal The appointment or removal of the Company Secretary of the Company is a matter appointment or removal The as a whole. the Board for Information and support Information the advice and services has access to Each of the Directors the of Under the direction of the Chairman, the Company Secretary. Company within flows include ensuring information Secretary’s responsibilities and senior management, as its Committees and between the Board, development as facilitating induction,well evaluation and professional legal and on corporate governance, activities, and advising the Board matters. procedural As noted above, the Chairman regularly agrees and reviews each and reviews the Chairman agrees regularly above, noted As Members of the committees needs. training and development Director’s role. to their relevant that are on matters specific updates receive the Members with responsibility for of the senior management team meetings about business make at Board periodic presentations Group’s their functions, performance, markets and strategy. Itai Frieberger received a full induction as an on joining the Board received Itai Frieberger on 13 May 2015, including in respect of the role Director Executive procedures. and Board his duties and responsibilities of a Director, during appointed 2015. were Directors No new Non-Executive All Directors have access to the advice and services access to have All Directors of the Company responsible who are advisers, nominated Secretary and the Company’s able to are Directors followed. are procedures ensuring that Board for at the Company’s if required, advice, seek independent professional of their Company first notified the that they have expense provided do so. to intention Development and advice and advice Development and rigorous should be a formal, understands that there Board The has which the induction of new for Directors, procedure transparent with the guidance of the Nominations Committee. been formulated Following the evaluation, the Board was satisfied that each of the the evaluation, the Board Following to demonstrate and be effective to continue Non-executive Directors them for proposes and therefore roles their respective commitment to re-election the Board. to Following analysis of the questionnaire responses, a detailed discussion responses, analysis of the questionnaire Following who were Directors Non-Executive the led by the Board, was held by of the results, performing of the Senior Independent the role Director, Company’s The taking Directors. account the views of the Executive into The external feedback. & Neeman, provided Herzog Fox legal adviser, key appoint a Senior the evaluation need to was the action from item do in the near future. to intends Independent Board which the Director A detailed questionnaire was used covering various was used covering aspectsA detailed questionnaire of the quality the overall to functions, and particular was given focus Board’s of decision-making and performance of the Chairman. The internal evaluation of the Board and its Committees relating to to relating and its Committees internal evaluationThe Board of the performance in 2015 was carried and included 2016, out in March evaluation of the performance as a and each Committee of the Board and the Chairman as evaluation of individual Directors whole as well The Board. the set by against criteria and minimum requirements external legal adviser, with the Company’s Chairman in coordination Herzog Fox the evaluation process. & Neeman, facilitated Herzog Fox the as an external for not be considered facilitator & Neeman may purposes Governance Code. of the UK Corporate GOVERNANCE

44 CORPORATE GOVERNANCE STATEMENT continued

» Measures that safeguard proper IT-based processing of matters The Directors’ Remuneration Report, which outlines the Remuneration and data relevant to accounting; Committee’s work and details of Directors’ remuneration, is on pages 46 to 60. The Remuneration Committee’s terms of reference are available » Reporting information of companies around the 888 Group which on the Company’s website, corporate.888.com. enable 888 Holdings plc to prepare consolidated financial statements including management accounts. Gaming Compliance Committee In accordance with Nevada Gaming Control Board requirements, the The reporting structure relating to all the companies included in the Board has appointed a Gaming Compliance Committee. Its members consolidated financial statements requires that significant risks are to are Michael Alonso (an external consultant to the Company), be reported immediately to the Board on identification. Ron McMillan and Amos Pickel.

Audit Committee and auditors The Gaming Compliance Committee is entrusted with making sure The Board has established an Audit Committee. Details of the Audit that the 888 Group’s licensed gaming activity is carried out with honesty Committee’s functions, together with its specific activities in 2015, and integrity, in accordance with high moral, legal and ethical standards, are set out in the Audit Committee Report on page 61. and free from criminal and corruptive elements. As such, the committee is responsible and has the power to identify and evaluate situations During 2015, Deloitte carried out the Company’s internal audit function, arising in the course of the Company’s and its Affiliates’ business that reporting to the Audit Committee; during 2015, the internal auditor may adversely affect the objectives of gaming control. provided seven reports to the Audit Committee and discussed the internal audit working plan for 2016. The Committee is not intended to displace the Board or the Company’s executive officers with decision-making authority but is intended to 888’s payment risk management team, based in Gibraltar, has developed serve as an advisory body to better ensure that the Company’s goals stringent payment risk management and fraud control procedures. of avoiding unsuitable situations and in entering into relationships The team makes use of external and internal systems to manage the exclusively with suitable persons. payment risks. Detailed procedures exist throughout the Company’s operations and compliance is monitored by operational management The Committee’s work is being done independently and impartially. and the internal audit function. To this end, its members are appointed by and report directly to the Board of Directors. Details of the Company’s risk management strategy and the Board’s assessment of the Company’s viability in light of its risks are set out Whistle-blowing policy on pages 20 and 27 respectively. The Company’s whistle-blowing policy sets out the overall responsibility of the Board for implementation of the policy, but notes that the Remuneration Committee Board has delegated day-to-day responsibility for overseeing and The Board has overall responsibility for determining the framework of implementing it to the designated whistle-blowing officer. The policy executive remuneration and its cost. It is required to take account of any provides that where an employee is not comfortable making a disclosure recommendation made by the Remuneration Committee in determining to his/her respective direct line manager, disclosure can be made to the the remuneration, benefits and employment packages of the Executive designated whistle-blowing officer whose details are provided. If the Directors and senior management and the fees of the Chairman. subject of the disclosure in any way involves the designated whistle- blowing officer, the disclosure may be made directly to the Chairman During the year the Company’s Remuneration Committee comprised of the Audit Committee or to another member of the Group’s senior two Independent Non-executive Directors: Amos Pickel (Chairman) management. Whilst employees are permitted to make disclosures and Ron McMillan. As there are only two Independent Non-executive anonymously, disclosing employees are encouraged to reveal their Directors serving on the Board, it has not been possible for the Board to identity to the designated whistle-blowing officer in order to allow a appoint three Independent Non-executive Directors to the committee. full and proper investigation to take place; measures can be taken to preserve the confidentiality of the disclosure where appropriate. The The Remuneration Committee determines the Chairman’s and Board commits to investigating all disclosures fully, fairly, quickly and, Executive Directors’ fees, whilst the Chairman and the Executive Directors where circumstances permit, confidentially. Undertakings are made to determine the fees paid to the Non-executive Directors. Further details employees who raise genuinely held concerns in good faith under the are provided on page 53. procedure that they will not be dismissed or subjected to any detriment as a result of his/her action. Employees of the Group are regularly sent The Remuneration Committee is advised by New Bridge Street, a trading reminders regarding the whistle-blowing policy as part of general name of Aon Hewitt, being a subsidiary of Aon plc. Further details are refreshers of various Group policies. provided on page 60. No reports of incidents under the whistle-blowing policy were received All new long-term incentive schemes and significant changes to in 2015. existing long-term incentive schemes are put to the shareholders of the Company for approval before they are adopted (save for certain circumstances as set out in the Listing Rules). STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 45 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A age 36 P

e provided

Disclosur

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

o-rata allotments for cash (issuer) o-rata allotments for cash o-rata allotments for major subsidiaries cash by o-rata allotments for eholder waivers of dividends eholder waivers dividends of future eholder waivers aiver of emoluments by a Director of emoluments by aiver a Director emoluments by of future aiver etails of long-term incentive schemes only etails of long-term incentive greements with controlling shareholders with controlling greements ontracts of significance ublication of unaudited financial information financial ublication of unaudited rovision of services shareholder rovision a controlling by arent participationarent subsidiary a listed in a placing by nterest capitalised by the Group capitalised by nterest involving a Director a Director involving Non pr Non pr Non pr P C P Shar Shar A I P D W W 888 HOLDINGS PLC HOLDINGS 888

(1) Brian Mattingley Chairman 2016 22 March Corporate Social Responsibility Statement Social Responsibility Corporate and otherwise Officer appointed, Chief Executive (where Group’s The monitoring for responsible the Director senior management) is periodic receives Board The corporate within 888. social responsibility Chief Executive the from activities in this area reports on the Group’s Further Corporate Responsibilityare set out in the details Officer. section 31. 28 to on pages Other Disclosures pages: in this report on the following can be found matters following The Applicable sub-paragraph within LR 9.8.4 (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) On behalf of the Board: The Company’s Viability Statement is set out on page 27. is set out on page Viability Statement Company’s The The principalThe risks disclosed and uncertainties are the Group faced by in the Risk Management report Strategy on page 20. Going concern medium-term 2015, its budget for of the Group’s review careful After are the Directors matters, relevant and all resources liquid plans, financial adequate have Group and the Company confident that the future the foreseeable for continue in operational existence to resources of this Annual the approval a period of at least 12 months from and for adopt the going concern continued to basis therefore have They Report. the financial statements. in preparing Compliance with statutory provisions with statutory Compliance it is subject compliance to Gibraltar, in is registered the Company As relevant main legislation The with Gibraltar statutory requirements. The Act 2014. the Gibraltar Companies companies in Gibraltar is to Act. is in full compliance with the Gibraltar Companies Company All shareholders are welcome to attend the 2016 Annual General the 2016 attend to welcome are All shareholders Meeting be held on 10 May 2016) and private investors (scheduled to take encouraged to of the opportunity advantage are ask to given members) of the Audit, Chairmen nominated The (or questions. the meeting will attend Remuneration Nominations Committees and questions. answer to and be available The Company did not have a Senior Independent did not have during Director Company The The performing are Directors role. this 2015 and the Non-Executive if they shareholders talk to to available are Directors Non-Executive contact where matters any are or concerns issues or if there any have Financial Officer Officer with the Chairman, Executive Chief and Chief the issue. such contact resolve or where has failed to is inappropriate The outcome of this dialogue and meetings is reported to the Board. is reported of this dialogue and meetings the Board. outcome to The and interim of full year presentations includes formal programme The and discussion calls and periodic roadshows conference analysts’ results, held with Discussions were and governance. strategy of the Company’s advisoryshareholder bodies in 2015, in particular discuss Directors’ to policy. the remuneration to relating and matters remuneration Relations with shareholders and and with shareholders Relations audiences financial key dialogue with principal maintains an active and regular Company The a planned sell-side analysts through and and institutional shareholders also The Board and financial PR activity. relations of investor programme meetings through the views with keeps major shareholders of date up to the year. throughout representatives and discussions with shareholder GOVERNANCE

46 DIRECTORS’ REMUNERATION REPORT

ANNUAL STATEMENT

Dear Shareholder,

I am pleased to present our Directors’ Remuneration Report to shareholders.

As a company incorporated in Gibraltar, 888 Holdings plc is not bound by UK law or regulation in the area of Directors’ remuneration to the same extent that it applies to UK incorporated companies. However, by virtue of 888’s Premium Listing on the London Stock Exchange and reflecting the Committee’s approach to good governance, we have adopted in full the disclosure requirements of a UK incorporated company and shareholders will be given the opportunity to approve both our remuneration policy and our Annual Report on Remuneration at the 2016 Annual General Meeting, each being subject to an advisory vote. The Committee has given considerable thought to the policy for 888 going forward (outlined on pages 48 to 51) and we believe that this new policy is capable of lasting the full three year period before the next policy vote is required by UK Law.

Remuneration and strategy Our goal is to reward executives fairly, by providing an appropriate balance between fixed and variable remuneration, linked to the achievement of suitably challenging performance measures. As highlighted at the front of this Annual Report, our strategy focuses on the following pillars:

» Development of core B2C brands;

» Driving margin growth through operational efficiencies;

» Expansion in regulated markets;

» B2B partner of choice; and

» Continue to protect our customers and act responsibly.

Our incentive plans are closely aligned to this strategy.

Pay outcomes for 2015 The annual bonus was focused on the achievement of stretching like-for-like EBITDA growth targets. Like-for-like EBITDA growth in 2015 was 21.3%, resulting in bonuses to the Directors of the maximum amount of 150% of salary. In exercising its discretion to grant this bonus level, the Committee was mindful that 888 management had faced exceptional challenges in 2015, including in the fields of regulation and taxation, as well as development of 888’s offering in regulated markets and currency headwinds. For full details of Executive Directors’ bonuses and the associated performance delivered see page 55.

In relation to long-term incentives, the awards granted in 2012 under the All Employee Share Plan were half based on absolute EPS growth targets and half on relative TSR. EPS growth performance was measured over the three year period to 31 December 2014. Our EPS growth performance over this period was 2,582% against a target range of 15.76% (5% p.a. compounded) to 72.80% (20% p.a. compounded). TSR performance was measured over three years to 31 December 2014 and our TSR performance was 261% compared to a stretch target of 59.9% (10% p.a. above the median). Overall, this resulted in 100% of the 2012 award vesting in April 2015.

The 2013 All Employee Share Plan award is due to vest in April 2016. The EPS performance period (which accounts for 50% of the award) ended on 31 December 2015. We achieved 96% EPS growth over the three year performance period compared to a target range of 15.76% to 72.80% (5% to 20% p.a. compound), resulting in 100% of this part of the award becoming due to vest. TSR performance was measured over three years to 31 December 2015 and our TSR performance was 79% compared to a stretch target of 39.9% (10% p.a. above the median). Overall, this resulted in 100% of the 2013 award being due to vest in April 2016.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 47

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 o be based on challenging EBITDA growth targets. The maximum bonus opportunityThe unchanged at 150% of remains targets. growth EBITDA o be based on challenging ies for the Chief Executive and Chief Financial Officer have been set at ILS 3,024,495 (effective from 2 March 2016) and £416,000 respectively. respectively. March 2016) and £416,000 from 2 Officer (effective been set at ILS 3,024,495 have and Chief Financial the Chief Executive ies for eholding guidelines have been introduced requiring the Executive Directors to build and maintain a shareholding of 200% of salary. build and maintain a shareholding to Directors the Executive requiring been introduced eholding guidelines have obust recovery and withholding provisions have now been incorporated into both the annual bonus and LTIP (applying to 2016 awards onwards). onwards). 2016 awards (applying to both the annual bonus and LTIP been incorporated into now have obust recovery provisions and withholding The increase in Itai Frieberger’s salary the salary responsibilities in Itai from as Chief Operating Officer reflects increase The he received (ILS 2,571,433) the increased Frieberger’s in the CEO role. involved R Annual bonus will continue t of the salary 50% up to salary at the discretion (previously could be awarded award the entire and objective performance be set for will now targets well as out-performance as of budget, EBITDA year’s the previous over increase significant of the full bonus will require Payment of the Committee). basis. will be disclosed in full on a retrospective targets EBITDA The 100% of salary shares. into above bonus and any be deferred will now Shar Salar

» » » » The Committee is committed to maintaining an open and constructive dialogue with our shareholders on remuneration matters and I welcome and I welcome matters on remuneration maintaining an open and constructive dialogue with our shareholders to is committed Committee The have. may you feedback any on Remuneration will be subject an advisory support to will be able to and I hope that you at the forthcoming vote the resolution AGM. Amos Pickel Amos Committee of the Remuneration Chairman 2016 22 March The final sectionreportThe of this is the Annual the newReport policy on how detailed disclosure will be implemented on Remuneration which provides necessary with the information a judgment shareholders form to provide disclosures The 2015. to been paid in relation have Directors 2016 and how for with the Annual Report together Annual Statement This paid. were performance Directors the link between Company as to the Executive and how The revised remuneration policy has been carefully considered by the Committee and has been designed to support to and has been designed and reflect the business strategy the Committee by policy considered remuneration revised been carefully has The policy. the remuneration about the changes to with its major shareholders best practice. 888 has consulted UK corporate governance In addition, the following changes are being made for 2016: being made for changes are In addition, the following We have introduced a new 888 Holdings plc 2015 Long Term Incentive Plan (the 2015 LTIP). This replaced the previous share plans which expired plans which expired share the previous replaced This Incentive (the 2015 LTIP). Plan Term a new 888 Holdings plc 2015 Long introduced have We is 200% the 2015 LTIP under level maximum award The 2015. at the EGM held on 29 September shareholders by and was approved 2015 in August will be made under this new plan in 2016 (at a maximum of 200% of salary Directors of salaryfor the Chief Executive to Executive awards and the first performance TSR (against a relative will be based 50% on awards vesting of the The Officer). and a maximum of 150% of salary the Chief Financial for years. financial three over will be measured Performance targets. EPS growth and 50% on challenging companies) of gaming and leisure peer group Details of the performance described 53. on page are targets Various changes have been made to the remuneration policy for 2016 following a full review of the remuneration policy, in order to reflect the to in order policy, of the remuneration a full review policy 2016 following the remuneration been made to for changes have Various of Itai notably the promotion structure, Frieberger Board take the Executive of the business and to to account of the changes repositioning strategic the right paying level are that we ensure to been designed changes have The 2016. place on 2 March which took the position of Chief Executive to marketplace. the business and the extremely competitive to the criticality Directors of the Executive 888 recognising for of pay Overall, in light of the annual and long-term performance delivered, the Committee is satisfied that there has been a robust link betweenrobust a has been is satisfied that there the Committee annual and long-term in light of the performanceOverall, delivered, performance and reward. 2016 for policy Remuneration Finally, the Phantom Share Award granted to Brian Mattingley (during his time as Chief Executive) vested during the year. Following share price share Following during the year. Brian vested to Mattingley (during granted his time as Chief Executive) Award Share the Phantom Finally, under awards was £3.3 million. Mr the performance on vesting any Mattingley of 149% over award the value of the did not receive period, growth Plan. Share the 888 All Employee GOVERNANCE

48 DIRECTORS’ REMUNERATION REPORT continued

DIRECTORS’ REMUNERATION POLICY How the views of shareholders are taken into account This part of the Directors’ Remuneration Report sets out the 888 engages with significant investors regarding remuneration issues Remuneration Policy for 888. The policy has been developed taking into and intends to continue doing so. Views of shareholders and their account the principles of the UK Corporate Governance Code and the representative bodies expressed at the AGM and feedback received views of our major shareholders. The policy will be voted into effect from at other times will be considered by the Committee. As part of the the date of the 2016 AGM and is currently intended to operate until the remuneration review, 888 discussed the proposed changes with its AGM in 2019. major shareholders.

The Remuneration Committee applies a remuneration policy which has How the views of employees are taken into account at its core the following objectives: Whilst 888 does not formally consult employees on remuneration, in determining the remuneration policy for Executive Directors, the » To align the incentives of executives with the interests of shareholders, Committee takes account of the policy for employees across the including being mindful of employee costs in light of 888’s capital workforce. In particular, when setting base salaries for executives, the needs and return to shareholders; Committee takes into account the salary increases being offered to the workforce as a whole. The overall structure of the remuneration policy » To focus on top-line growth and margin improvement; for Executive Directors is broadly consistent with that for other senior employees, but reflects the additional risks and responsibilities borne » To link a significant proportion of remuneration to financial by the Executive Directors. Executive remuneration and remuneration performance, as well as shareholder return, both in the short term of senior employees is weighted towards performance-related pay. and long term; Our Senior Vice Presidents all participate in the same annual bonus and long-term incentive arrangements as the Executive Directors (at varying » To provide strong linkage between remuneration, performance levels of quantum) and our Business Leadership Forum also participate and delivery of Company strategy; in a long-term equity plan.

» To ensure total remuneration is market-competitive in the industry and helps attract and retain executives of the highest calibre; and

» To promote the long-term success of 888, and for performance-related elements thereof to be transparent, stretching and rigorously applied.

The Committee has conducted an extensive review of the remuneration policy, taking into account the needs and the future strategy of the combined business.

Remuneration policy table

Base salary Purpose and link to strategy To recruit, motivate and retain high-calibre Executive Directors by offering salaries at market competitive levels.

Reflects individual experience and role. Operation Reviewed annually with any changes normally effective from 1 January. Positioning and annual increases are influenced by:

» our sector, where the market for executive talent is intense; » the experience and performance of the individual; » changes in responsibility or position; » changes in broader workforce salary; and » the performance of 888 as a whole.

Benchmarking is carried out on a total remuneration basis and takes into account pay levels for comparable roles at a range of organisations of similar size and sector – including pay practices in other UK listed companies and in the international gaming industry. Opportunity Any increase to Directors’ salaries will generally be no higher than the average increase for other employees. However, a higher increase may be proposed in the event of a role change or promotion, or in other exceptional circumstances. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 49

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 Rewards the achievement of annual financial and, if appropriate, non-financial strategic targets. non-financial strategic if appropriate, of annual financial and, the achievement Rewards of salary) and financial (percentage based on objectiveBonus targets and disclosable calculations for are non-financial performance possible. where greater be a will be always although there year, each between metrics differ weightings may precise The to non-financial performance. on financial as opposed focus after in equal tranches vest which of 100% of salary shares in excess into bonus payment Any is deferred years. two and three one, on unvested be accrued (in cash or shares) enabling dividends to operates A dividend equivalent provision in the case of nil cost options). the point of exercise up to (or bonus shares deferred were of 888 financial statements if the bonus is subjectThe a recovery to and withholding provision in assessing the performance occurred or an error materially misstated conditions on bonus and/or if the misconduct. gross due to or employee be a Director ceased to Executive maximum opportunityThe is 150% of base salary. is 50% of the performance, of target the Committee the achievement of pay-out as set by level The for to in addition growth is based on like-for-like the target EBITDA Adjusted maximum amount. Presently the Board. by as approved the year for EBITDA Adjusted budgeted exceeding 25% of the maximum. be up to may of payment level threshold The Contribution towards the funding of post-retirement life. funding of post-retirement the Contribution towards or cash in lieu providers) pension a defined contribution pension scheme (via outsourced 888 offers of pension. 15% of base salary. Up to Market support structure to competitive and retention. recruitment of illness. interruption minimal business as a result ensure aims to Medical cover These may various benefits in receive may kind as part Directors terms. Executive of their employment use of a relocate), to the executive 888 has required (where allowance include an accommodation insurance scheme), a health a contribution health insurance (or towards car allowance), car (or company relocation expenses, assurance, disability benefit in Israel), (a common savings and life fund” “study law and other to the by insurances permitted extent and officers’ indemnities and Directors’ Directors’ Committee. of the ad hoc benefits at the discretion is no pre-determinedto 888 and there the cost value of benefits is based on The maximum limit. periodically. reviewed is offered range and value of the benefits The Non-financial Performance use non-financial performance wishes initially to Committee is no intention but the conditions, There for a minority of the bonus opportunity. flexibilityto do so, retain to Financial Performance This will normally of performance. key financial measures financial component is based on 888’s The financial KPIs. include other but may growth be based on like-for-like EBITDA Adjusted annually. financial performance measured applies for which are A sliding scale of targets targets vary may in targets depending on the business aims and the broader each year of stretch degree The economic or industry at the start year. environment of the relevant Annual bonus Annual Pension Benefits Purpose and link to strategy and link to Purpose Operation Opportunity metrics Performance Purpose and link to strategy and link to Purpose Operation Opportunity Purpose and link to strategy and link to Purpose Operation Operation Opportunity Remuneration policy table continued policy Remuneration GOVERNANCE

50 DIRECTORS’ REMUNERATION REPORT continued

Remuneration policy table continued

Long Term Incentives (LTIP) Purpose and link to strategy Rewards Executive Directors for achieving superior returns for shareholders over a longer-term timeframe.

Enables Executive Directors to build a meaningful shareholding over time and align goals with shareholders. Operation 888 sought shareholder approval for the 2015 LTIP at the EGM held on 30 September 2015. This replaced the previous share plans which expired in August 2015.

LTIP awards are made annually in the form of nil cost options or conditional awards with vesting dependent on the achievement of performance conditions over at least three financial years, commencing with the year of grant.

Awards are subject to a recovery and withholding provision if there is a material misstatement in 888’s financial statements, an error in the calculation of any performance conditions or if the Executive Director ceases to be a Director or employee due to gross misconduct.

A dividend equivalent provision operates enabling dividends to be accrued (in cash or shares) on LTIP awards to the extent they vest. Opportunity Award levels are determined primarily by seniority. A maximum individual grant limit of 200% of salary applies, based on the face value of shares at the date of grant. The current award level is 200% of salary for the Chief Executive and 150% of salary for the Chief Financial Officer. Performance metrics Awards vest at the end of a three year performance period based on performance measures reflecting the outputs of the long-term strategy of the business at the time of grant.

Awards are currently based 50% on adjusted EPS and 50% on relative total shareholder return (TSR), but the choice and weightings of metrics may differ for future award cycles. Where possible TSR will be compared to a basket of 888’s peers, but recognising the level of consolidation in the sector the selection criteria may be broadened to the Leisure Sector or listed companies more generally.

The Committee will review the weightings between measures and the target ranges prior to each LTIP grant to ensure that the overall balance and level of stretch remains appropriate.

A sliding scale of targets applies for financial metrics with no more than 25% of the award vesting at threshold performance.

For TSR, none of this part of the award will vest below median ranking and awards will vest on a sliding scale for performance between the threshold and stretch targets.

Details of the measures and targets to be applied to the 2016 awards are set out in the Annual Report on Remuneration on page 53.

Share ownership guidelines Under the guidelines, Executive Directors are expected to build and maintain an interest equivalent in value to no less than two times salary. Beneficially owned shares and fully vested unexercised nil-cost options (valued on a net of tax basis) will be included when determining the extent to which the guideline holding is achieved. Until such time as the guideline threshold is achieved. Executive Directors are required to retain 50% of the net of tax value of awards that vest under the LTIP or deferred annual bonus. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 51

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 To recruit, motivate and retain a Chairman and Non-Executive Directors of a high calibre by offering offering by of a high calibre Directors a Chairman and Non-Executive retain and motivate recruit, To of 888. and which takes level a market account of the specific circumstances fee competitive The Non-executive the Directors. paid to determine the fees Directors ChairmanThe and the Executive rates fee prevailing to with reference the Remuneration determined by Committee are fees Chairman’s an to reference set by are the Non-executive Directors paid to Fees companies. amongst other gaming and the Chairman and with each role, commitment and responsibility associated assessment of the time amongst other gaming companies. rates fee prevailing in this respect to reference have Directors Executive take virtue by Non-executive account of additional demands placed upon individual Directors Levels of and their holding particular Chairman Committee and/or Senior such as offices, Independent Director, the UK). held outside be paid as appropriate may meetings (which are Board fees time to Additional travel fee policy in the shown Details of the current are role. of the time commitments reflect increased to Annual Report on Remuneration on page 53. participate to plan, pension bonus not eligible in any Chairman are The and the Non-executive Directors entitled Chairman are The and Non-executive Directors plan of 888. plan, or long term incentive plan, share performance in the and accommodation expenses incurred travel of reasonable any for be reimbursed to thereon). tax incurred their duties (including any No maximum. Chairman and Non-Executive Directors’ (NEDs) fees Directors’ Non-Executive and Chairman Purpose and link to strategy and link to Purpose Operation Opportunity

All historical awards that were granted under any previously approved share schemes operated by 888 which remain outstanding are eligible to vest vest to eligible outstanding are 888 which remain by operated schemes share approved previously under any granted that were All historical awards and the Plan under the 888 All Employee granted includes awards This part forms terms and this provision of the policy. award based on their original Details of of these plans. under any in 2005). No further will be granted shareholders by awards approved Incentive (which were Plan Term 888 Long set out in the Annual Report under these plans are the outstanding awards on Remuneration on page 58. Historical awards Historical The Committee will operate all incentive plans according to the rules of each respective plan and the discretions contained therein. The discretions discretions The contained therein. plan and the discretions the rules of each respective to according plans all incentive will operate Committee The (subject the policy to of of the award treatment determining limits), the the size of awards, aspects and vesting such as the timing of grant cover a corporate restructuring a rights issue, for (e.g. adjustment of awards on pages 52 and 53), retrospective Terminations on (see the Policy leavers happen if events award an incentive for set targets adjust previously to the discretion circumstances, in exceptional special dividends) and, or for will take account into the Committee such discretions, In exercising do so. to be appropriate determine that it would to which cause the Committee policy. remuneration approved market of the UK Listing Rules and 888’s generally accepted practice, the provisions best practice guidelines, Remuneration Committee discretion Committee Remuneration Determination of performance measures of performance Determination acknowledge Directors the performance that of its Executive performance 888 in determining the remuneration The by of the adopted measures to has regard the Remuneration Policy this reason, with the performance in accordance For is best measured of 888 as a whole. Directors Executive Per in Earnings growth and cumulative growth such as like-for-like EBITDA internal including both measures Adjusted various financial measures, best median, which 888 believes a peer group Return to Shareholder compared Total like), like as relative as well compare for to (adjusted Share award takingfor each cycle environment account the operating set into are Robust and demanding targets of shareholders. reflects the interests to take be made may adjustments financial metrics, Inand priorities, market to ahead. relation the year(s) expectations and the business plan for Further details on the performance arrive to at like-for-like regulatory the changing environment to figures. relating items account exceptional into Annual Report set out in the the forthcoming are year be used for to on Remuneration. and weightings measures Remuneration policy table continued policy Remuneration GOVERNANCE

52 DIRECTORS’ REMUNERATION REPORT continued

Illustrations of annual application Approach to recruitment remuneration of remuneration policy The remuneration package for a new Executive Director would take The charts below show the potential total remuneration opportunities into account the skills and experience of the individual, the market rate for the Executive Directors in 2016 at different levels of performance for a candidate of that experience and the importance of securing the under the policy. relevant individual.

Itai Frieberger, Chief Executive Officer Salary would be provided at such a level as is required to attract the most appropriate candidate. The annual bonus and LTIP potential would be in line with the Policy. In addition, the Committee may offer additional Maximum 28.9% 31.0% 40.1% cash and/or share based elements to replace deferred or incentive pay forfeited by an executive leaving a previous employer. It would ensure that these awards would be consistent with awards forfeited in terms of vesting periods, expected value and performance conditions. Target 44.9% 24.0% 31.1% For an internal Executive Director appointment, any variable pay element awarded in respect of the prior role may be allowed to pay out according to its terms, or adjusted as relevant to take into account the Minimum 100% appointment. In addition, any other ongoing remuneration obligations existing prior to appointment may continue.

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 The Committee may agree that 888 will meet relocation expenses $’000 as appropriate.

■ Fixed ■ Short term Incentive ■ Long term Incentive Service contracts and loss of office payment policy for Executive Directors Executive Directors have service contracts with up to 12 month notice periods. In the event of termination, the Executive Directors’ contracts Aviad Kobrine, Chief Financial Officer provide for compensation up to a maximum of base salary plus the value of any benefits (including pension), and in the case of the Chief Financial Officer, annual bonus for the unexpired portion of the notice Maximum 29.2% 35.4% 35.4% period. 888 seeks to apply the principle of mitigation in the payment of compensation on the termination of the service contract of any Executive Director. There are no special provisions in the service contracts for payments to Executive Directors on a change of control of 888. Target 46% 27% 27% In the event of an exit of an Executive Director, the overriding principle will be to honour contractual remuneration entitlements and determine on an equitable basis the appropriate treatment of deferred and Minimum 100% performance linked elements of the package, taking account of the circumstances. Failure will not be rewarded.

0 500 1,000 1,500 2,000 2,500 3,000 If an Executive Director resigns or is summarily dismissed, salary, pension $’000 and benefits will cease on the last day of employment and there will be no further payments. ■ Fixed ■ Short term Incentive ■ Long term Incentive There are no other obligations to pay remuneration, or which could impact remuneration, contained in any service contract other than the Minimum = Fixed Pay terms of the Executive Directors’ service agreements described herein. Target = Fixed Pay + Target Bonus (being half the Maximum Bonus Opportunity) + Target Value of 2016 LTIP grant (assuming 50% vesting with face values of 200% Directors’ service agreements are available for inspection at 888’s of salary for the CEO and 150% of salary for the CFO). registered office and at each AGM. Maximum = Fixed Pay + Maximum Bonus Opportunity + Maximum Value of 2016 LTIP grant (assuming 100% vesting). Leaver on arranged terms or good leaver Fixed Pay includes 2016 salary, actual value of 2015 taxable benefits and 2016 pension contributions or payment in lieu. No account has been taken of any share price growth If an Executive Director leaves on agreed terms, including compassionate or dividend accrual. circumstances, there may be payments after cessation of employment. Salary, pension and benefits will be paid up to the length of the agreed notice period or agreed period of gardening leave.

Subject to performance, a bonus may be payable at the discretion of the Committee pro-rata for the portion of the financial year worked. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 53

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

est if 888’s TSR is 33% or more above the TSR of the median TSR the above is 33% or more TSR est if 888’s est if 888’s TSR is equal to the TSR of the median company of the median company TSR the is equal to TSR est if 888’s est if 888’s TSR below the TSR of the median company in 888; of the median company TSR the below TSR est if 888’s 888 HOLDINGS PLC HOLDINGS 888 aximum – 3 year CAGR of 20%; CAGR aximum – 3 year esting will be on a proportionate basis for performanceesting will be on a proportionate basis for between hreshold – 3 year CAGR of 5%; CAGR – 3 year hreshold company; and V median and stretch. T M 0% will v 25% will v in 888; 100% will v

» » » » » » Performance conditions Performance performanceTSR subject and relative EPS are to awards 2016 LTIP chosen metricsThese were each with a 50% weighting. conditions, underlying financial performance, on 888’s a focus as EPS provides market stock for an objective reward provides TSR and relative peers. performance against 888’s ranges Detail and target 2016 awards: range for EPS target vest 25% will threshold, if EPS is below will vest None of the award between Performance at maximum. and 100% will vest at threshold, basis. and maximum is determined on a straight-line threshold 2016 awards: for target TSR comprising peer five group against a comparator is compared TSR 888’s plc, Playtech Ladbrokes plc, GVC Holdings plc, companies as follows: HillWilliam plc. Betfair plc, Power Paddy Chairman is £290,000. fee Chairman’s The Directors Non-executive is £85,000. fee Director Non-Executive The Annual bonus a bonus opportunity 2016, the CEO and CFO will have of 150% For of salary. targets like likeBonus will be based on a sliding scale range of EBITDA for in next which will be disclosed retrospectively 100% vesting, 25% to for annual report on remuneration. year’s 100% of salary shares. bonus above Any will be paid in deferred plan incentive Long-term levels Award worth awards 200% of base salary CEO and CFO will be granted The and 150% of salary respectively.

viad Kobrine £416,000 (effective from 1 Januaryviad Kobrine from £416,000 (effective 2016). tai Frieberger ILS 3,024,495 (effective from 2 March 2016). 2 March from ILS 3,024,495 (effective tai Frieberger CEO – I CFO – A

» » The salary for Itai Frieberger reflects his promotion to Chief Executive to Chief Executive salaryThe reflects his promotion Itai for Frieberger Kobrine salaryThe Aviad (5%) is in line with for increase 2016. on 2 March the rest has considered Committee The other employees. for the average of the package when arriving at these salary in the round, levels. Base salary and fees salary Base Directors Executive set out below: 2016 are Salaries for Implementation of Remuneration Policy for 2016 for Policy of Remuneration Implementation described section, the Policy in the previous In the expected to relation 2016 is set out below. for application of the Policy Annual report on remuneration on remuneration Annual report Annual ReportThis with the Chairman’s on Remuneration together as detailed on page 46 will be subject an advisoryAnnual Statement, to on page 54 with respect to information The at the 2016 AGM. vote page 60 has been audited. through Emoluments and onwards Directors’ In with best practice Governance accordance under the UK Corporate individually for submit the Directors to proposes the Board Code, re-election at the 2016 AGM. the shareholders by Terms of appointment for Non-executive Directors Directors Non-executive of appointment for Terms serve Directors of appointment subject Non-Executive The letters to Non-Executive The subject re-election appointed to and are at the AGM. although the typically years, serve are expected to Directors three for serve to an additional Director for a Non-Executive invite may Board the continued service has considered Board The of Amos Pickel period. notwithstanding and, that he has served Director as a Non-Executive of letters Their is of the opinion that he is independent. years, ten for office and registered inspection at 888’s for available appointment are at each AGM. Depending upon circumstances, the Committee may consider other may the Committee Depending upon circumstances, outplacement support unfair dismissal award, in respect of an payments and assistance with legal fees. Unvested LTIP awards under the 888 All-Employee Plan will generally Plan under the 888 All-Employee awards LTIP Unvested determines in its discretion unless the Committee lapse, automatically normally would vest under the 2015 LTIP awards otherwise. Unvested determines that such unless the Committee on the normal date vesting awards cessation. Unvested at the time of vest shall instead awards the extent to that the performancewill only vest conditions have the full or curtailed(over been satisfied relevant). period A pro-rata as based upon the normally would apply, of awards reduction in the size of cessation and ending on the date period date of time after the grant the normal period. to vesting relative of employment Unvested deferred bonus shares will ordinarily vest in full at the end vest will ordinarily shares bonus deferred Unvested must be exercised awards All such vested of the normal period. vesting has discretion Committee The date. vesting within 12 months of the early vest rather than continue to awards permitto such unvested on the normal timetable. vesting GOVERNANCE

54 DIRECTORS’ REMUNERATION REPORT continued

Remuneration paid to Executive Directors for service in 2015 The following table presents the Executive Directors’ emoluments in respect of the year ended 31 December 2015.

Other Items in Taxable Annual Long-Term the nature of Salary3 Benefits4 Bonus5 Incentives6 Pension remuneration7 Total Executive Directors1 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 Itai Frieberger, COO2 2015 401 129 597 — 56 — 1,183 2014 — — — — — — — Aviad Kobrine, CFO 2015 605 56 876 1,521 91 347 3,496 2014 621 52 879 2,556 93 — 4,201 Brian Mattingley, former CEO8 2015 230 12 336 4,837 — — 5,415 2014 653 64 923 — — — 1,640

1 Directors’ remuneration is converted from Sterling and New Israeli Shekels into US$ at the average rate of exchange for the relevant month it was paid save for the annual cash bonus which is converted into US$ at the year end exchange rate. 2 Remuneration of Itai Frieberger is shown with respect to the period following his appointment to the Board on 13 May 2015. Itai Frieberger was appointed as Chief Executive Officer on 2 March 2016. 3 Salaries for 2015 were ILS 1,547,073 for Itai Frieberger (from 13 May 2015), £396,000 for Aviad Kobrine and £152,088 for Brian Mattingley (until 13 May 2015). 4 Benefits orf Brian Mattingley comprise provision of accommodation and health insurance; for Aviad Kobrine include car allowance and health, disability and life insurance; and for Itai Frieberger include convalescence and health insurance for Itai Frieberger and his family, contribution to “study fund” up to the Israeli tax-free ceiling with the excess up to 7.5% of Itai Frieberger’s salary paid in cash, as well as gross-up of car allowance, meals allowance and transport allowance. 5 A breakdown of the 2015 annual bonus targets and the extent of their achievement is set out overleaf. As regards 2014, as noted in last year’s remuneration report, following approval by the shareholders of the revised Remuneration Policy at the 2015 Annual General Meeting the bonus figures for 2014 were increased to US$923,000 (£594,000) for Brian Mattingley and US$879,000 (£565,000) for Aviad Kobrine. 6 Performance-based long-term incentives are disclosed in the year in which they vest. A breakdown of the basis for the payments under long term incentives is set out on page 56. Brian Mattingley’s long-term incentive relates to the phantom award granted in 2012 which vested on 27 March 2015. Aviad Kobrine’s long term incentives which vested in 2014 and 2015 were governed by the 888 All-Employee Share Plan. In 2015, 625,000 nil-cost options granted to Aviad Kobrine on 27 March 2012 and due to vest on 12 April 2015 subject to fulfilment of the performance conditions set out in the Directors’ Remuneration Report, vested in full. 7 Other items in the nature of remuneration include share awards and nil cost options (including dividends accrued thereupon) that are not subject to performance conditions, and which were granted in the reporting year, regardless of vesting date. These are valued by reference to the market price of the shares upon grant. In 2015, this includes 136,524 Nil Cost Options granted to Aviad Kobrine as a like-for-like replacement for options previously granted under the 888 All-Employee Share Plan which expired on 4 October 2015, of which 136,000 were vested immediately and 524 will vest on 28 August 2018 in accordance with their terms. 8 Brian Mattingley stepped down as CEO on 13 May 2015 and was appointed Executive Chairman on the same date. Brian Mattingley’s remuneration as Executive Chairman is excluded from the table above and included in the table below. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 1 2 55 83 47 127 380 127 otal 130 128 301 130 T Total US$ 000 US$ 000

150% of salary Bonus awarded

1 — — — — — — — — — — 18 ther ther O O US$ 000 US$ 000 Aviad KobrineAviad – GBP 594,000 Itai Frieberger – ILS 3,673,476 Itai Frieberger Brian Mattingley– GBP 228,132

ee ee 83 47 F F 127 127 380 130 128 283 130 US$ 000 US$ 000 ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

Actual performance

2014 2014 2014 2014 2014 — 2015 2015 2015 2015 2015 Max 888 HOLDINGS PLC HOLDINGS 888 (100% pay-out) Target (75% pay-out) 5% 10% 20% 21.3%

Threshold (25% pay-out)

3

5

4 2

ian Mattingley stepped down as CEO on 13 May 2015 and was appointed Executive Chairman on the same date. Only Brian Mattingley’s remuneration as Executive Chairman Executive as remuneration Only Brian Mattingley’s Chairman on the same date. Executive ian Mattingley as CEO on 13 May 2015 and was appointed down stepped ichard Kilsby stepped down as Chairman Kilsby down on 13 May 2015. stepped ichard on McMillan on 15 May 2014. joined the Board ro rated until 13 May 2015 when Brian Chairman. rated Mattingley and was appointed as CEO down ro stepped ohn Anderson stepped down as a Non-executive Director on 13 May 2015. as a Non-executive Director down ohn Anderson stepped I marketsregulated in and currency offering headwinds. of 888’s as development and taxation, as well of regulation P R J “O R Br is included in the table above. urrent Non-Executive Directors and Chairman Non-Executive urrent ichard Kilsby ichard on McMillan

R Brian Mattingley John Anderson

Former Non-Executive Directors Non-Executive Former R

Amos Pickel Like-for-like EBITDA growth per annum Like-for-like growth EBITDA 2 1 challengesin2015,includingthefields mindful that888managementhadfacedexceptional was theCommittee bonuslevel, this grant to itsdiscretion n exercising Performance Measures Performance EBITDA performance EBITDA performance is as follows: achieved extent which the EBITDA The to conditions were The normalThe annual bonus opportunity EBITDA challenging to was 100% of base salary reference and the bonus was determined by performance bonus opportunity with an additional conditions, of 50% of base salary in the event Committee of the at the discretion available performance.of exceptional 5 performance of 2015 Annual bonus payments in respect Report, participates detailed in the Policy Director As plan, under which performance in the annual bonus each Executive over is measured year. a single financial 4 1 2 Brianrole. Mattingleyreimbursement ofexpensesconnected withhis for reflects ther” 3

Non-executive Directors’ and Chairman’s fees and Chairman’s Directors’ Non-executive C GOVERNANCE

56 DIRECTORS’ REMUNERATION REPORT continued

Long-term incentive awards with performance periods ending in the year ended 31 December 2015 888 All Employee Share Plan The 2013 All Employee Share Plan awards are due to vest in April 2016. The tables below set out the achievement against the performance conditions attached to the award, resulting in aggregate vesting of 100%, and the actual number of awards vesting (with their estimated value).

TSR1 Like-for-like EPS Growth Performance level Performance required % vesting Performance required2 % vesting Below threshold Below median 0% Below 15.76%2 0% Threshold Median = 30% 25% 15.76%2 25% Stretch or above 33% above median3 = 39.9% 100% 72.8% or above2 100% Actual achieved 79% 100% 96%2 100%

1 Relative to a comparator group of 5 gaming companies – Bwin.Party Digital Entertainment, Sportech PLC, Ladbrokes PLC, Playtech Ltd and Paddy Power PLC. 2 15.76% aggregate EPS growth is the equivalent of 5% EPS growth compounded annually. 72.8% aggregate EPS growth is the equivalent of 20% EPS growth compounded annually. 3 33% aggregate out-performance is equivalent to 10% per annum compound out-performance of the median.

Details of the expected level of vesting for each Director, based on the above, are shown in the table below:

Dividend accrual Value of on vested awards including Number of Number of Number of awards value2 Dividend Accrual1 Executive awards at grant awards to lapse awards to vest US$ US$ Itai Frieberger 279,407 0 279,407 0 752,129 Aviad Kobrine 213,100 0 213,100 0 573,639

1 The value of the vested awards is based on the share price on the date of vesting, being US$2.69 (based on the exchange rate of 1.475) on 31 December 2015. 2 Dividends accrue on awards at the date of a dividend payment and upon exercise the cash value of the accrued dividends is paid to the employee on the number of vested awards.

The 2012 All Employee Share Plan awards vested on 12 April 2015. The tables below set out the achievement against the performance conditions attached to the award, resulting in aggregate vesting of 100%, and the actual number of awards vesting (with their estimated value).

TSR1 Like-for-like EPS Growth Performance level Performance required % vesting Performance required2 % vesting Below threshold Below median 0% Below 15.76%2 0% Threshold Median = 45% 25% 15.76%2 25% Stretch or above 33% above median3 = 59.9% 100% 72.8% or above2 100% Actual achieved 261% 100% 2,582%2 100%

1 Relative to a comparator group of 5 gaming companies – Bwin.Party Digital Entertainment, Sportech PLC, Ladbrokes PLC, Playtech Ltd and Paddy Power PLC. 2 15.76% aggregate EPS growth is the equivalent of 5% EPS growth compounded annually. 72.8% aggregate EPS growth is the equivalent of 20% EPS growth compounded annually. 3 33% aggregate out-performance is equivalent to 10% per annum compound out-performance of the median.

Details of the performance LTIP vesting for each Director, based on the above, are shown in the table below:

Dividend accrual Value of on vested awards including Number of Number of Number of awards value2 Dividend Accrual1 Executive awards at grant awards to lapse awards to vest US$ US$ Aviad Kobrine 625,000 0 625,000 93,750 1,520,956

1 The value of the vested awards is based on the share price on the date of vesting, being US$2.28 (based on the exchange rate of 1.46) on 12 April 2015. 2 Dividends accrue on awards at the date of a dividend payment and upon exercise the cash value of the accrued dividends is paid to the employee on the number of vested awards. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 57 N/A 25% 25%

threshold threshold % vesting at % vesting performance 1 $625,200 $614,615 $342,208 Face value of Face awards granted awards ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

2 2 3 249,424 245,201 136,524 Number of awards granted awards 888 HOLDINGS PLC HOLDINGS 888 Grant date 28 August 2015 28 August 2015 28 August 28 August 2015 28 August il Cost Options granted to Aviad Kobrine as a like-for-like replacement for options previously granted under the 888 All-Employee Share Plan which expired on 4 October which expired Plan Share under the 888 All-Employee Kobrine granted Aviad options previously as a like-for-like to for Options granted il Cost replacement hese awards were made over shares with a value equivalent to 100% of gross salary, and are due to vest subject performance vest to due to and are salary, conditions being met at the end of the 100% of gross with a value equivalent to shares made over were hese awards F T N with their terms. 2018 in accordance on 28 August and 524 will vest upon grant, immediately 136,000 vested 2015. Out of the 136,524 Nil Options awarded, Cost performance performanceTSR is subject period a peer an EPS performance ending 31 December to condition versus 2017. 50% of an award condition and 50% is subject a to to whilst the awards of Ordinary awards Shares, were Itai to Frieberger awards The disclosed on page 53. are Details of the performance the awards attaching to targets group. Kobrine Nil Options. Aviad Cost were

Aviad KobrineAviad KobrineAviad Itai Frieberger Details of all outstanding share awards Details of all outstanding share by Directors. held awards based sets out details of all outstanding share the table below made duringyear, the 2015 financial In awards addition to Loss of office payments of office Loss Directors. Executive to past made were payments and no Directors, Executive to made In were payments 2015, no loss of office 1 2 whichwas£1.628. price ofgrant, onthedate usingshare wascalculated granted ace valueofawards 3 Executive The table below sets out the grants under the 888 All Employee Share Plan on 28 August 2015. on 28 August Plan Share under the 888 All Employee sets out the grants below table The Scheme interests awarded during the year during awarded Scheme interests Phantom share award share Phantom which vested award “phantom” 2012, Brian On 27 March Mattingley a cash-settled share-based capacity (in his former as CEO of 888) was granted price share based on the average basis, on an incremental was calculated payable the amount 2015. Under the terms of the award, on 27 March £3.3 million (US$4.8 million) out of a maximum in an entitlement of (£1.56), resulting date a periodprior the vesting of 20 dealing days to over page 40 of the 2014 Annual disclosed in full on are £5.5 million. Detailspossible entitlement of of the performance this award attaching to targets Report & Accounts. GOVERNANCE

58 DIRECTORS’ REMUNERATION REPORT continued

Directors’ shareholdings and share interests A policy for formal shareholding guidelines has been introduced, requiring the Executive Directors to build and maintain a shareholding in 888 worth two times annual salary as set out in the Policy Report.

Details of the Directors’ interests in shares as at 31 December 2015 (or in the case of former Directors, the date on which they retired from the Board) are shown in the table below. There were no changes in the Directors’ interests in shares between 31 December 2015 and the date of this Report.

Number of Ordinary Shares At 31 December 2015 Unvested Unvested % Unvested shares Unvested options achievement shares with without options with without Vested against Legally performance performance performance performance unexercised shareholding Director owned conditions conditions conditions2 conditions2 options2 Total guideline 7 Itai Frieberger4 1,057,7896 3,339,528 1,262,175 — — 50,6573 5,710,149 452% Aviad Kobrine4 — — — 707,146 524 3,049,7835 3,757,453 737% Brian Mattingley 142,857 — — — — — 142,857 N/A Amos Pickel 100,000 — — — — — 100,000 N/A Ron McMillan — — — — — — — N/A Richard Kilsby1,4 — — — — — — — N/A John Anderson1 138,869 — — — — — 138,869 N/A

1 Richard Kilsby and John Anderson retired from the Board on 13 May 2015. 2 Nil Cost Options. 3 Itai Frieberger has 15,965 options with exercise price of £1.22 and 34,692 options with exercise price of £1.49. 4 During 2015, Aviad Kobrine exercised 500,204 nil-cost options and subsequently sold the underlying shares, Itai Frieberger sold 350,000 shares and Richard Kilsby sold 114,285 shares. 5 Includes 235,075 Nil Cost Options without performance conditions granted to Aviad Kobrine in 2011 and vested during 2015, and 136,000 replacement Nil Cost Options without performance conditions granted to Aviad Kobrine and vested in 2015 (referred to in footnote 7 on page 54 and footnote 3 on page 57). 6 Includes 158,216 share awards without performance conditions granted to Itai Frieberger in 2011 and which vested during 2015. 7 The Executive Directors are required to build and maintain a shareholding equivalent to 200% of base salary. Shares counting towards this guideline include legally owned shares and fully vested but unexercised nil-cost options (valued on a net of tax basis). Achievement against the guideline holding is calculated using the share price at 31 December 2015.

No Director was materially interested during the year in any contract which was significant in relation to the business of 888.

Performance graph The following graph shows 888’s performance, measured by TSR, compared with the performance of the FTSE 250 Index. The Directors consider that the FTSE 250 Index is the most appropriate comparator benchmark as it has been a member of this index for a significant period of the time covered by the chart.

200 Value of £100 Sterling in 888 since 1/1/2008 v. FTSE 250

180

160

140

120

100

80

60

40

20

0

1/01/11 1/06/11 1/01/12 1/01/13 1/01/14 1/01/15 1/01/16 1/01/08 1/06/08 1/01/09 1/06/09 1/01/10 1/06/10 1/06/12 1/06/13 1/06/14 1/06/15 888 dividend reinvested FTSE 250 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 59 59% 2015

72 0% Tax** +167% 27 0% 2013 2014 ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

2 53 0% 2012 +5% Dividends 51 1 888 HOLDINGS PLC HOLDINGS 888 US$ millions 0% 100% 958 3,783 1,060 1,275 1,640 5,415 139 +4% Selling and Selling 134 Marketing expenses Marketing 68% 2009 2010 2011 1,168 100% 100% 100% 100% 100% 100% 100% 106 -5% 112 2015 keting expenses – This reflects the amount invested in development of the future revenue stream of 888 driven by of 888 driven stream revenue of the future in development reflects the amount invested This keting expenses – This reflects amounts distributed to shareholders. reflects amounts distributed This Employee pay & benefits* Employee ■ 2014 ■ ian Mattingley was CEO from 27 March 2012 to 13 May 2015. Brian‘s total remuneration in 2015 included a phantom award granted to him on 27 March 2012 which vested 2012 which vested on 27 March him to granted award in 2015 included a phantom remuneration total 13 May 2015. Brian‘s 2012 to ian Mattingley 27 March was CEO from he employee pay figure includes employee benefits in accordance with the financial statements (including both staff costs and with the financial statements benefits in accordance includes employee figure pay he employee axes and duties – This is a necessaryThis business environment. cost of doing business in a regulated – and duties axes ncludes corporation tax of US$3.0 million (2014: US$11.0 million), EU VAT of US$10.2 million (2014: nil) and gaming duties of US$58.4 million (2014: US$15.8 million). VAT ncludes corporation tax of US$3.0 million (2014: US$11.0 million), EU 0 Emplo I Gig Br on 27 March 2015. There was no CEO from 14 May 2015 to 1 March 2016. 1 March 14 May 2015 to was no CEO from There 2015. on 27 March Dividends – T T charges). benefit share Sales and mar customer acquisition. customer

20 80 60 40

120 160

140 100 » » » » LTI vesting (%) vesting LTI Annual bonus (%) Total remuneration (US$ 000) remuneration Total

Total remuneration history for CEO for history remuneration Total as a percentage years with the annual bonus paid the last seven over for the CEO’s remuneration single figure sets out the total below table The in the year. vesting awards of long-term share percentage of the maximum and the * ** ofUS$4.1million(2014:US$1.7million). benefitcharges andincludeshare Financial Statements, 6ofthe withNote inaccordance &benefitsiscalculated pay yee the following: comparables chosen were The Relative importance of spend on pay importance Relative remuneration including on 2015 on variousyears 2014 and financial items, 888 in actual by sets out the graph expenditure following The employees. Group to Percentage change in CEO remuneration compared to the average for other employees for the average to compared remuneration change in CEO Percentage this analysis for meaningful year-on-year provide it is not possible to of the year, most vacant for position remained the Chief Executive As requirement. disclosure 1 2 2012. 26March 1May 2011to wasnoCEOfrom There 30April 2009to 2011. wastheCEOof888from i Levy GOVERNANCE

60 DIRECTORS’ REMUNERATION REPORT continued

Committee members, attendees and advice Remuneration Committee adviser The Remuneration Committee consists solely of Non-executive Directors, The Remuneration Committee is advised by New Bridge Street, a trading currently Amos Pickel (Chair), Ron McMillan and Brian Mattingley (since name of Aon Hewitt, being a subsidiary of Aon plc. New Bridge Street his appointment as Chairman of 888).John Anderson was a member of was appointed by the Remuneration Committee in 2007. New Bridge the Committee until he stepped down from the Board at the 2015 AGM. Street has discussions with the Remuneration Committee Chairman Details of attendances at Committee meetings are contained in the regularly on Committee process and topics which are of particular statement on Corporate Governance on page 42. relevance to 888.

The Remuneration Committee’s remit includes such matters as: The primary role of New Bridge Street is to provide independent and objective advice and support to the Committee’s Chair and » Determining and agreeing with the Board the remuneration policy members. In order to manage any possible conflict of interest, New with regard to 888’s Chairman, Chief Executive Officer, Chief Financial Bridge Street operates as a distinct business within the Aon Group Officer and other members of the executive management; and there is a robust separation between the business activities and management of New Bridge Street and all other parts of Aon Hewitt » Regularly reviewing the ongoing appropriateness and relevance and the wider Aon Group. The Committee is satisfied that the advice of 888’s remuneration policy; that it receives is objective and independent. New Bridge Street is also a signatory to the Remuneration Consultants Group Code of Conduct » Setting and monitoring performance criteria for bonus arrangements which sets out guidelines for managing conflicts of interest, and has operated by 888 ensuring that they represent achievable and confirmed to the Committee its compliance with the Remuneration motivating rewards for appropriate levels of performance and, Consultants Group Code. where appropriate, are justifiable taking into account 888’s and Group’s overall performance and the corresponding return on The total fees paid to New Bridge Street in respect of its services shareholders’ investment in the same period; to the Committee for the year ending 31 December 2015 were £57,721 (2014: £0). Fees are charged on a “time spent” basis. » Recommending to the Board the policy for and scope of pension arrangements for the Executive Directors; and

» In relation to 888’s share option and share award schemes, setting or recommending vesting criteria which are appropriate in terms of 888’s performance and return on shareholders’ investment over the same period.

The formal terms of reference of the Remuneration Committee are available on 888’s corporate website, corporate.888.com.

Engagement with shareholders Details of votes cast for and against the resolution to approve last year’s Remuneration Report and the Remuneration Policy, as well as approval of the adoption of the 2015 LTIP at the Extraordinary General Meeting held on 29 September 2015, are shown below.

Advisory Vote to approve Advisory Vote to approve Vote to approve adoption Directors’ Remuneration Policy Annual Report on Remuneration of the 2015 LTIP Total number of votes % of votes cast Total number of votes % of votes cast Total number of votes % of votes cast

For 242,429,082 89.48% 251,418,195 92.8% 254,779,426 92.40% Against 28,513,273 10.52% 19,493,445 7.2% 20,947,627 7.60% Vote withheld 1,813 — 32,528 — 256,461 —

Approved by the Board of Directors and signed on behalf of the Board:

Amos Pickel Chairman of the Remuneration Committee 22 March 2016 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 61

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888

s exposure to corporation tax, VAT and gaming duties in various jurisdictions. VAT corporation to tax, s exposure he adequacy of 888’s IT systems and controls. and IT systems he adequacy of 888’s he adequacy relies. on which management and controls of the systems management. by prepared assessment of risk and the risk register he Board’s management. by he viability prepared statement he complex legal and regulatory environment in which 888 operates, together with changes in laws and regulations which may impact which may and regulations changes in laws with together in which 888 operates, he complex legal and regulatory environment he carryingin the financial statements. disclosures other non-current value of goodwill and assets and related 888’s business, sector and market. business, 888’s T T T T T 888’ T

AUDIT COMMITTEE COMMITTEE AUDIT REPORT » » » » » » » LETTER TO SHAREHOLDERS SHAREHOLDERS TO LETTER Chairman of the Audit Committee of the Audit Chairman Sincerely, McMillan Ron I will be available at the Annual General meeting in May 2016 to answer any questions and would like to thank my colleagues on the Committee colleagues on the Committee like thank my questions and would to any at the Annual General answer meeting in MayI will be available 2016 to their help and support.for Further information on the Committee’s responsibilities and the manner in which they are discharged are set out below and are available available and are set out below are discharged they and the manner in which are responsibilities the Committee’s on information Further corporate.888.com. corporate website on 888’s In relation to risks and controls, the Committee ensures that these have been identified and that appropriate responsibilities and accountabilities been identified and that appropriate that these have ensures the Committee risksIn to and controls, relation been set. have Internal audit work is conducted by Deloitte and the scope of their work is agreed with both management and the Audit Committee. Committee. management and the Audit with both Internal audit work of their work is conducted Deloitte and the scope is agreed by external audit, which is conducted EY. by the key and reviews also monitors aspects Committee The of 888’s A key responsibility of the Committee is to review the scope, nature and effectiveness of internal and external and effectiveness audits. nature the scope, review A key is to responsibility of the Committee Amongst other things, during the year the Committee considered: the Committee during the year Amongst other things, The Audit Committee exercises oversight of 888’s financial reporting and considers the integrity financial of the financial statements monitors policies, of 888’s oversight exercises Committee Audit The preparing that disclosures the financial statements. applied in It also ensures and judgments financial and accounting estimates the significant appropriate. are in the financial statements Dear Shareholders, GOVERNANCE

62 AUDIT COMMITTEE REPORT continued

Committee composition Regulation The Committee comprises two members, both of whom are 888 manages its regulatory risk with input from its legal advisors and Independent Non-executive Directors. seeks to balance regulatory requirements with those of the business. 888 works with its lawyers to produce regular updates so that the Two members constitute a quorum. The Committee requires the Board and Audit Committee understand what is happening in the inclusion of at least one financially qualified member with recent and regulatory landscape. relevant financial experience. The Committee’s Chairman fulfils that requirement. Both members of the Committee are expected to have an During 2015, the Audit Committee received a detailed regulatory understanding of financial reporting, 888’s internal control environment, briefing from 888’s lawyers and reviewed updates on the management relevant corporate legislation, the functions of internal and external audit of regulatory risk from management, as well as reviewing the status and the regulatory framework of the business. of litigation involving 888. It furthermore refreshed 888’s regulatory policy taking into account developments in Europe, the US and The members of the Committee during the year were: worldwide. In addition, 888’s internal auditor reviewed 888’s regulatory risk management process and reported its findings » Ron McMillan (Chairman) to the Audit Committee.

» Amos Pickel Taxation The Board oversees and sets 888’s tax strategy and evaluates tax risk. The Board will continue its efforts in 2016 to recruit suitable and In undertaking this task 888 uses its legal advisors and internal auditor experienced Independent Non-executive Directors. (Deloitte), and receives reports from its external auditors (EY) on its audit work. During the year 888’s legal advisors have kept the Audit Committee The Chief Executive Officer, the Chief Financial Officer and apprised of both existing and emerging tax risks and, where appropriate, representatives of the internal and external auditors are invited to attend these have been elevated to the Board for consideration in conjunction Audit Committee meetings where appropriate. with 888’s commercial strategy.

Details of meetings of the Audit Committee are set out in the Corporate In 2015, the Board and Audit Committee considered the significant Governance Report on page 42. uncertainty as to whether VAT is due in respect of certain services provided by 888 to customers in certain European Union Member In addition to scheduled meetings, the Chairman of the Committee States prior to 2015. Based on a thorough legal assessment, the Board met with the Chief Financial Officer and the internal and external and Audit Committee concluded that it is unlikely that any liability will auditors on a number of occasions. arise and decided, therefore, not to record any liability in 888 financial statements. Furthermore, given the uncertainties surrounding the Responsibilities quantification of any VAT which may be payable, the Board formed the The committee is responsible for: view that any attempt to either estimate or quantify the amounts which may reasonably be in dispute would potentially be misleading and may » Monitoring the integrity of 888’s financial statements and reviewing be prejudicial to 888’s position in defending any claims for past VAT. significant financial judgments and estimates in advance of these being considered by the Board; Furthermore, 888 was approached by an EU member state concerning potential liability to gaming duty in respect of the provision of gaming » In conjunction with internal audit and considering reports on its services to customers located in that jurisdiction. On the basis of legal findings from external audit, reviewing internal financial controls and tax advice received, 888 filed the necessary forms and has made and management’s response to required corrective action; payments, whilst reserving its position concerning contesting its liability. For further information, see notes 5 and 26 to the financial statements. » Monitoring and reviewing the role and effectiveness of the internal audit function, including activities and resources; Goodwill and intangible assets As set out in note 11 to the consolidated financial statements, 888 » Overseeing the role and effectiveness of the external auditors, has significant goodwill and other intangible assets relating to the reviewing and monitoring their objectivity and independence and acquisitions of businesses and the development of gaming platforms agreeing the scope of work and fees for audit and non-audit services; and software. and The Audit Committee reviewed the cash flow forecasts supporting the » Assisting the Board in its consideration of relevant risk factors and carrying value of goodwill and other intangible assets including the key determining appropriate mitigation actions. assumptions and estimates, and satisfied itself that no impairments were required in relation to carrying values. In addition, the appropriateness Activities of the capitalisation of costs relating to the development of gaming The key matters discussed by the Committee during the year included: platforms and software was reviewed. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 63

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 aking recommendations to the Board in respect of its findings in aking the Board to recommendations verseeing the management of 888’s whistleblowing procedures procedures whistleblowing the management of 888’s verseeing eporting to the Board on how it has discharged its responsibilities. eporting it has discharged on how the Board to eviewing the going concern position of 888 and the viability eviewing the reports prepared by the externaleviewing by on key the reports auditors prepared of internal risk systems control, eviewing and considering 888’s eviewing the performance including EY’s of the external auditors, R R M matters. respect of all of the above R set out on pages 45 and 27. statement R financial control deficiencies in the significant audit findings and any made the recommendations reviewed Committee The environment. with management’s together and controls processes improve EY to by EY did not highlight any those recommendations. to responses weaknesses internal control has and management significant in areas making to controls changes to committed appropriate EY. by highlighted R During the year, fraud. to of assurance and exposure sources management undertook assessment of the principal risks a robust set out on pages 20 to 23, together are These facing the business. The mitigated. being the risks how are with explanations as to the outputs of this risk assessment has reviewed Committee In comprehensive. are and is of the opinion that the risk disclosures risk define 888’s to carrying management has sought out this review, which of the processes the effectiveness and has considered response risk. managing to relate O in confidence, receive, to the Committee for which contain procedures matters. complaints and notifications on all operational non-audit with 888, the use of the external for relationship auditors services the paid to and the balance of audit and non-audit fees Non-audit services auditors. processes generally subject tender to are cost done on the basis of competence, and the allocations of work are for conflicts to the potential regulatory requirements, effectiveness, is satisfied that Committee The business. arise and knowledge of 888’s these services, to in relation EY has taken that any actions ensure to managed. properly are conflictspotential of interest

» » » » » » » The Board considers that the processes undertaken considers that the processes Board The the Audit by and in and effective robust be appropriately continue to Committee Reporting the Financial Council. compliance with the guidance issued by Committee the Audit has not been advised by the Board During the year, weaknesses frauds or failings, in internal any nor identified itself, of, be material in the context it has determined which to of the control financial statements. y significant adjustments were required arising from arising from required were adjustments y significant ompliance with statutory tax obligations and 888’s tax policy;ompliance with statutory tax obligations and 888’s he accounting principles, policies and practices policies he accounting principles, and adopted and judgments estimates issues, accounting he significant the audit; and the adequacy of related disclosures in the reportsthe adequacy disclosures of related T reporting; financial to of management in relation Whether an C T eeting with internal and external auditors, both with and in the eeting with internal and external auditors,

eviewing the draft interim and annual reports and considering: eviewing and approving the resources of, the scope of work of, the resources eviewing and approving 4. 1. 2. 3. R undertaken internal audit. Deloitte, by and the reports by prepared Committee. Audit to the its findings presents as internal auditor, various aspects Deloitte has reviewed of In years, past three the servicescustomer B2B and B2C finance, and business operations, global operations human resources, activities, product technologies, In and regulation. 2015, Deloitte issued reports security, on physical regulatory and billing processes, B2B agreements penetration testing, regulators, by reviewed not technologies affairs management, product Whilst no critical issues were plans. incentive and employee VIPs to the presented were recommendations findings and identified, implementation. senior management for and Board absence of the Executive Directors. absence of the Executive R M

» » » In addition to the matters described above, the work of the Committee the workthe Committee of In described the matters above, addition to during included: the year 888’s internal audit function is outsourced to Deloitte and the Audit Deloitte and the Audit internal audit function to is outsourced 888’s and modified the internal audit plan. reviewed Committee It has also all internal audit work to reports in relation Deloitte reviewed from has also reviewed Committee Audit The carried out during the year. internal control to in relation the external auditors, reports EY, from its work. arisingmatters from Internal controls controls Internal the purpose of for of internal control system 888 maintains a robust complying required, where risk and, managing assets, 888’s safeguarding controls, all material risks and related covers This with regulations. together with operational and compliance controls including financial, mitigating actions and responsibilities. During the year, the Audit Committee has reviewed reports has reviewed from Committee the Audit During the year, management on data security In recovery and disaster planning. addition, 888 periodically commissions external of its systems testing identify potential to in order testing, penetration included simulated remediation. for vulnerabilities and implement recommendations IT systems in house. developed complex and in the main are are IT systems 888’s IT platforms of on the development of the business relies success The In the addition, customers. and appealing to innovative which are a commercial integrity and security vital from are of the IT systems standpoint. GOVERNANCE

64 AUDIT COMMITTEE REPORT continued

External auditors EY has been 888’s external auditor since 2014. The partners responsible for the external audit are Jose Julio Pisharello, a partner in EY’s Gibraltar office, and Cameron Cartmell, a partner in EY’s London office. Jose Julio and Cameron have been responsible for the audit since EY was appointed. The Committee has formally reviewed the performance of EY, a process which involved all Board members and senior members of 888’s finance function. The conclusions reached were that EY continued to perform the external audit in a very professional and efficient manner, and it was therefore the Committee’s recommendation that the reappointment of EY be put to shareholders at the Annual General Meeting in May 2016. If reappointed, EY will hold office until the conclusion of the next Annual General Meeting at which accounts are laid. Given EY’s short tenure to date, the Board has no present plans to consider an audit tender process.

During 2015, EY provided material non-audit services to 888 in connection with the proposed acquisition by 888 of bwin.party digital entertainment plc, which was subsequently terminated. This resulted in non-audit fees significantly exceeding audit fees in the year, presenting a threat to EY’s independence as 888’s external auditors. However, the Audit Committee considered and is satisfied that given their knowledge of the group, EY were best placed to undertake that work and that EY maintained its independence through various safeguards, principally by ensuring that effective separation procedures were implemented between its teams auditing 888 and advising 888, respectively, and on the basis that this level of non-audit services is not expected to recur. The Audit Committee seeks to ensure that 888’s auditors are objective and independent by monitoring the appointment of the auditors for any non-audit work involving fees above US$0.1 million. In 2015, for the reasons noted above, the external auditors carried out non-audit work for 888 involving fees in the aggregate amount of US$3.4 million (2014: US$0.1 million), out of which US$3.3 million was associated with the proposed acquisition of bwin.party digital entertainment plc. In agreeing that the work could be done by EY, the Committee was mindful of the attitude investors now have to the auditors performing non-audit services and of the new guidance in this area which is operative for accounting periods starting on or after 16 June 2016. Going forward, the Committee will ensure that fees for non-audit services performed by the auditors will not exceed 70% of aggregate audit fees measured over a three year period. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 65

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888

Company year then ended for the of cash flows statement Company esentation of exceptional items within the income statement items esentation of exceptional e performed one being of components, financial information two an audit of the complete verall Group materiality of US$2.7 million, which represents 5% of profit before tax and before 5% of profit materiality Group of US$2.7 million, which represents verall apitalisation of development costs apitalisation of development egulatory and legal risks recognition evenue he components where we performed full audit procedures accounted for the entirety for performed accounted we he components where full audit procedures axation of the Group’s revenue, profit before tax and total assets. tax and before profit revenue, of the Group’s a subsidiary of the Group. in Israel and the other being the remainder T O items. exceptional R T R Classification and pr C W

» » » » » » » » ’s Group financial statements and Company financial statements (the ‘financial statements’) give a true and fair view of the state of give a true and fair view of the state ‘financial statements’) (the financial statements Company and financial statements Group ’s ements have been prepared in accordance with the requirements of the Gibraltar Companies Act 2014 and, as regards the Group the Group as regards Act 2014 and, of the Gibraltar Companies with the requirements in accordance been prepared ements have

oup financial statements have been properly prepared in accordance with International Financial Reportingby with (IFRSs) as adopted in accordance International Standards prepared been properly have oup financial statements ompany financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in European by the with IFRSs as adopted in accordance prepared been properly have statements financial ompany

the European Union; the European the C Act 2014; and of the Gibraltar Companies with the provisions accordance the financial stat Articlefinancial statements, of the IAS 4 Regulation. 888 Holdings plc ended; year then for the profit affairs as at 31 of the Group’s December 2015 and and of the Company’s the Group’s the Gr he financial reporting framework that has been applied in their preparation is IFRSs as adopted by the European Union and, as regards the Company Company the regards as Union and, reportingEuropean by the he financial is IFRSs as adopted framework that has been applied in their preparation

AUDITORS’ REPORT AUDITORS’ INDEPENDENT INDEPENDENT to the members of 888 Holdings plc the members of 888 to » » » » Materiality Audit scope Audit Overview of our audit approach Overview Risks of material misstatement Related notes 1 to 26 to the financial statements the financial 26 to 1 to notes Related Group What we have audited have we What comprise: financial statements 888 Holdings plc’s Opinion on financial statements Opinion on financial In our opinion: financial statements, as applied in accordance with the provisions of the Gibraltar Companies ActCompanies 2014. of the Gibraltar with the provisions as applied in accordance financial statements, T Consolidated income statement for the year ended 31 December 2015 the year for income statement Consolidated then ended the year income for of comprehensive statement Consolidated balance sheet as at 31 December 2015 Consolidated then ended the year of changes in equity statement for Company balance sheet as at 31 December 2015 Company then ended the year of changes in equity statement for Consolidated year then ended for the of cash flows statement Consolidated the financial statements 10 to 1 to notes Related FINANCIAL STATEMENTS

66 INDEPENDENT AUDITORS’ REPORT continued

Our assessment of risk of material misstatement and response to that risk We identified the risks of material misstatement described below as those that had the greatest effect on our overall audit strategy, the allocation of resources in the audit and the direction of the efforts of the audit team. In addressing these risks, we have performed the procedures below which were designed in the context of the financial statements as a whole and, consequently, we do not express any opinion on these individual areas.

What we concluded Risk Our response to the risk to the Audit Committee

Regulatory and legal risks » Given the industry and jurisdictions in which » We understood the Group’s process and related Based on our audit procedures on the the Group operates, as described in the Principal controls over the identification and mitigation Group’s accounting conclusions in each Risks and Uncertainties on page 21, there is of regulatory and legal risks and the related of its major jurisdictions, we concluded a risk that the Group will operate without an accounting, and assessed whether the controls that the accruals for amounts payable appropriate licence, have an existing licence are designed effectively to achieve this. to regulatory authorities are conservative, adversely affected or be subject to other within an acceptable range and that the regulatory sanctions. » We inquired of management and the Group’s disclosures in the financial statements legal advisers about any known instances were appropriate. » Judgement is also applied in estimating of material breaches in regulatory or licence amounts payable to regulatory authorities in compliance that needed to be disclosed or certain jurisdictions. This gives rise to a risk required accruals to be recorded. over the accuracy of accruals and disclosure of contingent liabilities. There is also a risk that » Based on the Group’s correspondence management may influence these significant with regulators and any legal advice the Group estimates and judgements in order to meet has received, we understood management’s market expectations or bonus targets. interpretation and application of relevant laws and regulations. With support from our VAT » Refer to the Audit Committee Report (page 62); experts in respect of the uncertainties over significant accounting policies (Note 2 on page EU VAT, we challenged the appropriateness of 79); and Note 26 to the Consolidated Financial its assumptions and estimates in relation to Statements (page 107). accruals and contingent liabilities with reference to historical payments made by the Group and the period to which any accrued liabilities relate.

Taxation » The Group recognised a taxation charge of » We discussed with management and its legal We concluded that management’s US$3.0 million in 2015 (2014: US$11.0 million) advisers, with support from our tax experts, judgements in relation to the taxation and had income tax receivables of US$2.7 how the Group manages and controls the charge, provisions for taxation and the million (2014: nil) and payables of US$2.8 million companies in countries in which it operates. related disclosures were appropriate. at 31 December 2015 (2014: US$4.6 million). » We obtained and read the results of the third » The Group operates in a number of countries, party tax studies obtained by the Group and resulting in complexities in the payment of and reviewed its correspondence with the relevant accounting for tax. The Group faces a risk that tax authorities, in order to support the tax given the international nature of its operations, position of the Group. material tax exposures may not be appropriately provided or disclosed in the financial » With support from our international tax statements. experts we understood management’s interpretation and application of relevant » Refer to the Audit Committee Report (page 62); tax law and challenged the appropriateness significant accounting policies (Note 2 on page of its assumptions and estimates in relation 78); and Notes 8 and 14 to the Consolidated to provisions and contingent liabilities. Financial Statements (pages 89 and 97). » We considered whether the Group’s disclosure of changes in tax estimates in Gibraltar were in accordance with IFRS requirements. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 67

What we concluded concluded we What Committee Audit the to was appropriate. Based on our audit procedures, we we Based on our audit procedures, classification concluded that the Group’s of certain acquisition costs and retroactive as exceptional, charges duties and associated disclosures, with the related together We concluded that the revenue recognised recognised concluded that the revenue We B2B including in respect of its in the year, of certaincontracts the treatment and is materially correct. bonuses, customer ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 e considered whether any other items of other items whether any e considered e performed detailed transaction testing e checked the appropriateness of the items e checked of the items the appropriateness whether the disclosures e considered e understood and tested the key and tested application e understood contractual Group’s the e reviewed e performed testing detailed substantive income and expense in the Group’s consolidated consolidated income and expense in the Group’s definition met the Group’s income statement in its accounting policies. items of exceptional W items. on a sample of exceptional W income in the Group’s classified as exceptional in the contextstatement of the Group’s accounting policy and external guidance. W financial statements included in the Group’s our with our findings from consistent were audit work. W and manual controls over the Group’s principal the Group’s over and manual controls then applied IT-based We gaming systems. re-perform to auditing techniques the gaming between the Group’s reconciliation accounts. cash and customer revenue, arrangements in they operate and how judgement practice management’s check to as a was operating whether the Group as to principal its B2B contracts or an agent in with in the context of the guidance in customers, of also challenged the treatment We IAS 18. certain considering by bonuses the customer contractual obligations in respect customer’s marketing provide services.of these bonuses to W on a sample of and cut-off procedures transactions. revenue W W

» » » » » » » Our response to the risk to Our response efer to the significant accounting policies (Note (Note accounting policies the significant to efer efer to the significant accounting policies the significant to efer he Group classifies certain he Group in the income items he Group makes of judgements he Group a number 2 on page 80); and Note 5 to the Consolidated the Consolidated 5 to 2 on page 80); and Note (page 86). Statements Financial statement as exceptional, in order to assist users to in order as exceptional, statement in understanding of the financial statements presentation The its underlying performance. significant involves as exceptional of items is a risk that There management judgement. influence the judgements in management may items respect of the classification of exceptional meet market to in order expectations or bonus targets. R items of US$23.0 million (2014: nil), including of US$23.0 million (2014: items acquisition costs and exceptional exceptional charges. duties and associated retroactive T (Note 2 on page 78); and Note 3 to the 3 to 2 on page 78); and Note (Note (page 84). Statements Financial Consolidated T R million in 2015 (2014: US$454.7 million). million in 2015 (2014: US$454.7 principally in respect revenue, in recognising is actingof whether the Group as a principal and or an agent with its B2B customers whether certain treated bonuses are customer or as a cost. Any as a deduction revenue from in a judgements could result inappropriate and operating of revenue material misstatement is also a risk that management There expenses. judgements influence the significant may in order recognition in respect of revenue meet marketto expectations. T T

Risk » » » exceptional separately presented he Group » » » ofUS$462.1 revenue recognised Group he Classification and presentation of and presentation Classification the income within items exceptional audit) our 2015 for (new statement Revenue recognition recognition Revenue FINANCIAL STATEMENTS

68 INDEPENDENT AUDITORS’ REPORT continued

What we concluded Risk Our response to the risk to the Audit Committee

Capitalisation of development costs » The Group capitalised development costs of » We understood and tested the process and We concluded that the Group’s capitalisation US$6.8 million in 2015 (2014: US$8.6 million) key controls over the Group’s capitalisation of development costs during 2015 was and had net capitalised development costs of of internal development costs, including its appropriate and in accordance with IAS 38. US$26.5 million at 31 December 2015 (2014: payroll and purchasing systems. US$27.6 million). » For development projects capitalised in the » The capitalisation of costs associated with year, we challenged whether the Group met the development of the Group’s systems, in the conditions set out in IAS 38 for capitalisation accordance with the criteria set out in IFRS, and tested on a sample basis external supplier involves significant management judgement and internal payroll costs capitalised. and is therefore an area of focus for our audit. There is a risk that costs are capitalised » We considered the impact of the capitalisation inappropriately, affecting the Group’s of development costs in conjunction with profitability. There is also a risk that management our comparison of the Group’s results against may influence the significant judgements in analysts’ expectations and the Group’s budgets. respect of the capitalisation of development costs in order to meet market expectations » We compared the useful lives of capitalised or bonus targets. development costs to the Group’s business plans for each development project and to » Refer to the significant accounting policies historical experience of project lives in the (Note 2 on page 79); and Note 11 to the online gaming industry. Consolidated Financial Statements (page 92). » We checked that where projects are not yet in use and no amortisation has been charged, they are still expected to be implemented and meet the conditions set out in IAS 38.

The above risk areas are consistent with those in the prior year other than as described below.

» Impairment of assets was an area of focus for our 2014 audit. However, given the headroom in the Group’s impairment tests in 2014, auditing this area no longer constitutes a significant proportion of audit effort or audit strategy. The Group’s impairment testing is described in note 11 to the consolidated financial statements on page 92.

» The classification and presentation of exceptional items is a new area of focus for our 2015 audit. This reflects the exceptional items of US$23.0 million, including exceptional acquisition costs of US$14.6 million and exceptional retroactive duties and associated charges of US$8.4 million incurred in 2015, for which there were no comparable costs in 2014. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 69

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 During the course of our audit, we reassessed initial materiality our assessment. During reassessed and made no changes to the course of our audit, we In calculating materiality, we excluded the effects of certain non-recurring items from profit before tax. For 2015, these related to the exceptional to the related For 2015, these tax. of certain before the effects profit excluded we from non-recurring In items materiality, calculating of US$5.9 million and exceptional finance expenses acquisition income of US$8.8 million, exceptional acquisition costs of US$17.5 million, exceptional the financial statements. 5 to in Note of US$8.4 million, as highlighted charges duties and associated retroactive We believe that profit before tax, adjusted for the items described below, provides us with a consistent year on year basis for determining materiality year basis year on us with a consistent provides describedfor the items below, tax, adjusted before that profit believe We reflects the effects the prior predominately year reduction from The performanceand is the most relevant the stakeholders to of the Group measure 1 January from 2015. VAT 1 December 2014 and EU of point of consumption tax in the UK from payment of the Group’s We determined materiality for the Group to be US$2.7 million (2014: US$3.4 million), which is approximately 5% (2014: 5%) of adjusted profit profit 5% (2014: 5%) of adjusted be US$2.7 million (2014: US$3.4 million), which is approximately to the Group determined materiality for We tax. before Materiality decisions the economic influence to be expected “The reasonably could that, individually or in the aggregate, or misstatement magnitude of an omission and extent of our audit procedures.” the nature a basis for determining Materiality provides of the users of the financial statements. We apply the concept of materiality in planning and performingWe on the audit and in of identified misstatements the audit, in evaluatingeffect the our audit opinion. forming Our application of materiality of materiality Our application During these visits the Group audit team attended audit planning and closing meetings, the Group’s Audit Committee meetings and conducted Committee Audit the Group’s audit planning and closing meetings, attended team audit During these visits the Group during regularly interacted the various audit team visits the Group the location in addition to the Israeli subsidiary, audit work.and reviewed For and its discussion of fraud and error including planning, keystages of the audit, reviewed working participated papers, in the component team’s and the Israeli audit team between the Group allocation of responsibilities The the scope and direction of the audit process. for responsible were with together This, audit team. the Group of risk was led by described that the audit work was such on each of the areas above component team financial statements. on the Group our opinion evidence for us appropriate gave performed level, the procedures at Group The Group audit team performed the majority of its audit fieldwork in Israel and Gibraltar, with visits to both locations at the planning, interim and to both locations at the planning, with visits performed audit team Group The the majority of its audit fieldwork in Israel and Gibraltar, end phases of the audit. year In establishing our overall approach to the Group audit, we determined the type be undertaken audit, we of work that needed to the Group to In approach at each of the components establishing our overall subsidiaryThe Israeli other EY global network from firms component auditors our instruction. operating under or by audit team, as the Group us, by the as a full scope audit, by directly, was audited of the Group in Israel and the remainder team was subject a component full scope audit by a to audit team. Group teams with component Involvement We performed an audit of the complete financial information of both of these components (“full scope”). The components we audited therefore therefore we audited The components performed (“full of both of these components scope”). financial information an audit of the complete We in the prioryear. with our approach This is consistent total assets. tax and before profit revenue, the entirety of the Group’s account for The Group operates from a small number of locations and as an online gaming operator the Group’s accounting is centrally managed. In accounting is centrally managed. assessing the Group’s as an online gaming operator a small number of locations and from operates Group The one being a subsidiary components, were two in Israel we determined that there financial statements, the Group the risk to of material misstatement of the Group. and the other being the remainder An overview of the scope of our audit of the scope An overview the scope Tailoring risk,Our assessment of audit our evaluation of materiality of performance and our allocation each entity materiality determine our audit scope for risk profile, We take account size, into financial statements. an opinion on the consolidated form to this enables us together, Taken within the Group. recent and other factors such as in the business environment changes controls, group-wide of and effectiveness of the Group the organisation be performed of work to the level when assessing internal audit results at each entity. FINANCIAL STATEMENTS

70 INDEPENDENT AUDITORS’ REPORT continued

Performance materiality “The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.”

On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that performance materiality was 50% (2014: 50%) of our planning materiality, namely US$1.35 million (2014: US$1.70 million). We have set performance materiality at this percentage due to our past experience of the audit that indicates a higher risk of misstatements, both corrected and uncorrected.

Audit work at the Israeli subsidiary for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken based on a percentage of total performance materiality. The performance materiality set for that component is based on its relative scale and risk to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year, the performance materiality allocated to the Israeli subsidiary was US$0.6 million (2014: US$0.7 million). The audit work on the remainder of the Group was undertaken using Group materiality.

Reporting threshold “An amount below which identified misstatements are considered as being clearly trivial.”

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of US$135,000 (2014: US$145,000), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view warranted reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.

Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and Accounts to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Respective responsibilities of Directors and auditors As explained more fully in the Directors’ Statement of Responsibilities set out on page 39, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. The Directors are also responsible for the preparation of the Directors’ Remuneration Report, which they have chosen to prepare, being under no obligation to do so under Gibraltar law, and the preparation of the Corporate Governance Statement and statement on going concern under the Listing Rules. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report is made solely to the Company’s members, as a body, in accordance with the Gibraltar Companies Act 2014 and our engagement letter dated 30 November 2015.

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.

Opinion on other matter prescribed by the Gibraltar Companies Act 2014 In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements and has been properly prepared in accordance with the Act. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 71

We have no exceptions no exceptions have We report.to no exceptions have We report.to We have no exceptions no exceptions have We report.to ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 t of the Corporate Governance Statement relating to the Company’s the Company’s to relating Governance Statement t of the Corporate ectors’ statement in relation to going concern, to set out on page 38, relation in statement ectors’ ently materially incorrect with, our based on, or materially inconsistent wise misleading. wise misleading. ompany has not kept proper accounting records; or not kept accounting records; has ompany proper e are material misstatements in the Directors’ Report based on in the Directors’ material misstatements e are erially inconsistent with the information in the audited financial in the audited erially with the information inconsistent e have not received all the information and explanations we require require and explanations we all the information not received e have our knowledge and understanding of the Company and its environment our knowledge and its environment and understanding of the Company obtained in the course of the audit. the Dir the par Governance Code Corporate of the UK compliance with the provisions review. for our specified the C w our audit; or for ther set out on page 27; and viability, and longer-term mat or statements; appar in the course of performingknowledge acquired of the Group our audit; or other

» » » » » » » » In particular, we are required to report whether we have identified any identified any report to have whether we required are we In particular, between our knowledgeinconsistencies of performing in the course acquired that they consider the annual report statement and the audit and the Directors’ balanced and understandable and provides accounts taken as a whole is fair, performance, assess the entity’s necessary to the information shareholders for business model and strategy; and whether the annual report appropriately that the audit committee to communicated that we those matters addresses been disclosed. consider should have we in our opinion: report if, to you to required are We review: to required are We We are required to report to you if, in our opinion, financial and non-financial in our opinion, financial report if, to you to required are We Report in the Annual information is: and Accounts tion of the Directors’ Remuneration basis with the Report in accordance prepared that is described has been properly as audited tion of the Directors’ ormation given in the Corporate Governance Statement with respect to internal control and risk management systems in relation risk and in relation management systems internal control with respect to Governance Statement in the Corporate ormation given to financial reporting processes and share capital structures is consistent with the financial statements; and with the financial statements; reporting capital structures is consistent financial and share to processes described therein. of preparation the inf the sec

» » Gibraltar Companies Companies Gibraltar Act 2014 reporting Listing Rules review requirements Matters on which we are required to report by exception by report to required are on which we Matters (UK and Ireland) ISAs reporting Opinion on other matters as per the terms of our engagement with the Company the Company of our engagement with as per the terms matters Opinion on other In our opinion: FINANCIAL STATEMENTS

72 INDEPENDENT AUDITORS’ REPORT continued

Statement on the Directors’ assessment of the principal risks that would threaten the solvency or liquidity of the entity

ISAs (UK and Ireland) We are required to give a statement as to whether we have anything material We have nothing material to reporting to add or to draw attention to in relation to: add or to draw attention to.

» the Directors’ confirmation in the Annual Report and Accounts that they have carried out a robust assessment of the principal risks facing the entity, including those that would threaten its business model, future performance, solvency or liquidity;

» the disclosures in the Annual Report and Accounts that describe those risks and explain how they are being managed or mitigated;

» the Directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the entity’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements; and

» the Directors’ explanation in the Annual Report and Accounts as to how they have assessed the prospects of the entity, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the entity will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

Cameron Cartmell (Non-Statutory Auditor) Jose Julio Pisharello (Statutory Auditor) Ernst & Young LLP For and on behalf of EY Limited, Registered Auditors London Gibraltar 22 March 2016 22 March 2016

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 73 — — — — — — — 3.0 0.1 3.8 0.3 (1.7) (7.7) (0.3) (0.5) (4.8) 81.7 59.9 56.9 80.0 67.9 56.9 (35.1) (40.7) (15.8) (11.0) 2014 2014 15.9¢ 454.7 454.7 16.1¢ (133.8) (149.3)

US$ million US$ million

— — 8.8 8.8 0.3 (4.1) (8.4) (0.1) (1.1) (2.2) (1.1) (5.9) (2.6) (3.0) 62.0 27.3 29.5 40.8 32.5 29.5 8.3¢ 8.2¢ (17.5) (17.5) (32.5) (36.8) (58.4) 2015 2015 (10.2) 462.1 472.3 (138.9) (146.0) US$ million US$ million ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

5 5 5 5 5 6 5 7 4 7 9 3 21 13 13

888 HOLDINGS PLC HOLDINGS 888

3

4

3

AT evenue (including EU VAT) EU (including evenue evenue rofit after tax for the year attributable to equity attributable holders of the parent year for the after tax rofit rofit for the year for the rofit inance income Operating profit before exceptional acquisition costs, costs, acquisition exceptional before profit Operating duties retroactive exceptional income, acquisition exceptional benefit charge and share charges and associated acquisition costs Exceptional acquisition income Exceptional charges duties and associated retroactive Exceptional benefit charge Share R EU V

OF COMPREHENSIVE INCOME COMPREHENSIVE OF CONSOLIDATED STATEMENT STATEMENT CONSOLIDATED

INCOME STATEMENT STATEMENT INCOME CONSOLIDATED CONSOLIDATED Operating profit Operating Exceptional acquisition income Exceptional Exceptional acquisition costs Exceptional Profit before tax before Profit Total comprehensive income for the year attributable to equity to holders of the parent attributable the year for income comprehensive Total The notes on pages 77 to 107 form part 107 form on pages 77 to notes financial statements. The of these consolidated Total other comprehensive (expense)/income for the year for (expense)/income other comprehensive Total Administrative expenses Administrative and associates loss of equity joint ventures of post-tax accounted Share Items that will not be reclassified to profit or loss profit to will not be reclassified Items that liability pay of severance Remeasurement Selling and marketing expenses Movement in contingent consideration Movement Exchange differences on translation of foreign operations foreign on translation of differences Exchange Research and development expenses and development Research Exceptional finance expenses Exceptional Items that may be reclassified subsequently to profit or loss to profit subsequently be reclassified may Items that partner of equity injections share joint venture Group by in equity joint ventures accounted Gaming duties expenses Finance P R Operating expenses F P Earnings per share Note

For the year ended 31 December 2015 the year For Basic Diluted 8 Taxation Note For the year ended 31 December ended 2015 the year For FINANCIAL STATEMENTS

74 CONSOLIDATED BALANCE SHEET At 31 December 2015

2015 2014 Note US$ million US$ million Assets Non-current assets Goodwill and other intangible assets 11 157.3 157.2 Property, plant and equipment 12 11.2 15.5 Investments 13 1.6 0.2 Non-current receivables 16 0.8 0.7 Deferred tax assets 14 1.2 0.5 172.1 174.1

Current assets Cash and cash equivalents 15 178.6 163.1 Trade and other receivables 16 32.9 30.0 Income tax receivable 2.7 — 214.2 193.1 Total assets 386.3 367.2

Equity and liabilities Equity attributable to equity holders of the parent Share capital 17 3.2 3.2 Share premium 17 2.2 1.3 Retained earnings 156.8 180.6 Total equity attributable to equity holders of the parent 162.2 185.1

Liabilities Current liabilities Trade and other payables 18 137.2 104.1 Derivative financial instruments 24 — 2.5 Income tax payable 2.8 4.6 Customer deposits 19 82.4 67.5 Share benefit charges – cash settled 21 — 3.4 222.4 182.1 Non-current liabilities Deferred tax liabilities 14 1.7 — Total liabilities 224.1 182.1 Total equity and liabilities 386.3 367.2

The consolidated financial statements on pages 73 to 107 were approved and authorised for issue by the Board of Directors on 22 March 2016 and were signed on its behalf by:

Itai Frieberger Aviad Kobrine Chief Executive Officer Chief Financial Officer

The notes on pages 77 to 107 form part of these consolidated financial statements. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 75 0.9 2.4 0.4 1.3 3.0 (2.2) otal 27.3 29.5 59.9 56.9 (53.5) (51.2) T 185.1 174.7 162.2

US$ million

— — — — — — — — — (1.1) (1.1) (0.5) (0.5) (0.5) (1.6) rency oreign eserve r F cur translation US$ million

— — 2.4 1.3 3.5 (1.1) 28.4 29.5 60.4 56.9 (53.5) (51.2) 181.1 170.6 nings 158.4 etained ear R US$ million ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

— — — — — — — — — — 0.9 1.3 0.4 0.9 2.2 Share premium US$ million

888 HOLDINGS PLC HOLDINGS 888 — — — — — — — — — — — — 3.2 3.2 3.2 Share capital US$ million

e 10) e 10) es to cover employee share schemes (note 17) schemes (note share employee cover es to es to cover employee share schemes (note 17) schemes (note share employee cover es to

ther comprehensive expense for the year expense for ther comprehensive ther comprehensive income for the year income for ther comprehensive alance at 31 December 2015 31 December at alance alance at 31 December 2014 31 December at alance alance at 1 January at alance 2014 rofit after tax for the year attributableto equity the for holders of the parent after tax rofit he following describes the nature and purpose of each reserve within equity. and purpose describes of each reserve the nature within equity. he following quity settled share benefit charges (note 21) (note quity benefit charges settled share quity settled share benefit charges (note 21) (note quity benefit charges settled share otal comprehensive income otal comprehensive otal comprehensive income otal comprehensive The notes on pages 77 to 107 form part 107 form on pages 77 to notes financial statements. The of these consolidated Share capital – represents the nominal value of shares allotted, called-up and fully paid. fully paid. called-up and allotted, the nominal value of shares capital – represents Share of nominal value. in excess capital share the amount subscribed for – represents premium Share income and other of comprehensive statement in the consolidated net gains and losses recognised the cumulative Retained earnings – represents transactions with equity holders. functional currency entities that have the translation of all Group arising from differences currency exchange translation reserve – represents Foreign US Dollars. from different T B Issue of shar E

CONSOLIDATED STATEMENT STATEMENT CONSOLIDATED OF CHANGES IN EQUITY EQUITY IN CHANGES OF Dividend paid (not T O B P Issue of shar E Dividend paid (not T O Profit after tax for the year attributable equityto the for holders of the parent after tax Profit B

For the year ended 31 December ended 2015 the year For FINANCIAL STATEMENTS

76 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2015

2015 2014 Note US$ million US$ million Cash flows from operating activities Profit before tax 32.5 67.9 Adjustments for: Depreciation 12 8.9 9.0 Amortisation and impairment charges 11 9.7 10.0 Interest income 7 (0.3) (0.3) Interest expense 7 0.2 — Share of post- tax loss of equity accounted joint ventures and associates 13 0.1 7.7 Movement in contingent consideration — (0.1) Share benefit charges 21 4.1 1.7 55.2 95.9 (Increase) decrease in trade receivables 16 (0.1) 1.6 (Increase) decrease in other accounts receivables 16 (1.6) 3.6 Increase in customer deposits 19 12.9 8.1 Decrease in foreign exchange derivatives 7 (2.5) (1.7) Increase in trade and other payables 18 27.1 12.5 Cash generated from operations 91.0 120.0 Income tax paid (6.0) (8.1) Net cash generated from operating activities 85.0 111.9

Cash flows from investing activities Consideration paid on acquisitions — (0.3) Acquisition of investment in equity accounted associates 13 (1.5) — Acquisition of property, plant and equipment 12 (4.6) (5.5) Decrease in short term investments — 3.9 Interest received 7 0.3 0.3 Acquisition of intangible assets 11 (3.0) (2.9) Internally generated intangible assets 11 (6.8) (8.6) Net cash used in investing activities (15.6) (13.1)

Cash flows from financing activities Issue of shares to cover employee share schemes 17 0.9 0.4 Dividends paid 10 (53.5) (51.2) Net cash used in financing activities (52.6) (50.8)

Net increase in cash and cash equivalents 16.8 48.0 Net foreign exchange difference (1.3) (0.7) Cash and cash equivalents at the beginning of the year 15 163.1 115.8 Cash and cash equivalents at the end of the year1 15 178.6 163.1

1. Cash and cash equivalents includes restricted short-term deposits of US$3.3 million (2014: US$0.9 million) (see note 15).

The notes on pages 77 to 107 form part of these consolidated financial statements. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 77

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 ublic Limited Company. ublic Limited and its subsidiaries. Company ublic Limited s defined in IAS 24 – Related Party s defined in IAS 24 – Related Disclosures. Ventures. and Joint s defined in IFRS 11 – Associates Joint Arrangements in and IAS 28 – Investments ompanies over which the Company has control (as defined in IFRS 10 – Consolidated Financial Statements) Financial Statements) Consolidated in IFRS 10 – (as defined has control which the Company ompanies over   888 Holdings P 888 Holdings P  C A A  with those of the Company. consolidated and whose accounts are

o IAS 19 – Defined Benefit Plans: Employee Contributions (effective for annual periods beginning on or after 1 July 2014). The The beginning on or for annual after 1 July 2014). periods Contributions (effective Plans: Employee o IAS 19 – DefinedBenefit

mprovements 2011-2013 Cycle. This includes minor amendments to IFRS 3 – Business Combinations, IFRS 13 – Fair Value Measurement Measurement Value 13 – Fair IFRS IFRS 3 – Business Combinations, minor amendments to includes This 2011-2013 Cycle. mprovements mprovements 2010-2012 Cycle. This includes minor amendments to IFRS 2 – Share-based Payment, IFRS 3 – Business Combinations, IFRS 3 – Business Combinations, IFRS 2 – Share-based minor amendments to includes This Payment, 2010-2012 Cycle. mprovements

and IAS 40 – Investment Property. None of these improvements had an impact on the Group. None of these improvements Property. and IAS 40 – Investment IFRS 8 – Operating Segments, IAS 16 – Property, Plant and Equipment, IAS 24 – Related Party Disclosures and IAS 38 – Intangible Assets. and IAS 38 – Intangible Party IAS 24 – Related Assets. and Equipment, Disclosures Plant IAS 16 – Property, IFRS 8 – Operating Segments, had an impactGroup. on the None of these improvements Annual I Amendments t Group’s As the parties or third defined benefit plans. employees when accounting for contributions from amendments clarify the accounting for the amendments had no impactGroup. any such contributions, on the have defined benefit plan does not Annual I

FINANCIAL STATEMENTS FINANCIAL NOTES TO THE CONSOLIDATED CONSOLIDATED THE TO NOTES » » » The following amendments to IAS, issued by the IASB, have been adopted by the Group during the year with no significant impact during with no significant on its consolidated the year the Group by been adopted have the IASB, IAS, issued by amendments to following The financial position: or results The significant accounting policies applied in the consolidated financial statements in the prior year have been applied consistently in these been applied consistently have in the year financial statements prior accounting policies applied in the consolidated significant The during adopted 2015. to changes to accounting standards In addition, due of the amendments with the exception financial statements, consolidated reflection of the underlying a better performance policy for an allow Group recognition was expanded and to of the rules the revenue VAT in the detail below. described in more are These policy items exceptional was adopted. The consolidated financial statements comply with the Gibraltar Companies ActCompanies 2014. comply with the Gibraltar financial statements consolidated The The consolidated financial statements are presented in US Dollars (US$ million) because that is the currency primarily presented in. the Group operates are financial statements consolidated The The significant accounting policies applied in the preparation of the consolidated financial statements are as follows: follows: are as statements financial of the consolidated accounting policies applied in the preparation significant The Basis of preparation Financial Reporting with (IFRSs), in accordance International Standards been prepared have of the Group financial statements consolidated The (IASB) and endorsed Board the International by Standards (IAS) and Interpretations adopted including International Accounting Standards Accounting for except on a historical cost basis, been prepared have financial statements consolidated The market. on an EU regulated companies listed use by for at fair value. been measured which have and derivative financial instruments, sale investments for available 2 SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT 2 The Company The Definitions In these financial statements: The Group The Subsidiaries partiesRelated and associates Joint ventures The Group is the owner of innovative proprietary of innovative is the owner a range of virtual software Group The solutions providing online gaming services internet, the including over Sportsbook), party on third revenue brand licensing platforms Offerings (mainly comprising Bingo and Emerging 888’s Poker, games, and Casino end users (B2C) services to These business partners to provided and unit, business its business to are through and Mytopia games. social services, payment supportDragonfish (B2B). customer provides In addition, the Group and online advertising. 1 GENERAL INFORMATION GENERAL 1 and activities description Company Islands Virgin in 1997 in the British was founded ‘Group’) ‘Company’) and its subsidiaries the (together (the Company Limited 888 Holdings Public on the London listed number 90099). On 4 October 2005, the Company and since 17 December in Gibraltar (Company 2003 has been domiciled Exchange. Stock FINANCIAL STATEMENTS

78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

2 SIGNIFICANT ACCOUNTING POLICIES continued The following standards, interpretations and amendments issued by the IASB have not been adopted by the Group as they were not effective for the year. The Group is currently assessing the impact these standards and amendments will have on the presentation of, and recognition in, its consolidated results in future periods:

» Amendments to IAS 1 – Disclosure Initiative (effective for accounting periods beginning on or after 1 January 2016).

» Amendments to IAS 16 and IAS 38 – Clarification of Acceptable Methods of Depreciation and Amortisation (effective for accounting periods beginning on or after 1 January 2016).

» Amendments to IAS 16 and IAS 41 – Agriculture: Bearer Plants (effective for accounting periods beginning on or after 1 January 2016).

» Amendments to IAS 27 – Equity Method in Separate Financial Statements (effective for accounting periods beginning on or after 1 January 2016).

» Amendments to IFRS 10, IFRS 12 and IAS 28 – Investment Entities: Applying the Consolidation Exception (effective for accounting periods beginning on or after 1 January 2016).

» Amendments to IFRS 11 – Accounting for Acquisitions of Interests in Joint Operations (effective for accounting periods beginning on or after 1 January 2016).

» IFRS 14 – Regulatory Deferral Accounts (effective for accounting periods beginning on or after 1 January 2016).

» Annual Improvements 2012-2014 Cycle (effective for accounting periods beginning on or after 1 January 2016), including minor amendments to IFRS 5 – Non-Current Assets Held for Sale and Discontinued Operations, IFRS 7 – Financial Instruments: Disclosures, IAS 19 – Employee Benefits and IAS 34 – Interim Financial Reporting.

» IFRS 9 – Financial Instruments (effective for accounting periods beginning on or after 1 January 2018).

» IFRS 15 – Revenue from Contracts with Customers (effective for accounting periods beginning on or after 1 January 2018).

» IFRS 16 – Leases (effective for accounting periods beginning on or after 1 January 2019).

» Amendments to IFRS 10 and IAS 28 – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (in December 2015, the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting).

Critical accounting estimates and judgments The preparation of consolidated financial statements under IFRS requires the Group to make estimates and judgments that affect the application of policies and reported amounts. Estimates and judgments are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

Included in this note are accounting policies which cover areas that the Directors consider require estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities in the future. These policies together with references to the related notes to the financial statements, which include further commentary on the nature of the estimates and judgments made, can be found below:

Revenue The Group applies judgement in determining whether it is acting as a principal or an agent where it provides services to business partners through its business to business unit. In making these judgements the Group considers, by examining each contract with its business partners, which party has the primary responsibility for providing the services and is exposed to the majority of the risks and rewards associated with providing the services, as well as if it has latitude in establishing prices, either directly or indirectly. This is described in further detail in the revenue accounting policy set out below.

Taxation Due to the international nature of the Group and the complexity of tax legislation in the jurisdictions in which it operates, the Group applies judgement in estimating the likely outcome of tax matters and the resultant provision for income taxes. However, in 2015 the Group has reached agreement on a number of tax matters with tax authorities in the key jurisdictions from which it operates, materially reducing the level of judgement to be made in preparing the financial statements. The Group believes that its accruals for tax liabilities are appropriate.

Impairment of goodwill and other intangible assets Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which the goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. For further information see note 11. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 79

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 continued Poker Poker each poker hand in ring from games and entry participation the commission charged for represents in Poker fees online gaming revenue Poker tournaments less the fair value of certain In tournaments entry bonuses and the value of loyalty points accrued. Poker revenue promotional fee when the tournament has concluded. is recognised Casino and Bingo won, less amounts by customers between the amounts of bets placed difference the by is represented and Bingo online gaming revenue Casino and the value of loyalty points accrued. customers the fair value of certain to for bonuses granted adjusted promotional Revenue from online activitiesRevenue from comprises: Revenue consists of income from online activities and income generated from foreign exchange commissions on customer deposit and withdrawals deposit and withdrawals commissions on customer exchange foreign online activities from Revenue consists of income from and income generated each reporting to which is allocated segment. and account fees, Revenue is recognised provided that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. reliably measured. can be revenue Group and the to the that economic benefits will flow that it is probable provided Revenue is recognised in the accounting periods in which the transactions after Revenue deduction occurred is recognised of certain to bonuses granted promotional at the fair value of the and is measured accounts, customer applied to and charges and after adding the management fees VAT, and EU customers or receivable. consideration received The financial statements of subsidiaries are prepared for the same reporting period as the Parent Company and using consistent accounting policies. accounting policies. and using consistent Company reportingParent same for the period as the prepared of subsidiaries financial statements are The Revenue its accounting has updated on some of its gaming services Group The in certain EU Member States. VAT 1 January is subject 2015 the Group to From VAT). (EU VAT after deductingrecorded this is revenue reflect that to policy revenue for Intercompany transactions and balances are eliminated on consolidation. transactions eliminated and balances are Intercompany The financial statements of subsidiaries are included in the consolidated financial statements using the purchase method of accounting. On the date On the date method of accounting. using the purchase financial statements included in the consolidated of subsidiaries financial statements are The over of the fair value of the consideration excess subsidiaryof the acquisition, the assets and liabilities of a their fair values and any at measured are as goodwill. recognised is the fair values of the identifiable net assets acquired The consolidated financial statements include the accounts of the Company and its subsidiaries. The subsidiaries are companies controlled by 888 controlled companies The subsidiaries are and its subsidiaries. Company include the accounts of the financial statements consolidated The an entity; its over variable from to returns has power or rights, the Company exposure, exists where Control Company. Limited Holdings Public the with an entity; from consolidated Subsidiariesreturns. are involvement an entity the amount of its affect to over and the ability use its power to ceases. as control until such time gained control the parent date The Group makes a number of judgements in respect of the accounting for and disclosure of expenses and contingent liabilities for regulatory of expenses and contingent liabilities for and disclosure makes in respect of the accounting for Group a number of judgements The described in further are These 26. detail in note including gaming duties. matters, Basis of consolidation Contingent liabilities and regulatory matters and regulatory liabilities Contingent The Group also applies judgement in determining the appropriate accounting treatment for its share of equity contributions made by its joint venture of equity its share contributions its joint venture made by for accounting treatment also applies judgement in determining the appropriate Group The further 13. see note partners. information For Investment in equity accounted joint ventures and associates joint ventures accounted in equity Investment using the equity income statement method of accounting. is included in the consolidated and associates of joint ventures of results share Group’s The of share changes in the Group’s carried at cost plus post-acquisition balance sheet are in the consolidated and associates in joint ventures Investments its investment equals or exceeds and associates of losses in the joint ventures share Ifnet assets of the entity impairment in value. less any the Group’s further does not recognise losses. the Group or associates, in the joint ventures 2 SIGNIFICANT ACCOUNTING POLICIES POLICIES ACCOUNTING SIGNIFICANT 2 initial capitalisation of costs The met. as assets are recognition if the criteria capitalised for are assets, intangible internally generated to relating Costs In met. criteria and economic feasibility are making that technological judgment considers this judgement, management is based on management’s income the consolidated project. Other to each charged is for expenditure forecasts its latest project and in each development made the progress carried accumulated assets are at cost less any intangible initial recognition, Following is incurred. the expenditure in which in the year statement further 11. note see information amortisation For impairment accumulated losses. any and Internally generated intangible assets generated Internally FINANCIAL STATEMENTS

80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

2 SIGNIFICANT ACCOUNTING POLICIES continued Emerging Offerings Revenue from Emerging Offerings is mainly comprised of Sportsbook, Social games and brand licensing on third party platforms.

» Sportsbook online gaming revenue comprises bets placed less payouts to customers, adjusted for the fair value of open betting positions.

» Social games revenue comprises the Group’s share from the sale of virtual goods to customers playing the Group’s games.

» Revenue derived from brand licensing on third party platforms represents the Group’s net revenue share from that activity.

B2B For services provided to business partners through its business to business unit, the Group considers whether for each customer it is acting as a principal or as an agent by considering which party has the primary responsibility for providing the services and is exposed to the majority of the risks and rewards associated with providing the services, as well as if it has latitude in establishing prices, either directly or indirectly.

» Where the Group is considered to be the principal, income is recognised as the gross revenue generated from use of the Group’s platform in online gaming activities with the partners’ share of the revenue charged to operating expenses.

» In other cases income is recognised as the Group share of the net revenue generated from use of the Group’s platform.

» B2B also includes fees from the provision of certain gaming related services to partners.

» Customer advances received are treated as deferred income within current liabilities and released as they are earned.

Operating expenses Operating expenses consists primarily of staff costs, payment service providers’ commissions, chargebacks, commission and royalties payable to third parties, all of which are recognised on an accruals basis, and depreciation and amortisation.

Administrative expenses Administrative expenses consist primarily of staff costs and corporate professional expenses, both of which are recognised on an accruals basis.

Exceptional items The Group classifies certain items of income and expense as exceptional, as the Group considers that it allows for a better reflection of the underlying performance of the Group. The Group considers any non-recurring items of income and expense for classification as exceptional by virtue of their nature and size. The item classified as exceptional are described in further detail in note 5.

Foreign currency Monetary assets and liabilities denominated in currencies other than the functional currency of the relevant company are translated into that functional currency using year-end spot foreign exchange rates. Non-monetary assets and liabilities are translated using exchange rates prevailing at the dates of the transactions. Exchange rate differences on foreign currency transactions are included in financial income or financial expenses in the consolidated income statement, as appropriate.

The results and financial position of all Group entities that have a functional currency different from US Dollars are translated into the presentation currency at foreign exchange rates as set out below. Exchange differences arising, if any, are recorded in the consolidated statement of comprehensive income as a component of other comprehensive income.

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; and

(ii) income and expenses for each income statement are translated at an average exchange rate (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions). STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 81 33% 15% 7-15%

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

ver the shorterver of the term lives of the lease or useful O 888 HOLDINGS PLC HOLDINGS 888 continued

otor vehicles otor ffice furniture and equipment ffice furniture easehold improvements M Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset’s cash generating amount of an individual asset, the impairment is carried test out on the asset’s the recoverable estimate not possible to it is Where cash inflows). independent largely identifiable and separately are which there which the asset belongs for of assets to the smallest group unit (i.e. Impairment of non-financial assets Impairment of non-financial assets in the immediately applicable an impairment loss is recognised Impairment and where undertaken on goodwill are tests annually on 31 December, indicate Other income statement. subject or changes in circumstances consolidated to impairmenttests whenever events non-financial assets are the carrying amount (being the higher of value Where its recoverable value of an asset exceeds that their carrying not be recoverable. amount may income statement. the consolidated through accordingly sell), the asset is written down in use and fair value less costs to IT equipment Depreciation is calculated using the straight-line method, at annual rates estimated to write off the cost of the assets less their estimated residual write off the cost of the assets less their estimated to estimated at annual rates method, using the straight-line is calculated Depreciation as follows: are rates annual depreciation The their expected useful lives. values over Property, plant and equipment is stated at historic cost less accumulated depreciation. Assets are assessed at each balance sheet date for indicators indicators for assessed at each balance sheet date are Assets depreciation. at historic cost less accumulated plant and equipment is stated Property, of impairment. O L Property, plant and equipment plant and equipment Property, Goodwill represents the excess of the fair value of the consideration in a business combination over the Group’s interest in the fair value of the interest the Group’s of the consideration in a business combination over of the fair value the excess Goodwill represents liabilities assumed assets transferred, Consideration comprises the fair value of any liabilities and contingent liabilities acquired. identifiable assets, and equity instruments issued. impairment in carrying asset with any Goodwill and not as an intangible is capitalised income statement the consolidated to value being charged the fair value of consideration paid, liabilities and contingent liabilities exceed of identifiable assets, the fair values Where subsequently reversed. Changes in the fair value of the contingent consideration are on the acquisition. income statement the consolidated in full to is credited the excess the consolidated to immediately In charged income statement. the consolidated addition, the direct costs of acquisition are to or credited charged income statement. Goodwill and business combinations Goodwill and business Expenditure incurred on development activities of gaming platform is capitalised only when the expenditure will lead to new or substantially will lead to activities is capitalised only when the expenditure on development incurred of gaming platform Expenditure resources has sufficient and the Group feasible and commercially technically are products or processes the or processes, products improved assets is capitalised only on intangible Subsequent expenditure is expensed. expenditure All other development development. complete to of these assets the useful life estimates The Group relates. to which it the asset to be derived from the economic benefits it clearly increases where whichever years, to 20 for certain or up of the licence, amortised except licence costs which are either the life over years, and five as between three is the shorter period. Internally generated intangible assets intangible assets generated Internally Intangible assets Intangible assets intangible assets Acquired as part acquired Those of at cost. capitalised consist mainly of software separately are licences and domain names Intangible assets acquired amortisedassets are intangible These reliably. goodwill if the fair value can be measured from separately recognised a business combination are years. for domain names is five years and software licences is between one and five which for of the assets, useful life the over Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax base. They the carrying where its tax base. recognised from amount of an asset or liability are tax assets and liabilities in the balance sheet differs Deferred that it is probable those instances where tax assets is restricted to of deferred Recognition using the balance sheet liability method. for accounted are temporary if the recognised are not differences Such assets and liabilities be utilised. can available against which the difference will be taxable profits of other assets and liabilities in a transaction than in a business combination) (other that affects the initial recognition goodwill or from arise from been enacted or have The amount of the asset or liability that is determined using tax rates nor the accounting profit. neither the taxable profit settled/recovered. tax liabilities/assets are apply when the deferred expected to and are enacted the balance sheet date by substantively 2 SIGNIFICANT ACCOUNTING POLICIES POLICIES ACCOUNTING SIGNIFICANT 2 applicable tax rates. based on currently the year for payable tax represents tax expense The Taxation Taxation FINANCIAL STATEMENTS

82 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

2 SIGNIFICANT ACCOUNTING POLICIES continued Investment in equity accounted joint ventures and associates Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions.

Associates are those businesses in which the Group has a long-term interest and is able to exercise significant influence over the financial and operational policies but does not have control or joint control over those policies.

Joint ventures and associates are accounted for using the equity method and are recognised initially at cost. The Group’s share of post-acquisition profits and losses is recognised in the consolidated income statement, except that losses in excess of the Group’s investment in the joint ventures and associates are not recognised unless there is an obligation to make good those losses.

Profits and losses arising on transactions between the Group and its joint ventures or associates are recognised only to the extent of unrelated investors’ interests in the joint ventures and associates. The investor’s share in the profits and losses of the investment resulting from these transactions is eliminated against the carrying value of the investment.

Any premium paid above the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the investment. Where there is objective evidence that the investment has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets, and any charge or reversal of previous impairments is taken to the consolidated income statement.

Where amounts paid for an investment in joint venture and associates are in excess of the Group’s share of the fair value of net assets acquired, the excess is recognised as negative goodwill and released to the consolidated income statement immediately.

The Group’s share of additional equity contributions from other joint venture partners is taken to the consolidated statement of comprehensive income.

Trade receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost and principally comprise amounts due from credit card companies and from e-payment companies. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when there is objective evidence that the full amount may not be collected.

Fair value measurement The Group measures certain financial instruments, including derivatives and available for sale investments, at fair value at each balance sheet date. The fair value related disclosures are included in notes 24 and 25. Fair value is the price that would be received or paid in an orderly transaction between market participants at a particular date, either in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market for that asset or liability accessible to the Group.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Derivative financial instruments The Group enters into contracts for derivative financial instruments such as forward currency contracts to hedge operational risks associated with foreign exchange rates. Such derivative financial instruments are measured at fair value under IAS 39 and are carried in the consolidated balance sheet as assets when the fair value is positive and as liabilities when the fair value is negative. Any gains or losses arising from changes in the fair values of derivatives are recorded immediately in the consolidated income statement.

The fair value measurement hierarchy is based on the inputs to valuation techniques used to measure fair value. The inputs are categorised into three levels, with the highest level (level 1) given to inputs for which there are unadjusted quoted prices in active markets for identical assets or liabilities and the lowest level (level 3) given to unobservable inputs. Level 2 inputs are directly or indirectly observable inputs other than quoted prices.

Cash and cash equivalents Cash comprises cash in hand and balances with banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash. They include short-term deposits originally purchased with maturities of three months or less.

Equity Equity issued by the Company is recorded as the proceeds received from the issue of shares, net of direct issue costs.

Trade and other payables Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 83

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 continued eporting less date; ed using the projected unit credit method, discounted to its present value using yields available for the appropriate the appropriate for value using yields available its present to discounted method, unit credit ed using the projected ecognised past serviceecognised costs. plan liabilities calculat the terms of the liabilities; plus maturity to appropriate bonds that have government dates unr the fair value of plan assets at the r

» » » Financial guarantee contracts Financial guarantee at fair value, as financial liabilities and measured contracts classified financial guarantee these are into enters or Company Group the Where Company. or the Group from cash outflows being called upon and the related estimating the probability of the guarantees by Remeasurements of the net severance pay scheme assets and liabilities, including actuarial scheme assets and liabilities, changes pay gains and losses on the scheme liabilities due to of the net severance Remeasurements recognised are income and the actualreturn on assets, between the interest differences in assumptions or experience within the scheme and any income in the period in which they arise. of comprehensive statement in the consolidated Severance pay schemes Severance as: measured scheme surplusesSeverance pay and deficits are Until the liability is settled, the Company measures the fair value of the liability reporting measures at each of settlement, with any and at the date date Until the liability the Company is settled, income statement. the consolidated to or credited changes in fair value charged Cash-settled and income statement an expense in the consolidated recognises Company the benefit charges, as cash-settled share transactions treated For services. render liabilitya corresponding as the employees Share benefit charges benefit charges Share Equity-settled income in the consolidated recognised the cost of those awards, or options, or contractors shares its employees grants the Company Where Market of grant. the fair value at the date to with reference is measured in equity, period increase the vesting with a corresponding over statement performance Non-market of grant. taken account in determining the fair value at the date into performance conditions are including conditions, so that, ultimately, at each balance sheet date service vest expected taken adjusting the number of instruments to account by are into conditions, period vest. eventually the vesting is based on the number of instruments that over amount recognised the cumulative Dividends this is when declared In equity when they the case of interim payable. dividends to become legally Shareholders, recognised Dividends are at the Annual General by the Shareholders Meeting. In this is when approved the case of final dividends, of Directors. the Board by Provisions Provisions that which it is probable from a past event of or constructivea result obligation as has a present when the Group recognised are Provisions reasonably estimated. of economic benefits that can be in an outflow it will result Leases are classified as finance leases wherever the terms of the lease transfer substantially all the risks and rewards of ownership to the Group. Group. the to ownership of substantially all therewards risks and terms the transfer of the lease finance leases wherever classified as are Leases basis on a straight-line income statement to the consolidated charged are rentals payable classified as operating leases and All other leases are term the of the lease. over Leases Leases 2 SIGNIFICANT ACCOUNTING POLICIES POLICIES ACCOUNTING SIGNIFICANT 2 ‘wallet’), including provision electronic bankroll (the Group’s customers’ to credited comprise customers the amounts that are Liabilities to provision along with full progressive accounts, customer applied to and charges fees less management the Group, by bonuses granted for with the applicable terms and conditions. in accordance repayable amounts are These jackpots. for Liabilities to customers customers to Liabilities FINANCIAL STATEMENTS

84 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

3 SEGMENT INFORMATION Segmental results are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the management team comprising mainly the Chief Executive Officer and the Chief Financial Officer. The operating segments identified are:

» B2C (Business to Customer): including Casino and games, Poker, Bingo and Emerging Offering; and

» B2B (Business to Business): offering Total Gaming Services under the Dragonfish trading brand. Dragonfish offers to its business partners use of technology, software, operations, E-payments and advanced marketing services, through the provision of offline/online marketing, management of affiliates, SEO, CRM and business analytics.

There has been no aggregation of these two operating segments for reporting purposes. The management team continues to assess the performance of operating segments based on revenue and segment profit, being revenue net of chargebacks, payment service providers’ commissions, gaming duties, royalties payable to third parties, selling and marketing expenses.

B2C B2B Consolidated Emerging Casino Poker Bingo offerings Total B2C 2015 US$ million US$ million US$ million US$ million US$ million US$ million US$ million Segment revenue 230.6 86.7 44.0 41.3 402.6 59.5 462.1

Segment revenue (including EU VAT) 238.7 88.5 44.0 41.3 412.5 59.8 472.3 EU VAT1 (8.1) (1.8) — — (9.9) (0.3) (10.2)

Segment result2 182.2 32.4 214.6 Unallocated corporate expenses3 (173.8) Operating profit 40.8 Finance income 0.3 Finance expenses (2.6) Exceptional financeexpenses (5.9) Share of post-tax loss of equity accounted joint ventures and associates (0.1) Taxation (3.0) Profit after tax for the year 29.5 Assets Unallocated corporate assets 386.3 Total assets 386.3 Liabilities Segment liabilities 68.6 13.8 82.4 Unallocated corporate liabilities 141.7 Total liabilities 224.1

1 From 1 January 2015 the Group is subject to VAT on some of its gaming services in certain EU Member States. This VAT, which is a deduction from revenue, has been presented separately to allow for comparability with 2014. 2 Revenue net of chargebacks, payment service providers’ commissions, gaming duties, EU VAT, royalties payable to third parties, selling and marketing expenses. 3 Including staff costs, corporate professional expenses, other administrative expenses, exceptional acquisition costs, depreciation, amortisation, share benefit charges and exceptional retroactive duties and associated charges. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 85 0.3 0.1 (7.7) (4.8) 67.5 56.9 27.8 80.0 55.2 (11.0) 2014 114.6 182.1 367.2 367.2 249.7 201.6 170.1 454.7 454.7 (169.7)

US$ million US$ million C onsolidated

8.1 38.7 63.9

22.5 48.5 2015 212.7 178.4 462.1 B2B US$ million

US$ million

59.4 211.0 390.8 otal B2C T US$ million

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

29.9 ging

erings off Emer US$ million

46.6 Bingo

888 HOLDINGS PLC HOLDINGS 888 US$ million

93.7 oker P

US$ million

asino 220.6 C US$ million

2

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e of post-tax loss of equity loss of joint ventures e of post-tax accounted ncluding staff costs, corporate professional expenses, other administrative expenses, depreciation, amortisation depreciation, benefit charges. expenses, and share other administrative expenses, corporate professional ncluding staff costs,

R I ovement ovement perating profit perating ssets rofit after tax for the year for the after tax rofit

egment revenue egment result egment egment egment otal liabilities otal assets inance inance axation Unallocat T T Liabilities S P Unallocated Unallocated A T Unallocat O F M Shar F UK Europe Americas revenue Total Revenue by geographical market (based on location of customer) on location (based market geographical by Revenue Geographical information information Geographical performance markets considering by the geographical locations within which the Group can also be reviewed and geographical Group’s The is outlined below: information This operates. Other than where amounts are allocated specifically to the B2C and B2B segments above, the expenses, assets and liabilities relate jointly to all jointly relate assets and liabilities the expenses, above, to the B2C and B2B segments specifically allocated Other amounts are than where be arbitrary. allocation would as any analysed between the two operating segments not discretely amounts are These segments. 1. 2. parties, third sellingandmarketing to payable expenses. royalties gamingduties, commissions, service payment netofchargebacks, evenue providers’ Rest of world B2C

S S 2014

FINANCIAL STATEMENTS

86 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

3 SEGMENT INFORMATION continued Non-current assets by geographical location Carrying amount of non-current assets by location 2015 2014 US$ million US$ million Gibraltar 144.9 161.0 Rest of world 26.0 12.6 Total non-current assets by geographical location1 170.9 173.6

1 Excludes deferred tax assets of US$1.2 million (2014: US$0.5 million)

4 OPERATING PROFIT 2015 2014 US$ million US$ million Operating profit is stated after charging: Staff costs (including Executive Directors) 102.2 110.1 Fees payable to EY Limited, Ernst & Young LLP and its affiliates: Statutory audit of the consolidated financial statements 0.3 0.3 Other statutory audits 0.1 0.1 Other assurance services 0.1 0.1 Corporate finance services (see note 5) 3.3 — Gaming duties1 58.4 15.8 Depreciation (within operating expenses) 8.9 9.0 Amortisation (within operating expenses) 9.7 8.3 Impairment charges (within operating expenses) — 1.7 Chargebacks 3.2 2.7 Payment of service providers’ commissions 21.2 22.3

1 Gaming duties includes Point of Consumption tax in the UK of US$29.7 million (2014: US$2.1 million) reflecting the implementation of this tax from 1 December 2014 and exceptional retroactive duties and associated charges of US$8.4 million (2014: nil) in respect of gaming taxes relating to activity in prior years in Austria and Romania (see note 5).

5 EXCEPTIONAL ITEMS The Group classifies certain items of income and expense as exceptional, as the Group considers that it allows for a better reflection of the underlying performance of the Group. The Group considers any non-recurring items of income and expense for classification as exceptional by virtue of their nature and size.

2015 2014 US$ million US$ million Exceptional acquisition costs: Legal and professional costs1 17.5 — Exceptional acquisition income: Reimbursement of acquisition costs2 (8.8) — Exceptional finance costs3 5.9 — Total exceptional acquisition costs 14.6 — Exceptional retroactive duties and associated charges (included within gaming duties in the consolidated income statement)4 8.4 — Total exceptional costs 23.0 —

1 During 2015 the Group incurred legal and professional costs of US$17.5 million associated with the proposed acquisition of bwin.party digital entertainment plc. 2 Following the termination of the proposed acquisition described above, the Group received reimbursement income of US$8.8 million from bwin.party digital entertainment plc, in line with its contractual agreement. 3 The Group incurred finance costs of US$5.9 million in connection with the proposed acquisition described above. The costs represent fair value movements on derivatives entered into to hedge the currency exposure associated with the transaction. 4 Exceptional retroactive duties and associated charges of US$8.4 million (2014: nil) in respect of gaming taxes relating to activity in prior years in Austria and Romania. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 87 7.0 4.5 (6.7) 822 354 120 29.6 22.1 58.4 2014 2014 2014 110.1 1,296 110.1 116.8 105.3 Number

US$ million US$ million

6.6 4.7 800 377 122 (5.9) 28.7 19.7 53.8 96.8 2015 2015 2015 102.2 1,299 102.2 108.1 Number US$ million US$ million

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888

espect of internally generated intangible assets espect intangible of internally generated

expenses

development salaries

expenses and and security ages The average number of employees by category by number of employees was as follows: average The 1,318 (2014: 1,306) staff. employed 31 DecemberAt 2015 the Group

Research Research Administration Administrative Administrative Operations In the consolidated income statement total staff costs, excluding share benefit charges of US$4.1 million (2014: US$1.7 million), are included within are included of US$4.1 million (2014: US$1.7 million), benefit charges share excluding staff costs, In total income statement the consolidated categories: expenditure the following expenses and development Research

Operating Staff costs capitalised in r

The current service cost and the present value of the defined benefit obligation are measured using the projected unit credit method, according according credit method, projected unit using the service current The are measured value of the defined benefit obligation cost and the present Benefits (Revised). IAS 19 – Employee to Severance pay scheme – Israel pay scheme – Israel Severance As such Group. the on leaving certain in specific circumstances the Group receive to benefits from eligible in Israel are employees Group’s The funds. administrated to separately contributions to be made requires pay plan which a defined benefit severance operates the Group W Social

6 EMPLOYEE BENEFITS EMPLOYEE 6 elements: following remuneration, comprises the Directors’ including Executive Staff costs, Pension and severance pay scheme costs pay and severance Pension FINANCIAL STATEMENTS

88 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

6 EMPLOYEE BENEFITS continued The following table summarises the employee benefits figures as included in the consolidated financial statements:

2015 2014 US$ million US$ million Severance pay scheme liability (within trade and other payables on the consolidated balance sheet) 2.5 1.2 Current service costs (within operating expenses in the consolidated income statement) 1.7 1.7 Current service costs (within research and development expenses in the consolidated income statement) 1.7 1.7 Current service costs (within administrative expenses in the consolidated income statement) 0.6 0.6 Remeasurement of severance pay scheme liability (included as an expense in the consolidated statement of comprehensive income) 1.1 0.3

Movement in severance pay scheme liability:

2015 2014 Severance pay scheme assets US$ million US$ million At beginning of year 14.6 14.1 Interest income 0.5 0.5 Contributions by the Group 3.8 4.1 Benefitspaid (2.6) (2.7) Return on assets less interest income already recorded (0.3) 0.3 Exchange differences — (1.7) At end of year 16.0 14.6

2015 2014 Severance pay plan liabilities US$ million US$ million At beginning of year 15.8 15.3 Interest expense 0.5 0.5 Current service costs 4.0 4.0 Benefitspaid (2.6) (2.8) Actuarial loss on past experience — 0.4 Actuarial loss on changes in demographic assumptions — 0.4 Actuarial loss (gain) on changes in financial assumptions 0.8 (0.2) Exchange differences — (1.8) At end of year 18.5 15.8

Employees can determine individually into which type of investment their share of the plan assets are invested, therefore the Group is unable to accurately disclose the proportions of the plan assets invested in each class of asset.

The expected contribution for 2016 is US$4.2 million.

The main actuarial assumptions used in determining the fair value of the Group’s severance pay plan are shown below:

2015 2014 % % Discount rate (nominal) 4.58 3.10 Estimated increase in employee benefits costs 5.12 2.47 Voluntary termination rate 75 75 Inflation rates based on Israeli bonds 1.67 1.87 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 89 — — 1.4 4.1 1.3 6.8 0.7 2.8 2.0 4.8 5.6 5.2 0.3 0.3 (0.5) (2.1) (0.5) 11.0 11.0 67.9 10.3 2014 2014 2014 2014

US$ million US$ million US$ million US$ million

— 3.0 2.4 3.1 3.3 1.0 3.0 2.0 0.1 2.3 2.6 1.3 4.6 0.3 0.3 0.2 (2.8) (0.1) (2.9) (3.9) 32.5 2015 2015 2015 2015 US$ million US$ million US$ million US$ million

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888

taxation

losses

forward income taxation taxation exchange exchange expense income carried jurisdictions before before urrent taxation urrent rofit rofit otal tax charge for the year for otal tax charge nterest nterest nterest nterest T Non-taxable tax charges prior to years’ Adjustments Losses Losses tax losses unrecognised Utilisation of previously Expenses not allowed for taxation for Expenses not allowed Higher effective tax rate on other jurisdictionsHigher tax rate effective Taxation expense Taxation The taxation expense for the year differs from the standard Gibraltar rate of tax. The differences are explained below: The differences of tax. Gibraltar rate the standard from differs the year taxation expense for The P in Gibraltar (2015:10%, 2014: 10%) tax rate Standard

Deferred taxation Deferred of temporary and reversal Origination differences

Foreign Foreign expenses Finance 5. included in note finance expenses are Details of the exceptional Other in respect of prior years Adjustments Gibraltar

8 TAXATION TAXATION 8 taxes Corporate

I I derivatives exchange on foreign value movements Fair C

7 FINANCE INCOME AND FINANCE EXPENSES FINANCE AND INCOME FINANCE 7 income: Finance Finance income Finance expenses: Finance FINANCIAL STATEMENTS

90 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

8 TAXATION continued Current tax is calculated with reference to the profit of the Company and its subsidiaries in their respective countries of operation. Set out below are details in respect of the significant jurisdictions where the Group operates and the factors that influenced the current and deferred taxation in those jurisdictions:

Gibraltar Gibraltar companies are subject to a corporate tax rate of 10%. During the year, the Group changed certain elements of its tax calculation in Gibraltar, which have been agreed with the tax authorities. These changes reduced current taxation in 2015 and resulted in adjustments in respect of prior years.

Israel The domestic corporate tax rate in Israel in 2015 is 26.5% (2014: 26.5%), although from 1 January 2016 the rate has been reduced to 25%. The Company’s Israeli subsidiary has concluded an assessment agreement with respect to all tax years up to and including 2013. In addition, the subsidiary has entered into certain transfer pricing agreements with the Israeli Income Tax Commissioner as regards 2014-2015. This agreement resulted in adjustments in respect of prior years. The current tax charge has reduced in the current year as a result of non-recurring taxable foreign exchange gains in 2014.

UK The Group’s subsidiary in the UK paid corporate tax at the applicable rate of 20.25% (2014: 21.5%) and will pay corporate tax at a rate of 20% for 2016. During the year, the UK government announced and substantively enacted a further reduction in the UK corporation tax rate to 19% (from April 2017) and to 18% (from April 2020).

9 EARNINGS PER SHARE Basic earnings per share Basic earnings per share (EPS) has been calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of shares in issue during the year.

Diluted earnings per share In accordance with IAS 33 – Earnings per Share, the weighted average number of shares for diluted earnings per share takes into account all potentially dilutive equity instruments granted, which are not included in the number of shares for basic earnings per share. Certain equity instruments have been excluded from the calculation of diluted EPS as their conditions of being issued were not deemed to satisfy the performance conditions at the end of the performance period or it will not be advantageous for holders to exercise them into shares, in the case of options. The number of equity instruments included in the diluted EPS calculation consist of 3,423,108 Ordinary Shares (2014: 3,100,238) and 158,484 market – value options (2014: 122,228).

The number of equity instruments excluded from the diluted EPS calculation is 3,051,243 (2014: 3,153,810).

2015 2014 Profit for the period attributable to equity holders of the parent (US$ million) 29.5 56.9 Weighted average number of Ordinary Shares in issue 356,129,113 353,515,738 Effect of dilutive Ordinary Shares and Share options 3,581,592 3,222,466 Weighted average number of dilutive Ordinary Shares 359,710,705 356,738,204 Basic earnings per share 8.3¢ 16.1¢ Diluted earnings per share 8.2¢ 15.9¢ STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 91 — 7.7 1.7 1.7 (0.1) 67.9 56.9 51.2 2014 2014 19.0¢ 19.2¢

US$ million US$ million 356,738,204 353,515,738

— — 0.1 4.1 56.7 29.5 23.0 53.5 2015 2015 15.8¢ 15.9¢ US$ million US$ million 359,710,705 356,129,113

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888

continued

paid profit profit rofit for the period attributableto equity holders of the parent rofit Adjusted diluted earnings per share earnings diluted per share Adjusted Adjusted basic earnings per share basic earnings per share Adjusted Weighted average number of dilutive Ordinary number of dilutive Shares average Weighted Weighted average number of Ordinary in issue average Shares Weighted Adjusted Adjusted Share of post-tax loss of equity accounted joint ventures and associates (see note 13) (see note and associates loss of equity joint ventures of post-tax accounted Share Impairment 11) (see note charges Movement in contingent consideration Movement Share benefit charges (see note 21) (see note benefit charges Share 10 DIVIDENDS 10 In was paid was paid on 1 October an interim 2014 dividend of 3.5¢ per share 2014 (US$12.4 million) and a final dividend of 11.5¢ per share on 15 May 2015 (US$41.0 million). P 5) (see note items Exceptional Dividends the shareholders to will recommend of Directors Board The 2015 (US$12.5 million). was paid on 30 September An interim dividend of 3.5¢ per share and an additional one-offrespectyear ended 31 December 2015 comprisinga final dividend in of the 4.0¢ per share, both dividend of 8.0¢ per share, once approved. in the 2016 financial statements of which will be recognised Reconciliation of profit to profit excluding exceptional items, share benefit charges, movement in contingent consideration, impairment charges in contingent consideration, impairmentmovement charges benefit charges, share items, exceptional excluding to profit Reconciliation of profit profit”): (“Adjusted and associates loss of equity joint ventures of post-tax accounted and share 9 EARNINGS PER SHARE SHARE PER EARNINGS 9 earnings per share Adjusted impairment in contingent consideration, charges movement benefit charges, share items, exceptional EPS excluding that believe Directors The reflects the underlying better performance EPS”) of the (“Adjusted and associates loss of equity joint ventures of post-tax accounted and share view of the performance a clearer business and assists in providing Group. of the FINANCIAL STATEMENTS

92 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

11 GOODWILL AND OTHER INTANGIBLE ASSETS Internally Acquired generated intangible intangible Goodwill assets assets Total US$ million US$ million US$ million US$ million Cost or valuation At 1 January 2014 146.1 11.6 43.4 201.1 Additions — 2.9 8.6 11.5 At 31 December 2014 146.1 14.5 52.0 212.6 Additions — 3.0 6.8 9.8 At 31 December 2015 146.1 17.5 58.8 222.4 Amortisation and impairments: At 1 January 2014 20.7 9.5 15.2 45.4 Amortisation charge for the year — 0.8 7.5 8.3 Impairment charge — — 1.7 1.7 At 31 December 2014 20.7 10.3 24.4 55.4 Amortisation charge for the year — 1.8 7.9 9.7 At 31 December 2015 20.7 12.1 32.3 65.1 Carrying amounts At 31 December 2015 125.4 5.4 26.5 157.3 At 31 December 2014 125.4 4.2 27.6 157.2 At 1 January 2014 125.4 2.1 28.2 155.7

Analysis of goodwill by cash generating units: Bingo online Total business Other goodwill US$ million US$ million US$ million Carrying value at 31 December 2014 and 31 December 2015 125.1 0.3 125.4

Impairment In accordance with IAS 36 and the Group’s stated accounting policy an impairment test is carried out annually, at 31 December, on the carrying amounts of goodwill and a review for indicators of impairment is carried out for other non-current assets. Where an impairment test was carried out, the carrying value is compared to the recoverable amount of the asset or the cash generating unit. In each case, the recoverable amount was the value in use of the assets, which was determined by discounting the future cash flows of the relevant asset or cash generating unit to their present value.

Goodwill – Bingo online business Goodwill and intangible assets associated with the Bingo online business unit arose following the acquisition of the Bingo online business of Globalcom Limited during 2007 and the acquisition of the Wink Bingo business in 2009. The income streams generated from the Bingo online business, comprising the B2C Bingo cash generating unit and the B2B cash generating unit, have been considered together as the risks and rewards associated with those income streams are deemed to be sufficiently similar. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 2 93 1% 1% ease ear 6+ y incr

expenses Operating

2

2% 4% ease ears 1-5 incr y expenses Operating

1% 1% ear 6+ y ong-term rowth rate rowth L g ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

1% 2% lying y rowth rate rowth Under g

ears 2-5

1

888 HOLDINGS PLC HOLDINGS 888 2% 4% year lying rowth rate rowth Under g

1

continued e 9% 9% re-tax P applied discount rat

clude marketing costs which are included in the projections as a fixed percentage of revenues. of percentage clude marketing included in the projections as a fixed costs which are 2014 December 31 T the Group. applied to of Capital Cost Average Weighted commenting upon the Operating expenses ex

At 31 December 2015 31 December At At At In performed prior the Group year no longer expected an impairment certain on review abandoned as they were that were projects development in an impairment in the table above. of US$1.7 million, as indicated resulted review The revenues. generate to No impairment tests were considered to be required at 31 December 2015 and the carrying be be required to to assets is considered considered value of other intangible No impairment were tests appropriate. No impairment tests were considered to be required at 31 December 2015 and the carrying be required be appropriate. to to considered value of licences is considered No impairment were tests Other intangible assets 2 key impairment possible changes to lead to in the Bingo goodwill assumptions that would no reasonably are concluded that there have Directors The assets. and intangible Licences 1 external to data regard betaandhaving every equity pre-taxhe andcompany risk takingrecalculated is by rates, premium discountrate risk year accountprevailing free into

Key assumptions and inputs used and inputs used assumptions Key The pre-tax discount rate that is considered by the Directors to be appropriate is the Group’s specific Weighted Average Cost of Capital, adjusted adjusted Capital, Cost of Average Weighted specific is the Group’s be appropriate to the Directors by pre-taxThe that is considered discount rate the online Bingo cash generating units. for appropriate be to tax, which is considered for 11 GOODWILL AND OTHER INTANGIBLE ASSETS ASSETS INTANGIBLE OTHER AND GOODWILL 11 growth Underlying been assumed. has rate growth term which a long following period, year for a five been prepared projections have flow Cash in 2015 and 2014 results including the positive based on past experience, and are revenue to been applied have in the table below, as shown rates, in the online gaming market. changes growth and projections of future Key include moderate projections these cash flow assumptions in preparing and be subject the same operate to continue to and the expectation will acquisition costs per customer of a stable level Group that the in revenue, jurisdictions. gaming duties in its core FINANCIAL STATEMENTS

94 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

12 PROPERTY, PLANT AND EQUIPMENT Officefurniture, equipment and Leasehold IT equipment motor vehicles improvements Total US$ million US$ million US$ million US$ million Cost At 1 January 2014 58.7 3.5 13.8 76.0 Additions 4.6 0.1 0.8 5.5 Disposals (0.3) (0.1) — (0.4) At 31 December 2014 63.0 3.5 14.6 81.1 Additions 3.8 0.6 0.2 4.6 Disposals (17.6) — — (17.6) At 31 December 2015 49.2 4.1 14.8 68.1 Accumulated depreciation At 1 January 2014 44.6 2.5 9.8 56.9 Charge for the year 7.6 0.2 1.2 9.0 Disposals (0.3) — — (0.3) At 31 December 2014 51.9 2.7 11.0 65.6 Charge for the year 7.4 0.3 1.2 8.9 Disposals (17.6) — — (17.6) At 31 December 2015 41.7 3.0 12.2 56.9 Carrying amounts At 31 December 2015 7.5 1.1 2.6 11.2 At 31 December 2014 11.1 0.8 3.6 15.5 At 1 January 2014 14.1 1.0 4.0 19.1

Following a review of fully written down assets, assets no longer in use with a total cost and accumulated depreciation of US$17.6 million were written off in 2015.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 95 — — — — — 1.5 1.4 (0.1) 47% 47% 47% 2014 million interest Effective

ecember Associates US$ 31 D

— — — — 3.8 3.9 (7.7) 20% 47% 47% 47% 2015 terest million ember ffective in ventures E US$ Joint 31 Dec

of USA USA USA Israel ountry C ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL incorporation

ssociate

A elationship oint venture oint venture oint venture R J J J

888 HOLDINGS PLC HOLDINGS 888

e of post-tax loss of equity accounted joint ventures and associates equity loss of joint ventures e of post-tax accounted e of post-tax loss of equity loss of joint ventures e of post-tax accounted oup share of equity injections by joint venture partner of equityoup share injections joint venture by in equity joint venture accounted t 31 December 2015 t 31 December t 31 December 2014 cquisitions A Shar A reconciliation of the movements in the Group’s interest in equity accounted joint ventures and associates is shown below: is shown and associates in equity joint ventures accounted interest in the Group’s of the movements A reconciliation A Come2Play Limited Come2Play A Shar AAPN New Jersey LLC Gr AGN LLC AGN On this basis the three entities AAPN, AAPN NJ and AGN have been equity accounted for, reflecting the Group’s effective 47% interest in their 47% interest effective reflecting the Group’s been equity for, accounted have entities AAPN, AAPN NJ and AGN On this basis the three and assets. results aggregated As at 31 December 2015, AGN LLC (AGN), the entity which contracted with a Las Vegas casino licensee in connection with the operation of a B2C Vegas the entity which contracted (AGN), with a Las LLC at 31 December 2015, AGN As AGN is operated to the manner in which that due considers the Group However, the Group. by owned remained 100% in Nevada, gaming offering contribute its to commitment also has an irrevocable Group The a joint venture. as it is regarded under the contractual arrangements in the JVA, no consideration upon fulfilment of certain for AAPN to conditions. of AGN ownership The Group’s share of equity injections by its joint venture partners during 2014, which amounted to US$3.8 million, was accounted for through partners through of equity share injections for its joint venture US$3.8 million, was accounted by during to 2014, which amounted Group’s The income. of comprehensive statement the consolidated US joint ventures and other minority shareholders (Avenue) Entertainment LLC OLG with Avenue (JVA) agreement a joint venture into In entered 2013 the Group AAPN New subsidiary, Jersey AAPN. AAPN has a 100% owned in LLC has a 47% interest under which the Group (AAPN), AAPN Holdings LLC form to NJ),(AAPN in New Jersey. which has a B2C gaming offering 1 JanuaryAt 2014

13 INVESTMENT IN EQUITY ACCOUNTED JOINT VENTURES AND ASSOCIATES AND VENTURES JOINT ACCOUNTED EQUITY IN INVESTMENT 13 financial statements: been equity consolidated in the accounted and have and associates ventures of joint entities meet the definition following The Name AAPN Holdings LLC FINANCIAL STATEMENTS

96 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

13 INVESTMENT IN EQUITY ACCOUNTED JOINT VENTURES AND ASSOCIATES continued Amounts relating to the joint ventures and the Group’s share of net assets and post-tax losses of the joint ventures are as follows:

Net assets of US joint ventures 2015 2014 US$ million US$ million Non-current assets 4.7 5.3 Current assets 12.9 17.0 Current liabilities (1.9) (1.7) Net assets of joint ventures 15.7 20.6 Assets attributed to class B holders (15.7) (20.6) Net assets of joint ventures attributed to the Group — — Group effective interest in joint ventures 47% 47% Group share of net assets of joint ventures — — Income statement of US joint ventures Income 3.8 2.3 Expenses (8.7) (18.0) Post tax loss of joint ventures (4.9) (15.7) Expenses attributed to class B holders (2.0) (0.7) Total post tax loss of joint ventures attributed to the Group (6.9) (16.4) Group effective interest in joint ventures 47% 47% Group share of post tax loss of joint ventures1 (3.2) (7.7)

1 The Group’s share of post tax loss of joint ventures during 2014 amounted to US$7.7 million. As at 31 December 2014 the Group’s investment in the US joint ventures had reduced to nil due to the US joint ventures’ cumulative losses exceeding the Group’s investment. In 2015 the US joint ventures incurred further losses and, as a result, the Group’s investment remained at nil. As the Group’s investment remained at nil, the Group did not recognise the losses of US$3.2 million in its consolidated income statement in 2015.

Associates On 15 April 2015 the Group acquired 20% of the Ordinary Shares of Come2Play Limited for a cash payment of US$1.5 million. Further disclosures have not been provided as the investment is not material to the Group.

Other investments The Group holds available for sale investments of US$0.2 million at 31 December 2015 (31 December 2014: US$0.2 million). STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 97 0.7 0.9 0.5 0.9 0.4 0.1 0.5 0.3 1.3 (1.7) (0.8) 30.7 30.0 11.0 94.7 67.5 19.0 2014 2014 2014 163.1

US$ million US$ million US$ million

— 0.8 3.3 1.0 0.5 0.1 0.6 1.2 (2.7) (1.7) (0.5) 33.7 32.9 92.9 82.4 14.3 18.6 2015 2015 2015 178.6 US$ million US$ million US$ million

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888

deposits

instruments pay

charges accrual assets financial short-term funds pay pay severance severance benefit receivables erred tax assets erred ash and short-term deposits rade

The carrying value of trade receivables and other receivables approximates to their fair value as the credit risk has been addressed as part risk has been addressed their fair value as the credit to of carryingThe approximates and other receivables value of trade receivables not subject ongoing fluctuations they the short-term are to due to in market of the receivables and, nature rates. impairment provisioning on trade and other receivables. risk disclosures credit 24 provides Note Customer funds represent bank deposits matched by liabilities to customers and progressive prize pools of an equal value (see note 19). Restricted pools of an equal value (see note prize and progressive customers liabilities to by bank deposits matched funds represent Customer banks primarily held by amounts short-term support markets to represent deposits in respect of regulated licence requirements. guarantees Non-current and prepayments other receivables

Current trade and other receivables trade Current The Group has tax losses at 31 December 2015 of US$1.8 million (2014: US$1.8 million) that are available indefinitely for offset against future taxable future against offset for indefinitely available has tax losses at 31 December (2014: US$1.8 million) that are 2015 of US$1.8 million Group The is insufficient respect losses as there in of these recognised not been tax assets have Deferred of the companies in which the losses arose. profits certainty against which these losses can be offset. profits will be suitable taxable that there Customer Customer Restricted

Intangible T

16 TRADE AND OTHER RECEIVABLES OTHER AND TRADE 16 15 CASH AND CASH EQUIVALENTS EQUIVALENTS CASH AND CASH 15

Def Accrued C Other and prepayments receivables

14 DEFERRED TAXES DEFERRED 14 temporary of the tax effects reflect the net between carrying reporting income taxes for financial differences Deferred of assets and liabilities amounts some temporaryfrom resulting tax assets and liabilities differences, deferred Group’s The tax purposes. income purposes and the amounts used for as follows: are on a net basis, be settled expected to of which are Share Share Vacation Derivative tax liabilities Deferred plant and equipment Property, FINANCIAL STATEMENTS

98 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

17 SHARE CAPITAL Share capital comprises the following: Authorised 31 December 31 December 31 December 31 December 2015 2014 2015 2014 Number Number US$ million US$ million Ordinary Shares of £0.005 each 1,026,387,500 426,387,500 8.1 3.9

At the Extraordinary General Meeting of the members of 888 Holdings plc held on 29 September 2015, the members approved a resolution pursuant to which the authorised share capital of the Company was increased from its previous limit of £2,131,937.50 divided into 426,387,500 Ordinary Shares of £0.005 each to £5,131,937.50 divided into 1,026,387,500 Ordinary Shares of £0.005 each.

Allotted, called up and fully paid 31 December 31 December 31 December 31 December 2015 2014 2015 2014 Number Number US$ million US$ million Ordinary Shares of £0.005 each at beginning of year 354,436,608 351,977,275 3.2 3.2 Issue of Ordinary Shares of £0.005 each 2,644,675 2,459,333 — — Ordinary Shares of £0.005 each at end of year 357,081,283 354,436,608 3.2 3.2

The narrative below includes details on issue of Ordinary Shares of £0.005 each as part of the Group’s employee share option plan (see note 21) during 2015 and 2014:

During 2015, the Company issued 2,644,675 shares (2014: 2,459,333) out of which 458,256 shares (2014: 239,693) were issued in respect of employees’ exercising market value options giving rise to an increase in share premium of US$0.9 million (2014: US$0.4 million).

Shares issued are converted into US$ at the exchange rate prevailing on the date of issue. The issued and fully paid share capital of the Group amounts to US$3.2 million (2014: US$3.2 million) and is split into 357,081,283 (2014: 354,436,608) Ordinary Shares. The share capital in UK sterling (GBP) is £1.8 million (2014: £1.8 million).

18 TRADE AND OTHER PAYABLES 2015 2014 US$ million US$ million Trade payables 29.7 29.9 Other payables, accrued expenses and deferred income 107.5 74.2 137.2 104.1

The carrying value of trade and other payables approximates to their fair value given the short maturity date of these balances. The increase in other payables, accrued expenses and deferred income during the year mainly relates to accruals for gaming duties for the new regulated markets in the UK, Romania and Denmark and EU VAT in certain EU Member States.

19 LIABILITIES TO CUSTOMERS AND PROGRESSIVE PRIZE POOLS 2015 2014 US$ million US$ million Liabilities to customers 76.1 58.0 Progressive prize pools 6.3 9.5 82.4 67.5 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 99

Payment transmission and social gaming Payment Nature of business Nature for European markets not locally European which are for regulated and Manufacturer of licence in the state Nevada Holder of Transactional Waiver Holder Waiver of Transactional full licensing in the pending application for of New Jerseystate of Delaware operations support ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

% — company Holding — of gaming licences in Gibraltar Holder — of Romanian Holder online gaming licence — Holder of Irish online gaming licence — Holder of Danish online gaming licence — 100 Holder of gaming licences in Gibraltar 100 business operator Bingo 100 Bingo) (except B2B business operator 100 gaming licence of UK remote Holder 100 Holder of Italian online gaming licence 100 of Spanish online gaming licence Holder 100 Holder of Interactive Gaming Service Provider 100 100 License in the state Vendor of Gaming Holder 100 Development of social games – Mytopia 100 transmission Payment 100 IP assets Holder of group 100 Marketing acquisition 100 Advertising services 100 of US-based services US for Provider 100 operator call center Customer 100 and marketing development Research, 100 Software development 100 services Data hosting and development 100Venture Holder of US Joint 2014 Percentage of Percentage equity interest equity interest 888 HOLDINGS PLC HOLDINGS 888 % 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 2015 Percentage of Percentage equity interest equity interest UK BVI USA USA Israel Antigua Gibraltar Gibraltar Gibraltar Gibraltar Gibraltar Gibraltar Gibraltar Gibraltar Gibraltar Gibraltar Gibraltar Gibraltar Gibraltar Gibraltar Gibraltar Gibraltar Gibraltar Romania Delaware, Delaware, Country of New Jersey, New Jersey, incorporation inancing Limited V

* irtual Marketing ServicesVirtual Marketing Italia (formerly Limited Services Italia Italy 2015. from Srl) Gibraltaron24August wasredomiciled to Name 20 INVESTMENTS IN SIGNIFICANT SUBSIDIARIES SIGNIFICANT IN INVESTMENTS 20 principalfollowing subsidiaries Holdings plc: of 888 include the financial statements consolidated The VHL F Cassava Enterprises Limited (Gibraltar) Cassava Virtual Services Digital Limited Brigend Limited Fordart Limited Fordart 888 UK Limited Virtual Marketing Services Italia Limited* Gibraltar 888 Spain Public Limited Company Limited 888 Spain Public 888 US Limited 888 Atlantic Limited 888 Atlantic 888 Liberty Limited 888 Romania Limited 888 (Ireland) Limited 888 Denmark Limited New Wave Virtual Ventures VirtualLimited Ventures New Wave Gisland Limited Virtual Limited IP Assets Virtual Marketing Services Limited (Gibraltar) Virtual Marketing Services (UK) Limited 888 US Services Inc. Dixie Operations Limited Random Logic Limited Random Logic Sparkware Technologies SRL Sparkware Technologies Virtual Internet Services Limited 888 US Inc. Virtual Marketing Services (Ireland) Limited Ireland FINANCIAL STATEMENTS

100 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

21 SHARE BENEFIT CHARGES Equity-settled share benefit charges The Company had two equity-settled employee share incentive plans during 2015 – the 888 All-Employee Plan, which expired according to its terms in August 2015, and the 888 Long-term Incentive Plan 2015 which was adopted at the Extraordinary General Meeting on 29 September 2015. The 888 Long-term Incentive Plan 2015 is open to employees (including Executive Directors) and full-time consultants of the Group, at the discretion of the Remuneration Committee. Awards under this scheme will vest in installments over a fixed period of at least three years subject to the relevant individuals remaining in service. Certain of these awards are subject to additional performance conditions imposed by the Remuneration Committee at the dates of grant, further details of which are given in the Directors’ Remuneration Report on page 50.

Details of equity settled shares and share options granted as part of the 888 All-Employee Plan and the 888 Long-Term Incentive Plan are set out below:

Share options granted 2015 2014 Weighted Weighted average average exercise price Number exercise price Number Outstanding at the beginning of the year £1.48 2,136,633 £ 1.44 2,560,600 Market value options lapsed during the year £1.75 (770,153) £ 1.51 (184,274) Market value options exercised during the year £1.28 (458,256) £ 1.10 (239,693) Outstanding at the end of the year1,2,3 £1.35 908,224 £ 1.48 2,136,633

1. Of the total number of options outstanding at 31 December 2015 908,224 had vested and were exercisable (2014: 2,136,633). 2. The range of exercise prices for options outstanding at 31 December 2015 is £1.02-£1.80 (2014: £1.02-£1.80). 3. The weighted average remaining contractual life at the year-end was 2.26 years (2014: 2.44 years)

Ordinary Shares granted (without performance conditions) 2015 2014 Number Number Outstanding at the beginning of the year 738,746 1,495,484 Shares granted during the year 1,320,000 — Shares issued during the year (731,263) (756,738) Outstanding at the end of the year 1,327,483 738,746 Averaged remaining life until vesting 2.63 years 0.40 years

Shares are granted at a nominal exercise price.

Ordinary shares granted (subject to performance conditions) 2015 2014 Number Number Outstanding at the beginning of the year 3,496,205 3,949,488 Shares granted during the year 3,367,724 1,039,223 Lapsed future vesting shares (134,810) (29,604) Shares issued during the year (1,455,156) (1,462,902) Outstanding at the end of the year 5,273,963 3,496,205 Averaged remaining life until vesting 2.00 years 1.16 years

Of these grants, 50% of each are dependent on an EPS growth target, and 50% on total shareholder return (TSR) compared to a peer group of companies. Further details of performance conditions that have to be satisfied on these awards are set out in the Directors’ remuneration report on page 50. The EPS growth target is taken into account when determining the number of shares expected to vest at each reporting date, and the TSR target is taken into account when calculating the fair value of the share grant. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 101 ith 0.4 1.7 1.3 ears 32% 45% W 2014 2014 2014 £0.92 £1.31 £1.39 £1.54 1.18% 0.14% 27.30% 519,612

0.24 y onte Carlo onte onte Carlo onte conditions US$ million M M performance

2014 — 1.7 4.1 2.4 32% 45% £1.32 2015 2015 £1.06 1.18% Without 1,683,862 conditions onte Carlo onte US$ million performance M

ith W £1.63 £1.56 formance conditions

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

per

2015 £1.63 £1.64 Without formance formance onditions c per

888 HOLDINGS PLC HOLDINGS 888

continued

rate icing model used deviation interest interest d emaining life until vesting emaining life quity-settled Average standard deviation of peer group standard Average Average standard deviation standard Average Risk-free Risk-free Standar Average risk-free interest rate interest risk-free Average R Total share benefit charges share Total Determined fair value granted Number of shares schemes under the above or options granted shares in respect of any income statement the consolidated to In with IFRSs a charge accordance adjusted date, or options at the grant shares or options based on the fair value of the period the vesting of the shares over and spread is recognised no cash impact. have charges These conditions at each balance sheet date. changes in vesting for Weighted average share price at issue of shares share average Weighted which the Group performance date, price at grant valued at the share conditions are with EPS growth vesting future for Ordinary granted shares of dividends, non-receipt primarily to during period, restrictions the vesting The relating on the shares the fair value. to considers approximates option charge. on the share an immaterial effect have to considered are Weighted average share price at grant date price at grant share average Weighted Share pricing model used Share Cash-settled Award in respect of the Phantom Charges Share price at 31 DecemberShare

Option pr E the year for Equity-settled charge Share benefit charges Share

Valuation information Valuation in the consolidated been recorded at 31 December 2015, no amounts have no outstanding cash-settled share-based awards are payment there As US$3.4 million based on valuation assumptions at 31 December to 2014 amounted cash-settled liabilityThe recognised balance sheet at that date. as follows: Under the terms of the Phantom Award, the amount payable was calculated on an incremental basis, based on the average share price over a period price over share based on the average basis, on an incremental was calculated the amount payable Award, Under the terms of the Phantom in an entitlement of £3.3 million (US$4.8 million). (£1.56), resulting date prior the vesting of 20 dealing days to Cash-settled share-based payment share-based Cash-settled Award”). Officer the Chairman) its Chief Executive (“Phantom (now a cash-settled share-based award awarded 2012, the Company On 27 March fulfilled. were requirements 2015 as all vesting on 27 March vested Award Phantom The Valuation information – shares granted – shares information Valuation Valuation information – shares granted under TSR condition under TSR granted – shares information Valuation Shares granted during the year: granted Shares 21 SHARE BENEFIT CHARGES CHARGES BENEFIT SHARE 21 FINANCIAL STATEMENTS

102 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

22 RELATED PARTY TRANSACTIONS The aggregate amounts payable to key management personnel, considered to be the Directors of the Company, as well as their share benefit charges, are set out below: 2015 2014 US$ million US$ million Short-term benefits 3.9 3.4 Post-employment benefits 0.1 0.1 Share benefit charges – equity-settled 1.8 0.4 Share benefit charges – cash-settled 1.7 0.4 7.5 4.3

Further details on Directors’ remuneration are given in the Directors’ Remuneration Report on pages 46 to 60.

US joint ventures During 2015 the Group charged the US joint ventures for reimbursement of costs of US$1.8 million (2014: US$6.1 million), of which the outstanding balance at 31 December 2015 is US$0.2 million (2014: US$0.3 million).

Investment in associates During 2015 the Group charged its associate for the Group share of the net revenue of US$1.5 million (2014: nil), of which the outstanding balance at 31 December 2015 is US$1.0 million (2014: nil).

23 COMMITMENTS Lease commitments Future minimum lease commitments under operating leases on properties occupied by the Group at the year end are as follows:

2015 2014 Leases expiring US$ million US$ million

Within one year 3.7 3.7 Between two and five years 1.3 4.7 5.0 8.4

The expense relating to operating leases recorded in the consolidated income statement in the year was US$4.5 million (2014: US$4.3 million).

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 103 0.2 2.5 92.5 67.5 26.3 2014 2014 189.6 162.5 163.1

ecember US$ million US$ million 31 D

— 0.2 82.4 29.7 2015 2015 124.9 208.5 207.3 178.6 ember US$ million US$ million 31 Dec

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888

instruments

o customers; financial deposits vailable for sale financial investments sale financial investments vailable for ash and cash equivalents; estricted cash; rade and other receivables; rade and other payables; A R T T Liabilities t C

rade and other payables rade and other receivables » » » » » » In accordance with IAS 39, all financial assets are classified as loans and receivables except for available-for-sale investments, which are classified as which investments, available-for-sale for except receivables and classified as loans In with IAS 39, all financial assets are accordance sale assets. for available T recognised are which held at amortisedfor the derivative financial instruments, In with IAS 39, all financial liabilities are accordance cost except and loss. profit at fair value through

Financial liabilities Financial Customer Derivative Available for sale investment for Available Cash and cash equivalents Cash Financial assets Financial

Detailed analysis of these financial instruments is as follows: Detailed analysis of these financial instruments is as T The main financial instruments used by the Group, on which financial risk arises, are as follows: follows: are as on which financial risk arises, the Group, by financial instruments used main The 24 FINANCIAL RISK MANAGEMENT MANAGEMENT RISK FINANCIAL 24 these risks for managing Policies and procedures risks use of its financial instruments. its operations to that arise from through is exposed Group The and, procedures effectiveness of these reviews the The Board Officer. the Chief Financial from recommendations following the Board set by are these to mitigate risks. in order policies and procedures specific approves if required, FINANCIAL STATEMENTS

104 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

24 FINANCIAL RISK MANAGEMENT continued Capital The capital employed by the Group is composed of equity attributable to shareholders. The primary objective of the Group is maximising shareholders’ value, which, from the capital perspective, is achieved by maintaining the capital structure most suited to the Group’s size, strategy, and underlying business risk. Other than disclosed elsewhere in note 25, there are no demands or restrictions on the Group’s capital.

The main financial risk areas are as follows:

Credit risk Trade receivables The Group’s credit risk is primarily attributable to trade receivables, most of which are due from the Group’s payment service providers (PSP). These are third party companies that facilitate deposits and withdrawals of funds to and from customers’ virtual wallets with the Group. These are mainly intermediaries that transact on behalf of credit card companies.

The risk is that a PSP would fail to discharge its obligation with regard to the balance owed to the Group. The Group reduces this credit risk by:

» Monitoring balances with PSPs on a regular basis.

» Arranging for the shortest possible cash settlement intervals.

» Replacing rolling reserve requirements, where they exist, with a Letter of Credit by a reputable financial institution.

» Ensuring a new PSP is only contracted following various due diligence and “Know Your Customer” procedures.

» Ensuring policies are in place to reduce dependency on any specific PSP and as a limit any concentration of risk.

The Group considers that based on the factors above and on extensive past experience, the PSP receivables are of good credit quality and there is a low level of potential bad debt amounting to US$0.5 million arising from a PSP failing to discharge its obligation (2014: US$0.5 million). This has been charged to the consolidated income statement.

An additional credit risk the Group faces relates to customers disputing charges made to their credit cards (“chargebacks”) or any other funding method they have used in respect of the services provided by the Group. Customers may fail to fulfil their obligation to pay, which will result in funds not being collected. These chargebacks and uncollected deposits, when occurring, will be deducted at source by the PSPs from any amount due to the Group. As such the Group provides for these eventualities by way of an impairment provision based on analysis of past transactions. This provision is set off against trade receivables and at 31 December 2015 was US$1.3 million (2014: US$1.2 million).

The Group’s in-house Fraud and Risk Management department carefully monitors deposits and withdrawals by following prevention and verification procedures using internally-developed bespoke systems integrated with commercially-available third party measures.

Cash and cash equivalents The Group controls its cash position from its Gibraltar headquarters. Subsidiaries in its other main locations maintain minimal cash balances as required for their operations. Cash settlement proceeds from PSPs, as described above, are paid into bank accounts controlled by the Treasury function in Gibraltar.

The Group holds its funds with highly reputable financial institutions and will not hold funds with financial institutions with a low credit rating. The Group maintains its cash reserves in highly liquid deposits and regularly monitors interest rates in order to maximise yield.

Customer funds Customer funds are matched by customer liabilities and progressive prize pools of an equal value.

Restricted short-term deposits Short-term deposits held by banks primarily to support guarantees in respect of regulated markets licence requirements.

The Group’s maximum exposure to credit risk is the amount of financial assets presented above, totaling US$208.5 million (2014: US$189.6 million). STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 105 2.5 otal 67.5 92.5 otal 82.4 T 162.5 T 124.9 207.3

US$ million US$ million

— — — — — — — ear ear 1 y 1 y ore than ore ore than ore M M US$ million US$ million

– — 1.8 ear ths ear 13.0 11.2 34.7 34.7 ween ween etween etween Bet B 2014 3 months 2015 3 mon and 1 y and 1 y US$ million US$ million ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

— — 0.7 72.3 71.6 83.6 83.6 US$ million n 3 months I n 3 months US$ million I

888 HOLDINGS PLC HOLDINGS 888 — 9.7 6.6 77.2 67.5 82.4 89.0 n demand US$ million On demand US$ million O

continued

1 1 instruments

, the majority of which are denominated in foreign currencies including Pounds Sterling (GBP), Euros (EUR) and New Israeli Shekels (ILS). Euros Sterling (GBP), including Pounds currencies , the majority in foreign denominated of which are financial ismatches between customer deposits, which are predominantly denominated in US$, and the net receipts from customers, which are settled which are customers, from in US$, and the net receipts denominated predominantly which are deposits, between customer ismatches functional and reporting currency), in US Dollars (the Group’s which is mainly generated (USD) between reportedismatches revenue, Ex Ex in the currency of the customer’s choice and of which Pounds Sterling (GBP) and Euros (EUR) are the most significant. are (EUR) and Euros Sterling (GBP) choice and of which Pounds in the currency of the customer’s M portionand a significant of deposits settled in local currencies. Expenses M ustomer deposits ustomer

rade and other payables rade and other payables » » » T T

C Derivative

Customer deposits Customer At 31 December 2014 the Group had open foreign exchange forward contracts exchange between New Israeli Shekels and US Dollars with a principal had open foreign 31 DecemberAt 2014 the Group fair value of these forwardThe contracts was a liability in New amount of US$91 million, in respect of 2015 operational costs incurred Israeli Shekels. of US$2.5 million, which was settled during 2015. At 31 December 2015 the Group does not have any open foreign exchange forward contracts. exchange open foreign any does not have 31 DecemberAt 2015 the Group The Group continually monitors the foreign currency risk and takes steps, where practical, to ensure that the net exposure is kept an acceptable that the net exposure to ensure currency practical, to risk where and takes steps, the foreign continually monitors Group The forward fix the economic impact contracts to exchange of designed liabilities. known includes the use of foreign This level. Market risk Market risk Currency fluctuations rate to: is mainly attributed financial exchange risk arising from Group’s The 1. income. cludes deferred 1. income. cludes deferred

Liquidity risk Liquidity The following table details the contractual maturity analysis of the Group’s financial liabilities: table details the contractual maturity following The analysis of the Group’s 24 FINANCIAL RISK MANAGEMENT MANAGEMENT RISK FINANCIAL 24 Group monitors The due. financial obligations as difficulties in meeting its they become might encounter Liquidity the Group risk exists where to meet its obligations. it to allow available are resources that sufficient liquid ensure its liquidity to order in

FINANCIAL STATEMENTS

106 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

24 FINANCIAL RISK MANAGEMENT continued The tables below detail the monetary assets and liabilities by currency:

2015 GBP EUR ILS USD Other Total US$ million US$ million US$ million US$ million US$ million US$ million Cash and cash equivalents 56.1 33.8 20.6 61.5 6.6 178.6 Trade and other receivables 13.6 8.4 0.3 4.1 3.3 29.7 Available for sale investments — — — 0.2 — 0.2 Monetary assets 69.7 42.2 20.9 65.8 9.9 208.5 Trade and other payables (40.8) (28.2) (23.2) (30.9) (1.8) (124.9) Customer deposits (22.9) (9.4) — (49.3) (0.8) (82.4) Monetary liabilities (63.7) (37.6) (23.2) (80.2) (2.6) (207.3) Net financial position 6.0 4.6 (2.3) (14.4) 7.3 1.2

2014 GBP EUR ILS USD Other Total US$ million US$ million US$ million US$ million US$ million US$ million Cash and cash equivalents 19.1 15.6 22.6 99.0 6.8 163.1 Trade and other receivables 12.8 5.1 0.4 3.3 4.7 26.3 Available for sale investments – – – 0.2 — 0.2 Monetary assets 31.9 20.7 23.0 102.5 11.5 189.6 Trade and other payables (31.5) (12.9) (22.9) (23.6) (1.6) (92.5) Derivative financial instruments — — — (2.5) — (2.5) Customer deposits (13.5) (5.2) — (48.7) (0.1) (67.5) Monetary liabilities (45.0) (18.1) (22.9) (74.8) (1.7) (162.5) Net financial position (13.1) 2.6 0.1 27.7 9.8 27.1

Interest rate risk The Group’s exposure to interest rate risk is limited to the interest bearing deposits in which the Group invests surplus funds.

The Group’s policy is to invest surplus funds in low risk money market funds and in interest bearing bank accounts. The Group arranges for excess funds to be placed in these interest bearing accounts with its principal bankers in order to maximise availability of funds for investments.

Downside interest rate risk is minimal as the Group has no floating rates borrowings. Given current low interest rates a 0.5% downward movement in bank interest rates would not have a significant impact on finance income for the year. However, a 0.5% increase in interest rates would, based on the year end deposits, increase annual profits by US$0.6 million. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 107 — — ILS ILS 0.2 (0.2)

US$ million US$ million

0.3 0.5 EUR (0.3) EUR (0.5) US$ million US$ million

0.6 1.3 GBP (1.3) GBP (0.6) ear ended 31 December 2014 Y Year ended 31 December 2015 ended 31 December Year US$ million US$ million ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888

continued

engthening engthening eakening eakening en the nature of the legal and regulatory landscape of the industry, from time to time the Group has received notices, communications notices, has received time the Group time to of the legal and regulatory from en the nature landscape of the industry, str w here is significant uncertainty as to whether VAT is due in respect is due in of certain in certainto customers servicesEuropean by the Group provided VAT uncertainty is significant here to whether as he Group operates in numerous jurisdictions. Accordingly, and on the basis of tax advice obtained, the Group is filing tax returns, providing providing returns, is filing tax the Group and on the basis of tax advice obtained, jurisdictions. Accordingly, in numerous operates he Group n respect of other taxes and duties, other than as provided in the Group financial statements, the Board considers it unlikely further the Board that any financial statements, in the Group other than as provided and duties, n respect of other taxes liability the final settlement of such assessments. will arise from Union Member States prior to 2015. These uncertaintiesThese in respect of the determination of the place of supply of some or all of the services are Union Member prior 2015. States to is located, be the Member in which the customer as the place of supply is determined insofar to State prior 2015 and, to the Group by provided uncertainty is also There services on relevant in certain certain by Member be lawful. Member would States VAT whether a possible imposition of services. relevant is due on any Based on VAT determined that that it is ultimately in the event be applied the tax base to surrounding States liability any in the not recorded considers that it is unlikely liability therefore, legal assessment, the Group that any will arise and has, a thorough the Board payable, may be VAT which the uncertaintiesFurthermore,given any the quantification of surrounding statements. financial Group be potentially would be in dispute reasonably or quantify the range of the amounts which may either estimate to attempt that any believes VAT. past claims for any position in defending the Group’s to be prejudicial misleading and may I for and paying all taxes and duties it believes are due based on local tax laws and transfer pricing agreements. The Group is also periodically Group The pricing agreements. and transfer due based on local tax laws are and duties it believes all taxes and paying for subject local taxing authorities. audits and assessments by to developments, and their potential impact on the business, and continues to take appropriate advice in respect of these developments. take advice in respect of these developments. impact and continues to appropriate and their potential on the business, developments, has taken Group legal advice and legal actions a small number of regulatoryThe from authorities and other parties in respect of its activities. of the actions, and the likelihood the manner in which it should respond of success of such actions. Based on this advice and the nature as to been made. have no provisions Accordingly, result, if any. of funds that may material outflow any quantify reliably is unable to the Board T T A Giv

10% w 10% str

10% 10%

(b) (c) (a) legalandregulatory monitor itcontinuesto ongoingregulatory operationalrisk complianceand assessmentprocess, s part oftheBoard’s 26 CONTINGENT LIABILITIES AND REGULATORY MATTERS REGULATORY AND LIABILITIES CONTINGENT 26 Other financial instruments carried at fair value are not considered material. There were no changes in valuation techniques or transfers between techniques or transfers no changes in valuation were There Other material. carried financial instruments not considered at fair value are categories in the period. The Group’s derivative financial instruments are measured at fair value under IAS 39 and are designated as level 2 in the fair value hierarchy. 2 in the fair value hierarchy. as level designated at fair value under IAS 39 and are measured derivative financial instruments are Group’s The derivative financial instruments was US$nil (2014: a liability of US$2.5 million), determined using 31 DecemberAt 2015 the fair value of the Group’s in an active market. quoted that are rates forward exchange 25 FAIR VALUE MEASUREMENTS VALUE FAIR 25 derivative financial and at 31 December at fair value 2014, the Group’s is measured sale investment for available 31 DecemberAt 2015, the Group’s considers that the Group assets and liabilities, financial the remaining For at fair value. measured were sale investment for instruments and available fair value. to the book value approximates Sensitivity analysis analysis Sensitivity

24 FINANCIAL RISK MANAGEMENT MANAGEMENT RISK FINANCIAL 24 at the balance sheet weakening)exchange rate (and in the US Dollar tax of a 10% strengthening before on profit details the effect below table The and New Israeli Shekels: Euros Sterling, in Pounds denominated balance sheet items for date FINANCIAL STATEMENTS

108 COMPANY BALANCE SHEET At 31 December 2015

2015 2014 Note US$ million US$ million Assets Non-current assets Investments in subsidiaries 2 29.6 27.4 29.6 27.4

Current assets Trade and other receivables 3 91.6 88.8 Income tax receivable 2.7 — 94.3 88.8 Total assets 123.9 116.2

Equity and liabilities Equity Share capital 4 3.2 3.2 Share premium 4 2.2 1.3 Retained earnings 69.6 65.4 Total equity 75.0 69.9

Liabilities Current liabilities Trade and other payables 5 47.2 39.4 Income tax payable — 2.9 Share benefit charges – cash-settled 8 — 3.4 47.2 45.7 Non-current liabilities Deferred tax liabilities 10 1.7 0.6 Total liabilities 48.9 46.3 Total equity and liabilities 123.9 116.2

The financial statements on pages 108 to 112 were approved and authorised for issue by the Board of Directors on 22 March 2016 and were signed on its behalf by:

Itai Frieberger Aviad Kobrine Chief Executive Officer Chief Financial Officer

The notes on pages 111 and 112 form part of these financial statements. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 109 2.4 0.9 1.3 0.4 otal 55.3 69.9 74.9 44.5 75.0 (53.5) (51.2) T

US$ million

— — 2.4 1.3 65.4 55.3 70.8 44.5 69.6 (53.5) (51.2) US$ million etained earnings R ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

— — — — — — 0.9 1.3 0.4 0.9 2.2 e premium US$ million Shar 888 HOLDINGS PLC HOLDINGS 888

— — — — — — — — 3.2 3.2 3.2

e capital US$ million Shar

e 9) e 9)

es (note 4) es (note es (note 4) es (note

alance at 31 December 2015 31 December at alance alance at 31 December 2014 31 December at alance alance at 1 January at alance 2014 quity settled share benefit charges (note 8) (note quity benefit charges settled share quity settled share benefit charges (note 8) (note charges quity benefit settled share

OF CHANGES IN EQUITY IN CHANGES OF COMPANY STATEMENT STATEMENT COMPANY B The notes on pages 111 and 112 form part pages 111 and 112 form on notes The of these financial statements. Share capital – represents the nominal value of shares allotted, called-up and fully paid for. called-up and allotted, the nominal value of shares capital – represents Share of nominal value. in excess capital share the amount subscribed for – represents premium Share income and other of comprehensive statement in the consolidated net gains and losses recognised the cumulative Retained earnings – represents transactions with equity holders. The following describes the nature and purpose of each reserve within equity. and purpose describes of each reserve the nature within equity. following The E Issue of shar Dividend paid (not B Total comprehensive income for the year income for comprehensive Total E Issue of shar Dividend paid (not B Total comprehensive income for the year income for comprehensive Total

For the year ended 31 December ended 2015 the year For COMPANY BALANCE SHEET SHEET BALANCE COMPANY At 31 December 31 At 2015 FINANCIAL STATEMENTS

110 COMPANY STATEMENT OF CASH FLOWS For the year ended 31 December 2015

2015 2014 Note US$ million US$ million Cash flows from operating activities: Profit before tax 52.0 50.1 Adjustments for: Share benefit charges 8 2.0 0.7 Decrease (increase) in net amounts owed by subsidiaries 3, 5 5.1 (1.9) Decrease in other receivables 3 0.1 — (Decrease) increase in trade and other payables 5 (5.4) 4.7 Cash generated from operations 53.8 53.6 Income tax paid (1.2) (3.5) Net cash generated from operating activities 52.6 50.1 Cash flows from financing activities: Issue of shares 4 0.9 0.4 Dividends paid 9 (53.5) (51.2) Net cash used in financing activities (52.6) (50.8) Net decrease in cash and cash equivalents — (0.7) Cash and cash equivalents at the beginning of the year — 0.7 Cash and cash equivalents at the end of the year — —

The notes on pages 111 and 112 form part of these financial statements. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 111 8.6 0.3 0.4 39.4 88.5 30.4 88.8 2014 2014

ecember ecember US$ million US$ million 31 D 31 D

8.5 0.2 0.3 47.2 38.4 91.4 91.6 2015 2015 ember ember US$ million US$ million 31 Dec 31 Dec

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888

om subsidiaries

payables rade

NOTES TO THE COMPANY COMPANY THE TO NOTES FINANCIAL STATEMENTS FINANCIAL repayable are All balances included within trade and other payables carrying their fair value. The to approximates value of trade and other payables on demand. Other and accrued expenses payables 7 CONTINGENT LIABILITIES CONTINGENT 7 Company. for the identical are financial statements the consolidated 26 to in note disclosures The 6 FINANCIAL RISK MANAGEMENT RISK FINANCIAL 6 to the consolidated 24 as disclosed in note to those of the Group identical financial risk management objectives and policies are Company’s The financial statements. Amounts due to subsidiariesAmounts due to

The disclosures in note 17 to the consolidated financial statements are identical for the Company. Company. for the identical are financial statements the consolidated 17 to in note disclosures The PAYABLES OTHER AND TRADE 5 4 SHARE CAPITAL SHARE 4

3 TRADE AND OTHER RECEIVABLES OTHER AND TRADE 3 Under Section 10(2) of the Gibraltar Companies Act 2014, the Company is exempt from the requirement to present its own income statement. income statement. its own present to the requirement from is exempt Under Section Act Company 2014, the Companies 10(2) of the Gibraltar SUBSIDIARIES IN INVESTMENTS 2 are financial statements Company’s and in the financial statements the consolidated 20 to in note principal listed subsidiaries are Company’s The as a cost of recognises the Company Consequently, 2 – Share-based applies IFRS Group Payment. The impairment. any for held at cost less provision or contractors of its subsidiaries. employees options to share the purpose of granting that it makes for shares available the value of its own investment share-based in subsidiaries payment was US$2.2 million (2014: US$1.3 million) included within this were during the year in investment movement The of US$2.1 million in 2015 (2014: US$0.9 million). charges Amounts due fr Other and prepayments receivables and other receivables None of the balances included within trade their fair value. carrying to The approximates of trade and other receivables value on demand. payable subsidiaries are Amounts due from past due or impaired. are T The Company has applied accounting policies identical to the Group’s accounting policies listed in note 2 to the consolidated financial statements, financial statements, the consolidated 2 to in note listed accounting policies the Group’s to has applied accounting policies identical Company The required. impairment provision held at cost less any which are in subsidiaries, investments to other than in relation 1 GENERAL INFORMATION AND ACCOUNTING POLICIES POLICIES ACCOUNTING AND INFORMATION GENERAL 1 financial statements. to the consolidated 1 in note its activities included are and definitions A description of the Company, FINANCIAL STATEMENTS

112 NOTES TO THE COMPANY FINANCIAL STATEMENTS continued

8 SHARE BENEFIT CHARGES The disclosures in note 21 to the consolidated financial statements are identical for the Company except that the charge for the year is partly taken to investment in subsidiaries, as set out in note 2.

9 RELATED PARTY TRANSACTIONS

During the year the Company received dividends from its subsidiaries totaling US$60.5 million (2014: US$60.0 million) and paid to its shareholders dividends totaling US$53.5 million (2014: US$51.2 million).

Share benefit charges in respect of options and shares of the Company awarded to employees of subsidiaries totalled US$2.1 million (2014: US$0.9 million).

During the year subsidiaries of the Company supported it in funding US$7.5 million of the Company’s costs (2014: US$18.8 million). At 31 December 2015, the net amounts owed by subsidiaries to the Company were US$53.0 million (2014: US$58.1 million).

The aggregate benefits paid to key management personnel, which the Company considers are the Directors of the Company, by its subsidiaries are set out below:

Year ended Year ended 31 December 31 December 2015 2014 US$ million US$ million Short term benefits — 0.2

10 DEFERRED TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s deferred tax assets and liabilities resulting from temporary differences, some of which are expected to be settled on a net basis, are as follows:

2015 2014 US$ million US$ million Deferred tax assets Derivative financialinstruments — 0.3 — 0.3 Deferred tax liabilities Property, plant and equipment 1.0 0.9 Intangible assets (2.7) (1.8) (1.7) (0.9) (1.7) (0.6) STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 113

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INFORMATION INFORMATION SHAREHOLDER » » » » » » » » » » » » » 888’s Poker offering is through 888poker is through offering Poker 888’s Poker Poker Casino through offered games are Casino 888’s casino its 888casino and live The following websites can also be accessed websites following The website main the Group’s through directly. available or are www.888.com Group websites websites Group is available information A range of shareholder of the Group’s Relations area in the Investor including: corporate.888.com, website, FINANCIAL STATEMENTS

114 NOTES STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 115

ANNUAL REPORT & ACCOUNTS 2015 ACCOUNTS & REPORT ANNUAL

888 HOLDINGS PLC HOLDINGS 888 FINANCIAL STATEMENTS

116 NOTES 888 HOLDINGS PLC ANNUAL REPORT & ACCOUNTS 2015

COMPANY INFORMATION

Shareholder services Company secretary All enquiries relating to Ordinary Shares, Strait Secretaries Limited Depository Interests, dividends and changes 57/63 Line Wall Road of address should be directed to the Group’s Gibraltar Transfer Agent: Auditors Capita Registrars Ernst & Young LLP The Registry 1 More London Place 34 Beckenham Road Beckenham London Kent SE1 2AF BR3 4TU United Kingdom UK EY Limited Tel: 0870 162 3100 PO Box 191 www.capitaregistrars.com Regal House Queensway Further information Gibraltar For further information please contact: [email protected]

Principal bankers Barclays Bank Plc 1 Churchill Place London E14 5HP UK

Solicitors Allen & Overy LLP One Bishops Square London E1 6AD UK

Hassans 57/63 Line Wall Road Gibraltar

Herzog Fox Neeman Asia House 4 Weizman Street Tel Aviv Israel 64239

Incorporated in Gibraltar with registered number 90099 Stock Code: 888 888 Holdings plc Suite 601/701 Europort Europort Road Gibraltar

T +350 20049800 F +350 20048280 E [email protected] corporate.888.com