20-F

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 20-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT 1934

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 1934

For the transition period from              to             

Commission file number 000-13259

SPORTECH PLC

(Exact name of registrant as specified in its charter)

Scotland

(Jurisdiction of incorporation or organization)

Sportech House, Enterprise Way, Wavertree Technology Park,

Liverpool, L13 1FB, England

(Address of principal executive offices)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Title of each class	Name of each exchange on which registered
American Depository Shares, each representing 1 Ordinary Share of 5p	Non-NASDAQ OTC
Ordinary Shares of 5p each*	Non-NASDAQ OTC

*- Not for trading, but only in connection with the registration of American Depository Shares, pursuant to the requirements of the Securities and Exchange Commission.

SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION

PURSUANT TO SECTION 15(d) OF THE ACT:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Ordinary Shares of 5p each (fully paid) 592,074,138

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  x    Item 18  ¨

Index

Introductory Note		1
Part I
Item 1:	Identity Of Directors, Senior Management And Advisers	2
Item 2:	Offer Statistics And Expected Timetable	2
Item 3:	Key Information	2
Item 4:	Information On The Company	7
Item 5:	Operating And Financial Review And Prospects	17
Item 6:	Directors, Senior Management And Employees	26
Item 7:	Major Shareholders And Related Party Transactions	32
Item 8:	Financial Information	32
Item 9:	The Offer And Listing	33
Item 10:	Additional Information	34
Item 11:	Quantitative And Qualitative Disclosures About Market Risk	39
Item 12:	Description Of Securities Other Than Equity Securities	40
Part II
Item 13:	Defaults, Dividend Arrearages And Delinquencies	40
Item 14:	Material Modifications To The Rights Of Security Holders And Use Of Proceeds	40
Item 15:	Controls And Procedures	40
Item 16A:	Audit Committee Financial Expert	40
Item 16B:	Code of Ethics	40
Item 16C:	Principal Accountant Fees And Services	40
Item 16D:	Exemptions from the Listing Standards for Audit Committees	40
Item 16E:	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	40
Part III
Item 17:	Financial Statements	40
Item 18:	Financial Statements	40
Item 19:	Exhibits	41

Sportech PLC Form 20-F for the year ended 31 December 2003

Introductory Note

Unless the context indicates otherwise, the “Company,” and “Sportech” refer to Sportech PLC and its subsidiaries. “Littlewoods Gaming” refers to Littlewoods Promotions Limited, Littlewoods Lotteries Limited and their respective subsidiaries.

Sportech publishes its financial statements expressed in United Kingdom (“UK”) pounds Sterling. In this document references to “US Dollars”, “US $”, or “$” are to United States (“US”) Dollars, references to “pounds Sterling”, “Sterling” or “£” and “pence” or “p” are to UK currency. For historical information regarding rates of exchange between US Dollars and pounds Sterling, see “Exchange Rates” within “Item 3A – Selected Financial Data”.

Cash dividends paid by Sportech will be in pounds Sterling, and exchange rate fluctuations will affect the US Dollar amounts received by holders of American Depositary Receipts (“ADRs”) on conversion of such dividends. Moreover, fluctuations in the exchange rates between pounds Sterling and the US Dollar will affect the US Dollar equivalent of the pounds Sterling price of the ordinary shares of the Company (the “Ordinary Shares”) on the London Stock Exchange, and, as a result, are likely to affect the market price of the ADRs.

On October 10, 2003, the Company issued a notice of termination of its ADR program. The ADR Program was duly terminated on January 10, 2004. On or after July 12, 2004 all outstanding ADRs will be terminated when the Depositary (Bank of New York) sells off the underlying ordinary shares of the Company and distributes the proceeds to the former ADR holders.

The Company’s fiscal year ends on December 31 of each year, and references herein to “fiscal year” are to the year ended December 31 of the year specified.

Certain information included with this document is forward-looking and involves risks and uncertainties that could result in actual results differing materially from those expressed or implied by the forward looking statements. Forward-looking statements included in this document and in documents incorporated herein by reference generally may be identified by, the words “expects”, “plans”, “anticipates”, “intends”, and similar expressions that indicate the statement addresses the future. Forward-looking statements include, without limitation, projections relating to results of operations and financial conditions and the Company’s plans and objectives for future operations. All forward-looking statements in this report are based upon information available to the Company on the date of this report. Sportech undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. It is not reasonably possible to itemise all of the many factors and specific events that could affect the Company’s future operations or results. Some factors that could significantly impact revenues, expenses, capital expenditures, cash flows and margins include customer demand and other commodity costs, actions of the UK and other governments, inflation, the general economic environment, the ability to reach labour and wage agreements and other items discussed herein, including those discussed in “Item 3D - Risk Factors”.

References below to major headings include all information under such major headings, including subheadings, unless such reference is part of a reference to a subheading, in which case such reference includes only the information contained under such subheading.

Sportech PLC Form 20-F for the year ended 31 December 2003 1

Item 1. Identity Of Directors, Senior Management And Advisers - Not Applicable.

Item 2. Offer Statistics And Expected Timetable - Not Applicable.

Item 3. Key Information

A. Selected Financial Data

The following table sets out selected historical statement of income data, supplemental financial data and balance sheet data. These are derived from the audited financial statements of the Company. The selected financial data set forth below should be read in conjunction with, and are qualified in their entirety by reference to, the Financial Statements and Notes thereto included elsewhere in this Annual Report. The Company prepares its Financial Statements in accordance with UK GAAP which differ in certain significant respects from US GAAP. A description of the significant differences and reconciliations of net income/(loss) and shareholders’ equity are set forth in Note 30 to the Financial Statements.

Income Statement Data	Year to 30 September 1999		Three Months to 31 December 1999		Year to 31 December 2000		Year to 31 December 2001		Year to 31 December 2002		Year to 31 December 2003
	£m		£m		£m		£m		£m		£m
Amounts in accordance with UK GAAP:
Group turnover	—		—		63.0		183.3		195.3		207.9
Cost of sales	(0.6	)	(0.3	)	(46.9	)	(129.3	)	(139.4	)	(153.0	)
Net operating (expenses)/income	(0.6	)	(0.4	)	10.3		(45.4	)	(44.5	)	(45.4	)
Operating profit/(loss)	(1.2	)	(0.7	)	26.4		8.6		11.4		9.5
Discount on redemption of loan stock	—		—		3.9		—		—		—
Profit on sale of tangible fixed assets	—		—		—		—		1.4		—
Profit on sale of Technology Patents	—		—		—		—		—		0.6
Net interest income payable and similar items	—		—		(2.9	)	(9.2	)	(8.2	)	(6.6	)
Profit/(loss) on ordinary activities before taxation	(1.2	)	(0.7	)	27.4		(0.6	)	4.6		3.5
Tax on profit/(loss) on ordinary activities	—		—		(2.9	)	(2.1	)	(1.7	)	(3.7	)
Retained profit/(loss) for the financial period	(1.2	)	(0.7	)	24.5		(2.7	)	2.9		(0.2	)
Weighted average number of ordinary shares (‘000s)	254,275		254,275		471,148		592,074		592,074		592,074
Net income/(loss) per ordinary share – basic & diluted	(0.4	)p	(0.3	)p	5.2	p	(0.5	)p	0.5	p	( 0.0	)p

Sportech PLC Form 20-F for the year ended 31 December 2003 2

A. Selected Financial Data (continued)

Income Statement Data	Year to 30 September 1999		Three Months to 31 December 1999		Year to 31 December 2000		Year to 31 December 2001		Year to 31 December 2002		Year to 31 December 2003
	£m		£m		£m		£m		£m		£m
Amounts in accordance with US GAAP:
Group turnover	—		—		63.0		183.3		195.3		207.9
Cost of sales	(0.6	)	(0.3	)	(46.9	)	(129.3	)	(139.4	)	(153.0	)
Net operating (expenses)/income	(0.6	)	(0.4	)	10.3		(45.4	)	(36.4	)	(36.7	)
Operating profit/(loss)	(1.2	)	(0.7	)	26.4		8.6		19.5		18.2
Discount on redemption of loan stock	—		—		3.9		—		—		—
Profit on sale of tangible fixed assets	—		—		—		—		1.4		—
Profit on sale of Technology Patents	—		—		—		—		—		0.6
Net interest income payable and similar items	—		—		(2.9	)	(9.7	)	(8.4	)	(5.7	)
Profit/(loss) on ordinary activities before taxation	(1.2	)	(0.7	)	27.4		(1.1	)	12.5		13.1
Tax on profit/(loss) on ordinary activities	—		—		(2.9	)	(2.0	)	(1.6	)	(4.0	)
Retained profit/(loss) for the financial period	(1.2	)	(0.7	)	24.5		(3.1	)	10.9		9.1
Weighted average number of ordinary shares (‘000s)	254,275		254,275		471,148		592,074		592,074		592,074
Net income/(loss) per ordinary share – basic & diluted	(0.4	)p	(0.3	)p	5.2	p	(0.5	)p	1.8	p	1.5	p

Sportech PLC Form 20-F for the year ended 31 December 2003 3

A. Selected Financial Data (continued)

Balance Sheet Data	At 30 September 1999		At 31 December 1999		At 31 December 2000		At 31 December 2001		At 31 December 2002		At 31 December 2003
	£m		£m		£m		£m		£m		£m
Amounts in accordance with UK GAAP:
Total assets	0.2		0.2		206.8		189.4		179.0		169.8
Long-term debt	(20.3	)	(20.3	)	(139.7	)	(117.9	)	(104.0	)	(94.2	)
Net assets/(liabilities)	(20.4	)	(21.1	)	31.3		28.6		31.5		31.3
Share capital	13.6		13.6		30.5		30.5		29.6		29.6
Amounts in accordance with US GAAP:
Total assets	0.2		0.2		206.8		190.3		186.6		186.8
Long-term debt	(20.3	)	(20.3	)	(139.7	)	(117.9	)	(104.0	)	(94.2	)
Net assets/(liabilities)	(20.4	)	(21.1	)	31.3		28.2		39.1		48.2
Capital stock	13.6		13.6		30.5		30.5		29.6		29.6
Total shareholders’ funds/(deficit):
As reported under UK GAAP:	(20.4	)	(21.1	)	31.3		28.6		31.5		31.3
As reported under US GAAP:	(20.4	)	(21.1	)	31.3		28.2		39.1		48.2

The Company has not paid cash dividends in the five year period for which financial information is presented above.

Sportech PLC Form 20-F for the year ended 31 December 2003 4

A. Selected Financial Data (continued)

Exchange Rates

The Noon Buying Rate expressed in US Dollars to pounds Sterling as of June 25, 2004 was $1.82. The following table sets forth, for the periods and dates indicated, certain information concerning the Noon Buying Rate, expressed in US Dollars to pound sterling.

Year Ended	End rate	Average rate	High	Low
30 September 1999	1.65	1.63	1.68	1.55
1 October – 31 December 1999	1.62	1.61	1.65	1.58
31 December 2000	1.49	1.51	1.62	1.42
31 December 2001	1.45	1.44	1.51	1.37
31 December 2002	1.61	1.50	1.61	1.41
31 December 2003	1.79	1.64	1.79	1.55
Month
December 2003	—	—	1.79	1.72
January 2004	—	—	1.85	1.79
February 2004	—	—	1.91	1.82
March 2004	—	—	1.87	1.79
April 2004	—	—	1.86	1.77
May 2004	—	—	1.84	1.76

Source : The Bank of England

B. Capitalization And Indebtedness – Not Applicable.

C. Reasons For The Offer And Use Of Proceeds – Not Applicable.

D. Risk Factors

This section describes some of the risks that could affect the Company’s business and results of operations. These factors should be considered in connection with any forward looking statements contained in this report and the cautionary statement contained in the “Introductory Note”.

The Company’s businesses are highly competitive and have experienced, and the Company expects will continue to experience, significant changes. In addition, the Company’s future performance is subject to a variety of factors over which it has little or no control, including indebtedness / liquidity risk, adverse governmental regulation, competition and adverse changes in economic conditions. There may be other risks that the Company has not identified that could have a material adverse effect on the Company’s business, revenues, operating income, net assets and liquidity and capital resources.

Substantial indebtedness / liquidity risk

The Company has incurred significant indebtedness and may incur additional indebtedness in the future. The Company’s indebtedness may restrict the Company’s liquidity with respect to working capital, requisitions, new product developments or other purposes. For more information on the Company’s debts, see Notes 18 to 20 to the Financial Statements which are incorporated herein by reference, and also the schedule of significant contractual commitments discussed in “Item 5B - Liquidity and Capital Resources”.

Interest rate risk

All of the Company’s debts have floating interest rates (though a significant portion is subject to an interest rate cap). Although the Company expects to have sufficient working capital, interest rate volatility may nevertheless affect the Company’s operations and financial results. For more information on the Company’s interest rates, please see Note 20 to the Financial Statements which is incorporated herein by reference.

Sportech PLC Form 20-F for the year ended 31 December 2003 5

D. Risk Factors (continued)

Government regulation

The Company’s operations are subject to a high degree of UK regulations covering most aspects of its gaming, football pools, sports betting and lottery businesses. Future operating and financial results may vary based upon the effects of such regulation, including the granting, timing and renewal of permits needed to operate the Company’s gaming, football pools, sports betting and lottery businesses, and the cost associated with such permits and regulations.

The consequences for the UK gambling industry and government taxation revenues as gamblers decide to move offshore have been recognised in the recently announced review of gambling legislation, which has been asked to examine internet gambling. Whilst therefore it is probable that legislation will be brought in to regulate internet gaming, it is premature to speculate on its likely form. However, there can be no assurances that the ultimate form of such legislation would not have an adverse effect on the Company’s financial and operating results.

Competition

Most of the markets in which the Company operates are highly competitive. The Company faces competition from other competing companies and the United Kingdom national lottery. The Company’s pricing decisions are affected by many factors, including competition from other companies, some of which may have greater financial resources or economies of scale. This may cause the Company’s operations and financial results to vary from period to period.

Economic and other conditions

The demand for the Company’s businesses and, accordingly, the Company’s operating and financial results may be affected by changes in local, regional, and national economic, political and other conditions. Significant and prolonged downturns in economic conditions would be likely to have an adverse effect on the Company. In addition, other demand-related factors such as war, political instability (or the threat thereof) or the continuation or escalation of terrorist activities could have an adverse effect on the Company’s financial results and operations.

Geographic and business concentration

The Company operates almost exclusively within the United Kingdom and expects that a large portion of its operating profits, for the financial year ended 31 December 2004 at least, will be generated by one business stream, football pools. Any significant decline in the performance of this business stream could have a material adverse effect on the financial results of the Company.

Risks relating to current and future operations

There can be no assurance with respect to the Company’s future operations and financial results.

Sportech PLC Form 20-F for the year ended 31 December 2003 6

Item 4. Information On The Company

A. History And Development Of The Company

General

Until 4 September 2000, the business of the Company was the licensing and exploitation of its patents covering disk drive technology. The principal objective of the Company was to collect royalties from third parties on the manufacture and sale of disk drives in respect of which the Company holds patents registered in the United States, Canada and certain major Western European countries.

On 4 September 2000, Sportech acquired Littlewoods Gaming, which comprised the football pools, fixed odds betting and charity lottery management businesses of The Littlewoods Organisation PLC. Consequent to this acquisition the focus of the business has changed to that sector and the Company changed its name from Rodime PLC to Sportech PLC at that time.

Additionally, the Company intends in the future to seek new opportunities to increase shareholder value through strategies involving acquisitions as well as management and development of existing business streams.

Sportech PLC was incorporated in Scotland on August 17, 1979 and commenced business in October 1980. Its head office was located at 4 Heriot Row, Edinburgh, EH3 6HU, Scotland until December 2000. From January 2001 to May 2002 its head office was located at Walton Hall Avenue, Liverpool, L67 1AA, England, and since May 2002 its head office is located at 2 Enterprise Way, Wavertree Technology Park, Liverpool L13 1FB (telephone number 0044-151-525-3677). The Company’s registered office is at 249 West George Street, Glasgow, G2 4RB, Scotland, and its registered number is 69140. Sportech PLC is a going concern. The name and address of the Company’s US agent is Bank of New York Company Inc., 1, Wall Street, New York, N.Y. 10286.

Historical Summary

Through to August 1991 the Company’s business was the development, manufacture and marketing of high performance magnetic rigid disk drives. For a number of years prior to 1991 the Company incurred operating losses. Economic and industry conditions made it unlikely that the Company would achieve a return to profitability. Consolidation took place within the industry and many smaller manufacturers ceased trading. This resulted in the disk drive manufacturing industry becoming dominated by a few large companies, many of which had significantly greater financial resources and economies of scale than the Company.

In March 1991 the Directors reported that, because of the problems noted above, the Company had exhausted much of its working capital and would not be able to continue in the disk drive industry unless it could find a partner to share the risks associated with manufacturing. Shareholders were also advised that the Company was actively seeking potential joint venture manufacturing partners but that the outcome was uncertain. By August 1991 the Company had been unable to conclude any arrangement with joint venture parties and these factors led the Directors to conclude that it was not feasible in the long term to continue the manufacture and sale of disk drives. Subsequently, the Company’s manufacturing operations in Singapore were sold to Myrica Technology Inc, and the Company’s subsidiaries (Rodime Europe Limited, Rodime Singapore Pte Limited and Rodime Inc) were liquidated. Although the Company sold its manufacturing operations, the Company continued to seek revenue from its remaining assets, primarily patents covering its disk drive technology. In some cases, the Company deemed it necessary to file lawsuits for patent infringement against certain parties. The most significant lawsuit was filed against Seagate Technology Inc. in 1992. In 2000, Seagate paid to Rodime a settlement fee equal to $45m (£27.8m) in satisfaction of all claims raised in the lawsuit.

Acquisition of Littlewoods Gaming

Following the successful settlement of the Company’s legal action against Seagate and the redemption of outstanding loan stock, the Company embarked on a search for potential added value acquisition opportunities. This search culminated in the purchase on 4 September 2000 of Littlewoods Gaming for £162.5m and the renaming of the Company from Rodime PLC to Sportech PLC. Now the core business of the Company, Littlewoods Gaming is the foremost UK provider of gaming products direct to customers in their homes. Littlewoods Gaming has a brand which is synonymous with football (i.e. soccer) in the UK and the Company expects that this brand will be well placed to take advantage of high growth opportunities particularly through new media channels. The purchase of Littlewoods Gaming was financed by the issue of new ordinary shares raising £28.7m and by the draw down of long term loans totalling £140.0m. As part of the process of raising this new ordinary share capital the Bank of Scotland’s holding was reduced from 49.7% to 28.4% of the enlarged capital of the Company. The Bank of Scotland is one of the Company’s most significant shareholders and is its most significant lender.

Sportech PLC Form 20-F for the year ended 31 December 2003 7

A. History And Development Of The Company (continued)

Acquisition of Littlewoods Gaming (continued)

The financial reporting period of the Company was also reviewed at the time of the acquisition, and the financial reporting date was amended from 30 September to 31 December.

Disposal of Technology Patents Business

On 1 July 2003, the Company sold its remaining patents business for $1.5m to a company based in the US. This resulted in a profit after disposal costs of £0.6m. Consequent upon this disposal, the Littlewoods Gaming business is now the core business of the Company.

Capital Expenditures and Divestitures

See “Item 5B – Liquidity and Capital Resources”.

B. Business Overview

Principal activities and markets

Until September 2000 and the acquisition of Littlewoods Gaming, the Company’s principal activity was the exploitation through licensing and litigation of its pioneering patents relating to 3½ inch disk drive technology. In addition to the two U.S. patents (the ‘988 and ‘383 patents) formed the basis of the Company’s original patent licensing and litigation program, the Company held and maintained several patents relating to disk drive and other storage system technology which should have broader application than the ‘988 and ‘383 patents.

The Company’s patents principally covered certain hard disk drives which are either manufactured or sold in or into the United States, Canada and certain major Western European countries. For more information on the Company’s patents at this time, see “Patents and Licences” on page 13.

The Company’s patent licensing and exploitation activity has in years prior to 1999 generated revenue from three types of licences:

(a) fully paid up agreements whereby a lump sum payment by the licensee extinguishes liability for both past and future patent infringement;

(b) running royalty agreements whereby the licensee agrees to pay Sportech a percentage of past and future revenue from infringing disk drives sold and/or manufactured in the United States; and

(c) release agreements whereby the licensee pays a lump sum for prior infringement when no ongoing licence is required in the future.

The Company’s most significant patent infringement suit was against Seagate Technology Inc (“Seagate”) (see Note 27 to the Financial Statements). After more than seven years of litigation, the case was finally settled in January 2000 by the payment of £27.8m million from Seagate to the Company, in full and final settlement of the Company’s claims, without admission of liability by either party.

At that time, there remained around 20 patents owned by the Company, principally relating to disk drive and storage access technologies.

During the financial year ending 31 December 2001, the Company had entered into an agreement granting an exclusive licence to QED Intellectual Property Limited in respect of all patents held by the Company involving disk drive technology. The agreement empowered QED to exploit these intellectual property rights world wide to the mutual benefit of the parties until expiry of each patent. Their fees were linked to the amount of revenue generated. The agreement was performance related and the contract was terminated in June 2002.

Following the termination of this contract the Company undertook a further review of the most effective way of deriving value from the patent portfolio. It was concluded that best value could be obtained by selling the remaining patents. In consequence, on 1 July 2003, the Company sold its remaining patents business for $1.5m to a company based in the US. This resulted in a profit after disposal costs of £0.6m. Since the acquisition of Littlewoods Gaming, the Company’s principal activity is now Gaming consisting of Football Pools, Games & Lotteries, Interactive Television Gaming and Sports Betting.

Sportech PLC Form 20-F for the year ended 31 December 2003 8

B. Business Overview (continued)

Football Pools

Littlewoods Pools is the leading football (i.e. soccer) pools promoter in the United Kingdom and has been trading for 80 years. Football pools are a competition in which players select a minimum of 10 football matches from a list of 49 and score points based on the matches results. The prize fund is determined by the value of entry fees less taxes and administration expenses, and this prize fund is divided amongst the winning players.

In the period since acquisition, the football pools business has remained profitable and cash generative, despite a continuing decline in sales revenue, which is currently around 11% year on year. The way in which the game is played and the distribution efficiency have changed significantly since 1994 when virtually all entries were paper coupons, to today, with over 68% of football pools entries now gathered by telephone and electronically, including portable “pools card” terminals. Not only do these methods make the football pools quick and easy to play, but they completely eliminate all paper processing. This changing collection profile, together with increased automation in the processing and marking systems, has helped reduce costs and maintain operating profitability.

In 2002, the Company purchased the pools business of a small competitor, Zetters, thus increasing further its leading position in the market. This business, which operated from London, was transferred to the Liverpool operation during the course of 2003 with a complete transfer achieved by January 2004.

In 2002, new technology was introduced for the marking of football pools coupons. This technology is less labour and space intensive than the technology it replaced. The smaller scale of new coupon processing equipment enabled processing to be concentrated in one of two pools processing buildings. The surplus land and building were sold for redevelopment generating proceeds of £2.0m and realising an exceptional gain on disposal of £1.4m.

In 2002, the UK government changed the way Pool Betting Duty is calculated from being 17.5% of stakes to 15% of gross profit defined as stakes less winnings, and this has lowered the tax burden on the business.

The Company’s efforts in 2003 significantly continued to focus on three main areas: further cost reductions to sustain profitability of football pools; repackaging the game and the way it is played to increase its appeal to different market segments; and extending its distribution capabilities through the use of new media channels. This will continue in 2004.

Games and Lotteries

This part of the business derives income from the running of games and competitions such as Spot The Ball, the on-line casino, littlewoodscasino.com, and from acting as an external lottery manager for the running of society charity lotteries. During the year the Company continued its investment in new product concepts and delivery platforms. Sales of products through the door to door collector channel continued to decline.

During 2002, a non-core part of the Lotteries business, “Pull-tabs”, was sold generating a surplus of £0.5m.

During 2003, the key development in Games & Lotteries was the successful operation and extension of an on-line casino, littlewoodscasino.com, which launched in August 2002 and achieved operating profits in line with expectations in 2003.

In September 2003, the location of the casino was moved from the Isle of Man to the Netherlands Antilles as the extent of the regulation in the Isle of Man was excessively restrictive. Following the move, the casino was successfully expanded to provide integrated jackpot products, and in November 2003 poker games and tournaments were launched on littlewoodspoker.com. Our combined casino and poker sites now offer a choice of over 70 different games.

Extended scratchcard trials with two major UK supermarket groups, Sainsbury’s and Safeway, continue, with both retailers having stocked Littlewoods core scratchcards in store for the first time during 2003. Littlewoods Gaming continues to establish relationships with high profile charities and good causes with broad appeal. Our Poppy Appeal scratchcard last autumn was a notable success. The latest of these collaborations is the British Olympic Association scratchcard, which launched in April 2004 and is aimed at supporting Team GB in Athens this summer.

Sportech PLC Form 20-F for the year ended 31 December 2003 9

B. Business Overview (continued)

Interactive Television Gaming

The Company has entered a contract with Independent Television, one of the two major terrestrial UK broadcasters, to supply interactive gaming services in return for certain payments and minimum guarantees. This contract

• offers the opportunity to provide gaming directly linked to programming content; and

• represents a 24:7 interactive distribution channel for a range of interactive gaming and betting products.

This business has no turnover up to 31 December 2003 as it is still in development.

The Littlewoods Bet Direct product is being introduced to ITV’s interactive service. This will be the only betting service available behind ITV’s football and sports related coverage.

It is planned to introduce a 24:7 Game Zone on the ITV interactive service, which will include a range of non-programme related compelling “pay to play to win” games which viewers can access and enjoy at their leisure.

Sports Betting

Littlewoods Bet Direct currently provides customers with a wide range of betting opportunities across telephone, internet and satellite (Sky Digital) platforms. Organic growth across telephone and internet has delivered annual revenues of £101.7m which was 22% higher than 2002 (2002: £83.1m). This growth was underpinned by a 10% increase in average telephone stakes and a 35% increase in average internet stakes. Overall, customer numbers increased to 313,000 (2002: 272,000). However, this revenue growth was not reflected in retained gross win, principally as a result of a run of poor horse racing results which reduced the gross win rate (GWR) to 7.3% as against 9.6% in 2002. This is the principal reason why losses increased to £3.1m in 2003 (2002: loss of £2.0m) although there was also the impact of development costs associated with the launch of interactive betting services on the attheraces and Sky Active television channels.

Although margins did improve in the second half of 2003 on telephone betting, the gross win performance was nevertheless disappointing and is intended to be addressed through a number of key actions. In particular, the reliance on horse racing is intended to be reduced by increasing the share of the football betting market, where GWR over the last two years has been maintained at 11%. In addition, more betting opportunities will be exploited in other sports including cricket, tennis, rugby and golf, and the introduction of in-running betting across a number of sports. The Littlewoods Bet Direct presence will also be launched on ITV, and growing our Sky Active presence, where experience since launch, and the experience of the market generally, points to a GWR above 10%. The betdirect.net internet site is undergoing a major upgrade.

Sportech PLC Form 20-F for the year ended 31 December 2003 10

B. Business Overview (continued)

Segmental Information

The Company’s revenues are generated through three businesses: Football Pools, Games & Lotteries and Betting. A fourth business, Interactive Television Gaming, only commenced trading in 2004 and to date has not produced a material amount of revenue.

The Company’s segments for reporting purposes are the above four businesses (making up Littlewoods Gaming) along with Technology Patents, which was disposed of in 2003.

The following table shows the Company’s principal markets, including a breakdown of financial results under UK GAAP by category of activity and geographic market for each of the last three years. Substantially all of the Company’s business activity occurs within the United Kingdom.

	Year to 31 December 2001		Year to 31 December 2002		Year to 31 December 2003
	£m		£m		£m
Profits/(losses)
Generated from the United States:
Patent income	(0.6	)	—		—
Profit on sale of Technology Patents	—		—		0.6
Generated from the United Kingdom:
Football Pools	23.2		25.6		25.6
Games & Lotteries	0.5		0.9		1.0
Interactive Television Gaming	(1.6	)	(2.3	)	(3.6	)
Sports Betting	(4.0	)	(2.0	)	(3.1	)
	17.5		22.2		20.5
Restructuring costs	—		(2.0	)	(1.3	)
Amortisation of goodwill	(8.9	)	(8.8	)	(9.1	)
	8.6		11.4		10.1
Profit on sale of fixed assets	—		1.4		—
Interest income	0.4		0.2		0.2
Interest expense	(9.6	)	(8.3	)	(6.8	)
Amortisation of loan arrangement fee	—		(0.1	)	—
Income/(loss) before tax expense	(0.6	)	4.6		3.5
Net assets
Football Pools	43.2		48.8		52.9
Games & Lotteries	(2.8	)	(2.1	)	(1.2	)
Interactive Television Gaming	(1.2	)	(3.2	)	(6.2	)
Sports Betting	(10.6	)	(12.0	)	(14.2	)
Technology Patents	—		—		—
	28.6		31.5		31.3

Sportech PLC Form 20-F for the year ended 31 December 2003 11

B. Business Overview (continued)

Seasonality of the Company’s Main Business

The Company is not aware of any seasonal factors that materially affect the business of the Company.

Sources and Availability of Raw Materials

The Company does not expect to engage in the manufacture of physical products and for this reason is not affected by supply availability issues.

Marketing Channels Used by the Company

The importance of reliable and secure distribution in the football pools business cannot be over-emphasised, and Littlewoods Gaming has built its world class reputation over 80 years since 1923. While the Company now offers many choices of distribution, the cornerstone remains the 16,000 strong network of door-to-door collectors of coupons and stakes, which provides a unique service throughout the UK. This network is augmented by telephone, post, internet and interactive digital television distribution, all of which currently take the Company’s products into some 1.6 million households every week.

The Company’s future distribution strategy will have two main themes. Its own multi channel development will focus on extending its penetration into the home gaming market and becoming an important content provider for those with appropriate distribution channels into retail outlets.

The Company believes the new media channels, particularly interactive digital television, will open up a much wider playing audience and provide an ideal platform for many of its gaming concepts.

Dependency Upon Patents and Licences

Patents

Prior to September 2000, the Company was dependent for its income on patents. In 1983, the Company completed the development of and demonstrated the world’s first 3 ¹/2 inch hard disk drive product, and applied for a patent in the US in February 1984 (US Patent Number 4568988) (‘988). A continuation patent was filed in the US in November 1985 (US Patent Number 4683383) (‘383). These patents were issued in February 1986 and January 1987, respectively. Court rulings have narrowed the scope of the claims of these patents to certain types of drives.

The licensing program for the ‘988 and ‘383 patents has resulted in the Company reaching agreement with twenty licensees, including negotiated settlements with Seagate Technology, IBM, Miniscribe and Corner Peripherals. Under United States law, the Company was entitled to receive royalties through to the year 2003.

After significant development activity Rodime applied in September 1990 for a US patent in respect of an invention which digitally positions read/write heads over media (the means by which information is retrieved or stored in rotating storage devices). In September 1991, further international patent applications were made for the European Community and Canadian markets. The US Patents and Trademarks office issued to the Company seven patents in respect of this technology during 1997.

During 2003, the Company undertook a review of the most effective way of deriving value from the patent portfolio. It was concluded that best value could be obtained by selling the remaining patents. In consequence, on 1 July 2003, the Company sold its remaining patents business for $1.5m to a company based in the US. This resulted in a profit after disposal costs of £0.6m.

Following the disposal of this business segment, the Company is no longer dependent on patents.

Licenses

The businesses comprising Littlewoods Gaming operate utilising licenses issued by the United Kingdom for betting and gaming and for the management of charity lottery competitions, and a license issued by Netherlands Antilles to operate internet casinos. Licences formerly held in both the Isle of Man and Alderney to operate internet casinos have not been renewed.

As part of the acquisition agreement for Littlewoods Gaming, Littlewoods Gaming has been licensed by Littlewoods Limited (formerly The Littlewoods Organisation), at no cost, to use “Littlewoods” as part of the Littlewoods Gaming branding for betting, gaming and lottery products. The agreement will run until 3 September 2010 unless previously terminated (for material breach or insolvency) or renewed by agreement between the parties.

Sportech PLC Form 20-F for the year ended 31 December 2003 12

B. Business Overview (continued)

Competitive Position

The competitive position of Littlewoods Gaming is as follows:

Football Pools – Littlewoods Pools is dominant within its sector, accounting for over 80% of the British football pools market. This was reinforced by the acquisition of a competitor, Zetters Pools. This sector has been in decline since the introduction of the United Kingdom national lottery in 1994.

Games & Lotteries – Littlewoods Lotteries is the major private charity lottery manager in the United Kingdom. However, the number of such private lottery managers and their share of the market is small in a sector dominated by Camelot, the operator of the United Kingdom national lottery.

Interactive Television Gaming – The Company has an exclusive contract with ITV for fixed odds betting which commenced in March 2004 making Littlewoods Gaming the principal supplier of all interactive gaming and betting content behind ITV programming across all channels. Furthermore, the Company’s interactive betting service is now established on the Sky platform, and will be enhanced by the addition of fixed-odds games throughout 2004. Sportech is at the vanguard of this brand new entertainment experience and is ideally positioned to grow the interactive betting and gaming market at a number of levels, having invested in the technical and content expertise required to exploit this opportunity throughout 2003.

Sports Betting – the Company, trading as Bet Direct and formerly Bet247, is a relatively new entrant, commencing trading in 1998, in a highly competitive sector dominated by several major long established competitors, such as William Hill and Ladbrokes. The competition in the sector has recently been increased further by the emergence of online betting exchanges.

Material Effects of Government Regulations

The main trading subsidiaries of the Company, Littlewoods Promotions Limited and Littlewoods Lotteries Limited operate their businesses subject to UK government issued licences.

Betting and gaming

Betting and gaming in the UK is subject to regulation. The first comprehensive legislation governing the industry was the Betting, Gaming and Lotteries Act 1963 which provided a regulatory framework for the whole industry. The laws governing gaming (including casinos, bingo and gaming machines) and lotteries have since been codified separately in two acts - the Gaming Act 1968 and the Lotteries and Amusements Act 1976. The Gaming Act 1968 established the Gaming Board for Great Britain, the regulatory body for casinos, bingo clubs, gaming machines and the larger society and all local lotteries in Great Britain.

Pools

Pools are regulated by the Betting, Gaming and Lotteries Act 1963. Pools promoters are required to register with the local government authority and must also have a permit from Customs and Excise for each premises from which they operate pools betting or fixed-odds coupon betting.

Telephone betting

Telephone betting in the UK is regulated under the Betting, Gaming and Lotteries Act 1963 as a bookmaking operation. The main provision of the Act is to require anyone who accepts bets on his own account in the course of his business to hold a bookmaker’s permit. An application for a permit in England and Wales must be made to the local court acting for the local area in which the applicant has its head office.

Sportech PLC Form 20-F for the year ended 31 December 2003 13

B. Business Overview (continued)

Material Effects of Government Regulations (continued)

Lotteries and scratchcards

The Lotteries and Amusements Act 1976 differentiates between private lotteries (restricted to members of a society or a club) and society lotteries (open to all but run on behalf of a charity or not-for-profit society).

• Private lotteries (which the Company is no longer involved in)

These are lotteries restricted to members of a society or club or other persons visiting its premises. There is no limit placed upon the price of each ticket or the size of any of the prizes.

• Society lotteries

The Lotteries and Amusements Act 1976 permits individuals and companies to act as managers (generally referred to as external lottery managers or ‘ELMs’) of lotteries for charities and other ‘societies’, subject to certification by the Gaming Board. Society lotteries are subject to certain restrictions, which were altered by The Lotteries (Variation of Monetary Limits) Order 2002 on 17 June 2002, in particular:

• The proportion of proceeds allocated to prizes must not be more than 55%.

• The proportion of proceeds allocated to expenses (including the ELM’s fee and any VAT thereon) is restricted to a maximum of 35%.

• The sum of the prizes and expenses percentages must not exceed 80%, thus leaving at least 20% for the society.

• Tickets in a society lottery may not be ‘sold by means of a machine’.

• The scheme for each society lottery must be approved in advance by the Gaming Board.

• The price of each ticket or chance is limited to £2 maximum.

• The maximum size of each society lottery is limited to £2,000,000 and the maximum top prize is the higher of 10% of the proceeds or £25,000. In practice, therefore, the maximum top prize is £200,000.

The other forms of lottery which may lawfully be promoted to members of the general public are those run as part of the National Lottery. These include the scratchcards marketed under the ‘Instants’ brand by Camelot and the main on-line Lottery draws. The main operator of the Lottery is licensed under Section 5 of the 1993 National Lottery Act. However, other companies are permitted to run lotteries under the Lottery umbrella (as Vernons, a competitor, did with its ‘Easy Play’ game) provided that they obtain a licence under Section 6 of the Act from the National Lottery Commission and conclude an agreement with the Section 5 licensee (Camelot, at present); this has proven to be an involved process which only one competitor has completed.

Internet

The current legal position in the UK regarding the internet for the various gambling sectors is as follows:

• Bookmaking and pools

Bookmakers have for many years been able to accept telephone bets from clients with credit accounts. Similarly, therefore, they may accept bets over the internet using it as a form of communication. Likewise, football pools operators have always been able to accept entries by post and can therefore also use the internet.

• Casinos, bingo and gaming machines

Casino, bingo and machine gaming can only be conducted on licensed or registered premises and players have to be present on the premises when gaming. Hence no licence could be granted in the UK to an internet casino and it would be illegal to operate one in the UK.

• Lotteries

Lottery tickets can be sold by post or telephone but not by means of a machine, except in the case of the National Lottery (subject to conditions) and private lotteries. This has led to the Gaming Board giving permission to one external lottery manager (ELM), Littlewoods Gaming, to operate lotteries over the internet so long as it is merely used, rather like a telephone, as a means of communication connecting the buyers and sellers of tickets and the actual sale is carried out by human agency.

Sportech PLC Form 20-F for the year ended 31 December 2003 14

B. Business Overview (continued)

Material Effects of Government Regulations (continued)

The global reach of the internet enables residents of one country to participate in gambling opportunities offered from other countries. This has provided the opportunity for UK operators to expand their off-shore capabilities in order both to gain access to a far wider universe of gamblers and to offer a greater range of products, particularly low tax or tax-free betting.

The consequences for the UK gambling industry and government taxation revenues as gamblers decide to move offshore have been recognised in the recently announced review of gambling legislation, which has been asked to examine internet gambling. Whilst therefore it is probable that legislation will be brought in to regulate internet gaming, it is premature to speculate on its likely form. However, there can be no assurances that the ultimate form of such legislation would not have an adverse effect on the Company’s financial and operating results.

Current UK Gambling Review

The UK government has recently commissioned a review of gambling legislation to examine to what extent the legal framework under which gambling is conducted in the UK could be modernised. The report resulting from this review has now been published and its recommendations are designed to simplify the regulation of gambling and to extend choice for adult gamblers, whist keeping the industry free from the influence of crime. Its main proposals in summary are:

• All regulation relating to gambling be incorporated in a single Act of Parliament and controlled by a single regulator with licensing of individuals and companies being undertaken by the Gambling Commission.

• A range of measures be introduced to ease ability of adult gamblers to play. The main features that relate to the Company are that betting on the National Lottery is to be permitted and the use of credit cards is to be approved for gambling purchases.

C. Organisational Structure

Sportech PLC heads the Group containing the companies listed in note 1(c) to the Financial Statements, which is incorporated herein by reference. 100% of the ordinary shares of all of the companies are held by Sportech, either directly or indirectly, and hence they are all included in the consolidated financial statements. The organisational structure is as follows:

All of these companies are incorporated in England and Wales with the exceptions of Sportech PLC and Rodime Technologies Limited (incorporated in Scotland), Littlewoods Isle of Man Limited (incorporated in the Isle of Man), LWL Management NV (incorporated in Netherlands Antilles) and Littlewoods Alderney Limited (incorporated in Alderney).

Sportech PLC Form 20-F for the year ended 31 December 2003 15

D. Property, Plants And Equipment

Until the acquisition of Littlewoods Gaming the Company occupied offices totalling 800 sq. ft in Edinburgh, Scotland. These premises were occupied under a short-term lease that expired in February 2001.

In January 2001 the Company moved its headquarters to the premises of Littlewoods Gaming at Walton Hall Avenue in Liverpool. This property was held under a long leasehold (999 year lease) and carried in the balance sheet at £1.1m. The company also rents a number of smaller properties in the United Kingdom. In May 2002 the Company moved its headquarters to new premises in the Wavertree Technology Park in Liverpool, which was named Sportech House. This left the football pools operation in 2 buildings at the Walton Hall Avenue site. One of these was extensively refurbished incurring capital additions of £1.1m, and the entirety of the football pools operation moved into it. The second, along with surplus land, was disposed of during the financial year to 31 December 2002, resulting in a profit on disposal of £1.4m. The Walton Hall Avenue site occupied 501,000 square feet before the disposal; 334,000 square feet were sold with 167,000 square feet retained.

The Wavertree Technology Park premises is held under a 10 year lease that expires in January 2011. These premises comprise 23,000 square feet of purpose built office accommodation. During the year ended 31 December 2002, the Company spent £0.6m fitting out Sportech House.

Following the acquisition of the Zetters football pools business, the Company now holds the remaining lease for two floors of Saffron House in London, which houses the Zetters football pools business. This expires in September 2005. This also now houses certain parts of the Interactive unit.

The most significant element of the plant and equipment relates to pools collector handheld terminals. These are data capture terminals used by a national network of door to door collectors to capture details of football pools entries for onward transmission to the Football Pools operational headquarters at Walton Hall Avenue.

For information on the closing balance value of property, plant and equipment see Note 13 to the Financial Statements.

Sportech PLC Form 20-F for the year ended 31 December 2003 16

Item 5. Operating And Financial Review And Prospects

A. Operating Results

Non-GAAP measure

The discussion below contains references to ‘operating profit (before goodwill amortisation and restructuring)’. This is a non-GAAP measure derived from operating profit. It is used as it provides investors with a better insight into the results as it focuses on the underlying performance of the business. A demonstration of how operating profit before restructuring costs and amortisation of goodwill reconciles to operating profit is set out below, using the 2003, 2002 and 2001 operating results:

	2003		2002		2001
	£m		£m		£m
Operating profit (before goodwill amortisation and restructuring)	19.9		22.2		17.5
Restructuring costs	(1.3	)	(2.0	)	—
Amortisation of goodwill	(9.1	)	(8.8	)	(8.9	)
Operating profit	9.5		11.4		8.6

Overview

The turnover of the Football Pools business continues to decline though the Company continues to adopt policies to limit that decline. The revenues in the Betting business continue to increase, though the operating profit in this segment was affected by poor horse racing results. A fuller analysis of the 2003 figures is set out in the discussion below.

The Company’s sales revenue for the year was £207.9m, an increase of 6.5% on the 2002 figure of £195.3m. The increase reflects strong growth in Sports Betting revenues, with turnover 22% higher at £101.7m. This has been partially offset by the continuing decline of the Football Pools business, although the rate of decline in turnover reduced further to 11%, reflecting customer retention programmes in the direct and collector channels, along with the full-year benefit of Zetters.

The table below summarises the Company’s operating profit / (loss), before restructuring costs and amortisation of goodwill, from each of its businesses:

For the year ended 31 December	2003		2002		2001
	£m		£m		£m
Football Pools	26.0		25.6		23.2
Games & Lotteries	1.3		0.9		0.5
Interactive Television Gaming	(4.3	)	(2.3	)	(1.6	)
Betting	(3.1	)	(2.0	)	(4.0	)
Littlewoods Gaming	19.9		22.2		18.1
Technology Patents	—		—		(0.6	)
Operating profit (before goodwill amortisation and restructuring)	19.9		22.2		17.5

Sportech PLC Form 20-F for the year ended 31 December 2003 17

A. Operating Results (continued)

Operating results for the 12 months ended 31 December 2003 vs. 2002

Football Pools

Turnover decreased to £89.8m (2002: £100.8m). This represents a rate of decline of 11% (2002: 15%), reflecting customer retention programmes in the direct and collector channels, along with the full-year benefit of Zetters.

The operating profit (before goodwill amortisation and restructuring) of Football Pools was slightly ahead of 2002 at £26.0m (2002: £25.6m), as a result of the continued focus on generating operating efficiencies and initial synergies relating to the Zetters integration. While the Zetters identity has been retained, operations have now transferred to Littlewoods Football Pools, utilising more fully the Company’s call centre and recently implemented scanning technologies.

The Company continues to explore opportunities to further develop the Football Pools product in order to increase its attraction to new players.

Games & Lotteries

Turnover increased to £16.4m (2002: £11.4m), mainly as a result of the continued expansion of the online casino, Littlewoodscasino.com, and our other gaming site, LittlewoodsGameOn.com.

Operating profit (before goodwill amortisation and restructuring) increased to £1.3m (2002: £0.9m) mainly stemming from the successful operation and extension of the on-line casino, littlewoodscasino.com, which launched in August 2002. In September 2003, the casino was successfully expanded to provide integrated jackpot products, and in November 2003 poker games and tournaments were launched on littlewoodspoker.com. The combined casino and poker sites now offer a choice of over 70 different games.

Off-line games such as Spot the Ball and Lotto 3/4 continue to be profitable, as a result of lower product and distribution costs. In addition, charity scratchcards have undergone a major redesign with new stakes and prizes introduced in an effort to revitalise sales.

Extended scratchcard trials with Sainsbury’s and Safeway supermarkets continue, with both retailers having stocked Littlewoods core scratchcards in store for the first time during 2003.

Littlewoods Gaming continues to establish relationships with high profile charities and good causes with broad appeal. The Poppy Appeal scratchcard last autumn was a notable success. The latest of these collaborations is the British Olympic Association scratchcard, which was launched in April 2004 and is aimed at supporting Team GB in Athens this summer.

Interactive Television Gaming

This business had no turnover up to 31 December 2003 as it was still in development.

The operating loss (before goodwill amortisation and restructuring) of £4.3m (2002: £2.3m) represents the costs of beginning to establish this business.

The interactive television gaming contract with ITV:

• offers the opportunity to provide gaming directly linked to programming content; and

• represents a 24:7 interactive distribution channel for a range of interactive gaming and betting products.

Sportech PLC Form 20-F for the year ended 31 December 2003 18

A. Operating Results (continued)

Operating results for the 12 months ended 31 December 2003 vs. 2002 (continued)

Betting

Littlewoods Bet Direct currently provides customers with a wide range of betting opportunities across telephone, internet and Sky Digital platforms. Organic growth across telephone and internet delivered annual revenues of over £100m for the first time, which at £101.7m was 22% higher than 2002 (2002: £83.1m). This growth was underpinned by a 10% increase in average telephone stakes and a 35% increase in average internet stakes. Overall, customer numbers increased to 313,000 (2002: 272,000).

This revenue growth was not reflected in retained gross win, principally as a result of a run of poor horse racing results which reduced the gross win rate (GWR) to 7.3% as against 9.6% in 2002. This is the principal reason why the operating loss (before goodwill amortisation and restructuring) increased to £3.1m in 2003 (2002: £2.0m) although there was also the impact of development costs associated with the launch of interactive betting services on attheraces and Sky Active.

Although margins did improve in the second half of 2003 on telephone betting, the gross win performance was nevertheless disappointing and is intended to be addressed through a number of key actions. In particular, the Company aims to reduce the reliance on horse racing by increasing it’s share of the football betting market, where GWR over the last two years has been maintained at 11%. In addition, betting opportunities in other sports including cricket, tennis, rugby and golf will be exploited, and the introduction of in-running betting across a number of sports. The Company is also launching the Littlewoods Bet Direct presence on ITV, and growing it’s Sky Active presence, where experience since launch, and of the market generally, points to a GWR above 10%. The betdirect.net internet site is undergoing a major upgrade.

Operating Profit

Following goodwill amortisation of £9.1m (2002: £8.8m) and restructuring costs of £1.3m (2002: £2.0m), operating profit was £9.5m (2002: £11.4m). Restructuring costs of £1.3m in 2003 mainly reflect the full integration of Zetters Football Pools, along with a reorganisation following the disposal of the Rodime Technology Patents business.

Cashflow

Operating cash flow in 2003 was stronger than in 2002 at £18.6m (2002: £18.1m) enabling continued investment in growth strategies. Total capital expenditure during the year was £3.0m (2002: £4.9m) which included further investment in developing games and betting content for interactive television.

Financial position

Sportech started the year ending 31 December 2003 with net assets of £31.5m. The Company’s loss after taxation for the year ending 31 December 2003 was £0.2m after amortising £9.1m of goodwill. Net assets were £31.3m at 31 December 2003.

Goodwill

The amortisation charge for the year relating to the Littlewoods Gaming acquisition was £8.7m. A further £0.4m relating to the Zetters Pools Business resulted in a total amortisation charge for the year of £9.1m (2002: £8.8m).

Taxation

The total tax charge for the year ended 31 December 2003 was £3.7m on profits of £3.5m. A reconciliation of the effective rate of tax to the standard rate is given in Note 10 of the Financial Statements. The main reconciling item is for goodwill amortisation not allowable for tax.

Net interest

Net interest paid for the year ending 31 December 2003 was £6.6m compared with £8.2m for the period ended 31 December 2002, reflecting a decrease in the level of bank loans and lower interest rates.

Inflation

The effects of inflation on the Company’s financial position and results of operations were not material during the year ending 31 December 2003.

Sportech PLC Form 20-F for the year ended 31 December 2003 19

A. Operating Results (continued)

Operating results for the 12 months ended 31 December 2002 vs. 2001

The financial results for the period reflect the acquisition by the Company of the Zetters Pools business on 29 August 2002 for net cash of £0.7m (purchase price of £1.4m offset by £0.7m cash acquired) delivering a customer base of 60,000. There has been no exceptional customer loss following acquisition, and the business has performed in line with expectations, contributing £1.8m to turnover and £0.4m to operating profit.

The only amounts relating to the Technology Patents business in the year were patent exploitation consultancy fees amounting to less than £0.1m.

Football Pools

Turnover was £100.8m in 2002 compared to £119.0m in 2001. This includes the above £1.8m in respect of Zetters Pools in 2002 (2001: nil). The like for like rate of decline in turnover in the second half of the year reduced further to 14%.

The operating profit (before goodwill amortisation and restructuring) of Football Pools increased to £25.6m (2001: £23.2m), reflecting significant improvement in operating efficiencies, the reduction in the duty burden from April 2002 and a £0.4m contribution from Zetters since its acquisition in August 2002.

The Company continues to identify opportunities to rationalise the operational and overhead base of the football pools whilst extending our distribution of this product via television, internet and overseas businesses.

Games & Lotteries

Turnover was slightly down on 2001 at £11.4m (2001: £12.5m).

Operating profit before restructuring costs and amortisation of goodwill for Games & Lotteries increased by £0.4m to £0.9m (2001: £0.5m), mainly due to the £0.5m profit from the sale of the Pull Tabs lottery business. 2002 was a period of significant transition for the soft gaming business as the Company concluded a number of major new distribution arrangements, significantly enhancing both on line and off line customer access, while withdrawing from low growth marginal businesses such as Pull Tabs lotteries.

Growth of on-line games has been underpinned by the launch of LittlewoodsCasino.com, the on-line casino, which was launched in August 2002. Levels of customer interest in this product are encouraging and the choice and quality of games available was enhanced in the second half of 2003.

The Company’s plan to capture a larger share of the £500m scratchcard market was boosted by groundbreaking retail distribution deals with both Sainsbury’s and Safeway for the supply of own label scratchcards dedicated for specific charities such as Comic Relief and Great Ormond Street Hospital.

Interactive Television Gaming

As noted above, this business has no turnover up to 31 December 2003 as it is still in development.

The operating loss (before goodwill amortisation and restructuring) of £2.3m (2001: £1.6m) represents the costs of acquiring an interactive television gaming contract with ITV and developing the gaming functionality to be used by this business.

Betting

Betting continued to deliver strong revenue growth, with turnover 60% higher, at £83.1m (2001: £51.8m). This growth reflected the benefits of a level playing field arising from the elimination of tax for customers in October 2001. As a result of the increased betting volumes, the operating loss (before goodwill amortisation and restructuring) was halved during the year to £2.0m compared to £4.0m in 2001. Customer numbers increased by 20% to 272,000 (2001: 227,000), with average stakes per telephone call up 23% to £36 (2001: £29) and the average internet bet up 26% to £17 (2001: £13). Following a strong first half, gross win margins eased back in the second half, in line with market trends, leading to a gross win margin for the full year of 10% (compared to 11% in 2001).

The commencement of an all weather racing sponsorship programme covering three seasons and ending on 1 May 2004, positioning the Littlewoods Bet Direct brand at more than one in five UK televised horse racing events, significantly raised Littlewoods Bet Direct’s profile. The business continued to provide a variety of unique best and special bet offers to customers, generating continued media exposure for the brand.

Sportech PLC Form 20-F for the year ended 31 December 2003 20

A. Operating Results (continued)

Operating results for the 12 months ended 31 December 2002 vs. 2001 (continued)

Operating Profit

Following goodwill amortisation of £8.8m (2001: £8.9m) and restructuring costs of £2.0m (2001: nil), the Company’s operating profit was £11.4m compared with £8.6m in 2001.

Restructuring costs of £2.0m in 2002 related mainly to redundancies.

Cashflow

The Company’s operating cashflow for the year was £18.1m compared with £15.7m for 2001, reflecting the increased operating profit. The acquisition of the Zetters Pools business was almost entirely funded by the proceeds from the sale of the Pull Tabs business. Scheduled loan payments of £16m were made in the year, and a £2m drawdown was made against a new facility set up to finance the investment in the Interactive business.

Financial position

Sportech started the year ending 31 December 2002 with net assets of £28.6m. The Company’s profit after taxation for the year ending 31 December 2001 was £2.9m after amortising £8.8m of goodwill. Net assets were £31.5m at 31 December 2002.

Goodwill

The acquisition of the Zetters Pools business resulted in an addition to goodwill of £1.3m. This is being amortised over 3 years, resulting in a charge for the period since acquisition to 31 December 2002 of £0.1m. The amortisation charge for the year relating to the Littlewoods Gaming acquisition was £8.7m, resulting in a total amortisation charge for the year of £8.8m (2001: £8.9m).

Taxation

The total tax charge for the year ended 31 December 2002 was £1.7m on profits of £4.6m. A reconciliation of the effective rate of tax to the standard rate is given in Note 10 of the Financial Statements.

Net interest

Net interest paid for the year ending 31 December 2002 was £8.2m compared with £9.2m for the period ended 31 December 2001, reflecting a decrease in the level of bank loans.

Inflation

The effects of inflation on the Company’s financial position and results of operations were not material during the year ending 31 December 2002.

Sportech PLC Form 20-F for the year ended 31 December 2003 21

A. Operating Results (continued)

Critical accounting policies

Our consolidated financial statements, included in “Item 17 - Financial Statements”, are prepared based on the accounting policies described in Note 2 to the consolidated financial statements which are in conformity with UK generally accepted accounting principles, which differs in significant respects from US generally accepted accounting principles.

The preparation of our consolidated financial statements in conformity with UK generally accepted accounting principles, and the reconciliation of these financial statements to US generally accepted accounting principles as described in Note 30, requires management to make estimates and assumptions that affect the carrying value of assets and liabilities at the date of the consolidated financial statements and the reported amount of sales and expenses during the periods reported in these financial statements. Certain of our accounting policies require the application of management judgment in selecting assumptions when making significant estimates about matters that are inherently uncertain. Management bases its estimates on historical experience and other assumptions that it believes are reasonable.

We believe that the following are our more critical accounting estimates used in the preparation of our consolidated financial statements that could have a significant impact on our future consolidated results of operations, financial position and cash flows. Actual results could differ from estimates. These accounting estimates, and the following description, have been developed in consultation with the Company’s senior management and audit committee.

Impairment

The Company has made a significant investment in Littlewoods Gaming resulting in a significant goodwill amount being carried in the balance sheet. Under UK GAAP, this goodwill amount is tested for impairment when management believes that circumstances indicate that it is appropriate to make such a test. Factors that would trigger such an impairment review would include significant under-performance in relation to expected operating results, changes in the overall strategy for the business or negative industry or economic trends. The Company’s estimation techniques for determining the impairment of goodwill includes an analysis of the Company’s discounted cash flows. Changes in the Company’s estimation techniques with respect to goodwill impairment could materially effect the Company’s presentation of its financial results and operations.

Under US GAAP, the goodwill is tested for impairment on an annual basis. Please refer to Note 30(e) to the Financial Statements which is incorporated herein by reference.

Provision for collector incentive scheme

In December 1996, an incentive scheme to reward football pools collectors was established. Under the terms of the scheme, the collectors earn points on the basis of their sales. These points can be converted into vouchers to purchase items from high street shops. On the basis of similar schemes and past redemption rates, estimation techniques for determining the expected future redemption rate and liabilities attributable to these points have been established. The Company has used an estimated redemption rate of 58% in preparing the accruals as at 31 December 2003 and 31 December 2002, and hence the value of the points not provided for in these financial statements amounts to £2.6m in 2003 compared with £2.4m in 2002. Changes in the Company’s estimation techniques with respect to this scheme could materially effect the Company’s presentation of its financial results and operations. Below is a sensitivity analysis of the redemption rate assumption as at 31 December 2003 and 31 December 2002:

	As at 31 December 2003				As at 31 December 2002
	Provided		Unprovided	Total	Provided		Unprovided	Total
	£m		£m	£m	£m		£m	£m
Current redemption rate of 58%	3.6		2.6	6.2	3.4		2.4	5.8
Redemption rate of 40%	2.5		3.7	6.2	2.3		3.5	5.8
Resultant increase in profit before tax	1.1				1.1
Redemption rate of 80%	5.0		1.2	6.2	4.6		1.2	5.8
Resultant (decrease) in profit before tax	(1.4	)			(1.2	)
Redemption rate of 100%	6.2		—	6.2	5.8		—	5.8
Resultant (decrease) in profit before tax	(2.6	)			(2.4	)

Sportech PLC Form 20-F for the year ended 31 December 2003 22

A. Operating Results (continued)

Critical accounting policies

Depreciation and amortisation

The Company’s depreciation and amortisation policies are based on management estimates of the future economic lives of tangible and intangible fixed assets. The depreciation and amortisation of goodwill is governed in part by UK Financial Reporting Standard 11 and is written off over a period of 20 years. Depreciation is provided for in the Company’s financial statements on a straight-line basis to write off the cost of fixed assets over their anticipated useful lives at the following annual rates:

Long leasehold land	NIL
Long leasehold buildings	Over remaining estimated useful life (12 years)
Buildings fixtures and fittings	4.0% - 20%
Plant, equipment and other fixtures and fittings	10.0% – 33.3%
Leasehold improvements	10.0% (or period of lease if shorter)
Computers	14.3% - 33.3%
Motor vehicles	12.5% - 25.0%
Hand-held pools bet capture equipment	16.7%

Changes in the Company’s estimation techniques with respect to its depreciation rates or related estimates could materially effect the Company’s presentation of its financial results and operations.

Recently Issued US Accounting Pronouncements

Please refer to Note 30(j) to the Financial Statements which is incorporated herein by reference.

Sportech PLC Form 20-F for the year ended 31 December 2003 23

B. Liquidity And Capital Resources

Liquidity

The Company expects that its principal source of funds will be revenues received from its operating activities. Although the Company believes that it will have sufficient liquidity to meet its anticipated cash needs, this belief is based on assumptions about a variety of factors, many of which are beyond the control of the Company. For example, the Company’s cash needs could be significantly greater than anticipated as a result of adverse market conditions, adverse government actions or regulations, or increases in interest rates on the Company’s substantial indebtedness.

For 2003, the Company’s net cash inflow from its operating activities was £18.6m compared with £18.1m in 2002. The Company’s net cash decreased by £3.1m in 2003, compared to £9.7m in 2002. The businesses of Littlewoods Gaming are expected to generate further net cash operating inflow.

The £162.5m consideration for the acquisition of Littlewoods Leisure in the year to 31 December 2000 was funded through new loan facilities totalling £140m together with a Rights Issue and Subscription raising £27.9m. The new bank facilities were established with Bank of Scotland comprising a five year term loan of £110m, mezzanine loans of £30m repayable in December 2008, and a further mezzanine facility of £11m to fund investment in the interactive television gaming contract also repayable in December 2008. During each of the years to 31 December 2002 and 2003, £16m of the term loan was repaid. Net debt at the end of the financial year was £114.7m. The loans were renegotiated since 31 December 2003, as set out in Note 19 to the Financial Statements.

The Company’s financial liabilities comprise borrowings from the Bank of Scotland of approximately £116.9m at 31 December 2003 compared with £125.7m at 31 December 2002. Such indebtedness also includes an overdraft balance of £6.9m at 31 December 2003 compared with £5.7m at 31 December 2002, which is netted off against cash balances of £4.1m (2002: £6.0m) when establishing the net overdraft position. The Company’s debts falling due within one year for 2003 equals £44.3m compared with £43.5m for 2002. A maturity profile of the carrying amount of financial liabilities and details of undrawn committed facilities are presented in Notes 18, 19 and 20 to the Financial Statements.

The Company’s net overdraft loans are subject to floating interest rates based on central bank base rates. However, certain liabilities of the Company, including the facility agreements with the Bank of Scotland, are subject to floating interest rates based on LIBOR. In order to mitigate the Company’s risks arising from floating interest rates, it is the Company’s policy to hedge interest rate risk using interest rate swaps and interest rate caps. The analysis by year of these hedging instruments is given in “Item 11 - Quantitative And Qualitative Disclosures About Market Risk”.

Financial instruments

The Company’s financial instruments comprise bank loans, bank overdraft and cash and term bank deposits, as well as trade debtors and creditors that arise directly from its operations. The main purpose of these financial instruments is to provide finance for the Company’s future operations and potential acquisitions. The Company utilises interest rate swaps, floors and caps. For more information see “Item 11 - Quantitative And Qualitative Disclosures About Market Risk”.

Prior to the acquisition of Littlewoods Gaming, the Company’s investment policies prohibited it from entering into forward currency hedging arrangements. The Company changed this policy after the acquisition, but has not yet deemed it necessary to enter into such contracts. Prior to the time of the acquisition, Littlewoods Gaming entered into certain foreign currency hedging contracts, although none were in place at the time of the acquisition or at the year end.

Capital expenditures

The Company’s operations are not particularly capital intensive. Prior to the current year, the Company’s capital expenses were predominantly targeted at enhancing productivity and to provide a means of reducing player turnover (e.g. hand held terminals for the network of collectors). In the year ended 31 December 2003, the capital expenditure was targeted mainly at IT projects, in particular relating to the ITV contract. There were no material divestures during the year. There were no material contracted commitments for capital expenditure at 31 December 2003.

Sportech PLC Form 20-F for the year ended 31 December 2003 24

B. Liquidity And Capital Resources (continued)

During the three year period ended 31 December 2003, the Company’s capital expenditures and investments totalled approximately £9,900,000. During the same three-year period the Company’s divestitures yielded £3,500,000.

All expenditures and divestitures were in the United Kingdom.

Capital commitments

There are no material commitments for capital expenditures.

C. Research And Development, Patents And Licenses, Etc.

There is no formal policy for research and development. The Company in the last three years has not incurred any significant research and development costs, with the exception of those noted under “Capital expenditures” under Item 5B. A business development unit does exist within the acquired business of Littlewoods Leisure for the purpose of identifying potential products or new business channels for existing products. This unit’s expenses were £1.0m in the year to 31 December 2003, £0.7m in the year to 31 December 2002 and £1.6m in the year to 31 December 2001.

D. Trend Information

The following trends, uncertainties and events could have a material impact on the Company’s net revenues from continuing operations, net income and liquidity and capital resources:

1. Whilst the Company has now hedged a significant portion of its debts, the Company has and may continue to incur significant debts at floating exchange rates. This may impact the Company’s operations, profits and business opportunities.

2. A substantial portion of the Company’s revenues in 2000 were attributable to the Seagate technology lawsuit. Following the sale of the Technology patents, there will be no future revenues from further litigation or patent royalties.

3. The Company may invest in its gaming, football pools, sports betting and lottery businesses. This may impact the Company’s operations, profits and business opportunities. The football pools business has been in a period of substantial decline for a number of years although the rate of that decline is now slowing. This has been offset by substantial growth in the Sports Betting business. See “Operating Results” for further information.

E. Off Balance Sheet Arrangements – The Company has no off balance sheet arrangements.

F. Tabular Disclosure Of Contractual Obligations

The Company’s significant contractual commitments at 31 December 2003 were as follows:

	Total	Less Than 1 Year	1 to 3 Years	3 to 5 Years	More Than 5 Years
	£m	£m	£m	£m	£m
Long term debt	110.0	16.0	32.0	62.0	—
Capital (finance) lease obligations	—	—	—	—	—
Operating lease commitments	2.5	0.4	0.6	0.5	1.0
Hire purchase contracts	0.2	—	0.1	0.1	—
Other commitments (Note 1)	38.9	11.3	11.8	15.8	—
Total	151.6	27.7	44.5	78.4	1.0

Note 1 – The other commitments include minimum guaranteed commissions payable under sales contracts. These are expected to be covered by revenues. One of these contracts has a break clause after two years (subject to a poor performance condition set out in the contract) which if exercised would mean the £15.8m included in ‘3 to 5 years’ and £6.4m of the amount included under ‘1 to 3 years’ would not have to be paid.

Following the year end, the repayment terms for the long-term debt were renegotiated. See Item 11 – “Quantitative And Qualitative Disclosures About Market Risk” for revised timescales.

Sportech PLC Form 20-F for the year ended 31 December 2003 25

Item 6. Directors, Senior Management And Employees

A. Directors And Senior Management

The directors and officers of the Company are set forth below. At every annual general meeting of the Company one-third of the directors or, if that number is not three or a multiple of three, the number nearest to one-third shall retire from office but shall be eligible for re-election. Any director retiring at the meeting shall retain office until the close of the meeting. The directors to retire by rotation shall be those who have been longest in office since their last appointment. In the following table: a) indicates a member of the Board of Directors; and b) indicates Senior Executives of the Company.

	Name	Age	Title	Experience
a)	David Mathewson	56	Non-executive Chairman	David Mathewson has been a Director of the Company since 1992 and was appointed Chairman on 1 January 2002. He is a Director of Noble & Co Ltd, merchant bankers and a Non-executive Director of Edinburgh UK Tracker Trust PLC, Martin Currie High Income Trust PLC, Murray VCT PLC and various private companies. He is also Non-executive Chairman of Geared Opportunities Income Trust plc and a Trustee of the Royal Botanic Gardens, Edinburgh. David Mathewson is a qualified chartered accountant.
a)	George Rushton	50	Managing Director	George Rushton was appointed Managing Director of Sportech PLC and Littlewoods Gaming on 18 November 2003. He had previously been a main Board Director at Bourne Leisure, and prior to this, Managing Director of Hotels and Resorts at The Rank Group’s Holidays Division, as such he has been responsible for three of the UK’s leading leisure brands: Warner Holidays, Butlins and Oasis Villages. George Rushton is a qualified solicitor.
a)	Gary Speakman	42	Finance Director	Gary Speakman was appointed Finance Director on 1 November 2000, having previously been Finance Director of Littlewoods Gaming for three years. He had previously held a variety of positions with The Littlewoods Organisation, Gallaher Limited, Leyland DAF, Rover Group and Dowty Group. He is responsible for finance and group services including technology. Gary Speakman is a qualified chartered management accountant.
a)	Roger Withers	61	Non-executive Director	Roger Withers was appointed to the Board on 4 September 2000, following the acquisition of Littlewoods Gaming where he was Executive Chairman. He previously held a variety of senior positions with Bass PLC and Hilton Group PLC. Roger Withers is Chairman of Arena Leisure PLC and holds a number of Non-executive Directorships in the leisure, exhibition and technology industries.
a)	Kathryn Revitt	39	Non-executive Director	Kathryn Revitt was appointed to the Board on 4 September 2000. She is a Director of a number of companies including Leisure Parcs Limited, the owner of Blackpool Tower and The Winter Gardens, and Cuerden Leisure Limited, an operator and distributor of gaming machines. Kathryn Revitt is a qualified solicitor.
b)	Robert Haggis	50	Company Secretary	Robert Haggis was appointed Company Secretary and Legal Adviser on 22 January 2001. He has held senior positions at Hoechst and J Bibby & Sons PLC. He is responsible for compliance and general legal advice. Robert Haggis is a qualified barrister.

(continued on following page)

Sportech PLC Form 20-F for the year ended 31 December 2003 26

A. Directors And Senior Management (continued)

	Name	Age	Title	Experience
b)	Angela Moran	48	Director of Football Pools	Angela Moran was appointed Director of Football Pools in January 2001. She is responsible for all aspects of Football Pools operations. She joined Littlewoods Gaming in 1976 and has held a variety of Senior Management positions within the Company.
b)	Peter Cuffe	46	Director of Interactive Media	Peter Cuffe joined Littlewoods Gaming in March 2000. He is responsible for new media and e-commerce strategy for all products within the Company’s portfolio. He was previously Managing Director of London-based Blue Marble, the new media production facility of the D’Arcy Group.
b)	Steve Taylor	42	Director of Sports Betting	Steve Taylor joined Littlewoods Gaming in June 1997 as Business Development Director. He is responsible for Sports Betting across all distribution channels. He was previously a management consultant with BDO Binder Hamlyn, and worked as a Finance Director in manufacturing industries including Gradus PLC and GEC PLC. Steve Taylor is a qualified chartered accountant.
b)	David Henderson	33	Director of Technology and Strategy	David Henderson joined Littlewoods Gaming in October 2001 and is responsible for the Company’s extensive IT infrastructure and systems development and corporate strategy. Prior to joining, he completed an MBA and held positions with KPMG Consulting, Virgin and Accenture.
b)	Mark Allison	41	Director of Retail Gaming	Mark Allison joined Littlewoods Gaming as Retail Gaming Director in March 2003. He is responsible for the Littlewoods scratchcard business and the development of new retail products and channels. He previously held positions with the Rank Group in Bingo and Casinos and worked extensively in Asia and Africa in the development of lottery projects.

Sportech PLC Form 20-F for the year ended 31 December 2003 27

B. Compensation

Details of each Director’s remuneration are given below:

	Fees/ Salary	Compen- sation for loss of office	Taxable benefits	Bonuses	Year to 31 December 2003 Total	Year to 31 December 2002 Total	Year to 31 December 2001 Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Executive
George Rushton	24	—	—	—	24	—	—
Colin McGill 4	176	309	22	80	587	261	261
Gary Speakman	161	—	1	74	236	208	216
Non-Executive
Malcolm McIver 1	—	—	—	—	—	—	65
David Mathewson	50	—	—	—	50	46	65
Roger Withers 2	25	—	—	—	25	25	6
Kathryn Revitt 3	—	—	—	—	—	—	—
Aggregate Emoluments	436	309	23	154	922	540	613
Fees paid to third parties 2, 3					25	25	114

The Non-Executive Directors do not participate in any incentive, pension or benefit schemes of the Company (with the exception of David Mathewson whose benefits shown below are legacy payments relating to his service as an Executive Director in the preceding financial year) and their remuneration is determined by the Board. No amounts have been set aside for or accrued by the Company to provide pension payments to its Directors and Management for the year ending 31 December 2003. Taxable benefits comprise various insurance policies.

1 Malcolm McIver was Non-Executive Chairman through to his retirement on 31 December 2001. His emoluments include £30,000 paid by the Company as compensation for loss of office as a Director following his resignation from the Board on 31 December 2001.

2 Roger Withers became a Non-Executive Director on 31 October 2001, and has been paid directly by the Company since that date. Prior to that, Mr Withers was an Executive Director and his services were provided through a consultancy agreement between the Company and Hemway Limited. Payments to Hemway Limited amounted to £99,000 in 2001. In total the amount paid in relation to Mr Withers in 2001 was £105,250.

3 The services of Kathryn Revitt are provided through a consultancy agreement between the Company and Hemway Limited. Payments to Hemway Limited amounted to £25,000 in 2003 (2002: £25,000).

4 Ceased to be Director of the Company on 28 November 2003. Colin McGill was the Managing Director until this date.

Sportech PLC Form 20-F for the year ended 31 December 2003 28

B. Compensation (continued)

Two Directors (2002: two, 2001: three) are members of defined contribution schemes. Contributions paid by the Company in respect of these Directors were as follows:

	Year to 31 December 2003 Total	Year to 31 December 2002 Total	Year to 31 December 2001 Total
	£’000	£’000	£’000
Colin McGill	14	14	11
Gary Speakman	12	11	34
David Mathewson	—	—	4
	26	25	49

None of the Directors (or their associates) of the Company has ever been indebted to the Company.

The main component parts of the remuneration packages for executive directors and senior management are as follows:

Basic annual salary

An individual’s basic salary is reviewed and determined by the Committee annually, taking into account external research and his or her performance.

Performance related bonus

For 2004 as in 2003 the Executive Directors and Senior Executives will be rewarded on the basis of a two-part bonus structure, reflecting the achievement of profit targets and key business objectives. The total of such bonus payments will be limited to 50% of basic salary.

Pension arrangements

All Senior Executives are members of the Sportech defined contributions scheme. No amounts have been set aside or accrued by the Company or subsidiaries in their books to provide pension, retirement or similar benefits.

Share option scheme

A share option scheme is in place, the rules of which are designed to comply with the best practice provisions annexed to the listing rules of the UK Listing Authority and current guidelines of institutional shareholders. The level of grant to any individual is at the discretion of the Remuneration Committee. The total number of Ordinary Shares over which options will be granted under the scheme will not exceed 3% of the Company’s issued ordinary share capital from time to time, or such higher percentage (not exceeding 10%) as may be approved by shareholders at a future date.

Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary shares in the Company granted to or held by the Directors. Details of the options granted to Directors and other participants are discussed below in “Item 6E - Share Ownership”.

Sportech PLC Form 20-F for the year ended 31 December 2003 29

C. Board Practices

Directors service contracts

The dates each of the directors and managers took up office are contained in Item 6A. The Company has entered into Service Contracts with all five directors. Notice periods and/or unexpired terms are as set out in the following table:

	Unexpired term	Notice period
George Rushton	n/a	6 months
Gary Speakman	n/a	1 year
David Mathewson	n/a	3 months
Roger Withers	n/a	3 months
Kathryn Revitt *	n/a	n/a

* - the contract under which Kathryn Revitt’s services are provided to the Company continues from each Annual General Meeting at which she is re-appointed as a Director until the Annual General Meeting at which she is required to retire by rotation. Kathryn Revitt retired by rotation in accordance with the Articles of Association of the Company at this year’s Annual General Meeting and was re-appointed.

A proforma Director’s contract has been included as an exhibit as an example of the terms and conditions that are included in such contracts.

With respect to the payment of benefits upon termination of the service contracts listed above, the contracts provide that the Company must provide the above notice, where applicable, prior to terminating the Directors’ employment or pay their salary and all other contractual benefits in lieu of providing such notice.

Audit Committee

The Audit Committee of the Board currently comprises the three Non-Executive Directors – Roger Withers, Kathryn Revitt and David Mathewson (who is the chairperson). The Committee meets at least three times a year to consider aspects of internal control, accounting policies and the financial results. The Committee has also met with the external auditors without the presence of the Executive Directors. The Audit Committee has a charter.

The Audit Committee reviews the effectiveness of the internal control environment of the Company. It receives reports and recommendations from the internal and external auditors which includes recommendations for improvement. The Audit Committee’s role in this area is confined to a high level review of the arrangements for internal control. Significant risk issues are referred to the Board for consideration, and the Committee is entitled to seek professional advice from outside the Company

A risk management programme is in place, supported by a comprehensive business control and risk self-assessment process and a business continuity plan. There is an ongoing process for identifying, evaluating and managing the Company’s significant risks. A Schedule of Strategic Risks is produced and maintained, and presented to the Audit Committee and Board.

David Mathewson is the Audit Committee’s Financial Expert, being a Chartered Accountant.

Sportech PLC Form 20-F for the year ended 31 December 2003 30

C. Board Practices (continued)

Remuneration Committee

A Remuneration Committee (the Committee) comprising the Non-Executive Directors only (Roger Withers, Kathryn Revitt and David Mathewson) was in place for the year ending 31 December 2003. None of the Committee has any personal financial interest (other than as a shareholder), conflicts of interest arising from cross-directorships or day to day involvement in the running of the business. The Committee makes its proposals following consultation with the Managing Director (on remuneration other than his own) and is entitled to seek professional advice from outside the Company.

The Non-Executive Directors do not participate in any incentive, pension or benefit schemes of the Company (with the exception of David Mathewson whose benefits shown above are legacy payments relating to his service as an Executive Director in the 2001 financial year) and their remuneration is determined by the Board.

The Committee aims to ensure that the remuneration packages offered to executive directors and senior management are designed to:

• Be competitive and to attract, retain and motivate executives of the right calibre.

• Reflect their responsibility.

• Incorporate a significant element of pay linked to the achievement of key business objectives and increased shareholder value.

In considering its policy, the Committee has given full consideration to the provisions of the “Committee on Corporate Governance Combined Code: Principles of Good Governance and Code of Best Practice (June 1998)”.

D. Employees

The information included in note 8 to the Financial Statements is incorporated herein by reference.

E. Share Ownership

The Directors who held office during the year had the following beneficial interests in the share capital of the Company:

	2001 No.	2002 No.	2003 No.
George Rushton	n/a	n/a	—
Colin McGill	3,768,263	4,268,263	n/a
Gary Speakman	—	500,000	500,000
Roger Withers	500,665	500,665	500,665
David Mathewson	3,500,000	3,500,000	3,500,000
Kathryn Revitt	—	—	—

In April 2001, March 2002, April 2003, November 2003 and April 2004 the Company granted the following directors options to purchase the following number of shares:

	Apr 2001	Mar 2002	Mar 2003	Nov 2003	Apr 2004	Total
Granted & Outstanding
George Rushton	—	—	—	2,500,000	2,500,000	5,000,000
Gary Speakman	1,200,000	1,200,000	1,200,000	—	900,000	4,500,000
	1,200,000	1,200,000	1,200,000	2,500,000	3,400,000	9,500,000

The April 2001 scheme gives these persons the option to acquire ordinary shares in the company at an option price of £0.1475 per share. The option is exercisable no earlier than 10 April 2004 and no later than 10 April 2011 and can only be exercised subject to the condition that the market value of a share shall not be less than £0.35 for a period of 5 dealing days at any time in the period of 6 months prior to the date the option is first exercised.

The March 2002 scheme gives these persons the option to acquire ordinary shares in the company at an option price of £0.1742 per share. The option is exercisable no earlier than 8 March 2005 and no later than 8 March 2012 and can only be exercised subject to the condition that the market value of a share shall not be less than £0.35 for a period of 5 dealing days at any time in the period of 6 months prior to the date the option is first exercised.

Sportech PLC Form 20-F for the year ended 31 December 2003 31

E. Share Ownership (continued)

The March 2003 scheme gives these persons the option to acquire ordinary shares in the company at an option price of £0.1225 per share. The option is exercisable no earlier than 25 March 2006 and no later than 24 March 2013 and can only be exercised in the event of growth in earnings per share compounded over a three year period from 2002 of 20%, 15% and 10% per annum.

The November 2003 scheme gives these persons the option to acquire ordinary shares in the company at an option price of £0.1925 per share. The option is exercisable no earlier than 21 November 2006 and no later than 20 November 2013 and can only be exercised in the event of growth in earnings per share compounded over a three year period from 2003 of 20%, 15% and 10% per annum.

The April 2004 scheme gives these persons the option to acquire ordinary shares in the company at an option price of £0.1325 per share. The option is exercisable no earlier than 27 April 2007 and no later than 27 April 2014 and can only be exercised in the event of growth in earnings per share compounded over a three year period from 2003 of 20%, 15% and 10% per annum.

For further information on the share option schemes, please see Note 21 to the Financial Statements, which is incorporated herein by reference.

Item 7. Major Shareholders And Related Party Transactions

A. Major Shareholders

On June 25, 1991, the Company’s American Depository Receipts (“ADRs”) were delisted from the National Association of Securities Dealers Automated Quotation system (“NASDAQ”) because the Company was not in compliance with the net worth requirements of NASDAQ.

Prior to the acquisition of Littlewoods Gaming, the Bank of Scotland owned 49.6% of the ordinary shares of the Company. As a result of the share issues that generated a substantial part of the funds used in this acquisition, the Bank of Scotland’s shareholding was diluted to 28.4%.

The following table lists each person known to the Company to be the owner of 5% or more of the issued share capital of the Company as at 25 June 2004:

Title of class	Identity of shareholder	Amount owned	% of class
5p Ordinary shares	Bank of Scotland	168,282,663	28.4	%
5p Ordinary shares	Newby Manor Limited	168,282,663	28.4	%

So far as is known to the Company, the Company is not directly or indirectly owned or controlled by another corporation or by any foreign government, except to the extent that the Company’s two major shareholders own a combined total of 56.8% of its outstanding shares. No shareholders have any special voting rights.

As at 23 June 2004, there were 141 US record holders holding 742,791 shares in the ADR program.

B. Related Party Transactions

Please see the information set forth in note 28 to the Financial Statements on page F-29.

C. Interests Of Experts And Counsel – No material interests.

Item 8. Financial Information

Please see the information set forth in the Financial statements on pages F-1 to F-41.

Sportech PLC Form 20-F for the year ended 31 December 2003 32

Item 9. The Offer And Listing

A. Offer And Listing Details

As of 25 June 1991, the Company’s American Depository Shares (“ADRs”) were delisted from the National Association of Securities Dealers Automated Quotation system (“NASDAQ”) because the Company was not in compliance with the net worth requirements of NASDAQ. The principal trading market for the Company’s Ordinary Shares is the London Stock Exchange. The Bank of New York is the depositary with respect to the ADRs.

On October 10, 2003, the Company issued a notice of termination of its ADR program. The ADR Program was duly terminated on January 10, 2004. On or after July 12, 2004 all outstanding ADRs will be terminated when the Depositary (Bank of New York) sells off the underlying ordinary shares of the Company and distributes the proceeds to the former ADR holders.

The following table sets forth for the periods indicated the highest and lowest middle market quotations for the Ordinary Shares as derived from the Daily Official List of the London Stock Exchange and the highest and lowest sales prices of the ADRs as reported on the New York Stock Exchange composite tape:

	Ordinary Share		ADRs
Year Ended	High	Low	High	Low
	(UK pence)		(US$)
30 September 1999	1.1	0.4	.38	.01
1 October to 31 December 1999	10.2	0.6	.14	.05
31 December 2000	34.1	3.8	.30	.05
31 December 2001	27.0	6.8	.38	.10
31 December 2002	18.0	9.5	.20	.17
31 December 2003	20.8	11.0
2002
First Quarter	18.0	11.2	.25	.17
Second Quarter	16.3	12.0	.26	.15
Third Quarter	13.0	9.5	.15	.10
Fourth Quarter	15.5	10.5	.20	.15
2003
First Quarter	15.5	11.0	.21	.13
Second Quarter	17.5	12.2	.28	.22
Third Quarter	18.0	14.5	.31	.20
Fourth Quarter	20.8	15.5	.32	.23
2004
First Quarter	20.0	15.25	Note 1	Note 1
Monthly Figures
December 2003	19.0	15.0	.35	.15
January 2004	18.3	15.5	Note 1	Note 1
February 2004	20.0	17.0	Note 1	Note 1
March 2004	19.2	15.0	Note 1	Note 1
April 2004	16.0	13.0	Note 1	Note 1
May 2004	14.0	11.5	Note 1	Note 1

Note 1 – No data presented due to the termination of the ADR programme noted above.

On June 25 2004, the closing price on the London Stock Exchange was 12.35p.

B. Plan Of Distribution – Not Applicable.

C. Markets – See Item 9A above.

D. Selling Shareholders – Not Applicable.

E. Dilution – Not Applicable.

F. Expenses Of The Issue – Not Applicable.

Sportech PLC Form 20-F for the year ended 31 December 2003 33

Item 10. Additional Information

A. Share Capital – Not Applicable.

B. Memorandum And Articles Of Association

The Company is a public limited company registered at Companies House, Edinburgh, Scotland having registration number 69140. In page one of the Memorandum of Association, there is set out the objects of the Company which are intentionally expressed in wide terms including a power to carry on business as a general commercial company and additionally to carry on the business of an investment holding company.

With respect to directors and powers to vote on any proposal, arrangement or contract in which the director is materially interested, regulation 90 (B) and (C) states that such director would be required to declare his or her interest in any contract with the Company and as such he or she would be debarred from voting or being counted in a quorum (of which three is the minimum number to conduct business at a directors’ meeting). However, there are provisions in regulation 90 for such person to be counted in a quorum and to have his or her vote included if the proposal concerning any other company is one in which he or she is interested and he or she does not hold 1% or more in the share capital of that other Company. Certain other provisions exist where a director is lending money to the Company and the Company grants security in return.

The Remuneration Committee (the Committee) comprising non-executive directors only exists to decide compensation payments to individual directors and meets regularly. The Committee makes its proposals following consultation with the Managing Director (on compensation other than his own) and is entitled to seek professional advice from outside the Company, the non executive directors do not participate in any incentive, pension or benefit schemes of the Company and their own compensation is determined by the Board which requires a minimum quorum of 3 directors.

In Article 100 of the Articles of Association the Board of Directors may exercise all the powers of the Company to borrow money or charge any undertaking of the Company.

At every Annual General Meeting of shareholders, 1/3 of the directors or the number nearest to 1/3 are under obligation to retire from office but are eligible for re-election and those to retire are those who have been longest in office since their last appointment. Section 293 of the Companies Act 1985 requires that any director seeking re-appointment and who has attained the age of 70 years must have such re-appointment approved by the shareholders and special notice of such Resolution is a requirement.

The directors of the Company are not subject to any minimum number of shares held qualification.

Prior to 23 December 2002, the Company had two classes of shares in existence, namely ordinary and deferred. On that date, the deferred shares were cancelled, as set out in note 21 of the Financial Statements. The ordinary shares have standard voting rights and rights to dividend payments, whereas the deferred shares held no voting or dividend rights. The deferred shares conferred on the holders an entitlement to receive out of the assets of the Company available for distribution the amount paid on the deferred shares but only after payment shall have been made to the holders of ordinary shares the sum of £10,000 in respect of each ordinary share.

The directors have power to make calls upon shareholders in respect of any monies unpaid on their shares and no other liability exists.

The action necessary to change the rights of holders of shares would require the approval of shareholders in a General Meeting. Each year a notice of Annual General Meeting is sent to all shareholders giving a minimum of 21 days notice of the proposed date of the meeting and the condition of admission to the meeting and/or to vote there at is that those shareholders who do not wish to attend but wish to appoint a proxy to vote on their behalf must have certified to the Company notice of that fact no later than 24 hours before the date of the meeting.

If the directors require shareholder consent on any specific matter the law considers necessary to be put to shareholders, and which cannot wait until the next Annual General Meeting, then the directors will call an extraordinary general meeting of shareholders giving not less than 14 days notice. An individual or a collection of shareholders holding not less than 10% of the issued share capital may at any time lodge a requisition requiring the directors to convene an extraordinary general meeting for the purposes stated in the requisition.

There are no limitations on the rights of non-resident or foreign shareholders to hold or exercise voting rights. Under section 198 of the Companies Act 1985 there is a statutory obligation of disclosure for shareholders to notify the Company where such shareholder acquires 3% or more of the shares in the Company.

The Memorandum and Articles of Association do not contain any conditions relating to changes in the capital of the Company capable of being more stringent than is required by law.

Sportech PLC Form 20-F for the year ended 31 December 2003 34

C. Material Contracts

A summary of material contracts entered into by the Company is as follows:

The Littlewoods Organisation

As part of the acquisition agreement for Littlewoods Gaming, Littlewoods Gaming has been licensed by Littlewoods Limited (formerly The Littlewoods Organisation), at no cost, to use “Littlewoods” as part of the Littlewoods Gaming branding for betting, gaming and lottery products. The agreement will run until 3 September 2010 unless previously terminated (for material breach or insolvency) or renewed by agreement between the parties.

D. Exchange Controls – None.

Sportech PLC Form 20-F for the year ended 31 December 2003 35

E. Taxation

The following discussion of tax is intended only as a descriptive summary and it does not purport to be a complete technical analysis or listing of all potential tax effects relevant to the Ordinary Shares or ADRs. The statements of UK and US tax law set forth below are based (i) on the laws and the UK Inland Revenue practice and published Statements of Practice in force as of the date of this report, (ii) on existing US federal income tax law, including legislation, regulations, administrative rulings and court decisions as of the date of this report and (iii) on representations of the Depositary and the assumption that each obligation in the deposit agreement among the Company, the Depositary and the holders from time to time of ADRs and any related agreement will be performed in accordance with its terms. The statements herein are subject to any changes occurring after the date of this report in UK or US law, or in the double tax conventions between the United States and the United Kingdom with respect to income and capital gains taxes (the “Income Tax Convention”) and with respect to estates and gifts taxes (the “Estate Tax Convention”).

United Kingdom Income Tax

Beneficial owners of ADRs who are resident in the United States are treated as the owners of the underlying Ordinary Shares for purposes of the Income Tax Convention and US federal income tax.

Under the current Income Tax Convention, a US resident individual or corporate holder of an Ordinary Share or ADR who or which satisfies the following conditions (an “Eligible US Holder”):

(i) is resident in the United States for the purposes of the Income Tax Convention (and, in the case of a corporation, not also resident in the United Kingdom for UK tax purposes);

(ii) is not a corporation which, alone or together with one or more associated corporations, controls, directly or indirectly, 10% or more of the voting stock of the Company;

(iii) whose holding of the Ordinary Shares or ADRs is not effectively connected with a permanent establishment in the United Kingdom through which such holder carries on a business or with a fixed base in the United Kingdom from which such holder performs independent personal services; and

(iv) under certain circumstances, is not an investment or holding company 25% or more of the capital of which is owned, directly or indirectly, by persons that are neither individual residents nor citizens of the United States

will generally be entitled under the current Income Tax Convention to receive, in addition to any dividend paid by the Company, an amount equal to the tax credit available to UK resident shareholders in respect of such dividend (currently equal to one –ninth of the dividend paid), but subject to a notional withholding tax equal to 15% of the sum of the dividend paid and the tax credit. The withholding tax will exceed the tax credit and therefore no additional payment will result.

The amount of withholding tax is restricted to the amount of the tax credit and no additional withholding tax is due in situations where the withholding tax is more than the tax credit.

For example a dividend of 80 will entitle the holder to receive a tax credit of 8.89 (i.e. one-ninth of 80) and the amount of withholding tax will be limited to 8.89 (even though 15% of the gross dividend would be 13.33). The result is that no refund entitlement exists and there is no withholding tax due. As a consequence the payment will equal 80.

It is anticipated that almost all ADR holders will be subject to the above arrangements.

US shareholders who own less than 10% of the voting stock as portfolio investors, and who are entitled to a tax credit under the Income Tax Convention may elect to be treated as receiving an amount equal to the credit without affirmatively making a claim to the United Kingdom or obtaining a receipt therefrom. This election is made on Line 5 of Form 8833, which is to be filed with the portfolio investor’s income tax return. Such an investor making this election will be treated as having received an additional dividend equal to the gross tax credit payment and as having paid the UK withholding tax on such tax credit payment.

Sportech PLC Form 20-F for the year ended 31 December 2003 36

E. Taxation (continued)

United Kingdom Tax on Capital Gains

Under the current Income Tax Convention, the United States and the United Kingdom each may, in general, tax capital gains in accordance with the provisions of its domestic law. Under current UK law, residents of the United States who are not resident or ordinarily resident in the United Kingdom will not be subject to UK tax on capital gains made on the disposal of their ADRs or Ordinary Shares unless those ADRs or Ordinary Shares are held in connection with a trade carried on through a permanent UK establishment. A US holder of an ADR or Ordinary Share will be liable for US federal income tax on such gains in the same manner and to the same extent as on any other gains from the sale or exchange of stock.

United Kingdom Inheritance Tax

Under the current Estate Tax Convention, ADRs or Ordinary Shares held by an individual who for the purpose of the convention is domiciled in the United States and is not a national of the United Kingdom will not, provided any tax chargeable in the United States is paid, be subject to UK inheritance tax on the disposal of ADRs or Ordinary Shares by way of gift or upon the individual’s death unless the ADRs or Ordinary Shares are part of the business property of a permanent UK establishment of the individual or, in the case of a holder who performs independent personal services, pertain to a fixed base situated in the United Kingdom. In the exceptional case where the ADRs or Ordinary Shares are subject both to UK inheritance tax and to US federal gift or estate tax, the Estate Tax Convention generally provides for double tax to be relieved by means of credit relief.

United Kingdom Stamp Duty and Stamp Duty Reserve Tax

Transfer of ADRs will not be subject to UK stamp duty provided that the transfer instrument is not executed in, and at all times remains outside of, the United Kingdom.

Under the Finance Act 1986, a stamp duty reserve tax (“SDRT”) of 1½% is payable on all transfers to the Depositary, or its nominee, of Ordinary Shares for inclusion in ADRs. Such SDRT is calculated on the purchase price or market value of the Ordinary Shares so transferred.

United States Federal Income Tax

For purposes of this discussion, a U.S. holder is a beneficial owner of Ordinary Shares or ADRs that is (a) a citizen or resident of the United States, (b) a domestic corporation, (c) an estate whose income is subject to United States federal income tax regardless of its source, or (d) a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorised to control all substantial decisions of the trust.

Dividends. Under the United States federal income tax laws, a U.S. holder must include in its gross income the gross amount of any dividend paid by the Company out of its current or accumulated earnings and profits (as determined for United States federal income tax purposes). In addition, an eligible U.S. holder that elects as described above to be treated, with respect to the receipt of any such dividend, as having received a tax credit under the Income Tax Convention and as having paid the withholding tax due under the Income Tax Convention (an “electing U.S. holder”), must include the amount of the tax credit (not reduced by the amount of any deemed withholding tax) in this gross amount even though it does not in fact receive the credit.

The dividend is ordinary income that the U.S. holder must include in income when the holder, in the case of Ordinary Shares, or the Depositary, in the case of ADRs, receive the dividend, actually or constructively. The dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. The amount that the U.S. holder must include in income will be the U.S. Dollar value of the dividend received (plus, if the holder is an electing U.S. holder, the dividend that it is deemed to receive) in British pounds, determined at the spot British pounds/U.S. Dollar rate on the date the dividend distribution is includible in the holder’s income, regardless of whether the payment is in fact converted into U.S. Dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the holder includes the dividend payment in income to the date the holder converts the payment into U.S. Dollars will be treated as ordinary income or loss. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a non-taxable return of capital to the extent of the holder’s basis in the Ordinary Shares or ADRs and thereafter as capital gain.

Sportech PLC Form 20-F for the year ended 31 December 2003 37

E. Taxation (continued)

Subject to certain limitations, the withholding tax that an electing U.S. holder is deemed to pay to the United Kingdom under the Income Tax Convention will be creditable against the holder’s United States federal income tax liability.

Dividends will be income from sources outside the United States, but generally will be “passive income” or “financial services income” which is treated separately from other types of income for purposes of computing the foreign tax credit allowable to a U.S. holder.

Capital Gains. A U.S. holder that sells or otherwise disposes of Ordinary Shares or ADRs will recognise capital gain or loss for United States federal income tax purposes equal to the difference between the U.S. Dollar value of the amount realised and the holder’s tax basis, determined in U.S. Dollars, in the Ordinary Shares or ADRs. Capital gain of a non-corporate U.S. holder is generally taxed at a maximum rate of 20% where the property is held more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.

F. Dividends And Paying Agents – Not Applicable.

G. Statements By Experts – Not Applicable.

H. Documents On Display

It is possible to read and copy documents referred to in this annual report on Form 20-F that have been filed with the SEC at the SEC’s public reference room located at 450 Fifth Street, NW, Washington DC. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges.

I. Subsidiary Information

Sportech plc heads the Group containing the companies listed in note 1(c) to the Financial Statements on page F-7. 100% of the ordinary shares of all of the companies are held by Sportech plc or by one of Sportech’s subsidiaries, and hence they are all included in the consolidated financial statements.

Sportech PLC Form 20-F for the year ended 31 December 2003 38

Item 11. Quantitative And Qualitative Disclosures About Market Risk

Interest Rate Risk

The Company’s primary market risk exposure is interest rate risk. The following table provides information with respect to the Company’s fixed and flexible interest rate risks. All loans have been entered into for the purpose of financing the trade of the Company.

	Term Loan		Mezzanine Loan		Overdraft
Expected final maturity date before 31 December:	Floating rate principal	Weighted average floating rate	Floating rate principal	Weighted average floating rate	Floating rate principal	Weighted average floating rate
	(£m)	(%)	(£m)	(%)	(£m)	(%)
2004	4.0	3.76	—	—	6.9	3.76
2005	10.0	3.76	—	—	—	—
2006	16.0	3.76	—	—	—	—
2007	20.0	3.76	—	—	—	—
2008	24.0	3.76	—	—	—	—
thereafter	4.0	3.76	32.0	3.76	—	—
Total	78.0		32.0		6.9
2003 fair value	78.0		32.0		6.9
2002 total	94.0		26.0		5.7
2002 fair value	94.0		26.0		5.7

The terms of the loan repayments for all loans are detailed in Note 19 of the Financial Statements. Interest on the loan facilities is based on floating interest rates based on LIBOR.

In 2003, interest rate risk remained the Company’s market risk exposure, and was not materially different to 2002 and 2001. Interest rate risk has been hedged via the interest rate swap and cap described below.

Hedging agreements

The Company has purchased an interest rate cap which covered £62.4m of the Term Loan as at 31 December 2003. The cap then covered £54.6m of the Term Loan for the quarter ended 31 March 2004, and from that date will cover £50.0m until it expires on 31 December 2005. The cap rate is 6%. A premium of £850,000 was paid to purchase the cap in the year ended 31 December 2001.

The fair value of the cap is detailed in Note 30(d) of the Financial Statements. The profile of the debt covered by the cap is detailed in Note 20 of the Financial Statements.

The entirety of the Term Loan is not covered by the cap due to rescheduling of loan repayments. The Mezzanine loan is not covered by any hedge as the Company has the option to repay it at any time on giving the bank 30 days notice (see Note 19 of the Financial Statements).

Management has assessed the risk that the Bank of Scotland will not satisfy its obligations to the Company under the interest rate floor and cap on its consolidated financial statements and believes that there is no significant risk of default.

With effect from 31 March 2003, the Company entered into a further interest rate swap arrangement. The swap covers £50.0m, fixing the rate at 3.5% until 31 March 2005.

The fair value of these derivatives are discussed in Note 30(c) to the Financial Statements, which is incorporated herein by reference.

Sportech PLC Form 20-F for the year ended 31 December 2003 39

Item 12. Description Of Securities Other Than Equity Securities – None.

Item 13. Defaults, Dividend Arrearages And Delinquencies – None.

Item 14. Material Modifications To The Rights Of Security Holders And Use Of Proceeds – None.

Item 15. Controls And Procedures

The Managing Director and Finance Director, after evaluating the effectiveness of the Group’s disclosure controls and procedures (as defined in US Exchange Act Rule 13a-14(c)) at the end of the period covered by this report, have concluded that, as of such date, the Group’s disclosure controls and procedures were effective to ensure that material information relating to the Group was made known to them by others within the Group particularly during the period in which this annual report and accounts was being prepared.

There were no changes in the Group’s internal controls over financial reporting that occurred during the period covered by this report that has materially affected or is reasonably likely to materially affect the Group’s internal control over financial reporting.

Item 16A. Audit Committee Financial Expert

David Mathewson is the Audit Committee Financial Expert, being a Chartered Accountant.

Item 16B. Code of Ethics

The Company has not adopted a Code of Ethics because the Company is in compliance with UK Company Law, Listing regulations and Corporate Governance guidance which covers many of the items which would be in such a code. As such, it would be an inefficient use of Company resources implementing such a Code of Ethics.

Item 16C. Principal Accountant Fees And Services

	2001	2002	2003
	£m	£m	£m
Audit Fees	0.2	0.2	0.1
Audit-related Fees	—	—	—
Tax Fees	—	—	0.3
All other Fees	—	—	—

Selection of the Principal Accountant is the responsibility of the Audit Committee. All work performed by the Principal Accountant has been by the Principal Accountant’s full-time permanent employees. The Audit Committee has not adopted pre-approval policies and procedures.

Item 16D. Exemptions from the Listing Standards for Audit Committees – N/a

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers – N/a

Item 17. Financial Statements

The information set forth in the Financial Statements on pages F-1 to F-41 is incorporated herein by reference.

Item 18. Financial Statements – Information provided in Item 17 in lieu of this item.

Sportech PLC Form 20-F for the year ended 31 December 2003 40

Item 19. Exhibits

1 n/a

2 n/a

3 n/a

4 Material Contracts:

4.1	Revised Trade Mark License Agreement between the Littlewoods Organisation Plc and Littlewoods Promotions Limited dated 4 September 2000, incorporated by reference to Exhibit 3.1.8 of the Company’s report on Form 20-F for the year ended December 31, 2000;
4.2	Supplementary Facility Agreement between Sportech PLC and The Governor and Company of the Bank of Scotland dated 24 September 2002, incorporated by reference to exhibit 4.9 of the Company’s report on Form 20-F for the year ended December 31, 2002;
4.3	Supplementary Mezzanine Facility Agreement between Sportech PLC and The Governor and Company of the Bank of Scotland dated 24 September 2002, incorporated by reference to exhibit 4.10 of the Company’s report on Form 20-F for the year ended December 31, 2002;
4.4	Supplemental Facility Letter dated 24 September 2002 between Sportech PLC and the Governor and Company of the Bank of Scotland setting out amendments to the Supplemental Facility Letter dated 10 August 2000, incorporated by reference to exhibit 4.11 of the Company’s report on Form 20-F for the year ended December 31, 2002;
4.5	Supplementary Intercreditor Deed between Sportech PLC and The Governor and Company of the Bank of Scotland dated 24 September 2002, incorporated by reference to exhibit 4.12 of the Company’s report on Form 20-F for the year ended December 31, 2002;
4.6	Second Supplementary Facility Agreement between Sportech PLC and The Governor and Company of the Bank of Scotland dated 31 March 2003, incorporated by reference to exhibit 4.13 of the Company’s report on Form 20-F for the year ended December 31, 2002;
4.7	Second Supplementary Mezzanine Facility Agreement between Sportech PLC and The Governor and Company of the Bank of Scotland dated 31 March 2003, incorporated by reference to exhibit 4.14 of the Company’s report on Form 20-F for the year ended December 31, 2002;
4.8	Supplemental Facility Letter dated 25 March 2003 between Sportech PLC and the Governor and Company of the Bank of Scotland setting out amendments to the Supplemental Facility Letter dated 10 August 2000 (as amended on 24 September 2002), incorporated by reference to exhibit 4.15 of the Company’s report on Form 20-F for the year ended December 31, 2002;
4.9	Second Supplementary Intercreditor Deed between Sportech PLC and The Governor and Company of the Bank of Scotland dated 31 March 2003, incorporated by reference to exhibit 4.16 of the Company’s report on Form 20-F for the year ended December 31, 2002;
4.10	Proforma Director’s contract.

Sportech PLC Form 20-F for the year ended 31 December 2003 41

Item 19. Exhibits (continued)

5 n/a

6 n/a

7 n/a

8 Note 1(c) to the Financial Statements contains a list of subsidiaries, and is incorporated herein by reference.

9 n/a

10 n/a

11 n/a

12 The certifications of the Managing Director and Finance Director as required by Rule 13a-14(a):

12.1	The certifications of the Managing Director as required by Rule 13a-14(a); and
12.2	The certifications of the Finance Director as required by Rule 13a-14(a).

13 The certifications of the Managing Director and Finance Director as required by Rule 13a-14(b):

13.1	The certifications of the Managing Director as required by Rule 13a-14(b); and
13.2	The certifications of the Finance Director as required by Rule 13a-14(b).

14 The Financial Statements on pages F-1 to F-41, are incorporated herein by reference.

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

	/s/ Gary Speakman
SPORTECH PLC	GARY SPEAKMAN	30 June 2004
(Registrant)	(Signature)	(Date)

Sportech PLC Form 20-F for the year ended 31 December 2003 42

EX-4.10

Exhibit 4.10

DATED

(1) SPORTECH PLC

(2) DIRECTOR

AGREEMENT

THIS AGREEMENT is made on

BETWEEN:

(1) SPORTECH PLC (registered in Scotland under number 69140) whose registered office is at 249 West George Street, Glasgow G2 4RB (the “Company”); and

(2) DIRECTOR (the “Director”).

WHEREAS:

The Director has agreed to act as a non-executive director of the Company on the terms set out below.

NOW IT IS AGREED as follows:

1. APPOINTMENT AND DUTIES

1.1 The Company hereby confirms the appointment of the Director as a non-executive director of the Company with effect from                                      (the “Commencement Date”).

1.2 During the continuance of this Agreement the Director shall, unless prevented by ill health, devote such of his time, attention and abilities to the business of the Company as may be necessary for the proper conduct of his duties as a non-executive director and shall use his best endeavours to promote the interests of the Company and its subsidiaries.

1.3 The Director shall serve on such committees of the Board as may from time to time be determined by the Board and shall, where requested by the Board, act as chairman of any such committee. The Director shall not commit the Company to any obligation or liability without the prior authorisation of the Board.

1.4 The Director shall, in furtherance of his duties, be entitled where necessary and after discussion with the chairman of the board of directors, to take independent professional advice at the Company’s expense.

2. COMMENCEMENT AND TERM

This Agreement shall be deemed to have commenced on the Commencement Date and, subject to Clause 4, shall continue until determined by not less than              months’ notice in writing by either the Company or the Director to the other.

3. FEES AND EXPENSES

3.1 The Company shall pay to the Director for his services as non executive director under this Agreement a fee at the rate of                          per annum plus vat (or such other rate as may from time to time be agreed) payable by equal monthly instalments in arrears on the last business day of each calendar month, without deduction of tax and National Insurance Contributions.

3.2 The Director shall be reimbursed by the Company in respect of travelling and other expenses reasonably and properly incurred by him in attending meetings of the Board or of committees of the Board and general meetings of the Company together with any other expenses approved in advance by the Board and in each case vouched for in the manner required by the Board from time to time. Expense claims together with supporting vouchers shall be submitted by the Director monthly to the Company for approval, and in any event not more than 3 months in arrears.

4. PAYMENT GROSS

4.1 The Director is a self-employed consultant and as such shall be responsible for the payment of tax and National Insurance contributions in respect of the fees payable to him under this Agreement. The Director shall indemnify the Company and keep the Company fully indemnified against any tax and National Insurance contributions (other than employer’s National Insurance contributions) or other amounts which the Company may be required to pay in respect of the fees payable to the Director under this Agreement and against any penalties, fines, interest or other liabilities and all associated costs and expenses which the Company may incur in connection with payment or non-payment of such tax and National Insurance contributions or other amounts by the Company.

TERMINATION

This Agreement shall terminate forthwith without any requirement for notice to the Director and without any payment in lieu of notice in the following circumstances:

(a) the Director is prohibited by law from holding office as a director or is otherwise required to vacate office by the articles of association of the Company (as from time to time in force);

(b) the Director resigns his office as a director or is removed from office by resolution of the members of the Company;

(c) the Director is required to retire as a director by the articles of association of the Company (as from time to time in force) and is not re-elected; or

(d) the Director is guilty of serious misconduct or commits any breach of his duties to the Company, whether under this Agreement or otherwise, and the Board resolves that this Agreement should terminate: the Director shall resign his office as a director of the Company forthwith on the passing of any such resolution.

5. SHARE DEALINGS

The Director undertakes that whilst he is a director of the Company:

(a) he shall not deal in any securities of the Company on considerations of a short term nature;

(b) he shall not deal in any securities of the Company unless prior written notice of such proposed dealing has been given to the Board or to a director of the Company appointed for this specific purpose and he has received clearance for such dealing from the Board or such director;

(c) he shall not deal in any securities of the Company at any time during the period of 2 months immediately preceding the preliminary announcement of the annual results of the Company for each financial year or during the period of 2 months immediately preceding the announcement of the interim results of the Company for each half-year or in each case, if shorter, the period from the end of the relevant financial period up to and including the time of the announcement;

(d) he shall not deal in any securities of the Company at any time when he is in possession of unpublished price-sensitive information in relation to those securities;

(e) he shall use his best endeavours to prevent any dealings in securities of the Company by any person connected with him (within the meaning of section 346 of the Companies Act 1985) or any investment manager on his behalf or on behalf of any person connected with him at any time when he would himself be prevented from dealing in such securities under this Clause 5;

(f) he shall comply with all laws (including without limitation Part V of the Criminal Justice Act 1993), all codes of conduct and guidance issued by the Financial Services Authority and all Company rules from time to time in force relating to dealings in securities of the Company and of any other company in whose securities the Company is interested (actually or prospectively) or with which the Company has, or proposes to have, a significant business relationship; and

(g) so long as any securities of the Company are listed on the official list of the UK Listing Authority, he shall observe and comply with the Model Code on dealings in such securities issued by the Financial Services Authority, as amended from time to time (the “Model Code”).

References in this Clause 5 to “dealing”, “securities” and “unpublished price- sensitive information” shall have the meanings given to them in the Model Code.

6. CONFLICTS OF INTEREST

6.1 During the course of this Agreement the Director may take up other appointments or employment but shall not, without the prior written consent of the Company, take up any other appointment or employment which may give rise to any conflict between his duties to the Company and his duties under such appointment or employment.

6.2 The Director confirms that he has no present interests, which will or may give rise to a conflict between such interests and the interests of the Company and its subsidiaries.

6.3 The Director agrees that, should any cause of likely conflict arise, he shall disclose it at a meeting of the Board and be prepared to absent himself from discussion of the relevant matter in accordance with the Company’s articles of association.

7. CONFIDENTIAL INFORMATION

7.1 Without prejudice to any other duty owed to the Company under which the Director is required to keep information received or obtained by him in confidence, the Director agrees with the Company that he shall not use or disclose to any person (other than in the course of properly performing his duties or with the written

consent of the Company or as required by a court of competent jurisdiction, by law or by the rules of any statutory or regulatory body to whose rules the Company is subject), and shall use his best endeavours to prevent the unauthorised use or disclosure of, any Confidential Information. For purposes of this Clause 7.1, “Confidential Information” shall mean any of the trade secrets or other confidential, technical or commercial information of the Company or any of its subsidiaries (together the “Group”) relating to the business, organisation, transactions, accounts, finances or affairs of the Group or the working of any process, invention or computer program which is owned or used by the Group. This restriction shall continue to apply after the termination of this Agreement, without limit in point of time, but shall cease to apply to information which may come into the public domain otherwise than through unauthorised disclosure by or through the Director.

7.2 All correspondence, documents, records and other materials of whatsoever nature, whether originals or copies, made or compiled or received by the Director whilst a director of the Company and concerning the business, organisation, transactions, accounts, finances or affairs of the Group shall be and shall remain the property of the Company or its relevant subsidiary and upon the termination of this Agreement the Director shall not retain any copies (in any form) and shall forthwith return the same to the Company.

8. NOTICES

Any notice given under this Agreement shall be duly served if delivered by hand or sent by first class post addressed to the secretary of the Company at its registered office or, as the case may be, to the Director at his usual or last known place of abode in the United Kingdom and in the case of service by post such notice shall be deemed to be served 2 days after the date of posting.

9. WHOLE AGREEMENT

This Agreement sets out the whole agreement and understanding between the parties and supersedes all previous agreements and understandings between them regarding the engagement of the Director.

10. LAW AND JURISDICTION

This Agreement shall be governed by and construed in accordance with English law. Each of the parties submits to the non-exclusive jurisdiction of the courts of England.

SIGNED by or on behalf of the parties.

SIGNED by

for and on behalf of SPORTECH PLC

SIGNED by DIRECTOR

EX-12.1

Exhibit 12.1

CERTIFICATIONS – MANAGING DIRECTOR

I, George Rushton, certify that:

1. I have reviewed this annual report on Form 20-F of Sportech PLC:

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the Company’s auditors and the audit committee of Company’s board of directors (or persons performing the equivalent function):

a. all significant deficiencies in the design or operation of internal controls over financial reporting which could adversely affect the Company’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls.

/s/ George Rushton

George Rushton

Managing Director

Date: 30 June 2004

EX-12.2

Exhibit 12.2

CERTIFICATIONS – FINANCE DIRECTOR

I, Gary Speakman, certify that:

1. I have reviewed this annual report on Form 20-F of Sportech PLC:

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the Company’s auditors and the audit committee of Company’s board of directors (or persons performing the equivalent function):

a. all significant deficiencies in the design or operation of internal controls over financial reporting which could adversely affect the Company’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls.

/s/ Gary Speakman

Gary Speakman

Finance Director

Date: 30 June 2004

EX-13.1

Exhibit 13.1

CERTIFICATION OF MANAGING DIRECTOR

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 AND RULE 13a-14(b) OR RULE 15d-14(b) OR THE SECURITIES EXCHANGE ACT 1934

In connection with the Annual Report of Sportech PLC (“the Company”) on Form 20-F for the period ended December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (“the Report”), I, George Rushton, Managing Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, the undersigned has executed this certification as of the 30th day of June 2004.

/s/ George Rushton

George Rushton

Managing Director

EX-13.2

Exhibit 13.2

CERTIFICATION OF FINANCE DIRECTOR

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 AND RULE 13a-14(b) OR RULE 15d-14(b) OR THE SECURITIES EXCHANGE ACT 1934

In connection with the Annual Report of Sportech PLC (“the Company”) on Form 20-F for the period ended December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (“the Report”), I, Gary Speakman, Finance Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, the undersigned has executed this certification as of the 30th day of June 2004.

/s/ Gary Speakman

Gary Speakman

Finance Director

EX-14

Exhibit 14

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

UK company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and of the profit or loss for that period. In preparing those financial statements, the directors are required to:

• select suitable accounting policies and apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with the Companies Act 1985. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect fraud and other irregularities.

Sportech PLC Form 20-F for the year ended 31 December 2003

PricewaterhouseCoopers LLP

8 Princes Parade,

St. Nicholas Place

Liverpool

L3 1QJ

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Sportech plc

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of cash flows and of changes in shareholders’ equity present fairly, in all material respects, the financial position of Sportech plc and its subsidiaries at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United Kingdom. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Accounting principles generally accepted in United Kingdom vary in certain important respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 30 to the consolidated financial statements.

/s/ PricewaterhouseCoopers

PricewaterhouseCoopers LLP

Chartered Accountants and Registered Auditors

Liverpool, England

26 March 2004

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 2

CONSOLIDATED PROFIT AND LOSS ACCOUNT

for the year ended 31 December 2003

(£m except for share data)

	Notes	2001		2002		2003
		£m		£m		£m
Group turnover	3	183.3		195.3		207.9
Cost of sales		(129.3	)	(139.4	)	(153.0	)
Gross profit		54.0		55.9		54.9
Net operating expenses	5	(45.4	)	(44.5	)	(45.4	)
Operating profit		8.6		11.4		9.5
Profit on sale of Technology Patents	6	—		—		0.6
Profit on sale of tangible fixed assets	5	—		1.4		—
Net interest payable and similar items	7	(9.2	)	(8.2	)	(6.6	)
Profit/(loss) on ordinary activities before taxation		(0.6	)	4.6		3.5
Tax on profit/(loss) on ordinary activities	10	(2.1	)	(1.7	)	(3.7	)
Retained profit/(loss) for the financial period	21	(2.7	)	2.9		(0.2	)
Earnings per share
Basic and diluted	11	(0.5	)p	0.5p		(0.0	)p

All operations are continuing.

The company has no other recognised gains or losses other that the loss for the financial year shown above.

The profit and loss accounts are stated in £ sterling.

The accompanying notes on pages F-7 to F-41 are an integral part of these financial statements.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 3

CONSOLIDATED BALANCE SHEET

as at 31 December 2003

	Notes	2002		2003
		£m		£m
FIXED ASSETS
Intangible assets	12	155.1		146.4
Tangible assets	13	8.5		9.1
		163.6		155.5
CURRENT ASSETS
Stock	15	0.1		—
Debtors
- due within one year	16	8.3		9.5
- due after more than one year	16	1.0		0.7
Cash at bank and in hand	17	6.0		4.1
		15.4		14.3
CREDITORS:
Amounts falling due within one year	18	(43.5	)	(44.3	)
NET CURRENT (LIABILITIES)		(28.1	)	(30.0	)
TOTAL ASSETS LESS CURRENT LIABILITIES		135.5		125.5
CREDITORS:
Amounts falling due after more than one year	19	(104.0	)	(94.2	)
		31.5		31.3
CAPITAL AND RESERVES
Called up share capital	21	29.6		29.6
Share premium account	21	—		—
Profit and loss account	21	1.9		1.7
TOTAL EQUITY SHAREHOLDERS FUNDS		31.5		31.3

The balance sheets are stated in £ sterling.

The accompanying notes on pages F-7 to F-41 are an integral part of these financial statements.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 4

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 December 2003

	Notes	2001		2002		2003
		£m		£m		£m
Net cash inflow from operating activities	22	15.7		18.1		18.6
Returns on investments and servicing of finance:
Interest received		0.4		0.2		0.2
Interest paid		(10.2	)	(8.3	)	(6.5	)
Purchase of interest rate cap		(0.9	)	—		—
Net cash outflow from returns on investments and servicing of finance		(10.7	)	(8.1	)	(6.3	)
Taxation		(4.3	)	(2.6	)	(3.1	)
Capital expenditure:
Purchase of tangible fixed assets		(2.0	)	(4.1	)	(2.6	)
Purchase of intangible fixed assets		—		(0.8	)	(0.4	)
Sale of tangible fixed assets		0.2		2.6		0.1
Net proceeds from sale of Technology Patents	6	—		—		0.6
Net cash outflow from capital expenditure and financial investment		(1.8	)	(2.3	)	(2.3	)
Acquisition of business:	14
Acquisition of Zetters Pools business		—		(1.4	)	—
Acquisition expenses		—		(0.1	)	—
Net cash acquired with business		—		0.7		—
Net cash outflow from acquisitions		—		(0.8	)	—
Cash inflow before management of liquid resources and finance		(1.1	)	4.3		6.9
Financing:
Net loans repaid		(6.0	)	(14.0	)	(10.0	)
Net cash outflow from financing		(6.0	)	(14.0	)	(10.0	)
Decrease in net cash		(7.1	)	(9.7	)	(3.1	)

The cash flow statements are stated in £ sterling.

The accompanying notes on pages F-7 to F-41 are an integral part of these financial statements.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 5

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

	Notes	Ordinary share capital	Deferred share capital		Share premium account		Profit and loss account reserve		Total
		£m	£m		£m		£m		£m
Balance as at 31 December 2000		29.6	0.9		47.1		(46.3	)	31.3
Retained loss		—	—		—		(2.7	)	(2.7	)
Balance as at 31 December 2001		29.6	0.9		47.1		(49.0	)	28.6
Cancellation of deferred share capital	21	—	(0.9	)	—		0.9		—
Transfer of share premium account	21	—	—		(47.1	)	47.1		—
Retained profit		—	—		—		2.9		2.9
Balance as at 31 December 2002		29.6	—		—		1.9		31.5
Retained loss		—	—		—		(0.2	)	(0.2	)
Balance as at 31 December 2003	21	29.6	—		—		1.7		31.3

The consolidated statements of changes in shareholders’ equity are stated in £ sterling.

The accompanying notes on pages F-7 to F-41 are an integral part of these financial statements.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Consolidated Financial Statements

a) General

Unless the context indicates otherwise, the “Company”, “Group” and “Sportech” refer to Sportech PLC and its subsidiaries collectively. On 4 September 2000, Sportech acquired Littlewoods Gaming, which comprised the football pools, fixed odds betting and charity lottery management businesses of The Littlewoods Organisation PLC. Consequent to this acquisition the focus of the business has changed to that sector and the Company changed its name from Rodime PLC to Sportech PLC.

Until the acquisition of Littlewoods Gaming, the Company’s principal activity was the licensing and exploitation of its patents covering disk drive technology and its principal objective was to collect royalties from third parties on the manufacture and sale of disk drives in respect of which the Company held patents registered in the United States, Canada, and major European countries. Subsequent to 4 September 2000 the core activities of the Company have been extended to the operation of football pools, games, lotteries and sports betting. The Company operates almost exclusively within the United Kingdom and expects that a large portion of its profits will be generated by one business stream, football pools. Subsequent to the sale of the Technology Patents business, Littlewoods Gaming is the Company’s core activity.

Amounts in the accompanying consolidated financial statements are expressed in £sterling in millions unless otherwise indicated. At 31 December 2003, the United States dollar exchange rate for pounds sterling was $1.79 = £1 (31 December 2002, $1.61 = £1).

b) Generally accepted accounting principles

The accompanying financial statements have been prepared on the historical cost basis in conformity with accounting practices generally accepted in the United Kingdom which differ in certain material respects from generally accepted accounting principles in the United States (“US GAAP”); see note 30 for details of these differences.

The accompanying financial statements do not represent the statutory financial statements of the Company which are presented in accordance with the form and contents requirements of the UK Companies Act 1985 and filed with the Registrar of Companies in Scotland. The financial statements have been prepared on a going concern basis.

c) Subsidiaries included in the consolidation

These financial statements consolidate the results of Sportech PLC and its wholly owned subsidiaries which are listed below.

Name of company	Incorporated in…	Nature of business
Littlewoods Gaming Limited *	England & Wales	Intermediate holding company
Littlewoods Promotions Limited	England & Wales	Betting & gaming
Littlewoods Leisure Marketing Services Limited	England & Wales	Dormant
Littlewoods Competitions Company Limited	England & Wales	Dormant
Littlewoods Lotteries Limited	England & Wales	Management of charity lotteries
Littlewoods Pools Limited	England & Wales	Dormant
Littlewoods of Liverpool Limited	England & Wales	Asset hiring
Bet 247 Limited	England & Wales	Gaming
Littlewoods Leisure.com Limited	England & Wales	Dormant
UKCL Limited	England & Wales	Dormant
Rodime Technologies Limited *	Scotland	Dormant
Littlewoods Isle of Man Limited *	Isle of Man	Gaming
Littlewoods Alderney Limited	Alderney	Gaming
Littlewoods Bet Direct Limited	England & Wales	Dormant
LWL Management NV	Netherlands Antilles	Gaming
Littlewoods Leisure Limited	England & Wales	Dormant
Sportech Trustees Limited *	England & Wales	Pension fund trustee

* - Held directly by Sportech plc

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 7

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. Summary of Significant Accounting Policies

A summary of the more important group accounting policies is set out below. These have been applied consistently throughout the year and the preceding period.

a) Basis of consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are 100% owned. All intercompany balances have been eliminated on consolidation. The results of subsidiary undertakings are included from the date of acquisition.

b) Turnover

Turnover represents:

• The value of entry fees receivable in respect of football pools based on the date of the event

• The value of bets received in relation to fixed odds betting based on the date of the event

• Gross gaming yield received from casino gaming activities based on the date of the event

• The value of goods and services sold to external customers, including management fees to registered charities for the management of charity lotteries, exclusive of value added tax.

Management fees to registered charities for the management of charity lotteries are based on sales estimates. Sales estimates are calculated by reference to the number of prizes paid for the lotteries concerned if the tickets have been distributed to external vendors without EPOS systems, or on actual sales made by external vendors with EPOS systems. Final sales for each lottery are based on actual cash collected by external vendors. Each lottery may be active over a period encompassing one to three financial years. Any difference between the estimated sales and the final cash sales is adjusted in the year in which the final lottery position is determined.

Income which arose from the patents formerly owned by the company was accounted for either when agreement was reached for a non-refundable lump sum settlement or, in the case of running royalties, when the product to which the royalty relates was manufactured or sold by licensees in the USA. Following the disposal of the Technology Patents business, no further income or expenditure will arise from this source.

c) Deferred income

Deferred income is recognised as the value of entry fees receivable in respect of competitions and sporting events held subsequent to the end of the financial period.

d) Patents and patent costs

Patent costs (including those relating to pending applications) are expensed as incurred. The value of the Company’s intellectual property is not reflected in the balance sheet.

e) Deferred taxation

Deferred tax is provided in full on all timing differences which result in either an obligation at the balance sheet date to pay more tax or a right to pay less tax. Deferred tax assets are only recognised to the extent that it is more likely than not they will crystallise. Assets and liabilities are calculated at rates expected to apply when they crystallise, and are not discounted.

f) Stock

Stock is valued at the lower of cost and estimated realisable value. Cost is based on the first in, first out method of valuation.

g) Foreign currencies

Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Profits and losses on foreign exchange transactions, relating to the supply of merchandise are taken through the profit and loss account in the period in which they arise.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 8

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. Summary of Significant Accounting Policies (continued)

h) Tangible fixed assets

Tangible fixed assets are carried at historical cost less accumulated depreciation.

i) Depreciation

Depreciation is provided on a straight-line basis to write off the cost of fixed assets over their anticipated useful lives at the annual rates set out in “Item 5A - Operating Results”.

j) Goodwill and other intangible fixed assets

Goodwill arising on consolidation represents the excess of the fair value of consideration given over the fair value of the separable net assets acquired. Goodwill is capitalised and is amortised on a straight-line basis over the shorter of 20 years or the anticipated life of the goodwill.

Other intangible fixed assets comprises externally generated costs incurred in respect of developing interactive television gaming products. These costs are amortised through the profit & loss account over their estimated useful lives (5 years) once trading has commenced.

Advance commissions paid to television broadcasters in accordance with the terms of broadcasting contracts are held within prepayments and are recovered against commissions due to broadcasters over the life of the relevant contract. The Directors consider that sufficient revenue will be generated over the lives of the contracts concerned to recover these payments.

k) Impairment of fixed assets and goodwill

Fixed assets and goodwill are subject to review for impairment in accordance with FRS 11, Impairment of Fixed Assets and Goodwill. Any impairment would be recognised in the profit and loss account in the year in which it occurs.

l) Leased assets

Rentals payable under operating leases are charged to the profit and loss account on a straight line basis over the lease term.

m) Pension contributions

Contributions to employees defined contribution schemes are charged to the profit and loss account as incurred. The Group has adopted the transitional arrangements of FRS 17. For the defined benefits scheme, pension costs are accounted for on the basis of charging the expected cost of providing pensions over the period during which the Group benefits from the employees services. The effects of variations from regular cost are spread over the expected average remaining service lives of members of the scheme.

n) Financial instruments

The Group uses derivative financial instruments to reduce exposure to foreign currency risk and interest rate movements. The Group does not hold or issue derivative financial instruments for speculative purposes.

o) Website development costs

In line with UITF Abstract 29 “Website Development Costs”, the Group has capitalised design and development costs relating to on-line casinos. These costs are being amortised over their anticipated useful lives (four years). Pre-design and development costs are charged to the profit and loss account as incurred.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

3. Turnover

	2001	2002	2003
	£m	£m	£m
Generated from the United States:
Technology Patents – running royalties	—	—	—
Generated from the United Kingdom:
Football Pools	119.0	100.8	89.7
Games & Lotteries	12.5	11.4	16.5
Interactive Television Gaming	—	—	—
Betting	51.8	83.1	101.7
	183.3	195.3	207.9

4. Segmental information

	2001		2002		2003
	£m		£m		£m
Profits/(losses)
Generated from the United States:
Technology Patents	(0.6	)	—		—
Generated from the United Kingdom:
Football Pools	23.2		25.6		25.6
Games & Lotteries *	0.5		0.9		1.0
Interactive Television Gaming	(1.6	)	(2.3	)	(3.6	)
Sports Betting	(4.0	)	(2.0	)	(3.1	)
Restructuring costs **	—		(2.0	)	(1.3	)
Amortisation of goodwill **	(8.9	)	(8.8	)	(9.1	)
Operating profit	8.6		11.4		9.5
Profit on sale of tangible fixed assets	—		1.4		—
Profit on sale of tangible Technology Patents	—		—		0.6
Net interest payable and similar items	(9.2	)	(8.2	)	(6.6	)
Profit/(loss) before taxation	(0.6	)	4.6		3.5
Net assets
Football Pools			48.8		52.9
Games & Lotteries			(2.1	)	(1.2	)
Interactive Television Gaming			(3.2	)	(6.2	)
Sports Betting			(12.0	)	(14.2	)
Technology Patents			—		—
			31.5		31.3

* - included within this in 2002 is £0.5m profit on sale of Pull Tabs lottery business

** - principally Football Pools

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 10

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Net operating expenses

	2001		2002		2003
	£m		£m		£m
Distribution costs	(0.1	)	(0.1	)	(0.1	)
Amortisation of goodwill on acquisitions	(8.9	)	(8.8	)	(9.1	)
Restructuring costs	—		(2.0	)	(1.3	)
Other administrative expenses	(36.4	)	(33.6	)	(34.9	)
Administrative expenses	(45.3	)	(44.4	)	(45.3	)
Net operating expenses	(45.4	)	(44.5	)	(45.4	)

The restructuring costs in 2002 relate to the introduction during the year of new technology for the marking of football pools coupons. This technology is less labour and space intensive than the technology it replaced. In consequence, there was a significant reduction in staff requirements, and the restructuring costs of £2.0m comprise £1.8m of redundancy payments and £0.2m of other costs. The smaller scale of new coupon processing equipment also enabled processing to be concentrated in one of two pools processing buildings. The surplus land and building were sold for redevelopment generating proceeds of £2.0m and realising an exceptional gain on disposal of £1.4m.

The restructuring costs in 2003 relate to the transfer of the Zetters Football Pools operation from London to Liverpool and also to costs incurred in respect of a reorganisation subsequent to the sale of the Technology Patents business.

6. Profit on sale of Technology Patents

	2001	2002	2003
	£m	£m	£m
Profit on sale of Technology Patents	—	—	0.6

During 2003 the Group sold its portfolio of Technology Patents for $1.5m (£0.9m).

Disposal costs of £0.3m resulted in a profit on sale of £0.6m.

7. Net interest payable and similar items

	2001		2002		2003
	£m		£m		£m
Interest payable on bank loans and overdrafts	(9.6	)	(8.3	)	(6.5	)
Interest receivable	0.4		0.2		0.2
Amortisation of interest rate cap premium	—		—		(0.3	)
Amortisation of loan arrangement fee	—		(0.1	)	—
	(9.2	)	(8.2	)	(6.6	)

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 11

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

8. Staff costs

	2001	2002	2003
	Number	Number	Number
Average number of monthly employees comprised:
Sales and marketing	120	109	136
Operations and distribution	344	281	231
Administration	164	164	145
	628	554	512
	£m	£m	£m
Their aggregate remuneration comprised:
Wages and salaries	10.5	11.0	11.0
Social security costs	0.9	0.9	0.9
Other pension costs	0.8	0.6	0.6
	12.2	12.5	12.5

On average, less than 40% of the Company’s employees are temporary employees.

All of the Company’s employees are located in the United Kingdom.

9. Directors’ remuneration

	2001	2002	2003
	£’000	£’000	£’000
Emoluments	583	540	613
Defined benefit scheme contributions	49	25	26
Compensation for loss of office	30	—	309
	662	565	948
Fees paid to third parties	114	25	25
Emoluments paid to the highest paid director are as follows:
Aggregate emoluments	261	261	278
Compensation for loss of office	—	—	309
Company contributions to a personal defined contribution benefit plan	11	14	14

David Mathewson is the Audit Committee’s Financial Expert.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 12

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

10. Tax on profit/(loss) on ordinary activities

	2001	2002		2003
	£m	£m		£m
Current tax:
UK corporation tax – on trading profits	1.7	3.2		3.4
Adjustments in respect of prior periods	—	(2.1	)	—
Total current tax	1.7	1.1		3.4
Deferred tax
Current year	0.4	0.5		0.3
Adjustments in respect of prior periods	—	0.1		—
Total deferred tax	0.4	0.6		0.3
Total taxation charge	2.1	1.7		3.7

The current tax for the period is higher (2002: lower) than the standard rate of corporation tax in the UK (30%). The differences are explained below:

	2001		2002		2003
	£m		£m		£m
Profit/(loss) on ordinary activities before tax	(0.6	)	4.6		3.5
Profit/(loss) on ordinary activities multiplied by the standard rate of corporation tax in the UK of 30%	(0.2	)	1.4		1.0
Effects of:
Tax impact of disallowable goodwill write off	2.7		2.6		2.6
Tax impact of fair value adjustments	(0.5	)	—		—
Other permanent differences	0.1		(0.3	)	0.1
Origination and reversal of timing differences	(0.4	)	(0.5	)	(0.3	)
Adjustments to tax in respect of prior periods	—		(2.1	)	—
Total current tax	1.7		1.1		3.4

11. Earnings per share

The calculations of earnings per share are based on the following profits attributable to ordinary shareholders and the weighted average numbers of shares.

	2001		2002	2003
Earnings (£m)	(2.7	)	2.9	(0.2	)
Weighted average number of shares (‘000)	592,074		592,074	592,074
Basic and diluted earnings per share (p)	(0.5	)	0.5	(0.0	)

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 13

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

12. Intangible fixed assets

	Goodwill	Other	Total
	£m	£m	£m
Cost:
At 1 January 2003	174.8	0.8	175.6
Additions	—	0.4	0.4
At 31 December 2003	174.8	1.2	176.0
Amortisation:
At 1 January 2003	20.5	—	20.5
Provided during the period	9.1	—	9.1
At 31 December 2002	29.6	—	29.6
Net book value:
At 31 December 2002	154.3	0.8	155.1
At 31 December 2003	145.2	1.2	146.4

Goodwill represents:

• the goodwill arising on the acquisition of Littlewoods Gaming which is being amortised on a straight-line basis over 20 years. This is the period over which the directors estimate that the values of the underlying businesses are expected to exceed the values of the underlying assets; and

• the goodwill arising on the acquisition of the Zetters Pools business (see note 14). This is being amortised on a straight-line basis over 3 years from the date of acquisition. This is the period over which the Directors estimate that the values of the underlying business are expected to exceed the values of the underlying assets.

As part of the acquisition agreement for Littlewoods Gaming, Littlewoods Gaming has been licensed by Littlewoods Limited (formerly The Littlewoods Organisation), at no cost, to use “Littlewoods” as part of the Littlewoods Gaming branding for betting, gaming and lottery products. The agreement will run until 3 September 2010 unless previously terminated (for material breach or insolvency) or renewed by agreement between the parties. Having completed an annual impairment review, the Directors consider that the projected future net income streams support a 20 year amortisation period.

“Other” relates to costs incurred in respect of developing interactive television gaming products. These will be amortised over their estimated useful lives of 5 years once trading has commenced.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 14

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

13. Tangible fixed assets

	Long Leasehold Land & Buildings		Plant & Machinery		Work in Progress		Total
	£m		£m		£m		£m
Cost:
At 1 January 2003	1.8		13.3		0.3		15.4
Additions	0.1		1.7		1.0		2.8
Reclassification	—		0.3		(0.3	)	—
Disposals	(0.1	)	(0.3	)	—		(0.4	)
At 31 December 2003	1.8		15.0		1.0		17.8
Depreciation:
At 1 January 2003	0.1		6.8		—		6.9
Provided during the period	0.1		2.0		—		2.1
Disposals	—		(0.3	)	—		(0.3	)
At 31 December 2002	0.2		8.5		—		8.7
Net book value:
At 31 December 2002	1.7		6.5		0.3		8.5
At 31 December 2003	1.6		6.5		1.0		9.1

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 15

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

14. Acquisition of Zetters Pools business

On 29 August 2002 Sportech PLC acquired the Football Pools business of Zetters International Pools Limited. The purchase consideration was £1.4m satisfied by cash. Goodwill arising on the acquisition of this business was capitalised and included within intangible fixed assets and amortised over 3 years (see note 12). An analysis of the acquisition is as follows:

	Book value		Fair value adjustments	Fair value
	£m		£m	£m
Tangible fixed assets	0.2		—	0.2
Prepayments	0.2		—	0.2
Cash	0.7		—	0.7
Total assets	1.1		—	1.1
Trade creditors	(0.2	)	—	(0.2	)
Accruals and deferred income	(0.7	)	—	(0.7	)
Total liabilities	(0.9	)	—	(0.9	)
Net assets acquired	0.2		—	0.2
Acquisition costs				(0.1	)
Goodwill				1.3
Discharged by cash				1.4

15. Stock

	2002	2003
	£m	£m
Consumable stores	0.1	—

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 16

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

16. Debtors

	2002		2003
	£m		£m
Amounts falling due within one year:
Trade debtors	1.8		1.4
Provision for bad debts	(0.2	)	(0.2	)
Other debtors	0.8		0.8
Prepayments	5.9		7.5
	8.3		9.5
Amounts falling due after more than one year:
Deferred tax	1.0		0.7
Deferred tax comprises:
Accelerated capital allowances	1.0		0.7
Movement in deferred tax:
At 1 January 2002			1.6
Amount charged to profit and loss			(0.6	)
At 31 December 2002			1.0
Amount charged to profit and loss			(0.3	)
At 31 December 2003			0.7

17. Cash

		2002	2003
		£m	£m
Cash balances held on behalf of registered charities	(a)	1.7	1.8
Cash balance constituting committed security	(b)	2.3	1.3
Cash balance constituting security for gaming licence	(c)	2.0	—
Other cash balances		—	1.0
		6.0	4.1

(a) Cash balances held on behalf of registered charities relate to the sale of Charity Scratchcards in respect of charity lotteries which have not reached their final sale date and for which proceeds have not been passed to the charities concerned.

(b) The cash balance constituting committed security relates to deferred payments which must be made under a contractual obligation of a subsidiary company. The contract is with Rehab Charity Lotteries, and relates to the running of charity lotteries.

(c) The cash balance constituting security for a gaming licence represented a deposit made into an Isle of Man bank account which was required to obtain a gaming licence in the Isle of Man for the on-line casino. Following the transfer of the casino from the Isle of Man to the Netherlands Antilles, and confirmation being given to the Isle of Man Government that all customers’ balances had been refunded, this cash balance was released back to the Group.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 17

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

18. Creditors: amounts falling due within one year

	2002	2003
	£m	£m
Current instalments due on loans	15.9	15.9
Bank overdrafts	5.7	6.9
Trade creditors	4.6	3.6
Corporation tax	1.4	1.7
Other taxes and social security costs	2.8	2.6
Accruals and deferred income	13.1	13.6
	43.5	44.3

19. Creditors: amounts falling after more than one year

	2002	2003
	£m	£m
Bank loans	104.0	94.0
Amounts due on hire purchase contracts	—	0.2
	104.0	94.2

Bank loans are repayable as follows:

	2002	2003
	£m	£m
2004	15.9	15.9
2005	16.0	16.0
2006	16.0	16.0
2007	16.0	16.0
2008	16.0	46.0
2009	40.0	—
	119.9	109.9

In order to finance the acquisition of Littlewoods Gaming, loans and overdrafts were arranged with and drawn from the Bank of Scotland. In respect of the loans, two separate loan facilities were negotiated:

• The first facility was for a term loan of £110.0m repayable over five years commencing 18 months from the draw down of the loan. £16.0m of scheduled payments were made in the year (2002: £16.0m). The balance remaining to be repaid on this facility at 31 December 2003 was £78.0m. The repayment terms of this loan were renegotiated during the prior financial year and at 31 December 2003, the loan was repayable by 31 December 2008.

• The second was a facility for £30.0m repayable, in whole or in part, at the Company’s discretion at 30 days notice but with a fixed repayment date, if this option was not exercised, of 31 December 2006. The balance remaining to be repaid on this facility at 31 December 2003 was £24.0m. The repayment terms of this loan were also renegotiated during the prior financial year, and at 31 December 2003 the loan was repayable by 31 December 2008. No repayments were made during the year (2002: £Nil).

During 2002, further loans and working capital facilities were agreed with the Bank of Scotland to assist in the financing of the Group’s investment in interactive developments:

• Loan facilities of £11.0m were made available to the Company repayable, in whole or in part, at the Company’s discretion but with a fixed repayment date, if this option was not exercised, of 31 December 2008. A further £6.0m has been drawn against this facility during the year (2002: £2.0m), to make the total drawn £8.0m.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 18

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

19. Creditors: amounts falling after more than one year (continued)

Since 31 December 2003, loan repayments have been renegotiated with the Bank of Scotland, and the bank loans are now repayable as follows:

	2002	2003
	£m	£m
2004	15.9	3.9
2005	16.0	10.0
2006	16.0	16.0
2007	16.0	20.0
2008	16.0	24.0
2009	40.0	36.0
	119.9	109.9

Amounts due on hire purchase contracts are repayable as follows:

	2002	2003
	£m	£m
2004	—	—
2005	—	0.1
2006	—	0.1
	—	0.2

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 19

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

20. Financial instruments

The Group’s financial instruments, other than derivatives, comprise bank loans, a hire purchase agreement, bank overdraft and cash and term bank deposits, as well as trade debtors and creditors that arise directly from its operations. The main purpose of these financial instruments is to provide finance for the Group’s future operations.

The Group also enters into derivatives transactions (principally interest rate swaps, caps and floors, and forward foreign currency contracts). The purpose of such transactions is to manage the interest and currency risks arising from the Group’s operations and its sources of finance.

The main risks arising from the Group’s financial instruments are interest rate risk and liquidity risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. Short-term debtors and creditors have been excluded from all the following disclosures, in accordance with FRS 13, Derivatives and other financial instruments.

Financial liabilities

It is the Group’s policy to hedge interest rate risk using interest rate swaps, floors and caps. An analysis of the Group’s financial liabilities, all of which are denominated in sterling, is set out below:

	2002	2003
	£m	£m
Fixed rate	—	0.2
Floating rate	125.7	116.9
Non-interest bearing	—	—
Total	125.7	117.1
Fixed rate financial liabilities weighted averages:
Interest rate (%)	n/a	5.2	%
Period for which rate is fixed (months)	n/a	60

Floating rates are based on LIBOR. The Company has purchased an interest rate cap which, at 31 December 2003, covered £62.4m of the first loan facility described in note 19. The cap then covered £54.6m for the quarter ended 31 March 2004, and from that date until it expires on 31 December 2005 will cover £50.0m. The cap rate is 6%. A premium of £850,000 was paid to purchase the cap.

The maturity profile of the Group’s borrowings is set out in note 19. All other financial liabilities are repayable within one year or on demand.

The profile of the balance of the loan subject to the interest rate cap as at the year end is as follows:

	31 March	30 June	30 September	31 December
	£m	£m	£m	£m
2003				62.4
2004	61.4	60.4	59.4	58.4
2005	55.9	53.4	50.9	48.4
2006	44.4	40.4	36.4	32.4
2007	27.4	22.4	17.4	12.4

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 20

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

20. Financial instruments (continued)

Financial assets

Financial assets comprise cash at bank and term deposits of £4.1m (2002: £6.0m), further details of which can be found in note 17, and the interest rate cap noted on the previous page of £0.6m (2002: £0.9m).

Term bank deposits are placed on a 7 day rolling basis and earn interest at rates based on Bank of England base rate. The cash at bank, which is on a floating rate, earns interest based on Bank of England base rate.

All financial assets mature within one month of the year end, with the exception of the interest rate cap.

Currency exposures

It is the Group’s policy to hedge against foreign currency risk by entering into forward foreign currency contracts to eliminate the currency exposures that arise on transactions denominated in foreign currencies.

At both the current and prior period ends all amounts in the balance sheet were receivable or payable in £ sterling, and hence the Group had no exposure to foreign currency movements at the year end. There are no foreign exchange hedges at the year end (2002: nil).

Borrowing facilities

The Group has various available borrowing facilities, including the loan facilities set out in note 19. The undrawn committed facilities at 31 December 2003 in respect of which all conditions precedent had been met were as follows:

	2002	2003
	£m	£m
Expiring in:
-  one year or less	0.3	0.7
-  more than one year but less than two years	—	—
-  more than two years	9.0	3.0
	9.3	3.7

Fair values of financial assets and financial liabilities

The fair value of the financial assets and liabilities is not materially different from the book value, with the exception of the interest rate cap, which has a book value of £0.5m and a fair value of £0.1m, and the interest rate swap, which has a book value of £nil and a fair value of £0.6m.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 21

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

21. Shareholders’ funds

	2001		2002			2003
Authorised ordinary shares:
Number of ordinary shares authorised at beginning and end of year		785,000,000		785,000,000			785,000,000
Issued ordinary shares:
Number of ordinary shares outstanding at beginning and end of year		592,074,183		592,074,183			592,074,183
Equivalent par value of ordinary share capital at end of year	£	29,603,709	£	29,603,709		£	29,603,709
Authorised and issued deferred shares
Number of deferred shares outstanding at beginning of year		17,057,795		17,057,795			—
Cancelled in the year		—		(17,057,795	)		—
Number of deferred shares outstanding at end of year		17,057,795		—			—
Equivalent par value of deferred share capital at end of year	£	852,890	£	nil		£	nil

For the purposes of UK Financial Reporting Standard 4, deferred share capital of £0.9m constituted non-equity shareholders funds. The deferred shares had no entitlement to participate in the profits of the Company or to vote in general meetings of the Company. On a winding up of the company the deferred shareholders were only entitled to be repaid their subscription price after payment has been made to ordinary shareholders of £10,000 in respect of each ordinary share in issue.

An analysis of the share premium account is as follows:

	2001	2002		2003
	£m	£m		£m
Balance at the beginning of the year	47.1	47.1		—
Cancelled in the year	—	(47.1	)	—
Balance at the end of the year	47.1	—		—

Following confirmation from the Court of Session in Scotland, the following became effective from 23 December 2002:

• The parent company’s share premium account has been used to eliminate a deficit in distributable reserves of the same amount by transfer to the profit and loss account reserve.

• The parent company’s deferred share capital has been cancelled, resulting in a credit to the profit and loss account reserve equal to the nominal value of the cancelled shares. The rights which were attached to the deferred shares are summarised above.

A summary of the entries in 2002 is as follows:

	Deferred share capital		Share premium account		Profit & loss account reserve
	£m		£m		£m
Cancellation of deferred share capital	(0.9	)	—		0.9
Transfer of share premium account	—		(47.1	)	47.1
Total	(0.9	)	(47.1	)	48.0

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 22

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

21. Shareholders’ funds/(deficit) (continued)

Changes in the profit and loss account reserve are as follows:

	2001		2002		2003
	£m		£m		£m
Balance at the beginning of the year	(46.3	)	(49.0	)	1.9
Net profit/(loss) for the year	(2.7	)	2.9		(0.2	)
Cancellation of deferred share capital	—		0.9		—
Transfer of share premium account	—		47.1		—
Balance at the end of the year	(49.0	)	1.9		1.7

Changes in shareholders’ funds/(deficit) are as follows:

	2001		2002	2003
	£m		£m	£m
Shareholders’ funds at the start of the year	31.3		28.6	31.5
Net profit/(loss) for the year	(2.7	)	2.9	(0.2	)
Shareholders’ funds the end of the year	28.6		31.5	31.3

No dividends have been proposed. The Company will review its dividend policy in the future. There can be no assurances with respect to future dividends.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 23

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

21. Shareholders’ funds/(deficit) (continued)

Potential Issue of Ordinary Shares

Certain Directors, Senior Executives and other employees hold options to subscribe for shares in the Company at prices ranging from 12.25p to 19.25p under share option schemes approved by the shareholders. During 2003 options on 10,000,000 shares were granted (2002: 6,300,000); no options were exercised (2002: Nil) and 5,000,000 options lapsed (2002: Nil). Since the end of the year, a further 5,200,000 options have been granted and a further 700,000 options have lapsed. The number of shares subject to options, the periods in which they were granted and the periods in which they may be exercised are given below:

Grant Date	Exercise Price (p)	Exercise Period	2002 Number	2003 Number
10 April 2001	14.75	2004–2011	5,700,000	4,000,000
8 March 2002	17.42	2005–2012	6,300,000	4,400,000
25 March 2003	12.25	2006–2013	—	5,400,000
21 November 2003	19.25	2006–2013	—	2,500,000
27 April 2004	13.25	2007–2014	—	5,200,000
			12,000,000	21,500,000

The options are exercisable at any time during the seven year period commencing three years from the date of the grant. Exercise of the 2001 and 2002 options is subject to the market value of the shares being not less than 35.0p for a period of five consecutive dealing days at any time in the period of six months prior to the date the option is first exercised. Exercise of the March 2003 options is subject to growth in earnings per share compounded over a three year period from 2002 of 20%, 15% and 10% per annum. Exercise of the November 2003 and April 2004 options is subject to growth in earnings per share compounded over a three year period from 2003 of 20%, 15% and 10% per annum.

22. Reconciliation of operating profit to net cash inflow from operating activities

	2002		2003
	£m		£m
Operating profit	11.4		9.5
Depreciation on property, plant & equipment	2.4		2.1
Amortisation of goodwill	8.8		9.1
Profit on disposal of tangible fixed assets	(0.1	)	—
Profit on disposal of business	(0.5	)	—
Decrease in stock	0.1		0.1
(Increase)/decrease in trade debtors	(0.3	)	0.4
(Increase)/decrease in other debtors	0.4		—
(Increase)/decrease in prepayments	(2.5	)	(1.9	)
Increase/(decrease) in trade creditors	0.3		(1.0	)
(Decrease) in other taxes	(1.2	)	(0.2	)
Increase/(decrease) in accruals and deferred income	(0.7	)	0.5
Net cash inflow from operating activities	18.1		18.6

Included within cash balances in 2002 was £2.0m of cash to which the Group had restricted access. This related to a deposit placed on the Isle of Man during 2002 in connection with the on-line casino business. This cash could only have been accessed with the permission of the Isle of Man Government. Consequent upon the transfer of the casino to the Netherlands Antilles, this cash has been released back to the Group (see note 17).

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 24

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

23. Analysis and reconciliation of net debt

	At 31 December 2001		Cash flow		Other movements		At 31 December 2002		Cash flow		Other movements		At 31 December 2003
	£m		£m		£m		£m		£m		£m		£m
Cash at bank and in hand excluding charity cash balances	11.7		(7.4	)	—		4.3		(2.0	)	—		2.3
Bank overdrafts	(2.9	)	(2.8	)	—		(5.7	)	(1.2	)	—		(6.9	)
	8.8		(10.2	)	—		(1.4	)	(3.2	)	—		(4.6	)
Debt due within one year	(15.9	)	16.0		(16.0	)	(15.9	)	16.0		(16.0	)	(15.9	)
Debt due after one year	(117.9	)	(2.0	)	15.9		(104.0	)	(6.0	)	16.0		(94.0	)
Hire purchase contracts	—		—		—		—		—		(0.2	)	(0.2	)
	(133.8	)	14.0		(0.1	)	(119.9	)	10.0		(0.2	)	(110.1	)
	(125.0	)	3.8		(0.1	)	(121.3	)	6.8		(0.2	)	(114.7	)

	2001		2002		2003
	£m		£m		£m
Decrease in cash in period	(7.1	)	(9.7	)	(3.1	)
Movement in charity cash	0.4		(0.5	)	(0.1	)
Change in net debt resulting from cash flows	(6.7	)	(10.2	)	(3.2	)
New hire purchase contracts	—		—		(0.2	)
Cash inflow from increase in loans	—		(2.0	)	(6.0	)
Cash outflow from repayment in loans	6.0		16.0		16.0
Amortisation of deferred loan arrangement fee	(0.1	)	(0.1	)	—
Movement in net debt for the period	(0.8	)	3.7		6.6
At 1 January 2002	(124.2	)	(125.0	)	(121.3	)
At 31 December 2002	(125.0	)	(121.3	)	(114.7	)

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 25

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

24. Capital commitments

	2002	2003
	£m	£m
Contracts placed for future capital expenditure not provided for in the financial statements	0.6	1.0

25. Operating lease commitments

Annual commitments under non-cancellable operating leases in respect of land and buildings are as follows:

	2002	2003
	£m	£m
Expiring between two and five years	0.1	0.1
Expiring after more than five years	0.2	0.2
	0.3	0.3

26. Other commitments

Collector Incentive Scheme

In December 1996, an incentive scheme to reward football pools collectors was established. Under the terms of the scheme, the collectors earn points on the basis of their sales. These points can be converted into vouchers to purchase items from high street shops. On the basis of similar schemes, a redemption rate attributable to these points has been established and an appropriate provision made in these accounts. The value of the points not provided for in these financial statements amounts to £2.6m (2002: £2.4m).

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 26

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

26. Other Commitments (continued)

Material contracts

The Company has entered into a number of material contracts that will generate future commitments that cannot be fixed in extent as the contracts relate to transaction volumes that are variable in nature. A summary of these contracts is as follows:

Rehab

Rehab is a UK charity for which Littlewoods Leisure runs society lotteries in return for a management fee of approximately 30% of sales. The contract runs until 30 April 2005, subject to earlier termination at the Company’s option on three months’ notice. The contract guarantees a minimum payment to Rehab of £8 million. This consists of an initial advance sum of £3 million, paid in February 2000, plus 20 quarterly advance payments of £250,000, payable from 1 May 2000. These payments will be set off against charity proceeds earned from ticket sales. Any excess of charity proceeds over the minimum payments made as at the end of any year is paid to Rehab in an annual catch-up payment. Charity proceeds are generally 20% of ticket sales and budgeted to be around £1.5 million annually.

An amount of £5 million, the sum of the quarterly advance payments, was deposited in a separate bank account with withdrawals only possible with Rehab’s agreement (the “Deposit”). If the Company exercises its right to early termination or if any of the quarterly advance payments are improperly withheld by the Company, the remaining balance in the Deposit is immediately payable to Rehab. At 31 December 2003, the balance of the Deposit was £1,250,000 (2002: £2,250,000).

The Company expects to receive approximately £2.1 million per annum in management fees. The Company is also entitled to run non-scratchcard lotteries for Rehab, in which case any charity proceeds paid to Rehab shall be set off against the Deposit until the Deposit has been exhausted in the same way as charity proceeds from scratchcard sales. The Company must also ensure that sales of Rehab scratchcards represent at least 50% of the Company’s total scratchcard sales.

Vertex Data Science

Vertex supplies call centre services to Bet Direct. Charges are based on the volume of calls handled. The contract is for five years from 1 July 2001. Early termination will trigger a payment of £300,000 in years one and two and £200,000 in years three through five.

The Littlewoods Organisation

Littlewoods Gaming has been licensed, at no cost, to use ‘Littlewoods’ as part of Littlewoods Gaming’s branding for betting, gaming and lottery products. The agreement will run until at least 3 September 2010 and can be terminated on or after that date with two years’ prior notice.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 27

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

27. Legal matters

Seagate Technology inc. (“Seagate”)

The Company’s legal action against Seagate began on 18 November, 1992 in the United States District Court for the Central District of California (“the District Court”) seeking reasonable royalties and damages for wilful infringement of the Company’s ‘383 patent. During 1999 the Company was successful in strengthening its case against Seagate.

On 16 April, 1999 the Company reported the findings of the United States Court of appeals for the Federal Circuit (“the Appeal Court”) in the appeals lodged by the Company and Seagate against judgements issued in 1997 by the District Court. The Appeal Court vacated (i.e., overturned) the previous judgements in two important respects:

i) In 1997, the District Court had interpreted the Company’s patent claims to include thermal compensation and on this basis decided that Seagate did not infringe the Company’s patent. The Appeal Court adopted a different interpretation of these claims and decided that the Company’s claims 3, 5, 8, and 17 of the ‘383 patent do not include thermal compensation. The Appeal Court therefore overturned the District Court’s finding of non-infringement and sent the case back to the District Court for trial to resolve whether or not there has been infringement under the new interpretation of the Company’s claims.

ii) The Appeal court also vacated the District Court’s judgement regarding the Company’s California state law claims. These claims assert that Seagate engaged in unfair competition and interference with the Company’s prospective economic advantage. The District Court had earlier held that the Company did not allege facts sufficient to state a cause of action for trial. The Appeal Court found that there were sufficient issues of fact for these to be sent back to the District court for trial.

Further, as a result of the Appeal Court’s decision to vacate earlier judgements, Seagate’s cross appeal for an award of attorney’s fees (which had previously been rejected by the District Court) was not granted. The Company received in July 1999 a refund of the costs plus interest (approximately $250,000) that the District Court had awarded to Seagate and which the Company had paid in 1998.

The Appeal Court’s findings above were favourable to the Company. The Appeal Court did not grant the Company’s appeal for consequential business damages in addition to its claims for a reasonable royalty. The exclusion of consequential damages was not considered by the Directors to be material to the main thrust of the litigation.

Following the issuance of the judgements described above, Seagate requested that the Appeal Court amend its decision, in particular that part of the judgements relating to the Company’s California state law claims. Seagate also filed on 26 April, 1999, a combined petition for rehearing and a suggestion for rehearing en banc ( i.e., by all of the judges of the Appeal Court). The Appeal Court ruled against Seagate in all three of these requests, and remanded the case back to the District Court in July 1999. Seagate, however, on 1 October 1999 exercised its right to petition the Supreme Court for a review of the Appeal Court’s judgements. In July 1999, the District Court recommenced proceedings that were necessary for a jury trial to be scheduled. However, these proceedings were postponed by the Court to allow time for the Supreme Court to decide whether it would hear Seagate’s petition.

On 18 January 2000, the Supreme Court denied Seagate’s petition for a hearing.

On the advice of its US lawyers, the Company agreed to participate in mediation discussions with Seagate in January 2000. As a result of the mediation, the Company and Seagate agreed to settle their dispute, without admission of liability by either party, and Seagate paid to Sportech the sum of $45 million in full and final settlement of the Company’s claims under its ‘383 patent. The company agreed to pay to the bank $27.5 million, out of the proceeds received from Seagate in full settlement of its overdraft borrowings and loan stock totalling $34 million.

The Directors believe that there are no matters in dispute that would have material adverse financial consequences for the Company.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 28

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

28. Related Party Transactions

The extent of transactions with related parties of Sportech PLC as defined by Financial Reporting Standard No. 8, and the nature of the relationship with them are summarised below:

a) The Foundation for Sports and Arts is a UK discretionary trust which was established in 1991 with the aim of encouraging and developing involvement in general sports activities and in the arts. The contributions are made by Littlewoods Promotions Limited and the trustees include Mr. G. Speakman, a director of both Sportech PLC and Littlewoods Promotions Limited.

Contributions of £1.3m were made in the year (2002: £1.9m). At 31 December 2003, £0.1m (31 December 2002: £0.1m) was owed to the Foundation for Sports and Arts.

b) The Bank of Scotland provided loan finance for the acquisition of Littlewoods Gaming, and is a significant shareholder with 28.4% of the Share Capital of the Company, as set out in “Item 7A – Share Ownership”.

The details of the balances on the loans as at 31 December 2003 and 31 December 2002 are set out in note 19. Interest on these loans amounting to £6.4m (2002: £7.3m) has been charged in these financial statements.

The Group has also entered into interest rate swap and cap transactions with the Bank of Scotland, as set out in note 20. £nil (2002: £nil) was paid to the Bank of Scotland for the interest rate cap, and £nil (2002: £1.0m) of interest was charged and £0.1m (2002: £nil) of interest was received under interest rate swap contracts.

c) The Group’s head office, Sportech House, is owned by Northern Trust Company Limited. There is common control of Northern Trust Company Limited and Newby Manor Limited, which is a significant shareholder with 28.4% of the Share Capital of the Company, as set out in “Item 7A – Share Ownership”.

£0.2m of rent has been charged in these financial statements (2002: £0.2m). The lease period is for ten years and the contract included an initial rent free period of six months, the equivalent cost of which is being held in Accruals and Deferred Income and amortised over the period to the earliest break point in the contract (5 years), in accordance with UITF 28, Operating Lease Incentives. At 31 December 2003, £0.1m (31 December 2002: £nil) was held in Accruals and Deferred Income.

29. Pension Scheme

The Group participates in two pension schemes. One is a defined contribution stakeholder scheme, and the second is a defined benefit scheme, which is funded.

Summary of pension contributions paid

	2002	2003
	£m	£m
Defined contribution scheme: Stakeholder pension scheme	0.4	0.4
Defined benefit scheme contributions	0.2	0.2
Total pension contributions (see note 8)	0.6	0.6

Defined contribution scheme

Those employees who joined the Group consequent upon the acquisition of Littlewoods Leisure and who were aged under 50 on 4 September 2000, and all other employees of Sportech can join a stakeholder pension scheme established on 6 April 2001. The contributions to this scheme are made at a rate of 8% of pensionable salaries.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 29

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

29. Pension Scheme (continued)

Defined benefit scheme

Pursuant to the sale agreement between Littlewoods plc and Sportech, a defined benefit scheme has been set up for those employees who joined the Group consequent upon the acquisition of Littlewoods Gaming and who were aged 50 or over on 4 September 2000, the date of the acquisition. This scheme was formed on 6 April 2001 and currently has 58 members (2002: 65 members).

The Group has continued to account for pensions in accordance with SSAP 24 and the disclosures required by that standard are set out in (i). FRS 17, “Retirement Benefits”, was issued in November 2000 but the Group is not required to implement the new standard fully until the year to 31 December 2005. However, FRS 17 requires certain disclosures to be made in these accounts. To the extent that they are different or additional to those required under SSAP 24 these are set out in (ii).

(i) SSAP 24

The most recent actuarial valuation was carried out at 31 December 2003 by the independent actuary. The principal assumptions and results of the valuation are set out below:

Discount rate and expected rate of investment return		6.0	%
Rate of increase in pensionable salaries		4.5	%
Rate of increase in pensions in payment and inflation		3.0	%
Market (& actuarial) value of assets	£	1.0	m
Level of funding (actuarial value of assets as a percentage of accrued service liabilities)		140	%

The next actuarial valuation is due to be carried out no later than 31 December 2006.

The contributions of the employees have been set at the rates set out in the rules of the fund of 6% of pensionable salary. The contributions of the relevant Group companies are 20.2% of pensionable salary.

The total charge for the year in the accounts of the Group was £0.2m (2002: £0.2m). There were no outstanding or prepaid contributions at either the beginning or end of the year.

(ii) FRS 17

The valuation used for FRS 17 disclosures has been based on the most recent actuarial valuation at 6 April 2001 amended to take account of the requirements of FRS 17 and updated to 31 December 2003 by a qualified independent actuary. The principal assumptions used by the actuary for this purpose are set out below:

	2001		2002		2003
Rate of increase in pensionable salaries	4.2	%	4.0	%	4.3	%
Rate of increase in pensions in payment	2.7	%	2.5	%	2.8	%
Discount rate	5.7	%	5.4	%	5.3	%
Inflation assumption	2.7	%	2.5	%	2.8	%

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 30

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

29. Pension Scheme (continued)

The assets in the Scheme and the expected rates of return (net of administrative expenses) were:

	Long term rate of return expected 31 December 2001	Value at 31 December 2001		Long term rate of return expected 31 December 2002	Value at 31 December 2002		Long term rate of return expected 31 December 2003	Value at 31 December 2003
	%	£m		%	£m		%	£m
Equities	—	—		7.3	0.3		7.1	0.7
Bonds	—	—		—	—		—	—
Cash	4.5	0.3		4.0	0.3		4.0	0.3
Total market value of assets		0.3			0.6			1.0
Present value of scheme liabilities		(0.3	)		(0.5	)		(0.8	)
Surplus in the scheme		—			0.1			0.2
Related deferred tax liability		—			—			—
Net pension asset		—			0.1			0.2

At 31 December 2001, all the assets of the scheme were held on fixed rate deposit, pending the formal appointment of professional investment managers.

If the above amounts had been recognised in the financial statements, the Group’s nets assets and profit and loss reserves at 31 December 2003 and 31 December 2002 would be as follows:

	2002	2003
	£m	£m
Net assets excluding pension asset	31.5	31.3
Pension asset	0.1	0.2
Net assets including pension asset	31.6	31.5
Profit & loss reserve excluding pension asset	1.9	1.7
Pension reserve	0.1	0.2
Profit & loss reserve	2.0	1.9

Analysis of the amount charged to operating profit

The following amounts would have been charged to profit & loss in the year to 31 December 2003 under the requirements of FRS 17:

	2002	2003
	£m	£m
Current service	0.2	0.2
Past service cost	—	—
Total operating charge	0.2	0.2

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 31

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

29. Pension Scheme (continued)

Movement in surplus during the year

	2002		2003
	£m		£m
Surplus in scheme at the beginning of the year	—		0.1
Movements:
Current service cost	(0.2	)	(0.2	)
Contributions	0.2		0.2
Past service cost	—		—
Other finance income	—		—
Actuarial gain	0.1		0.1
Surplus in the scheme at the end of the year	0.1		0.2

Analysis of the amount credited to other finance income

The following amounts would have been credited to other finance income in the year to 31 December 2003 under the requirement of FRS 17:

	2002	2003
	£m	£m
Expected return on scheme assets	—	—
Interest on pension scheme liabilities	—	—
Net return	—	—

Analysis of the amount recognised in the statement of total recognised gains and losses

The following amounts would have been recognised in the statement of total recognised gains and losses in the year to 31 December 2003 under the requirement of FRS 17:

	2002	2003
	£m	£m
Actual return less expected return on pension scheme assets	—	0.2
Experience gains and losses arising on scheme liabilities	0.1	—
Changes in the assumptions underlying the present value of the scheme liabilities	—	—
Actuarial gain recognised in the statement of total recognised gains and losses	0.1	0.2

History of experience gains and losses

	2002		2003
	£m		£m
Difference between actual and expected return on scheme assets:
Amount (£m)	—		0.2
Percentage of scheme assets	0.7	%	17.5	%
Experience gains and losses on scheme liabilities
Amount (£m)	0.1		—
Percentage of the present value of scheme liabilities	21.1	%	5.4	%
Total amount recognised in statement of total recognised gains and losses:
Amount (£m)	0.1		0.2
Percentage of the present value of scheme liabilities	19.4	%	23.5	%

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 32

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

30. Summary of significant differences between US GAAP and UK GAAP

The consolidated financial statements are prepared in accordance with UK GAAP, which differs in certain significant respects from US GAAP. These differences relate principally to the following items and the impact upon the presentation of results and the effect on net income and shareholders’ equity is shown in the following tables. In preparing the summary of differences between UK and US GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the estimates of revenue and expenses. Accounting estimates have been employed in these financial statements to determine reported amounts, including realisability, useful lives of tangible and intangible assets, income taxes and other areas. Actual results could differ from these estimates.

Effect on net income on differences between UK GAAP and US GAAP

	2001		2002		2003
	£m		£m		£m
Net profit/(loss) under UK GAAP	(2.7	)	2.9		(0.2	)
US GAAP adjustment:
Share options (note c)	—		—		(0.1	)
Derivative financial instruments (note d)	(0.5	)	(0.2	)	0.9
Amortisation of goodwill (note e)	—		8.8		9.1
Pre-contract costs (note g)	—		(0.8	)	(0.4	)
Defined benefit plan (note h)	—		0.1		0.1
Tax effect of US GAAP adjustments	0.1		0.1		(0.3	)
Net income/(loss) under US GAAP	(3.1	)	10.9		9.1

Effect on shareholders’ funds of differences between UK GAAP and US GAAP

	2002		2003
	£m		£m
Shareholders’ funds under UK GAAP	31.5		31.3
US GAAP adjustments:
Share options (note c)	—		(0.1	)
Derivative financial instruments (note d)	(0.7	)	0.2
Amortisation of goodwill (note e)	8.8		17.9
Pre-contract costs (note g)	(0.8	)	(1.2	)
Defined benefit plan (note h)	0.1		0.2
Tax effect of US GAAP adjustments	0.2		(0.1	)
Shareholders’ funds under US GAAP	39.1		48.2

Effect on EPS of calculating under US GAAP

	2001 Pence per share		2002 Pence per share	2003 Pence per share
Basic and diluted earnings/(loss) per share:
Under US GAAP	(0.5	)	1.8	1.5

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 33

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

30. Summary of significant differences between US GAAP and UK GAAP (continued)

a) Deferred taxation

Under US GAAP deferred taxation is provided on all temporary differences under the liability method, subject to a valuation allowance on deferred tax assets where applicable, in accordance with FAS109, Accounting for Income Taxes.

Under UK GAAP, up to the year ended 31 December 2001, deferred taxation was provided on timing differences to the extent that a liability or asset was expected to crystallise in the future. This policy was changed in 2002 in order to adopt FRS 19, “Deferred Tax”, and prior period adjustments were processed. There should now be no adjustments required by the Company to reconcile between UK and US GAAP, and hence there are no entries in the tables on the prior page for deferred tax, other than adjustments to deferred tax resultant from other UK GAAP to US GAAP adjustments identified below.

b) Exceptional items

Exceptional items are material items within the consolidated ordinary activities, which under UK GAAP are required to be disclosed separately due to their size or incidence. One item in the UK financial statements has been disclosed as an exceptional item, and two further items have been highlighted on the face of the profit and loss account due to their particular nature.

Under US GAAP, to be classified as an extraordinary item, a transaction needs to both unusual in nature and infrequent in occurrence. No such transactions have been identified.

c) Share options

Under UK GAAP the Company does not recognise compensation expense, at the date of grant, of share options granted under the employee share option schemes unless the exercise price is at a discount to the open market value at date of grant.

Under US GAAP, the Company has elected to follow Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees”. In accordance with APB 25, as the number of options that will be available to participants is dependent on the attainment of certain long-term performance goals of the Company, compensation expense should be charged to income over the performance (vesting) period adjusted for changes in the market price of the stock during the period. For the period ending 31 December 2003, £0.1m (2002 and prior periods: £nil) has been recognised for the company’s employee stock options granted.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 34

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

30. Summary of significant differences between US GAAP and UK GAAP (continued)

c) Share options (continued)

The following pro forma information regarding net income/(loss) and earnings/(loss) per share is required when APB 25 accounting is elected, and was determined as if the Company had accounted for its employee stock options under the fair value method of FAS 123, “Accounting for Stock-Based Compensation.”

The weighted average fair value of options granted during the year was £0.09 (value of 2002 grant: £0.11, value of 2001 grant: £0.12). The fair values for these options were estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 2003 grant (2002 and 2001 grant comparatives given in brackets): risk-free interest rates of 4.5% (2002: 4.0%, 2001: 4.9%); volatility factors of the expected market price of the Company’s ordinary shares of 0.59 (2002: 0.57, 2001: 0.88); dividend yields of 0% (2002: 0%, 2001: 0%); and a weighted-average expected life of the options of 7 years (2002: 7 years, 2001: 7 years). For purposes of pro forma disclosures, the estimated fair values of the options are amortised to expense over the option’s vesting periods (in £m except for per share information):

	2001		2002		2003
	£m		£m		£m
Net income/(loss):
As reported under US GAAP	(3.1	)	10.9		9.1
Add back APB 25 expense	—		—		0.1
Pro forma FAS 123 compensation expense	(0.1	)	(0.2	)	(0.2	)
Pro forma net income/loss	(3.2	)	10.7		9.0
Basic and diluted earnings/(loss) per share (pence):
As reported under US GAAP	(0.5p	)	1.8p		1.5p
Pro forma effect of FAS 123 compensation expense	—		—		—
Pro forma basic and diluted earnings/(loss) per share (pence)	(0.5p	)	1.8p		1.5p

Activity with respect to Sportech’s share option schemes is as follows (WAEP = Weighted average exercise price):

	2001			2002			2003
	Shares		WAEP	Shares		WAEP	Shares		WAEP
	(‘000)		(p)	(‘000)		(p)	(‘000)		(p)
Outstanding at January 1	—		—	5,800		14.75	12,000		16.15
Granted	6,000		14.75	6,300		17.42	10,000		14.00
Lapsed	(200	)	14.75	(100	)	14.75	(5,000	)	14.65
Outstanding at December 31	5,800		14.75	12,000		16.15	17,000		15.33
Exercisable at December 31	—		—	—		—	—		—

No share options are currently exercisable. Share options outstanding at December 31 2003, 2002 and 2001 were as follows:

	2001		2002		2003
Exercise price	Options	Remaining contractual life	Shares	Remaining contractual life	Shares	Remaining contractual life
(p)	(‘000)	(years)	(‘000)	(years)	(‘000)	(years)
14.75	5,800	10	5,700	9	4,200	8
17.42	—	—	6,300	10	4,700	9
12.25	—	—	—	—	5,600	10
19.25	—	—	—	—	2,500	10

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 35

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

30. Summary of significant differences between US GAAP and UK GAAP (continued)

d) Derivatives

In June 1998, the Financial Accounting Standards Board (FASB) issued FAS No. 133, Accounting for Derivative Instruments and Hedging Activities as amended by FAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FAS No. 133. FAS No. 133 establishes accounting and reporting standards for derivative financial instruments, including certain derivatives used for hedging activities and derivatives embedded in other contracts. FAS No. 133 requires all derivatives to be recognised on the balance sheet at fair value. The recognition of the changes in the fair value of a derivative depends upon its intended use.

Derivatives that do not qualify for hedging treatment under FAS No. 133 must be adjusted to fair value through earnings. For fair value hedges that qualify under FAS No. 133, the changes in fair values of the derivatives will be recognised in earnings together with the change in fair value of the hedged item attributable to the risk being hedged. For cash flow hedges that qualify under FAS No. 133, the changes in the fair value of the derivatives will be recognised in other comprehensive income until the hedged item affects earnings. For all hedging activities, the ineffective portion of a derivative’s change in fair value will be immediately recognised in earnings. The Company has adopted FAS No. 133 with effect from inception.

Under FAS No. 133 there is a requirement for contemporaneous hedge documentation before it is possible to offset changes in the fair value of a derivative with the change in the fair value of the corresponding hedged asset or liability. In the absence of such documentation it is necessary to record changes in the fair value of the derivatives in the income statement.

Contemporaneous documentation was not in place for the Company’s financial instruments and hence they are adjusted to fair value through earnings In 2003, the fair value of the interest rate swap has increased from £nil to £0.6m, resulting in the credit to the income statement of that amount. The fair value of the interest rate cap is unchanged at £0.1m. The net impact of these derivatives on the amounts recognised for US GAAP compared to UK GAAP for the years ended 31 December 2003 and 2002 are as follows:

	2001			2002			2003
	UK GAAP	US GAAP		UK GAAP	US GAAP		UK GAAP		US GAAP
	£m	£m		£m	£m		£m		£m
Profit and loss account
Other income	—	1.1		—	1.3		—		0.6
Other expenditure	—	(1.7	)	—	(1.5	)	—		—
Net interest payable and similar items	—	—		—	—		(0.3	)	—
Taxation	—	0.1		—	0.1		—		(0.2	)
Net impact	—	(0.5	)	—	(0.1	)	(0.3	)	0.4
Balance sheet
Other debtors – derivative assets
Swap	—	1.1		—	—		—		0.6
Cap	0.9	0.5		0.8	0.1		0.5		0.1
Attributable deferred tax asset	—	0.1		—	0.2		—		—
Total assets	189.4	190.2		179.0	178.5		169.8`		170.0
Other liabilities – derivative liability	—	(1.3	)	—	—		—		—
Total shareholders’ funds	28.6	28.1		31.5	31.0		31.3		31.5

Management has assessed the risk, on its consolidated financial statements, that the Bank of Scotland will not satisfy its obligations to the Company under the interest rate floor and cap and believes that there is no significant risk of default.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 36

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

30. Summary of significant differences between US GAAP and UK GAAP (continued)

e) Amortisation of goodwill

Under UK GAAP, goodwill is amortised through the profit and loss account. A charge of £9.1m is included in the profit and loss account for the year ended 31 December 2003. In July 2001, the FASB issued FAS No. 142, “Goodwill and Other Intangible Assets” (“FAS 142”) which supersedes APB Opinion No. 17, “Intangible Assets”. FAS 142 addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. FAS 142 also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements.

Under UK GAAP, the Group periodically reviews the recoverability of goodwill, not identified with impaired long-lived assets, based on estimated discounted future cash flows from operating activities compared with the carrying value of goodwill and recognizes any impairment on the basis of such comparison Under US GAAP, the Group performed the transitional impairment test under FAS 142 as of January 1, 2002 by comparing the carrying value of each reporting unit to its fair value as determined by discounted future cash flows. Upon completion of the transitional impairment test, the group determined that no impairment was required as of January 1, 2002 as the fair value of each reporting unit exceeded carrying value. The Group also completed the annual impairment tests required by FAS 142 as at January 1, 2003. Following this review, management do not believe that any impairment write down is necessary. The impact on the profit and loss account of removing amortisation is to increase reported net income by £9.1m, and there is an equivalent increase in the value of goodwill in the balance sheet. For future years, the impact will be to increase profits or reduce losses by a similar amount each year until goodwill is fully amortised in the UK accounts, or until the adoption of International Accounting Standards causes the accounting in the UK accounts to be the same as the accounting under US GAAP.

The following table shows the results of operations as if FAS 142 were applied to prior periods:

	2001
	£m
	except per share amounts
Profit/(loss) for the financial year as reported under US GAAP	(3.1	)
Add back: goodwill amortization	8.9
Adjusted profit/(loss) for the financial year	5.8
Basic and diluted earnings/(loss) per equity share as reported under US GAAP (pence)	(0.5	)
Add back: goodwill amortization (pence)	1.5
Adjusted earnings per equity share (pence)	1.0

The following table provides a roll forward of the Group’s US GAAP goodwill during 2002 and 2003:

	£m
Balance as of 1 January 2002	161.8
Goodwill acquired during 2002	1.3
Balance as of 31 December 2002 and 31 December 2003	163.1

During 2002, the Group completed the acquisition of the Zetters Pools business with an aggregate purchase price of £1.4m. Under both UK and US GAAP, a total of £1.3m has been recorded in goodwill in respect of this (see note 14 for the purchase price allocation).

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 37

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

30. Summary of significant differences between US GAAP and UK GAAP (continued)

f) Cash flow information

Under UK GAAP the Consolidated Cash Flow statement is presented in accordance with UK Financial Reporting Standard No. 1 as revised (“FRS 1”). The Statement prepared under FRS 1 presents substantially the same information as that required under US GAAP as interpreted by FAS No. 95. Under UK GAAP, cash comprises cash in hand (including overnight deposits), net of bank overdrafts. Under US GAAP, cash and cash equivalents include cash and short term investments with original maturities of three months or less.

Under UK GAAP, cash flows are presented for operating activities; returns on investments and servicing of finance; taxation; capital expenditure and financial investment; acquisitions and disposals; equity dividends paid; management of liquid resources and financing. US GAAP requires the classification of cash flows as resulting from operating, investing and financing activities.

Cash flows under UK GAAP in respect of interest received, interest paid, investment income and taxation would be included within operating activities under US GAAP. Capital expenditure and financial investment and cash flows from acquisitions and disposals would be included within investing activities under US GAAP. Dividends paid by subsidiary undertakings, minority interests, equity dividends paid, management of liquid resources and returns on investments and servicing of finance would be included within financing activities under US GAAP.

Set out below, for illustrative purposes, is a summary consolidated statement of cash flows under US GAAP:

	2001		2002		2003
	£m		£m		£m
Net cash (used in)/provided by operating activities	0.7		7.4		9.2
Net cash provided by/(used in) investing activities	(1.8	)	(3.1	)	(2.3	)
Net cash (used in)/provided by financing activities	(3.9	)	(11.2	)	(8.8	)
Net movement in investment in restricted cash	(1.2	)	(0.5	)	(0.1	)
Net (decrease)/increase in cash and cash equivalents	(6.2	)	(7.4	)	(2.0	)
Cash at the beginning of the year	17.9		11.7		4.3
Cash and cash equivalents at the end of the year	11.7		4.3		2.3
Net (decrease)/increase in cash and cash equivalents	(6.2	)	(7.4	)	(2.0	)

The company has £1.8m of restricted cash as at December 31, 2003: (2002: £1.7m 2001: £1.2m) as discussed in more detail in note 17. In the current year, for amounts shown as cash in the table above, restricted cash has been excluded from the balances presented. Prior year amounts have been reclassified to reflect the current year presentation.

g) Pre-contract costs

During the current and prior years, the Company incurred costs securing major new contracts to provide interactive television gaming products. Certain of these costs were required to be capitalised under UITF 34 “Pre-contract costs” and under UK GAAP, £0.4m in 2003, £0.8m in 2002 and £nil in earlier years of pre-contract costs were capitalised as intangible fixed assets.

Under US GAAP, start-up costs are defined as those one-time activities related to opening a new facility, introducing a new products or service, conducting business in new territory, conducting business in a new territory, or commencing some new operation. SoP 98-5 requires that these costs must be expensed as incurred. Accordingly, under US GAAP costs incurred have been expensed.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 38

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

30. Summary of significant differences between US GAAP and UK GAAP (continued)

h) Defined benefit plan

At 31 December 2002, Sportech PLC had one statutorily approved defined benefit pension plan and one statutorily approved defined contribution plan. The basis for membership of these schemes is detailed in note 29.

Under UK and US GAAP, in respect of the defined contribution plan, contributions are paid by the member and the employer at fixed rates, these contributions are charged against income in the period they are paid. Benefits under the defined contribution plan reflect each employee’s fund at retirement and the cost of purchasing benefits at that time.

Under UK GAAP the cost of providing pension benefits is expensed over the average expected service lives of eligible employees in accordance with the provisions of Statement of Standard Accounting Practice (“SSAP”) 24 “Accounting for Pension Costs”. SSAP 24 aims to produce an estimate of cost based on long-term actuarial assumptions. Variations from the regular pension cost arising from, for example, experience deficiencies or surpluses, are charged or credited to the profit and loss account over the expected average remaining service lives of current employees in the schemes.

Under US GAAP, the annual pension cost comprises the estimated cost of benefits accruing in the period as determined in accordance with SFAS 87 ”Employers Accounting for Pensions”, which requires readjustment of the significant actuarial assumptions annually to reflect current market and economic conditions. Under FAS 87, part of the surplus (the excess of plan assets over plan liabilities), the majority of which for the Group is attributable to prior acquisitions, has been recognized in the balance sheet. The remainder of the unrecognized surplus is spread over the employees’ remaining service lifetimes.

A reconciliation of the beginning and end balances of the projected pension benefit obligation and the funded status of the defined benefit plan, prepared in accordance with FAS 87, is as follows:

:

	Year ended 31 December 2001	Year ended 31 December 2002		Year ended 31 December 2003
	£m	£m		£m
Change in benefit obligation
Benefit obligation at 1 January	—	0.3		0.5
Service cost	0.2	0.2		0.2
Interest cost	—	—		—
Employee contributions	0.1	0.1		0.2
Actuarial (gain)	—	(0.1	)	(0.1	)
Benefit payments	—	—		—
Benefit obligation at 31 December	0.3	0.5		0.8
Change in plan assets
Fair value of assets at 1 January 2002	—	0.3		0.6
Actuarial return on plan assets	—	—		0.1
Employer contributions	0.2	0.2		0.2
Employee contributions	0.1	0.1		0.1
Benefit payments	—	—		—
Fair value of assets at 31 December	0.3	0.6		1.0
Funded status at year end
Unrecognised Transition (Obligation)/Asset	—	—		—
Unrecognised net actuarial gain	—	0.1		0.2
Unrecognised prior service cost	—	—		—
Net amount recognised	—	0.1		0.2

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 39

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

30. Summary of significant differences between US GAAP and UK GAAP (continued)

h) Defined benefit plan (continued)

	Year ended 31 December 2001	Year ended 31 December 2002		Year ended 31 December 2003
	£m	£m		£m
Components of net periodic pension cost
Service cost	0.2	0.2		0.2
Interest cost	—	—		—
(Expected return on assets)	—	—		—
Amortisation of prior service cost	—	—		—
Recognised net actuarial (gain)	—	(0.1	)	(0.1	)
Amortisation of transition obligation	—	—		—
Net periodic pension cost	0.2	0.1		0.1

As a result, under US GAAP, net income would be £0.1m higher than UK GAAP and shareholders’ funds would be £0.2m higher than UK GAAP.

The weighted average actuarial assumptions used in determining benefit obligations were as follows:

	31 December 2001		31 December 2002		31 December 2003
Discount rate	5.7	%	5.4	%	5.3	%
Salary increases	4.2	%	4.0	%	4.3	%
Long term rate of return on assets	4.5	%	5.7	%	5.6	%
Pension increases	2.7	%	2.5	%	2.8	%

i) Segments

The company has determined that its reportable segments are those that are based on the Group’s method of internal reporting, which disaggregates its business by product category. The Group’s segments are the same under UK GAAP and information with respect to the segments is presented in Notes 3 and 4 to the financial statements.

The accounting policies of the segments are the same as those described in Note 2. The Group’s management evaluates the performance of its segments and allocates resources to them based on underlying sales growth and trading margin improvement. There are no material inter-segment revenues.

j) Recently Issued US Accounting Pronouncements

FA132 (Revised 2003)

FAS 132 (Revised 2003), Employers’ Disclosures about Pensions and Other Post-Retirement Benefits was issued on 23 December 2003 and is effective, subject to certain exemptions, for fiscal years ending on or after 15 December 2003. The Group has complied with the new requirements in these Financial Statements.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 40

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

30. Summary of significant differences between US GAAP and UK GAAP (continued)

j) Recently Issued US Accounting Pronouncements (continued)

EITF 00-21

In January 2003, the Emerging Issues Task Force (EITF) issued EITF 00-21, ‘Accounting for Revenue Arrangements with Multiple Deliverables’. EITF 00-21 addresses the issues of how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and how arrangement consideration should be measured and allocated to the separate units of accounting in the arrangement. EITF 00-21 does not change otherwise applicable revenue recognition criteria. EITF 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after 15 June 2003. The adoption of EITF 00-21 has not, to date, had any significant impact on the Group’s financial position or results of operations.

FIN 45

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), ‘Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others’. FIN 45 requires a liability to be recognised at the time a company issues a guarantee for the fair value of the obligations assumed under certain guarantee agreements. The provisions for initial recognition and measurement of guarantee agreements are effective on a prospective basis for guarantees that are issued or modified after 31 December 2002. The adoption of this interpretation has had no impact on the Group’s financial position or results of operations.

FIN 46

In January 2003, the FASB issued FIN 46, ‘Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin (ARB) 51’, which was amended in December 2003 when the FASB issued FIN 46-R. FIN 46-R addresses the consolidation of entities for which control is achieved through means other than through voting rights (‘variable interest entities’ or ‘VIE’) by clarifying the application of ARB No. 51, ‘Consolidated Financial Statements’ to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46-R provides guidance on how to determine when and which business enterprise (the ‘primary beneficiary’) should consolidate the VIE. In addition, FIN 46-R requires that both the primary beneficiary and all other enterprises with a significant variable interest in a VIE make additional disclosures. FIN 46-R will be effective for the Company from January 1, 2004. The statement is not expected to have a material impact on the results of operations and financial position under US GAAP.

Sportech PLC Form 20-F for the year ended 31 December 2003 F - 41