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The achievement of the Group’s objectives is heavily reliant on the timely execution of the Group’s business strategies by the Directors, the senior management team and the workforce as a whole. Developing and implementing appropriate people strategies are critical to ensuring we attract and retain talented employees that can adapt quickly to changes in the business and regulatory environment. Attracting and relocating people to the local area from international markets is always a challenge for any business. The Group maintains a strong working relationship with the Gibraltarian authorities ensuring we maintain an appropriate balance of overseas as well as local employees in order to support the local economy.

Over the past 12 months the Group has undergone substantial organisational change following the termination of all real money games to customers in the US. Having hit a peak of over 2,080 full time employee equivalents in September 2006, by the end of the same year this had been reduced to just 1,203 reflecting the loss of the majority of the Group’s revenues which historically had been generated by customers based in the US. This restructuring required enormous professionalism from our Human Resources team. Within days of the UIGEA passing, a firm policy and approach to redundancies had been agreed, incorporating the requirements for an appropriate consultation process, redundancy and relocation terms, as well as outplacement support.

In spite of the dramatic change to the scale and mix of our workforce, PartyGaming remains a very cosmopolitan place to work. As at 31 December 2006 we had a total of 26 different nationalities represented across the Group and approximately 40% of the employees were female. All employees are issued with a contract of employment. There is also a Group intranet site which contains all of our people policies and processes. These outline the way in which we expect our employees to behave, the policies that are relevant to them and the obligations the Company has to each and every one of them. In addition, the site provides helpful information for new recruits and those relocating to Gibraltar.

As an internet business, ensuring that our staff have all of the technical skills and knowledge that they need to do their jobs, as well as helping them to develop the next generation of products and services, is essential. Training is an ongoing part of life at PartyGaming and is provided both internally and externally. For example, our customer service operators in Europe, many of whom are multi-lingual, undergo a rigorous training programme, including classroom sessions as well as on-the-job training before speaking to customers. We also provide funding for employees’ personal development, such as learning a new language.

PartyGaming operates in a highly competitive and dynamic international market and a key business need is to recruit and retain high-calibre individuals who can continue to drive the future growth and performance of what is a highly entrepreneurial business. The enactment of the UIGEA had a significant impact on the overall value of our employees’ total remuneration. Share ownership by all employees is a key element of our remuneration policy and as such employees have witnessed a near 80% reduction in the value of their holdings. In response it was essential to put in place an appropriate long-term incentive plan.

Having completed a detailed review of the Group’s long-term incentive arrangements during 2006, two new Share Option Plans have been proposed to reward all employees across the organisation. Designed by external consultants and agreed with the Remuneration Committee, the plans aim to ensure that those individuals that are critical to the ongoing success of the business are suitably incentivised over the medium-term with rewards geared to strong share price performance, thereby aligning the interests of shareholders and employees.

The Board recognises that the continued and careful management of our people is critical to the ongoing success of the Group. As part of this management process, the Group has established a number of people processes and systems to ensure that issues surrounding succession planning and talent management, learning and development, rewards, health and safety, performance management and whistle-blowing are all monitored and controlled. For example, during 2006 the Company introduced a change in the performance management process to ensure closer alignment between the organisation’s business objectives and those of individual employees. This change fed through to influence the structure of employee bonus payments in 2006 and will continue to be a priority for the business in 2007.

During the coming year, the Group will introduce a new system for managing the Group’s human resources that, among other things, will enable the measurement and tracking of key people metrics. This data will provide the final link in ensuring PartyGaming has a robust people strategy that is fully embedded within the core business strategy and can be effectively measured to demonstrate the value of effective Human Capital Management.

Diversity

As at 31 December 2006 the Group had employees from 26 different nations and remains a highly cosmopolitan working environment.