Cottons Centre 
Hay’s Lane
London  SE1 2QP
Tel  +44 (0)20 7940 0490 
Fax  +44 (0)20 7940 0499
Web  www.patsystems.com
Soaring to 
new heights
Annual Report 2006
PS2133 - AR06 Cover AW01.indd   1 PS2133 - AR06 Cover AW01.indd   1 9/3/07   4:19:58 pm 9/3/07   4:19:58 pm Patsystems plc
We’ll never try to push a one-size-fits-all 
trading system onto you. We’ll work with 
you to deliver tailored solutions, built from 
modular components, that maximise the 
investment you’ve already made and align 
with your business strategies.
From a single plug-and-play module 
to address a specific issue, to complete 
high performance trading systems with 
global market access, our solutions are 
designed to enhance derivatives trading 
performance and trade processing.
We call it FlexAbility.
Highlights 1
Timeline   2
Chairman’s Statement  4 
Chief Executive’s Report 8
Financial Directors’ Review 16
Our Board 22 
Directors’ Report 24
Statement of Corporate Governance 28
Report of the Board on Directors’ 
Remuneration and on Group  31 
Remuneration Policy
Independent Auditors’ Report 35
Consolidated income statement 37
Consolidated statement of  
recognised income and expense 37
Consolidated balance sheet 38
Consolidated cash flow statement 39
Reconciliation of net profit to net  
cash flows from operating activities 40
Notes to the financial statements 41
Independent Auditors’ Report 67
Company Balance Sheet 69
Notes to the financial statements 70
Directors and Advisers IBC
Contents Report & Accounts 2006 1
Pre-tax profit up 353% to £1.63 million (2005: £0.36 million)
Operating profit as a percentage of sales increased to 10.3% 
(2005: 2.2%)
Fully diluted Earnings per Share 4.1p (2005: 0.2p)
Pre-deferred tax adjusted fully diluted Earnings per Share*  
up 300% to 0.8p
Board announces inaugural dividend of 0.3p per share based 
on 2006 results
Net cash flow from Operating Activities increased 220% to 
£2.69 million (2005: £0.84 million)
12 new trading system software installations globally in 2006 
for existing and new customers including JPMorgan in London, 
Citigroup in New York and Singapore and CFETS in China
129 Pro-Mark screens deployed to paying customers (2005: nil)
•
•
•
•
•
•
•
•
As a result of the large deferred tax credit being recognised this year the directors consider that it is 
appropriate to exclude deferred tax in the calculation of the adjusted fully diluted Earnings per Share (EPS).
*
Highlights 
Profit/(loss)  
before tax
£’000 
Cash Flow from  
operating activities
£’000 
2000
0
-2,000
-4,000
-6,000
-8,000
-10,000
02 03 04 05 06 02 03 04 05 06
4000
2000
0
-2,000
-4,000
-6,000
-8,000
-10,000 2 Patsystems plc
In 2006 we achieved 12 trading 
system installations globally.
Timeline: Jan – Dec 2006
JANUARY 
David Webber 
appointed as CEO 
of Patsystems plc
FEBRUARY
Patsystems plc 
announces a 
normalised profit 
for 2006
MARCH
Chicago – Calyon 
Financial adopt 
Risk Informer
APRIL
Tokyo – Harbest 
Futures Contract 
Signature
MAY
Global – Citigroup 
contract (New York 
& Singapore)
JUNE
J-Trader brackets 
& trailing stops 
launched at FOW 
London
Risk Informer “hand 
cuffs” campaign Report & Accounts 2006 3
DECEMBER
129 Pro-Mark 
screens deployed
JULY
Pro-Mark excel plug, 
energy spreads & 
agricultural futures 
available
AUGUST
CME Eurodollar 
Options launched 
on Pro-Mark
OCTOBER
Calyon Singapore 
installation live
CFETS contract 
signed
SEPTEMBER
Midas Trading, 
FCT International, 
Transmarket 
Group and 
Nomura Securities 
International 
trading system 
contracts signed
NOVEMBER
Embedded charts 
launched on  
J-Trader and  
Pro-Mark at FIA 
Chicago
Calyon Financial 
London 
installation live 4 Patsystems plc
I think I should start this year’s 
statement by commending David, 
on behalf of the whole board, on 
his first year as Chief Executive of 
Patsystems. In 2006, we have delivered 
full-year results in line with market 
expectations, while also reshaping  
the business to provide a stronger  
base going forward.
Pre-tax profit, under International 
Financial Reporting Standards (IFRS), for 
the full year ended 31 December 2006 
was £1.63 million compared to £0.36 
million in 2005. Cash flows from 
operating activities also grew to £2.69 
million from £0.84 million in 2005.
This growth in profit has justified the 
Board’s confidence for 2006 that we 
expressed within the last annual report 
and accounts.
I am particularly pleased that in 
2006 we achieved 12 trading system 
software installations globally, some 
for new customers and some for 
existing ones, compared to none in 
2005. This indicates the solid base that 
management has built for Patsystems 
going forward into 2007 and beyond.
As described in greater detail within 
the Chief Executive’s Review, we have 
achieved the goals we set at the start 
of 2006 for establishing new user 
communities for both the Pro-Mark 
professional trading screen and the Risk 
Informer real-time risk margining product. 
We anticipate further growth from both 
Pro-Mark and Risk Informer in 2007. 
We have also completed the 
development of our new back-end 
platform. The new platform supports 
global 24-hour trading and provides 
our customers with a single global 
view of the status of their order book. 
Currently two of our tier-one 
customers have signed contracts and 
scheduled their upgrades to the new 
platform for 2007. A further three 
customers are currently discussing the 
timing of their own implementations.
At the start of 2006, we believed that 
we had a strong product suite and are 
even more confident now. The successful 
integration of Tamesis within Patsystems 
also bodes well for the future.
Stewart Millman 
Chairman,  
Non-Executive 
Director 
I think I should start this year’s 
statement by commending 
David on his first year as Chief 
Executive of Patsystems.
Chairman’s Statement Turning to customers, I am delighted 
that we have strengthened our 
presence in Asia with new and existing 
customers. More particularly, we have 
extended our geographical presence 
in the region by being the first 
Independent Software Vendor (ISV) 
to sell a trading and risk system into 
mainland China through our contract 
with China Foreign Exchange Trade 
System (CFETS), a subsidiary of China’s 
Central Bank: People’s Bank of China.
DIVIDEND
As a tangible way to demonstrate its 
confidence in Patsystems’ commercial 
and financial strength, the Board is 
pleased to recommend the payment of 
an inaugural dividend to shareholders, 
based on the results for 2006. The 
Board proposes the payment of a 
dividend of 0.3p per ordinary share, 
subject to confirmation at the Annual 
General Meeting (AGM), to be paid on 
the 25 May 2007 to shareholders on 
the register as at 27 April 2007. The 
shares are expected to be quoted ex 
dividend on 25 April 2007.
MANAGEMENT  
Under David Webber and Martin 
Thorneycroft’s leadership as the two 
Executive Directors, the achievements 
in 2006 have been accomplished with 
minimal turnover in senior personnel 
and no major changes in strategy. 
Only one member of the Executive 
Management Committee (EMC) has 
changed, with Kieron O’Toole joining 
at the start of 2007, replacing Martin 
Coen. The Chief Executive’s report 
details the EMC and their respective 
responsibilities.
The stability in the senior team is 
mirrored in the rest of Patsystems. This 
is pleasing in itself and enables us to 
provide our customers with continuity 
in both technical know-how and our 
day-to-day relationships.
BOARD
It is with sadness and gratitude, that 
we announced on 25 September 
the planned retirement of Stewart 
Douglas-Mann from the Board after 
the 2007 AGM. Stewart has been a 
Director with Patsystems for seven 
The Board is pleased to recommend 
the payment of an inaugural 
dividend to shareholders.
Report & Accounts 2006 5
“PATS respond to 
our ever-changing 
requirements and 
do so quickly and 
courteously and 
can be relied upon 
to deliver with a 
full understanding 
of our requests.”
David Olney,  
IT Manager,  
Man Financial Ltd 6 Patsystems plc
years through some of the most 
challenging periods of its history. I 
often think that without his resilience 
Patsystems might not have been 
able to achieve its present status and 
strength. As he can now observe the 
positive fruits of his efforts, I thank 
him warmly on behalf of everyone 
involved with the Company.
Arun Aggarwal also decided to 
stand down from our Board at the 
end of 2006, due to increasing time 
commitments following his promotion 
to Head of Consultancy, EMEA at Tata 
Consultancy Services. His input has 
been valuable and much appreciated.
To replace such accomplished Non-
executive Directors, we have been 
fortunate to add two new Board 
colleagues, from whose experience we  
are already benefiting.
Steve Sparke joined our Board on 
25 September 2006 bringing with him 
a wealth of business and technology 
knowledge of the futures industry 
from an 18 year career with UBS, 
most recently as their Global Head of 
Futures & Options.
John Priestley joined the Board on 
1 January 2007. John has built a long 
and successful career in the IT and 
software industry, most recently 
with British Telecommunications 
plc, including the role of Director of 
Business Development for Syntegra.
FUTURE
Trading since 31 December 2006 has 
continued in line with business plans 
and the Board remains comfortable 
with current market expectations for 
2007 and, early though it is, 2008.
Despite continuing consolidation 
within our market place, with Chicago 
Mercantile Exchange’s (CME) proposed 
acquisition of Chicago Board of Trade 
(CBOT), and Calyon Financial’s and 
Société Générale’s planned merger of 
The Board remains comfortable  
with current market expectations  
for 2007, and early though it is, 2008.
Chairman’s Statement continued their futures brokerage activities as two 
examples, we believe that opportunities 
remain good for the business.
As well as continued success 
promoting our existing products,  
we expect further opportunities to 
arise for us in new derivative asset 
classes; in cash based products and  
in foreign exchange.
CUSTOMERS, STAFF AND 
SHAREHOLDERS
I would like to thank all of our 
customers, and our partners, for their 
continued support during the year. An 
important factor behind our success 
this year has been our customers’ 
willingness to trust us to help create 
further business success for them. We 
take that responsibility very seriously 
and I hope and believe we have 
discharged it well.
I would also like to thank all the 
management and employees of 
Patsystems for their focus and 
energy. We started the year with 
the inevitable upheaval of a 
change in Chief Executive and they 
have responded to that change 
with the utmost commitment and 
professionalism. The positive results 
are there for all to see.
Finally, on behalf of Patsystems, I 
would like to thank our shareholders 
for their continued support. We look 
forward to their continued association 
with us as the company and business 
continue to develop. 
Stewart Millman 
Chairman, Non-executive Director
Report & Accounts 2006 7
“This contract is part 
of our continued 
expansion of our 
global Patsystems 
offering. We now 
have a globally 
comprehensive 
offering of the 
Pats trading and 
risk management 
products.”
Leslie Sutphen,  
Head of E- brokerage 
Strategy/
Implementation,  
Calyon Financial 8 Patsystems plc
I joined the business in January 2006 
with high expectations that our 
people, products and the opportunities 
within our market would enable us to 
build a highly successful business.
The results for the financial year ended 
31 December 2006 are a significant 
step in our ambition to become a key 
technology provider to the electronic 
trading industry and demonstrates 
that my initial impression as to the 
fundamental strength of this business 
was well founded.
The overall performance of the 
business has shown a significant 
improvement compared to the 
previous year with an operating profit 
under IFRS of £1.6 million compared to 
£0.3 million in 2005.
Underlying turnover has risen 15% to 
£15.3 million compared to £13.3 million 
in 2005. Underlying turnover excludes 
the revenue related to the provision 
of hardware and hardware support 
on the Tokyo Grain Exchange project 
in 2005 which was supplied at a low 
margin and is one-off in nature.
Despite the turnover growth the cost 
base has been closely monitored with 
the operating expenses being £13.3 
million compared to £13 million in 2005. 
TRADING SYSTEMS AND MARKET 
CONNECTIVITY
Trading systems revenue increased by 
15% to £13.3 million during the year.
The change in ownership of Refco in 
November 2005 did have a negative 
impact on recurring revenues in 2006, 
but revenue from new customers, 
and growth from existing customers 
compensated for that revenue 
shortfall.
During the year there were 
three additional installations for 
two existing customers in new 
geographical regions and nine 
installations for new customers 
to Patsystems. The new customer 
installations included JPMorgan in 
London, Citigroup in New York and 
Singapore, and CFETS, the People’s 
Bank of China subsidiary, in Shanghai.
At the start of 2006, we set an 
objective to establish Pro-Mark, our 
trading screen for the high-volume 
David Webber 
Chief Executive
I am pleased to announce the 
first set of financial results for 
Patsystems under my leadership.
Chief Executive’s Report professional, within the professional 
electronic trader community. Though 
take-up of the screens was slower than 
anticipated in the first half of the year, 
by 31 December 2006 we had achieved 
129 billable users. 
Throughout the year we have 
continued to add functionality to both 
our retail and professional offerings.
At the Futures and Options Week 
(FOW) tradeshow in London in June, 
we launched trailing stops and 
brackets functionality for the J-Trader 
product. In the summer, additional 
functionality to support the trading 
of CME Eurodollar options, New York 
Mercantile Exchange NYMEX energy 
spreads and CBOT agricultural futures 
was made available in Pro-Mark. We 
also launched a plug-in tool to enable 
seamless integration of Microsoft Excel 
strategy spreadsheets with Pro-Mark.
Additionally, at the Futures Industry 
Association (FIA) exposition in Chicago 
in November 2006, we showcased our 
new charting capability that is being 
embedded within both our retail and 
professional trading systems.
During the year, all of our customers 
were upgraded to the latest version 
of our price distribution servers at an 
additional charge and all of our major 
customers took the option to upgrade 
to the latest version of our transaction 
servers.
The Global Trading project achieved 
our planned milestones for the year 
with the beta software release being 
available for the sponsoring customers 
for the last quarter of the year. Two 
of our major customers have signed 
contracts to upgrade to the new core 
architecture in 2007 and a further three 
are currently in discussions to schedule 
their projects for 2007.
Global Trading provides our customers 
with the ability to run the system 
continuously, with the down-time 
limited only to a minimal weekly 
clean-up period, and to deploy a 
number of instances of the software 
across diverse geographical locations 
while managing the software as a 
single instance. Most importantly, it 
enables our customers, through the 
Global Order Management capability, 
to view their overall customers’ 
trading and position activity. When 
Global Trading is combined with 
Risk Informer it enables Patsystems 
When Global Trading is combined 
with Risk Informer it enables 
Patsystems to provide a fully global 
electronic trading and risk solution.
Report & Accounts 2006 9
“Berkeley Futures 
and Patsystems 
have worked 
well together in 
the support and 
promotion of 
Berkeley IQ-Trader.”
Marc Quinn,  
Senior Associate 
Director,  
Berkeley Futures 10 Patsystems plc
to provide a fully global electronic 
trading and risk solution on an open 
hardware platform.
The Global Trading product has been 
designed so that the existing trading 
front-ends, Pro-Mark and J-Trader, 
the Risk Informer product and our 
exchange connections will operate 
within both the Global Trading 
solution and the existing core system.
Connectivity has been further 
established to a number of additional 
electronic exchanges, bringing the 
total supported to 37. Connectivity 
was established to the Dubai Gold and 
Commodity Exchange and the Mexican 
Derivatives Market at the close of the 
year and we are encouraged by the 
further business opportunities that 
connections to new geographies, such 
as these, will bring to the business.
RISK SYSTEMS
The Tamesis business acquired in August 
2005 is now integrated fully into our 
operations and we remain confident that 
Risk Informer, the real-time risk margining 
product, will fulfil the expectations 
held at the time of acquisition.
We have enjoyed tremendous support 
from Calyon Financial, the Credit 
Agricole subsidiary, in establishing 
the Risk Informer product within our 
market. In March we announced that 
Calyon Financial chose Risk Informer, 
after a global selection process, as 
their preferred product for providing 
real-time risk margining for their 
futures business. 
Subsequent to our financial year-end, 
and directly resulting from the success 
of the earlier project, Calyon Financial 
has announced an extension of that 
project with Risk Informer to provide 
risk margining for their spot and 
forward foreign exchange and foreign 
exchange options business.
In October 2007, we announced that 
CFETS has also contracted to adopt 
Risk Informer to monitor risk for 
all the business that their members 
submit to the CME through the 
Patsystems CME gateway.
We enter 2007 with opportunities to 
provide the global risk management 
Connectivity has been further 
established to a number of additional 
electronic exchanges, bringing the 
total supported to 37.
Chief Executive’s Report continued capability to a number of futures 
clearing merchants.
EXCHANGE SYSTEMS
In 2005 we delivered the Tokyo 
Grain Exchange (TGE) project for 
the continuous market system. We 
have continued to provide TGE with 
additional services through out the year.
By their nature, opportunities for 
systems projects for electronic futures 
exchanges arise infrequently and 
the selection processes to appoint a 
vendor are usually in excess of nine 
months. Hence our business plans for 
2007 do not presume the winning of 
a new exchange systems contract. 
Nevertheless, we have several 
prospective opportunities that are 
in the early stages of their selection 
process and if we should be selected 
for either of these our 2008 financial 
results would benefit.
I am particularly pleased to see how 
the revenue mix for our exchange 
business has matured. The increasing 
proportion of recurring revenue within 
our exchange business enables us 
to identify 95% of anticipated 2007 
revenue coming from established 
customer relationships and being 
recurring in nature.
BRAND AND MARKETING
With a new range of products and 
an ambition to be seen within our 
sector as the technology partner of 
choice, rather than one of a number 
of independent software vendors, 
we decided at the start of 2006 
to fundamentally review how we 
position the business in our sector.
In the first quarter of the year, 
we carried out extensive market 
research with our existing customers, 
prospective customers and technology 
partners to assess the existing 
perception of Patsystems within the 
market. The research made it apparent 
that for our marketing to successfully 
support our business growth 
aspirations, we needed to move 
perception away from Patsystems as 
a supplier of excellent trading screen 
functionality to one of a capable and 
trusted technology partner.
In the second quarter of 2006, the 
target sectors and individuals were 
identified and the core Patsystems 
proposition to the market was defined. 
Report & Accounts 2006 11
Risk Informer: 
Is your approach to 
risk restricting your 
ability to take on 
new business?
Unlock the potential 
with Risk Informer. 12 Patsystems plc
On the back of this approach we 
launched a campaign for Risk Informer 
during the early summer that produced 
a good number of new sales prospects, 
extended awareness in our market 
place and generated a good level of 
press coverage.
In the third quarter, the key brand 
message and the revisions to our sales 
collateral, website and exhibition 
stands were established. At the core 
of this will be the establishment of the 
‘Total FlexAbility’ brand. In November 
at the FIA event in Chicago, we 
launched the new visual concept for 
our advertising and exhibition branding 
and also launched a completely 
refreshed and restructured website.
For 2007, we have substantially 
increased our planned expenditure 
for marketing to support the ongoing 
growth of our new products, and our 
penetration into new asset classes 
and trading communities. Additional 
expenditure has been allocated to 
promote the range of modules within 
our core offering available to those 
organisations wishing to take best 
of breed technology rather than a 
complete end-to-end solution.
BUSINESS RISK, STRATEGY AND 
PRODUCT DEVELOPMENT
The principal business risks remain the 
same as in previous years:
Competition
The Group operates in a growing 
but competitive market. There are 
three major software suppliers in 
the global electronic trading systems 
market for futures and options, of 
which Patsystems is one. There are 
many smaller companies who supply 
screens, but not market connectivity. 
In such a market there is always a 
risk that customers could move to 
other competitors and there is always 
downwards pressure on margins. 
Patsystems mitigates this risk by 
supporting it’s brands with appropriate 
marketing activity and by consistently 
extending it’s market connectivity 
as well as improving it’s software, 
customer support and customer care.
Customer consolidation
Consolidation within the financial 
services industry has occurred over 
the past few years and further 
We plan to extend our sales functions in 
each of our operational regions and we 
are looking to extend the quality and 
level of support services we provide.
Chief Executive’s Report continued consolidation remains a risk. Where 
consolidation takes place the risk 
to our business is typically  to the 
revenues associated with market 
connectivity and support and 
maintenance. Patsystems mitigates  
this risk by actively adding new 
customers, products and asset 
categories to our portfolio.
Our business strategy remains 
unchanged with the ambition:
to extend the asset classes we 
support beyond futures and options 
on which we currently focus
to service products converting from 
open outcry markets to electronic 
trading; and
to broaden our presence beyond the 
locations where we presently operate.
We believe the reference sites we gain 
in 2007 will enable Risk Informer to be 
extended across trading of any type and 
will ensure that business opportunities 
are not limited to our historical market 
of futures and options.
For our front-end trading screens, we 
will be looking to extend functionality 
to strengthen our position in the market.
For the core system, we plan to extend 
the functionality to support crossing of 
internal and external order flow, which 
•
•
•
will benefit any of our customers 
considering becoming Systematic 
Internalisers under the new Markets in 
Financial Instruments Directive (MiFID).
Investment in exchange connectivity 
will continue to be in line with 
anticipated market demand for new 
product types and liquidity pools.
BUSINESS EVOLUTION
During 2007, we plan to extend 
our sales functions in each of our 
operational regions and we are 
looking to extend the quality and 
level of support services we provide, 
particularly in North America.
Currently, we have sales and support 
operations in Chicago, London, 
Report & Accounts 2006 13 New York, Singapore, Sydney and Tokyo. 
During 2007, we plan to extend our 
representation in Shanghai, Hong Kong 
and within North America and consider 
representation in other geographies. 
We expect to re-introduce trading 
systems support in Chicago, in addition 
to support functions in London and 
Singapore, to enable us to provide a more 
seamless support service 24 hours a day.
We have established performance 
benchmarks for our key operational 
areas and these will be monitored 
through out the year.
We are instigating a major change 
in our release policy to enable us to 
better serve our customers and to 
enable them to plan their software 
upgrades more effectively. From the 
first quarter 2007 onwards, we will 
switch to quarterly software releases 
for both our core systems and the 
front end trading screens.
EXECUTIVE MANAGEMENT 
COMMITTEE
The senior executive team remains 
broadly the same as at the start of 
2006 with Kazuaki Takabatake as 
Head of Asia Pacific, Patrick Kenny 
responsible for North American 
operations, Graeme Neilly as Director 
European sales and global accounts 
and Jon Regan as Head of new 
business sales Europe.
In November 2006, Martin Coen left 
Patsystems and the opportunity was 
taken to better align the structure 
of our operations for the growth 
opportunities we expect for the 
business.
Andy Edwards, as product and 
development director, has taken 
responsibility for the aspects of 
Martin’s role pertaining to product 
selection and investment so that 
planning and resource management in 
this area are more closely aligned to 
the product development function.
Kieron O’Toole joined at the start of 
2007 as Client Services Director, with 
responsibility for software support, 
software releases, and trading and risk 
system installations. Kieron joins us 
with an accomplished track record in 
software company operations within 
the financial sector.
14 Patsystems plc
Chief Executive’s Report continued
…we are confident that we can 
deliver our planned turnover and 
profit growth in 2007 and 2008. This organisational change will enable 
Andy and Kieron to focus on maturing 
our development, support and 
implementation functions.
These six executives, plus Martin 
Thorneycroft and myself, constitute 
our Executive Management 
Committee. I am delighted to be 
leading such a committed and 
professional management team.
STAFF
I have enjoyed working with the 
Patsystems staff enormously in 2006, 
and I thank them for the positive 
manner in which I was received as the 
new CEO.
They should all feel great pride in what 
they have achieved in the business 
over the last year and I am sure they 
share my excitement as to what the 
future may bring for our company.
We do envisage a marginal increase 
in the number of employees over 
the coming year, as we increase 
headcount in our sales and support 
functions. Overall salary costs are 
budgeted to increase to reflect 
salary increases and anticipated 
bonus payments to staff, contingent 
on achieving the anticipated 2007 
financial performance.
BUSINESS OBJECTIVES AND OUTLOOK
Our key objectives for 2007 are as 
follows:
To establish the Patsystems 
FlexAbility brand and establish 
ourselves as technology partner of 
choice within our market place;
To grow substantially the Pro-Mark 
installed user-base;
To establish user communities for 
both Global Trading and the Risk 
Informer product;
To extend our technology into 
additional asset classes and
To deliver productivity gains within 
our product development, delivery 
and support functions to further 
increase our operating margin.
Trading subsequent to the year-end has 
progressed in line with expectations. 
Despite the planned amalgamation of the 
futures trading businesses of Calyon 
Financial and Fimat we are confident 
that we can deliver our planned turnover 
and profit growth in 2007 and 2008.
David Webber 
Chief Executive plc
•
•
•
•
•
Report & Accounts 2006 15 16 Patsystems plc
I am delighted to report significant improvements  
across all our financial key performance indicators:
Underlying turnover up 15% to  
£15.26 million
Operating profit as a percentage  
of sales up to 10.3% (2005: 2.2%)
Profit Before Taxation (PBT) up 353%  
to £1.63 million
Fully diluted Earnings per Share 4.1p 
(2005: 0.2p)
Pre-deferred tax adjusted fully diluted 
Earnings per Share*(EPS) up 300% to 0.8p
Net cash flow from Operating Activities 
up to £2.69 million (2005: £0.84 million)
129 Pro-Mark screens deployed (2005: nil)
1,462 Professional J-Trader screens 
deployed (2005: 1,364)
•
•
•
•
•
•
•
•
Profit Before Taxation (PBT) 
up 353% to £1.63 million.
Finance Director’s Review
As a result of the large deferred tax credit being recognised this year the 
directors consider that it is appropriate to exclude deferred tax in the 
calculation of the adjusted fully diluted Earnings per Share (EPS).
*
Martin Thorneycroft 
Finance Director Report & Accounts 2006 17
DETAILED INCOME STATEMENT
The income statement, with more detail than in statutory format, is as follows:
Half year 
ended  
30 Jun 2006
£’000
Half year 
ended  
31 Dec 2006 
£’000
Half year 
ended  
30 Jun 2005 
£’000
Half year 
ended  
31 Dec 2005 
£’000
Revenue
– Trading systems 6,048 7,254 5,678 5,954
– Exchange systems 658 649 2,030 1,508
– Risk systems 419 227 – 287
7,125 8,130 7,708 7,749
Cost of sales (231) (156) (1,529) (631)
Gross profit 6,894 7,974 6,179 7,118
Depreciation (242) (233) (274) (270)
Amortisation of internally 
generated assets (92) (91) – (46)
Amortisation of other 
intangible assets (221) (228) (66) (193)
Other operating expenses (5,951) (6,234) (6,119) (5,987)
Operating profit/(loss) 388 1,188 (280) 622
Interest receivable and 
similar income 23 31 12 23
Interest payable and 
similar charges (3) (1) (16) (1)
Profit/(loss) on ordinary 
activities before 
taxation 408 1,218 (284) 644
Taxation (1) 6,281 83 (40)
Profit/(loss) for the year 407 7,499 (201) 604 18 Patsystems plc
INTERNATIONAL FINANCIAL 
REPORTING STANDARDS (IFRS)
Patsystems has chosen to adopt IFRS 
for the financial year ending on the 
31 December 2006 and the financial 
statements have been prepared on this 
basis. The Company has chosen early 
adoption for two reasons:
we believe that IFRS enables a 
better appreciation of the product 
investments within the business and 
the on-going operating functions
a number of new UK GAAP 
standards would have been adopted 
by the Company during 2006 and 
IFRS would have been adopted in 
2007 – giving two years of significant 
restatements of previously reported 
numbers. By adopting early we will 
only have one year of restatement.
The change to IFRS results in no change 
to the revenue or the cash flows of the 
business. The most significant change 
is regarding IAS 38 – Intangible assets, 
which requires that relevant product 
development expenditure which satisfies 
the criteria under the standard is 
capitalised and subsequently amortised.  
We have adopted the policy of capitalising 
product development and amortising 
the amount over three years from the 
date of completion. In 2006 this change 
results in £1.5 million being capitalised 
and £0.2 million being amortised.
The other less significant changes relate to:
IFRS 3 – Business combinations, 
which requires goodwill to remain 
on the balance sheet and be subject 
•
•
•
to an annual impairment test, 
but not to be amortised over its 
estimated useful life
IFRS 2 Share based payment – which 
requires the cost of options to be 
charged to the income statement and 
IAS 39 – Financial instruments: 
recognition and measurement – 
which requires certain financial 
instruments to be brought onto the 
balance sheet at fair value.
A more detailed explanation of the 
transition to IFRS is shown in note 30 
to the financial statements.
TURNOVER
Underlying Group turnover increased 
by £2 million (15%) to £15.3 million 
from £13.3 million last year (£15.4 
million less hardware and hardware 
support sales of £2.1 million).
Trading Systems
Trading systems revenue grew from 
£11.6 million in 2005 to £13.3 million in 
2006 – an increase of 15%.
Exchange Systems
As reported last year, included within 
Exchange Systems revenue in 2005 is 
£2.1 million of hardware and hardware 
support supplied as part of the TGE 
contract. This was supplied at a low 
margin and is a one-off by nature. The 
effect of this is to gross up both sales 
and cost of sales. In order to properly 
compare years this item needs to be 
excluded from 2005 comparatives.
•
•
Underlying Group turnover 
increased by £2 million (15%).
Finance Director’s Review continued After excluding hardware and 
hardware support Exchange Systems, 
revenue declined by £0.1m to £1.3 
million in 2006 in line with our 
expectation as there were no new 
exchange system projects in 2006.
Risk Systems 
Revenues from our Risk Systems 
business acquired in August 2005 grew 
to £0.7 million from £0.3 million last 
year, although the business was only 
consolidated for 5 months in 2005.
COST OF SALES
This year cost of sales reduced to a 
normal level following lasts years one-
off hardware and hardware support costs 
incurred as a result of the TGE contract. 
OPERATING EXPENSES
Operating expenses increased by  
£0.3 million to £13.3 million from  
£13 million in 2005.
Staff costs, excluding the share 
compensation expense, are the most 
material item of expenditure within 
operating expenses comprising £7.8 
million (2005: £7.6 million). This 
represents 59% (2005: 58%) of our cost 
base and 51% (2005: 57%) of underlying 
revenues. We ended the year with 134 
permanent staff (2005: 133).
Amortisation of intangible assets increased 
to £0.6 million from £0.3 million in 2005 
as a result of a full year’s amortisation 
charge for the capitalised internal 
development cost of Pro-Mark and a 
full years charge for the amortisation 
of the purchased Risk Informer software. 
The amortisation charge consists of 
£0.18 million (2005: £0.05 million) in 
relation to amortisation of capitalised 
internal development and £0.45 million 
(2005: £0.26 million) in relation to 
purchased licenses and software.
PROFIT ON ORDINARY ACTIVITIES 
BEFORE TAXATION
The profit on ordinary activities before 
taxation increased to £1.63 million 
from £0.36 million in 2005.
TAXATION
The UK has gross tax losses carried 
forward of £20 million and will 
therefore not be in a corporation tax 
paying position for a number of years.  
The tax credit shown on the face of the 
income statement comprises of a deferred 
tax credit of £6.43 million mainly in 
Respect of the recognition of prior year 
losses, withholding tax of £0.11 million 
and US minimum tax of £0.04 million.
A deferred tax asset of £6.4 million has 
been recognised this year in respect 
of tax losses and capital allowances 
Report & Accounts 2006 19
“Our traders 
have been using 
Patsystems’ 
J- Trader for years – 
it’s the original 
system that we 
can rely on.”
Ben Few Brown, 
Director,  
Man Financial 20 Patsystems plc
carried forward from previous years in 
both the UK and other geographical 
regions. The asset has been recognised 
this year because the increasing 
profitability of the Group means that 
previous years’ tax losses will be offset 
against current and future years’ 
profits and hence these losses now 
have a quantifiable value.
PROFIT FOR THE YEAR
Profit for the year increased to £7.9 
million from a profit of £0.4 million  
last year.
EARNINGS PER SHARE
As a result of the large deferred tax 
credit this year and the reversal of this 
over future years the standard basic 
and fully diluted EPS calculations show 
a high level of volatility. A more stable 
measure of EPS is pre-deferred tax EPS.
Using this measure, basic adjusted 
EPS has grown by 200% to 0.9p from 
0.3p and adjusted fully diluted EPS has 
grown 300% to 0.8p from 0.2p last year.
Including the deferred tax credit, 
basic EPS is 4.9p (2005: 0.3p) and fully 
diluted EPS is 4.1p (2005: 0.2p).
INTANGIBLE AND TANGIBLE FIXED 
ASSETS
Intangible Assets
During the year the Group capitalised 
£1.55 million of development costs 
in respect of our new Global Trading 
software. This will be amortised over 
three years from date of completion in 
line with our current intangible asset 
amortisation policy.
Acquired software represents the fair 
value of the Risk Informer software 
acquired as part of the Tamesis 
acquisition in 2005. This software 
is being amortised over three years 
starting from the date of acquisition.
Tangible Assets
During the year the group purchased 
fixed assets totalling £0.3 million.   
The majority of this consisted of 
computer hardware.
CURRENT ASSETS
Trade Debtors
Trade debtors have increased to £2.6 
million from £1.3 million in 2005 as 
a result of the increase in sales and 
particularly the increase in sales in the 
final quarter of 2006. The average days 
sales outstanding in debtors through 
out the year was 38 days.
CURRENT LIABILITIES
Included within current liabilities is 
contingent consideration of £2.1 million 
in respect of the purchase of Tamesis Ltd 
Basic adjusted EPS has grown by 200% 
to 0.9p from 0.3p and adjusted fully 
diluted EPS has grown 300% to 0.8p 
from 0.2p last year.
Finance Director’s Review continued in 2005. This represents an estimate 
of the final consideration payable, 
however, the actual amount will 
depend on the financial performance 
of Tamesis Ltd to 31 July 2007. The final 
consideration is payable in Patsystems 
Plc shares (final consideration is capped 
at a maximum of 23,333,334).
ABILITY TO PAY DIVIDENDS
Dividends are paid out of the reserves of 
Patsystems plc and, as can be seen on 
page 54, Patsystems plc had distributable 
reserves of £0.6 million at 31 December 
2006. During 2006 we undertook an 
exercise to ensure that the Group has the 
ability to freely pay dividends up to 
Patsystems plc.  As a result of the 
exercise Patsystems Holdings Ltd, a direct 
subsidiary of Patsystems plc, has 
distributable reserves of £15.2 million, 
which, providing that the Group 
continues to trade successfully, will be 
available to dividend up to Patsystems plc.
CASH AND TREASURY 
The Group generated net cash inflows 
from operating activities of £2.69 million 
(2005 – £0.84 million) and £2.03 million 
was invested in intangible and tangible 
assets. Cash and cash equivalents 
increased by £0.65 million over the year.
In normal circumstances the Group 
would expect cash and cash equivalents 
to increase by approximately the 
amount of the profit for the year less 
any dividends and purchases of fixed 
assets. This would have been the case 
in 2006 except for the cash impact of 
two items from 2005 (both of which had 
been provided for in the 2005 accounts, 
but for which the cash outflow was 
felt in 2006) – namely the cost of the 
replacement of a director – £0.45 million 
and the payment of dilapidations in 
order to terminate the lease of the 
Tamesis building – £0.24 million. 
The Group is exposed to foreign 
currency risk on sales, purchases and 
cash balances that are denominated 
in a currency other than Sterling. The 
principal currency giving rise to this risk 
is the US dollar. Patsystems’ policy is to 
carry forward cover for 75% of US$/£ 
net anticipated exposure for 12 months 
forward. That level of cover is in place, 
and was through 2006, and is comprised 
of a mixture of forward contracts and 
options. The average US$/£ exchange 
rate used in the 2006 income statement 
was 1.85. The average rate of the 
hedges in place at 31 December 2006 for 
2007 was 1.83. The fair value of these 
hedges is recognised as a financial asset 
of £0.1 million on the Group balance 
sheet at the year end. 
Martin Thorneycroft 
Finance Director
Report & Accounts 2006 21 22 Patsystems plc
STEWART MILLMAN 
Chairman, Non-executive Director, Age 58
Stewart has over 30 years’ experience in investment 
management and corporate finance. He was part of the 
senior management of BZW, NatWest Markets and HSBC 
Investment Bank. In 2002, he became self-employed 
and since then he has acted as a consultant to various 
companies in the UK and abroad. Stewart is also Non-
Executive Chairman of a publicly traded company providing 
network related services to the global telecommunications 
industry and a non-Executive Director of other companies. 
He has broad experience with technology and financial 
sector companies. Stewart, a Fellow of the Securities and 
Investment Institute, holds a M.A. (Oxon). 
DAVID WEBBER 
Chief Executive, Age 41
David was appointed Chief Executive of Patsystems in 
January 2006. He was formerly Chief Executive of AttentiV 
Systems Group, where his business leadership saw the 
company through significant expansion by both organic 
growth and acquisition. He led the management buyout, 
subsequent AIM flotation of the business and was retained 
as Chief Executive when AttentiV Systems Group plc was 
acquired by TietoEnator in May 2005. David, a member of 
the Institute of Chartered Accountants since 1989, holds a 
BSc (Economics) from the London School of Economics.
MARTIN THORNEYCROFT 
Finance Director, Age 45
Martin joined Patsystems as Finance Director in July 
2004. He was previously Finance Director of Profile Media 
Group plc. Martin, a member of the Institute of Chartered 
Accountants having qualified with Ernst and Young in 
1986, holds a B. Com. from Birmingham University.
Our Board STEWART DOUGLAS-MANN 
Non-executive Director, Chairman of the Remuneration and 
Nomination Committee, Age 69
Stewart was a partner of a City law firm before moving into 
investment banking in 1972. Prior to his retirement in 2002 he 
was a senior director of Corporate Finance at Investec Bank. 
Stewart has held senior positions at Charterhouse Bank and 
Hoare Govett, was a Managing Director of the London Stock 
Exchange and has been a non-executive director of a number of 
listed companies. Stewart holds a B.A. (Oxon).
RICHARD LAST 
Non-executive Director, Chairman of the Audit Committee, 
Age 49
Richard is Chief Executive of Lynx plc, an IT, systems and services 
group. He is also Chairman and Non-Executive Director of Xpertise 
Group plc, an IT training company, and Financial Payments Systems 
Limited, both listed on AIM and a director of two venture capital 
trusts. Richard, a Fellow of the Institute of Chartered Accountants, 
holds a BA (Hons) from Sheffield University.
STEVE SPARKE 
Non-executive Director, Age 48
Steve has had a 27-year career in the City spanning interest 
rate trading and futures and options broking. Most recently, he 
was Global Head of UBS Exchange Traded Derivatives business 
until April 2006. Additionally, he has driven a number of the 
technology-led changes within the FCM industry. Steve is 
currently a non-executive director of Euronext.Liffe and chairs 
the Exchange’s Audit and Risk Committee. Steve graduated with 
a law degree from Nottingham University in 1979.
JOHN PRIESTLEY 
Non-executive Director, Age 57
John has over 30 years experience in the software and services 
sector and in 2003 concluded a 13 year career with British 
Telecommunications as director of business development for 
Syntegra. Previously, he was a director of Kapiti and a divisional 
director with Hoskyns. He is currently Managing Director of 
Fitzmaine Limited. 
Report & Accounts 2006 23 24 Patsystems plc
The Directors present their report for Patsystems plc and the audited financial statements for the 
year ended 31 December 2006.
PRINCIPAL ACTIVITIES
The principal activities of the Group are the development, distribution and support of software 
enabling:
–  the electronic trading of financial products on global trading exchanges
–  real time trade capture, valuation and risk management for the structured finance market.
RESULTS AND DIVIDENDS
The profit on ordinary activities attributable to shareholders after taxation amounted to 
£7,906,000 (2005: £403,000).
The proposed dividend for the year is detailed in the Chairman’s Statement on page 5.
REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS
The Directors are pleased with the Group’s performance during the year and its position at 
31 December 2006. The Directors are confident that performance will continue to improve in 2007 
and beyond.
The review section of this report contains a detailed assessment of the business and future projects.
Detailed reviews of the risks faced by the business are detailed in the Chief Executive’s Report and 
the Finance Director’s Review. The Finance Director’s Review also details the Key Performance 
Indicators (KPIs) for the year.
PROCEEDS FROM SHARES ISSUES DURING THE YEAR
£164,000 was received in proceeds from the exercise of share options during the year ended 
31 December 2006.
In addition £53,000 worth of shares were issued to non-executive directors in lieu of payment 
of their fees.
From November 2006 non-executive directors ceased being paid in shares and were subsequently 
remunerated in cash.
SUBSTANTIAL SHAREHOLDINGS
On 5 February 2007, the following holdings of 3% or more of the issued share capital of Patsystems 
plc were known to the Company:
Beneficial owner, as notified to the Company
Number of 
shares %
SEDAF Holding SA 15,389,600 9.38
AG Edwards & Sons 13,937,500 8.49
SG Asset Mgmt Client PF/UT 11,458,322 6.98
Brewin Dolphin Clients 9,778,100 5.96
Credit Agricole (Suisse) SA 7,151,227 4.36
Rathbones Special Situations Fund 8,000,000 4.87
Merrill Lynch Bank Suisse SA 6,600,000 4.02
Herald Investment Trust 6,400,000 3.90
Directors’ Report  25 Report & Accounts 2006
DIRECTORS
The Directors of the Company, together with those who served during the year, are as follows:
Executive Directors Non-Executive Directors
M Thorneycroft S Douglas-Mann
D Webber (appointed 3 January 2006) S Millman
R Last
A Aggarwal (resigned 31 December 2006)
S Sparke (appointed 29 September 2006)
J Priestley (appointed 1 January 2007)
DIRECTORS AND THEIR INTERESTS
Ordinary shares of 1p each in Patsystems plc 5 Feb 2007 31 Dec 2006 31 Dec 2005*
D Webber 420,000 420,000 –
M Thorneycroft 40,000 40,000 40,000
S Douglas–Mann 863,097 863,097 756,981
S Millman 1,192,282 1,192,282 1,042,365
R Last 786,886 786,886 696,795
A Aggarwal 225,073 225,073 75,380
S Sparke 150,000 150,000 –
J Priestley 91,017 91,017 91,017
*or at date of appointment
Save as disclosed in this report, and note 29, there were no other contracts of significance 
subsisting during or at the end of the financial year in which a director of the Company is or was 
materially interested.
EMPLOYEE INVOLVEMENT
The Directors recognise the importance of employee involvement established by good 
communications and working relationships. The decentralised nature of the Group’s activities 
necessitates that the practical application of this policy is the responsibility of local management 
in a manner appropriate to their circumstances.
EMPLOYMENT POLICIES
The Group is committed to the terms of the Codes of Practice for the elimination of all or any 
discrimination and to the promotion of equality of opportunities in employment.
It is Group policy to afford equal opportunities to all employees and job applicants. No employee 
or job applicant is less favourably treated than another on the grounds of their sex, sexual 
orientation, age, marital status, religion, race, nationality, ethnic or national origin, colour 
or disability and all appointments and promotions are determined solely by merit.
It is also Group policy to encourage and assist in the employment, training, re-training and career 
development of disabled persons where possible, having regard to their suitability for a particular 
vacancy and the nature of the Group’s activities. In the event that employees become disabled 
during employment the Group will where possible continue their employment and arrange 
appropriate training. 26 Patsystems plc
Responsibility for monitoring the effective working of these policies is vested in Martin 
Thorneycroft, the Finance Director.
RESEARCH AND DEVELOPMENT
During the year the Company continued to invest in research and development (R&D). All 
expenditure, whether incurred through internal staff costs or through third party suppliers, 
relating to R&D that satisfies the criteria for capitalisation under IAS 38, ‘Intangible assets’,  
is capitalised. Otherwise it is written off to the income statement in the period incurred.
CREDITOR PAYMENT POLICY
Given the international nature of the Group’s operations, there is no standard code for the Group 
in respect of payments to suppliers. Operating subsidiaries are responsible for agreeing terms and 
conditions for their business transactions when orders for goods and services are placed, ensuring 
that suppliers are aware of the terms of payment and including the relevant terms in contracts 
where appropriate. These arrangements are adhered to provided that suppliers meet their 
contractual commitments.
Creditor days have not been calculated for the Company as it is an investment holding company.
CHARITABLE & POLITICAL DONATIONS
The Group made charitable contributions of £550 during the year (2005: £1,000). The donations 
were made to Childline and Care International. No political donations were made in 2006 or 2005.
DISCLOSURE OF INFORMATION TO AUDITORS
For each of the persons who were directors at the time this report was prepared, the following 
applies:
–  So far as the directors are aware, there is no relevant information of which the Company’s 
auditors are unaware; and
–  The directors have taken all the steps that they ought to have taken as directors in order to 
make themselves aware of any relevant audit information and to establish that the Company’s 
auditors are aware of that information.
ANNUAL GENERAL MEETING
The Notice convening the Annual General Meeting (AGM) together with the proposed resolutions 
is contained in the document accompanying this report. The AGM will be held on 19th April 2007.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
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 the Group, as at the end of the 
year, and of the profit or loss of the Group for the year. In preparing those financial statements, 
the Directors are required to:
1.  Select suitable accounting policies and then apply them consistently;
2.  Make judgements and estimates that are reasonable and prudent;
3.  State whether applicable accounting standards have been followed, subject to any material 
departures disclosed and explained in the financial statements;
4.  Prepare the financial statements on the going concern basis unless it is inappropriate to 
presume that the Group will continue in business.
The Directors confirm that the financial statements comply with the above requirements.
Directors’ Report continued  27 Report & Accounts 2006
The Directors are responsible for the maintenance and integrity of the Patsystems website. 
Information published on the Internet is accessible in many countries with different legal 
requirements. Legislation in the United Kingdom governing the preparation and dissemination 
of financial statements may differ from legislation in other jurisdictions.
The Directors are responsible for maintaining proper accounting records which disclose with 
reasonable accuracy at any time the financial position of the Company and the Group and enable 
them to ensure that the financial statements comply with the Companies Act 1985. The Directors 
are also responsible for safeguarding the assets of the Company and the Group and hence for 
taking reasonable steps for the prevention and detection of fraud and other irregularities.
Daljit Kaur-Khela Registered office: 
Company Secretary Cottons Centre,
  Hays Lane, 
  London SE1 2QP 28 Patsystems plc
The following statement of corporate governance reflects the position of the Company 
as at 31 December 2006.
The Board is responsible for the Group’s corporate governance policy and recognises the 
importance of high standards of integrity, and consistently seeks to apply the principles set 
out in the Combined Code on Corporate Governance (the “Code”) to the extent that they are 
appropriate for, and applicable to, a company of Patsystems’ size quoted on the Alternative 
Investment Market (“AIM”).
DIRECTORS
Details of the appointment and resignation dates of directors are shown in the Directors’ Report. 
All directors are subject to re-election within a three-year period. The roles of the Chairman and 
Chief Executive are separate and have been so throughout the year.
The non-executive directors are considered to be ‘independent’ within the definition contained in 
the Code. The non-executive directors meet, without the presence of the executive directors, 
whenever it is appropriate for them to do so.
All the directors have access to the advice and services of the Company Secretary and may, in 
furtherance of their duties, take independent legal and financial advice at the Company’s expense. 
They also have access to the minutes of the Board, in which any concerns expressed by them 
regarding matters pertaining to the Group are recorded.
While there is no formal process, the performance and effectiveness of each director, including the 
non-executive directors, is assessed on an on-going basis by the other members of the Board.
BOARD MEETINGS
The Board generally meets monthly and at such other times as required, and receives regular 
reports on a wide range of key issues including operational performance, risk management and 
corporate strategy.
The Board’s accountability is demonstrated by the adoption of a formal schedule of matters 
specifically reserved to the Board for its decision, concerning all key areas across the Group’s 
activities. Thereby ensuring that all major decisions affecting the Group are taken at Board level. 
All the directors are free to bring any matter to the attention of the Board, at any time.
COMMITTEES
The Audit Committee and the combined Remuneration and Nominations Committee meet at least 
twice a year.
Audit Committee
The Audit Committee is chaired by Richard Last and comprises all the non-executive directors. 
The external auditors, together with the Finance Director and other financial staff are invited 
to attend these meetings as and when required.
In accordance with its terms of reference the principal functions of this committee is to determine 
the appropriateness of accounting policies to be used in the Group’s annual results. In addition 
the Committee is responsible for monitoring the independence of the Group auditors, assessing 
the Group’s audit arrangements and the Group’s system of internal controls, and to review the 
half-yearly and annual results before publication.
Remuneration and Nominations Committee
The Remuneration and Nominations Committee comprises all the non-executive directors and 
is chaired by Stewart Douglas-Mann. From 19 April 2007 the Committee will be chaired by 
John Priestley.
Statement of Corporate Governance  29 Report & Accounts 2006
In accordance with its terms of reference the Committee determines the level and make-up of 
remuneration (including bonuses and options) of the executive directors and certain senior 
management. This also includes formulation of remuneration policy throughout the Group, 
embracing both share options and bonuses.
The Committee also evaluates the balance of skills, knowledge and experience on the Board and 
considers all new Board appointments and re-appointments against this evaluation.
The Report of the Board on Directors’ Remuneration and on Group Remuneration Policy giving 
details of Company policy and individual directors’ remuneration is set out on pages 31 to 34. 
The remuneration arrangements of the non-executive directors are determined by the Board 
as a whole.
The notice period provisions contained in the directors’ service agreements are summarised on 
page 33 of these accounts.
Executive Management Committee
The Executive Management Committee (the “EMC”), under the Chairmanship of the Chief 
Executive, or in his absence the Finance Director, meets monthly and is responsible for the  
day-to-day running of the Group. The members of the EMC are the two executive directors of  
the Company, together with the six key business heads who are not directors.
RELATIONS WITH SHAREHOLDERS
The Board welcomes the views of shareholders. 
The Annual General Meeting (AGM) is used as an opportunity to communicate with shareholders 
All shareholders are encouraged to attend the Company’s AGM, in order to take advantage of the 
opportunity to ask questions of the directors.
Shareholders may also contact the Company in writing or via its website, which is regularly 
updated. Additional information is supplied through the circulation of the quarterly trading 
updates, the Interim Report and the Annual Report and Accounts. During the year the Company 
issued a series of announcements to the Stock Exchange. The Chief Executive, Finance Director and 
the Chairman from time to time meet individual and institutional shareholders and provide such 
information as is permissible in order to facilitate a better understanding of the Group’s business 
and operations.
INTERNAL CONTROL
The Board of Directors has overall responsibility both for the Group’s system of internal controls, 
which includes internal financial controls and for reviewing their effectiveness. The directors 
recognise that no system of internal control can provide absolute assurance. The Group’s systems 
are designed to manage the risk of failure to achieve business objectives and therefore can only 
provide the directors with reasonable assurance against material misstatement or loss.
The key elements of the Group’s internal control system, which have been operational for the 
whole of the financial year, are as follows:
Management Structure
The Board has overall responsibility for the Group and there is a formal schedule of matters 
specifically reserved for decision by the Board. Each executive director has been given responsibility 
for specific aspects of the Group’s affairs. Reporting to the Chief Executive, is the EMC which is 
responsible for the day to day running of the Group’s affairs.
Monitoring Systems used by the Board
The Board receives regular reports on the financial and business performance of the Group. 
The Board is regularly advised through these reports on the working capital position and financial 
performance relative to the Group’s approved budget. 30 Patsystems plc
Internal Audit
The Board reviews from time to time the need for an Internal Audit function and remains of the 
opinion that the systems of internal financial control are appropriate to the Group’s present 
activities and that such a function is unnecessary.
Going Concern
The Directors have reasonable expectation that the Company and the Group have adequate 
resources to continue in operational existence for the foreseeable future. For this reason they 
continue to adopt the going concern basis in preparing the financial statements.
Compliance Statement
Corporate Governance procedures are subject to regular review by the Board. Throughout the year 
the Group has complied with the provisions as set out in Section 1 of the Code, to the extent that 
they are appropriate for, and applicable to, a company of Patsystems’ size quoted on AIM.
For and on behalf of the Board of Patsystems plc
Daljit Kaur-Khela
Company Secretary
Statement of Corporate Governance continued  31 Report & Accounts 2006
REMUNERATION COMMITTEE
The Remuneration Committee, which comprises all of, and only, non-executive directors, 
determines Group remuneration policy and the remuneration (including bonuses and options) 
of executive directors and certain other senior management.
POLICY ON GROUP REMUNERATION
The Company’s policy is to set the remuneration of senior executives (including executive directors) 
at a level to attract and retain executives of appropriate ability, experience and integrity to 
manage the affairs of the Company. In formulating its remuneration policy, the Remuneration 
Committee is mindful of the competitive pressures inherent in a sector that straddles both the 
software and financial services industries. It is the Company’s policy that a significant element 
of total remuneration is related to the financial performance of the company. Remuneration 
is reviewed annually.
THE REMUNERATION PACKAGE
The remuneration package comprises base salary and benefits, pension contributions, annual 
bonus and long term incentive arrangements. All senior employees of the Group (including the 
executive directors) are remunerated using the policy described below.
Base salary and benefits
Base salary takes into account the performance of the individual and information from 
independent sources on market levels of remuneration. The executive Directors basic salary is 
reviewed by the Committee prior to the beginning of each year. The executive Directors are also 
entitled to private medical and death in service insurance.
Pension contributions
The Group operates a defined contribution pension scheme for eligible UK employees. Neither 
of the executive directors are members of this scheme; the executive Directors receive a company 
contribution to their individual pension arrangements.
Annual bonuses
Bonus scheme arrangements are in place for all members of staff, including the executive 
Directors. Bonuses are linked to the financial performance of the Group. Bonuses are calculated 
based on individual and Group performance targets which are set at the start of the financial year.
Long term incentives
Share Options
The Group operates two share option plans – an Enterprise Management Incentive Share Option 
Scheme (EMI) and a standard unapproved share option scheme. All senior staff, including the 
executive directors participate in both schemes.
20% of the options awarded under the second and third awards of both schemes will vest on 14 
February 2007.  Rollover conditions continue to apply to the remaining 80% of the options and the 
percentage of options which are not eligible to be exercised on the basis of the 2007 audited 
financial statements do not lapse but rollover to the next and, if applicable, subsequent years.  The 
Remuneration Committee will determine what performance conditions to attach to them.
The total charge to the Income Statement in 2007 for all option schemes, providing results are 
in line with market expectations is expected to be approximately £200,000.
Report of the Board on Directors’ Remuneration 
and on Group Remuneration Policy 32 Patsystems plc
Cash-based long-term incentive scheme
As noted in last years Remuneration Committee Report the Remuneration Committee has, during 
2006, reviewed the long term incentive plans in place for senior staff, including the executive 
Directors. Following consultation with and advice from New Bridge Street Consultants it has 
been decided to introduce (beginning in 2007) a new cash based long term incentive scheme 
(“the Cash Scheme”).
The maximum conditional award allowable under the three year Cash Scheme will be 100% 
of salary with each award vesting no earlier than the third anniversary from date of grant and 
vesting being subject to achievement of performance conditions and continued employment 
(“the Award”). When the Award to the Directors vest, they will be expected, to use 50% of the net 
of tax amount in purchasing the Company’s shares in the open market until such time as a total 
personal shareholding has been achieved which is equivalent to 100% of base salary. In the event 
of a change of control (eg a take-over) the Awards would vest provided the Remuneration 
Committee is satisfied that it is fair and reasonable for them to do so (eg. that the terms of a take-
over implicitly reflect prospective performance on a scale that would have resulted in full vesting).
The performance conditions attached to the Award will require fully diluted pre-deferred tax 
EPS growth from the 2006 financial year to the 2009 financial year of between 10% compound 
per annum to 30% compound per annum for between 30% and 100% of the Award to vest. 
The Award will vest on a straight line basis between minimum and maximum thresholds. The 
charge to the income statement in 2007 for this scheme, providing results are in line with market 
expectations, is expected to be approximately £220,000.
DIRECTORS’ EMOLUMENTS
Salary/fees
£
Bonus
£
Benefits  
in kind
£
Total
2006
£
Total
2005
£
Executive Directors
D Webber 209,192 80,625 2,072 291,889 –
M Thorneycroft 130,000 49,688 480 180,168 125,220
K Ashby* – – – – 562,760
Non–Executive Directors
S Douglas Mann 27,500 – – 27,500 27,500
S D’Isidoro** – – – – 11,111
S Millman 45,000 – – 45,000 45,000
R Last 27,500 – – 27,500 27,500
A Aggarwal** 25,000 – – 25,000 17,436
S Sparke*** 6,346 – – 6,346 –
470,538 130,313 2,552 603,403 816,527
*K Ashby resigned on 20 December 2005. His 2005 emoluments included £344,193 for compensation for loss of office
**S D’Isidoro resigned on 20 April 2005 and A Aggarwal was appointed 20 April 2005
***S Sparke was appointed on 29 September 2006
Report of the Board on Directors’ Remuneration 
and on Group Remuneration Policy continued  33 Report & Accounts 2006
Pensions
The Group operates a defined contribution pension scheme for eligible UK employees. The executive 
directors that served during the year were not members of this scheme. The following 
contributions to their private pensions were charged to the income statement:
2006
£
2005
£
D Webber 21,000 –
M Thorneycroft 13,000 12,500
K Ashby – 21,835
34,000 34,335
DIRECTORS’ CONTRACTUAL TERMS
D Webber
M Thorn-
eycroft S Millman
S Douglas– 
Mann R Last S Sparke J Priestley
Date 
appointed 03-Jan-06 05-Jul-04 17-Feb-03 03-Dec-02 17-Feb-03 29-Sep-06 01-Jan-07
Service 
Contract* Yes Yes No No No No No
Notice period
– by company 12 months 6 months 3 months 3 months 3 months 3 months 3 months
– by director 12 months 6 months 3 months 3 months 3 months 3 months 3 months
Benefits
Death in 
service
Death in 
service – – – – –
Pension 10% 10% – – – – –
*All the non-executive directors are engaged under “letters of appointment.”
In the event that an offer for the entire issued share capital of Patsystems plc becomes wholly 
unconditional, the executive and non-executive directors are entitled to 12 months notice.
DIRECTORS’ SHARE OPTIONS
Scheme type Exercise price
Outstanding 
options at  
31 Dec 2006 Exercise date Expiry date
D Webber EMI 13.75p 727,272 Note 1 14.02.16
Unapproved 13.75p 3,272,728 Note 2 14.02.16
4,000,000
M Thorneycroft EMI 15.25p 655,737 Note 3 30.07.14
Unapproved 15.25p 344,263 Note 4 30.07.14
Unapproved 18.00p 500,000 Note 4 17.03.15
1,500,000
M Thorneycroft’s options were outstanding at 31 December 2005. D Webber’s options were 
granted during the year.
The IFRS 2 charge to the income statement in relation to these options was £101,000. 34 Patsystems plc
Note 1:  These options were granted under a special award of the Enterprise Management 
Incentive (EMI) Scheme. One third of these options can be exercised after a period of three 
years after the date of the grant. Two thirds of these options can be exercised after a 
period of three years after the date of the grant but subject to the Group achieving 
growth in adjusted fully diluted pre-deferred tax EPS from the 2005 financial year to the 
2008 financial year of 10% compound per annum.
Note 2:  These options were granted under a special award of Part B (Inland Revenue Unapproved) 
of the Patsystems Plc 2003 Share Option Scheme, exercise conditions are as per note 1.
Note 3:  Options were granted under the second and third awards of the Enterprise Management 
Incentive (EMI) Scheme. 20% of these options will vest on 14th February 2007. The 
remaining 80% of the options will be carried forward into future years and the 
Remuneration Committee will determine what performance conditions to attach to them 
in 2007.
Note 4:  These options were granted under the second and third awards of Part B (Inland Revenue 
Unapproved) of the Patsystems Plc 2003 Share Option Scheme. The vesting status is the 
same as note 3.
The mid-market price of the Company’s shares at the end of the financial year was 17.25p, and the 
range of market prices during the year was 13.25p to 18p. 
Stewart Douglas-Mann
Chairman, Remuneration Committee
13 February 2007
Report of the Board on Directors’ Remuneration 
and on Group Remuneration Policy continued  35 Report & Accounts 2006
We have audited the group financial statements of Patsystems Plc for the year ended 31 December 
2006 which comprise the Consolidated income statement, the Consolidated balance sheet, the 
Consolidated cash flow statement, the Consolidated statement of recognised income and expense 
and the related notes. These group financial statements have been prepared under the accounting 
policies set out therein.
We have reported separately on the parent company financial statements of Patsystems Plc for the 
year ended 31 December 2006.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report and the group financial statements 
in accordance with applicable law and International Financial Reporting Standards (IFRSs) as 
adopted by the European Union are set out in the Statement of Directors’ Responsibilities.
Our responsibility is to audit the group financial statements in accordance with relevant legal and 
regulatory requirements and International Standards on Auditing (UK and Ireland). This report, 
including the opinion, has been prepared for and only for the company’s members as a body in 
accordance with Section 235 of the Companies Act 1985 and for no other purpose. We do not, in 
giving this opinion, accept or assume responsibility for any other purpose or to any other person to 
whom this report is shown or into whose hands it may come save where expressly agreed by our 
prior consent in writing.
We report to you our opinion as to whether the group financial statements give a true and fair 
view and whether the group financial statements have been properly prepared in accordance with 
the Companies Act 1985. We also report to you whether in our opinion the information given in 
the Directors’ Report is consistent with the group financial statements.
In addition we report to you if, in our opinion, we have not received all the information and 
explanations we require for our audit, or if information specified by law regarding directors’ 
remuneration and other transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it is consistent 
with the audited group financial statements. The other information comprises only the Directors’ 
Report, the Chairman’s Statement, the Chief Executive’s Report, the Finance Director’s Review, the 
Statement of Corporate Governance and the Report of the Board on Directors’ Remuneration and 
on Group Remuneration Policy. We consider the implications for our report if we become aware of 
any apparent misstatements or material inconsistencies with the group financial statements. Our 
responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) 
issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence 
relevant to the amounts and disclosures in the group financial statements. It also includes an 
assessment of the significant estimates and judgments made by the directors in the preparation of 
the group financial statements, and of whether the accounting policies are appropriate to the 
group’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which 
we considered necessary in order to provide us with sufficient evidence to give reasonable 
assurance that the group financial statements are free from material misstatement, whether 
caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall 
adequacy of the presentation of information in the group financial statements.
Independent Auditors’ Report to the Members of Patsystems Plc 36 Patsystems plc
Opinion
In our opinion:
•  the group financial statements give a true and fair view, in accordance with IFRSs as adopted by 
the European Union, of the state of the group’s affairs as at 31 December 2006 and of its profit 
and cash flows for the year then ended;
•  the group financial statements have been properly prepared in accordance with the Companies 
Act 1985; and
•  the information given in the Directors' Report is consistent with the group financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
London
13 February 2007
Independent Auditors’ Report to the Members of Patsystems Plc 
continued  37 Report & Accounts 2006
Notes
2006
£’000
2005
£’000
Revenue 4 15,255 15,457
Cost of sales (387) (2,160)
Gross profit 14,868 13,297
Operating expenses (13,292) (12,955)
Operating profit 5 1,576 342
Finance income 54 35
Finance costs (4) (17)
Finance costs – net 7 50 18
Profit on ordinary activities before taxation 1,626 360
Taxation 8 6,280 43
Profit for the year attributable to equity holders  
of the company 7,906 403
Earnings per share 10
– basic 4.9p 0.3p
– diluted 4.1p 0.2p
Adjusted Earnings per ordinary share* 10
– basic 0.9p 0.3p
– diluted 0.8p 0.2p
*EPS per been adjusted for deferred tax – see note 10 for a detailed explanation.
The income statement has been prepared on the basis that all operations are continuing 
operations.
There is no difference between the profit on ordinary activities before taxation and the profit for 
the year stated above and their historical cost equivalents
 Consolidated Statement of Recognised Income and Expense
 for the year ended 31 December 2006
2006
£’000
2005
£’000
Profit for the year 7,906 403
Foreign exchange adjustment on foreign currency net investments (144) (221)
Total recognised income for the year 7,762 182
Consolidated Income Statement
for the year ended 31 December 2006 38 Patsystems plc
Notes
2006
£’000
2005
£’000
ASSETS
Non-current assets
Goodwill 11 1,745 1,552
Intangible assets 12 2,536 1,479
Property, plant and equipment 13 754 902
Deferred tax assets 15 6,979 –
12,014 3,933
Current assets
Inventories 16 188 294
Trade and other receivables 17 4,021 3,213
Financial assets – derivative financial instruments 28 127 –
Cash and cash equivalents 3,251 2,604
7,587 6,111
LIABILITIES
Current liabilities
Trade and other payables 18 (3,594) (2,798)
Current income tax liabilities (101) –
Financial liabilities – derivative financial instruments 28 – (43)
Provisions 20 – (170)
Contingent consideration 21 (2,140) –
(5,835) (3,011)
Net current assets 1,752 3,100
Non-current liabilities
Contingent consideration 21 – (1,500)
Provisions 20 (34) (10)
Net assets 13,732 5,523
EQUITY
Capital and reserves attributable to equity holders  
of the company
Share capital 23 1,641 1,605
Share premium account 25 3,691 3,510
Other reserves 25 17,348 17,348
Retained earnings 25 (8,948) (16,940)
Total equity 25 13,732 5,523
The financial statements on pages 37 to 66 were approved by the Board of Directors on 
13 February 2007.
 
David Webber Martin Thorneycroft
Chief Executive Officer Finance Director
Consolidated Balance Sheet
at 31 December 2006  39 Report & Accounts 2006
2006
£’000
2005
£’000
Cash flows from operating activities
Cash flows from operations 2,694 840
Interest received 54 35
Interest paid (4) (16)
Tax (paid)/received (51) 390
Net cash flows from operating activities 2,693 1,249
Cash from investing activities
Purchase of intangible assets (1,689) (622)
Purchase of property, plant and equipment (344) (193)
Acquisition of subsidiaries (net of bank overdraft acquired) (10) (166)
Net cash flows used in investing activities (2,043) (981)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 164 1,473
Finance lease principle payments (40) (34)
Repayment of borrowings – (245)
Net cash flows from financing activities 124 1,194
Net increase in cash and cash equivalents 774 1,462
Cash and cash equivalents at beginning of the year 2,604 1,075
Effect of exchange rates (127) 67
Cash and cash equivalents at end of the year 3,251 2,604
Consolidated Cash Flow Statement
for the year ended 31 December 2006 40 Patsystems plc
2006
£’000
2005
£’000
Net profit 7,906 403
Tax (6,280) (43)
Depreciation of property, plant and equipment 475 544
Amortisation of intangible assets 632 305
Share compensation expense 230 (224)
Shares issued in lieu of payment 53 74
Interest income (54) (35)
Interest expense 4 17
Decrease/(increase) in inventories 106 (26)
(Increase)/decrease in trade and other receivables (808) 74
(Increase)/decrease in financial assets and liabilities (170) 172
Increase/(decrease) in trade and other payables 836 (349)
Decrease in provisions (236) (72)
Cash flows from operating activities 2,694 840
 MATERIAL NON CASH TRANSACTIONS
During the year the estimate of contingent consideration increased to £2,140,000 (2005: £1,500,000). 
This increase does not have an effect on the cash flows of the Group. Please see note 21 for details.
Reconciliation of Net Profit to Net Cash Flows 
from Operating Activities  41 Report & Accounts 2006
1.1 Accounting policies
These financial statements have been prepared in accordance with International Financial 
Reporting Standards (IFRS) and IFRIC interpretations endorsed by the European Union (EU) and 
with those parts of the Companies Act 1985 applicable to companies reporting under IFRS.
The Group is preparing its financial statements in accordance with IFRS for the first time and 
consequently has applied IFRS 1 First-time Adoption of International Financial Reporting Standards. 
The Groups’ transition date is 1 January 2005.
IFRS 1 First time adoption of International Financial Reporting Standards sets out the transition 
rules, which must be applied, when IFRS is adopted for the first time. The standard sets out certain 
mandatory exemptions to retrospective application and certain optional exemptions. The optional 
exemptions available and taken by the Group are as follows:
(i)  Share-based transactions; the Group adopted the exemption in IFRS 1 which allows a first time 
adopter to apply the new standard only to share options granted after 7th November 2002 
that have not vested by 1st January 2005.
(ii)  Business combinations; the Group adopted the business combinations exemption in IFRS 1. It has 
not restated business combinations that took place prior to the 1 January 2005 transition date.
A summary of the more important Group accounting policies is given below.
1.2 Accounting convention and basis of preparation
The results and net assets of subsidiary undertakings acquired are included in the consolidated 
income statement and consolidated balance sheet using the acquisition method of accounting 
from the effective date of acquisition.
These consolidated financial statements have been prepared under the historical cost convention, 
with the exception of financial instruments which are stated in accordance with IAS 39 Financial 
Instruments: Recognition and Measurement.
Standards that are not yet effective and not adopted early by the Group
IFRS 7, ‘Financial instruments: Disclosures’, and the complementary amendment to IAS 1, 
‘Presentation of financial statements – Capital disclosures’, were not adopted early in 2006. IFRS 7 
introduces new disclosures relating to financial instruments. This standard will not have any impact 
on the classification and valuation of the Group’s financial instruments.
Interpretations to existing standards that are not yet effective and have not been early adopted 
by the Group
The following interpretations to existing standards have been published that are mandatory for 
the Group’s accounting periods beginning on or after 1 May 2006 or later periods but which the 
Group has not early adopted:
IFRIC 8, Scope of IFRS 2
IFRIC 8 requires consideration of transactions involving the issuance of equity instruments – where 
the identifiable consideration received is less than the fair value of the equity instruments issued – 
to establish whether or not they fall within the scope of IFRS 2.
IFRIC 10, Interim Financial Reporting and Impairment
IFRIC 10 prohibits the impairment losses recognised in an interim period on goodwill and 
investments in equity instruments and in financial assets carried at cost to be reversed at 
a subsequent balance sheet date.
Notes to the Financial Statements 42 Patsystems plc
Notes to the Financial Statements continued
Interpretations to existing standards that are not yet effective and not relevant for the 
Group’s operations
The following interpretations to existing standards have been published that are mandatory for 
the Group’s accounting periods beginning on or after 1 May 2006 or later periods but are not 
relevant for the group’s operations:
IFRIC 7, Applying the restatement approach under IAS 29, Financial reporting in hyperinflationary 
economies
As none of the group entities has a currency of a hyperinflationary economy as it functional 
currency, IFRIC 7 is not relevant to the Group’s operations.
IFRIC 9, Reassessment of embedded derivatives
IFRIC 9 requires an entity to assess whether an embedded derivative is required to be separated 
from the host contract and accounted for as a derivative when the entity first becomes a party to 
the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the 
contract that significantly modifies the cash flows that otherwise would be required under the 
contract, in which case reassessment is required. IFRIC 9 is not relevant to the Group’s operations 
because none of the terms of the Group’s contracts have been changed.
1.3 Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the 
currency of the primary economic environment in which the entity operates (the ‘functional 
currency’). The consolidated financial statements are presented in Pounds Sterling, which is the 
Company’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates 
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the 
settlement of such transactions and from the translation at year-end exchange rates of monetary 
assets and liabilities denominated in foreign currencies are recognised in the income statement.
Group companies
The results and financial position of all group entities (none of which has the currency of a 
hyperinflationary economy) that have a functional currency different from the presentation 
currency are translated into the presentation currency as follows:
–  assets and liabilities for each balance sheet presented are translated at the closing rate at the 
date of that balance sheet;
–  income and expenses for each income statement are translated at average exchange rates; and
–  all resulting exchange differences are recognised in reserves.
1.4 Property, plant and equipment
Property, plant and equipment is shown at cost less subsequent depreciation. Cost includes 
expenditure that is directly attributable to the acquisition of the items.
Depreciation on assets is calculated using the straight-line method to allocate the cost of each 
asset to its residual value over its estimated useful life, as follows:
Leasehold improvements – over the period of the lease
Computer hardware and software – over 3 years
Furniture, fixtures and fittings – over 4 years
1.5 Investments
Investments in subsidiaries are stated at cost less any provision for impairment.  43 Report & Accounts 2006
1.6 Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share 
of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is tested 
annually for impairment and carried at cost less accumulated impairment losses. The carrying value 
of capitalised goodwill is reviewed if events or changes in circumstances indicate a potential 
impairment. Any impairment is charged to the income statement. Gains and losses on the disposal 
of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is 
allocated to cash-generating units for the purpose of impairment testing.
1.7 Intangible assets
Acquired computer software licences and software acquired in the Tamesis acquisition are 
capitalised on the basis of the costs incurred to acquire and bring to use the specific software. 
These costs are amortised over their estimated useful lives (three years). Costs associated with 
maintaining computer software programs are recognised as an expense as incurred.
1.8 Impairment of assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually 
for impairment and whenever events or changes in circumstance indicate that the carrying value 
may not be recoverable. Assets that are subject to amortisation are tested for impairment 
whenever events or changes in circumstance indicate that the carrying value may not be 
recoverable. An impairment loss is recognised for the amount by which the assets carrying value 
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less 
costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the 
lowest levels for which they are separately identifiable cash flows (cash generating units).
1.9 Research and development
Research expenditure is recognised as an expense as incurred. Costs incurred on product 
development are capitalised as intangible assets when it is probable that the development will 
provide economic benefits, considering its commercial and technical feasibility, resources are 
available for the development and costs can be measured reliably. Other development expenditures 
are recognised as costs are incurred. Capitalised product development is amortised from 
completion of development over 3 years.
1.10 Inventories
Inventories are stated at the lower of cost and net realisable value.
1.11 Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising 
between the tax bases of assets and liabilities and their carrying amounts in the consolidated 
financial statements. The deferred income tax is not accounted for on the initial recognition of 
an asset or liability in a transaction, other than a business combination, that at the time of the 
transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined 
using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet 
date and are expected to apply when the related deferred income tax asset is realised or the 
deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable 
profit will be available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries 
except where the timing of the reversal of the temporary difference is controlled by the Group and 
it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax balances are not discounted. 44 Patsystems plc
Notes to the Financial Statements continued
1.12 Employee benefits
Pension obligations
The Group operates a defined contribution scheme which is open to UK and US employees. 
The Group pays contributions to publicly or privately administered pension insurance schemes on a 
mandatory, contractual or voluntary basis. The Group has no further payment obligations once the 
contributions have been paid. The contributions are recognised as employee benefit expense when 
they are due.
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement 
date, or when an employee accepts voluntary redundancy in exchange for these benefits. 
The Group recognises termination benefits when it is demonstrably committed to either: 
terminating the employment of current employees according to a detailed formal plan without 
possibility of withdrawal; or providing termination benefits as a result of an offer made to 
encourage voluntary redundancy.
Share-based benefits
The Group operates two share options schemes; the Enterprise Management Incentive Scheme and 
the 2003 Share Option Scheme (Inland Revenue unapproved).
The fair value of options are recognised as an employee benefit expense with a corresponding 
increase in reserves over the vesting period. The proceeds received net of any directly attributable 
transaction costs are credited to share capital (nominal value) and share premium when the 
options are exercised. A detailed explanation of how the fair values have been derived can be seen 
in note 24.
1.13 Revenue recognition
Revenue comprises the fair value of the sale of goods and services, net of value added tax.
Revenue is recognised as follows:
–  Non-refundable installation income: this is invoiced in advance of installation work and is taken 
to the Income statement in line with the performance of the work.
–  Monthly end user or lot charges, monthly maintenance and income on any rentals – these are 
credited to the income statement in the period in which the service is provided.
–  Income from consultancy, software development projects and perpetual licences – this is 
recognised in the income statement when and to the extent that the Company obtains the right 
to consideration in exchange for its performance in accordance with the terms for acceptance set 
out in the customer contracts.
1.14 Leases
Costs in respect of operating leases are charged to the income statement on a straight line basis 
over the lease term.
Assets purchased under finance leases are recorded as tangible fixed assets in the Balance Sheet. 
The obligations to pay future capital instalments are shown in creditors and are analysed between 
amounts falling due within one year and amounts after more than one year. The asset value is 
calculated at the inception of the contract as the purchase price of the asset, and the finance 
charge is allocated to accounting periods on the sum of the digits basis.
1.15 Accounting for derivative financial instruments and hedging activities
The Group enters into forward currency contracts and options in order to hedge against the cash 
flow risk of foreign currency cash flows. Derivatives are initially recognised at fair value on the 
date the contract is entered into and subsequently re-measured in future periods at their fair 
value. The movement in fair values is taken to the income statement.  45 Report & Accounts 2006
The fair value of forward contracts is determined using forward exchange market rates at the 
balance sheet date.
1.16 Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term 
highly liquid investments with original maturities of three months or less, and bank overdrafts.
1.17 Segment reporting
A business segment is a group of assets and operations engaged in providing products or services 
that are subject to risks and returns that are different from those of other business segments. 
A geographical segment is engaged in providing products or services within a particular 
environment that are subject to risks and returns that are different from those of other economic 
environments.
All direct costs of a segment are included in that segment’s result.
1.18 Financial assets
Purchases and sales of financial assets are recognised on the trade-date – the date on which the 
group commits to purchase or sell the asset. Financial assets are initially recognised at fair value 
and transaction costs are expensed in the income statement. Financial assets are derecognised 
when the rights to receive cash flows from the investments have expired or have been transferred 
and the group has transferred substantially all risks and rewards of ownership.
Gains or losses arising from changes in the fair value of the financial assets are presented in the 
income statement within in the period in which they arise.
1.19 Provisions
Provisions are measured at the present value of the expenditures expected to be required to settle 
the obligation using a pre-tax rate that reflects current market assessments of the time value of 
money and the risks specific to the obligation.
2. CRITICAL ACCOUNTING ESTIMATES AND jUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and 
other factors, including expectations of future events that are believed to be reasonable under  
the circumstances.
The Group makes estimates and assumptions regarding the future. The resulting accounting 
estimates will, by definition, seldom equal the related actual results. The estimates and 
assumptions that have a significant risk of causing a material adjustment to the carrying amounts 
of assets and liabilities within the next financial year are the assumptions used in calculating the 
contingent consideration for the purchase of Tamesis Ltd detailed in note 21 and the assumptions 
used for recognising the deferred tax asset detailed in note 8.
3. FINANCIAL RISK MANAGEMENT
The group’s activities expose it to a variety of financial risks. The Chief Executive’s Report details 
the business risks facing the Group and the Group’s strategy for mitigating them. The Finance 
Director’s Report details the foreign currency risk faced by the Group and the ways in which the 
Group hedges against this risk. 46 Patsystems plc
Notes to the Financial Statements continued
4. SEGMENTAL ANALYSIS
The Group operates in one business segment; that of the supply of software to financial 
institutions. The operations are monitored by the geographical regions of Europe, North America 
and Asia.
2006
Europe
£’000
North 
America
£’000
Asia Pacific
£’000
Total
£’000
Turnover by origin 6,722 5,555 2,978 15,255
Turnover by destination 5,543 5,555 4,157 15,255
Depreciation and amortisation 1,007 31 69 1,107
Operating profit 1,249 675 (348) 1,576
Finance costs – net 27 22 1 50
Profit before tax 1,276 697 (347) 1,626
Capital expenditure on Property,  
Plant and equipment 234 64 46 344
Capital expenditure on Intangible assets 1,679 2 8 1,689
Total assets 15,216 2,481 1,904 19,601
Total liabilities (4,944) (691) (234) (5,869)
2005
Europe
£’000
North 
America
£’000
Asia Pacific
£’000
Total
£’000
Turnover by origin 5,148 5,435 4,874 15,457
Turnover by destination 5,011 5,435 5,011 15,457
Depreciation and amortisation 709 52 88 849
Operating profit (878) 1,404 (184) 342
Finance costs – net 15 3 – 18
Profit before tax (863) 1,407 (184) 360
Capital expenditure on Property,  
Plant and equipment 242 4 21 267
Capital expenditure on Intangible assets 617 – 5 622
Total assets 6,697 1,626 1,721 10,044
Total liabilities (3,527) (614) (380) (4,521)  47 Report & Accounts 2006
5. OPERATING PROFIT BEFORE INTEREST AND TAxATION
2006
£’000
2005
£’000
Operating profit is stated after charging/(crediting):
Staff costs 9,552 7,919
Less: wages and salaries capitalised in accordance with IAS 38 (1,550) (577)
8,002 7,342
Depreciation – Owned tangible assets 450 519
– Under finance leases 25 25
Amortisation – Intangible assets 632 305
Operating lease costs – plant and machinery 23 16
– other 380 387
Foreign exchange loss (79) (50)
Exceptional costs – external costs of trademark – 250
– replacement of director – 448
– settlement of patent dispute – 79
Services provided by the Group’s auditor and network firms
During the year the Group (including it’s overseas subsidiaries) obtained the following services 
from the Group’s auditor as detailed below:
Audit services – statutory audit (Group) 82 53
– statutory audit (Company) 6 5
Non audit services –  the audit of Company’s subsidiaries 
pursuant to legislation 6 5
– tax services 53 61
– other 6 5
Operating expenses are all of an administrative nature.
6. STAFF COSTS
2006
£’000
2005
£’000
Staff costs (including directors’ emoluments) during the year  
amounted to:
Wages and salaries 8,200 7,173
Share compensation expense 230 (224)
Social security costs 820 710
Pension costs 302 260
9,552 7,919
Included in the above wages and salaries is £1,550,000 (2005: £577,000) in relation to development 
costs that were capitalised in accordance with IAS 38. 48 Patsystems plc
Notes to the Financial Statements continued
The average monthly number of persons (included directors) employed by the Group during the 
year, in full time equivalents, was:
2006
Number
2005
Number
Sales, account management and marketing 15 18
Customer Operations, testing and technical 64 59
Development and product development 38 29
Finance, Administration and Board 19 18
136 124
Details of the emoluments of the Directors are contained in the Report of the Board on Directors’ 
Remuneration and Group Remuneration Policy on page 32.
7. FINANCE COSTS – NET
2006
£’000
2005
£’000
Interest receivable: Bank interest receivable 54 35
Interest payable and similar charges:
On finance leases (3) (9)
Other interest payable (1) (8)
(4) (17)
Finance costs – net 50 18
8. TAx ON PROFIT ON ORDINARY ACTIVITIES
2006
£’000
2005
£’000
United Kingdom
Withholding tax 111 9
Research & Development tax credit in respect of prior periods – (85)
111 (76)
Foreign tax
Corporation tax 41 33
Total current tax 152 (43)
Deferred tax
Movement in deferred tax (note 15) (6,432) –
Taxation credit (6,280) (43)  49 Report & Accounts 2006
The tax for the year is different from that which would result from applying the standard rate of 
Corporation Tax in the UK (30%). The differences are explained below:
2006
£’000
2005
£’000
Profit on ordinary activities before tax 1,626 360
Profit on ordinary activities multiplied by standard rate of Corporation 
Tax in the UK of 30% 488 108
Effects of:
Research & Development tax credit in respect of prior periods – (85)
Expenses not deductible for tax purposes 68 19
Short term timing differences – (74)
Depreciation in excess of capital allowances 142 119
Amortisation of intangibles 147 89
Effect of differing tax rates on overseas earnings 16 (186)
Withholding tax 111 9
Recognition of deferred tax asset respect of losses, capital allowances 
and share options (6,432) –
Tax losses utilised (820) (42)
Taxation credit (6,280) (43)
Factors that may affect future tax charges
The Group has tax losses arising of £23,378,000 (2005: £27,179,000) that are available for offset 
against future taxable profits in their respective territories. A deferred tax asset amounting to 
£240,000 (2005: £7,832,000) has not been recognised in respect of these losses as their future 
recovery is uncertain.
9. PARENT COMPANY ACCOUNTS
The Parent company accounts are set out in pages 67 to 76.
10. EARNINGS PER ORDINARY SHARE
In accordance with IAS 33, the calculation of profit per ordinary share is based upon:
(a) Basic and adjusted basic EPS
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders 
by the weighted average number of ordinary shares in issue during the year:
2006 2005
Profit for the year attributable to equity holders of the company £7,906,000 £403,000
Deferred tax movement (note 8) (£6,432,000) –
Adjusted profit on ordinary activities* £1,474,000 £403,000
Weighted average number of shares 162,794,000 153,378,000
Basic EPS 4.9p 0.3p
Adjusted basic EPS 0.9p 0.3p 50 Patsystems plc
Notes to the Financial Statements continued
(b) Diluted and adjusted diluted EPS
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary 
shares outstanding to assume conversions of all dilutive potential ordinary shares.
The Group has two categories of dilutive potential ordinary shares: share options and contingent 
shares (note 21).
For share options a calculation is performed to determine the number of shares that could have 
been acquired at fair value (determined as the average annual market price of the Group’s shares) 
based on the monetary value of the subscription rights attached to the outstanding options.
The number of shares calculated above is compared with the number of shares that would have 
been issued assuming the exercise of the share options.
2006 2005
Profit for the year attributable to equity holders of the company £7,906,000 £403,000
Deferred tax movement (note 8) (£6,432,000) –
Adjusted profit on ordinary activities* £1,474,000 £403,000
Weighted average number of shares 162,794,000 153,378,000
Effect of dilutive share options 15,020,000 15,524,000
Effect of contingent share consdieration 14,267,000 10,000,000
192,081,000 178,902,000
Diluted EPS 4.1p 0.2p
Adjusted diluted EPS 0.8p 0.2p
due to the material size of the deferred tax movement in 2006 and the significant effect it has on the reported EPS 
figure, the directors consider that it is more appropriate to give an adjusted EPS calculations that exclude the effect 
of deferred tax.
11. GOODWILL
2006
£’000
Cost and net book value
At 1 January 2006 1,552
Additions 193
At 31 December 2006 1,745
The additions in the year are in relation to the 2005 acquisition of Tamesis Ltd and are detailed 
below:
2006
£’000
Increase in the fair value of the dilapidations provision 90
Recognition of the fair value of the deferred tax asset (547)
Additional acquisition costs 10
Increase in the estimated contingent consideration (note 21) 640
193
The Goodwill is all held in Europe.
*  51 Report & Accounts 2006
Impairment review
The recoverable amount for the cash generating unit has been measured based on a value in use 
calculation. The calculations use pre-tax profits based on budgets approved by management for 
the year 2007. Cash flows beyond this are based on a growth rate of 2.25%. A pre-tax discount 
rate of 10% has been applied to the calculations.
As the value in use is greater than the carrying value there is no impairment in the period and the 
carrying value of goodwill represents the value of goodwill calculated at the time of acquisition.
12. INTANGIBLE ASSETS
2006
Software 
licences
£’000
Acquired 
software
£’000
Capitalised 
development
£’000
Total
£’000
Cost
At 1 January 2006 992 898 577 2,467
Additions 139 – 1,550 1,689
Foreign exchange (8) – – (8)
At 31 December 2006 1,123 898 2,127 4,148
Amortisation
Amortisation at 1 January 2006 (817) (125) (46) (988)
Charge for the year (150) (299) (183) (632)
Foreign exchange 8 – – 8
At 31 December 2006 (959) (424) (229) (1,612)
Net book value
At 31 December 2006 164 474 1,898 2,536
At 31 December 2005 175 773 531 1,479
The acquired software is in relation to the Risk Informer software purchased as part of the Tamesis 
Ltd acquisition in 2005. The fair value was assessed by taking account of the cost incurred by 
Tamesis in developing the software, the likely costs of Patsystems building similar software and the 
potential revenues arising. 52 Patsystems plc
Notes to the Financial Statements continued
2005
Software 
licences
£’000
Acquired 
software
£’000
Capitalised 
development
£’000
Total
£’000
Cost
At 1 January 2005 942 – – 942
Additions 45 898 577 1,520
Foreign exchange 5 – – 5
At 31 December 2005 992 898 577 2,467
Amortisation
Amortisation at 1 January 2005 (678) – – (678)
Charge for the year (134) (125) (46) (305)
Foreign exchange (5) – – (5)
At 31 December 2005 (817) (125) (46) (988)
Net book value
At 31 December 2005 175 773 531 1,479
At 31 December 2004 264 – – 264
13. PROPERTY, PLANT AND EQUIPMENT
2006
Leasehold
£’000
Plant & 
equipment
£’000
Office 
equipment
£’000
Total
£’000
Cost
At 1 January 2006 506 2,599 463 3,568
Additions 41 290 13 344
Disposals (3) (39) – (42)
Foreign exchange (4) (84) (24) (112)
31 December 2006 540 2,766 452 3,758
Amortisation
At 1 January 2006 (145) (2,099) (422) (2,666)
Provided during the year (93) (362) (20) (475)
Disposals 3 39 – 42
Foreign exchange 2 71 22 95
At 31 December 2006 (233) (2,351) (420) (3,004)
Net book value
At 31 December 2006 307 415 32 754
At 31 December 2005 361 500 41 902
Included in Plant and equipment are assets held under finance leases at a net book value of 
£24,000 (2005: £49,000). The depreciation charge on these assets was £25,000 (2005: £25,000).  53 Report & Accounts 2006
2005
Leasehold
£’000
Plant & 
equipment
£’000
Office 
equipment
£’000
Total
£’000
Cost
At 1 January 2005 506 2,324 434 3,264
Additions (including acquisitions) – 263 9 272
Disposals – (29) – (29)
Foreign exchange – 41 20 61
31 December 2005 506 2,599 463 3,568
Amortisation
At 1 January 2005 (16) (1,718) (357) (2,091)
Provided during the year (129) (370) (45) (544)
Disposals – 29 – 29
Foreign exchange – (40) (20) (60)
At 31 December 2005 (145) (2,099) (422) (2,666)
Net book value
At 31 December 2005 361 500 41 902
At 31 December 2004 490 606 77 1,173
14. PRINCIPAL SUBSIDARIES
The principal investments in sudsidary undertakings held by the Parent company are as follows:
1.  A 100% investment in respect of voting rights and nominal value in Patsystems Holdings 
Limited, a company incorporated in England and Wales.
  The historical cost of the investment in the shares of Patsystems Holdings Limited is 
£11,180,000. Under the Scheme of Arrangement the subsidiary undertaking returned capital 
to the company amounting to £9,865,000, and the cost of the investment has been reduced 
accordingly to reflect this.
  The following subsidiary undertakings were wholly owned in respect of voting rights and 
nominal value of issued shares by Patsystems Holdings Limited and perform the sale and 
support of electronic trading systems:
 Patsystems (UK) Ltd – incorporated in England and Wales
 Patsystems (NA) LLC – incorporated in United States of America
 Patsystems Pte Ltd – incorporated in Singapore
 Patsystems Pty Ltd – incorporated in Australia
 Patsystems GmbH – incorporated in Germany
 Patsystems Spzoo – incorporated in Poland
  The following subsidiary is wholly owned in respect of voting rights and nominal value 
of issued shares by Patsystems Holdings Limited and acted as holding companies:
  Professional Automated Trading Systems BV (incorporated in The Netherlands).
  Professional Automated Trading Systems BV owns 100% of voting rights and nominal value 
of issued shares in Patsystems (Japan) KK (incorporated in Japan), which performs the sale and 
support of electronic trading systems. 54 Patsystems plc
Notes to the Financial Statements continued
  Patsystems (Japan) KK owns 100% of voting rights and nominal value of issued shares 
in Patsystems (Ireland) Ltd (incorporated in the Republic of Ireland), which acts as a 
holding company.
  Wintrade Ltd, incorporated in England and Wales, was acquired on 27 September 2000 
as a wholly owned subsidiary of Patsystems Holdings Limited. Wintrade Ltd is not trading.
2.  A 100% investment in Tamesis Limited, a company incorporated in England and Wales that 
develops, distributes and supports software enabling real time trade capture, valuation and 
risk management for the structured finance market.
  All subsidiaries are included in the consolidation.
15. DEFERRED TAx ASSETS
Trading 
losses
£’000
Capital 
allowances
£’000
Share 
options
£’000
Total
£’000
At 1 January 2006 – – – –
Fair value adjustment in respect of tax losses 
in Tamesis at date of acquisition 547 – – 547
Credited to income statement 6,200 200 32 6,432
At 31 December 2006 6,747 200 32 6,979
16. INVENTORIES
2006
£’000
2005
£’000
Goods for resale 188 294
£14,000 of inventory was recognised in cost of sales during the year.
£96,000 of inventory was expensed to cost of sales in the year to write down stock to its net 
realisable value.
17. TRADE AND OTHER RECEIVABLES
2006
£’000
2005
£’000
Trade receivables 2,622 1,377
Less: provision for impairment of receivables (50) (120)
Trade receivables – net 2,572 1,257
Other receivables 329 389
Prepayments and accrued income 1,120 1,567
4,021 3,213  55 Report & Accounts 2006
18. TRADE AND OTHER PAYABLES
2006
£’000
2005
£’000
Trade payables 635 487
Net obligation under finance leases – 40
Other tax and social security 423 333
Other payables – 3
Accruals 1,119 1,167
Deferred Income 1,417 768
3,594 2,798
None of the payables are secured.
19. OBLIGATION UNDER FINANCE LEASES AND HIRE PURCHASE
2006
£’000
2005
£’000
Repayable within one year – 40
Included in liabilities falling due within one year – 40
20. PROVISIONS
Group
At  
1 Jan 2006 
£’000
Utilised  
in year 
£’000
Movement  
in year 
£’000
At  
31 Dec 2006 
£’000
Due within one year
Onerous lease provision 20 (20) – –
Dilapidations provision 150 (240) 90 –
170 (260) 90 –
Due between two to five years
Dilapidations provision 10 – 24 34
180 (260) 114 34
The dilapidations provision is in respect of work to be carried out at the end of the lease on 
property. It is due to expire in the second half of 2009.
21. CONTINGENT CONSIDERATION
The contingent share consideration is in relation to the acquisition of Tamesis Ltd which is payable 
entirely in Patsystems Plc ordinary shares. The consideration is based on management’s best 
estimate of the future earnings before tax of Tamesis Ltd and is payable in September 2007. 
The maximum consideration is capped at 23,333,334 shares. 56 Patsystems plc
Notes to the Financial Statements continued
22. COMMITMENTS UNDER OPERATING LEASES
The Group leases various offices under non-cancellable operating lease arrangements. The leases 
have varying terms, escalation clauses and renewal rights.
The lease expenditure charged to the income statement during the year is disclosed in note 5.
The future minimum lease payments under non-cancellable operating leases are as follows:
2006
£’000
2005
£’000
Land and buildings
No later than one year 295 263
Later than one year and less than five years 678 584
After five years 13 –
986 847
23. CALLED UP EQUITY SHARE CAPITAL
2006
£’000
2005
£’000
Authorised
Ordinary shares of 1p each
At 1 January 2006 and 31 December 2006 – 250,000,000 shares 2,500 2,500
Deferred shares of 1p each
At 1 January 2006 and 31 December 2006 – 2 shares – –
Redeemable preference shares of £1 each
At 1 January 2006 and 31 December 2006 – 49,998 shares 50 50
Allotted, called up and fully paid
Ordinary shares of 1p each
At 1 January 2006 – 160,534,642 shares 1,605 1,492
Allotted under placing – 100
Allotted under share option schemes 32 8
Allotted in lieu of payment 4 5
At 31 December 2006 – 164,154,850 1,641 1,605
The 1p ordinary shares are listed on the AIM market. They have one voting right per share.
2006
£’000
2005
£’000
Deferred shares of 1p each
At 1 January 2006 and 31 December 2006 – 2 shares – –
The deferred 1p shares are not listed. They have no voting rights and no access to dividends.  57 Report & Accounts 2006
 24. SHARE OPTION SCHEMES
The following options to purchase 1p Ordinary shares in Patsystems Plc were granted, exercised, 
lapsed and outstanding during the year:
Exercise  
price  
in pence
Outstanding 
at 1 jan 
2006
Granted  
in year
Exercised  
in year
Lapsed  
in year
Outstanding 
at 31 Dec 
2006
Effective  
dates
Enterprise Management Incentive Scheme
3.92p 1,060,000 – (1,060,000) – – Note a
5.08p 4,211,250 – (2,048,750) – 2,162,500 Note a
9.50p 187,500 – (90,000) – 97,500 Note a
13.00p 769,231 – – (769,231) – Note b
13.50p 90,000 – – – 90,000 Note b
13.75p – 727,272 – – 727,272 Note d
14.25p 834,211 – – (165,000) 669,211 Note b
14.50p 1,186,606 – – – 1,186,606 Note b
15.25p 835,737 – – (60,000) 775,737 Note b
15.58p 3,059,000 – – (82,500) 2,976,500 Note b
17.50p 90,000 – – – 90,000 Note b
12,323,535 727,272 (3,198,750) (1,076,731) 8,775,326
2003 Share Option Scheme
13.00p 16,269 – – (16,269) – Note c
13.75p – 3,272,728 – – 3,272,728 Note e
14.25p 455,351 – – (22,500) 432,851 Note c
14.50p 144,494 – – – 144,494 Note c
15.25p 524,263 – – (60,000) 464,263 Note c
15.58p 1,115,500 – – (130,000) 985,500 Note c
16.00p 445,000 – – – 445,000 Note c
18.00p 500,000 – – – 500,000 Note c
3,200,877 3,272,728 – (228,769) 6,244,836
Total all schemes
15,524,412 4,000,000 (3,198,750) (1,305,500) 15,020,162
Note a:  These options were granted under the initial award of the Enterprise Management 
Incentive (EMI) Scheme. These options are now 100% exercisable.
Note b:  Options were granted under the second and third awards of the Enterprise Management 
Incentive (EMI) Scheme. 20% of these options will vest on 14th February 2007. 
The remaining 80% of the options will be carried forward into future years and the 
Remuneration Committee will determine what performance conditions to attach to 
them in 2007. 58 Patsystems plc
Notes to the Financial Statements continued
Note c:  These options were granted under the second and third awards of Part B (Inland Revenue 
Unapproved) of the Patsystems Plc 2003 Share Option Scheme. The vesting status is the 
same as note b.
Note d:  These options were granted under a special award of the Enterprise Management 
Incentive (EMI) Scheme. One third of these options can be exercised after a period of three 
years after the date of the grant. Two thirds of these options can be exercised after 
a period of three years after the date of the grant but subject to achieving company 
performance targets.
Note e:  These options were granted under a special award of Part B (Inland Revenue Unapproved) 
of the Patsystems Plc 2003 Share Option Scheme, exercise conditions are as per note d.
For the options that were exercised during the year, the weighted average share price at the date 
of exercise was 14p.
The weighted average remaining contractual life of options outstanding at the year end is 8 years.
The total fair value that was charged to the income statement in relation to the share options was 
£230,000 (2005: credit of £224,000), all of which related to equity settled share based payment 
transactions.
The fair value of the options have been calculated using the Binomial Model. The model takes into 
account the following factors in determining the fair value of an option:
(a) Stock Price and Exercise Price
Share prices are closing share prices as at the date of grant. Exercise prices are listed in the above 
schedule.
(b) Expected Term of the Options
It is assumed that the expected life of the options under consideration is 5 years.
(c) Volatility
Volatility of the Company’s share price has been calculated as the annualized standard deviation 
of daily continuosly compounded returns on the Company’s stock, derived from the Company’s 
historical share prices, adjusted for splits, over 3 years back from each date of grant.
(d) Risk-Free interest rate
The risk-free rates of interest are assumed to be the yield to maturity on a UK Gilt Strip with the 
term to maturity equal to the expected life of the option.  59 Report & Accounts 2006
(e) Dividends
The table below sets out the information known about the expected future dividend yield at each 
date of grant:
Date of grant Dividend yield (%)
24 February 2003 0.00%
13 March 2003 0.00%
30 June 2003 0.00%
27 October 2003 0.00%
01 January 2004 0.00%
30 July 2004 0.00%
27 August 2004 0.00%
16 November 2004 0.00%
04 February 2005 0.00%
17 March 2005 0.00%
06 October 2005 2.00%
23 November 2005 2.00%
14 December 2005 2.00%
14 February 2006 2.00%
25. SHARE CAPITAL AND RESERVES
At  
1 Jan 2006
£’000
Shares  
issued in  
the year
£’000
Earnings  
for the year
£’000
Foreign 
exchange 
movement
£’000
Share  
compensation 
expense
£’000
At  
31 Dec 2006
£’000
Paid up share 
capital 1,605 36 – – – 1,641
Share premium 3,510 181 – – – 3,691
Other reserves 17,348 – – – – 17,348
Retained earnings (16,940) – 7,906 (144) 230 (8,948)
5,523 217 7,906 (144) 230 13,732
At  
1 Jan 2005
£’000
Shares  
issued in  
the year
£’000
Earnings for 
the year
£’000
Foreign 
exchange 
movement
£’000
Share  
compensation 
expense
£’000
At  
31 Dec 2005
£’000
Paid up share 
capital 1,492 113 – – – 1,605
Share premium 2,076 1,434 – – – 3,510
Other reserves 17,348 – – – – 17,348
Retained earnings (16,898) – 403 (221) (224) (16,940)
4,018 1,547 403 (221) (224) 5,523 60 Patsystems plc
Notes to the Financial Statements continued
Investments in own shares
The Group has an investment in own shares of 71,856 shares (2005: 35,928 shares) as a result 
of employees leaving the All Employee Share Scheme. The nominal value of these shares are 
£719 (2005: £359). The market value at 31 December 2006 is £12,000 (2005: £5,000).
26. STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
2006
£’000
2005
£’000
Profit on ordinary activities after taxation 7,906 403
Foreign exchange adjustment (144) (221)
Share compensation expense 230 (224)
Proceeds from the issue of ordinary share capital 217 1,613
Issue costs – (66)
8,209 1,505
Shareholders’ funds at 1 January 5,523 4,018
Shareholders’ funds at 31 December 13,732 5,523
27. FINANCIAL INSTRUMENTS
The Group’s financial instruments comprise cash and liquid resources, trade and other debtors 
and creditors arising directly from the operations of the Group and forward exchange contracts. 
The main risks arising from the Group’s financial instruments are interest rate risk and foreign 
currency risk. The Board reviews and agrees policies for managing each of these risks and they 
are summarised below.
28.1 Short term debtors and creditors
In accordance with IAS 38, short term debtors and creditors have been excluded from all the 
following disclosures, other than the currency risk exposures.
28.2 Financial assets
2006 2005
Cash at  
bank
£’000
Interest 
bearing 
deposits
£’000
Total
£’000
Cash at  
bank
£’000
Interest 
bearing 
deposits
£’000
Total
£’000
Sterling 689 251 940 132 665 797
US dollars 336 667 1,003 511 518 1,029
Japanese Yen 1,034 – 1,034 628 – 628
Other currencies 205 69 274 150 – 150
2,264 987 3,251 1,421 1,183 2,604
The interest rates on interest bearing deposits are floating rates. All financial assets mature 
within one year.  61 Report & Accounts 2006
28.3 Financial liabilities
The Group had no borrowings as at 31 December 2006.
28.4 Foreign currency
The Group’s principal exposure to exchange rate fluctuations arises on the translation of overseas 
net assets and profits into Sterling for accounting purposes.
Foreign Currency exposures
As at 31 December 2006 the Group’s currency exposures relate to payables and receivables 
denominated in foreign currencies and translated at the rate of exchange at the transaction date 
together with inter-company balances with overseas subsidiaries.
Net foreign currency liabilities (in £’000)
Functional 
currency of  
group operation
2006 2005
Sterling
£’000
Euro
£’000
Yen
£’000
Other
£’000
Total
£’000
Sterling
£’000
Euro
£’000
Yen
£’000
Other
£’000
Total
£’000
Sterling – – 812 – 812 – – 1,280 – 1,280
US dollar 2,302 – – – 2,302 4,894 – – – 4,894
Euro 2,523 – – – 2,523 3,623 – – – 3,623
Singapore dollar 1,207 – – – 1,207 1,279 – – – 1,279
Australian dollar 632 – – 6 638 493 – – 7 500
Japanese yen 816 1,007 – 94 1,917 679 2,149 – 98 2,926
Other 12 – – – 12 12 – – – 12
7,492 1,007 812 100 9,411 10,980 2,149 1,280 105 14,514
28.5 Foreign currency risk
The Group has a net earnings exposure to the US dollar together with an exposure to the 
translation of the balance sheet of its US subsidiary. During the year, the Board authorised the 
hedging of US dollar exposures. At the 31 December 2006 the company has the following 
hedges in place:
28.5. 1 Forward contracts
Forward contract value Maturity date Effective forward rate
$400,000 31 January 2007 1.759
$350,000 28 February 2007 1.750
$350,000 30 March 2007 1.750
$350,000 29 June 2007 1.843
$320,000 31 August 2007 1.872
$350,000 28 September 2007 1.872
$550,000 31 October 2007 1.898 62 Patsystems plc
Notes to the Financial Statements continued
28.5.2 Currency Options
Forward contract value Maturity date Effective forward rate
$700,000 29 May 2007 1.86
$290,000 27 July 2007 1.89
At the year end the fair value of the above contracts is an asset of £127,000 (2005: liability of 
£43,000). The movement in fair values of £170,000 has been credited to the income statement in 
the year.
28.6 Fair values
The fair value of the financial assets and liabilities are not materially different from their carrying 
value in the financial statements, except for the foreign currency risks above.
29. Related party transactions
Turnover includes £366,000 (2005: £349,000) in respect of Banca Caboto Spa (London Branch), a 
member of a group of companies which include CAI (Suisse), a shareholder of the Company.
Key management remuneration
Details of the remuneration of key management are detailed below:
2006
£’000
2005
£’000
Salaries and short term employee benefits 1,394 883
Share based payments 180 27
1,574 910
30. Transition to IFRS
(a)  Application of IFRS 1: First time adoption of International Accounting Standards
  The Group is preparing its financial statements in accordance with IFRS as adopted by the 
European Union for the first time and consequently has applied IFRS 1 First-time Adoption 
of International Financial Reporting Standards. The Groups’ transition date is 1 January 2005.
  IFRS 1 First time adoption of International Financial Reporting Standards sets out the transition 
rules, which must be applied, when IFRS is adopted for the first time. The standard sets out 
certain mandatory exemptions to retrospective application and certain optional exemptions. 
The optional exemptions available and taken by the Group are as follows:
 (i)  Share-based transactions; the Group adopted the exemption in IFRS 1 which allows a first 
time adopter to apply the new standard only to share options granted after 7th November 
2002 that have not vested by 1st January 2005.
 (ii)  Business combinations; the Group adopted the business combinations exemption in IFRS 1. 
It has not restated business combinations that took place prior to the 1 January 2005 
transition date.  63 Report & Accounts 2006
(b)  Main policy differences between IFRS and UK GAAP
 (i)   Share compensation expense; IFRS 2 Share-based Payment
   IFRS 2 requires that the fair value for share options to employees be estimated and 
charged to the income statement over the vesting period of the incentive. This applies to 
all share options granted except those covered by the IFRS 1 exemptions mentioned above.
 (ii)  Capitalisation of development costs; IAS 38 Intangible assets
   Under UK GAAP all expenditure on research and development was expensed as incurred. 
Under IFRS, research expenditure is recognised as an expense as costs are incurred but costs 
incurred on product development are capitalised as intangible assets when it is probable 
that the development will provide future economic benefit, considering its commercial 
and technical feasibility, resources are available for the development and costs can be 
measured reliably. Other development expenditures are recognised as costs are incurred. 
Capitalised product development is amortised from completion of development over 3 years.
 (iii)  Acquisition of subsidiary; IFRS 3 Business Combinations
   Goodwill represents the excess of the cost of an acquisition over the fair value of the net 
identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is not 
amortised, instead it is subject to annual impairment tests, or more frequently if there is an 
indication of impairment.
   IFRS 3 also requires that intangible assets acquired are identified separately from goodwill.
Hence for the business combination acquired after 1 January 2005 part of the cost of 
acquisition has been allocated to Intangible assets for the element that relates to the fair 
value of the software acquired. This element is then amortised through the income 
statement over three years.
 (iv) Fair value of cash flow hedge; IAS 39 Financial Instruments
   The Group enters into forward currency contracts and options in order to hedge against 
the cash flow risk of foreign currency cash flows. Derivatives are initially recognised at fair 
value on the date the contract is entered into and subsequently re-measured in future 
periods at their fair value. The movement in fair values is taken to the income statement.
   Offset against the movement in these fair values in the income statement is the foreign 
exchange revaluation of the repayable portion of inter-company loans. 64 Patsystems plc
Notes to the Financial Statements continued
30. Transition to IFRS
 (c) Reconciliations between IFRS and UK GAAP
 (i) Reconciliation of UK GAAP loss to IFRS (loss)/profit
Note
Year ended 
31 Dec 2005
£’000
Loss for period as reported under UK GAAP (734)
Adjustments for:
Share compensation expense (b)(i) 224
Capitalisation of development costs (b)(ii) 577
Reinstate amortisation of goodwill (b)(iii) 389
Amortisation of intangible assets (b)(iii) (171)
Fair value of financial instruments (b)(iv) (172)
Foreign exchange movement on inter-company loan (b)(iv) 290
Adjustment to operating expenses 1,137
Profit for period as reported under IFRS 403
 (ii)  Reconciliation of equity from UK GAAP to IFRS
Note
As at  
1 Jan 2005
£’000
Year ended 
31 Dec 2005
£’000
Total equity as reported under UK GAAP 3,889 4,771
Adjustments for:
Share compensation expense to income statement (b)(i) (515) 224
Share compensation expense to reserves (b)(i) 515 (224)
Foreign exchange movement on loans to income statement (b)(v) (214) 290
Foreign exchange movement on loans to reserves (b)(v) 214 (290)
Capitalisation of development costs (b)(ii) – 577
Amortisation of intangible assets (b)(iii) – (171)
Allocation of software to intangible assets (b)(iii) – 898
– 1,304
Allocation of software from goodwill (b)(iii) – (898)
Reinstate amortisation of goodwill (b)(iii) – 389
– (509)
Fair value of cash flow hedge (b)(v) 129 (43)
Total equity as reported under IFRS 4,018 5,523  65 Report & Accounts 2006
(iii)  Reconciliation of cash flows from UK GAAP to IFRS
 The consolidated statement of cash flows prepared under IFRS presents substantially the same 
information as that required under UK GAAP.
 Under IFRS only three categories of cash flow activity are required to be reported: operating, 
investing and financing. Cash flows from returns on investments and servicing of finance under 
UK GAAP are including as operating activities and investing activities respectively under IFRS. 
There are no other material differences between the cash flow statement presented under IFRS 
and the cash flow statement presented under UK GAAP.
(d) Detailed reconciliation between IFRS and UK GAAP
Year ended 31 December 2005
UK GAAP
£’000
Effect of 
transition  
to IFRS
£’000
IFRS
£’000
Revenue 15,457 – 15,457
Cost of sales (2,160) – (2,160)
Gross profit 13,297 – 13,297
Operating expenses (14,092) 1,137 (12,955)
Operating (loss)/profit (795) 1,137 342
Interest receivable 35 – 35
Interest payable (17) – (17)
(Loss)/Profit before tax (777) 1,137 360
Taxation 43 – 43
(Loss)/profit for the year (734) 1,137 403 66 Patsystems plc
Notes to the Financial Statements continued
30. Transition to IFRS
 (iii) Reconciliations of equity at 1 January 2005 and 31 December 2005 from UK GAAP to IFRS
As at 1 January 2005 Year ended 31 December 2005
UK GAAP
£’000
Effect of 
transition  
to IFRS
£’000
IFRS
£’000
UK GAAP
£’000
Effect of 
transition  
to IFRS
£’000
IFRS
£’000
Non-current assets
Goodwill 296 – 296 2,061 (509) 1,552
Intangible fixed assets 264 – 264 175 1,304 1,479
Property, plant and 
equipment 1,173 – 1,173 902 – 902
1,733 – 1,733 3,138 795 3,933
Current assets
Inventories 268 – 268 294 – 294
Trade and other receivables 3,472 – 3,472 3,213 – 3,213
Financial assets – derivative 
financial instruments – 129 129 – – –
Cash and cash equivalents 1,075 1,075 2,604 – 2,604
4,815 129 4,944 6,111 – 6,111
Current liabilities
Trade and other payables (2,608) – (2,608) (2,798) – (2,798)
Financial liabilities – derivative 
financial instruments – – – – (43) (43)
Provisions (41) – (41) (170) – (170)
(2,649) – (2,649) (2,968) (43) (3,011)
Net current assets 2,166 129 2,295 3,143 (43) 3,100
Non-current liabilities
Provisions (10) – (10) (10) – (10)
Contingent consideration – – – (1,500) – (1,500)
(10) – (10) (1,510) – (1,510)
Net assets 3,889 129 4,018 4,771 752 5,523
Shareholders’ equity
Ordinary shares 1,492 – 1,492 1,605 – 1,605
Share premium 2,076 – 2,076 3,510 – 3,510
Other reserves 17,348 – 17,348 17,348 – 17,348
Retained earnings (17,027) 129 (16,898) (17,692) 752 (16,940)
Total shareholders’ equity 3,889 129 4,018 4,771 752 5,523  67 Report & Accounts 2006
We have audited the parent company financial statements of Patsystems Plc for the year ended 
31 December 2006 which comprise the Balance sheet and the related notes. These parent company 
financial statements have been prepared under the accounting policies set out therein.
We have reported separately on the group financial statements of Patsystems Plc for the year 
ended 31 December 2006.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report and the parent company financial 
statements in accordance with applicable law and United Kingdom Accounting Standards 
(United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of 
Directors’ Responsibilities.
Our responsibility is to audit the parent company financial statements in accordance with relevant 
legal and regulatory requirements and International Standards on Auditing (UK and Ireland). 
This report, including the opinion, has been prepared for and only for the company’s members 
as a body in accordance with Section 235 of the Companies Act 1985 and for no other purpose. 
We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any 
other person to whom this report is shown or into whose hands it may come save where expressly 
agreed by our prior consent in writing.
We report to you our opinion as to whether the parent company financial statements give a true 
and fair view and whether the parent company financial statements have been properly prepared 
in accordance with the Companies Act 1985. We report to you whether in our opinion the 
information given in the Directors’ Report is consistent with the parent company financial 
statements.
In addition we report to you if, in our opinion, the company has not kept proper accounting 
records, if we have not received all the information and explanations we require for our audit, 
or if information specified by law regarding directors’ remuneration and other transactions is 
not disclosed.
We read other information contained in the Annual Report and consider whether it is consistent 
with the audited parent company financial statements. The other information comprises only 
the Directors’ Report. We consider the implications for our report if we become aware of any 
apparent misstatements or material inconsistencies with the parent company financial statements. 
Our responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) 
issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence 
relevant to the amounts and disclosures in the parent company financial statements. It also 
includes an assessment of the significant estimates and judgments made by the directors in the 
preparation of the parent company financial statements, and of whether the accounting policies 
are appropriate to the company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which 
we considered necessary in order to provide us with sufficient evidence to give reasonable 
assurance that the parent company financial statements are free from material misstatement, 
whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated 
the overall adequacy of the presentation of information in the parent company financial 
statements.
Independent Auditors’ Report to the Members of Patsystems Plc 68 Patsystems plc
Opinion
In our opinion:
•  the parent company financial statements give a true and fair view, in accordance with United 
Kingdom Generally Accepted Accounting Practice, of the state of the company’s affairs as at 
31 December 2006;
•  the parent company financial statements have been properly prepared in accordance with the 
Companies Act 1985; and
•  the information given in the Directors’ Report is consistent with the parent company 
financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
London
13 February 2006
Independent Auditors’ Report to the Members of Patsystems Plc  
continued  69 Report & Accounts 2006
Notes
2006
£’000
2005
£’000
FIxED ASSETS
Investments 4 3,614 2,964
CURRENT ASSETS
Debtors 5 4,575 3,785
Cash in bank and in hand 5 154
4,580 3,939
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 7 (2,175) (118)
Net current assets 2,405 3,821
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN 
ONE YEAR 9 – (1,500)
Net assets 6,019 5,285
CAPITAL AND RESERVES
Share capital 10 1,641 1,605
Share premium account 12 3,691 3,510
Other reserves 12 50 50
Retained earnings 12 637 120
Equity shareholders’ funds 12 6,019 5,285
The financial statements on pages 69 to 76 were approved by the Board of Directors on 
13 February 2007.
 
David Webber Martin Thorneycroft
Chief Executive Officer Finance Director
Company Balance Sheet
for the year ended 31 December 2006 70 Patsystems plc
1.1 Accounting policies
The financial statements have been prepared on the historical cost basis of accounting and in 
accordance with applicable accounting standards in the United Kingdom.
1.2 Investments
Investments in subsidiaries are stated at cost less any provision for impairment. Where an 
acquisition satisfies the provisions of sections 131 to 134 of the Companies Act 1985, merger relief 
is available and the investment is stated at nominal value of shares issues plus the value of any 
other consideration.
1.3 Hire purchase obligations, finance leases and operating leases
Costs in respect of operating leases are charged to the Profit and Loss account on a straight line 
basis over the lease term.
Assets purchased under hire purchase contracts and finance leases are recorded as tangible fixed 
assets in the Balance Sheet. The obligations to pay future capital instalments are shown in creditors 
and are analysed between amounts falling due within one year and amounts after more than one 
year. The asset value is calculated at the inception of the contract as the purchase price of the 
asset, and the finance charge is allocated to accounting periods on the sum of the digits basis.
1.4 Deferred taxation
Deferred taxation is recognised in respect of timing differences that have originated but not 
reversed at the balance sheet date, where transactions or events that result in an obligation to pay 
more tax in the future or a right to pay less tax in the future have occured at the balance sheet date.
A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the 
basis of all available evidence, it can be regarded as more likely than not that there will be 
sufficient taxable profits to utilise carried forward tax losses and against which the reversal of 
underlying timing differences can be deducted.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in 
which the timing differences are expected to reverse based on tax rates and laws that have been 
enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a non-
discounted basis.
1.5 Related party transactions
Financial Reporting Standard (FRS) 8, “Related Party Transactions”, requires the disclosure of the 
details of material transactions between the reporting entity and related parties. The Company has 
taken advantage of exemptions under FRS 8 not to disclose transactions between Group companies.
1.6 Share based payments
The Group operates two share options schemes; the Enterprise Management Incentive Scheme and 
the 2003 Share Option Scheme (Inland Revenue unapproved).
The fair value of options are recognised as an employee benefit expense with a corresponding 
increase in reserves over the vesting period. The proceeds received net of any directly attributable 
transaction costs are credited to share capital (nominal value) and share premium when the 
options are exercised.
1.7 Cash Flow statement
The Company is the Parent company of the Patsystems Plc Group and is included in the 
consolidated financial statements of Patsystems Plc. Consequently, the Company has taken 
advantage of the exemption from preparing a cash flow statement under the terms of Financial 
Reporting Standard 1 (revised 1996).
Notes to the Financial Statements  71 Report & Accounts 2006
2. DIRECTORS AND EMPLOYEES
The Parent company does not employ any directors or employees.
3. PROFIT AND LOSS ACCOUNT
The profit for the year dealt with in the accounts of the Company was £287,000 (2005: 
loss £218,000).
The Directors have taken advantage of the exemption available under section 230(4) of the 
Companies Act 1985, and have not presented a Profit and Loss account for the Company alone.
4. INVESTMENTS
Investment in subsidiary undertaking
Investment in subsidiary undertaking
£’000
At 1 January 2006 2,964
Additions 650
At 31 December 2006 3,614
The additions in the year are in relation to the 2005 acquisition of Tamesis Ltd and are 
detailed below:
£’000
Additional acquisition costs 10
Increase in the estimated contingent consideration (note 9) 640
650
The investment in subsidiary undertakings represents:
1.  A 100% investment in respect of voting rights and nominal value in Patsystems Holdings 
Limited, a company incorporated in England and Wales.
  The historical cost of the investment in the shares of Patsystems Holdings Limited is 
£11,180,000. Under the Scheme of Arrangement the subsidiary undertaking returned capital 
to the company amounting to £9,865,000, and the cost of the investment has been reduced 
accordingly to reflect this.
  The following subsidiary undertakings were wholly owned in respect of voting rights and 
nominal value of issued shares by Patsystems Holdings Limited and perform the sale and 
support of electronic trading systems:
 Patsystems (UK) Ltd – incorporated in England and Wales
 Patsystems (NA) LLC – incorporated in United States of America
 Patsystems Pte Ltd – incorporated in Singapore
 Patsystems Pty Ltd – incorporated in Australia
 Patsystems GmbH – incorporated in Germany
 Patsystems Spzoo – incorporated in Poland
  The following subsidiary is wholly owned in respect of voting rights and nominal value 
of issued shares by Patsystems Holdings Limited and acted as holding companies:
  Professional Automated Trading Systems BV (incorporated in The Netherlands).
  Professional Automated Trading Systems BV owns 100% of voting rights and nominal value 
of issued shares in Patsystems (Japan) KK (incorporated in Japan), which performs the sale and 
support of electronic trading systems. 72 Patsystems plc
Notes to the Financial Statements continued
  Patsystems (Japan) KK owns 100% of voting rights and nominal value of issued shares  
in Patsystems (Ireland) Ltd (incorporated in the Republic of Ireland), which acts as a  
holding company.
  Wintrade Ltd, incorporated in England and Wales, was acquired on 27 September 2000 as 
a wholly owned subsidiary of Patsystems Holdings Limited. Wintrade Ltd is not trading.
2.  A 100% investment in Tamesis Limited, a company incorporated in England and Wales that 
develops, distributes and supports software enabling real time trade capture, valuation and 
risk management for the structured finance market.
5. DEBTORS
2006
£’000
2005
£’000
Amounts owed by group undertakings 4,538 3,766
Deferred tax asset 32 –
Other debtors 3 15
Prepayments and accrued income 2 4
4,575 3,785
6. DEFERRED TAx ASSET
The deferred tax asset relates to future tax deductions in relation to the share option expense. 
The amount credited to the income statement in the year was £32,000 (2005: £nil).
7. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
2006
£’000
2005
£’000
Trade creditors 3 70
Net obligation under finance leases – 18
Other tax and social security – 2
Contingent consideration 2,140 –
Other creditors 2 –
Accruals and deferred income 30 28
2,175 118
None of the creditors are secured.
8. OBLIGATION UNDER FINANCE LEASES AND HIRE PURCHASE
2006
£’000
2005
£’000
Repayable within one year – 18
Included in liabilities falling due within one year – 18  73 Report & Accounts 2006
9. CONTINGENT CONSIDERATION
The contingent share consideration is in relation to the acquisition of Tamesis Ltd which is payable 
entirely in Patsystems Plc ordinary shares. The consideration is based on management’s best 
estimate of the future earnings before tax of Tamesis Ltd and is payable in September 2007. 
The maximum consideration is capped at 23,333,334 shares.
10. CALLED UP EQUITY SHARE CAPITAL
2006
£’000
2005
£’000
Authorised
Ordinary shares of 1p each
At 1 January 2006 and 31 December 2006 – 250,000,000 shares 2,500 2,500
Deferred shares of 1p each
At 1 January 2006 and 31 December 2006 – 2 shares – –
Redeemable preference shares of £1 each
At 1 January 2006 and 31 December 2006 – 49,998 shares 50 50
Allotted, called up and fully paid
Ordinary shares of 1p each
At 1 January 2006 – 160,534,642 shares 1,605 1,492
Allotted under placing – 100
Allotted under share option schemes 32 8
Allotted in lieu of payment 4 5
At 31 December 2006 – 164,154,850 1,641 1,605
The deferred 1p shares are not listed. They have no voting rights and no access to dividends.
2006
£’000
2005
£’000
Deferred shares of 1p each
At 1 January 2006 and 31 December 2006 – 2 shares – –
The 1p ordinary shares are listed on the AIM market. They have one voting right per share. 74 Patsystems plc
Notes to the Financial Statements continued
11. SHARE OPTION SCHEMES
The following options were granted, exercised, lapsed and outstanding during the year:
Exercise  
price  
in pence
Outstanding 
at 1 jan
 2006
Granted  
in year
Exercised  
in year
Lapsed  
in year
Outstanding 
at 31 Dec 
2006
Effective  
dates
Enterprise Management Incentive Scheme
3.92p 1,060,000 – (1,060,000) – – Note a
5.08p 4,211,250 – (2,048,750) – 2,162,500 Note a
9.50p 187,500 – (90,000) – 97,500 Note a
13.00p 769,231 – – (769,231) – Note b
13.50p 90,000 – – – 90,000 Note b
13.75p – 727,272 – – 727,272 Note d
14.25p 834,211 – – (165,000) 669,211 Note b
14.50p 1,186,606 – – – 1,186,606 Note b
15.25p 835,737 – – (60,000) 775,737 Note b
15.58p 3,059,000 – – (82,500) 2,976,500 Note b
17.50p 90,000 – – – 90,000 Note b
12,323,535 727,272 (3,198,750) (1,076,731) 8,775,326
2003 Share Option Scheme
13.00p 16,269 – – (16,269) – Note c
13.75p – 3,272,728 – – 3,272,728 Note e
14.25p 455,351 – – (22,500) 432,851 Note c
14.50p 144,494 – – – 144,494 Note c
15.25p 524,263 – – (60,000) 464,263 Note c
15.58p 1,115,500 – – (130,000) 985,500 Note c
16.00p 445,000 – – – 445,000 Note c
18.00p 500,000 – – – 500,000 Note c
3,200,877 3,272,728 – (228,769) 6,244,836
Total all schemes
15,524,412 4,000,000 (3,198,750) (1,305,500) 15,020,162
Note a:  These options were granted under the initial award of the Enterprise Management 
Incentive (EMI) Scheme. These options are now 100% exercisable.
Note b:  Options were granted under the second and third awards of the Enterprise Management 
Incentive (EMI) Scheme. 20% of these options will vest on 14th February 2007. 
The remaining 80% of the options will be carried forward into future years and the 
Remuneration Committee will determine what performance conditions to attach to 
them in 2007.
Note c:  These options were granted under the second and third awards of Part B (Inland Revenue 
Unapproved) of the Patsystems Plc 2003 Share Option Scheme. The vesting status is the 
same as note b.  75 Report & Accounts 2006
Note d:  These options were granted under a special award of the Enterprise Management 
Incentive (EMI) Scheme. One third of these options can be exercised after a period of 
three years after the date of the grant. Two thirds of these options can be exercised after 
a period of three years after the date of the grant but subject to achieving company 
performance targets.
Note e:  These options were granted under a special award of Part B (Inland Revenue Unapproved) 
of the Patsystems Plc 2003 Share Option Scheme, exercise conditions are as per note d.
For the options that were exercised during the year, the weighted average share price at the date 
of exercise was 14p.
The weighted average remaining contractual life of options outstanding at the year end is 8 years.
The total fair value that was charged to the income statement in relation to the share options was 
£230,000 (2005: credit of £224,000), all of which related to equity settled share based payment 
transactions.
The fair value of the options have been calculated using the Binomial Model. The model takes into 
account the following factors in determining the fair value of an option:
(a) Stock Price and Exercise Price
Share prices are closing share prices as at the date of grant. Exercise prices are listed in the above 
schedule.
(b) Expected Term of the Options
It is assumed that the expected life of the options under consideration is 5 years.
(c) Volatility
Volatility of the Company’s share price has been calculated as the annualized standard deviation 
of daily continuosly compounded returns on the Company’s stock, derived from the Company’s 
historical share prices, adjusted for splits, over 3 years back from each date of grant.
(d) Risk-Free interest rate
The risk-free rates of interest are assumed to be the yield to maturity on a UK Gilt Strip with the 
term to maturity equal to the expected life of the option. 76 Patsystems plc
Notes to the Financial Statements continued
(e) Dividends
The table below sets out the information known about the expected future dividend yield at each 
date of grant:
Date of grant Dividend yield (%)
24 February 2003 0.00%
13 March 2003 0.00%
30 June 2003 0.00%
27 October 2003 0.00%
01 January 2004 0.00%
30 July 2004 0.00%
27 August 2004 0.00%
16 November 2004 0.00%
04 February 2005 0.00%
17 March 2005 0.00%
06 October 2005 2.00%
23 November 2005 2.00%
14 December 2005 2.00%
14 February 2006 2.00%
12. SHARE CAPITAL AND RESERVES
At  
1 Jan 2006
£’000
Shares issued 
in the year
£’000
Profit for  
the year
£’000
Share 
compensation 
expense
£’000
At  
31 Dec 2006
£’000
Paid up share capital 1,605 36 – – 1,641
Share premium 3,510 181 – – 3,691
Other reserves 50 – – – 50
Profit & loss account 120 – 287 230 637
5,285 217 287 230 6,019  77 Report & Accounts 2006
 DIRECTORS
Stewart Millman Chairman and Non-Executive Director
David Webber Chief Executive
Martin Thorneycroft Finance Director
Stewart Douglas-Mann  Non-Executive Director, Chairman of the combined Remuneration 
and Nominations Committee
Richard Last Non-Executive Director, Chairman of the Audit Committee
Steve Sparke Non-Executive Director
john Priestley Non-Executive Director
 COMPANY SECRETARY
Daljit Kaur-Khela
 ADVISERS
Broker and Nominated adviser Seymour Pierce Limited
Lawyers Jones Day Gouldens
 Vedder, Price, Kaufman & Kammholz
Registered auditors PricewaterhouseCoopers LLP
Bankers Royal Bank of Scotland plc
 HSBC plc
Registrars Computershare Services plc
 PO Box 82
 The Pavillions
 Bridgewater Road
 Bristol
 BS99 7NH
 CORPORATE DETAILS
Registered office: Cottons Centre, Hay’s Lane, London SE1 2QP
Company number: 4498002
Country of incorporation: England and Wales
Website: www.patsystems.com
Stock Exchange symbol: pts
 OFFICES AND ADDRESSES
 
Directors and Advisers
Europe
London
Cottons Centre
Hay’s Lane
SE1 2QP
Tel +44 (0)20 7940 0490
Fax +44 (0)20 7940 0499
USA
Chicago
175 W. Jackson Blvd
Suite 2260
Chicago, IL 60604
Tel +1 312 922 7600 
Fax +1 312 922 7625
New York
80 Broad Street
5th Floor, Suite #507
New York NY 10004
Tel +1 212 837 7843  
Fax +1 212 837 7792
Asia Pacific
Singapore
No 63, Circular Road # 03-01
Singapore 049417
Tel +65 6216 0452
Fax +65 6216 0453
Tokyo
2nd Floor,  
Kakigara-Cho Bldg
10-7, Nihon-bashi Kakigara-Cho 1-chome
Chuo-Ku
Tokyo 103-0014
Tel +81 (0) 3 3668 9372
Fax +81 (0) 3 2664 7594
Sydney
25 Chifley Tower
2 Chifley Square
Sydney NSW 2000
Tel +61 (0) 2 9293 2523
Fax +61 (0) 2 9293 2828 Cottons Centre 
Hay’s Lane
London  SE1 2QP
Tel  +44 (0)20 7940 0490 
Fax  +44 (0)20 7940 0499
Web  www.patsystems.com
Soaring to 
new heights
Annual Report 2006
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