PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 MARCH 2005
www.portraitsoftware.com
PORTRAIT SOFTWARE PLC ANNUAL REPORT AND ACCOUNTS 2005
EUROPE
Portrait Software
The Smith Centre
The Fairmile
Henley-on-Thames
Oxfordshire, RG9 6AB
UK
Email: contactus@portraitsoftware.com
TEL: +44 (0)1491 416600
FAX: +44 (0)1491 416601
AMERICAS
Portrait Software
265 Church Street
Suite 404
New Haven, CT 06510
USA
Email: contactus@portraitsoftware.com
TEL: +1 203 782 2300
FAX: +1 203 782 7961
ASIA PACIFIC
Portrait Software
10 Faber Park
129101
Singapore
Email: contactus@portraitsoftware.com
TEL: +65 9752 1759
FAX: +65 6872 6764
Make every interaction count PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
Main Board
Non Executives
John O’Connell – Chairman
Felda Hardymon
Rob Stavis
Hugh McCartney
Geoff Probert
Advisors
Auditors
Deloitte & Touche LLP
Abbots House 
Abbey Street 
Reading
Berkshire RG1 3BD
Stockbrokers & Nominated Advisors 
Shore Capital & Corporate Ltd
Bond Street House 
14 Clifford Street
London W1S 4JU
Registrars
Capita Registrars
Northern House 
Woodsome Park 
Fenay Bridge
Huddersﬁeld HD8 0LA
Solicitors
Taylor Wessing
Carmelite
50 Victoria Embankment
Blackfriars
London EC4Y 0DX
Executives
Nick Randall – Chief Executive Officer
Robin Martin – Chief Operating Officer
Matthew White – Chief Financial Officer & Company Secretary
Principal Bankers
National Westminster Bank plc
Abbey Gardens 
4 Abbey Street
Reading
Berks RG1 3BA
Registered Office
The Smith Centre
The Fairmile
Henley-on-Thames 
Oxfordshire RG9 6AB
Company Number
3358035
Contents
2 Highlights
3 Chairman’s Statement
5 Chief Executive Officer’s Review
8 Platform Division
11 Applications Division
12 Client Services Division
14 Financial Review
16 Board of Directors
17 Directors’ Report
19 Corporate Governance Statement
21 Directors’ Remuneration Report
23 Independent Auditors’ Report
24 Group Proﬁt and Loss Account
24 Group Statement of Total Recognised
Gains and Losses
25 Group Balance Sheet
26 Group Cashﬂow Statement
27 Notes to the Group Cashﬂow Statement
28 Company Balance Sheet
29 Notes to the Financial Statements
39 Notice of Annual General Meeting
Portrait Software is the 
new name of the company
formerly known as AIT. 
We specialise in Customer
Interaction Management software
that handles the interaction
processes that enterprises care
most about: the ones that affect
their customers.  PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
1
Portrait takes the hardest, most important
processes, those that actually touch the
customer, and intelligently automates them.
It lets businesses develop ﬂexible interaction
processes that drive intelligent, personalised
interactions across any channel, integrating
with any system and collaborating with any
partners. This means that organisations
wanting to respond to dynamic market
conditions can implement new policies,
campaigns and new products in a few hours
instead of a few months, giving organisations
a distinct competitive advantage.
The beneﬁts of Portrait to an
organisation include the ability to:
• gain greater customer insight and keep
their promises;
• identify and execute new sales
opportunities in a non-intrusive way
through inbound customer interactions;
• improve customer loyalty and brand
differentiation by providing consistently
excellent personalised service;
• enforce compliance and process
adherence through auditable, rules-based
customer interaction processes;
• improve the performance and effectiveness
of customer-facing staff and the efficiency
of the follow-through processes; and
• maximise the potential of existing
infrastructure and unlock value from 
legacy IT investments.
How does Portrait
differentiate from Customer
Relationship Management
(CRM)?
Until Portrait arrived on the scene, large
companies who serve the business to
consumer market were between a rock and 
a hard place if they wanted to automate their
most important business processes. On the
one hand they could opt for packaged CRM
software. This was costly to acquire and
maintain, and difficult to change leaving 
little room for competitive advantage. Such
CRM packages typically had a prescriptive
approach to business processes which were
unsuitable for the demands of dealing with
millions of individual customers in a complex
and rapidly evolving business environment. 
The alternative was to opt for bespoke
solutions which were frequently delivered 
too late for the business and massively over
budget. Portrait provides the best of both
worlds by offering ﬂexible pre-packaged
components for common customer-facing
processes along with a process conﬁguration
suite which allows the user to rapidly
develop their own tailored CIM applications.
What about Business
Process Management
(BPM)?
Business Process Management (BPM)
software was also pitched as a better 
way of making applications that improve
customer service. Whilst it’s a powerful
concept, most BPM tools fall far short of 
this ideal: these packages are generally
limited to driving cost efficiencies in simple
business-to-business processes within 
a department, or more often used as
gloriﬁed forms-routing tools that are 
strong on workﬂow but weak on real-time
intelligent interactions.
What is Portrait Foundation ™?
Portrait Foundation™ is the only Microsoft .NET
Application Platform Suite (APS) designed 
to enable the rapid development of CIM
applications for today’s service-oriented
software world.
What’s an Application
Platform Suite (APS)?
An Application Platform Suite uses next
generation tools to allow an organisation 
to build and deploy composite applications
which for the ﬁrst time links the customer
experience to ﬁnancial performance. An APS
integrates Business Process Management
with powerful application integration tools
within a service-oriented architecture 
to provide consistent common business
processes, and a single view of the customer
across any channel of customer interaction.
What makes Portrait
Foundation™ so special?
It delivers what we call Living Apps™ –
process-centric, composite applications
that do three things better: deliver better
customer interactions in real time;
orchestrate super-efficient Customer
Interaction Management processes; 
and integrate with legacy systems the 
way service-oriented applications should.
Portrait Living Apps™ can be built in half
the time it takes to develop applications
using raw development tools. Portrait Living
Apps™ can be highly tuned to any industry
and speciﬁc business needs, and can be
adapted as and when required.
What is Customer Interaction
Management (CIM)?
It’s the management of customer
information and the execution of the
customer facing processes which support 
an organisation in providing a continuous 
high level of service in what they do, 
say and offer to their customers. 
Each and every customer interaction is
unique and requires a personalised intelligent
response. Whatever the interaction, getting 
it right ﬁrst time is expected by the customer.
You can’t predict how and when the
customer wishes to interact with you, it may
be through the call centre, branch, Internet,
email, letter, fax or mobile device. The
interaction could be a complaint, the need 
to pay a bill, a call to say a wallet has been
stolen, a desire to open a new account or 
a call requiring emergency assistance. If any
interaction is poorly handled it will have a
dramatic effect on customer experience and
may result in lost customers, missed sales
opportunities, regulatory action for non-
compliance or in the case of an emergency
call, it could lead to a potential loss of life.
Customer interaction processes are the
priority for every enterprise with hundreds of
thousands or millions of customers, because
while customers may not recognise poorly
synchronised business processes, they do
notice lousy service, uninformed staff and
irrelevant offers.  PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
Highlights
2
“I am pleased that we
have now completed two
full years of proﬁtability
and believe that we are
now well positioned to
exploit the full potential 
of Portrait software in 
an expanding market.”
Nick Randall
Chief Executive Officer 
FINANCIAL 
Fourth consecutive half-year 
of operating proﬁtability.
£4.75 million (net) fund raising
post year-end to strengthen
balance sheet and provide
additional working capital 
to enable implementation of
business development strategy.
Operating proﬁt excluding
exceptional income increased 
by 17% to £1.5 million
before exceptional income of 
£0.2 million (2004: £1.3 million
before exceptional income of 
£1.0 million).
Pre-tax proﬁt of £1.4 million
including exceptional income
(2004: £2.0 million including
exceptional income).
Adjusted diluted earnings per
share of 2.45p (2004: 3.27p)
after excluding goodwill
amortisation, exceptional items 
and movement in deferred tax
asset (see note 4). Unadjusted
diluted earnings per share of
2.49p (2004: 7.49p).
OPERATIONAL 
Appointment of John O’Connell 
as Non Executive Chairman and
Robin Martin as Chief Operating
Officer.
Core Portrait product gaining
momentum:
– First order in China recently
announced from China Automobile
Association.
– Major new business collaboration
signed with Fiserv CBS.
– Entered new Emergency Call
Handling market.
Reorganised into three divisions 
to focus on selling Portrait through
key partners worldwide.
Positioned to take advantage 
of projected growth in the use 
of Application Platform Suites 
for demanding customer
applications based on the
Microsoft .NET platform. Chairman’s Statement
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
3
It is very pleasing to report, in this my ﬁrst
report to shareholders as Chairman of the
Company, on the second complete year 
of the successful turnaround of Portrait
Software. Accordingly, it is very pleasing to
be able to report that 2005 was the second
successive year when the Company was 
able to declare a proﬁt from its operations.
This has been followed by the recent
announcement of an over-subscribed 
placing of the Company’s shares to 
raise approximately £4.75 million, net 
of expenses. This means the ﬁnancial 
re-structuring of the Group, started in
September 2002, is now virtually complete
and will ensure the Company is well
positioned to pursue its business strategy 
on a ﬁrm ﬁnancial footing.
Market development
We believe that the emerging market 
for Application Platform Suites (APS) will
expand signiﬁcantly over the next few years
and I believe that Portrait Software is well
positioned to exploit this opportunity.
Importantly this is not a new market
dependent upon many external factors, 
but it is a displacement one, where
developers of complex high volume
Customer Interaction Management
applications, will choose Portrait Software to
be their main development tool, rather than
older, less efficient and more cumbersome
development programming languages. 
Business development
In order to get a better focus on 
core activities, Nick Randall completed 
a reorganisation into three divisions 
earlier this year. The fruits of this
refocusing are already coming through 
in terms of more management attention
on the critical success factors in having
the Company’s products and services
distributed more aggressively to both
existing and new customers, in most 
cases via Partner Channels.
The most exciting development has been 
to see our core Portrait product gaining
momentum (we now have thirteen Portrait
customers worldwide) and real traction in
the market leading to new business wins
and partnerships on an international basis,
for example, our ﬁrst major customer in the
Emergency Call Handling market going live. 
Perhaps the most signiﬁcant event of 
the year came in our last quarter when 
we signed an important new collaboration
agreement with Fiserv CBS Worldwide, 
a division of Fiserv, Inc. Fiserv, Inc. is one 
of the top providers of IT products and
services to the ﬁnance sector with reported
sales exceeding $3.7 billion last year. This
agreement will see Fiserv CBS Worldwide
developing a range of products under its 
own brand (CBS Aperio) for the banking 
and ﬁnancial services sector which will be
‘powered by Portrait’ and which will be 
sold through its global distribution network. 
Another more recent important development
in the ﬁrst quarter of FY06 has been the
signing of our ﬁrst order for Portrait software
with the China Automobile Association, 
who have recently been purchased by IAG.
We plan to work with Ultrapower, who 
are a leading Chinese Microsoft software
partner, to help develop a Portrait based
sales and service platform. In addition, 
we will work with Ultrapower to develop 
other opportunities in the rapidly expanding
ﬁnancial services market in China.
Product development
The Board strongly believe that the Portrait
suite of development tools is integral to
the future development of the Company.
Our opinion is that the three components:
a powerful back-end process engine,
comprehensive integration capability 
and a fully functional front-end Customer
Interaction module, supporting multi-channel
communications over the Internet, in the
branch, by telephone, post, fax and so on
are second to none.
During the last year, 25% of total revenue
was spent on Portrait product R&D. This is 
at the high end for any proﬁtable company 
in the software sector, worldwide, where 
in my experience the industry average is in
the order of 13-15%. We believe this is the
core asset of your company and this degree
of investment should help to ensure it
maintains its leading edge in the emerging
market for Application Platform Suites. 
Financial highlights
Regarding the year ended 31 March 2005,
turnover was £14.3 million which was below
the £19.6 million achieved in 2004. This
was mainly due to our continuing strategy 
of focusing on licence sales by partners who
themselves carry out most of the services
work associated with these contracts. 
A result of this strategy was a reduction in
services revenue from £8.6 million in 2004
to £4.0 million in 2005.
Operating proﬁt excluding exceptional
income was £1.5 million before exceptional
income of £0.2 million (2004: £1.3 million
before exceptional income of £1.0 million).
Pre-tax proﬁt was £1.4 million including
exceptional income (2004: £2.0 million
including exceptional income). Adjusted
diluted earnings per share were 2.45p
(2004: 3.27p) after excluding goodwill
amortisation, exceptional items and
recognition of deferred tax asset. 
Unadjusted diluted earnings per 
share were 2.49p (2004: 7.49p).
Our results for the year have been impacted
by a number of one-off revenue and cost
adjustments, being mainly a legacy of the
massive restructuring activities initiated in
2002. Cash outﬂow from operating activities
during the year was £3.2 million (2004:
outﬂow of £1.0 million) which included 
£1.6 million cash outﬂow arising from
settlement of inherited legacy obligations 
in respect of onerous property leases and
other commercial liabilities. Reported cash
outﬂow was also affected by the reduction 
in deferred income of £2.5 million, of which
£2.0 million related to the recognition of
prepaid licence revenues previously deferred,
and which accordingly did not contribute to
cash during the year. Consequently our cash
resources were depleted last year, which has
now been addressed by the £4.75 million
fund raising. John O’Connell
Non Executive Chairman
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
Chairman’s Statement
4
Change of name
The Board wanted to mark what it considers
to be a new beginning with a new name for
the Group; and AIT Group plc became Portrait
Software plc effective on 9 June 2005. The
new name reﬂects the focus on the Portrait
product suite which we see as being the
lynchpin of our success going forward.
Dividend policy
No dividend is recommended for this year.
The Board believes that capital should be
allocated to developing our products and
driving future growth.
Board changes
I was delighted to accept the Board’s
invitation to become Chairman as announced
on 9 June 2005. I look forward to leveraging
my experience in growing a successful listed
UK based software business internationally,
having been founder, CEO and Chairman of
Staffware plc. I look forward to helping the
Board achieve the Group’s potential as a
leader in its chosen markets, following the
successful completion of its turnaround
initiated by Nick Randall, CEO and Matthew
White, CFO approximately two and a half
years ago.
Richard Hicks, having moved from an
Executive Chairman position to a Non
Executive one last year, has now stepped
down completely from the Board. On behalf
of the Board, I would like to express our
great gratitude for Richard’s participation 
in the Company’s development and we 
wish him all the best in the future. 
We also announced recently that Robin
Martin will be joining the Board as Chief
Operating Officer, starting full-time in July.
Robin, who had a similar role at Staffware
plc where he worked very closely with
myself, has been asked by Nick Randall to
lead the Company’s drive to sell software
licences worldwide mainly through our
Partner Channel.
Staff
Portrait Software has the beneﬁt of a 
highly talented and loyal workforce which
has been through some major corporate
changes in the last few years. The Board
would like to thank all members of our 
team around the world for their commitment
during a sometimes difficult period. Throughout
this time their contribution to retaining the
vast majority of our customers plus helping
to win some very notable new contracts has
been magniﬁcent. 
Outlook
2005 was a year of major transition 
for our company. We now have a 
proven product with key reference sites. 
We address an established Customer 
Interaction Management software market
where we believe that Application Platform
Suites will play an increasingly important
part. We are well positioned to exploit the
opportunities in this growing area and are
increasingly convinced that our approach 
has signiﬁcant beneﬁts in terms of cost,
performance and ﬂexibility both for our
partners and end user customers.
We now have a clear ‘go to market’ strategy
via key partners worldwide (including Fiserv,
Inc). Our goal for the next phase is to
increase the number and effectiveness 
of our key partners so that we can steadily
grow sales, improve our proﬁtability and take
full advantage of the opportunities within 
the market in which we operate. Laying ﬁrm
foundations for our future growth via partner
channels will be our priority this year. 
John O’Connell
Non Executive Chairman
2 August 2005
“I am very pleased to
report, in this my ﬁrst
report to shareholders 
as Chairman of the
Company, on the second
complete year of the
successful turnaround 
of Portrait Software.
Accordingly, it is very
pleasing to be able to
report that 2005 was the
second successive year
when the Company was
able to declare a proﬁt
from its operations.”
John O’Connell
Non Executive Chairman PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
5
Chief Executive Officer’s Review
Introduction
As highlighted by our new Chairman, this
year represents the second full year of
proﬁtable trading following the issues that
the Company faced in 2002. This is a very
encouraging indicator of the potential of the
Company to deliver future shareholder value.
It also represents the solidifying of a more
robust and secure business platform from
which to build the Company and launch 
new business initiatives.
We therefore have reported an operating 
proﬁt of £1.8 million on sales of £14.3
million for the year. Our Chief Financial
Officer, Matthew White, will provide more
detail on our ﬁnancial performance in his
Financial Review.
With the business in a healthier state it 
is particularly important to bring on board 
the right people who are best positioned 
to leverage the Company’s potential. 
I am therefore delighted to welcome John
O’Connell to the Board as Non Executive
Chairman and Robin Martin as our new,
sales orientated Chief Operating Officer. 
Both John and Robin were integral in
developing Staffware into one of the UK’s
leading Business Process Management
software companies, prior to its sale to 
Tibco in 2004. They will both bring vital
experience to our team as we seek to
become a much more product orientated
and international business.
I would also like to take this opportunity 
to thank Richard Hicks for his enormous
contribution to the Company since he
founded it 19 years ago. Richard has 
been an invaluable help to myself and our
Executive team since we embarked on the
turnaround in September 2002 and the
culture he has encouraged to develop 
within our business, in terms of technical
excellence and creative vision, will continue
to thrive and be the cornerstone for our
future success. Richard is resigning from 
the Board but will continue to be available 
to help our team as needed in the future.
Progress
In previous reports to shareholders, I have
mentioned that we viewed the turnaround 
of the business in three distinct phases. 
Phase 1 was the initial restructuring and 
re-organisation, including the integration 
of the IMA acquisition in the USA with the
original UK based activities. Phase 2 has
been all about stabilising the business and
returning the Company to proﬁtability. This
has been the main focus for myself and 
the management team over the course 
of the last two years. We have faced many
challenges in achieving this objective,
however I believe that we now have a 
much stronger business platform from 
which we can move with more conﬁdence
into the business development phase 3 
of our recovery program.
Commercial acceptance of Portrait
The key objective that we have set for
ourselves for the business development
phase is to exploit more fully and more
effectively the potential of our Portrait 
based technology and to return the
company, step by step, to a growth path.
In September 2002, Portrait was not yet
complete nor was it running in any demanding
customer interaction applications. Today we
have 13 Portrait customers, including our
largest reference site, Nationwide Building
Society (which has won yet more awards this
year) as well as a new and very mission
critical emergency call handling system. As 
a result of the success achieved with Portrait,
we are now more conﬁdent than ever that 
we have a powerful, cutting-edge technology,
which is capable of being used much more
extensively across a wide range of demanding
customer interaction applications in different 
market sectors internationally.
Nick Randall
Chief Executive Officer
“As highlighted in the
Chairman’s Statement,
perhaps the most
signiﬁcant event of the
year was the signing of 
a major new collaboration
agreement with Fiserv
CBS Worldwide, a division
of Fiserv, Inc.”
Nick Randall
Chief Executive Officer PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
Chief Executive Officer’s Review
6
Strengthening our brand
Our conﬁdence in Portrait is reﬂected in the
recent change of the name of the combined
AIT and IMA business to Portrait Software
plc. The main purpose of the change is to
align our product branding with the company
name so that we can fully maximise the
potential of our new ‘Powered by Portrait™’
branding concept. The whole idea is to get
our Portrait brand more widely recognised
and accepted as the software platform of
choice by our target users. 
Our aim is for as many partners, OEM’s and
customers as possible to deploy the Portrait
platform in order to develop demanding,
process-centric, customer interaction
applications much more rapidly and
powerfully than by using conventional
development tools. The change of name
signals a new beginning for our company 
as we move forward into the next phase 
of our business development program.
Favourable market dynamics
In relation to the above it is worth spending
a little time on the approach to putting in
place Customer Interaction Management
systems. There are generally two ways in
which companies have historically implemented
a CIM solution. The ﬁrst is to buy a
‘conventional’ off the shelf, inﬂexible and
expensive CIM solution and try to ‘make 
it ﬁt’ to your requirements once installed.
Generally, this is unsatisfactory in its
performance, it is difficult and costly to
‘make it ﬁt’ and once installed, it is very
difficult to ‘uninstall’ it and switch to an
alternative. Consequently, many companies
ﬁnd themselves trapped with a rapidly more
obsolete and costly CIM solution. The other
alternative is to direct signiﬁcant corporate
resources to developing a solution from
scratch in-house. This may well mean that 
it does exactly what you want it to do but 
it is extremely expensive to build since it is
completely bespoke and, as such, so is 
all related development and maintenance. 
The market is therefore looking for an
answer to the downside associated with
these two approaches. The answer is
Portrait™. Our approach enables the creation
of tailored CIM solutions using our modular
building blocks or applications. This approach
is efficient, fast and ﬂexible. This is the
favourable dynamic in the market which
gives us conﬁdence that we will see
continued demand for our solutions. 
New strategic relationship with Fiserv
As highlighted in the Chairman’s Statement,
perhaps the most signiﬁcant event of the
year was the signing of a major new
collaboration agreement with Fiserv CBS
Worldwide, a division of Fiserv, Inc. We have
enjoyed a long-standing relationship with
Fiserv, however the new agreement enables
us to partner in a much broader way. Fiserv
is developing a range of products under its
own brand for the banking and ﬁnancial
services sector which will be ‘powered by
Portrait™’. We have been working with
Fiserv’s product development, marketing 
and sales teams and a few of our staff have
transferred to Fiserv as part of the product
development process. We will receive an 
ongoing royalty of all future sales of these
products. Initial products have already been
launched and their ﬁrst beta customer has
now gone live successfully.
I am convinced that this new agreement
represents a major step forward in terms 
of our ability to access the international
ﬁnancial services market through partnerships.
New divisional structure
During the year, we formed the Company
into three very focused divisions. The purpose
of this re-alignment was to ensure that we
had dedicated teams working towards our
speciﬁc strategic objectives for each area
which I am pleased to detail as follows.
Platform Division
Our Platform Division is now responsible for
the ongoing development of our Application
Platform Suite, which we now call Portrait
Foundation™. This team has been working
with a number of key partners (including
Fiserv CBS Worldwide) who wish to use 
our software platform to accelerate the
development of complex customer
interaction software. Our platform is based
on the Microsoft .NET architecture and we
believe that more and more products will 
be built using Portrait™ for two key reasons.  PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
7
Firstly, because it is much more efficient 
to develop applications using our platform
(typically two to three times faster) but
perhaps most importantly, the products built
using Portrait Foundation™ have at their
centre our ﬂexible Business Process Engine,
which allows the customer to quickly change 
and improve processes. Our new market
positioning is that we allow our users to
develop living (rather than static) applications,
which is a vital aspect for all fast moving and
complex business to consumer processes.
You will ﬁnd more information on the
importance of ‘living applications’ further 
on in this report.
Applications Division
Our new Applications Division focuses on
developing innovative solutions using the key
differentiation enabled by our core software
for the ﬁnancial services and public safety
markets. During the year we focused
speciﬁcally, through partners, on developing
and selling solutions for critical emergency
call handling, insurance and compliance.
Client Services Division
Our Client Services Division has been formed
to focus on providing a high level of support
to our existing 150 plus customers who are
increasingly international. Our customer 
base have been extremely loyal users of our
products over the past three years and we
now have a dedicated team who provide
software support as well as services to our
customer community worldwide. A key aim
for this group is to provide a roadmap for our
existing customers so that they can start to
use some of the major beneﬁts associated
with our new Portrait architecture but without
the costs associated with re-developing
processes built in previous versions of our
products. To achieve this, during the year 
we developed a Gateway product, enabling
existing Edge users to access our new
architecture so that they can start to use 
our ﬂexible Business Process Engine and
have access, in a very effective way, to the
beneﬁt of our web services structure. Our
ﬁrst customer went live last year and we
hope to work with an increasing number 
of users who wish to adopt this approach.
Typically in our industry, customers have
bought software and spent considerable
sums developing applications that are then
wasted when new architecture is purchased.
Our aim is to allow our family of customers
to continue to use existing applications that
they like, whilst having the ability to gradually
move in a low cost manner to our next
generation Portrait software platform. 
The above changes have been far reaching
within our organisation and I would like to
take this opportunity to thank all our staff
for the enthusiastic way they have responded
to the major changes over the past two
years and for their hard work, talent 
and commitment.
New Business 
In the ﬁrst quarter of ﬁnancial year 2006
we signed our ﬁrst order for Portrait
Software with the China Automobile
Association (CAA), who have recently 
been purchased by IAG, one of the world’s
largest insurance companies. We plan to
work with Ultrapower, who are a leading
Chinese Microsoft software partner, to help
develop a leading Portrait based sales and
service platform to enable CAA to both
provide the usual breakdown services 
to their 10 million customers as well as
providing a platform for insurance and
other product sales initiatives. We plan 
to work with Ultrapower to develop other
opportunities in the rapidly developing
ﬁnancial services market in China.
The signiﬁcance of this business win 
and others is that it is evidence of the 
true potential of our product in terms of
ﬂexibility, functionality, modularity, and
importantly, scalability. These are extremely
important attributes that are highly valued
and required by our customers. I look
forward to continued success based on
these important competitive advantages. 
Outlook
The past two years have been challenging
and as ever there remain further challenges
ahead of us. However, I feel that the most
difficult issues are now behind us. With 
the right team on board, a solid ﬁnancial
structure, and a clear business strategy 
I believe we have now ‘steadied the ship’ 
in advance of the next phase of our
development. With a focus on products 
and partnership, I believe we are now 
well positioned to take advantage of 
the opportunities presented to us in 
an expanding market.
Nick Randall
Chief Executive Officer
2 August 2005
OUR STRUCTURE
The Company has three business
units that respond to market
needs and opportunities.
PLATFORM DIVISION
This division sells Portrait Foundation™
(Application Platform Suite) to
Independent Software Vendors and
Business Process Outsourcers to 
enable them to build packaged 
business applications for their own
markets ‘powered by Portrait™’.
APPLICATIONS DIVISION
This division sells business solutions
solving speciﬁc business needs in
ﬁnancial services, emergency services
and compliance. These applications 
are all developed with Partners using 
the Portrait Foundation™ platform
CLIENT SERVICES DIVISION
This division supports and develops 
our 150+ customers and where
possible enhances their existing
solutions through our Extend and 
Evolve program.
Robin Martin
Chief Operating Officer 8
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
Platform Division
Portrait Foundation™ is the ﬁrst Application
Platform Suite (APS) designed to generate
Customer Interaction Management (CIM)
applications for the new service-oriented
software world. It helps get process-driven,
composite applications to market twice as
fast as traditional development environments.
Service-oriented architectures have changed
forever the way applications are developed.
For the ﬁrst time, developers don’t have 
to be limited by legacy environments;
business processes won’t be constrained 
by hard-coded applications; and customer
interactions need not be spoiled by inﬂexible,
standalone systems.
Our Platform Division targets independent
software vendors and outsourcers to help
them deliver next-generation products 
and applications that aren’t limited by 
legacy environments. 
Fiserv accelerates new Living Apps™ 
with Portrait
Fiserv, Inc. is a leading provider of
technology and item processing to the
ﬁnancial services industry, with more than
16,000 clients worldwide. Fiserv CBS
Worldwide has clients around the world
utilising its core banking, customer, channel
and business process management, middle
office and business intelligence solutions.
Two years ago, Fiserv began an initiative to
re-architect its front-office CRS application,
an industry-leading retail banking system –
covering processes such as sales campaign
management, contact centre, customer
acquisition and servicing operations and
teller services, including security. 
The new solution had to integrate back-end
systems enabling Fiserv customers to fully
utilise their existing applications and data, 
enable a single view of the customer,
automate processes and deliver the 
new services consumers expected.
After investigating a number of ways of
delivering the new functionality, Fiserv opted
to use Portrait Foundation™. The outcome
was a new multi-channel sales and service
solution called CBS Aperio. 
The ﬁrst four releases of this product were
developed in just nine months, which was
faster than Fiserv had expected. A major 
US bank was the beta test site. It had tried
to build new customer service applications
using one of the major off-the-shelf CRM
applications and had ended the project. 
It was attracted by CBS Aperio’s real 
time environment, easy links to their core
banking systems and data along with the
ability to transform their manual processes
into automatic ones that revolutionised 
customer service. 
CBS Aperio delivers a real-time, ‘single-view’
of each customer across all systems and
channels: branch, call centre, Internet, IVR,
payment network or dealer/introducer. 
This enables rapid response to customer
enquiries, accurate targeting of sales
campaigns, efficient application processing
and consistent follow-up. 
Portrait and Microsoft
Microsoft .NET is without doubt the most
powerful development and integration
environment available to developers (which
is why we built Portrait Foundation™ with it). 
Portrait supplements Microsoft .NET by
including the essentials of process-centric,
customer-critical Applications, what we call
Living Apps™. 
“Process Management, service-
orientation and customer interaction
are three hotspots in enterprise IT
today – particularly within Financial
Services and Public Services. Our
customers in these sectors are all
looking to squeeze more from their 
IT systems with fewer resources. 
This has led to a generational shift 
in the way applications are
developed, delivered and managed
where speed to market and agility is
key. We’re excited that Portrait’s
Application Platform Suite together
with .NET tools such as BizTalk
Server and Sharepoint Portal Server
can help our ISVs bring to market 
a new wave of process-centric
business applications.”
Mark Quirk
Head of Technology for Microsoft’s 
Developer and Platform Group
Microsoft UK Ltd
“Among platform suites, Portrait is
competitively differentiated through
the combination of well-deﬁned
process design and execution
environments, support of multiple
interaction channels, and 
service-oriented integration. This
combination is unique, particularly
within the .NET environment.”
Nathaniel Palmer
Chief Analyst
Delphi Group
OUR PARTNERS
“We chose Portrait Foundation™ 
as the development tool and run-time
environment for our new Aperio
application. We went through product
training and delivered our ﬁrst three
Aperio product version releases
ahead of schedule, and we have
recently won our ﬁrst major Aperio
victory in the US. Fantastic results 
in a very short period of time.”
John Macaluso
CTO, Fiserv CBS Worldwide
Introducing Living Apps™  
Living Apps™ are applications that drive super-efficient, customer-critical processes by 
combining the power of Business Process Management with the ease of integration and 
flexibility of Service-Oriented Architectures.
In short, Living Apps™ are what enterprises need to address the challenges posed by their 
customer-critical processes.
Whether you’re a CIO thinking about your next front-end applications or a software developer, 
integrator or outsourcer thinking about the needs of your enterprise customers, you need to 
be thinking about Living Apps™ now.
Living Apps™ differ from traditional ‘static apps’ in these important ways
Living Apps™
Process driven
Loose-coupled to legacy
Composite
Service-oriented
Adapt to business processes
Embrace collaboration
Business users drive
Multi-channel support
Minimal code development
Constantly refreshable
Static apps
Data driven
Hard-wired to legacy
Monolithic
Application silos
Business processes adapt to apps
Inhibit collaboration
IT department drives
Build one channel at a time
Programmer-intensive
In-built obsolescence PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
9
“Portrait helps partners
develop Livings Apps™ 
in half the time.” 10
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
“If you’re wondering which
business processes 
to improve ﬁrst, ask 
a customer.” Applications Division
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
11
The Applications Division sells business
solutions solving speciﬁc business needs
in ﬁnancial services, emergency services
and compliance. These applications are
all developed with partners using the
Portrait Foundation™ platform.
The Applications Division has been established
to leverage our successes in the ﬁnancial
services and public services markets. In
particular, Europe’s largest police force 
uses Portrait to revolutionise emergency 
call handling and response. 
The Applications Division works with partners
to deliver new process-driven applications
that we call Living Apps™. These Living
Apps™ are centred around speciﬁc
challenges that customers face around
compliance, sales campaign effectiveness
and improving the customer experience.
Living Apps™ are loosely coupled services
that integrate with any legacy system.
They’re easy to design, deploy, monitor 
and change (which is why enterprises 
want them).
The most important processes
Some processes are more important than
others. And the most important are the ones
that affect customers. Unfortunately, these
also tend to be the fastest-changing and 
the most complex – often involving real-time
interactions, multiple legacy systems and
different people spread throughout the
enterprise (and beyond).
We call these customer-critical processes
because they’re the ones that make the
biggest impact on the way customers
perceive the companies that serve them.
And, they offer the greatest opportunity 
for differentiation.
The industries that value Portrait’s ﬂexibility
are characterised by:
• Millions of customers – like ﬁnancial
services and public services.
• Real-time interactions – requiring live 
data updates.
• Many channels – web, contact centre,
branch, email, self-service.
• Tight regulation – requiring compliance,
traceability and full process auditing.
• Multiple products and siloed systems
– requiring an integrated view of all 
products and services.
Armed with Portrait™ and utilising our
partners’ domain expertise, we aim to
generate Living Apps™ in about half the 
time as would be the case using raw
development environments. It’s a faster,
more proﬁtable way to build better, more
ﬂexible applications. So as different as these
applications may seem, they all share four
key features:
• Process-driven – created with intuitive
process maps.
• Multi-channel – design once, deploy 
to all channels.
• Massively conﬁgurable – easy to build and
change with minimal coding.
• Easily integrated – with a service-oriented
integration layer for loose coupling to any
underlying systems.
Because Portrait Foundation™ makes it 
so easy to develop new applications, the
Portrait Living Apps™ portfolio of templates 
is always growing. Here’s a small sample to
give you a sense of the kinds of customer-
critical processes that Portrait™ was built 
to manage.
Aperio powered by Portrait™: A retail banking
speciﬁc sales and service platform built by
Fiserv to drive better customer interactions
across all channels and seamlessly integrate
with legacy systems.
Portrait Emergency Services: Life or death
response management and call handling for
emergency services and other public sector
agencies to reduce the burden on contact
and command centres while increasing the
speed and quality of response.
Portrait Authenticate: A fail-safe way of
proving your customers are who they say
they are. Built in conjunction with GB Group
and BT, Portrait Authenticate is an online
service that checks billions of records 
to prove identity. More comprehensive 
than traditional credit checking, Portrait
Authenticate reduces fraud and cuts down
account opening from weeks to days.
Portrait Underwrite: an application illustration
of next generation underwriting – designed to
streamline and automate key life underwriting
processes leading to immediate underwriting
decisions at the point of sale.
OUR PARTNERS
“Identity theft costs UK plc over 
£1.3 billion every year. As fraudulent
paper documents become more
sophisticated, traditional methods 
of identiﬁcation fall down on a number
of levels; many fake documents are
difficult to detect; the process can
take up to four weeks; and critical
personal documents can easily be 
lost. URU™ is an effective, reliable 
way to verify that individuals are 
who they say they are.”
Rob Laurence 
Managing Director, Data Authentication
Division, GB Group plc
“The Portrait alliance with Unisys
continues to generate innovative 
and lucrative sales opportunities 
on a global scale in both Financial
Services and Emergency Services. As
organisations change their thinking
from static, data driven, hard coded
systems to the new world of process-
driven applications, Portrait delivers
ﬂexibility by placing power in the
hands of the business user.”
Steve Olyha 
Vice-President and Global Managing
Partner, Unisys Enterprise Solutions PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
Client Services Division
12
Business in the 21st Century is process.
That’s why enterprises are tired of
applications that can’t actually help them
create better processes. Especially when
the processes are the ones that drive
customer interactions and relationships.
Applications built on Portrait Foundation™
don’t just deliver functionality, they deliver
ﬂexibility – to create new processes, then
model, change, deploy and monitor them.
That’s why we have over 150 existing
customers using our technology.
Some already use Portrait™ at the heart 
of their business processes like Nova KBM 
in Slovenia and Cheshire Building Society.
Others are long-standing customers using
products of an older vintage, who are looking
to Portrait to take them into the process-
centric, service-oriented world such as 
HMR, an existing EDGE customer.
The Client Services Division supports these
customers and partners and provides them
with ﬁrst rate services and support as well 
as helping them adopt new Portrait-based
solutions. 
Moving EDGE towards the 
service-oriented future
The original EDGE product was the industry’s ﬁrst
call centre solution with a built-in development
environment that allowed call centres to design
their own interaction processes.
Today, hundreds of call centres have valuable
libraries of processes created in EDGE.
Under a programme called EDGE 2020™, 
we are helping these customers transition 
to next generation contact centre functionality
– without ‘ripping and replacing’ existing
systems or processes.
Using Portrait, our extensive EDGE
customer base is augmenting their existing
contact centre investments across other
channels. For EDGE customers who want
to embrace web architectures and multi-
channel service and selling, we are offering
the perfect solution.
Nationwide Building 
Society and Portrait Sales 
Campaign Effectiveness
The Nationwide Building Society decided to
remodel its relationships with its 10 million
customers in response to a rapidly changing
competitive environment where customers
were more demanding and regulations were
testing the ﬂexibility of business systems. 
Nationwide needed systems that could
handle such a cycle of change. Using
Portrait, Nationwide was able to design 
and model the processes that drove
customer interactions and satisfaction,
deploy them efficiently and consistently
across all channels (in the branch, on the
phone and across the web) and manage or
change these processes quickly and easily. 
With Portrait, Nationwide was also able 
to deliver Intelligent Prompts which delivers
advanced customer intelligence to the
desktop in the contact centre, branch
network and across the web. Customer
interactions are now highly personalised; 
and no longer do customers receive 
offerings for products they have already
rejected in the past. 
Portrait is deployed throughout Nationwide
on over 12,000 desktops and plays a
strategic role in the Society’s drive to be 
the best in the industry for customer service. 
The installation is also the largest multi-
channel implementation on Microsoft
technology in the world.
OUR CLIENTS
“Portrait has helped us to have more
relevant and timely conversations
with customers. This has led to an
increase in sales that is running well
ahead of our original expectations.
We are very pleased with our returns
from this investment.”
Simon Baines 
Head of Customer Insight, 
Nationwide Building Society
“Competitive differentiation through
customer service is going to be 
key to the success of the CAA as 
it seeks to win business in China’s
massive market. With Portrait
Foundation™ we’re building agile,
ﬂexible applications that will be 
light and nimble allowing us to 
scale easily as demand increases. 
And they’re easily integrated with
existing systems and, critically, 
easily changed.”
Ivica Orsolic 
General Manager, People & Technology
Service at CAA
Proven return of investment for 
Portrait Software customers
Builds auditable process-centric customer facing applications 50% faster than raw 
development tools.
Maximises ROI – Nationwide exceeded sales targets by 150% with a payback within 
less than 30 months of deployment.
Adds value to customer interactions by delivering personalised sales and service 
messages that drive revenue and delight customers. PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
13
“Call centres are only as
good as the processes
behind them.” PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
Financial Review
14
£14.3m
turnover
adjusted earnings per share
2.45p
“Of greater interest in
terms of future potential
has been the performance
of our core software
product, Portrait, which
has been gaining
momentum as attributable
licence and maintenance
revenues grew 197% to
£4.8 million...”
Matthew White
Chief Financial Officer
Trading performance
Revenues
Turnover for the ﬁnancial year 2005 was
£14.3 million, down £5.3 million on the
prior year revenues of £19.6 million. This
decrease was primarily attributable to the
reduction in professional services revenues,
which decreased to £4.0 million from 
£8.6 million in 2004, following the move 
we signalled last year away from lower
margin direct services engagements 
towards a higher margin product-driven
business model where software product 
is sold via service delivery partners.
Professional services will remain an
important source of revenue in the future
but the growth in our indirect partner
channels will mean that we will focus 
more on adding value to projects working
alongside our partners, rather than providing
commodity services where margin pressure
is strong.
This shift in the business model is underscored
by the fact that software licence and related
maintenance revenues of £10.3 million
(2004: £11.0 million) represented 72% of 
all revenues for the year compared to 56% 
of all revenues in ﬁnancial year 2004. 
Of greater interest in terms of future potential
has been the performance of our core
software product, Portrait, which has been
gaining momentum as attributable licence
and maintenance revenues grew 197% to
£4.8 million, which included £2.0 million
from the recognition of pre-paid licence
revenues previously deferred.
In terms of geographical split, Europe
remains our biggest developed market
representing 72% of all sales by destination.
Sales in the North America region have held
up very well despite the weak dollar and now
represent 24% of all global sales, up from
18% in the prior year. The remaining 4% of
sales came from the developing Asia Paciﬁc
and South American markets.
Operating costs
Operating costs excluding exceptional 
items were £12.7 million compared to 
£18.3 million in the prior year, and the
greater part of this saving came from a 
£3.2 million reduction in cost of sales
reﬂecting the decrease in professional
services revenues and from improved
efficiencies in our global support centre. 
Total gross margin before exceptionals
increased to 79% from 68% in prior year 
as a result. Further cost efficiencies were
achieved by reducing distribution costs 
by £0.4 million and by reducing
administrative expenses by £2.0 million. 
Both numbers are stated before the 
impact of exceptional items.
Operating costs including exceptional items
were £12.5 million (2004: £17.3 million)
which included a substantial cost beneﬁt
arising from the release of £1.0 million 
of provisions no longer required, offset 
by further provisions made of £0.4 million. 
Although we have continued to manage
expenditure very carefully we recognise the
critical importance of continued sustainable
investment in research and development
and targeted marketing activities. The
savings delivered by our cost management
programme have not been at the expense 
of future business development.
Sales and marketing spend represented
approximately 24% of turnover (2004:
20%), while research and development 
costs were approximately 25% (2004: 22%).
Exceptional items
The £246,000 balance of exceptional
income recognised in the year largely
relates to the management of the Group’s
exposure to onerous property leases and
other commercial liabilities. We negotiated
exits from two surplus property leases
during the year and also settled our
remaining commitments under an 
onerous outsource contract. We have 
come a very long way in dealing with 
the various legacy commitments we
inherited at the time of the 2002
reﬁnancing and the residual exposures 
are now at very manageable levels.
The provision releases identiﬁed in the 
ﬁrst half of the year have been partially
offset by additional amounts provided 
in the second half to top up the carrying
value of our provisions for property
exposures. We continue to maintain a
relatively high level of provisions in our
balance sheet reﬂecting our cautious
approach to identifying and providing
against potentially onerous liabilities of 
the business. We continue to work hard 
to ensure that wherever possible these
risks are mitigated or eliminated entirely.
Earnings per share
Diluted earnings per share of 2.49p (2004:
7.49p) compares unfavourably with prior year
as the comparatives were bolstered by
signiﬁcant exceptional income and the
recognition of a deferred tax asset during 
that ﬁnancial year. In order to provide a more
comparable indication of underlying trading
performance, we have disclosed adjusted
earnings per share information in note 8 to
the ﬁnancial statements, on the same basis
as in the prior year. Adjusted diluted earnings
per share of 2.45p compares more fairly to
earnings per share of 3.27p in 2004. PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
15
Cashﬂow
Total cash outﬂow before ﬁnancing 
was £3.6 million (2004: cash outﬂow 
£0.7 million) and £0.7 million was 
raised from the placing of shares with
institutional investors in September 2004
to help fund settlement of the onerous
outsource contract referred to above. 
Debt repayments accounted for £1.1
million. Total net cash outﬂows from
ﬁnancing amounted to £0.4 million 
(2004: net inﬂows £5.9 million).
The net cash decrease for the year after
ﬁnancing was £4.0 million (2004: net cash
increase of £5.2 million). Cash and deposits
at year end stood at £3.6 million (2004:
£7.7 million).
The Group’s net debt position was £2.2 million
at year end compared to a net funds
position of £0.8 million at prior year end.
July 2005 fundraising
We have recently completed a £5 million
fundraising (£4.75 million net of costs)
which strengthens our balance sheet
signiﬁcantly and ensures the Group has
sufficient funds to implement our business
development strategy.
In conjunction with the fundraising we have
also secured the agreement of our bankers
to extend our existing loan facility to 2010.
This will provide greater ﬁnancial ﬂexibility 
to the Group by ensuring that repayment 
of the legacy debt does not compromise 
the availability of working capital required 
for investment in the business in the
medium term.
Summary
The ﬁrst two stages of the Group’s
turnaround were all about creating a 
stable platform for sustainable business
growth. Our second full year of proﬁtability
combined with the tremendous work 
that has been done to unshackle the
business from the inherited burden of the
legacy debt, lease and other contractual
obligations, gives us a stable and signiﬁcantly
less fettered ﬁnancial platform to take the
business forward with renewed conﬁdence.
The injection of additional cash from 
the fundraising and the extension of our 
loan facilities since the year end have
signiﬁcantly bolstered our ﬁnancial position
and have secured our working capital
requirements for the foreseeable future.
We remain grateful for the renewed support
of our investors and our bankers in sharing
our conviction that by leveraging its core
assets of its products, customers and
people, Portrait Software has enormous
potential for the future.
Matthew White
Chief Financial Officer
2 August 2005
Matthew White
Chief Financial Officer 16
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
Board of Directors
1. John O’Connell (60)
Non Executive Chairman, 
Chairman of the Remuneration Committee,
(appointed 9 June 2005)
John, a qualiﬁed accountant, was Founder,
Chairman and CEO of Staffware a workﬂow/
BPM company, which listed on AIM in 1996
and went on the LSE main market in 2000.
Staffware operated proﬁtably in 22 countries
and was the leading independent in its ﬁeld
until it was sold to Tibco in June of 2004 
for approximately $230 million. John is 
now on the board of four companies in 
the Technology sector; Clarity Commerce
Solutions (Chairman), Columba Systems,
InforSense and Portrait Software plc, and 
is a board member/shareholder of London
Wasps Rugby Club.
2. Nick Randall (54)
Chief Executive Officer 
Nick has enjoyed success in growing and
turning around companies. He founded
Oxford Magnetic Technology Limited in
1981, the revenues for which grew to
approximately £50 million within ﬁve years.
He left Oxford Magnetic Technology to
purchase Airtech Limited and returned it 
to proﬁtability within two years. He sold 
two divisions of Airtech for £13 million 
and formed Airtech plc, which obtained 
an AIM quotation in 1996 and merged 
with Remec Inc, in 1999. Post acquisition, 
Nick managed Remec’s worldwide wireless
infrastructure group, and oversaw mergers
and acquisitions activities for the company.
3. Robin Martin (40)
Chief Operating Officer
(appointed 9 June 2005)
Robin has been a consistent high achiever 
in Sales and Management roles with UK
headquartered IT companies. Robin worked
for Staffware plc from 1994 until its sale to
Tibco and was Chief Operating Officer from
2001. During his time at Staffware, Robin
was responsible for building the company’s
worldwide Sales and Partner network.
Between 1994 and 2004, Staffware’s
sales grew from £6.4 million per year 
to £42 million per year. At Tibco, Robin
became SVP Global Field Operations. 
Robin is a Computer Science graduate 
who has also worked in technical and 
sales roles for companies including 
Hytec Information Systems, TIS Limited 
(a division of Misys) and COBOL 
specialist Micro Focus.
4. Matthew White (38)
Chief Financial Officer
(appointed 14 June 2004)
Matthew has extensive experience in business
turnaround and ﬁnancial management and
has worked alongside Nick Randall as Finance
Director of quoted technology companies
since 1998. Before joining Portrait Software
(then AIT) in 2002, he was European Finance
Director for Remec Inc, a NASDAQ listed
Electronic Engineering group, and before that
he was Group Finance Director of Airtech plc.
Prior to that Matthew had gained seven years’
international corporate recovery experience 
as a manager in the Corporate Financial
Services team at Arthur Andersen (London)
and Binder Hamlyn, and prior to that he 
spent six years in audit practice. Matthew 
is a Chartered Accountant and a qualiﬁed
Insolvency Practitioner.
5. Felda Hardymon (57)
Non Executive Director 
Felda is Professor of Management Practice 
at Harvard Business School where he teaches
Venture Capital and Private Equity. Prior to
that, he joined Bessemer Venture Partners 
as a general partner in 1981 where he
remains a Venture Partner. He has led
investments in young companies in the
software, communications and retail sectors,
including American Superconductor, Cascade
Communications (acquired by Ascend),
Celcore (acquired by DSC), Parametric
Technology, the Sports Authority, Staples,
LBMS (acquired by Platinum Technology),
Celtel International (acquired by MTC) and
Sirocco Systems (acquired by Sycamore
Systems). He currently serves on the Board 
of Silicon Valley Bancshares (NASDAQ:SIVB)
and several private companies.
6. Hugh McCartney (55)
Non Executive Director 
Hugh has over 25 years’ experience in the
computer software industry, most recently 
as Senior Vice President Worldwide Operations
for enterprise software company Merant 
based in San Francisco, California. Prior 
to Merant, Hugh held senior Sales and 
General Management positions in Europe 
with database vendors Sybase Inc and Ingres
Inc and application software company MSA
Inc. Hugh is Chairman of NeverFail Holdings
Ltd, Centennial Software Ltd and Scapa
Technologies Ltd and also serves on the Board
of UK quoted company Alterian Plc. Hugh is
considered independent by the Board.
7. Robert Stavis (42)
Non Executive Director, 
Chairman of the Audit Committee 
Robert joined Bessemer Venture Partners 
in July 2000 and is now a partner in the
ﬁrm’s New York investment office, located 
in Larchmont, New York. He primarily
focuses on early-stage investments in
ﬁnancial services, ﬁnancial services
technologies and consumer software. 
Prior to joining Bessemer, Robert was a
private equity investor, managing a portfolio
of private equity interests in a variety of
industries including telecommunications,
software, technology, gaming and
restaurants. Until July 1998, Robert was 
the co-head of global arbitrage trading 
for Salomon Smith Barney. Some of 
the companies with which he is currently
involved are The Gerson Lehrman Group,
Soliel Securities, PXRE Reinsurance
(NYSE:PXT), Skype and Inﬁnitrust.
8. Geoff Probert (51)
Non Executive Director 
Geoff was previously a Main Board Director
at Perpetual plc responsible for information
systems. He joined Perpetual in 1984. He
was closely associated with the setting up 
of both the EMX Co and Cofunds initiatives
within the Unit Trust industry. Following the
takeover of Perpetual plc by AMVESCAP Plc
he was employed as a technical strategist
and is a private investor. Prior to joining
Perpetual, he worked for a number of
software houses supplying the ﬁnancial
services industry. He is a Trustee of 
POWER, an international charity working 
for motor disabled victims of conﬂict.
Other Directors serving during 
the year
In addition to the above, Richard Hicks
served during the year as Non Executive
Chairman. Mr Hicks retired from the Board
on 9 June 2005. Directors’ Report
for the year ended 31 March 2005
The Directors present their annual report on the affairs of the Group,
together with the audited financial statements, for the year ended
31 March 2005. 
Principal activity
The Group’s principal activity, which has remained unchanged
throughout the year, is the provision of information technology
solutions, based on a core product set, concentrating on specialist
computer software design, systems integration and systems support. 
Results and dividends
The results for the year are set out on page 24 and the movements
in reserves are shown in Note 19 to the financial statements.
Further commentary is given in the Chairman’s Statement, the 
Chief Executive Officer’s Review and the Financial Review. 
The Directors are not recommending the payment of a dividend
(2004: £nil).
Review of the business
A review of the Group’s business and future prospects is given 
in the Chairman’s Statement, Chief Executive Officers’s Review 
and the Financial Review.
Following an extraordinary general meeting held on 9 June 2005 
the Company changed its name from AIT Group plc to Portrait
Software plc.
Post balance sheet events
On 30 June 2005 the Company announced the placing of
20,000,000 Ordinary Shares with institutional investors at 
a subscription price of 25 pence per share. The shares were 
issued for a total cash consideration of £5 million (before costs 
of approximately £250,000) including share premium arising 
of £4,500,000 for the purposes of providing additional working
capital to enable the Company to exploit the full potential of its
Portrait based technology and to further strengthen the Company’s
balance sheet.
Research and development
The Group continues to invest significantly in research and
development and the Directors believe that investment in this area
is a prerequisite for success in the medium to long term. During 
the year Portrait Software plc invested £3.6 million in research 
and development (2004: £4.4 million).
Share capital
Details of movements in share capital are given in Note 18 to 
the financial statements.
Directors and their interests
The current Directors of the Company and all other Directors who
served during the year are shown on page 16. The Directors’ interests
in the share capital of the Company are shown in the Report of the
Remuneration Committee. No Director had a material interest in any
contract of significance to which the Company, or any subsidiary,
was a party during the year.
Directors’ and officers’ insurance
The Company maintains insurance cover for all Directors and
Officers of Group companies against liabilities which may be 
incurred by them while acting in those capacities.
Substantial shareholdings
As at 15 June 2005, the Company had been notified that 
the following were interested in 3% or more of the Company’s 
share capital.
Name (other than directors) No. of shares Percentage
Deer V & Co. LLC (see note below)* 9,135,426 17.36%
Richard Hicks (former director) 3,907,580 7.43%
The Bank of New York (Nominees) Limited 2,870,500 5.45%
Quester VCT 4 PLC 2,615,240 4.97%
Close Brothers Group plc 2,505,352 4.76%
Finsbury Technology Trust 2,439,091 4.63%
Trustees Martyn Arbib ’79 Settlement 2,356,327 4.47%
Royal Bank of Scotland plc/ 
West Register (Investments) Limited 1,911,428 3.63%
*Note: The interest of Deer V & Co. LLC is shown in its capacity as general
partner of Bessemer Venture Partners VLP ., Bessemer Ventures Investors III
LP ., Bessec Ventures V .L.P ., and BIP 2001 LP ., and as a managing member of
BVE 2001 LLC and BVE 2001(Q) LLC.
Donations
During the year the Group made donations of £1,750 (2004:
£1,000) to various charities. No contributions were made for
political purposes.
Payment policy
The Group’s policy is to abide by the terms of payment agreed 
with suppliers. At 31 March 2005 the number of days of annual
purchases represented by trade creditors amounted to 36 days
(2004: 34 days). The Company has no trade creditors.
Economic and monetary union
All relevant parts of the Group are able to handle transactions 
in the Euro when required.
Employment policy
It is the policy of the Group to consider all applicants for employment
on the basis of qualification for the specific job without regard to
race, colour, religion, sex, age, disability or national origin. This 
policy extends to all aspects of employment including recruitment,
placement, training, compensation, career development, transfer
and promotion.
Employee development and involvement
The contribution of employees is vital to enable the Group to achieve
its commercial and financial objectives. The Group’s ability to sustain
a competitive advantage over the long term will depend, in large
part, on the continuous development of all employees. For this
reason the Group is committed to providing an environment which
values continuous learning and which creates development
opportunities across all business areas. Various programmes exist 
to meet the learning and development needs of employees. 
17
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005 Directors’ Report
for the year ended 31 March 2005
The Group places considerable value on the involvement of its
employees and has continued to keep them informed on matters
affecting them as employees and on the various factors affecting 
the performance of the Group. This is achieved through regular
formal and informal meetings, newsletters and the Group intranet.
Employee representatives are consulted regularly on a wide range 
of matters affecting their current and future interests.
A shared commitment by all employees to the success of the
business is of fundamental importance. All employees have share
option entitlements with vesting terms linked directly to the Group’s
financial performance. The allocation of share options provides all
staff with a direct stake in the growth and prosperity of the business.
In addition, all employees who do not already participate in sales
commission schemes are entitled to an annual bonus which is
dependant on the overall profitability of the Group. 
Share schemes
The Company maintains two employee trusts. These are the AIT
Group Employee Share Ownership Plan Trust (the ‘ESOP’) and the 
AIT Qualifying Employee Share Ownership Trust (the ‘QUEST’). The
original purpose of these trusts was to hold and distribute Ordinary
Shares in the Company under current and future share option
schemes. The trustees of both trusts include an executive director, 
a non-executive director, an employee representative and a third 
party professional.
The Company adopted a new share option scheme in September
2002, which allowed for the grant of options under the Enterprise
Management Incentive Scheme. The options vest and are
exercisable in accordance with the rules of the Scheme and 
subject to the following conditions:
1 Normal Vesting: 
a One-quarter of the Ordinary Shares comprised in each 
Option Grant on the first anniversary of the Date of Grant; and
b One thirty-sixth of the remaining three-quarters of the
Ordinary Shares comprised in each Option Grant on the last
day of each calendar month between the first and fourth
anniversaries of the Date of Grant.
2 Accelerated Vesting: the conditions for accelerated vesting of the
options shall depend, inter alia, on the performance of the Group
as measured by the audited yearly Trading Profit released by the
Group. Trading Profit is defined as the Profit on Ordinary Activities
Before Taxation, excluding any windfall gains from the release of
unutilised provisions and including any exceptional items. The date
on which this accelerated vesting condition will become applicable
shall be the date on which the Company announces its Preliminary
Results for the year. The residual balance of non-vested options
after the accelerated vesting condition has occurred shall be
calculated and the Normal Vesting conditions shall continue to
apply to that balance.
a One-half of the Ordinary Shares comprised in each Option
Grant (including options already vested) on the first year that
Trading Profit is greater than £3 million; and
b All of the Ordinary Shares comprised in each Option Grant
(including options already vested) on the first year that
Trading Profit is greater than £5 million.
Annual General Meeting
Notice of the Annual General Meeting of shareholders on 
13 September 2005, together with details of the resolutions 
to be proposed at the meeting, are included on page 39. 
Auditors
A resolution for the re-appointment of Deloitte & Touche LLP 
will be proposed at the forthcoming Annual General Meeting.
Approved by the Board of Directors and signed on behalf of the Board.
John O’Connell
Non Executive Chairman
2 August 2005 
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
18 Corporate Governance Statement
for the year ended 31 March 2005
In June 1998, the Hampel Committee and the London Stock
Exchange published the Principles of Good Governance and Code 
of Best Practice (‘the Combined Code’) which embraces the work 
of the Cadbury, Greenbury and Hampel Committees and became
effective in respect of accounting periods ending on or after 
31 December 1998. In July 2003 the UK Listing Authority 
published the new Combined Code (‘the new code’).
Although the Group is not governed by the Listing Rules of the 
UK Listing Authority the Directors have given consideration to the
Combined Code and the new code and have applied its principles
where appropriate for the limited size of the Company and its
position as described below.
The Board and its Committees
The Board
The composition of the Board is set out on page 16. The Board
comprises a Non Executive Chairman plus up to three Executive
Directors and four further Non Executive Directors. The Board meets
regularly and has a formal schedule of matters which are reserved
for its decision. It has delegated specific responsibilities to the
Remuneration and Audit Committees which have specific terms 
of reference approved by the Board. Board and Committee papers
are circulated in advance of each meeting and are supplemented 
by reports and presentations so that all Directors are fully briefed
and provided with the information they need. All Directors may take
independent professional advice in furtherance of their duties at the
Company’s expense.
The primary function of the Board is to set Group strategy and 
to oversee the effective implementation of that strategy. The 
Board meets regularly throughout the year with an established
agenda of items dealing with important aspects of the Group’s 
affairs including monitoring strategy, approving acquisitions 
and disposals, management performance, major capital and
development expenditure, approving budgets and significant
financing matters. The Board monitors exposures to key business
risks and reviews business performance against strategic and
budgetary goals and development programmes. The Board 
also considers employee issues, key appointments and reporting 
to shareholders.
Details of the Directors’ service contracts are given in the Report 
of the Remuneration Committee.
Division of Responsibilities
The Board structure provides demonstrable separation of executive
responsibility for running the business and responsibility for running
the Board. This structure ensures there is appropriate accountability
to the Board and helps safeguard the independence and objectivity
of the Board.
The Board has delegated specific responsibilities to two principal
Committees, each of which has written terms of reference. In 
line with best practice, the terms of reference of the following
committees have been subject to review within the last 12 months.
Audit Committee
The Audit Committee comprises Robert Stavis (Chairman) and Hugh
McCartney. The role of the Audit Committee is key both to ensuring
that a sound system of internal control is maintained within the
Group and to ensuring that Portrait Software plc presents (and its
policies support) a balanced, clear and understandable assessment
of its position and prospects. The Audit Committee meets twice a
year and more frequently if required. 
The Committee examines the process of financial reporting within
the Group. It reviews annually the adequacy of the Group’s system
of internal controls and the processes for monitoring and evaluating
the risks facing the Group. The Committee reviews the scope and
results of the audit, as well as the fees of the auditors for both 
audit and non-audit services. The Committee is authorised to seek
information from any member of the Group and to obtain external
professional advice if it considers it necessary. The Committee also
reviews the interim and annual results and the annual report and
financial statements, prior to their submission to the Board and
ensures an appropriate relationship is maintained between the
Group and its external auditors.
Remuneration Committee
The Remuneration Committee comprises John O’Connell
(Chairman), Felda Hardymon and Hugh McCartney and meets
periodically as required. The role of the Committee is to approve
terms of service, agree the remuneration of the Executive Directors
and to determine the allocation of share options within the terms 
of a remuneration policy which is approved annually by the Board. 
Nominations Committee
In view of the size of the Board, the appointment of new Directors 
is considered by the Board as a whole, accordingly there is no
Nominations Committee. 
Shareholder communication
The Company encourages two-way communication with 
both institutional and private investors and endeavours to 
respond promptly to queries received. The Group’s website
(www.portraitsoftware.com) provides detailed financial and business
information about the Group. It is the policy of the Company to
ensure that all our market announcements are made immediately
available to all our shareholders via the medium of the Internet. 
Meetings between Directors, designated senior management,
institutional shareholders and other market professionals are held
regularly in accordance with the Company’s investor management
programme and always follow the terms of the Company’s Market
Communications Policy. 
Shareholders attending the AGM are invited to ask questions during
the meeting and to meet the Directors and other members of senior
management after the formal proceedings have ended. 
Internal controls
The Board attaches considerable importance to the Group’s systems
of internal control and risk management with specific emphasis in
the areas of financial, legal/commercial and compliance risk.
These procedures include financial, operational and compliance
19
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005 Corporate Governance Statement
for the year ended 31 March 2005
controls as well as risk management, which accord with the criteria
contained in the Internal Control Guidance for Directors on the
Combined Code published by the ICAEW in September 1999.
However the internal controls are designed to manage rather than
eliminate risk and the Board recognises that any system can only
provide reasonable and not absolute assurance against material
misstatement or loss. It acknowledges its responsibility for ensuring
that the Group’s system of internal financial control provides
reasonable assurance regarding the reliability of financial information
used both within the business and for publication and to safeguard
shareholders’ investment and the Group’s assets. 
The Board delegates day to day responsibility for internal control 
and risk issues to the Chief Executive Officer who conducts 
meetings with his senior management team on a regular basis. 
In these management meetings the exposures to financial,
operational and compliance risks are identified, reported on,
assessed and controlled. 
The Audit Committee is also responsible for reviewing the ongoing
financial and compliance control procedures. The Board reviews 
the effectiveness of the systems of internal control and risk
management on a continuing basis by:
• Considering Group strategy and approving an annual budget
based on that strategy and medium-term projections. Core to 
this process is the review of the risks and opportunities facing 
the Group undertaken on a continuing basis.
• Regularly reviewing operational performance and updated forecasts.
• Retaining primary responsibility for acquisition and divestment
policy, the approval of major capital expenditure and financing
arrangements. Below Board level there are clearly defined
management authority limitations for the approval of capital
expenditure, Human Resource actions, significant contracts,
investments, acquisitions and divestments.
• Receiving reports on environmental, social, ethical and health 
and safety matters as they relate to the Group’s operations.
• Receiving regular reports from the Audit Committee as to whether
the systems of internal control and risk management are
operating effectively.
These procedures have been in place since the start of the
accounting period, have been reviewed and improved to enhance
their effectiveness during the year, and have remained in place 
up to the date of approval of the annual report.
The Board acknowledges that companies without an internal audit
function should, from time to time, review the need to establish
one. At present the Board and the Audit Committee feel that current
internal controls are adequate to meet the needs of the business
and, while constantly reviewing controls in all areas, will consider 
the need for an internal audit function as the Group continues 
to develop.
Business and environmental ethics
The Board requires that its employees comply with the laws and
standards of conduct of the countries in which it does business. 
The Directors and employees are all required to avoid personal
conflicts of interest regarding Company business.
In complying with the Public Interest Disclosure Act 1998 in the
United Kingdom, the Group has established a procedure enabling
employees to bring matters to the attention of an appropriate
manager outside of their own department in the event that they 
do not feel able to approach their local line management.
The Board recognises that it is important, both for its employees and
the communities in which it operates, that the Group maintains high
standards of health and safety and takes effective measures to
ensure that its activities do not damage the environment.
In particular the Group recognises the responsibility it has toward the
environment. The Group Environmental Policy addresses compliance
with environmental legislation, conformity with standards for air, 
waste disposal and noise, the economical use of materials and the
establishment of environmental performance standards. The Group
commenced implementation of this policy during 2003, a process
that has continued in 2005.
Going concern basis
After making enquiries, the Directors have formed a judgement, 
at the time of approving the financial statements, that there is a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. For this
reason the Directors continue to adopt the going concern basis in
preparing the financial statements.
Statement of responsibilities
United Kingdom 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 Group and of 
the profit and loss of the Group for that period.
In preparing those financial statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable and 
prudent; and
• state whether applicable accounting standards have been
followed.
The Directors are responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the financial
position of the Company and enable them to ensure that the
financial statements comply with the Companies Act 1985. They 
are also responsible for the system of internal control and for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and 
other irregularities.
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
20 Directors’ Remuneration Report
for the year ended 31 March 2005
Although the Group is not governed by Schedule 7A of the
Companies Act 1985, the directors have given consideration 
to the requirements under this schedule to the Act and applied
them where appropriate for the limited size of the Company and 
its position.
Membership
The Committee consists of three Non Executive Directors, John
O’Connell (Chairman), Felda Hardymon and Hugh McCartney. 
The Committee, while reserving the right of decision, consults 
with the Chairman and Chief Executive Officer about its proposals 
and is empowered to seek professional advice, as it deems
appropriate. The Board of Directors determines the remuneration 
of the Non Executive Directors.
Objectives
The objectives of the Committee are:
• to set the remuneration of the Group’s Executive Directors 
to ensure that they are fairly rewarded for their individual
contribution to the Group’s overall performance; and
• to assist the Board by monitoring wider aspects of remuneration
as may from time to time be assigned to the Committee.
Remuneration policy
The Committee is responsible for determining and reviewing a
remuneration policy to attract and retain high quality executives
capable of achieving the Group’s objectives. The remuneration
package of Executive Directors consists of basic salary, a discretionary
annual bonus, pension, and other benefits. The individual
components of the remuneration package are discussed below.
Base salary and benefits
Salaries are reviewed annually and are set to reflect the
responsibilities, knowledge, skill and experience of the individual. 
In addition, the Group provides life assurance cover, health care
benefits and, in the case of Executive Directors, a car allowance.
Performance-related bonuses
The approach for setting Directors’ bonuses is to establish 
a framework at the beginning of the year, related to business
performance and profitability, as a base for the assessment 
of achievements and performance bonus awards at year end. 
Senior managers are assessed in a similar manner and reviewed 
by the Remuneration Committee. 
Pension
The Company contributes to a defined contribution pension scheme
for the Executive Directors.
Share options
The Committee is also responsible for ensuring the proper
constitution and operation of the Group’s share option schemes.
These options are distributed to all Group employees. Details of
Directors’ share options in the year ending 31 March 2005 are
disclosed below.
Contracts of service
None of the Directors’ service contracts provides for more than 
12 months’ notice of termination. 
Directors’ interests in shares
The beneficial and non-beneficial interests of the Directors at the end of the year in the share capital of the Company were as follows:
31 March 2005 31 March 2004
Ordinary 2.5p shares Ordinary 2.5p shares
Beneficial Warrants Beneficial Warrants
Director
Richard Hicks 3,907,580 926,757 3,907,580 926,757
Nick Randall 2,145,423 724,029 2,145,423 724,029
Geoff Probert 551,267 115,844 551,267 115,844
Matthew White 102,857 11,449 102,857 11,449
6,707,127 1,778,079 6,707,127 1,778,079
21
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005 Directors’ Remuneration Report
for the year ended 31 March 2005
Share Options
Options held Options held Market price Date
at 31 March Granted Surrendered at 31 March Exercise at date  from first 
Director 2004 in year in year** 2005 price of grant exercisable Expiry date
Nick Randall 360,000 – (360,000) – £0.875 £0.635 20/10/03 20/10/12
Nick Randall – 227,273 – 227,273 £0.025* £0.685 24/09/04 24/06/14
Nick Randall – 500,000 – 500,000 £0.255 £0.255 24/08/05 24/08/14
Geoff Probert 100,000 – (100,000) – £0.875 £0.635 20/10/03 20/10/12
Geoff Probert – 151,515 – 151,515 £0.025* £0.685 24/09/04 24/06/14
Geoff Probert – 100,000 – 100,000 £0.255 £0.255 24/08/05 24/08/14
Richard Hicks 100,000 – (100,000) – £0.875 £0.635 20/10/03 20/10/12
Richard Hicks – 151,515 – 151,515 £0.025* £0.685 24/09/04 24/06/14
Richard Hicks – 100,000 – 100,000 £0.255 £0.255 24/08/05 24/08/14
Matthew White 100,000 – (100,000) – £0.875 £0.635 20/10/03 20/10/12
Matthew White 50,000 – (50,000) – £0.740 £0.725 15/01/04 15/01/13
Matthew White – 53,030 – 53,030 £0.025* £0.685 24/09/04 24/06/14
Matthew White – 200,000 – 200,000 £0.255 £0.255 24/08/05 24/08/14
Felda Hardymon 50,000 – (50,000) – £0.740 £0.725 15/01/04 15/01/13
Felda Hardymon – 100,000 – 100,000 £0.255 £0.255 24/08/05 24/08/14
Robert Stavis 50,000 (50,000) – £0.740 £0.725 15/01/04 15/01/13
Robert Stavis – 100,000 – 100,000 £0.255 £0.255 24/08/05 24/08/14
Hugh McCartney 50,000 – (50,000) – £0.740 £0.725 15/01/04 15/01/13
Hugh McCartney – 100,000 – 100,000 £0.255 £0.255 24/08/05 24/08/14
Total 860,000 1,783,333 (860,000) 1,783,333
*Options granted in settlement of contractual performance bonus for year ended 31 March 2004.
** See Note 18.
The closing price of an Ordinary Share on 31 March 2005 was 31.5p. The share price range during the year was 75p (high) and 25p (low).
Emoluments of Directors
The emoluments of Directors serving during the year ended 31 March 2005 are disclosed below:
Salary and Benefits Pension 
fees in kind contributions Total 2005 Total 2004
Director £££££
EXECUTIVE
Nick Randall 201,750 3,123 28,125 232,998 374,182
Matthew White* 94,684 2,826 4,354 101,864 –
Richard Hicks* 5,000 140 – 5,140 138,725
Geoff Probert* 9,966 369 – 10,335 239,000
Sub Total 311,400 6,458 32,479 350,337 751,907
NON EXECUTIVE
Richard Hicks * 19,000 530 – 19,530 –
Geoff Probert* 36,667 841 – 37,508 –
Hugh McCartney 16,000 – – 16,000 16,000
Felda Hardymon 10,000 – – 10,000 10,000
Robert Stavis 10,000 – – 10,000 10,000
Sub Total 91,667 1,371 – 93,038 36,000
Total 403,067 7,829 32,479 443,375 787,907
* The figures for Matthew White, Geoff Probert, and Richard Hicks are shown pro-rata for the period in office.
The Remuneration Committee has approved the Report of the Remuneration Committee.
By order of the Board
John O’Connell
Chairman of the Remuneration Committee
2 August 2005
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
22 Independent Auditors’ Report to the Members 
of Portrait Software plc 
for the year ended 31 March 2005
We have audited the financial statements of Portrait Software plc 
for the year ended 31 March 2005 which comprise the Group 
Profit and Loss Account, the Balance Sheets, the Group Cash Flow
Statement, the Group Statement of Total Recognised Gains and
Losses and the related Notes numbered 1 to 22 together with 
the notes to the Group Cash Flow Statement. These financial
statements have been prepared under the accounting policies 
set out therein. 
This report is made solely to the Company’s members, as a body, 
in accordance with section 235 of the Companies Act 1985. Our
audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to
them in an auditors’ report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s members 
as a body, for our audit work, for this report, or for the opinions 
we have formed.
Respective responsibilities of Directors and auditors
As described in the statement of Directors’ responsibilities, the
Company’s Directors are responsible for the preparation of the
financial statements in accordance with applicable United Kingdom
law and accounting standards. They are also responsible for the
preparation of the other information contained in the Annual Report
including the Director’s Remuneration Report. Our responsibility is 
to audit the financial statements in accordance with relevant United
Kingdom legal and regulatory requirements and auditing standards.
We report to you our opinion as to whether the financial statements
give a true and fair view and whether the financial statements have
been properly prepared in accordance with the Companies Act
1985. We also report to you if, in our opinion, the Directors’ Report
is not consistent with the financial statements, if 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
transactions with the Company and other members of the Group 
is not disclosed.
We read the Directors’ Report and the other information contained
in the Annual Report for the above year as described in the contents
section and consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies
with the financial statements. 
Basis of audit opinion
We conducted our audit in accordance with United Kingdom auditing
standards issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts
and disclosures in the financial statements. It also includes an
assessment of the significant estimates and judgements made 
by the Directors in the preparation of the financial statements 
and of whether the accounting policies are appropriate to the
circumstances of the Company and of the Group, 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 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 financial statements.
Opinion
In our opinion the financial statements give a true and fair view of the
state of affairs of the Company and of the Group at 31 March 2005
and of the profit of the Group for the year then ended and have been
properly prepared in accordance with the Companies Act 1985.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
Reading 
2 August 2005
23
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005 Group Profit and Loss Account
for the year ended 31 March 2005
Exceptional
Before income/ Total
exceptional (charges) including
items (Note 3) Total exceptionals*
2005 2005 2005 2004
Note £’000 £’000 £’000 £’000
TURNOVER 2 14,288 – 14,288 19,648
Cost of sales (2,988) 342 (2,646) (5,772)
GROSS PROFIT 11,300 342 11,642 13,876 
Distribution costs (3,410) – (3,410) (4,074)
Administrative expenses (6,347) (96) (6,443) (7,493)
OPERATING PROFIT 4 1,543 246 1,789 2,309 
Finance charges (net) 6 (356) (291)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 1,433 2,018 
Tax (charge)/credit on profit on ordinary activities 7 (55) 948
RETAINED PROFIT AFTER TAXATION FOR THE FINANCIAL YEAR 1,378 2,966
Retained loss brought forward (37,216) (40,182)
RETAINED LOSS CARRIED FORWARD (35,838) (37,216)
Basic earnings per Ordinary Share of 2.5p 8 2.67p 8.06p
Diluted earnings per Ordinary Share of 2.5p 8 2.49p 7.49p 
Adjusted diluted earnings per Ordinary Share of 2.5p 8 2.45p 3.27p 
* The results for 2004 include exceptional income of £985,000 (refer to Note 3).
All amounts derive from continuing operations.
Note 2005 2004
£’000 £’000
Profit for the financial year 1,378 2,966
Exchange translation differences 19 (13) 427
Total recognised gains and losses relating to the year 1,365 3,393
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
24
Group Statement of Total Recognised Gains and Losses Group Balance Sheet
as at 31 March 2005
2005 2005 2004 2004
Note £’000 £’000 £’000 £’000
FIXED ASSETS
Intangible assets – goodwill 9(a) 1,827 2,051
Intangible assets – licences 9(b) 120 300
Tangible assets 10 999 1,293
2,946 3,644
CURRENT ASSETS
Debtors 12 2,512 3,191
Cash at bank and in hand 20(a) 3,610 7,668
6,122 10,859
CREDITORS:
Amounts falling due within one year 13 (3,410) (3,614)
NET CURRENT ASSETS 2,712 7,245
TOTAL ASSETS LESS CURRENT LIABILITIES 5,658 10,889
CREDITORS: Amounts falling due after more than one year 14 (3,805) (5,024)
PROVISIONS FOR LIABILITIES AND CHARGES 16 (2,329) (4,525)
ACCRUALS AND DEFERRED INCOME 17 (3,842) (8,646)
NET LIABILITIES (4,318) (7,306)
CAPITAL AND RESERVES
Called up share capital 18 3,354 3,296
Share premium 19 28,222 27,542
Other reserve 19 1,635 763
Merger reserve 19 (1,162) (1,162)
Profit and loss account 19 (35,838) (37,216)
Own shares held 19 (529) (529)
SHAREHOLDERS’ DEFICIT (4,318) (7,306)
Shareholders’ deficit may be analysed as:
Equity interests (6,357) (9,345)
Non equity interests 2,039 2,039
(4,318) (7,306)
25
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005 2005 2004
Note £’000 £’000
NET CASH OUTFLOW FROM OPERATING ACTIVITIES (i) (3,205) (1,025)
Returns on investments and servicing of finance 
Interest received 52 103
Interest paid (358) (216)
Interest element of finance leases (50) (52)
(356) (165)
Taxation
Taxation (paid)/received (55) 367
Capital expenditure
Payments to acquire tangible fixed assets (39) (28)
Payments to acquire intangible fixed assets – (630)
(39) (658)
Acquisitions
Investments in associated undertakings – (4)
Loan recovery from former associate – 500
– 496
Management of liquid resources
Decrease in cash deposits 82 280
CASH OUTFLOW BEFORE FINANCING (3,573) (705)
Financing
Issue of new shares (net of expenses) 738 2,689
Repayment of bank loan (750) –
Repayment of IMA Loan Note – (969)
Issue of Convertible Loan Notes (net of expenses) – 4,656
Finance lease repayments in year (391) (458)
Cash (outflow)/inflow from financing (403) 5,918
(DECREASE)/INCREASE IN CASH IN THE YEAR (ii) & (iii) (3,976) 5,213
The accompanying notes are an integral part of this group cashflow statement.
Group Cashflow Statement
for the year ended 31 March 2005
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
26 Notes to the Group Cashflow Statement
for the year ended 31 March 2005
(i) RECONCILIATION OF OPERATING PROFIT TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES 
2005 2004
£’000 £’000
Operating profit 1,789 2,309
Depreciation charges 292 355
Amortisation of goodwill 224 246
Amortisation of intangible licences 180 330
Loss on disposal of fixed assets 41 –
Decrease in debtors 679 1,520
IMA Loan Note waiver (before costs) – (969)
Decrease in creditors (332) (386)
Decrease in accruals and deferred income (3,847) (1,717)
Decrease in provisions (2,196) (2,328)
Other (35) 115
Loan recovery from former associate (see Note 3) – (500)
Net cash outflow from operating activities (3,205) (1,025)
(ii) ANALYSIS OF MOVEMENT IN NET FUNDS/(NET DEBT)
At 1 April At 31 March
2004 Cashflow 2005
£’000 £’000 £’000
Cash at bank and in hand 7,225 (3,976) 3,249
Restricted cash deposits 443 (82) 361
Bank term loan (6,000) 750 (5,250)
Finance leases (865) 341 (524)
Net funds/(net debt) 803 (2,967) (2,164)
(iii) RECONCILIATION OF (DECREASE)/INCREASE IN CASH TO MOVEMENT IN (NET DEBT)/NET FUNDS
2005 2004
£’000 £’000
(Decrease)/increase in cash in the year (3,976) 5,213
Decrease in cash deposits (82) (280)
Cash outflow/(inflow) from decrease/(increase) in debt and lease financing 1,091 (3,573)
Change in net debt resulting from cash flows (2,967) 1,360
Waiver of IMA Loan Note – 941
Translation difference – 312
Conversion of former Director’s loans into equity – 754
Equity conversion – 5,000
Increase in finance leases – (1,323)
Movement in net debt in year (2,967) 7,044
Net funds/(debt) as at beginning of year 803 (6,241)
Net (debt)/funds at end of year (2,164) 803
27
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005 2005 2005 2004 2004
Note £’000 £’000 £’000 £’000
FIXED ASSETS
Investments 11 1,863 1,863
CURRENT ASSETS
Debtors – amounts falling due within one year 12 31 –
Debtors – amounts falling due after one year 12 26,417 21,631
Cash at bank and in hand 2,541 6,653
28,989 28,284
CREDITORS 
Amounts falling due within one year 13 (98) (433)
NET CURRENT ASSETS 28,891 27,851
NET ASSETS 30,754 29,714
CAPITAL AND RESERVES
Called up share capital 18 3,354 3,296
Share premium 19 28,222 27,542
Other reserves 19 885 –
Profit and loss account 19 (1,707) (1,124)
SHAREHOLDERS’ FUNDS 30,754 29,714
Shareholders’ funds may be analysed as:
Equity interests 28,715 27,675
Non equity interests 2,039 2,039
30,754 29,714
On behalf of the Board
John O’Connell – Chairman Nick Randall – Chief Executive Officer
Approved by the Board on 2 August 2005
Company Balance Sheet
as at 31 March 2005
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
28 Notes to the Financial Statements
for the year ended 31 March 2005
1. Accounting policies
Basis of accounting
The financial statements have been prepared under the historical cost convention and in accordance with the Companies Act 1985 and
applicable UK accounting standards, applied consistently throughout the year and the preceding year.
Basis of consolidation
The financial statements include the financial statements of the Company and its subsidiary undertakings, Portrait Software International
Limited, Portrait International, Inc., AIT Group Qualifying Employee Share Ownership Trust and AIT Group ESOP Trust. The employee benefit
trusts are consolidated on the basis of dominant influence exercised by the officers of the Company over the direction of the Trusts. For
associated undertakings the Group includes its share of profits and losses in the Consolidated Profit and Loss Account and its share of post
acquisition retained profits or accumulated deficits in the Consolidated Balance Sheet. The consolidated financial statements are based on
financial statements which are coterminous with those of the parent company.
The acquisition method of accounting has been adopted. Under this method, the results of subsidiary and associated undertakings acquired
or disposed of in the year are included in the Consolidated Profit and Loss Account from the date of acquisition or up to the date of
disposal. Goodwill arising on consolidation (representing the excess of the fair value of the consideration given over the fair value of the
separable net assets acquired) is capitalised and written off over a period of 10 years, its expected useful life. Any excess of the aggregate
of the fair value of the separable net assets acquired over the fair value of the consideration given (negative goodwill) is credited to the profit
and loss account in the period(s) expected to benefit.
The merger reserve represents the excess of the nominal value of the shares issued by the Company over the nominal value of the share
capital and share premium of Portrait Software International Limited.
No profit and loss account is presented for Portrait Software plc as permitted by section 230 of the Companies Act 1985. The Company’s
retained loss for the year is disclosed in Note 19.
Turnover
Turnover represents revenue recognised in the period net of value added tax.
Licence fees are recognised when there is a binding arrangement with a customer and there is entitlement to consideration based on
performance. Licence sales to channel partners (resellers) are recognised on the earlier of sales to end users and the licence expiring. 
If after two years neither of these events has occurred and payment has been made in full, the Directors assess the attributable value 
of any existing or potential future obligations connected with the sale of the licences or the partner relationship and carry forward a 
deferral amount which recognises the attributable value of these existing or potential obligations. The amount of licence is accounted 
for net of amounts due for product maintenance and amounts due to third parties. 
Royalties and maintenance are recognised in accordance with contract terms on an accruals basis.
Contracts for the supply of services at fixed rates are accounted for as and when the work is performed, irrespective of the contract duration.
Revenue on fixed price contracts is taken while the contract is in progress, having regard to the proportion of the contract which has been
completed at the balance sheet date. Provision is made for foreseeable losses.
Amounts recoverable on contracts
Amounts recoverable on contracts represent revenue that has not yet been invoiced to clients. Such amounts are separately disclosed within
debtors. Amounts billed but not recognised as revenue in the reporting period, are shown as deferred income.
Research and development
Research and development expenditure is written off as it is incurred.
Intangible fixed assets – licences
Acquired long term licences for the distribution rights to third party software are capitalised and amortised to the profit and loss account over
the period in which economic benefit is received by the Group.
Tangible fixed assets
Tangible fixed assets are shown at original historical cost, net of depreciation and any provision for impairment. Depreciation is provided 
on a straight line basis at the following rates, calculated to write down the cost of tangible fixed assets over their estimated useful lives. 
Leasehold improvements Shorter of lease or useful life
Fixtures and fittings 20%
Motor vehicles 25%
Computer equipment 33%
29
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005 Notes to the Financial Statements
for the year ended 31 March 2005
1. Accounting policies continued
Investments
Long term investments are classified as fixed assets. Unlisted investments and own shares are stated at cost less any provision for impairment.
Foreign currency transactions
Transactions in foreign currencies are translated at contracted rates or the exchange rate on the date of the transaction. Assets and liabilities
in foreign currencies are translated at the year end rate of exchange or, if hedged, at the forward contract rate. The exchange differences are
taken to the profit and loss account.
The results of overseas subsidiary undertakings are translated into sterling at average rates for the year. The exchange differences are taken
to reserves and reported in the Statement of Total Recognised Gains and Losses.
Pensions
The Group operates a group personal pension scheme on a defined contribution basis. Contributions payable for the year are charged to the
profit and loss account. Differences between contributions payable in the year and contributions actually paid are shown as either accruals
or prepayments in the balance sheet.
Employee share schemes
The issue of shares under employee share schemes is charged to the profit and loss account over the period to which participants’
performance relates. The charge is based on the market value of the shares, less any potential consideration, at the time of granting rights
thereto. Annual adjustments are made for staff who have left the Group during the year.
Taxation
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates 
and laws that have been enacted or substantially enacted by the balance sheet date. 
Deferred tax is recognised in respect of all 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 occurred at 
the balance sheet date. Timing differences are differences between the Group’s profits and its results as stated in the financial statements
that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the
financial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised when it is more likely than not that there will be suitable
taxable profits from which the future reversal of the 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.
Hire purchase and leasing commitments
Assets obtained under hire purchase contracts or finance leases are capitalised in the balance sheet when they give rights approximating 
to ownership.
Those held under hire purchase contracts are depreciated over their estimated useful lives. Assets held under finance leases are
depreciated over their estimated useful lives or the lease term, whichever is the shorter. The interest element of these obligations is
charged to the profit and loss account over the relevant period. The capital element of the future payments is treated as a liability. 
Rentals paid under operating leases are charged to the profit and loss account as incurred. Profit on sale and leaseback is amortised 
over the period to the first rent review. 
2. Segmental information
Turnover includes revenue recognised from licence, maintenance, support, integration and development. Throughout the year, turnover was
derived from a single class of business, being the provision and maintenance of information technology products and solutions.
Turnover by geographical destination for the year was as follows:
2005 2004
£’000 £’000
Europe 10,244 15,414
North America 3,367 3,449
Rest of World 677 785
14,288 19,648
Turnover by type of revenue for the year was as follows:
2005 2004
£’000 £’000
Licence and maintenance revenues 10,251 11,002
Professional services revenues 4,037 8,646
14,288 19,648
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
30 Notes to the Financial Statements
for the year ended 31 March 2005
2. Segmental information continued
Turnover, operating profit and net assets by geographical source for the year were as follows:
United Kingdom USA Group
2005 2004 2005 2004 2005 2004
£’000 £’000 £’000 £’000 £’000 £’000
Turnover 11,535 15,839 2,753 3,809 14,288 19,648
Operating profit/(loss) 2,145 2,015 (356) 294 1,789 2,309
Finance income/(charges) (356) 4 – (295) (356) (291)
Profit/(loss) on ordinary activities before taxation 1,789 2,019 (356) (1) 1,433 2,018
Net assets/(liabilities) 11,228 5,868 (15,546) (13,174) (4,318) (7,306)
3. Exceptional items
Exceptional income/(charges) comprises:
2005 2004
£’000 £’000
Restructuring and reorganisation costs – (615)
Onerous leases and other commercial liabilities 246 159
Gain on IMA Loan Note settlement – 941
Loan recovery from former associate – 500
246 985
Exceptional income/(charges) in 2004 comprised £395,000 attributable to cost of sales, (£234,000) attributable to distribution costs, and
£824,000 attributable to administrative expenses.
4. Operating profit
The operating profit is stated after charging/(crediting):
2005 2004
£’000 £’000
Operating lease rentals – plant and machinery 185 223
Operating lease rentals – land and buildings 582 931
Operating lease rentals – other 246 639
Depreciation – owned assets 180 262
Depreciation – assets on finance lease contracts 112 93
Amortisation of goodwill 224 246
Amortisation of other intangible assets – licences 180 330
Loss on disposal of fixed assets 41 –
Auditors’ remuneration:
• Audit services – Deloitte & Touche LLP – Group 35 37
• Audit services – Deloitte & Touche LLP – Company 10 10
• Non-audit services – Deloitte & Touche LLP 46 126
Release of unutilised provisions (1,022) (1,525)
Increase in provisions 404 1,204
Research and development 3,609 4,357
31
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005 Notes to the Financial Statements
for the year ended 31 March 2005
5. Information regarding Directors and employees
2005 2004
Directors’ emoluments £’000 £’000
Remuneration 411 750
Pension contributions 32 38
443 788
2005 2004
The highest paid Director received £’000 £’000
Remuneration 205 348
Pension contributions 28 26
233 374
2005 2004
Staff costs (including Directors) £’000 £’000
Wages and salaries 7,160 9,400
Social security costs 745 941
Pension contributions 333 377
8,238 10,718
Employee and employer pension contributions payable at 31 March 2005 were £44,218 (2004: £38,463).
2005 2004
Average number of employees ’000 ’000
Professional services and product development 83 109
Management and administration 17 22
Sales and marketing 31 28
131 159
The total number of employees at the year end was: 128 135
6. Finance charges
2005 2004
£’000 £’000
Interest receivable and similar income 52 103
Interest payable:
– on bank loan, overdrafts and other loans (358) (342)
– on finance lease agreements (50) (52)
(356) (291)
7. Tax on profit on ordinary activities 
The tax (charge)/credit on the profit on ordinary activities for the year was as follows:
2005 2004
£’000 £’000
Adjustment in respect of prior years, being total current tax credit – 18
Recognition of deferred tax asset – 930
Overseas tax suffered (55) –
Total tax (charge)/credit on profit on ordinary activities (55) 948
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
32 Notes to the Financial Statements
for the year ended 31 March 2005
7. Tax on profit on ordinary activities continued
The difference between the total current tax (charge)/credit shown above and the amount calculated by applying the standard rate of UK
Corporation tax to the profit before tax is as follows:
2005 2004
£’000 £’000
Profit on ordinary activities before tax 1,433 2,018
Profit on ordinary activities multiplied by the standard rate of UK corporation tax 430 606
Effects of:
Higher tax rates on overseas earnings (39) 145
Capital allowances in excess of depreciation 80 (80)
Expenses not deductible for tax purposes 55 607
Movement in short term timing differences (326) (296)
Increase/(decrease) in potential deferred tax asset not recognised 413 (964)
State tax deduction – (3)
Excess withholding tax suffered 39 –
Adjustment in respect of prior years – (33)
Income not taxable (22) –
Deduction for shares exercised (19) –
Utilisation of losses brought forward (556) –
Current tax charge/(credit) 55 (18)
The tax charge in future periods will be principally affected by the Group’s ability to generate taxable profits. As at 31 March 2005 there
were estimated tax losses in the UK, including associates’ losses of £22,686,085 (2004: £23,240,000), and overseas losses of
£1,259,816 (2004: £2,074,000).
Deferred tax
Deferred tax assets have been recognised in respect of tax losses that are likely to be utilised in the two years to 31 March 2007. The
assets will be recognised in future periods as their recoverability becomes foreseeable. There were no unrecognised deferred tax liabilities 
at either year end. A reconciliation of the deferred tax assets contained in the Group balance sheet and shown in Note 12 is given below:
2005 2004
£’000 £’000
Deferred tax asset brought forward 930 –
Movement in the year – 930
Deferred tax asset carried forward 930 930
There were unrecognised potential deferred tax assets as set out below:
2005 2004
£’000 £’000
Accelerated depreciation 124 51
Short-term timing differences 3,140 3,332
Tax losses carried forward 7,473 6,941
10,737 10,324
The net effect of the movement in the deferred tax asset recognised in the year was nil. £556,000 of the deferred tax asset brought forward
was utilised in the period as reflected in the reconciliation above. The deferred tax asset to be recognised at 31 March 2005 is £930,000
and hence the utilisation of £556,000 is offset by the recognition of further deferred tax assets of £556,000.
8. Earnings per share
Earnings per share has been calculated in accordance with Financial Reporting Standard 14 by dividing the consolidated profit after tax
attributable to shareholders by the weighted average number of 2.5p Ordinary Shares outstanding during the year.
Diluted earnings per share has been calculated on the same basis as above except that the weighted average number of 2.5p Ordinary
Shares that would be issued on the conversion of all the dilutive potential Ordinary Shares into Ordinary Shares has been added to the
denominator. There are no changes to the profit (numerator) as a result of the dilutive calculation. 
The calculations of earnings per share are based on profit on ordinary activities after taxation of £1,378,000 (2004: profit £2,966,000). 
Adjusted earnings per share information has been disclosed to provide a more comparable indication of the underlying trading performance. 
33
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005 Notes to the Financial Statements
for the year ended 31 March 2005
8. Earnings per share continued
The earnings per share and adjusted earnings per share information has been calculated as follows:
2005 2004
£’000 £’000
Profit after taxation 1,378 2,966
Adjustment to exclude amortisation of goodwill 224 246
Adjustment to exclude exceptional income (246) (985)
Adjustment to exclude movement in deferred tax asset – (930)
Adjusted profit 1,356 1,297
2005 2004
Number Number
Weighted average number of shares in issue 51,535,409 36,782,407
Effect of dilutive potential Ordinary Shares – share options 1,556,061 100,969
Effect of dilutive potential Ordinary Shares – warrants 2,212,758 2,725,657
Diluted weighted average number of shares 55,304,228 39,609,033
2005 2004
Pence Pence
Basic earnings per share 2.67 8.06
Dilution impact (0.18) (0.57)
Diluted earnings per share 2.49 7.49
Adjustment to exclude amortisation of goodwill 0.40 0.62
Adjustment to exclude exceptional income (0.44) (2.49)
Adjustment to exclude movement in deferred tax asset – (2.35)
Adjusted diluted earnings per share 2.45 3.27
9(a). Intangible assets – Goodwill
GROUP £’000
COST
At 1 April 2004 and 31 March 2005 13,832
AMORTISATION
At 1 April 2004 11,781
Charge for year 224
At 31 March 2005 12,005
NET BOOK VALUE
At 31 March 2005 1,827
At 31 March 2004 2,051
9(b). Intangible assets – Licences
GROUP £’000
COST
At 1 April 2004 and 31 March 2005 630
AMORTISATION
At 1 April 2004 330
Charge for year 180
At 31 March 2005 510
NET BOOK VALUE
At 31 March 2005 120
At 31 March 2004 300
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
34 Notes to the Financial Statements
for the year ended 31 March 2005
10. Tangible fixed assets
GROUP Leasehold Fixtures and Computer
improvements fittings equipment Total
£’000 £’000 £’000 £’000
COST
At 1 April 2004 1,941 233 727 2,901
Additions 27 – 12 39
Disposals (65) (16) – (81)
Exchange adjustment – (2) (6) (8)
At 31 March 2005 1,903 215 733 2,851
DEPRECIATION
At 1 April 2004 946 211 451 1,608
Charge for year 143 8 141 292
Disposals (30) (10) – (40)
Exchange adjustment – (2) (6) (8)
At 31 March 2005 1,059 207 586 1,852
NET BOOK VALUE
At 31 March 2005 844 8 147 999
At 31 March 2004 995 22 276 1,293
Fixed assets, included in the above, which are held under finance lease contracts comprise computer equipment with a net book value of
£131,000 (2004: £244,000).
There were no capital commitments contracted but not provided for at the year end.
11. Investments
COMPANY £’000
Cost and net book value
At 1 April 2004 and 31 March 2005 1,863
Shares in Group Country of registration % of share capital
undertakings or incorporation and voting rights held Principal activity
Portrait Software International Limited England and Wales 100% Development and 
sale of computer 
software and services
Portrait International, Inc. Ohio, USA 100%* Development and 
sale of computer
software and services
AIT Quest Trustee Limited England and Wales 100% Trustee for AIT Group 
Employee Share 
Ownership Trust
*Wholly owned subsidiary of Portrait Software International Limited.
12. Debtors
GROUP 2005 2004
£’000 £’000
Trade debtors 1,036 1,826
Amounts recoverable on contracts 78 53
Deferred tax asset 930 930
Prepayments and other debtors 468 382
2,512 3,191
COMPANY 2005 2004
Amounts falling due within one year £’000 £’000
Prepayments and other debtors 31 –
35
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005 Notes to the Financial Statements
for the year ended 31 March 2005
12. Debtors continued
COMPANY 2005 2004
Amounts falling due after more than one year £’000 £’000
Amounts owed by Group undertakings 26,417 21,631
13. Creditors: Amounts falling due within one year
GROUP 2005 2004
£’000 £’000
Bank loan (refer to Note 14) 1,500 1,500
Trade creditors 631 563
Social security and other taxes 639 1,162
Finance lease contracts 469 341
Other creditors 171 48
3,410 3,614
2005 2004
COMPANY £’000 £’000
Other creditors 98 433
14. Creditors: Amounts falling due after more than one year
GROUP 2005 2004
£’000 £’000
Bank loan repayable between one and five years 3,750 4,500
Finance lease contracts repayable between one and five years 55 524
3,805 5,024
At 31 March 2005, the remaining bank loan was scheduled as repayable in 14 equal quarterly instalments between April 2005 and July 2008.
The bank loan attracts interest at 2% above National Westminster Bank base rates and is secured on substantially all of the Group’s assets.
Following the year end, the Group’s bankers agreed to reschedule the bank loan to be repayable over an extended term to October 2010.
15. Operating lease commitments
At 31 March 2005 there were annual commitments under operating leases as follows:
Land and buildings Other leases
2005 2004 2005 2004
£’000 £’000 £’000 £’000
Expiring within one year – 257 131 143
Expiring between one and five years 45 – 73 304
Expiring in more than five years 822 942 – 6
867 1,199 204 453
16. Provision for liabilities and charges
Onerous leases/
other commercial liabilities
GROUP £’000
At 1 April 2004 4,525
Utilisation of provision (1,578)
Release of unutilised provision (1,022)
Increase in provision 404
As at 31 March 2005 2,329
The provision for onerous leases and other commercial liabilities represents provision for commitments of the Group that are not expected 
to generate future economic benefit. These commitments include leases for property and other operating assets which the Directors have
assessed as excessive following the restructuring of the business in prior years, and provision for the resolution of commercial matters with
business partners. The provision represents the Directors’ estimate of the costs to the Group of settling these commitments. The Directors
expect the provision for onerous leases and other commercial liabilities to be utilised over the course of the three financial years ending 
31 March 2008.
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
36 Notes to the Financial Statements
for the year ended 31 March 2005
17. Accruals and deferred income 
Falling due within one year 2005 2004
£’000 £’000
Accruals 689 3,005
Deferred income 2,935 5,367
3,624 8,372
Falling due after one year
Deferred income 218 274
3,842 8,646
18. Called-up share capital
Authorised Nominal 2005 2004
Number Class value £’000 £’000
91,882,081 Ordinary 2.5p 2,297 2,016
2,038,947,966 Deferred 0.1p 2,039 2,039
4,336 4,055
Allotted, issued and fully paid Nominal 2005 2004
Number Class value £’000 £’000
52,618,827 (2004: 50,290,820 shares) Ordinary 2.5p 1,315 1,257
2,038,947,966 Deferred 0.1p 2,039 2,039
3,354 3,296
The Deferred Shares have no right to vote or receive dividends and, in all practical respects, no rights to a return of capital on a liquidation
of the Company. 
On 13 September 2004, the Company announced the placing of 2,142,857 Ordinary Shares with institutional investors at a price of 
35 pence per share. The shares were issued for a total cash consideration of £750,000 (before costs) including share premium arising 
of £696,428 for the purposes of providing funds to terminate a contract with a sub-contractor.
During the year, 185,150 share options were exercised for a consideration of £12,225, including share premium arising of £7,597.
Share options in issue at 31 March 2005, all of which may normally be exercised up to nine years from the date on which they first vest,
are shown below:
Grant date Option price Exercisable from Number
20 October 2002 £0.875 20 October 2003 2,800
25 June 2003 £0.275 25 June 2004 214,000
24 June 2004 £0.025 24 September 2004 1,003,443
24 June 2004 £0.1725 24 September 2004 184,102
24 August 2004 £0.255 24 August 2005 2,445,500
18 September 2004 £0.3525 18 September 2005 14,000
6 December 2004 £0.345 6 December 2005 15,000
29 March 2005 £0.325 29 March 2005 10,500
3,889,345
Following a Remuneration Committee review of incentive policies in August 2004, the Company provided employees the opportunity to
surrender their existing out of the money share options and receive new options on similar terms based on the prevailing market price, with
the vesting schedule recommencing anew. 1,880,050 options were surrendered at this time and 1,991,000 new share options were issued.
There are also 4,865,990 warrants in issue, at a subscription price of 25p. The subscription rights conferred by warrants are capable of
exercise at any time between 7 September 2003 and 7 September 2009. Ordinary Shares allotted pursuant to any exercise of subscription
rights conferred by the existing warrants shall be allotted and issued fully paid; shall not rank to any dividends or other distributions declared,
paid or made on the Ordinary Share capital of the Company by reference to a record date prior to the date of exercise of such subscription
rights; but subject thereto, shall otherwise rank pari passu in all other respects with the Ordinary Shares then in issue.
In the event that the number and/or nominal value of Ordinary Shares to be subscribed will be increased/decreased, the warrantholder’s
proportion of voting rights in the Company and rights to participate in the profits and assets of the Company will be maintained.
37
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005 Notes to the Financial Statements
for the year ended 31 March 2005
18. Called-up share capital continued
Certain events may trigger adjustments to the number of warrants and/or the subscription price, including capital reorganisation, or where
the Company issues shares at a price lower than the warrant subscription price or the Company issues shares at a subscription price lower
than market price per share on the date of the relevant offer.
The grant of options under employee share schemes is charged to the profit and loss account over the period to which participants’
performance relates. The charge is based on the market value of the shares at the time of granting rights thereto, less any potential
consideration. Annual adjustments are made for staff who have left the Group during the year.
19. Shareholders’ (deficit)/funds
Share Share Other Merger Own Profit and 
capital premium reserves reserve Shares Loss Account Total
GROUP £’000 £’000 £’000 £’000 £’000 £’000 £’000
At 1 April 2004 3,296 27,542 763 (1,162) (529) (37,216) (7,306)
Profit for year ––––– 1,378 1,378
Shares issued 58 704–––– 762
Costs of share issue – (24) –––– (24)
Bonus share options – – 885––– 885
Foreign exchange – – (13) – – – (13)
At 31 March 2005 3,354 28,222 1,635 (1,162) (529) (35,838) (4,318)
COMPANY
At 1 April 2004 3,296 27,542––– (1,124) 29,714
Loss for year ––––– (583) (583)
Shares issued 58 704–––– 762
Costs of share issue – (24) –––– (24)
Bonus share options – – 885––– 885
At 31 March 2005 3,354 28,222 885 – – (1,707) 30,754
Other reserves shown for both Group and Company at 31 March 2005 included £885,000 in respect of share options granted to
employees at a discount to market value in lieu of cash bonus payments (2004: £nil).
20. Financial Instruments
Group policy prohibits speculative transactions and no trading activity in financial instruments is undertaken. Treasury policies are 
determined by the Chief Financial Officer, based on forecast business requirements, and are reviewed regularly by the Board. 
Certain financial assets, such as investments in subsidiary undertakings are excluded from the scope of these disclosures. As permitted 
by FRS 13, short term debtors and creditors have been excluded from the disclosures, except for the currency disclosures.
a) Interest rate profile
All of the Group’s financial assets, comprising £3,463,382 denominated in sterling and £146,493 denominated in US dollars 
(2004: £7,508,370 denominated in sterling and £159,390 denominated in US dollars), are held at floating interest rates.
The financial assets of the Group comprise cash and cash equivalents of £3,609,785 (2004: £7,667,759). Of this amount £361,000 
was held on deposit not available on 24 hours notice (2004: £442,145).
Details of the interest rate profile of the Group’s bank loan obligations are shown in Note 14. In addition the Group has finance lease
obligations of £524,607 (2004: £864,959), which are classified as financial liabilities and are held at fixed interest rates.
b) Currency exposures
Substantially all of the monetary assets and liabilities of the Group are denominated in the functional currency of the operating unit involved.
21. Fair values of the Group’s financial assets, liabilities and instruments
As at 31 March 2005 the book values of the Group’s financial assets, financial liabilities and financial instruments were not materially
different to their estimated fair values.
22. Post balance sheet events
Following an extraordinary general meeting held on 9 June 2005 the Company changed its name from AIT Group plc to Portrait Software plc.
On 30 June 2005 the Company announced the placing of 20,000,000 Ordinary Shares with institutional investors at a subscription price of
25 pence per share. The shares were issued for a total cash consideration of £5 million (before costs of approximately £250,000) including
share premium arising of £4,500,000 for the purposes of providing additional working capital to enable the Company to exploit the full
potential of its Portrait based technology and to further strengthen the Company’s balance sheet.
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
38 39
PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of Portrait Software plc (‘the Company’) will be held at The Smith Centre, 
The Fairmile, Henley-on-Thames, Oxfordshire RG9 6AB on Thursday 15 September 2005 at 10.00 am, for the following purposes:
Ordinary Business
To consider and, if thought fit, to pass Resolutions 1 to 6 (inclusive) as ordinary resolutions of the Company:
Resolution 1
To receive and adopt the accounts of the Company for the financial year ended 31 March 2005, together with the reports of the Directors 
of the Company and the auditors of the Company on those accounts.
Resolution 2
To receive, adopt and approve the remuneration report for the financial year ended 31 March 2005.
Resolution 3
To re-appoint Deloitte & Touche LLP as auditors of the Company to hold office until the conclusion of the next general meeting at which
accounts are laid before the Company and to authorise the Directors of the Company to fix and determine Deloitte & Touche LLP’s
remuneration for the ensuing year.
Resolution 4
To re-elect Geoff Probert as a Director of the Company.
Resolution 5
To re-elect John O’Connell as a Director of the Company.
Resolution 6
To re-elect Robin Martin as a Director of the Company.
Special business
To consider and, if thought fit, to pass the following resolutions, of which Resolutions 7 and 8 will be proposed as ordinary resolutions 
of the Company and Resolution 9 as a special resolution of the Company:
Resolution 7
That the authorised share capital of the Company be increased by £470,000 from £4,336,000 to £4,806,000 by the creation 
of 18,800,000 Ordinary Shares of 2.5p each in the Company ranking pari passu with the existing Ordinary Shares of 2.5p each in 
the Company.
Resolution 8
That in substitution for any existing authority:
(a) in accordance with Section 80 of the Companies Act 1985 (the ‘Act’) the Directors be and are hereby generally and unconditionally
authorised to exercise all the powers of the Company to allot relevant securities within the terms of the following restrictions and
provisions, namely:
(i) this authority shall (unless previously revoked, varied or renewed by the Company in general meeting) expire on the earlier of the
conclusion of the next Annual General Meeting of the Company following the passing of this Resolution and the date 15 months after
the date of passing of such Resolution; and
(ii) this authority shall be limited to the allotment of relevant securities up to an aggregate nominal amount of £606,263; and
(b) for the purpose of sub-paragraph (a) above:
(i) the said power shall allow and enable the Directors to make an offer or agreement which would or might require relevant securities to
be allotted after such expiry and the Directors may allot relevant securities in pursuance of such an offer or agreement as if the power
conferred hereby had not expired; and
(ii) words and expressions defined in or for the purpose of Part IV of the Act shall bear the same meaning herein.
Resolution 9
That:
(a) conditionally upon the passing of Resolution 8 above and in accordance with Section 95 of the Act, the Directors be and are hereby
given power to allot equity securities for cash pursuant to the authority conferred by Resolution 8 above as if sub-section (1) of 
Section 89 of the Act did not apply to any such allotment provided that:
(i) the power hereby granted shall be limited:
(aa) to the allotment of equity securities in connection with or pursuant to an offer by way of rights to the holders of shares in the
Company and other persons entitled to participate therein, in the proportion (as nearly as may be) to such holders’ holdings of
such shares (or, as appropriate, to the number of shares which such other persons are for these purposes deemed to hold)
subject only to such exclusions or other arrangements as the Directors may feel necessary or expedient to deal with fractional
entitlements or the regulations or requirements of any recognised regulatory body in any territory;
(bb) to the grant of options to subscribe for shares in the Company and the allotment of such shares pursuant to the exercise of
options granted, under the terms of any share option scheme adopted or operated by the Company; and
(cc) to the allotment of equity securities, otherwise than pursuant to sub-paragraphs (aa) and (bb) above, up to an aggregate 
nominal amount of £181,880;
(ii) the power hereby granted shall expire on the earlier of the conclusion of the next Annual General Meeting of the Company 
following the passing of this Resolution and the date 15 months after the passing of such Resolution;  PORTRAIT SOFTWARE PLC
ANNUAL REPORT AND ACCOUNTS 2005
40
Notice of Annual General Meeting
(b) (i) the said power shall allow and enable the Directors to make an offer or agreement before the expiry of the said power which would 
or might require equity securities to be allotted pursuant to such offer or agreement after such expiry as if the power conferred herein
had not expired; and
(ii) words and expressions defined in or for the purpose of Part IV of the Act shall bear the same meaning herein.
By order of the Board 
Registered Office
The Smith Centre 
The Fairmile 
Henley-on-Thames 
Oxfordshire, RG9 6AB
Matthew White
Company Secretary
2 August 2005
Notes:
(1) Only those shareholders registered in the register of members of the Company as at 10.00 am on 13 September 2005 shall be entitled to attend and vote
at the meeting in respect of the number of shares registered in their name at that time. Changes to entries on the relevant register of securities after 10.00 am
on 13 September 2005 shall be disregarded in determining the rights of any person to attend or vote at the meeting.
(2) Any shareholder who is entitled to attend and vote at this meeting is entitled to appoint a proxy to attend and, on a poll, vote on his or her behalf. A proxy need
not be a shareholder of the Company. Completion and return of the Form of Proxy will not preclude a shareholder from attending and voting at the meeting.
(3) A Form of Proxy is enclosed which to be effective must be completed and received by the Company’s registrars at, Capita Registrars, The Registry, 
34 Beckenham Road, Beckenham, Kent BR3 4TU, not later than 10.00 am on 13 September 2005.
(4) The following documents are available for inspection on any day (except Saturday, Sunday and Bank Holidays) during usual business hours at the registered
office of the Company and will, on the date of the Annual General Meeting, be available for inspection from 15 minutes prior to, until the conclusion of 
the meeting:
(i) the register of interests of Directors (and their family interests) in the share capital of the Company;
(ii) copies of all the contracts of service and letters of engagement between the Directors of the Company and the Company or any of its subsidiaries;
and
(iii) the Memorandum and Articles of Association of the Company.
In view of the voting and quorum requirements for the Annual General Meeting, shareholders are particularly requested to complete and
return their Forms of Proxy whether or not they intend to be present at the Annual General Meeting.
The Annual General Meeting starts at 10.00 am, however the doors to the Meeting will be open from 9.45 am and you may wish to arrive
by 9.45 am to take your seat in good time for the start of the Meeting.
Annual Report and Accounts and Remuneration Report (Resolutions 1 and 2)
The Directors of the Company (the ‘Directors’) must lay the accounts of the Company for the financial year ended 31 March 2005, 
the report of the Directors and the report of the auditors of the Company on those accounts before the Meeting.
In addition, Resolution 2 provides for the remuneration report for the financial year ended 31 March 2005 to be received, adopted 
and approved by the Meeting.
An extract from the auditors’ report on page 23 of the Annual Report and Accounts will be read at the Meeting.
Appointment and remuneration of auditors (Resolution 3)
The Company is required to appoint auditors at each general meeting at which accounts are laid before the Company, to hold office until the
next such meeting. Resolution 3 proposes the re-appointment of Deloitte & Touche LLP as auditors of the Company and authorises the
Directors to fix and determine their remuneration for the ensuing year.
Re-election of Directors (Resolutions 4, 5 and 6)
Under the regulations of the Company’s articles of association concerning retirement by rotation and re-election, Geoff Probert is required 
to retire as Director and is recommended by the Directors for re-election.
John O’Connell and Robin Martin have been appointed since the Company’s last Annual General Meeting and are offering themselves for 
re-election. Brief biographical details of the Directors appear on page 16 of the Annual Report and Accounts.
Special business (Resolutions 7, 8 and 9)
Resolution 7 is to increase the authorised share capital of the Company in order to ensure that there is sufficient headroom to allow for the
issue of shares pursuant to the exercise of warrants granted by the Company to certain investors as part of the re-financing of the Company
in September 2002, the issue of shares pursuant to the exercise of options granted and to be granted under the terms of share option
schemes adopted or operated by the Company and in order to give the Board flexibility for the future.
Resolution 8 is to confer on the Directors authority to allot Ordinary Shares pursuant to Section 80 of the Act, amounting to approximately
one-third of the anticipated issued share capital of the Company (as diluted).
Resolution 9 is to confer on the Directors power to allot Ordinary Shares as if the statutory pre-emption rights set out in Section 89 of 
the Act did not apply to such allotments plus, in order to give the Board flexibility for the future, an additional authority amounting to
approximately 10% of the current issued share capital of the Company.