portrait software plc
annual report and accounts
for the year ended 31 march 2005
wwwportraitsoftwarecom
portrait software plc annual report and accounts 2005
europe
portrait software
the smith centre
the fairmile
henleyonthames
oxfordshire rg9 6ab
uk
email contactusportraitsoftwarecom
tel 44 01491 416600
fax 44 01491 416601
americas
portrait software
265 church street
suite 404
new haven ct 06510
usa
email contactusportraitsoftwarecom
tel 1 203 782 2300
fax 1 203 782 7961
asia pacific
portrait software
10 faber park
129101
singapore
email contactusportraitsoftwarecom
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
henleyonthames 
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 nonintrusive way
through inbound customer interactions
• improve customer loyalty and brand
differentiation by providing consistently
excellent personalised service
• enforce compliance and process
adherence through auditable rulesbased
customer interaction processes
• improve the performance and effectiveness
of customerfacing staff and the efficiency
of the followthrough 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 prepackaged
components for common customerfacing
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
businesstobusiness processes within 
a department or more often used as
gloriﬁed formsrouting tools that are 
strong on workﬂow but weak on realtime
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 serviceoriented
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 serviceoriented 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™ –
processcentric composite applications
that do three things better deliver better
customer interactions in real time
orchestrate superefficient customer
interaction management processes 
and integrate with legacy systems the 
way serviceoriented 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 halfyear 
of operating proﬁtability
£475 million net fund raising
post yearend 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 £15 million
before exceptional income of 
£02 million 2004 £13 million
before exceptional income of 
£10 million
pretax proﬁt of £14 million
including exceptional income
2004 £20 million including
exceptional income
adjusted diluted earnings per
share of 245p 2004 327p
after excluding goodwill
amortisation exceptional items 
and movement in deferred tax
asset see note 4 unadjusted
diluted earnings per share of
249p 2004 749p
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 oversubscribed 
placing of the company’s shares to 
raise approximately £475 million net 
of expenses this means the ﬁnancial 
restructuring 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 37 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 backend process engine
comprehensive integration capability 
and a fully functional frontend customer
interaction module supporting multichannel
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 rd 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 1315 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 £143 million which was below
the £196 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 £86 million in 2004
to £40 million in 2005
operating proﬁt excluding exceptional
income was £15 million before exceptional
income of £02 million 2004 £13 million
before exceptional income of £10 million
pretax proﬁt was £14 million including
exceptional income 2004 £20 million
including exceptional income adjusted
diluted earnings per share were 245p
2004 327p after excluding goodwill
amortisation exceptional items and
recognition of deferred tax asset 
unadjusted diluted earnings per 
share were 249p 2004 749p
our results for the year have been impacted
by a number of oneoff 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 £32 million 2004
outﬂow of £10 million which included 
£16 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 £25 million of which
£20 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 £475 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 fulltime 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 £18 million on sales of £143
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 
reorganisation 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 cuttingedge 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
processcentric 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 inhouse 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 longstanding 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 realignment 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 redeveloping
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 serviceoriented
software world it helps get processdriven
composite applications to market twice as
fast as traditional development environments
serviceoriented 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 hardcoded 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 nextgeneration 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
16000 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
rearchitect its frontoffice crs application
an industryleading 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 backend
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 multichannel 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 offtheshelf 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 realtime ‘singleview’
of each customer across all systems and
channels branch call centre internet ivr
payment network or dealerintroducer 
this enables rapid response to customer
enquiries accurate targeting of sales
campaigns efficient application processing
and consistent followup 
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 processcentric
customercritical 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 processcentric
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 welldeﬁned
process design and execution
environments support of multiple
interaction channels and 
serviceoriented 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 runtime
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 superefficient customercritical processes by 
combining the power of business process management with the ease of integration and 
flexibility of serviceoriented architectures
in short living apps™ are what enterprises need to address the challenges posed by their 
customercritical processes
whether you’re a cio thinking about your next frontend 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
loosecoupled to legacy
composite
serviceoriented
adapt to business processes
embrace collaboration
business users drive
multichannel support
minimal code development
constantly refreshable
static apps
data driven
hardwired to legacy
monolithic
application silos
business processes adapt to apps
inhibit collaboration
it department drives
build one channel at a time
programmerintensive
inbuilt 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 processdriven 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 fastestchanging and 
the most complex – often involving realtime
interactions multiple legacy systems and
different people spread throughout the
enterprise and beyond
we call these customercritical 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
• realtime interactions – requiring live 
data updates
• many channels – web contact centre
branch email selfservice
• 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
• processdriven – created with intuitive
process maps
• multichannel – design once deploy 
to all channels
• massively conﬁgurable – easy to build and
change with minimal coding
• easily integrated – with a serviceoriented
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 failsafe 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 
£13 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 
vicepresident 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 longstanding customers using
products of an older vintage who are looking
to portrait to take them into the process
centric serviceoriented 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 portraitbased
solutions 
moving edge towards the 
serviceoriented future
the original edge product was the industry’s ﬁrst
call centre solution with a builtin 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 12000 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 processcentric 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
£143m
turnover
adjusted earnings per share
245p
“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
£48 million”
matthew white
chief financial officer
trading performance
revenues
turnover for the ﬁnancial year 2005 was
£143 million down £53 million on the
prior year revenues of £196 million this
decrease was primarily attributable to the
reduction in professional services revenues
which decreased to £40 million from 
£86 million in 2004 following the move 
we signalled last year away from lower
margin direct services engagements 
towards a higher margin productdriven
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 £103 million
2004 £110 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
£48 million which included £20 million
from the recognition of prepaid 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 £127 million compared to 
£183 million in the prior year and the
greater part of this saving came from a 
£32 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 £04 million and by reducing
administrative expenses by £20 million 
both numbers are stated before the 
impact of exceptional items
operating costs including exceptional items
were £125 million 2004 £173 million
which included a substantial cost beneﬁt
arising from the release of £10 million 
of provisions no longer required offset 
by further provisions made of £04 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 £246000 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 249p 2004
749p 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 245p compares more fairly to
earnings per share of 327p in 2004 portrait software plc
annual report and accounts 2005
15
cashﬂow
total cash outﬂow before ﬁnancing 
was £36 million 2004 cash outﬂow 
£07 million and £07 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 £11
million total net cash outﬂows from
ﬁnancing amounted to £04 million 
2004 net inﬂows £59 million
the net cash decrease for the year after
ﬁnancing was £40 million 2004 net cash
increase of £52 million cash and deposits
at year end stood at £36 million 2004
£77 million
the group’s net debt position was £22 million
at year end compared to a net funds
position of £08 million at prior year end
july 2005 fundraising
we have recently completed a £5 million
fundraising £475 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 membershareholder 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 £64 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 nasdaqsivb
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 earlystage 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 cohead 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
nysepxt 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
20000000 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 £250000 including share premium arising 
of £4500000 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 £36 million in research 
and development 2004 £44 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 9135426 1736
richard hicks former director 3907580 743
the bank of new york nominees limited 2870500 545
quester vct 4 plc 2615240 497
close brothers group plc 2505352 476
finsbury technology trust 2439091 463
trustees martyn arbib ’79 settlement 2356327 447
royal bank of scotland plc 
west register investments limited 1911428 363
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 lp  and bip 2001 lp  and as a managing member of
bve 2001 llc and bve 2001q llc
donations
during the year the group made donations of £1750 2004
£1000 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 nonexecutive 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 onequarter of the ordinary shares comprised in each 
option grant on the first anniversary of the date of grant and
b one thirtysixth of the remaining threequarters 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 nonvested options
after the accelerated vesting condition has occurred shall be
calculated and the normal vesting conditions shall continue to
apply to that balance
a onehalf 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 reappointment 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 nonaudit 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 twoway communication with 
both institutional and private investors and endeavours to 
respond promptly to queries received the group’s website
wwwportraitsoftwarecom 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 legalcommercial 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 mediumterm 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
performancerelated 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 nonbeneficial 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 25p shares ordinary 25p shares
beneficial warrants beneficial warrants
director
richard hicks 3907580 926757 3907580 926757
nick randall 2145423 724029 2145423 724029
geoff probert 551267 115844 551267 115844
matthew white 102857 11449 102857 11449
6707127 1778079 6707127 1778079
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 360000 – 360000 – £0875 £0635 201003 201012
nick randall – 227273 – 227273 £0025 £0685 240904 240614
nick randall – 500000 – 500000 £0255 £0255 240805 240814
geoff probert 100000 – 100000 – £0875 £0635 201003 201012
geoff probert – 151515 – 151515 £0025 £0685 240904 240614
geoff probert – 100000 – 100000 £0255 £0255 240805 240814
richard hicks 100000 – 100000 – £0875 £0635 201003 201012
richard hicks – 151515 – 151515 £0025 £0685 240904 240614
richard hicks – 100000 – 100000 £0255 £0255 240805 240814
matthew white 100000 – 100000 – £0875 £0635 201003 201012
matthew white 50000 – 50000 – £0740 £0725 150104 150113
matthew white – 53030 – 53030 £0025 £0685 240904 240614
matthew white – 200000 – 200000 £0255 £0255 240805 240814
felda hardymon 50000 – 50000 – £0740 £0725 150104 150113
felda hardymon – 100000 – 100000 £0255 £0255 240805 240814
robert stavis 50000 50000 – £0740 £0725 150104 150113
robert stavis – 100000 – 100000 £0255 £0255 240805 240814
hugh mccartney 50000 – 50000 – £0740 £0725 150104 150113
hugh mccartney – 100000 – 100000 £0255 £0255 240805 240814
total 860000 1783333 860000 1783333
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 315p 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 201750 3123 28125 232998 374182
matthew white 94684 2826 4354 101864 –
richard hicks 5000 140 – 5140 138725
geoff probert 9966 369 – 10335 239000
sub total 311400 6458 32479 350337 751907
non executive
richard hicks  19000 530 – 19530 –
geoff probert 36667 841 – 37508 –
hugh mccartney 16000 – – 16000 16000
felda hardymon 10000 – – 10000 10000
robert stavis 10000 – – 10000 10000
sub total 91667 1371 – 93038 36000
total 403067 7829 32479 443375 787907
 the figures for matthew white geoff probert and richard hicks are shown prorata 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 14288 – 14288 19648
cost of sales 2988 342 2646 5772
gross profit 11300 342 11642 13876 
distribution costs 3410 – 3410 4074
administrative expenses 6347 96 6443 7493
operating profit 4 1543 246 1789 2309 
finance charges net 6 356 291
profit on ordinary activities before taxation 1433 2018 
tax chargecredit on profit on ordinary activities 7 55 948
retained profit after taxation for the financial year 1378 2966
retained loss brought forward 37216 40182
retained loss carried forward 35838 37216
basic earnings per ordinary share of 25p 8 267p 806p
diluted earnings per ordinary share of 25p 8 249p 749p 
adjusted diluted earnings per ordinary share of 25p 8 245p 327p 
 the results for 2004 include exceptional income of £985000 refer to note 3
all amounts derive from continuing operations
note 2005 2004
£’000 £’000
profit for the financial year 1378 2966
exchange translation differences 19 13 427
total recognised gains and losses relating to the year 1365 3393
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 9a 1827 2051
intangible assets – licences 9b 120 300
tangible assets 10 999 1293
2946 3644
current assets
debtors 12 2512 3191
cash at bank and in hand 20a 3610 7668
6122 10859
creditors
amounts falling due within one year 13 3410 3614
net current assets 2712 7245
total assets less current liabilities 5658 10889
creditors amounts falling due after more than one year 14 3805 5024
provisions for liabilities and charges 16 2329 4525
accruals and deferred income 17 3842 8646
net liabilities 4318 7306
capital and reserves
called up share capital 18 3354 3296
share premium 19 28222 27542
other reserve 19 1635 763
merger reserve 19 1162 1162
profit and loss account 19 35838 37216
own shares held 19 529 529
shareholders’ deficit 4318 7306
shareholders’ deficit may be analysed as
equity interests 6357 9345
non equity interests 2039 2039
4318 7306
25
portrait software plc
annual report and accounts 2005 2005 2004
note £’000 £’000
net cash outflow from operating activities i 3205 1025
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 paidreceived 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 3573 705
financing
issue of new shares net of expenses 738 2689
repayment of bank loan 750 –
repayment of ima loan note – 969
issue of convertible loan notes net of expenses – 4656
finance lease repayments in year 391 458
cash outflowinflow from financing 403 5918
decreaseincrease in cash in the year ii  iii 3976 5213
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 1789 2309
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 1520
ima loan note waiver before costs – 969
decrease in creditors 332 386
decrease in accruals and deferred income 3847 1717
decrease in provisions 2196 2328
other 35 115
loan recovery from former associate see note 3 – 500
net cash outflow from operating activities 3205 1025
ii analysis of movement in net fundsnet debt
at 1 april at 31 march
2004 cashflow 2005
£’000 £’000 £’000
cash at bank and in hand 7225 3976 3249
restricted cash deposits 443 82 361
bank term loan 6000 750 5250
finance leases 865 341 524
net fundsnet debt 803 2967 2164
iii reconciliation of decreaseincrease in cash to movement in net debtnet funds
2005 2004
£’000 £’000
decreaseincrease in cash in the year 3976 5213
decrease in cash deposits 82 280
cash outflowinflow from decreaseincrease in debt and lease financing 1091 3573
change in net debt resulting from cash flows 2967 1360
waiver of ima loan note – 941
translation difference – 312
conversion of former director’s loans into equity – 754
equity conversion – 5000
increase in finance leases – 1323
movement in net debt in year 2967 7044
net fundsdebt as at beginning of year 803 6241
net debtfunds at end of year 2164 803
27
portrait software plc
annual report and accounts 2005 2005 2005 2004 2004
note £’000 £’000 £’000 £’000
fixed assets
investments 11 1863 1863
current assets
debtors – amounts falling due within one year 12 31 –
debtors – amounts falling due after one year 12 26417 21631
cash at bank and in hand 2541 6653
28989 28284
creditors 
amounts falling due within one year 13 98 433
net current assets 28891 27851
net assets 30754 29714
capital and reserves
called up share capital 18 3354 3296
share premium 19 28222 27542
other reserves 19 885 –
profit and loss account 19 1707 1124
shareholders’ funds 30754 29714
shareholders’ funds may be analysed as
equity interests 28715 27675
non equity interests 2039 2039
30754 29714
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 periods 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 10244 15414
north america 3367 3449
rest of world 677 785
14288 19648
turnover by type of revenue for the year was as follows
2005 2004
£’000 £’000
licence and maintenance revenues 10251 11002
professional services revenues 4037 8646
14288 19648
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 11535 15839 2753 3809 14288 19648
operating profitloss 2145 2015 356 294 1789 2309
finance incomecharges 356 4 – 295 356 291
profitloss on ordinary activities before taxation 1789 2019 356 1 1433 2018
net assetsliabilities 11228 5868 15546 13174 4318 7306
3 exceptional items
exceptional incomecharges 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 incomecharges in 2004 comprised £395000 attributable to cost of sales £234000 attributable to distribution costs and
£824000 attributable to administrative expenses
4 operating profit
the operating profit is stated after chargingcrediting
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
• nonaudit services – deloitte  touche llp 46 126
release of unutilised provisions 1022 1525
increase in provisions 404 1204
research and development 3609 4357
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 7160 9400
social security costs 745 941
pension contributions 333 377
8238 10718
employee and employer pension contributions payable at 31 march 2005 were £44218 2004 £38463
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 chargecredit 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 chargecredit 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 chargecredit 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 1433 2018
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
increasedecrease 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 chargecredit 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 £22686085 2004 £23240000 and overseas losses of
£1259816 2004 £2074000
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
shortterm timing differences 3140 3332
tax losses carried forward 7473 6941
10737 10324
the net effect of the movement in the deferred tax asset recognised in the year was nil £556000 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 £930000
and hence the utilisation of £556000 is offset by the recognition of further deferred tax assets of £556000
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 25p 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 25p 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 £1378000 2004 profit £2966000 
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 1378 2966
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 1356 1297
2005 2004
number number
weighted average number of shares in issue 51535409 36782407
effect of dilutive potential ordinary shares – share options 1556061 100969
effect of dilutive potential ordinary shares – warrants 2212758 2725657
diluted weighted average number of shares 55304228 39609033
2005 2004
pence pence
basic earnings per share 267 806
dilution impact 018 057
diluted earnings per share 249 749
adjustment to exclude amortisation of goodwill 040 062
adjustment to exclude exceptional income 044 249
adjustment to exclude movement in deferred tax asset – 235
adjusted diluted earnings per share 245 327
9a intangible assets – goodwill
group £’000
cost
at 1 april 2004 and 31 march 2005 13832
amortisation
at 1 april 2004 11781
charge for year 224
at 31 march 2005 12005
net book value
at 31 march 2005 1827
at 31 march 2004 2051
9b 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 1941 233 727 2901
additions 27 – 12 39
disposals 65 16 – 81
exchange adjustment – 2 6 8
at 31 march 2005 1903 215 733 2851
depreciation
at 1 april 2004 946 211 451 1608
charge for year 143 8 141 292
disposals 30 10 – 40
exchange adjustment – 2 6 8
at 31 march 2005 1059 207 586 1852
net book value
at 31 march 2005 844 8 147 999
at 31 march 2004 995 22 276 1293
fixed assets included in the above which are held under finance lease contracts comprise computer equipment with a net book value of
£131000 2004 £244000
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 1863
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 1036 1826
amounts recoverable on contracts 78 53
deferred tax asset 930 930
prepayments and other debtors 468 382
2512 3191
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 26417 21631
13 creditors amounts falling due within one year
group 2005 2004
£’000 £’000
bank loan refer to note 14 1500 1500
trade creditors 631 563
social security and other taxes 639 1162
finance lease contracts 469 341
other creditors 171 48
3410 3614
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 3750 4500
finance lease contracts repayable between one and five years 55 524
3805 5024
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 1199 204 453
16 provision for liabilities and charges
onerous leases
other commercial liabilities
group £’000
at 1 april 2004 4525
utilisation of provision 1578
release of unutilised provision 1022
increase in provision 404
as at 31 march 2005 2329
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 3005
deferred income 2935 5367
3624 8372
falling due after one year
deferred income 218 274
3842 8646
18 calledup share capital
authorised nominal 2005 2004
number class value £’000 £’000
91882081 ordinary 25p 2297 2016
2038947966 deferred 01p 2039 2039
4336 4055
allotted issued and fully paid nominal 2005 2004
number class value £’000 £’000
52618827 2004 50290820 shares ordinary 25p 1315 1257
2038947966 deferred 01p 2039 2039
3354 3296
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 2142857 ordinary shares with institutional investors at a price of 
35 pence per share the shares were issued for a total cash consideration of £750000 before costs including share premium arising 
of £696428 for the purposes of providing funds to terminate a contract with a subcontractor
during the year 185150 share options were exercised for a consideration of £12225 including share premium arising of £7597
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 £0875 20 october 2003 2800
25 june 2003 £0275 25 june 2004 214000
24 june 2004 £0025 24 september 2004 1003443
24 june 2004 £01725 24 september 2004 184102
24 august 2004 £0255 24 august 2005 2445500
18 september 2004 £03525 18 september 2005 14000
6 december 2004 £0345 6 december 2005 15000
29 march 2005 £0325 29 march 2005 10500
3889345
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 1880050 options were surrendered at this time and 1991000 new share options were issued
there are also 4865990 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 andor nominal value of ordinary shares to be subscribed will be increaseddecreased 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 calledup share capital continued
certain events may trigger adjustments to the number of warrants andor 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’ deficitfunds
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 3296 27542 763 1162 529 37216 7306
profit for year ––––– 1378 1378
shares issued 58 704–––– 762
costs of share issue – 24 –––– 24
bonus share options – – 885––– 885
foreign exchange – – 13 – – – 13
at 31 march 2005 3354 28222 1635 1162 529 35838 4318
company
at 1 april 2004 3296 27542––– 1124 29714
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 3354 28222 885 – – 1707 30754
other reserves shown for both group and company at 31 march 2005 included £885000 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 £3463382 denominated in sterling and £146493 denominated in us dollars 
2004 £7508370 denominated in sterling and £159390 denominated in us dollars are held at floating interest rates
the financial assets of the group comprise cash and cash equivalents of £3609785 2004 £7667759 of this amount £361000 
was held on deposit not available on 24 hours notice 2004 £442145
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 £524607 2004 £864959 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 20000000 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 £250000 including
share premium arising of £4500000 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 henleyonthames oxfordshire rg9 6ab on thursday 15 september 2005 at 1000 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 reappoint 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 reelect geoff probert as a director of the company
resolution 5
to reelect john o’connell as a director of the company
resolution 6
to reelect 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 £470000 from £4336000 to £4806000 by the creation 
of 18800000 ordinary shares of 25p each in the company ranking pari passu with the existing ordinary shares of 25p 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 £606263 and
b for the purpose of subparagraph 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 subsection 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 subparagraphs aa and bb above up to an aggregate 
nominal amount of £181880
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 
henleyonthames 
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 1000 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 1000 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 1000 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 1000 am however the doors to the meeting will be open from 945 am and you may wish to arrive
by 945 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 reappointment of deloitte  touche llp as auditors of the company and authorises the
directors to fix and determine their remuneration for the ensuing year
reelection of directors resolutions 4 5 and 6
under the regulations of the company’s articles of association concerning retirement by rotation and reelection geoff probert is required 
to retire as director and is recommended by the directors for reelection
john o’connell and robin martin have been appointed since the company’s last annual general meeting and are offering themselves for 
reelection 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 refinancing 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
onethird 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 preemption 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


Summary:
 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 oversubscribed 
placing of the company’s shares to 
raise approximately £475 million net 
of expenses this means the ﬁnancial 
restructuring 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 37 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 backend process engine
comprehensive integration capability 
and a fully functional frontend customer
interaction module supporting multichannel
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 rd 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 1315 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 £143 million which was below
the £196 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 £86 million in 2004
to £40 million in 2005
operating proﬁt excluding exceptional
income was £15 million before exceptional
income of £02 million 2004 £13 million
before exceptional income of £10 million
pretax proﬁt was £14 million including
exceptional income 2004 £20 million
including exceptional income adjusted
diluted earnings per share were 245p
2004 327p after excluding goodwill
amortisation exceptional items and
recognition of deferred tax asset 
unadjusted diluted earnings per 
share were 249p 2004 749p
our results for the year have been impacted
by a number of oneoff 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 £32 million 2004
outﬂow of £10 million which included 
£16 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 £25 million of which
£20 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 £475 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 fulltime 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