Lombard Risk Management plc · 44 Southampton Buildings London WC2A 1AP ... especially the case in...

Lombard Risk Management plcAnnual Report & Accounts 2009

Managing Collateralised Trading. Enabling Regulatory Compliance.

corporate statement

company informationThe mission at Lombard Risk has always been to help the financial industry to improve the approach to managing the operational risk in their businesses. That mission remains unchanged today as Lombard Risk continues to deliver innovative specialised software solutions that help our customers improve the management of collateralised trading and regulatory compliance.

For over 20 years Lombard Risk Management plc (“Lombard Risk”) has delivered industry-leading global risk management and regulatory compliance software. Today, Lombard Risk is one of the world’s recognised leading providers of collateral management and regulatory compliance solutions to financial organisations and large corporations around the world. Our award-winning global solutions enable the financial industry to improve the management of counterparty risk, collateral risk, trading risk, liquidity risk reporting, financial crime detection and global regulatory reporting.

company registration number3224870

directorsJohn Wisbey Chairman

ian peacock Deputy Chairman

brian croWe

keith butcher

company secretaryJane Fineman

registered officeIndia House 45 Curlew Street London SE1 2ND

nominated advisor and brokernobLe & company Limited120 Old Broad Street London EC2N 1AR

auditorsgrant thornton uk LLpGrant Thornton House Melton Street Euston Square London NW1 2EP

corporate soLicitorsmemery crystaL44 Southampton Buildings London WC2A 1AP

registrarscomputershare investor services pLcPO Box 859 The Pavilions Bridgwater Road Bristol BS99 1XZ

bankersnationaL Westminster bank pLc180 Brompton Road London SW3 1HL

hsbc bank28 Borough High Street London SE1 1YB

datesannuaL generaL meeting 23 October 2009

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01Lombard Risk Management plc annual report and accounts 2009

HigHligHts

Highlights* Revenue £8.69m, up 2.8% on same period last year (2008: £8.46m)

Loss after tax £1.10m (2008: Loss £0.67m)

Profitabilityachievedbyriskmanagementandtradingsoftwarebusiness,withCOLLINE®CollateralManagementsoftwarebreakingthroughtoprofitabilityforfirsttime

RegulatoryCompliancebusinessSTBSystemsLimitedrestructuredandrenamedLombardRiskComplianceLimitedinDecember2008 and re-branding exercise largely completed

ConsolidationofLondonoperationsintoonebuilding,andcontinued reductions in London headcount; move to larger premisesinShanghai

MajorcontractwinsforCOLLINE®includingaTier1ContinentalEuropeanbank

Future prospects Continuedstrongdemandbybanksforcollateralmanagement

products and likely further changes in bank regulation in 2009willcreate ongoing commercial opportunities despite theglobaldownturn

Costcuttingmeasuresimplementedinlate2008,includingreductioninBoardsize,shouldensurethatthebusinessis cash generative again during FY 2010

Fund-raisingandbalancesheetrestructuringafterthefinancialyearendcombinedwithgoodcommercialprospectsleavetheCompanywellplacedforgrowthwithastrongsetofinstitutionalshareholders capable of funding the Group’s future expansion.

* Financial results for the year ended 31 March 2009 have been delivered in line with Board expectations and are prepared under International Financial Reporting Standards (“IFRS”) as adopted by the European Union.

20092008200720062005

Revenue (£m)

8.698.46

6.94

4.704.62

£8.69m+2.8%

01 HigHligHts 02 CHaiRman’s statement 08 BoaRd of diReCtoRs 10 lomBaRd RisK’s management team 12 diReCtoRs’ RepoRt 14 CoRpoRate goveRnanCe RepoRt 15 RepoRt of tHe audit Committee 16 Consolidated finanCial statements 17 RepoRt of tHe independent auditoR

– Consolidated finanCial statements 18 Consolidated inCome statement

19 Consolidated BalanCe sHeet 20 Consolidated statement of CHanges

in sHaReHoldeRs’ equity 21 Consolidated CasH flow statement 22 notes to tHe Consolidated

finanCial statements 35 paRent Company finanCial statements 36 RepoRt of tHe independent auditoR

– paRent Company finanCial statements 37 Company BalanCe sHeet 38 notes to tHe Company finanCial statements iBC Company infoRmation

Contentsto be updated.

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02 Lombard Risk Management plc annual report and accounts 2009

HigHligHts of tHe CHaiRman’s statement

ForwardmomentumfollowingTier1Bankcontractwin

Revenueincreaseinthefaceofdifficulteconomic times

CollateralManagementsoftwarebrokenthroughtoprofitability

Liquidity reporting to offer more opportunities for the company in the years ahead

CHaiRman’s statement

summaRyAlthough the financial year saw unprecedented turbulence in world financial markets, Lombard Risk continued to win contracts and grow organically. This was especially the case in the Collateral Management Software business, which has excellent forward momentum following a large contract win with a Tier 1 German bank announced in April 2009. The move away from a light touch regulatory regime in the UK beginning with a complete reform of Liquidity Reporting offers considerable opportunity to the firm in the coming year and years ahead. The challenge in FY 2009 at a time that no‑one could be sure of the financial outlook for the banking system in the next month let alone the next few years was to steer the right course between reducing costs while not damaging the future prospects of a promising company. We believe we got this balance about right, and that the Group is now well placed to grow significantly over the next few years.

As anticipated, the Group made a loss for the year, most of it in the first half. Revenues for the year ended 31 March 2009 were £8.69m. This is only a modest rise of 2.8% overall from the £8.46m in the previous year. The overall loss of £1.10m was, as already highlighted in the last Interim Reports and explained again below, largely due to various issues in the Regulatory Compliance business which should not affect FY 2010 to any material extent. The Trading and Risk business achieved overall profitability in the full year of around £0.87m including full apportionment of central overheads. Within the Trading and Risk division the collateral management software product COLLINE® also broke through to profitability during the year and ended the year ahead of budget, a clear example of how parts of our business are not affected by, and are possibly even benefiting from, the liquidity crunch in markets. We concluded nine contract wins for COLLINE® during the year, a good achievement.

continued growth...

1 excellent forward momentum 2 strong

growth opportunities

3 major fund-raising after year end 4 benefiting

from increased regulation

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The outlook for our COLLINE® collateral management software remains very positive with strong new business demand expected to continue and revenue growth likely from existing customers. This is due both to the current market focus on counterparty risk and liquidity risk, and to the considerable advances in the product in maturity, scalability and resilience. This now makes COLLINE® an ideal and suitable product for Tier 1 banks, as well as for smaller banks, asset managers and other firms.

Our Oberon® product continued to be our most profitable product and saw the completion of the installation at its first client in China as well as satisfactory product advances.

Given that most of our revenues come from banks and financial services companies, it is hard to see that our products could be much better placed for FY 2010 than to have our emphasis on collateral management (as part of risk and liquidity management) and regulatory compliance. We are the global number 2 in both collateral management software and bank regulatory reporting software.

On the regulatory compliance side we continued to sign significant contracts in Europe and Asia for STB‑Reporter despite the fact that some projects were put on hold due to cuts in bank IT spending or bank mergers. With it now clear that there will be previously unforeseen regulatory change in 2009 and future years in many

countries owing to the demand for reform of the financial system, we believe there will continue to be significant opportunities worldwide for our regulatory business. This is particularly significant for us in the UK where new Liquidity Reporting regulations come into effect in early 2010 as part of the new heavier touch regulatory regime.

We have invested heavily in technical resource since the balance sheet date, and more recently have strengthened our Board with the appointment of a new Finance Director Keith Butcher, but various cost actions that we took at the end of 2008 should allow us to operate in FY 2010 on a similar cost base to that in FY 2009 despite increasing revenues.

...innovative solutions

Lombard Risk is trusted by financial institutions and large organisations across the globe to provide specialised solutions.

Our innovative specialised products stay a step ahead of the ongoing risk and compliance reporting demands.

Lombard risk is abLe to provide software for the broad spectrum of compLiance and risk reporting

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Increased revenue despite tough economic conditions.

Strategy to reduce cost base coming to fruition.

£1,800,000 placing after year end will strengthen balance sheet.

FinancialRevenue increased to £8.69m against £8.46m in the comparable period last year. Loss before tax was £1.25m against £1.12m in the previous year. Cash at the end of the period was £0.15m and there were no bank borrowings. The Group’s balance sheet and cash position will be significantly strengthened in October 2009 when the proceeds of a placing, concluded at the end of September 2009, are received. At the same time £1.03m of the £1.33m director loans outstanding at the year end will be converted to equity and the remaining £0.30m, along with a further £0.30m of director loans received in July/August 2009, will be repaid in full, leaving the Group with a strong cash position and no borrowings. All software development and R&D expenditure expenditure during the year was expensed in full when incurred.

The fall in Sterling has clearly helped the Sterling recognition of revenue denominated in foreign currency. This has two conclusions:

a) Given that about £4.0m of our revenue was in USD, EUR and Asian currencies, it might have been expected that the revenue would have risen by more than it did. On a like for like basis, last year’s £8.46m would have equated to about £8.8m at the average rates prevailing during the FY 2009. The reason revenue did not achieve this level is wholly accounted for by the shortfall in ability to recognise revenues from Regulatory Compliance projects as described below.

b) We have a higher revenue base for FY 2010 given the fall in Sterling than we did at the beginning of FY 2009 which is helpful to our revenue outlook. Although Sterling has recovered at the time of writing from a low of US$1.35 to around US$1.64, this range is lower than the average for FY 2009 which was US$1.69.

Recurrent revenue has historically been a high proportion of revenues at Lombard Risk. Recurrent annual revenues for the Group are running at around £4.4m. In addition, the revenue profile remains fairly well dispersed. moving to

profitability...

chairman’s statementcontinued

Full year revenue growth since 2007

27%post acquisition oF lombard risk compliance

Fortis Investments is the autonomous global asset management arm of the Fortis group.

After a rigorous review of the major providers of collateral management, the team determined that Colline was ideally suited to meet Fortis Investment’s requirements.

In addition to improving the timeliness and accuracy of margin calls and full support for disputes, Colline provided:


Lombard risk group is weLL positioned to take fuLL advantage of aLL that is needed to enabLe finanicaL institutions manage heir risk and compLiance requirements.

both in functionality, scalability and resilience which now makes COLLINE® a very suitable product for Tier 1 banks with large trading books, as well as for smaller firms. COLLINE® is ahead of budget for this year, and has a large and growing pipeline including opportunities with some of the biggest market participants.

Oberon®, the trading and risk management system, saw the completion of its first installation in China. Oberon® remains our most profitable product and it continues to provide capital to support the development of other products. Functionally the product has made good progress. Support for inflation trades has been much improved which allows inflation based instruments to be managed more effectively in Oberon®. A new yield curve module has been developed

that uses a consistent B‑Spline methodology for all types of curves and allows users a greater degree of control over the smoothness and accuracy of the curves produced. Finally, performance and scalability of Oberon® has been further improved, with particular emphasis on commonly used functions within Oberon® and on Oberon®’s API.

Overall this division earned revenue for the year in excess of £3.85m and a profit of £0.87m after full allocation of group overhead costs.

RegulatoRy and ComplianCe softwaRe pRoduCtsThere are appreciable opportunities now for this part of our business with the move away from light touch regulation generally and, specifically in the UK, the introduction of new regulatory

requirements for Liquidity Reporting and Liquidity Stress Testing. However, during the year, our Regulatory Compliance business underestimated the work effort around the Basel 2 roll‑out programme. This caused both increased costs and delayed revenue recognition on a number of fixed price contracts committed in mid‑2007 which have consequently in some cases been significantly loss‑making. Most of the impact of this has now worked its way through the accounts, and we expect that substantially all the rest will do so in the Group’s current financial year. The Regulatory Compliance business has undergone a reconstruction exercise including a review of management and processes, and the Board now looks forward to the future.

tRading and RisK softwaRe pRoduCts As anticipated this time last year, the credit crisis has been beneficial for our COLLINE® collateral management software product. This product now substantially handles all the key requirements of a collateral business including margining, repo and securities lending, trade reconciliation and inventory management. We secured nine contract wins for COLLINE® in the financial year. These included contracts with Lombard Odier Darier Hentsch & Cie, Jyske Bank A/S, SBAB, Daiwa Securities and SMBC Europe, as well as with a large US East Coast based asset manager and two US hedge funds, and a major contract with a Tier 1 Continental European bank concluded at the end of the financial year. At the same time there has been considerable innovation in the product this year

...major tier 1 bank win

“we are an agile operation that is very customer service driven. we looked for a system that could

offer broad product coverage and selected Lombard risk’s colline® as much for its features as for the company’s collateral management expertise and

excellent reputation within the market.”global head of derivative operations

fortis investments

wideproductcoverageincludingRepo,Energy,SecuritiesLendingandOTCDerivatives.

thefamiliarityofanintuitiveandeasy-to-useweb-basedinterfacetoensure a seamless transition.

ahighlyexperiencedsalesandserviceteam,manyofwhomwereformercollateralmanagerswithakeenunderstandingofcollateralmanagement

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buoyant sales pipeline...

CHaiRman’s statementContinued

The problems described above in UK Regulatory Compliance contracts committed in 2007 do not apply to UK contracts signed more recently, and we had some notable successes during the year with large institutions including Bank of Scotland Treasury Services and a large German bank. In addition, we successfully handled the move by UK, Irish and other regulators to Mandatory Electronic Reporting (“MER”).

Lombard Risk is the market leader for UK Bank Regulatory Reporting with approximately 130 of the 360 banks and foreign branches, and approximately 15 investment firms in the UK using the STB‑ Reporter product for regulatory reporting to the FSA. This depth of customer base clearly gives opportunities to sell additional functionality to existing customers, and we believe this puts us in a very strong position to roll out our solutions for Liquidity Reporting and Liquidity Stress Testing to many of our customers later in this financial year after the final version of the FSA’s new rules

are published in October 2009. We already have considerable activity going on in this area in the UK and a number of early engagements. All the current indications are that there will be more regulation in the next year with appreciable extra focus on liquidity reporting and stress testing.

The firm’s ability to offer global solutions has been greatly enhanced through it now having regulatory offerings available or under production for several EMEA and Asian countries as well as the United States. Our Singapore office has made a number of worthwhile product wins including business in Singapore won away from our main competitor, and we obtained our first two customers for Japanese reporting. In addition, the AML product STB‑Detector has seen more contract wins.

In December 2008 the name of the Regulatory Compliance business changed from STB Systems Ltd to Lombard Risk Compliance Ltd. We have kept the STB name in

the products STB‑Reporter and STB‑Detector but under the unified brand for the whole firm of Lombard Risk.

peRsonnel and pRemisesDuring the year we continued to make new hires appropriate to the expected growth of parts of the business, but we also took cost actions designed to establish profitability in the business as a whole, and to allow us to re‑allocate resources to those parts of the business where we see the best prospects. Costs should continue to be contained overall and to reduce as a percentage of any revenue rises as more work proportionately is done in Shanghai.

After the year end we appointed Keith Butcher as Finance Director of the Group. This is an important appointment for us at a time when the Group has broken through to profitability for COLLINE® and sees appreciable opportunity in the regulatory area. Jane Fineman, who has been our Chief Financial Officer for the last two years will be leaving

us shortly. Our arrangement with her had been a part time one, and Jane was unable to change this to full time which the Board felt it now needed. Our thanks go to her for her work in those two years.

Following the successful fund‑raising concluded at the end of September 2009, and my own shareholding reducing to slightly under 50% for the first time, it is entirely appropriate to move towards splitting the roles of Chairman and Chief Executive. We have announced that these roles will be divided in due course, a move that is welcomed by new investors into the Company.

As part of our cost reduction measures the Board collectively decided to reduce the size of our Non‑executive Board to two, from its four at the start of the year. Ian Peacock and Brian Crowe have remained on the Board, while Christopher Wright and Dan Kochav volunteered to step down in January 2009. In addition Michael Thomas, formerly

oveR

250CustomeRs

20of tHe woRld’s top 50 BanKs

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...strengthened governance

than in normal times. Quite apart from the increase in bank regulation there are also a number of “Business as Usual” regulatory software projects in the pipeline, and we are winning contracts especially in Europe and Asia.

The fund‑raising concluded at the end of September 2009 is a very positive move as it will allow the company to operate aggressively in its chosen areas. With a much strengthened balance sheet we also believe this will have commercial advantages to us in an environment where credit risk is still an important issue to many firms.

In this changing environment, the Board continues to believe that as changes in legislation are adopted and credit risk and liquidity management are ever more tightly controlled, risk and regulatory software will be in

demand. Lombard Risk, as the global number 2 in both collateral management software and bank regulatory reporting software, should be well positioned to take advantage of this.

I would like to thank all my colleagues, as well as our advisors, for their hard work and support. Many went the extra mile to win new business and provide good service to our customers, and they deserve my special thanks.

JoHn wisBeyCHaiRman and CHief exeCutive offiCeR24 septemBeR 2009

Chief Executive Officer of STB Systems (renamed Lombard Risk Compliance), has stepped down from the Board. He will remain on the boards of our subsidiaries in Asia. I would like to personally thank all of them for their useful contribution to the Board over several years.

In Shanghai we moved to larger offices in August 2008, having outgrown the previous office. In London we have consolidated our operations into our Curlew Street premises, made possible by a reduced UK headcount. We were not successful in letting out the Earls Court premises, but thankfully the lease expires at the end of September 2009. All residual rent, rates and service charges of the Earls Court lease were provided for in FY 2009, so there will be no further P&L effect in FY 2010. This is a saving of around £0.3m per annum.

pRospeCtsThe Group continues to forecast a buoyant sales pipeline for its COLLINE® collateral management software following the major contract win with a top continental European bank. In addition the Board foresees no end to the increase in bank and securities firm regulation, and is optimistic that this will have a positive effect on the Group’s Regulatory Compliance business. The climate in 2009 is for mandatory spend on bank regulation, and the only issue is what share of this spend the Group can achieve rather than whether it exists. The Board believes that these positive effects well outweigh any residual issues from the 2008 banking crisis and resulting liquidity crunch, although it can be expected that there will continue to be bank mergers and branch closures at a higher rate

china merchants bank is the sixth largest commercial bank by assets in china and is currently among the top 100 banks in the world.

“using stb-reporter from Lombard risk increases our operational transparency and makes

operational control and regulatory reporting easier, faster and ultimately more cost-efficient.

we now have complete ownership over the line-items that we report to our regulators.”

Joseph LoffredoVice President and Chief Financial Officer

china merchants bank, new York

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BoaRd of diReCtoRs

1 2

3 4

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1. JoHn wisBey (B.1956) CHaiRman and CHief exeCutive offiCeRJohn Wisbey founded Lombard Risk in 1989, and has led the Company from start‑up, when the only product was Oberon®, to its current international and multi‑product status. He is responsible for the main strategic issues of the Group and plays a major part in the firm’s client relationships. He has also led the Company’s M&A initiatives, including the acquisition of STB Systems, the acquisition and subsequent spin‑out on AIM of what is now IDOX plc, and the sale to Fitch Ratings of the ValuSpread business for £6m. John was Chairman of IDOX plc until 2005 and continued as a non‑executive director until 2008.

Prior to establishing Lombard Risk, John Wisbey was Head of Option Trading and a Director in the Swap Group at Kleinwort Benson Limited. Before that he spent eight years at Kleinwort Benson in the banking division where he acquired his initial experience in the area of credit risk. This period included several years based in Hong Kong and Singapore.

2. KeitH ButCHeR (B.1962) finanCe diReCtoRKeith Butcher is the newest member of the Lombard Risk team, joining in September 2009. He qualified as a Chartered Accountant with KPMG. Prior to Lombard Risk, he was Finance Director of Flomerics Group plc where he managed the successful sale to a NASDAQ listed business for almost triple the pre‑bid valuation. Before that, he was Finance Director at DataCash Group plc during which time the market capitalisation grew from £8m to almost £300m. He previously worked for PriceWaterhouseCoopers and Diagonal plc.

3. ian peaCoCK (B.1947) non‑exeCutive deputy CHaiRmanIan Peacock joined the Board of Lombard Risk in 2000. He is also the Chairman of Mothercare plc, a consultant to the Board of the UK bank C.Hoare & Co (founded in 1672), and Chairman of the Family Mosaic Housing Association. Ian Peacock previously held a number of other senior positions including serving on the Barclays Bank Group Credit Committee, and the Group Board of Kleinwort Benson Group plc as well as Chairman of the Kleinwort Benson Credit Committee. He was also Chairman of Galiform plc from 2000‑2006, a special advisor to the Bank of England from 1998–2000 and was a Non‑executive Director of Norwich and Peterborough Building Society until 2005.

4. BRian CRowe (B.1957) non‑exeCutive diReCtoRBrian Crowe joined the Board of Lombard Risk in 2004 at the time of its IPO on AIM. He was the Chief Executive of Global Banking & Markets at the Royal Bank of Scotland plc (“RBS”) until October 2008. During his tenure at RBS, Brian Crowe was a member of the Group ALCO, Credit and Investment Committees of RBS and a member of the Group Executive Management Committee. He was chairman of the Wholesale Committee of the British Bankers Association from 2006 to 2008, and was a member of the Global Banking Issues Committee of the European Banking Federation (or Fédération Bancaire Européenne) from 2005 to 2008. He was also a member of the City of London EU Strategy Group for 2007/8. Prior to joining RBS, he was Head of Derivatives at Chase Manhattan Bank in London. He is a former Board member of the International Swaps and Derivatives Association (ISDA).

the group is run by its board of directors, which currently has four members including two non-executive directors and meets regularly. the non-executive directors make a valuable contribution by bringing a breadth of business and relevant professional experience to the board. the board has overall responsibility for the group and there is a formal schedule of matters specifically reserved for decision by the board. it is responsible for the overall group strategy, acquisition and divestment policy, approval of major capital expenditure and consideration of significant capital matters.

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lomBaRd RisK’s management team

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Lombard risk’s management team has been constructed from experts in their respective fields. Many have banking backgrounds and have used risk management and regulatory software in previous roles, giving them first hand knowledge of customer needs and desires.

these individuals’ skills and experience have been brought together to create a team that now has the ability to respond to and anticipate customer requirements. this gives considerable market advantage when competing for business and delivering to plan.

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Directors’ report For the year enDeD 31 March 2009

The Directors submit their Annual Report together with the consolidated financial statements for the year ended 31 March 2009.

Directors’ responsibilitiesThe Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union, and Parent Company financial statements in accordance with UK Generally Accepted Accounting Practice (“UK GAAP”). The financial statements are required by law to give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:

select suitable accounting policies and then apply them consistently;

make judgments and estimates that are reasonable and prudent;

state whether applicable IFRS and UK GAAP have been followed, subject to any material departures disclosed and explained in the financial statements; and

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

The Directors are responsible for keeping proper accounting records that 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 safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

In so far as each of the Directors is aware:

there is no relevant audit information of which the Company’s auditors are unaware; and

the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

principal activities anD business reviewThe Company is a holding company. The principal activities of the Group are the provision of trading, valuation and risk management systems and regulatory, anti money laundering and compliance systems to the financial markets. A review of these activities, future developments and financial risk management is provided in the Chairman’s statement and note 14 Financial risk management. This information forms a part of the Directors’ report.

results anD DiviDenDsThe audited financial statements for the year ended 31 March 2009 are set out on pages 18 to 21. The Group’s loss for the year after taxation amounted to £1,098,937 (2008: loss £672,895). The Directors do not propose a dividend for the year (2008: £Nil).

Directors anD their interestsThe Directors who served during the year and their beneficial interests in the Company’s ordinary share capital were as follows: 31 March 2009 31 March 2008 number Number

John Wisbey1 81,889,562 81,324,562Ian Peacock 1,088,532 1,088,532Brian Crowe 625,000 625,000Michael Thomas (resigned from Board 1 July 2009) 4,958,360 4,958,360Dan Kochav (resigned from Board 31 January 2009) 375,000 375,000Christopher Wright (resigned from Board 31 January 2009) 1,205,066 1,205,0661 77,939,562 shares are owned directly. In addition John Wisbey is a beneficiary of Advanced Technology Trust which owns a further 3,950,000 shares.

In addition to these shareholdings listed above, the Directors have been granted options over ordinary shares.

In accordance with the Articles of Association, John Wisbey is due to retire at the forthcoming Annual General Meeting and, being eligible, will offer himself for re‑election.

charitable anD political DonationsThe Group made no charitable donations in the year (2008: £Nil) and no political donations (2008: £Nil).

payMent oF creDitorsIt is the Group’s practice to agree credit terms with all suppliers and to pay all approved invoices within these agreed terms. The average trade creditor days for the year was 75 days (2008: 71 days).

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substantial shareholDingsAs at 31 March 2009 the Company was aware of the following interests in 3% or more of its issued share capital: Number of shares % holding

John Wisbey 81,889,562 60.13AMF (NBF) Holdings Inc. 12,222,222 8.98Merifin Capital NV 7,525,264 5.53Royal Bank Ventures Investments Ltd 5,536,990 4.07Michael Thomas 4,958,360 3.64Anthony Brown 4,808,360 3.53

research anD DevelopMentResearch and development expenditure incurred on the Group’s suite of products has all been expensed to the income statement in the relevant period.

post balance sheet eventsThe Company entered into additional Director loans from Brian Crowe, Non‑executive Director, for £200,000 and a further £100,000 from John Wisbey, Chairman and Chief Executive Officer. These funds have been used to provide the Company with additional working capital. This raised the overall total of Director loans (the “Loans”) to £1,600,000 (excluding the £30,000 loan from Michael Thomas who was a director at year end but stood down in July 2009). The Loans, which bear interest at 1% per month, are on a demand basis from the point of view of the lenders and repayable at any time at the Company’s option.

On 23 September 2009 the Company concluded a fund‑raising in which, subject to EGM approval and the meeting of various placing conditions, it will raise £1,800,000 of new money (before expenses) in a placing from institutional investors and other shareholders. At the same time as completion of the placing, there will be conversions of director loans into equity by John Wisbey in the amount of £790,000, £200,000 by Brian Crowe, £10,000 by Ian Peacock and £30,000 by a former director Michael Thomas. There will also be a repayment of the remaining £600,000 of director loans. The proceeds of the fund‑raising are being used partly to strengthen the Company’s balance sheet and partly to repay in their entirety, the director loans not converted into equity.

As a result of these events the Company will, on completion of the placing, have no external debt including debt due to Directors.

going concernThe financial statements have, as in previous years, been prepared on a going concern basis. The Directors have formally considered this issue in the light of the operating losses and the consequent operating cash outflows in the period.

In forming an opinion that the Company and the Group are going concerns, the Directors have taken into account the Group’s strong sales pipeline helped by its contract win earlier this year with a Tier 1 bank for collateral management, the opportunity in the regulatory space for UK Liquidity Reporting in the next year, the fund‑raising of £1,800,000 concluded at the end of September 2009, subject to EGM approval and the meeting of various placing conditions (expected to complete in October 2009), and the simultaneous capitalisation of £1,030,000 of loans from directors and a former director and the elimination of all debt from the balance sheet.

The Directors have prepared cashflow forecasts for the period to 31 March 2011. Within these forecasts certain assumptions have been made over the timing of revenues and costs and take into account the £1,800,000 fundraising concluded at the end of September 2009.

The forecasts show that the Company and Group have sufficient facilities for ongoing operations. Whilst there will always remain some inherent uncertainty within the aforementioned cashflow, the Directors believe the Company and Group have sufficient resources to continue in operational existence for at least twelve months from the date of approval of these financial statements.

Accordingly the Directors continue to adopt the going concern basis in preparing the financial statements for the year ended 31 March 2009.

auDitorsA resolution to re‑appoint Grant Thornton UK LLP as auditors and to authorise the Directors to agree their remuneration will be placed before the forthcoming Annual General Meeting of the Company.

On behalf of the Board

John wisbeyDirector

registereD oFFiceIndia House 45 Curlew Street London SE1 2ND

24 septeMber 2009

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corporate governance report For the year enDeD 31 March 2009

policy stateMentThe Board is committed to high standards of integrity and Corporate Governance, consistently seeking to apply the principles set out in the Combined Code (“the Code”) although recognising that as an AIM company the Company is not required to comply with the provisions of the Code and, largely because of its size, does not comply with a number of them. This statement, together with the Directors’ report and the Report of the Board to shareholders on Directors’ remuneration, explains how the Group has applied the principles set out in the Code.

internal controlsThe Directors are responsible for the systems of internal control. Although no system of internal control can provide absolute assurance against material misstatement or loss, the Group’s systems are designed to provide the Directors with reasonable assurance that problems are identified on a timely basis and dealt with appropriately. The Board considers that there have been no substantial weaknesses in internal financial controls resulting in any material losses, contingencies or uncertainties, and thus disclosable in the accounts. The Board has considered the need for an internal audit function and has concluded that there is no current need for such a function within the Company.

accounting policiesThe Board considers the appropriateness of its accounting policies on an annual basis. The Board believes that its accounting policies and estimation techniques are appropriate in particular in relation to income recognition, research and development and deferred expenses.

boarD oF DirectorsThe Board, comprising an Executive Chairman, one Executive Director and two Non‑executive Directors, is responsible for the overall strategy and direction of Lombard Risk Management plc as well as for approving potential acquisitions, major capital expenditure items and financing matters. The Board has a formal schedule of business reserved to it and meets regularly during the year. Advice from independent sources is available if required. The Board monitors exposure to key business risks, reviews the strategic direction of the Company, the annual budgets and progress against those budgets.

The Board members and their roles are described on page 9. The Executive Directors have service contracts, which are terminable upon periods between three and twelve months’ notice. In accordance with the Company’s Articles of Association, one third of the Directors are required to retire by rotation at the Annual General Meeting.

shareholDer relationsThe Company recognises the importance of dialogue with all of its shareholders. The Annual General Meeting is an opportunity to communicate with institutional and other shareholders. Additional information is supplied through the circulation of the interim report and the Annual Report and accounts. Lombard Risk Management plc maintains up to date information on the investor section of its website www.lombardrisk.com.

Every shareholder receives a full Annual Report after each year end and has access to an interim report online after each half year end. Care is taken to ensure that any price sensitive information is released to all its shareholders, institutional and private, at the same time in accordance with London Stock Exchange requirements.

auDit coMMitteeThe Audit Committee is a committee of the Board chaired by Ian Peacock and also comprises Brian Crowe and John Wisbey. The Report of the Audit Committee can be found on page 15.

reMuneration coMMitteeThe Remuneration Committee is chaired by Brian Crowe and also comprises Ian Peacock and John Wisbey. The committee reviews the remuneration structures and performance of the Executive Directors and reviews the remuneration policy for senior management. The Remuneration Committee meets as and when necessary and has access to professional advice from inside and outside the Company. No Executive Director may participate in decisions regarding his own remuneration. The Board as a whole determines the remuneration arrangements of the Non‑executive Directors.

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report oF the auDit coMMittee For the year enDeD 31 March 2009

MeMbership anD Meetings oF the auDit coMMitteeThe Audit Committee is a committee of the Board and the majority is composed of Non‑executive Directors, whom the Board considers to be independent. The Audit Committee invites the Executive Directors and other senior managers to attend its meetings as appropriate.

During the year the Audit Committee was chaired by Christopher Wright and also Ian Peacock, who adopted this role from 1st February 2009. John Wisbey remained a committee member, while Brian Crowe became a member on 1 February 2009. The Audit Committee is considered to have sufficient, recent and relevant financial experience to discharge its functions. The Audit Committee invites others, including the external auditors, to attend its meetings as appropriate.

During the period under review, the Audit Committee met four times.

role, responsibilities anD terMs oF reFerenceThe Audit Committee’s role is to assist the Board in the effective discharge of its responsibilities for financial reporting and internal control.

The Audit Committee’s responsibilities include:

reviewing the integrity of the annual and interim financial statements of the Group ensuring they comply with legal requirements, accounting standards and the AIM rules, and any other formal announcements relating to the Group’s financial performance;

reviewing the Group’s internal financial control and risk management systems;

monitoring and reviewing the requirement for an internal audit function; and

overseeing the relationship with the external auditors, including approval of their remuneration, reviewing the scope of the audit engagement, assessing their independence, monitoring the provision of non‑audit services, and considering their reports on the Group’s financial statements.

inDepenDence oF external auDitorsThe Audit Committee keeps under review the relationship with the external auditors including:

the independence and objectivity of the external auditors, taking into account the relevant UK professional and regulatory requirements and the relationship with the auditors as a whole, including the provision of non‑audit services;

recommending to the Board and shareholders the re‑appointment or otherwise of the external auditors for the following financial period; and

the consideration of audit fees and any fees for non‑audit services.

The Audit Committee develops and recommends to the Board the Company’s policy in relation to the provision of non‑audit services by the auditors, and ensures that the provision of such services does not impair the external auditor independence.

ian peacockchairMan oF the auDit coMMittee24 septeMber 2009

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consoliDateD Financial stateMentsFor the year enDeD 31 March 2009

17 report oF the inDepenDent auDitor – consoliDateD Financial stateMents 18 consoliDateD incoMe stateMent 19 consoliDateD balance sheet 20 consoliDateD stateMent oF changes in shareholDers’ equity 21 consoliDateD cash Flow stateMent 22 notes to the consoliDateD Financial stateMents

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report oF the inDepenDent auDitorconsoliDateD Financial stateMents

to the shareholDers oF loMbarD risk ManageMent plcWe have audited the Consolidated financial statements (the “financial statements”) of Lombard Risk Management plc for the year ended 31 March 2009 which comprise the accounting policies, the consolidated income statement, the consolidated balance sheet, the consolidated statement of changes in shareholders’ equity, the consolidated cash flow statement and notes 1 to 22. These financial statements have been prepared under the accounting policies set out therein.

We have reported separately on the Parent Company financial statements of Lombard Risk Management plc for the year ended 31 March 2009.

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 auDitorThe Directors’ responsibilities for preparing the Annual Report and the Consolidated financial statements in accordance with United Kingdom Law and International Financial Reporting Standards (“IFRS”) as adopted by the European Union are set out in the Statement of Directors’ responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the Consolidated 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 whether in our opinion the information given in the Directors’ report is consistent with the financial statements. The information given in the Directors’ report includes that specific information presented in the Chairman’s statement and the Corporate governance report that is cross referred from the Business review section of the Directors’ report.

In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding Directors’ remuneration and other transactions is not disclosed.

We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. The other information comprises only the Highlights, the Chairman’s Statement, the Board of Directors, the Directors’ report, the Corporate governance report and the Report of the Audit Committee. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

basis oF auDit opinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Consolidated financial statements. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the Consolidated financial statements and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the 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 Consolidated financial statements.

opinionIn our opinion:

the Consolidated financial statements give a true and fair view, in accordance with IFRS as adopted by the European Union, of the state of the Group’s affairs as at 31 March 2009 and of the Group’s loss for the year then ended;

the Consolidated financial statements have been properly prepared in accordance with the Companies Act 1985; and

the information given in the Directors’ report is consistent with the financial statements.

grant thornton uk llpregistereD auDitor, chartereD accountantslonDon24 septeMber 2009

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consoliDateD incoMe stateMent For the year enDeD 31 March 2009

year ended Year ended 31 March 2009 31 March 2008 Note £ £

Continuing operations

Revenue 2 8,694,450 8,460,594

Cost of sales (43,936) (52,897)

Gross profit 2 8,650,514 8,407,697

Administrative expenses (9,769,510) (9,458,899)

(Loss) from operations 4 (1,118,996) (1,051,202)

(Loss) on disposal of quoted investment — (40,788)

Finance expense 5 (139,736) (35,218)

Finance income 6 5,000 10,652

(Loss) before taxation (1,253,732) (1,116,556)

Taxation 7 96,074 150,000

(Loss) for the year from continuing operations (1,157,658) (966,556)

Profit for the year from discontinued activities 8 58,721 293,661

(Loss) for the year (1,098,937) (672,895)

(Loss) per share

Basic (pence) 9 (0.81) (0.50)

Diluted (pence) 9 (0.81) (0.50)

(Loss) per share on continuing activities

Basic (pence) 9 (0.85) (0.71)

Diluted (pence) 9 (0.85) (0.71)

Earnings per share on discontinued activities

Basic (pence) 9 0.04 0.22

Diluted (pence) 9 0.04 0.22

The accompanying accounting policies and notes form an integral part of the financial statements.

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consoliDateD balance sheet as at 31 March 2009

as at As at 31 March 2009 31 March 2008 Note £ £

Non‑current assets

Property, plant and equipment 10 239,798 143,995

Goodwill 11 3,632,680 3,632,680

Other intangible assets 11 11,441 4,319

3,883,919 3,780,994

Current assets

Trade and other receivables 12 2,842,226 2,320,672

Cash and cash equivalents 150,999 494,894

2,993,225 2,815,566

Total assets 6,877,144 6,596,560

Current liabilities

Trade and other payables 13 (3,847,208) (2,406,181)

Provisions 15 (137,664) (146,794)

Deferred income (2,580,502) (2,690,195)

(6,565,374) (5,243,170)

Total liabilities (6,565,374) (5,243,170)

Net assets 311,770 1,353,390

Equity

Share capital 16 1,110,715 1,108,510

Share premium account 2,512,904 2,490,110

Foreign exchange reserves (9,136) (30,208)

Other reserves 1,649,152 1,637,906

Profit and loss account (4,951,865) (3,852,928)

Total equity 311,770 1,353,390

The financial statements were approved by the Board on 24 September 2009 and signed on its behalf by:

John wisbeychairMan anD chieF executive oFFicer

The accompanying accounting policies and notes form an integral part of the financial statements.

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consoliDateD stateMent oF changes in shareholDers’ equityFor the year enDeD 31 March 2009 Share Foreign Profitand share premium exchange other loss total capital account reserves reserves account equity £ £ £ £ £ £

Balance at 1 April 2008 1,108,510 2,490,110 (30,208) 1,637,906 (3,852,928) 1,353,390

Foreign exchange movements on consolidation of foreign operations — — 21,072 — — 21,072

Income and expense recognised directly in equity — — 21,072 — — 21,072

Loss for the year — — — — (1,098,937) (1,098,937)

Total recognised income and expense for the year — — 21,072 — (1,098,937) (1,077,865)

441,176 new ordinary shares issued 2,205 22,794 — — — 24,999

Share‑based payment charge — — — 11,246 — 11,246

Balance at 31 March 2009 1,110,715 2,512,904 (9,136) 1,649,152 (4,951,865) 311,770

Share Foreign Profitand Share premium exchange Other loss Total capital account reserves reserves account equity £ £ £ £ £ £

Balance at 1 April 2007 1,103,510 2,415,110 (4,196) 1,597,295 (3,180,033) 1,931,686

Foreign exchange movements on consolidation of foreign operations — — (26,012) — — (26,012)

Income and expense recognised directly in equity — — (26,012) — — (26,012)

Loss for the year — — — — (672,895) (672,895)

Total recognised income and expense for the year — — (26,012) — (672,895) (698,907)

1,000,000 new ordinary shares issued 5,000 75,000 — — — 80,000

Share‑based payment charge — — — 40,611 — 40,611

Balance at 31 March 2008 1,108,510 2,490,110 (30,208) 1,637,906 (3,852,928) 1,353,390

Other reserves relate to negative goodwill arising on the acquisition of a subsidiary undertaking prior to 1 April 1997 and the merger reserve.

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consoliDateD cash Flow stateMent For the year enDeD 31 March 2009

year ended Year ended 31 March 2009 31 March 2008 £ £

Cash flows from operating activities

Loss for the period excluding discontinued operations (1,157,658) (966,556)

Tax credit (96,074) (150,000)

Finance income (5,000) (10,652)

Finance expense 139,736 35,218

Loss on disposal of quoted investment — 40,788

Operating loss (1,118,996) (1,051,202)

Profit on discontinued activities (58,721) (353,328)

Adjustments for:

Depreciation 157,032 193,908

Amortisation 13,451 20,315

Share‑based payment charge 11,246 40,611

Provision for onerous lease (9,130) 146,794

Increase in trade and other receivables (521,554) (874,248)

Increase in trade and other payables 683,059 296,170

(Decrease)/increase in deferred income (109,693) 180,982

Cash used in operations (953,306) (1,399,998)

Tax credit received 96,074 150,000

Net cash outflow from operating activities (857,232) (1,249,998)

Cash flows from investing activities

Purchase of property, plant and equipment (235,151) (112,945)

Purchase of intangible fixed assets (20,496) (10,195)

Proceeds from sale of IVRS 58,721 691,058

Disposal of IDOX shares — 407,212

Net cash generated by/(used in) investing activities (196,926) 975,130

Cash flows from financing activities

Loans from Directors 820,000 660,000

Repayment of Directors’ loan — (150,000)

Shares issued 24,999 —

Interest received 5,000 10,652

Interest paid (139,736) (35,218)

Net cash generated by financing activities 710,263 485,434

Net (decrease)/increase in cash and cash equivalents (343,895) 210,566

Cash and cash equivalents at beginning of period 494,894 284,328

Cash and cash equivalents at end of period 150,999 494,894

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notes to the consoliDateD Financial stateMents For the year enDeD 31 March 2009

1. accounting policies(a) basis oF preparationThese consolidated financial statements are for the year ended 31 March 2009. They have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and International Financial Reporting Interpretation Committee (“IFRIC”) interpretations as at 31 March 2009, as adopted by the European Union. They have been prepared under the historical cost convention.

The preparation of financial statements under IFRS requires the Board to make judgments, estimates and assumptions that affect the application of accounting policies, the reported amounts of balance sheet items at the period end and the reported amount of revenue and expense during the reporting period. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments that are not readily apparent from other sources. However, the actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on‑going basis.

New standards and interpretations currently in issue but not effective for accounting periods commencing on 1 April 2008 are:

a. IAS 1 “Presentation of Financial Statements” (revised 2007)

b. IAS 23 “Borrowing Costs” (revised 2007)

c. Amendment to IAS 32 “Financial Instruments: Presentation” and IAS 1 “Presentation of Financial Statements – Puttable Financial Instruments and Obligations Arising on Liquidation”

d. IAS 27 “Consolidated and Separate Financial Statements” (Revised 2008)

e. Amendment to IFRS 2 “Share‑based Payment – Vesting Conditions and Cancellations”

f. Amendments to IFRS 1 “First‑time Adoption of International Financial Reporting Standards” and IAS 27 “Consolidated and Separate Financial Statements – Costs of Investment in a Subsidiary, Jointly Controlled Entity or Associate”

g. Amendment to IAS 39 “Financial Instruments: Recognition and Measurement – Eligible Hedged Items”

h. “Group Cash‑settled Share‑based Payment Transactions” – Amendment to IFRS 2

i. Amendment to IFRS 7 “Financial Instruments: Disclosures – Improving Disclosures About Financial Instruments”

j. “Embedded Derivatives” – Amendments to IAS 39 and IFRIC 9

k. Improvements to IFRSs 2008

l. Improvements to IFRSs 2009

m. IFRS 3 “Business Combinations” (Revised 2008)

n. IFRS 8 “Operating Segments”

o. IFRIC 13 “Customer Loyalty Programmes”

p. IFRIC 15 “Agreements for the Construction of Real Estate”

q. IFRIC 16 “Hedges of a Net Investment in a Foreign Operation”

r. IFRIC 17 “Distributions of Non‑cash Assets to Owners”

s. IFRIC 18 “Transfers of Assets from Customers”

The Directors do not believe that the implementation of these standards will have a material effect on the reported results.

(b) basis oF consoliDationThe Group accounts consolidate the financial statements of the Parent Company (Lombard Risk Management plc) and its subsidiary undertakings over which it has full control (see note 5 to the Parent Company balance sheet). A description of the principal activities and operations of the Group can be found in the Director’s Report on pages 12 and 13.

The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings made up to 31 March 2009. The acquisition method of accounting has been adopted. Under this method, the results of subsidiary undertakings acquired or disposed of in the year are included in the consolidated income statement from the date of acquisition or up to the date of disposal. All of the Group’s assets and liabilities existing at the date of acquisition are recorded at their fair values reflecting their condition at that date. Profits or losses on intra‑group transactions are eliminated in full. Goodwill arising on consolidation was written off to reserves prior to 1 April 1999. Goodwill arising after this date is capitalised and under IFRS 3 goodwill is not amortised, but an impairment test is performed as appropriate, but at least annually. The value of goodwill is to be written down according to the outcome of the impairment test.

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(c) going concernThe financial statements have, as in previous years, been prepared on a going concern basis. The Directors have formally considered this issue in the light of the operating losses and the consequent operating cash outflows in the period.





(d) revenueRevenue represents the value of goods sold and services provided during the year, stated net of Value Added Tax. Revenue and pre‑tax profit are wholly attributable to the principal activities of the Group.

The recognition of revenue depends on the type of income:

Licence income For long‑term projects which do not include the up‑front delivery of immediately usable software, revenue is recognised on both the consultancy and initial licence elements in line with the estimated percentage of completion of the project. That part of licence and maintenance revenue invoiced simultaneously with the initial licence but considered to relate to the period when the licence is deemed to be live is deferred in its entirety until the live date, following which it is released to profit in equal daily instalments over the duration of the relevant licence or maintenance. For other projects which do include the up‑front delivery of immediately usable software, revenue is recognised in accordance with the invoicing schedule, on a percentage completion basis. For non‑refundable licences revenue is recognised in full on customer acceptance.

Customisation income Recognised once the customisation has taken place.

Maintenance income Recognised evenly over the term of the maintenance contract.

Rental income Recognised evenly over the term of the rental contract.

Data subscription income Recognised evenly over the term of the data contract.

Training income Recognised when the relevant courses are run.

(e) property, plant anD equipMentProperty, plant and equipment are stated at cost, net of depreciation and any provision for impairment. No depreciation is charged during the period of construction. Leasehold property is included in property, plant and equipment only where it is held under a finance lease.

The cost of computer hardware, fixtures, fittings and equipment, is written down to the residual value and is depreciated in equal annual instalments over the estimated useful lives of the assets. The residual values of assets or groups of like assets and their useful lives are reviewed annually.

The estimated useful lives of the assets are as follows:

Computer hardware two years Fixtures, fittings and equipment four years

(f) gooDwillGoodwill, representing the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired, is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment losses. Negative goodwill is recognised immediately after acquisition in the Income statement.

(g) intangible assetsresearch anD DevelopMentExpenditure on research is recognised as an expense in the period in which it is incurred.

Development costs incurred are capitalised when all the following conditions are satisfied:

completion of the intangible asset is technically feasible so that it will be available for use or sale;

the Group intends to complete the intangible asset and use or sell it;

the Group has the ability to use or sell the intangible asset;

the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits;

there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

the expenditure attributable to the intangible asset during its development can be measured reliably.

Development costs not meeting the criteria for capitalisation are expensed as incurred.

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notes to the consoliDateD Financial stateMents continueDFor the year enDeD 31 March 2009

1. accounting policies continueD(g) intangible assets continueDcoMputer soFtwareThe cost of computer software, net of estimated residual value and impairment, is depreciated in equal annual instalments over one to two years based on the estimated useful lives of the assets. The residual values of assets or group of like assets are reviewed annually.

(h) Financial instruMentsFinancial assets and liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument. The Group’s financial instruments comprise cash, trade receivables and trade and other payables. Derivative instruments are not used by the Group and the Group does not enter into speculative derivative contracts.

loans anD receivablesLoans and receivables are stated at their fair value plus transaction costs, then subsequently at amortised cost using the effective interest method, if applicable, less impairment losses. Provisions against trade receivables are made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write‑down is determined as the difference between the assets carrying amount and the present value of the estimated future cash flows.

cash anD cash equivalentsThe Group manages short‑term liquidity through the holding of cash and highly liquid interest bearing deposits. Only deposits that are readily convertible into cash, with no penalty of lost interest, are shown as cash or cash equivalent.

traDe payablesFinancial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial liabilities categorised as at fair value through profit or loss are recorded initially at fair value; all transaction costs are recognised immediately in the income statement. All other financial liabilities are recorded initially at fair value, net of direct issue costs.

Financial liabilities categorised as at fair value through profit or loss are re‑measured at each reporting date at fair value, with changes in fair value being recognised in the income statement. All other financial liabilities are recorded at amortised cost using the effective interest method, with interest‑related charges recognised as an expense in finance cost in the Income statement.

A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.

(i) Foreign exchangeTransactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Non‑monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Non‑monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the profit or loss in the period in which they arise. Exchange differences on non‑monetary items are recognised in the statement of recognised income and expenses to the extent that they relate to a gain or loss on that non‑monetary item taken to the statement of recognised income and expenses, otherwise such gains and losses are recognised in the income statement.

The assets and liabilities in the financial statements of foreign subsidiaries are translated at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at the actual rate at the date of transaction. The exchange differences arising from the retranslation of the opening net investment in subsidiaries are taken directly to the “Foreign exchange reserve” in equity. On disposal of a foreign operation the cumulative translation differences (including, if applicable, gains and losses on related hedges) are transferred to the income statement as part of the gain or loss on disposal.

(j) taxationCurrent tax is the tax currently payable based on taxable profit for the year. The tax credit arises from the UK legislation regarding the treatment of certain qualifying research and development costs, allowing for the surrender of tax losses attributable to such costs in return for a tax rebate.

Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity (such as the revaluation of land) in which case the related deferred tax is also charged or credited directly to equity.

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(k) leaseD assetsThe Group does not hold any finance leases.

All leases referred to are regarded as operating leases and the payments made under them are charged to the income statement on a straight line basis over the lease term. Lease incentives are spread over the term of the lease.

Where leased buildings are vacated or under‑utilised a provision is made for the loss of benefit over the remainder of the lease.

(l) pension costsThe Group operates a number of defined contribution pension schemes. The assets of the schemes are held separately from those of the Group in independently administered funds. The amount charged to the income statement represents the contributions payable to the schemes in respect of the accounting period.

(m) share options issueD to eMployeesAll share‑based payment arrangements granted after 7 November 2002 that had not vested prior to 1 April 2006 are recognised in the financial statements.

All goods and services received in exchange for the grant of any share‑based payment are measured at their fair values. Where employees are rewarded using share‑based payments, the fair values of employees’ services are determined indirectly by reference to the fair value of the instrument granted to the employee. This fair value is appraised at the grant date using a Binomial model, taking into account the terms and conditions upon which the options were granted.

All equity‑settled share‑based payments are ultimately recognised as an expense in the income statement with a corresponding credit to “other reserves”.

If vesting periods or other non‑market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.

Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital, and where appropriate, share premium.

(n) iMpairMent testing oF gooDwill, other intangible assets anD property, plant anD equipMentFor the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash‑generating units). As a result, some assets are tested individually for impairment and some are tested at cash‑generating unit level. Goodwill is allocated to those cash‑generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors the related cash flows.

Goodwill, other individual assets or cash‑generating units that include goodwill, other intangible assets with an indefinite useful life, and those intangible assets not yet available for use are tested for impairment at least annually. All other individual assets or cash‑generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset’s or cash‑generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Impairment losses recognised for cash‑generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash‑generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

(o) key JuDgMent in applying the entity’s accounting policies anD gooDwill iMpairMentThe Group’s management makes estimates and assumptions regarding the future. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a reasonable risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

recognition oF revenueRevenue is recognised according to the accounting policies as stated and is dependent upon the type of income. Where contracts include different elements of revenue, those elements are recognised in line with those policies, with fair values attributed to each component part.

Judgement is used in the recognition of revenue from long term projects.

If work is contracted on a fixed cost basis, revenue is recognised in line with an estimation of the percentage of completion of the project. This estimation is based upon the views of the consultants implementing the projects as to the proportion of the project completed and this is supported by data from a time recording system. There is, however, an element of judgement involved that can impact the recognition of revenue. This process and individual project recognition is reviewed regularly to ensure that, whilst still subjective, the reflection of revenue is the best approximation possible.

Where projects include the up‑front delivery of immediately usable software, the element of non‑refundable licence revenue is recognised on receipt of the software by the customer, with other revenue being recognised in line with the performance of the contracted services. The unbundling of this contract revenue requires management to exercise judgement as to the relative fair values of the component parts of the contract.

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1. accounting policies continueD(o) key JuDgMent in applying the entity’s accounting policies anD gooDwill iMpairMent continueDgooDwill iMpairMentThe goodwill relates to the acquisition of the STB group of companies (renamed Lombard Risk Compliance) that were acquired in 2005. The impairment review has been carried out on that sub‑group. The results of this secondary reporting segment are reported as Regulatory compliance software in note 2.

In accordance with IAS36 “Impairment of assets”, the carrying value of goodwill has been assessed comparing its carrying value to its recoverable amount. The recoverable amount has been calculated by the Directors as being the fair value less costs of sale.

To arrive at fair value less costs of sale, the Directors have reviewed observable market information, that being the price to sales ratios of recent transactions in the sector as well as enterprise value/turnover ratios based on recent deals and similar quoted companies.

The value of Lombard Risk Compliance is largely influenced by the expected success of its Liquidity Engine, which is expected to benefit significantly from the FSA’s rules on liquidity reporting and stress testing introduced in April 2009.

The directors are of the opinion that this opportunity supports the fair value less costs of sale approach to assessing the carrying value of the Lombard Risk Compliance group and consider this to be a more relevant and reliable methodology, in this instance, than value in use.

On the basis of these assessments the Board considers there is no need to impair the carrying value of goodwill.

The key assumption when using observable information is that the company will be successful in taking advantage of the current regulatory environment and that sales of the Liquidity Engine will significantly increase revenue. Should this not be the case, then direct comparisons to other transactions and other quoted companies would become less relevant and the need for impairment would be assessed.

2. business segMentationFor management purposes only the Group had four operating units during the period: the United Kingdom; Rest of Europe; Middle East and Africa; The Americas; and Asia Pacific. These units are the primary segments of the Group. In addition the Group’s revenue and loss on ordinary activities are derived from trading in valuation and risk management systems and regulatory, anti money laundering and compliance systems to the finance and banking sector. These are the secondary segments of the Group.

analysis by geographical Destination year ended Year ended 31 March 2009 31 March 2008 £ £

RevenueUnited Kingdom 4,948,005 4,451,189Rest of Europe, Middle East and Africa 1,491,944 2,324,387The Americas 1,586,906 1,030,239Asia Pacific 667,595 654,779Total revenue 8,694,450 8,460,594CostsUnited Kingdom (7,933,184) (6,028,169)Rest of Europe, Middle East and Africa (152,000) (1,534,016)The Americas (723,322) (1,176,436)Asia Pacific (984,881) (688,529)Total costs (9,793,387) (9,427,150)Profit/(loss)United Kingdom (2,985,179) (1,576,980)Rest of Europe, Middle East and Africa 1,339,944 790,371The Americas 863,584 (146,197)Asia Pacific (317,286) (33,750)Total (loss) (1,098,937) (966,556)Net assetsUnited Kingdom (1,863,675) 1,087,749Rest of Europe, Middle East and Africa 1,339,944 —The Americas 898,975 26,011Asia Pacific (63,474) 239,630Net assets 311,770 1,353,390

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analysis by traDing activity year ended Year ended 31 March 2009 31 March 2008 £ £

RevenueRegulatory compliance software 4,840,863 5,304,332Risk management and trading software 3,853,587 3,153,457Software development unallocated — 2,805Group unallocated — —Total revenue 8,694,450 8,460,594CostsRegulatory compliance software (6,805,675) (4,722,762)Risk management and trading software (2,987,712) (1,779,776)Software development unallocated — (997,740)Group unallocated — (1,926,872)Total costs (9,793,387) (9,427,150)Profit/(loss)Regulatory compliance software (1,964,812) 581,570Risk management and trading software 865,875 1,373,681Software development unallocated — (994,935)Group unallocated — (1,926,872)Total profit/(loss) (1,098,937) (966,556)Net assetsRegulatory compliance software (602,309) 1,362,503Risk management and trading software 2,643,077 1,777,202Software development unallocated (1,540,367) (1,540,367)Group unallocated (188,631) (245,948)Net assets 311,770 1,353,390

In 2008, neither overhead nor development costs were allocated to the regulatory compliance software or risk management and trading software activities. This year, and henceforth, they will be fully allocated to enable clear visibility of activity profitability.

3. Directors anD eMployees 2009 2008 £ £

Emoluments 431,215 540,463Pension costs 9,326 3,000 440,541 543,463

Highest paid Director:Aggregate emoluments 200,000 198,500

No share options were exercised by the highest paid Director. Michael Thomas is the only Director accruing benefits under a stakeholder pension scheme. There were no pension contributions made in respect of the highest paid Director. 2009 2008 £ £

Wages and salaries 5,804,417 5,604,766Social security costs 820,099 701,822Pension costs 112,357 117,714Share‑based payments charge (note 17) 11,246 40,611Total staff costs 6,748,119 6,464,913

The average monthly number of employees (excluding Directors) during the year was: 2009 2008 number Number

Office and administration 12 12Operational 146 121Total 158 133

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4. loss FroM operationsThe loss on operations before taxation is stated after charging/(crediting): 2009 2008 £ £

Auditors’ remuneration – Company audit fee 25,000 22,426

Fees payable to the Company auditors for other servicesSubsidiary company audit fees 67,953 60,955Tax services 33,166 5,670Other services 20,049 26,500Depreciation 157,032 193,908Amortisation 13,451 20,315Foreign exchange (41,610) (83,254)Operating leases 916,891 793,835Research and development expenditure 1,139,528 2,441,742

5. Finance expense 2009 2008 £ £

Interest on bank loans and overdrafts 1,348 3,487Other interest payable 138,388 31,731 139,736 35,218

6. Finance incoMe 2009 2008 £ £

Interest on bank deposits 1,807 4,970Other interest receivable 3,193 5,682 5,000 10,652

7. taxationThe credit for the year is made up as follows: 2009 2008 Corporate taxation on the results for the year £ £

UK — —Non‑UK — — — —Research and Development tax credit in respect of prior years (96,074) (150,000)Taxation (credit) charge for the year (96,074) (150,000)

The Group has received to date R&D tax credits of £816,082 (2008: £720,008) relating to financial years ended 31 March 2002 to 2007. As for all companies that have received these credits, the amounts are subject to potential future HM Revenue & Customs clawback. During the year ended 31 March 2009 no tax losses (2008: £Nil) were surrendered in exchange for the research and development tax credit.

The tax assessed for the period is the standard rate of corporation tax in the UK of 28% (2008: 30%). The differences are explained as follows: 2009 2008 £ £

(Loss) on ordinary activities before tax (1,253,732) (1,116,556)(Loss) on ordinary activities multiplied by standard rate of corporation tax in the UK of 28% (2008: 30%) (351,045) (334,967)Effect of:Capital allowances for the period in excess of depreciation 12,000 3,940Increase in tax losses 309,092 274,904Expenses not deductible for tax purposes 29,953 56,123Subtotal — —Relief and refund available in respect of R&D expenditure (96,074) (150,000)Current tax (credit)/charge for the period (96,074) (150,000)

The Directors have not recognised the deferred tax asset of £1.5m arising primarily on trading losses carried forward.

8. DiscontinueD operationsIndependent Valuation and Risk Services Limited (“IVRS”) was sold by the Group on 14 February 2008. In the year ended 31 March 2009, the Group received the full and final settlement of contingent consideration from the disposal, totalling £58,721. This was recognised in the Income statement in the year ended 31 March 2009.

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9. loss per shareBasic loss per share has been calculated by dividing the loss after taxation by the weighted average number of ordinary shares in issue during each period.

Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue on the assumption of conversion of all dilutive potential ordinary shares. The Group has only one category of dilutive potential ordinary shares; those share options granted under the Enterprise Management Incentive Plan. When a loss is incurred, since the conversion of potential ordinary shares to ordinary shares would decrease the net loss per share, options are not dilutive and therefore diluted and basic losses per share are the same (see note 17).

loss per share year ended Year ended 31 March 2009 31 March 2008

(Loss) for the year and basic and diluted earnings attributable to ordinary shareholders (pound) (1,098,937) (672,895)Weighted average number of ordinary shares 136,118,768 135,363,007(Loss) per share (pence) (0.81) (0.50)Effect of dilutive share options — —Adjusted weighted average number of ordinary shares 136,118,768 135,363,007Diluted (loss) per share (pence) (0.81) (0.50)

continuing operations year ended Year ended 31 March 2009 31 March 2008

(Loss) for the year and basic and diluted earnings attributable to ordinary shareholders (pound) (1,157,658) (966,556)Weighted average number of ordinary shares 136,118,768 135,363,007(Loss) per share (pence) (0.85) (0.71)Effect of dilutive share options — —Adjusted weighted average number of ordinary shares 136,118,768 135,363,007Diluted (loss) per share (pence) (0.85) (0.71)

DiscontinueD operations year ended Year ended 31 March 2009 31 March 2008

Profit for the year and basic and diluted earnings attributable on discontinued operations (pound) 58,721 293,661Weighted average number of ordinary shares 136,118,768 135,363,007Earnings per share (pence) 0.04 0.22Effect of dilutive share options — —Adjusted weighted average number of ordinary shares 136,118,768 135,363,007Diluted earnings per share (pence) 0.04 0.22

10. property, plant anD equipMent Computer Fixtures,fittings hardware and equipment Total Group £ £ £

CostAt 1 April 2007 791,362 512,534 1,303,896Additions 80,609 32,336 112,945Foreign exchange effect 5,715 2,866 8,581At 31 March 2008 877,686 547,736 1,425,4221 April 2008 877,686 547,736 1,425,422Additions 97,066 138,085 235,151Foreign exchange effect 41,012 33,093 74,105At 31 March 2009 1,015,764 718,914 1,734,678DepreciationAt 1 April 2007 653,757 427,220 1,080,977Charge for the year 138,793 55,115 193,908Foreign exchange effect 5,103 1,439 6,542At 31 March 2008 797,653 483,774 1,281,427At 1 April 2008 797,653 483,774 1,281,427Charge for the year 88,049 68,983 157,032Foreign exchange effect 42,238 14,183 56,421At 31 March 2009 927,940 566,940 1,494,880Net book valueAt 31 March 2009 87,824 151,974 239,798At 31 March 2008 80,033 63,962 143,995At 31 March 2007 137,605 85,314 222,919

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11. intangible assets Other intangible Goodwill assets Total Group £ £ £

CostAt 1 April 2007 3,632,680 219,779 3,852,459Additions — 10,195 10,195Foreign exchange effect — 526 526At 31 March 2008 3,632,680 230,500 3,863,180At 1 April 2008 3,632,680 230,500 3,863,180Additions — 20,496 20,496Foreign exchange effect — 2,475 2,475At 31 March 2009 3,632,680 253,471 3,886,151AmortisationAt 1 April 2007 — 205,318 205,318Provided in the year — 20,315 20,315Foreign exchange effect — 548 548At 31 March 2008 — 226,181 226,181At 1 April 2008 — 226,181 226,181Provided in the year — 13,451 13,451Foreign exchange effect — 2,398 2,398At 31 March 2009 — 242,030 242,030Net book valueAt 31 March 2009 3,632,680 11,441 3,644,121At 31 March 2008 3,632,680 4,319 3,636,999At 31 March 2007 3,632,680 14,461 3,647,141

For disclosure on goodwill impairment, refer to note 1(o).

12. traDe anD other receivables 2009 2008 £ £

Trade receivables 1,827,243 1,833,164Other receivables 511,343 191,331Prepayments and accrued income 503,640 296,177 2,842,226 2,320,672

The amounts are short term and the Directors consider that the carrying amount of these trade and other receivables approximates to their fair value. All of the Group’s trade and other receivables have been reviewed for indications of impairment. As at 31 March 2009, trade receivables of £1,827,243 (2008: £1,833,164) were fully performing. An impairment provision of £52,914 (2008: £78,746) has been made against the invoices of four clients (2008: one client). In addition, some of the unimpaired trade receivables are past due as of the reporting date. Trade receivables past due are as follows: 2009 2008 £ £

Not more than three months 512,411 815,229More than three months but not more than six months 235,224 369,596More than six months but less than a year 85,144 3,312More than one year 74,475 28,440 907,254 1,216,577

All other receivables (non‑trade) are not past due.

Movements in Group provisions for impairment of trade receivables, as included in administrative expenses, are as follows: 2009 2008 £ £

Opening balance 78,746 —Provision for receivables impairment — 78,746Receivables written off in the year (25,832) —Closing balance 52,914 78,746

The Group operates in a global market with income arising in a number of different currencies, principally Sterling, Euros or US Dollars. The Group does not hedge potential future income, since the existence, quantum and timing of such income cannot be accurately predicted.

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Financial assets denominated in foreign currencies translated into Sterling at the closing rate were: 2009 2008 £ £

Financial assets denominated in Euros 224,824 605,833Financial assets denominated in US Dollars 458,221 162,184Total non Sterling financial assets 683,045 768,017

The following table illustrates the sensitivity of the net result for the year and the reported financial assets of the Group in regards to the exchange rate for Sterling; Euro and Sterling; and US Dollar. The table shows the impact of a fall or strengthening of Sterling against the Euro and US Dollar by 10%: 2009 If Sterling If Sterling as reported rose 10% fell 10% £ £ £

Group result for the year 683,045 (62,095) 102,403Euro denominated financial assets 224,824 (20,439) 24,486US Dollar denominated financial assets 458,221 (41,656) 76,165

13. traDe anD other payables 2009 2008 £ £

Trade payables 519,566 587,893Other taxes and social security costs 859,383 398,822Other payables 1,138,259 909,466Shareholder loans (see note 20) 1,330,000 510,000 3,847,208 2,406,181

14. Financial risk ManageMent anD Financial instruMentsThe Group’s multi‑national operations expose it to financial risks that include market risk, credit risk, operational risk and liquidity risk. The Directors review and agree policies for managing each of these risks and they are summarised below. These policies have remained unchanged from previous years.

Market riskMarket risk for the Group encompasses all those market risk factors that impact the value of the Group’s assets and liabilities and the expected value in base currency of the Group’s revenues and costs. The main risk factors are currency risk, inflation risk, and interest rate risk. The Company’s policies for managing these are as follows:

i) currency riskThe Group is exposed to translational and transactional foreign exchange risk. Overall the firm has receivables in Euros in excess of its payables and has payables in Chinese Yuan, Hong Kong Dollars and Singapore Dollars in excess of its revenues in those currencies. Although through its own software the Group has access to sophisticated models for the management of foreign exchange risk, there has been no use of foreign exchange derivatives to manage this position on the basis that historically the overall effect on the Group’s income statement has not been large enough to warrant this activity. In relation to translation risk, as far as possible the assets held in the foreign currency are matched to expenses in the same currency.

ii) inFlation riskThe Group has exposure to the inflationary effect of operating in countries in which it operates, offset by its ability to raise prices in those countries in which it sells. The Group’s cost base is mainly exposed to the inflation rates and changes in payroll taxes in the United Kingdom, the United States and China. The inflation rate for salaries in specialised parts of the financial sector in a financial centre such as London, New York or Shanghai is often different from the relevant country’s overall rate of wage inflation. Most of the Group’s software contracts give the Group the ability to raise prices on a formula linked to the inflation rate of the currency of the contract. No specific hedging of inflation risk has been carried out.

iii) interest rate riskInterest rate risk arises primarily on the investment of the Group’s cash balances or on its borrowings and the present value of the Group’s receivables. The Group finances its operations through a mixture of retained cash reserves and Directors’ loans at fixed rates. When the Group is a net depositor of funds, the Group stands to gain if interest rates rise and to lose if interest rates fall, ignoring any possible positive or negative correlation effects with business demand for the firm’s products or inflationary pressures on the firm’s cost base that might arise from changes in interest rates. When the Group is a net borrower of funds, the opposite is the case. Although through its own Oberon® software the Group has access to sophisticated models for the management of interest rate risk, there has been no use of interest rate derivatives to manage this position on the basis that the amounts are not large enough to warrant this activity. The policy of the Group is to monitor exposure to interest rate risk and take into account potential movements in interest rates as well as liquidity considerations when selecting methods of financing.

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14. Financial risk ManageMent anD Financial instruMents continueDcreDit riskMost of the Group’s business is with banks, asset management firms and other high quality companies, and the Group’s bad debt experience over 15 years has been negligible. The Group consequently has not considered taking out credit insurance and is not likely to do so in the foreseeable future. Deposits are placed with high quality banks.

Although through its own Firmament® software the Group has access to sophisticated models for the management of credit spreads and credit derivatives, there has been no use of credit derivatives to mitigate counterparty risk, and no such use is contemplated.

operational riskThe Group has numerous operational risks, ranging from control over bank accounts to its processes for delivering and supporting software to a required level of quality and on a timely basis, and retention and recruitment of key personnel. A key risk, as for any company, is the reputation risk that might arise from poor execution, non delivery or late delivery of a high profile project or breach of client confidentiality for sensitive data. Further risks may arise where late delivery of software or untimely delivery of related services causes a client to miss regulatory deadlines. A detailed operational risk review is outside the scope of this report, but the Board attaches importance to maintaining appropriate internal controls to identify and limit these risks.

liquiDity riskThe Group seeks to manage financial risk by ensuring that sufficient liquidity is available to meet foreseeable needs and by investing cash assets safely as well as profitably. At 31 March 2009 the Group had no financial liabilities other than short‑term creditors, accruals and Director loans. Some adjustments have been made to the Group’s processes as a result of the opening of the Shanghai operation since China remains a country with exchange controls, meaning that liquidity cannot be redeployed as quickly there as in other countries in which the Group operates.

15. provisionsThe Group has had office provision surplus to its needs, which it has been unable to re‑let because of the current economic conditions. The lease on the office space runs until September 2009 and the Group has made provision for the contracted cost of the surplus space up to the date of expiration of the lease. £

Balance at 31 March 2008 146,794Amount released to income statement (9,130)Total provision for future lease costs due within one year 137,664

16. share capital 2009 2008 £ £

Authorised714,034,085 ordinary shares of 0.5p each 3,570,170 3,570,170Allotted, called up and fully paid136,176,786 ordinary shares of 0.5p each (2008: 135,735,610) 680,884 678,679429,829,575 deferred shares of 0.1p each 429,831 429,831 1,110,715 1,108,510

The deferred shares carry no rights to receive dividends or to participate in any profits of the Company. The shareholders are not entitled to attend any meetings of the Company or have any rights to participate in any return of capital (except on a winding up). The deferred shares are not transferable other than with the consent of all the Directors of the Company.

share issueDuring the year the Company issued 441,176 0.5p ordinary shares at then market value of 5.6p as a bonus to an employee. The Company recorded this transaction as £2,205 issuance of Ordinary Share Capital and recognised £22,794 as Share Premium.

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17. share optionseMployee share options chargeThe fair value is based on a number of assumptions as stated below.

In accordance with the accounting policy stated under note 1(m) on page 25, the volatility of the Company’s shares for the relevant period has been estimated at 30%, giving rise to a charge to the income statement for the year ended 31 March 2009 of £11,246, (2008: £40,611), with the same amount being credited to reserves. The expected volatility has been based on historical volatility, using market prices of Lombard Risk Management Plc shares between 4 September 2004 to 31 March 2008.

equity‑settleD share‑baseD payMentsThe Company has a share option scheme for all employees. Options are granted to employees based on the discretion of the Directors to reward performance. The vesting period is usually five years. The options are settled in equity once exercised. If the options remain unexercised after a period of five years from the date of grant, the options expire. Options are forfeited if the employee leaves the Company.

The fair values of the options were calculated using a numerical binomial model assuming the inputs shown below: At start at end Exercise Exercise Exercise of year Granted Exercised Lapsed of year price (p) date from date to

2004 EMI Scheme 1,320,000 — — (185,000) 1,135,000 9.00 March–06 March–11 2,220,000 — — (170,000) 2,050,000 9.00 April–08 April–13 1,330,000 — — (70,000) 1,260,000 9.00 Dec–08 Dec–13Unapproved Scheme 1,520,555 — — — 1,520,555 9.00 Dec–06 Dec–11 1,194,445 — — — 1,194,445 11.00 Dec–06 Dec–11 935,555 — — (20,000) 915,555 9.00 April–08 April–13 444,445 — — — 444,445 11.00 April–08 April–13 — 1,600,000 — — 1,600,000 6.00 June–10 June–15 8,965,000 1,600,000 — (445,000) 10,120,000

Grant date 24 April 2006 24 April 2006 24 April 2006 1 December 2006 20 June 2008

Share price at grant 6.75p 6.75p 6.75p 7.75p 6.25pExercise price 9p 9p 11p 9p 6pContractual life (years) 5 5 5 5 5Staff turnover 50% 50% 50% 50% 50%Risk free rate .......................................... Discount curve used for UK on the day of valuation .........................................Expected volatility 30% 30% 30% 30% 30%Expected dividend yield — — — — —Fair value of option 2.09p 2.09p 1.65p 2.20p 2.55p

Details of the number of share options and the weighted average exercise price (“WAEP”) outstanding during the year are as follows: 2009 number 2009 waep 2008 Number 2008 WAEP

Outstanding at beginning of the year 4,930,000 9.18p 5,940,000 9.15pGranted during the year 1,600,000 6p — —Exercised during the year — — — —Forfeited during the year (260,000) 9.00p (1,010,000) 9.00pOutstanding at end of the year 6,270,000 8.37p 4,930,000 9.18pExercisable at the year end 1,360,000 Nil

The share options outstanding at the end of the year have the following exercise prices:Expiry date Exercise price 2009 number 2008 Number

24 April 2013 9p 2,965,555 3,155,55524 April 2013 11p 444,445 444,4451 December 2013 9p 1,260,000 1,330,00020 June 2015 6p 1,600,000 — 6,270,000 4,930,000

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18. coMMitMentsThe Group had commitments under non‑cancellable operating leases in respect of land and buildings as follows: 2009 2008 £ £

On leases which expire in one year or less 283,662 52,533On leases which expire in one to five years 1,716,681 1,798,867On leases which expire over five years — 279,497Total 2,000,343 2,130,897

This includes the lease provision of £137,664 (see note 15).

19. pensionsA Group company contributes to a defined contribution pension scheme on behalf of a limited number of employees of that subsidiary. The assets of the scheme are administered by trustees in a fund independent of the Company. Other defined contribution pension schemes to which the Group makes contributions on behalf of employees are of the stakeholder variety, again totally independent of the Company.

20. relateD parties transactionsJohn Wisbey made advances to the Company of £20,000 and £600,000 on 29 June 2007 and 31 August 2007 respectively. This loan was subject to review on 31 October 2007 and repayable by 29 February 2008. On 18 February 2008, £150,000 was repaid to John Wisbey, leaving a balance outstanding of £470,000 at the end of the financial year to March 2008. In July 2008 John Wisbey made further advances of £200,000 and £420,000 respectively in July and August 2008. The balance outstanding to him at the end of the financial year to March 2009 was therefore £1,090,000. The loan bears interest at 1% per month.

Ian Peacock advanced an amount of £10,000 to the Company on the 12 July 2007. Michael Thomas advanced a sum of £30,000 on the 29 June 2007. The loan was interest free until 31 March 2008. Thereafter the loan attracted interest of 1% per month.

In June 2008 Brian Crowe advanced £200,000 to the Company. The loan bears interest at 1% per month.

The Directors Loans, totalling £1,330,000 at the end of the financial year, are immediately repayable on demand from the point of view of the lenders and repayable at any time at the Company’s option.

21. controlling relateD partiesThe only group of undertakings for which Group accounts have been drawn up is that headed by Lombard Risk Management plc. The Chairman and Chief Executive Officer, John Wisbey, is the majority holder of ordinary shares and is therefore considered to be the ultimate controlling related party of the Group.

22. post balance sheet eventsThe Company entered into additional Director loans from Brian Crowe, Non‑executive Director, for £200,000 and a further £100,000 from John Wisbey, Chairman and Chief Executive Officer. These funds have been used to provide the Company with additional working capital. This raised the overall total of Director loans (the “Loans”) to £1,600,000 (excluding the £30,000 loan from Michael Thomas who was a Director at year end but stood down in July 2009). The Loans, which bear interest at 1% per month, are on a demand basis from the point of view of the lenders and repayable at any time at the Company’s option.


As a result of these events the Company will, on completion of the placing, have no external debt including debt due to directors.

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parent coMpany Financial stateMentsFor the year enDeD 31 March 2009

36 report oF the inDepenDent auDitor – parent coMpany Financial stateMents 37 coMpany balance sheet 38 notes to the coMpany Financial stateMents

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report oF the inDepenDent auDitorparent coMpany Financial stateMents

to the MeMbers oF loMbarD risk ManageMent plcWe have audited the Parent Company financial statements of Lombard Risk Management Plc for the year ended 31 March 2009, which comprise the balance sheet and notes 1 to 11 to the financial statements. These Parent Company financial statements have been prepared under the accounting policies set out therein.

We have reported separately on the Consolidated financial statements of Lombard Risk Management Plc for the year ended 31 March 2009.

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 auDitorThe Directors’ responsibilities for preparing the Annual Report, and the Parent Company financial statements in accordance with United Kingdom Law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors’ Responsibilities.

Our responsibility is to audit the Parent Company financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the Parent Company financial statements give a true and fair view and whether the Parent Company financial statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the Directors’ report is consistent with the Parent Company financial statements.

In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding Directors’ remuneration and other transactions is not disclosed.

We read other information contained in the Annual Report and consider whether it is consistent with the audited Parent Company financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Parent Company financial statements. Our responsibilities do not extend to any other information.

basis oF auDit opinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Parent Company financial statements. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the Parent Company financial statements, and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Parent Company financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the Parent Company financial statements.

opinionIn our opinion:

the Parent Company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the Company’s affairs as at 31 March 2009;

the Parent Company financial statements have been properly prepared in accordance with the Companies Act 1985; and

the information given in the Directors’ report is consistent with the financial statements.

grant thornton uk llpregistereD auDitor, chartereD accountantslonDon24 septeMber 2009

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coMpany balance sheetas at 31 March 2009

as at As at 31 March 2009 31 March 2008 Note £ £

Fixed assets

Tangible assets 4 30,022 57,480

Investments in subsidiaries 5 12,383,529 11,911,164

12,413,551 11,968,644

Current assets

Debtors due within one year 6 6,137,683 4,095,319

Cash at bank and in hand 658 4,918

6,138,341 4,100,237

Creditors: amounts falling due within one year 7 (13,455,058) (9,267,276)

Net current liabilities (7,316,717) (5,167,039)

Total assets less current liabilities 5,096,834 6,801,605

Net assets 5,096,834 6,801,605

Capital and reserves

Called up share capital 8 1,110,715 1,108,510

Share premium 9 2,512,904 2,490,110

Other reserves 9 7,158,957 7,153,926

Profit and loss account 9 (5,685,742) (3,950,941)

Shareholders’ funds 5,096,834 6,801,605

The financial statements were approved by the Board on 24 September 2009 and signed on its behalf by:

John wisbeychairMan anD chieF executive oFFicer

The accompanying accounting policies and notes form an integral part of these accounts.

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notes to the coMpany Financial stateMentsFor the year enDeD 31 March 2009

1. accounting policies(a) basis oF preparationThe separate financial statements of the Company are presented as required by the Companies Act 1985. As permitted by that Act, the separate financial statements have been prepared in accordance with all applicable United Kingdom accounting standards and on historical cost basis.

(b) going concernThe financial statements have, as in previous years, been prepared on a going concern basis. The Directors have formally considered this issue in the light of the operating losses and the consequent operating cash outflows in the period.





(c) Foreign exchangeTransactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to the profit and loss account.

(d) DeFerreD taxationDeferred 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, or a right to pay less, tax in the future have occurred at the balance sheet date. Deferred tax assets are recognised when it is more likely than not that they will be recovered. Deferred tax is measured using rates of tax that have been enacted or substantively enacted by the balance sheet date.

(e) leaseD assetsAll leases held by the Company are regarded as operating leases and the payments made under them are charged to the profit and loss account on a straight line basis over the lease term.

(f) FixeD anD intangible assetsDepreciation is provided using the following rates and bases so as to write off the cost or valuation of fixed and intangible assets over their useful lives in the Company’s business:

Computer software 50% to 100% straight line Computer hardware 50% straight line Fixtures, fittings and equipment 25% straight line

(g) investMents in subsiDiariesInvestments in subsidiaries are recorded at cost less any provision for permanent diminution in value.

2. Directors anD eMployees 2009 2008 Staff costs including Directors £ £

Wages and salaries 713,701 614,063Social security costs 96,293 111,304Pension costs 2,153 11,432Share‑based payments charge (note 18 to the Consolidated financial statements) 11,246 40,611Total staff costs 823,393 777,410

The average monthly number of employees (excluding Directors) during the year was: 2009 2008 number Number

Office and administration 10 8Operational — — 10 8

3. loss For the Financial yearThe Parent Company has taken advantage of Section 230 of the Companies Act 1985 and has not included its own income statement in these financial statements. The Parent Company’s loss for the year was £1,734,801 (2008: loss £2,468,687).

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4. tangible FixeD assets Computer Fixtures,fittings Otherintangible hardware and equipment assets Total Company £ £ £ £

Cost At 1 April 2008 659,093 412,321 223,803 1,295,217Additions 26,720 — 8,772 35,492At 31 March 2009 685,813 412,321 232,575 1,330,709Depreciation At 1 April 2008 624,775 393,107 219,855 1,237,737Charge for the year 37,512 14,390 11,048 62,950At 31 March 2009 662,287 407,497 230,903 1,300,687Net book valueAt 31 March 2009 23,526 4,824 1,672 30,022At 31 March 2008 34,318 19,214 3,948 57,480

5. investMent in subsiDiaries 2009 2008 Investment in subsidiaries £ £

Opening balance at 1 April 11,911,164 11,911,165Disposal of subsidiary – IVRS — (1)New capital investment in Lombard Risk International Limited 472,365 —Closing balance at 31 March 12,383,529 11,911,164

The Directors have considered the carrying value of the investments in subsidiaries and have concluded, on the basis of forecast financial performance of the subsidiaries, that no impairment in value has taken place and therefore that no provision is currently required.

At 31 March 2009 the undertakings in which the Company held more than 20% of the allotted share capital were as follows: Proportion of ordinary share capital held

Country of By parent (%) By Group (%) incorporation Business

Lombard Risk Systems Ltd 100 100 UK SoftwareLombard Risk Compliance Ltd 100 100 UK SoftwareLombard Risk International Ltd 100 100 China SoftwareLombard Risk Systems Inc. — 100 USA SoftwareLombard Risk International (USA) Inc. — 100 USA SoftwareLombard Risk International (Hong Kong) Ltd — 100 Hong Kong SoftwareLombard Risk International (Singapore) Ltd — 100 Singapore SoftwareLombard Risk Consultants Ltd 100 100 UK TrainingLombard Risk Systems (Pty) Ltd — 100 South Africa DormantLombard Risk Systems (Asia Pacific) Ltd — 100 Hong Kong DormantSwapval Ltd 100 100 UK Dormant

All of the subsidiary undertakings have been included in the consolidation.

6. Debtors Due within one year 2009 2008 £ £

Amounts receivable from subsidiary undertakings 6,032,812 3,979,281Prepayments and accrued income 104,871 116,038 6,137,683 4,095,319

The amounts due from subsidiary companies are due on demand. However, in the opinion of the Directors, it is unlikely that these amounts will be fully repaid within the next financial year.

7. creDitors Due within one year 2009 2008 £ £

Trade creditors 239,819 202,001Other taxes and social security costs 7,920 2,512Other creditors 11,739,655 8,405,969Lease provision 137,664 146,794Shareholder loans (see note 20 to the Consolidated financial statements) 1,330,000 510,000 13,455,058 9,267,276

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notes to the coMpany Financial stateMents continueDFor the year enDeD 31 March 2009

8. share capital 2009 2008 £ £

Authorised714,034,085 ordinary shares of 0.5p each 3,570,170 3,570,170Allotted, called up and fully paid136,176,786 ordinary shares of 0.5p each (2008: 135,735,610) 680,884 678,679429,829,575 deferred shares of 0.1p each 429,831 429,831 1,110,715 1,108,510

The deferred shares carry no rights to receive dividends or to participate in any profits of the Company. The shareholders are not entitled to attend any meetings of the Company or have any rights to participate in any return of capital (except on a winding up). The deferred shares are not transferable other than with the consent of all the Directors of the Company.

share options At start at end Exercise Exercise Exercise of year Granted Exercised Lapsed of year price (p) date from date to

2004 EMI Scheme 1,320,000 — — (185,000) 1,135,000 9.00 March–06 March–11 2,220,000 — — (170,000) 2,050,000 9.00 April–08 April–13 1,330,000 — — (70,000) 1,260,000 9.00 Dec–08 Dec–13Unapproved Scheme 1,520,555 — — — 1,520,555 9.00 Dec–06 Dec–11 1,194,445 — — — 1,194,445 11.00 Dec–06 Dec–11 935,555 — — (20,000) 915,555 9.00 April–08 April–13 444,445 — — — 444,445 11.00 April–08 April–13 — 1,600,000 — — 1,600,000 6.00 June–10 June–15 8,965,000 1,600,000 — (445,000) 10,120,000

9. share preMiuM anD other reserves Sharepremium Other Profitand Shareholders’ Share capital account reserves loss account funds £ £ £ £ £

Balance at 1 April 2008 1,108,510 2,490,110 7,153,926 (3,950,941) 6,801,605Loss for the year — — — (1,734,801) (1,734,801)441,176 new shares issued at 0.5p 2,205 22,794 — — 24,999Share‑based payment charge — — 11,246 — 11,246Foreign exchange movements — — (6,215) — (6,215)Balance at 31 March 2009 1,110,715 2,512,904 7,158,957 (5,685,742) 5,096,834

Other reserves relate to negative goodwill arising on the acquisition of a subsidiary undertaking prior to 1 April 1997, merger reserve and net foreign exchange movements in connection with overseas subsidiaries.

10. relateD parties transactionsJohn Wisbey made advances to the Company of £20,000 and £600,000 on 29 June 2007 and 31 August 2007 respectively. This loan was subject to review on 31 October 2007 and repayable by 29 February 2008. On 18 February 2008, £150,000 was repaid to John Wisbey, leaving a balance outstanding of £470,000 at the end of the financial year to March 2008. In July 2008 John Wisbey made further advances of £200,000 and £420,000 respectively in July and August 2008. The balance outstanding to him at the end of the financial year to March 2009 was therefore £1,090,000. The loan bears interest at 1% per month.

Ian Peacock advanced an amount of £10,000 to the Company on the 12 July 2007. Michael Thomas advanced a sum of £30,000 on the 29 June 2007. The loan was interest free until 31 March 2008. Thereafter the loan attracted interest of 1% per month.

In June 2008 Brian Crowe advanced £200,000 to the Company. The loan bears interest at 1% per month.

The Directors Loans, totalling £1,330,000 at the end of the financial year, are immediately repayable on demand from the point of view of the lenders and repayable at any time at the Company’s option.

11. post balance sheet eventsThe Company entered into additional Director loans from Brian Crowe, Non‑executive Director, for £200,000 and a further £100,000 from John Wisbey, Chairman and Chief Executive Officer. These funds have been used to provide the Company with additional working capital. This raised the overall total of Director loans (the “Loans”) to £1,600,000 (excluding the £30,000 loan from Michael Thomas who was a Director at year end but stood down in July 2009). The Loans, which bear interest at 1% per month, are on a demand basis from the point of view of the lenders and repayable at any time at the Company’s option.


As a result of these events the Company will, on completion of the placing, have no external debt including debt due to Directors.

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corporate statement

company informationThe mission at Lombard Risk has always been to help the financial industry to improve the approach to managing the operational risk in their businesses. That mission remains unchanged today as Lombard Risk continues to deliver innovative specialised software solutions that help our customers improve the management of collateralised trading and regulatory compliance.

For over 20 years Lombard Risk Management plc (“Lombard Risk”) has delivered industry-leading global risk management and regulatory compliance software. Today, Lombard Risk is one of the world’s recognised leading providers of collateral management and regulatory compliance solutions to financial organisations and large corporations around the world. Our award-winning global solutions enable the financial industry to improve the management of counterparty risk, collateral risk, trading risk, liquidity risk reporting, financial crime detection and global regulatory reporting.

company registration number3224870

directorsJohn Wisbey Chairman

ian peacock Deputy Chairman

brian croWe

keith butcher

company secretaryJane Fineman

registered officeIndia House 45 Curlew Street London SE1 2ND

nominated advisor and brokernobLe & company Limited120 Old Broad Street London EC2N 1AR

auditorsgrant thornton uk LLpGrant Thornton House Melton Street Euston Square London NW1 2EP

corporate soLicitorsmemery crystaL44 Southampton Buildings London WC2A 1AP

registrarscomputershare investor services pLcPO Box 859 The Pavilions Bridgwater Road Bristol BS99 1XZ

bankersnationaL Westminster bank pLc180 Brompton Road London SW3 1HL

hsbc bank28 Borough High Street London SE1 1YB

datesannuaL generaL meeting 23 October 2009

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Lombard risk management pLcIndia House 45 Curlew Street London SE1 2ND UK

tel: +44 (0)20 7089 3700 fax: +44 (0)20 7089 3780 e: [email protected]

www.lombardrisk.com

Lom

bard risk m

anag

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t pLc annual report and accounts

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