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DICOM Group plc Annual Report & Accounts 2005

About DICOM Group

XKPGLOURVISIONFSQKOHGRUORHQUIGAHEDNHYI We are creating a world where people and organisations can automatically exchange, instantly understand and easily use information to drive business processes and transactions, regardless of format, application or device.

DICOM Group plc (“DICOM Group”, London Stock Exchange: DCM) is the global leader in Information Capture. Its leading edge capture and communication technologies and solutions enable Business Process Automation by managing the transformation and exchange of business-critical information (residing in various formats such as paper, fax, electronic documents, e-mail, SMS) among people, applications and devices. The company’s centres for product development and marketing include Kofax, the world’s leading provider of Information Capture solutions, and TOPCALL, a worldwide provider of Unified Communication technology. Through a global network of more than 1,200 authorised partners and its own sales and service organisations in Europe, the USA, Asia and Australia, DICOM Group help blue-chip enterprises in more than 60 countries to reduce cost, increase efficiency and minimise risk in their critical business processes. For more information, visit www.dicomgroup.com The Group‘s Samsung General Agency (SGA) Division focuses on multimedia visualisation products for the IT, POI and Entertainment market in Switzerland. It operates as sole agency of Samsung‘s high performance flat screen display.

Annual Report & Accounts 2005 Content

2 DICOM Group 4 Chairman’s Statement 8 Chief Executive’s Review 11 Finance Director’s Review 14 DICOM Group: The Power of Transformation 28 Team and Management 29 International Presence DICOM Group 30 Shareholder Information 32 Board of Directors 34 Directors’ Report 36 Corporate Social Responsibility 39 Corporate Governance Statement 43 Remuneration Report 48 Statement of Directors’ Responsibilities 49 Independent Auditors’ Report To the Shareholders of DICOM Group plc 51 Consolidated Financial Statements 2005 52 Consolidated Profit and Loss Account 53 Consolidated Balance Sheet 54 Consolidated Cash Flow Statement 55 Accounting Policies 58 Notes to the Financial Statements

78 Five Year Record 79 Implementation of International Financial Reporting Standards 83 Company Secretary and Advisers 83 Principal Subsidiaries 87 Glossary

DICOM Group At a glance

• Group turnover of £179.8m up 15% in FY2005 compared with £156.2m in FY2004 • Profit before tax* recorded its seventh successive year of improvement, increasing by 15% • Adjusted earnings per share* up 13% • Strong operating cash flow generation (£18.7m), representing 128% of operating profit • Completion of TOPCALL International AG and Neurascript Limited acquisitions • Global leading market position maintained in revenue, licenses and installations (81,000+ Ascent software licenses shipped, 70,000+ installations for VRS) PBT* in £m

Turnover in £m

180

15

170

14

160

13

150

12

140

11

130

10

FY01

FY02

FY03

FY04

FY05

Adjusted earnings per share* in pence

FY01

FY02

FY03

FY04

FY05

Sales by geographical market in %

Europe 78 %

60p 50p

North America 18 %

40p 30p Australasia 3 %

20p

Rest of the world 1 %

10p

FY01

FY02

FY03

FY04

FY05

* before goodwill amortisation and exceptional items

DICOM Group At a glance

2

Financial Highlights

in £’000

2005

Turnover

2004

2003

2002

2001

179,795

156,197

156,432

149,527

140,290

Operating profit*

14,672

12,922

11,796

11,262

9,876

Profit before tax*

15,245

13,257

11,731

10,900

9,607

Earnings per share basic

28.2p

18.7p

26.2p

3.5p

27.9p

adjusted

50.8p

45.0p

40.2p

36.9p

33.4p

diluted

27.3p

18.2p

26.0p

3.5p

27.6p

6.39p

5.55p

4.83p

4.2p

3.66p

21,111,015

20,857,817

20,849,126

20,821,701

20,716,446

1,093

846

826

737

634

Total dividend per share Average number of ordinary shares Average number of employees * before goodwill amortisation and exceptional items

3 DICOM Group Financial Highlights

“The focus of our business is to provide our customers with a high return on their investment, while creating value for our investors. DICOM’s cost-effective solutions, provided through a global network of more than 1,200 authorised partners in more than 60 countries plus our own sales and service organisations, enable our customers to reduce cost, increase efficiency and minimise risk in their criticial business processes.“

Chairman’s Statement Results I am very pleased to announce another year of record results. Group turnover for the year to 30 June 2005 was up 15% to £179.8m (£156.2m). Turnover in local currency terms and adjusted for acquisitions grew by 9%. Operating profit amounted to £9.9m (£9.7m), an increase of 3%. Operating profit before goodwill amortisation increased by 14% to £14.7m (£12.9m) and by 7% in local currency terms, adjusted for acquisitions. Profit before tax was £10.5m (£7.8m), up 35%. Profit before tax, adjusted for goodwill amortisation and an exceptional item in the prior year, is reported at £15.2m, up 15%. After tax and minority interests basic earnings per share (EPS) is calculated at 28.2p (18.7p). Adjusted EPS, earnings adjusted for goodwill amortisation and an exceptional item in the prior year, rose 13% to 50.8p (45.0p).

Otto Schmid, Chairman, DICOM Group plc

As reported during the year the weakness in the US dollar (on average 7% lower than in the previous financial year) has adversely affected the reported sterling results of our US operations where over half of the Group’s operating profits are generated. Financial Position Due to its cash generative business model, the Group’s operating cash flow amounted to £18.7m (£18.6m), representing a 128% conversion of operating profit into operating cash flow. The Group ended the period with net funds £16.2m, down from £20.9m at 30 June 2004 after spending £20.5m on acquisitions in the year.

Chairman’s Statement

4

The IC Division continued its growth record and expanded its market position. During the financial year the acquisitions of Neurascript and Topcall expanded the product portfolio significantly, allowing the Group to address new market opportunities. Neurascript adds expertise in enterprise solution development and unstructured data. Topcall expands the ability to support Business Process Automation (“BPA”) solutions and opens up a new market. We also released further upgrades of major products as a result of our continuing investment in technology. Furthermore various awards mark the successful development of the Group. Our product development centre Kofax has been named Global Alliance Technology Partner of the Year by Open Text. For the second consecutive year Kofax has been ranked by KMWorld in its annual “100 Companies that Matter in Knowledge Management” list. Our INDICIUS Advanced Capture Suite won the prestigious AIIM Expo Best of Show Award for this year and we have been named the Overall Global Share Leader for Document Capture Software by Harvey Spencer Associates. I am pleased to report that this financial year also saw the Group sign our geographically largest-ever deployment of Ascent – across multiple sites in Europe, Asia and South America with Carrefour.

The Samsung General Agency (“SGA”) Division, the representative of Samsung Electronics in Switzerland, continued to trade in line with expectations. It contributed 9% to Group operating profits and 22% to Group turnover. As reported in previous quarters, the SGA Division continues to face tough trading conditions. Turnover and Operating Profit* in £m 180

16

170

14

160

12

150

10

140

8

OP

The Information Capture (“IC”) Division, our largest division representing 91% (92%) of profits and 78% (77%) of turnover, continued to benefit from its position as the leading global partner for IC products and services with a significant level of new contract wins. The IC Division develops and markets application software and hardware, provides a comprehensive range of services and sells key related products to over 1,200 system integrators, software developers and resellers in more than 60 countries world-wide. Information Capture and Communications solutions enable organisations to automate business processes and streamline transactions, hence to reduce costs, increase operational efficiencies, and minimise business risk.

The IC Division recorded turnover growth of 18% during the financial year ending 30 June 2005. Organic turnover growth amounted to 10% in local currency terms. The provision of services and sales of products developed by the Group accounted for 61% of IC turnover (57% in the comparable period). Own product sales grew by 11% in local currency terms adjusted for acquisitions, and accounted for 32% of IC sales. Service income was up by 21% in local currency terms adjusted for acquisitions, and contributed 29% to IC sales. The sale of complementary third party products, primarily high-speed document scanners, accounted for 39% of sales, up 2% in local currency terms. Operating profit before goodwill amortisation increased to £13.4m, up 13% (up 6% in local currency terms).

Turnover

Operating Review Today, DICOM Group is the global leader in the Information Capture market and with its growing technology portfolio and global reach, DICOM Group is on the way to becoming the pre-eminent provider of Information Capture and Communications solutions that enable organisations to automate business processes and streamline transactions.

FY01

FY02

FY03

FY04

FY05

Turnover Operating Profit * before goodwill amortisation and exceptional items

Board and Management Changes On 16 December 2004 we announced the appointment of two Non-executive directors, Chris Conway, aged 60, and Mark Wells, aged 49, with immediate effect.

5 Chairman’s Statement

Chris Conway, an Irish citizen, is Non-executive Chairman of Detica Group plc, a UK IT Consultancy and Services company focusing on building Information Intelligence systems for UK Government, Security and large Commercial clients, a position he has held since April 2001. He was a board member of IBM UK and Chairman and Chief Executive of Digital Equipment Co Ltd.

has been exceeded. Following the successful buy-out of the remaining minorities DICOM Group owns 100% of Topcall today. Topcall has been fully consolidated in the DICOM Group results from 1 December 2004. The total gross cash consideration amounts to £32.7m, excluding £11.4m cash acquired in Topcall’s balance sheet on completion.

Mark Wells, a British citizen, was Chairman and CEO of Image Metrics Plc, an image analysis software company. Previously he was Chief Operating Officer for Brainpower NV, a supplier of advanced financial analytical software and Managing Director UK and Vice president of Continental Europe for Dun and Bradstreet Software. We welcome Chris and Mark to the Board.

The results of Neurascript and Topcall form part of the IC Division.

At the same time we announced the retirement from the Board of one Non-executive director, Paul Gerny, aged 63. Paul has been a Non-executive director for the past nine years. He joined the Company’s Board on 15 December 1995. I would like to thank Paul for his substantial contribution during the past years. On 12 April 2005 we announced the appointment of Stefan Gaiser as Group Finance Director with immediate effect. Stefan Gaiser (aged 31), a German citizen, joined DICOM Group in October 2000 as Associate Chief Financial Officer, strengthening the DICOM Group Finance team. Before joining DICOM Group he worked as a tax consultant for a German accountancy firm. He was appointed to the main Board on 8 April 2005. We welcome Stefan to the Board. Acquisitions On 25 October 2004 the Group announced the acquisition of Neurascript Limited (“Neurascript”), a leading worldwide provider of high-end Information Capture tools. Neurascript was purchased for a total cash consideration of £4.1m, compromised of £2.4m paid on completion, £0.6m payable on the first anniversary and a further contingent variable deferred consideration, now estimated to be up to £1.1m, depending on the achievement of certain targets. The Offer for TOPCALL International AG (“Topcall”), a worldwide provider of mission-critical Unified Communication solutions, has been successful and the required 75% acceptance condition for the voluntary public bid

Reorganisation On 20 July we introduced a new global corporate structure, following the recent acquisitions of Neurascript and Topcall. The reorganisation has been undertaken to increase operational efficiencies between business groups, such as product management, engineering, sales and marketing. The introduction of the new corporate structure also provided the Group with the opportunity to strategically review each of its operating activities. Following the review the Group has decided to reorganise its underperforming Capture Services activities. Delisting On 31 August we announced our intention to file an application for revocation of the admission of our shares held in the form of depository receipts on the General Standard of the Frankfurt Stock Exchange. This is anticipated to take place with effect from the end of the calendar year dependent upon approval by the Frankfurt Stock Exchange. We have made this decision on the basis that for some time there has not been a significant institutional shareholder base in Germany, and a delisting will allow the management to focus more of its IR activities on the UK market. In addition, the delisting will provide some cost savings, though these are not anticipated to be material. After the effective date of the delisting it will no longer be possible to trade DICOM Group depository receipts on the Frankfurt Stock Exchange. However, ordinary shares will continue to be listed on the Official List of the London Stock Exchange (ticker symbol: DCM).

Chairman’s Statement

6

Share Split The Board has also been considering how best to improve the market liquidity of the Group‘s shares. Following the rise in the share price in the last year, the Board considers a share split to be in the best interests of shareholders and we are therefore planning to implement a 4 for 1 sub-division of the Group‘s issued and authorised share capital, subject to gaining shareholder approval at the Annual General Meeting. Staff Staff numbers grew from 849 to 1194 during the year, principally due to the acquisitions of Neurascript and Topcall. Our future prosperity is in large measure dependent on the ability, energy and loyalty of our employees, whose specialist knowledge, training and experience is key to the successful provision and deployment of our value-added products and services. Staff turnover has remained at low levels and we continue to attract and retain high calibre people around the world.

Prospects DICOM Group is well positioned as the global industry leader in the Information Capture market. The balance sheet is strong and the Group continues to be highly cash generative. Our continuing investment in technology, our wellknown and industry leading products, our customer base and our channel relationships are key to the further enhancement of our market leading position in Information Capture. Good growth prospects enable us to view the Group’s outlook with optimism.

Otto Schmid, Chairman, 22 September 2005

On behalf of the Board, I would like to thank our employees for their commitment. As ever, they will remain the driving force behind the Group’s dynamic development in the future. DICOM Group’s growth over the last 14 years has resulted in becoming the global leader in the Information Capture market in terms of turnover, profitability and geographic coverage. We have to further develop the managerial capacity of DICOM Group to prepare the next stage of development and growth. During the year we developed and started courses for management training and education at DICOM Group. All Senior Executives and other management members are invited to the DICOM Academy Leadership and Management Programme, which focuses on three key aspects of leading and managing a company successfully. Leadership, Value and Ethics; Strategic Marketing and Sales Management; Financial, Operational and HR Management. The first three day session started in January 2005 with very encouraging feedback. Dividend The Board is pleased to recommend a final dividend of 4.26p per ordinary share, making a total dividend of 6.39p (5.55p) per ordinary share for the year. This represents an increase of 15% over the previous year. The dividend will be paid on 2 December 2005 to shareholders on the register on 4 November 2005.

7 Chairman’s Statement

“Our comprehensive portfolio of products, technologies and services addresses today’s real challenges of unstructured content, transactional capture, and bi-directional communication. We enable organisations to adopt highly automated processes that are faster, more efficient, more effective and readily adaptable to changing market conditions and customer expectations.”

Chief Executive’s Review Looking back The economic and political climate of the reporting year can be called average. There were neither big surprises to the up- nor to the downside. We have definitively left behind the difficult situation in the IT markets following the bursting of the tech bubble in 2001. However we certainly did not experience any exuberant purchasing behaviour by our clients. Quite to the contrary we find that capital expenditure in Information Technology is still more scrutinised than in the late nineties. Yet I am pleased to say we have again continued to grow and our core product lines and services did well. Last year we completed two strategic acquisitions. After the purchase of Mohomine in 2003, which gave us access to classification technology, we acquired Neurascript in Cambridge, UK, in October 2004. A few weeks later we acquired Topcall, headquartered in Vienna, Austria. Besides a mostly UK based customer base and a seasoned engineering team, the Neurascript acquisition has brought to DICOM Group extensive know how in the high-volume forms capture market and important

Arnold von Büren, Chief Executive Officer, DICOM Group plc

additional text and image classification technologies. Topcall brought to DICOM Group a broad portfolio of Unified Communications products and technologies. Current Products We maintained our yearly update cycle for existing product lines and again added significant features and functionality. Our main Information Capture product – now on version 7.0 – has definitively reached a level of maturity to compete in almost any capture environment, however challenging or diverse it might be. It is one of the strengths of DICOM Group to consistently come up with new releases to its existing product lines, a result of our continuing investment into product development. Our partners have grown accustomed to these regular updates and appreciate their reliability.

Chief Executive’s Review

8

World’s Largest Information Capture Vendor 1 Most imaging developers toolkits- ImageControls

3,770 + SDKs (Software Development Kit)

Most production scanner controllers- Adrenaline

200,000 + Units

Most production capture licenses- Ascent

81,000 + Licenses

Most image enhancement solution sales- VRS

70,000 + Units

Largest capture customer base- Ascent

15,000 + Installations

Largest certified capture channel- CSPs

1,200 + Certified Software Partners

De facto leader in image processing technology

VRS

Paving the path for processing unstructured data

INDICIUS & Mohomine Technology

Largest capture revenue

£141m (FY05)

Most profitable capture company

£14.7m Operating Profit (FY05)

1

Source: Strategy Partners

Strong growth was encountered again from our solutions to capture ‘semi-structured’ documents (e.g. invoices). We call invoice documents ‘semi-structured’ although the expected information is known, its location on the documents needs to be searched for. We expect healthy growth in the ‘semi-structured’ area to continue for the next few years. New Product Launches Within months of Neurascript joining DICOM Group we were able to launch INDICIUS 5.0 integrating technologies from Neurascript and Mohomine. Neurascript software tools automate the recognition, extraction, and indexing of information from business documents and forms. Mohomine technology speeds automated data capture, routing, and categorisation for unstructured documents. By integrating these technologies with advanced patent-pending algorithms for automatic document separation (“ADS”), INDICIUS 5.0 became the most sophisticated set of software tools for advanced Information Capture. ADS eliminates the labour required to insert separator sheets between different documents in a batch and reduces the substantial cost in consumables associated with printing separator sheets, such as paper, ink and toner. In the few months between launch and year-end INDICIUS 5.0 was already responsible for some significant project wins for DICOM Group. Market Trends More and more, customers are looking to reduce costs by streamlining processes and increasing efficiencies throughout their organisation. As a result, a significant new market opportunity has emerged focused specifically on Business Process Auto-

mation. The BPA market is a new emerging growth sector and is reported by IDC as one of the fastest growing software and services segments of IT. A year ago I wrote about the fact that we are seeing our solutions being used more and more to enable Business Process Automation. Documents entering an organisation often trigger very specific business processes. In the past documents were often kept in their original form, separate from the business process. Only after the process ended the documents were brought to a central location for archival scanning. Today, organisations want to capture the documents immediately upon entering the organisation, extract the necessary information at once to start the respective business process and then have the documents accessible – in electronic form – during the entire life of the business process. The capturing environment therefore has changed significantly in a couple of ways: • Capture of documents and content has become much more distributed, almost down to the desktop • Media formats of documents have also changed. It used to be almost exclusively paper documents, but today’s documents come in many form and shapes (e-mail, attachments, pdf files, faxes, SMS, voice mail, etc.) • Exception handling during the business process and confirmation of successful completion are requirements which ask for very specific communication capabilities

9 Chief Executive’s Review

Realising these market changes DICOM Group has reworked its customer value proposition: We enable the automation of business processes and streamline the exchange of business-critical documents and information among people, applications and devices. We provide the most cost-effective solutions in our industry by delivering the highest real-world ROI, the most complete, best integrated and easiest to use set of technologies, and by combining our technical expertise with the industry knowledge of our worldwide partners to reduce costs, increase operational efficiencies, and minimise risk for our customers. Topcall Acquisition The Topcall acquisition has to be seen entirely in the light of the above mentioned customer value proposition. Topcall adds a profound familiarity with different content formats (fax, pdf, SMS, voice, e-mail, etc.) to the Group. This enables us to integrate the collection of new content formats into our solutions. By combining the communication technologies of Topcall with our existing Information Capture technologies we will provide integrated solutions to enable Business Process Automation. It will take some time to combine the product platforms of both Topcall and DICOM Group. But planning and know how exchange is well under way to achieve this goal as quickly as possible. In the meantime I am happy to report that Topcall has successfully integrated our transformation technology into one of its offerings and is already selling a specific solution to greatly automate the Information Capture of fax purchase orders. Product Development Selling its products on a global scale and getting a significant portion of its turnover from government institutions it is important for DICOM Group to demonstrate that its product carry ‘local content’. It has been an important personal goal for me during the last four years to create a distributed product development environment that allows us to claim ‘local content’ on each continent. Over the last two years DICOM Group has significantly expanded and diversified its development resources. Our largest engineering force is still located in California, US, but we have also built up significant engineering capacity in Hanoi, Vietnam. By acquisitions we lately gained additional engineering teams in Vienna, Austria, and in Cambridge, UK.

These engineering teams work within DICOM Group’s global development framework, each with a specific technology or product focus based on training, talent and experience. Product development roadmaps remain highly focused with research and development expenditure at a high £9.9m (2004: £7.9m, 2003: £7.3m), up 12% in local currency terms, consistent with the company’s objective to invest up to 20% of turnover in its own products into development. We anticipate a number of product innovations for existing products and the launch of entirely new products and services in the new financial year. Looking ahead I am truly convinced that market needs and our new and developing capabilities are converging, leaving us facing the future with confidence and optimism. We will continue to expand our leadership position in the traditional Information Capture market. In addition we will develop new solutions to enable Business Process Automation. We have already acquired or are developing all the technology necessary to support our growth. We are maintaining a healthy rate of product innovation and have an experienced sales and marketing organisation. Going forward, it is my intention to lead the DICOM Group team to become an even higher quality business than it is today by further increasing turnover, whilst at the same time improving margins and expanding the proportion of recurrent revenue. We have a healthy number of very seasoned and experienced managers in DICOM Group. With their help and with the help of everybody in the team we will continue to be successful for the benefit of all DICOM Group stakeholders. Thanks DICOM Group’s growth, its financial success and its excellent reputation with partners and customers alike are directly related to the daily efforts of our hard-working staff. I would like to express my deep gratitude to everybody at DICOM Group for their contribution to our achievements. And lastly, I would like to thank you, as a share- or stakeholder in DICOM Group, for your continued support.

Arnold von Büren, Chief Executive Officer, 22 September 2005

Chief Executive’s Review

10

Finance Director’s Review Group Performance There has been continued success for DICOM Group’s IC division as it further expanded and improved its role as industry leader by developing and marketing its own products and services. The acquired companies Neurascript and Topcall have been fully consolidated from 1 November and 1 December 2004 respectively. The Samsung General Agency (SGA) division, operating in Switzerland, achieved good results both in turnover and operating profit contribution despite the difficult market conditions. The weakness of the US dollar (on average 7% lower than previous year) has adversely affected the reported sterling results of our US operation during the year, where over half the Group’s operating profits are generated. Operating profit before goodwill amortisation increased by 14% to £14.7m (£12.9m) on sales of £179.8m (£156.2m). Growth in operating profit before goodwill amortisation in local currency terms was 7%. In the first six months, operating profit before goodwill amortisation was £7.6m, a margin of 8.8% on sales of £86.9m. The second half results contributed £7.1m or 7.6% on sales of £92.9m.

“To extend our leadership in the Information Capture market and to grow in the market for Business Process Automation, we both acquire and invest in the development of innovative technologies. The result is a sustainable business and attractive long-term returns for our stakeholders.” Stefan Gaiser, Finance Director, DICOM Group plc

Overall gross margin increased to 43.1% (40.3%). The increase is due to the change in business mix. Our higher margin business grew significantly faster compared to IC third party products. During the year operating expenses excluding goodwill amortisation increased from £50.0m to £62.8m, up 26%. Organic growth of overheads amounted to 11%. Goodwill amortisation included under operating expenses increased to £4.7m (£3.2m). Adjusted earnings per share (EPS) rose by 13% to 50.8p (45.0p). Adjusted EPS is shown exclusive of goodwill amortisation. Basic earnings per share increased by 51% to 28.2p (18.7p). Diluted earnings per share increased to 27.3p (18.2p).

11 Finance Director’s Review

Divisional Results The table below shows the performance of DICOM Group’s divisions in each of the years to 30 June 2005 and 2004: IC 2005

IC 2004

SGA 2005

SGA 2004

140.7

119.5

39.1

36.7

Turnover contribution (% of total turnover)

78%

77%

22%

23%

Gross profit margin (%)

51.5%

48.3%

13.0%

14.2%

EBITA (£m)

13.4

11.8

1.3

1.1

EBITA contribution (% of total EBITA contribution)

91%

92%

9%

8%

3.3%

2.9%

Divisional Results Turnover (£m)

EBITA margin (%)

9.5%

9.9%

Europe

North America

Australasia

ROW

Own products

19.2

23.5

2.1

0.7

Services

30.3

8.0

1.4

0.3

Third party products

52.6

-

2.3

0.3

31.5

5.8

1.3

Geographical Split of IC Division in £m

Total IC

102.1

Research and Development Expenditure DICOM Group continues to invest in the ongoing research and development of its market leading products. Such expenditure on research and development is charged to the profit and loss account as incurred. R&D costs totalled £9.9m (£7.9m), an increase of 12% in local currency terms, adjusted for acquisitions. Taxation The tax charge for the year ended 30 June 2005 of £4.3m reflected an effective tax rate on profit before tax excluding goodwill amortisation of 28% (29%). Balance Sheet DICOM Group’s balance sheet continues to be strong. Shareholders’ funds increased during the year to 30 June 2005 from £70.8m to £77.9m. Due to strong operating cash flow of £18.7m net funds as per 30 June 2005 are reported at £16.2m (£20.9m). At year-end committed but undrawn working capital facilities amounted to £18.6m (£28.8m). Return on capital employed of 384% (79%) is based on profit before goodwill amortisation, interest, tax and average net tangible assets, adjusted for net funds.

Cash Flow Operating cash flow generation also remains strong. During the year to 30 June 2005, DICOM Group’s operating activities have generated positive operating cash flows of £18.7m (£18.6m), turning 128% (144%) of operating profit before goodwill amortisation into operating cash flow. Dividend A final dividend of 4.26p has been proposed, making a total dividend payable on ordinary shares for the year of 6.39p (5.55p), up 15%. Dividends on ordinary shares will absorb £1.4m (£1.2m) of the Group’s after tax earnings. These are covered 7.8 times (8.1 times) by profit attributable to ordinary shareholders, adjusted for goodwill amortisation and loss on disposal of fixed asset investment in the prior year.

Finance Director’s Review

12

Compound annual growth rates | Turnover 13% | Adjusted EPS 12%

(FY01 – FY05)

Operating Profit* 25% | Dividend 15% |

* before goodwill and exeptional items

Adjusted EPS and Dividend in pence 6

50

Treasury Management Borrowings are negotiated at the centre or locally after consultation with Group directors. Any funds in excess of local working capital requirements are managed centrally in order to maximise the return. At 30 June 2005 the Group’s fixed rate borrowings amounted to 69% (54%) of total borrowings. Short-term flexibility is achieved by overdraft facilities. Positive cash balances carry floating rate interest based on relevant national interbank rates.

5

40

4

30

3

Adj. EPS

Dividend

20

FY01 Adjusted EPS

FY02

FY03

FY04

FY05

Dividend

Gross Profit and Operating Profit Margin in %

40

8

30 6 20

The Group has significant overseas subsidiaries, which operate principally in their local currency. Where appropriate, borrowings are arranged in local currencies to provide a natural hedge against overseas assets. IFRS Conversion The Group is required to report its results in accordance with IFRS from 1 July 2005. We will therefore be reporting our first quarter results to 30 September 2005 and the accounts for the year ending 30 June 2006 under IFRS, together with the restated comparatives. The unaudited provisional reconciliations and notes on pages 79 to 82 set out the main differences between UK GAAP and IFRS as at, and for the comparative year ended, 30 June 2005. The reconciliations should be considered provisional given the uncertainty that currently exists regarding industry practice on capitalisation of development expenditure which has meant that the Group has not yet finalised its accounting policy in this area.

OP

Gross Profit

4

FY01 Gross Profit

FY02

FY03

Operating Profit

FY04

FY05

Stefan Gaiser, Finance Director, 22 September 2005

13 Finance Director’s Review

SKNDUEZTCBNDHDPCEHCWCJCIKEJHCIOKCIDZDHCB GAGLIFHFGRUQRHQUI GYNLXLUIFAUJPAHEDNHYQGN GVBNLKILOIUZGIMLKJHGFDSAMNBVCXYGPOIASERT SUFKFZUIOPFTREWQHJGKERTUZLXFGFDSVBNMVCXY YZUIREUIDCIGHKBNITREWDFGGPOYXCGFDSERTUZTK BRUDFJWSTGBLQAXWIDFVTGHNUIJKIOPLXRFGBWSD DICOM Group: The Power of Transformation

ASUGLUZTAUSIUAHFJNWVEZZIOGURKODNVSZRXNB AZUTJWHIBCALKSDPOFUGQBMOHUCHIVPLHSWAXFJ GZILUZTREWQLKJHGTREWQMLEADINGVOIUBZMJUK YFGDGHJSKIOZUJKLREWQFGHDBNDSMXJVCHXJKIUM KLMNBZUIFDSAQWERGGFDSTZUUJMEDTXGBOLONIWJ ZHNUJKERDKERDFQASERUIFGHIVBNJKLIOFASDXFLIF Preparing businesses for the future Rapid advancements in information technology have significantly increased the pace of organisations around the world. For instance, we are already used to the increasingly perfect digitalisation of business-critical documents. The information contained in these files is an ever more valuable commodity, necessary to make business processes run smoothly. Today, thanks to the products and services offered by DICOM Group, this information can be integrated quickly, functionally and with a high quality into the digital workflow. But, let’s take a moment and think back to how this was accomplished in the days before Electronic Document Capture and Information Capture. The organisation may have to manually track thousands of invoices, waybills, letters and orders; undertake the time-consuming task of keying the information into its business systems or databases; and then file the documents away, carting tons of paper to an archive. Electronic correspondence often has been printed out and subjected to the same labour-intensive processes and anyone needing to consult a document that has already been filed is in for a long, nerve-wracking and costly search. Now consider the process improvements that thousands of organisations, like Rent-A-Center, Chase Manhattan Mortgage, MGM/Mirage, FedEx, have made thanks to DICOM Group. Our Information Capture products and solutions allow companies quick and precise access to

the documented information that is crucial for the procedures within the entire company. In this way, business processes can be optimised and streamlined, placing DICOM Group customers in a much better position. The importance of these aspects is all the greater given the manifold increase in the number and types of documents now confronting companies. In addition to paper documents, there are numerous electronic document formats to capture and process. Information content is produced every day in e-mails, office applications and PDF documents, and it is estimated that 80% of corporate data is unstructured, what means that the location of information contained in the document is not fixed. New developments accelerate further demand for the Information Capture market. The importance of recording and storing business correspondence in electronic form is growing, with increasing focus on corporate governance (Sarbanes-Oxley) and accountability. Modern Information Capture systems, as installed worldwide by DICOM Group offer far more than just the scanning of paper documents and filing of TIFF files in an archive. Our products and solutions enable our customers to transform business content data into actionable content, by image enhancement, classification, data extraction and data validation.

15 The Power of Transformation Preparing businesses for the future

SKNDUEZTCBNDHDPCEHCWCJCIKEJHCIOKCIDZDHCB GAGLIFHFGRUQRHQUI GYNLXLUIFAUJPAHEDNHYQGN GVBNLKILOIUZGIMLKJHGFDSAMNBVCXYGPOIASERT SUFKFZCOMMUNICATIONS SOLUTIONSFDSVBNMVCX YZUIREUIDCIGHKBNITREWDFGGPOYXCGFDSERTUZTK BRUDFJWSTGBLQAXWIDFVTGHNUIJKIOPLXRFGBWSD

ASUGLUZTAUSIUAHFJNWVEZZIOGURKODNVSZRXNB AZUTJWHIBCALKSDPOFUGQBMOHUCHIVPLHSWAXFJ GZILUZTREWQLKJHGTREWQMLEADINGVOIUBZMJUK FGDGHJSKIOZUJKLREWQFGHDBNDSMXJVCHXJKIUM KLMNBZUIFDSAQWERGGFDSTZUUJMEDTXGBOLONIWJ ZHNUIJKERDKERDFQASERUIFGHIVBNJKLOFASDXFLIF Enabling the automation of business processes The automation of business processes can be considered a key factor to the success of companies. To remain competitive, companies must ensure that processes for capturing, transforming and delivering business-critical data become faster, more efficient and more sophisticated in terms of their quality. Furthermore regulatory needs have to be fulfilled. Our products enable such processes to be more efficient, streamline and accelerate these operational processes measurably ensuring better informed decisions can be made more quickly. Straight-through processing reduces manual tasks to a minimum and therefore cost.

BPA is the next logical step in the evolution of existing Information Capture technologies. Our expanded line of products today includes Unified Communication Solutions, which link relevant business processes and IT systems with all communications media – such as e-mail, fax, SMS and telephone systems. Whether implemented alone or in combination with our Information Capture products, DICOM Group’s Unified Communication Solutions can both facilitate the distribution of information in any appropriate digital format and also communicationenable entire business processes.

DICOM Group’s Information Capture products and services have progressed well beyond the scanning of paper documents and filing of images in an archive. They also perform sophisticated classification and extraction of unstructured information from various electronic formats, such as e-mails, office applications and PDF documents. Our products are now a significant enabler of BPA, allowing organisations to adopt highly automated processes that are faster, more efficient, more effective and readily adaptable to changing market conditions and customer expectations.

17 The Power of Transformation Enabling the automation of business processes

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ASUGLUZTAUSIUAHFJNWVEZZIOGURKODNVSZRXNB AZUTJWHIBCALKSDPOFUGQBMOHUCHIVPLHSWAXFJ GZILUZTREWQLKJHGTREWQMLEADINGVOIUBZMJUK YFGDGHJSKIOZUJKAUTOMATE BUSINESSVCHXJKUNI KLMNBZUIFDSAQWERGGFDSTZUUJMEDTXGBOLONIWJ NSACTIONSKERDFQASERUIFGHIVBNJKLIOFASDXFLF From capture to communication The result is that DICOM Group today enables intelligent, integrated solutions that move organisations closer to the ideal of straight-through processing, eliminating as much human interaction and intervention as possible at all stages of a business process:

• Collection of the incoming business documents and forms needed to drive business processes. • Classification and Extraction of business information and metadata from the documents. • Routing and Validation of the extracted information and metadata. • Conformation or Exception Handling to verify receipt of information or to request special handling as needed. • Delivery of information to business systems, archives and various devices.

19 The Power of Transformation From capture to communication

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ZHDGHJSGHJVZUIOOLDUJCG PROVIDER OF INFORMATION CAPTURE AND ORGANISATIONS TO AUTOMATE BUSINESS UPROCESSES AND STREAMLINE TRANSACTIONS OPLÖRFGBWSDZHNUIJKERDFQA D Partner for the future DICOM Group has fundamentally improved the way its customers do business, but we also recognise that organisations will continue to seek new ways to operate more efficiently and discover additional competitive advantages. That is, why we have built a comprehensive portfolio of products, technologies and services that address today’s challenges of unstructured content, transactional capture, and bi-directional communication, and we are well positioned to address the future challenges of the rapidly evolving BPA market (estimated growth rate around 30%).

Our culture is supported by motivated employees who think globally, act locally and cultivate open dialogue amongst customers, partners and each other. Together, our vision is to create a world where people and organisations can automatically exchange, instantly understand and easily use information to drive business processes and transactions, regardless of format, application or device.

Today, we enable the automation of business processes and streamline the exchange of business-critical documents and information among people, applications and devices. Through our global presence, we provide the most cost-effective solutions in our industry by delivering the highest real-world ROI, the most complete, best integrated and easiest to use set of technologies, and by combining our technical expertise with the industry knowledge of our worldwide partners to reduce costs, increase operational efficiencies, and minimise risk for our customers.

21 The Power of Transformation Partner for the future

SKNDUEZTABCDEFGHIJKLMNOPQRSTUVWXYZABCDE GAGLIFHFGRUQRHTOPCALL SERVERMNOPQRSTUVWX GVBABCDEFGHIJKLMNOPQRSTUVWXYZABCDEFGHIJ SUFKFZUIASCENT RELEASE FOR ERPRSTUVWXYCDEFG YZUIREUIDCIGHKBNITRABCDEFGHIJKLMNOPQRSTUVW BRUDFJWSTGABCDEFGHIJASCENT 4 INVOICESXZABCD Case Studies OPEC Goes Mobile with SMS Solution In the member states of OPEC (Organization of the Petroleum Exporting Countries), the high-ranking employees of oil companies and government power ministries need the latest information about developments in the oil market, yet they are frequently out of their offices. Topcall addressed their needs by implementing a communication solution that leverages the popularity of mobile phones and SMS messages in the region. Every morning, a central Topcall server at the OPEC Secretariat in Vienna automatically sends SMS messages with the latest oil prices to the mobile phones of selected OPEC members. The system also sends detailed background information via fax. The Topcall solution supports the Arabic character set, and both the SMS and fax communication channels are integrated with Microsoft Exchange for quick, easy receipt and editing.

data into their SAP R/3 accounting system, and then photocopy the invoices and mail them to the person responsible for each budget for approval. The entire process was highly manual and took up to three weeks, resulting in lost discounts and the need to pay interest on arrears. Rigips was on the verge of hiring extra staff to keep up with the workload. Instead, they implemented Ascent for Invoices – built on the Ascent Information Capture platform – to help them automate their business processes and create tighter, more transparent administrative procedures.

The combined solution ensures that the OPEC members always have the information they need, in the most appropriate format for their location.

In the new process, invoices are scanned and the resulting images are enhanced with VRS (VirtualReScan) to ensure that the rest of the system can produce the best results possible. Then Ascent for Invoices automatically extracts and interprets information from the invoices in 2 to 3 seconds per page. Finally, Ascent Release for ERP uses the SAP ArchiveLink interface to deliver the invoice information into the Rigips optical archive in a tamper-proof way.

Invoice Processing from Manual to Automatic in 30 Days Rigips, a leading provider of wall and ceiling systems for the construction industry, receives about 70,000 pages of invoices from its suppliers every year. Their previous manual workflow required the accounting staff to sort the documents, manually enter the

The new solution’s 90% recognition rate exceeded the company’s desired target by 10%, reduced their processing time by 40%, and enabled the accounting staff to use their time for more productive tasks. And the system was in place in 30 days, letting Rigips quickly get back to business.

The Power of Transformation Case Studies

22

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Helping an Insurance Company Cope with Success When Pan-American Life Insurance Company introduced a new line of supplementary insurance for workers, they didn’t expect it to be a runaway success. When it was, the company’s claims processors quickly found themselves struggling to push 7,000 claims per week through a manual, paper-based process. Pan-American added temporary workers and outside service bureaus, but the cost was high and the process remained slow. Even customer service and sales personnel began to feel the effects of the manual process and filing system. Pan-American had previously used Ascent Capture to convert their life insurance archives from microfiche to digital images. They believed Ascent could solve their new problem, but they had one strict requirement: the system had to be delivered in one month. The solution was delivered on time, and was a solid success. Now Pan-American scans the medical claim forms, uses VRS (VirtualReScan) to automatically improve the image quality, and then processes the scanned forms through Ascent Capture and its powerful INDICIUS advanced capture modules. The INDICIUS modules read the crowded, data-heavy forms and extract their information so it can be delivered into Pan-American’s database. The company’s system then approves routine claims automatically before cutting and mailing checks without human intervention.

With the new solution in place, Pan-American was able to eliminate their outside service bureau, improve customer service and reduce their staff to its previous level while handling the increased volume and even providing capacity for future growth. New Zealand Governments Set New Standard for Vote-Counting Speed In any election, there can be a conflict between the need for quick results, accurate results, and clear, auditable records. But not in New Zealand, where a private company under contract to 13 local government councils used a new automated vote-counting system that delivered accurate election results, weeks faster than competing technologies. The Ascent for Elections solution – built on the Ascent Information Capture platform – enabled the company to finish tallying votes for one-third of New Zealand‘s voting population just one hour after the polls closed, and to post preliminary results before the end of election day. By comparison, the rest of the country used a different vote-counting system and had to wait more than three weeks for results. The Ascent system’s ability to quickly and accurately process more than 400,000 voting forms was widely praised in the New Zealand press, which raised questions about the viability of the country’s other votecounting systems.

23 The Power of Transformation Case Studies

ABCDEFGHIJKLMNOPQRSTUVWXYZABCDEFGHIJKLM ABCDE INFORMATION CAPTURE XYZABCDEFGHIJKLM ABCDEFGHIJKLMNOPQRSTUVWXYZABCDEFGHIJKLM ABCDEFGHIJKLMNOPQRSTUVWXYZABCDEFGHIJKLM ABCDEFGHIJKLMNOPQRSTUVWXYZABCDEFGHIJKLM ABCDEFGHIJKLMNOPQRSTUVWXYZABCDEFGHIJKLM Unmatched Products and Technologies DICOM Group’s products and services have significantly evolved to meet the growing demands of organisations around the world that seek to automate business processes and streamline the exchange of business-critical documents and information. No other company has the same global reach, depth of experience, or breadth of technology devoted to capturing and exchanging business information. Our product portfolio has expanded through the growth of our Information Capture technologies and the acquisition and integration of Unified Communication technologies. Information Capture DICOM Group is unique in providing solutions across the entire spectrum of capture technologies, from enterprise-strength applications that can serve widely distributed global organisations to OEM chips and algorithms. Our Information Capture products provide a remarkably fast payback by solving the three key challenges of moving information into business systems: 1.Collecting data from the source. Our technologies simplify the connection of scanners, digital copiers and fax servers, and enable the collection of electronic documents and data such as office docu-

ments, e-forms and XML streams. For example, our award-winning VRS (VirtualReScan) technology has been adopted by every major production scanner manufacturer to maximise the quality, simplicity and productivity of scanning. By simplifying scanning, VRS enables organisations to distribute scanners to remote offices and capture information directly into corporate business systems. 2.Transforming data into information. The transformation of documents and forms into information is the most challenging part of the capture process, and it is at the heart of the value DICOM Group brings to our customers. We provide an open, powerful, customisable platform for classifying, extracting, authenticating, indexing and validating information. Our Ascent platform features a growing set of powerful technologies that drive the entire Information Capture process, from the collection of documents and forms, through their transformation into information, to the delivery of that information into business systems and archives. At the centre is Ascent Capture, which remains the world’s most popular Information Capture application, helping thousands of organisations ranging from local governments to global corporations. This powerful application is used “right out-of-the-box“ by departments, workgroups and

The Power of Transformation Unmatched Products and Technologies

24

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small- to medium-sized organisations. And large enterprises around the world use Ascent’s modular, extended capabilities to capture information directly from remote offices and to further automate and drive down the cost of processing large volumes of documents and forms. DICOM Group has enhanced Ascent’s extended capabilities with the introduction of the latest version of INDICIUS, based on multiple technologies obtained through the acquisitions of Mohomine and Neurascript. As previously offered by Neurascript, INDICIUS was already an impressive set of tools for extending Ascent into complex Information Capture applications. The latest version incorporates compelling document-separation technology from Mohomine that greatly reduces labour costs by eliminating the need to manually sort documents and insert physical separator sheets during document preparation. This powerful extension to the Ascent platform was recognised with a Best of Show award at the 2005 AIIM Expo. 3.Delivering information into business systems. Our products connect seamlessly to content management systems, databases and other repositories, simplifying and accelerating the delivery of information into important business applications.

Together, our Information Capture technologies enable more organisations to automate more business processes by efficiently and automatically capturing the range of information encountered in modern business: from the highly structured and predictable data found on a company’s own forms, through the structured but far less predictable information on invoices and bills of lading, to the completely unstructured and unpredictable information received in correspondence and contracts. Unified Communication With the acquisition of Topcall, DICOM Group has added an impressive set of technologies for exchanging and distributing information in any appropriate digital format. These Unified Communication technologies can be implemented alone or in combination with our Information Capture products, providing an unmatched range of capabilities for enabling the automation of business processes. For example, the Topcall Server provides a single-server solution that links existing IT systems with a wide variety of communications media – such as e-mail, fax, SMS and telephone systems. The result is easier distribution of digital information and the ability to communicationenable entire business processes.

25 The Power of Transformation Unmatched Products and Technologies

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Adding new technologies to a business and communication process becomes as straightforward as adding a connection to the Topcall Server. For example, organisations are increasingly using multifunctional peripherals (“MFPs”) in place of multiple printers, copy machines, scanners and fax machines. However, these devices are often not tied into an automated business process, and their inbound and outbound communications are often uncontrolled, creating security and compliance risks. Using the MFPConnect enterprise solution, organisations can tie these systems into the Topcall Server, enabling MFPs to be used for communication with a business process, controlling the sending and receiving of documents and maintaining a complete audit trail of communications.

We have developed an unmatched combination of Information Capture and Unified Communication products – from software tools that enable developers to add document capture capabilities to their applications, to sophisticated software platforms that enable organisations to transform documents and forms into electronic information for driving business processes, to robust hardware servers that enable the automatic delivery and exchange of information among organisations and devices. The result is that organisations can address a wide variety of business process issues, ranging from the automated processing of inbound information to the automated communication and exchange of information with customers and partners.

Bringing It All Together DICOM Group recognises that each organisation has its own preferred systems for managing its business processes and workflows. That is why our products and technologies remain focused on enabling the automation of business processes, so those systems can get to work faster and run more efficiently.

The Power of Transformation Unmatched Products and Technologies

26

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SGA Division Samsung General Agency (SGA) By combining expertise in flat screen visualisation technology, marketing and sales, consulting and project management, the Samsung General Agency (SGA) Division created a well established and exclusive partnership with the world’s leading display manufacturer, Samsung. The SGA Division markets LCD computer displays, LCD and Plasma Screens and TVs to each of the IT, POI/POS (Point of Information / Point of Sales) and Home Entertainment markets through resellers, solution providers, integrators and mass merchandisers in Switzerland.

As independent research indicates, SGA has built a leading market position for Samsung LCD flat panel displays, and LCD and Plasma TVs in the Swiss market. In autumn 2004, Samsung successfully entered the Swiss market with notebook pc’s.

27 The Power of Transformation SGA Division

Giulio Battistini

Gary Collins

Stefan Gaiser

Michael Giove

Richard Murphy

Urs Niederberger

Sameer Samat

Arnold von Büren

Anthony Macciola

Team and Management Executive Committee of the Group • Giulio Battistini (Managing Director Asia) • Gary Collins (Managing Director EMEA) • Stefan Gaiser (Finance Director) • Michael Giove (Managing Director Americas) • Anthony Macciola (VP Product management) • Richard Murphy (Executive Director) • Urs Niederberger (COO) • Sameer Samat (VP Engineering & Development) • Arnold von Büren (CEO)

The continued and sustained improvement in the performance of the Group depends on its ability to attract, motivate and retain employees of the highest calibre. We constantly strive to attract customer-focused people who seek to accomplish high reaching goals and support a range of initiatives that foster personal skills and capabilities. We are proud of having one of the lowest staff turnover rates in the IT industry. This is a result of a company culture that enables us to recruit and retain qualified, well-trained and highly motivated employees.

DICOM Group is an international company, where a great variety of people from different countries and cultures ensure the company’s success. We share the vision of creating a world where people and organisations can automatically exchange, instantly understand and easily use information to drive business processes and transactions, regardless of format, application or device.

The Executive Committee of the Group is responsible for the definition and development of the group strategy on behalf of the Group Board and is responsible for the execution of such strategy once agreed by the Board. During the year the staff numbers grew from 849 to 1194, principally due to the acquisition of Neurascript and Topcall.

Team and Management DICOM Group

28

International Presence DICOM Group Asia Pacific

Europe, Middle East & Africa

Americas

Regional Sales & Marketing Australia

Austria

Belgium

China

Croatia

Czech Republic

Indonesia

Denmark

Finland

Japan

France

Germany

Malaysia

Hungary

Italy

Philippines

Netherlands

Norway

Singapore

Poland

Portugal

Spain

Sweden

Switzerland

United Arab Emirates

USA

United Kingdom Product Development Vietnam

Austria

United Kingdom

29 International Presence DICOM Group

USA

Shareholder Information

Open Dialogue with Investors, Equity Analysts and Financial Commentators It is important to us to provide capital market participants with a continuous flow of timely and comprehensive information about developments of our company and to engage in open dialogue with investors, equity analysts and financial commentators.

Shareholder Structure in %

Institutional Investors UK 58%

Private Investors UK 17%

We are also focused on making the Investor Relations web site the best place to access and analyse the company’s financial information by providing company presentations, historical financial data, corporate governance information and much more. This information is available at www.dicomgroup.com. Share Price increases by 20% in the last Financial Year During the last financial year the equity capital market recovered after a difficult previous year. The FTSE techmark 100 index increased 4% with the FTSE Small Cap index increasing 13% over the year. DICOM Group’s share price increased 20% from 775p at the beginning of the year to 933p on 30 June 2005. The market capitalisation of DICOM Group was £201.0m on 30 June 2005, compared to £163.7m at the end of June 2004. Shareholder Structure The total number of shares in issue as at 30 June 2005 was 21,543,729. The directors, the management and the employees held approximately 13% of all shares. UK institutional investors accounted for 58%, with a further 17% held by private investors in the UK and 12% investors in Continental Europe. A list of substantial shareholders, as notified, is shown on page 35.

Continental Europe 12%

Management and Employees 13%

Data as of 15 June 2005

Trading Information • Symbol LSE:DCM • ISIN GB 0002682622 DE 0009314864 • SEDOL 0268262 • Index FTSE techMARK 100 FTSE Small Cap Company Calendar 2005 • 8 November 2005 Annual General Meeting in London • 8 November 2005 Q1 Trading Update • 2 December 2005 Final Dividend Payment 2006 • February 2006 • May 2006 • May 2006 • 30 June 2006 • August 2006

Shareholder Information

30

Interim Results Interim Dividend Payment Q3 Trading Update End of Financial Year 2006 Preliminary Announcement of Results – Year ending 30 June 2006

Total Shareholder Return in % (from 1 July 2000 to 30 June 2005) 180 163%

160 140 120

99%

100 80 60

39%

40 20 0 DICOM Group 1 July 2000

30 June 2001

30 June 2002

AGM Details The tenth Annual General Meeting of DICOM Group plc will be held at the offices of Bridgewell Securities Limited, Old Change House, 128 Queen Victoria Street, London, EC4V 4BJ, on 8 November 2005 at 11am. Notice of the Company’s Annual General Meeting is given in the Circular which is sent out to shareholders together with the Annual Report. Enquiring about your shareholding If you want to ask, or need any information, about your shareholding please contact the Company’s registrars. Capita Registrars, whose contact details are Capita Registrars, Woodsome Park, Fenay Bridge, Huddersfield HD8 0LA, United Kingdom. Capita’s shareholder services helpline: 0870 162 3100. Paying your dividends direct to your account Shareholders who do not currently have their dividends paid directly to a bank or building society account and who wish to do so should complete a mandate instruction available from the Company’s registrars.

30 June 2003

FTSE Techmark 100 30 June 2004

FTSE Small Cap 30 June 2005

Shareholder Helpline Call us toll-free on 0800 - 65 20 616 (UK) or contact us via e-mail: [email protected]. For access to additional financial information, visit the Investor Relations website online at www.investor.dicomgroup.com. Investor Relations Contacts Dr. Bettina Moschner Investor Relations Phone: +49 (0) 761 45 269 190 Fax: +49 (0) 761 45 269 8190 e-mail: [email protected] Gabriele Rosenbusch Group Communications Phone: +49 (0) 761 45 269 192 Fax: +49 (0) 761 45 269 8192 e-mail: [email protected]

31 Shareholder Information

Arnold von Büren Chief Executive Officer

Urs Niederberger Chief Operating Officer

Stefan Gaiser Finance Director

Richard Murphy Executive Director

Board of Directors Executive Directors Arnold von Büren (52), a Swiss citizen, was appointed the Group’s Chief Executive Officer in July 2002. Before his appointment, he was CEO of Kofax, DICOM Group’s centre for product development. He has more than 20 years’ experience in the Computer industry. Before joining DICOM Group in 1994, he co-founded and was general manager of Computerway AG, a Swiss IT services company. He obtained a degree in economics and business administration at the University of Applied Science St. Gallen. He was appointed to the main Board on 15 December 1995. Urs Niederberger (39), a Swiss citizen, was appointed the Group’s Chief Operating Officer in July 2002. He has served as Group Finance Director between October 1997 and April 2005. Before joining DICOM Group he worked as a consultant with Visura Consulting, part of BDO International. He obtained a degree in economics and business administration at the University of Applied Science Lucerne. He was appointed to the main Board on 2 December 1997.

Stefan Gaiser (31), a German citizen, was appointed the Group‘s Finance Director in April 2005. He joined DICOM Group in October 2000 as Associate Chief Financial Officer, strengthening the DICOM Group Finance team. Before joining DICOM Group he worked as a tax consultant for a German accountancy firm. He was appointed to the main Board on 8 April 2005. Richard Murphy (59), a US citizen, was appointed Executive Director in March 2004. Taking charge of sales and business development on executive board level, he is working with the regional sales organisation to maximise cross group efficiencies and global opportunities. Prior he was President and Chief Executive Officer of Kofax. He has 35 years’ experience working in the computer industry. Before joining Kofax in 1989, he was Vice President of North American Sales for Emulex Corporation. He was appointed to the main Board on 26 March 2004.

Board of Directors Executive Directors

32

Otto Schmid

Bruce Powell

Chris Conway

Mark Wells

John Alexander

Board of Directors Non Executive Directors Otto Schmid (67), a Swiss citizen and cofounder of DICOM Group, is the Group’s Chairman. During his tenure as Chairman and Chief Executive, he led the development of DICOM Group in countries outside Switzerland and took specific responsibility for planning and corporate development at Board level. He holds a PhD in applied mathematics from the University of Zurich. He was appointed to the main Board on 15 December 1995.

Chris Conway, (60), an Irish citizen, is Non-executive Chairman of Detica Group plc, a UK IT Consultancy and Services company focusing on building Information Intelligence systems for UK Government, Security and large Commercial clients, a position he has held since April 2001. He was a board member of IBM UK and Chairman and Chief Executive of Digital Equipment Co Ltd. He was appointed to the main Board on 15 December 2004.

Bruce Powell, FCA, MA (Cantab.) (56), a British citizen, is the senior Non-executive director. He was involved as Finance Director in the operational management and initial flotations of Acal Group plc and VideoLogic Group plc, now Imagination Technologies Plc. He is a Non-executive director of Dataform Group Ltd, Princeton Consulting Ltd and Argenta Discovery Ltd. He was appointed to the main Board on 16 March 1996.

Mark Wells, (49), a British citizen, was Chairman and CEO of Image Metrics Plc, an image analysis software company. Previously he was Chief Operating Officer for Brainpower NV, a supplier of advanced financial analytical software and Managing Director UK and Vice president of Continental Europe for Dun and Bradstreet Software. He was appointed to the main Board on 15 December 2004.

John Alexander, MA (Oxon) (46), a British citizen, has 24 years’ experience working as an investment manager in the City of London. He worked at Touche Remnant, Henderson Administration plc and Henderson Global Investors between 1984 and 2002. He currently works for Hansa Capital Ltd. He was appointed to the main Board on 1 July 2003.

Audit Committee Bruce Powell, John Alexander and Mark Wells Remuneration Committee Chris Conway, John Alexander and Mark Wells Nomination Committee Otto Schmid, Bruce Powell, John Alexander, Chris Conway and Mark Wells

33 Board of Directors Non Executive Directors

Directors’ Report

The directors present their tenth annual report, together with the audited financial statements of the Company for the year ended 30 June 2005. Principal Activities The principal activities of the Group comprise development and marketing of Information Capture products and services. It is also engaged as general agent of Samsung Electronics in Switzerland. Business Review Details of the Group’s operations, the development of its business and an indication of its future prospects are contained in the Chairman’s statement, the Chief Executive’s and the Finance Director’s review on pages 4 to 13. Profits and Dividends The profit attributable to ordinary shareholders for the year to 30 June 2005 was £6.0m (£3.9m). The directors recommend a final dividend of 4.26p per ordinary share of 10p. This will result in a total dividend of 6.39p (5.55p) per ordinary share of 10p and will absorb £1.4m (£1.2m) of the results of the year.

Directors and Directors’ Interests The names and biographical details of the current directors appear on pages 32 and 33. Chris Conway and Mark Wells were appointed to the Board on 15 December 2004. Paul Gerny resigned from the Board on 15 December 2004. Stefan Gaiser was appointed to the Board on 8 April 2005. In accordance with the Company’s Articles of Association Chris Conway, Mark Wells and Stefan Gaiser, having been appointed as directors by the Board during the financial year ended 30 June 2005, will retire at the forthcoming Annual General Meeting and will offer themselves for election. Bruce Powell also retires by rotation at the forthcoming Annual General Meeting and offers himself for re-election. The beneficial interests of the current directors and their families in the issued share capital of the Company as well as details of share options granted to the directors are given in the Remuneration report on pages 43 to 47. No director had any interest in any subsidiary at the beginning or end of the year.

Research and Development Research and development costs amounted to £9.9m (£7.9m). All such expenditure is written off to the profit and loss account as incurred. Share Capital Details of changes in the issued share capital of the Company during the year to 30 June 2005 are set out in note 21. At the forthcoming Annual General Meeting, the Company will be seeking authority to purchase its ordinary shares. Authorities were previously granted at the Annual General Meeting in 2004, but expire at the close of the forthcoming meeting.

Directors’ Report

34

Employees Involvement The success of the Group depends on the quality and performance of its employees and the Group ensures this by communicating with its employees about both local and Group-wide matters; this communication is conducted through personal briefings, regular meetings and e-mails on a regular basis. The Company encourages all of its employees to participate in the growth of the Group and welcomes staff input at all levels. Employee involvement in the Group’s profitability is encouraged through locally based bonus and profit related pay schemes and a share option scheme. Payment of Suppliers The Group as well its operating companies are responsible for agreeing terms and conditions with suppliers when purchase contracts are entered into, taking into account local good practice, and seeks to abide by these payment terms whenever satisfied that the supplier has provided the goods or services in accordance with the agreed terms and conditions. As at 30 June 2005 trade creditors represented 47 days (53 days) purchases.

Substantial Shareholdings At 22 September 2005 the Company had been notified, in accordance with sections 198 to 208 of the Companies Act 1985, of the following interests in the Company’s issued share capital: Number

Fidelity Investment

1,899,883

8.8

Standard Life

898,890

4.2

Scottish Widows Investment Partnership

666,000

3.1

Legal & General Investment Management

661,364

3.1

Annual General Meeting Notice of the Company’s Annual General Meeting is given in the Circular which is sent out to shareholders together with the Annual Report. At the meeting, resolutions will be proposed to renew the general authority of the directors to issue shares (together with the authority to issue shares without applying the statutory pre-emption rights) and to authorise the Company to make market purchases of its own shares. No such purchases have been made during the last financial year. The Board also proposes a 4 for 1 sub-division of the Group’s issued and authorised share capital.

By order of the Board

Stefan Gaiser, Company Secretary, 22 September 2005

35 Directors’ Report

%

Corporate Social Responsibility Putting CSR into Our Corporate Context We are committed to high standards and ongoing improvements in the area of Corporate Social Responsibility. Typically, the direct impact an information technology developer and provider can make on key aspects of CSR is limited. Examples include the protection of the global ecosystem or guaranteeing core labour standards as set out of the International Labour Organisation in the developing world. We believe, however, that our core values and CSR initiatives in other areas do matter significantly to our stakeholders and subsequently impact the future development of the company positively. Employees Welfare and Corporate Citizenship are the key areas where we believe can make a difference.

The Impact of Recent Developments on CSR A key characteristic at DICOM Group which does not change is constant change, which is in part driven by changing customer needs but also because it is a strong element of our company culture. Unsurprisingly, developments at DICOM Group have continued at a fast pace during the Financial Year 2005. We continuously strive to improve the way we serve our customers and business partners, both taking a short and long term view. As result we acquired businesses last year, strategic and bolt on, which have extended our market reach and product offering significantly. Through the acquisition and through organic growth the world-wide workforce grew by 41%. Growth at that level constitutes a number of challenges in the area of CSR along the lines of the key considerations: how do we spread our company culture and how do we drive integration of the acquired businesses for the benefit of our customers and employees? These key aspects constitute challenges and will always be considered and addressed.

Corporate Social Responsibility

36

Average Number of Employees

1,200

1,200

1,000

1,000

800

800

600

600

FY01

FY02

FY03

FY04

FY05

Progress to Date During the Financial Year 2005 our first CSR Report was developed containing a description of our CSR goals, where we are today and initiatives. The Report, which was based on a survey carried out the entire organisation was extensively discussed internally and approved by the Board in early 2005. The Report and Policy is based on our core goals and values, which are spelled out in this report on the inside cover. Following these values we have established goals falling in three categories: 1. Employee Welfare and Health and Safety • Set up DICOM Academy, a training and management development scheme to improve leadership skills and management capabilities. • Discuss and communicate our core values and business ethics actively and openly (DICOM Academy). • Establish strategic objectives and improve KPIs relating to our Employment Policy. 2. Environment • Reduce power consumption 3. Corporate Citizenship separated into the four subsections: • Customer Welfare – Maintain excellent product quality standards • Human Rights and Ethics – Ensure employee commitment and raise awareness throughout the organisation • Relation to Suppliers – Introduce formal evaluation programme – Evaluate CSR information relating to supplier organisation • Community involvement – Develop a group-wide community project

For each section specific Key Performance Indicators have been spelled out. These KPI’s have been discussed with local management. The performance will be measured during the first Quarter of Financial Year 2006. Results and Achievements: Employees Welfare The key to our success is first and foremost based on our strong company culture, which is build on respect, integrity, the promotion of partnerships within and outside the company leading to a highly committed workforce. We believe that investing into the development of our people constitutes not just an important CSR goal, but is the key requisite for future growth as it is our employees that need to permanently improve the attractiveness of our value proposition to our customers. In a word of great opportunity but also high uncertainty it is crucial to attract and retain people with high levels of commitment and talent. In order to further improve in these respects we delivered on our promise to significantly invest in the development of our managers which we spelled out in our CSR Report. To date, 120 managers have been invited to the DICOM Academy Leadership and Management Programme, which focuses on three key aspects leading and managing companies successfully: • Leadership, Value and Ethics at DICOM Group, covering also aspects of CSR; • Strategic Marketing and Sales Management; • Financial, Operational and HR Management, in which also the HR Policy is being discussed. Each of the three subjects is covered by a dedicated off-site seminar session taught and moderated by renowned experts in their field, primarily Professors of leading schools such as the Harvard Business School. The programme started in January. By August 2005, 61% of all managers had attended one session. Following the sessions participants were polled anonymously to provide a rating of the session in general, its contents in detail, overall relevance as well as the quality of the faculty and logistics. On a scale of 1 to 6 (1 = excellent and relevant), the Academy was rated on average of 1.3 which we believe is a clear indicator that this major CSR initiative was a success.

37 Corporate Social Responsibility

As outlined in our CSR Report we believe that internal communication is key for the development of our people. During the year our group-wide HR Policy was implemented in all organisations. Whereas in earlier years only larger subsidiaries had such a Policy we can now operate on global HR standards, which again support our efforts to integrate the company and lead in terms of the employees’ welfare. The HR Policy covers all HR relevant aspects such as employee selection, the hiring and retention process and measures how to implement and manage the Policy.

Results and Achievements: Environment and Corporate Citizenship In the area of environmental protection we raised the awareness of the issue, primarily in the area of reduction of energy consumption and materials and recycling. It is our aim to keep our product quality on very high standards which we measure by customer surveys and product return rates, which where at almost negligible levels during the past years.

Each year all managers of the Group convene for the Manager Meeting, which is conference to exchange experiences and ideas and to align our activities to our company Vision and Mission. During the last Financial Year each manager attending the conference participated in workshops covering the HR Policy, communication and CSR. We believe that these initiatives lead to a continued high retention rate (over 90%) in particularly if compared to the industry average. During the Financial Year no work related accidents occurred. On a local management level we discussed and raised awareness for Health and Safety standards, in particularly in countries where low levels of regulations prevail.

Corporate Social Responsibility

38

Corporate Governance Statement

The Board is committed to high standards of corporate governance. The Board considers that the Company has, throughout the year ended 30 June 2005, complied with all the provisions of the 2003 new Combined Code on Corporate Governance (the new Combined Code), with the exception of a formal appraisal process for the Board and its committees. The Board will initiate a formal appraisal process during the current financial year. Directors The Board, which operates as a single team, is currently made up of nine directors, being the Chairman, who is part-time, four Executives and four independent Non-executive directors. Biographical details of the directors and the Board committees on which they sit are set out on pages 32 and 33. The Board considers that the balance of its constitution brings an appropriate balance of experience in judging matters of strategy, performance, resources, investor relations, internal controls and corporate governance. All the Non-executive directors, with the exception of Otto Schmid, former Executive Chairman, meet the criteria for independence set out in the new Combined Code and are therefore considered to be independent of management, in the opinion of the Board, and free from any business or other relationships which could interfere with the exercise of their judgement. Bruce Powell is the Senior Independent director. The Board meets at least eight times each year, either physically or by conference call, with additional meetings and contact between the meetings as necessary. During the financial year ended 30 June 2005, there were 10 meetings of the Board. All members of the Board attended all meetings:

Scheduled Board meetings attended

Arnold von Büren

10/10

Urs Niederberger

10/10

Stefan Gaiser

3/3

(appointed on 8 April 2005)

Richard Murphy

10/10

Otto Schmid

10/10

Bruce Powell

10/10

Paul Gerny

5/5

(resigned on 15 December 2004)

John Alexander Chris Conway

10/10 6/6

(appointed on 15 December 2004)

Mark Wells

6/6

(appointed on 15 December 2004)

There is a formal schedule of matters reserved for the Board’s consideration. These include the Group’s strategic plans and annual and mid term operating plans, business acquisitions and disposals of companies, major litigation and employee share schemes. The directors may, at the Company’s expense, take independent professional advice and receive training on appointment, and subsequently, as they see fit. In addition, all directors have access to the advice and services of the Company Secretary, the appointment and removal of whom is a matter of the whole Board. He advises the Chairman and the Board on appropriate procedures for the management of its meetings and duties (and the meetings of the Company’s principal committees), as well as the implementation of corporate governance and compliance within the Group.

39 Corporate Governance Statement

Prior to appointment, prospective directors participate as observers to the Board. This allows the individual, as well as the existing directors, to get to know each other prior to appointment. On appointment, the directors take part in an induction programme. They receive information about DICOM Group, the role of the Board, matters reserved to the Board, terms of reference and membership of principal Board and management committees, the powers delegated to committees, the company’s corporate governance practices and procedures, followed by provision of the latest financial information on the Company. This is supplemented by visits to key DICOM Group locations and meetings with key senior executives. Throughout their period in office, the directors are continually updated on DICOM Group’s business and the competitive environment in which it operates, technology matters and other changes affecting DICOM Group. Directors are also advised on appointment of their legal and other duties, responsibilities, and obligations as a director of a listed company, both in writing and in faceto-face meetings with the Company’s solicitors. Any director appointed by the Board during the year is required, under the provisions of the Company’s Articles of Association, to retire and seek re-election by shareholders at the next Annual General Meeting. The Articles also require one-third of the Board to retire by rotation each year. All directors are required to offer themselves for re-election at least every three years. There is a clear division of responsibilities between the Chairman and the Chief Executive which has been approved by the Board. The Chairman is responsible for leadership of the Board, ensuring its effectiveness on all aspects of its role and setting its agenda. He facilitates both the contribution of the Non-executive directors, and constructive relations between the Executives and Non-executive directors. He ensures that the Chief Executive develops a strategy with which the Board as a whole is comfortable. The Chief Executive is responsible for formulating strategy and for ensuring its delivery once agreed by the Board. He creates a framework of strategy, values, organisation and objectives to ensure the successful delivery of results, allocating decision making and responsibility to support this. In doing so, he works with the Executive Committee of the Group (ECG), which comprises of all of the Executive directors and certain other senior executives.

This separation of responsibilities, together with the ratio of board membership between Executive and Non-executive directors, ensures there is a balance of power and authority at the head of the Company. The views of all directors are taken into account in the decision-making process. To enable the Board to function effectively and assist directors to discharge their responsibilities, full and timely access is given to all relevant information. In the case of Board meetings, this consists of a comprehensive set of papers, including regular business progress reports and discussion documents regarding specific matters. Senior executives are regularly invited to Board meetings and make business presentations. Board Committees The Board has delegated certain responsibilities to Board committees, which operate within clearly defined terms of reference, reporting regularly to the Board. These are the: • Audit Committee assists the Board in reviewing the reporting of financial and non-financial information to shareholders, the system of internal control and risk management, and the audit process. The Committee comprises three Non-executive directors, chaired by Bruce Powell, and meets formally at least four times a year. It met 5 times during the financial year ended 30 June 2005 and all members were in attendance. The meetings are normally attended by the Finance Director and the external auditors. The attendance of individual Committee members at Audit Committee meetings is shown in the table below: Scheduled Audit Committee meetings attended

Bruce Powell

5/5

Otto Schmid

2/2

(resigned from the Audit Committee on 15 December 2004)

John Alexander

5/5

Mark Wells

3/3

(appointed on 15 December 2004)

The scope of audit is discussed in advance by the Audit Committee. Audit fees are reviewed by the Audit Committee after discussions between the operating companies and the local auditors and a review by the Group Finance team.

Corporate Governance Statement

40

The Committee also keeps under review the independence and objectivity of the external auditors. The Committee reviews the nature and amount of non-audit work undertaken by BDO Stoy Hayward LLP (BDO) each year to satisfy itself that there is no impact on their independence. In some cases, the nature of the advice may make it more timely and cost-effective to select BDO who already have a good understanding of the Group. Details of this year’s fees are given in note 2. BDO are also subject to professional standards which safeguard the integrity of the auditing role they perform on behalf of the shareholders. There is a formal policy in place for the provision of non-audit services by the auditors. This policy prohibits the provision of certain services and requires that others are subject to prior approval. • Remuneration Committee comprises three Nonexecutive directors, is chaired by Chris Conway, and meets formally at least three times a year. It met 3 times during the financial year ended 30 June 2005 and all members were in attendance. The attendance of individual Committee members at Remuneration Committee meetings is shown in the table below: Scheduled Remuneration Committee meetings attended

John Alexander

3/3

Paul Gerny

1/1

(resigned from the Remuneration Committee on 15 December 2004)

Otto Schmid

1/1

(resigned from the Remuneration Committee on 15 December 2004)

Chris Conway

2/2

(appointed on 15 December 2004)

Mark Wells

2/2

(appointed on 15 December 2004)

Further details about the Committee are included in the Remuneration Report. • Nomination Committee keeps under review the Board structure, size and composition; proposes to the Board suitable candidates for appointment as directors of the Group, and considers Board succession plans. The Committee comprises all Nonexecutive directors, is chaired by Otto Schmid, and meets as required. It met 2 times during the financial

year ended 30 June 2005 and all members were in attendance. The attendance of individual Committee members at Nomination Committee meetings is shown in the table below: Scheduled Nomination Committee meetings attended

Otto Schmid

2/2

Bruce Powell

2/2

Paul Gerny

1/1

(resigned on 15 December 2004)

John Alexander

2/2

Chris Conway

1/1

(appointed on 15 December 2004)

Mark Wells

1/1

(appointed on 15 December 2004)

The Chairman will have initial meetings with candidates and recommend a shortlist of individuals who then meet with other Nomination Committee members and the Executive directors. The Nomination Committee then meet and decide which candidate, if any, will be invited to join the Board. Relations with Shareholders The Company is committed to maintaining good communications across its entire shareholder base, whether institutional investors, private or employee shareholders. This is achieved principally through annual and interim reports, quarterly and other trading statements, as well as via the Annual General Meeting. Normal shareholder contact is the responsibility of the Chief Executive, the Finance Director and DICOM Group’s Investor Relations department. The Chairman and Senior Independent director are available to discuss matters with institutional shareholders where it would be inappropriate for those discussions to take place with either the Chief Executive or the Finance Director. Regular dialogue and presentations take place throughout the year with institutional investors, buyside and sellside analysts. Shareholders have the opportunity to meet and question the Board at the Annual General Meeting, which will be held in London on 8 November 2005. There will be a business presentation by the Chief Executive and the Finance Director. The Company seeks to ensure that the Chairmen of the Audit, Remunera-

41 Corporate Governance Statement

tion and Nomination Committee are available to answer questions. The results of the proxy voting will be disclosed at the meeting after the shareholders have voted on each resolution on a show of hands. The Company’s website at www.dicomgroup.com contains both corporate and customer information, updated on a regular basis. Internal Control and Risk Management Responsibility for risk and internal control: The Board has overall responsibility for the Group’s approach to assessing risk and the systems of internal control, and has delegated responsibility for reviewing its effectiveness to the Audit Committee. This includes financial, operational and compliance controls and risk management procedures. The role of executive management is to implement the Board’s policies on risk and control, and present assurance on compliance with these policies. This process, regularly reviewed by the directors, is carried out in conjunction with business planning and is documented in a risk register. Because of the limitations that are inherent in any system of internal control, this system is designed to manage, rather than eliminate the risk of failure to achieve the Group’s business objectives. Accordingly, it can only provide reasonable but not absolute assurance against material misstatement or loss. Risk assessment: The Board has established an ongoing process for identifying, evaluating and managing the significant risks faced by the Group. This process, which is regularly reviewed by the Board and accords with the Turnbull guidance, was in place throughout the year under review and has continued up to the date of these accounts. A key control procedure is the day-to-day involvement of executive members of the Board and Group management in all aspects of the business and their attendance at regular management meetings of the operating companies at which performance against plan and business prospects are reviewed. Internal control: Whilst the Board maintains full control and direction over appropriate strategic, financial, organisational and compliance issues, it has delegated to executive management the implementation of the systems of internal control within an established framework.

ning, capital expenditure, information and reporting systems, and for monitoring the Group’s business and their performance. Other key features and the processes for reviewing effectiveness of the internal control system are described below: • terms of reference for the Board and its subcommittees, including a schedule of matters reserved for the Board and an agreed annual programme of fixed agenda items for Board approval; • managers for each operating company being clearly accountable for establishing and maintaining internal controls within their respective companies; • Board approved strategy, three-year operating plans and yearly budget plans for each operating company; • reviews of monthly management accounts, quarterly reviews of business re-forecasts and reviews of performance indicators by management and the Board following approval of the annual group budget; • reviews of the scope of the work of the external auditors by the Audit Committee and any significant issues arising; • operational controls in human resources management, information technology and asset security; • appropriate monitoring of key suppliers to the Group. The directors have this year again considered the need for a full time internal audit function in light of the nature of its business and the complexity of transactions. At present, the size of the business is at a scale that does not justify the need for a full-time internal audit function. Group Executives perform periodic internal assessments on main areas of activity at operating unit level. The directors, through the Audit Committee, have reviewed the effectiveness of the Group’s systems of internal control. Going Concern The directors confirm that they are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Group financial statements.

The Board has put in place an organisational structure with formally defined lines of responsibilities and delegation of authority. There are also established procedures for plan-

Corporate Governance Statement

42

Remuneration Report

This report is made by the Board on the recommendation of the Remuneration Committee. The report provides details of directors’ remuneration policy and information on directors’ remuneration for the year ended 30 June 2005. This report has been drawn up in accordance with the 2003 new Combined Code and the Directors’ Remuneration Report Regulations 2002. A resolution will be put to shareholders at the Company’s Annual General Meeting inviting them to approve this report. Remuneration Committee The Remuneration Committee presently comprises Chris Conway (Chairman), Mark Wells and John Alexander. Paul Gerny was a member of the Committee until he retired from the Board in December 2004. Otto Schmid was also a member of the Committee until December 2004. The Committee receives assistance from the Chief Executive who attends meetings by invitation to discuss the performance of the other Executive directors and make proposals as necessary, but takes no part in deliberations when his own position is being discussed. The Committee reviews the remuneration package of Executive directors and other senior employees of the Group (having due regard to pay levels throughout the Group) and makes recommendations thereon to the Board within agreed terms of reference. The Committee establishes a reward framework to enable the Company to attract and retain its Executive directors and senior management, giving due regard to the financial and commercial health of the Company. The Committee’s approach reflects the Company’s overall philosophy that all employees should be appropriately and competitively rewarded. The Committee keeps itself fully informed of all relevant developments and best practices in the field of remuneration in the territories in which it operates. The Committee makes use of current surveys or seeks advice where appropriate and required from external advisors.

Remuneration Policy The success of the Group is dependent upon the skills and experience of motivated employees throughout all levels of the business. The remuneration policy is therefore designed to attract, motivate and retain high calibre individuals to drive the performance of the business and secures new path of growth. Total remuneration for Executive directors comprises a fixed salary, variable pay, benefits, comprising car and other personal expense allowances and payments to personal pension schemes. As set out in the pensions note on pages 71 to 73, the Group now needs to account for the Swiss pension scheme, which 3 directors are a member of, as a defined benefit scheme rather than a defined contribution scheme. Due to a change in Swiss pension law effected 1 January 2005, the Group can be obliged to contribute to a minimum return on the assets held under the pension scheme. Executive directors may participate in the Company’s share option scheme. Salaries and performance-related remuneration are reviewed annually. The remuneration for the Non-executive directors is reviewed periodically by the Board as a whole. The Chairman’s remuneration package consists of a salary only. The other Non-executives directors are paid a basic fee with an additional fee payable to members of the Audit and Remuneration Committees. These salary and fees are neither performance related nor pensionable. The Non-executive directors do not participate in any annual bonus, pension or share option scheme. Components of remuneration Basic salary Salaries and Benefits Basic salary and benefits for Executives are reviewed annually at the beginning of the financial year or on promotion. Salaries are benchmarked against equivalent market salaries for other FTSE 100 techMARK companies with a similar turnover and market capitalisation, taking into account local

43 Remuneration Report

scales of remuneration. The salaries are set by the Committee after consideration of the Company’s performance, market conditions, the level of increase awarded to employees throughout the business and the need to reward individual performance. In addition to basic salary, the Executive directors may receive a company car and other personal expense allowances. The salaries of the Executive directors for the last two financial years are set out in the table on page 45. Pension Arnold von Büren, Urs Niederberger and Stefan Gaiser form part of the defined benefit scheme operated in Switzerland. Performance related remuneration Annual performance-related cash bonus The annual performance-related cash bonus scheme is designed to reinforce the relationship between individual and corporate performance and reward. In order to ensure that the remuneration packages of the Executive directors are increasingly dependent on performance, the annual performance-related cash bonus ranges between approx. 43% to 50% of basic salary for on-target performance as from 1 July 2005. The targets are determined annually by the Committee and incorporate a mixture of financial measures. Target performance is based on annual adjusted EPS which carries a 60% weighting and operating cash flow which carries a 30% weighting. The remaining 10% will be paid based on compound annual growth rates of adjusted EPS. The achievement of targets for all Executive directors is assessed by the Committee, with the help and advice of the Chief Executive. Share Options The Company has operated share option schemes since its Initial Public Offering in 1996 as the Remuneration Committee considers that share ownership and the award of share options are key components in the overall remuneration package for Executive directors and senior management. It is the Remuneration Committee’s objective that all Executive directors and members of senior management should by direct share ownership and/or by grant of share options have a material interest in the success of the Group.

Executive directors are entitled to participate in the share option scheme open to all employees of the Group. The Remuneration Committee approves the granting of any share options. The exercise of share options to the Executive directors is subject to meeting of performance targets set by the Remuneration committee. The Committee reviews the performance condition prior to the annual award of options to ensure that it is set at appropriately challenging levels. For options to be granted during financial year ending 30 June 2006, no options will be exercisable for average annual growth of adjusted earnings per share (EPS) of less than RPI plus 3% per annum over the performance period, 50% of the option will be exercisable if average growth of adjusted EPS of RPI plus 3% per annum is achieved and, for average growth of adjusted EPS of RPI plus 5% per annum, the option is exercisable in full, with a pro rating between 3% and 5%. Adjusted EPS is measured against a fixing starting point over the performance period beginning with the prior year in which the option is granted. The Company does not operate any long-term incentive scheme for directors other than the share option scheme described above. Service Agreements It is the Company’s policy that Executive directors should have service agreements with an indefinite term providing for a maximum of 12 months’ notice. There are no other predetermined provisions for Executive directors with regard to compensation in the event of loss of office. Non-executive directors, including the Chairman, do not have service agreements, but are appointed pursuant to letters of appointment. They are normally appointed for an initial three-year period. At the end of this three year period the appointment may be continued by mutual agreement. Service agreements are normally terminable on three months’ notice by either the Company or the director. Bruce Powell has served as a Non-executive director on the Board for nine years. In accordance with the recommendations of the Combined Code Bruce Powell will be subject to re-election on an annual basis.

Remuneration Report

44

External Appointments The Company recognises that Executive directors may be invited to become Non-executive directors of other companies and that such appointments can broaden their knowledge and experience, to the benefit of the Company. Fees are normally retained by the individual director.

past 5 years. Performance, as required by legislation, is measured by Total Shareholder Return (share price growth plus dividends paid). FTSE techMARK and FTSE Small Cap index were chosen, as the Company is a constituent of these indices.

Performance Graph The graph on page 31 illustrates the performance of the Company against the FTSE techMARK 100 and FTSE Small Cap index over the

Directors’ Emoluments (audited) 30 June 2005

Details of the remuneration of directors who served during the year to

Salary/Fee 2005

Bonus 2005

Benefits 2005

Total 2005

Total 2004

Pension Constributions 2005

Arnold von Büren

155,256

98,745

13,333

267,334

284,953

52,260

35,428

Urs Niederberger

145,200

88,049

13,333

246,582

254,889

38,360

27,122

Richard Murphy

105,688

36,557

–

142,245

46,438

1,077

288

16,000

9,701

2,667

28,368

–

3,275

–

Otto Schmid

95,556

–

–

95,556

94,518

–

–

Bruce Powell

27,500

–

–

27,500

27,500

–

–

(resigned 15 December 2004)

13,750

–

–

13,750

27,500

–

–

John Alexander

27,500

–

–

27,500

27,500

–

–

13,750

–

–

13,750

–

–

–

13,750

–

–

13,750

–

–

–

–

–

–

–

19,643

–

3,040

613,950

233,052

29,333

876,335

782,941

94,972

in £

Pension Constributions 2004

Executive directors

Stefan Gaiser (appointed 8 April 2005)

Non-executive directors

Paul Gerny

Chris Conway (appointed 15 December 2004)

Mark Wells (appointed 15 December 2004) Directors who left the Board before the start of the financial year

Total

45 Remuneration Report

65,878

Directors remuneration As set out in note 20 the Swiss pension scheme to which Arnold von Büren, Urs Niederberger and Stefan Gaiser belong is in its general characteristics more equivalent to a UK defined contribution scheme. The contributions to the scheme by the Group are given above. Richard Murphy is not a member of the company scheme and the company made contributions of £1,077 (2004 – £288) to his personal pension scheme during the year. Arnold von Büren, Urs Niederberger, Stefan Gaiser and Richard Murphy have service agreements with a notice period of 12 months. The expiry dates for current Non-executive directors’ letter of appointments are as follows: Expiry date of current appointment

Notice period

Otto Schmid

8 November 2005

3 months

Bruce Powell

8 November 2005

3 months

30 June 2006

3 months

Chris Conway

14 December 2007

3 months

Mark Wells

14 December 2007

3 months

Non-executive director

John Alexander

Directors’ Interests The beneficial interests of the current directors and their families in the issued share capital of the Company are as follows: Interests at 30 June 2005

Interests at 30 June 2004

Arnold von Büren

315,180

315,180

Urs Niederberger

129,200

129,200

Richard Murphy

25,000

25,000

819

819

Otto Schmid

206,589

326,589

Bruce Powell

25,370

25,370

3,250

3,250

Chris Conway

–

–

Mark Wells

–

–

in £

Stefan Gaiser

John Alexander

The interests of directors in the shares of the Company at 22 September 2005 are unchanged from those at 30 June 2005.

Remuneration Report

46

Directors’ Interests in long-term Incentive Schemes (audited) Directors’ holdings of DICOM 2000 share options as per 30 June 2005 are as set out below; no share options lapsed during the year to 30 June 2005. All share options have been granted at no less than market price. Share options outstanding to Otto Schmid were granted during his executive tenure. Share options at 30 June 2004

in £

Granted during the year

Exercised during the year

Share options at 30 June 2005

Exercise price

Exercise period

Arnold von Büren

48,000

–

–

48,000

830p

2001-2010

Arnold von Büren

18,000

–

–

18,000

430p

2001-2010

Arnold von Büren

12,000

–

–

12,000

360p

2002-2011

Arnold von Büren

95,000

–

–

95,000

495p

2003-2012

Arnold von Büren

7,000

–

–

7,000

615p

2004-2013

Arnold von Büren

–

7,000

–

7,000

729.5p 2005-2014

Urs Niederberger

48,000

–

–

48,000

830p

2001-2010

Urs Niederberger

18,000

–

–

18,000

430p

2001-2010

Urs Niederberger

12,000

–

–

12,000

360p

2002-2011

Urs Niederberger

185,000

–

–

185,000

495p

2003-2012

Urs Niederberger

6,000

–

–

6,000

615p

2004-2013

Urs Niederberger

–

6,000

–

6,000

729.5p 2005-2014

Stefan Gaiser

2,000

–

–

2,000

430p

2001-2010

Stefan Gaiser

2,000

–

–

2,000

290p

2002-2011

Stefan Gaiser

2,000

–

–

2,000

360p

2003-2012

Stefan Gaiser

2,500

–

–

2,500

615p

2004-2013

Stefan Gaiser

–

15,000

–

15,000

729.5p 2005-2014

Richard Murphy

50,000

–

–

50,000

830p

2001-2010

Richard Murphy

2,500

–

–

2,500

512p

2001-2010

Richard Murphy

16,500

–

–

16,500

305p

2002-2011

Richard Murphy

63,000

–

–

63,000

493p

2003-2012

Richard Murphy

5,000

–

–

5,000

615p

2004-2013

Richard Murphy

–

30,000

–

30,000

729.5p 2005-2014

Otto Schmid

96,000

–

–

96,000

830p

2001-2010

Otto Schmid

9,000

–

–

9,000

430p

2001-2010

Otto Schmid

12,000

–

–

12,000

360p

2002-2011

The closing market price of the shares at 30 June 2005 was 933p and the range during the year ended on that date was 665p to 997.5p. Approval its behalf by

This Remuneration report has been approved by the Board on 22 September 2005 and signed on

Chris Conway, Chairman of the Remuneration Committee

47 Remuneration Report

Statement of Directors’ Responsibilities

Company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial period and of the profit or loss of the Group for that period. In preparing those financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable accounting standards 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 and the Group will continue in business.

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and the Group and to 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 the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the directors. The directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.

Statement of Directors’ Responsibilities

48

Independent Auditors’ Report To the Shareholders of DICOM Group plc

We have audited the financial statements of DICOM Group plc for the year ended 30 June 2005 on pages 52 to 77 which have been prepared under the accounting policies set out on pages 55 to 57. We have also audited the information in the Directors‘ Remuneration Report that is described as having been audited. Respective responsibilities of directors and auditors The directors‘ responsibilities for preparing the annual report, the Directors‘ Remuneration Report and the financial statements in accordance with applicable law and United Kingdom Accounting Standards are set out in the Statement of Directors‘ Responsibilities. Our responsibility is to audit the financial statements and the part of the Directors‘ Remuneration Report to be audited in accordance with relevant legal and regulatory requirements, United Kingdom Auditing Standards, and the Listing Rules of the Financial Services Authority. We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the Directors‘ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors‘ Report is not consistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law or the Listing Rules regarding directors‘ remuneration and transactions with the company and other members of the group is not disclosed.

We review whether the Corporate Governance Statement reflects the Group‘s compliance with the nine provisions of the 2003 FRC Code specified for our review by the Listing Rules of the Financial Service Authority and we report if it does not. We are not required to consider whether the Board‘s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the group’s corporate governance procedures or its risk and control procedures. We read other information contained in the annual report and consider whether it is consistent with the audited financial statements. This other information comprises only the Directors‘ Report, the unaudited part of the Directors‘ Remuneration Report, the DICOM Group at a glance, the Chairman‘s Statement, the Chief Executive’s Review, the Finance Director’s Review, the Board of Directors, and the Corporate Governance Statement. 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. Our report has been prepared pursuant to the requirements of the Companies Act 1985 and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of the Companies Act 1985 or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

49 Independent Auditors’ Report To the Shareholders of DICOM Group plc

Basis of audit opinion We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the Remuneration Report to be audited. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the 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 and the part of the Remuneration Report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the Directors‘ Remuneration Report to be audited.

Opinion

In our opinion:

• the financial statements give a true and fair view of the state of affairs of the group and the company at 30 June 2005 and of the profit of the group for the year then ended; and • the financial statements and the part of the Directors‘ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985. BDO Stoy Hayward LLP, Chartered Accountants and Registered Auditors London, 30 September 2005

Independent Auditors’ Report To the Shareholders of DICOM Group plc

50

41435070324489416356534303921508395130404832 729837305154292396130616546450578375639024341 425930794210876493427395765919586453821969210 836160395623608547807129676549724200547392795 804308542346746519725937638278036306123420722 199454670784390195629867249408439142865601584 DICOM Group plc Consolidated Financial Statements

Consolidated Profit and Loss Account (UK GAAP) for the Year ended 30 June 2005

Year to 30 June 2005 in £’000

Note

Turnover

1

Cost of sales

Existing

Acquisitions

Total

Year to 30 June 2004 (as restated) Total

167,692

12,103

179,795

156,197

(99,593)

(2,725)

(102,318)

(93,291)

Gross profit

68,099

9,378

77,477

62,906

Operating expenses

(59,289)

(8,240)

(67,529)

(53,205)

Operating profit before goodwill amortisation

12,787

1,885

14,672

12,922

Goodwill amortisation

(3,977)

(747)

(4,724)

(3,221)

Operating profit

8,810

1,138

9,948

9,701

117

91

–

(2,218)

Share of results of associated undertakings Loss on disposal of fixed asset investment Interest receivable and similar income

3

637

376

Interest payable and similar charges

3

(223)

(193)

10,479

7,757

(4,304)

(3,885)

6,175

3,872

(215)

24

5,960

3,896

(1,368)

(1,164)

4,592

2,732

basic

28.2p

18.7p

adjusted

50.8p

45.0p

diluted

27.3p

18.2p

Profit on ordinary activities before taxation Taxation

5

Profit on ordinary activities after taxation Minority interests Profit attributable to ordinary shareholders Dividends – equity

6

Retained profit Earnings per ordinary share

7

Dividend per ordinary share

6.39p

5.55p

Statement of total recognised gains and losses Profit for financial year

5,960

3,896

Actuarial gains and losses

(245)

163

Gain/(loss) on currency translation

809

(1,916)

6,524

2,143

Total recognised gains and losses relating to the year Prior year adjustment – adoption of FRS 17

(359)

Total recognised gains and losses since the last financial statements

6,165

All amounts relate to continuing activities. The notes on pages 55 to 77 form part of these financial statements

Consolidated Financial Statements Consolidated Profit and Loss Account

52

Consolidated Balance Sheet (UK GAAP) at 30 June 2005

in £’000

Note

Group at 30 June 2005

Group at 30 June 2004 (as restated)

Parent company at 30 June 2005

Parent company at 30 June 2004

Fixed assets Intangible assets

8

62,719

41,432

9

6,717

5,135

–

–

10/11

703

398

43,524

43,737

70,139

46,965

43,524

43,737

Tangible assets Investments

–

–

Current assets Stocks

12

11,558

10,864

–

–

Debtors

13

41,766

33,791

57,229

54,845

Investments

14

147

126

–

–

20,669

23,273

499

2,569

74,140

68,054

57,728

57,414

(55,694)

(38,615)

(43,834)

(43,758)

Net current assets

18,446

29,439

13,894

13,656

Total assets less current liabilities

88,585

76,404

57,418

57,393

Cash at bank and in hand Creditors Amounts falling due within one year

15

Creditors Amounts falling due after more than one year

16

(8,425)

(4,628)

–

–

Provisions for liabilities and charges

19

(2,315)

(990)

–

–

77,845

70,786

57,418

57,393

Net assets Capital and reserves Called up share capital

21

2,154

2,112

2,154

2,112

Share premium account

22

54,567

52,730

54,567

52,730

Merger reserve

22

1,717

1,717

–

–

ESOP shares

22

(516)

(503)

–

–

Profit and loss account

22

19,944

14,788

697

2,551

Shareholders’ funds – Equity

23

77,866

70,844

57,418

57,393

Minority interests – Equity

(21)

(58)

–

–

77,845

70,786

57,418

57,393

The notes on pages 55 to 77 form part of these financial statements

These financial statements were approved by the Board of directors on 22 September 2005 and were signed on its behalf by Otto Schmid

53

Stefan Gaiser

Consolidated Financial Statements Consolidated Balance Sheet

Consolidated Cash Flow Statement (UK GAAP) for the Year ended 30 June 2005

Year to 30 June 2005

Year to 30 June 2004

18,727

18,643

307

156

Taxation paid

(2,120)

(3,705)

Capital expenditure and financial investment

(1,710)

2,649

(20,515)

1,824

(1,226)

(1,061)

(6,537)

18,506

8,346

(13,001)

Issue of ordinary shares

1,879

886

Increase/(decrease) in debt

1,428

(2,566)

3,307

(1,680)

5,116

3,825

5,116

3,825

Cash (inflow)/outflow from (increase)/decrease in debt and lease financing

(1,428)

2,566

Cash (inflow)/outflow from (decrease)/increase in liquid resources

(8,346)

13,001

Change in net funds resulting from cash flows

(4,658)

19,392

in £’000

Cash inflow from operating activities Returns on investments and servicing of finance

Acquisitions and disposals Equity dividends paid Cash (outflow)/inflow before use of liquid resources and financing Management of liquid resources Financing

Increase in cash in the period Reconciliation of net cash flow to movement in net funds Increase in cash in the year

Loans and finance leases acquired with subsidiaries

–

(83)

New finance leases

(191)

(401)

Exchange difference

181

(149)

Movements in net funds in the period

(4,668)

Net funds at start of period

20,894

2,135

16,226

20,894

Net funds at end of period Further information in respect of the consolidated cash flow statement can be found in notes 11 and 26. The notes on pages 55 to 77 form part of these financial statements

Consolidated Financial Statements Consolidated Cash Flow Statement

54

18,759

Accounting Policies

The following accounting policies have been consistently applied in dealing with items which are considered material in relation to the Group’s financial statements: Basis of Accounting The financial statements have been prepared under the historical cost convention and in accordance with applicable United Kingdom accounting standards. Changes to Accounting Policies The Group has adopted FRS17-Retirement benefits the first time for the financial year ended 30 June 2005. Due to the adoption of FRS 17 the Group is required to record a pension fund deficit amounting to £576,000 as at 30 June 2005 (£359,000 as at 30 June 2004). There is no material impact on profitability. Basis of Consolidation The consolidated financial information includes the financial information of DICOM Group plc and all subsidiary undertakings made up to 30 June. Intercompany balances and transactions have been eliminated on consolidation. The acquisition method of accounting has been adopted. The results of subsidiary undertakings acquired or disposed of during the year are included in the consolidated profit and loss account from the date of acquisition or up to the date of disposal. Subsidiary Undertakings The investment in subsidiary undertakings is stated in the company’s balance sheet at cost, less provision where appropriate for permanent diminution in value. Cost comprises any cash consideration, the fair value of shares issued as consideration and any expenses of these acquisitions.

Associated Undertakings Associated undertakings are these undertakings where the Group has a participating interest and exercises significant influence over its financial and operating policy decisions. The Group includes its share of associated undertakings’ profits or losses in the consolidated profit and loss account. The investments in associated undertakings are stated in the consolidated balance sheet at the Group’s share of the underlying net asset value. Goodwill and Amortisation Goodwill arising on acquisitions of subsidiary undertakings and businesses, representing any excess of the fair value of the consideration given and associated costs over the fair value of the separable net assets acquired, is capitalised and amortised on a straight line basis over its estimated useful life. The principal annual rate used for this purpose is 5%, with a minority using 33%. Purchased goodwill in respect of acquisitions prior to 1 July 1998, when FRS 10 was adopted, was eliminated against reserves in the year of acquisition. When a subsequent disposal occurs, any related goodwill previously eliminated against reserves is written back through the profit and loss account as part of the profit or loss on disposal. Impairment of Fixed Assets and Goodwill Impairment reviews are carried out in accordance with FRS 11 to ensure that goodwill is not carried at above its recoverable amount. The need for any fixed asset impairment write down is assessed by comparison of the carrying value of the asset against the higher of net realisable value or value in use. Turnover Turnover represents the total amount receivable by the Group for goods supplied and services provided to third parties, excluding VAT and similar taxes. The Group derives its income principally from the sale of hardware products and software licenses and fees derived from installation, consultancy, training, capture services and maintenance.

55 Consolidated Financial Statements Accounting Policies

Turnover for hardware products and software license are recognised upon shipment. Fee income from installation, consultancy, training and capture services is recognised over the period in which the services are provided. For hardware and software maintenance and support, customers are billed in advance. Income is recognised monthly, spread evenly over the period covered by the maintenance fee. Long term projects are assessed on a project by project basis and are reflected in the profit and loss account by recording turnover according to the degree of completion. Depreciation Depreciation of fixed assets is provided on a straight line basis to write off the cost of the assets over their expected lives. The principal annual rates used for this purpose are: %

Buildings

3

Leasehold improvements

10–20

Machines and equipment

20–50

Motor vehicles

20

Furniture and fixtures

20

Research and Development Research and development costs are charged to the profit and loss account in the period in which the expenditure is incurred. Taxation The charge for taxation is based on the profit for the relevant period and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date at rates expected to apply when they crystallise, based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements. Deferred tax is not provided on unremitted earnings of subsidiaries and associates where there is no commitment to remit these earnings. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.

Fixed Assets Fixed assets are included in the financial statements at cost less accumulated depreciation. Stocks Stocks and work in progress are stated at the lower of cost and net realisable value. Leased Assets Fixed assets acquired under hire purchase contracts and finance leases, which transfer to the lessee substantially all the benefits and risks of ownership, are capitalised in the balance sheet. The corresponding leasing commitments are shown as amounts payable to the lessor. Depreciation on the relevant assets is charged to the profit and loss account. Expenditure on operating leases is charged to the profit and loss account on a straight line basis over the lease period. Pensions The Group makes payments to defined contribution schemes and to defined benefit pension schemes. Contributions to the Groups defined contribution pensions schemes are charged to the profit and loss account in the year in which they become payable. For defined benefit schemes pensions scheme assets are measured using market values and pensions scheme liabilities are measured using a projected unit method and discounted at the current rate of return in a high quality corporate bond of equivalent term and currency to the liability. A pension scheme deficit is recognised in full. The movement in the scheme deficit is split between operating charges, finance costs, and, in the statement of total recognised gains and losses, actuarial gains and losses. Foreign Currency and financial Instruments Company: Transactions in foreign currency are recorded at the rate ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date, or at forward rates where covered by forward exchange contracts. All differences are taken to the profit and loss account.

Consolidated Financial Statements Accounting Policies

56

Group: Trading results denominated in foreign currencies are translated at the average monthly exchange rate. Assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Exchange differences arising on retranslation of opening net assets of overseas subsidiary undertakings and of long term intra group loans as permanent as equity are taken directly to reserves. The exchange differences arising on the retranslation of the profit and loss account at the year end rate are taken to reserves. All other translation differences are taken to the profit and loss account. The Group does not trade in derivative financial instruments. Sales and purchases which occur in other currencies than the local currency are hedged where such transactions are material. This is carried out primarily by entering into short term forward exchange contracts to match cashflows. Where the instrument is used to hedge a committed or probable future transaction, no gains and losses are recognised until the transaction occurs.

Employee Share Ownership Plan The Group operates an Employee Share Ownership Plan for all employees (full-time and part-time working at least 50% of full time hours). The cost of the company’s shares held by the ESOP is deducted from shareholders’ funds in the Group balance sheet. Other assets and liabilities of the ESOP are recognised as assets and liabilities of the Group. Any shares held by the ESOP are treated as cancelled for the purposes of calculating earnings per share. The profit and loss account charge is equal to the company’s share price at the date of the award and is charged as an operating cost over a three-year period. Any financing and administrative costs are charged to the profit and loss account in the period in which the expenditure is incurred.

57 Consolidated Financial Statements Accounting Policies

Notes to the Financial Statements for the Year ended 30 June 2005

Note 1 Segmental Analysis Year to 30 June 2005

in £’000

Year to 30 June 2004

Sales by divisions Information Capture (“IC”) Own products

45,553

39,722

Services

40,026

27,819

Third party products

55,129

51,991

140,708

119,532

39,087

36,665

179,795

156,197

141,214

120,459

31,512

30,309

Australasia

5,795

4,426

Rest of the World

1,274

1,003

179,795

156,197

72,400

57,703

Total IC Samsung General Agency (“SGA”)

Sales by geographical market – by destination Europe North America

The sales by origin are not materially different Gross profit by divisions IC SGA

5,077

5,203

77,477

62,906

13,371

11,844

1,301

1,078

14,672

12,922

IC

8,647

8,623

SGA

1,301

1,078

9,948

9,701

Operating profit before goodwill amortisation by divisions IC SGA

Operating profit by divisions

Consolidated Financial Statements Notes

58

Note 1 Segmental Analysis (continued) Year to 30 June 2005

Year to 30 June 2004

Europe

9,165

6,824

North America

5,794

6,865

(287)

(767)

14,672

12,922

Europe

6,343

5,504

North America

3,996

5,067

(391)

(870)

9,948

9,701

At 30 June 2005

At 30 June 2004 (as restated)

Europe

43,626

30,218

North America

32,560

39,447

in £’000

Operating profit by geographical market (before goodwill amortisation)

Australasia

Operating profit by geographical market

Australasia

in £’000

Shareholders’ funds by geographical market

Australasia

1,680

1,179

77,866

70,844

Year to 30 June 2005

Year to 30 June 2004

Research and development costs

9,886

7,946

Depreciation of tangible fixed assets – owned

2,313

2,143

Depreciation of tangible fixed assets – leased

214

334

4,724

3,221

42

61

(Loss)/profit on disposal of tangible fixed assets

(110)

7

Foreign currency exchange gains

306

427

Shareholders’ funds by operating division is not readily available.

Note 2 Profit on ordinary Activities before Taxation in £’000

Profit on ordinary activities before taxation is stated after charging/(crediting)

Amortisation of goodwill – subsidiaries Amortisation of goodwill – associates

59 Consolidated Financial Statements Notes

Note 2 Profit on ordinary Activities before Taxation (continued) Year to 30 June 2005

Year to 30 June 2004

audit (Parent company: £ 55,000 2004: £50,000)

229

230

tax compliance & advisory services

274

283

22

26

116

33

674

705

1,798

1,544

in £’000

Auditors’ remuneration for principal auditors

other non-audit services Auditors’ remuneration for secondary auditors (including non-audit fees) Operating lease rentals hire of plant and machinery other operating lease charges All operating expenses relate to administrative expenses.

Note 3 Net Interest receivable/(payable) and similar charges Year to 30 June 2005

Year to 30 June 2004

Interest receivable

637

376

Less: interest payable on bank loans, overdrafts and other loans

(207)

(172)

(16)

(21)

Total interest payable

(223)

(193)

Net interest receivable

414

183

Year to 30 June 2005

Year to 30 June 2004

Sales and marketing

333

280

Service

345

260

Support and software development

415

306

1,093

846

in £’000

Less: other interest payable

Note 4 Staff Numbers and Costs Number

The average number of employees (including executive directors) during the year was as follows

Year to 30 June 2005

in £’000

Year to 30 June 2004

Group employment costs for all employees (including directors) were as follows Wages and salaries Social security costs Pension costs

Consolidated Financial Statements Notes

60

40,438

32,965

6,743

4,926

583

663

47,764

38,554

Note 4 Staff Numbers and Costs (continued) Year to 30 June 2005

Year to 30 June 2004

Fees to Non-executive directors

192

177

Salaries and benefits in kind

451

369

Bonuses

233

237

Total emoluments

876

783

95

66

971

849

in £’000

Remuneration in respect of the directors was as follows

Employers contributions to pension schemes

All of the Executive directors, with the exception of Richard Murphy, are members of a defined benefit pension scheme. Further details of the scheme are given in note 20. A full analysis of directors’ emoluments and options is contained in the Remuneration report on pages 43 to 47.

Note 5 Taxation in £’000

Year to 30 June 2005

Year to 30 June 2004

599

333

–

–

599

333

3,449

3,807

The current tax charge represents UK corporation tax Adjustment in respect of previous years Total current UK corporation tax Overseas tax Current overseas tax Adjustment in respect of previous years Total current tax

78

–

4,126

4,140

116

(21)

62

(234)

178

(255)

Deferred tax credit represents Increase/(decrease) in deferred tax provision due to timing differences Decrease in deferred tax asset due to timing differences Total deferred tax charge/(credit) Total tax charge

4,304

3,885

3,144

2,327

1,426

914

Reconciliation of tax charge Profit on ordinary activities before taxation multiplied by the expected group corporation tax charge of 30% (30%) Effects of Expenses not deductible for tax purposes (mainly goodwill amortisation) Exceptional items not attracting tax relief

–

665

Utilisation of tax losses brought forward

(546)

(252)

Differences in tax rates

45

281

Other adjustments

57

205

4,126

4,140

Current tax charge for the year

61 Consolidated Financial Statements Notes

Note 6 Dividends – Equity

in £’000

Year to 30 June 2005 (per share)

Year to 30 June 2004 (per share)

Year to 30 June 2005

Year to 30 June 2004

These comprise Ordinary shares of 10p Interim dividend-paid

2.13p

1.85p

448

386

Final dividend-proposed

4.26p

3.70p

920

778

Total dividend

6.39p

5.55p

1,368

1,164

Note 7 Earnings per Share Basic earnings per share of 28.2p (18.7p) for the year to 30 June 2005 have been calculated based on the profit attributable to shareholders of £5,960,000 (£3,896,000) using the weighted average number of ordinary shares in issue totalling 21,111,015 (20,857,817) during the period. Adjusted earnings per share of 50.8p (45.0p) for the year to 30 June 2005 are based on profit of £10,726,000 (£9,396,000), being adjusted by the amortisation of goodwill in subsidiaries of £4,724,000 (£3,221,000) and the amortisation of goodwill in associates of £42,000 (£61,000) using the weighted average number of ordinary shares in issue totalling 21,111,015 (20,857,817) during the period. The Board considers that adjusted EPS better reflects the underlying performance of the Group. Diluted Earnings per share of 27.3p (18.2p) for the year to 30 June 2005 have been calculated based on the profit attributable to shareholders of £5,960,000 (£3,896,000) using 21,844,909 ordinary shares (21,457,560), the difference to the basic calculation representing the additional shares that would be issued on the conversion of all the dilutive potential ordinary shares. Share options with an exercise price below the average share price during the year ended 30 June 2005 are considered as dilutive potential ordinary shares.

Note 8 Intangible Assets – Goodwill Goodwill has arisen during the year on the Group’s acquisition of Dubai-based Valuevad, DICOM Technology Lab Co Ltd in Vietnam, Neurascript Ltd in the UK and TOPCALL International AG, based in Austria. The Group also acquired minorities in DICOM Australia Pte Ltd, DICOM Edb-distribution A/S, Denmark and DICOM Informationstechnologie GmbH, Austria. The Group further disposed of its minority stake in Basenet Informatik AG and Basenet Research AG. Further details are shown in note 11.

Consolidated Financial Statements Notes

62

Note 8 Intangible Assets – Goodwill (continued) Associated Undertakings

in £’000

Subsidiary Companies

Total

Cost At 1 July 2004

1,096

51,263

52,359

Additions

–

26,211

26,211

Increase in contingent deferred consideration

–

164

164

–

(482)

–

(55)

(55)

614

77,583

78,197

279

10,648

10,927

42

4,724

4,766

(153)

–

(153)

(61)

(62)

Disposals

(482)

Currency exchange movements At 30 June 2005 Amortisation At 1 July 2004 Charge for the year Disposals Currency exchange movements

(1)

At 30 June 2005

167

15,311

15,478

Net book value at 30 June 2005

447

62,272

62,719

Net book value at 30 June 2004

817

40,615

41,432

Note 9 Tangible Assets

in £’000

Building

Leasehold improvements

Machines and equipment

Furniture and fixtures

Motor vehicles

Total

Cost At 1 July 2004

286

1,144

10,007

2,664

1,404

15,505

Acquisitions

–

196

1,850

1,906

1,109

5,061

Additions

1

318

1,833

493

467

3,112

Disposals

–

(57)

(1,335)

(220)

(305)

(1,917)

Currency exchange movements

1

14

130

18

14

177

288

1,615

12,485

4,861

2,689

21,938

At 30 June 2005 Depreciation At 1 July 2004

30

665

7,112

2,096

467

10,370

Acquisitions

–

122

1,348

1,373

781

3,624

Charge for the year

9

190

1,461

443

424

2,527

Disposals

–

(34)

(963)

(196)

(233)

(1,426)

Currency exchange movements

–

3

107

14

2

126

39

946

9,065

3,730

1,441

15,221

Net book value at 30 June 2005

249

669

3,420

1,131

1,248

6,717

Net book value at 30 June 2004

256

479

2,895

568

937

5,135

At 30 June 2005

The amounts stated above include tangible assets held under finance leases and similar hire purchase contracts as follows: in £’000

At 30 June 2005

Net book value

702

The depreciation charge for the year on these assets was £214,000 (£334,000)

63 Consolidated Financial Statements Notes

At 30 June 2004

695

Note 10 Investments Associated Undertakings

in £’000

Unlisted investments

Group

Parent company

Cost At 1 July 2004

75

1,349

1,424

43,737

159

–

159

–

Additions

–

–

–

–

Disposals

196

–

196

–

Currency movement

(50)

–

(50)

–

Total costs

380

1,349

1,729

43,737

Provisions brought forward

–

1,026

1,026

–

Increase in provisions

–

–

–

213

At 30 June 2005

–

1,026

1,026

213

Share of profits in associated undertakings

Net book value at 30 June 2005 Net book value at 30 June 2004

380

323

703

43,524

75

323

398

43,737

Parent company investments relate to investments in subsidiary undertakings. The total carrying value of associates is £827,000 (£892,000) which includes goodwill of £447,000 (£817,000) as detailed in note 8. Further details on Group investments can be found below. Principal Subsidiary and Associated Undertakings Country of incorporation and operation

in %

Percentage of issued share capital held

Subsidiary Undertakings Azag Software Lab AG Azag Software Lab Sdn Bhd. DICOM AG

Switzerland

100%

Malaysia

80%

Switzerland

100%

DICOM Australia Pte Ltd

Australia

48%

DICOM Benelux NV/SA

Belgium

100%

Czech Republic

100%

DICOM Deutschland AG

Germany

100%

DICOM Edb-distribution A/S

Denmark

94%

DICOM Finland OY

Finland

100%

DICOM France SAS

France

100%

DICOM France Services SAS

France

100%

Dubai

100%

Austria

90%

Japan

100%

DICOM Magyarország Kft.

Hungary

100%

DICOM Malaysia Sdn Bhd.

Malaysia

80%

Norway

100%

Italy

100%

Poland

100%

Switzerland

60%

DICOM Data Management CZ, spol. s r.o.

DICOM FZE DICOM Informationstechnologie GmbH DICOM Japan K.K.

DICOM Norge A/S DICOM PDS S.r.l. DICOM Polska Sp. z o.o. DICOM SEDICO AG

Consolidated Financial Statements Notes

64

Note 10 Investments (continued) Principal Subsidiary and Associated Undertakings (continued) Country of incorporation and operation

in %

Percentage of issued share capital held

Subsidiary Undertakings DICOM SEDICO-IT AG

Switzerland

100%

DICOM Singapore Pte Ltd

Singapore

80%

DICOM Technologies Ltd*

England

100%

DICOM Technologies Lab Co Ltd

Vietnam

100%

United States

100%

Neurascript Ltd

England

100%

NorDICOM AB

Sweden

100%

Kofax Image Products, Inc.

PhilDICOM Inc.

Philippines

40%

Switzerland

100%

Croatia

60%

Spain

100%

Italy

100%

England

85%

Australia

100%

TOPCALL Belgium NV

Belgium

100%

TOPCALL Corporation

United States

100%

France

100%

Germany

100%

Austria

100%

Recos AG Sidus d.o.o. Sistemas DICOM Ibérica, S.A. Sydoc Italia S.p.a. Sydoc (UK) Ltd.* TOPCALL Australia Pte Ltd

TOPCALL France Sarl TOPCALL GmbH TOPCALL International AG TOPCALL Italia SRL

Italy

100%

Hungary

100%

TOPCALL Nederlande BV

Netherlands

100%

TOPCALL Polska Sp.z.o.o

Poland

80%

Spain

100%

England

100%

Germany

20%

Switzerland

42%

Intelligo AB

Sweden

30%

iSource AG

Switzerland

30%

TOPCALL Magyarország Kft.

TOPCALL Sistemas de Communicacion TOPCALL UK Ltd Associated Undertakings Alos GmbH DICOM Security AG

* Subsidiary Undertakings which are held directly by the parent company.

The principal activities of the subsidiaries and the Associated Undertakings are the same as those of the Group.

65 Consolidated Financial Statements Notes

Note 11 Acquisition In July 2004 the Group acquired Valuevad, based in Dubai. In August 2004 the Group acquired DICOM Technology Lab Co Ltd, based in Vietnam. In October 2004 the Group acquired Neurascript Ltd, based in the UK. An analysis of the combined consideration paid, fair value of net assets acquired and goodwill arising in relation to the above acquisitions is set out below: Book/Fair Value to the Group in £’000

Total

Fixed assets Tangible fixed assets

32

Current assets Stocks

–

Debtors

541

Cash at bank

203

Total assets

776

Creditors

(683)

Net assets

93

Consideration paid in cash (including expenses of £202,000)

3,140

Contingent deferred consideration (provisional)

1,897

Total fair value of consideration

5,037

Net assets acquired

93

Goodwill arising from acquisitions

4,944

£4,065,000 of the goodwill arose on the acquisition of Neurascript Ltd, £633,000 on the acquisition of Valuevad and £246,000 on the acquisition of DICOM Technology Lab Co Ltd. The contingent deferred consideration is primarily based on the post acquisition results of the acquired companies. The maximum amount that may become payable is £2.4m. The amounts attributed to the assets and liabilities are still provisional. The fair values of the acquired net assets are reviewed regularly and any necessary adjustment to the fair value will be made within one year. Cash Flows: The net outflow of cash arising from acquisition is as follows: in £’000

Cash consideration (including expenses of £202,000)

3,140

Cash acquired

(203)

Overdraft acquired

–

Net outflow of cash relating to the acquisition

2,937

Neurascript’s result after taxation prior to its acquisition was a profit of £43,126 for the period 1 April 2003 to 31 March 2004 and a loss of £326,238 for the period 1 April 2004 to 31 October 2004.

Consolidated Financial Statements Notes

66

Note 11 Acquisition (continued) In November 2004 the Group acquired TOPCALL International AG, based in Austria, and it’s subsidiaries. An analysis of the consideration paid, fair value of net assets acquired and goodwill arising in relation to the above acquisition is set out below: Book/Fair Value to the Group in £’000

Total

Fixed assets Tangible fixed assets

1,427

Current assets Stocks

1,034

Debtors

4,462

Cash at bank

11,380

Total assets

18,303

Creditors

(6,517)

Net assets

11,786

Consideration payable in cash (including expenses of £679,000)

32,736

Total fair value of consideration

32,736

Net assets acquired

11,786

Goodwill arising from acquisitions

20,950

The amounts attributed to the assets and liabilities are still provisional. The fair values of the acquired net assets are reviewed regularly and any necessary adjustment to the fair value will be made within one year. Cash Flows: The net outflow of cash arising from acquisition is as follows: in £’000

Consideration payable in cash (including expenses of £679,000)

32,736

Less cash payable subsequent to year end

(4,154)

Cash paid in the period

28,582

Cash acquired

(11,380)

Overdraft acquired

–

Net outflow of cash relating to the acquisition

17,202

The results of the acquired company prior to its acquisition were as follows: 1 January 2004 to 30 November 2004

in £’000

Turnover

1 January 2003 to 31 December 2003

16,131

18,940

Operating (loss)/profit before goodwill amortisation

(275)

1,459

Operating (loss)/profit

(839)

995

191

268

(Loss)/profit on ordinary activities before taxation

(648)

1,263

Taxation

(530)

(409)

(1,178)

854

94

(114)

Net interest

(Loss)/profit for the period Profit/(loss) on currency translation Total recognised gains and losses

67 Consolidated Financial Statements Notes

(1,084)

740

Note 12 Stocks Group at 30 June 2005

in £’000

Work in progress Finished goods and goods for resale

Group at 30 June 2004

Parent company at 30 June 2005

Parent company at 30 June 2004

90

224

–

–

11,468

10,640

–

–

11,558

10,864

–

–

The replacement cost of stock is not considered to be materially different from the amounts shown above.

Note 13 Debtors Group at 30 June 2005

in £’000

Trade debtors

Group at 30 June 2004

Parent company at 30 June 2005

Parent company at 30 June 2004

31,038

23,925

–

–

Amounts due from subsidiary undertakings

–

–

57,141

54,737

Amounts due from associated undertakings

1,176

1,201

–

–

Other debtors

2,323

2,681

78

66

732

488

–

–

Deferred tax asset Amounts recoverable under contracts Prepayments and accrued income

610

698

–

–

5,887

4,798

10

42

41,766

33,791

57,229

54,845

in £’000

Parent company

Group

Deferred tax asset At 1 July 2004

488

–

Acquisitions

273

–

Decrease due to timing differences

(62)

–

33

–

732

–

Currency exchange movements At 30 June 2005 Deferred tax asset consists of short-term timing differences and tax losses.

Note 14 Investments

in £’000

Unlisted investments

Group at 30 June 2005

Group at 30 June 2004

147

126

Parent company at 30 June 2005

–

Parent company at 30 June 2004

–

The unlisted investments relate primarily to short term investment funds held by one of the Group’s subsidiaries and the market value is not materially different from cost.

Consolidated Financial Statements Notes

68

Note 15 Creditors Group at 30 June 2005

in £’000

Group at 30 June 2004

Parent company at 30 June 2005

Parent company at 30 June 2004

Amounts falling due within one year Bank loans and overdrafts

3,693

1,371

14

67

13,048

13,481

40

–

–

–

41,821

41,752

Other creditors

2,694

1,434

21

28

Creditors for taxation and social security

3,471

2,099

–

–

Dividend payable

920

778

920

778

Deferred income

14,880

9,450

–

–

Accruals

13,496

8,717

1,018

1,133

3,186

1,015

–

–

306

270

–

–

55,694

38,615

43,834

43,758

Trade creditors Amounts due to subsidiary undertakings

Corporation tax Obligations under hire purchase contracts and finance leases

Bank loans and overdrafts to certain subsidiary undertakings amounting to £3,400,000 (£1,291,000) were secured on the assets of those subsidiary undertakings.

Note 16 Creditors Group at 30 June 2005

in £’000

Group at 30 June 2004

Parent company at 30 June 2005

Parent company at 30 June 2004

Amounts falling due after more than one year Deferred income

3,826

2,314

–

–

Due after 1 year but not more than 2 years

40

286

–

–

Due after 2 years but not more than 5 years

–

–

–

–

4,155

1,576

–

–

404

452

–

–

8,425

4,628

–

–

Long term loans, at market interest rates

Accruals Obligations under hire purchase contracts and finance leases

Note 17 Financial Instruments An explanation on the Group’s policy in respect of the risks relating to financial instruments is included in the Accounting Policies on pages 56 to 57. Short-term debtors and creditors are not financial assets or financial liabilities in relation to the disclosures made below. Monetary assets and liabilities of Group companies denominated in a currency other than the local currency are considered not to be material and consequently the impact on the Group profit and loss account will not be significant. The currency and interest rate exposure of the Group’s borrowings is shown below:

69 Consolidated Financial Statements Notes

Note 17 Financial Instruments (continued)

in £’000

Total

Floating borrowings

Fixed borrowings

Weighted average interest rate (in %)

Weighted average time for which rate is fixed (years)

Currency Sterling

126

126

–

–

–

3,268

677

2,591

3.2

0.1

US Dollar

185

185

–

–

–

Other

153

153

–

–

–

3,732

1,141

2,591

3.2

0.1

70

70

–

–

–

Euro

1,149

689

460

5.6

1.0

Other

436

–

436

0.9

0.1

1,655

759

896

3.3

0.5

Euro

At 30 June 2005 Sterling

At 30 June 2004

An analysis of the Group’s cash by currency is as follows: in £’000

At 30 June 2005

At 30 June 2004

Sterling

4,463

6,098

Euro

6,774

3,104

971

1,155

US Dollar

6,055

11,289

Other currencies

2,406

1,627

20,669

23,273

Currency

Swiss Franc

Cash balances and bank overdrafts carry floating rate interest based on the relevant national interbank rates. The majority of the short-term investments are held with a maturity of less than one month. The Group has negotiated working capital facilities with local relationship banks in the countries in which it operates. These facilities are negotiated annually and are normally repayable on demand. The benchmark is linked to libor. They are primarily for the purpose of providing additional working capital. At 30 June 2005 committed but undrawn working capital facilities amounted to £18.6m (2004: £28.8m). There are no material differences between book values of financial instruments and fair values in either the current or the previous year. Further details of the Group’s Treasury Management policies can be found in the Finance Director’s Review on page 11.

Note 18 Obligations under Hire Purchase Contracts and Finance Leases Group at 30 June 2005

in £’000

Group at 30 June 2004

Parent company at 30 June 2005

Parent company at 30 June 2004

Repayable in one year or less, or on demand

306

270

–

–

in more than one year, but not more than two years

278

160

–

–

126

292

–

–

710

722

–

–

in more than two years, but not more than five years

Consolidated Financial Statements Notes

70

Note 19 Provisions for liabilities and charges in £’000

Deferred Taxation

Pensions fund deficit (see note 20)

Total

Group at 1 July 2004 As previously reported

631

–

631

–

359

359

As restated

631

359

990

Acquisition

930

–

930

Charge for the year

116

(28)

88

–

245

245

62

–

62

1,739

576

2,315

Prior year adjustment

Actuarial loss Currency exchange movements At 30 June 2005

Deferred taxation principally relates to short-term timing differences. The Parent Company does not have any provision for liabilities and charges.

Note 20 Pensions Several defined contribution pension schemes are operated on behalf of the employees of different subsidiary undertakings. The assets are held separately from those of the companies in independently administered funds. The pension charges represent contributions payable by the companies to the funds and amounted to £451,000 (2004 - £510,000). No contributions were outstanding at year end. A pension scheme is operated by two subsidiary undertakings in Switzerland for its employees. The scheme is managed by a corporate trustee accountable to the pension scheme members. The directors have reviewed the terms and conditions of the scheme, in particular with regard to the mechanism for funding any deficit that might arise. Although the scheme has many of the characteristics of a defined contribution scheme and has, in prior periods, been accounted for as such, the scheme effectively includes a minimum guaranteed annuity rate, any shortfall in which the trustee would normally ask the employer to contribute to. Following their review, and further consideration of the operation of other similar pension schemes in Switzerland, the directors have concluded that the Group has a constructive obligation to fund a share of any deficit that arises. In consequence, the scheme is being accounted for under FRS 17 as a defined benefit scheme and the Group has recognised 50% of the actuarial deficit, being the proportion that the Group considers it is required to contribute to any deficit. The contributions made during the year by the Group amount to £157,000 (2004: £153,000). Contribution rates payable by the Group vary from 2.5% to 6.0%, depending on the age of the employee. The pension cost relating to this scheme was assessed in accordance with the advice of a qualified actuary using the projected unit method. The most recent valuation, at 30 June 2005, indicated that, on the basis of service to date and current salaries, the scheme‘s assets were sufficient to meet 78.0% of its liabilities. The deficit has arisen due to the actuarial methods used to value the scheme under FRS 17. At 30 June 2005 the Group’s share of the scheme assets was approximately £2.1m (2004 - £2.0m) at market value. The impact of adopting FRS 17 resulted in a deficit of £576,000 (2004 – £359,000) which has been fully recognised in the balance sheet.

71 Consolidated Financial Statements Notes

Note 20 Pensions (continued) A full actuarial valuation of the defined benefit scheme was carried out at 30 June 2005 by a qualified independent actuary on a FRS17 basis. The major assumptions used by the actuary were: in %

2005

2004

2003

Rate of increase in salaries

1.50

2.00

2.00

Rate of increase in pensions in payment

0.50

1.00

1.00

Discount rate

2.70

3.50

3.75

Inflation assumption

0.75

0.75

1.00

The assets in the scheme and the expected rate were: Long-term rate of return expected at 2005 (in %)

in £’000

Value at 2005

Long-term rate of return expected at 2004 (in %)

Long-term rate of return expected at 2003 (in %)

Value at 2004

Value at 2003

Shares

6.7

881

6.6

820

6.7

335

Bonds

2.6

1,029

3.2

1,133

3.2

1,211

Property

4.0

189

–

–

–

–

2,099

1,953

1,546

Total market value of assets

2,099

1,953

1,546

Present value of scheme liabilities

(2,675)

(2,312)

(2,068)

(576)

(359)

(522)

Deficit in the scheme on a FRS 17 basis

No deferred tax asset has been taken on the pension scheme liability as its future recoverability is uncertain. in £’000

2005

2004

Movement in deficit during the year Deficit in scheme at beginning of year

359

522

Operating cost

132

153

(3)

–

Other finance (income)/costs Actuarial (gains)/losses

245

(163)

Contributions paid

(157)

(153)

Deficit in scheme at end of year

576

359

132

153

93

80

(90)

(80)

3

–

Analysis of the amount charged to operating profit Current service cost Analysis of the amount credited to other finance income Expected return on pension scheme asset Interest on pension scheme liabilities

Consolidated Financial Statements Notes

72

Note 20 Pensions (continued) in £’000

2005

2004

Analysis of amount recognised in statement of total recognised gains and losses Actual return less expected return on pension scheme asset

(122)

141

Experience (loss)/gain arising on the scheme liabilities

(123)

22

(245)

163

Amount

(122)

141

Percentage of scheme assets

(5.8%)

7.2%

Amount

(123)

22

Percentage of the present value of the scheme liabilities

(4.6%)

1.0%

Actuarial (loss)/gain recognised in statement of total recognised gains and losses History of experience gains and losses Difference between the expected and actual return on scheme assets

Experience gains and losses on scheme liabilities

Total amount recognised in statement of total recognised gains and losses Amount

(245)

Percentage of the present value of the scheme liabilities

(9.2%)

163 7.1%

The history of actuarial gains and losses for 2003 and 2002 is not available without the amounts being obtained separately from the Group’s actuary. Having considered this matter, the directors have concluded that the expense of obtaining this information would outweigh the benefits arising.

Note 21 Share Capital

in £’000

Authorised

Issued, called up and fully paid (Number)

33,000,000

3,300

21,119,296

2,112

–

–

424,433

42

33,000,000

3,300

21,543,729

2,154

Authorised (Number)

Issued, called up and fully paid

Equity share capital Ordinary shares of 10p At 1 July 2004 Issued under option scheme At 30 June 2005

73 Consolidated Financial Statements Notes

Note 21 Share Capital (continued) Including the options granted to the directors, which are shown in the Remuneration report on pages 43 to 47, the following options over ordinary shares have been granted to certain employees of the Group under various Option Schemes and remain outstanding at June 2005: Outstanding at 1 July 2004

Granted during the year

Share Option Plan

38,000

–

(18,750)

–

19,250 90p-382.5p 2000-2008

Share Option Super Plan

82,000

–

(53,500)

–

28,500 90p-382.5p 2001-2008

2,832,523

373,784

(352,183)

in £’000

DICOM 2000 Share Option Plan

Exercised during the year

Lapsed during the year

Outstanding at 30 June

Exercise price

Exercise period

(114,659) 2,739,465 260p-1,213p 2001-2015

Note 22 Reserves Share premium

Merger reserve

52,730

1,717

–

–

52,730

1,717

Retained profit for the year

–

–

–

Change in ESOP shares

–

–

(13)

Actuarial loss

–

–

–

(245)

(245)

Currency exchange movements

–

–

–

809

809

1,837

–

–

–

1,837

54,567

1,717

19,944

75,712

in £’000

Group at 1 July 2004 Prior year adjustment Group restated at 1 July 2004

Premium arising on issue of ordinary shares At 30 June 2005

ESOP shares

(503) – (503)

(516)

Profit & loss

Total

15,147

69,091

(359)

(359)

14,788

68,732

4,592

4,592

–

(13)

The cumulative goodwill resulting from acquisitions to date which has been eliminated against reserves is £7,722,000 (£7,722,000). in £’000

Share premium

Profit & loss

Total

52,730

2,551

55,281

(1,854)

(1,854)

Parent Company At 1 July 2004 Retained loss for the year Premium arising from share issues At 30 June 2005

1,837

–

1,837

54,567

697

55,264

Under the exemption given in the Companies Act 1985 Section 230 the Parent Company does not present its own profit and loss account. The loss attributable to the Parent Company was £486,000 (2004 – profit £149,000). The company’s retained loss also includes the dividends paid and proposed.

Consolidated Financial Statements Notes

74

Note 23 Reconciliation of Movements in Shareholders’ Funds Group at 30 June 2005

in £’000

Group at 30 June 2004

Parent company at 30 June 2005

Parent company at 30 June 2004

Shareholders’ funds At 1 July 2004

71,203

69,502

57,393

57,522

(359)

(522)

–

–

Shareholders’ funds as restated

70,844

68,980

57,393

57,522

Profit/(loss) for the financial year

5,960

3,896

(486)

149

Dividends

(1,368)

(1,164)

(1,368)

(1,164)

Currency exchange movements

809

(1,916)

–

–

Actuarial gains and losses

(245)

163

–

–

1,879

886

1,879

886

(13)

(1)

–

–

77,866

70,844

57,418

57,393

Prior year adjustment

New share capital issued Change in ESOP shares Shareholders’ funds at 30 June 2005 All of the shareholders’ funds are equity.

Note 24 Commitments under Operating Leases expire in the periods set out below:

in £’000

The Group had annual non-cancellable operating leases which

Group at 30 June 2005

Group at 30 June 2004

Parent company at 30 June 2005

Parent company at 30 June 2004

Lease of land and buildings Within 1 year

764

500

–

–

1,859

1,145

–

–

27

649

–

–

Within 1 year

504

267

–

–

In 2 to 5 years inclusive

719

630

–

–

13

23

–

–

In 2 to 5 years inclusive After 5 years Other leases

After 5 years

75 Consolidated Financial Statements Notes

Note 25 Related Party Transactions in £’000

Sales to Associated undertakings Purchases from Associated undertakings

Year to 30 June 2005

Year to 30 June 2004

1,424

1,773

344

450

At 30 June 2005 the Associated undertakings owed £1,176,000 (£1,201,000) to the Group. The majority of the transactions set out above took place with Alos GmbH, Cologne, Germany.

Note 26 Notes to the Consolidated Cash Flow Statement Year to 30 June 2005

Year to 30 June 2004

Operating profit

9,948

9,701

Depreciation and amortisation

7,251

5,948

Profit/(loss) on sale of tangible fixed assets

(110)

7

Decrease in stocks

340

285

Increase in debtors

(2,679)

(1,684)

Increase in creditors

3,916

4,702

61

(316)

18,727

18,643

Interest paid

(226)

(235)

Interest received

643

391

Dividend paid to minorities

(110)

–

Net cash inflow for returns on investments and servicing of finance

307

156

(2,653)

(2,608)

60

269

795

4,906

88

82

in £’000

Reconciliation of operating profit to operating cash flows

Foreign exchange differences Net cash inflow from operating activities Returns on investments and servicing of finance

Capital expenditure and financial investments Purchase of tangible fixed assets Sale/(purchase) of fixed assets investments Disposal of fixed asset investment Sale of tangible fixed assets Net cash (outflow)/inflow for capital expenditure and financial investments

Consolidated Financial Statements Notes

(1,710)

76

2,649

Note 26 Notes to the Consolidated Cash Flow Statement (continued) Year to 30 June 2005

in £’000

Year to 30 June 2004

Acquisitions and disposals Purchase of subsidiary undertakings Net cash/(overdraft) acquired with subsidiary

(32,406)

(1,091)

11,583

(149)

308

3,064

Disposal of subsidiaries Net cash disposed with subsidiary

–

Net cash (outflow)/inflow for acquisitions

–

(20,515)

1,824

Management of liquid resources Investment in short term deposits

8,346

(13,001)

Net cash outflow from management of liquid resources

8,346

(13,001)

Financing Issue of ordinary shares (net of share issue costs)

1,879

886

Debt due within a year Loan repayment

–

Loan taken out

(1,972)

1,876

–

Debt due beyond one year Loan repayment

(243)

(301)

Capital element of finance leases repayment

(205)

(293)

1,428

(2,566)

3,307

(1,680)

Net cash inflow/(outflow) from financing Acquired with subsidiaries*

Other non-cash changes

Foreign exchange movements

At 30 June 2004

Net Cash flow

9,424

5,571

–

–

79

15,074

(152)

(455)

–

–

2

(605)

(1,219)

(1,876)

–

–

7

(3,088)

Debt due after 1 year

(286)

243

–

–

3

(40)

Finance leases

(722)

205

–

(2)

(710)

13,849

(8,346)

–

92

5,595

20,894

(4,658)

–

181

16,226

Analysis of Net Funds in £’000 Cash in hand, at bank Overdrafts Debt due within 1 year

Current asset investment Total

(191) – (191)

At 30 June 2005

*(excl. cash and overdrafts)

Other non cash changes relate to the inception of new finance leases.

Note 27 Contingent Liabilities The parent company has guaranteed bank borrowings of its subsidiary undertakings. At the year end the liabilities covered by these guarantees totalled £3.4m (£1.3m).

77 Consolidated Financial Statements Notes

Five Year Record

2004 as restated

2003 as restated

2002 as restated

2001 as restated

179,795

156,197

156,432

149,527

140,290

14,672

12,922

11,796

11,262

9,876

9,948

9,701

8,927

3,967

7,787

117

91

41

(288)

(462)

–

(2,218)

–

414

183

(167)

(158)

146

Profit on ordinary activities before taxation

10,479

7,757

8,801

3,521

7,471

Taxation

(4,304)

(3,885)

(3,407)

(2,780)

(1,797)

Profit on ordinary activities after taxation

6,175

3,872

5,394

741

5,674

(215)

24

58

(8)

101

5,960

3,896

5,452

733

5,775

basic

28.2p

18.7p

26.2p

3.5p

27.9p

adjusted

50.8p

45.0p

40.2p

36.9p

33.4p

diluted

27.3p

18.2p

26.0p

3.5p

27.6p

6.39p

5.55p

4.83p

4.2p

3.66p

Fixed assets

70,139

46,965

58,066

49,822

50,069

Current assets

74,140

68,054

52,327

52,922

48,653

Current liabilities

(55,694)

(38,615)

(37,448)

(34,985)

(32,096)

Net current assets

18,446

29,439

14,879

17,937

16,557

Total assets less current liabilities

88,585

76,404

72,945

67,759

66,626

Creditors due after more than one year

(10,740)

(5,618)

(3,953)

(3,128)

(2,473)

Net assets

77,845

70,786

68,992

64,631

64,153

77,866

70,844

68,980

64,428

63,971

in £’000

2005

Consolidated profit and loss account Turnover Operating profit before goodwill amortisation and exceptional items Operating profit Share of results of associated undertakings Exceptional item Net interest receivable/(payable)

Minority interests Profit attributable to ordinary shareholders

–

–

Earnings per share

Dividends per share Assets employed

Represented by Shareholders’ funds Minority interests

(21)

(58)

12

203

182

77,845

70,786

68,992

64,631

64,153

The Group has restated the numbers from 2001 to 2004 in accordance with FRS 17 as set out in note 20.

Five Year Record DICOM Group

78

Implementation of International Financial Reporting Standards (unaudited)

This information has not been subject to audit In line with other listed companies in the European Union, DICOM Group is required to report its results in accordance with International Financial Reporting Standards adopted for use in the European Union (“IFRS”) with effect from the start of its new financial year commencing 1 July 2005. DICOM Group will therefore be reporting its quarterly results and its full year accounts for the year ending 30 June 2006 under IFRS, together with the restated comparatives. The unaudited provisional reconciliation and notes set out below identify the main differences between UK GAAP and IFRS as at, and for the IFRS comparative year ended, 30 June 2005. The reconciliations should be considered provisional given the uncertainty that currently exists regarding industry practice on the capitalisation of development expenditure (see note 5 below) which has meant that DICOM Group has not yet finalised its accounting policy in this area. These unaudited provisional reconciliations have been prepared on the basis of all IFRSs issued as at the date of this report which are expected to be effective as at the time of the reporting of the interim and full year financial statements for the year ended 30 June 2006. However, the IFRSs are the subject of ongoing review and endorsement by the European Commission and therefore may be subject to change.

79 Provisional reconciliation of the consolidated income statement from UK GAAP to IFRS

Provisional reconciliation of the consolidated income statement from UK GAAP to IFRS for the year ended 30 June 2005

in £’000

Turnover Gross profit

UK GAAP

IFRS Adjustments

179,795

IFRS Adjustments Notes

–

77,477

179,795

–

77,477

Amortisation of goodwill

4,724

1

Goodwill impairment

(1,408)

1

Amortisation of intangible assets

(1,262)

1

(19)

2

(686)

3

Vacation accruals Share based payment R&D accounting Operating expenses Operating profit

–

IFRS

4

(67,529)

(66,180)

9,948

1,349

Share of results of associated undertakings

117

42

Interest receivable

414

–

414

10,479

1,391

11,870

Profit on ordinary activities before taxation

11,297 1

Taxation

(4,304)

567

Profit on ordinary activities after taxation

6,175

1,958

8,133

(215)

–

(215)

Profit for the year

5,960

1,958

7,918

Equity dividends

(1,368)

142

Profit retained for the financial year

4,592

2,100

6,692

basic

28.2p

9.3p

37.5p

diluted

27.3p

8.9p

36.2p

Minority interest

5

159

6

(3,737)

(1,226)

Earnings per share

Provisional reconciliation of the consolidated balance sheet from UK GAAP to IFRS

80

Provisional reconciliation of the consolidated balance sheet from UK GAAP to IFRS at June 2005

in £’000

UK GAAP

IFRS Adjustments

IFRS Adjustments Notes

IFRS

Fixed assets Intangible assets Tangible assets Investments

62,719

5,293

6,717

–

1

68,012 6,717

703

–

703

70,139

5,293

75,432

Stocks

11,558

–

11,558

Debtors

41,766

310

147

–

147

20,669

–

20,669

74,140

310

74,450

Creditors: amounts falling due within one year

(55,694)

(211)

Net current assets

18,446

99

18,545

Total assets less current liabilities

88,585

5,392

93,977

Amounts falling due after more than one year

(8,425)

–

(8,425)

Deferred taxation

(1,739)

Current assets

Investments Cash at bank and in hand

5

2

42,076

(55,905)

Creditors

Provision for pension fund deficit

(2,819)

1

(4,558)

7

(576)

(576)

–

77,845

2,573

80,418

2,154

–

2,154

Share premium

54,567

686

Merger reserve

1,717

–

1,717

(516)

–

(516)

19,944

1,887

Net assets Capital and reserves Share capital

ESOP shares Profit and loss account Minority interest Shareholders funds

3

1,2,3,5

55,253

21,831

(21)

–

(21)

77,845

2,573

80,418

Transitional arrangements upon first time adoption of IFRS (IFRS 1) In preparing these provisional reconciliations, DICOM Group has utilised two exemptions available on first time adoption of IFRS, namely: • DICOM Group has elected not to apply retrospectively the provisions of IFRS 3, Business Combinations, to acquisitions that occurred prior to DICOM Group ’s transition date of 1 July 2004; and • DICOM Group has elected not to apply the provisions of IFRS 2, Share Based Payments, to share options granted on or before 7 November 2002.

81 Explanatory notes to the provisional IFRS adjustments

Explanatory notes to the provisional IFRS adjustments 1.Goodwill (IAS 36) Under IFRS, goodwill has an indefinite life and is only written down when an annual impairment test suggests that the carrying value is overstated. The goodwill amortisation charge of £4.7m under UK GAAP is reversed under IFRS following an impairment review. The impairment review led to a goodwill write-off of £1.4m during the year. Intangible assets arising on the acquisition of TOPCALL and Neurascript are written off over the estimated useful life of five years. 2.Holiday accruals (IAS 19) Accruing for holiday pay was not required under UK GAAP but is required under IFRS and a charge of £19,000 is made under IFRS relating to the movement in holidays that have accrued to staff but have not yet been taken between 2005 and 2004. 3.Share Based Payments (IFRS 2 and IAS 19) Options A charge of £686,000 has been made in the IFRS income statement to spread the fair value of share options issued since November 2002 and still outstanding at 1 July 2004 and those issued in the year to 30 June 2005 over the four year service obligations of those options. Share options have been valued on the basis of a Black-Scholes Model using the input data which includes the following: • Expected volatility of 40% • Expected life of the option of 3 ½ years 4.Research and development (IAS 38) Under IAS 38, DICOM Group is required to capitalise and amortise the development element of R&D costs providing certain criteria (such as proof of technical and commercial feasibility) are met. Previously under UK GAAP all R&D expenditure has been expensed as incurred irrespective of the tests referred to above. The Board has carefully considered the stage of current product development and is currently of the opinion that no expenditure incurred would qualify for capitalisation under IFRS. Nonetheless, this is a sensitive area for the software and IT services sector and, as yet, formal industry practice for companies currently moving to IFRS has not been finalised. The Board will monitor how practice evolves before finalising its accounting policy in this area. Progress in this regard will be reported with the half-year results to December 2005. No adjustment has been made for capitalisation or amortisation in the provisional IFRS reconciliations. 5.Taxation effect of IFRS adjustments (IAS 12) Under IAS 12 the following tax adjustments are required and result in a £567,000 net decrease in the tax charge: Intangible assets arising on acquisition are not deductible for tax purposes and therefore the temporary difference arising results in the provision of a deferred tax liability. This deferred tax liability is reversed as the related intangible asset is amortised, impaired in value or disposed of. The temporary difference between the recognition of the IFRS 2 charge for share based payments and the Group’s expected future tax deduction is established as a deferred tax asset under IFRS calculated by reference to the intrinsic value of all unvested share options at each balance sheet date. The resultant credit in the tax charge is restricted to the tax effect of the cumulative IFRS 2 charge with the difference credited directly to the IFRS profit and loss reserve. 6.Dividends (IAS 10) Dividends are not adjusting post-balance sheet events under IFRS and can only be accrued if they have been formally approved at the balance sheet date. This means that previously accrued dividends of £920,000 at 30 June 2005 (2004: £778,000) will be recognised in the year ended 30 June 2006 positively impacting the year’s charge for dividends by £142,000. 7.Pension accounting (IAS 19) through the income statement.

The Group has decided to charge all actuarial gains and losses immediately

Provisional reconciliation of the consolidated balance sheet from UK GAAP to IFRS

82

Company Secretary and Advisers

Company Secretary Stefan Gaiser Company Number 3119779

Advisers Auditors BDO Stoy Hayward LLP 8 Baker Street, London W1U 3LL

Registered Office Beechwood Chineham Business Park Basingstoke, Hampshire RG24 8WA

Registrars Capita Registrars Northern House, Woodsome Park Fenay Bridge Huddersfield HD8 0LA

Stockbroker and Corporate Finance Adviser Bridgewell Securities Limited Old Change House 128 Queen Victoria Street London EC4V 4BJ PR Adviser Financial Dynamics Holborn Gate 26 Southampton Buildings London WC2A 1PB

Principal Subsidiaries AUSTRALIA DICOM Australia Pty Ltd Norwest Business Park 33 Brookhollow Avenue Baulkham Hills, NSW 2153 Phone: +61 (0) 2 9894 8900 Fax: +61 (0) 2 9894 8700 e-mail: [email protected] Internet: www.dicomaustralia.com.au DICOM Australia Pty Ltd Suite 3, Level 7 11 Queens Road Melbourne, Vic 3000 Phone: +61 (0) 3 8807 9924 Fax: +61 (0) 3 8807 9928 e-mail: [email protected] Internet: www.dicomaustralia.com.au TOPCALL Australia Pty Ltd. Norwest Business Park 33 Brookhollow Avenue Baulkham Hills, NSW 2153 Phone: +61 (0) 2 9354 8606 Fax: +61 (0) 2 9488 2001 e-mail: [email protected] Internet: www.topcall.com/au/

AUSTRIA DICOM Informationstechnologie GmbH Perfektastraße 84 1231 Vienna Phone: +43 (0) 1 866 45 400 Fax: +43 (0) 1 866 45 420 e-mail: [email protected] Internet: www.dicomgroup.at TOPCALL Austria Talpagasse 1 1230 Vienna Phone: +43 (0) 1 863 53 0 Fax: +43 (0) 1 863 53 21 e-mail: [email protected] Internet: www.topcall.com/at BELGIUM DICOM Benelux NV/SA Zandvoortstraat 5 2800 Mechelen Phone: +32 (0) 15 28 89 60 Fax: +32 (0) 15 21 66 85 e-mail: [email protected] Internet: www.dicom.be

Kofax Image Products Koning Albert I – Laan 64-66 1780 Wemmel/Bruxelles Phone: +32 (0) 2 456 1720 Fax: +32 (0) 2 456 1721 e-mail: [email protected] Internet: www.kofax.com TOPCALL Belgium NV/SA Derbystraat 47 9051 Gent Phone: +32 (0) 9 244 7272 Fax: +32 (0) 9 244 7282 e-mail: [email protected] Internet: www.topcall.com/be/ CROATIA SIDUS d.o.o. Ulica Garibaldi 9 52474 Brtonigla – Verteneglio, Croatia Phone: +385 52 774 630 Fax: +385 52 774 630 e-mail: [email protected]

83 Company Secretary and Advisers / Principal Subsidiaries DICOM Group

CZECH REPUBLIC DICOM Data Management CZ, spol. s r.o. Zeleny pruh 95/97 147 00 Prague 4 Phone: +420 227 027-316/-318 Fax: +420 227 230 010 e-mail: [email protected] Internet: www.dicomgroup.cz

GERMANY DICOM Deutschland AG Jechtinger Straße 8 79111 Freiburg Phone: +49 (0) 761 452 69-0 Fax: +49 (0) 761 452 69-90 e-mail: [email protected] Internet: www.dicom.de

HUNGARY DICOM Magyarország Kft. Rimaszombati út 17. 1118 Budapest Phone: +36 (1) 309 07 65 Fax: +36 (1) 310 49 20 e-mail: [email protected] Internet: www.dicom.hu

DENMARK DICOM Edb-distribution A/S Ringager 4C 2605 Brøndby Phone: +45 43 42 41 50 Fax: +45 43 42 41 80 e-mail: [email protected] Internet: www.dicom.dk

DICOM Deutschland AG Office Mülheim Eppinghofer Straße 50 45468 Mülheim an der Ruhr e-mail: [email protected]

TOPCALL Hungary Kft. Róna u. 120-122. 3rd Floor 1149 Budapest Phone: +36 (1) 273 0825 Fax: +36 (1) 273 0826 e-mail: [email protected] www.topcall.com/hu/

FINLAND DICOM Finland Oy Itälahdenkatu 18C 00210 Helsinki Phone: +358 (0) 9 41 310 400 Fax: +358 (0) 9 41 310 420 e-mail: mailbox_dicfi@dicomgroup.com Internet: www.dicom.fi FRANCE DICOM France SAS 4, allée de Londres BP 21 91941 Courtaboeuf Cedex Phone: +33 (0) 160 92 18 50 Fax: +33 (0) 169 28 77 38 e-mail: [email protected] Internet: www.dicomfrance.fr DICOM Services France SAS 4, allée de Londres BP 21 91941 Courtaboeuf Cedex Phone: +33 (0) 164 86 26 86 Fax: +33 (0) 164 86 26 85 TOPCALL France SARL 4, rue d l‘Abreuvoir 92400 Courbevoie Phone: +33 (0) 1 563 704 00 Fax: +33 (0) 1 563 704 01 Internet: www.topcall.com/fr/

DICOM Service Center Storage DICOM Deutschland AG Vosskamp 1 26655 Westerstede e-mail: [email protected] Sales Office Berlin DICOM Deutschland AG Dovestraße 1 10587 Berlin e-mail: [email protected] TOPCALL GmbH Robert-Koch-Straße 2 82152 Planegg Phone: +49 (0) 89 898 272-0 Fax: +49 (0) 89 898 272-27 e-mail: [email protected] Internet: www.topcall.com/de/

ITALY DICOM PDS S.r.l. Via Manna 82 S. Andrea delle Fratte 06132 Perugia Phone: +39 075 52 854 1 Fax: +39 075 52 854 99 e-mail: [email protected] Internet: www.dicompds.it

Berner Straße 119 60437 Frankfurt Phone: +49 (0) 69 500 009-0 Fax: +49 (0) 69 500 009-50

DICOM PDS S.r.l. Via Jacopo Nardi 18 50132 Florence Phone: +39 055 24 23 39 Fax: +39 055 23 46 524

Zettachring 6 70567 Stuttgart Phone: +49 (0) 711 727 240 00 Fax: +49 (0) 711 727 240 40 GREATER CHINA REGION DICOM Asia Holdings Pte Ltd Hong Kong Representative Office 45/F, The Lee Gardens 33, Hysan Avenue Causeway Bay, Hong Kong Phone: +852 3180 2238 Fax: +852 3180 2299 e-mail: [email protected] DICOM Asia Holdings Pte Ltd Beijing Representative Office China Merchants Tower No.118 JianGuo Rd. ChaoYang District, Beijing, China 100022, Phone: +86 10 6566 1282 Fax: +86 10 6567 1500 e-mail: [email protected]

Principal Subsidiaries DICOM Group

INDONESIA DICOM Asia Holdings Pte Ltd (Indonesia Representative Office) Wisma 46, Kota BNI 43rd Floor, Suite 15 Jalan Jendral Sudirman Kav. 1 Jakarta 10220 Phone: + 62 (0) 21 574 8862 Fax: + 62 (0) 21 574 8888 e-mail: [email protected] Internet: www.dicomgroup.com.sg

84

DICOM PDS S.r.l. Viale Brianza, 20 20092 Cinisello Balsamo (Milan) Phone: +39 02 3653 2928 Fax: +39 02 700 438 923 DICOM PDS S.r.l. Via Napoli 125 Centro Meridiana – Casalnuovo 80013 Naples Phone: +39 081 842 05 37 Fax: +39 06 233 223 197

DICOM PDS S.r.l. Villa Loschi Zileri Motterle Via Biron 102 36050 Monteviale – Vicenza Phone: +39 0444 965218 Fax: +39 0444 965218 DICOM PDS S.r.l. Via Benedetto Croce 62 00142 Rome Phone: +39 06 546802 Fax: +39 06 546827 Sydoc Italia S.p.a. Viale Caduti Guerra Liberazione, 118 00128 Rome Phone: +39 065 07 72 51 Fax: +39 065 07 96 624 e-mail: [email protected] Internet: www.sydoc.it Sydoc Italia S.p.a. Via S. Bellino, 40 35020 Albignasego (PD) Phone: +39 049 880 95 85 Fax: +39 049 880 95 85 e-mail: [email protected] Internet: www.sydoc.it TOPCALL Italia S.r.l. Viale Monza 270 20128 Milan Phone: +39 02 252 051 Fax: +39 02 257 0534 e-mail: [email protected] Internet: www.topcall.com/it/ TOPCALL Italia S.r.l. Via C. Maestrini 263 00128 Rome Phone: +39 06 507 900 04 Fax: +39 06 507 989 94 JAPAN DICOM Japan K.K. 5F Toranomo 1-Chome Mori Building 1-19-5 Toranomon 1-Chome Mori Building 105-0001 Tokyo Phone: +81 3 3519 2640 Fax: +81 3 3519 2644 e-mail: [email protected]

NETHERLANDS DICOM BENELUX NV Manitobadreef 6 3565 CH Utrecht Phone: +31 (0) 30 26 26 206 Fax: +31 (0) 30 26 73 928 e-mail: [email protected] www.dicomgroup.nl TOPCALL Nederland B.V. Hogeweg 39A 5301 LJ, Zaltbommel Phone: +31 (0) 418 570 400 Fax: +31 (0) 418 570 401 e-mail: [email protected] Internet: www.topcall.com/nl/ NORWAY DICOM Norge AS Tevlingveien 23 1081 Oslo Phone: +47 23 28 80 50 Fax: +47 23 28 80 51 e-mail: [email protected] Internet: www.dicom.no PHILIPPINES PhilDICOM, Inc Unit 407, Peninsula Court 8735 Paseo de Roxas Makati City Phone: +63 (0) 2 750 2211 Fax: +63 (0) 2 752 2308 e-mail: [email protected] Internet: www.dicomgroup.com.ph POLAND DICOM Polska Sp. z o.o. Kolejowa 5/7 01 217 Warsaw Phone: +48 (22) 434 89 40 Fax: +48 (22) 434 89 45 e-mail: [email protected] Internet: www.dicom.pl TOPCALL Polska Sp.z o.o. ul. Jagiellonska 74 03-301 Warsaw Phone: +48 (22) 511 22 30 Fax: +48 (22) 511 22 40 e-mail: [email protected] Internet: www.topcall.com/pl/

PORTUGAL Sistemas DCM Ibérica S.A. – Portugal Av. Clotilde, Centro de Congressos do Estoril, 4° piso B 2765-211 Estoril, Portugal Phone: +351 21 464 6190 Fax: +351 21 464 6191 e-mail: [email protected] Internet: www.dicomportugal.com SINGAPORE DICOM Singapore Pte Ltd 205 Henderson Road #08-02 Henderson Industrial Park Singapore 159549 Phone: +65 6278 76 62 Fax: +65 6278 43 45 e-mail: [email protected] Internet: www.dicomgroup.com.sg SPAIN Sistemas DICOM Ibérica, S.A.U. Conchita Supervía, 9 08028 Barcelona Phone: +34 93 409 20 63 Fax: +34 93 409 20 64 e-mail: [email protected] Internet: www.dicom.es Sistemas DICOM Ibérica, S.A.U. Orense, 85, Esc. 1, 3° B 28020 Madrid Phone: +34 91 567 12 70 Fax: +34 91 567 12 71 TOPCALL Sistemas de Comunicación, SA C/Juan Esplandiu 15 6a 28007 Madrid Phone: +34 913 237 760 Fax: +34 913 237 761 e-mail: [email protected] Internet: www.topcall.com/es SWEDEN NorDICOM AB Headoffice Energigatan 11 43437 Kungsbacka Phone: +46 (0) 300 358 80 Fax: +46 (0) 300 358 99 e-mail: [email protected] Internet: www.nordicom.se NORDICOM AB Salesoffice Linjalvägen 6B 187 66 Täby Phone: +46 (0) 8 544 404 80 Fax: +46 (0) 8 544 404 89

MALAYSIA DICOM Malaysia Sdn Bhd Suite A-5-9, Plaza Mont’ Kiara No. 2, Jalan 1/70C, Mont’ Kiara 50480 Kuala Lumpur Phone: +60 (0) 3 620 35 701 Fax: +60 (0) 3 620 35 801 e-mail: [email protected] Internet: www.dicomgroup.com.my

85 Principal Subsidiaries DICOM Group

SWITZERLAND DICOM AG Grundstraße 14 Business Building Forren West 6343 Rotkreuz Phone: +41 (0) 41 799 82 82 Fax: +41 (0) 41 799 82 95 e-mail: [email protected] Internet: www.dicom.ch RECOS AG Churerstraße 160A 8808 Pfäffikon Phone: +41 (0) 55 415 7711 Fax: +41 (0) 55 415 7721 e-mail: [email protected] Internet: www.topcall.com/ch SAMSUNG GENERAL AGENCY SEDICO-IT AG Grundstraße 14 Business Building Forren West 6343 Rotkreuz Phone: +41 (0) 41 799 82 82 Fax: +41 (0) 41 799 82 95 e-mail: [email protected] Internet: www.sedico.ch www.samsung.ch SAMSUNG GENERAL AGENCY SEDICO-IT SA Chemin de la Gottrause 10 1023 Crissier Phone: +41 (0) 21 637 65 50 Fax: +41 (0) 21 637 65 55 SAMSUNG GENERAL AGENCY DICOM SEDICO AG Grundstraße 14 Business Building Forren West 6343 Rotkreuz Phone: +41 (0) 41 798 12 12 Fax: +41 (0) 41 798 12 88

UNITED ARAB EMIRATES DICOM FZE Dubai Airport Free Zone and Business Park East Wing 3E G07 P.O. Box 54574 Dubai Phone +971 4 299 4426 Fax +971 4 299 4496 Internet: www.dicom.ae

TOPCALL U.K. Limited Beechwood Chineham Business Park Basingstoke, Hampshire RG24 8WA Phone: +44 (0) 1344 383 100 Fax: +44 (0) 1344 383 101 e-mail: [email protected] Internet: www.topcall.com/uk

UNITED KINGDOM DICOM Technologies Ltd Beechwood Chineham Business Park Basingstoke, Hampshire RG24 8WA Phone: + 44 (0) 870 777 3767 Fax: + 44 (0) 870 777 3768 e-mail: [email protected] Internet: www.dicom.co.uk Sydoc (UK) Ltd Suite 1, Block A Ashleigh Way Langage Business Centre Plympton, Plymouth PL7 5JX Phone: +44 (0) 870 428 3020 Fax: +44 (0) 870 428 3021 e-mail: captureservices_sydocuk@ dicomgroup.com Internet: www.sydoc.co.uk

TOPCALL CORPORATION 16245 Laguna Canyon Road Irvine, California 92618 Phone: +1 (610) 240 43 00 Fax: +1 (610) 240 43 40 e-mail: [email protected] Internet: www.topcall.com/us VIETNAM DICOM Asia Holdings Pte Ltd (Hanoi Representative Office) 174 Trieu Viet Vuong Hai Ba Trung district Hanoi Phone: +84 (0) 4 976 1930 Fax: +84 (0) 4 976 1934 e-mail: [email protected]

Kofax Image Products Unit 2, Kings House Greystoke Business Centre High Street, Portishead Bristol BS20 6PY Phone: +44 (0) 870 066 8315 e-mail: [email protected] Internet: www.kofax.com Neurascript Ltd 201 Cambridge Science Park Milton Road Cambridge CB4 0GZ Phone +44 (0) 870 460 6120 Fax +44 (0) 870 460 6121 e-mail [email protected] Internet: www.neurascript.com

Principal Subsidiaries DICOM Group

USA Kofax Image Products 16245 Laguna Canyon Road Irvine, California 92618 Phone: +1 (949) 727-1733 Fax: +1 (949) 727-3144 e-mail: [email protected] Internet: www.kofax.com

86

Glossary

The following definitions apply throughout this annual report: Business Process Automation Handling business processes and transactions through electronic and other automated means rather than as manual, often paperbased processes. The goal of Business Process Automation is to minimise the cost and time of business processes by eliminating as much human intervention as possible. For example, consider an organisation whose manual accounting system requires branch offices to send physical paper invoices to a central office for manual processing, approval and payment. This organisation might automate their process with a system in which invoices are scanned into an electronic format at the branch office and automatically delivered into the central accounting system, which also routes the invoice information to the correct knowledge worker and sends confirmation messages back to the branch office and the vendor. DICOM Group’s Information Capture and Unified Communication products enable of this kind of automation by feeding and interoperating with business applications, databases, workflow systems, and archives. Capture See Information Capture. Classification Examining the format or content of a document, form or piece of text and then automatically assigning it into one or more categories to enable appropriate automated processing, routing or archiving. Classification is part of Transformation. Collection The first step in Information Capture and Unified Communication: Converting paper documents and forms into digital images using scanners, digital copiers, MFPs, and so on, or by importing digital information from fax servers, e-forms and other business systems. After Collection, the digital documents and forms go through Transformation so they can be Delivered appropriately into an automated business process. Confirmation A message verifying that an event has occurred, sent in an appropriate format to the involved people or systems. Data Capture Automatically extracting information from the digital image of a scanned paper form, so the information can be used in an automated business process.

The alternative to automated data capture is to manually key the information into a business system, or simply to manually process the form. Data capture previously focused on structured forms (see definition), but newer technologies such as INDICIUS and Mohomine technologies from DICOM Group, enable the capture of information from semi-structured forms (see definition). Data capture was once treated as separate from document capture, but both are now part of Information Capture. Delivery The last step in Information Capture and Unified Communication: Feeding transformed information to one or more business systems or archives in the most appropriate form for each system. Document A paper document is one or more pages that contain information and that belong together for a specific purpose (as in a contract or a letter). An electronic document can be a similar collection of one or more digital images (of scanned pages, for example), or it can be information that was created electronically but not printed (as in a word processing document). Documents are usually unstructured (see definition below). Document Capture Scanning paper documents and delivering digital images and index terms into repositories and archives. The alternative to document capture is to manually process, file and retrieve paper documents. Newer technologies enable organisations to automatically extract the information from unstructured documents and classify them for automated processing. Document capture was once considered as separate from data capture, but both are now part of Information Capture. Document Preparation The manual tasks required to prepare paper documents and forms for scanning. Some document preparation is unavoidable, such as removing paper clips and staples, or making sure that all pages are face up or face down. DICOM Group technologies have eliminated the need for many other time-consuming preparation steps, such as sorting documents from forms, or sorting based on size, colour, quality, and so on. Document Separation When done manually, an expensive and time-consuming part of document preparation in which a person inserts a coded “separator sheet” between documents before scanning, so the capture system can tell where one document ends and the

87 Glossary DICOM Group

next begins. Sophisticated Mohomine technology from DICOM Group can eliminate this step by intelligently detecting the boundaries between documents. Electronic Document Capture See Information Capture. Enhancement Maximising the quality of collected documents and forms, often through the automatic cleanup of scanned images, to ensure that extraction, classification, and other automated Transformation steps can run at high efficiency, and that the information delivered into business applications and archives is of the highest quality. Enhancement is part of Transformation. Exception Handling A reliable process for handling documents, forms and information that are unsuitable for automated processing. Extraction An umbrella term for the location, identification, recognition, and conversion of data or text from scanned images into desired electronic formats. This includes Optical Character Recognition (OCR) for converting machine-printed text into machine-readable text, Intelligent Character Recognition for converting hand-printed or handwritten text into machine-readable text, and Optical Mark Recognition (OMR) for recognising and determining the values of checked boxes and other marks. Automated extraction is an area where the cost benefits of Information Capture are obvious to a prospective customer; to get information into a computerised system without this capability, someone has to key it in. Extraction is part of Transformation. Form A paper or electronic document containing fields of specific kinds of information, such as an invoice or employment application. A form is “structured” if it contains expected information in a known layout and structure. A form is “semi-structured” if it contains expected information but the specific layout and structure are not known ahead of time. See Structured and Semi-Structured. Image The digitised visual representation of a document, form, picture or graphic. Indexing Extracting or otherwise creating “metadata” that describes captured information or digital images and that can be used to search for and retrieve the information. For example, a policy number might be one of several index terms associated with an insurance claim document. Information Capture The process of Collecting paper documents, forms and e-documents; Transforming them into accurate, retrievable, digital information; and Delivering the information into business applications and databases for immediate action. MFP See Multi-Functional Peripheral. Multi-Functional Peripheral A single piece of office equipment that acts as a printer, copier, scanner and fax

machine, often supporting a workgroup, department or branch office. DICOM Group’s products enable organisations to use their MFPs as the collection and distribution point for Information Capture and Unified Communication processes. Recognition See Extraction. Routing The distribution of information to the systems and knowledge workers that can use it to further a business process. Semi-Structured Usually applies to forms rather than documents, especially forms that differ in layout from company to company but that tend to contain the same information, such as invoices or bills of lading. Separator Sheet See Document Separation. SMS The format used to exchange text messages to and from mobile phones. Straight-Through Processing The “ideal” of Business Process Automation, eliminating all need for human interaction and intervention throughout a business process. Structured Usually applies to forms rather than documents, especially forms where both the information and its location in the form are highly predictable, as in a company’s own employment application. Transaction A single communication, or communication and response, that furthers a business process, as opposed to a “batch” involving multiple communications. Transformation Converting collected documents, forms, and other data into information for use in a business process or archive. The Transformation process comprises four steps: Enhancement, Classification, Extraction, and Validation. All four steps might not be used in a particular application, and the steps are not necessarily performed in this order. Unified Communication Technology that enables the communication and exchange of information among people, applications and devices in the most appropriate format. For example, a Unified Communication system might send a brief confirmation message by SMS to a mobile phone, plus details by fax and e-mail. Unstructured Usually applies to documents rather than forms, where both the information and its location in the document may differ greatly from other documents, as in letters or CVs. Validation Confirming that Transformed information is complete and correct before Delivering to a business process or archive. Validation might involve a human operator checking extracted text or data against a scanned image, or keying in additional data, or the system automatically checking extracted text or data against a database, or automatically importing additional data from another system. Validation is part of Transformation.

Glossary DICOM Group

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DICOM Group plc Publication Data

Publisher DICOM Group plc Beechwood Chineham Business Park Basingstoke, Hampshire RG24 8WA United Kingdom Phone: + 44 (0) 800 65 20 616 Fax: + 44 (0) 870 77 04 798 Investor Relations Contacts Dr. Bettina Moschner Investor Relations Phone: +49 (0) 761 45 269 190 Fax: +49 (0) 761 45 269 8190 e-mail: [email protected] Gabriele Rosenbusch Group Communications Phone: +49 (0) 761 45 269 192 Fax: +49 (0) 761 45 269 8192 e-mail: [email protected] Concept, Layout and Design PUNKTLANDUNG Baumheuer Günther GbR, Hamburg Printer Timm Specht Druck & Produktion GmbH, Hamburg Photos DICOM Group, page 4, 8, 11, 26, 28, 32, 33, 36; Getty Images, page 14, 16; Plainpicture, page 14; Zefa, page 18

www.dicomgroup.com