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1、Annual report 2005Unlocking the Value of LegacyTMMicro Focus International Plc Annual report 2005Contents1 Micro Focus2 Group at a glance4 Chairmans statement5 Technology review7 Chief Executive Officers review of operations12 Chief Financial Officers review14 Board of directors 16 Directors report1
2、8 Corporate governance23 Corporate social responsibility24 Remuneration report28 Directors responsibilities29 Micro Focus International Plc29 Independent auditors report to the members of Micro Focus International Plc30 Balance sheet31 Cash flow statement32 Notes to the financial statements35 Micro
3、Focus International Limited35 Independent auditors report to themembers of Micro Focus InternationalLimited36 Consolidated profit and loss account37 Statement of Group total recognisedgains and losses37 Reconciliation of movement in Groupshareholders funds38 Consolidated balance sheet39 Consolidated
4、 cash flow statement40 Notes to the financial statements63 Historical summary64 Directors,Secretary,registered office and advisers65 Offices66 GlossaryAgile solutionsOur Leverage and Extend and Lift and Shift solutionsmake it possible to protectinvestment in legacy applications by migrating them to
5、more open andflexible contemporaryplatforms.Micro Focus,founded in 1976,is a leading provider of legacy development anddeployment software.Our Leverage and Extend and Lift and Shift solutionsenable our customers,which include more than 70 of the 2004 Fortune“Global 100”companies,to continue to gain
6、value from their legacy of investmentin business applications.We enable more than 5,000 customers and one million licensed users,across the financial services,government,healthcare,retail,manufacturing and software industries,worldwide,to improve theirefficiency,to take advantage of Web Services and
7、 to migrate legacy applications to modern environments.We also work with a variety of partners,including systems integrators,platform providers,resellers andother technology companies,to extend our capabilities.Our ability to deliver evolutionary and cost-effective solutions is sustained by our comm
8、itment toremaining at the forefront of technology and product development.Because technology platforms are constantly movingthere will always be a need to unlock strategicallyimportant business applications from the constraints of older hardware and software platforms.This enablesour customers to re
9、duce the cost of their IT operations,whilst at the same time increasing their agility to meetthe demands of their businesses with minimal risk.Micro Focus calls this simply Unlocking the Value of LegacyMicro Focus International Plc Annual report 2005 12 Micro Focus International Plc Annual report 20
10、05Group at a glance?Turnover increased 19.3%to$150.6 million(2004:$126.3 million).?Turnover increased 15%at constant currency.?EBITDA increased 35.0%to$41.7 million(2004:$30.9 million)and adjusted EBTIDA increased 45.7%to$48.7 million(2004:$33.5 million).?Profit on ordinary activities before tax inc
11、reased 25.6%to$27.7 million(2004:$22.0 million).?Basic earnings per share increased 21.8%to 11.91c(2004:9.78c).?Successful IPO in May 2005.04050405040504050402060801001201401600102030405005101520253035400510152025Turnover$millionAdjusted EBITDA$millionOperating profit$millionR&D expenditure$million8
12、 April 2004Microsoft and Micro Focus form the MMANew product release to Lift and Shift legacyapplications to Windows platforms.2 June 2004Opening of new offices in St Albans,UK.17 August 2004New product releases to Lift andShift legacy applications to HP andIBM eServer platforms.30 Sept 2004Awarded
13、the status of MicrosoftGold Certified Partner.4 Dec 2004Opening of new offices in Durham,North Carolina.8 June 2004New product release to Leverageand Extend IBM mainframeapplications.Micro Focus International Plc Annual report 2005 3Revenues by type$millionLicence feesMaintenance feesConsulting fees
14、79.966.74.1Number of employeesby regionNorth AmericaEurope and Middle EastRest of the world21025323Number of employees by functionGeneral and administrationSales and distributionResearch and development159183144Revenues by region$millionNorth AmericaEurope and Middle EastRest of the world73.257.420.
15、1Cost breakdown$millionCost of salesR&D costsSelling and distribution costsOther admin costs48.16.323.436.9Number of officesNorth AmericaEurope and Middle EastRest of the world1306037 Feb 2005Single development environmentbased on Microsoft Visual Studioannounced.3 March 2005New product release to L
16、everage andExtend legacy applications running onIntel Itanium 2 processor-based platforms.14 March 2005Won a global award recognisingexemplary customer service standardsfor the fourth consecutive year.17 May 2005 Micro Focus International Plc acquiredthe entire share capital of Micro FocusInternatio
17、nal Limited.17 May 2005The ordinary shares of Micro FocusInternational Plc are admitted to theOfficial List and to the main market of theLondon Stock Exchange for listed securities.6 June 2005Dr Anthony Hill wins“Technology CEOof the Year”award.I am delighted to welcome shareholders to this,the firs
18、t annualreport of Micro Focus International Plc.On 17 May 2005,the share capital of Micro Focus InternationalLimited(“Operating Company”)was acquired by Micro FocusInternational Plc(“Company”)in a share-for-share exchange withthe previous shareholders of the Operating Company.On 17 May2005,the ordin
19、ary shares of the Company were admitted to theOfficial List and to the London Stock Exchange to be traded on its main market for listed securities.This annual report concentrateson providing shareholders with consolidated information on theOperating Company and its subsidiaries.Whilst the Operating
20、Company traces its origins back to 1976 the current strategy has evolved since 2001,when the businesswas acquired by Golden Gate Capital,a US-based private equityfund.Since that time we have refocused the business on legacydevelopment and deployment,a strategy which has formed thebasis of our succes
21、s over the past four years.We have increasedrevenues from$79 million for the nine months ended April 2002,to$110 million for the comparable nine months ended January2005,and further to$151 million for the full year ended 30 April 2005.Our strategyOur strategy is to help our customers leverage their
22、legacyassets.We do this by expanding the market for mainframemigration,strengthening existing customer relationships,extending leveraged sales channels,continuing to developinnovative technology and by pursuing selected opportunities foracquisition.This is covered in more detail in the Chief Executi
23、veOfficers review of operations on pages 7 to 11.The IPOThe Company raised$122 million in the IPO,the net proceedsbeing used to repay the full balance of the debt outstandingunder facilities with Wells Fargo Foothill,Inc.and DB ZwirnSpecial Opportunities Fund(including early payment fees).This has l
24、eft the Company with a strong balance sheet to pursue its strategy.Our peopleOur board comprises two executive and five non-executive directors.Dr Anthony Hill,who has been with the Operating Company orone of its antecedents since 1987,became Chief Executive Officerand President of the Operating Gro
25、up in August 2001.Richard Lloyd,who has been with the Operating Company or one of itsantecedents since 1991,became Chief Financial Officer of theOperating Group in August 2001.I was pleased to accept the roleof non-executive Chairman on 4 April 2005.Our other non-executive directors are David Domini
26、k and Prescott Ashe,who arefounders and Managing Directors of Golden Gate Capital,DavidMaloney,who has extensive experience in finance at a number ofleading companies,and John Browett who was appointed as a non-executive director on 1 July 2005(biographies of the board membersare shown on page 15).W
27、e are fortunate to have a highly skilled,experienced and loyalfamily of employees,including a senior management team fourof whom have been with the Company for more than 20 years.I thank my fellow directors,the members of the managementteam and,indeed,all employees for their energy,commitmentand con
28、tribution during the past year,which has been a time of immense change and demanding deadlines.The futureOur business model is continuing to prove its value.Over the pastyear we have achieved greater penetration of our target marketsand,following the IPO and the repayment of loans,we arefinancially
29、well positioned to maintain profitable growth and to generate cash.I am confident that Micro Focus will continue to prosper and will deliver good value to all its stakeholders.Kevin Loosemore Chairman3 August 20054 Micro Focus International Plc Annual report 2005Chairmans statementBy April 2005,ther
30、e were approximately 16,000 IBM mainframesin use around the world.Many operations supported by legacy applications are based on COBOL.It is estimated thatmore than 200 billion lines of COBOL code are in use today and that COBOL applications continue to process 85%of allcomputer transactions.Over tim
31、e,IT organisations are deploying more businessapplications on Windows,UNIX and Linux operatingenvironments.We estimate that the compound annual growthrate(CAGR)for Windows,UNIX and Linux deployment softwarewill be approximately 7.2%from 2003 to 2008,and that much ofthis new workload will be based on
32、 legacy applications.The WebServices market,which is fuelling growth in the reuse of legacyapplications on contemporary platforms,is expected to grow ata rate of 42.4%CAGR over the same period.Our Leverage and Extend and Lift and Shift solutions enable our customers to modernise their legacy usingco
33、ntemporary platforms.Leverage and Extend This solution enables our customers to:lLeverage existing information technology assets by allowingdevelopers to use existing skills and code within a productiveWindows-based environment and to manage all aspects oflegacy application development.This signific
34、antly improvesdeveloper productivity,as well as reducing risks relating toquality and unavailability;and lExtend legacy applications which deliver core businessservices into new business processes using service-orientedarchitectures and Web Services frameworks quickly and easily.Leverage and Extend
35、is used by many large organisations,such as those in the financial,insurance and government sectors,which have invested heavily in legacy IT and which have a strategic commitment to an existing platform often a mainframe.Leverage and Extend is also used by manypackaged application providers,such as
36、Lawson and Misys,who embed our software in their applications on a wide range of contemporary platforms.Lift and ShiftThis solution,introduced in 2004,enables organisations toreduce their dependence on IBM mainframes when there arecompelling business reasons to exploit alternative,lower-costplatform
37、s.Lift and Shift makes it possible to migrate legacyapplications to lower-cost,more open and flexible contemporaryplatforms,such as Windows,UNIX or Linux,and to reuse existingskills and code.Migration can be implemented more quickly,more successfully and more economically than writing newapplication
38、s or implementing commercial application packages.Combining Leverage and Extend and Lift and ShiftThe intrinsic strength of these solutions is that they can beimplemented across a wide range of technologies individuallyor in combination.When used together,they can transform an IT cost base,increase
39、its scalability and turn legacy applicationsinto strategic assets.Micro Focus International Plc Annual report 2005 5Technology reviewIn the 40 years since the IBM mainframe was introduced,more than$1 trillion has been invested in building information technology(IT)infrastructures.In those years,tech
40、nology has developed radically,frommainframes to distributed and internet-enabled computing,and fromprogramming languages,such as Assembler,COBOL and PL/I,to C,C+and Java.A significant proportion of the worlds IT infrastructure is still,however,based on mainframe or“legacy”technologies and applicati
41、ons,and around 70%of business operations are still supported by them.WEB SERVICES ARE THE BRIDGEFROM THE OLD TO THE NEW.$3.6 BILLION MARKETOPPORTUNITY FORECAST BY 2008.2003-2008 CAGR OF 42%.Our products provide customers with a broad range of rapidlegacy application development and deployment tools,
42、collectively known as Micro Focus Studio and Micro Focus Server.These give customers the power to maximise their investments in legacy applications using contemporary architectures and Web Services frameworks,such as.NET,J2EE and XML.Micro Focus StudioMicro Focus Studio is a collection of developmen
43、t softwareproducts which are used in a highly-productive,MicrosoftWindows development environment to Leverage and Extendlegacy applications,regardless of the platform which is used todeploy them.Micro Focus Studio development software is alsoused to Lift and Shift legacy applications from mainframes
44、 to contemporary platforms.Micro Focus Studio software includes the following products:Mainframe ExpressEnterprise Edition is a complete mainframeapplication development and extension environment which providesautomated code generation,analysis,compilation,debugging and unittesting of mainframe appl
45、ications on a desktop while facilitating theflexibility to extend existing transactions to contemporary applicationarchitectures,such as.NET,J2EE and Web Services.Net Expresswith.NET is an integrated development environmentbased on Microsoft Visual Studio,which is used to moderniseand extend legacy
46、applications for the Microsoft Windowsplatform and the.NET framework.It can be used in conjunctionwith Micro Focus Server Express to deploy applications to UNIXand Linux platforms.Server Express is a development environment based on UNIX and Linux,which is used to modernise and extend legacy applica
47、tions that are to be deployed on platforms,such asRedHat and Novell Linux,HP-UX,IBM AIX and SUN Solaris,with J2EE environments and Web Services framework.RevolveEnterprise Edition helps developers adapt legacyapplications more quickly by enabling them to analyse theimpact of change and to manage lar
48、ge inventories of code.Micro Focus ServerMicro Focus Server is deployment software which customers use to integrate their legacy applications with contemporaryarchitectures and Web Services frameworks,and deploy them on all leading contemporary platforms.Micro Focus Server software includes the foll
49、owing products:Application Server is a high-performance executionenvironment which incorporates powerful facilities that enableCOBOL applications to run on all leading Windows,UNIX and Linux platforms,including support for the latest 64-bittechnologies.Enterprise Server is a high-performance transac
50、tion processingenvironment.Fully compatible with IBM mainframe technology,Enterprise Server enables the deployment of mainframe legacyapplications and provides seamless integration with.NET andJ2EE architectures and Web Services frameworks to facilitate the implementation of service-oriented archite
51、ctures.Additional development and deployment toolsMicro Focus also offers additional legacy development anddeployment tools.These include Micro Focus APS,Micro FocusAppMaster Builder,Micro Focus Enterprise Link,Micro FocusObject COBOL Developer SuiteTMand Micro Focus Eurosmart.6 Micro Focus Internat
52、ional Plc Annual report 2005ExpertiseWe have developed a deep technicalunderstanding of legacy technologiesand contemporary platforms which wedeliver to our customers in Micro FocusStudio and Server products,which,amongst other things,provide a completeenvironment for developing IBM mainframeapplica
53、tions on a laptop computer.Technology review The 12 months to April 2005 have been excellent for Micro Focuswith revenues up 19.3%to over$150 million.At the same timewe have substantially improved both profit margins and the cashflows from our operations.We believe that our success is driven by the
54、need for companies to increase their agility while,at the same time,reducing costs and minimising risk.This imperative has led many to look for waysto capitalise on their investment in legacy technology.As much as 80%of an organisations software budget may be used tomaintain and operate legacy appli
55、cations which have traditionallybeen too inflexible to integrate with one another or with newertechnologies.The lower cost of contemporary platforms combinedwith technical advances,such as security,flexibility and scalability,and the emergence of enabling technologies,such as Web Servicesand service
56、-oriented architectures,has driven many organisationsto look for ways to re-use their legacy investments.Organisations seeking to modernise their IT infrastructurebroadly have the following alternatives:lImprove the development infrastructure for their currentapplications and platforms by increasing
57、 developer productivityand lowering development costs.We refer to this as Leverageand Extend;lExtend critical legacy applications and services on currentplatforms to new internal and external user communities byusing the Internet and contemporary architectures,also part of Leverage and Extend;lMove
58、legacy applications from current high-cost or end-of-life platforms,such as the mainframe,to more contemporary,open and flexible platforms,such as Windows,UNIX and Linux.We refer to this as Lift and Shift;andlReplace legacy applications on mainframes with newpackages or new custom-built applications
59、 which run on morecontemporary,open and flexible platforms,such as Windows,UNIX and Linux,often referred to in the industry as Rip and Replace.Our legacy application development and deployment software,described in the technology review on pages 5 to 6,enables our customers to improve their developm
60、ent infrastructure,to extend legacy applications to new users and to move them to contemporary platforms.We believe that the high costs andrisks associated with large-scale replacement projects are rarely viable in todays climate of tight cost and risk management and are,in most instances,unnecessar
61、y.CustomersWe sell our software through three channels:lDirect customers buy our software to maintain and operate core legacy business applications and pay licence and maintenance fees direct to us;lIndirect customers buy our software and pay licence andmaintenance fees through packaged application
62、providers and systems integrators;andlResellers sell Micro Focus software in geographic areaswhere Micro Focus does not have a presence.Micro Focus International Plc Annual report 2005 7Chief Executive Officers review of operationsMicro Focus in education“We were able to preserve our investment in C
63、OBOL at low cost and risk because ourprogrammers were able to become productiveso quickly.Leveraging and extending our legacy system was the best option for us,and Micro Focus helped us preserve the value of our legacy investment.”John Elliott,Director of Information Technology,Campus PartnersStreng
64、thsOur technology and resources enable businesses to extract value from legacy applications,platforms and architectures in a continually,and rapidly changing,IT environment.Below I highlight the key strengths of the Company which I believeplace Micro Focus in a unique position to help IT organisatio
65、nsacross the globe to reduce costs,increase agility and minimiserisk by leveraging their legacy assets.We have deep technical understanding of legacy technologies(for example,CICS,IMS,PL/I,Assembler,COBOL,DB2,Rexx,JCL and TSO)combined with that of contemporary platforms,(Windows,UNIX and Linux)and a
66、rchitectures(.NET,J2EE andWeb Services).Our collaboration with specialist technologypartners supplements this knowledge,giving us and ourcustomers access to expertise in legacy technologies,such as Natural,Adabas,IDMS and RPG.Our expertise,developed over 30 years,with a strong record oftechnology in
67、novation in legacy development and deploymentsolutions,has resulted in more than one million licensed users of our software around the world.Our customers include more than 70 of the Fortune Global 100 companies.They includecompanies who operate in a wide range of industry sectors,including financia
68、l services,insurance and government,ofvarying sizes and over a wide geographic area.Approximately49%of our turnover is derived from North America,38%from Europe and the Middle East,and 13%from the rest of theworld.No single customer dominates.Because our products are deeply integrated into our custo
69、mers core IT systems,we have been able to create and maintain long-termrelationships with them.We have developed a strong platform,technology,service andapplication partner ecosystem to expand our ability to develop,market and distribute our products,and to further support ourcustomers legacy modern
70、isation initiatives.For example:lMicro Focus is a member of the IBM Partnerworldprogramme.We are a Microsoft Gold Certified Partner and a premier member of Microsofts Visual Studio Industry Partnerprogramme.In 2004,we jointly announced the formation of the MMA with Microsoft;lWe founded the Migratio
71、n and Transformation Consortium,a global network of companies which specialises in modernisinglegacy systems with a combination of our software,specialisttechnology and legacy expertise;lSystems integrators such as Accenture,CSC and EDS workwith us to provide migration and deployment services which
72、use our Lift and Shift software to minimise the risk of movingcustomers applications to a contemporary platform;andlOur application partners offer a range of packagedapplications which feature the latest technology innovations andwhich can be implemented across a wide range of mainframeand contempor
73、ary platforms.8 Micro Focus International Plc Annual report 2005Chief Executive Officers review of operationsInnovativeWe have a strong record,based on30 years experience,of developinglegacy and deployment solutions toenable customers to evolve,ratherthan replace,their technology.Micro Focus in fina
74、ncial services“With Net Express,CNB has shown that theycan easily exchange data across legacy andnew systems,minimising the disruption ofacquisitions while gaining agility to meet new business requirements as they emerge.”Ed Proud,Vice President Information Systems,County National BankLong-term cust
75、omer relationships have resulted in a relativelystable stream of revenue from recurring maintenance fees,aswell as from licence fees from packaged application providers.Around 44%of our revenue is derived from maintenancecontracts and,in the year ended 30 April 2005,around 90%ofour customers in the
76、US,the UK and Germany(which togetheraccounted for approximately 75%of our total maintenance fee revenue)renewed their contracts with us.Our senior management team has more than 110 yearscombined experience in the software industry.Our technicalteams,who come from diverse backgrounds,are application,
77、platform and software engineering experts,and often choose to stay with us for many years.This stability,combined with ourexpertise,gives us a strong basis on which to execute our strategy.StrategyOur objective is to be the leading global provider of legacydevelopment and deployment software.We beli
78、eve we willachieve this with the strategies outlined below.We will endeavour to strengthen relationships with existingcustomers by promoting our complementary Leverage and Micro Focus International Plc Annual report 2005 9Micro Focus in energy“As we move proprietary credit cardprogrammes to a servic
79、es-basedtechnology environment,Valero neededa solution that would allow for a phasedlow-risk approach.One that tookadvantage of existing COBOL assets.”Steve DiPaola,Vice President of Administrative Systemsand Production Support,Valero Energy CorporationGlobal diversityMore than one million usersarou
80、nd the world are licensed to use our software:our customers include more than 70 of the FortuneGlobal 100 companies.85%OF ALL TRANSACTIONSARE PROCESSED BY LEGACYAPPLICATIONS.Extend and Lift and Shift solutions.We believe thatopportunities also exist to help systems integrators develop and deploy the
81、ir own legacy applications.The market for mainframe migration is expanding rapidly.We have been involved in more than 20 Lift and Shift projectssince we launched the software in April 2004.We aim to increase awareness of this solution through marketing and by establishing alliances with large system
82、s integrators,andsoftware and hardware vendors,including members of theMMA.The increasing level of interest from customers and thegrowth in the average size of projects is,we believe,evidencethat the market for mainframe migration continues to grow.We aim to increase indirect sales through packaged
83、applicationproviders,systems integrators and resellers by strengtheningexisting relationships with key industry players,such asAccenture,EDS and CSC,and by developing new relationshipswith other industry leaders.We intend to continue to 10 Micro Focus International Plc Annual report 2005FocusedOur o
84、bjective is to becomethe leading global providerof legacy and deploymentsoftware.Our common-sense approach to upgradingcustomers IT drives therealisation of this ambition.Micro Focus in retail“The migration to a Micro Focus environmentunder Windows has enabled us to re-allocatethe$150,000 we saved b
85、y slashing our ITbudget into business development.We expect to experience a dramatic rise in productivity due to the enhancedcapabilities and increased efficiencies of the system,which has already enabled us to boost customer service and create better methods to market our products.”Lo Thberge,CIO,Q
86、ubec Loisirs$1 TRILLION INVESTMENT IN LEGACY OVER LAST 30 YEARS.focus on selling software licences,and the associatedmaintenance,and to rely on our systems integrator partners for professional services.We endeavour to continue to develop innovative technologyand we will further invest in expanding t
87、he features andfunctionality of our technology and products.We intend tomaintain a leading position in our market for legacy applicationdevelopment and deployment software by co-operating with our partners to expand the coverage of our technologies and products.We intend to pursue selected technolog
88、y-based acquisitions to take advantage of the growing mainframe migration market.This will enable us to ensure that our technologies cover all thenecessary legacy and contemporary architectures,platforms andapplications.Any acquisition will be incremental and will beselected to supplement existing p
89、roducts and to expand ourcustomer base.Helping customers compete in a global economyWe help customers meet new industry regulations(such as Basel II and Sarbanes-Oxley)and add value to their businesses by enabling them to re-use and extend their legacy investmentsto new internal and external user co
90、mmunities.Our softwareincreases the agility of their systems and the effectiveness oftheir employees with minimum risk.Micro Focus Leverage and Extend reduces development costs by using available skills and platforms efficiently,and increasesagility through the use of development tools,based on Wind
91、ows,to extend legacy applications to J2EE,.NET or Web Services.Micro Focus Lift and Shift lowers hardware and software costs by migrating legacy applications to modern,open andextensible platforms.Lift and Shift is underpinned by extensive support for mainframe applications on contemporaryWindows,UN
92、IX and Linux platforms.Because of this,manyapplications can be migrated in a fraction of the time it wouldtake to build a new application or to implement a newcommercial package.We are committed to helping organisations protect theirinvestment in legacy applications.With the help of ourtechnology an
93、d over 50 active partners,more than 5,000customers have already leveraged their legacy assets.Dr Anthony Hill Chief Executive Officer3 August 2005Micro Focus International Plc Annual report 2005 11Chief Executive Officers review of operationsPartnershipsWe have developed an applicationpartner system
94、 to expand our ability to develop,market and distribute our products and to support our customers legacymodernisation.Micro Focus in partnership“Micro Focus and Microsoft have helpedus position INGENIUM to a wider range of customers without sacrificing the security or scalability we enjoy on themain
95、frame version,which many of ourcustomers continue to use.It truly is thebest of both worlds.”Blair Goulet,Senior Vice President,Strategy and Global Initiatives,SOLCORPResults of operationsOverall our results were in line with market expectations.This is anexcellent set of results reflecting the hard
96、 work of all our people.On 17 May 2005,the share capital of Micro Focus International Limited(“Operating Company”)was acquired by Micro FocusInternational Plc(“Company”)in a share-for-share exchange with theprevious shareholders of the Operating Company.On 17 May 2005,the ordinary shares of the Comp
97、any were admitted to the Official Listand to the London Stock Exchange to be traded on its main market for listed securities.TurnoverTurnover for the year ended 30 April 2005 increased by 19.3%to$150.6 million from$126.3 million for the year ended 30 April2004.Even after removing the impact of curre
98、ncy fluctuations onturnover during the year,turnover increased by 15%.This was anexcellent performance against the backdrop of the IPO.Year ended 30 April20052004$000%$000%Licence fees179,86053.064,21150.9Maintenance fees166,70544.357,98045.9Consultancy fees14,0802.74,0773.2Total turnover150,645100.
99、0126,268100.0Note:1 The directors use the split of turnover between licence fees,maintenance feesand consultancy fees in order to assess the future revenue flows from the currentportfolio of customers.The increase of 19.3%over the year was principally driven by a 24.4%increase in licence fees and a
100、15%increase inmaintenance fees.The increase in licensing turnover wasprincipally attributable to increased volumes of licence sales,12 Micro Focus International Plc Annual report 2005Chief Financial Officers reviewparticularly in North America,as a result of Micro Focus effortsto leverage its partne
101、rs distribution networks.Within licencesales,the proportion of turnover generated from sales ofdeployment software,particularly with respect to the UNIXplatform,continued to increase,partially driven by the overallindustry trend towards the use of service-oriented architecturesand Web Services frame
102、works.Contributing to these gains werelicence fees generated by a new PeopleSoft contract as of 1 May2004 and additional sales activities of resellers.However,thesegains were partially offset by the impact of reduced prices withrespect to Micro Focus development software.The increase in maintenance
103、fees was driven by increasinglicence sales during the year ended 30 April 2005,as well asmaintenance renewal fees for licences sold during the priorfinancial year.Consultancy fees during the year continued todecrease on an absolute basis and as a percentage of totalturnover,in line with the Companys
104、 overall strategy with respectto the provision of consultancy and training services in the future.Cost of salesCost of sales for the year ended 30 April 2005 decreased by23.6%to$6.3 million from$8.3 million for the year ended 30 April 2004.The decrease in cost of sales was principally driven by a re
105、duction in headcount as a result of the Groupsimplementation of its partner-centric approach towardscustomer support and a reduction in the level of consulting and training services provided during the year.This has been a significant focus for the board and Micro Focus continuedfocus on being a nea
106、rly pure software business.Costs Selling and distribution costs for the year increased by 21%to$48.1 million from$39.7 million for the year ended 30 April 2004.The principal driver of the increase was the hiring of additionalmembers of the sales force,particularly relationship managersfor the accoun
107、ts of systems integrators,in order to capitalise onLift and Shift growth opportunities.In addition to initial hiringcosts,we also paid more commissions to sales personnel duringthe year,principally driven by the growth in the volume ofdevelopment and deployment software sold.Research and development
108、 for the year increased by 4.7%to$23.4 million from$22.4 million for the year ended 30 April 2004,primarily the release of version updates for existing products aswell as ongoing development of new products and technologies.The absolute cost level of research and development is expectedto rise,but a
109、t a substantially lower rate than turnover.Administrative expenses for the year increased by 20%to$36.9 million from$30.7 million for the year ended 30 April2004.The increased costs related primarily to the Global Offerand recognition costs,and share-based compensation costs.Operating profitOperatin
110、g profit for the year ended 30 April 2005 increased by 42.3%to$35.9 million from$25.2 million for the year ended 30 April 2004.This is an excellent result and reflects thesignificant economies of scale in our cost structure againstsubstantial growth in revenues.EBITDA and adjusted EBITDAThe board,in
111、 common with most software companies,paysparticular attention to EBITDA and adjusted EBITDA as two keymeasures of performance.These are calculated as follows:Year endedYear endedApril 30 2005April 30 2004$000$000Operating profit35,92425,239Depreciation1,9621,849Amortisation3,7693,769Earnings before
112、interest tax depreciation and amortisation(EBITDA)41,65530,857Share-based compensation3,581840Non-recurring costsManagement charges1,2001,200Reorganisation costs2,302Redundancy costs562Adjusted EBITDA48,73833,459EBITDA increased by 35%and adjusted EBITDA increased by 46%over the previous year.Net in
113、terest payableThe increase in net interest payable was attributable to a$1.9 millionincrease in interest charges as a result of higher average outstandingloan balances during the year ended 30 April 2005 as compared to the prior year and a$3.4 million charge representing acceleratedamortisation of i
114、ssue costs based on the planned early repayment of a portion of the Companys long-term debt arrangements withWells Fargo Foothill,Inc.,and DB Zwirn Special Opportunities Fund.Micro Focus International Plc Annual report 2005 13Tax on profit on ordinary activitiesTax on profit on ordinary activities f
115、or the year ended 30 April2005 increased to$10.1 million from$7.8 million for the yearended 30 April 2004.The increase is principally attributable toincreased taxes due to increased profitability,both in the UnitedKingdom and abroad,during the year,partially offset by a decrease in deferred taxes.Pr
116、ofit for the financial yearProfit for the year ended 30 April 2005 increased by 23.3%to$17.5 million from$14.2 million for the year ended 30 April 2004.DividendsDividends paid by Micro Focus during the year ended 30 April2005 increased to$78.8 million from$28.5 million for the yearended 30 April 200
117、4.Under Cayman law the unrealised profit on the revaluation of an asset may be used to fund a dividend.As such the directors obtained an independent valuation of theintellectual property held in the Operating Company and itssubsidiaries;which confirmed the adequacy of the distributablereserves under
118、 Cayman laws.The board intends to adopt a progressive dividend policyreflecting the long-term earnings and cash flow potential ofMicro Focus whilst targetting an initial level of dividend coverfor the full financial year ended 30 April 2006 of approximately2.5 times on a pre-exceptional earnings bas
119、is.Cash flowFor the financial year ended 30 April 2005,the OperatingCompany generated a net cash inflow from operating activitiesof$46.4 million(2004:$31.7 million).The increase in net cashinflow was driven by the improved operating performance,specifically through increased sales of software and th
120、e effectivemanagement of our working capital.Going forward,the Company anticipates that its principal sourceof cash from operating activities will continue to be generatedby software licence and maintenance fees.The strong cash flow,together with the funds generated from theIPO($122 million),enabled
121、 us to pay off the outstanding loans.Richard Lloyd Chief Financial Officer3 August 200514 Micro Focus International Plc Annual report 2005Board of directorsKevin LoosemoreDr Anthony HillRichard LloydDavid DominikPrescott AsheDavid MaloneyJohn BrowettKevin Loosemore,46(Non-executive Chairman)*Kevin w
122、asthe Chief Operating Officer of Cable&Wireless plc from April2003 until 31 March 2005.He was previously President ofMotorola Europe,Middle East and Africa and,before that,wasChief Executive of IBM UK and a member of the IBM WorldwideManagement Committee.From 1997 to 1999 he was ManagingDirector of
123、De La Rue Card Systems.He has a degree in politicsand economics from Oxford University.Dr Anthony Hill,55(Executive director and Chief ExecutiveOfficer)Anthony became Chief Executive Officer and Presidentof the Group in August 2001.He previously filled a number of roles,including UK Country Manager,
124、European MarketingHead,Vice President of European Sales and,most recently,Senior Vice President and General Manager.Before joining theGroup in 1987,he was European Manager for software productsat Scientific Software Intercomp.Anthony has an undergraduatedegree in mathematics from Oxford University,a
125、 masters degreein pure mathematics from Newcastle-upon-Tyne University,and a doctorate in applied mathematics from Newcastle-upon-TynePolytechnic.Richard Lloyd,48(Executive director and Chief Financial Officer)Richard became the Groups Chief Financial Officer in August2001.He previously worked in a
126、variety of finance positions,including as European Controller and International Controllerdirecting business planning and financial strategies.Beforejoining the Group in 1991,he was Controller at Cullinet Softwarewhere he managed finance operations for the companys Europeand Middle East division.Ric
127、hard is a Chartered Secretary.David Dominik,49(Non-executive director)David has been a Managing Director of Golden Gate Capital since its inception in 2000.He previously spent ten years as a Managing Director at Bain Capital,where he focused on making operationally-intensive growth investments,with
128、a particular emphasis on theinformation,software,semiconductor and electronic hardwareindustries.He managed Information Partners,a specialised fundwithin Bain Capital,that focused on opportunities in theinformation services and software markets and also served onthe investment committee of Brookside
129、,Bain Capitals publicequity hedge fund.David has a juris doctor degree from HarvardLaw School(cum laude)and an AB in social studies(economicsand history)from Harvard College(magna cum laude;Phi BetaKappa).Prescott Ashe,38(Non-executive director)Prescott has been aManaging Director of Golden Gate Cap
130、ital since its inception in 2000.He was previously a principal at Bain,which he joined in 1991 and,before that,was a consultant at the global strategyconsultancy,Bain&Company.He has more than 14 yearsexperience of private equity investing.He has participated in more than 50 acquisitions/recapitalisa
131、tions with aggregatetransaction values in excess of US$5.0 billion.Prescott has a jurisdoctor degree from Stanford Law School and a bachelor ofscience degree in business administration from the University of California at Berkeley.David Maloney,49(Non-executive director)*David is a non-executive dir
132、ector of Virgin Mobile Holdings(UK)plc.His mostrecent executive role was as Chief Financial Officer of the globalhotel group Le Meridien Hotels and Resorts.Prior to that he wasChief Financial Officer of Thomson Travel Group and PreussagAirlines,and Group Finance Director of Avis Europe plc.David isa
133、 fellow of the Chartered Institute of Management Accountantsand has a degree in economics from Heriot-Watt University,Edinburgh.John Browett,41(Non-executive director)*John was appointed to the Micro Focus board on 1 July 2005.He has been OperationsDirector UK for Tesco since January 2004 and was pr
134、eviouslyresponsible,as Chief Executive Officer of T,for Tescosinternet business and for Tesco Telecoms.Before joining Tesco in 1998,he worked for The Boston Consulting Group.John has a degree in Natural Sciences from Cambridge and an MBA fromWharton Business School.*Audit committee Remuneration comm
135、ittee Nomination committeeMicro Focus International Plc Annual report 2005 15 The directors of the Company present their report and theaudited financial statements of the Company for the periodfrom incorporation on 21 May 2004 to 30 April 2005 and of the Operating Group for the year ended 30 April 2
136、005.On 17 May 2005(immediately prior to the IPO),the Companybecame the holding company of the Group by acquiring theOperating Company in a share-for-share exchange,pursuant to which the previous shareholders of the Operating Companywere issued and allotted three ordinary shares in the capital ofthe
137、Company for every one ordinary share they previously heldin the Operating Company(“Share Exchange”).On 17 May 2005,all the ordinary shares of the Company were admitted to theOfficial List and to the London Stock Exchange to be traded on its main market for listed securities.The separate financial st
138、atements have been presented toprovide shareholders with information on the performance of the Operating Group.On Admission,the Company adopted the policies and proceduresof the Operating Group.In addition the directors have reviewedthese policies and procedures in light of the requirements of a lis
139、ted company.Unless otherwise indicated the policies andprocedures described are those of the Operating Group.The information in the directors report and the remunerationreport relate primarily to the Operating Group.Principal activitiesThe Company did not trade during the period from the date ofinco
140、rporation to 30 April 2005.The principal activities of the Operating Group during the yearwere the provision of legacy application development anddeployment software for contemporary platforms.Review of business and future developmentsFor details regarding the Operating Groups activity and thefuture
141、 developments of the Company,please refer to the ChiefFinancial Officers review on pages 12 and 13.DividendsDuring the year ended 30 April 2005 the directors of theOperating Company recommended and paid dividends amountingto$78,800,000(2004:$28,450,000).Research and developmentFor information on the
142、 activities of the development teamplease refer to the technology review on pages 5 and 6.DonationsThe Company and the Operating Group made no charitable or political donations during the year(2004:nil).Post balance sheet eventsPursuant to the Share Exchange,the entire ordinary share capital of the
143、Operating Company was acquired by the Company.The consideration for this acquisition was three ordinary shares in the Company for every ordinary share previously owned byshareholders in the Operating Company.On Admission,the Company issued and allotted 51,069,602 new ordinary shares.On 20 May 2005,t
144、he net proceeds of theoffering,together with existing funds,were used to enable therepayment of all of the outstanding debt of the OperatingGroup,which stood at$110,625,000 at that date.International Financial Reporting StandardsIn June 2002,the Council of the European Union adopted aregulation requ
145、iring listed companies in its member states toprepare their consolidated financial statements in accordancewith International Financial Reporting Standards(“IFRS”).Under this regulation the Group will prepare its first financialstatements under IFRS in respect of the year ending 30 April2006.A proje
146、ct to implement the conversion from UK GAAP toIFRS has been completed and the Company will be in a positionto report its interim statement for the six-month period to 31 October 2005 in accordance with IFRS.Directors and their interestsThe directors of the Company who served during the year are as f
147、ollows:ExecutiveDr Anthony Hill(Chief Executive Officer,appointed 12 April 2005)Richard Lloyd(Chief Financial Officer,appointed 12 April 2005)Non-executiveKevin Loosemore(Chairman,appointed 4 April 2005)Prescott Ashe(appointed 12 April 2005)David Dominik(appointed 12 April 2005)David Maloney(appoint
148、ed 4 April 2005)16 Micro Focus International Plc Annual report 2005Directors report Additionally,John Browett was appointed as a non-executivedirector on 1 July 2005.Details of the interests of the directors and their families in theordinary shares of the Company and the Operating Company,as disclos
149、ed in the register of directors interests,are given in the remuneration report on pages 24 to 27.Employment policyEqual opportunitiesThe Group operates an equal opportunities policy.Fullconsideration is given to all job applicants,irrespective ofgender,age,marital status,disability,sexuality,race,co
150、lour,religion,ethnic or national origin or any other conditions notrelevant to the performance of the job,who can demonstratethat they have the necessary skills and abilities.Disabled employees With regard to existing employees and those who may becomedisabled,the Groups policy is to examine ways an
151、d means toprovide continuing employment under its existing terms andconditions and to provide training,and career development,including promotion,wherever appropriate.All employeesaccept the commitment within this policy that the Group will notallow pressure to discriminate or harassment by employee
152、s orothers acting on the Groups behalf,in respect of sex,age,maritalstatus,race,nationality,disability or religious or political beliefs.Employee involvement The Group believes it is important that employees are aware ofthe Groups business strategy and objectives,to assist employeesto focus on worki
153、ng towards these goals.Communications at thetime of key announcements,including presentations by directorsto all employees,together with briefings throughout the year,are part of the communication and consultation programme.In addition,regular meetings are held with staff and managers,both to raise
154、issues and to assist with the two-way flow ofinformation.Further education,training and developmentContinuing education,training and development are importantto ensure the future success of the Group.The Group supportsindividuals who wish to obtain appropriate further educationqualifications and rei
155、mburses tuition fees,up to a specified level.Training needs of all employees are also analysed during theannual appraisal process,at which time a training plan is agreedas part of each individuals ongoing development.Share incentive schemes The directors remain committed to the principle that select
156、edemployees should be able to participate in the Groups progressthrough share-based incentive schemes.Details of the OperatingGroups share-based incentive schemes are given in theremuneration report on pages 24 to 27.Payment of creditorsThe Group does not follow a specific payment code but has a pol
157、icy to pay its suppliers in accordance with the specific terms agreed with each supplier.The average number of dayspurchases outstanding at 30 April 2005 for the Group was 31 days(2004:34 days).Substantial shareholdingAs at 3 August 2005,the latest practicable date before publicationof this annual r
158、eport,the Company had been notified inaccordance with Sections 198 to 208 of the Companies Act 1985,of the following interests of more than 3%in the ordinary sharecapital of the Company:Ordinary sharesPercentage ofName of holderof 10 pence eachissued capital Golden Gate Capital120,140,73360.51The Go
159、ldman Sachs Group,Inc.13,232,0796.66Parallax Capital Partners LLC11,634,0005.86Dr Anthony Hill7,524,0003.79Annual General MeetingThe notice convening the Annual General Meeting of theCompany together with the explanatory notes on the proposedresolutions accompanies this annual report.The meeting wil
160、l beheld at The Lawn,22-30 Old Bath Road,Newbury,Berkshire,RG14 1QN,UK at 2.00pm on 28 September 2005.AuditorPricewaterhouseCoopers LLP have indicated their willingness tocontinue in office and a resolution that they be re-appointedwill be proposed at the Annual General Meeting.By order of the board
161、Jane Smithard Company Secretary3 August 2005Micro Focus International Plc Annual report 2005 17The Combined CodeThe ordinary shares of the Company were admitted to theOfficial List and to the London Stock Exchange to be traded on its main market for listed securities,on 17 May 2005.TheCompany is com
162、mitted to practising good corporate governanceof its affairs as part of its management of relationships with itsshareholders and other stakeholders.Compliance statementThe directors are committed to ensuring that the Company willwork towards compliance with the provisions set out in Section 1 of the
163、 Combined Code.As a private company for the whole of the year ended 30 April 2005,the provisions of the CombinedCode did not apply to the Operating Group.Furthermore,theCompany did not form part of the Group until after the ShareExchange had taken place on 17 May 2005 and did not seek to comply with
164、 the provisions of the Combined Code until itbecame a listed company on Admission.During the currentfinancial year the board will assess its practices to ensure theCompany works towards compliance with the Combined Codeand will continue to monitor any changes required to be madeto further develop an
165、d enhance its governance policies.The principles set out in the Combined Code cover four areas:the board,directors remuneration,accountability and audit and shareholder relations.With the exception of directorsremuneration(which is dealt with separately in the remunerationreport on pages 24 to 27)th
166、e following section sets out how theboard has(since Admission)applied such principles.The board The Group is controlled by the board,which is responsible forthe Groups system of corporate governance.As at 30 April 2005,the board comprised six directors:Kevin LoosemoreNon-executive ChairmanDr Anthony
167、 HillChief Executive OfficerRichard LloydChief Financial OfficerDavid MaloneyNon-executive directorPrescott AsheNon-executive directorDavid DominikNon-executive directorAdditionally,John Browett was appointed as a non-executivedirector on 1 July 2005.The role of the non-executive directors is to ens
168、ure thatindependent judgement is brought to board deliberations and decisions.The non-executive directors possess a wide rangeof skills and experience,relevant to the development of theCompany,which complement those of the executive directors.The Chairman operates in a non-executive capacity and isc
169、onsidered by the board to be independent of management and free from any business or other relationship which couldmaterially interfere with the exercise of his independentjudgement.David Maloney,the senior independent non-executive director,and John Browett,the recently appointed non-executive dire
170、ctor,are also considered by the board to beindependent.Prescott Ashe and David Dominik are not consideredby the board to be independent by virtue of their positionswithin Golden Gate Capital.All directors are required to retire and submit themselves for re-election at the Annual General Meeting with
171、in three years of their appointment and,thereafter,at least every three years.However,in accordance with the Combined Code,all directors will be subject to election by the shareholders at the first Annual General Meeting of the Company after theirappointment and accordingly the directors will be sub
172、ject to re-election at the Companys Annual General Meeting to be held on 28 September 2005.Subject to their re-election andCompanies Act provisions,the non-executive directors areappointed for specified terms.The board has agreed procedures for directors to follow if theybelieve they require indepen
173、dent professional advice in thefurtherance of their duties and these procedures allow the directorsto take such advice at the Companys expense.In addition,allthe directors have direct access to the advice and services of theCompany Secretary.The Company Secretary is accountable to theboard through t
174、he Chairman on governance matters.It is theresponsibility of the Company Secretary to ensure that boardprocedures are followed and all rules and regulations are compliedwith.Under the direction of the Chairman,the Company Secretarysresponsibilities include facilitating induction and professionaldeve
175、lopment and ensuring the smooth flow of information withinthe board and its committees,and between non-executive directorsand senior management.Any new director receives a comprehensive,formal and tailored induction into the Companys operations.Appropriate training is provided to new directors and i
176、s alsoavailable to other directors as required.The Company hasarranged directors and officers insurance on behalf of all the directors.18 Micro Focus International Plc Annual report 2005Corporate governanceThe terms of reference of the Chairman and Chief ExecutiveOfficer have been agreed with the bo
177、ard and,in accordancewith best practice,their roles remain separate.As part of its leadership and control of the Company,the boardhas agreed a list of items that are specifically reserved for itsconsideration.These include business strategy,financingarrangements,material acquisitions and divestments
178、,approval of the annual budget,major capital expenditure projects,riskmanagement,treasury policies and establishing and monitoringinternal controls.At each meeting,the board reviews progress of the Group towards its objectives,particularly in respect ofresearch and development projects,and monitors
179、financialprogress against budget.In the year to 30 April 2006,the board will meet on a regularbasis approximately every two months,with additional meetingswhen circumstances and business dictate.A schedule of meetingshas been established.All directors receive an agenda and boardpapers in advance of
180、meetings to help them make an effectivecontribution at the meetings.In addition,the executive directors ensure regular informal contactis maintained with non-executive directors.The board makes fulluse of appropriate technology as a means of updating andinforming all its members.While the board reta
181、ins overall responsibility for,and control of,the Company,day-to-day management of the business is conductedby the executive directors.Review of the Groups principal businessactivities is the responsibility of the senior management(comprisingthe executive directors,together with executives responsib
182、le formarketing,sales,HR and research)who meet fortnightly.Due to the short period of time since Admission,the board hasnot undertaken a formal and rigorous process for the evaluationof its own performance and that of its committees and individualdirectors(including the Chairman),as required by Comb
183、inedCode provision A6.1.However,this process is being establishedand,during the course of the current year,will take the form ofquestionnaires and personal interviews with the Chairman.It is intended that the Chairman will hold meetings with non-executive directors without the presence of executive
184、directors as appropriate.Board committeesIn accordance with best practice,the Company has establishedaudit,nomination and remuneration committees,with writtenterms of reference for each,that deal with their respectiveauthorities and duties.The full terms of reference of all thecommittees are availab
185、le from the Company Secretary.TheCompany is aware that the Chairman is not regarded asindependent for purposes of the Combined Code.It is plannedthat Kevin Loosemore will step down from the remunerationand audit committees when other independent non-executivesare appointed to such committees.Audit c
186、ommitteeThe audit committee is comprised entirely of non-executivedirectors of the Company.It is chaired by David Maloney,who the board considers has recent and relevant financial experience.The other members are Kevin Loosemore and John Browett.The audit committee has met twice since Admission.The
187、auditcommittee is responsible for reviewing the Groups annual accountsand interim reports prior to their submission for approval to thefull board.This committee will also monitor the Groups accountingpolicies,internal financial control systems and financial reportingprocedures.The audit committee pr
188、ovides a forum through whichthe Groups external auditor reports to the board.The auditor willbe invited to attend meetings of the committee on a regular basisand will have the opportunity to meet privately with committeemembers in the absence of executive management.The auditcommittee oversees the r
189、elationship with the auditor,includingthe independence and objectivity of the auditor(taking intoaccount UK professional and regulatory requirements and therelationship with the audit firm as a whole)and the considerationof audit fees and fees for other non-audit work.In addition,the audit committee
190、 develops and recommends to the board a policy designed to ensure that the auditors objectivity and independence is not compromised by its undertakinginappropriate non-audit work.All significant non-audit workcommissioned from the external auditor requires auditcommittee approval.As at 30 April 2005
191、 there was no internal audit function.Theaudit committee will discuss the ongoing need for an internalaudit function and,if established,will be responsible foragreeing the annual internal audit plan.Micro Focus International Plc Annual report 2005 19It is intended that the audit committee will meet
192、at least four times during the forthcoming year(and,additionally as appropriate),and a schedule of meetings for the year has been established.The audit committees terms of reference includes a process foremployees of the Company to raise in confidence concerns aboutpossible impropriety in matters of
193、 financial reporting or othermatters.The terms of reference of the audit committee include,amongother things,the following responsibilities:lTo ensure that the interests of shareholders are properlyprotected in relation to financial reporting and internal control;lTo monitor the integrity of the fin
194、ancial statements of theCompany,including its annual and interim reports,preliminaryresults announcements and any other announcement relating to its financial performance;lTo review the consistency of,and changes to,accountingpolicies;lTo keep under review the effectiveness of the Companysinternal c
195、ontrols and risk management systems;lTo review the Companys arrangements for its employees to raise concerns,in confidence,about possible wrongdoing in financial reporting or other matters;lTo monitor and review the need for,and the effectiveness of,the Companys internal audit function in the contex
196、t of theCompanys overall risk management system;andlTo consider and make recommendations to the board inrelation to the appointment,re-appointment and removal of the Companys external auditor.Nomination committee The nomination committee is comprised entirely of non-executivedirectors of the Company
197、 and has met once since Admission.It is chaired by Kevin Loosemore and the other members areDavid Maloney and David Dominik.The nomination committeewill be responsible to the full board for proposing candidates to the board,having regard to the balance and structure of the board.In appropriate cases
198、,recruitment consultants will also assist in the process.The nomination committee will meet at least twice during the forthcoming year.The terms of reference of the nomination committee include,among other things,the following responsibilities:lTo review the structure,size and composition of the boa
199、rdand make recommendations to the board with regard to anychanges;lTo identify and nominate,for the approval of the board,candidates to fill board vacancies as and when they arise;lTo give full consideration to succession planning fordirectors and other senior executives;andlTo keep under review the
200、 leadership needs of the Group,both executive and non-executive,with a view to ensuring thecontinued ability of the organisation to compete effectively inthe market place.Remuneration committeeThe remuneration committee is comprised entirely of non-executive directors of the Company.It is chaired by
201、 KevinLoosemore and the other members are David Maloney and John Browett.The remuneration committee has met once sinceAdmission.The remuneration committee is responsible forreviewing remuneration arrangements for members of the board and for providing general guidance on aspects ofremuneration polic
202、y throughout the Group.The remunerationcommittee will meet at least twice during the forthcoming year.The terms of reference of the remuneration committee include,among other things,the following responsibilities:lTo determine and agree with the board the framework orbroad policy for the remuneratio
203、n of the Companys Chief ExecutiveOfficer,Chairman,the executive directors,the Company Secretaryand other members of the executive management(as appointedfrom time to time);lTo approve the design of salaries for senior managers,anddetermine targets for any performance-related pay schemesoperated by t
204、he Company,and approve the total annualpayments;20 Micro Focus International Plc Annual report 2005Corporate governancelTo review the ongoing appropriateness and relevance of the remuneration policy;lTo review the design of all share incentive plans forapproval by the board and shareholders;lTo dete
205、rmine the policy for,and scope of,pensionarrangements for each executive director and other seniorexecutives;lTo determine the total individual remuneration package of each executive director and other senior executives includingbonuses,incentive payments and share options or other shareawards;andlT
206、o oversee any major changes in employee benefitsstructures throughout the Company or Group.Accountability and auditThe board is responsible for the preparation of financial statementsthat present a balanced assessment of the Groups financial positionand prospects.This responsibility is administered
207、primarily by theaudit committee,the terms of reference for which are referredto above.Internal controlsThe board is ultimately responsible for establishing and monitoringinternal control systems throughout the Group and reviewingtheir effectiveness.It recognises that rigorous systems of internalcont
208、rol are critical to the Groups achievement of its businessobjectives,that those systems are designed to manage ratherthan eliminate risk and that they can only provide reasonable andnot absolute assurance against material misstatement or loss.An ongoing process for identifying,evaluating and managin
209、g thesignificant risks faced by the Group is currently being implemented.The effectiveness of the Groups internal control systems will alsobe reviewed by the board during the year.The audit committeesterms of reference include the review of the Groups internalfinancial control systems.The audit comm
210、ittee will be requiredto report and make recommendations to the board in this area.Human resourcesThe Group endeavours to appoint employees with appropriateskills,knowledge and experience for the roles they undertake.The Group has a range of policies which are aimed at retainingand providing incenti
211、ves for key staff.Objectives are set fordepartments and employees that are derived from the Groupsbusiness objectives.The Group has a clear and well-understoodorganisational structure and each employee knows his or her lineof accountability.AnnouncementsAll major announcements are approved by the Ch
212、airman,theexecutive directors and a panel of senior executive managementand then circulated to the board prior to issue.The Group alsohas internal and external checks to guard against unauthorisedrelease of information.FinancialA comprehensive budgeting system allows managers to submitdetailed budge
213、ts which are reviewed and amended by executivedirectors prior to submission to the board for approval.InsuranceThe Group has reviewed its portfolio of insurance policies withits insurance broker to ensure that the policies are appropriateto the Groups activities and exposures.Attendance at meetingsT
214、he number of board meetings and committee meetingsattended by each director in the period following Admission wasas follows:AuditRemunerationNominationBoardcommitteecommitteecommitteeHeld AttendedHeld AttendedHeld AttendedHeld AttendedKevin Loosemore44221111Dr Anthony Hill44Richard Lloyd44David Malo
215、ney43221111Prescott Ashe42David Dominik4311John Browett*41211*John Browett was appointed on 1 July 2005 and was thereforeonly available to attend two board meetings and one meeting ofthe audit committee.Micro Focus International Plc Annual report 2005 21Shareholder relations The Company values the v
216、iews of shareholders and recognisestheir interests in the Groups strategy and performance.TheCompany will report formally to shareholders twice a year,around July(preliminary announcement of annual results)andDecember(interim statement).The annual report will usually bemailed to shareholders in Augu
217、st.Separate announcements ofall material events will be made as necessary.Regular communications will be maintained with institutionalshareholders and presentations will be given to shareholderswhen the half-year and full-year financial results are announced.In addition to the Chief Executive Office
218、r and Chief FinancialOfficer,who have regular contact with investors,KevinLoosemore,Chairman,and David Maloney,Senior IndependentDirector,are available to meet with shareholders as and whenrequired.The whole board is kept up to date at its regularmeetings with the views of shareholders and analysts.
219、Externalanalysts reports are also circulated to directors.The Companys website()provides an overviewof the business including its strategy,products and objectives.All Group announcements will be available on the website,andnew announcements will be published without delay.The termsof reference of ea
220、ch of the boards three committees and otherimportant corporate governance documents will be availablefrom the Company Secretary.Additionally,the Groups corporatecommunications department and Chief Financial Officer provide a focal point for shareholders enquiries and dialoguethroughout the year.Annu
221、al General MeetingThe Companys first Annual General Meeting,which will be held on 28 September 2005,will provide an opportunity for the board to meet with all shareholders,and their participation is encouraged.At the meeting,in addition to the statutory business,the board will adopt a policy of hold
222、ing business presentationsto ensure that an up-to-date picture of the Groups activities isgiven,following which the board is available for questions fromshareholders.In accordance with the Combined Code recommendations,the Company will count all proxy votes and on each resolution,which is voted on a
223、 show of hands,the Company will indicate the level of proxies lodged,and number of proxy votes for and against such resolution and the number of abstentions.A resolution will be proposed for each substantive issue and the Chairs of the audit,remuneration,and nominationcommittees will attend to answe
224、r questions.22 Micro Focus International Plc Annual report 2005Corporate governanceThe board is committed to running the Company in accordancewith best practice in corporate governance.This commitmentincludes recognition by the Company of the importance oftaking into account its corporate social res
225、ponsibilities(“CSR”)in operating the business.In this context,Micro Focus seeks to integrate CSR considerations relating particularly to social,ethical and health,safety and environment(“HS&E”)issues in its day-to-day operations.The board acknowledges its duty to ensure the Company conducts its acti
226、vities responsibly andwith proper regard for all its stakeholders including employees,shareholders,business partners,suppliers and the localcommunities.In exercising its corporate social responsibility,Micro Focus seeksto ensure that:lThe board takes account of the significance of social,ethicaland
227、HS&E issues;lBusiness practices are managed ethically;lThe business is focused on delivering value to stakeholders;lExisting legislation,regulations and guidelines are adheredto as a minimum;lEmployees are recognised as key to the business withindividual skills and experience being valued and develo
228、ped;andlHealth,safety and environmental issues are treated ascritical areas of concern for the business.SocialThe health,welfare and development of the Companysemployees remain a priority.With the intent of attracting,recruiting,developing and retaining key employees,Micro Focusmaintains a number of
229、 policies and procedures for the benefit of its employees,for example an equal opportunities policyapproved by Acas.Employee development is encouragedthrough appropriate training.Regular and open communication between management andemployees is viewed as essential for motivating a highlyeducated wor
230、kforce.Briefings are held regularly to provideupdates on Company business and to provide opportunity forquestions and feedback.Review meetings are also held regularlywithin each department.The Company maintains both anInternet website which is freely accessible and an intranet siteaccessible to all
231、employees.EthicalThe Company manages its resources prudently to ensureappropriate investment is made in its research and developmentprogrammes and its commercialisation activities.Up-to-datesecurity systems are utilised to protect the Companys IT systems.The Companys intellectual property is protect
232、ed through anappropriate patenting programme.Close attention is paid tomaintaining relationships with key stakeholders includingbusiness partners,suppliers and shareholders.EnvironmentMicro Focus complies with all local environmental legislation.Health safety and environmentThe Company has well-deve
233、loped health and safety policies andprocedures,safeguarding staff,contractors and visitors,and itcomplies with current legislation and best practice.Micro Focus International Plc Annual report 2005 23Corporate social responsibilityOn 17 May 2005,the Company became the holding company of the Group by
234、 acquiring the Operating Company in a share-for-share exchange,pursuant to which the previous shareholdersof the Operating Company were issued and allotted threeordinary shares in the capital of the Company for every oneshare held in the Operating Company(“Share Exchange”).On 17 May 2005 all the ord
235、inary shares of the Company wereadmitted on to the Official List and to the London StockExchange to be traded on its main market for listed securities.This remuneration report provides information on theremuneration of the directors for their services provided to the Operating Group for the year end
236、ed 30 April 2005 withcomparative figures provided for the year ended 30 April 2004.As a private entity the Operating Group did not seek to complywith the Listing Rules,Schedule 7A of the Companies Act 1985,or the Combined Code.This remuneration report providesinformation on the steps already taken a
237、nd proposed actions,to ensure that the Company complies as a listed company withsuch requirements.In accordance with the Companies Act 1985,a resolution toapprove the remuneration report will be proposed at theCompanys Annual General Meeting on 28 September 2005.Details of the resolution may be foun
238、d in the notice of meetingaccompanying this annual report.The vote will be advisory andwill be considered carefully by the members of the remunerationcommittee in the formulation and approval of the Companysfuture remuneration policies.The remuneration committeePrior to Admission the Company formed
239、the remunerationcommittee(“committee”),which is made up entirely of non-executive directors of the Company.It will meet at least twice during the coming financial year.Kevin Loosemore is the Chairman of the committee,with David Maloney and John Browett its other members.The Company is aware that the
240、Chairman is not regarded as independent for the purposes of theCombined Code.It is planned that Kevin Loosemore,the Chairman,will step down from the committee when other independent non-executive directors are appointed to it.Where appropriate thecommittee will invite the views of the Chief Executiv
241、e Officerand the Director of Human Resources,as well as of externalremuneration consultants.Following Admission the committee has been materially assistedby New Bridge Street Consultants in providing remunerationadvice,by Mr Simon Steen of Steen and Co in providing legaladvice with respect to direct
242、ors service agreements,by Ms JaneSmithard,Company Secretary and Legal Counsel,and byLinklaters,solicitors,who are external advisers,in providinggeneral legal advice and who were already in place as adviserswhen the remuneration committee was formed.Remuneration policyPreviously the remuneration of e
243、xecutive directors was establishedby the non-executive directors of the Operating Company;themanagement team set the policy for employees,including senioremployees;and the board of the Operating Company approvedthis remuneration as part of the annual budget exercise.TheCompanys policy on the remuner
244、ation of executive directors andtheir direct reports will now be established by the committee andapproved by the board.The individual remuneration packages of each executive director will be determined by the committee.No executive director or employee will participate in discussionsrelating to the
245、setting of their own remuneration.The overall budget for the remuneration of employees willcontinue to be approved by the board as part of the annualbudget-setting exercise.The objective of the Groups remuneration policies is that allemployees,including executive directors,should receive appropriate
246、remuneration for their performance,responsibility,skills andexperience.Remuneration packages enable the Group to attractand retain key employees by ensuring they are remuneratedappropriately and competitively and that they are motivated toachieve the highest level of Group performance in line with t
247、hebest interests of shareholders.It is intended that an appropriate and significant proportion ofremuneration will be performance related(see details below).Performance conditions for performance-related bonuses andlong-term incentives will represent challenging growth targetswhich are designed to i
248、ncrease shareholder value.The committeewill review the performance conditions used to ensure that theperformance conditions are demanding and appropriate.24 Micro Focus International Plc Annual report 2005Remuneration reportIt is the boards intention to award share incentives to executivedirectors a
249、nd selected employees as appropriate to reward andencourage performance.These share incentives will be grantedat the discretion of the committee.Share options granted underpre-IPO share option plans will be fully vested by September2007.There are no options currently held by executive directors.Non-
250、executive directors do not participate in the Groups shareincentives.Policies on remuneration take account of the pay structure andemployment conditions within the Group and also the industrysector.To determine the elements and level of remunerationappropriate to each executive director the committe
251、e consideredbenchmark remuneration data for selected comparabletechnology companiesDirectors service contractsThe Groups policy in entering into service contracts with executivedirectors is to enable the recruitment of high-quality executivesand to obtain protection from their sudden departure wheth
252、er ornot to competitor companies.In addition,service contracts are animportant element in maintaining maximum protection for theGroups intellectual property rights and other commerciallysensitive information.The executive directors are employed subject to service contracts.The service contracts of e
253、xecutive directors Dr Anthony Hill andRichard Lloyd,with the Company,were agreed on 3 August 2005and came into immediate effect.The service contract with Dr Anthony Hill provides for a base annual salary of 220,000and requires the Company to give 12 months notice oftermination.The service contract w
254、ith Richard Lloyd provides for a base annual salary of 125,000 and requires six monthsnotice of termination from the Company.The executive directorsare required to give six months notice of the termination of theiremployment should they wish to leave.If an executive director isguilty of a material b
255、reach of his service contract or commits anycrime or act of gross misconduct or dishonesty,the Company isentitled summarily to terminate the service contract withoutnotice and without payment in lieu of notice or othercompensation.Such a contract term cannot,however,as a ruleof law,affect the execut
256、ive directors statutory rights such asrights in respect of unfair dismissal.Should an executive director be dismissed other than asdescribed above,the Company may pay him,in lieu of notice,a sum equal to his basic pay over his notice period.At the discretion of the committee having regard to theComp
257、anys performance at the time of dismissal,the committeemay in addition pay all or a proportion of the bonus whichwould,but for the dismissal,have become payable during thenotice period.The Companys policy on the duration of suchcontracts with executive directors is explained above.Theexecutive direc
258、tors do not currently serve as non-executivedirectors elsewhere and cannot do so without the consent of the board.Non-executive directorsNon-executive directors are appointed by letter of appointmentfor periods not exceeding three years.They receive fees forservices as members of the board and its c
259、ommittees.The levelof fees is determined by the board after taking into accountappropriate advice.The fees payable to non-executive directors for 2005-06 are asfollows:Kevin Loosemore125,000 paDavid Maloney60,000 paJohn Browett30,000 paDavid DominiknilPrescott AshenilKevin Loosemore and David Malone
260、y signed appointment letterswith the Company which became effective on 4 April 2005.Prescott Ashe and David Dominik are non-independent directorsof the Operating Company and signed appointment letters with the Company on 29 April 2005 which became effectiveimmediately.John Browett signed an appointm
261、ent letter witheffect from 1 July 2005.All non-executive directors haveappointments for a fixed term of three years.All of these appointments are subject to the directors being re-elected under the rotation provisions in the Companys Articlesof Association,and subject to Companies Act provisions.Eac
262、hnon-executive director still serving at the end of his term willhave his appointment reviewed by the board and a further termof office may be agreed.Where a non-executive director doesnot serve until the end of his term,the policy is to pay the feesdue pro rata to the date of cessation.Micro Focus
263、International Plc Annual report 2005 25Remuneration package(audited)Executive directors remuneration currently comprises annualsalary,a performance-related bonus,a long-term incentive in the form of share incentives,pension contributions and otherbenefits.Annual salaryThe board will approve the over
264、all budget for employee salaryincreases and the committee will agree the specific increases for executive directors and certain other senior members of the management team.In determining appropriate salary levels for each executive director and senior employee,the committeewill consider both the nat
265、ure and the status of the Companysoperations and the responsibilities,skills,experience andperformance of the executive director or employee.Thecommittee will compare the Groups remuneration packages for its directors and employees with those for directors andemployees of similar seniority in compan
266、ies whose activities are comparable with the Group and with which it competes for staff.The committee has used New Bridge Street Consultantsin making these comparisons.Performance-related bonusThe executive directors and all other employees,except for salesstaff,participate in a performance-related
267、bonus scheme.Thelevel of commission for sales staff is based on a percentage ofrevenue generated,with the percentages increasing as revenueexceeds target levels.The level of bonus for eligible employees is based on overall Group performance in meeting its primaryfinancial objectives in worldwide ear
268、nings before interest,tax,depreciation and amortisation(“EBITDA”)and revenue goals.The percentages increase as revenue and profit exceed target.Going forward,the remuneration committee will place asignificant proportion of executive pay“at risk”,so that it is closelylinked to the interests of shareh
269、olders.The committee will ensurethat challenging and clearly assessable targets are set for executivedirectors.Details of bonuses paid to executive directors by theOperating Group in the year to 30 April 2005 are detailed in the remuneration tables below.Bonus levels range between 5%and 40%for all o
270、ther employees based on their role and marketneed.Bonuses are awarded wholly in cash.In respect of the year 2005-06 there will be a cap on bonusespayable to executive directors of 150%of base salary.Long-term incentivesThe board believes that long-term incentive schemes areimportant in retaining and
271、 recruiting high-calibre individualsand ensuring that the performance of executives is focused oncreating long-term shareholder value whilst allowing the Groupscash reserves to be conserved.Further awards of options or freeshares will be considered by the committee on an ongoing basis.Therefore the
272、Company adopted the Micro Focus InternationalPlc Incentive Plan 2005(the“Plan”)prior to Admission.This isintended to provide a flexible framework to allow the Companyto make awards of free shares in the form of nil-cost options,conditional awards or forfeitable shares,or to grant marketvalue options
273、(“Awards”).It is intended that the Plan will beoperated this year.The Awards to be granted this year will be subject to anearnings per share performance condition designed to drivegrowth over three financial years.The targets for Awards to bemade during this financial year have not yet been set by t
274、heremuneration committee but will be challenging and stretching.The maximum aggregate value of Awards that can be granted to any individual in any financial year will not exceed two timeshis or her basic salary.For these purposes,the value of theAwards is equal to the market value of free shares at
275、the time ofaward or,in the case of market value options,50%of themarket value of the shares under option at the time of award.This limit may be exceeded only where the committeedetermines that there are exceptional circumstances.Pension contributionsAll employees including executive directors are in
276、vited toparticipate in a Group Personal Pension Plan.All major schemesare money purchase in nature and,aside from Japan,have no defined benefits.The level of the Groups contribution varies by country.The Group has no obligation to the pension schemebeyond the payment of contributions.Pension benefit
277、s include death in service.There is no pension fora spouse.Other benefitsBenefits in kind for executive directors can include the provisionof a company car,fuel,life insurance and medical benefits.26 Micro Focus International Plc Annual report 2005Remuneration reportDetailed emoluments of the direct
278、ors of the Operating Group(audited)Directors include Richard Lloyd who,whilst not a director of the Operating Company during the year,will be disclosed as a director of the Company in future periods.The aggregateremuneration paid to directors was as follows:2005BaseBenefits2004salaryBonusin kind Pen
279、sionsTotalTotal000000000000000000Executive directorsDr Anthony Hill196209119425372Richard Lloyd10243951591482982522014584520Neither of the non-independent non-executive directors of theOperating Company(David Dominik and Prescott Ashe)receivedany emoluments during the year ended 30 April 2005(2004:n
280、il).David Dominik and Prescott Ashe are directors of Golden GateCapital.Details of transactions with related parties are set out innote 26 of the financial statements of the Operating Company.Gains made by directors of the Operating Group on shares(audited)On 28 October 2004 Dr Anthony Hill was give
281、n the opportunity to purchase 200,000 class A ordinary shares in the OperatingCompany at a price of$1.67 per share.These shares vestedimmediately and became immediately beneficially held.Thevalue(as calculated under FRS 20)on 28 October 2004 was$8.98,representing an aggregate gain of$1,407,000.There
282、 were noother shares or share options issued to directors in the yearended 30 April 2005(2004:nil).Directors interests in share capital of the Operating Company(audited)The directors owned the following shares in the OperatingCompany as at 30 April 2005.These interests were all beneficiallyheld.On 1
283、7 May 2005,prior to the Admission,each ordinaryshare in the Operating Company was exchanged for three sharesin the Company pursuant to the Share Exchange.Dr Anthony HillRichard LloydClass of sharesABCABAt 1 May 2004 and 30 April 20051,800,000400,000308,000160,00040,000As at 3 August 2005 the directo
284、rs owned the following ordinaryshares in the Company:DirectorNumber of ordinary sharesKevin Loosemore76,923David Maloney7,692Dr Anthony Hill7,524,000Richard Lloyd600,000David Dominik0Prescott Ashe0John Browett5,000No director was granted,owned or exercised any options duringthe year ended 30 April 2
285、005(2004:nil)and have not beengranted any options up to the date of this report.There have been no changes in the directors interests between 1 May 2005 and 3 August 2005 except for the purchase of 5,000ordinary shares by John Browett.Performance graphIn accordance with the Companys aim of complying
286、 withSchedule 7A of the Companies Act 1985,the Company notes the requirement for the remuneration report to contain aperformance graph.For the reasons set out in the introductionto this report,such a graph is not relevant at this stage.A performance graph will be included within remunerationreports
287、for the following years.Share option schemes(audited)Details of share option schemes are given in note 24 of thefinancial statements of the Operating Company.On behalf of the boardKevin LoosemoreChairman of the remuneration committee3 August 2005Micro Focus International Plc Annual report 2005 27The
288、 directors are required by the Companies Act 1985 to preparefinancial statements for each financial year which give a true andfair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period.The directors confirm that in preparing the financial st
289、atementsthe Company and the Group have used appropriate accountingpolicies,consistently applied and supported by reasonable andprudent judgements and estimates,and that all accountingstandards which they consider to be applicable have beenfollowed subject to any explanations and material departuresd
290、isclosed in the notes to the financial statements.The directors further confirm that they consider the Group to be a going concern and the financial statements have been prepared on that basis.The directors have responsibility for ensuring that the Companyand the Group keep proper accounting records
291、 which disclose,with reasonable accuracy at any time,the financial position of the Company and the Group and which enable them to ensurethat the financial statements comply with the Companies Act1985.The directors have responsibility for taking such steps as are reasonably open to them to safeguard
292、the assets of theCompany and the Group and to prevent and detect fraud and other irregularities.The directors are responsible for the maintenance and integrity of the Groups website and acknowledge that informationpublished on the Internet is accessible in countries with differentlegal requirements
293、relating to the preparation and disseminationof financial statements.Going concernAfter reviewing the Companys and the Groups budget for the next financial year and other longer-term plans,the directors are satisfied that,at the time of approving the financialstatements,the Group has adequate resour
294、ces to continue inoperational existence for the foreseeable future and for a periodof not less than 12 months from the date of this annual report.Therefore,the financial statements have been prepared on a going concern basis.By order of the boardJane Smithard Company Secretary3 August 200528 Micro F
295、ocus International Plc Annual report 2005Directors responsibilitiesWe have audited the financial statements which comprise thebalance sheet,the cash flow statement and the related noteswhich have been prepared under the historical cost conventionand the accounting policies set out in the statement o
296、f accountingpolicies.We have also audited the disclosures required by part 3of Schedule 7A to the Companies Act 1985 contained in theremuneration report(“auditable part”).Respective responsibilities of directors and auditorsThe directors responsibilities for preparing the annual reportand the financ
297、ial statements in accordance with applicableUnited Kingdom law and accounting standards are set out in the statement of directors responsibilities.The directors are also responsible for preparing the remuneration report.Our responsibility is to audit the financial statements and theauditable part of
298、 the remuneration report in accordance withrelevant legal and regulatory requirements and United KingdomAuditing Standards issued by the Auditing Practices Board.This report,including the opinion,has been prepared for andonly for the Companys members as a body in accordance withSection 235 of the Co
299、mpanies Act 1985 and for no otherpurpose.We do not,in giving this opinion,accept or assumeresponsibility for any other purpose or to any other person towhom this report is shown or into whose hands it may comesave where expressly agreed by our prior consent in writing.We report to you our opinion as
300、 to whether the financialstatements give a true and fair view and whether the financialstatements and the auditable part of the remuneration reporthave been properly prepared in accordance with the CompaniesAct 1985.We also report to you if,in our opinion,the directorsreport is not consistent with t
301、he financial statements,if theCompany has not kept proper accounting records,if we have not received all the information and explanations we require forour audit,or if information specified by law regarding directorsremuneration and transactions is not disclosed.We read the other information contain
302、ed in the annual reportand consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies withthe financial statements.The other information comprises onlythe Chairmans statement,Chief Financial Officers review,thedirectors report and the corpor
303、ate governance statement andthe unaudited parts of the remuneration report.We also,at the request of the directors(because the Companyapplies the Listing Rules as if it had been a listed company at the end of the year),review whether the corporate governancestatement reflects the Companys compliance
304、 with the nineprovisions of the 2003 FRC Combined Code specified for our reviewby the Listing Rules of the Financial Services Authority,and wereport if it does not.We are not required to consider whether theboards statements on internal control cover all risks and controls,or form an opinion on the
305、effectiveness of the Companys corporategovernance procedures or its risk and control procedures.Basis of audit opinionWe conducted our audit in accordance with auditing standardsissued by the Auditing Practices Board.An audit includesexamination,on a test basis,of evidence relevant to the amountsand
306、 disclosures in the financial statements and the auditablepart of the remuneration report.It also includes an assessmentof the significant estimates and judgements made by thedirectors in the preparation of the financial statements,and ofwhether the accounting policies are appropriate to the Company
307、scircumstances,consistently applied and adequately disclosed.We planned and performed our audit so as to obtain all theinformation and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonableassurance that the financial statements and the auditabl
308、e part of the remuneration report are free from material misstatement,whether caused by fraud or other irregularity or error.Informing our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.OpinionIn our opinion:lthe financial statements giv
309、e a true and fair view of thestate of affairs of the Company at 30 April 2005 and of the cashflows of the Company for the period then ended;lthe financial statements have been properly prepared inaccordance with the Companies Act 1985;andlthose parts of the remuneration report required by part 3of S
310、chedule 7A to the Companies Act 1985 have been properlyprepared in accordance with the Companies Act 1985.PricewaterhouseCoopers LLPChartered Accountants and Registered AuditorsReading3 August 2005Micro Focus International Plc Annual report 2005 29Independent auditors report to the members of Micro
311、Focus International PlcMicro Focus International Plc2005Notes$Current assetsCash 2Debtors295,354Net current assets95,356Total assets less current liabilities95,356Net assets95,356Capital and reservesCalled up share capital395,356Equity shareholders funds495,356The financial statements set out on pag
312、es 30 to 34 were approved by the board on 3 August 2005 and were signed on its behalf by:Dr Anthony Hill DirectorRichard Lloyd Director30 Micro Focus International Plc Annual report 2005Balance sheetas at 30 April 2005Micro Focus International PlcCash flow statementfor the period ended 30 April 2005
313、Micro Focus International Plc Annual report 2005 31Period from21 May 2004to30 April 2005$FinancingIssue of ordinary share capital2Net cash inflow from financing2Increase in net cash2Cash at 30 April 20052Micro Focus International PlcMicro Focus International PlcNotes to the financial statements32 Mi
314、cro Focus International Plc Annual report 20051 Principal accounting policiesThe financial statements have been prepared under the historical cost convention,the accounting policies set out below and inaccordance with accounting principles generally accepted in the UK.Micro Focus International Plc(“
315、Company”)acquired the entire share capital of Micro Focus International Limited(“OperatingCompany”)on 17 May 2005.The Operating Company has previously adopted US Dollars as its reporting currency.The Company hasaccordingly also adopted US Dollars as its reporting currency.The Company did not trade d
316、uring the period.CostsThe costs incurred by the Company in respect of the Admission to the Official List of the FSA will be charged to the share premiumaccount arising on the proposed issue of shares in connection therewith.Such costs were borne by the Operating Company and wereonly charged to the C
317、ompany upon Admission.2 Debtors30 April2005$Other debtors95,354Other debtors represent an undertaking to pay for redeemable preference shares,as is permitted under the provisions of theCompanies Act.Micro Focus International PlcMicro Focus International Plc Annual report 2005 333 Called up share cap
318、ital30 April2005$Authorised2,499,500,000 ordinary shares of 0.10 each476,674,64650,000 redeemable preference shares of 1 each95,354Total476,770,00030 April2005$Allotted,called up and fully paidOne ordinary share of 0.1050,000 redeemable preference shares of 1 each95,35695,356The Company was incorpor
319、ated on 21 May 2004 with an authorised share capital of 100 ordinary shares of 1 each.On this date oneordinary share was issued for a consideration of 1.On 4 April 2005,the Company sub-divided the share capital into 1,000 ordinary shares of 0.10 each.On this date,the Company alsoauthorised the creat
320、ion of redeemable preference shares and authorised and allotted 50,000 redeemable preference shares of 1each.The subscription took the form of an undertaking to pay the Company,which under Section 738(2)of the Companies Act isdeemed to be fully paid.On 27 April 2005 the Company increased the authori
321、sed ordinary share capital from 1,000 ordinary shares to 2,499,500,000 ordinaryshares of 0.10 each.On 17 May 2005,the Company acquired the entire issued share capital of the Operating Company by way of a share-for-shareexchange,pursuant to which the previous shareholders of the Operating Company wer
322、e issued and allotted three ordinary shares inthe capital of the Company for every one ordinary share they previously held in the Operating Company.On 17 May 2005,51,069,062new ordinary shares in the capital of the Company were issued to institutional investors as part of the IPO and these shares,as
323、 well asthe Companys existing ordinary shares,were admitted to the Official List and to the London Stock Exchange to be traded on its mainmarket for listed securities.The 50,000 redeemable preference shares in issue immediately before the IPO were redeemed and thensub-divided and reclassified into o
324、rdinary shares of 10 pence each by the Company after the IPO.4 Reconciliation of movements in shareholders funds30 April2005$At 21 May 2004Issue of share capital95,356At 30 April 200595,3565 Post balance sheet eventsOn 17 May 2005(immediately prior to Admission),the Company acquired the entire issue
325、d share capital of the Operating Companyby way of a share-for-share exchange,pursuant to which the previous shareholders of the Operating Company were issued andallotted three ordinary shares in the capital of the Company for every one ordinary share they previously held in the OperatingCompany.On 1
326、7 May 2005,51,069,062 new ordinary shares in the capital of the Company were issued to institutional investors aspart of the IPO and these shares,as well as the Companys existing ordinary shares,were admitted to the Official List and to theLondon Stock Exchange to be traded on its main market for li
327、sted securities.The 50,000 redeemable preference shares in issueimmediately before the IPO were redeemed and then sub-divided and reclassified into ordinary shares of 10 pence each by theCompany after the IPO.34 Micro Focus International Plc Annual report 2005Notes to the financial statementsMicro F
328、ocus International PlcWe have audited the non-statutory consolidated financial statements which comprise the profit and loss account,the statement oftotal recognised gains and losses,the balance sheet,the cash flow statement and the related notes which have been prepared underthe historical cost con
329、vention and the accounting policies set out on pages 41 to 43.Respective responsibilities of directors and auditorsThe directors responsibilities for preparing the non-statutory financial statements in accordance with applicable United Kingdom lawand accounting standards are set out in the statement
330、 of directors responsibilities.Our responsibility is to audit the non-statutory financial statements in accordance with relevant legal and regulatory requirements and UnitedKingdom Auditing Standards issued by the Auditing Practices Board.This report,including the opinion,has been prepared for and o
331、nly forthe Companys members as a body.We do not,in giving this opinion,accept or assume responsibility for any other purpose or to any otherperson to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.We report to you our opinion as
332、to whether the non-statutory financial statements give a true and fair view.We also report to you if,in our opinion,the directors report is not consistent with the non-statutory financial statements,if the Company has not kept properaccounting records,if we have not received all the information and
333、explanations we require for our audit,or if information specifiedby law regarding directors remuneration and transactions is not disclosed.We read the other information contained in the annual report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements.The other information comprises only theChairman
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