Final Results

13 May 2014

Lombard Risk Management

("Lombard Risk" or the "Company")

Final Results for the year ended 31 March 2014

Lombard Risk Management plc (LSE:LRM), a leading provider of integrated collateral management, regulatory compliance and reporting solutions for the financial services industry, is pleased to announce its final results for the year to 31 March 2014.

Highlights

· Revenues £20.4m (2013: £16.8m), of which second half £13.1m (2013 : £9.0m)

· EBITDA £6.0m (2013: £5.3m)

· Profit before tax £4.4m (2013: £3.9m)

· Cash at end of period £2.9m (2013: £1.9m) with net cash(1) of £2.3m (2013: £0.2m)

· A further 34 contracts signed for COREP, of which 16 are new names

· Significant sale of COLLINE® to a Tier 1 bank in December 2013

· FY 2015 opens with record year end revenue order book in place

· Final dividend 0.045p per share (2013: 0.040p per share) recommended to shareholders

· The Board continues to view the future with optimism

(1) Cash less total bank borrowings. Bank borrowings were £0.7m (2013:£1.7m)

Chief Executive Officer, John Wisbey, commented on the results:

"Our revenues advanced by 22% continuing the trend of growth of the previous three years. We have now achieved compound revenue growth in the last four years of almost 23% p.a. and it is pleasing to have beaten market expectations on both revenue and profitability. We have entered the new financial year with recurrent revenues at another all-time high of around £8.6m, our highest ever year end level of order book at £5.2m, and with a good sales pipeline. There is continued new European regulation in the UK beyond COREP, such as FINREP and Asset Encumbrance, and also regulatory change in several of the countries in which we operate. Our Alliances programme is starting to become interesting with a number of opportunities being worked on. We have a new product, Compliance Assessor, which looks like a potential source of very useful new revenue. We have invested in a Global Sales Director and are strengthening the Americas operation. Taking all these factors into account the Board believes that the commercial outlook is favourable."

For further information, please contact:

Chairman's statement

I am pleased to report another good year for Lombard Risk. The Group posted progressive financial results and further broadened and enhanced its product portfolio.

Results

In the year the Group achieved strong financial results in both its Regulatory Compliance and Risk Management divisions. This performance, following a number of years of strong growth, is testament to the continuing expansion of regulation in global financial markets.

In the year we saw our revenue increase by 22%, giving a four-year compound annual growth rate of 23%. Annually recurring revenues made up 42% (2013: 43%) of total revenues. The Company took the opportunity to raise £2.5m net of fees through a placing of new shares to ensure the Group maintained a healthy balance sheet.

Importantly, the Company closed a further 34 new contracts to provide its Common Reporting ("COREP") solution for European Banking Authority during the 12 month period to 31 March 2014, giving a total of 67 COREP customers. Of these 67, 27 are new customers. A further success was the contract to supply our COLLINE® collateral management software to a Tier 1 bank.

We continued to invest strategically in technology and infrastructure to scale our business to ensure we are best positioned to maximise future revenue opportunities and sustain the Group's growth.

Profits have been realised in line with our expectations; this was despite the sales success resulting in the need for additional resources to satisfy our customers' product implementation needs.

Dividend

On the back of the progressive financial performance, the Board proposes a final dividend of 0.045 pence per share which, if approved, will be paid on 25 July 2014 to those shareholders on the register on 11 July 2014. This brings the dividend for the year to 0.075 pence per share (2013: 0.065 pence per share), an increase of 15%.

Strategy

The Group enjoyed a strong performance from its direct sales function in Europe. This year, the Board intends to replicate this growth in the Americas and Asia Pacific. In addition, the Board is focussing on expanding its partner network to increase its indirect sales performance.

The intellectual property of the Group remains a key asset. The Group is perceived a market leader by many in its core markets. Subsequently, the Group intends to leverage this market position to drive sales. This objective will be supported by our recent recruitment of further experienced senior sales executives. Additional investment in technology development is available to support the sales drive.

Employees

During the year, I have made a conscious effort to connect with many of the Group's valued employees. The diverse nature of the employees, their market knowledge, enthusiasm, commitment and desire reassure me that the Group possesses a deep level of talent.

On behalf of the Board, I would like to thank all the employees for their valued contribution.

Board of Directors

Since the Annual General Meeting held in 2013 we have appointed Steve Rogers and John McCormick as Non-executive Directors, effective August 2014 and November 2013 respectively. These appointments have added considerable relevant experience to the Group.

In February 2014, Paul Tuson, the Company's CFO, resigned. He left in May 2014 after serving three months' notice. On behalf of the Board, I would like to thank Paul for his valued contribution to the growth, governance and well-being of the Group during his three-and-a-half-year tenure. The Board is actively seeking a suitable replacement.

Outlook

The Board looks forward to the forthcoming year with continued optimism. The unrelenting macro-regulatory environment in the financial industry persists. This, together with the addition of the sales drive and the healthy £5.2m order book of contracted licence and professional services, gives the Board comfort of further growth progression.

AGM

The Annual General Meeting will be held at the Company's London office at 9.30 a.m. on Wednesday 9 July 2014. My fellow Directors and I look forward to meeting shareholders at that time.

Philip Crawford

Group Non-executive Chairman

Chief Executive's statement

In summary

· Revenue increased by 22% to £20.4m (2013: £16.8m), of which £13.1m was in the second half (2013: £9.0m)

· EBITDA increased to £6.0m (2013: £5.3m)

· Profit before tax increased to £4.4m (2013: £3.9m)

· Record revenues both from Regulatory and Collateral businesses

· 67 UK COREP contracts signed - 27 from new customers - and major COLLINE® deal signed

· Optimisation for COLLINE® launched

· Good foundations laid for Alliances Programme

· Well placed for future growth

The year was another record year both for revenue and profits, with 22% revenue growth, all of it organic revenue growth (2013: 31% revenue growth, of which 18% was organic revenue growth). The second half of the year was especially strong, and revenues were 44% higher than our previous record half year with £13.1m of revenue (2013 H2: £9.1m). EBITDA, adjusted for share-based payments, increased from £5.3m last year to £5.9m in the current year and profit before tax increased from £3.9m to £4.4m. Both profit before tax and revenues were ahead of market expectations. In addition to this strong revenue achievement we were also able to build a record revenue backlog/order book going into the new financial year. The drive to gain longevity of contractual commitment started in FY13 has continued with equivalent success in the current year.

The Group continues to benefit from having a strong market position in two important and growing segments of the financial industry, namely regulation and collateral management. The European Banking Authority's initiatives such as COREP, FINREP and Asset Encumbrance have kept us extremely busy, and revenue from this will continue in the current financial year. Additional growth can also be expected to come from the Compliance area, where we have a new product, and from our increased use of alliances with major global firms or leading regional firms. Our professional services team is extremely busy billing its time to meet the COREP deadlines of seventy clients, but the programme is on track. As a result of all the above we remain confident of further growth in the new financial year and beyond.

We invested appreciably during the year, both in product development, delivery capability and in further strengthening the sales team, including the appointment of a Global Sales Director. We expect research and development costs to reduce in the 2014/15 financial year as a percentage of revenues but at the same time it would be very short sighted not to invest in our future growth. There continues to be significant opportunities in our markets, some with regulatory deadlines associated with them, which demand further investment in product development and which the Board believes will contribute appreciably to future revenues. Indirect sales are expected to become an increasingly important part of our revenue model and again this should contribute to revenue growth.

No company achieves 22% revenue growth in a year without considerable effort by many of its team. I would like particularly to thank all those involved in EMEA regulatory for their efforts in selling and delivering almost 70 COREP projects. With numerous changes in the regulations during the consultation and legislative period, our teams involved have sometimes had to go more than the extra mile and this continues to be the case with key regulatory deadlines in June 2014. They deserve special thanks, although thanks are also due to all who contributed during the year.

During the year we conducted a placing and were able to welcome some exciting new names to our shareholder register. We are particularly pleased that Fidelity has become our largest institutional shareholder.

We enter the new financial year with our recurrent revenues at another all-time high of around £8.6m, our highest ever level of order book at £5.2m, and with a good sales pipeline.

What we do, what we plan to do and why

Lombard Risk is a global technology firm in the Governance, Risk Management and Compliance ("GRC") space, with a special focus on collateral management, regulatory and compliance. We are a market leader in our chosen niches. With ever-increasing demands from regulators, GRC is one of the fastest growing areas in the financial industry and several investment banks visiting us have used the phrase "sweet spot". The compound revenue growth rate of almost 23% that we have achieved in the last four years is indicative of our strategy having worked in that period, and the Board has no current plan to diversify out of this area as we believe a lot of shareholder value can be obtained from continuing to focus on this area over the next few years. Indeed by achieving a consistently higher level of excellence in all the geographies we cover, leveraging our client relationships, developing our alliances programme further and continuing with our record of investing in winning products in our chosen market space, we believe that the rise in growth rate that we have achieved in the last four years can be continued or even exceeded with the caveat that there will inevitably be swings in growth rate owing to the cycle of regulatory change. Our main strategy at present is to grow through organic growth. We have, however, in the past made successful acquisitions and we hope to do so again in the future. Our appetite to make acquisitions will be a combination of the strategic product and client fit, the revenue and cost synergies, and, importantly, the achievable acquisition price in relation to our own share price. While our share price remains on lower revenue and earnings multiples than some of our targets' expectations despite our having a higher growth rate, the Board's willingness to dilute our own shareholders by issuing shares at the market price in order to pay a full price to a seller is necessarily limited.

Financial review

The Group has continued the growth trend that has now been evident for several years. The Group enjoyed respectable revenue growth, with only Americas revenues falling below management expectations. Costs also increased as additional resources were required to fulfil development and implementation demands of the ever-expanding customer base.

Profit and loss

Revenues increased by 22% to a record £20.4m for the year, compared with £16.8m in the prior year. Licence revenues increased in the year by 14% to £9.4m (2013: £8.3m), representing 46% of revenues (2013: 49%). Recurring annual revenues totalled £8.6m, approximately 42% of revenue (2013: 43%), and now have a current annual run rate of £8.6m.

Operating profit before share-based charges, depreciation and amortisation and acquisition costs (EBITDA) increased to £6.0m (2013: £5.3m). Profit before tax increased to £4.4m (2013: £3.9m).

The effective rate of tax for the year was a credit of 17% (2013: charge of 5%).The recognised deferred tax asset increased by £0.5m to £1.0m (2013: £0.5m) and the unrecognised deferred tax asset was £2.0m (2013: £0.7m).

Cash flow

Cash generated in operations was £5.2m (2013: £5.8m). As for many growth technology companies, the pressure on balancing working capital requirements with investing in longer-term growth continues. The Group produces weekly cash forecasts which are monitored closely. The decision to raise £2.6m in July 2013 ensured we were able to service the higher than anticipated new customer numbers and mitigated any risk of delays by regulatory authorities in finalising new reporting requirements.

Investment in research and development expenditure that was capitalised was £5.3m (2013: £4.3m).

The Group raised £2.9m (net) (2013: £1.5m) with £0.4m (2013: £0.1m) resulting from the exercise of employee stock options.

In April 2013, the Group settled the short-term bank loan of €400,000 that had been used for the early repayment of a loan note for $550,000 that was repaid approximately one year early in December 2012 at a discount of $83,000.

Overall there was a net cash inflow of £1.0m (2013: £1.7m).

Balance sheet

Non-current assets at 31 March 2014 increased to £18.0m (2013: £13.4m) predominantly the result of an increase in capitalised development costs.

Net cash at 31 March 2014 was £2.3m (2013: £0.2m) after total borrowings of £0.7m (2013: £1.7m).

Trade receivables were 14% of revenues at 31 March 2014, compared to 13% and 20% for 2013 and 2012 respectively.

Year-on-year trends

The capitalisation of development costs for the last three years inadvertently reduces the transparency of the financial performance of the Group. Internally, the Group's operating budget and monthly management information measure financial performance assuming no capitalisation. The figures below aid transparency and allow users to make a more informed assessment of the financial performance of the Group.

* Includes research, development, testing, support and product maintenance.

** Operating profit less capitalised development costs adding back depreciation, amortisation and share-based payment charge.

Business model

Products

Lombard Risk has two key divisions, namely Risk Management and Regulatory Compliance. The main software products within these divisions are:

i) Risk Management division - 53% of Group revenues in FY 2014 (2013: 53%):

a. COLLINE® - OTC Collateral management, Repo, Securities Lending, Cash and Inventory Management, Optimisation. Market-leading position including several Tier 1 banks.

b. OBERON® valuation and risk of derivatives and other financial products

COLLINE® had a successful year with many new prospects being worked on at the end of the financial year, some in conjunction with our partners. During the year we signed a major COLLINE® deal with a Tier 1 UK bank, and we also made inroads into the Japanese domestic market by signing a deal with a regional Japanese bank in conjunction with one of our partners. Much progress was made on making the product fully compliant with Dodd-Frank and EMIR and other IOSCO regulations, and with adding Optimisation to the product set. COLLINE® now has modules for OTC Collateral, Clearing, Repo, Securities Lending, Exchange Traded Funds and Optimisation, making it a very comprehensive offering. Not all our existing COLLINE® clients use all this functionality and this is an upsell opportunity and challenge for us.

OBERON® also had a good year and remains a commercially successful product.

ii) Regulatory Compliance division - 47% of Group revenues in FY 2014 (2013: 47%)

a. REPORTER - Regulatory Reporting in multiple countries; market-leading position in UK (eg FCA and PRA reporting)

b. REG-Reporter - Regulatory Reporting in the US (eg FDIC, FRBNY reporting) and various countries in Americas; market leader for reporting by foreign banks in the US

c. LISA - stress testing of liquidity reporting

d. ComplianceAssessor - Product that allows firms to manage their on-going compliance with regulations and produce multiple reports around the related compliance risks.

This year was an especially strong one for the REPORTER product in the UK. 67 client groups have so far signed up for our COREP solution, with a multiple of that for the exact number of legal entities. This number means that we were able to gain over thirty brand new clients, all of which will help our revenue model in future years. We also had a good year in Asia, with new clients signed up in Hong Kong and Singapore, including some important regional banks. In the US we were busy selling some of the new Federal Reserve reports to our existing REG-Reporter customers.

Clients and client geography

Many of the Company's clients have operations across multiple countries. Overall we do business with around thirty of the top fifty banks in the world. In the UK we do business with over 140 separate banking groups, with the number of legal entities using our software considerably higher than that. Altogether we have clients in over 25 countries and in centres such as London and New York we have clients with parent companies or head offices in many more countries.

We regard our client base and the associated relationships as a very important asset of the Group. We have had very few client losses over the past few years other than when a bank closes a UK or US branch and therefore ceases to need our services in that branch.

In FY 2014, 59% of our revenues were from the UK (2013: 39%) and a further 13% from EMEA non-UK (2013: 28%).This is not at all because we are a UK or EMEA focussed firm but because of our very strong position in the regulatory market in the UK and strong COLLINE® revenue from the UK as a result of a Tier 1 contract win and other on-going COLLINE® projects.

We are making major investment in more quality people in the US as we believe that longer term the proportion of our revenues from the Americas could and should be nearer to 40-50% as against the 20% in FY 2014 (2013: 25%). So while we expect the UK and the rest of EMEA to continue to grow this will account for a lower share of revenues as American revenues grow faster. We are also investing in additional sales and delivery resource and product for the Asia Pacific area which the board recognises as a good opportunity for increased revenue, helped particularly by the credibility for Lombard Risk from a major delivery presence already established in China.

Intellectual property

The intellectual property of the Group remains a key asset, enabling Lombard Risk to be a market leader in its chosen markets.

To maintain a market-leading position, the Group continues to invest in its intellectual property. The cost of development of innovative, function-rich, new technology is material to the Group's finances. The Group capitalises these development costs, in line with and subject to the conditions of IAS 38. In FY 2014 the Group capitalised £5.3m.

In particular, during the current year, the Group has invested in developing a market-leading solution to satisfy the regulatory requirements of the European Banking Authority's Common Reporting and in the new Optimisation module for the COLLINE® product family. Development costs of £1.3m and £1.5m were capitalised respectively.

Personnel

We are headquartered in London, England but 60% of our 270 employees work outside the UK. Our development and testing centre is in Shanghai, China. We have offices in the US (New York and New Jersey), Hong Kong, Singapore, Tokyo with representatives in other centres.

Inevitably people are our greatest asset and also by far our greatest expense with personnel costs being 81% of our cash cost base. Retaining key staff is always very important to us. We have been relatively successful in the UK in recruiting well and then retaining staff who we have identified as key, but we have been less successful in the US where we have made more recruitment mistakes on the non-regulatory side and then suffered higher staff turnover. We are hopeful that some recent leadership changes in the US will reverse this pattern there.

Commercial outlook

We entered the new financial year with our recurrent revenues at another all-time high of around £8.6m, our highest ever level of order book at £5.2m, and with a good sales pipeline. There is continued new European regulation in the UK beyond COREP, such as FINREP and Asset Encumbrance, and also regulatory change in several of the countries in which we operate. Our Alliances programme is starting to become interesting with a number of opportunities being worked on. We have a new product, Compliance Assessor, which looks like a potential source of very useful new revenue. We have invested in a Global Sales Director and are strengthening the Americas operation. Taking all these factors into account the Board believes that the commercial outlook is favourable.

The strategic report was approved by the Board on 12th May 2014 and signed on its behalf by:

John Wisbey

Chief Executive

Consolidated statement of comprehensive income

For the year ended 31 March 2014

.

Consolidated balance sheet

As at 31 March 2014

Consolidated statement of changes in shareholders' equity

For the year ended 31 March 2014

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

Consolidated cash flow statement

For the year ended 31 March 2014

Notes to the consolidated financial statements

For the year ended 31 March 2014

1. Accounting policies

 (A) Basis of preparation

These consolidated financial statements are for the year ended 31 March 2014. They have been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRS Interpretation Committee ("IFRIC") interpretations as at 31 March 2014, as adopted by the European Union. They have been prepared under the historical cost convention.

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

These results are audited, however, the financial information does not constitute statutory accounts as defined under section 434 of the Companies Act 2006. The financial information for the year ended 31 March 2013 has been derived from the Group's statutory accounts for that year, as filed with the Registrar of Companies. The auditors' report on the statutory accounts for the year ended 31 March 2014 was unqualified and did not contain statements under section 498 of the Companies Act 2006.

New standards, amendments and interpretations

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective and have not been adopted early by the Group.

Management anticipates that all of the pronouncements will be adopted by the Group's accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group's financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group's financial statements.

· IFRS 9 "Financial instruments" (effective 1 January 2015)IFRS 9 addresses the classification and measurement of financial assets and will replace IAS 39. The standard is mandatory for accounting periods commencing on or after 1 January 2015, subject to adoption by the European Union.

(B) Basis of consolidation

The Group accounts consolidate the financial statements of the Parent Company (Lombard Risk Management plc) and its subsidiary undertakings over which it has control (see note 5 to the Parent Company balance sheet). A description of the principal activities and operations of the Group can be found in the Directors' report.

The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings made up to 31 March 2014. The acquisition method of accounting has been adopted. Under this method, the results of subsidiary undertakings acquired or disposed of in the year are included in the Consolidated statement of comprehensive income from the date of acquisition or up to the date of disposal. All of the Group's assets and liabilities existing at the date of acquisition are recorded at their fair values reflecting their condition at that date. Profits or losses on intra Group transactions are eliminated in full. Goodwill is capitalised and under IFRS 3 goodwill is not amortised but an impairment test is performed as appropriate, at least annually. The value of goodwill is to be written down according to the outcome of the impairment test.

Non-controlling interests, presented as part of equity, represent the portion of a subsidiary's profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the Parent and the non-controlling interest based on their respective ownership interest.

(C) Segment reporting

In identifying its operating segments, management generally follows the Group's product lines. The Group operates two main operating segments: Regulatory Compliance software and Risk Management and Trading software. Regulatory Compliance software is for regulatory, anti-money laundering and compliance systems to financial markets. Risk Management and Trading software provides trading, valuation and risk management systems to the financial markets. Each of these product lines is managed separately as they each require different technology and other resources as well as marketing approaches. Corporate overheads, assets and liabilities which are not directly attributable to either product line are not allocated to segments.

 (D) Going concern

The financial statements have, as in previous years, been prepared on a going concern basis.

In forming an opinion that the Company and the Group is a going concern, the Directors have taken particular note of the trading performance in the year ended 31 March 2014, both in the signing of new business contracts and in the realised financial results. These show an improvement in profitability and an increase in the cash balance at 31 March 2014. The Directors have prepared a cash flow forecast for the period to 30 June 2015, which shows that the Company and Group have sufficient facilities for on-going operations. Whilst there will always remain some inherent uncertainty within the aforementioned forecasts, the Directors believe the Company and Group have sufficient resources to continue in operational existence for at least twelve months from the date of approval of these financial statements.

Accordingly the Directors continue to adopt the going concern basis in preparing the financial statements for the year ended 31 March 2014.

 (E) Revenue

Revenue represents the fair value of goods sold and services provided during the year, stated net of value added tax. Revenue and profit before tax are wholly attributable to the principal activities of the Group.

The recognition of revenue depends on the type of income:

Licence income For long-term projects which do not include the up-front delivery of immediately usable software, revenue is recognised on both the consultancy and initial licence elements in line with the estimated percentage of completion of the project. This estimation is based upon the views of the consultants implementing the projects as to the proportion of the project completed and this is supported by data from a time recording system. Annual licence/usage fees and maintenance revenue invoiced simultaneously with the initial licence, but considered to relate to the period when the licence is deemed to be live, is deferred in its entirety until the live date, following which it is released to profit in equal daily instalments over the duration of the relevant licence or maintenance. For other projects which do include the up-front delivery of immediately usable software, revenue is recognised on a percentage completion basis. For non-refundable licences, revenue is recognised in full on customer acceptance as there are no on-going obligations in respect of such sales.

Customisation income Recognised once the customisation has taken place.

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

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

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

Training income Recognised when the relevant courses are run.

Multiple element transactions are allocated to relevant revenue categories based on typical revenue splits for transactions which are contracted separately and by using industry best practice.

(F) Property, plant and equipment

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

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

The estimated useful lives of the assets are as follows:

Computer hardware two years

Fixtures, fittings and equipment four years

(G) Goodwill

Goodwill, representing the excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired, is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment losses. Negative goodwill is recognised immediately after acquisition in the Consolidated statement of comprehensive income.

 (H) Intangible assets

Research and development

Expenditure on research is recognised as an expense in the period in which it is incurred.

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

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

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

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

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

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

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

Development costs not meeting the criteria for capitalisation are expensed as incurred. Capitalised development costs are amortised in equal annual instalments over a period of five years from when the separately identifiable intangible asset is available for use in the manner intended by management. Enhancements to a separately identifiable intangible asset that is already available for use in the manner originally intended by management are expensed as incurred.

Computer software

The cost of computer software, net of estimated residual value and impairment, is depreciated in equal annual instalments over one to three years based on the estimated useful lives of the assets. The residual values of assets or group of like assets are reviewed annually.

Customer relationships

The cost of customer relationships, net of estimated residual value and impairment, is amortised in equal annual instalments over nineteen years based on the estimated useful lives of the assets. The residual values of assets or group of like assets are reviewed annually.

Trademarks

The cost of trademarks, net of estimated residual value and impairment, is amortised in equal annual instalments over seven years based on the estimated useful lives of the assets. The residual values of assets or group of like assets are reviewed annually.

(I) Financial instruments

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

Loans and receivables

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

Cash and cash equivalents

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

Trade payables

Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument.

All financial liabilities are recorded at amortised cost using the effective interest method, with interest related charges recognised as an expense in finance cost in the statement of comprehensive income.

A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged, cancelled or expires. Where debt has been converted into equity, the liability is extinguished at no gain no loss. The equity is measured at the carrying value of the extinguished debt.

(J) Foreign exchange

Transactions in foreign currencies are translated into the functional currency of the individual entity at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.

Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the profit or loss in the period in which they arise. The assets and liabilities in the financial statements of foreign subsidiaries are translated into the Parent Company's presentation currency at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at the actual rate at the date of transaction. The exchange differences arising from the retranslation of the opening net investment in subsidiaries are recognised in other comprehensive income and taken to the "Foreign exchange reserve" in equity. On disposal of a foreign operation the cumulative translation differences (including, if applicable, gains and losses on related hedges) are transferred to profit or loss as part of the gain or loss on disposal.

(K) Taxation

Current tax is the tax currently payable based on taxable profit for the year. Current tax credits arise from the UK legislation regarding the treatment of certain qualifying research and development costs, allowing for the surrender of tax losses attributable to such costs in return for a tax rebate.

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

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

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

(L) Leased assets

The Group does not hold any finance leases.

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

(M) Pension costs

The Group operates a number of defined contribution pension schemes. The assets of the schemes are held separately from those of the Group in independently administered funds. The amount charged to profit or loss represents the contributions payable to the schemes in respect of the accounting period.

(N) Share options issued to employees

All share-based payment arrangements granted after 7 November 2002 that had not vested prior to 1 April 2006 are recognised in the financial statements.

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

All equity-settled share-based payments are ultimately recognised as an expense in the statement of comprehensive income with a corresponding credit to "other reserves".

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

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

(O) Impairment testing of goodwill, other intangible assets and property, plant and equipment

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors the related cash flows.

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

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

(P) Key judgements in applying the entity's accounting policies and goodwill impairment

The Group's management makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a reasonable risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Recognition of revenue

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

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

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

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

Goodwill impairment

An impairment loss is recognised if the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows, management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual results may vary and may cause significant adjustments to the Group's assets within the next financial year.

In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to asset-specific risk factors.

Capitalisation of development costs

Development costs are capitalised when all of the criteria (see accounting policy note above) have been met. Employees' time is recorded by product and activity and valued by reference to salaries and directly attributable overheads. Values by product are reviewed with reference to future profitability.

Judgement is used to determine which activities constitute development that should be capitalised. Likewise, judgement is required in assessing when a product has reached its intended use and hence when capitalisation of associated costs should cease. In addition, judgement is used to determine future profitability of the products and timing thereof.

Deferred tax assets

The assessment of the probability of future taxable income on which deferred tax assets can be utilised is based on the Group's latest approved budget forecasts, which is adjusted for significant non-taxable income and expense. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in respect of the period for which future profits can be confidently foreseen. The recognition of deferred tax assets that are subject to certain legal or economic limit or uncertainties is assessed individually by management based on the specific facts and circumstances.

2. Business segmentation

Management currently identifies the Group's two product lines as operating segments as further described in the accounting policies. These operating segments are monitored and strategic decisions are made on the basis of segment operating results.

Segment information can be analysed as follows for the reporting periods under review:

The two segments operate independently and inter-segment income or expenditure is cross charged at arm's length.

The Group's revenues from customers and its non-current assets are divided into the following geographical areas:

In the year ended 31 March 2014 11% (2013: 10%) of the revenue depended on a single customer.

3. Directors and employees

During the year, three Directors have exercised their share options. There were no pension contributions made in respect of the highest paid Director. During the year one Director accrued benefits under a Company pension scheme (2013: two).

The Directors of the Company are the key management personnel.

Individual Director's emoluments and compensation

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

4. Profit from operations

The profit from operations before taxation is stated after charging / (crediting):

Fees payable to the Company's auditor, Grant Thornton UK LLP, and its associates for non-audit services to the Company itself are not disclosed in the individual financial statements of the Company because the Company's Group financial statements are required by the Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) Regulations 2008, Regulation 5(1) to disclose such fees on a consolidated basis.

5. Finance expense

6. Finance income

7. Taxation

(A) Analysis of charge in the period

(B) Research and development tax credits

The Group has received to date research and development tax credits of £1,038,000 (2013: £816,000) relating to financial years ended 31 March 2002 to 2010. As for all companies that have received these credits, the amounts are subject to potential future HM Revenue & Customs claw back.

(C) Tax on profit on ordinary activities

The tax assessed for the period is the standard rate of corporation tax in the UK of 23% (2013: 24%). The difference is explained as follows:

(D) Unrecognised deferred tax

A deferred tax asset of £2.0m (2013: £0.7m) is unrecognised and relates principally to trading losses carried forward.

(E) Deferred tax asset

The deferred tax asset included in the balance sheet relates principally to the carry forward of tax losses.

The Directors have recognised a deferred tax asset in respect of carried forward trading tax losses as, based on current estimates, the Group is forecast to make sufficient trading tax profit in the future against which these losses can be offset. The recognised deferred tax asset is based on expected profits in the next financial year. The movement in the deferred tax asset in the year is recognised in full in the profit for the year; no amount is recognised directly in equity.

The deferred tax asset is expected to crystallise in full in the next financial year.

8. Profit per share

Basic profit per share has been calculated by dividing the profit after taxation by the weighted average number of Ordinary Shares in issue during each period.

For diluted earnings per share, the weighted average number of shares, 251,717,005 (2013: 227,991,541), is adjusted to assume conversion of all dilutive potential Ordinary Shares under the Group's share option plans, being 3,051,314 (2013: 6,755,180), to give the diluted weighted number of shares of 253,341,143 (2013: 234,746,721).

Profit per share

9. Non-controlling interest

Non-controlling interest relates to 20% of Lombard Risk Compliance Policies Limited that is owned by a third party.

10. December 2011 acquisition

On 15 December 2011, the Group acquired the assets of the regulatory business of SOFGEN, including customers, REG-Reporter® software and trademarks together with the on-going business for a consideration of £2.8m, primarily to expand its regulatory compliance business geographically.

The main part of the business acquired, which in the past was known in the US regulatory market as IDOM USA, is the US and Canada regulatory reporting product REG-Reporter®. REG-Reporter® has a strong client base in North America.

The purchase price for the SOFGEN business included cash of £1.963m, the issue of Ordinary Shares with a fair value of £305,000 and the issue of loan notes, of which £174,000 was due to be settled on 31 December 2012 and £347,000 on 31 December 2013. The loan note due for settlement on 31 December 2013 was settled during the year ended 31 March 2013 for an adjusted amount of £296,000.

11. Property, plant and equipment

12. Intangible assets

The goodwill at 31 March 2014 relates to the acquisition of STB Systems Limited, since renamed Lombard Risk Compliance Limited, which was acquired in 2005 and which constituted the Group's regulatory compliance business, and to goodwill arising in 2011 relating to the acquisition of the regulatory reporting business of SOFGEN, further details of which are provided in note 10. Both these businesses now represent the Group's regulatory compliance business. An impairment review has therefore been carried out on this cash-generating unit.

The cash-generating unit has been assessed by comparing its carrying value to its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation.

For the year ended 31 March 2014, the cash-generating unit recoverable amount was determined based on value-in-use calculations, which are based on detailed five-year discounted forecast cash flows (using a discount rate of 10%). Cash flows for the regulatory compliance business are based on management forecasts, which are approved by the Board and reflect management's expectations of sales growth, operating costs and margin based on past experience as well as the current order book. Management has used a five-year period in the cash flow projections as the regulatory compliance business experiences a low level of customer turnover and the technology is based on regulations which, whilst subject to periodic amendment, are unlikely to be withdrawn.

For the years 2015 to 2019 no new business is forecast with retention levels of recurring revenues averaging 90% per annum. In view of this, no sales and marketing or research and development costs are forecast for the years 2015 to 2019.

Sensitivity to changes in key assumptions: impairment testing is dependent on management's estimates and judgements, in particular in relation to the forecasting of future cash flows and the discount rate applied to the cash flows. Management has concluded that no reasonably possible change in the key assumptions would cause the carrying value of goodwill to exceed its recoverable account.

Capitalised development costs reflect the expenditure attributable to the development of new technology that will provide economic benefit in future periods as set out in note 1(H). The Group's development costs relate to the Group's products, including COLLINE®, Compliance Assessor, REFORM™, MIS reporting, etc. The COLLINE® suite of products is individually significant; the net book value at 31 March 2014 is £3,629,000 (2013: £2,405,000). Amortisation is over a five-year period from the time when each separately identifiable intangible asset reaches its intended use by management.

One of the Risk Management products has been identified as impaired following a review of the carrying values of capitalised development costs. The net carrying value of this product has therefore been written down to £Nil, resulting in an impairment charge of £424,000.

13. Trade and other receivables

The amounts are short term and the Directors consider that the carrying amount of these trade and other receivables approximates to their fair value. All of the Group's trade and other receivables have been reviewed for indications of impairment. As at 31 March 2014, trade receivables of £2.9m (2013: £2.3m) were fully recoverable. An impairment provision of £0.13m (2013: £0.04m) has been made against the invoices of nineteen clients (2013: twelve clients). In addition, some of the unimpaired trade receivables are past due as of the reporting date. Trade receivables past due but not impaired are as follows:

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

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

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

14. Borrowings

Borrowings at 31 March 2014 is a Sterling bank loan. Borrowings at 31 March 2013 comprise a Sterling bank loan and a Euro bank loan.

The Sterling bank loan is repayable in equal quarterly instalments over a three year term with the first repayment in April 2012. The loan principal is £2.0m and interest is payable at the rate of LIBOR + 4%. The balance outstanding at 31 March 2014 is £0.7m (2013: £1.3m).

The Euro bank loan was paid in one payment on 30 April 2013. The loan principal was €0.4m and interest was payable at a rate of LIBOR + 4.25%. The balance outstanding at 31 March 2014 was £Nil (2013: £0.3m).

15. Trade and other payables

16. Financial risk management and financial instruments

The Group's multinational operations expose it to financial risks that include market risk, credit risk, operational risk and liquidity risk. The Directors review and agree policies for managing each of these risks and they are summarised below. These policies have remained unchanged from previous years.

Market risk

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

I) Currency risk

The Group is exposed to translational and transactional foreign exchange risk as it operates in various currencies, including US Dollars, the Euro, Chinese Yuan, Hong Kong Dollars and Singapore Dollars, which affect the management and levels of working capital.

Mitigation: Although, through its own software, the Group has access to sophisticated models for the management of foreign exchange risk, there has historically been no use of foreign exchange derivatives to manage this position on the basis that the overall effect on the Group's income statement has not been large enough to warrant the management, costs and margin requirements of this activity. The Group does use natural hedges where the appropriate opportunity arises. In addition, the Group prepares working capital forecasts that incorporate sensitivity analysis on exchange rate fluctuations. The Group's main on-going transactional exposure is to be long of Euro and US Dollars and short of Chinese Yuan.

II) Inflation risk

The Group has exposure to the inflationary effect in countries in which it operates, offset by its ability to raise prices in those countries in which it sells. This exposure could affect the Group's cost base. The Group's cost base is mainly exposed to the inflation rates and changes in payroll taxes in the UK, the US and China.

Mitigation: The inflation rate for salaries in specialised parts of the financial sector in a financial centre such as London, New York or Shanghai is often different from the relevant country's overall rate of wage inflation. Salary inflation in these markets and internally is monitored. No specific hedging of inflation risk has been carried out.

III) Interest rate risk

Interest rate risk arises primarily on the investment of the Group's cash balances or on its borrowings and the present value of the Group's receivables. In particular, interest on the Group's borrowings is affected by LIBOR.

Mitigation: The Group finances its operations through retained cash reserves and overdraft facilities. The policy of the Group is to monitor exposure to interest rate risk and take into account potential movements in interest rates as well as liquidity considerations when selecting methods of financing.

Credit risk

Credit risk is the risk that a third party might fail to fulfil its performance obligations under the terms of a financial instrument. For cash and cash equivalents and trade and other receivables, credit risk represents the carrying amount on the balance sheet.

Mitigation: Most of the Group's business is with banks, asset management firms and other high-quality companies and the Group's bad debt experience over fifteen years has been negligible. The Group consequently has not considered taking out credit insurance and is not likely to do so in the foreseeable future. Deposits are placed with high-quality banks. The Group closely monitors its credit risk.

There has been no use of credit derivatives to mitigate counterparty risk and no such use is contemplated.

The Group's exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance sheet date, as summarised below:

Operational risk

The Group has numerous operational risks, ranging from control over bank accounts to its processes for delivering and supporting software to a required level of quality and on a timely basis and retention and recruitment of key personnel. A key risk, as for any group, is the reputational risk that might arise from poor execution, non-delivery or late delivery of a high profile project or breach of client confidentiality for sensitive data. Further risks may arise where late delivery of software or untimely delivery of related services causes a client to miss regulatory deadlines.

Mitigation: The Group's Audit Committee regularly reviews controls over certain aspects of the operations of the Group. In addition, the Audit Committee maintains an operational risk register. Such a detailed operational risk review is outside the scope of this report but the Board attaches importance to maintaining appropriate internal controls to identify and limit these risks; this includes integrated project management across all functions of the business.

Liquidity risk

Liquidity risk is the risk of loss from not having access to sufficient funds to meet both expected and unexpected cash demands.

Mitigation: The Group seeks to manage financial risk by ensuring that sufficient liquidity is available to meet foreseeable needs and by investing cash assets safely as well as profitably. The Group's working capital report, produced each month, shows forecast monthly movements in working capital and cash for the following year. When required the Group has a short-term overdraft facility which at the year-end has not been used. At 31 March 2014 the Group's financial liabilities were as follows:

Maturity analysis

At 31 March 2014 the Group's liabilities have contracted maturities which are summarised below:

The above contractual maturities reflect the payment obligations which may differ from the carrying value of the liabilities at the balance sheet date.

Interest rate sensitivity

The Group is exposed to changes in market interest rates (LIBOR) through the bank borrowings as set at in note 14.

The following table illustrates the sensitivity of profit and equity to a reasonably possible change in interest rates (LIBOR) of +1% or -1%. These changes are considered to be reasonably possible based on observations of current market conditions. These calculations are based on a change in the average market interest rate for each period and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant.

Capital management

The Group's capital management objectives are to ensure the Group's ability to continue as a going concern and to provide an adequate return to shareholders. The Group monitors capital in proportion to risk and makes adjustments in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure the Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt.

The Group had bank borrowings of £0.67m as at the year end. In line with the terms of that debt the Group monitors capital on the basis of three covenants in place over the debt, being:

· total net debt to adjusted EBITDA;

· EBITDA to net finance charge; and

· cash flow to debt service.

All covenants were satisfied at 31 March 2014.

17. Share capital

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

Share issue

On 28 May 2013, the Company issued 120,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 18. The shares were issued at a premium of 5.0p per share, which has been credited to the share premium account.

On 12 June 2013, the Company issued 120,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 18. The shares were issued at a premium of 5.0p per share, which has been credited to the share premium account.

On 17 July 2013, the Company issued 19,090,909 Ordinary Shares of 0.5p per share in order to accelerate growth, to recruit certain key staff and to provide cash for potential acquisition opportunities. The shares were issued at a premium of 10.5p per share, which has been credited to the share premium account, net of issue costs of £93,000.

On 17 July 2013, the Company also issued further 4,545,454 Ordinary Shares of 0.5p per share to a then-prospective new Director. The shares were issued at premium of 10.5p per share, which has been credited to the share premium account.

On 16 August 2013, the Company issued 1,000,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 18. The shares were issued at a premium of 5.5p per share, which has been credited to the share premium account.

On 16 August 2013, the Company issued 1,600,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 18. The shares were issued at a premium of 4.0p per share, which has been credited to the share premium account.

On 22 August 2013, the Company issued 2,400,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 18. The shares were issued at a premium of 5.0p per share, which has been credited to the share premium account.

On 7 October 2013, the Company issued 800,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 18. The shares were issued at a premium of 5.0p per share, which has been credited to the share premium account.

On 3 December 2013, the Company issued 80,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 18. The shares were issued at a premium of 8.5p per share, which has been credited to the share premium account.

On 5 December 2013, the Company issued 200,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 18. The shares were issued at a premium of 8.5p per share, which has been credited to the share premium account.

On 30 January 2014, the Company issued 1,000,000 Ordinary Shares of 0.5p per share as part of the Company's share option scheme; further details are provided in note 18. The shares were issued at a premium of 5.0p per share, which has been credited to the share premium account.

18. Share options

Employee share options charge

The fair value is based on a number of assumptions as stated below.

In accordance with the accounting policy stated under note 1(N), the volatility of the Company's shares for the relevant period has been estimated at 30% historically, and for the year under review between 34% to 38% to reflect the current market situation, giving a charge to the profit and loss account for the year ended 31 March 2014 of £66,906 (2013: £2,445), with the same amount being credited to reserves. The expected volatility has been based on historical volatility, historically using market prices of Lombard Risk Management plc shares between 4 September 2004 and 31 March 2010, giving 30%. For the year under review, volatility is calculated using past year share price at the date of share option issued, giving a volatility between 34% to 38% for various share option issued; for details see below.

Equity-settled share-based payments

The Company has a share option scheme for all employees. Options are granted to employees based on the discretion of the Directors to reward performance. The options are settled in equity once exercised. If the options remain unexercised after the end of the exercising period, the options expire. Options are forfeited if the employee leaves the Company.

The fair values of the options were calculated using a numerical binomial model assuming the inputs shown below:

2,000,000 share options were modified during the year under review. Details of the inputs into the modified options are set out in the table below. The cost of the modification has been calculated as the difference between the fair value of the original share option price and the fair value of the re-priced share options, both measured at the modification date. The cost of the modification is £130,000 and this amount has been debited directly to the other reserves within equity.

Details of share options granted during the year are as follows:

Details of share options modified during the year are as follow.

Details of the number of share options and the weighted average exercise price ("WAEP") outstanding during the year are as follows:

The weighted average remaining contractual life of share options outstanding at the year-end was 2.3 years (2013: 2.1 years).

19. Operating leases

The Group had commitments under non-cancellable operating leases in respect of land and buildings. The Group's future minimum operating lease payments are as follows:

20. Pensions

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

21. Related party transactions

There are no related party transactions in this reporting year or comparative period.

Key management of the Group are the Directors of the Parent Company. Details of the Directors' remuneration are set out in note 3 and in the Remuneration Committee report.

22. Controlling personnel related parties

In the opinion of the Directors, there was no ultimate controlling party at 31 March 2014.

23. Dividends

During 2014, Lombard Risk Management plc paid a dividend of £171,686 (2013: £139,166) to its equity shareholders. This represents a payment of 0.070p per share (2013: 0.060p).

Also during 2014, the Directors proposed a dividend of 0.045p per share (2013: 0.040p) to be paid on 25 July 2014 to those shareholders on the register on 11 July 2014. As the distribution of the dividends by Lombard Risk Management plc requires the approval at the shareholders' meeting, no liability in this respect is recognised in the 2014 consolidated financial statements. No income tax consequences for Lombard Risk Management are expected to arise as a result of this transaction.

24.  Report and Accounts

Copies of the annual report and accounts will be sent to shareholders and will be available to the public from the Company's head office, 7th Floor, Ludgate House, 245 Blackfriars Road, London, SE1 9UF. The report and accounts will also be available to download from the investor relations section of the Company's website www.lombardrisk.com.