Annual Report & Accounts 2010

Your Onramp to Document Driven Business Process Automation

Kofax plc

1 Cedarwood

Chineham Business Park

Basingstoke, Hampshire

RG24 8WD

www.kofax.com

Publication DataPublisher

Kofax plc

1 Cedarwood

Chineham Business Park

Basingstoke, Hampshire

RG24 8WD

Phone: +44 (0) 870 777 3767

Fax: +44 (0) 870 777 3768

ContactsFor further information regarding Kofax please contact:

Rob Jensen

Senior Director, Corporate Communications

Phone: +1 (949) 783-1295

Email: rob.jensen@kofax.com

Kofax on the Internet: www.kofax.com

Kofax annual report on the Internet:

www.kofax.com/go/annualreport2010

Revenue Highlights

Kofax at a Glance Kofax plc (LSE: KFX) is the leading provider of document driven business process

automation solutions. For more than 20 years, Kofax has provided award winning

solutions that streamline the flow of information throughout an organization by

managing the capture, transformation and exchange of business critical

information arising in paper, fax and electronic formats in a more accurate, timely

and cost effective manner. These solutions provide a rapid return on investment to

thousands of customers in financial services, government, business process

outsourcing, healthcare, supply chain and other markets. Kofax delivers these

solutions through its own sales and service organizations, and a global network of

more than 700 authorized partners in more than 60 countries throughout the

Americas, EMEA and Asia Pacific.

For more information, visit: www.kofax.com

FY2010 FY2009 Increase/ (decrease)

Software business revenue $215.8m $169.4m 27.4% Adjusted EBITA $24.8m $13.8m 79.7% Adjusted EBITA margin 11.5% 8.1% 42.0%Hardware business revenue $126.6m $128.8m (1.7%) Adjusted EBITA $1.8m $8.8m (79.5%) Adjusted EBITA margin 1.4% 6.8% (79.4%)Total revenue $342.4m $298.2m 14.8% Adjusted EBITA $26.6m $22.6m 17.7% Adjusted EBITA margin 7.8% 7.6% 2.6%

2 Chairman’s Statement

3 Chief Executive Officer’s Review

7 Chief Financial Officer’s Review

12 Markets, Products, Services and Customers

16 Corporate Social Responsibility

18 Board of Directors

20 Executive Management Team

22 Directors’ Report

27 Statement of Directors’ Responsibilities

28 Corporate Governance Statement

34 Directors’ Remuneration Report

40 Independent Auditor’s Report

Financial Statements

44 Consolidated Income Statement

45 Consolidated Statement of Comprehensive Income

46 Consolidated and Parent Statements of Financial Position

47 Consolidated Statement of Changes in Equity

47 Parent Statement of Changes in Equity

48 Consolidated and Parent Statements of Cash Flows

49 Notes to the Consolidated and Parent Financial Statements

88 Notice of Annual General Meeting

91 Shareholder Information

91 Company Secretary and Advisers

92 Five Year Record

Annual Report & Accounts 2010 Content

1,150 employees in 37 countries

782 resellers in 64 countries

Sales & Services Offices

Represented by Resellers

Americas Europe, Middle East & Africa (EMEA) Asia Pacific

Argentina Colombia Austria Denmark Hungary Poland South Africa Australia Japan Brazil Mexico Belgium Finland Italy Portugal Sweden China MalaysiaCanada USA Croatia France Netherlands Russia Switzerland Hong Kong SingaporeChile Czech Republic Germany Norway Spain United Arab Emirates India Vietnam

United Kingdom Indonesia

Sales & Services

2 Chairman’s Statement

Greg Lock

Chairman’s Statement

I am pleased to report significant progress in the

performance of our software business in this past year,

tempered by the disappointing results of our hardware

distribution and maintenance operations. The restructuring

of our Company has begun to deliver the results we

hoped to achieve, sales execution, profitability and cash

generation have been robust and our confidence in our

ability to deliver increasing value to our customers, and, as

a result, our shareholders, has grown throughout the year.

We are pleased with the integration of 170 Systems into

our business and will continue to look for opportunities

to improve our business organically and through prudent

acquisition and disposal actions.

We do not expect any dramatic improvement in the

prevailing economic environment in any region of the

world, and our plans for the coming year reflect caution in

our cost and expense deployment allied to ambition and

optimism in our products, processes and services. Our aim

to be the leading provider of document driven business

process automation solutions is at the core of our ambition,

and I am, therefore, also pleased to report that recent

independent studies have shown an increase in our market

share. We save our customers money, help them become

more productive and competitive and as result become

more successful ourselves.

Pleased though we are with our performance in the past

year, we remain far from satisfied that we have yet delivered

to our full potential. We are better placed than a year ago to

benefit from our rebuilt Company, we have greater leverage

in place, our balance sheet is strong and our employees

are performing extremely well. I thank them for their

commitment and these results.

We face the future confident in our Company and its

prospects, but mindful of continued economic uncertainty

and of the need to improve everything that we do.

Greg Lock Chairman of the Board September 20, 2010

S O F T W A R E B U S I N E S S R E V E N U E H A R D W A R E B U S I N E S S R E V E N U E T O TA L R E V E N U E

$298.2m

$342.4m

2009 20102009 2010

$128.8m $126.6m

2009 2010

$169.4m

$215.8m

Financial Performance

The year ended June 30, 2010 was successful for Kofax,

with the Company’s financial results beginning to reflect the

anticipated benefits of the strategic initiatives started in

February of 2008.

Software Business Our software business revenues grew 27.4% to $215.8m

(2009: $169.4m). This was aided by the acquisition of 170

Systems, Inc. in September of 2009, but these revenues

nonetheless grew by an impressive 14.4% on an organic,

constant currency basis. This was driven by:

1. Continuing progress with our hybrid go-to-market

strategy in the applications software and services area,

which resulted in 46% (2009: 28%) of licence revenues

coming from direct engagements,

2. Improving sales execution across the Americas, EMEA

and Asia Pacific in both our applications software and

services area and OEM/POS product lines,

3. The acquisition of 170 Systems in September of 2009 and

4. A gradual although not pervasive recovery in the global

economic environment.

This growth, coupled with the benefit of cost saving

measures implemented in prior years and the ongoing

prudent management of expenses, yielded an adjusted

EBITA of $24.8m (2009: $13.8m) equating to an 11.5%

margin (2009: 8.1%).

Hardware Business As expected, our hardware business revenues declined by

1.7% to $126.6m (2009: $128.8m) as a result of the

increasingly competitive nature of the products distribution

portion of this business. More digital scanners of all types

have progressively been sold by larger distributors of general

purpose information technology products, and end users

have recently started purchasing more front office, desktop

scanners rather than back office, production level scanners.

This latter trend has rapidly accelerated an erosion in both

Chief Executive Officer’s Review 3

Chief Executive Officer’s ReviewReynolds C. Bish

S O F T W A R E B U S I N E S S A D J U S T E D E B I TA

H A R D W A R E B U S I N E S S A D J U S T E D E B I TA

T O TA L A D J U S T E D E B I TA

2009 2010

$13.8m

$24.8m

2009 2010

$8.8m

$1.8m

2009 2010

$22.6m

$26.6m

4 Chief Executive Officer’s Review

average selling prices and gross margins. All of these factors

have resulted in us being less able to leverage our

historically important “value added distribution” capabilities

and lead to an adjusted EBITA of only $1.8m (2009: $8.8m)

equating to a 1.4% margin (2009: 6.8%).

These developments led us in July of 2010 to announce an

exceptional charge of $2.5m in the financial year ended

June 30, 2010 to restructure the hardware business’ sales,

service and administrative functions. These changes will

allow us to better manage and realise operational

efficiencies in those functions, and should result in annual

savings of at least $1.5 million in the current and future

financial years. This will in turn better position the business

for improved operating results and value as we continue to

evaluate the long term strategic value of this business unit.

Total Company Total revenues grew 14.8% to $342.4m (2009: $298.2m)

and our adjusted EBITA grew 17.7% to $26.6m (2009:

$22.6m) equating to a 7.8% margin (2009: 7.6%).

As a result of good operating cash flow generation of $33.9m

(2009: $15.2m), we ended the year with total cash of $55.0m

(2009: $48.1m) taking into consideration the overdrafts after

investing $20.0m on our acquisition of 170 Systems net of

cash acquired and $5.3m on capital expenditures.

We are very pleased with the obvious progress in our

software business, which more than offset the disappointing

results in our hardware business. We look forward to

building on the positive momentum and strong foundation in

our software business and improving the results in our

hardware business.

Operating Highlights and Progress

One of the most notable events during this last financial

year was our acquisition of 170 Systems in September of

2009. 170 Systems was a U.S. based company and leading

provider of financial process automation software. The

company’s flagship product, the MarkView® Financial Suite,

is a proven workflow solution for invoice processing and

accounts payable functions that is fully integrated and

certified for use in both SAP and Oracle enterprise resource

planning (ERP) environments. This is complemented by 170

MarkView Advisor, the industry’s first real time financial

process performance management and cash flow

optimisation software, and SupplierExpress, a software

application that streamlines supplier interaction and enables

more timely, accurate payments. As long time business

partners, the 170 Systems and Kofax software products had

been successfully integrated prior to the acquisition and

deployed at numerous customer sites.

This acquisition was consistent with our stated acquisition

strategy and positioned the Company for leadership in the

important and rapidly growing invoice processing market.

The combination of the 170 Systems and Kofax Capture,

Transformation Modules and e-Transactions software now

allows us to provide the complete invoice processing

solution end users desire, incorporating paper as well as

electronic invoice capture and accounts payable workflow

capabilities. Our integration of 170 Systems was

substantially completed by December 31, 2009 and its

results have been consistent with our original expectations.

In August of 2010, Harvey Spencer Associates, the leading

independent capture software and services market analyst

firm, published its annual report, which notes that:

1. The overall market is expected to expand from $2 billion

in 2009 to over $3 billion in 2013 at a compound annual

growth rate of almost 11%,

2. Kofax increased its overall market share to 11% during

2009 from 10% in 2008,

3. We maintained our dominant leadership position in the

“Image Capture” segment, which is defined as the

scanning, indexing and exporting of document images

and data for archive purposes with a 25% share and

4. We, for the first time, achieved a leadership position in

the “Transaction Capture” segment, which is defined as

the scanning, classifying, extracting critical business

data and exporting of document images and data to

downstream business processes with a 13% share.

It’s clear that we’re pursuing a large and growing market

opportunity, and, in a significant reversal of past years,

we’ve started to once again increase our overall market

share. In addition, we now have a solid leadership position in

both segments that comprise the “enterprise” portion of the

market, which accounts for more than 64% of the total.

During this last financial year we successfully added over

1,900 new customers, not including those arising as a result

of our acquisition of 170 Systems, and closed significantly

more six and seven figure software business sales. For

example, we closed 17 sales greater than $0.5m (2009:10),

representing a 70% increase, and nine greater than $1.0m

(2009:5), an 80% increase. These included the two largest

such sales in the history of Kofax – one for $5.9m to a

leading global freight transport and services company and

another for $4.4m to a major North American financial

services firm.

All of these achievements were the direct result of the

progress we’ve had in implementing our hybrid go-to-market

strategy.

During the year we were also pleased to receive widespread

recognition for our market position and products. This

included:

• The Company being named as the highest performing

vendor in the automated accounts payable market by

Aberdeen Group in its annual e-Payables AXIS report

• Kofax e-Transactions being named a 2009 KMWorld

magazine Awards Finalist

• A “Best Channel Product” award for our Kofax Capture

software from Business Solutions magazine

• The Company being named 164 on Software Magazine’s

27th Annual “Software 500” ranking of the world’s

largest software and service providers

• The Company being ranked number 19 on the “Truffle

100” list of Europe’s largest software vendors

• As outlined above, Kofax again being recognized as a

global leader in the capture market by Harvey Spencer

Associates

In this last financial year we also successfully launched eight

new software product releases:

• Kofax Capture 9.0, to better enable enterprise wide

deployments

• Kofax Transformation Modules 4.5 and 5.0, to enhance

our support for enterprise wide deployments, let

customers more easily leverage large, distributed

workforces and provide improved invoice processing

capabilities

• Kofax Front Office Server 2.7 and 3.0, which rebranded

our Document Exchange Server product, implemented

more collaborative functions such as scan-to-email,

scan-to-fax and a thin client desktop scanner application

for office automation needs and offers better integration

with Kofax Capture and Transformation Modules

• Kofax Express 2.0, to enhance the ease of use and

functionality of this all-in-one scan-to-archive product

• Kofax Desktop 2.0, to add full text optical character

recognition (OCR) capabilities and internationalize this

entry level desktop scanning product that makes

scanning as easy as printing by seamlessly embedding

these capabilities within Microsoft Office 2007

applications

• MarkView Financial Suite 6.5, to more seamlessly

integrate 170 Systems’ flagship product with Kofax

Capture, Transformation Modules and e-Transactions

and extend its international language support

Corporate Mission and Strategies

Our software business is now responding very well to the

strategic initiatives started in February of 2008. As a result,

our mission remains the same – to be the leading provider

of document driven business process automation solutions.

We will pursue this mission by automating manual, paper

based document processes, ingesting electronic documents

and automating related, synergistic business processes. In

essence, by providing the more complete and compelling

solutions our customers desire and need to realise an

acceptable return-on-investment. Over time this will

significantly expand our vision beyond the capture market to

encompass additional growth opportunities.

We intend to accomplish our mission by:

1. Delivering organic software business revenue growth

that meets or exceeds capture market growth rates

while attempting to maintain our hardware business

revenues,

2. Continuing to transform both our software and

hardware business models to improve their adjusted

EBITA margins,

3. Controlling costs to meet or exceed our adjusted EBITA

objectives and

4. Augmenting our organic revenue growth and adjusted

EBITA with strategic acquisitions of complementary

software companies and products.

Specific revenue growth strategies in our software business

include:

1. Continuing to improve our overall market reach, sales

execution and productivity via our hybrid go-to-market

strategy,

2. Reinvigorating and carefully adding new channel

partners,

3. Better selling our higher value proposition, transaction

capture products,

4. Migrating our larger, existing end users from tactical to

enterprise wide deployments and

5. Expanding the channel for our OEM/POS product lines.

We will also look to exploit potential growth opportunities in

our hardware business by adding to our existing product

offerings.

We made a great deal of progress in many of these areas

during this last financial year and created a solid foundation

for more aggressively pursuing our mission and strategies

during the current and future financial years.

Chief Executive Officer’s Review 5

Dividend Matters

After careful consideration of the Company’s future

opportunities, the Board intends to maintain its policy of not

paying a regular dividend in order to invest in better growing

the Company’s software business. As a result, no dividends

were declared or paid during the year ended June 30, 2010.

Board and Management Changes

We continued to transform our executive management team

with seasoned professionals possessing extensive enterprise

software experience. This included the addition of James

Arnold, Jr. as our Chief Financial Officer and an Executive

Director during June of 2010, and Martyn Christian as our

Chief Marketing Officer during July of 2010. Both individuals

possess many years of directly relevant experience and have

already started contributing to our success.

In conjunction with James’s appointment as our Chief

Financial Officer and an Executive Director, Stefan Gaiser

resigned from these positions. No other Board changes

occurred during the year ended June 30, 2010.

Outlook

Kofax’s last financial year ended positively with substantial

progress in our software business, which is now responding

very well to the strategic initiatives started in February of

2008. While we confidently believe we can build upon this

positive momentum and strong foundation in our software

business and improve the results in our hardware business,

the global economic environment is fragile and the extent

and continuation of any recovery difficult to predict.

As a result, during this current financial year management

and the Board expect approximately 10% revenue growth in

the Company’s overall software business – with a higher

growth rate in software licence revenues – and a low single

digit percent decline in its hardware business revenues in

U.S. Dollars on a constant currency basis.

Thank You

Our performance is the direct result of the dedication and

hard work of our valued employees, channel partners and

suppliers, and the continued support of our customers and

shareholders. I would like to use this opportunity to

sincerely thank all of these stakeholders for their ongoing

contributions to our success.

Reynolds C. Bish Chief Executive Officer September 20, 2010

6 Chief Executive Officer’s Review

Chief Financial Officer’s Review

Overview

Against a backdrop of improving but still challenging market

conditions, 2010 was a tale of two businesses. Our software

business overachieved for both the second half and the

full year because our software solutions provide a very

quick return on investment and our switch to a more direct

sales model has proven effective. However, competitive

challenges, including pricing pressures, resulted in our

hardware business underachieving against anticipated

revenues and operating results. As management continues

to drive for increased profitability in both businesses and

directly as a result of some of the inherent challenges seen

in the 2010 results for the hardware business, we initiated

a modest restructuring of that business in June 2010 which

more effectively aligns our cost with expected revenues.

We changed our presentational currency into US Dollars.

Details on this change are reflected in Note 1.

In 2010, total revenues grew 14.8% or $44.2m, to $342.4m.

The software business grew 27.4% during the period with

14.4% organic constant currency growth. While achieving

this significant organic and acquisitive revenue growth, we

substantially completed our transformation of the sales

organisation to our hybrid go-to-market strategy as evidenced

by substantially increasing revenues from direct sales where

in the second half of the year we achieved 48% direct sales

compared to 42% in the first half of the year and 28% in the

second half of 2009. The hardware business declined by 1.7%

for the year (a 3.3% decline in organic constant currency).

Total gross margin was 54.3% up from 52.3% in 2009.

Adjusted EBITA (also known as adjusted operating profit)

increased 17.7% or $4.0m, to $26.6m resulting from a

nominal increase in adjusted operating margin. We

continued to invest in sales personnel and marketing

programs with those expenses rising from 22.3% of

revenue to 26.1%. R&D was down as a percentage of sales

as we began to realise the benefits of cost saving measures

previously announced and benefits from our ability to

Chief Financial Officer’s Review 7

James Arnold, Jr.

Reconciliation of Adjusted Profit Year Ended June 30

2010

EPS in $

2010

$’000

2009

EPS in $

2009

$’000

Profit for the period attributable to the equity holders 0.093 7,616 0.100 8,244Amortisation of acquired intangible assets 0.056 4,628 0.053 4,408Restructuring costs 0.031 2,538 0.066 5,455Share based payment charge 0.054 4,415 0.016 1,318Financial income and expense and other income and expenses (0.015) (1,255) (0.007) (597)Tax effect of above (0.011) (907) (0.025) (2,086)Adjusted profit for the period attributable to the equity holders 0.208 17,035 0.203 16,742

8 Chief Financial Officer’s Review

leverage our lower cost offshore engineering facilities. G&A

was down both in nominal dollars and as a percentage of

revenue as we also began to realise the benefits of cost

saving measures previously announced and reap the

benefits from our recently upgraded corporate infrastructure.

These changes create a much stronger and more scalable

foundation to support the Company’s future growth.

With our enhanced focus on cash we reduced days sales

outstanding in accounts receivable to 67 days from 82 and

increased our cash flow from operations before restructuring

from $15.2m to $33.9m.

Trading Results

For the year, revenues grew by 14.8% to $342.4m (2009:

$298.2m). In organic constant currency terms, total

revenues grew by 6.8%. The software business grew

by 27.4% (14.4% in organic constant currency) with

applications software revenues increasing 29.6% and the

OEM/POS software business rebounding with an increase

of 12.5%. Our total software business revenues now

amount to $215.8m and represent 63.0% of total revenues.

The remaining revenue is derived from our hardware

distribution and maintenance business which declined 1.7%

(a 3.3% decrease in constant currency terms) to $126.6m.

Adjusted EBITA increased 17.7% from $22.6m to $26.6m.

Cost of sales increased to $156.3m from $142.1m due

largely to cost of sales associated with revenue from 170

Systems products. Total operating expenses increased from

$133.5m to $159.5m, up 19.5% due to increased personnel

expenses largely due to the acquisition of 170 Systems

and additional investments in sales and marketing across

the Company. Amortisation of acquired intangible assets,

included under operating expenses, increased to $4.6m

from $4.4m. Share based payment charges increased to

$4.4m compared to $1.3m in the previous year as the prior

year charge was comparably low due to forfeitures of share

based incentives. In addition, we incurred an exceptional

charge of $2.5m in the second half of the year ended June

30, 2010 related to restructuring the hardware organisation.

The restructuring affected our hardware sales, services and

administrative functions and was substantially completed in

June.

In the first half of this past financial year, adjusted EBITA

was $10.0m, a margin of 6.0% on total revenues of

$168.3m. In the second half adjusted EBITA was $16.6m,

with a margin of 9.5% on total revenues of $174.1m. This split

reflects our seasonal sales pattern with a slow first quarter

followed by significantly stronger subsequent quarters.

Adjusted earnings per share (EPS) increased to $0.208

(2009: $0.203). A reconciliation of adjusted profit is provided

in the table below.

Basic earnings per share decreased to $0.093 (2009: $0.100).

Diluted earnings per share decreased to $0.090 (2009: $0.100).

Software Business Revenue Breakdown

Total applications software revenues grew 29.6% for the

year, with the increase mainly due to strong performance in

applications services in the Americas as well as revenue

from our acquisition of 170 Systems. Our applications

software licence revenues increased 22.0% due to growth

in our core business and contributions from the 170 Systems

acquisition. Applications software services revenue

increased 36.8% with 14.0% growth from our core business,

on the heels of a 26.1% increase the prior year, enhanced

by the contribution from our acquisition of 170 Systems. The

growth in our core services was largely driven by an

increase in software maintenance revenues.

Our OEM/POS software business rebounded in 2010 with

an increase of 12.3% after declining 15.5% in 2009. The

increase is attributable to two factors: the overall market

for capital expenditures has improved slightly from the prior

year, thus increasing scanner sales being shipped with VRS

on an OEM basis and increased traction with Kofax Express.

Hardware Business Revenue Breakdown

Hardware revenues in total decreased 1.7%. Hardware

product revenues decreased 1.9% and hardware services

revenues decreased 1.1%. The performance of the hardware

business was negatively affected by increased pricing

competition as broadline distributors continued to expand

into our traditionally strong space. However, based on data

available we believe we have nonetheless increased our

market share with key suppliers and therefore have strengthened

our market position. Our maintenance revenues increased

but were offset by lower installation and other services.

Revenue by Geographic Segments

Revenue in the Americas increased overall by 43.3%.

Applications software revenues grew 50.5%, driven

principally because of continued success with direct sales

for enterprise accounts and revenues from the 170 Systems

acquisition. The growth in our services revenues is primarily

attributable to increased maintenance revenues in our core

business driven by greater emphasis on the value of this

offering and our efforts to ensure renewals. The growth in

OEM/POS revenues, most of which are included in this

region, amounted to 19.2%.

Total revenue in EMEA grew by 3.0% with a 11.5% growth

in applications software revenues and a 1.4% decrease in

hardware revenues. For our software business, we offset

declines in channel revenue with the increased productivity

of the direct sales force. As noted above the hardware

business struggled in the face of increased pricing pressure

from broadline distributors and a reduced need for

installation and other professional services.

Applications software revenues in Asia Pacific increased by

46.0% (an increase of 30.4% in constant currency), driven

almost equally by increases in licence and service revenues.

As we rebuild our Asia Pacific operations, our new sales

leadership achieved increasingly strong results, especially in

the second half of the financial year.

Software Business Revenue Year Ended June 30

2010

$m

2009

$m

% change Organic constant

currency

Applications software licences 87.1 71.4 22.0% 15.4%

Applications software services 104.1 76.1 36.8% 14.0%

Total applications software 191.2 147.5 29.6% 14.7%

OEM/POS software licences 24.6 21.9 12.3% 12.8%

Total software business 215.8 169.4 27.4% 14.4%

Hardware Business Revenue Year Ended June 30

2010

$m

2009

$m

% change Organic constant

currency

Hardware products 90.8 92.6 (1.9%) (3.4%)

Hardware services 35.8 36.2 (1.1%) (2.8%)

Total hardware business 126.6 128.8 (1.7%) (3.3%)

Geographic Segments Year Ended June 30

Americas EMEA Asia-Pacific Total

$m % change $m % change $m % change $m % change

Applications software licences 36.8 22.1% 42.0 17.0% 8.3 56.0% 87.1 22.0%

Applications software services 52.9 79.5% 44.0 6.7% 7.2 35.8% 104.1 36.8%

Total applications software 89.7 50.5% 86.0 11.5% 15.5 46.0% 191.2 29.6%

OEM/POS software licences 21.2 19.2% 3.3 (16.5%) 0.1 (14.9%) 24.6 12.3%

Total software business 110.9 43.3% 89.3 10.1% 15.6 45.1% 215.8 27.4%

Hardware products - - 90.8 (1.8%) - - 90.8 (1.9%)

Hardware services - - 35.7 (0.5%) 0.1 - 35.8 (1.1%)

Total hardware business - - 126.5 (1.4%) 0.1 - 126.6 (1.7%)

Total revenues 2010 110.9 43.3% 215.8 3.0% 15.7 39.7% 342.4 14.8%

Total revenues 2009 78.0 - 209.1 - 11.1 - 298.2 -

The indicated percentage changes are in comparison to the previous financial year.

Chief Financial Officer’s Review 9

Reconciliation of Adjusted Profit Before TaxYear Ended June 30

2010

$’000

2009

$’000

Profit on ordinary activities before taxation 16,264 11,992Amortisation of acquired intangible assets 4,628 4,408Restructuring costs 2,538 5,455Share based payment charges 4,415 1,318Net financial income and expense and other income and expenses (1,255) (597)Adjusted EBITA 26,590 22,576

Tax expense 8,648 3,748Tax effect of above 907 2,086Adjusted tax expense 9,555 5,834Adjusted effective tax rate 35.9% 25.8%

10 Chief Financial Officer’s Review

Research and Development Expenditures

We continued to invest in our market leading software

products through research and development at 9.7% of

revenue but have taken steps to reduce our expenditures

in line with other cost reductions made in the business. For

the period, research and development costs totalled $33.0m

(2009: $29.1m) which represents a 13.4% increase (2009:

4.0%). This increase is largely due to personnel added with

the 170 Systems acquisition. We plan to further reduce

these expenses as a percent of total software revenues

during the new financial year.

Taxation

The tax charge for the year ended June 30, 2010 of $8.6m

reflects a tax rate on profit before tax of 53.2% (2009:

31.3%). This increase is largely due to an increase in share

based payments charges and a change in mix of where

profits are earned and benefits taken. The amortisation of

intangible assets, and the share based payment expense

are, for the most part, not deductible for tax purposes. The

effective tax rate on adjusted profit before tax is reported

at 35.9% (2009: 25.8%) and we anticipate this remaining

in this range after considering the earnings mix and ability

to utilise prior year tax losses. Adjusted profit before tax is

defined as profit before tax adding back the amortisation

of acquired intangible assets, restructuring charges, share

based payment charges and financial income and other

income and expenses, as provided net in the table below.

Balance Sheet

The consolidated balance sheet remained strong with

shareholders equity reported at $179.3m (2009: $175.1m). The

net funds position was $41.5m (2009: $46.8m), with cash and

cash-equivalents of $55.5m (2009: $49.3m) held at year end.

Cash Flow

Operating cash flow generation increased substantially. During

the year ended June 30, 2010, Kofax generated $33.9m (2009:

$15.2m) of operating cash flows before exceptionals, turning

127% (2009: 67%) of adjusted EBITA into operating cash

flow. As a result of the restructuring previously effected, the

Company incurred a cash outflow of $3.5m (2009: $5.2). The

remaining provision amounts to $2.3m, of which the majority

will be settled in the 2011 financial year.

We made an initial payment of $20m for the acquisition of 170

Systems. In addition we invested $5.3m in property, plant,

equipment and other capital items. As described earlier, the

company deployed a standard global accounting and sales

order entry system, which was a much needed improvement,

and made other significant investments to upgrade its

corporate infrastructure. These outflows were offset with

interest received and the disposal of fixed assets, resulting in a

net cash outflow from investing activities of $22.7m.

Cash inflow from financing activities amounted to $9.2m.

Treasury Management

The Company has continued to generate solid cash flows.

Kofax’s policy has been to fund its operations internally

through the use of retained earnings, equity and bank

facilities. Material bank borrowing arrangements are

negotiated by management and approved by the Board of

Directors. Positive cash balances earn floating rate interest

based on relevant national interbank rates.

During 2009, the Company signed a credit facility of $16m

with a major European bank. The credit facility remains in

place until September 2011 and is unsecured.

The Company has significant overseas subsidiaries,

which operate principally in their local currencies. Where

appropriate, intra group borrowings are arranged in local

currencies to provide a natural hedge against exchange rate

movement risks.

During 2009, Kofax discontinued the use of foreign currency

swaps. The swaps did not qualify for hedge accounting

and therefore gains or losses were recorded in the income

statement, and shown along with the gains or losses arising on

the translation of intercompany loans. No loss was recorded in

the income statement in financial year ($0.5m in 2009).

Ordinary Share Matters

At the Annual General Meeting on November 5, 2009 the

shareholders approved the Board’s authority to buy back

up to 10 percent of Kofax’s issued share capital for a period

of one year or the next Annual General Meeting should it

occur at an earlier date. During this past financial year the

Company bought back none of its ordinary shares.

At the beginning of this financial year Kofax had 90.5m

ordinary shares issued. During the year 0.8m shares were

issued to satisfy the exercise of stock options. On June 30,

2010, the Company therefore had 91.3m ordinary shares

issued, of which 5.1m were held in treasury and 3.6m were

held in the Company’s employee benefit trust.

Business Risks and Uncertainties

Under current European Union requirements, the Board is

required to comment on risk factors facing the business.

Details on financial risk factors facing the business together

with details on the Company’s financial instruments are

reflected in Note 26.

As with any business, various risks may affect the Company,

its results and management’s ability to execute. The Board

has implemented systems to identify risks, to assess them

and to ensure that reasonable mitigation and action plans

are in place. The Board is paying particular attention to the

operational risks and uncertainties surrounding the dynamic

economic conditions in many of the Company’s markets.

The following general risk categories have been identified by

the Company:

Rapidly changing technology

As a technology based company, we are subject to rapid

changes in the marketplace in which we compete. We

seek out strategic acquisitions as well as make significant

investments in research and development to ensure that we

remain competitive in the markets we serve.

Structural transition

A particularly challenging area for the Company has been its

complex legal structure and outdated corporate infrastructure.

We made substantial progress during this past financial year

in reducing the number of legal entities we have in place as

well as updating our corporate infrastructure. We will

complete these upgrades and continue to refine our legal

structure throughout the current financial year.

Identification of key employees and retention program

Recruiting and retaining highly skilled personnel is another

key to our success in the future. We’ve made a number of

very significant additions to our management team during

the past financial year and now have a new and more

appropriate management team in place with substantial

“enterprise software” experience.

Go-to-market approach

During the year we made substantial progress in our

transition to the “hybrid go-to-market” model to expand

our market reach by selling direct to end users in addition

to supporting channel sales through value added resellers

and system integrators. This mixed approach has helped us

maintain and improve our revenues during the year despite

global economic challenges.

Financial risks

One of the principal financial risks facing the Company relates

to the movements in exchange rates. The Company derives

its revenues from a variety of currencies, principally from US

Dollars and Euros. Expenses are denominated principally in

US Dollars, Euros and Swiss Francs. Fluctuations in exchange

rates between these currencies may cause fluctuations in

financial results of the Company as the results of overseas

operations are translated into US Dollars for consolidation.

The Company does not hedge the foreign exchange exposure

arising on net investments in or assets and liabilities of

overseas subsidiaries. Assessment of the credit risk profile

of the Company’s key customers and resellers is another key

area of attention.

General economic risks

The economic and trading environment has been challenging

throughout the financial year. The Company has an extended

geographic presence, necessitating a number of local

banking relationships and cash holdings. While the Company

operates a cash pooling system, and has adopted a treasury

policy designed to ensure that it is not over exposed to

any particular bank failure, the risk remains that such a

failure could adversely impact the Company’s assets. The

recessionary trading environment has had a significant impact

on many previously financially stable businesses. While the

Company seeks to minimise the risk of being adversely

affected by the failure of a supplier, a reseller or a customer,

the volatility of trading and its impact on our trading partners

represents a potential risk to the business.

James Arnold, Jr. Chief Financial Officer September 20, 2010

Chief Financial Officer’s Review 11

12 Markets, Products, Services and Customers

Markets, Products, Services and Customers

While information remains the lifeblood of organizations around

the world, paper based, labour intensive business processes

remain pervasive in many industries. In health care, for

example, it is estimated that nearly 90% of patient and claims

related information is paper based. In the public sector, the U.S.

federal government consumes over 110,000 tons of paper

annually. In accounts payable, recent research found that

75% of companies use mostly paper based processes,

taking as long as 33 days to process an invoice at an average

cost of $37. Overall in the U.S. and EMEA, organisations

consume about 20 million tons of paper per year. The cost of

printing, copying, storing and mailing copier paper is 10

times the original purchase price of the paper itself.

As organisations seek to drive down costs and reduce their

dependence on labour intensive processes, the demand for

document capture and business process automation

solutions is accelerating. With a rapid return on investment

— typically less than one year — these solutions are

increasingly viewed by organisations as a strategic

enterprise initiative. A significant number of business

processes such as account applications, order processing,

accounts payable, proof of delivery, claims processing, loan

origination and case management demand the capture and

processing of information and data from within documents.

Organisations are recognising the importance of eliminating

paper from these processes as soon as it is received,

converting the paper to its electronic equivalent, intelligently

classifying and extracting the content in real time and then

delivering it into appropriate workflows and business

systems for immediate action.

For more than 20 years, Kofax has provided award winning

solutions that streamline the flow of information throughout

an organisation by managing the capture, transformation and

exchange of business critical information arising in paper, fax

and electronic formats in a more accurate, timely and cost

effective manner. These solutions provide a proven, rapid

return on investment to thousands of customers in financial

services, government, business process outsourcing, health

care, supply chain and other markets. Kofax delivers these

solutions through its own sales and service organisations,

and a global network of more than 700 authorised partners

in more than 60 countries throughout the Americas, EMEA

and Asia Pacific.

Value PropositionReduce Costs

Speed ProcessingIncrease Information QualityImprove Customer Service

Gain Competitive AdvantageEnhance Regulatory Compliance

Migrate from Paper to a Paper & Electronic Document Environment

Software

Document capture has evolved far beyond its roots in

scanning paper to replace file cabinets. Today, sophisticated

document capture systems feed and initiate transactional

and time sensitive business processes, enabling document

driven business process automation, including

• Transforming paper based documents into digital

images as soon as they enter the organisation;

• Delivering outstanding image quality for any scanned

document;

• Classifying, extracting data and ensuring the accuracy

and validity of the data in any document or form,

regardless of format or type;

• Increasing the ability to perform straight-through

processing of information into workflows and business

systems; and

• Auditing the processing of all documents from point of

receipt through to archiving.

Document driven business process automation requires

integrated solutions that extend from the desktop of an

individual office worker to the department and the

enterprise. The comprehensive Kofax product portfolio

provides such a breadth of functionality and scalability.

Kofax offers unmatched scalability from central to highly

distributed environments, from individual desktops to

enterprise deployments and from basic scanning to powerful

document classification and data extraction. Our market-

leading technology supports a wide variety of input devices

and line of business applications, providing a strong

enterprise-wide platform on which to standardise all of an

organisation’s document driven processes.

Kofax Capture

Kofax Capture is the leading enterprise software solution for

automatically capturing documents from both paper and

electronic sources, extracting key index information, and

delivering that content to archives. Kofax Capture is flexible

and scalable, enabling customers to define where and how

documents are captured, whether in a home office, remote

branch or data centre. The latest version incorporates new

features that enable more efficient deployment and deliver

administration capabilities to support enterprise-wide

installations and other benefits.

Kofax Transformation Modules

Kofax Transformation Modules automatically classify paper

and electronic documents, and then intelligently extract and

validate the accuracy of the information they contain. The

latest release features new enterprise-level processing

capabilities and enhanced data validation and recognition that

significantly increase speed, accuracy and throughput for high

volume document processing.

Kofax e-Transactions

Kofax e-Transactions enables organisations to handle

incoming electronic documents such as invoices through the

same powerful capture solution used for paper documents,

so that all data is extracted, validated and processed in a

consistent way.

Markets, Products, Services and Customers 13

Kofax Front Office Server

Kofax Front Office Server enables customer facing employees

to perform ad hoc scanning from familiar equipment such as

multifunction peripherals (MFPs) and desktop scanners.

Employees can start processes with a few clicks, changing

the days required to ship paper to a central location into just

minutes via electronic transmission. The latest release

enhances the functionality, performance and value by

enabling front office and remote users to directly initiate

document driven processes and workflows.

Kofax Communication Server

The Kofax Communication Server enables the automated

exchange of business critical information, linking devices

such as MFPs, fax and phone systems, media types

including email and SMS, and applications such as ERP and

CRM systems and Kofax Capture. Its Fax-over-IP capabilities

also deliver significant cost savings potential while providing

all the advantages of a traditional fax solution.

Kofax Monitor

Kofax Monitor provides real time monitoring and metrics on

the operational health of capture systems. It examines the

system’s components and its business service viability and

provides real time access to operational information.

Kofax Express

Kofax Express is a state of the art, all in one, scan to archive

application that makes it easy for anyone to quickly scan,

organise and store documents. It’s easy enough for

beginners, but powerful enough for professionals. The latest

release offers new features that enhance the application’s

ease of use and expand its functionality, thereby increasing

productivity and significantly reducing operating costs.

Kofax Desktop

Kofax Desktop is designed to make scanning as easy as

printing, enabling users to scan documents into the

software they use every day, including Microsoft Office

2007, Outlook and SharePoint. The latest release increases

scanning functionality and ease of use by adding full text

optical character recognition (OCR) capabilities, allowing

images to be exported as searchable PDF files and adding

new language versions.

VirtualReScan (VRS)

VirtualReScan is Kofax’s patented image enhancement

software that automatically improves the quality of scanned

images, dramatically improving both scanning productivity

and the efficiency of the automated document capture

process.

MarkView for Accounts Payable

MarkView for Accounts Payable is Kofax’s comprehensive,

capture enabled, process automation platform for accounts

payable. It automates the receipt and capture of paper and

electronic invoices, performs data extraction and perfection,

and manages workflows for routing transactions through

approval and exception handling processes, significantly

reducing cycle times and costs while optimizing process

control and cash flow management.

OEM/POS Software

In addition to delivering software solutions, Kofax also

provides technologies to manufacturers of document

scanners on an OEM basis to enable them to improve

performance and stay competitive, and to a large community

of channel partners who resell Kofax software as a core part

of their business.

Hardware Business

Our EMEA hardware distribution network brings scanning

and storage products to resellers in more than 40 countries.

Our relationships with key manufacturers enable us to offer

an impressive range of document scanners and storage

solutions, and our expertise enables us to provide highly

knowledgeable assistance before, during and after purchase.

Services

Our commitment to excellence includes more than just

developing and providing superior products. It also includes

professional services to deploy Kofax solutions; education

classes and computer based training to develop skilled

resellers and users; post installation software maintenance

and telephone support to assist customers; and hardware

maintenance services in EMEA to keep our customers’

document scanning and storage systems running smoothly.

14 Markets, Products, Services and Customers

Markets, Products, Services and Customers 15

Customers support customers across Europe, including a major financial services company. The Kofax solution enables

MailSource UK to capture, classify and extract data from

incoming mail and deliver the resulting images and data in a

standardised format to customer workflows and

repositories. This reduces manual processing, decreases

operating costs, increases data accuracy and productivity

and improves profitability. It also enables the BPO firm to

meet service level agreements that specify the delivery of

images and data within hours of their receipt.

Every company and government agency has its own specific

business processes and rules. As such, Kofax solutions

adapt to the unique needs of each customer, streamlining

and accelerating document driven business processes from

new account openings for a bank, to claims processing for

an insurance company, to medical records processing for a

health care provider, to invoice processing for almost any

organisation.

Financial Services Health Care

One of the largest financial services institutions in the U.S.

selected Kofax to provide solutions in three divisions: The

wholesale banking division captures data from about 60

million insurance forms, customer account documents,

credit applications, tax forms and invoices received annually

from its network of banking locations; the business banking

division captures and extracts data from about 11 million

financial documents annually; and the corporate properties

group automates its accounts payable process by capturing

and extracting data from the thousands of invoices it

receives annually.

The leading regulator of health and social care services in

England selected a Kofax solution to automatically receive,

exchange and output information from more than 3 million

medical records annually. The Kofax solution enables the

agency to receive documents from social workers, field

representatives and agency staff via fax for processing and

thereby consolidate and streamline its communications into

a centralised, automated system. This reduces labour

intensive, mistake prone manual processing tasks and

allows faster processing times, significant cost savings and

better compliance with stringent health information privacy

and security mandates.

Government Invoice Processing

The U.S. Bureau of the Census, the nation’s leading source of

statistical information about its people and economy, selected

a Kofax solution to digitally capture, match, categorise and

process more than 17 million pages of employment

applications and background materials per year. The Kofax

solution electronically captures and transforms documents

that must be legally assessed and verified quickly, securely

and accurately, enabling the organisation to reduce time

consuming manual tasks, automate paper intensive activities

and process vital data more cost effectively.

Business Process Outsourcing

MailSource UK, a leading business process outsourcing

(BPO) provider of mailroom and document management

solutions, selected a Kofax distributed capture solution to

One of the world’s largest providers of cable, entertainment

and communications products, serving millions of cable,

high speed Internet and digital telephone customers,

selected Kofax to provide an enterprise level automated

invoice and expense report processing solution. The Kofax

solution captures and extracts data from more than 8 million

invoices and expense reports annually. As a result, the

organisation can automate manual, paper based business

processes, reduce costs and improve their operational

efficiency. It further ensures that extracted information from

paper documents is accurate and valid before it is used,

resulting in fewer exceptions, improved data quality and

faster processing.

16 Corporate Social Responsibility

During the financial year 2010, we have further improved

our profile as a socially responsible company through the

rollout of a number of initiatives. The Company’s executive

management is responsible for the continued implementation

and monitoring of the Company’s compliance in all matters

of corporate social responsibility. In addition, the Company’s

corporate social responsibility risks and compliance are

regularly reviewed by the Board of Directors with the

assistance of the Company’s executive management.

Employees

During the year, we continued to implement a series of

new human resources policies and procedures. In addition,

the Company conducted management training sessions

worldwide to further develop consistent and professional

management practices. As at June 30, 2010 the Company

employed 1,150 professionals in 37 countries, making us

a leader in our field in terms of global coverage and the

ability to serve customers both on an enterprise level

as well as locally. We believe that this is a key strength

of the Company. The skills and experience of the people

working for us are the most important factors supporting

this competitive advantage. To successfully exploit all the

opportunities we have and cope with rapidly changing

markets and the challenging economic environment, it is

crucial to continuously attract, retain and develop talented

employees. Therefore, maintaining good relations with our

employees is a high priority at all levels of the organisation.

Kofax has been highly successful in attracting high calibre

professionals and in developing the Company’s talent. James

Arnold, Jr. was hired in June 2010 as the Company’s Chief

Financial Officer and Martyn Christian in July 2010 as its

Chief Marketing Officer, both of whom possess extensive

executive management experience in the enterprise software

market. In addition, the Company continued to hire new sales

executives to greatly enhance its selling capabilities in the

enterprise software market. These hires are part of a series

of successful initiatives to further enhance the Company’s

market position and revenue growth.

The Company’s communications with its employees are a

high priority. We regularly inform all employees about market

developments, changes in our business, and product and

strategy updates. We hold quarterly all-employee meetings,

formal and informal employee briefings, and management

and sales conferences to update and obtain feedback from

employees on all aspects of the business. We make use

of Company email, webcasts and intranet sites to provide

information and news. “This Week at Kofax,” a weekly

newsletter, gives all employees a cohesive, up-to-date look

at the latest news from throughout the organisation.

Our Customers, Suppliers and Business Partners

No company can thrive without a satisfied and growing

base of customers, suppliers and business partners. During

the last year we continued to furnish our business partners

and end user customers with quality products and services

which allow them to increase their competitiveness in their

respective fields. The Company regularly consults with its

customers, suppliers and business partners as to how to

improve its business.

Community

The Company is dedicated to giving back to the communities

in which it conducts its business. During the financial year

2010 the Company therefore donated funds to poverty

assistance and literacy programs. In addition, the Company

implemented a Corporate Donation and Employee Matching

Program, whereby the Company matches donations made

by employees to specifically designated and reputable

charitable organizations.

Health and Safety

The Company recognises its health and safety duties under

the Health and Safety at Work Act 1974 and the Management

of Health and Safety at Work Regulations 1999 as well as

applicable local laws and regulations, and as a result continued

to further implement its health and safety policy during the

financial year 2010. Pursuant to this policy, the Company is

committed to ensuring, as far as is reasonably practicable,

the health and safety and welfare at work of its employees,

consultants, subcontractors and visitors to its facilities.

The Company takes as a high priority the provision and

maintenance of work systems that ensure employees are safe

and without risk to health, and the provision of appropriate

information, instruction and supervision as necessary to ensure

the health and safety at work of all employees, consultants,

subcontractors and visitors.

Environment

The Company is committed to assessing and minimising

its potential impact on the environment and improving its

environmental performance, and as a result continued to

implement its Company wide environmental policy during the

financial year 2010. The Company integrates environmental

concerns into relevant business decisions in a cost efficient

manner. In doing so, the Company promotes environmental

awareness among its employees. The Company further takes

complaints about any breach of its environmental policy

seriously, and shall act to promptly correct any such breaches.

The Company’s environmental policy is available on the

Company’s web site at www.kofax.com/ir.

Corporate Social Responsibility

Equal Opportunity

Kofax is committed to providing a work environment that is

free from unlawful discrimination and harassment in any form.

It is the Company’s policy to comply with all applicable laws

that provide equal opportunity in employment for all persons

and to prohibit unlawful discrimination in employment. This

policy applies in full force to all Company employees around

the world, consistent with local laws and regulations.

Code of Ethics

During the financial year 2010, the Company adopted a Code

of Ethics to ensure that the Company continues its strong

record of responsible business practices and ethical conduct

by its employees. New online training and compliance

programs are being implemented, requiring the active

participation of all employees worldwide. The Company’s

Code of Ethics is available on the Company’s web site at

www.kofax.com/ir.

Future Initiatives

The Company plans to further strengthen its profile as a

corporate citizen during the next financial year and to better

position itself to serve the needs of its customers and

business partners. The Company also plans to implement

more consistent processes, policies and procedures on a

global basis.

Corporate Social Responsibility 17

18 Board of Directors

Executive Directors

Reynolds C. Bish (58) was appointed as Chief Executive Officer and a member of Kofax’s Board of

Directors on November 5, 2007. Reynolds has been active in enterprise software markets for more

than 20 years. In 1989, he co-founded Captiva Software Corporation, which became a leading provider

of input management solutions and a NASDAQ listed company (CPTV). He served as Captiva’s

President and CEO until its acquisition by EMC Corporation in December 2005. He then served as Vice

President of EMC’s Enterprise Software Group until June 2006 when he resigned to take a sabbatical.

Prior to Captiva, Reynolds was President and CEO of Unibase Systems, Inc., the first company to

provide data entry systems on industry standard, open platforms. He has served on the Board of

Directors of many industry organisations, including AeA, AIIM and TAWPI and in 2003 was named

Ernst & Young’s Software Entrepreneur of the Year for the San Diego area. He holds a Bachelor of

Science in Business Administration from the Pennsylvania State University.

James Arnold, Jr. (54) was appointed as Chief Financial Officer and a member of Kofax’s Board of

Directors on June 15, 2010. He has almost 30 years of executive financial management experience.

Most recently, he was with Nuance Communications, Inc., a leading provider of speech and imaging

solutions, where he was Senior Vice President and Chief Financial Officer from September 2004 to

August 2008, and then a consultant to September 2009. From 2003 to 2004, James was Vice

President and Corporate Controller at Cadence Design Systems, Inc. From 1997 to 2003, he held

several senior financial management roles at Informix Software, Inc., including Vice President and

Chief Financial Officer, and from 1995 to 1997, he served as Corporate Controller at Centura Software

Corporation. James began his career at PricewaterhouseCoopers. He holds a Bachelor of Business

Administration in Finance from Delta State University and a Master of Business Administration from

Loyola University.

Non-Executive Directors

Greg Lock (63) is the Company’s Non-Executive Chairman of the Board and Chairman of the

Nomination Committee. In addition to serving on Kofax’s Board, he is Chairman of the Board at

Computacenter plc and a member of the Board of Directors at United Business Media, Liberata plc

and Target Group. Between 1970 and 2000, Greg held various positions with IBM Corporation. Most

notably, from 1998 to 2000, he was General Manager of IBM’s Global Industrial sector. He served as a

member of IBM’s Worldwide Management Committee and as governor of the IBM Academy of

Technology. He holds a Master of Arts in Natural Sciences from Churchill College, Cambridge and is a

Fellow of the Royal Society of Arts, Manufacturers and Commerce. He was appointed to the Kofax

Board on March 15, 2007.

Bruce Powell (61) is Chairman of Kofax’s Audit Committee and a member of its Nomination

Committee. He was involved as Finance Director in the operational management and initial flotations

of Acal Group plc and VideoLogic Group plc (which changed its name to Imagination Technologies

Group plc on August 31, 1999). He has held a portfolio of Non-Executive Directorships of both listed

and unlisted technology companies. Until its recent successful exit in March 2010, he was CFO and

latterly Non-Executive Director of ApaTech Ltd. He holds an FCA and a Master of Arts from the

University of Cambridge. He was appointed to the Kofax Board on March 16, 1996.

Board of Directors

Board of Directors 19

Chris Conway (65) is Chairman of Kofax’s Remuneration Committee and a member of its Audit and

Nomination Committees. In addition to Kofax, he is Non-Executive Chairman of two privately held

technology companies: Artificial Solutions, a private equity backed company that provides customer

service optimisation solutions to a wide range of European clients, and WTG (Web Technology Group),

which provides web-based services to U.K. government and commercial enterprises. He holds a

Bachelor of Arts from the University of South Africa. He was appointed to the Kofax Board on

December 15, 2004.

Mark Wells (54) is a member of Kofax’s Audit, Remuneration and Nomination Committees. He is

Non-Executive Director of INVU Plc, Charteris Plc and Chairman of Truthtek Limited. Previously Mark

was Non-Executive Deputy Chairman of CODA Plc before its sale to Unit 4 Agresso in 2008. He holds

a Bachelor of Science in Electronic Engineering from the University of Bath and a Master of Business

Administration from Cranfield University. He was appointed to the Kofax Board on

December 15, 2004.

William T Comfort III (44) is a member of Kofax’s Remuneration and Nomination Committees. He has

extensive experience in investing in the public and private markets. In 2003 he founded Conversion

Capital Partners Ltd, an investment partnership with offices in London and New York. Prior to

Conversion, he worked for CVC Capital Partners and advised Citicorp Venture Capital in London,

focusing on European mid to large management buyouts. He is currently Chairman of the marketing

technology solutions company Lyris, Inc. He holds a Bachelor of Science in Business Administration

from Boston University and a Juris Doctor and Master of Laws in tax law from New York University

School of Law. He is also a member of the New York State Bar. He was appointed to the Kofax Board

on August 24, 2007.

Joe Rose (59) is a member of Kofax’s Remuneration and Nomination Committees. He brings extensive

board and executive management experience in the software, business process outsourcing (BPO)

and other technology based industries to Kofax, having formerly served as a Non-Executive Director

alongside then CEO Reynolds C. Bish at Captiva Software Corporation and as a Director at Attenex,

Inc., Form Maker Software, Inc., Identitech, Inc., SourceCorp, Inc. and People Support, Inc. and in

executive management positions at companies such as SourceCorp, Inc., Form Maker Software, Inc.,

National Data Corporation and John H. Harland Company. He is currently President, CEO and Director

at Health Payment Specialists, Inc. (HPS) and serves on the Board of eOriginal, Inc. and its parent

company, Paperless Transaction Management as well. He holds a Bachelor of Arts degree from Texas

Tech University. He was appointed to the Kofax Board on April 1, 2009.

20 Executive Management Team

Reynolds C. Bish (58) was appointed as Chief Executive Officer and a member of Kofax’s Board of

Directors on November 5, 2007. Reynolds has been active in enterprise software markets for more

than 20 years. In 1989, he co-founded Captiva Software Corporation, which became a leading provider

of input management solutions and a NASDAQ listed company (CPTV). He served as Captiva’s

President and CEO until its acquisition by EMC Corporation in December 2005. He then served as Vice

President of EMC’s Enterprise Software Group until June 2006 when he resigned to take a sabbatical.

Prior to Captiva, Reynolds was President and CEO of Unibase Systems, Inc., the first company to

provide data entry systems on industry standard, open platforms. He has served on the Board of

Directors of many industry organisations, including AeA, AIIM and TAWPI and in 2003 was named

Ernst & Young’s Software Entrepreneur of the Year for the San Diego area. He holds a Bachelor of

Science in Business Administration from the Pennsylvania State University.

James Arnold, Jr. (54) was appointed as Chief Financial Officer and a member of Kofax’s Board of

Directors on June 15, 2010. He has almost 30 years of executive financial management experience.

Most recently, he was with Nuance Communications, Inc., a leading provider of speech and imaging

solutions, where he was Senior Vice President and Chief Financial Officer from September 2004

through to August 2008, and then a consultant to September 2009. From 2003 to 2004, James was

Vice President and Corporate Controller at Cadence Design Systems, Inc. From 1997 to 2003, he held

several senior financial management roles at Informix Software, Inc., including Vice President and

Chief Financial Officer, and from 1995 to 1997, he served as Corporate Controller at Centura Software

Corporation. James began his career at PricewaterhouseCoopers. He holds a Bachelor of Business

Administration in Finance from Delta State University and a Master of Business Administration from

Loyola University.

Alan Kerr (54) is Executive Vice President of Field Operations. He is responsible for Kofax’s customer-

facing functions on a global basis, including all sales, professional services, maintenance services,

channel management, business development and sales operations activities. Alan comes to Kofax from

HP, where he was most recently Vice President of Global Sales and Distribution within HP Software, the

company’s enterprise software group. During his tenure with HP Software, he also served as Vice

President of Global Operations, where he oversaw the integration of Mercury Interactive into the HP

Software organisation. Prior to HP, Alan was part of the executive management team at Peregrine

Systems, Inc, where he was instrumental in restructuring that business prior to it being acquired by HP.

He previously held senior sales management positions at a number of other technology companies,

including Ascential Software, Informix Software, Software AG and Data General.

Martyn Christian (48) is Chief Marketing Officer (CMO), having been appointed as of July 28, 2010. He

is responsible for all marketing initiatives, including brand, product, industry and field marketing

functions. Martyn has more than 25 years of marketing and general management experience within the

software industry. Prior to joining Kofax, he served as Director of Marketing Programs (U.K. & Ireland)

and Vice President of ECM Marketing at IBM. Prior to that, he was Chief Marketing Officer at FileNet

Corporation, where he spent 18 years in a wide range of marketing and sales roles in Europe and the

U.S. He holds a Bachelor of Arts in Business Studies from Coventry University, is a member of the

Chartered Institute of Marketing and is a Fellow and former Chair of the Association for Information and

Image Management (AIIM).

Anthony Macciola (47) is Chief Technology Officer (CTO). He originally worked for Kofax from 1990

to May 2000, when he left to become the Vice President of Worldwide Marketing for Lantronix, Inc., a

company focused on the network enabling market. In 2002, Anthony returned to Kofax. He holds a

Bachelor of Arts in Management Information Systems from California State University, Fullerton.

Executive Management Team

Executive Management Team 21

Bradford Weller (52) is Executive Vice President of Legal Affairs, General Counsel and Company

Secretary. Brad has had a successful career both working as an attorney at a law firm and as an in house

attorney at a number of publicly held technology companies, including Captiva Software Corporation,

where he worked for then CEO Reynolds C. Bish as General Counsel, Vice President of Legal Affairs and

Secretary. Brad has complete responsibility for the management of all of our in-house attorneys, our use

of any and all external law firms and our corporate Secretary function. He holds a Bachelor of Arts in

Economics from Stanford University and a Juris Doctor from Hastings College of the Law.

Jim Nicol (57) is Executive Vice President of Products at Kofax. He served as Vice President and

General Manager of the Captiva Product Business Unit at EMC, where he was responsible for product

strategy, product management and marketing, engineering, quality assurance, mergers and

acquisitions, and strategic initiatives. Prior to Captiva, Jim led engineering, quality assurance and

product management at FutureTrade, Inc. He also served as Vice President of Development &

Technical Operations at Previo and held several senior management positions at IBM and Lotus

Development Corporation, where he assisted the CEO with the merger of specific IBM and Lotus

products. He holds a Bachelor of Science in Computer Science and a Master of Science from California

State University, Chico.

Lynne Scheid (52) is Vice President of Human Resources. She has been with Kofax since 1989.

Before joining Kofax, she worked in Human Resources for Century Data Systems (a Xerox company)

and Charleston Associates (eventually acquired by Anacomp). Lynne is responsible for all human

resources functions. She holds a certificate in Human Resources Management from the University of

California, Irvine, and she studied Business Administration at California State University, Fullerton.

Charles Padgett (50) is Senior Vice President of Acquisitions and Integration. He is responsible for

Kofax’s acquisition activity, including integration of acquired businesses into the Kofax organisation.

Charles has held a number of executive and management positions with publicly held and early stage

private companies, including EMC, Captiva, Boeing, Wireless Facilities, The Walter Group, British

Petroleum and KPMG. Charles holds a Bachelors Degree in Finance and History from the University of

Oregon and in Accounting from the University of Alaska, Anchorage.

22 Directors’ Report

The Directors present their Annual Report, together with the

audited Financial Statements of the Company (Registration

No. 3119779) for the years ended June 30, 2010 and 2009.

Principal ActivitiesThe principal activities of the Company comprise development

and marketing of document driven business process

automation solutions and services.

Business ReviewThe Business Review and Financial Review on pages 2 to 11

of this report include the Directors’ view on the development

of the business, its position at the end of the financial year,

and future developments, with reference to performance

indicators used by the Directors to monitor the business.

The key performance indicators discussed are:

• Total Revenue

• Software Business Revenue

• Adjusted EBITA

• Adjusted EPS

• Cash Flow and Balance Sheet

The Chief Financial Officer’s report on pages 7 to 11

discusses the principal risks and uncertainties facing the

business.

The Corporate Social Responsibility Report on pages 16 to

17 discusses the Company’s activities in the areas of

environmental matters, social and community issues and

company employees.

Financial InstrumentsThe financial risk management objectives and policies of the

Company are discussed in note 26 to the Financial

Statements on pages 74 to 78.

Profits and Dividends The profit attributable to shareholders for the year ended

June 30, 2010 was $7.6m (2009: $8.2m).

In the year ended June 30, 2010 the Directors decided to

suspend the payment of a regular dividend until further notice.

Research and DevelopmentResearch and development costs amounted to $33.0m (2009:

$29.1m). The basis of accounting for this expenditure is set

out in note 1 to the Financial Statements on page 51.

Share CapitalDetails of changes in the issued share capital of the Company

during the year ended June 30, 2010 are set out in note 29.

At the forthcoming Annual General Meeting, the Company

will be seeking authority to purchase its ordinary shares.

Authorities were previously granted at the Annual General

Meeting in 2009, but expire at the close of the forthcoming

meeting.

There were no purchases of the Company shares by the

Company during the year ended June 30, 2010.

The Company holds a total of 5,068,374 ordinary shares in

treasury being 5.88% of the total issued share capital of

91,270,015 at June 30, 2010.

Directors and Directors’ InterestsThe names and biographical details of the current Directors

appear on pages 18 and 19. James Arnold, Jr. was appointed

to the Board of Directors as the Chief Financial Officer on

June 15, 2010 and Stefan Gaiser retired as Chief Financial

Officer on the same day. No other Board appointments or

resignations were made during the course of the year.

The beneficial interests of the current Directors and their

families in the issued share capital of the Company as well

as details of share options granted to the Directors are given

in the Remuneration Report on pages 34 to 39. No Director

or member of the executive management team had any

interest in any subsidiary at the beginning or end of the year.

Qualifying Third-Party IndemnitiesThe Company had granted an indemnity to all of its Directors

against liability in respect of proceedings bought by third

parties, subject to the conditions set out in the Companies

Act 2006. Such qualifying third-party indemnity provision

was in force throughout the financial year and remains in

force as at the date of approving the Directors’ report.

Employees’ InvolvementThe success of the Company depends on the quality and

performance of its employees, and the Company ensures

this by communicating with their employees about both

local and Company wide matters. This communication is

conducted through personal briefings, regular meetings and

emails on a regular basis. The Company encourages all of its

employees to participate in the growth of the Company and

welcomes staff input at all levels. Some employees share

directly in the success of the Company through the Kofax

share option schemes and performance based incentive

cash compensation schemes. Employee involvement in

profitability of the Company is encouraged through bonus

and profit related pay schemes. Training programmes for

staff continue to focus on management, technical and

people skills to meet the needs of a high growth business.

An induction programme is in place for all new hires.

Directors’ Report

Directors’ Report 23

Disabled EmployeesThe Company is committed to a policy of recruitment and

promotion on the basis of aptitude and ability without

discrimination. The Company gives full consideration to

applications for employment from disabled persons where

the requirements of the job can be adequately fulfilled by a

handicapped or disabled person. Where existing employees

become disabled, it is the policy of the Company wherever

practicable to provide continuing employment under normal

terms and conditions and to provide training and career

development and promotion wherever appropriate.

Payment of SuppliersThe Company is responsible for agreeing to terms and

conditions with suppliers when purchase contracts are

entered into, taking into account good practice, and seeks to

abide by these payment terms whenever satisfied that the

supplier has provided the goods or services in accordance

with the agreed terms and conditions. At June 30, 2010, the

Company had an average of 62 days’ (2009: 34 days)

purchases owed to trade creditors.

Major Interests in SharesThe information provided to the Company pursuant to the

Financial Services Authority’s (FSA) Disclosure and

Transparency Rules (DTRs) is published on a Regulatory

Information Service and on the Company’s website. As at

September 20, 2010, the Company had been notified under

DTR 5 of the following significant holdings of voting rights in

its shares:

Name Number of ordinary shares

Percentage of issued share capital (%)*

65 BR Trust/ Natasha Foundation /Conversion Master Fund Limited** 16,115,702 18.63%Fidelity Investment LLP 8,398,587 9.71%Aberforth Partners LLP 4,266,754 4.93%AXA Investment Managers 4,190,558 4.84%Ogier Employee Benefit Trustee Limited 3,647,683 4.22%Legal & General Investment Management 3,393,212 3.92%

*as at the date of the report

**William T Comfort III indirectly holds 16,115,702 or 18.63% of the current shares outstanding through the aggregated holdings of 65 BR Trust, the Natasha Foundation and the Conversion Master Fund Limited.

Please note that the percentage figures are based on the

shares in issue excluding treasury shares. The total number

of ordinary shares in issue as of September 20, 2010 was

91,593,466. There are 5,068,374 ordinary shares held in

treasury, and therefore the total number of ordinary shares

with voting rights in the Company is 86,525,092.

AuditorsDuring the year, Ernst & Young LLP remained as the

Company’s auditors. Ernst & Young LLP have expressed their

willingness to continue in office. Accordingly, a resolution to

reappoint Ernst & Young LLP as the Company’s auditors and

authorising the Directors to fix their remuneration will be put

to the forthcoming Annual General Meeting.

Annual General MeetingNotice of the Company’s Annual General Meeting is given

on pages 88 to 90 at the end of this document. The first part

of the meeting will consider the following matters that

comprise the ordinary business of the meeting and which

will be proposed as ordinary resolutions:

• Approval of the accounts of the Company for the

year ended June 30, 2010 and the reports of the

Directors and auditors thereon (resolution 1)

The directors of the Company must present the

accounts to the AGM.