MKT-R&A2005
Pace Micro Technology plc
Victoria Road  Saltaire  Shipley
West Yorkshire  BD18 3LF  England
Tel +44 (0)1274 532000   
Fax +44 (0)1274 532010
www.pacemicro.com
bringing technology home
pace micro technology plc
report & accounts
2005
pace micro technology plc report & accounts 2005
Registered in England No 1672847
Pace F/B Cover  25/7/05  10:58 am  Page 1 Contents
1 Highlights
4 Chairman’s statement
7 Chief executive’s review
17 Finance director’s review
21 Product review
25 Report of the directors
32 Remuneration report
40 Statement of directors’ responsibilities
41  Independent auditors’ report
42 Financial statements
48 Notes to the financial statements
67 Five year record
68 Directors, secretary and advisers
69 Shareholder information
70
Pace Micro Technology plc Report & Accounts 2005
Notes
Financial highlights
•
Turnover for the year (53 weeks) of £253.3m (2004: £239.9m)
•
Profit before tax, amortisation of goodwill and exceptional items of £8.1m (2004: £5.9m)
•
Full year gross margin of 20.8% (2004: 19.0%)
•
Significant gross margin improvement from 16.8% in the first half to 26.6% in the second 
half, reflecting the improved mix of Pace products to higher margin products together with
increased service and engineering revenues 
•
Adjusted diluted earnings per share (stated before exceptional items and amortisation of 
goodwill) of 5.8p  (2004: 4.5p)
•
Net cash position £26.4m (2004: net cash £20.4m)
•
Volume shipments increased to 3.4 million set-top boxes (2004: 2.2 million)
Pace F/B Cover  25/7/05  10:58 am  Page 2 Business highlights
•
Further penetration of the US market achieved
with multi-year agreement with Comcast Corporation,
the US’s largest provider of cable, entertainment
and communications.
•
Development of existing customer relationships 
through new product announcements with Premiere
in Germany and Foxtel in Australia.
•
Additional new business signed including UPC in
The Netherlands and Galaxy in Hong Kong.
•
Capitalising on strengths of engineering and
technology teams to develop competitiveness and
leadership in the set-top box market and explore 
diversification opportunities.
•
Continued focus on productivity and performance 
improvement.
02
Pace Micro Technology plc Report & Accounts 2005
R&A Section 1  25/7/05  8:31 am  Page 1 Pace is one of 
the world’s most
successful
developers of 
digital set-top 
box technology
Major Pace customers
•
BSkyB - operator of the UK’s largest digital platform
•
Comcast - the US’s largest provider of cable, entertainment and communications products
and services
•
Foxtel - Australia's leading subscription television provider
•
Kabel Deutschland (KDG) - Germany’s largest cable network operator
•
Ntl & Telewest - the UK’s leading providers of broadband communications
•
Premiere - Germany’s largest digital TV operator and only national payTV broadcaster
•
Sky Italia - The largest pay television provider in Italy
•
Sky New Zealand - New Zealand's main payTV operator
•
Time Warner Cable - owns and manages cable systems serving 10.9 million subscribers in
27 US states
•
Viasat - The largest commercial TV operator in Northern Europe
Pace technology has been installed in over 20 million homes worldwide since the Company was
founded in 1982. Pace is the world’s largest dedicated developer of digital set-top box technology
and the largest supplier of set-top boxes in Europe.
Pace develops innovative set-top box solutions and services for digital television broadcasters and
operators on satellite, cable, terrestrial and telecommunications platforms. At the Company’s
headquarters in Saltaire and at bases in the US and France, Pace has a world-leading engineering
team. The team’s expertise spans the digital spectrum, from basic digital TV, through to interactive
services and the latest innovations in personal video recorder and high definition technology.
Digital technology is constantly evolving. Pace is always working on new and innovative solutions that
will exploit the full potential of digital television to excite end-users and create new business
opportunities for the Company’s diverse customer base.
Our Vision
We will be the world’s best supplier of products and services for the digital home.
Major customers
03
Pace Micro Technology plc Report & Accounts 2005
R&A Section 1  25/7/05  8:31 am  Page 2 Chairman’s statement
The Board of Pace Micro Technology plc established a strategy two years ago to
broaden its customer base and to align its business to the global payTV market.  The
overall aim was to broaden the geographical spread of Pace’s sales from an over
dependence on a maturing UK market, and, in particular, to obtain a much improved
position in the US market which represents an estimated 40% of the global payTV
market.  In order to fulfil this strategy, we have been investing in the US market, at the
same time as focusing research and development on more complex products, such
as the Personal Video Recorder (PVR) and products for High Definition (HD) TV.
With the announcement of the agreement with Comcast in May 2005, Pace is well
positioned to meet these strategic aims, although there remains considerable work to
be done during the course of this year to deliver on the contractual requirements. This
work makes predicting the results for this year harder than ever, however we are
confident that, by the end of this year, the business will be in a strong position for
continued growth.
The Pace Board is therefore delighted to report a further improvement in Pace’s result
for the year ended 4 June 2005.  
We have achieved this improvement by delivering on a range of new contracts won in the previous year and a series of new
business wins, most importantly in the US, due to our leadership in higher value set-top box technologies used in PVR and
HDTV. At the same time we have continued to manage the level of business costs. Several new initiatives to improve
productivity and extend our outsourcing activities are now under way as the management team recognises there is still
significant room and opportunity for performance improvement.
Results 
Profit before tax, amortisation of goodwill and exceptional items improved to £8.1m (2004: £5.9m) on turnover of £253.3m
(2004: £239.9m), with profit before tax of £7.1m (2004: £3.9m).  Basic earnings per share were 5.4p (2004: 3.7p). Before
goodwill amortisation and exceptional items, adjusted earnings per share were 5.9p (2004: 4.6p) and adjusted diluted
earnings per share were 5.8p (2004: 4.5p).
The Board has decided not to recommend a dividend (2004: nil).
Trading review
During the period Pace set a new record for set-top box shipments, with volumes increasing by 55% to 3.4 million. To
improve margin performance Pace has limited its role in the low margin market for free-to-air set-top boxes and shifted the
balance of shipments towards higher specification, higher-margin products for payTV operators. As a result, and with the
addition of more service and engineering revenues, the Group increased annual gross margins for the year as a whole to
20.8% (2004: 19.0%) from 16.8% in the first half. Underlying product margins for the year were similar to the prior year.
The trading environment continues to be highly competitive and the management team is driving initiatives to improve
efficiency and cost-effectiveness. These initiatives, which involve significant changes to how we manage our engineering
development process, have associated implementation costs and gave rise to some exceptional costs in the year. There will
be further such costs in the year ahead. In addition we have expanded Pace’s team of outsourced software engineers at
Tata Elxsi in Bangalore, India and engaged an additional large scale manufacturing partner with design capabilities to
complement our existing successful relationship with Solectron. 
04
Pace Micro Technology plc Report & Accounts 2005
Sir Michael Bett, CBE
Chairman
R&A Section 1  25/7/05  8:31 am  Page 3 United Kingdom
In the UK, Europe’s most mature digital TV market, BSkyB continues to be an important customer as their Sky+ PVR service
expands.  We also made shipments to our cable customers Ntl and Telewest and won new business with a number of
smaller companies. Total UK shipments remained constant at 1 million boxes and represented circa 40% of total revenues.
EMEA
Shipments into Continental Europe increased to 1.9 million boxes (2004: 0.7m), largely due to our successful Sky Italia
relationship. Pace was the lead supplier in Sky Italia’s digital upgrade programme, which took place in the first half of the
financial year and volumes were substantially lower in the second half as the upgrade programme completed.  
Pace’s relationship with Premiere in Germany expanded, with new orders for PVR and Europe’s first high definition set-top
box for commercial deployment.  In Scandinavia and Germany we also continued to work with Viasat, for which we now
provide a PVR, and for KDG.  The year ended with another important customer win at UGC, owners of cable operator UPC.
Pace was selected as a key vendor to supply set-top boxes for UPC’s digital rollout in The Netherlands.
Asia Pacific
In Asia Pacific, Pace’s largest customer was Foxtel in Australia, which continued to purchase our cable and satellite set-top
boxes and launched iQ, a new PVR service for which Pace was sole launch supplier. Elsewhere we maintained our long-
term relationship with Sky New Zealand and are now working with them on PVR, in addition to establishing a number of new
relationships with operators in markets as diverse as Pakistan, China and Hong Kong. Total shipments remained at 350,000
units.
North America
In the US we continued to invest heavily, as we have done over the last five years.  Set-top box shipments reduced slightly
to 138,000 units (2004: 162,000) but the region’s contribution objective was met due to increased engineering revenues.
More importantly, we have won new business with Comcast, the world’s largest and most important digital TV operator.  The
agreement includes a set-top box order with a total purchase value of between $375 million and $550 million, a joint
development agreement whereby Pace and Comcast will work together on new technology projects and a licence for
Comcast to use Pace’s Engineware™ software platform in the North American market.  
This agreement demonstrates that important operators now perceive Pace as a technology partner that can add value. It
puts us at the centre of the world’s largest payTV operator in the world’s most technologically advanced payTV market.  We
have also shipped product to our other US cable customers Time Warner Cable and Bright House, our Canadian IPTV
customer Sasktel, and won business with Canadian cable operator Videotron. 
Future technologies
We continue to invest in technology development so that we can win the more profitable business ahead of the competition.
For example, our long-term investment in multiroom and home networking technologies – distributing television around the
home to multiple TVs – is beginning to excite our markets.  Multiroom and home networking is expected to become an
important long-term goal for advanced operators as it supports high value customer retention and revenue expansion.  
Next year we will increase our focus on the new advanced coding standards, the growth of next generation mobile and high
definition PVR platforms as well as expanding our work on alternative delivery platforms such as internet protocol television
(IPTV).  At the same time we will continue to investigate new markets in which we can apply our technological skills for new
opportunities within the Intelligent Home.  
Financial review
Overheads have increased, due to the investment required to support Pace’s new business wins.  Selling, general and
administrative expenditure (excluding operating exceptional items and goodwill amortisation) rose to £20.9m (2004: £18.5m)
and engineering development expenditure rose to £24.0m (2004: £21.3m).  As a percentage of revenue, total overheads
excluding operating exceptional items and goodwill amortisation, were 17.7% (2004: 16.6%).
The Group continued its policy of providing for all current claims relating to the alleged use of the intellectual property of
others and was able, as in previous years, to release part of the overall provision. In the year ended 4 June 2005, the level
of releases exceeded new provisions by £0.8m (2004: £0.6m).
05
Pace Micro Technology plc Report & Accounts 2005
R&A Section 1  25/7/05  8:31 am  Page 4 The period has benefited from a tax credit of £4.8m relating to the agreement of a prior year tax computation with the UK
Revenue and Customs.  At the end of the year we have approximately £12m of UK tax losses of which £8m is recognised
in the form of a deferred tax asset.  In future years, when UK tax losses are utilised, the Group will again bear UK corporate
tax charges.
In January 2005, Pace agreed to pay a civil penalty of £450,000 in relation to a settlement with the Financial Services
Authority (FSA), without admitting the FSA's conclusions.  An exceptional provision of £1.5 m was made in the year ending
29 May 2004 to cover costs in relation to this matter and, following insurance recoveries and the payment of the penalty,
there has been a £0.2m release of the provision in the period. 
Net assets at 4 June 2005, excluding goodwill, increased to £53.0m (2004, as restated: £40.1m).  Net current assets were
£61.0m (2004: £54.1m).  Net cash balances at the year end were £26.4m (2004: £20.4m).  
Stocks at the year end amounted to £10.1m (2004: £10.0m), comprising £2.3m of raw materials and work in progress and
£7.8m of finished goods. The stock turnover rate was over 20 times based on year end stock levels (2004: 19 times).
Debtors of £55.8m (2004: £64.7m) included insured balances of £36.8m (2004: £38.5m).  The trade debt collection period
was 8 weeks (2004: 11 weeks). 
International Accounting Standards
In the last year Pace commenced an analysis of the impact of International Accounting Standards (IAS), which the European
Commission requires all EU-listed public companies to adopt.  Pace’s 2006 accounts will be presented under the IAS format,
which for the year under review would have provided an improvement to profit before tax of £1.9m. The principal ongoing
impact of IAS for Pace is the requirement under IAS38 to capitalise engineering development expenses, with subsequent
amortisation as product shipments are made.  
Board appointments
Two new Non-executive Board members were appointed during February.  The first, Marten Fraser, was the senior partner
at PricewaterhouseCoopers Nottingham and the second, Pat Chapman-Pincher, is a founding partner of the Cavell Group.
Bob Lambourne, a Pace Non-executive Director since 1996 has decided to retire from the Board at the AGM and our thanks
go to Bob for his commitment and diligence over the last nine years.    
Outlook
Looking forward Pace’s full year business outlook is in line with expectations. Revenues are likely to exceed current
expectations although gross margins will be lower than last year. 
In the UK, a market that is becoming increasingly mature, we expect units and revenues to fall. Revenues in continental
Europe and APAC are also expected to fall, although with a lower number of more complex units being shipped, average
selling prices will rise. In the US, we continue to focus our efforts on building our relationships with Comcast, Time Warner
and Bright House, as well as developing increasingly good relationships with other important operators.
There will be an uneven split of revenues between the first and second halves of the year, as deliveries on our new US and
European business start at the end of calendar 2005 and grow in 2006. As a result second half revenues for the next year
are expected to be significantly ahead of first half revenues, with first half results expected to be below break-even. The new
business Pace will deliver on during the course of next year includes a substantial range of new products and the outcome
for the year is dependent on good execution of these contracts. 
Pace is now in a much improved position and the Board is enthusiastic about the Company’s current and future
opportunities and is confident in the ability of Pace’s employees to deliver upon them.
Sir Michael Bett
Chairman
12 July 2005
06
Pace Micro Technology plc Report & Accounts 2005
R&A Section 1  25/7/05  8:31 am  Page 5 Chief executive’s review
The last 12 months have been a year of active transition for Pace.  
Following a series of new customer announcements in Europe and Australia made in the previous year, our company has
continued to grow. We have significantly reinforced our position in the market with a succession of further business wins.
Crucially, we have made important inroads into the US market, the world’s largest market for digital payTV technology, by
winning new business with Comcast Communications.  
We continue to work with the world’s most successful and innovative payTV operators, ranging from BSkyB in the UK to
customers in the US and Foxtel in Australia. To ensure we are in the best possible shape to capitalise on the opportunity
these substantial customers present, we have also taken on new organisational challenges to make our business more
efficient and responsive. 
Markets
The global market for digital set-top box products continues to grow.  During 2004 over 45 million digital set-top boxes were
shipped worldwide, with the market predicted to grow by a further 29% to over 58 million set-top box shipments during
2005 and to 132 million by 2010
1
. Within this market Pace has been assessed as the world’s fifth largest supplier
2
– our
ongoing aim is to be one of the top three.  
Our focus though is not just on the total number of set-top boxes we ship, but also the type of products we create and the
companies we deliver them to.  In the last year our attention has once again totally returned to the payTV market, moving
away from less profitable ‘free-to-air’ markets. 
Set-top box demand from the payTV sector has also been typified by a growing demand for more ‘added value’ products
such as personal video recorder (PVR) products and a significant increase of interest in high definition (HD) technology
outside of the US.  Not only are these more profitable products for Pace to develop, capitalising on our engineering
capabilities, they are more attractive to payTV operators as they help retain customers and increase average revenue per
user (ARPU).  
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Pace Micro Technology plc Report & Accounts 2005
We have made important inroads 
into the US market, the world’s
largest market for digital payTV
technology, by winning new
business with Comcast.
John Dyson
Chief Executive
1
Source: Strategy Analytics, Digital TV Devices Forecast, April 2005.
2
Source: Strategy Analytics, November 2004.
R&A Section 1  25/7/05  8:31 am  Page 6 08
Pace Micro Technology plc Report & Accounts 2005
En-route to being 
the best set-top 
box supplier in 
the world.
R&A Section 1  25/7/05  8:31 am  Page 7 09
Pace Micro Technology plc Report & Accounts 2005
EMEA
Our European focus last year was primarily on the continent, as the major operators continued their transitions to digital,
catching up with developments in the UK led by BSkyB. BSkyB has set the standard in Europe since it launched digital in
1998 and remains an important Pace customer for standard digital set-top boxes and the Sky+ PVR, for which it now has
770,000 subscribers
3
. We have also continued to work with both of our UK-based cable operators Ntl and Telewest. 
In addition, we won new business with Ntl Ireland and SSVC, a registered charity that provides radio and television services
to British armed forces around the world. British troops are now using Pace set-top boxes to watch TV in military bases and
HM ships in diverse locations, from the Falkland Islands to Norway, from Belize to the Gulf and Afghanistan.
Relationships with all of our customers in continental Europe deepened. Importantly, we made some significant steps
forward with Premiere, Germany’s largest digital TV operator.  We began to ship an entry-level satellite set-top box for this
operator in May 2004. Since then we have gone on to supply a cable set-top box, which was the first to achieve network
certification from both Premiere and our second German customer KDG, the country’s largest cable operator.  We also made
two important new product announcements with Premiere: the first was for a satellite PVR for shipment in Summer 2005;
with the second for a high definition set-top box, which will be used to deliver Europe’s first MPEG-4 high definition payTV
service from November this year. 
Elsewhere in Europe, we continued our successful relationships with Sky Italia in Italy and Viasat in Scandinavia.  Sky Italia
was one of our most important customers during the first half of the year as it continued to work through its major launch
phase, which involved replacing set-top boxes for a large number of existing subscribers. As with all payTV operators, its
rate of growth fell back after the launch phase to a more ‘normal’ level of rollout. 
We are keeping a close watch on other large operators in continental Europe and the Middle East and believe we are in a
strong position to win more business in this region as more markets move to digital over the next two to three years. 
Relationships with all of our
customers in continental Europe
deepened. Importantly, we made
some significant steps forward
with Premiere, Germany’s largest
digital TV operator.
3
BSkyB results to 31st March 2005
R&A Section 1  25/7/05  8:31 am  Page 8 North America
We have turned a very significant corner in the US following our contract announcement with Comcast at the end of May.
Over the last five years we have invested approximately £35 million in our US operations, confident that, as this is the world’s
largest payTV market, we would be able to recoup our investment over the longer-term. This is what is now beginning to
happen. The Comcast contract is significant for Pace on a number of fronts. Importantly it includes a major commitment to
purchase Pace set-top boxes, which is worth between $375 million and $550 million to us over the next three years.  
Comcast will also licence our EngineWare
TM
software for the North American market, via a one-off payment that has now
been made. Engineware was a fundamental development to Pace’s US cable set-top box strategy and leverages our
substantial experience of the wide variety of technologies used in set-top box deployments to create new middleware
performing core set-top box processing functions. For Comcast, EngineWare is useful on a number of fronts and will
support their implementation of the emerging US middleware standard OCAP
4
. Our investment in one common software
architecture will enable Pace engineers to provide solutions rapidly across a wide range of emerging and current hardware
architectures, from simple zappers to high-end PVRs.
Finally, as part of the agreement, Pace and Comcast will jointly fund future technology development to be carried out by a
dedicated Pace development team. This element of the agreement is very exciting for Pace as it places us at the centre of
the world’s largest payTV operator and offers us an opportunity to be at the forefront of their development activities.  
The first box that we will deliver as part of the Comcast agreement is the high definition TDC775 otherwise known as Tahoe.
This highly sophisticated box is part of our growing range of new products for this market, which includes a new ‘all digital’
platform that has been designed to support US cable operators as they push for all digital networks. The range now
includes, through the product development work we have done for Comcast, set-top boxes that can operate on Motorola
networks, which has expanded our US market reach.
It is difficult for any non-US company to break into the US, particularly, when as in our sector, there are some very powerful
and well-established local suppliers. During our time in the US we have seen other non-US set-top box companies come
and go. Breaking into the US takes time, skill, persistence and a long-term vision. We’ve always believed that Pace’s
experience of markets outside of the US would bring a new and fresh perspective to the US market, which we have been
able to demonstrate over the last few years and have taken to a new level with our Comcast announcement.  
We should not let our Comcast agreement overshadow our other successes in North America. We continue to work with
Time Warner and Bright House, shipping our well-established DC551 high definition set-top box, which has been our main
US box for the last two years. We have added to the DC551HD customer list with Videotron, who will be using this and our
standard definition DC511 for its illico Digital TV service in Canada. Additionally in Canada we won new business with
Sasktel, a company we have worked with on an exclusive basis since 2002.  Sasktel is now using Pace’s DB240 IP set-top
box as they grow their TV over DSL service, which is the largest of its kind in North America. 
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Pace Micro Technology plc Report & Accounts 2005
4
Open Cable Applications Platform, a middleware software  
layer specification, designed by Cablelabs in the US.
R&A Section 1  25/7/05  8:31 am  Page 9 Asia Pacific
Asia Pacific is an opportunity market. We already have some important customers in this region through our long-term
relationship with Sky New Zealand with which we have now signed a new agreement to supply set-top boxes for New
Zealand’s first PVR service. More recently we have worked with Foxtel, which used Pace set-top boxes to launch its new
digital service in Australia. 
Foxtel is Australia’s leading subscription television provider and recently celebrated its one-millionth-service subscriber. We
began deliveries of our first Foxtel set-top boxes in May 2004 and provide products for its satellite and cable networks. This
relationship was strengthened during the year with the launch of the Foxtel iQ PVR in March. Pace was sole supplier for this
important launch and not only is Foxtel iQ the first PVR to reach the Australian market, the cable variant is the world’s first
cable-based DVB PVR. Foxtel and Sky New Zealand are more great examples of how Pace can work with an important
digital television operator, moving from service launch through to next generation technologies, supporting a customer’s
delivery and growth strategies.  
We are also now seeing some limited traction in other Far Eastern markets following an intensive 18 months during which
we have invested considerable energies in developing relationships and business models for the region.  For example, a
new product range that meets the pricing and service needs of Asian operators has been launched and we have developed
a licensing approach to support sales into China. As a result we have been able to announce our first new Asian customer
– Galaxy in Hong Kong – who will use our Asian cable platform.
Pace engineering and technologies
In my report on our successes across Pace’s global markets, one theme is clear, the importance of the Pace engineering
team and their technological leadership. 
Pace’s strength lies in our ability to develop new technologies for the payTV industry and it is important that our in-house
engineering teams are totally focussed on what happens next. Not only is this ultimately what our customers want – a
visionary partner that supports them in achieving their goals – it also creates a more profitable company for our shareholders.
Over the years Pace has proven the value of being first to market with new technologies and in today’s increasingly
competitive market it is vital we take ‘first mover advantage’. 
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Pace Micro Technology plc Report & Accounts 2005
In my report on our successes across
Pace’s global markets, one theme is
clear, the importance of the Pace
engineering team and their
technological leadership.
R&A Section 1  25/7/05  8:31 am  Page 10 12
Pace Micro Technology plc Report & Accounts 2005
R&A Section 1  25/7/05  8:31 am  Page 11 Last year the work of our engineers and technologists has crystallised on two fronts. The first relates to how we deliver
current and immediate next generation products to our customers by making them as cost-effective as possible so that we
retain and grow their business. Pace has always been good at re-engineering existing products to reduce the component
count and make them easier to manufacture.  
However, this is no longer enough if we are to continue as a frontrunner in the competitive marketplace and on the second
front we began to reassess our own business model to improve development processes and increase our use of outsource
partners. This approach is starting to free up more of our in-house engineering expertise to concentrate on what really sets
us apart from the competition: the development of higher value, higher specification products and technologies that excite
the market, help retain existing customers and win new business. For example, we have been able to build our position in
high definition, developing a high definition PVR for Comcast and Europe’s first MPEG-4 high definition set-top box for
Premiere.  
With high definition now gaining ground and PVR becoming an essential part of many operators’ business strategies, it is
vitally important we anticipate the next set of industry trends, which we believe will be all about extending the ‘delivery pipe’
for payTV services. To this end we are growing our technology team, which is concentrating its energies around four key
themes: core set-top box technology, home networking, bandwidth efficient channel access and mobile devices. 
Many of the concepts we are now working on have been around for some time. Today a confluence of component pricing,
more effective technologies and standards alongside a growing consumer awareness and demand for new digital TV
services means that the work we are now doing will put Pace in a strong position for the next stage of market evolution. At
the same time we recognise the importance of looking for new technology opportunities outside of the immediate payTV
market. Pace is highly skilled in the fundamental technologies that will drive the intelligent home of the future and we are
actively seeking out new market opportunities for the Group that will include the opportunity to gain recurring revenues.
Intellectual property
Intellectual property (IP) is important to Pace on a number of fronts and in the last year we have revitalised our IP programme.
On the business front we are able to use it as a form of currency in business negotiations, for example as a defensive
measure when challenged by other IP owners in the course of our day-to-day business. Effective use of Pace IP in this type
of royalty negotiation can help make us more competitive and cost-effective and is an important strand of our wider business
improvement activity.
An active IP recognition scheme also creates an environment that encourages innovation and provides an opportunity for
staff to register their ideas and be rewarded. We relaunched our in-house IP award, programme this year as the David Hood
Innovation Awards, to recognise David’s significant contribution to the Company and raise the programme’s profile.  
Today our IP portfolio is small but growing, with 48 patents granted and over 160 applications pending. Our patents are
mostly digital set-top box technology specific, which will add future value to Pace as our portfolio continues to grow.
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Pace Micro Technology plc Report & Accounts 2005
R&A Section 1  25/7/05  8:31 am  Page 12 14
Pace Micro Technology plc Report & Accounts 2005
Today a confluence of component pricing, more
effective technologies and standards alongside a
growing consumer awareness and demand for
new digital TV services means that the work we
are now doing will put Pace in a strong position
for the next stage of market evolution.
R&A Section 1  25/7/05  8:31 am  Page 13 15
Pace Micro Technology plc Report & Accounts 2005
R&A Section 1  25/7/05  8:31 am  Page 14 People
As we move ahead with the changes I have outlined to our business, the investment we make in our people becomes even
more important. The skills of the Pace team are recognised worldwide from the way we build customer relationships, to our
technical expertise and post-delivery support.  
To develop our people so that they can participate in our current business transformation we have continued to invest in
training and several major programmes took place during the year. The Developing Leadership Focus programme was
aimed at managers throughout the organisation to help them understand the strategic context for our change programme
and their role within it. To support more specific skills development we have developed sales and product management
training programmes and a series of technical training programmes for our engineers. In addition we supported
communications skills with cross-cultural training for those working directly with our new Asian partners and team meeting
training for managers. 
We ended the year with just over 600 employees, slightly up on last year, with most of our additional new recruits being
engineers with specialist skills for the development of our next generation products. 
Our next steps
Pace has made some very important steps forward in the last year. We made a very clear and dramatic mark on the US
market with our Comcast announcement and grew our business elsewhere in the world by developing existing customer
relationships and winning new business. At the same time we have reasserted our technology leadership with new products
and concepts from HD PVR to multiroom and mobile payTV.
Looking ahead into the next year we need to focus on the delivery of our new contracts and improve our cost performance.
Through the work we are now doing on improving our business structure and processes, Pace can look ahead to the future
with more assurance than has been possible in the last few years.
John Dyson
Chief Executive
12 July 2005
16
Pace Micro Technology plc Report & Accounts 2005
Pace has made some very
important steps forward in the
last year. Pace can look ahead to
the future with more assurance
than has been possible in the 
last few years.
R&A Section 1  25/7/05  8:31 am  Page 15 Finance director’s review
Results for the period
In the 53 weeks ending 4 June 2005 Pace shipped 3.4m units (2004: 2.2m) and generated revenues of £253m (2004:
£240m) from sales of set-top boxes and associated engineering consultancy and support services revenue.
Overall the Group recorded a profit before taxation, goodwill amortisation and exceptional items of £8.1m (2004: 5.9m).
Reorganisation costs accounted for operating exceptional charges of £0.3m (2004: £nil). There was a £0.2m release of the
£1.5m provision set up last year in respect of the reference to the Financial Services and Markets Tribunal. The loss of £0.4m
on closure of a business, treated as a non-operating exceptional item, was caused by the writing off of goodwill previously
written off directly to reserves on the original acquisition of a subsidiary in Italy. This write off, required under FRS10 on the
final liquidation of the subsidiary concerned, does not affect the reserves of the Group.
After goodwill amortisation of £0.6m (2004: £0.6m) and all exceptional items, the Group recorded a profit before taxation of
£7.1m (2004: £3.9m)
Overheads
The Group’s overheads primarily relate to staff and engineering expenditure. At the year-end our total headcount was 621
(2004: 594), which includes 365 people in engineering (2004: 347), but excludes 120 outsourced engineers at Tata Elxsi in
India (2004:47). The total engineering spend represents 53% (2004: 54%) of total overheads (before goodwill and
exceptional items), reflecting the importance of research and development to Pace.
17
Pace Micro Technology plc Report & Accounts 2005
The Group ended the year with net
cash balances of £26.4m, due to our
growing profitability, continued control
of working capital and our outsourced
manufacturing strategy. 
David Brocksom
Finance Director
R&A Section 1  25/7/05  8:31 am  Page 16 Taxation
The Group’s tax charge has benefited from a credit of £4.8m, being the release of the remainder of a provision made in
2002. This release follows final agreement with the UK Revenue and Customs in respect of a repayment received in 2002.
In the UK, at the end of the year, the Group has accumulated tax losses of approximately £12m, of which £8m (i.e. £2.4m
at a 30% tax rate) are provided as deferred tax assets and £4m remains unrecognised. The Group will start to incur a normal
UK tax charge, and will start to pay UK tax again, once available tax losses (both provided for and unprovided for) are
utilised. In addition to the UK, where all of the commercial risk in our product strategy is taken, the Group has an exposure
to US, French and other overseas jurisdictions. This has resulted in a charge of £0.2m in the year.  
Cash flow and banking facilities
The Group ended the year with net cash balances of £26.4m (2004: net cash of £20.4m), due to our growing profitability,
continued control of working capital and our outsourced manufacturing strategy which has allowed the Group to grow the
business without a large consumption of working capital.
The Group has renegotiated new banking facilities to replace the existing facilities (which were due to expire in the normal
course in September 2005). In view of the improved cash and trading position, the Group has decided to maintain
uncommitted facilities, which will be available to 30 September 2006. The Group is not anticipating any significant use of
such facilities.
Balance sheet
Intangible fixed assets
The intangible fixed assets represent goodwill from the purchase of Pace Europe in 2001. The balance, net of amortisation
and prior year provisions, was £8.9m (2004: £9.4m).
18
Pace Micro Technology plc Report & Accounts 2005
R&A Section 1  25/7/05  10:29 am  Page 17 Investments
The Group has investments in two unquoted companies, VegaStream Limited and Intamac Limited. These investments
which, after provisions made in earlier years, total £0.7m, provide some exposure for the Group to developments in VOIP
(Voice Over Internet Protocol) and to the digital home security and control industries.
Net tangible fixed assets
The net balance of £6.2m (2004: £7.0m) primarily represents plant and machinery associated with test and engineering
development equipment, together with computer equipment and leasehold improvements. The downward trend in our net
tangible fixed assets over the last two years largely reflects our switch to outsourced manufacturing.
Stocks
Stocks totalled £10.1m (2004: £10.0m). Finished goods rose to £7.8m (2004: £4.6m) reflecting both stocks held for resale
and stocks in transit to customer delivery. Raw materials and consumables continued to decline to £2.3m (2004: £5.4m) a
feature of the outsourced manufacturing arrangements, although the Group continues to buy strategic components for
onward delivery to our manufacturers.
Debtors
Debtors have fallen to £55.8m (2004: £64.7m) due to the decrease in new customer shipments, particularly towards the
year-end. Group debtor days have reduced from 77 days to 56 days. We have continued with a credit insurance
programme, which provides cover against higher levels of exposure in respect of the majority of our trade debtor customers.
Trade debtors were £44.8m at the year end, which included insured balances of £36.8m (2004: £38.5m). However, as
expected, it has not been possible to gain insurance cover for some of our customers or on all of the exposure to those
customers covered.
Creditors
Creditors have fallen to £31.7m (2004: £41.4m), largely a feature of the decreased levels of trading in the last quarter.  Group
creditor days have reduced from 40 days to 37 days. Significant elements of the creditor balance relate to the Group’s main
sub-contract manufacturer, payments in respect of critical component supplies and accruals for outstanding royalty
payments. In addition to accruals for royalties, the Group maintains, as a provision, balances for royalties under negotiation
(see below).
Provisions
Provisions have decreased to £14.6m (2004: £20.7m), primarily due to the tax agreement (see above) and part utilisation
of the royalties and onerous lease provisions. These have been offset by a net increase in the warranty provision, itself a
feature of the increased level of trading coupled with an increase in some warranty periods.
19
Pace Micro Technology plc Report & Accounts 2005
R&A Section 1  25/7/05  10:29 am  Page 18 Foreign exchange
The majority of the Group’s production costs are designated in US dollars. The Group endeavours to obtain as much of its
income as possible in US dollars, but a significant proportion of income is currently received in Sterling or Euros.
The Group does not take a view or attempt to speculate on how the foreign exchange markets will move. Currencies are
only purchased and sold in accordance with forecast cash flow to minimise downside risk.  The Group has a policy of
hedging progressively against movements in the value of foreign currencies, in respect of specific cash receipts and
payments expected over the next 6 months.
As the Group’s sales into the US grow, the net exposure of the Group to the US dollar will lessen, with such income forming
a hedge against US dollar expenses and reducing the need for foreign exchange contract hedging. However the exposure
of the Group to the income in Euros will remain.
Year-end rates used in the accounts are $1.81:£1 (2004: $1.83:£1) and €1.48:£1 (2004: €1.5:£1). 
International Accounting Standards (IAS)
To date, Pace has prepared its accounts in compliance with UK Generally Accepted Accounting Principles (UK GAAP).  EU
regulations require Pace to adopt IAS in its financial statements for the year ending 3 June 2006. This requires adjustment
to be made to the opening position of the comparative period (29 May 2004) together with a restatement of the results for
the period ended 4 June 2005.  
The Group has undertaken a detailed review of the impact of IAS on its published financial statements.  Based on the current
standards in place, the key areas of impact on the Group’s accounts are in relation to the need to revalue (mark-to-market)
financial instruments, the capitalisation and subsequent amortisation of research and development expenditure, the
charging of a value related to share option grants, and the prohibition against amortisation of goodwill on business
combinations. The net impact of adopting IAS would be to increase the net asset position at 29 May 2004 by £5.6m and
the profit before tax for the 53 weeks ending 4 June 2005 would increase by £1.9m. The net asset postion at 4 June 2005
would increase by £7.9m.
Further detail on the key areas of impact are disclosed in note 32 to the financial statements.
David Brocksom
Finance Director
12 July 2005
20
Pace Micro Technology plc Report & Accounts 2005
The net impact of adopting IAS
would be to increase reported
profit before tax for the year
ended 4 June 2005 by £1.9m.
R&A Section 1  25/7/05  10:29 am  Page 19 Product review
Pace is a world leader in the development of digital set-top box technology through our vision, engineering expertise and
our ability to deliver a service that excites the payTV marketplace. 
Our business is focussed on the biggest and best payTV operators in the world, as working together we can drive the
industry forward. In the last year we have raised our game again by correctly anticipating the next set of market demands
and developing new products and technologies ahead of the competition. For example our work in high definition (HD)
personal video recorders (PVR) and EngineWare™ software has resulted in a strategically important agreement with
Comcast that has placed us at the centre of their development programme.
Platform experience
Pace has delivered in excess of 16 million digital set-top boxes on all commercial digital platforms: cable, internet protocol
television (IPTV), satellite and terrestrial. 
We have worked with many of the world’s leading payTV operators, leading the development of digital set-top box
technology from the front, and our list of industry firsts is extensive. We launched the world’s first digital MPEG-2 DVB 
set-top boxes for commercial deployment on cable, satellite and terrestrial platforms in the 1990s. We were the first to
integrate DOCSIS, EuroDOCSIS and DAVIC cable modems for two-way interactive services into commercially deployed
digital set-top boxes. And in the last 12 months we launched the world’s first mobile personal video recorder for 
payTV PVR2GO and demonstrated our first satellite MPEG-4 high definition set-top box.
Our aim is always to create the best, but most cost-effective product for our operator customers, which we are achieving
on a number of fronts. The Pace product range has been designed to support payTV operators across a full range of service
needs. It starts with basic self-install ‘zapper’ boxes for multichannel TV and then includes boxes with a return channel
(allowing the set-top box to communicate with the broadcaster) for interactive television, to the latest developments in
personal video recorders (PVR) and high definition (HD) concepts.  
We also continue to standardise our set-top box architectures across broadcast platforms to provide a cost-effective, yet
proven and rapid route to market; and by pushing the boundaries of digital home entertainment to support the operators’
growth and customer retention strategies.  
21
Pace Micro Technology plc Report & Accounts 2005
Our strategy of focusing on winning
business with the world’s most
successful payTV operators on the
basis of our advanced technology
solutions and vast experience is
working.
Neil Gaydon
Worldwide Sales and Marketing Director
R&A Section 1  25/7/05  10:29 am  Page 20 Technology trends
Today many consumers are familiar with the concept of multichannel digital television with an electronic programme guide
(EPG) to change channels, access interactive services and perhaps, if they are on cable, VOD (video-on-demand) content.
A growing number of consumers are living with the benefits of PVR
1
technology, such as pausing live TV and their own
personalised TV channel. In the last year Pace has continued to deliver PVR to BSkyB and announced new PVR contracts
with Comcast, Foxtel, Premiere and Viasat. We expect more operators to follow as a growing number of consumers get
used to watching what they want, when they want.  
High definition is now being added to this mix, taking viewing quality to a new level.  We have been shipping high definition
products into US cable since 2002 and will ship our first European high definition set-top boxes to Premiere in Germany later
this year.  High definition is gaining real momentum outside of the US and within Europe high profile sporting events such as
the 2006 football World Cup and Wimbledon will provide a stimulus to demand.
As consumers get accustomed to PVR in the living room, they want to access stored TV content elsewhere in the home. It
is uneconomic and technologically clumsy to put a big PVR box in every room, so we are now investing in ‘multiroom’. Our
multiroom concept turns the living room PVR into a server, which is linked through coaxial cable or the existing in-home
powerline
2
network, to distribute content and PVR functionality to smaller, more cost-effective boxes or ‘thin clients’ around
the home. 
PayTV operators are excited by the work we are doing on this front, as multiroom provides them with an opportunity to
expand their revenues and retain their most valuable customers. We can also see an attitude shift amongst consumers
3
. A
growing number, particularly the ‘PVR generation’, have a growing appetite not just to move away from schedule driven TV,
to watching what they want, when they want, but now increasingly where they want. PVR2GO, which we launched at IBC
in Amsterdam last September, picks up on this trend and extends the opportunity for PVR services beyond the traditional
home-viewing environment. Users can download protected TV content onto a 40 GByte hard drive, to view on a handheld
screen anywhere that they choose: on the train, in the car, on holiday. 
Many of these ideas have been around for some time, but have been waiting on the right equipment, sufficient bandwidth
and the right technology to ensure the right quality and service standards can be achieved. Pace’s opportunity lies in creating
the right devices and we are making a significant investment in our technology team.  
22
Pace Micro Technology plc Report & Accounts 2005
1
Also know as PDR (Personal Digital Recorder) and DVR (Digital Video Recorder).
2
Powerline is a means of carrying data, such as TV, over existing mains wiring in home. 
3
Pace analysis of major market research reports and industry trends.
R&A Section 1  25/7/05  10:29 am  Page 21 At the same time we must ensure Pace is at the forefront of the underlying technologies and standards that act as the
enablers for our work. For example advanced video codecs and new compression standards continue to grow in importance
and will be vital for the long-term success of high definition. Digital television today is delivered using the MPEG-2
compression standard, but with high definition using four times as much broadcast space, next generation codecs such as
MPEG-4 H.264 and other concepts such as DVB-S2 will enable operators to maximise their bandwidth capabilities.
We are also looking at smart concepts that will enable our operator customers to better exploit their existing network
infrastructure and Pace set-top box portfolio. DSG
4
for example, a concept we launched last year, enables cable operators
to exploit the full potential of out-of-band communications, which most importantly makes simultaneous use of the highest
bandwidth broadband possible, to deliver extra revenue generating services such as online gaming. Additionally we are
looking at new opportunities to deliver the cable triple-play service of voice, video and data.  Our latest concept on this front
is a new embedded multimedia terminal adapter or eMTA to meet a growing demand for IP-based voice services. 
Environmental issues 
Pace is not just a leader in set-top box design and digital TV technologies, it is also at the forefront of managing the
environmental challenges that face our industry.   
Environmental considerations have grown in importance over the last five years, with the majority of Pace’s products now
conforming to voluntary energy efficiency standards.  Pace continues to make a proactive contribution to standards regimes
worldwide, helping drive them in a way that is achievable and realistic while still delivering environmental benefits.  For
example Pace engineers continue to play an active role in developing the European Commission’s Code of Conduct on
Energy Efficiency of Digital TV Service Systems and setting the minimum energy performance standards for set-top boxes.  
23
Pace Micro Technology plc Report & Accounts 2005
4
DOCSIS set-top box gateway
R&A Section 1  25/7/05  10:29 am  Page 22 Within the Code of Conduct stand-by power has become an important issue and all of Pace’s non-US boxes are designed
to meet the European Standard and in many cases exceed them. For example in the last year we have reduced standby
power consumption on one of our PVR platforms by 14%, significantly within the European requirement. The Code of
Conduct is closely linked to the forthcoming European Directive for Energy using Products (EuP), which will require consumer
electronics manufacturers to carry out a total environmental impact lifecycle analysis. 
All of our US products continue to be designed to the Energy Star standard even though it was suspended in respect of 
set-top boxes during the year. Pace is actively participating in consultation on a new Energy Star standard for set-top boxes
as well as advising on energy efficiency legislation in Australia.
Our environmental team has also been working on the implementation of two new European directives; WEEE and RoHS.
WEEE (Waste from Electrical and Electronic Equipment) sets goals for the recycling of electrical goods and was planned to
come into effect this year.  However, the UK and several other European countries are still to launch their schemes and have
announced delays to the directive’s implementation.  Pace’s environmental team is well prepared, but until regional schemes
are launched it will be difficult to identify the overall process and cost issues.  
The Restriction of Hazardous Substances directive (RoHS) will come into force next year. The main implication for our
industry is that we will no longer be able to use lead solder and five other restricted substances in the manufacture of
electronic products. Pace has made excellent progress on this front and of the ten new projects initiated this year over 95%
of the components are already RoHS compliant 12 months before the EU deadline. We are now working with our outsource
partners to ensure they understand and can work to the European standard and so that we can establish a common and
cost-effective Pace RoHS system.
The way ahead
Pace has consistently proven the value of a forward thinking product range that can meet the needs of payTV operators
worldwide. Pace has the industry and engineering know-how, skills, service network and partners to develop products ahead
of the market for today and tomorrow. In the last year this has manifested itself in a series of important new product launches
and business wins worldwide.  
Neil Gaydon
Worldwide Sales and Marketing Director
12 July 2005
24
Pace Micro Technology plc Report & Accounts 2005
R&A Section 1  25/7/05  10:29 am  Page 23 Report of the directors
The directors present their report to shareholders on pages 25 to 31 together with the audited financial statements for the 53 week period
ended 4 June 2005 (prior year 52 weeks ended 29 May 2004). 
Principal activities
The Group’s principal activities are the development, design and distribution of digital receivers and receiver decoders which provide a
gateway for the reception of digital television and the reception/transmission of interactive services, telephony and high-speed data. The
Group also provides engineering design, support services and software applications to its set-top box customers. Each of these services
may be delivered over satellite, cable, terrestrial and IP network transmission systems.
Business review and financial results
A review of the Group’s activities, developments and the financial results for the year is presented in the Chairman’s Statement, the Chief
Executive’s Review and Finance Director’s Review on pages 4 to 20. The consolidated profit and loss account for the 53 weeks ended 4
June 2005 is set out on page 43. The profit before tax was £7.1 million (2004: £3.9 million). 
Dividend
No interim dividend was paid during the year. The directors do not recommend the payment of a final dividend (2004:nil).
Share capital
Changes in the Company’s share capital during the year ended 4 June 2005 are set out in note 21 to the financial statements.
Significant shareholdings
The Company has been notified in accordance with Sections 198 to 208 of the Companies Act 1985 of the following significant shareholdings
as at 11 July 2005:
Number of shares % of issued share capital
David Hood and related family trusts 44,486,957 19.6
Barclays plc 8,862,917 3.9
Legal & General Investment Management Limited 8,575,949 3.8
Robert Fleming and related family trusts 8,880,178 3.9
Pace Micro Technology plc Employee Benefits Trust 7,343,104 3.2
Directors
The names of the current directors of the Company are shown below. Other than as described, all those listed held office throughout 
the year.
Sir Michael Bett, CBE
Sir Michael, aged 70, joined the Board in February 2000 and was appointed Chairman in March 2000. He is also Non-executive Chairman
of Compel Group plc and a Non-executive Director of Ordnance Survey. His previous career in the private, public and charity sectors has
included being Chairman of Cellnet Group, Deputy Chairman of BT and Managing Director of BTUK. He is a former President of the Chartered
Institute of Personnel and Development, Chairman of Save the Children Fund and Chairman of the Independent Review of Armed Forces
Manpower, Pay and Conditions of Service. In July 2000, he retired as First Commissioner for the Civil Service. Currently he is Pro-Chancellor
of Aston University.
25
Pace Micro Technology plc Report & Accounts 2005
R&A Directors Section  25/7/05  8:42 am  Page 1 David Brocksom
David, aged 44, was appointed Finance Director in February 2004. Previously Group Finance Director of Avesco plc, he has also held a
number of other senior financial roles including Group Finance Director at Tele-Cine Cell Group plc and Group Finance Director at Westport
Group plc. He qualified as a Chartered Accountant with Price Waterhouse.
Patricia Chapman-Pincher
Pat, aged 57, was appointed as a Non-executive Director in February 2005. She has over 30 years’ experience in the communications
industry from senior roles in multinational Internet and telecoms companies to participating in technology company start-ups. A founding
partner of the Cavell Group, which specialises in operational consultancy IP and wireless technologies, she is also Chairman of VegaStream
Limited and a non-executive director of Sportev Limited.
John Dyson
John, aged 57, was appointed Chief Executive on 1 May 2003, after assuming the role of Acting Chief Executive in January 2003. Prior to
this he was Finance Director, joining the Company in November 1997. He is also a Non-executive Director of XP Power plc. Prior to his
employment at the Company he was Vice President of Finance, Europe for LSI Logic Corporation. Other previous appointments included
positions as Finance Director of CASE Group plc and Norbain plc.
Robert Fleming
Rob, aged 48, joined the Company in 1983 and became Operations Director in 1984, with responsibility for production and distribution. With
effect from February 1999 he assumed responsibility for the Engineering function within the Group and became a Non-executive Director of
the Company in May 2001. He is Chief Executive of The Franklyn Group Limited, a care home group.
Marten Fraser
Marten, aged 59, was appointed as a Non-executive Director in February 2005. He was previously senior partner at Pricewaterhouse
Coopers, Nottingham, where he worked in the Audit and Business Advisory Services Department, and prior to this he was the Partner in
charge of the East Midlands practice of Price Waterhouse.
Neil Gaydon
Neil, aged 45, is Worldwide Sales and Marketing Director and was appointed as an Executive Director in June 2002. He has been with the
Company since 1995 and spearheaded the development of the Company’s US business between 1999 and December 2003 as President,
Pace Americas. Prior to this he was Regional Sales Director EMEA and head of New Business Development and Product Marketing for the
Company.
Robert Lambourne
Bob, aged 53, was appointed as a Non-executive Director in June 1996 and was appointed Senior Independent Director in February 2000.
He is a Non-executive Director of Abacus Group plc and a director of a number of private companies. He was an Executive Director of RMC
Group plc from 1997 to 2003, an Executive Director of Hepworth plc from 1991 to 1997 and Finance Director of Foseco plc from 1987 to
1990.
Michael McTighe
Mike, aged 51, was appointed a Non-executive Director in June 2001. He has held a number of directorships, and is currently Chairman of
a number of private equity-backed companies and, in addition, is a Director of London Metal Exchange Holdings Ltd and a Non-executive
Director of Alliance & Leicester plc. Mike also advises a number of private equity partnerships. Previously he was Chairman & CEO of Carrier1
International SA, and before that Executive Director & Chief Executive, Global Operations of Cable & Wireless plc. Prior to these experiences,
Mike spent 5 years with Philips of the Netherlands, 5 years with Motorola, and 10 years with GE.
During the year the following persons also held office as directors:
David Hood: retired 8 September 2004
Marvin Jones: retired 31 December 2004
Sir Michael Bett and Neil Gaydon will retire by rotation at the Annual General Meeting of the Company and offer themselves for re-election.
Pat Chapman-Pincher and Marten Fraser, having been appointed by the Board subsequent to the date of the last Annual General Meeting,
will hold office until the forthcoming Annual General Meeting and will then offer themselves for election at that meeting. Details of the executive
directors’ service contracts and the non-executive directors’ letters of appointment are disclosed on page 34.
Report of the directors Continued 
26
Pace Micro Technology plc Report & Accounts 2005
R&A Directors Section  25/7/05  8:42 am  Page 2 Report of the directors  Continued 
Payment to suppliers
It is the policy of the Group to agree terms and conditions for its business transactions with suppliers. Payment is made in accordance with
those terms, subject to the other terms and conditions being met by the supplier. The Group does not follow any code or standard on
payment practice. Creditor days at the end of the year for the Group were 37 days (2004: 40 days) and for the Company were 43 days (2004:
44 days).
Research and development
The directors regard it as fundamental to the future success of the Group to engage in a substantial ongoing programme of research and
development of new products, spending £24.0 million (2004: £21.3million) during the year.
Donations
During the year the Group donated £37,000 (2004: £35,442) to charitable causes. No political donations were made. Further details of the
charitable and community-related activities of the Group are given on page 30.
Corporate governance
The directors believe that the Company has complied throughout the year with the Combined Code–Principles of Good Governance and
Code of Best Practice as revised and adopted by the Financial Reporting Council. The Board confirms that it has established the procedures
necessary to implement the guidance "Internal Control: Guidance for Directors on the Combined Code" (published by the Internal Control
Working Party of the ICA) and that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the
Company. 
Board of directors
The Group is controlled through the Board of Directors, which comprises three executive and six non-executive directors who bring a wide
range of skills and experience to the Board. Biographical details of all directors are to be found on page 26. The Chairman, Sir Michael Bett,
is mainly responsible for the running of the Board ensuring, together with the Company Secretary, that it receives timely and clear information
appropriate to enable it to discharge its duties. The responsibilities of the Chief Executive, John Dyson, focus on running the Group’s business
and implementing Group strategy. The Chief Executive is assisted in managing the business on a day-to-day basis by the Executive
Committee as further described below. All the designated non-executive directors are deemed by the Board to be independent apart from
Rob Fleming who was an executive director of the Company within the last five years. In addition, the Board has designated Bob Lambourne
as the Senior Independent Director. All directors have access to the advice and services of the Company Secretary and are able to take
independent professional advice at the Company’s expense in the furtherance of their duties, if necessary. All directors, in accordance with
the Combined Code, submit themselves for re-election at least once every three years. New directors receive a programme of tailored
induction on joining the Board and all directors are offered the opportunity to continually update their skills and knowledge.
The Board has a formal schedule of matters specifically reserved to it and normally meets monthly. It is responsible for overall Group strategy,
acquisition and divestment policy, approval of major capital expenditure projects and consideration of significant financing matters. It reviews
the strategic direction of the Group and conducts formal strategy reviews together with other senior executives within the Group at least once
a year.  The Chairman holds meetings with the non-executive directors without the executive directors being present at least twice during
the year.
Each year the Board undertakes a formal review and evaluation of its performance including the performance of its committees and individual
directors.  This is conducted by written feedback in standardised form from each director to the Chairman and, in respect of performance
evaluation of the Chairman, to the Senior Independent Director.
The Board has established the following committees, each of which has written terms of reference specifying its authority and duties and
copies of which are publicly available on the Company’s website www.pacemicro.com:
•
The Audit Committee is comprised of independent designated non-executive directors: Pat Chapman-Pincher, Marten Fraser, Mike
McTighe and is chaired by Bob Lambourne. Sir Michael Bett served on the Committee during the year before resigning in April
2005. The Committee has primary responsibility for making recommendations on the appointment, reappointment or removal of the
auditors and receives and reviews reports from management and from the auditors relating to the interim and annual accounts and
the control systems in use throughout the Group. Meetings are held by the Committee with the auditors without executive
management being present at least once a year and the Committee reviews arrangements by which staff may, in confidence, raise
concerns about possible improprieties, including  review of the Group whistleblowing policy.
•
The Executive Committee is chaired by John Dyson as Chief Executive. The Committee generally meets monthly and ensures that
the strategy, plans and policies previously agreed or delegated by the Board are implemented.
27
Pace Micro Technology plc Report & Accounts 2005
R&A Directors Section  25/7/05  8:42 am  Page 3 The Executive Committee comprises the three executive directors together with the following senior executives:
Anthony Dixon Director of Legal Services
John Eaglesham Acting Director of Engineering
David Gillies Director of Technology
Callum Gordon Director of Organisation Planning Business Process
Steve Owens Director of Commercial Operations
Maggie Pedder Director of Personnel
•
The Remuneration Committee is comprised of independent designated non-executive directors Marten Fraser, Bob Lambourne,
Mike McTighe and is chaired by Pat Chapman-Pincher. Sir Michael Bett was Chairman of the Committee during the year before
resigning in April 2005. The Committee is responsible for setting the remuneration of the executive directors and other members of
the Executive Committee including making recommendations regarding the grant of share options. The members of the Committee
have no personal interest, other than as shareholders, in the matters to be decided, no potential conflicts of interest arising from
cross-directorships and no day-to-day involvement in the running of the business.
•
The Nominations Committee is comprised of non-executive directors Sir Michael Bett, Pat Chapman-Pincher, Marten Fraser, Rob
Fleming and Bob Lambourne, together with Chief Executive John Dyson, and is chaired by Mike McTighe. Its purpose is to consider
and make recommendations to the Board regarding the appointment of new directors.
Board and committee meetings attendance
Audit Remuneration Nominations 
Board Committee Committee Committee
Total Meetings 11 4 2 2
Sir Michael Bett 10 2 2 1
David Brocksom 11 n/a n/a n/a
Pat Chapman-Pincher* 3 1 1 1
John Dyson 11 n/a n/a 2
Robert Fleming 10 n/a n/a 1
Marten Fraser* 3 1 1 1
Neil Gaydon 9 n/a n/a n/a
Bob Lambourne 10 4 2 1
Mike McTighe 8 3 1 2
*director since February 2005 and has attended all meetings since appointment
Directors’ remuneration
The Remuneration Committee reviews the performance of the executive directors and other members of the Executive Committee as a
prelude to recommending their annual remuneration, bonus awards and award of share options to the Board for final determination. The final
determinations are made by the Board as a whole but no director plays a part in any discussions concerning their own remuneration.
The Remuneration Report of the Directors to shareholders is set out on pages 32 to 39 and includes the remuneration policy of the Company
and details of directors’ incentive payments and the related performance criteria.
Authority to purchase own shares
At the Annual General Meeting in 2004 the Company was authorised by shareholders to purchase up to 22,677,124 of its own ordinary
shares, representing 10 per cent of its issued share capital as at 6 August 2004. The Company did not utilise this authority during the year.
The authority for the Company to purchase its own shares expires at the conclusion of the Annual General Meeting in 2005 and a resolution
to renew it will be proposed at that meeting.
Accountability and audit
A detailed review of the performance of the Group’s business is contained in the Chief Executive’s Statement and the Finance Director’s
Review. These statements, together with the Chairman’s Statement and the Report of the Directors, are intended to present a balanced
assessment of the Group’s position and prospects. The directors’ responsibility for the financial statements is described on page 40 and the
responsibilities of the auditors are described on page 41.
Report of the directors Continued 
28
Pace Micro Technology plc Report & Accounts 2005
R&A Directors Section  25/7/05  8:42 am  Page 4 29
Pace Micro Technology plc Report & Accounts 2005
Report of the directors  Continued 
Internal controls
Overall responsibility for the Group’s system of internal control rests with the Board of Directors. The Board has delegated certain of its
powers to the Audit Committee to review the effectiveness of the systems of control and to receive reports from the auditors and from the
management relating to the interim and annual accounts and the control systems in use throughout the Group.
During the year and up to the date of this report, the Board carried out a review of the effectiveness of the Group’s internal controls. The
reviews were undertaken in accordance with the Joint Working Group’s guidance under the following headings and were aimed at clearly
identifying the systems already in place and the action plans necessary to improve areas of control weakness.
•
The control environment. Subject to those powers and limits of authority reserved by the Board, and to the Group policies and guidelines
they have established, the conduct of the business of the Group is delegated within a clearly defined organisational structure and
approved level of authority. The Board has also adopted a Code of Business Ethics, which has been incorporated into the Employee
Handbook issued to all employees.
•
Risk assessment. The directors and senior managers are responsible for identifying and monitoring sources of potential business risk
and financial risk, and for taking such preventative and protective actions as they consider necessary to manage effectively such risks.
During the year a risk assessment review of the Group’s business has been conducted in conjunction with the Executive Committee. The
Board has received and considered this review as part of an annual risk and control assessment.
The Group’s systems are designed to identify and manage rather than eliminate significant business risks, including the risk of failure to
achieve business objectives and can only provide reasonable not absolute assurance against material misstatement or loss. Business risks
are identified, evaluated and managed through functional line management reporting to divisional meetings, monthly Executive Committee
meetings and Board meetings as appropriate. Each member of the Executive Committee is required to highlight and report on any significant
business risks identified within their sphere of responsibility.
The key business risks associated with the timely completion of long-term development projects and on-going business risks, including
alleged infringement of third party intellectual property rights, are managed by cross-functional teams of senior employees. Business
continuity plans addressing physical risks to the Group’s development sites are reviewed and updated at least annually.
Company-wide initiatives have been maintained, including Continuous Improvement and the Pace Quality Committee review process, with a
view to attaining the highest standards in quality and reliability.
•
Financial control and information systems. The Group’s strategic direction is reviewed regularly by the Board and plans, budgets and
performance targets are reviewed and approved at least annually. Directors receive monthly summaries of financial results which compare
actual performance with targets, together with detailed management reports that identify the reasons for variances and the progress
achieved. Business planning documents are revised on a regular basis in line with actual and expected performance.
•
Control procedures. Financial control procedures have been developed for all of the main business functions and have been documented
in a procedures manual. Authorisation limits for purchases and capital expenditure are clearly specified and procedures are in place for
minimising exposure to potential weaknesses in the receipt, handling and despatch of goods. The Group’s Saltaire premises have
received accreditation for BSI ISO 9001: 2000 and this has been extended to include the Boca Raton site in Florida.
•
Monitoring systems. Monitoring of the internal control systems is carried out by designated employees on a periodic basis pursuant to
a programme agreed by Finance and Quality departments.  The Audit Committee considers annually whether there is a need to appoint
a dedicated internal auditor and has determined that, having regard to the monitoring systems referred to above, there is no current
business requirement for such an appointment.
Although no system of internal financial control can provide absolute assurance against material misstatement or loss, the Group’s systems
are designed to provide the directors with reasonable assurance that transactions are authorised and completely and accurately recorded,
that assets are safeguarded and that material errors, irregularities and actions contrary to Group policies and directions are either prevented
or promptly discovered.
Going concern
The directors, having taken account of the Group’s net cash resources, available bank facilities and the factors referred to in note 1 to the
financial statements and having reviewed the Group’s budget and forecasts for the year to 3 June 2006, consider that the Group has
adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern
basis in preparing the financial statements.
R&A Directors Section  25/7/05  8:42 am  Page 5 30
Pace Micro Technology plc Report & Accounts 2005
Report of the directors Continued 
Corporate social responsibility
Employment policies
The directors recognise the importance of the Group’s employees to its success and future development and are committed to providing an
environment that will attract, motivate and reward high quality employees. The Group continues to invest in a range of internal and external
initiatives to promote employee development. This commitment has been acknowledged by Investors in People (IIP) recognition.
Employees are kept informed of matters affecting them as employees and factors affecting the performance of the Group through employee
meetings/briefings and a Company newsletter, "Pacesetter". In the UK, meetings of the Employee Consultation Work Group, an elected forum
for the discussion of work related issues, are held with members of the Executive Committee at least four times per year.
The Group welcomes applications for employment from all sectors of the community and is striving to promote equality of opportunity in
employment regardless of age, sex, sexual orientation, disability or ethnic origin. It is the Group’s policy that training, career development and
promotion opportunities should be available to all employees. In the event that an employee becomes disabled, the Group makes reasonable
adjustments where any aspect of premises or working practices puts such a disabled employee at a substantial disadvantage compared with
a non-disabled employee.
Health and safety
The Group has an established Health and Safety Committee which conducts quarterly review meetings with Group safety representatives
regarding health and safety issues relevant to the Group’s business. Other safety-related committees also conduct periodic reviews of specific
work practices. These actions complement the Health and Safety Executive’s Working Well Together initiatives implemented by the Company.
The Company Health and Safety Officer has reported to the Board regarding health and safety matters at least twice during the year.
Site inspections and individual ergonomic risk assessments have been conducted in the UK by safety representatives and this has resulted
in several local workplace health and safety improvements. Generic and detailed risk assessments, chemical assessments and safe systems
of work guidance are maintained for the benefit of employees on the Company’s Intranet site.
The importance of ongoing health and safety awareness training for managers and safety representatives is recognised. As part of this
process safety representatives have had refresher training and during the year a further three health and safety representatives have
successfully completed the IOSH Managing Safely course.
The number of UK workplace accidents during the year was 18 (2004:27) none of which were reportable to the Health & Safety Executive. A
report concerning health and safety aspects of the Group's business and copies of specific Group safety policy documents can be obtained
from the Company Secretary.
Charitable and community support
The Group has an established Charitable Donations Committee comprising employees based at the Group’s premises in the UK, the USA
and France. The committee, which meets once a month, considers all requests for charitable and community project assistance within a
financial budget and criteria approved by the Board on an annual basis.
The Group’s support through the committee is focused on the local geographical area of Pace’s premises in Saltaire, Bracknell, Grenoble and
Boca Raton in Florida, as well as charitable and community initiatives of Group employees. The corporate charity policy is to support local
charities of benefit to the local area and people living close to each Group site.
During the year 169 requests for support were considered by the committee, 138 of these satisfying the criteria and receiving financial support
amounting to £37,000. The participation of employees of the Group in community and charitable activities outside work hours has been
encouraged with the provision of funds to match individual sponsorship raised.
Further details of the charitable and community donations made during the year and criteria for awards made by the Charitable Donations
Committee can be obtained from the Company Secretary.
R&A Directors Section  25/7/05  8:42 am  Page 6 Environmental management
During the year the Company commissioned its third independent Environmental Report, prepared by consultants, Atkins Environmental
Services. The Company has achieved certification to the international management standard ISO 14001 at its Saltaire and Florida sites and
the Group Environmental Policy has been applied to all Pace sites worldwide.
Pace continues to work with the US environmental protection agency on the Energy Star standard for STBs, which sets low power usage
performance criteria for electrical products. The Company is also a signatory to the European Code of Conduct on Energy Efficiency of Digital
TV Service Systems and is committed to ensure that products are designed to minimise energy consumption. Pace is also in consultation
with the Australian Greenhouse Office about legislation for minimum energy performance standards of STBs in Australia.
The Company has developed systems to monitor the proportion (by weight) of its products that is recyclable and procedures to ensure that
each product is checked for certain hazardous materials, in each case in anticipation of expected requirements of forthcoming EU regulations.
In addition, procedures have been implemented to require that the packaging the Company specifies in the design process is recyclable. The
Company is preparing for compliance with new environmental legislation including regulations to be implemented pursuant to the Waste  from
Electrical and Electronic Equipment (WEEE) directive and the Restriction of Hazardous Substances (RoHS) directive.
The Company has developed supplier assessment and approval procedures to evaluate the environmental performance of its suppliers and
sub-contractors. Using the supplier assessment and approval process, the Company intends to influence environmental awareness of its
subcontractors and component vendors. During the year the Company set environmental targets and achieved the following outcomes in
respect of its chosen measures of environmental impact:
Objective 2002 2003 20042005
CO2 emission (tonnes) 4,170 3,000 2,371 2,115
Electricity (kWh) 4.7 million 3.5 million 3.1 million 3.7 million
Gas (kWh) 2.1 million 2.1 million 1.8 million 1.4 million
Water (m3/employee) 20.6 24.7 22.1 21.0
The Company is a member of the Yorkshire Wildlife Trust and during the year participated in the Yorkshire and Humber Regional Index of
Environmental Engagement. This scheme is administered by Business in the Community and ranks companies in terms of their environmental
performance. In the 2005 index the Company was ranked 9th (2004 index: 12th).
A copy of the Group’s Environmental Policy Statement and the Environmental Report referred to above can be obtained from the Company
Secretary.
Auditors
KPMG Audit Plc held office as auditors during the year. A resolution for the re-appointment of KPMG Audit Plc will be proposed at the
forthcoming Annual General Meeting.
Relations with shareholders
The Board has continued to establish and maintain relationships with institutional shareholders and communicates with investors through the
Group’s web site (www.pacemicro.com). Shareholders are welcome to participate at the Annual General Meeting on 6 September 2005 at
which the Board will be available for questions.
Annual general meeting
The Annual General Meeting of the Company will be held on 6 September 2005 at the offices of Citigate Dewe Rogerson, 26 Finsbury Square,
London EC2A 1SH. Full details of the business to be transacted at the meeting will be set out in the Notice of Annual General Meeting.
By order of the Board
Anthony J Dixon
Company Secretary
12 July 2005
31
Pace Micro Technology plc Report & Accounts 2005
Report of the directors  Continued 
R&A Directors Section  25/7/05  8:42 am  Page 7 Remuneration report
The directors present their report to shareholders on pages 32 to 39 regarding remuneration matters in respect of the 53 week period ended
4 June 2005.
Remuneration committee
The Remuneration Committee (the Committee) is responsible for setting the individual remuneration of the executive directors and other
members of the Executive Committee within the framework of the remuneration policy described below, which is set by the Board.
The Directors who were members of the Committee at any time during the period ending 4 June 2005 were Patricia Chapman-Pincher (who
acted as Chairman of the Committee from 21 April 2005), Sir Michael Bett (who acted as Chairman of the Committee prior to 21 April 2005),
Marten Fraser, Bob Lambourne and Mike McTighe. For guidance, the Committee makes use of surveys of executive pay and knowledge of
market rates. The Committee was assisted in its consideration of remuneration matters by Maggie Pedder, Director of Personnel of the
Group. Pinsent Masons, legal advisers to the Company, also advised the Committee regarding certain share option related issues.
Remuneration policy
The Board believes that it is necessary to ensure that the remuneration packages of the executive directors remain competitive in order to
attract, retain and motivate executive directors and senior managers of a high calibre and to reward them for performance. The policy is for
a significant proportion of executive directors’ total remuneration to be capable of being earned from variable, performance-based incentives,
through annual bonuses and share options. The objective of this policy is to provide rewards and incentives that reflect corporate and
individual performance and align management’s objectives directly with those of the Group.
The Board’s policy in relation to non-executive directors continues to be to pay fees that are competitive with the fees paid by comparable
quoted companies. Non-executive directors’ fees are determined by the Board as a whole within the limits set out in the Company’s Articles
of Association. Non-executive directors are not eligible for performance bonuses or pension contributions and do not participate in the share
option schemes.
The main components of senior executive remuneration derived from the Remuneration Policy, including performance-related elements, are
set out below. Following the appointement during the year of a new Chairman of the Committee, the Committee proposes to undertake a
full review of senior executive remuneration (including remuneration of executive directors) during the coming year in conjunction with external
advisers.
Salary
Basic salary for each executive director is determined by the Committee, taking into account the performance of the individual and
information from independent sources on the rates of salary for comparable jobs. In setting senior executives’ salaries, the Committee also
takes into account pay and employment conditions in the Group as a whole.
Performance bonus
The Company established a non-pensionable performance-related bonus scheme for the executive directors and other key members of
management for the year ending 4 June 2005, which was based on the successful achievement of corporate and individual objectives. The
corporate objectives were linked to the interests of shareholders and the key measure therefore was the profitability of the Group for the full
financial year. Achievement of the bonus was dependent on the Group’s pre-tax profits (before certain exceptional items and goodwill
amortisation) exceeding £6 million with the capacity to earn additional bonus increments upon achievement of higher profit targets up to a
ceiling of £15 million. In addition, a number of individual personal objectives were set for each director and manager, which were aligned with
the objectives of the Group for the year. The performance bonuses awarded to each of the executive directors in respect of the year ending
4 June 2005 are shown on page 35. A similarly-structured performance-related bonus scheme for the executive directors and other key
senior executives is in effect in respect of the current financial year but with new pre-tax profit targets set in July 2005. In each year the
maximum bonus achievable by the executive directors in the event that all corporate and individual targets are met is 100% of basic salary.
32
Pace Micro Technology plc Report & Accounts 2005
Remuneration report
R&A Directors Section  25/7/05  8:42 am  Page 8 Benefits in kind
Each executive director is entitled to benefits such as the provision of a fully expensed company car plus fuel (or cash alternative), private
medical insurance, permanent health insurance and life insurance. In line with market practice. Neil Gaydon, who was based in the USA for
part of the financial year was, in addition, entitled to a non-pensionable overseas living allowance, payment of rental on a family home in the
USA, educational and associated expenses in respect of his children and international private medical insurance. With effect from June 2004
these additional benefits ceased to be payable when Neil Gaydon returned to be based at the Group Head Office in Saltaire.
Pension contributions
In the year ending 4 June 2005, contributions were paid into the executive directors’ pension schemes at rates determined by the Board.
Contributions have continued to be paid during the current year at the rate of 15% of each director’s basic salary subject to Inland Revenue
limits. The Group does not operate any defined benefit schemes.
Share option schemes
The Board believes that share ownership encourages employees to contribute further towards improvements in the Group’s performance.
To this end, the following share option schemes have previously been established under which employees, including executive directors, may
obtain ordinary shares:
•
A regular savings scheme (the “Sharesave Scheme”), which is open to directors and employees of the Group and under which
options, granted at an initial discount of up to 20% against the quoted market price, are normally exercisable on completion of a
three-year SAYE contract.
•
An All Employee Share Ownership Plan (“AESOP”) in terms prescribed by the legislation authorising such schemes. No shares have
yet been issued under the AESOP.
•
An Inland Revenue Approved Discretionary Scheme (the “Approved Scheme”) under which all employees, including full-time
directors of the Company or any subsidiary, who do not have and have not had within the previous twelve months a material interest
in the Company and are not within two years of retirement, are eligible to participate. Participation is at the discretion of the Board,
acting in accordance with the recommendations of the Committee. Under the Approved Scheme, options are granted at the
prevailing quoted market price and may usually be exercised between three and ten years from the date of the grant.
•
An Unapproved Discretionary Scheme 1996 (“1996 Unapproved Scheme”), which is similar to the Approved Scheme, although
certain rules of the Approved Scheme are not included e.g. the exclusion of employees who have a material interest in the
Company. No options have been granted under this scheme since the adoption of the 2000 Unapproved Scheme.
•
A Discretionary Unapproved Scheme 2000 (“2000 Unapproved Scheme”), adopted by the Group at the Extraordinary General
Meeting of the Company on 17 July 2000, which is open to all employees and full-time directors on the same basis as the 1996
Unapproved Scheme. Under the 2000 Unapproved Scheme options are granted at the prevailing quoted market price and become
exercisable (“vest”) as to 25% each anniversary after the grant over a four-year period. Under this scheme Basic Options may be
granted up to a limit such that unvested options may not exceed four times annual remuneration. For a category of up to 55 key
employees there is the ability to award options (“Super Options”) above the limit for Basic Options. In the case of up to 40 senior
employees, whose contribution is judged to be of key importance, Super Options may be granted up to a limit such that unvested
Super Options may not exceed four times annual remuneration; in the case of members of the Executive Committee and up to five
other key employees, the relevant limit is eight times annual remuneration; in the case of the Chief Executive, the relevant limit is
ten times annual remuneration.
33
Pace Micro Technology plc Report & Accounts 2005
Remuneration report  Continued 
R&A Directors Section  25/7/05  8:42 am  Page 9 In granting options under the Approved Scheme and the 1996 and 2000 Unapproved Schemes, the Board may include objective
performance targets or other conditions as it thinks fit and has included such performance conditions based on growth in earnings per share
(EPS) of 15% above the Retail Prices Index ("RPI") over a three-year period in all grants under the Approved Scheme and 1996 Unapproved
Scheme until July 2000. Under the 2000 Unapproved Scheme performance conditions of 6% per annum and 20% per annum compound
above RPI have been applied to the grant of Basic Options and Super Options respectively thereunder. The Remuneration Committee
believes that EPS is the most appropriate measure of the Group’s underlying financial performance. In order to assess whether the
performance conditions have been met, the Committee will utilise the EPS derived from the audited financial statements of the Group.
In addition, separate share option schemes have been established for the benefit of the Group’s US and French employees within the
authority given by shareholders at the Extraordinary General Meeting of the Company held on 17 July 2000. Both such schemes operate
within the overall limit on issue of new shares of 10% of the Company’s issued share capital applicable to all the Group’s employee share
schemes. The Pace Americas Sharesave Plan is based on the Sharesave Scheme rules and is designed to satisfy the US Internal Revenue
Service requirements for such saving-for-shares plans. The Pace Micro Technology plc French Share Option Scheme 2001 is based on the
UK Approved Scheme rules and satisfies the French statutory requirements, which provide favourable tax treatment for such schemes.
The Company’s authority from shareholders to make new grants under the Discretionary Schemes and its current Sharesave Schemes will
expire over the next year. Accordingly, at the Company’s Annual General Meeting on 6 September 2005 the Company will seek new authority
from shareholders for a new Sharesave Scheme and a new US Sharesave Plan together with new Approved and Unapproved Discretionary
Option Schemes.
Service contracts
Company policy is that in normal circumstances executive directors’ notice periods should not exceed one year. Each of the executive
directors has a service contract with the Company. Each of these agreements is terminable by the Company on twelve months’ prior written
notice or by the relevant director on not less than six months’ prior written notice. At the option of the Company each agreement may be
terminated forthwith subject to the Company paying to the director a sum equivalent to 12 months’ salary and pension contributions. The
Remuneration Committee considers that compensation payments on termination of employment should depend on individual circumstances.
It is the Company’s policy to honour its obligations with regard to directors’ service agreements and where the employment of a director is
terminated in accordance with the aforementioned contractual process the Company will pay the sum specified in the relevant service
agreement as payable.
The service agreement of John Dyson was entered into on 10 October 1997 and subsequently amended on 1 January 2003 and 2 May
2003. The service agreement of Neil Gaydon was entered into on 28 November 2001 and subsequently amended on 21 December 2001,
14 January 2003, 22 November 2003 and 1 June 2004. The service agreement of David Brocksom was entered into on 13 November 2003
and became effective on 9 February 2004, subsequently amended on 1 June 2004. Each of the aforementioned service agreements was
amended on 1 June 2005 to give effect to the Group salary review. Save for the notice periods referred to in the above paragraph, these
contracts have no unexpired term.
Each of the non-executive directors is appointed under a letter of appointment which is terminable at any time by the Company without
contractual notice. In addition, each of the non-executive directors has a letter of indemnity issued by the Company which provides an
indemnity in respect of liabilities incurred in the course of their office to the extent permitted by the Company’s Articles of Association and
the provisions of section 310 of the Companies Act 1985.
The Company maintains directors’ and officers’ liability insurance in respect of senior employees including the directors. The consent of the
Board is required in the event that an executive director wishes to accept an external appointment. It has been the practice of the Company
to permit a director to retain non-executive fees arising from any such appointment. John Dyson receives fees of £12,000 per year as 
a non-executive director of XP Power plc.
34
Pace Micro Technology plc Report & Accounts 2005
Remuneration report  Continued 
R&A Directors Section  25/7/05  8:43 am  Page 10 The auditors are required to report on the information disclosed on pages 35 to 37.
Directors’ remuneration
Total directors’ remuneration in respect of qualifying services for the year ending 4 June 2005  was as follows:
2005 2004
£000 £000
Fees 200 211
Salaries, benefits in kind and termination payments 675 593
Performance-related bonuses 85 -
Pension contributions 73 52
1,033 856
The remuneration of individual directors in respect of qualifying services for the year ending 4 June 2005 is set out in the table below 
Salaries Performance    Benefits  Total  Pension
and fees  bonus in kind remuneration contributions
2005 2004 2005 2004
Executive Directors £000 £000 £000 £000 £000 £000 £000
David Brocksom 147 20 9 176 45 23 7
John Dyson 273 39 5 317 272 31 30
Neil Gaydon 202 26 39 267 276 19 15
622 85 53 760 593 73 52
Non-executive Directors
Sir Michael Bett 65 - - 65 62 - -
Pat Chapman-Pincher* 5- - 5 - - -
Robert Fleming 29 - - 29 26 - -
Marten Fraser* 9- - 9 - - -
David Hood* 9- - 9 26 - -
Marvin Jones* 26 - - 26 44 - -
Bob Lambourne 30 - - 30 27 - -
Mike McTighe 27 - - 27 26 - -
822 85 53 960 804 73 52
*Remuneration referable only to period of the financial year since date of appointment to the Board or up to date of retirement.
A summary of the benefits in kind provided to the executive directors is contained on page 33.
35
Pace Micro Technology plc Report & Accounts 2005
Remuneration report Continued 
R&A Directors Section  25/7/05  8:43 am  Page 11 Directors’ interests in shares and share options
The interests of directors holding office at the year-end and those of their immediate families in the ordinary share capital of the Company at
4 June 2005 and at the beginning of the year or date of appointment, if later, are set out below:
4 June 2005 30 May 2004 or Date of Appointment
Shares Shares
Beneficial Non Under option Beneficial Non Under option
Beneficial Beneficial
Sir Michael Bett 343,300 - - 343,300 - -
David Brocksom 14,000 - 349,635 - - 250,000
Pat Chapman-Pincher - - - - - -       
John Dyson 191,586 - 1,392,221 191,586 - 1,501,655
Robert Fleming 8,850,990 29,188 - 8,850,990 29,188 -
Marten Fraser - - - - - -
Neil Gaydon 7,462 - 917,720 7,462 - 837,720
Bob Lambourne 14,500 - - 14,500 - -
Mike McTighe 20,000 - - 20,000 - -
There were no changes in the directors’ interests in the ordinary share capital of the Company between 4 June 2005 and 11 July 2005.
36
Pace Micro Technology plc Report & Accounts 2005
Remuneration report Continued 
R&A Directors Section  25/7/05  8:43 am  Page 12 Share options
Details of the options over the ordinary shares of 5p each in the Company held by the directors who held office during the year were as follows:
Number of options
At 29 May 2004 Granted      Expired At 4 June Exercise Exercise Period
2005 Price From To
David Brocksom
Approved Scheme          38,461 - - 38,461 78.0p 16.02.07 15.02.14
2000 Unapproved Scheme 211,539 - - 211,539 78.0p 16.02.05 15.02.14
2000 Unapproved Scheme        - 80,000 - 80,000 51.0p 17.08.05 16.08.14
Sharesave Scheme               - 19,635 - 19,635   48.0p 01.10.07 31.03.08
John Dyson
Approved Scheme        8,000 - - 8,000 375.0p 24.07.04 23.07.11
1996 Unapproved Scheme      259,434 - 259,434 - 53.0p 17.11.00 16.11.04
1996 Unapproved Scheme      150,000 - - 150,000 200.0p 07.07.02 06.07.09
2000 Unapproved Scheme      17,492 - - 17,492 857.5p 17.07.01 16.07.10
2000 Unapproved Scheme    500,000 - - 500,000 20.0p 21.01.04 20.01.13
2000 Unapproved Scheme       500,000 - - 500,000 37.0p 02.05.04 01.05.13
2000 Unapproved Scheme         - 150,000 - 150,000 51.0p 17.08.05 16.08.14
2000 Super Options  32,507 - - 32,507 857.5p 17.07.01 16.07.10
Sharesave Scheme            14,000 - - 14,000 18.0p 01.10.05 31.03.06
Sharesave Scheme       7,448 - - 7,448 14.5p 01.04.06 30.09.06
Sharesave Scheme         9,633 - - 9,633 35.5p 01.10.06 31.03.07
Sharesave Scheme         3,141 - - 3,141 60.0p 01.04.07 30.09.07
Neil Gaydon
Approved Scheme             3,498 - - 3,498 857.5p 17.07.03 16.07.10
1996 Unapproved Scheme     75,000 - - 75,000 64.0p 24.09.01 23.09.08
1996 Unapproved Scheme  75,000 - - 75,000 200.0p 07.07.02 06.07.09
2000 Unapproved Scheme   93,252 - - 93,252 375.0p 24.07.02 23.07.11
2000 Unapproved Scheme     7,023 - - 7,023 20.0p 21.01.04 20.01.13
2000 Unapproved Scheme        - 80,000 - 80,000 51.0p 17.08.05 16.08.14
2000 Super Option             56,748 - - 56,748 375.0p 24.07.02 23.07.11
2000 Super Option        492,977 - - 492,977 20.0p 21.01.04 20.01.13
Sharesave Scheme      14,000 - - 14,000 18.0p 01.10.05 31.03.06
Sharesave Scheme        7,448 - - 7,448 14.5p 01.04.06 30.09.06
Sharesave Scheme      9,633 - - 9,633 35.5p 01.10.06 31.03.07
Sharesave Scheme                       3,141 - - 3,141 60.0p 01.04.07 30.09.07
No options were exercised by any of the directors during the year or during the previous financial year.
The mid-market price of shares in the Company on 3 June 2005 (the last dealing day before the financial year end) was 58.25p. The lowest and highest
closing mid-market prices of shares in the Company during the year were 32p and 63.5p respectively.
Information concerning the performance conditions attached to the above options is contained on page 34.
37
Pace Micro Technology plc Report & Accounts 2005
Remuneration report  Continued 
R&A Directors Section  25/7/05  8:43 am  Page 13 Employee trusts
The Company has established the Pace Micro Technology plc Employee Benefits Trust, which is capable of acquiring shares in the
Company in the market and using them for the purposes of satisfying new share options granted under the Company’s Share Option
Schemes. No shares were acquired by the Trust during the year.
During the year no options under the Company’s Share Option Schemes were exercised and satisfied by shares transferred by the Trust.
The Company has established the Pace QUEST (Qualifying Employee Share Trust), which is capable of acquiring shares in the Company
either through purchases in the market or allotment and of using any such shares for the purposes of satisfying options under the
Company’s Sharesave Scheme. No shares were acquired by the QUEST during the year.
During the year 144,005 options under the Company’s Sharesave Scheme were exercised and were satisfied by shares transferred by the
QUEST.
38
Pace Micro Technology plc Report & Accounts 2005
Remuneration report Continued
R&A Directors Section  25/7/05  8:43 am  Page 14 Performance graph
Set out below is a performance graph showing the total shareholder return of the Company for the five financial years of the Company ending
4 June 2005 compared to the total shareholder return of the FTSE Electronics and Electrical Equipment sector index which is considered by
the Board to be an appropriate benchmark index against which to compare the Company’s performance having regard to the principal
activities of the Group.
By order of the Board
Anthony J Dixon
Company Secretary
12 July 2005
Remuneration report  Continued
100
80
60
40
20
0
2000                                 2001                                 2002                                2003                                 2004                                2005
Pace Micro Technology plc              FTSE Electronics & Electrical Equipment
39
Pace Micro Technology plc Report & Accounts 2005
R&A Directors Section  25/7/05  11:51 am  Page 15 The following statement, which should be read in conjunction with the Independent Auditors’ Report set out on page 41, is made for the
purpose of clarifying the respective responsibilities of the directors and auditors.
The directors are required by company law to prepare financial statements for each financial year which give a true and fair view of the state
of affairs of the Company and the Group, and of the profit or loss for that period. In preparing those financial statements, the directors are
required to:
•
select suitable accounting policies and then apply them consistently;
•
make judgements and estimates that are reasonable and prudent;
•
state whether applicable accounting standards have been followed, subject to any material departures which are disclosed and
explained in the financial statements; and
•
to prepare the financial statements on the going concern basis unless it is not appropriate to presume that the Group will continue
in business.
The directors are responsible for ensuring that proper accounting records are maintained, which disclose with reasonable accuracy at any
time the financial position of the Company, to enable them to ensure that the financial statements comply with the Companies Act 1985. The
directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
40
Pace Micro Technology plc Report & Accounts 2005
Statement of directors’ responsibilities
R&A Directors Section  25/7/05  8:43 am  Page 16 Independent auditors’ report to the members of Pace Micro
Technology plc
We have audited the financial statements on pages 43 to 64. We have also audited the information in the directors' remuneration report that is
described as having been audited.
This report is made solely to the Company's members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has
been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors are responsible for preparing the Annual Report and the directors' remuneration report. As described on page 40, this includes
responsibility for preparing the financial statements in accordance with applicable United Kingdom law and accounting standards. Our responsibilities,
as independent auditors, are established in the United Kingdom by statute, the Auditing Practices Board, the Listing Rules of the Financial Services
Authority, and by our profession's ethical guidance.
We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the
directors' remuneration report to be audited have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in
our opinion, the directors' report is not consistent with the financial statements, if the Company has not kept proper accounting records, if we have
not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and
transactions with the Group is not disclosed.
We review whether the corporate governance statement on pages 27 to 29 reflects the Company’s compliance with the nine provisions of the 2003
FRC Code specified for our review by the Listing Rules, and we report if it does not.  We are not required to consider whether the board’s statements
on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and
control procedures.
We read the other information contained in the Annual Report, including the corporate governance statement and the unaudited part of the directors'
remuneration report, and consider whether it is consistent with the audited financial statements. We consider the implications for our report if we
become aware of any apparent misstatements or material inconsistencies with the financial statements.
Basis of audit opinion
We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test
basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the directors' remuneration report to be audited.
It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and
of whether the accounting policies are appropriate to the Group's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements and the part of the directors' remuneration report to be audited are free
from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of
the presentation of information in the financial statements and the part of the directors' remuneration report to be audited.
Opinion
In our opinion:
• the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 4 June 2005 and of the profit of the
Group for the fifty three week period then ended; and
• the financial statements and the part of the directors' remuneration report to be audited have been properly prepared in accordance with the
Companies Act 1985.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
Leeds
12 July 2005
41
Pace Micro Technology plc Report & Accounts 2005
58653 Pace Rep&Accs 41-69  25/7/05  8:27 am  Page 41 42
Pace Micro Technology plc Report & Accounts 2005
Financial statements 2005
Contents
43  Financial statements
48  Notes to the financial statements
67  Five year record
68  Directors, secretary and advisers
69  Shareholder information
58653 Pace Rep&Accs 41-69  25/7/05  8:27 am  Page 42 For the fifty three week period ended 4 June 2005
Note 2005 2004
£000 £000
Turnover 3 253,326 239,949
Cost of sales (200,704) (194,425)
Gross profit 52,622 45,524
Net operating income and charges
Before operating exceptional items 5 (45,452) (40,350)
Operating exceptional items 6 (145) (1,500)
Total operating income and charges (45,597) (41,850)
Operating profit 7,025 3,674
Non-operating exceptional item: loss on closure of business 23 (360) –
Net interest receivable and similar income 7 410 206
Profit on ordinary activities before taxation 4 7,075 3,880
Tax credit on profit on ordinary activities 10 4,717 4,186
Retained profit for the financial year 23 11,792 8,066
Basic earnings per ordinary share 11 5.4p 3.7p
Diluted earnings per ordinary share 11 5.3p 3.6p
Adjusted basic earnings per ordinary share 11 5.9p 4.6p
Adjusted diluted earnings per ordinary share 11 5.8p 4.5p
The accompanying accounting policies and notes form an integral part of these financial statements.
In both the current and preceding year the Group had no acquisitions or discontinued operations.
Consolidated profit and loss account
43
Pace Micro Technology plc Report & Accounts 2005
58653 Pace Rep&Accs 41-69  25/7/05  8:27 am  Page 43 At 4 June 2005
Note 2005 2004
(as restated – note 2)
£000 £000 £000 £000
Fixed assets
Intangible 12 8,872 9,436
Tangible 12 6,185 7,010
Investments 13 674 –
15,731 16,446
Current assets
Stocks 14 10,135 10,006
Debtors 15 55,836 64,724
– due within one year 51,827 60,912
– due after more than one year 4,009 3,812
Cash at bank and in hand 26,647 20,705
92,618 95,435
Creditors: amounts falling due within one year 16 (31,666) (41,378)
Net current assets 60,952 54,057
Total assets less current liabilities 76,683 70,503
Creditors: amounts falling due after more than one year 17 (205) (246)
Provisions for liabilities and charges 20 (14,627) (20,748)
Net assets 61,851 49,509
Capital and reserves
Called up equity share capital 21 11,349 11,339
Share premium account 22 35,677 35,647
Profit and loss account 23 14,825 2,523
Total equity shareholders’ funds 61,851 49,509
These financial statements were approved by the Board of Directors on 12 July 2005 and were signed on its behalf by:
Sir Michael Bett - Non-executive Chairman
John Dyson - Chief Executive
Consolidated balance sheet
44
Pace Micro Technology plc Report & Accounts 2005
58653 Pace Rep&Accs 41-69  25/7/05  8:27 am  Page 44 At 4 June 2005
Note 2005 2004
(as restated – note 2)
£000 £000 £000 £000
Fixed assets
Tangible 12 4,956 5,530
Investments 13 10,074 15,139
15,030 20,669
Current assets
Stocks 14 9,300 7,200
Debtors 15 54,685 64,501
– due within one year 50,676 60,689
– due after more than one year 4,009 3,812
Cash at bank and in hand 26,744 19,201
90,729 90,902
Creditors: amounts falling due within one year 16 (34,233) (42,446)
Net current assets 56,496 48,456
Total assets less current liabilities 71,526 69,125
Provisions for liabilities and charges 20 (14,627) (20,748)
Net assets 56,899 48,377
Capital and reserves
Called up equity share capital 21 11,349 11,339
Share premium account 22 35,677 35,647
Profit and loss account 23 9,873 1,391
Total equity shareholders’ funds 56,899 48,377
These financial statements were approved by the Board of Directors on 12 July 2005 and were signed on its behalf by:
Sir Michael Bett - Non-executive Chairman
John Dyson - Chief Executive
Company balance sheet
45
Pace Micro Technology plc Report & Accounts 2005
58653 Pace Rep&Accs 41-69  25/7/05  8:27 am  Page 45 Consolidated cash flow statement
46
Pace Micro Technology plc Report & Accounts 2005
For the fifty three week period ended 4 June 2005
Note 2005 2004
£000 £000
Net cash inflow from operating activities 25 11,208 14,165
Returns on investments and servicing of finance 26 343 136
Taxation (1,378) 391
Capital expenditure and financial investment 26 (3,559) (2,665)
Acquisitions and disposals 26 (674) (4,936)
Cash inflow before financing 5,940 7,091
Financing 26 2 204
Increase in cash in the year 5,942 7,295
Reconciliation of net cash flow to movement in net funds
Note 2005 2004
£000 £000
Increase in cash in the year 5,942 7,295
Cash flow from decrease in debt 38 34
Movement in net funds in the year 5,980 7,329
Net funds at start of year 20,406 13,077
Net funds at end of year 27 26,386 20,406
58653 Pace Rep&Accs 41-69  25/7/05  8:27 am  Page 46 Consolidated statement of total recognised gains and losses and
reconciliation of movements in shareholders’ funds
47
Pace Micro Technology plc Report & Accounts 2005
For the fifty three week period ended 4 June 2005
Consolidated statement of total recognised gains and losses
2005 2004
£000 £000
Profit for the year 11,792 8,066
Currency translation differences on foreign currency net investments 150 (473)
Total recognised gains relating to the year 11,942 7,593
Prior year adjustment (as explained in note 2) (2,436)
Total recognised gains since last annual report 9,506
Reconciliation of movements in shareholders’ funds
2005 2004
(as restated
– note 2)
£000 £000
Retained profit for the year 11,792 8,066
Other recognised gains and losses relating to the year 150 (473)
Issue of ordinary share capital 40 247
Write back to profit and loss account of goodwill previously written off directly to reserves 360 –
Net addition to equity shareholders’ funds 12,342 7,840
Equity shareholders’ funds at start of year (originally £51,945,000 before prior year adjustment of £2,436,000) 49,509 41,669 
Equity shareholders’ funds at end of year 61,851 49,509
58653 Pace Rep&Accs 41-69  25/7/05  8:27 am  Page 47 Notes
48
Pace Micro Technology plc Report & Accounts 2005
1 Accounting policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial
statements.
Basis of preparation
The financial statements have been prepared in accordance with applicable accounting standards and under the historical cost convention.
Financial position and market conditions
The performance of the Group has continued to improve in this period. Unit volumes and turnover have increased and the geographical diversity
continues to widen. However, pressure on selling prices continues and the net profit margin remains low.
The risks in the digital broadcasting industry involve the application of new and evolving technologies and the nature of Pace’s activities, which
are characterised by large individual sales orders for goods and engineering or support services, to a limited range of customers, is unchanged.
Some customers are incurring losses as they implement their business plans and others continue to review the timing and nature of their plans.
These factors, particularly in the context of the level of net profitability, increase both the volatility of the business and the sensitivity of the
judgements required to prepare the financial statements. In making these judgements, a consistent approach has been applied using all available
information.
The Group ended the period with net cash balances of £26.4m and has uncommitted banking facilities in an amount of £20m, which are available
until 30 September 2006.
The Board has built the above circumstances into their working capital forecasts and has modelled various business scenarios. Based on these,
the Board has concluded that it is appropriate to confirm the going concern basis of preparation for the financial statements.
Financial year end
The annual financial statements are drawn up to the Saturday nearest to 31 May. The current year’s financial statements are for the 53 weeks
ended 4 June 2005 and the previous year’s financial statements are for the 52 weeks ended 29 May 2004. The annual financial statements for
the next period will be for a 52 week period ending 3 June 2006.
Basis of consolidation
The Group financial statements consolidate those of the Company and of its subsidiary undertakings (note 13) drawn up to 4 June 2005. Unless
otherwise stated, the acquisition method of accounting has been adopted. Under this method the results of the subsidiary undertakings acquired
or disposed of in the year are included in the consolidated profit and loss account from the date of acquisition or up to the date of disposal.
Turnover
Turnover represents the amounts derived from the sale of goods and the provision of services to third party customers occurring in the period,
stated exclusive of value added tax and net of trade discounts and rebates. Revenue on the sale of goods is recognised when substantially all of
the risks and rewards in the product have passed to the customer, which is usually upon delivery to the customer. Turnover in respect of services
rendered, including engineering consultancy and support and software services, is recognised over the period over which they are performed, in
relation to the level of work undertaken, project milestones achieved and any future obligations remaining.
Depreciation
Depreciation is calculated to write down the cost less estimated residual value of all tangible fixed assets by equal annual instalments over their
expected useful lives. The periods generally applicable are:
Long leasehold properties Period of lease
Short leasehold properties Period of lease
Plant and machinery 1 - 10 years
Motor vehicles 4 years
Research and development
Research and development expenditure is charged to the profit and loss account in the year in which it is incurred.
Stocks
Stocks are stated at the lower of cost and net realisable value.
58653 Pace Rep&Accs 41-69  25/7/05  8:27 am  Page 48 Notes continued
49
Pace Micro Technology plc Report & Accounts 2005
Deferred taxation
Deferred tax is recognised, without discounting, in respect of all timing differences between the treatment of certain items for taxation and
accounting purposes which have arisen but not reversed by the balance sheet date except as otherwise required by FRS 19 Deferred Tax.
Deferred tax assets are recognised only to the extent that they are expected to be recoverable and it is more likely than not that there will be
suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.
Goodwill
Purchased goodwill (both positive and negative) arising on consolidation in respect of acquisitions before 31 May 1998, when FRS 10 Goodwill
and Intangible Assets was adopted, was written off to reserves in the year of acquisition. When a subsequent disposal occurs any related
goodwill previously written off to reserves is written back through the profit and loss account as part of the profit or loss on disposal.
Purchased goodwill (representing the excess of the fair value of the consideration given and associated costs over the fair value of the
separable net assets acquired) arising on consolidation in respect of acquisitions since 31 May 1998 is capitalised. Positive goodwill is
amortised to nil by equal annual instalments over its estimated useful life, normally 20 years.
On the subsequent disposal or termination of a business acquired since 31 May 1998, the profit and loss on disposal or termination is
calculated after charging the unamortised amount of any related goodwill.
In the Company’s financial statements, investments in subsidiary undertakings are stated at cost (less provision for any impairment in value).
Accounting for employee share schemes
Consistent with the treatment outlined in UITF 38 ‘Accounting for ESOP Trusts’, the material assets, liabilities, income and costs of the Pace
Micro Technology plc Employee Benefits Trust are consolidated in these financial statements. Until such time as the Company’s own shares
vest unconditionally with employees, the consideration paid for the shares is deducted in arriving at shareholders funds (see note 2). The
Company has taken advantage of the exemption available under UITF No.17 revised 2000 (Accounting for Employee Share Schemes) in
respect of the 20% discount against the quoted market price for the Sharesave Schemes and discounts for equivalent overseas schemes.
Asset impairment
Intangible and tangible fixed assets are tested for impairment when an event that might affect asset values has occurred. An impairment loss
is recognised to the extent that the carrying amount cannot be recovered either by selling the asset or by the discounted future earnings from
operating the assets. In each of the five years following an impairment review, where an intangible fixed asset has been written down to a
recoverable amount based on value in use, the cash flows achieved are compared with those forecast and adjustments to the carrying value
are made as necessary.
Foreign currencies
Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Assets and liabilities denominated
in foreign currencies are translated at the rates of exchange ruling at the balance sheet date.
Exchange differences of a trading nature are dealt with in the profit and loss account. Exchange differences on the restatement of the net
investment in overseas subsidiaries and the difference between the profit and loss account translated at the average rate and the closing rate
are recorded as movements on reserves.
Financial instruments are used to reduce certain exposures to fluctuations in foreign exchange rates. If the instrument is used to hedge a
trading exposure then any gain or loss is dealt with in the profit and loss account in the period in which the trading exposure itself is accounted
for. Any gain or loss on an instrument used to hedge an exposure on the net investment in overseas subsidiaries is recorded as a movement
on reserves.
Pension contributions
The pension costs charged to the profit and loss account represent the amount of the contributions payable to various defined contribution
schemes during the year.
Leased assets
Assets held under finance leases and hire purchase contracts are capitalised in the balance sheet and depreciated over their expected useful
lives. The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to the profit
and loss account over the period of the lease.
All other leases are regarded as operating leases and the payments made under them are charged to the profit and loss account on a straight
line basis over the lease term.
2 Prior year adjustment
At 4 June 2005 the Pace Micro Technology plc Employee Benefits Trust and QUEST held shares in the Company which cost £21,421,000
(2004: £21,450,000). These shares are held to satisfy options granted to employees.
In line with the requirements of UITF Abstract No 38 “Accounting For ESOP Trusts”, such amounts have been reclassified to show the
Company’s purchases of own shares as deductions from the Profit and Loss Account reserve in arriving at Shareholders’ Funds. The previous
treatment was to classify such amounts, net of impairment provisions, as assets in Fixed Asset Investments. The comparative figures in the
financial information have been restated to reflect this change with a resulting impact on the balance sheets as follows.
29 May 2004  
£000
Decrease in Investments and Net Assets (2,436)
Net decrease in Profit and Loss Account Reserve and Shareholders’ Funds (2,436)
There is no impact on the Profit and Loss Account for the year ended 29 May 2004 resulting from the above restatement.
58653 Pace Rep&Accs 41-69  25/7/05  8:27 am  Page 49 Notes continued
50
Pace Micro Technology plc Report & Accounts 2005
3 Turnover
The geographical analysis of turnover which arises from the sale of goods and the provision of software, hardware and other consultancy services
to third party customers is as follows:
Turnover by destination 2005 2004
£000 £000
United Kingdom 106,269 138,275
Continental Europe 98,095 56,812
Far East and Australasia 24,547 19,986
North America 23,531 22,252
Rest of the World 884 2,624
253,326 239,949
By origin                                                                                Turnover                Profit before taxation                 Net assets
(as restated – note 2)
2005 2004 2005 2004 2005 2004
£000 £000 £000 £000 £000 £000
United Kingdom 249,848 226,786 8,134 3,526 58,425 42,932
Continental Europe 2,915 11,826 (706) 192 3,265 5,336
Far East and Australasia 563 1,357 (353) 162 161 1,241
253,326 239,949 7,075 3,880 61,851 49,509
The Group's principal activities are the development, design and distribution of digital receivers and receiver decoders, for the reception of digital
television and the reception/transmission of interactive services, telephony and high speed data. The Group also provides engineering design,
software applications and support services to Multiple Service Operators, broadcasters, telecommunications companies and retail markets
worldwide. Each of these services may be delivered over satellite, cable, terrestrial and IP network transmission systems.
4 Profit on ordinary activities before taxation is stated after charging
2005 2004
£000 £000
Group auditors’ and their associates’ remuneration
- audit services 175 192
- taxation services 52 44
- other services 36 35
Company auditors’ and their associates’ remuneration
- audit services 168 176
Amortisation of goodwill 564 564
Depreciation of tangible fixed assets
- owned 4,419 5,317
Other operating lease rentals
- land and buildings 1,387 1,421
- motor vehicles 146 192
Loss on disposal of tangible fixed assets 1 317
58653 Pace Rep&Accs 41-69  25/7/05  8:28 am  Page 50 Notes continued
51
Pace Micro Technology plc Report & Accounts 2005
5 Net operating expenses
2005 2004
£000 £000
Research and development expenditure 23,976 21,330
Administrative expenses – before operating exceptional items 21,476 19,020
Administrative expenses – operating exceptional items (see note 6) 145 1,500
Total administrative expenses 21,621 20,520
45,597 41,850
6 Operating exceptional items
2005 2004
£000 £000
(Release)/cost regarding reference to Financial Services and Markets Tribunal (180) 1,500
Restructuring and reorganisation costs 325 –
145 1,500
Previously the Company was party to a reference to the Financial Services and Markets Tribunal. In the prior year the Board considered it
appropriate to make an exceptional charge within administrative expenses for costs associated with this reference.
Following the settlement of the matter in the current period the net costs incurred, net of insurance recoveries, have been offset against the
provision established.
The restructuring and reorganisation charges relate to an ongoing restructuring programme within the Group.
7 Net interest receivable and similar income
2005 2004
£000 £000
Bank interest payable and other similar charges (318) (117)
Bank interest receivable 728 323
410 206
8 Remuneration of the directors
The remuneration, share options and pension entitlements of the directors are disclosed in the Remuneration Report on pages 32 to 39.
9 Staff numbers and costs
The average number of employees were: 2005 2004
Research and development 347 354
Administration 118 112
Sales and marketing 51 62
Manufacturing and operations 79 70
595 598
Staff costs: £000 £000
Wages and salaries 24,871 23,682
Social security costs 2,968 2,877
Other pension costs 903 857
Redundancy costs 313 –
29,055 27,416
58653 Pace Rep&Accs 41-69  25/7/05  8:28 am  Page 51 Notes continued
52
Pace Micro Technology plc Report & Accounts 2005
10 Tax credit on profit on ordinary activities
The tax credit is based on the profit for the year and comprises:  2005 2004
£000 £000
Current tax:
Adjustments in respect of previous periods 4,760 8,214
Overseas tax (charge)/credit (240) 44
Total current tax credit 4,520 8,258
Deferred tax:
Origination and reversal of timing differences (note 15) 197 (4,072)
Tax credit on profit on ordinary activities 4,717 4,186
Reconciliation of total current tax credit:  2005 2004
£000 £000
Profit on ordinary activities before tax 7,075 3,880
Profit on ordinary activities multiplied by standard rate of corporation tax (30%) 2,123 1,164
Effects of:
Expenses not deductible for tax purposes including amortisation of goodwill 785 1,312
Accelerated capital allowances (116) 57
Tax losses utilised in period (1,637) (1,826)
Research and development tax credit (975) (782)
Overseas tax not at 30% 60 31
Adjustments to tax charge in respect of previous periods (4,760) (8,214)
Current tax credit for period (4,520) (8,258)
No tax credit has been taken in respect of the exceptional items included within the above tax charges.
58653 Pace Rep&Accs 41-69  25/7/05  8:28 am  Page 52 Notes continued
53
Pace Micro Technology plc Report & Accounts 2005
11 Earnings per ordinary share
2005 2004
Basic and diluted earnings per share pence pence
Basic earnings per share before amortisation of goodwill and exceptional items 5.9 4.6
Effect of amortisation of goodwill (0.2) (0.2)
Effect of exceptional items (0.3) (0.7)
Basic earnings per share 5.4 3.7
The calculation of basic earnings per share is based on profit for the year of £11,792,000 (2004: £8,066,000) divided by the weighted average
number of ordinary shares in issue of 219,164,009 (2004: 218,497,203), excluding shares held by the QUEST and Employee Benefits Trust.
Adjusted earnings per share before amortisation of goodwill and exceptional items is disclosed to indicate the underlying profitability of the
Group and is based on profit of £12,861,000 (2004: £10,130,000).
2005 2004
£000 £000
Earnings before amortisation of goodwill and exceptional items 12,861 10,130
Effect of amortisation of goodwill (564) (564)
Effect of exceptional items (505) (1,500)
Profit for the year 11,792 8,066
2005 2004
Number of shares million million
Weighted average number of ordinary shares in issue during the year 219.2 218.5
Dilutive effect of options outstanding 4.6 6.8
Diluted weighted average number of ordinary shares in issue during the year 223.8 225.3
Diluted earnings per ordinary share varies from basic earnings per ordinary share due to the effect of the notional exercise of outstanding
share options.
58653 Pace Rep&Accs 41-69  25/7/05  8:28 am  Page 53 Notes continued
54
Pace Micro Technology plc Report & Accounts 2005
12 Fixed assets
Short
Long leasehold Tangible
Intangible leasehold land and Plant and Motor fixed assets
goodwill buildings buildings machinery vechicles Total
Group £000 £000 £000 £000 £000 £000
Cost
At 30 May 2004 35,685 600 4,450 24,029 30 29,109
Exchange adjustments – 7 3 1 – 11
Additions – – 186 3,408 – 3,594
Retirement of assets (see below) – – – (10,834) – (10,834)
Disposals – – (6) (253) – (259)
At 4 June 2005 35,685 607 4,633 16,351 30 21,621
Amortisation/depreciation
At 30 May 2004 26,249 209 3,445 18,415 30 22,099
Exchange adjustments – 8 3 (7) – 4
Provided in the year 564 23 441 3,955 – 4,419
Retirement of assets (see below) – – – (10,834) – (10,834)
Disposals – – (6) (246) – (252)
At 4 June 2005 26,813 240 3,883 11,283 30 15,436
Net book amount at 4 June 2005 8,872 367 750 5,068 – 6,185
Net book amount at 29 May 2004 9,436 391 1,005 5,614 – 7,010
Company
Cost
At 30 May 2004 – – 4,117 21,011 30 25,158
Additions – – 179 3,041 – 3,220
Retirement of assets (see below) – – – (10,834) – (10,834)
Disposals – – (6) (106) – (112)
At 4 June 2005 – – 4,290 13,112 30 17,432
Depreciation
At 30 May 2004 – – 3,228 16,370 30 19,628
Provided in the year – – 370 3,420 – 3,790
Retirement of assets (see below) – – – (10,834) – (10,834)
Disposals – – (6) (102) – (108)
At 4 June 2005 – – 3,592 8,854 30 12,476
Net book amount at 4 June 2005 – – 698 4,258 – 4,956
Net book amount at 29 May 2004 – – 889 4,641 – 5,530
During the year a review has been carried out to remove from the fixed asset registers fully written down fixed assets which are no longer
being used. Adjustments have been made to both cost and accumulated depreciation as a consequence. There is no profit or loss impact
from such adjustments.
58653 Pace Rep&Accs 41-69  25/7/05  8:28 am  Page 54 Notes continued
55
Pace Micro Technology plc Report & Accounts 2005
13 Fixed asset investments
Other
investments
Group £000
Cost at 30 May 2004 625
Additions 674
Cost at 4 June 2005 1,299
Provision at 30 May 2004 and 4 June 2005 (625)
Net book value at 4 June 2005 674
Net book value at 29 May 2004 –
Intra- Shares
group in group Other
loans undertakings investments Total
Company £000 £000 £000 £000
Cost at 30 May 2004 65,945 6,139 45 72,129
Additions – – 674 674
Liquidation of subsidiaries – (101) – (101)
Cost at 4 June 2005 65,945 6,038 719 72,702
Provision at 30 May 2004 (56,945) – (45) (56,990)
Movement in period (5,638) – – (5,638)
Provision at 4 June 2005 (62,583) – (45) (62,628)
Net book value at 4 June 2005 3,362 6,038 674 10,074
Net book value at 29 May 2004 9,000 6,139 – 15,139
Additions in the period relate to a further investment in VegaStream Limited, together with a trade investment in Intamac Limited.
At 4 June 2005 the Company had a beneficial interest in the equity of the following subsidiary undertakings:
Percentage Country of Country of Class of share
holding incorporation operation capital held
EURL New Com Immobilier** 100% France France Ordinary
Pace Advanced Consumer Electronics Limited 100% UK UK Ordinary
Pace Asia Pacific Limited (formerly Pace Asia Limited)*** 100% Hong Kong Hong Kong Ordinary
Pace Distribution GmbH 100% Germany Germany Ordinary
Pace Distribution (Overseas) Limited 100% UK UK Ordinary/Preference
Pace Micro Technology (HK) Limited 100% Hong Kong Hong Kong Ordinary
Pace Micro Technology (Australia) Pty Limited 100% Australia Australia Ordinary
Pace Micro Technology (Support Services) Limited*** 100% UK USA Ordinary
Pace Micro Technology (Asia Pacific) Limited* 100% Hong Kong Hong Kong Ordinary
SCI Les 9 Tilleuls** 100% France France Ordinary
Pace Europe SAS *** 100% France France Ordinary
Pace Micro Technology GmbH 100% Germany Germany Ordinary
* Denotes company owned by Pace Micro Technology (HK) Limited
** Denotes company owned by Pace Europe SAS
*** Denotes company owned by Pace Distribution (Overseas) Limited
Each of the subsidiary undertakings listed above have been consolidated in the Group’s financial statements.
58653 Pace Rep&Accs 41-69  25/7/05  8:28 am  Page 55 Notes continued
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Pace Micro Technology plc Report & Accounts 2005
14 Stocks
Group                            Company
2005 2004 2005 2004
£000 £000 £000 £000
Raw materials and consumable stores 2,354 5,388 2,287 3,328
Finished goods 7,781 4,618 7,013 3,872
10,135 10,006 9,300 7,200
15 Debtors
Group                            Company
2005 2004 2005 2004
£000 £000 £000 £000
Amounts falling due within one year:
Trade debtors 44,785 57,042 44,364 56,329
Amounts owed by subsidiary undertakings – – – 932
Other debtors 5,017 2,686 4,680 2,616
Prepayments and accrued income 2,025 1,184 1,632 812
51,827 60,912 50,676 60,689
Amounts falling due after more than one year:
Deferred tax 4,009 3,812 4,009 3,812
55,836 64,724 54,685 64,501
Deferred tax assets have been recognised to the extent they are regarded as recoverable, in accordance with FRS 19. The following table
outlines the recognised and unrecognised deferred tax assets.
Recognised asset          Unrecognised asset
2005 2004 2005 2004
Group and Company £000 £000 £000 £000
Accelerated capital allowances 1,598 1,714 – –
Trading losses 2,411 2,098 1,219 3,763
4,009 3,812 1,219 3,763
16 Creditors: amounts falling due within one year
Group                            Company
2005 2004 2005 2004
£000 £000 £000 £000
Bank loans and overdrafts (note 18) 56 53 – –
Trade creditors 22,259 32,256 23,300 33,098
Amounts owed to subsidiary undertakings – – 2,350 –
Corporation tax 49 587 647 1,050
Social security and other taxes 1,821 2,300 1,949 2,715
Other creditors 830 938 535 865
Accruals 6,651 5,244 5,452 4,718
31,666 41,378 34,233 42,446
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Pace Micro Technology plc Report & Accounts 2005
17 Creditors: amounts falling due after more than one year
Group
2005 2004
£000 £000
Bank loans (note 18) 205 246
18 Borrowings
Borrowings consist mainly of bank loans and overdrafts Group                                         Company
2005 2004 2005 2004
£000 £000 £000 £000
Within one year 56 53 – –
After one and within two years 56 53 – –
After two and within five years 149 160 – –
After five years – 33 – –
261 299 – –
The banking facilities of £20 million (2004: £20 million) are available until 30 September 2006 on an uncommitted basis. The facility is secured
by a fixed and floating charge over the assets of Pace Micro Technology plc and its subsidiary undertakings.
19 Derivatives and other financial instruments
Short term debtors and creditors that meet the definition of a financial asset or liability respectively have been excluded from all the following
FRS 13 analysis, other than the currency risk exposures, as permitted by FRS 13.
(a)  Interest rate risk profile of financial assets
Floating rate Interest free Total
Currency £000 £000 £000
At 4 June 2005:
Sterling 24,022 3 24,025
US Dollar 1,517 – 1,517
Euro 686 1 687
Other 417 1 418
Total 26,642 5 26,647
At 29 May 2004:
Sterling 12,778 6 12,784
US Dollar 5,525 – 5,525
Euro 2,526 – 2,526
Other 169 – 169
20,998 6 21,004
The interest rates on Sterling, US Dollar, Euro and other floating rate financial assets are linked to the relevant bank base rates.
(b)  Interest rate risk profile of financial liabilities
Floating rate Interest free Total
Currency £000 £000 £000
At 4 June 2005:
Euro 261 – 261
261 – 261
At 29 May 2004:
Euro 299 – 299
299 – 299
The interest rate on Euro floating rate financial liabilities is linked to the relevant bank base rate.
58653 Pace Rep&Accs 41-69  25/7/05  8:28 am  Page 57 Notes continued
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Pace Micro Technology plc Report & Accounts 2005
19 Derivatives and other financial instruments continued
(c)  Currency exposures
The table below shows the Group’s currency exposures that give rise to the net currency gains and losses recognised in the profit and loss
account. Such exposures comprise the monetary assets and monetary liabilities of the Group which are not denominated in the operating or
functional currency of the operating unit involved.
Net foreign currency monetary assets/(liabilities)
US Dollar Euro Other Total
Functional currency of group operation £000 £000 £000 £000
At 4 June 2005:
Sterling (7,577) 11,782 107 4,312
Euro 166 – – 166
Total (7,411) 11,782 107 4,478
At 29 May 2004:
Sterling (12,051) 11,106 (363) (1,308)
Euro 1,017 – (60) 957
Total (11,034) 11,106 (423) (351)
(d)  Gains and losses on hedges
The majority of the Group’s production costs are denominated in US Dollars. The Group endeavours to obtain as much of its income as
possible in US Dollars but a significant proportion of income is currently received in Sterling or Euros. The Group’s policy is to hedge forward
progressively against movements in the value of foreign currencies, in respect of cash receipts and payments expected over the next 6
months.
Outstanding foreign currency hedge contracts:
Sell Buy Average
Currency Currency Value Rate Maturity
At 4 June 2005: Euro Sterling £1m 1.4374 June 2005
Euro US Dollar $7.3m 1.2636 June - August 2005
At 29 May 2004: Sterling US Dollar $29m 1.7983 June - August 2004
Euro US Dollar $78.4m 1.1973 June - October 2004
The unrealised loss on the above contracts in the current year amounted to £149,249 (2004: £1,092,000) of which £36,467 (2004: £87,000)
was matched against monetary assets and liabilities denominated in the respective currencies and recognised in the profit and loss account.
(e)  Fair value
Set out below is a comparison by category of book values and fair values of the financial assets and liabilities. The fair values are estimated
by discounting the future cash flows to net present values using the prevailing market rates.
2005 2005 2004 2004
Book value Fair value Book value Fair value
£000 £000 £000 £000
Primary financial instruments held or issued
to finance the Group’s operations:
Cash and other liquid funds 26,647 26,647 20,705 20,705 
Bank loans and overdrafts (261) (261) (299) (299)
Derivative financial instruments held
to hedge the currency exposure:
Foreign exchange hedge contracts (36) (36) (87) (87)
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Pace Micro Technology plc Report & Accounts 2005
20 Provisions for liabilities and charges
Royalties Onerous Warranties Corporation Total
under negotiation contracts tax
£000 £000 £000 £000 £000
Group and Company
At 30 May 2004 7,864 1,828 5,696 5,360 20,748
Net (credit)/charge for the year (816) – 7,037 (5,360) 861
Utilised (608) (802) (5,572) – (6,982)
At 4 June 2005 6,440 1,026 7,161 – 14,627
The owners of patents covering technology allegedly used by the Group have indicated claims for royalties relating to the Group’s use
(including past usage) of that technology. Whilst negotiations over these liabilities continue, they are not concluded. The directors have made
provision for the potential royalties payable based on the latest information available. Having taken legal advice, the Board considers that
there are defences available that should mitigate the amounts being sought. The Group will vigorously negotiate or defend all claims but, in
the absence of agreement, the amounts provided may prove to be different from the amounts at which the potential liabilities are finally
settled.
The directors consider that to disclose the amounts unused following the negotiation of royalty claims during the year would be seriously
prejudicial to other royalty claims currently under negotiation, in litigation or dispute. Accordingly the directors have aggregated amounts
released unused with additional provisions made in order to arrive at the net credit for the year shown above.
21 Share capital
2005 2004
Number £000 Number £000
Authorised
Ordinary shares of 5p each 300,000,000 15,000 300,000,000 15,000
Allotted, called up and fully paid
Ordinary shares of 5p each 226,978,749 11,349 226,771,249 11,339
During the year, the Company allotted Ordinary shares as follows:
Number Nominal Consideration
value
£000 £000
Employee share option scheme (15.8 pence) 182,500 9 29
Employee share option scheme (42.5 pence) 25,000 1 11
207,500 10 40
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Pace Micro Technology plc Report & Accounts 2005
21 Share capital continued
The Company has granted options which are subsisting (including directors’ options and options granted prior to listing of the
Company) in respect of the following presently unissued ordinary shares of 5p each.
Number of ordinary Price per share
shares subject to option Exercise period pence
36,629 25 June 1999 to 24 June 2006 190.0
35,000 19 August 2000 to 18 August 2007 42.5
505,000 7 July 2002 to 6 July 2009 200.0
547,673 11 January 2003 to 10 January 2010 599.5
107,741 17 July 2003 to 16 July 2010 857.5
243,058 17 July 2001 to 16 July 2010 857.5
25,205 29 January 2004 to 28 January 2011 610.0
162,915 29 January 2002 to 28 January 2011 610.0
275,000 24 July 2005 to 23 July 2011 375.0
886,031 24 July 2002 to 23 July 2011 375.0
245,969 24 July 2004 to 23 July 2011 375.0
46,663 18 January 2003 to 17 January 2012 357.0
60,013 18 January 2005 to 17 January 2012 357.0
1,167,184 22 October 2003 to 21 October 2012 15.75
484,616 22 October 2005 to 21 October 2012 15.75
150,000 22 October 2006 to 21 October 2012 15.75
50,000 26 August 2007 to 25 August 2013 51.0
190,000 26 August 2004 to 25 August 2013 51.0
100,000 26 January 2004 to 25 November 2013 58.0
100,000 3 February 2005 to 2 February 2014 75.0
25,000 17 August 2008 to 16 August 2014 51.0
170,000 17 August 2005 to 16 August 2014 51.0
62,500 7 October 2007 to 6 October 2014 48.0
87,500 7 October 2005 to 6 October 2014 48.0
73,619 11 January 2008 to 10 January 2015 40.75
26,381 11 January 2006 to 10 January 2015 40.75
170,385 6 February 2006 to 5 May 2006 32.6
6,033,882
The Pace Micro Technology plc Employee Benefits Trust has granted options over existing shares and the QUEST has acquired shares to
satisfy certain Sharesave options. Details of these additional options are shown in note 23.
22 Share premium account
Group and Company £000
At 30 May 2004 35,647
Premium on allotments 30
At 4 June 2005 35,677
The shares allotted during the year are listed in note 21.
58653 Pace Rep&Accs 41-69  25/7/05  8:28 am  Page 60 Notes continued
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Pace Micro Technology plc Report & Accounts 2005
23 Profit and loss account
£000
Group
At 30 May 2004 – as previously reported 4,959
Prior year adjustment (note 2) (2,436)
As restated 2,523
Retained profit for the year 11,792
Write back to profit and loss account of goodwill previously written off directly to reserves (see note below) 360
Exchange differences 150
At 4 June 2005 14,825
£000
Company
At 30 May 2004 – as previously reported 3,827
Prior year adjustment (note 2) (2,436)
As restated 1,391
Retained profit for the year 8,482
At 4 June 2005 9,873
Following the liquidation of Pace Italy srl the cumulative total of goodwill written off directly against Group profit and loss reserves in respect
of this acquisition, of £360,000, has been written back to the face of the profit and loss account in line with the requirements of FRS10
(Goodwill and Intangible Assets). There was no other financial impact arising from the finalisation of the closure of this entity in the current
period. No goodwill remains written off directly to reserves.
Own shares held
The following amounts have been deducted from the profit and loss account reserves of the Group and Company as required by UITF38
(see prior year adjustment note 2).
At 4 June 2005 the Pace Micro Technology plc Employee Benefits Trust and QUEST held 7,662,333 (2004: 7,806,338) shares in the
Company which cost £21,421,000 (2004: £21,450,000). These shares are held to satisfy options granted to employees.
The Pace Micro Technology plc Employee Benefits Trust has granted options to employees (including directors’ options) over ordinary shares
of 5p each as follows:
Number of ordinary Price per share
shares subject to option Exercise period pence
839,350 24 September 2001 to 23 September 2008 64.0
670,919 26 January 2002 to 25 January 2009 84.5
317,500 7 July 2002 to 6 July 2009 200.0
3,174 20 March 2003 to 19 March 2010 945.0
135,570 17 July 2001 to 16 July 2010 857.5
556,112 29 January 2002 to 28 January 2011 610.0
148,000 24 July 2002 to 23 July 2011 375.0
1,000,000 21 January 2004 to 20 January 2013 20.0
500,000 2 May 2004 to 1 May 2013 37.0
2,155,734 26 August 2004 to 25 August 2013 51.0
250,000 16 February 2005 to 15 February 2014 78.0
1,310,000 17 August 2005 to 16 August 2014 51.0
7,886,359
58653 Pace Rep&Accs 41-69  25/7/05  8:28 am  Page 61 Notes continued
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Pace Micro Technology plc Report & Accounts 2005
23 Profit and loss account continued
The QUEST has acquired shares in the Company, either through purchase in the market or by allotment, for the purpose of satisfying the
grant of options under the following Sharesave Schemes:
Number of ordinary Price per share
shares subject to option Exercise period pence
6,990 1 April 2005 to 30 September 2005 269.0
2,514,000 1 October 2005 to 31 March 2006 18.0
1,333,819 1 April 2006 to 30 September 2006 14.5
1,222,385 1 October 2006 to 31 March 2007 35.5
404,920 1 April 2007 to 30 September 2007 60.0
202,229 1 October 2007 to 31 March 2008 48.0
496,094 1 April 2008 to 30 September 2008 32.0
6,180,437
24 Profit for the year
The parent Company has taken advantage of Section 230 of the Companies Act 1985 and has not included its own profit and loss account
in these financial statements. The Group profit includes a parent Company profit of £8,482,000 (2004: £6,060,000).
25 Reconciliation of operating profit to net cash inflow from operating
activities
2005 2004
£000 £000
Operating profit 7,025 3,674
Goodwill amortisation 564 564 
Depreciation 4,419 5,317 
Loss on disposal of tangible fixed assets 1 317
(Increase)/decrease in stocks (129) 5,961 
Decrease/(increase) in debtors 9,152 (11,540) 
(Decrease)/increase in creditors (9,063) 10,728
Decrease in provisions for liabilities and charges (761) (856)
Net cash inflow from operating activities 11,208 14,165 
58653 Pace Rep&Accs 41-69  25/7/05  8:28 am  Page 62 Notes continued
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Pace Micro Technology plc Report & Accounts 2005
26 Analysis of cash flows for headings netted in the cash flow statement
2005 2004
£000 £000
Returns on investments and servicing of finance
Interest received 728 152
Interest paid (385) (16)
Net cash inflow for returns on investments and servicing of finance 343 136 
Capital expenditure and financial investment
Purchase of tangible fixed assets (3,594) (2,747) 
Sale of tangible fixed assets 6 2
Exercise of employee share options 29 80
Net cash outflow for capital expenditure and financial investment (3,559) (2,665) 
Acquisitions and disposals
Settlement of deferred consideration in respect of previous acquisitions – (4,374) 
Net cash disposal with subsidiary – (562)
Acquisitions of trade investments (674) –
Net cash outflow for acquisitions and disposals (674) (4,936)
Financing
Issue of ordinary share capital 40 247
Repayment of subsidiary asset loans (38) (43)
Net cash inflow from financing 2 204
27 Analysis of change in net funds
At 30 May Cash At 4 June
2004 flow 2005
£000 £000 £000
Cash at bank and in hand 20,705 5,942 26,647
Debt due within one year (53) (3)  (56)
Debt due after one year (246) 41 (205)
20,406 5,980 26,386
28 Capital commitments
Group and Company
2005 2004
£000 £000
Contracted but not provided for 997 1,086
58653 Pace Rep&Accs 41-69  25/7/05  8:28 am  Page 63 Notes continued
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Pace Micro Technology plc Report & Accounts 2005
29 Pensions
The Company contributes to several defined contribution Group Personal Pension Plans, which all executive directors and employees are
entitled to join. At 4 June 2005 contributions of £Nil (2004: £Nil) were outstanding.
30 Leasing commitments
The following annual lease commitments are due within one year in respect of leases expiring:
Group Company
2005 2004 2005 2004
£000 £000 £000 £000
Land and buildings
Between two and five years 1,584 1,638 1,584 1,638
In five years or more 315 334 – –
1,899 1,972 1,584 1,638
Other
Within one year 25 34 25 34
Between two and five years 125 96 125 96
150 130 150 130
2,049 2,102 1,734 1,768
31 Contingent liabilities
The European Union has finalised the Waste Electrical and Electronic Directive which makes producers of electrical goods, including set-top
boxes, financially responsible for specified collection, recycling, treatment and disposal of past and future electronic products. The directive
must now be approved and implemented by individual European governments (such implementing legislation together with the directive, the
“WEEE legislation”). Under the WEEE legislation producers of electrical and electronic equipment are to be financially responsible for such
matters with effect from 13 August 2005. As it is likely that implementation of WEEE legislation will vary significantly between individual
European member states, it is not currently possible to estimate the Company’s existing liability or future expenses resulting from such WEEE
legislation. The Company will continue to assess its potential financial impact as the European Union and its individual member states clarify
specific requirements and policies.
The Company has been informed of a potential claim from a former customer relating to the supply of set-top boxes in 2000/2001 to a
maximum liability of £7.5m. The Directors believe that they have good defences to such claim and that, in the absence of any liability, no
provision has been made.
58653 Pace Rep&Accs 41-69  25/7/05  8:28 am  Page 64 Notes continued
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Pace Micro Technology plc Report & Accounts 2005
The following information does not form part of the audited financial statements.
32 International Financial Reporting Standards (“IFRS”)
To date, the Group has prepared its accounts in compliance with UK Generally Accepted Accounting Principles (“UK GAAP”).  EU
regulations require the Group to adopt IFRS in its financial statements for the year ending 3 June 2006. As outlined below, adjustments are
required to be made to the opening position of the comparative period (29 May 2004) together with a restatement of the results for the
period ended 4 June 2005.  
The rules for the first time adoption of IFRS are set out in IFRS 1. In general, a company is required to determine its IFRS policies and apply
those retrospectively to determine its opening balance sheet under IFRS. These IFRS policies are based on the standards expected to be
effective at the date of implementation.
The following summarises the significant areas of financial impact to arrive at the IFRS adjusted amounts.
Any adjustments referred to below are unaudited and included for illustrative purposes only.
(a)  Research and development costs
UK GAAP:  Research and development costs were expensed through the profit and loss account as and when they were incurred.
IFRS (as required by IAS 38):  Certain development costs, as defined by specific criteria, must be capitalised as intangible assets. Broadly,
these criteria will apply where the relevant spending can be reliably identified with development work rather than research and is likely to
generate future earnings. Spending will then be capitalised until the commencement of sales volumes related to the specific project, at
which point the amounts capitalised will be amortised over the deemed useful economic life, estimated to be in a range of between 6 and
18 months.  Amounts held on the balance sheet will be re-assessed regularly (in an “impairment test” under IAS 36) to ensure that the
recorded value is supported by the estimated value of the related future earnings.
Financial impact:  An intangible asset of £6,634,000 will be recognised on the balance sheet at 29 May 2004. Net operating expenses for
the period ended 4 June 2005 will decrease by £816,000 as the net result of capitalising and amortising relevant amounts in the period,
leaving an intangible asset of £7,450,000 at 4 June 2005.
(b)  Share based payments
UK GAAP:  No account is taken of the fair value of share based payments granted to employees.
IFRS (as required by IFRS2):  IFRS2 requires the fair value of share based payments granted to employees since 7 November 2002 to be
charged to the income statement. The fair value is calculated using an option-pricing model and is charged to income over the relevant
vesting periods, adjusted to reflect the actual and expected levels of vesting.
Financial impact:  A charge in the period to 4 June 2005 of £744,000 would be required to be recognised, in respect of share options
granted after 7 November 2002 and not vested by 31 January 2005.
(c)  Treatment of hedging for foreign exchange
UK GAAP:  Financial derivatives, employed to hedge future transactions, particularly in respect of foreign exchange, were “hedge”
accounted. That is to say, profit was recorded at the achieved exchange rate, blending together any transactions executed at spot rates
and settlement of maturing forward contracts held in the hedge book. Unrealised losses and gains on the on-going contracts within the
hedge book were disclosed within the notes to the accounts.
IFRS (as required by IAS32/ 39):  The aggregate value of all the Group’s outstanding derivatives will be shown as one asset on the balance
sheet, which will be “marked-to-market” each year, to reflect its fair value. In the profit and loss account, net finance costs will record the
net gain or loss on both realised derivative transactions and unrealised marked-to-market adjustments.
Financial impact:  An adjustment to reduce net assets at 29 May 2004 of £1,005,000 has been made to reflect the unrealised losses at that
date with an adjustment of £113,000 made to reduce net assets at 4 June 2005. A corresponding adjustment has been made to the profit
and loss account for the period ended 4 June 2005.
(d)  Goodwill and business combinations
UK GAAP:  Goodwill arising from business combinations has been carried as an intangible asset and amortised over its useful economic
life.
IFRS (as required by IFRS3):  IFRS3 prohibits the amortisation of goodwill arising in respect of business combinations. Instead it requires
goodwill to be carried at cost. Annual impairment tests are required to be performed.
Financial impact:  The value of goodwill has been frozen at 29 May 2004. Accordingly the profit and loss amortisation charge of £564,000
taken in the period to 4 June 2005 would not be required under IFRS.
In addition the entry writing off goodwill previously written off against reserves of £360,000 and written off again in the current year profit
and loss account upon the finalisation of the liquidation of Pace Italia Srl is not required to be made under IFRS.
58653 Pace Rep&Accs 41-69  25/7/05  8:28 am  Page 65 Notes continued
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Pace Micro Technology plc Report & Accounts 2005
32 International Financial Reporting Standards (“IFRS”) continued
Income statement reconciliation
The following table outlines the main adjustments outlined above as a result of adopting IFRS compared to UK GAAP on the Group profit
before tax for the fifty-three week period ended 4 June 2005.
£000
Profit before tax for period to 4 June 2005 – as disclosed under UK GAAP 7,075
Adjustment for development expenditure capitalised and amortised 816 
Share based payments adjustment (744) 
Adjustment for off balance sheet foreign exchange potential liabilities 892
Removal of goodwill amortisation in period 564
Removal of adjustment in respect of goodwill previously written off against reserves adjustment 360
Profit before tax for period to 4 June 2005 – under IFRS 8,963 
Opening net asset position
The following table outlines the main adjustments to be made to the opening net asset position of the Group at 29 May 2004.
£000
Net assets at 29 May 2004 – as disclosed under UK GAAP 49,509
Capitalised development expenditure 6,634 
Adjustment for off balance sheet foreign exchange contracts marked to market (1,005)
Net assets at 29 May 2004 – under IFRS 55,138 
Net asset position at 4 June 2005
The following table outlines the main adjustments to be made to the opening net asset position of the Group as 4 June 2005.
£000
Net assets at 4 June 2005 – as disclosed under UK GAAP 61,851
Capitalised development expenditure 7,450
Adjustment for off balance sheet foreign exchange contracts marked to market (113)
Removal of goodwill amortisation in period 564
Net assets at 4 June 2005 – under IFRS 69,752
58653 Pace Rep&Accs 41-69  25/7/05  8:28 am  Page 66 Five year record
67
Pace Micro Technology plc Report & Accounts 2005
2005 2004 2003 2002 2001
£000 £000 £000 £000 £000
Turnover 253,326 239,949 166,597 351,794 523,641 
Profit/(loss) before tax** 7,075 3,880 (48,577) (12,010) 38,068
Profit/(loss) before exceptional items and tax 7,580 5,380 (17,554) 10,427 42,597
Profit/(loss) after tax* 11,792 8,066 (48,031) (34,842) 24,460
Diluted EPS/(LPS)*/** 5.3p 3.6p (21.3)p (8.0)p 11.1p
Diluted EPS/(LPS) before exceptional items and goodwill amortisation* 5.8p 4.5p (6.8)p 2.9p 13.5p
Net assets excluding goodwill*/** 52,979 40,073 31,590 61,704 69,495
*  The comparatives for financial year 2001 have been restated to reflect the impact of adoption of FRS19 (Deferred Tax).
** The comparatives for financial years 2001 to 2004 have been restated to reflect the impact of UITF38 Accounting for ESOP Trusts
58653 Pace Rep&Accs 41-69  25/7/05  8:28 am  Page 67 Directors, secretary and advisers
68
Pace Micro Technology plc Report & Accounts 2005
Directors
all of Victoria Road
Saltaire  Shipley
West Yorkshire BD18 3LF
Sir Michael Bett Non-executive Chairman
John Howard Dyson Chief Executive
David Graham Brocksom Finance Director
Neil Gaydon Worldwide Sales &
Marketing Director
Patricia Chapman-Pincher Non-executive Director
Robert Arthur Fleming Non-executive Director
Marten Charles Fraser Non-executive Director
Robert Ernest Lambourne Non-executive Director
Robert Michael McTighe Non-executive Director
Company Secretary
Anthony John Dixon
Registered and Auditors
Head Office KPMG Audit Plc
Victoria Road 1 The Embankment
Saltaire  Shipley Neville Street
West Yorkshire BD18 3LF Leeds LS1 4DW
Registered Number 1672847
Registrars Principal Bankers
Lloyds TSB Registrars Barclays Bank plc
The Causeway PO Box 190
Goring-by-Sea  Worthing Barclays House
West Sussex BN99 6DA 6 East Parade
Leeds LS1 2UX
Stockbrokers
Hoare Govett Limited
250 Bishopsgate
London EC2M 4AA
Credit Suisse First Boston
20 Columbus Courtyard
London E14 4DA
58653 Pace Rep&Accs 41-69  25/7/05  8:28 am  Page 68 Shareholder information
Annual General Meeting
The Company’s Annual General Meeting will be held at 11.30 am, Tuesday 6 September 2005, at Citigate Dewe Rogerson, 26 Finsbury Square,
London EC2A 1SH.
Lloyds TSB Registrars
Enquiries regarding shareholdings, change of address or other particulars should be directed in the first instance to the Company’s Registrars,
Lloyds TSB Registrars, The Causeway, Worthing BN99 6DA, on 0870 600 3970. They also provide a range of online shareholder information
services at www.shareview.co.uk where shareholders can check their holdings and find practical help on transferring shares or updating their
details.
Multiple accounts on the shareholder register
If you have received two or more copies of this document, this means that there is more than one account in your name on the shareholder register.
This may be caused by either your name or address appearing on each account in a slightly different way.  For security reasons, the Registrars will
not amalgamate the accounts without your consent. If you would like any multiple accounts combined into one account, please
write to Lloyds TSB Registrars at the address given above.
Unsolicited mail
The Company is obliged by law to make its share register available upon request to the public and to other organisations, which may use
it as a mailing list, resulting in shareholders receiving unsolicited mail. Shareholders wishing to limit the receipt of such mail should write to the
Mailing Preference Service, DMA House, 70 Margaret Street, London W1W 8SS, or call +44 (0) 20 7291 3310 for an application form or visit
www.mps-online.org.uk
Results
Announcement of 2006 interim results – early January 2006.
Preliminary announcement of 2006 year-end results – mid July 2006.
Pace Website
Shareholders are encouraged to visit our website, www.pacemicro.com, which has a wealth of information about the Company.
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