ANNUAL REPORT & ACCOUNTS
2006
PACE MICRO TECHNOLOGY PLC
Registered in England No 1672847
BRINGING
TECHNOLOGY HOME
MKT-R&A2006
PACE MICRO TECHNOLOGY PLC REPORT & ACCOUNTS 2006
PACE MICRO TECHNOLOGY PLC
Victoria Road  Saltaire
BD18 3LF  England
Tel +44 (0)1274 532000   
Fax +44 (0)1274 532010
www.pacemicro.com
  PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 70
The selected financial data set out below, for each of the five years to 3 June 2006, have been extracted or derived from the audited financial statements.
2006 2005 2004* 2003* 2002*
£000 £000 £000 £000 £000
Revenue 178,095 253,326 239,949 166,597 351,794
(Loss)/profit before tax (27,450) 8,963 3,880 (48,577) (12,010) 
(Loss)/profit before exceptional items and tax (15,562) 9,108 5,380 (17,554) 10,427
(Loss)/profit after tax (28,784) 13,680 8,066 (48,031) (34,842)
Diluted (LPS)/EPS (13.0)p 6.1p 3.6p (21.3)p (8.0)p
Diluted (LPS)/EPS before exceptional items and goodwill amortisation* (7.6)p 6.1p 4.5p (6.8)p 2.9p 
Total equity attributable to equity holders of the parent excluding goodwill*/** 33,031 60,316 45,702 31,590 61,704 
* The comparatives for financial years 2002 to 2004 have been restated to reflect the impact of UITF38 Accounting for ESOP Trusts
The comparatives for 2005 (and net assets for 2004) are stated under Adopted International Financial Reporting Standards; all other figures are stated
on a UK GAAP basis
SHAREHOLDER INFORMATION
ANNUAL GENERAL MEETING
The Company’s Annual General Meeting will be held at 11.30 am, Thursday 2nd November 2006, at the Company’s head office, Victoria Road, Saltaire,
West Yorkshire BD18 3LF.
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, or by telephone 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
PACE WEBSITE
Shareholders are encouraged to visit our website, www.pacemicro.com, which has a wealth of information about the Company.
FIVE YEAR RECORD AND SHAREHOLDER INFORMATION PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 02
CONTENTS
FINANCIAL HIGHLIGHTS
n Revenues for the year of £178.1m (2005: £253.3m)
n Volume shipments of 2.2m set-top boxes (2005: 3.4m)
n Loss before tax and exceptional items of £15.6m 
(2005: profit £9.1m)
n Full year gross margin of 18.0% (2005: 22.6%) 
(restated basis) 
n Diluted loss per share of 13p (2005: earnings 
per share 6.1p)
n Net borrowings position £6.1m (2005: net cash £26.4m)
All figures, including comparatives, are presented under IFRS.
BUSINESS HIGHLIGHTS
n New executive management team in place
n Organisational changes either underway 
or completed to
n Resolve execution issues
n Refocus business around customers
n Reduce costs
n Improve margin performance
n Ensure Pace is best-placed to grow 
its business
n DirecTV shipments commenced, following 
product approval
02 HIGHLIGHTS  04 CHAIRMAN’S STATEMENT  07 CHIEF EXECUTIVE OFFICER’S REVIEW  13 FINANCE DIRECTOR’S
REVIEW 17 BOARD OF DIRECTORS  18 REPORT OF THE DIRECTORS  24 REMUNERATION REPORT  32 STATEMENT
OF DIRECTORS’ RESPONSIBILITIES 33 INDEPENDENT AUDITORS’ REPORT 34 FINANCIAL STATEMENTS
41 NOTES TO THE FINANCIAL STATEMENTS  69 DIRECTORS, SECRETARY AND ADVISERS  70 FIVE YEAR RECORD
AND SHAREHOLDER INFORMATION
  PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 03
“Pace is a leading independent developer of digital TV
technologies for the payTV industry”
The Company’s focus is on developing new technologies and
products for the constantly evolving digital TV industry. As a
result Pace technology has been installed in over 24 million
homes worldwide since the Company was founded in 1982. 
Pace has achieved this through a partnership approach,
creating intelligent and innovative products and services that
enable payTV operators worldwide to grow and develop their
businesses. 
Making it possible, 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 innovations such as high definition, home networking and
wireless technologies.
Pace is always working on new and innovative solutions to
exploit the full potential of digital television. Through its
technical vision, Pace aims to lead the digital TV marketplace
by exciting end-users and creating new business opportunities
for the Company’s diverse customer base.
n BSkyB
n Comcast
n DirecTV
n Foxtel
n Kabel Deutschland (KDG)
n Ntl Ireland
n Ntl:Telewest
n Optus
n Premiere
n Rogers Cable
n Sky Italia
n Sky New Zealand
n Time Warner Cable
n UPC Broadband (The Netherlands)
n Viasat
n Vidéotron
MAJOR PACE CUSTOMERS
  PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 04
CHAIRMAN’S STATEMENT
However, as previously highlighted, the delays in introducing leading edge products
for the US market have impacted this year’s results. Nevertheless, the Board is
confident in the strength of the underlying business as payTV operators continue their
long-term transition to digital systems and the migration to high definition (HD)
platforms.
Since the year-end, the Group has made important progress in the US. Pace is now
shipping its first satellite product, an HD MPEG-4 personal video recorder (PVR), to
DirecTV, the world’s largest satellite payTV operator. Pace’s HD PVR for US cable
networks has also received approval from a number of other operators and shipments
have started to some of these, with approvals from other operators imminent. Pace’s
standard definition (SD) PVR for US cable networks is in the final stage of field trials
with Comcast. 
New Chief Executive Officer, Neil Gaydon, has initiated a number of significant
organisational changes to resolve execution issues, improve margin performance,
reduce costs and ensure Pace is best-placed to grow its business. 
Over the last two months, the Group structure has been reshaped to improve
customer focus, with a combined sales, product and engineering team for each
customer group. This approach is more efficient as management layers have been
greatly reduced while at the same time allowing new talent to come to the fore. It has
also enabled a headcount reduction of over 10%, greater transparency and
accountability, and a marked reduction in the number of contractors, without
impacting customer deliverables. 
At the same time Pace’s internal processes, with particular emphasis on product
development, are being overhauled. Pace’s development teams are widely recognised
as amongst the most talented and experienced in the industry. Nonetheless, improved
processes are required to target the recent execution problems and re-establish a
more customer focussed approach to product development. 
The changes taking place within Pace are being driven by a strengthened executive
management team. The Board and executive team are implementing new appraisal
and remuneration systems to ensure Pace’s people are appropriately managed and
incentivised to deliver significantly improved financial performance.
The global market for digital set-top boxes remains
strong and Pace’s customer base within this market
includes some of the world’s largest and most
influential payTV operators. 
PACE IS TURNING AN IMPORTANT CORNER
Mike McTighe
Chairman PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 05
Results
In the year to 3 June 2006, Pace shipped 2.2m units (2005:
3.4m) and generated revenues of £178m (2005: £253m). The
underlying pre-tax trading loss for the year, before exceptional
charges of £11.9m, was £15.6m (2005: profit of £9.1m).
The exceptional charges relate to write-downs in respect of the
US HD PVR for US cable, re-organisation and restructuring
costs, and an impairment of a trade investment. These are
explained in more detail in the Finance Director’s review on
pages 13 to 16.
After exceptional charges the Group recorded a loss before
taxation of £27.5m (2005: profit of 9.0m).
Regional Operating Review
Pace has had a disappointing year, with delivery delays on a
number of new and highly complex set-top box products. The
year was further characterised by industry-wide difficulties in
the development by third parties of silicon and software for the
new MPEG-4/H.264 compression standard. This, combined
with delays in Pace’s own software development, held back
rollout of the Group’s own advanced HD products. Pace has,
however, embraced this new compression standard as it will be
the industry’s core technology for the next 10-15 years and
Pace is now at the forefront of this change.
EMEA
EMEA remains Pace’s largest market, with total shipments 
of 1.6m set-top boxes (2005: 2.9m). In the UK, Pace has
continued to work with BSkyB, recently winning new
business for Digibox and the Sky+ PVR for shipment later 
this calendar year. The Group also shipped, albeit in smaller
quantities, into UK cable. 
The Group is now benefiting from its early investment in HD,
with Pace products being used to launch HD services by
Premiere (Germany) and Sky Italia, two of the three major
European HD launches in the year. The Pace set-top box used
by Premiere was the world’s most advanced satellite 
HD box.
Pace also continues to lead in PVR, which provides Pace with
a higher average selling price and enables payTV operators
to deliver new services to their customers. During the year two
operators, Sky Italia and Viasat, selected Pace products for
their PVR launches.
The Group commenced shipments to UPC, an important 
new customer and part of Liberty Global. Liberty is a leading
player in European cable and now owns another Pace customer,
Ntl Ireland. The new cable platform for UPC creates potential in
other markets.
Pace, along with other set top-box manufacturers and
broadcasters, has noted the potential re-interpretation 
by European Union customs authorities of customs regulations
that could result in the extension of import duties to interactive
set-top boxes manufactured outside, but imported into, the
Pace also continues to lead in
PVR, which attracts a higher
average selling price for Pace
and enables payTV operators
to deliver new services to their
customers.
  PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 06
EU. If and until any change is made, and the timing of its
implementation clarified, it is impossible to quantify any
possible impact. 
Americas
Shipments into the Americas increased to 174,000 (2005:
138,000), with shipments to Time Warner Cable in the US and
Rogers, Vidéotron and Sasktel in Canada.   
Since the year-end, Pace has made important progress with
shipments now being made to DirecTV and a number of cable
operators, several of which are new customers. Pace’s third
new US product, a SD PVR for US cable, is now approaching
the end of its Comcast field trial. As previously announced, the
approval schedule for Comcast deliveries, as a result of the
delays, is now outside the terms originally agreed in the
contract with this customer, but the Board continues to believe
that Pace will generate substantial revenues from its
relationship with Comcast.
Asia Pacific
Overall, shipments increased to 400,000 (2005: 350,000
units). Pace’s main customers within this region are based in
Australia and New Zealand, where Pace is leading the rollout
of PVR products. In Australia, the Foxtel relationship continues
to be strong with Pace its lead supplier, shipping both
standard set-top boxes and the iQ PVR for both cable and
satellite customers. PVR shipments also commenced to
Optus, which offers the Foxtel digital service to its customers.
Pace was selected to launch the PVR service for Sky New
Zealand, one of its longstanding customers.  
Board and Executive appointments
There has been significant change to the Board with the
appointment of Neil Gaydon as Chief Executive Officer in 
April and Mike McTighe as Chairman in May. At the same 
time, Pat Chapman-Pincher became the Company’s Senior
Independent Director. 
New appointments to the strengthened Executive
Management team include David McKinney (Chief Operating
Officer), Jill Ezard (Director of HR), Mike Pulli (President Pace
Americas), Ian Sharp (President EMEA & APAC) and Helen
Kettleborough (Director of Corporate Communications).
Future Markets/Technologies
Consumer demand for flat panel TVs, HD, PVR services and
high quality audio is growing, as is the take-up of triple play
bundles of voice, video and internet. 
To support satellite, cable and telco payTV operators as 
they work to win and retain high value customers seeking out
these new products and services, Pace is developing its
product range and investigating new technology opportunities.
For example, broadband IP capability is being built into Pace’s
next generation set-top boxes and the Group is working with
conditional access partners on content protection for anytime-
anywhere media consumption. Work also continues on
‘Multiroom’ technology, enabling content distribution around
the home, which is expected to support high value customer
retention for operators. Additionally, progress is being seen in
IPTV markets and a new Pace product is being launched
shortly.  
Outlook 
Over the last 12 months Pace has been through a difficult
period, from which it is now emerging. 
The Board believes that with shipments to the US underway, 
a strong performance of the business in EMEA and Asia
Pacific, and the implementation of a new lower cost, but more
effective organisational structure, Pace is turning an important
corner. Pace is in the final stage of field trials on the SD PVR
for US cable. As the trials complete and shipments start,
expected in the near future, inventory commitments will be
realised and the Group will benefit from its leading
technological and market position.
The Board acknowledges that there is still much work to do,
but believes that the changes made since the start of the new
financial year will provide greater accountability within Pace,
better customer service, and more predictable engineering
delivery.
Overall the markets remain strong and Pace has good support
from its customers and partners. Therefore the Board is
confident that the business has started to recover and will
move back into profit this financial year.
Mike McTighe
Chairman
4 September 2006 
Consumer demand for flat panel TVs, high definition, PVR
services and high quality audio is growing, as is the take-up 
of triple play bundles. Pace’s DS810 
Europe’s first MPEG-4 
High Definition set-top box.
Neil Gaydon
Pace’s new Chief Executive Officer
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 07
CHIEF EXECUTIVE OFFICER’S REVIEW
Having taken on the role of Chief Executive Officer in April, I am now at the helm of an
organisation that has excellent customers and some of the most talented people in
the industry working alongside me. The key to success is doing a better job for our
customers by pulling the Pace team together to deliver what they need, when they
need it and in a way that delivers value for all. 
After nearly ten years at Pace, I can see that only now are we beginning to benefit
from the full potential of digital technology. Today consumers can watch what they
want, when they want, released from the confines of the schedule. High definition,
through a fourfold improvement in picture quality, is delivering an even richer and more
vibrant experience, equalling that of the cinema. 
Now with the promise of complete home systems that distribute high definition
anywhere in the home, to flat screen displays, in 5.1 Dolby digital surround sound,
consumers are waking up to a TV revolution. 
We have played a major role, defining today’s 
set-top box industry through innovations that
have helped shape a generation of TV viewers’
experiences. 
FOR OVER A DECADE PACE HAS BEEN A
WORLD LEADER IN DIGITAL TV TECHNOLOGY
  PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 08
Pace has delivered world 
firsts in High Definition
technology
IT’S JUST 
LIKE BEING THERE
The 2006 FIFA World Cup was the first major
sporting event with global High Definition coverage PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 09
We believe the market will continue to grow as payTV operators
compete to retain, grow subscribers and manage take up.
The traditional battle between satellite and cable operators continues, as both seek
out new technologies to build their market position. But new players and platforms are
bringing new challenges to the competitive environment. Telcos, under pressure to
widen their offering beyond voice and data, are finally starting to launch commercial
services. 
Moreover, broadband internet is emerging as an important content delivery platform.
This suggests technology demand will for the foreseeable future, remain strong and I
believe Pace is well placed to capitalise on operator requirements with innovative new
solutions.
DELIVERING SET-TOP BOX TECHNOLOGY 
TO PAYTV OPERATORS WORLDWIDE
David McKinney
Chief Operating Officer with Robert Sagar 
in Pace’s Test Laboratory
  PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 10
The new Pace organisation puts customers
right at the very heart of our business. 
In the last year, we have worked with customers in three core markets: North America,
Western Europe and Australasia, where demand has centred on PVR and high definition,
with a growing interest in IPTV and multiroom. However a difficult 12 months, with delays
in new product development for the US market, means we have underperformed.
Identifying long-term
trends and opportunities
New technology is the lifeblood of 
the Company as it paves the way 
to our future success. A group of
some of our most gifted people 
are working together to ensure
we can always offer our customers
new ground breaking products,
demonstration units that help 
them evaluate concepts, as well 
as create new ideas that could
eventually turn into new revenue
streams. 
Developing the reach of
our US business
To grow our North American business,
Mike, based at the Group’s offices in
Florida, has expanded his team to
ensure a successful rollout of new
satellite products to DirecTV and cable
products to operators across the
region. We provide close support for
all of our North American customers
through engineering, network and
sales people strategically placed 
in cities that include Denver,
Philadelphia and Los Angeles. 
Changing the way 
we work 
Our new approach at Pace is to
ensure that the customer is at the
heart of our business. To deliver we
have completely reorganised into
discrete teams, each one responsible
for customer groups, which in turn
are supported by cross-company
groups such as Quality and
Operations. This is enabling us to 
be much more efficient, significantly
reduce the number of management
layers and promote new talent.
Moving ahead it will allow us to
improve execution, quality and cost
effectiveness to create a more
successful and profitable business.
Mike Pulli
President Pace Americas 
David Gillies
Director of Technology 
Neil Gaydon PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 11
The Technology team, by identifying, proving and developing
innovative hardware and software solutions, aims to expand
Pace’s product range and market opportunities.
We have three technology themes - Home, Networks and
Wireless. In the Home group, significant advances have been
made in defining and prototyping architectures for secure
digital home networking solutions. 
The Networks group has developed a unique and scalable
content delivery solution to bring cost-effective digital TV,
PVR, broadband, VoIP and VOD services to apartment
blocks. Channel coding research by the Wireless group
should ensure we can create new wireless broadband content
delivery products. Pace’s R&D expansion is supported by our
local Regional Development Agency, which has allocated over
£1m to our programmes.
Finally, to bridge the gap between product and technology
development, we have created a new Advanced
Development team, dedicated to rapid prototyping of our
innovative new ideas.
Exploiting our internal competences, close dialogue with
customers and technology partners and participation at 
the highest levels in major standardisation bodies will enable
Pace to continue delivering world beating new technologies
and products. 
Anticipating technology trends our customers can exploit
to excite and retain their customers, is a critical element
of Pace’s service offering.
The DC621 for UPC in The
Netherlands, part of Liberty 
Global.
The Vegas standard definition
PVR for US Cable operators. PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 12
To position Pace for growth, we have built what is probably
the best portfolio of customers in the payTV industry. It
includes significant groups - News Corporation, Liberty Global
and US cable - plus other major operators such as Viasat and
KDG. We are focussed on delivering industry leading products
to help fuel their business growth and extend the all important
revenue per user (ARPU). 
To ensure Pace continues as an industry leader, we have
restructured into highly focussed teams that place customers
at the heart of our business and will enable us to drive on time
delivery and improve margins. This initiative has reduced
management layers, brought new talent to the fore, delivered
greater accountability and created new energy. Although there
is still much to do, we are moving ourselves into position for
profit and future growth.
Neil Gaydon
Chief Executive Officer
4 September 2006
Pace Multiroom supports up to four networked set-top boxes which
allow viewers to ‘shift’ their viewing around the home.
Our market is dynamic due to growing consumer appetite for new
technology led services and an imperative on our operator customers to 
grow businesses in markets where competition for subscribers is increasing. PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 13
Pace shipped 2.2m units and generated revenues of £178m 
from the sales of set-top boxes and associated engineering
consultancy and support services revenue.
FINANCE DIRECTOR’S REVIEW PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 14
Results for the period
In the 52 weeks ending 3 June 2006 Pace shipped 2.2m units
(2005: 3.4m) and generated revenues of £178m (2005:
£253m) from the sales of set-top boxes and associated
engineering consultancy and support services revenue.
The Group recorded a trading loss before taxation and
exceptional items of £15.6m (2005: profit of 9.1m). 
The Board has considered the carrying values of the items in
the balance sheet at 3 June 2006, in particular development
expenditure, inventory and other balance sheet values related
to those US products, which had not been launched at the
year-end. In considering these values, the Board has had
particular regard to the future competitiveness of the products,
especially where firm orders have not yet been received. 
Delays in the development of the HD PVR for US cable mean
that the design uses components many of which were
ordered, and prices fixed, over a year ago. Newer and less
expensive components are now available to use on new
designs. The delay also affects the anticipated product life of
the existing design. Therefore, the Board has decided to write-
down the balance sheet carrying values at the year-end by
£9.0m. This adjustment is shown as an exceptional inventory
write-down of £5.5m and an impairment charge against
capitalised development cost of £3.5m.  
There are two further exceptional items: restructuring and
reorganisation costs of £2.4m (2005: £0.3m) and a loss of
£0.5m resulting from the write-off of the investment in
VegaStream Limited. 
After exceptional items, the Group recorded a loss before
taxation of £27.5m (2005: profit of £9.0m).
Gross Margin
During the year to 3 June 2006, and excluding the exceptional
inventory and development costs write-down, gross margin
decreased to 18% (2005 re-based: 22.6%).
We have reviewed the appropriateness of including within the
cost of sales, the costs of running our operations department,
responsible for product manufacture. As more of our
manufacturing activity has been outsourced, the nature of
these costs have changed and it is now considered more
appropriate to include them within overheads, noting, in
particular, the fixed nature of these costs. Accordingly, the
overheads have been increased by £3.8m and the prior year
increased by £3.7m for consistency, with the gross profit
figures correspondingly increased.
Overheads
Selling, general and administrative expenditure (excluding
exceptional charges) rose to £26.9m (2005 restated: £25.4m).
Engineering development expenditure (excluding exceptional
costs) was £21.4m (2005: £23.2m). These figures are stated
David Brocksom
with Damien Wilkinson, 
Financial Controller The reorganisation undertaken
after the year-end, and referred
to in the Chairman’s Statement,
has resulted in a staff reduction
of over 10%.
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 15
after a net benefit resulting from the requirement under IAS38
to capitalise commercially realisable development expenditure
and subsequently to charge this development expenditure
over the expected life of the projects concerned. This year we
spent £17.1m (2005: £11.8m) on qualifying expenditure and
amortised £9.8m (2005: £11.0m). After the exceptional
development charge of £3.5m, this resulted in a net
capitalisation in the balance sheet of £3.8m (2005: £0.8m).
The net benefit reflects work on new product development,
particularly, although not exclusively, for the North American
market, where commercial product launches did not take
place before the end of the financial year, or late in the year in
other cases.
At the year-end our total headcount was 631 (2005: 621),
which includes 349 people in engineering (2005: 365), but
excludes 95 outsourced engineers at Tata Elxsi in India (2005:
120). The reorganisation undertaken after the year-end, and
referred to in the Chairman’s Statement, has resulted in a staff
reduction of over 10%.
Taxation
In the UK, at the end of the year, the Group has accumulated
tax assets of approximately £38m, of which £2.9m (i.e. £9.6m
at a 30% tax rate) are recognised as deferred tax assets and
£8.5m remains unrecognised. At the end of the prior year
£4.0m (£13.4m at a 30% tax rate) was recognised. As a result
of the fall in the Board’s view of the amount of tax recoverable
against future profits chargeable to corporation tax that should
be recognised as a deferred tax asset, it has made a charge
of £1m in the year to 3 June 2006. 
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 to overseas tax of £0.2m (2005: £0.2m) in the year.
The Group will start to incur a normal UK current tax charge,
and re-commence UK tax payments, once available tax losses
(both recognised and unrecognised) are utilised. 
Cash flow and banking facilities
The Group ended the year with net borrowings of £6.1m
(2005: net cash of £26.4m).
The cash flow in the year was affected by the recorded losses
and significant changes in working capital. There was a
significant increase in finished goods and component
inventories due to delays in product approval preventing
shipments before the year-end. The inventory increase, from
£10.1m to £34.8m, most of which took place at the end of the
year, also affected the trade payables position, which
increased from £22.3m to £38.7m. The trading losses have
also been a significant factor in the year’s cash outflow.
To accommodate product approval delays we have
renegotiated, rescheduled or cancelled a number of purchase
commitments and trading terms. This was only possible with
the co-operation of our suppliers to whom we would like to
express our thanks. PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 16
Current provisions predominantly represent warranty
provisions that could fall due within 12 months.
Non Current Liabilities
Non-current liabilities represent royalties, where the position is
essentially unchanged, and warranty provisions. The warranty
provision relates to that element of the product warranty
provision, which is in respect of warranty lives in excess of 12
months.
Foreign Exchange
The majority of the Group’s production costs are designated
in US dollars. While the Group endeavours to obtain as much
of its income as possible in US dollars, 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 six months.
As the Group’s US sales grow, our net exposure to the US
dollar will lessen, and this income will form a hedge against US
dollar expenses and reduce the need for some foreign
exchange contract hedging. The Group’s exposure to income
in Euros remains unchanged.
Year-end rates used in the accounts are $1.86:£1 (2005:
$1.81:£1) and €1.46:£1 (2005: €1.48:£1). Average rates
used in the accounts are $1.76:£1 (2005: $1.86:£1)
and€€1.46 :£1 (2005: €1.46 :£1).
Business Environment
Note 1 to the Financial Statements contains a review of the
business environment in which Pace operates and its financial
implications.
International Financial 
Reporting Standards (IFRS)
The consolidated results for the year ended 3 June 2006 are
reported under International Financial Reporting Standards
(IFRS). All comparative figures have been restated in
accordance with IFRS 1 and full reconciliations that explain the
impact of the transition from UK GAAP to IFRS have been
included in note 29 to the Financial Statements. 
David Brocksom
Finance Director
4 September 2006
The Group put new banking facilities in place in January 2006,
which run to September 2007, based upon a sales ledger
financing agreement. These facilities are subject to product
approval and certain performance covenants.
Balance Sheet
Overall net assets, or total equity attributable to equity holders
of the Company, fell from £69.8m to £42.5m, reflecting the
year’s loss. The fall in net assets was offset by £0.8m due to
the issue of shares upon option exercise. Charges in respect
of employee share incentive schemes of £0.5m were made in
the income statement, but do not affect the balance sheet of
the Group.
Non Current Assets
Non current assets, which include assets previously described
as tangible and intangible fixed assets as well as deferred tax
assets, rose to £31.6m from £27.8m.
There was a net increase in plant and equipment, from £6.2m
to £7.7m. The increase was principally from net investment in
head-end and line test equipment for product manufacturing
and test laboratory facilities aimed at improving both our
development process and in-field reliability. We spent £5.9m
on new investment in the year (2005: £4.1m), and depreciated
£4.1m (2005: £4.4m).
The Group had investments in two unquoted companies,
VegaStream Limited and Intamac Limited. The Group has
written off its investment in VegaStream Limited, which
encountered financial difficulties, rather than invest new funds.
The intangible fixed assets represent goodwill from the
purchase of Pace Europe in 2001. The balance, net of
amortisation and prior year provisions, was £9.4m (2005:
£9.4m). Under IFRS, no further amortisation takes place,
although annual impairment reviews are carried out.
Current Assets
Current assets include inventories, trade and other receivables
and cash and cash equivalents.
Overall current assets have fallen to £77.1m from £88.6m, but
as previously mentioned, there has been a marked change in
both inventories and cash balances. Trade and other
receivables also fell from £51.8m to £42.3m, a change that
reflects the lower level of turnover in the final quarter of the
year, compared to the prior year.
Current Liabilities
Total current liabilities, being trade and other payables,
interest-bearing loans and borrowings and current provisions,
have increased from £37.1m to £56.9m. As noted above, the
increase in the trade payables balances, which was the major
influence in the increase of trade and other payables balances
from £31.6m to £45.4m, was the result of the acquisition of
inventories near the year-end. The interest-bearing loans and
borrowings balance was similarly affected by working capital
changes and the losses incurred in the year. PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 17
MEET THE BOARD
01 Mike McTighe
Mike, aged 52, was appointed a Non-executive Director in June
2001 and became Chairman on 1 May 2006. He 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.
02 Neil Gaydon
Neil, aged 46, was appointed Chief Executive Officer in April 2006.
He was appointed to the Board in June 2002 as Worldwide Sales
and Marketing Director. He has been with the Company since
1995 and as President, Pace Americas spearheaded the
development of the Company’s US business between 1999 and
December 2003. Prior to this he was Regional Sales Director
EMEA and head of New Business Development and Product
Marketing for the Company.
03 David Brocksom
David, aged 45, 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.
04 Pat Chapman-Pincher
Pat, aged 59, was appointed a Non-executive Director in February
2005 and became Senior Independent Director in May 2006. 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 Chief
Executive of Cache Logic Ltd, Chairman of Rapid Mobile Ltd and
a non-executive director of Friends of the Earth.
05 Rob Fleming
Rob, aged 50, 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
property group, and a board member of Bradford U.R.C.
06 Marten Fraser
Marten, aged 60, was appointed a Non-executive Director in
February 2005. He was previously senior partner at
PricewaterhouseCoopers, 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.
01
04 05 06
02 03 REPORT OF THE DIRECTORS
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 18
REPORT OF THE DIRECTORS
The directors present their report to shareholders on pages 18 to 23 together with the audited financial statements for the 52 week period
ended 3 June 2006 (prior year 53 weeks ended 4 June 2005). 
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
The information that fulfils the requirements of the Business Review, including a review of the Group’s activities, developments and the
financial results for the year, can be found in the Chairman’s Statement, the Chief Executive Officer’s Review and Finance Director’s Review
on pages 4 to 16. This information is incorporated in this report by reference. Furthermore, an overview of the Group’s strategy and the key
issues/uncertainties, together with their management, is set out in the “Business Environment” section in note 1 to the financial statements.
The consolidated income statement for the 52 weeks ended 3 June 2006 is set out on page 35. The loss before tax was £27.5 million (2005:
profit £9.0 million).
The Group’s results are now stated under International Financial Reporting Standards (see note 29 to the financial statements).
DIVIDEND
No interim dividend was paid during the year. The directors do not recommend the payment of a final dividend (2005: nil).
SHARE CAPITAL
Changes in the Company’s share capital during the year ended 3 June 2006 are set out in note 19 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 1 September 2006.
Number of shares % of issued share capital
David Hood and related family trusts 44,486,957 19.6
Fidelity Investment Mangement and related companies 23,077,637 9.9
Barclays plc 8,862,917 3.9
Deutsche Bank Proprietary Account 9,312,732 4.05
Legal & General Investment Management Limited 8,575,949 3.78         
Robert Fleming and related family trusts 8,880,178 3.9
Pace Micro Technology plc Employee Benefits Trust 7,100,573 3.2
DIRECTORS
The names of the current directors of the Company are shown on page 17. All those listed held office throughout the year.
During the year the following persons also held office as directors:
John Dyson: retired 14 April 2006    Sir Michael Bett: retired 30 April 2006    Bob Lambourne: retired 8 August 2005
Mike McTighe and Rob Fleming will retire by rotation at the Annual General Meeting of the Company and offer themselves for re-election.
Details of the executive directors’ service contracts and the non-executive directors’ letters of appointment are disclosed on page 26.
PAYMENT TO SUPPLIERS
It is the policy of the Group to agree terms and conditions for its business transactions with suppliers which are varied from time to time.
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 69 days (2005: 37 days) and for
the Company were 68 days (2005: 43 days).
  REPORT OF THE DIRECTORS continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 19
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 £28.8 million in the year and charging £24.9 million (2005: £23.2million) to the income statement
during the year following the treatment under IAS38.
DONATIONS
During the year the Group donated £40,000 (2005: £37,000) to charitable causes. No political donations were made. Further details of the
charitable and community-related activities of the Group are given on page 22.
CORPORATE GOVERNANCE
The directors believe that the Company has complied throughout the year with the Combined Code on Corporate Governance dated June
2003, as revised and adopted by the Financial Reporting Council, save in relation to performance evaluation of the Chairman. 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 Institute of Chartered Accountants) 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 two executive and four 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 17. The Chairman, Mike McTighe,
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 Officer, Neil Gaydon, focus on running the Group’s
business and implementing Group strategy. The Chief Executive Officer 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 Pat
Chapman-Pincher 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. Following the retirement
of Sir Michael Bett, this year, no performance evaluation of the Chairman was conducted, but the review and evaluation to be conducted in
the following year will include all directors.
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:
n The Audit Committee is comprised of independent designated non-executive directors, Pat Chapman-Pincher and Marten Fraser, who
is the Chairman of the Commitee. Mike McTighe served on the Committee during the year before resigning in May 2006 upon his
appointment as Chairman. Bob Lambourne also served on the Committee during the year until his retirement on 8 August 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.
n The Executive Committee is chaired by Neil Gaydon as Chief Executive Officer. The Committee generally meets twice a month and
ensures that the strategy, plans and policies previously agreed or delegated by the Board are implemented. REPORT OF THE DIRECTORS continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 20
The Executive Committee comprises the two executive directors together with the following senior executives:
Anthony Dixon General Counsel
Jill Ezard Director of Human Resources
David Gillies Director of Technology
Helen Kettleborough Director of Corporate Communications
Michael Pulli President, Pace Americas
David McKinney Chief Operating Officer
Ian Sharp President, EMEA/APAC
n The Remuneration Committee is comprised of independent designated non-executive directors Marten Fraser and Pat Chapman-
Pincher, who is the Chairman of the Committee. Mike McTighe served on the Committee during the year before resigning in May 2006.
Bob Lambourne served on the Committee before his retirement in August 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.
n The Nominations Committee is comprised of non-executive directors Pat Chapman-Pincher, Marten Fraser and Rob Fleming, together
with Chief Executive Officer, Neil Gaydon, 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 13 4 4 1
David Brocksom 13 n/a n/a n/a
Pat Chapman-Pincher 12 4 4 1
Robert Fleming 12 n/a n/a 1
Marten Fraser 12 4 4 1
Neil Gaydon 12 n/a n/a n/a
Mike McTighe 11 3 4 1
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 24 to 31 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 2005 the Company was authorised by shareholders to purchase up to 22,698,874 of its own ordinary
shares, representing 10 per cent of its issued share capital as at 5 August 2005. 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 2006 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 Officer’s Review 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 32 and the
responsibilities of the auditors are described on page 33.
  REPORT OF THE DIRECTORS continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 21
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.
n 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.
n 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 such risks effectively. 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, 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 the Pace Quality Committee review process, with a view to attaining the highest
standards in quality and reliability.
n 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.
n 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 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.
n Monitoring systems. Monitoring of the internal control systems is carried out by designated employees on a periodic basis pursuant to a
programme agreed by the 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 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 period to 30 September 2007, 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. REPORT OF THE DIRECTORS continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 22
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. 
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 16 (2005:18) 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, Grenoble and Boca
Raton in Florida, as well as charitable and community initiatives of Group employees. The corporate charity policy focus is to support local
charities of benefit to the local area and people living close to each Group site.
During the year 160 requests for support were considered by the committee, 141 of these satisfying the criteria and receiving financial support
amounting to £40,000. 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.
  REPORT OF THE DIRECTORS continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 23
ENVIRONMENTAL MANAGEMENT
During the year the Company commissioned its fourth 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.
The Company is 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.
The Company continues 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. The Company has recently become compliant with 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 2003 200420052006
CO2 emission (tonnes) 3,000 2,371 2,115 3,200
Electricity (kWh) 3.5 million 3.1 million 3.7 million 3.8 million
Gas (kWh) 2.1 million 1.8 million 1.4 million 2.2 million
Water (m3/employee) 24.7 22.1 21.0 19.3
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 2006 index the Company was ranked 4th (2005 index: 9th) and 1st in the IT hardware sector.
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.
Each of the directors who held office at the date of approval of this Report of the Directors comfirms that, so far as they are aware, there is
no relevant audit information of which the Company’s auditors are unaware; and the directors have each taken all the steps that they ought
to have taken as a director to make themselves aware of any relevant audit information and to establish that the Company’s auditors are
aware of that information.
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). A programme of meetings with institutional shareholders is in place and analyst presentations are
made following announcement of the interim and annual results. Shareholders are welcome to participate at the Annual General Meeting on
2 November 2006 at which the Board will be available for questions.
ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held on 2 November 2006 at the offices of the Company at Salts Mill, Victoria Road,
Saltaire, West Yorkshire, BD18 3LF. 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
4 September 2006 DIRECTORS’ REMUNERATION REPORT
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 24
The directors present their report to shareholders on pages 24 to 31 regarding remuneration matters in respect of the 52 week period ended
3 June 2006.
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 3 June 2006 were Pat Chapman-Pincher, Marten
Fraser, and Mike McTighe, who retired from the Committee in May 2006. 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 New Bridge Street
Consultants, who conducted a review of directors’ and executive remuneration during the year. 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.
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 3 June 2006, 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) exceeding £11
million with the capacity to earn additional bonus increments upon achievement of higher profit targets up to a ceiling of £17.5 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. Since the profit targets were not met, no performance bonuses were awarded to any of the executive directors in respect
of the year ending 3 June 2006. 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 2006. 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.
  DIRECTORS’ REMUNERATION REPORT continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 25
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.
PENSION CONTRIBUTIONS
In the year ending 3 June 2006, 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 HMRC 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 been established by the Company.
n A regular savings scheme (the “Sharesave Scheme”), which is open to executive 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.
n 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.
n An HMRC 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 six months 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.  The Company adopted its first Approved Scheme
in 1996 and a new Approved Scheme at the AGM in September 2005.
n An Unapproved Discretionary Scheme (“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.  The Company
adopted its first Unapproved Scheme in 1996 and a new Unapproved Scheme at the AGM in September 2005.
n A Discretionary Unapproved Scheme 2000 (“2000 Unapproved Scheme”). Under the 2000 Unapproved Scheme options have been
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 was the ability to award options (“Super Options”) above the limit for Basic
Options. The 2000 Unapproved Scheme was discontinued in August 2005, but outstanding options previously granted survive until
exercise or lapse. DIRECTORS’ REMUNERATION REPORT continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 26
In granting options under the Approved Schemes and the 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 15-18% above
the Retail Prices Index ("RPI") over a three-year period in all grants under the 1996 Approved Scheme and 1996 Unapproved Scheme prior
to 2005. Under the 2000 Unapproved Scheme performance conditions of 6% per annum and 20% per annum compound above RPI were
applied to the grant of Basic Options and Super Options respectively thereunder. Initial performance targets for the 2005 Approved and 2005
Unapproved Schemes required a minimum growth in EPS of a compound 3% per annum above growth in inflation over a three year period
at which level there is 25% vesting.  Compound growth of 6% per annum above inflation is required for 100% vesting, with vesting on a sliding
scale between these two target thresholds. Similar performance conditions were attached to the grant of options during the year pursuant
to the 1996 Approved Scheme and 1996 Unapproved Scheme.
In setting targets for option grants in the current financial year, the Committee will be mindful of the need for targets to reflect a return to
profitability and significant improvements in earnings. In order to assess whether the performance conditions have been met, the Committee
will utilise the earnings figures derived from the audited financial statements of the Group.
In addition a separate share option plan has been established for the benefit of the Group’s US employees. Such plan operates 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.
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. In respect of executive directors’ service agreements
entered into prior to 2006, at the option of the Company, each agreement may be terminated forthwith subject to the Company paying a sum
equivalent to 12 months’ salary, benefits 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 or otherwise pay fair and reasonable compensation. During the year the Company teminated John Dyson’s service
agreement without contractual notice in accordance with its terms and a termination payment of £320,047 was paid to him, representing 12
months’ basic salary, benefits and pension contributions.
The service agreement of Neil Gaydon was entered into on 4 May 2006. 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 and 1 June 2006. 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. Each of the 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 309B of
the Companies Act 1985.
Copies of the service contracts of the executive directors and the letters of appointment of the non-executive directors, together with the
letters of indemnity referred to above, are available for inspection during normal business hours (Saturdays, Sundays and Bank Holidays
excepted) at the registered office of the Company.
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 but during the year neither of the current executive
directors held such external appointments. DIRECTORS’ REMUNERATION REPORT continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 27
The auditors are required to report on the information disclosed on pages 27 to 29.
DIRECTORS’ REMUNERATION
Total directors’ remuneration in respect of qualifying services for the year ending 3 June 2006 was as follows:
2006 2005
£000 £000
Fees 183 200
Salaries, benefits in kind and termination payments 930 675
Performance-related bonuses - 85
Pension contributions 77 73
1,190 1,033
The remuneration of individual directors in respect of qualifying services for the year ending 3 June 2006 is set out in the table below 
Salaries Performance Benefits Termination Total remuneration Pension contributions
and fees bonus in kind payment
2006 2005 2006 2005
Executive Directors £000 £000 £000 £000 £000 £000 £000 £000
David Brocksom 151 - 1 - 152 176 20 23
John Dyson* 257 - 3 320 580 317 34 31
Neil Gaydon 197 - 1 - 198 267 23 19
605 - 5 320 930 760 77 73
Non-executive Directors
Sir Michael Bett* 60 - - - 60 65 - -
Pat Chapman-Pincher 27 - - - 27 5 - -
Robert Fleming 27 - - - 27 29 - -
Marten Fraser 29 - - - 29 9 - -
Bob Lambourne* 7 - - - 7 30 - -
Mike McTighe 33 - - - 33 27 - -
788 - 5 320 1,113 925** 77 73**
*Remuneration referable only to period of the financial year up to date of retirement from the Board.
**Figures for the 53 week period ended 4 June 2005 exclude fees of £26,000 and £9,000 paid respectively to former non-executive directors
Marvin Jones and David Hood.
A termination payment of £320,047 was paid to John Dyson by way of compensation for termination of employment and, of such
compensation, £39,397 was paid by way of pension contribution.
A summary of the benefits in kind provided to the executive directors is contained on page 25. DIRECTORS’ REMUNERATION REPORT continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 28
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
3 June 2006 and at the beginning of the year are set out below.
3 June 2006 5 June 2005 
Shares Shares
Beneficial Non Under option Beneficial NonUnder option
Beneficial Beneficial
David Brocksom 14,000 - 349,635 - - 349,635
Pat Chapman-Pincher - - - -- -
Robert Fleming 8,850,990 29,188 - 8,850,990 29,188 - 
Marten Fraser 3,000 - - -- -
Neil Gaydon 28,910 - 1,526,499 7,462 - 917,720
Mike McTighe 20,000 - - 20,000 - -
There were no changes in the directors’ interests in the ordinary share capital of the Company between 3 June 2006 and 4 September 2006. DIRECTORS’ REMUNERATION REPORT continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 29
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 4 June 2005 Granted Exercised At 3 June* Exercise Exercise Period
2006 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
1996 Unapproved Scheme - 200,000 - 200,000 74.25p 02.08.08 01.08.15
Sharesave Scheme 19,635 - - 19,635 48.0p 01.10.07 31.03.08
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
1996 Unapproved Scheme - 250,000 - 250,000 74.25p 02.08.08 01.08.15
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 - 36,000 456,977 20.0p 21.01.04 20.01.13
2005 Unapproved Scheme - 600,000 - 600,000 63.5p 18.04.09 17.04.16
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
John Dyson
Approved Scheme 8,000 - - 8.000 375.0p 24.07.04 23.07.11
1996 Unapproved Scheme 150,000 - - 150,000 200.0p 07.07.02 06.07.09
1996 Unapproved Scheme - 450,000 - 450,000 74.25p 02.08.08 01.08.15
1996 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 Option 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
*In the case of John Dyson information given as at date of cessation, 14 April 2006. DIRECTORS’ REMUNERATION REPORT continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 30
On 3 October 2005 Neil Gaydon exercised an option over 14,000 shares under the Sharesave Scheme, retaining such shares. The share
price at this date was 49.75p.
On 3 April 2006 Neil Gaydon exercised an option over 7,448 shares under the Sharesave Scheme, retaining such shares. The share price
at this date was 63.25p.
On 11 August 2005 Neil Gaydon exercised an option over 36,000 Super Unapproved options and sold 18,000 shares arising at a price of
76.5p per share creating a gain of £20,340. On 11 August 2005 Neil Gaydon gifted 18,000 shares to his wife.
On 3 October 2005 John Dyson exercised an option over 14,000 shares under the Sharesave Scheme, retaining such shares. The share
price at this date was 49.75p.
On 3 April 2006 John Dyson exercised an option over 7,448 shares under the Sharesave Scheme, retaining such shares. The share price at
this date was 63.25p.
The mid-market price of shares in the Company on 2 June 2006 (the last dealing day before the financial year end) was 43.75p. The lowest
and highest closing mid-market prices of shares in the Company during the year were 43.75p and 79.75p respectively.
Information concerning the performance conditions attached to the above options is contained on page 26.
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 64,908 options under the Company’s Sharesave Scheme were exercised and were satisfied by shares transferred by 
the QUEST. DIRECTORS’ REMUNERATION REPORT continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 31
PERFORMANCE GRAPH
Set out below is a performance graph showing the total shareholder return of the Company for the five financial years ended 3 June 2006
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
4 September 2006 STATEMENT OF DIRECTORS’ RESPONSIBILITIES
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 32
The directors are responsible for preparing the Annual Report and the group and parent company financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare group and parent company financial statements for each financial year. Under that law they
are required to prepare the group financial statements in accordance with IFRSs as adopted by the EU and have elected to prepare the parent
company financial statements on the same basis.
The group and parent company financial statements are required by law and IFRSs as adopted by the EU to present fairly the financial position
of the group and the parent company and the performance for the financial year; the Companies Act 1985 provides in relation to such financial
statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving
a fair presentation.
In preparing each of the group and parent company financial statements, the directors are required to:
n select suitable accounting policies and then apply them consistently;
n make judgements and estimates that are reasonable and prudent;
n state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
n prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company
will continue in business.
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position
of the parent company and enable them to ensure that its financial statements comply with the Companies Act 1985. They 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.
Under applicable law and regulations, the directors are also responsible for preparing a directors' report, directors' remuneration report and
corporate governance statement that comply with that law and those regulations.
A copy of the accounts of the Company is posted on the Pace Micro Technology plc website (www.pacemicro.com).
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
  INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF 
PACE MICRO TECHNOLOGY PLC
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 33
We have audited the Group and parent company financial statements (the ''financial statements'') of Pace Micro Technology plc for the 52
week period ended 3 June 2006 which comprise the Consolidated Income Statement, the Consolidated and Company Balance Sheets, the
Consolidated and Company Cash Flow Statements, the Consolidated and Company Statements of Changes in Shareholders' Equity, and the
related notes. These financial statements have been prepared under the accounting policies set out therein. 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' responsibilities for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance
with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU are set out in the Statement of Directors'
Responsibilities on page 32. Our responsibility is to audit the financial statements and the part of the Directors' Remuneration Report to be
audited in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
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 and, as
regards the Group financial statements, Article 4 of the IAS Regulation. We also report to you whether in our opinion the information given in
the Report of the Directors is consistent with the financial statements. The information given in the Report of the Directors includes that specific
information presented in the Chief Executive Officer’s Review and Finance Director’s Review that is cross referenced from the Business Review
and Financial Results section of the Directors' Report.  We also report to you if, in our opinion, 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 other transactions is not disclosed.
We review whether the Corporate Governance Statement reflects the Company's compliance with the nine provisions of the 2003 FRC
Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not
required to consider whether the Board's statements on internal control cover all risks and controls, or form an opinion on the effectiveness
of the Group's corporate governance procedures or its risk and control procedures. We read the other information contained in the Annual
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. Our responsibilities do not extend to any other
information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) 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 judgments made by the
directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group's and Company'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:
n the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the EU, of the state of the Group's 
affairs as at 3 June 2006 and of its loss for the 52 weeks then ended; 
n the parent company financial statements give a true and fair view, in accordance with IFRSs as adopted by the EU as applied in 
accordance with the provisions of the Companies Act 1985, of the state of the parent company's affairs as at 3 June 2006;
n 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 and, as regards the Group financial statements, Article 4 of the IAS Regulation; and
n the information given in the Report of the Directors is consistent with the financial statements.
KPMG Audit Plc
Chartered Accountants 
Registered Auditor
Leeds
4 September 2006 FINANCIAL STATEMENTS 2006
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 34
CONTENTS
35 FINANCIAL STATEMENTS  41 NOTES TO THE FINANCIAL STATEMENTS  69 DIRECTORS, SECRETARY AND ADVISERS 
70 FIVE YEAR RECORD AND SHAREHOLDER INFORMATION
  Note 52 weeks ended 3 June 2006 53 weeks ended 4 June 2005
Results Exceptional Results for Results Exceptional Results for
before items* the year before items* the year
exceptional exceptional
items items
£000 £000 £000 £000 £000 £000
Revenue 3 178,095 - 178,095 253,326 - 253,326
Cost of sales 5 (145,984) (5,500) (151,484) (196,109) - (196,109)
Gross profit 32,111 (5,500) 26,611 57,217 - 57,217
Administrative expenses:
Research and development 
expenditure 5 (21,433) (3,500) (24,933) (23,160) - (23,160)
Other administrative expenses 5 (26,864) (2,383) (29,247) (25,359) (145) (25,504)
Total Administrative expenses (48,297) (5,883) (54,180) (48,519) (145) (48,664)
Other operating expenses:
Impairment loss on trade investment 5 - (505) (505) ---
Operating (loss)/profit (16,186) (11,888) (28,074) 8,698 (145) 8,553
Financial income - bank interest receivable 755 - 755 728 - 728
Financial expenses - bank interest payable (131) - (131) (318) - (318)
(Loss)/profit before tax (15,562) (11,888) (27,450) 9,108 (145) 8,963
Tax (charge)/credit 8 (1,334) 4,717
(Loss)/profit after tax (28,784) 13,680
Attributable to:
Equity holders of the Company (28,784) 13,680
Basic (loss)/earnings per ordinary share 9 (13.0)p 6.2p
Diluted (loss)/earnings per ordinary share 9 (13.0)p 6.1p
* The exceptional items relate principally to an inventory write down, impairment of capitalised development expenditure, restructuring costs and an
impairment of a trade investment. These are explained in more detail in note 5.
The accompanying accounting policies and notes form an integral part of these financial statements. The comparatives have been restated as disclosed
in note 2.
CONSOLIDATED INCOME STATEMENT
For the 52 weeks ended 3 June 2006
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 35 CONSOLIDATED BALANCE SHEET
At 3 June 2006
Note 3 June 2006 4 June 2005
£000 £000
Assets
Non Current Assets
Property, plant and equipment 10 7,671 6,185
Intangible assets – goodwill 10 9,436 9,436
Intangible assets – development expenditure 10 11,286 7,450
Investments in other companies 11 349 674
Deferred tax assets 12 2,887 4,009
Total Non Current Assets 31,629 27,754
Current Assets
Inventories 13 34,792 10,135
Trade and other receivables 14 42,337 51,827
Cash and cash equivalents - 26,647
Total Current Assets 77,129 88,609 
Total Assets 108,758 116,363
Equity
Issued capital 19 11,576 11,349
Share premium 20 36,246 35,677
Translation reserve 240 150
Retained earnings 21 (5,595) 22,576
Total Equity attributable to equity holders of the parent 42,467 69,752
Liabilities
Non Current Liabilities
Interest bearing loans and borrowings 16 154 205
Provisions                                                       18 9,284 9,304
Total Non Current Liabilities 9,438 9,509
Current Liabilities
Trade and other payables 15 45,406 31,561
Current tax liabilities 3 49
Interest bearing loans and borrowings 16 5,937 56
Provisions                                                         18 5,507 5,436
Total Current Liabilities 56,853 37,102
Total Liabilities 66,291 46,611
Total Equity and Liabilities 108,758 116,363
These financial statements were approved by the Board of Directors on 4 September 2006 and were signed on its behalf by:
Michael McTighe - Non-executive Chairman
Neil Gaydon - Chief Executive Officer
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 36 Note 3 June 2006 4 June 2005
£000 £000
Assets
Non Current Assets
Property, plant and equipment 10 6,348 4,956
Intangible assets – development expenditure 10 11,286 7,450
Investments in group and other companies 11 9,749 10,074
Deferred tax assets 12 2,887 4,009
Total Non Current Assets 30,270 26,489
Current Assets
Inventories 13 19,160 9,300
Trade and other receivables 14 53,594 50,676
Cash and cash equivalents - 26,744
Total Current Assets 72,754 86,720 
Total Assets 103,024 113,209
Equity
Issued capital 19 11,576 11,349
Share premium 20 36,246 35,677
Retained earnings 21 (10,240) 17,210
Total Equity 37,582 64,236
Liabilities
Non Current Liabilities
Provisions                                                   18 9,284 9,304
Total Non Current Liabilities 9,284 9,304
Current Liabilities
Trade and other payables 15 43,479 33,586
Current tax liabilities 275 647
Interest bearing loans and borrowings 16 6,897 -
Provisions                                                    18     5,507 5,436
Total Current Liabilities 56,158 39,669
Total Liabilities 65,442 48,973
Total Equity and Liabilities 103,024 113,209
These financial statements were approved by the Board of Directors on 4 September 2006 and were signed on its behalf by:
Michael McTighe - Non-executive Chairman
Neil Gaydon - Chief Executive Officer
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 37
COMPANY BALANCE SHEET 
At 3 June 2006 Group ShareShareTranslation Retained Total 
capital premium reserve earnings equity
£000 £000 £000 £000 £000
Balance at 29 May 2004 11,339 35,647 - 8,152 55,138
Profit for the period - - - 13,680 13,680
Employee share incentive charges - - - 744 744
Issue of shares 10 30 - - 40
Currency translation adjustments - - 150 - 150
Balance at 4 June 2005 11,349 35,677 150 22,576 69,752
Loss for the period - - - (28,784) (28,784)
Employee share incentive charges - - - 493 493
Movement in employee share trusts - - - 120 120
Issue of shares 227 569 - - 796
Currency translation adjustments - - 90 - 90
Balance at 3 June 2006 11,576 36,246 240 (5,595) 42,467
Company 
Balance at 29 May 2004 11,339 35,647 - 7,020 54,006
Profit for the period - - - 9,446 9,446
Employee share incentive charges - - - 744 744
Issue of shares 10 30 - - 40
Balance at 4 June 2005 11,349 35,677 - 17,210 64,236
Loss for the period - - - (28,063) (28,063)
Employee share incentive charges - - - 493 493
Movement in employee share trusts - - - 120 120
Issue of shares 227 569 - - 796
Balance at 3 June 2006 11,576 36,246 - (10,240) 37,582
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 38
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY 
  52 weeks 53 weeks 
ended 3 June ended 4 June
2006 2005
£000 £000
Cash flows from operating activities
(Loss)/profit before tax (27,450) 8,963
Adjustments for: 
Share based payments charge 493 744
Depreciation of property, plant and equipment 4,116 4,419
Amortisation and impairment of development expenditure 13,296 11,035
Impairment of trade investments 505 -
Loss on sale of property, plant and equipment 241 1
Net financial income (624) (410)
Movement in trade and other receivables 9,490 9,152
Movement in trade and other payables 13,871 (9,046)
Movement in inventories (24,657) (129)
Movement in provisions 51 (1,653)
Cash (used in)/ generated from operations (10,668) 23,076
Interest paid (142) (385)
Tax paid (258) (1,378)
Net cash (used in)/ generated from operating activities (11,068) 21,313
Cash flows from investing activities
Acquisition of trade investments (180) (674)
Purchase of property, plant and equipment (PPE) (5,862) (3,594)
Development expenditure (17,132) (11,851)
Proceeds from sale of PPE 5 6
Proceeds from exercise of employee share options on own shares held 120 29
Interest received 842 728
Net cash used in investing activities (22,207) (15,356)
Cash flows from financing activities
Proceeds from issue of share capital 796 40
Repayment of loans (50) (38)
Net cash generated from financing activities 746 2
Net change in cash and cash equivalents (32,529) 5,959
Cash and cash equivalents at start of period 26,647 20,705
Effect of exchange rate fluctuations on cash held 2 (17)
Cash and cash equivalents at end of period (5,880) 26,647
CONSOLIDATED CASH FLOW STATEMENT 
For the 52 weeks ended 3 June 2006
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 39 COMPANY CASH FLOW STATEMENT 
For the 52 weeks ended 3 June 2006
52 weeks 53 weeks 
ended 3 June ended 4 June
2006 2005
£000 £000
Cash flows from operating activities
(Loss)/profit before tax (27,315) 4,487
Adjustments for: 
Share based payments charge 493 744
Depreciation of property, plant and equipment 3,600 3,790
Amortisation and impairment of development expenditure 13,296 11,035
Impairment of trade investments 505 -
Provision against carrying value of investments - 5,739
Loss/(profit) on sale of property, plant and equipment 239 (1)
Net financial income (717) (440)
Movement in trade and other receivables (2,994) 10,080
Movement in trade and other payables 9,892 (7,821)
Movement in inventories (9,860) (2,100)
Movement in provisions 51 (1,653)
Cash (used in)/ generated from operations (12,810) 23,860
Interest paid (44) (385)
Tax paid - (1,001)
Net cash (used in)/ generated from operating activities (12,854) 22,474
Cash flows from investing activities
Acquisition of trade investments (180) (674)
Purchase of property, plant and equipment (PPE) (5,236) (3,220)
Development expenditure (17,132) (11,851)
Proceeds from sale of PPE 5 4
Proceeds from exercise of employee share options on own shares held 120 29
Interest received 838 758
Net cash used in investing activities (21,585) (14,954)
Cash flows from financing activities
Proceeds from issue of share capital 796 40
Net cash generated from financing activities 796 40
Net change in cash and cash equivalents (33,643) 7,560
Cash and cash equivalents at start of period 26,744 19,201
Effect of exchange rate fluctuations on cash held 2 (17)
Cash and cash equivalents at end of period (6,897) 26,744
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 40 NOTES
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 41
1 BASIS OF PREPARATION AND BUSINESS ENVIRONMENT
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 as modified
by the revaluation of derivative instruments.
As referred to in the Business Environment section below, the Group customarily has a level of inventory and purchase commitments, the realisation
of which is not certain. As a result of delays in the launch of US products, at 3 June 2006 these inventories and commitments were at much higher
levels than usual. The Group inventories included £23 million, and there were purchase commitments of c£60 million, in respect of these products, the
sales of which were not certain, either through pending approvals or through a lack of contractual certainty, or both. At 4 September 2006, approvals
and contracts had been obtained In respect of a significant proportion of this value; of which there remains a total inventory and purchase commitment
value, after provisions, of c£16 million pending approvals and further c£14 million as yet unmatched by customer commitments. The Directors have
considered the ongoing approvals process and negotiations with customers and have concluded that this value is likely to be realised.
The Group has bank facilities to September 2007, based upon 50% of relevant trade debtors, as adjusted, up to a maximum of £25 million. These
facilities are also subject to product approval and certain performance covenants which conditions, by their nature, introduce a degree of estimation
into the determination of facility availability.
In managing the product manufacturing schedule to the approval process the Group has, and continues to, reschedule, cancel or otherwise
renegotiate with its suppliers the timing and value of purchase commitments and payments, which has included the granting of security interests. The
ability and willingness of suppliers to work with Pace continues to be important to the management of the business.
As noted in the Chairman's Statement, no decision in respect of any changes in the EU import duty classification has yet been reached. Such a
decision could have a material impact on the future performance of the business in respect of its EU operations, depending upon the nature of the
change and the timing of any implementation.
The Board has prepared a working capital forecast based upon assumptions as to trading and the realisation of inventory, and the matters above, as
well as building in the other circumstances noted in the Business Environment section below. In particular the Board has noted the importance of
shipments expected in the near future of the SD PVR for US cable. The Board has also modelled a number of alternative business scenarios. Based
upon these, whilst recognising that there is uncertainty, the Board has concluded that the Group has adequate working capital and that therefore it is
appropriate to use the going concern basis of preparation for these financial statements.
INTERNATIONAL FINANCIAL REPORTING STANDARDS
EU law (IAS Regulation EC 1606/2002) requires that the annual consolidated financial statements of the company, for the 52-week period ending 3
June 2006, be prepared in accordance with International Financial Reporting Standards ("IFRS") adopted for use in the EU ("Adopted IFRS").
Consequently these financial statements for both the parent company and the Group have been prepared on the basis of the recognition and
measurement requirements of IFRS in issue that are either endorsed by the EU and effective (or available for early adoption) at 3 June 2006, being the
Group’s first annual reporting date at which it is required to use Adopted IFRS. On publishing the parent company financial statements here together
with the group financial statements, the Company is taking advantage of the exemption in s230 of the Companies Act 1985 not to present its individual
income statement and related notes that form a part of these approved financial statements.
An explanation of how the transition to Adopted IFRS has affected the reported financial position and financial performance of the Group and parent
is provided in note 29. This note includes reconciliations of equity and profit or loss for the comparative periods under UK Generally Accepted
Accounting Practices ("UK GAAP") to those reported for those periods under Adopted IFRS.
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 52 weeks ended
3 June 2006 and the previous year’s financial statements are for the 53 weeks ended 4 June 2005. 
BASIS OF CONSOLIDATION
The Group financial statements consolidate those of the Company and of its subsidiary undertakings (note 11) drawn up to 3 June 2006. 
The results of subsidiaries acquired in the period are included in the income statement from the date they are acquired. On acquisition, all of the
subsidiaries’ assets and liabilities that exist at the date of acquisition are recorded at their fair values reflecting their condition at that date.
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or
convertible are taken into account.  
The consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries. Intra-group transactions, including
sales, profits, receivables and payables, have been eliminated on the Group consolidation. 
BUSINESS ENVIRONMENT 
Strategy
The Group continues to develop its set-top box strategy on three fronts:
n To develop increasingly technologically advanced products
n To match the geographic spread of its business with that of the global payTV operator market
n To identify and exploit opportunities for additional recurring revenue streams
  NOTES continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 42
Customers and Markets
The global market for payTV products (primarily set-top box products) is growing, although concentrated within a limited number of operators, some
of which are currently in an unprofitable business development phase. The payTV market is attractive, and as with most modern markets, it is highly
competitive with Pace’s competitors ranging from divisions of large multinational electronics companies to specialist smaller companies. There are a
number of barriers to market entry, in particular a requirement for complex post-deployment support to ensure deployed set-top boxes can continue
to deliver over time a payTV service as this service grows in size and sophistication. 
Orders placed by Pace’ s payTV customers are typically large one-off orders for delivery over a number of months with supplemental orders for additional
volumes. As the eventual deployment of the set-top boxes can be unpredictable, revenues can be volatile. The difficulty in predicting Pace’s business
flow and its risks can be exacerbated by a number of other factors including, for example, the development process for an advanced set-top box which
can take over 12 months. The Group works on long lead times (e.g. four months or more) for component supply and manufacture, typical of the
industry. In the US market, in particular, customer firm order lead times may be less than the component lead times. There are third party delivery risks,
for example, difficulties in the delivery of components or software code, and the final go ahead for manufacture and firm contractual commitments is
usually dependent on product approvals and acceptance both from the operator and sometimes from third parties.  In addition, there is a requirement
for frequent design revisions that take into account price deflation and introduction of new, more cost effective electronic components. The revision
process places increased demand on engineering resources but, at the same time, provides a further barrier to entry to new competitors.
The combined impact of these factors, together with the need to meet customer delivery requirements, imposes risk on Pace’s product introduction
programme.
Currency Risks
The standard ‘industry currency’ is the US dollar, with the majority of components and manufacturing capacity purchased in this currency. As a result,
due to part of the Group’s sales being in Sterling and Euros (the sale prices of which will be fixed for months in advance), the Group remains exposed
to the risk of foreign currency movements. T o manage this risk, the Group’ s treasury policy is progressively to cover cash flows over a six month period,
and to seek a greater percentage of US dollar sales to provide a commercial hedge against currency exposures.
Interest Rate Risk
The Group’s policy is to review regularly the terms of its available short term borrowing facilities and to assess individually and manage each long term
borrowing commitment accordingly. The Group does not currently take out any interest rate swaps.
Credit Risk
Management has a credit policy in place, which provides cover over most debtors, subject to excesses and the exposure to credit risk is monitored
on an ongoing basis. The Group does not require collateral in respect of financial assets. 
Deposit investments are allowed only in liquid securities and only with counterparties that have a credit rating equal or better than the Group.
Transactions involving derivative financial instruments are with counterparties with whom the Group has a signed netting agreement as well as sound
credit ratings.
Engineering
The Group is dependent on the technological skills of its employees and is working to increase the average skill base at all of the main development
sites. At the same time Pace is seeking to outsource a larger part of its development and next generation cost down activity to independent
development centres and design and manufacturing partners. During the year a significant number of new products for new customers have been
developed. Development costs directly attributable to these products are capitalised according to specified criteria and amortised over the product life.
The nature of the development work, and the new product launch dates, have resulted in a significant capitalisation impact in this year.
To improve business effectiveness, so the Group is better able to manage the significant volume of development work currently underway and in plan,
there has been a significant internal re-organisation programme which is ongoing. The programme has focussed on organisation structures and is now
focussed on business processes; in particular improving the effectiveness of Pace’s development process.
Third Party and Other Risks
Pace provides product warranties for its set-top boxes. Although it is difficult to make accurate predictions of potential failure rates or the possibility of
an epidemic failure, as a warranty estimate must be calculated at the outset of a project before field deployment data is available, these estimates
improve during the lifetime of the product in the field.
Pace’s products incorporate third party technology, usually under licence. Inadvertent actions may expose Pace to the risk of infringing third party
intellectual property rights. Potential claims can still be submitted many years after a product has been deployed. Any such claims are always vigorously
defended. 
The Group outsources its manufacture to third party specialist electronics manufacturers, in particular to Solectron Corporation Inc. Solectron
manufactures a significant percentage of the Group’ s products at plants in Romania and Shenzhen China, with a further plant in Mexico coming on line
for some of Pace’s US products.
Regulatory
Like all other businesses, the Group remains exposed to changes in the regulatory environment, including potential modifications in import duty regimes,
discussions on which have been and continue to be held. Within the year, the Company has continued to manage the implementation of the EU WEEE
and RoHs directives.
USE OF ESTIMATES 
The preparation of financial statements in conformity with Adopted IFRS requires management to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are
based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis
of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from
these estimates. The note above "Business Environment" gives further detail on the nature of some these factors. 2 ACCOUNTING POLICIES
GOODWILL 
All business combinations are accounted for by applying the purchase method. Goodwill represents the excess of the fair value of the consideration
paid on acquisition of a business over the fair value of the assets, including any intangible assets identified and liabilities acquired. Goodwill is not
amortised but is measured at cost less impairment losses. In determining the fair value of consideration, the fair value of equity issued is the market
value of equity at the date of completion, and the fair value of contingent consideration is based upon the extent to which the directors believe
performance conditions will be met and thus whether any further consideration will be payable. 
As permitted by IFRS 1, goodwill arising on acquisitions before 29 May 2004 (date of transition to Adopted IFRS) has been frozen at the UK GAAP
amounts subject to being tested for impairment at that date. Goodwill is tested for impairment annually. The Group performs its annual impairment
review at the cash-generating unit level. For 2004, goodwill was assigned to the cash-generating units of the Group. The subsequent impairment test
showed no goodwill impairment.  
RESEARCH AND DEVELOPMENT EXPENDITURE 
All on-going research expenditure is expensed in the period in which it is incurred. Where a product is technically feasible, production and sales are
intended, a market exists, and sufficient resources are available to complete the project, development costs are capitalised and subsequently amortised
on a straight-line basis over the estimated useful life of the product concerned from commercial launch. The expenditure capitalised includes the cost
of materials, direct labour and an appropriate proportion of overheads. Where these conditions are not met development expenditure is recognised as
an expense in the period in which it is incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment
losses. The estimated useful lives for development expenditure are estimated to be in a range of between 6 and 18 months.
Capitalised development expenditure is not treated as a realised loss for the purpose of determining the Company’s distributable profits as the costs
meet the conditions required to be treated as an asset in accordance with IAS 38.
The amortisation of capitalised development expenditure is charged to the Income Statement in research and development expenditure within
Administrative expenses category.
IMPAIRMENT CHARGES 
The Company considers at each reporting date whether there is any indication that non-current assets are impaired. If there is such an indication, the
Company carries out an impairment test by measuring an asset’ s recoverable amount, which is the higher of its fair value less costs to sell and its value
in use (effectively the expected cash to be generated from using the asset in the business). If the recoverable amount is less than the carrying amount
an impairment loss is recognised, and the asset is written down to its recoverable amount. 
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, an impairment loss is reversed when there is an indication that the impairment loss may no longer exist and there has been
a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying value does not exceed the amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised.
REVENUE RECOGNITION 
Revenue comprises the value of sales of goods and 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, and substantially
all of the Group’s work is completed which is usually upon delivery to the customer, or his agent. 
Revenue 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.
GOVERNMENT GRANTS 
Grants in respect of specific research and development projects are credited to research and development costs within the income statement or against
the capitalised development expenditure as appropriate to match to the project’s related expenditure. 
CASH AND CASH EQUIVALENTS 
Cash and cash equivalents comprise cash balances and call deposits. The Company considers all highly liquid investments with original maturity dates
of three months or less to be cash equivalents. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash
management system are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. 
ALLOWANCE FOR DOUBTFUL DEBTS 
Trade receivables are assessed individually for impairment, or collectively where the receivables are not individually significant. Where necessary,
provisions for doubtful debts are recorded in the income statement.
INVENTORY 
Inventory is stated at the lower of cost and net realisable value. Cost is determined on a first-in-first-out basis and includes appropriate transport and
handling costs but excludes royalties due only on ultimate sale. Where necessary, provision is made for obsolete, slow-moving and defective inventory.
PROPERTY, PLANT AND EQUIPMENT 
The cost of items of property, plant and equipment is its purchase cost, together with any incidental costs of acquisition.
Depreciation is calculated so as to write off, on a straight-line basis over the expected useful economic lives of the asset concerned, the cost of property,
plant and equipment, less any estimated residual values, which are adjusted, if appropriate, at each balance sheet date. The principal economic lives
used for this purpose are:
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 43
NOTES continued
  PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 44
Long Leasehold properties  Period of lease
Short Leasehold properties  Period of lease
Plant and machinery One to ten years
Motor vehicles Four years
Provision is made against the carrying value of items of property, plant and equipment where an impairment in value is deemed to have occurred.
LEASED ASSETS
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. 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 income statement over the period of
the lease.
All other leases are regarded as operating leases and the payments made under them are charged to the income statement on a straight-line basis
over the lease term. 
CURRENCY TRANSLATION 
Transactions in foreign currencies are translated at the exchange rate ruling at the date of transaction. Monetary 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 income statement. The assets and liabilities of foreign operations, including goodwill and
fair value adjustments arising on consolidation are translated at foreign exchange rates ruling at the balance sheet date. The revenues and expenses
of foreign operations are translated at an average rate approximate to the foreign exchange rate ruling at the date of the transactions. 
Exchange differences from the above, and of related qualifying hedges are taken directly to the translation reserve. They are released to the income
statement on disposal.
DERIVATIVE FINANCIAL INSTRUMENTS 
The Group uses derivative financial instruments, usually forward foreign exchange contracts, to hedge its exposure to foreign exchange and interest
rate risks arising from operational, financing and investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative
financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments. 
Derivative financial instruments are recognised and classified as held for trading at fair value. The gain or loss on re-measurement to fair value is
recognised immediately in the income statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss
depends on the nature of the item being hedged.
TAXES 
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates that have been
enacted or substantively enacted by the balance sheet date. 
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured using the tax rates that have been
enacted or substantively enacted by the balance sheet date and are expected to apply when the asset is realised or the liability settled.
A net deferred tax asset is recognised only when it is probable that sufficient taxable profits will be available in the foreseeable future from which the
reversal of the temporary differences can be deducted.
SHARE-BASED PAYMENTS 
The Company issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at
the date of grant. Fair value is measured by use of the Black-Scholes pricing model. The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of the number of shares that
will eventually vest. 
The Company has applied the exemption available under IFRS 2, to apply its provisions only to those options granted after 7 November 2002 and
which were outstanding at 1 January 2005.
EMPLOYEE SHARE OWNERSHIP PLANS 
The material assets, liabilities, income and costs of the Pace Micro Technology plc Employee Benefits Trust and the Pace Micro Technology QUEST
are treated as being those of the company. Until such time as the Company’s own shares vest unconditionally with employees, the consideration paid
for the shares is deducted in arriving at equity.
EMPLOYEE BENEFITS
Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred. The Group has
no defined benefit arrangements in place.
INVESTMENTS
Investments in subsidiaries and other companies are carried at cost less provisions for any subsequent impairment.
INVESTMENT INCOME
Investment income relates to interest income, which is accrued on a time basis, by reference to the principal outstanding and at the effective interest
rate applicable.
EQUITY INSTRUMENTS 
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
NOTES continued
  3 SEGMENTAL ANALYSIS
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 (“set-top boxes”). 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.
The Directors have undertaken a review of the Group’s continuing operations and its associated business risks and consider that the continuing
operations should be reported as a single business segment. The Directors consider that the continuing operations represent one product offering
with similar risks and rewards and should be managed and reported as a single business segment in line with the Group’s internal reporting
framework.
The geographical analysis of revenue which arises from the sale of goods and the provision of software, hardware and other consultancy services
to third party customers is as follows:
Revenue by destination 2006 2005
£000 £000
United Kingdom 64,446 106,269
Continental Europe 56,517 98,095 
Far East and Australasia 38,309 24,547
North America 18,823 23,531
Rest of the World - 884
178,095 253,326
All revenue originates in the United Kingdom from continuing operations and there is no material inter-segment turnover.
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 45
DIVIDENDS PAYABLE 
Distributions to equity holders are disclosed as a component of the movement in shareholders’ equity. A liability is recorded for a final dividend when
the dividend is declared by the Company’s shareholders, and, for an interim dividend, when the dividend is paid.
PROVISIONS 
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the obligation. 
(a) Royalties
A provision for royalties is recognised where 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. The provision is based on the latest information available.
(b) Warranties
A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a
weighting of all possible outcomes against their associated probabilities. The level of warranty provision required is reviewed on a product by product
basis and provisions adjusted accordingly in the light of actual performance.
(c) Restructuring 
A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring has either
commenced or has been announced publicly. Provisions are not recognised for future operating losses.
(d) Onerous contracts 
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable
cost of meeting its obligations under the contract.
ACCOUNTING STANDARDS ISSUED BUT NOT ADOPTED
No impact is expected upon the result or net assets of the Group or Company from any standards that are available for early adoption, but have not
been early adopted.
RECLASSIFICATION
During the period, certain expenses relating to the operations department, which is responsible for overseeing manufacturing, have been reclassified
from cost of sales to administrative expenses, and the prior period comparatives adjusted accordingly. This classification better reflects the overhead
nature of the costs and the Group’s move to outsource more of its manufacturing and supply chain function. The amount reclassified was £3,779,000
(2005: £3,703,000). There has been no overall impact on the reported result for the current or prior period in respect of this matter.
NOTES continued
  PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 46
NOTES continued
4 EXPENSES AND AUDITORS’ REMUNERATION
2006 2005
£000 £000
Group auditors’ and their associates’ remuneration
- audit services 209 175
- taxation services 20 52
- other services 31 36
Company auditors’ and their associates’ remuneration
- audit services 201 168
Depreciation of plant, property and equipment
- owned 4,116 4,419
Other operating lease rental
- land and buildings 1,372 1,387
- motor vehicles 144 146
Loss on disposal of plant, property and equipment 241 1
5 EXCEPTIONAL ITEMS
2006 2005
£000 £000
Exceptional charge in respect of US product 9,000 -
Restructuring and reorganisation costs 2,383 325
Release regarding reference to Financial Services and Markets Tribunal - (180)
Impairment loss on trade investment 505 -
11,888 145
An exceptional charge has been made following the delay in the delivery of US product, which charge is reflected as a £5.5m inventory write down
and a £3.5m charge against capitalised development costs. The US product relates to the HD PVR product for the US cable market, where delays
have affected the anticipated product life.
The restructuring and reorganisation charges relate to a restructuring programme within the Group.
Previously the Company was party to a reference to the Financial Services and Markets Tribunal. Following the settlement of the matter in the 53
weeks ended 4 June 2005 a net release was made from the provision originally established.
The impairment loss relates to the Company’s investment in VegaStream Limited. This company encountered financial difficulties and, following a
decision not to make any further investments, a provision has been made against the carrying value of the investment. 6 REMUNERATION OF THE DIRECTORS
The remuneration, share options and pension entitlements of the directors are disclosed in the Remuneration Report on pages 24 to 31.
7 STAFF NUMBERS AND COSTS
The average number of persons (including directors) employed by the Group and Company during the year, analysed by category were as follows:
Group Company
2006 2005 2006 2005
Research and development 382 347 312 276
Administration 108 118 85 82
Sales and marketing 64 51 33 35
Manufacturing and operations 75 79 65 59
629 595 495 452
The aggregate payroll costs of these persons were as follows:
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Wages and salaries 26,916 24,871 20,031 19,461
Social security costs 3,479 2,968 3,451 2,948
Other pension costs 1,096 903 828 702
Share based payments (see note 24) 493 743 493 743
Redundancy costs 1,284 313 958 273
33,268 29,798 25,761 24,127
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 47
NOTES continued
  PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 48
NOTES continued
8 TAX CHARGE/(CREDIT)
2006 2005
The tax charge/(credit) is based on the (loss)/profit for the year and comprises:  £000 £000
Current tax:
Adjustments in respect of previous periods - (4,760)
Overseas tax charge 212 240
Total current tax charge/(credit) 212 (4,520)
Deferred tax:
Origination and reversal of timing differences (note 12) 1,122 (197)
Tax charge/(credit) in Consolidated Income Statement 1,334 (4,717)
Reconciliation of effective tax rate: 2006 2005
£000 £000
(Loss)/profit before tax (27,450) 8,963
Tax using domestic corporation tax rate at 30% (2005: 30%) (8,235) 2,689
Effects of:
Expenses not deductible for tax purposes 1,180 616
Tax losses utilised in period - (2,347)
Tax losses not recognised in period 9,191 -
Research and development tax credit (938) (975)
Overseas tax not at 30% 53 60
Adjustments to tax charge in respect of previous periods - (4,760)
Adjustments to tax charge in respect of overseas losses 83 -
Total tax charge/(credit) 1,334 (4,717)
No tax credit has been taken in respect of the exceptional items within the above tax charges, on the grounds of the Board’s assessment of the
recoverability of recognised deferred tax assets. 9 (LOSS)/EARNINGS PER ORDINARY SHARE
2006 2005
Basic and diluted loss/earnings per share pence pence
Basic (loss)/earnings per share before exceptional items (7.6) 6.3
Effect of exceptional items (5.4) (0.1)
Basic (loss)/earnings per share (13.0) 6.2
The calculation of basic (loss)/earnings per share is based on a loss for the year of £28,784,000 (2005: profit of £13,680,000) divided by the
weighted average number of ordinary shares in issue of 221,742,588 (2005: 219,164,009), excluding shares held by the QUEST and Employee
Benefits Trust. Adjusted (loss)/earnings per share before exceptional items is disclosed to indicate the underlying profitability of the Group and is
based on a loss of £16,896,000 (2005: profit £13,825,000).
2006 2005
£000 £000
Earnings before exceptional items (16,896) 13,825
Effect of charge in respect of US product (9,000) -
Effect of impairment of trade investments (505) -
Effect of restructuring costs (2,383) (145)
(Loss)/profit for the year (28,784) 13,680
2006 2005
Number of shares m m
Weighted average number of ordinary shares in issue during the year 221.7 219.2
Dilutive effect of options outstanding 2.9 4.6
Diluted weighted average number of ordinary shares in issue during the year 224.6 223.8
Diluted earnings per ordinary share varies from basic earnings per ordinary share due to the effect of the notional exercise of outstanding share
options.
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 49
NOTES continued
  PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 50
NOTES continued
10 INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT
Intangible assets Property, plant and equipment
Short Total
Long leasehold property
Development leasehold land and Plant and Motor plant and
Goodwill expenditure buildings buildings machinery vechicles equipment
Group £000 £000 £000 £000 £000 £000 £000
Cost
At 30 May 2004 9,436 6,634 600 4,450 24,029 30 29,109
Exchange adjustments - - 7 3 1 - 11
Additions - 11,851 - 186 3,408 - 3,594
Retirement of assets - (10,048) - - (10,834) - (10,834)
Disposals - - - (6) (253) - (259)
At 5 June 2005 9,436 8,437 607 4,633 16,351 30 21,621
Exchange adjustments - - 9 (9) (11) - (11)
Additions - 17,132 - 698 5,167 - 5,865
Retirement of assets - (9,579) - - - - -
Disposals - - - (533) (3,326) - (3,859)
At 3 June 2006 9,436 15,990 616 4,789 18,181 30 23,616
Amortisation/depreciation
At 30 May 2004 - - 209 3,445 18,415 30 22,099
Exchange adjustments - - 8 3 (7) - 4
Provided in the year - 11,035 23 441 3,955 - 4,419
Retirement of assets - (10,048) - - (10,834) - (10,834)
Disposals - - - (6) (246) - (252)
At 5 June 2005 - 987 240 3,883 11,283 30 15,436
Exchange adjustments - - 3 (8) 11 - 6
Provided in the year - 9,796 22 293 3,801 - 4,116
Retirement of assets - (9,579) - - - - -
Impairment (see note 5) - (3,500) - - - - -
Disposals - - - (481) (3,132) - (3,613)
At 3 June 2006 - 4,704 265 3,687 11,963 30 15,945
Net book amount at 29 May 2004 9,436 6,634 391 1,005 5,614 - 7,010
Net book amount at 4 June 2005 9,436 7,450 367 750 5,068 - 6,185
Net book amount at 3 June 2006 9,436 11,286 351 1,102 6,218 - 7,671
An annual impairment test on goodwill has been carried out in accordance with the accounting policies set out in note 2. This review did not
indicate any evidence of impairment.
Development expenditure for the Group and Company comprises a number of projects at varying levels of completion. Such expenditure will be
amortised from the date of commercial launch in line with the accounting policies set out in note 2.
Retirements of development expenditure represent the deletions of the cost and related amortisation at the end of products commercial lives. 10 INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT continued
Intangible assets Property, plant and equipment
Short Total
Long leasehold property,
Development leasehold land and Plant and Motor plant and
expenditure buildings buildings machinery vechicles equipment
Company £000 £000 £000 £000 £000 £000
Cost
At 30 May 2004 6,634 - 4,117 21,011 30 25,158
Additions 11,851 - 179 3,041 - 3,220
Retirement of assets (10,048) - - (10,834) - (10,834)
Disposals - - (6) (106) - (112)
At 5 June 2005 8,437 - 4,290 13,112 30 17,432
Additions 17,132 - 680 4,556 - 5,236
Disposals (9,579) - (529) (3,319) - (3,848)
At 3 June 2006 15,990 - 4,441 14,349 30 18,820
Amortisation/depreciation
At 30 May 2004 - - 3,228 16,370 30 19,628
Provided in the year 11,035 - 370 3,420 - 3,790
Retirement of assets (10,048) - - (10,834) - (10,834)
Disposals - - (6) (102) - (108)
At 5 June 2005 987 - 3,592 8,854 30 12,476
Provided in the year 9,796 - 253 3,347 - 3,600
Retirement of assets (9,579) - - - - -
Impairment (see note 5) (3,500) - - - - -
Disposals - - (476) (3,128) - (3,604)
At 3 June 2006 4,704 - 3,369 9,073 30 12,472
Net book amount at 29 May 2004 6,634 - 889 4,641 - 5,530
Net book amount at 4 June 2005 7,450 - 698 4,258 - 4,956
Net book amount at 3 June 2006 11,286 - 1,072 5,276 - 6,348
11 FIXED ASSET INVESTMENTS
Other 
investments
Group £000
Cost at 30 May 2004 625
Additions 674
Cost at 5 June 2005 1,299
Additions 180
Cost at 3 June 2006 1,479
Provision at 30 May 2004 and 5 June 2005 (625)
Impairment (505)
Provision at 3 June 2006 (1,130)
Net book value at 29 May 2004 -
Net book value at 4 June 2005 674
Net book value at 3 June 2006 349
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 51
NOTES continued PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 52
11 FIXED ASSET INVESTMENTS continued
Intra- Shares Other Total
group in group investments
loans undertakings
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 5 June 2005 65,945 6,038 719 72,702
Additions - - 180 180
Cost at 3 June 2006 65,945 6,038 899 72,882
Provision at 30 May 2004 (56,945) - (45) (56,990)
Movement in period (5,638) - - (5,638)
Provision at 5 June 2005 (62,583) - (45) (62,628)
Movement in period - - (505) (505)
Provision at 3 June 2006 (62,583) - (550) (63,133)
Net book value at 29 May 2004 3,362 6,139 - 9,501
Net book value at 4 June  2005 3,362 6,038 674 10,074
Net book value at 3 June 2006 9,000 6,038 349 15,139
Additions in the period relate to an investment in VegaStream Limited. This company encountered financial difficulties and following a decision not
to make any further investments, a provision has been made against the carrying value of the investment.
At 3 June 2006 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 Americas Limited*** 100% UK USA Ordinary
(formerly Pace Micro Technology (Support Services) Limited)
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.
NOTES continued
  12 DEFERRED TAX ASSETS
Deferred tax assets have been recognised in respect of differences between accounting and tax carrying values and trading losses where it is
probable that these assets will be recovered.
All of the deferred tax assets were available for offset against deferred tax liabilities. The movements in deferred tax assets and liabilities (prior to
the offsetting of balances within the same jurisdiction as permitted by IAS 12 Income Taxes) during the period are shown below:
Property, plant Trading Development
Group and Company & equipment losses costs (IAS 38) Total
Recognised asset £000 £000 £000 £000
At 4 June 2005 1,598 4,646 (2,235) 4,009
Credited/(charged) to income statement 31 (2) (1,151) (1,122)
At 3 June 2006 1,629 4,644 (3,386) 2,887
Unrecognised deferred tax assets of £8,500,000 exist at the period end in respect of unutilised trading losses.
13 INVENTORIES
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Raw materials and consumable stores 7,700 2,354 7,700 2,287
Finished goods 27,092 7,781 11,460 7,013
34,792 10,135 19,160 9,300
14 TRADE AND OTHER RECEIVABLES
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Trade receivables 33,248 44,785 30,437 44,364
Amounts owed by subsidiary undertakings - - 14,571 -
Other receivables 7,318 5,017 7,158 4,680
Prepayments and accrued income 1,771 2,025 1,428 1,632
42,337 51,827 53,594 50,676
15 TRADE AND OTHER PAYABLES
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Trade payables 38,707 22,259 38,321 23,300
Amounts owed to subsidiary undertakings - - - 2,350
Social security and other taxes 783 1,821 715 1,949
Other payables 745 830 361 535
Accruals 5,171 6,651 4,082 5,452
45,406 31,561 43,479 33,586
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 53
NOTES continued
  PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 54
NOTES continued
16 INTEREST BEARING LOANS AND BORROWINGS
Group Company
2006 2005 2006 2005
Borrowings consist mainly of bank loans and overdrafts falling due: £000 £000 £000 £000
Within one year 5,937 56 6,897 -
After one and within two years 56 56 - -
After two and within three years 98 149 - -
6,091 261 6,897 -
The banking facilities of £25 million (2005: £20 million) are available until 30 September 2007. The facility is based on a percentage drawdown of
appropriate trade receivables as adjusted and is secured by a fixed and floating charge over the assets of Pace Micro Technology plc and its
subsidiary undertakings.
17 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
analysis, other than the currency risk exposures.
This note provides information about the contractual terms of the Group and Company’s interest bearing loans and borrowings (note16). For more
information about the Group and Company’s exposure to interest rate, credit risk and foreign currency risk, see note 2.
(a)  Interest rate risk profile of cash/bank overdrafts
Floating rate Interest free Total
Currency £000 £000 £000
At 3 June 2006:
Sterling 2,684 2 2,686 
US Dollar (2,032) 7 (2,025)
Euro (6,631) 1 (6,630)
Other 88 1 89
Total (5,891) 11 (5,880)
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
The interest rates on Sterling, US Dollar, Euro and other floating rate financial assets and liabilities are linked to the relevant bank base rates.
(b)  Interest rate risk profile of bank loans
Floating rate Interest free Total
Currency £000 £000 £000
At 3 June 2006:
Euro 211 - 211
211 - 211
At 4 June 2005:
Euro 261 - 261
261 - 261
The interest rate on Euro floating rate financial liabilities is linked to the relevant bank base rate. 17 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
(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 income statement.
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 3 June 2006:
Sterling 10,264 12,905 (501) 22,668
Euro 47 - - 47
Other 1,395 (25) - 1,370
Total 11,706 12,880 (501) 24,085
At 4 June 2005:
Sterling (7,577) 11,782 107 4,312
Euro 166 - - 166
Total (7,411) 11,782 107 4,478
(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 Value Average Maturity
Currency Currency Rate
At 3 June 2006: Euro Sterling £14m 1.44 July-August
2006
Euro US Dollar $20m 1.21 July 2006
At 4 June 2005: Euro Sterling £1m 1.44 June 2005
Euro US Dollar $7.3m 1.26 June - August 
2005
The unrealised loss on the above contracts in the current year, as recognised in the Income Statement, amounted to £442,969  (2005: £149,249).  
(e)  Sensitivity analysis
In managing interest rate and currency risks the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the
longer term, however, permanent changes in foreign exchange and interest rates would have an impact on consolidated earnings. 
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 55
NOTES continued
  PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 56
18 PROVISIONS
Royalties Onerous Warranties Total
under negotiation contracts
£000 £000 £000 £000
Group and Company
At 4 June 2005 6,440 1,139 7,161 14,740
Net charge for the year 245 443 4,745 5,433
Utilised (423) (1,089) (3,870) (5,382)
At 3 June 2006 6,262 493 8,036 14,791
Due within one year - 493 5,014 5,507
Due after one year 6,262 - 3,022 9,284
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.
19 SHARE CAPITAL
2006 2005
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 231,521,866 11,576 226,978,749 11,349
During the year, the Company allotted Ordinary shares as follows:
Number Nominal value Consideration
£000 £000
Employee share option scheme (18.0 pence) 2,446,000 122 440
Employee share option scheme (14.5 pence) 1,131,667 56 164
Employee share option scheme (15.8 pence) 775,550 39 122
Employee share option scheme (51.0 pence) 50,000 3 26
Employee share option scheme (31.5 pence) 139,900 7 44
4,543,117 227 796
NOTES continued
  19 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 Exercise period Price per share
shares subject to option pence
36,629 25 June 1999 to 24 June 2006 190.0
35,000 19 August 2000 to 18 August 2007 42.5
485,000 7 July 2002 to 6 July 2009 200.0
484,173 11 January 2003 to 10 January 2010 599.5
101,687 17 July 2003 to 16 July 2010 857.5
46,443 17 July 2001 to 16 July 2010 857.5
25,005 29 January 2004 to 28 January 2011 610.0
131,663 29 January 2002 to 28 January 2011 610.0
258,000 24 July 2005 to 23 July 2011 375.0
790,704 24 July 2002 to 23 July 2011 375.0
213,296 24 July 2004 to 23 July 2011 375.0
37,663 18 January 2003 to 17 January 2012 357.0
30,337 18 January 2005 to 17 January 2012 357.0
684,684 22 October 2003 to 21 October 2012 15.75
80,316 22 October 2005 to 21 October 2012 15.75
130,000 22 October 2006 to 21 October 2012 15.75
50,000 26 August 2007 to 25 August 2013 51.0
140,000 26 August 2004 to 25 August 2013 51.0
50,000 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
135,000 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
159,179 12 February 2007 to 12 May 2007 52.0
475,000 2 August 2006 to 1 August 2015 74.25
47,430 23 January 2009 to 22 January 2016 63.25
202,570 23 January 2007 to 22 January 2016 63.25
5,204,779
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 21.
20 SHARE PREMIUM ACCOUNT
Group and Company £000
At 5 June 2005 35,677
Premium on allotments 569
At 3 June 2006 36,246
The shares allotted during the year are listed in note 19.
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 57
NOTES continued
  PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 58
NOTES continued
21 RETAINED EARNINGS
Group £000
At 4 June 2005 22,576
Retained loss for the year (28,784)
Employee share incentive charges 493
Movement in employee share trusts 120
At 3 June 2006 (5,595)
Company £000
At 4 June 2005 17,210
Retained loss for the year (28,063)
Employee share incentive charges 493
Movement in employee share trusts 120
At 3 June 2006 (10,240)
Own shares held
The following amounts have been deducted from the retained earnings reserves of the Group and Company.
At 3 June 2006 the Pace Micro Technology plc Employee Benefits Trust and QUEST held 7,354,894 (2005: 7,662,333) shares in the Company
which cost £21,304,000  (2005: £21,421,000). 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 Exercise period Price per share
shares subject to option pence
819,530 24 September 2001 to 23 September 2008 64.0
590,919 26 January 2002 to 25 January 2009 84.5
292,500 7 July 2002 to 6 July 2009 200.0
44,345 17 July 2001 to 16 July 2010 857.5
502,501 29 January 2002 to 28 January 2011 610.0
75,000 24 July 2002 to 23 July 2011 375.0
839,000 21 January 2004 to 20 January 2013 20.0
375,000 2 May 2004 to 1 May 2013 37.0
1,710,072 26 August 2004 to 25 August 2013 51.0
250,000 16 February 2005 to 15 February 2014 78.0
966,263 17 August 2005 to 16 August 2014 51.0
975,000 2 August 2008 to 16 August 2015 74.25
600,000 18 April 2009 to 17 April 2016 63.5
8,040,130
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 Exercise period Price per share
shares subject to option pence
141,938 1 April 2006 to 30 September 2006 14.5
1,083,465 1 October 2006 to 31 March 2007 35.5
343,037 1 April 2007 to 30 September 2007 60.0
181,025 1 October 2007 to 31 March 2008 48.0
476,407 1 April 2008 to 30 September 2008 32.0
430,487 1 October 2008 to 31 March 2009 59.5
481,959 1 April 2009 to 30 September 2009 49.0
3,138,318 22 LOSS/PROFIT FOR THE YEAR
The parent Company has taken advantage of Section 230 of the Companies Act 1985 and has not included its own income statement in these
financial statements. The Group (loss)/profit after tax includes a parent Company loss after tax of £28,063,000 (2005: profit of £9,446,000).
23 CAPITAL COMMITMENTS
Group and Company
2006 2005
£000 £000
Contracted but not provided for 990 997
24 EMPLOYEE BENEFITS
Pension plans
The Group contributes to several defined contribution Group Personal Pension Plans, which all executive directors and employees are entitled to
join. The total expenses relating to these plans in the current year was £1,096,000 (2005: £903,000). At 3 June 2006 contributions of £Nil (2005:
£Nil) were outstanding.
Share based payments
Details of the Company’s share option schemes are included in notes 19 and 21 and the Remuneration Report.
The number and weighted average exercise price of share options is as follows:
Weighted Number Weighted Number
Average of Average of
Exercise Options Exercise Options
Price Price
2006 2006 2005 2005
Outstanding at the beginning of the period 129p 20,100,228 154p 21,912,170
Granted during the period 66p 4,152,476 46p 2,901,333
Forfeited during the period 189p (3,018,921) 210p (4,361,770)
Exercised during the period 19p (4,850,556) 19p (351,505)
Outstanding at the end of the period 134p 16,383,227 129p 20,100,228
Exercisable at the end of the period 170p 6,365,303 207p 5,788,867
The options outstanding at 3 June 2006 have an exercise price in the range of 14.5p to 857.5p and a weighted average contractual life of 7 years.
The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The
estimate of the fair value of the services received is measured based on a Black-Scholes model. The following table gives the assumptions applied
to the options granted in the respective periods shown. Expectations of early exercise are incorporated into the model, where appropriate.
2006 2005
Average share price (pence) 61.4 45.6
Weighted average exercise price (pence) 134.0 129.0
Weighted average fair value of share options granted in the period (pence) 25.2 30.0
Expected volatility (%) 65% 65%
Option life (years) 10 10
Dividend yield (%) 1.4% 1.4%
Risk free interest rate (%) 4.5% 4.4%
The expected volatility is based on the historic volatility (calculated based on the weighted average remaining life of the share options), adjusted
for any expected changes to future volatility due to publicly available information.
The charge for share based payments in respect of share options is £493,000 (2005: £743,000) which is comprised entirely of equity settled
transactions.
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 59
NOTES continued
  PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 60
NOTES continued
25 LEASING COMMITMENTS
Total amounts payable under non-cancellable operating lease rentals are as follows:
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Land and buildings
Less than one year 77 - 47 -
Between one and five years 1,404 1,791 144 216
In five years or more 6,320 6,952 6,320 6,952
7,801 8,743 6,511 7,168
Other
Less than one year 36 25 36 25
Between one and five years 142 196 142 196
178 221 178 221
7,979 8,964 6,689 7,389
26 CONTINGENCIES
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. As it is likely that
implementation of WEEE legislation will vary significantly between individual European member states, until all individual member states have
implemented the directive and clarified the individual rules, it is not possible to estimate the Company’s existing liability or future expenses resulting
from such WEEE legislation. 
A writ has been issued against the Company by a former customer relating to the supply of set-top boxes in 2000/2001 in respect of a claim 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.
27 RELATED PARTIES
Identity of related parties
The Group has a related party relationship with its subsidiaries and with its Directors and Executive Officers.
Transactions with subsidiaries
The main transaction between the Company and its subsidiaries consist mainly of payments by the Company for engineering and administrative
support services provided by Pace Americas Limited and Pace Europe SAS. Total recharges of £10,438,000 were made in the year. In addition
inventory totalling £23m was sold from the Company to Pace Americas Limited during the year.
The amounts due to and from these subsidiaries are shown within notes 14 and 15.
Transactions with key management personnel
Key managment of the Group is through the executive directors of the Company. The main transactions with these individuals are disclosed in the
Remuneration Report on pages 24 to 31. 
Of the share option charge of £493,000 made in the period, approximately 22% relates to options granted to the executive directors.
28 POST BALANCE SHEET EVENTS
There are no significant or disclosable post balance sheet events. 29 RESTATEMENT OF COMPARATIVE RESULTS UNDER INTERNATIONAL FINANCIAL
REPORTING STANDARDS ("IFRS")
1. BASIS OF RESTATEMENT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF RESTATEMENT 
The Group’s consolidated financial statements were prepared in accordance with UK GAAP until 4 June 2005. The Group has applied the same
accounting policies and methods of computation in these financial statements as those published by the Group on 12 July 2005 within its 2005
Annual Report, except as explained in parts 2 and 3 of this note, where the effects of changes in accounting policies arising as a result of the
adoption of IFRS are set out. Reconciliations between previously reported financial statements prepared under UK GAAP and the IFRS
equivalents are presented for the profit and loss account for the year ended 4 June 2005 and net assets as at 4 June 2005 and 29 May 2004.
Further disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS are also given in parts 2 and 3 of this note. 
IFRS 1 provides certain optional exemptions from full retrospective application of all accounting standards effective at the Group reporting date.
As discussed in more detail in the relevant sections below, the Group has taken advantage of the exemptions relating to: business
combinations, cumulative translation differences and share-based payment transactions. The Group has not taken advantage of the available
optional exemption relating to fair value measurement of financial assets and financial liabilities at initial recognition.
2. EXPLANATION OF TRANSITION TO IFRS
The Group financial statements for the year ended 3 June 2006 are the first annual financial statements that comply with IFRS. These financial
statements have been prepared as described in note 1 and 2 of the financial statements. The Group has applied IFRS 1 in preparing these
financial statements. The last financial statements under UK GAAP were for the 53 week period ended 4 June 2005 and the date of transition
was therefore 29 May 2004. Presented below is the reconciliation of profit for the 53 week period ended 4 June 2005 and the reconciliations
of equity at 29 May 2004, being the start of that period ("Transition Date") and at 4 June 2005 (date of last UK GAAP financial statements) as
required by IFRS 1. For explanations of the nature and effect of the changes in accounting policies as a consequence of the transition to IFRS,
refer to part 3 of this note.
(I) RECONCILIATION OF UK GAAP CONSOLIDATED PROFIT AND LOSS ACCOUNT TO IFRS CONSOLIDATED INCOME STATEMENT
53 weeks ended 4 June 2005 
(end of last period presented under UK GAAP)
Notes UK Effect of IFRS 
GAAP transition to
IFRS 
£000 £000 £000
Revenue 253,326 - 253,326
Cost of sales e (197,001) 892 (196,109)
Gross profit 56,325 892 57,217
Administrative expenses
Research and development b (23,976) 816 (23,160)
Other administrative expenses a, d (25,324) (180) (25,504)
Total Administrative expenses (49,300) 636 (48,664)
Operating profit 7,025 1,528 8,553
Goodwill write back a (360) 360 -
Financial income 728 - 728
Financial expenses (318) - (318)
Profit before tax 7,075 1,888 8,963
Tax credit 4,717 - 4,717
Profit after tax 11,792 1,888 13,680
NOTES continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 61 NOTES continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 62
29 RESTATEMENT OF COMPARATIVE RESULTS UNDER INTERNATIONAL FINANCIAL
REPORTING STANDARDS ("IFRS") continued
(II) RECONCILIATION OF UK GAAP PROFIT TO IFRS PROFIT
Notes Group Company
53 weeks 53 weeks 
ended ended
4 June 4 June 
2005 2005
£000 £000
Profit after tax as reported under UK GAAP 11,792 8,482
Adjustments for:
Product development; capitalisation and amortisation b 816 816
Share-based payments; expensed to profit and loss d (744) (744)
FX contracts not revalued in period under UK GAAP e 892 892
Goodwill not amortised subsequent to Transition Date a 564 -
Goodwill write back a 360 -
Profit after tax as reported under IFRS 13,680 9,446 29 RESTATEMENT OF COMPARATIVE RESULTS UNDER INTERNATIONAL FINANCIAL
REPORTING STANDARDS ("IFRS") continued
(III) RECONCILIATIONS OF CONSOLIDATED EQUITY AND LIABILITIES AT 29 MAY 2004 FROM UK GAAP TO IFRS
Group As at 29 May 2004
Notes UK Effect of IFRS 
GAAP transition to
IFRS 
£000 £000 £000
Assets
Non Current Assets
Property, plant and equipment 7,010 - 7,010
Intangible assets – goodwill a 9,436 - 9,436
Intangible assets – development expenditure b - 6,634 6,634
Deferred tax assets f - 3,812 3,812
Total Non Current Assets 16,446 10,446 26,892
Current Assets
Inventories 10,006 - 10,006
Trade and other receivables 60,912 - 60,912
Cash and cash equivalents 20,705 - 20,705
Deferred tax assets f 3,812 (3,812) -
Total Current Assets 95,435 (3,812) 91,623
Total Assets 111,881 6,634 118,515
Equity
Share capital 11,339 - 11,339
Share premium account 35,647 - 35,647
Retained earnings a,b,d,e 2,523 5,629 8,152
Translation reserve c - - -
Total Equity attributable to equity holders of the parent 49,509 5,629 55,138
Liabilities
Non Current Liabilities
Borrowings 246 - 246
Provisions f 20,748 (9,580) 11,168
Total Non Current Liabilities 20,994 (9,580) 11,414
Current Liabilities
Trade and other payables 40,738 - 40,738
Current tax liabilities 587 - 587
Borrowings 53 - 53
Provisions e,f - 10,585 10,585
Total Current Liabilities 41,378 10,585 51,963
Total Liabilities 62,372 1,005 63,377
Total Equity and Liabilities 111,881 6,634 118,515
NOTES continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 63 NOTES continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 64
29 RESTATEMENT OF COMPARATIVE RESULTS UNDER INTERNATIONAL FINANCIAL
REPORTING STANDARDS ("IFRS") continued
(IV) RECONCILIATIONS OF  COMPANY EQUITY AND LIABILITIES AT 29 MAY 2004 FROM UK GAAP TO IFRS
Company As at 29 May 2004
Notes UK Effect of IFRS 
GAAP transition to 
IFRS 
£000 £000 £000
Assets
Non Current Assets
Property, plant and equipment 5,530 - 5,530
Investments 15,139 - 15,139
Intangible assets – development expenditure b - 6,634 6,634
Deferred tax assets f - 3,812 3,812
Total Non Current Assets 20,669 10,446 31,115
Current Assets
Inventories 7,200 - 7,200
Trade and other receivables 60,689 - 60,689
Cash and cash equivalents 19,201 - 19,201
Deferred tax assets f 3,812 (3,812) -
Total Current Assets 90,902 (3,812) 87,090
Total Assets 111,571 6,634 118,205
Equity
Share capital 11,339 - 11,339
Share premium account 35,647 - 35,647
Retained earnings b,d,e 1,391 5,629 7,020
Total Equity attributable to equity holders of the parent 48,377 5,629 54,006
Liabilities
Non Current Liabilities
Provisions f 20,748 (9,580) 11,168
Total Non Current Liabilities 20,748 (9,580) 11,168
Current Liabilities
Trade and other payables 41,396 - 41,396
Current tax liabilities 1,050 - 1,050
Provisions e,f - 10,585 10,585
Total Current Liabilities 42,446 10,585 53,031
Total Liabilities 63,194 1,005 64,199
Total Equity and Liabilities 111,571 6,634 118,205 29 RESTATEMENT OF COMPARATIVE RESULTS UNDER INTERNATIONAL FINANCIAL
REPORTING STANDARDS ("IFRS") continued
(V) RECONCILIATION OF CONSOLIDATED EQUITY AND LIABILITIES AT 4 JUNE 2005 FROM UK GAAP TO IFRS
Group As at 4 June 2005
Notes UK Effect of IFRS
GAAP transition to 
IFRS 
£000 £000 £000
Assets
Non Current Assets
Property, plant and equipment 6,185 - 6,185
Intangible assets – goodwill a 8,872 564 9,436
Intangible assets – development expenditure b - 7,450 7,450
Investments in other companies 674 - 674
Deferred tax assets f - 4,009 4,009
Total Non Current Assets 15,731 12,023 27,754
Current Assets
Inventories 10,135 - 10,135
Trade and other receivables 51,827 - 51,827
Cash and cash equivalents 26,647 - 26,647
Deferred tax assets f 4,009 (4,009) -
Total Current Assets 92,618 (4,009) 88,609
Total Assets 108,349 8,014 116,363
Equity
Share capital 11,349 - 11,349
Share premium account 35,677 - 35,677
Retained earnings a,b,d,e 14,825 7,751 22,576
Translation reserve c - 150 150
Total Equity attributable to equity holders of the parent 61,851 7,901 69,752
Liabilities
Non Current Liabilities
Borrowings 205 - 205
Provisions e,f 14,627 (5,323) 9,304
Total Non Current Liabilities 14,832 (5,323) 9,509
Current Liabilities
Trade and other payables 31,561 - 31,561
Current tax liabilities 49 - 49
Borrowings 56 - 56
Provisions e,f - 5,436 5,436
Total Current Liabilities 31,666 5,436 37,102
Total Liabilities 46,498 113 46,611
Total Equity and Liabilities 108,349 8,014 116,363
NOTES continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 65 29 RESTATEMENT OF COMPARATIVE RESULTS UNDER INTERNATIONAL FINANCIAL
REPORTING STANDARDS ("IFRS") continued
(VI) RECONCILIATION OF COMPANY EQUITY AND LIABILITIES AS AT 4 JUNE 2005 FROM UK GAAP TO IFRS
As at 4 June 2005
Notes UK Effect of IFRS
GAAP transition to 
IFRS 
£000 £000 £000
Assets
Non Current Assets
Property, plant and equipment 4,956 - 4,956
Intangible assets – development expenditure b - 7,450 7,450
Investments in group and other companies 10,074 - 10,074
Deferred tax assets f - 4,009 4,009
Total Non Current Assets 15,030 11,459 26,489
Current Assets
Inventories 9,300 - 9,300
Trade and other receivables 50,676 - 50,676
Cash and cash equivalents 26,744 - 26,744
Deferred tax assets f 4,009 (4,009) -
Total Current Assets 90,729 (4,009) 86,720
Total Assets 105,759 7,450 113,209
Equity
Share capital 11,349 - 11,349
Share premium account 35,677 - 35,677
Retained earnings b,d,e 9,873 7,337 17,210
Total Equity attributable to equity holders of the parent 56,899 7,337 64,236
Liabilities
Non Current Liabilities
Provisions e,f 14,627 (5,323) 9,304
Total Non Current Liabilities 14,627 (5,323) 9,304
Current liabilities
Trade and other payables 33,586 - 33,586
Current tax liabilities 647 - 647
Provisions e,f - 5,436 5,436
Total current liabilities 34,233 5,436 39,669
Total Liabilities 48,860 113 48,973
Total Equity and Liabilities 105,759 7,450 113,209
NOTES continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 66 29 RESTATEMENT OF COMPARATIVE RESULTS UNDER INTERNATIONAL FINANCIAL
REPORTING STANDARDS ("IFRS") continued
(VII) RECONCILIATION OF EQUITY FROM UK GAAP TO IFRS
Notes Group Group Company Company
29 May 4 June 29 May 4 June
2004 2005 2004 2005
£000 £000 £000 £000
Total equity as reported under UK GAAP 49,509 61,851 48,377 56,899
Adjustments for:
Intangible assets; product development 
capitalised b 6,634 7,450 6,634 7,450
FX contracts not revalued in period under UK GAAP e (1,005) (113) (1,005) (113)
Goodwill not amortised subsequent to Transition Date a - 564 - -
Total equity as reported under IFRS 55,138 69,752 54,006 64,236
3. EXPLANATION OF MATERIAL ADJUSTMENTS TO EQUITY AT 4 JUNE 2005 AND 29 MAY 2004, AND TO
PROFIT FOR THE YEAR ENDED 4 JUNE 2005
The transition to IFRS resulted in the following changes in accounting policies:
A. GOODWILL
Goodwill is not amortised under IFRS but is measured at cost less impairment losses. Under UK GAAP , goodwill was amortised on a straight-line
basis over the time that the Group was estimated to benefit from it. The change does not affect equity at 29 May 2004 because, as permitted by
IFRS 1, goodwill arising on acquisitions before 29 May 2004 (date of transition to IFRS) has been frozen at the UK GAAP amounts subject to being
tested for impairment at that date, the results of which assessment indicated no such impairment. 
Under UK GAAP, goodwill on acquisitions prior to 1 July 1998 was eliminated directly against reserves. The gain or loss on the disposal of a
previously acquired business reflects the attributable amount of purchased goodwill in respect of that business. As the Group has opted not to
restate business combinations prior to the date of transition, the goodwill written off to reserves under UK GAAP has been frozen and remains in
reserves. During the period ended 4 June 2005, the Group completed the liquidation of Pace Italia srl and goodwill previously written off to reserves
of £360,000 was recycled to the income statement and charged to the loss on disposal under UK GAAP. This adjustment is not required under
IFRS with the result that no gain or loss from the liquidation of Pace Italia srl is reported in the IFRS income statement in contrast to the loss
reported under UK GAAP .
B. RESEARCH AND DEVELOPMENT; IAS 38 INTANGIBLE ASSETS
Under UK GAAP all expenditure on research and development was expensed as incurred. Under IAS 38 research expenditure is recognised as
an expense as incurred but costs incurred on product development are capitalised as intangible assets when it is probable that the project will be
a success, considering its commercial and technological feasibility, resources are available to complete the development and costs can be
measured reliably. Other development expenditures are recognised as an expense as incurred. Capitalised product development expenditure is
amortised over the expected useful life.
C. OTHER RESERVES 
As permitted by IFRS 1, the Translation reserve has been re-set to zero as at 29 May 2004. This has had no effect on net equity but has decreased
retained earnings by £473,000 as at 4 June 2005, 4 December 2004 and 29 May 2004 with equal and opposite adjustments to the Translation
reserve. 
D. SHARE-BASED PAYMENTS
The Group issues equity-settled share-based payments to certain employees. In accordance with IFRS 2, equity-settled share-based payments
are measured at fair value at the date of grant, in respect of options granted after 7 November 2002 and which were outstanding at 1 January
2005. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting
period, based on the Group’s estimate of the shares that will eventually vest. Under UK GAAP, the charge recorded represented the difference
between the share price at the date of grant and the exercise price of the option. In addition, the Group took advantage of an exemption under
which no charge was made in respect of SAYE options. Thus, under UK GAAP, no charge was made in respect of share-based payments.
E. DERIVATIVE FINANCIAL INSTRUMENTS
The IFRS standards relevant to the accounting for, and presentation of, financial instruments are IAS 32 Financial Instruments: Disclosure and
Presentation, and IAS 39 Financial Instruments: Recognition and Measurement. The differences between IFRS and UK GAAP which are
immediately relevant to the Group are the requirement to recognise all derivatives on the balance sheet (which are then "marked-to-market" each
reporting period to reflect their fair value), and the detailed requirements that have to be met to qualify for hedge accounting.
NOTES continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 67 NOTES continued
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 68
29 RESTATEMENT OF COMPARATIVE RESULTS UNDER INTERNATIONAL FINANCIAL
REPORTING STANDARDS ("IFRS") continued
F. BALANCE SHEET RECLASSIFICATIONS
Provisions have been reclassified into amounts falling due within one year and amounts falling due after more than one year.
Deferred tax assets have been reclassified as Non Current Assets.
G. EXEMPTIONS
IFRS 1 First-time Adoption of International Financial Reporting Standards sets out the transition rules, which must be applied, when IFRS is
adopted for the first time. The standard sets out certain mandatory exemptions to retrospective application and certain optional exemptions. The
most significant optional exemptions available and taken by the Group are as follows:
(i) Share-based transactions; the Group adopted the exemption in IFRS 1 which allows a first-time adopter to apply the new standard only to
share options and equity instruments granted after 7 November 2002 that have not vested by 1 January 2005.
(ii) Cumulative translation differences; under IAS 21 The Effects of Changes in Foreign Exchange Rates cumulative translation differences within
reserves are recycled from equity to the income statement on disposal of a foreign operation. In order to eliminate the need to retrospectively
apply this requirement, the Group took the exemption to set cumulative translation differences to zero at the date of transition.
  DIRECTORS, SECRETARY AND ADVISERS
PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 69
DIRECTORS COMPANY SECRETARY
all of Victoria Road  Saltaire BD18 3LF  England Anthony John Dixon
Robert Michael McTighe Non-executive Chairman
Neil Gaydon Chief Executive
David Graham Brocksom Finance Director
Pat Chapman-Pincher Non-executive Director
Robert Arthur Fleming Non-executive Director
Marten Charles Fraser Non-executive Director
REGISTERED AND AUDITORS STOCKBROKERS
HEAD OFFICE KPMG Audit Plc Hoare Govett Limited Credit Suisse First Boston
Victoria Road 1 The Embankment 250 Bishopsgate 20 Columbus Courtyard
Saltaire BD18 3LF Neville Street London EC2M 4AA London E14 4DA
England 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 PACE MICRO TECHNOLOGY PLC
REPORT & ACCOUNTS 2006 70
The selected financial data set out below, for each of the five years to 3 June 2006, have been extracted or derived from the audited financial statements.
2006 2005 2004* 2003* 2002*
£000 £000 £000 £000 £000
Revenue 178,095 253,326 239,949 166,597 351,794
(Loss)/profit before tax (27,450) 8,963 3,880 (48,577) (12,010) 
(Loss)/profit before exceptional items and tax (15,562) 9,108 5,380 (17,554) 10,427
(Loss)/profit after tax (28,784) 13,680 8,066 (48,031) (34,842)
Diluted (LPS)/EPS (13.0)p 6.1p 3.6p (21.3)p (8.0)p
Diluted (LPS)/EPS before exceptional items and goodwill amortisation* (7.6)p 6.1p 4.5p (6.8)p 2.9p 
Total equity attributable to equity holders of the parent excluding goodwill*/** 33,031 60,316 45,702 31,590 61,704 
* The comparatives for financial years 2002 to 2004 have been restated to reflect the impact of UITF38 Accounting for ESOP Trusts
The comparatives for 2005 (and net assets for 2004) are stated under Adopted International Financial Reporting Standards; all other figures are stated
on a UK GAAP basis
SHAREHOLDER INFORMATION
ANNUAL GENERAL MEETING
The Company’s Annual General Meeting will be held at 11.30 am, Thursday 2nd November 2006, at the Company’s head office, Victoria Road, Saltaire,
West Yorkshire BD18 3LF.
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, or by telephone 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
PACE WEBSITE
Shareholders are encouraged to visit our website, www.pacemicro.com, which has a wealth of information about the Company.
FIVE YEAR RECORD AND SHAREHOLDER INFORMATION ANNUAL REPORT & ACCOUNTS
2006
PACE MICRO TECHNOLOGY PLC
Registered in England No 1672847
BRINGING
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PACE MICRO TECHNOLOGY PLC REPORT & ACCOUNTS 2006
PACE MICRO TECHNOLOGY PLC
Victoria Road  Saltaire
BD18 3LF  England
Tel +44 (0)1274 532000   
Fax +44 (0)1274 532010
www.pacemicro.com