1 Financial Highlights
2 Chairman’s Statement
3 Business Review – Group CEO’s Operating Review
8 Business Review – Financial Review
11 Business Review – Directors’ Assessment of Risk
13 Directors
14 Directors’ Report
18 Corporate Governance Statement
23 Remuneration Report
29 Statement of Directors’ Responsibilities
30 Independent Auditors’ Report
32 Consolidated Income Statement
34 Consolidated Statement of Recognised Income and Expense
35 Consolidated Balance Sheet
36 Consolidated Cash Flow Statement
38 Company Income Statement
38 Company Statement of Recognised Income and Expense
39 Company Balance Sheet
40 Company Cash Flow Statement
42 Notes to the Financial Statements
86 Corporate Directory
87 Shareholder Information
Filtronic plc Annual Report 2006
Contents Financial Highlights
Continuing
operations
2006 2005
Revenue £221.0m £212.9m
Operating (loss)/profit £(4.2)m £5.6m
(Loss)/profit before taxation £(6.9)m £3.9m
Basic (loss)/earnings per share (11.13)p 5.01p
Diluted (loss)/earnings per share (11.13)p 5.00p
Group
2006 2005
Revenue £234.6m £262.9m
Operating (loss)/profit £(4.0)m £11.2m
(Loss)/profit before taxation £(6.7)m £9.5m
Gain on sale of discontinued operation £14.1m –
Basic earnings per share 8.03p 12.44p
Diluted earnings per share 8.02p 12.41p
Dividend per share 2.70p 2.70p
Net debt £12.7m £43.4m
Total equity £94.4m £93.6m
Filtronic plc Annual Report 2006 1 Chairman’s Statement
These are the ﬁrst full year results prepared on the basis of International Financial Reporting Standards adopted by the
European Union.
Filtronic has again achieved growth for the continuing activities of the group, with revenue for the year ended 31 May
2006 increased by 3.8% to £221.0m (2005 £212.9m). The operating result for continuing operations was a loss of £4.2m
(2005 £5.6m proﬁt). The proﬁt for the period was £6.0m (2005 £9.3m).
The Board therefore proposes to maintain a ﬁnal dividend of 1.80p (2005 1.80p) payable on 31 October 2006 to
shareholders on the register on 29 September 2006.
This has been an eventful year for the group. The Handset Products division was sold in September 2005 for £56.7m,
including the earn-out. The composition of the Board changed in January 2006 with the resignation of John Roulston as
Group Chief Executive. The Board requested David Rhodes to move from Chairman to take on this role so that he would
bring his knowledge and experience of the business and staff to put the group on a stable footing. I took on the role of
non-executive Chairman on an interim basis whilst the Board seeks my long term successor. 
On 5 May 2006 we announced that we had entered into exclusive negotiations with Powerwave Technologies, Inc.
(“Powerwave”) for the sale of the major activities within our Wireless Infrastructure division, resulting in the formal
agreement of this transaction, which was announced on 12 June 2006. The consideration due is $150m (approximately
£81m) cash and 20.7m shares of Powerwave’s common stock, and the shareholder circular for this transaction is in
preparation, with completion of the sale due by 30 September 2006.
For the other activities of the group, the highlight for the year has been the GaAs semiconductor fabrication facility at
Newton Aycliffe reaching its target of breakeven by the ﬁnancial year end for the fourth quarter of the ﬁnancial year. The
Defence Electronics activities opened their new manufacturing facility in New Hampshire, USA in September 2005 which
provides the base for medium term growth. Also, we are retaining the point to point radio backhaul activity which is
showing strong growth.
The cash proceeds from the sale to Powerwave will be used to repay outstanding bank debt and to fund continuing
investment in the Newton Aycliffe semiconductor facility, along with other corporate working capital requirements. The
net proceeds from the sale of the Powerwave shares are expected to be returned to shareholders as cash, once they
are sold. 
This year also saw the retirement of Alan Needle from the role of Managing Director of the Wireless Infrastructure
division in December 2005. He initiated the commercial application of the defence technology that created the current
Wireless Infrastructure activity. As Managing Director, he took the business to ﬂotation in 1994 and, under his leadership,
Filtronic became the world’s leading independent supplier of transmit/receive modules for mobile base stations. We
thank him for this considerable contribution.
Reginald Gott joined the Board as a non-executive director on 13 July 2006 and brings his extensive background in the
machinery, automation and controls segments of the capital goods market across Europe and North America to
strengthen the Board.
I also expect that the Board will continue its active search for my long term replacement, who will be responsible for
organising the evolution of the management team and completion of the refresh of the members of the Board.
In supporting us through this eventful year, I would like to thank all of our employees for their dedication to the growth
of the business as the group continues to evolve and John Roulston for his dedication and contribution. The Board is
continuing its drive to have the intrinsic value of the group’s operations recognised in the company’s valuation.
Rhys Williams
Chairman
31 July 2006
2 Filtronic plc Annual Report 2006 Business Review
– Group CEO’s
Operating Review
Summary
This year has been one of considerable change as I have sought to complete the ﬁnancial restructuring initiated in
September 2004 and to revitalise the market’s appreciation of the value inherent in the group.
The Handset Products division was sold in September 2005 to Pulse Electronics (Singapore) PTE Ltd, a subsidiary of
Technitrol Inc. (“Pulse”) for a total consideration of £56.7m, including the earn-out consideration of £11.3m due in
August 2006. The initial consideration of £45.4m was used to repay the £44.0m term loan from Barclays and ABN AMRO,
which had been rescheduled over a ﬁve year term with revised ﬁnancial covenants in July 2005.
Defence Electronics opened its new manufacturing site in New Hampshire, USA in September 2005, partly to support
the supply of subsystems to ITT. The UK continued its activities across a range of programmes including the supply of
subsystem assemblies for the Euroﬁghter Defensive Aids system to Elettronica of Italy and EADS of Germany.
Compound Semiconductors continued to experience growing demand for its products, so we decided in the ﬁrst half
of the year to increase capacity as its ﬁnancial performance was on target.
In January 2006, the Board also asked me to move from being Chairman to take the role of Group Chief Executive on
John Roulston’s resignation. I undertook to carry out the role for a twelve to eighteen month period with the speciﬁc
aims of providing leadership to the Wireless Infrastructure division following the retirement of its previous Managing
Director, Alan Needle, in December 2005, and to support Iain Gibson in setting the direction for the next steps in the
growth of the Compound Semiconductor and Defence Electronics activities within the Integrated Products division. 
On appointment, I secured the management team of the Wireless Infrastructure division by ensuring the retention of
Geoff Fletcher as Managing Director of the division. Subsequently, after a review of the group’s strategic options, the
Board agreed that the majority of the activities in the Wireless Infrastructure business, covering transmit receive
modules, integrated power ampliﬁers and remote radio head products, would be acquired by Powerwave. 
We have subsequently continued to beneﬁt from strengthening growth for the Wireless Infrastructure division arising
from operators outside North America commissioning systems from OEMs. 
The outlook for the businesses within the group is set out at the end of this report.
The segmental analysis of the operating results for continuing operations is as follows:
Revenue Operating (loss)/proﬁt
Year ended 31 May 2006 2005 2006 2005
£m £m £m £m
Wireless Infrastructure 172.7 177.7 5.5 17.5
Defence Electronics 32.1 31.6 0.6 3.1
Compound Semiconductors 20.8 8.6 (5.1) (11.7)
Central Services – – (4.1) (5.7)
Inter segment (4.6) (5.0) – –
Unallocated pension (charge)/credit – – (1.1) 2.4
1 1 1 1
221.0 212.9 (4.2) 5.6
5 5 5 5
The business segments were redeﬁned with effect from 1 June 2005. The business segment results for the comparative
period have been re-analysed to be consistent with the current period.
Filtronic plc Annual Report 2006 3 Business Review
– Group CEO’s
Operating Review
Wireless Infrastructure
Wireless Infrastructure designs and manufactures the transmit/receive modules, power ampliﬁers and remote radio
heads for mobile base stations, and point to point backhaul radio products that are primarily used to support mobile
phone networks. During the year, the activities generated revenues of £172.7m (2005 £177.7m). The core business
maintained its market leading position supplying all Western OEMs, and reﬂected a static market awaiting the placing
of certain large contracts in India, China and the US that have started to be placed during the current year. 
The operating proﬁt was £5.5m (2005 £17.5m), reﬂecting principally pricing pressure that was not able to be fully
compensated by product redesign, and a slower than planned move of production on high volume product lines from
Finland to Hungary and from the US to China. We closed our Australian operations in August 2005 at a total cost of
£1.1m, which is included in this result. During the second half of the ﬁnancial year, the business suffered unseasonally
low demand during the third quarter and the activity for the fourth quarter included the negative impact of the
announcement made on 5 May 2006 of discussions with Powerwave. Provision was also made in the second half of the
ﬁnancial year for the ﬁnalisation of a commercial agreement in respect of a product liability issue with a customer.
The power ampliﬁer products were manufactured in production quantities for one customer, and we undertook product
development for another customer on a product scheduled to start production in the second half of the ﬁnancial year
ending 31 May 2007.
The principal products for the point to point backhaul radio products are radio transceivers assembled in the UK, which
use integrated circuits produced by Compound Semiconductors, along with diplex ﬁlters which are manufactured in the
UK and Hungary. Its customers are leading OEMs in the sector for whom several new products have entered production
during the year. Further new designs are in qualiﬁcation using our more complex multifunction integrated circuits.
Compound Semiconductors
In the past twelve months, the Compound Semiconductors facility at Newton Aycliffe has been undergoing a transition
from its prior position as a modest producer of Gallium Arsenide (GaAs) pHEMT wafers to being a volume producer of
these products. They are used mainly in switches in mobile telephones, but also have applications in communication
equipment and defence applications. While the majority of recent growth stems from expansion in the mobile telephone
sector, it has also been pleasing that the year has seen initial volume production orders from Selex as they achieve
success with E-Scan radar sales. While there was some disappointment in sales of merchant semiconductors, to a large
extent this has been caused by the priority of meeting steep customer demand for switches. One beneﬁt of the
additional capacity to be created in the future is to allow Compound Semiconductors to establish a stronger presence
in the merchant semiconductors sector.
The global mobile handset market is continuing its growth with approximately 815 million handsets sold in 2005, and
forecast to be over 1 billion handsets sold in 2008. Use of GaAs switches is now speciﬁed for most new handset designs,
and 80% of handsets manufactured in 2008 are expected to be of a design which contains this type of switch. This switch
has the advantage that it consumes less power than alternative products for complex switches, and meets demanding
low-loss and linearity requirements. Competition is from older technologies that use 3 way pin diode or GaAs switches
combined with band deﬁning ﬁlters. Furthermore, handsets are becoming more complex with increasing switching
requirements offering the possibility that the quantity of GaAs used per handset will increase further over the next two
to three years.
Revenue in the year grew 142% (2005 £8.6m to 2006 £20.8m) and the sequential growth rate in revenue comparing half
year on half year during the ﬁnancial year was 45%. Operating losses reduced from £11.7m in 2005 to £5.1m in 2006,
including closure costs of our USA West Coast sales ofﬁce of £0.4m which were incurred in the ﬁrst half of the year.
4 Filtronic plc Annual Report 2006 It was pleasing that Compound Semiconductors reached its targeted ﬁnancial performance of an operating break even
run rate over the fourth quarter of the ﬁnancial year to 31 May 2006. This was after absorbing the cost increases
associated with commissioning a further capacity in the second half of the year. This was before the recognition of the
release of £2.7m of deferred income in the period arising from the renegotiation of arrangements on past government
grants. On the basis of this performance and the demand growth mentioned above, the Board has planned further
expansion in the capacity of Compound Semiconductors in the coming ﬁnancial year.
Defence Electronics
For over 25 years Filtronic has supplied complex electromagnetic components and subsystems, most notably for use in
the ﬁeld of electronic warfare, to defence equipment prime contractors around the world. Although the Defence
Electronics activities are divided between the UK and the US, the two parts of the company, which are managed as
separate entities, operate in similar market sectors, reﬂecting the original technology base of the UK company. 
The UK business (FCL) currently has manufacturing sites in Shipley and at Newton Aycliffe and a small research group in
Australia. The past ﬁnancial year has seen one of FCL’s larger contracts, for the supply of subsystems for the Euroﬁghter
project, draw to a close. Consequently, additional focus has been applied to securing new business for future years. 
Following a review of the future opportunities for the company in the US defence market, the past year has seen a
signiﬁcant consolidation of the US business. In order to achieve better leverage of the company’s competencies and to
lay a solid growth path for the company in the US defence market, the Sage manufacturing operation and the Sigtek
design centre were combined into a new business, Filtronic Signal Solutions (FSS). A new manufacturing site was opened
in Hudson, New Hampshire in September 2005, which consolidated the two previous manufacturing operations in the
US, supporting the contract with ITT, following which the management team has been progressively strengthened. A
major review of the business following these changes resulted in an inventory write down of £1.5m, which was made in
the interim results for the six months to 30 November 2005.
Revenue in the year grew 2% (2005 £31.6m to 2006 £32.1m) and operating proﬁt before the inventory write down of
£1.5m in 2006 was £2.1m (2005 £3.1m).
Central Research and Development
Central Research and Development has supported the development of a new power ampliﬁer product for a new
customer, based on LDMOS technology, that is scheduled to start production in October 2006. It has also undertaken
development work on remote radio heads for 3G and WiMAX applications in support of the Wireless Infrastructure
division.
Business disposals
This has been a year of major change in the structure of the group with the sale of the Handset Products division in
September 2005, and agreement for the sale of the Wireless Infrastructure business (transmit/receive modules, power
ampliﬁers and remote radio heads activities of the Wireless Infrastructure division). 
The Handset Products division is treated as a discontinued operation. The Handset Products division was a market
leader in the provision of internal antennas for mobile handsets and was sold to Pulse in September 2005. For the period
from 1 June 2005 to the date of its sale on 8 September 2005, it generated revenue of £13.6m and an operating proﬁt
of £0.2m. The total consideration, including the earn-out due in August 2006, was £56.7m, resulting in a proﬁt on disposal
of £14.1m. 
Filtronic plc Annual Report 2006 5
Business Review
– Group CEO’s
Operating Review Finance
The group rescheduled its bank facilities with Barclays and ABN AMRO in July 2005 to be a term loan of £44m repayable
over ﬁve years and an overdraft of £9m. The term loan was repaid on completion of the sale of the Handset Products
division in September 2005 and the group’s facilities became a revolving credit facility of £18m available until August
2008 and an overdraft of £2m. In May 2006, the group secured an additional facility of £15m from its bankers until
30 November 2006 to fund the expansion of the Compound Semiconductors facility at Newton Aycliffe.
Capital expenditure
The group’s capital expenditure for the continuing operations was £13.4m (2005 £8.5m). The capital expenditure was
incurred principally to increase capacity in Compound Semiconductors in the light of continued growth in customer
demand, and the completion of the move to the new manufacturing facility in the US for Defence Electronics. Capital
expenditure in the discontinued Handset Products operation was £1.0m (2005 £4.5m) in the period before disposal. This
was for the start-up of the manufacturing facility in Hungary and capacity expansion in China.
Employees
At 31 May 2006, the group employed 3,353 people in its continuing operations, an increase of 20% since May 2005,
primarily in Wireless Infrastructure’s manufacturing operations in China and Hungary.
Outlook
Wireless Infrastructure
The Wireless Infrastructure division has experienced continuing strengthened demand in its market, that has been
reﬂected in the order book in June being extended out from its usual period of around two weeks to twelve weeks and
this has been accompanied by increased visibility in the forecasts received from customers for later in the ﬁnancial year.
As a result, production capacity has been increased with output for the largest volume product being doubled since
January and manufacturing operations in Finland have been restarted to meet demand for a speciﬁc product. In
addition, demand for point to point backhaul radios has doubled year on year.
With this increase in demand, pricing has been agreed for a longer period than usual with a key customer.
It is also well positioned to support Long Term Evolution GSM with its core OEM customers. This outlook for this division
is focused on growth from its traditional customer base.
The planned ﬁnancial performance for the Wireless Infrastructure division is therefore that revenue for the ﬁrst half of the
current ﬁnancial year is expected to increase by more than 25% compared with the preceding half year and, with the
strength of the current market, customer demand extends well into the second half of the current ﬁnancial year,
supporting expected continued growth going forward.
6 Filtronic plc Annual Report 2006
Business Review
– Group CEO’s
Operating Review Business Review
– Group CEO’s
Operating Review
Compound Semiconductors
For Compound Semiconductors, we are now providing some 20% of the overall mobile handset market with 4-way and
above mobile phone pHEMT switches, which is around an 80% share of the addressable market. Continued market
adoption of our type of switches is expected to reach 80% of overall mobile phone market over the coming three years.
As a result of a detailed assessment of future wafer requirements, we have phased our plans for capacity increase and
we are currently undertaking this expansion in line with forecast demand for the current ﬁnancial year.
Therefore our ﬁnancing plan for the growth of Compound Semiconductors requires less than £15m of additional cash
for this ﬁnancial year, after which the business is targeted to be self-ﬁnancing.
With the proﬁle of capacity deployment, revenue growth of over 25% is therefore expected per sequential half year for
the current ﬁnancial year including initial growth in merchant semiconductors and non-switch volume products and
growth in demand to support ﬁlter and backhaul radio products.
Defence Electronics
With its three major contracts substantially complete in the ﬁnancial year ended 31 May 2006, the focus in Defence
Electronics is to secure new business which will mostly generate replacement revenues over the ﬁnancial year and
provide a platform for future growth. In both the UK and US, opportunities have been identiﬁed and are being supported
by appropriate product development activities.
Pension scheme
We are expecting to implement changes to the group’s ﬁnal salary pension scheme at the end of the consultation period
on 31 July 2006 to have beneﬁts based on career average revalued earnings.
As part of this change to the scheme, the company has agreed to provide additional funding of £4.6m on
implementation of the changes to the scheme to fund the actuarial deﬁcit at the date of change. The existing
contribution arrangements remain in place which require that any increases in contribution rates over current levels that
are required to fund deﬁcits would be made two thirds by employee members and one third by the company.
Professor J David Rhodes CBE FRS FREng
Group CEO
31 July 2006
Filtronic plc Annual Report 2006 7 Business Review
– Financial Review
Results
Continuing operations generated revenue of £221.0m (2005 £212.9m), resulting in an operating loss of £4.2m
(2005 5.6m proﬁt). The group loss before tax was £6.7m (2005 £9.5m proﬁt), and the loss after tax was £8.1m (2005 £9.3m
proﬁt). The operating results are discussed in the Group CEO’s Operating Review, along with a review of the business
and outlook.
International Financial Reporting Standards
The ﬁnancial statements have been prepared for the ﬁrst time on the basis of International Financial Reporting Standards
as adopted by the European Union (IFRS). The comparative ﬁgures for the year ended 31 May 2005 have been restated
accordingly.
The main changes resulting from the implementation of IFRS were the recognition of deﬁned pension scheme liability
in the balance sheet, no amortisation of goodwill arising on acquisitions, share-based payment expense for share
options, and a revised accounting policy for research and development that permits capitalisation of expenditure in
certain circumstances.
Research and development costs
Research and development costs of £27.6m (2005 £31.1m) were expensed, which was 11.8% (2005 11.8%) of sales.
No research and development costs were capitalised in the balance sheet.
Gain on sale of property
During the year the group sold a property located on the East coast of the USA for £1.4m and surplus land at Newton
Aycliffe, County Durham for £2.1m. Together these two sales resulted in a gain on sale of property of £0.5m (2005 £2.4m).
Interest expense
Interest expense was reduced to £1.8m (2005 £4.2m) as a result of repaying the £44.0m bank loan during the year with
the proceeds from the sale of the Handset Products division. 
Taxation
The net taxation charge of £1.4m (2005 £0.2m) arises primarily from the group’s operations in China and Finland, where
taxable proﬁts cannot be relieved by losses available in other jurisdictions. The deferred tax credit arising in 2005 of
£2.2m was due to the initial recognition of a proportion of the tax losses carried forward by the group’s operations in the
United States of America as a deferred tax asset in the balance sheet.
Disposal of Handset Products division
On 8 September 2005 the Handset Products division was sold for a net consideration of £45.4m plus an earn-out
consideration of £11.3m, due to be paid in August 2006. The gain on the sale of the division was £14.1m. The Handset
Products division has been treated as a discontinued operation in the ﬁnancial results for both the years ended 31 May
2006 and 31 May 2005.
Capital expenditure
Capital expenditure of £14.4m (2005 £13.0m) comprised continuing operations £13.4m (2005 £8.5m) and discontinued
operations £1.0m (2005 £4.5m).
8 Filtronic plc Annual Report 2006 Business Review
– Financial Review
Compound Semiconductors operation at Newton Aycliffe
The Compound Semiconductor operation at Newton Aycliffe achieved its target of being at run rate breakeven over the
last quarter of the year ended 31 May 2006. In light of this improved operating performance and increasing customer
demand, an impairment review of the operation has not been undertaken.
The Board has approved further ﬁnancing of up to £15.0m for Newton Aycliffe, over the coming ﬁnancial year, to meet
current demand forecasts. The business is targeted to be self-ﬁnancing thereafter. 
Deferred income
Deferred income comprised government grants and the licence fee paid by BAE SYSTEMS Avionics Limited (now SELEX
SAS) in connection with the Supply and Development Agreement dated 30 November 2001. 
The arrangements for the regional selective assistance grants in respect of Newton Aycliffe were renegotiated during
the year. As a result of the renegotiation £2.7m has been released to income, bringing the total deferred grant income
recognised in the year to £3.9m (2005 £0.7m). No further grants are now due to be received, and there is no deferred
grant income at 31 May 2006 for recognition in later years. 
The deferred licence fee income recognised as revenue amounted to £2.3m (2005 £2.3m). The recognition of this
deferred licence fee income continues until 1 May 2008. 
Working capital
At 31 May 2006 net working capital was £48.5m (2005 £52.9m). The reduction was primarily due to the disposal of the
Handset Products division during the year. Net working capital comprised inventories £33.6m (2005 £34.8m), receivables
£56.3m (2005 £67.9m) and less payables £41.4m (2005 £49.8m).
Cash flow and net debt
Cash inﬂow from operating activities was £0.5m (2005 £18.6m), cash inﬂow from investing activities was £33.7m (2005
£5.0m outﬂow) and net cash outﬂow from ﬁnancing activities was £30.4m (2005 £12.2m). During the year the £44.0m term
loan was repaid, and £18.0m revolving credit facilities were drawn, to end the year with net debt of £12.7m (2005 £43.4m),
reducing gearing from 46% to 13%.
Financing 
We amended our bank debt facilities with Barclays and ABN AMRO three times during the year. In July 2005, the term
loan of £44.0m was agreed over a ﬁve year period along with an overdraft of £9.0m. The term loan was repaid on
completion of the sale of the Handset Products division in September 2005 and replaced by facilities totalling £20.0m.
These are a revolving credit facility of £18.0m available until 31 August 2008 and an overdraft of £2.0m. On 31 May 2006,
a further facility of £15.0m available to 30 November 2006 was arranged for the ﬁnancing of the expansion of Compound
Semiconductors. Arrangement fees totalling £0.5m have been charged in the year. The arrangement fee of £0.5m for the
most recent facility arises in the ﬁnancial year ending 31 May 2007.
Filtronic plc Annual Report 2006 9 Business Review
– Financial Review
Defined benefit pension scheme
The group operates a deﬁned beneﬁt pension scheme for United Kingdom employees. After a consultation period with
the members of the scheme, which ends on 31 July 2006, it is expected that the beneﬁts under the scheme will change
from the current ﬁnal salary basis to being based on career average revalued earnings. 
As part of the change to the scheme, the company has agreed to pay £4.6m into the scheme to fund the actuarial deﬁcit
at the date of change.
The deﬁned beneﬁt pension liability in the group and company balance sheets was £20.6m (2005 £16.1m). If the change
to the basis of the scheme beneﬁts had been in place at 31 May 2006, the deﬁned beneﬁt pension liability would have
been reduced by approximately £5.0m. This reduction is before the beneﬁt of the company’s additional £4.6m
contribution to the scheme referred to above.
Wireless Infrastructure disposal costs
In the event that the disposal of the majority of the Wireless Infrastructure division to Powerwave is not completed, costs
for professional fees, related to the preparation for its sale, of approximately £2.6m will be expensed in the ﬁnancial year
ending 31 May 2007, along with a potential break fee due to Powerwave of up to £2.4m ($4.6m). 
Charles Hindson BA FCCA MCT
Group Finance Director
31 July 2006
10 Filtronic plc Annual Report 2006 Business Review
– Directors’
Assessment of Risk
Introduction
More than 85% of the group’s revenue arises from the global communications market through the supply of technology
based electronic equipment and semiconductor components that are produced in high volume at low prices. This is a
fast-changing business sector with a limited number of sophisticated customers and has demanding performance
standards that are set through international competition, resulting in risks to continued operations.
In our communications activities, we develop products, and their associated production processes and capacity, largely
at the company’s risk in anticipation of customer requirements; these may represent substantial investment in the
context of the individual divisions’ operations. 
Market
Our principal markets depend on the capital spending plans of the cellular telephone operators and on mobile handset
acquisition by their subscribers. The spending plans of operators reﬂects demand for both network coverage and the
introduction of new network facilities, for example high bandwidth services on 2G and 3G technologies. Over the
medium term, these operators have shown a cycle in their levels of demand, and this affects our level of activity. In
addition, we have seasonal variations in demand arising from the purchasing proﬁle of our OEM customers.
We design and manufacture subsystems for our OEMs’ customers. Our ability to grow our presence in sectors of
subsystems for mobile base stations, in which we are not strongly represented, and to maintain our leading market share
in transmit/receive modules, depends on our target OEMs’ customers continuing or expanding their current policies on
purchasing of externally designed and manufactured products. With evolution in product technology and other
corporate decisions, these policies may change and so reduce our effective addressable market size.
Our volume semiconductors products are deployed in mobile handsets. This is a market that is being increasing supplied
by a reducing number of OEMs. Our components are supplied to a limited number of RF system module providers.
Demand for our products is therefore dependent on us being qualiﬁed in subsystem modules that are selected by the
OEMs, which will vary with the timing of when such modules are replaced, and by the level of demand for the handsets
in which these modules are deployed. We provide products both on a foundry basis, manufactured to the customers’
design and adapted by us for our processes, and using our own designs which generate higher margins. We therefore
have the risk that our designs may not be selected or that alternative production capacity may be used for products
provided on the foundry basis.
As well as these factors, that may result in decreased revenue and earnings, we may also fail to forecast market
movements correctly so missing opportunities or wrongly predicting product longevity.
Manufacturing
In our communications markets, production is demand led and customers may vary their requirements from the business
at short notice, so leading to changes in levels of goods supplied. Customers expect consistent high quality product and
reducing prices, to satisfy which we depend upon ongoing adequate control of our complex operating environment and
provision of the correctly designed technological solutions including achievement of target cost reduction plans.
Non-performance in these areas may diminish our market position.
Our products are provided to customers after detailed qualiﬁcation testing. However, this may not test all aspects of the
product’s design and manufacturing process or may not ensure that the product is viewed as ﬁt for purpose in its
intended use. Identiﬁcation of these types of problems after release of product to customers creates the risk of being
required to rectify such product defects. Historically, such work has not had a substantial impact on the ﬁnancial
performance of the business, although a major defect, leading to a ﬁeld recall, could do so in future.
Filtronic plc Annual Report 2006 11 Business Review
– Directors’
Assessment of Risk
Achieving sustained proﬁtability of Compound Semiconductors depends on the continued effective utilisation of our
deployed capacity, including its expansion planned for the coming ﬁnancial year. If this is not achieved, there is a risk of
both losing business and not achieving ﬁnancial objectives.
Technology
Our product competitiveness is strongly inﬂuenced by technology choices at the product concept stage and throughout
execution of design to product launch. For products in the production cycle, technology insertion is often required as a
means of achieving price reductions, which underpin sales. The market is time sensitive and opportunities may be lost
if the technology we develop is not appropriate or ready for exploitation to match market demand, so having an adverse
effect on business performance.
Our semiconductor capability is focused on pHEMT GaAs technologies. In the future, alternative technologies may be
developed to provide equivalent or enhanced functionality on a more cost-effective basis.
Financial management
We have organised the Wireless Infrastructure business with our manufacturing predominantly based in low cost areas
using, where possible, the linkage of currencies to reduce the risk of currency exposures. As a signiﬁcant part of our
activities support markets that are US dollar denominated, and the majority of our production activity across the group
is based in China, signiﬁcant weakening of the US dollar or strengthening of the Chinese yuan would unsettle this
structure for our production resources that is broadly neutral and could result in losses.
Our semiconductor markets are mainly US dollar denominated with the cost base substantially in sterling, which may
therefore create margin risks that may not be recoverable through price changes. 
The ﬁnancial facilities of the group are considered sufﬁcient for its operations, whilst a substantial variation in operating
performance and working capital outside of the usual levels of activities may not be covered within the level of the
currently agreed borrowing facilities.
12 Filtronic plc Annual Report 2006 Directors
Filtronic plc Annual Report 2006 13
Executive directors
Professor J David Rhodes CBE FRS FREng BSc PhD DSc DEng (Hon) DSc (Hon) FIEE FIEEE (aged 62) was
reappointed as Group Chief Executive Ofﬁcer and resigned as Chairman on 30 January 2006. He had been Chairman
since founding Filtronic in 1977 and also served as Group Chief Executive Ofﬁcer until John Roulston was appointed on
6 September 2004. John Roulston resigned on 29 January 2006. Professor Rhodes is Emeritus Professor of electronic and
electrical engineering at Leeds University and is an internationally recognised ﬁgure in the ﬁeld of circuit theory and
microwave engineering. He has written over 130 technical papers and books on the subject and has received several
international awards. In the 1992 New Year’s Honours List he was made an Ofﬁcer, Order of the British Empire, for his
contribution to science and technology and in 1993 he was elected a Fellow of the Royal Society. In the 2000 New Year’s
Honours List he was made a Commander, Order of the British Empire, for his contribution to engineering, research and
industry. In 2003, Professor Rhodes was awarded the Prince Phillip Medal by the Royal Academy of Engineering. He
became a Foreign Associate of the United States National Academy of Engineering in 2005. Professor Rhodes is a
non-executive director of Polar Capital Technology Trust PLC.
Charles Hindson BA FCCA MCT (aged 47) was appointed Group Finance Director in 2004. Prior to joining Filtronic he
was Finance Director of Eutelsat SA. Previously he held ﬁnance positions with British Gas plc, PricewaterhouseCoopers
and 3i plc.
Iain Gibson MA (aged 51) was appointed Chief Executive Ofﬁcer of Integrated Products, which comprises Defence
Electronics and Compound Semiconductors, in 2005. Prior to joining Filtronic he was Executive Vice President for
Euroﬁghter Typhoon and Radar with BAE SYSTEMS Avionics Limited.
Dr Christopher Mobbs BSc PhD MIEEE (aged 44) has been Director of Engineering since 2002. He has served as Chief
Technical Ofﬁcer since 1997. He joined Filtronic Components as an engineer after graduating from Leeds University
in 1982.
Non-executive directors
Rhys Williams (aged 72) was appointed Chairman on 30 January 2006. He had been the senior non-executive director
and chairman of the remuneration committee since 1994. A graduate engineer, Mr Williams worked in several GEC
companies during his career, in the UK, South Africa and Canada, before becoming an executive director of GEC,
Chairman of Marconi and latterly responsible for research and development group wide. For twelve years he was Pro
Chancellor and Chairman of the University of Warwick. He is currently Chairman of Radstone Technology plc and a non-
executive director of Acal plc.
Richard Blake (aged 70) has been a non-executive director since 1994 and has been chairman of the audit committee
since 1995. Mr Blake was a partner in Baker Tilly from 1964 until his retirement in 1993. Mr Blake is a non-executive
director of YooMedia plc.
Professor Stephen Burbank (aged 59) has been a non-executive director since 1994. Professor Burbank is currently the
David Berger Professor for the Administration of Justice at the University of Pennsylvania. He is Chairman of the Board of
the American Academy of Political and Social Science and of the Editorial Committee of the American Judicature Society.
One of the pre-eminent scholars of litigation procedure and judicial administration in the United States, Professor Burbank
is also an authority on issues of judicial independence and accountability, having served on the National Commission on
Judicial Discipline and Removal by appointment of the Speaker of the United States House of Representatives. Since
2002, by appointment of a federal judge, he has served as Special Master of the National Football League.
Ian Hardington (aged 42) has been a non-executive director since 1999. Since 30 January 2006 he has been chairman
of the remuneration committee. Mr Hardington is an analyst with Trinity Capital Limited, an investment management ﬁrm
located in the United States of America.
Graham Meek (aged 59) has been a non-executive director since 1999. Since 30 January 2006 he has been the senior
non-executive director and chairman of the nominations committee. He is Chairman of ICM Computer Group plc and
SPI Lasers plc and a non-executive director of Capital Gearing Trust plc.
Reginald Gott (aged 49) was appointed as a non-executive director on 13 July 2006. Since 2002 he has been a director
of FKI plc, an international diversiﬁed engineering group. He has an extensive background in the machinery, automation
and controls segments of the capital goods markets across Europe and North America. Directors’ Report
14 Filtronic plc Annual Report 2006
The directors present their report and the audited ﬁnancial statements for the year ended 31 May 2006.
Principal activities
The principal activities of the group are the design and manufacture of microwave products and compound
semiconductors for wireless telecommunications systems and military applications.
Business review and state of the company’s and group’s affairs
The business review on pages 3 to 12 inclusive contains a review of the group’s business performance and outlook. The
business review includes the statutory requirements of the enhanced business review.
The directors are satisﬁed with the state of affairs of the company and the group and believe it is well positioned to grow
through opportunities offered by the worldwide wireless telecommunications and military markets.
Financial results and dividend
The results for the year are set out in the income statement on page 32. The position at the end of the year is shown in
the balance sheet on page 35.
Following an interim dividend of 0.90p (2005 0.90p) per ordinary share, the directors are recommending payment of a
ﬁnal dividend of 1.80p (2005 1.80p), making a full year dividend of 2.70p (2005 2.70p) per ordinary share.
Research and development
Research and development costs were £27.6m (2005 £31.1m).
Directors and their interests
The directors of the company during the year were as follows:
Professor J David Rhodes CBE FRS FREng BSc PhD DSc DEng (Hon) DSc (Hon) FIEE FIEEE
John Roulston FREng FIEE CEng (resigned 30 January 2006)
Charles Hindson BA FCCA MCT
Alan Needle MBA FIEE CEng (retired 1 January 2006)
Iain Gibson MA
Dr Christopher Mobbs BSc PhD MIEEE
Rhys Williams
Richard Blake
Professor Stephen Burbank
Ian Hardington
Graham Meek
Reginald Gott was appointed a director on 13 July 2006.
Details of their interests in the share capital of the company are set out in the remuneration report on pages 23 to 28.
Graham Meek retires by rotation and, being eligible, offers himself for re-election at the annual general meeting.
Richard Blake and Professor Stephen Burbank, each having served on the Board for more than nine years, retire and
being eligible, offer themselves for re-election at the annual general meeting.
Reginald Gott retires and, being eligible, offers himself for election at the annual general meeting. Directors’ Report
Directors indemnity
The company has in place directors’ and ofﬁcers’ liability insurance on behalf of its directors and ofﬁcers in accordance
with the provisions of the Companies Act 1985. In addition, certain directors beneﬁt from an indemnity from the
company, to the extent not prohibited by law, in respect of losses incurred as a result of the discharge of their duties in
the management or supervision of any company in the group. The indemnity does not automatically terminate when the
indemniﬁed person ceases to be a director.
Substantial shareholdings
The following shareholders have indicated a holding of 3% or more of the issued share capital of 74,870,956 10p ordinary
shares as at 21 July 2006.
Number of % of issued
10p ordinary shares share capital
Prudential plc 12,701,925 17.0
Capital Group Companies Inc. 7,917,682 10.6
Aberforth Partners LLP 7,259,794 9.7
SVG Capital plc and SVG Investment Management Limited 6,727,250 9.0
Legal & General Investment Management Limited 4,575,093 6.1
Professor J David Rhodes CBE FRS FREng 3,230,001 4.3
Barclays PLC 2,415,727 3.2
Strategic Equity Capital 2,330,790 3.1
1 1
47,158,262 63.0
5 5
Employees
The group is committed to a policy of equal opportunities in employment by which the group ensures that all aspects
of selection and retention are based on merit and suitability for the job regardless of sex, marital status, colour, race,
ethnicity, sexual orientation or disability.
The group is conscious of its obligations towards disabled persons and tries to ensure that they receive equal
opportunities. So far as particular disabilities permit, the group will continue to provide employment for any existing
employee who becomes disabled. The group will also provide relevant training, career development and promotion for
disabled employees where this is appropriate.
Corporate & social responsibility
(i) Health and safety
The Board is committed to ensuring the health and safety of the group’s employees worldwide and applies high
standards throughout the group in the control and management of its operations. The group analyses its practices
and processes using systematic health and safety management techniques and auditing regimes. As part of the
group’s continued implementation of an occupational health, safety and management system, the group has put
preventative measures in place that aim to continue to reduce major injuries and lost time accidents. Further
development of the group’s health and safety management systems took place during the year with some sites
attaining OHSAS 18001 (health and safety management systems). A training management system is being
implemented throughout the group to assist managers with the implementation of the group’s health and safety
objectives.
Filtronic plc Annual Report 2006 15 Directors’ Report
(ii) Employee development
The group operates internationally and its employment policies are designed to meet local regulations and
requirements. Employee development has been established as one of the group’s key objectives. A training
management system is being implemented globally thus underlying the group’s commitment to ongoing employee
development and training.
(iii) Employee communications
The group believes in keeping employees fully informed on matters which affect them through communication
procedures including staff meetings, a group-wide newsletter and a culture which encourages openness and
interaction between all members of staff. All European sites have put in place works councils that are important for
raising and sharing certain issues that affect employees. In addition, the group’s United Kingdom sites have
implemented a forum for information and consultation (“ICON forum”). The ICON forum is designed to be a
gathering at which employee representatives can review group progress and discuss speciﬁc issues and concerns
with senior management.
(iv) The environment
Care for the environment is an integral part of the group’s business activities worldwide. It is the group’s policy to
ensure that its facilities throughout the world are safe and acceptable to the communities in which they operate. The
group is committed to ensure that their impact on the environment is minimised. The group supports and trains its
personnel to act responsibly in matters relating to the environment. The group takes account of relevant legislation
and regulations and analyses its practices, processes and products to reduce their environmental impact, and works
with its customers and suppliers to achieve a high standard of product stewardship. The group’s major
manufacturing sites have established environmental management systems and have achieved ISO 14001
certiﬁcation.
Wherever possible, components and materials are reused or recycled. The reuse, utilisation and recycling of
packaging is subject to monitoring. The group continues to work with its customers to implement programmes to
design products for disassembly and recycling, and in particular so as to ensure compliance with the European Union
directive on waste electrical and electronic equipment and the European Union and Chinese initiatives in relation to
the restriction of certain hazardous substances in electrical and electronic equipment. The group has introduced
focused management teams throughout its business to ensure that compliance with these requirements is achieved
within the required implementation timescales. The group continues to work with major suppliers, contractors and
customers to assist them in improving their environmental, health and safety performance.
(v) Social and ethical code of conduct
A social and ethical code of conduct was drafted during the year and adopted by the Wireless Infrastructure
business of the group to ensure good working conditions throughout its supply chain. The code sets out the
standards we demand both of ourselves and of our suppliers. A plan for implementation of the code has been
agreed with the individual Wireless Infrastructure business sites globally. The code is being actively considered for
adoption by the remainder of the group.
16 Filtronic plc Annual Report 2006 Directors’ Report
Political and charitable contributions
No contributions were made for political purposes. The group donated £27,000 (2005 £26,000) to various charities.
Supplier payment policy
It is the group’s policy to abide by the terms of payment agreed with suppliers in respect of the goods and services
properly invoiced to the group. At 31 May 2006 trade payables of £27.7m represented 58 days’ purchases, calculated in
accordance with the requirements of the Companies Act.
Disclosure of information to the auditors
The directors who held ofﬁce at the date of approval of this directors’ report conﬁrm that, so far as they are each aware,
there is no relevant audit information of which the company’s auditors are unaware; and each director has taken all the
steps that he ought to have taken as a director to make himself aware of any relevant audit information and to establish
that the company’s auditors are aware of that information.
Auditors
A resolution to re-appoint KPMG Audit Plc as auditors will be proposed at the annual general meeting.
Special business at the annual general meeting
Remuneration report
Pursuant to the Directors’ Remuneration Report Regulations 2002 the Board proposes the remuneration report which is
set out on pages 23 to 28, for approval (resolution 9 in the notice of annual general meeting). No entitlement of a
director to remuneration is conditional on the resolution being passed but the result of the vote will be taken into
account in considering the development and operation of the company’s remuneration policy.
Authority to allot shares
The Companies Act 1985 requires that the authority of the directors to allot relevant securities shall be subject to the
approval of shareholders in general meeting or to an authority set out in the company’s Articles of Association.
Accordingly, an ordinary resolution (resolution 10 set out in the notice of annual general meeting) will be proposed at
the annual general meeting to renew the authority granted at the annual general meeting held on 30 September 2005
and thereby authorise the directors to allot unissued ordinary shares of the company up to a total nominal value of
£2,495,698 (representing one third of the nominal value of the company’s issued share capital).
A proposal to allow the company to issue shares to shareholders who choose to receive dividends in fully paid ordinary
shares instead of cash will be put to shareholders in resolution 11.
The Companies Act 1985 also requires that any equity shares issued wholly for cash must be offered to existing
shareholders in proportion to their existing holdings. This requirement was disapplied to a limited extent by a resolution
passed at the annual general meeting held on 30 September 2005 and a special resolution (resolution 12 set out in the
notice of annual general meeting) will be proposed at the annual general meeting to renew the directors’ authority to
allot equity shares for cash other than on a pro rata basis. This will be limited to equity shares having a nominal value of
up to £374,354 (representing 5% of the issued share capital of the company). This authority will terminate no later than
ﬁfteen months after the passing of the special resolution.
By order of the Board
M Moynihan
Company Secretary
31 July 2006
Filtronic plc Annual Report 2006 17 Corporate Governance
Statement
The Combined Code on Corporate Governance
The Board supports the highest standards of corporate governance. For the year ended 31 May 2006 the directors
conﬁrm that the company has been in compliance with the provisions of section 1 of the Combined Code on Corporate
Governance.
The company has ﬁve non-executive directors excluding the chairman, three of whom (Ian Hardington, Graham Meek
and Reginald Gott) meet all of the speciﬁc criteria for independence set out in the Combined Code. The other two
directors (Richard Blake and Professor Stephen Burbank) do not meet all of the requirements for independence set out
in the Code since they have been directors since 1994 but yet are considered to be independent and to provide, ﬁrstly,
valuable advice to the company given its international reach and complexity and, secondly, continuity during a period
of change at Board level.
Internal control
The Board has overall responsibility for establishing and maintaining the company’s system of internal control. Internal
control systems are designed to be relevant to the company and the risks to which it is exposed and, by their nature,
can provide reasonable but not absolute assurance against material misstatement or loss. The key procedures
established by the directors with a view to providing effective internal control are as follows:
(a) Control environment and monitoring systems
The Board usually meets each month and has adopted a schedule of matters which are required to be brought to it
for decision, thus ensuring that it maintains full and effective control over appropriate strategic, ﬁnancial, operational
and compliance issues. The Board has put in place an organisational structure with clearly deﬁned lines of
responsibility and delegation of authority. Additionally, the Board has established an Executive Management Board
that is responsible for operational matters within the company.
The division of responsibilities between the Chairman and the Group Chief Executive Ofﬁcer has been set out in
writing and agreed by the Board.
The audit committee, which comprises all of the non-executive directors, reviews the effectiveness of the system of
internal control. The external auditors are engaged to express an opinion on the company’s annual ﬁnancial
statements. They test the system of internal ﬁnancial control and the information contained within the annual report
and ﬁnancial statements to the extent necessary for expressing their opinion.
(b) Major information systems
The directors have delegated to executive management implementation of the system of internal control
throughout the company. This includes ﬁnancial controls that enable the Board to meet its responsibilities for the
integrity and accuracy of the company’s accounting records.
The Board approves, in aggregate, budgets and other performance targets, the components of which form the
ﬁnancial objectives for individual operating units. Performance against these targets is reported monthly. Financial
forecasts are updated and reviewed monthly and include cash ﬂow forecasts.
18 Filtronic plc Annual Report 2006 Corporate Governance
Statement
(c) Main control procedures
In addition to matters reserved for Board decisions, the company has established a system whereby authority to take
decisions is distributed throughout the company. This distribution of authority deﬁnes procedures for authorisation
and approval and sets appropriate levels of responsibility.
An accounting policies and procedures manual sets out the company’s declared statement of policy in all ﬁnancial
areas and establishes the control procedures, including segregation of duties, to ensure that these policies are
implemented.
(d) Identiﬁcation and evaluation of business risks
The company has clear principles and procedures that are appropriate to a multinational electronics business. These
principles are designed to provide an environment of central leadership but with devolved operating responsibility
as the framework for the exercise of accountability and control by the Board, its committees and executive
management. The Board directs activities in and allocates resources to the key areas of business development,
product strategy, research and development, manufacture and ﬁnancial practice.
Through these ongoing procedures, the Board is able to identify, evaluate and manage the signiﬁcant risks that the
group faces from time to time.
The Board has appointed a Technology Advisory Board to provide strategic technical advice to the company. This
Board comprises leading, internationally respected electronics experts together with outstanding engineering talent
from within the company.
The Board has reviewed its approach to the identiﬁcation and evaluation of business risks and has put in place a
programme to review the main areas of risk identiﬁed for the company on an annual basis at the Board.
The Board conﬁrms that it has carried out a review of the effectiveness of the system of internal control as it operated
during the year. The Board undertakes, on an ongoing basis, a review of all aspects of the company’s internal control
procedures. The review is undertaken by the Board through the receipt and consideration of regular monthly and
other reports prepared by management on operational, strategic, organisational and ﬁnancial issues. The system of
ﬁnancial internal audit is carried out at the company’s various locations. The focus this year was on locations
representing the greatest ﬁnancial and operational risk to the group, and in contemplation of the potential sale of
the Wireless Infrastructure business. Additionally, areas of operations other than ﬁnance are audited periodically
either by external agencies or through peer review to ensure compliance with group policies.
Constitution of the Board
The Board comprises the Chairman, four executive and ﬁve independent, non-executive directors. Short biographies of
all of the directors are set out on page 13. The Board considers that its constitution brings both independence and an
appropriate balance of experience in judging matters of strategy, performance, resources, investor relations, internal
control and corporate governance. Graham Meek is the senior non-executive director. Each of the directors is proposed
for re-election at the annual general meeting at least every three years. Those non-executive directors who have served
longer than nine years on the Board will be subject to annual re-election.
Filtronic plc Annual Report 2006 19 Corporate Governance
Statement
Mr Blake and Professor Burbank each joined the company in 1994. The Board has considered the independence of these
directors with particular care. Both directors contribute signiﬁcantly through their individual skills, ﬁnancial and legal
expertise respectively, and their considerable knowledge of both the company and the industry. During the current
period of transition for the executive members of the Board, they provide continuity as well as contributing to the overall
balance of the Board. They continue to demonstrate strong independence of management of the Board in the manner
in which they discharge their duties as directors. Accordingly the Board has decided, in the absence of any other relevant
factors, that Mr Blake and Professor Burbank are independent non-executive directors. However being mindful of the
desire to refresh the skills and experiences of the directors, the Board appointed Reginald Gott as an additional non-
executive director in July 2006. A ﬁrm of professional recruitment consultants has been engaged to identify suitable
candidates with sufﬁcient, recent and relevant ﬁnancial experience to replace Mr Blake during the current ﬁnancial year.
The Board has a formal annual system of performance review of the Board, its committees and of all individual directors.
This has been implemented in the year by way of a written questionnaire completed by all Board members and the
resulting report has been reviewed by the Board. The performance of individual directors was reviewed by the Chairman.
The senior non-executive director led an evaluation of the performance of the Chairman.
Board committees
The Board has a nominations committee, a remuneration committee and an audit committee. The nominations
committee comprises the Chairman and all of the non-executive directors and is chaired by Graham Meek, the senior
non-executive director. The remuneration and audit committees comprise all of the independent non-executive
directors. Each of these committees operates under terms of reference which have been established by the Board.
The nominations committee
The nominations committee is chaired by Graham Meek, the senior non-executive director. The other members are the
Chairman and the independent non-executive directors: Richard Blake, Professor Stephen Burbank, Ian Hardington and
since July 2006, Reginald Gott. The nominations committee’s duties are conﬁned to the approval, support or otherwise
of appointments, re-appointments and termination of employment or engagement of directors and the company
secretary.
During the year, the nominations committee appointed external advisors to assist with the appointment of new directors.
The nominations committee has in place succession plans which have been developed with the assistance of external
recruitment advisors.
The remuneration committee
The remuneration committee is chaired by Ian Hardington. The other members are the other independent
non-executive directors: Richard Blake, Professor Stephen Burbank, Graham Meek and since July 2006, Reginald Gott.
The remuneration committee’s responsibilities include ensuring that the remuneration and service contract terms of the
executive directors and senior management are appropriate. The committee approves the grant of all share options.
20 Filtronic plc Annual Report 2006 Corporate Governance
Statement
The audit committee
The audit committee is chaired by Richard Blake. The other members are the other independent non-executive
directors: Professor Stephen Burbank, Ian Hardington, Graham Meek and since July 2006, Reginald Gott. Mr Blake has
sufﬁcient, recent and relevant ﬁnancial experience. The audit committee meets at least twice a year. The committee
reviewed its terms of reference during the ﬁnancial year and considered no changes to them were required. They are
consistent with the current best practice for the size of the company and are available on request from the company
secretary or on the company’s website.
The committee met twice during the ﬁnancial year with management and, following each meeting, the committee met
with the external auditors in private. The chairman of the committee also met privately with the auditors regularly during
the year. The committee reviewed the following matters and reported its conclusions to the Board:
● the ﬁnancial statements contained in the company’s annual and interim reports to shareholders
● various accounting matters, including the company’s accounting policies, raised by management and the external
auditors in the context of the ﬁnancial statements, including the ﬁrst time adoption of International Financial
Reporting Standards
● the effectiveness of internal controls and the group’s internal controls manual
● authorisation of the amount and purposes of non-audit fees and, in particular in light of the support provided to
prepare for the disposal of the Handset Products division, ensuring that auditor objectivity and independence were
not compromised
● the external auditors’ year end report and the ﬁndings of their work and conﬁrmation that all signiﬁcant matters had
been satisfactorily treated
● a full and careful consideration of the performance of the external auditors, which found their work satisfactory and
contribution effective, as a result of which the committee resolved to recommend the re-appointment of KPMG
Audit Plc as auditors to the company
● during the course of the year, the Board has considered the areas of greatest ﬁnancial and operational risk. As a
result, a number of speciﬁc review projects were carried out. These included, where appropriate, widening the scope
of the audits and reviews undertaken by the external auditors. The audit committee reviewed the results and
conclusions of these projects
The Board has reviewed the composition of the audit committee and is satisﬁed that it has members who have sufﬁcient,
recent and relevant ﬁnancial experience.
Filtronic plc Annual Report 2006 21 Corporate Governance
Statement
Attendance at Board meetings and committee meetings during the year ended 31 May 2006 was as follows:
Audit Remuneration
Board committee committee
Meetings held 11 2 3
Directors’ attendance
Executives
Professor J David Rhodes 10 n/a n/a
John Roulston (resigned 30 January 2006) 7 n/a n/a
Charles Hindson 11 n/a n/a
Alan Needle (retired 1 January 2006) 7 n/a n/a
Iain Gibson 10 n/a n/a
Dr Christopher Mobbs 10 n/a n/a
Non-executives
Rhys Williams 11 1 1
Richard Blake 921
Professor Stephen Burbank 11 1 3
Ian Hardington 10 1 2
Graham Meek 10 2 3
Relations with investors
Communications with investors are given high priority. There is regular dialogue with institutional investors including
presentations after the company’s preliminary announcement of the year-end results and at the half year, which are
attended by non-executive directors. Analyst reports and feedback from shareholders are discussed at Board meetings.
The Board uses the annual general meeting to communicate with private and institutional investors and welcomes their
participation. The Chairman aims to ensure that the chairmen of the audit and remuneration committees are available
at the annual general meeting to answer questions. Information is also available to all investors by way of the company’s
website at www.ﬁltronic.com.
Going concern
As explained in note 1 of the ﬁnancial statements, the directors have reviewed the budgeted cash ﬂow and other
relevant information and have a reasonable expectation that the group has adequate resources to continue in
operational existence for the foreseeable future. For this reason, the directors continue to adopt the going concern basis
in preparing the ﬁnancial statements.
22 Filtronic plc Annual Report 2006 Remuneration Report
for the year ended 31 May 2006
Composition of the remuneration committee
During the period 1 June 2005 to 31 May 2006 the remuneration committee consisted of the following non-executive
directors:
R J Williams (resigned as chairman and from the committee 30 January 2006)
I J Hardington (appointed chairman 30 January 2006)
R J B Blake
Professor S B Burbank
E G Meek
The committee receives advice in its deliberations concerning the remuneration of the executive directors from the
Group CEO, Professor J D Rhodes. The committee’s recommendations have been accepted by the Board without
amendment.
Compliance
The company has complied with the provisions in the Code of Best Practice relating to Directors’ Remuneration. In
preparing this report, the provisions in Schedule B to the Combined Code have been followed.
Policy on remuneration of executive directors and senior executives
(a) Total level of remuneration
The committee aims to ensure that remuneration packages offered are competitive and designed to attract, retain
and motivate executive directors and senior executives.
(b) The main components
The company’s policy is to structure remuneration packages so that an appropriate element comprises the grant of
share options which enables the company to align the interests of employees with those of shareholders.
The main components of remuneration payable are:
(i) Salary
Salary for each executive is determined by the remuneration committee taking into account the performance and
responsibilities of the individual. Electronic and electrical engineering is an international industry within which there
is a clear market in executive talent. The overriding factor in determining executive remuneration is market forces.
Salaries are normally reviewed on 1 July each year.
(ii) Joining bonus
Under the terms of his service contract, I A Gibson became entitled to and was paid a deferred joining bonus of
£70,000 on 31 May 2006.
(iii) Share options
The directors believe that the opportunity to participate in the company’s shareholding is a key factor in attracting
and retaining executives of the right calibre and that share ownership by executive directors and senior executives
strengthens the link between their personal interests and those of the shareholders. The company’s policy is to grant
options at the point of recruitment or promotion. All grants of options are determined by the committee. The
committee takes account of guidelines issued by the Association of British Insurers and the National Association of
Pension Funds when making awards of options. Pursuant to resolutions of the shareholders passed at the
extraordinary general meeting held on 17 February 1999, the committee is authorised in exceptional cases to grant
options to a value of up to eight times an executive’s salary. The terms of vesting and exercise of the directors’ share
options are the same as those which apply to all option holders.
Filtronic plc Annual Report 2006 23 Remuneration Report
for the year ended 31 May 2006
The remuneration committee has determined that the vesting of options granted under the share option scheme
will be conditional upon adjusted operating proﬁt targets for the ﬁve ﬁnancial years following the grant of options
being achieved. These targets will be determined by the remuneration committee annually, principally by reference
to the budget set for the relevant year, and will be set at a level which the remuneration committee determines will
be challenging to those concerned. Adjusted operating proﬁt for this purpose is deﬁned as operating proﬁt before
share-based payments and IAS 19 pension costs in excess of employers’ pension contributions. The adjusted
operating proﬁt target for the year ended 31 May 2006 was not achieved and accordingly no options vested.
(iv) Bonus scheme
During the year the remuneration committee approved the introduction of a bonus scheme for executive level
employees deemed important to business performance. The bonus scheme is designed to be self-funding
throughout its range and is intended to provide an incentive to achieve results above budget. A maximum of 30%
of salary on an individual basis would be payable if all performance conditions (based on revenue and operating
proﬁt targets) are achieved. It is necessary for the group adjusted operating proﬁt target to be met before the
divisional revenue and operating proﬁt targets are activated. The group adjusted operating proﬁt target for the year
ended 31 May 2006 was not achieved and accordingly no bonuses were paid.
(c) Company policy on contracts of service
All the executive directors, except for J F Roulston, have rolling service contracts under which the notice period for
termination by either party is 6 months. J F Roulston had a rolling service contract under which the notice period
for termination by either party was 9 months reducing to 6 months on 6 September 2006. There are no speciﬁc
compensation commitments for early termination.
J F Roulston was paid £379,000 after his resignation. This comprised £216,000 for salary in lieu of notice and holiday
pay and £163,000 compensation for loss of ofﬁce.
(d) Company pensions policy
The company’s policy is to offer UK executives membership of the Filtronic plc Retirement Beneﬁts Scheme.
UK executive directors who participate in the scheme do so on the same basis as all other UK employees of
the company. 
The scheme is a funded, Inland Revenue approved, ﬁnal salary, occupational pension scheme. Its main features are:
(i) a normal pension age of 65;
(ii) pension at normal pension age of 1/60th of ﬁnal pensionable salary for each complete year of service;
(iii) death in service beneﬁt of four times pensionable salary;
(iv) pensions payable in the event of ill health; 
(v) spouse’s pension on death;
(vi) long term disability insurance.
Pensionable salary is deﬁned as the member’s basic annual salary excluding all bonuses and beneﬁts.
All scheme beneﬁts are subject to Inland Revenue limits.
Under the terms of his service contract, R C Hindson is eligible to join the scheme or the company will pay the
equivalent of the employer’s contribution, currently 10.5% of pensionable salary, into a personal pension plan of his
choice. R C Hindson joined the scheme on 1 October 2005.
Under the terms of his service contract, I A Gibson is entitled to an enhanced pension arrangement. In addition to
being a member of the scheme, he is entitled to additional company pension contributions at a rate of 14.25% of
pensionable salary to be paid into his personal pension plan.
24 Filtronic plc Annual Report 2006 Remuneration Report
for the year ended 31 May 2006
Filtronic plc Annual Report 2006 25
For Finnish employees, the Finnish subsidiary contributes to deﬁned contribution plans in accordance with Finnish
regulations and practices.
For Hungarian employees, the Hungarian subsidiary contributes to a deﬁned contribution plan in accordance with
Hungarian regulations and practices.
For US employees, the US subsidiaries contribute to a deﬁned contribution plan under section 401(k) of the Internal
Revenue Code.
For Australian employees, the Australian subsidiary contributes to a deﬁned contribution superannuation fund.
(e) Company policy on external appointments
The remuneration committee reviews any request by an executive director with regard to a proposed external
appointment and deals with each request on its individual merits. The overriding requirement is for each executive,
as a term of his contract, to devote substantially the whole of his time, skill and attention to the affairs of the group.
Non-executive directors service contracts and remuneration
The non-executive directors, except for the Chairman, R JWilliams, have rolling agreements for services with the
company. These are terminable by the company or the non-executive director on three months notice and are reviewed
annually by the Board.
R J Williams has a contract commencing on 30 January 2006, for services as Chairman of Filtronic plc. The term of the
contract is two years. R J Williams shall resign as a director and Chairman of the company immediately upon the request
of the Board. In the event of such resignation, R J Williams shall remain as a consultant to the company for the remainder
of the two years. R J Williams’ fees for the two years are £100,000. The fee is paid on a quarterly basis.
The Board determines the remuneration of the non-executive directors. Non-executive directors are not entitled to any
share options, bonuses or pension beneﬁts. Remuneration Report
for the year ended 31 May 2006
The information on pages 26 and 27 has been audited.
Directors’ remuneration
Compensation Total remuneration
Salary for loss excluding pension
or fees Bonuses Beneﬁts of ofﬁce contributions
2006 2006 2006 2006 2006 2005
£000 £000 £000 £000 £000 £000
Executives
Prof J D Rhodes 256 – 27 – 283 272
J F Roulston (appointed 6 September 2004
and resigned 30 January 2006) 386 – 18 163 567 189
R C Hindson (appointed 14 December 2004) 188 – 13 – 201 73
A R Needle (retired 1 January 2006) 125 – 9 – 134 209
I A Gibson (appointed 21 February 2005) 184 70 17 – 271 50
Dr C I Mobbs 179 – 7 – 186 178
Prof C M Snowden (resigned 6 April 2005) ––––– 165
J Samuel (resigned 10 June 2004) ––––– 15
Non-executives
R J Williams 37––– 37 30
R J B Blake 30––– 30 30
Prof S B Burbank 30––– 30 30
I J Hardington 30––– 30 30
E G Meek 30––– 30 30
111111
Total 2006 1,475 70 91 163 1,799 1,301
555555
Total 2005 1,229 – 72 – 1,301
55555
Beneﬁts incorporate all assessable tax beneﬁts arising from employment by the company and relate in the main to the
provision of a fully expensed company car or car allowance and private medical insurance.
Directors’ pension benefits
Deﬁned beneﬁts scheme
Transfer value
of increase
in accrued
Increase in Increase in Increase in pension
accrued accrued transfer excluding
pension pension value less inﬂation less
excluding including directors’ directors’
Accrued inﬂation inﬂation Transfer Transfer contributions contributions
pension at during the during the value at value at during the during the
31 May 2006 year year 31 May 2006 1 June 2005 year year
£000 £000 £000 £000 £000 £000 £000
Prof J D Rhodes 112 13 15 1,847 1,506 328 180
J F Roulston 3 2 2 37 27 18 16
R C Hindson 2 2 2 17 – 9 9
A R Needle 61 6 8 623 474 142 51
I A Gibson 4 3 3 33 6 17 16
Dr C I Mobbs 62 7 9 431 324 96 35
26 Filtronic plc Annual Report 2006 Remuneration Report
for the year ended 31 May 2006
R C Hindson joined the deﬁned beneﬁts pension scheme on 1 October 2005. Prior to that, as R C Hindson had not joined
the deﬁned beneﬁts scheme, he accrued pension contributions of £6,000 (2005 £7,000), which the company has paid into
his personal pension plan. In addition to his membership of the deﬁned beneﬁts scheme, I A Gibson has accrued
additional pension contributions of £26,000 (2005 £6,000) which will be paid into his personal pension plan.
Directors’ shareholdings
31 May 2006 31 May 2005
Prof J D Rhodes 3,230,001 3,730,001
R C Hindson – –
I A Gibson – –
Dr C I Mobbs 295,617 295,617
R J Williams 102,609 102,609
R J B Blake 8,500 8,500
Prof S B Burbank 900 900
I J Hardington – –
E G Meek 75,000 75,000
11
3,712,627 4,212,627
55
All of the above shareholdings are held beneﬁcially.
Prof J D Rhodes sold 500,000 shares at 255p on 12 October 2005.
A R Needle held 257,202 shares on 31 May 2005. He sold 200,000 shares at 270p on 6 October 2005. He retained the
remaining 57,202 shares until his retirement on 1 January 2006.
J F Roulston purchased 10,000 shares at 242p on 13 October 2005. He retained the 10,000 shares until his resignation on
30 January 2006.
Directors’ interests in share options
Granted Forfeited
Exercise Option 31 May during during 31 May
Executive Share Option Scheme period price 2005 the year the year 2006
J F Roulston (resigned 30/01/06) 1/10/2006 – 29/10/2014 148p 300,000 – 300,000 –
R C Hindson 1/10/2006 – 14/12/2014 198p 200,000 – – 200,000
I A Gibson 1/10/2006 – 29/4/2015 200p 150,000 – – 150,000
1111
Total all directors 650,000 – 300,000 350,000
5555
None of the options were exercisable at 31 May 2006.
Under the terms of his service contract, subject to certain conditions, if R C Hindson remains employed by the group
until 14 December 2006 he has the right to relinquish his share options in exchange for either 85,000 shares or a £200,000
cash payment.
The closing middle market share price on 31 May 2006 was 196p, and on 31 May 2005 it was 197p. The range of closing
middle market share prices during the year ended 31 May 2006 was 157p – 291p.
There were no changes to the directors’ interests between 31 May 2006 and 31 July 2006. The company’s register of
directors’ interests which is open to inspection at the registered ofﬁce contains full details of directors’ shareholdings
and share options.
Filtronic plc Annual Report 2006 27 Remuneration Report
for the year ended 31 May 2006
Performance graph
This graph illustrates the performance of the company’s shares measured by Total Shareholder Return (TSR) relative to
a broad equity market index over the past ﬁve years. The FTSE All Share is considered to be the most appropriate index
against which to measure performance, as the company has been a constituent of the FTSE All Share throughout the
ﬁve-year period and the index is widely used. TSR is the measure of the returns that a company has provided for its
shareholders, reﬂecting share price movements and assuming reinvestment of dividends.
Total Shareholder Return
1 June 2001 to 31 May 2006 Weekly Indexed
Approved by the Board on 31 July 2006 and signed on its behalf by
M Moynihan
Company Secretary
2001 2002 2003 2004 2005 2006
0
250
200
150
100
50
Filtronic – Total Return Indexed
FTSE All Share – Total Return Indexed
Source: Thomson Datastream
28 Filtronic plc Annual Report 2006 Statement of Directors’
Responsibilities
Filtronic plc Annual Report 2006 29
Statement of directors’ responsibilities in respect of the annual report and the financial statements 
The directors are responsible for preparing the annual report and the 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 International Financial
Reporting Standards as adopted by the European Union (IFRS) 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 IFRS to present fairly the ﬁnancial position
of the group and the parent company and the performance for that period; 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: 
a) select suitable accounting policies and then apply them consistently; 
b) make judgments and estimates that are reasonable and prudent; 
c) state whether they have been prepared in accordance with IFRS; and 
d) 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 a 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.
The directors’ are responsible for the maintenance and integrity of the corporate and ﬁnancial information included on
the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of ﬁnancial
statements may differ from legislation in other jurisdictions. Independent Auditors’
Report
30 Filtronic plc Annual Report 2006
Independent auditors’ report to the members of Filtronic plc
We have audited the group and parent company ﬁnancial statements (the ‘’ﬁnancial statements’’) of Filtronic plc for the
year ended 31 May 2006 which comprise the group and parent company income statements, the group and parent
company balance sheets, the group and parent company cash ﬂow statements, the group and parent company
statements of recognised income and expense, 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 auditors’ 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
European Union are set out in the statement of directors’ responsibilities on page 29.
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 directors’ report is consistent with the ﬁnancial
statements. The information given in the directors’ report includes that speciﬁc information presented in the business
review that is cross referenced from the business review 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. Independent Auditors’
Report
Filtronic plc Annual Report 2006 31
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:
● the ﬁnancial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of
the state of the group’s and the parent company’s affairs as at 31 May 2006 and of the group’s and the parent
company’s proﬁt for the year then ended; 
● 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
● the information given in the directors’ report is consistent with the ﬁnancial statements.
KPMG Audit Plc
Chartered Accountants
Leeds 
Registered Auditor
31 July 2006 Consolidated
Income Statement
for the year ended 31 May 2006
Continuing Discontinued
operations operation Group
2006 2006 2006
note £000 £000 £000
Revenue 11 220,963 13,645 234,608
55 5
Operating (loss)/proﬁt 10 (4,238) 198 (4,040)
Gain on sale of property 523 – 523
Finance income 17 1,706 – 1,706
Finance costs 18 (4,934) – (4,934)
111
(Loss)/proﬁt before taxation (6,943) 198 (6,745)
Taxation 19 (1,390) – (1,390)
111
(Loss)/proﬁt after taxation (8,333) 198 (8,135)
Gain on sale of discontinued operation 20 – 14,146 14,146
111
(Loss)/proﬁt for the period (8,333) 14,344 6,011
55 5
(Loss)/earnings per share
Basic 21 (11.13)p 19.16p 8.03p
Diluted 21 (11.13)p 19.15p 8.02p
The (loss)/proﬁt for the period is attributable to the equity shareholders of the parent company Filtronic plc.
32 Filtronic plc Annual Report 2006 Consolidated
Income Statement
for the year ended 31 May 2005
Continuing Discontinued
operations operation Group
2005 2005 2005
note £000 £000 £000
Revenue 11 212,891 49,974 262,865
55 5
Operating proﬁt 10 5,650 5,554 11,204
Gain on sale of property 2,356 – 2,356
Finance income 17 1,988 – 1,988
Finance costs 18 (6,005) – (6,005)
111
Proﬁt before taxation 3,989 5,554 9,543
Taxation 19 (241) – (241)
111
Proﬁt after taxation 3,748 5,554 9,302
Gain on sale of discontinued operation 20 –––
111
Proﬁt for the period 3,748 5,554 9,302
55 5
Earnings per share
Basic 21 5.01p 7.43p 12.44p
Diluted 21 5.00p 7.41p 12.41p
The proﬁt for the period is attributable to the equity shareholders of the parent company Filtronic plc.
Filtronic plc Annual Report 2006 33 Consolidated Statement of
Recognised Income
and Expense
for the year ended 31 May 2006
Group
2006 2005
£000 £000
Proﬁt for the period 6,011 9,302
1 1
Actuarial loss on deﬁned beneﬁt pension scheme (2,849) (6,784)
Transfer to income from translation reserve related to business disposal (42) –
Currency translation movement arising on consolidation (531) 1,314
1 1
(3,422) (5,470)
1 1
1 1
Total recognised income and expense for the period 2,589 3,832
5 5
The total recognised income and expense for the period is attributable to the equity shareholders of the parent
company Filtronic plc.
34 Filtronic plc Annual Report 2006 Consolidated Balance Sheet
at 31 May 2006
Group
2006 2005
note £000 £000
Non-current assets
Goodwill 22 2,723 31,400
Property, plant and equipment 24 69,248 79,793
Deferred tax 25 2,249 2,309
1 1
74,220 113,502
1 1
Current assets
Inventories 26 33,623 34,802
Trade and other receivables 27 67,615 67,924
Income tax receivable 550 –
Cash and cash equivalents 28 5,293 6,563
1 1
107,081 109,289
1 1
1 1
Total assets 181,301 222,791
1 1
Current liabilities
Bank overdraft 29 – 5,958
Bank revolving credit 29 18,000 –
Bank loan 29 – 11,000
Trade and other payables 30 41,412 49,844
Income tax payable 1,764 1,880
1 1
61,176 68,682
1 1
Non-current liabilities
Bank loan 29 – 33,000
Deﬁned beneﬁt pension 32 20,585 16,149
Deferred income 33 4,475 10,730
Deferred tax 34 688 661
1 1
25,748 60,540
1 1
1 1
Total liabilities 86,924 129,222
1 1
1 1
Net assets 94,377 93,569
5 5
Equity
Share capital 35 7,484 7,484
Share premium 36 139,172 139,172
Translation reserve 36 698 1,302
Other reserve 36 6,237 5,584
Accumulated losses 38 (59,214) (59,973)
1 1
Total equity 94,377 93,569
5 5
The total equity is attributable to the equity shareholders of the parent company Filtronic plc.
Approved by the Board on 31 July 2006 and signed on its behalf by
Professor J D Rhodes CBE FRS FREng
Group CEO
Filtronic plc Annual Report 2006 35 36 Filtronic plc Annual Report 2006
Consolidated Cash Flow
Statement
for the year ended 31 May 2006
Group
2006 2005
£000 £000
Cash ﬂows from operating activities
Proﬁt for the period 6,011 9,302
Gain on sale of discontinued operation (14,146) –
Taxation 1,390 241
Finance costs 4,934 6,005
Finance income (1,706) (1,988)
Gain on sale of property (523) (2,356)
1 1
Operating (loss)/proﬁt (4,040) 11,204
Deﬁned beneﬁt pension charge/(credit) 3,624 (422)
Deﬁned beneﬁt pension contributions paid (2,561) (2,029)
Share-based payment 240 291
Depreciation 11,744 14,572
Loss/(gain) on sale of plant and equipment 402 (235)
Licence fee released to income (2,335) (2,335)
Government grants released to income (3,920) (693)
Government grants received – 1,000
Government grants repaid – (150)
Movement in inventories (3,215) 2,107
Movement in trade and other receivables 1,490 (13,249)
Movement in trade and other payables 1,086 10,384
1 1
Cash ﬂow from operations 2,515 20,445
Tax paid (1,998) (1,846)
1 1
Net cash from operating activities 517 18,599
1 1 Consolidated Cash Flow
Statement
for the year ended 31 May 2006
Group
2006 2005
note £000 £000
Net cash from operating activities 517 18,599
1 1
Cash ﬂows from investing activities
Proceeds from sale of property 3,508 6,349
Proceeds from sale of plant and equipment 348 1,555
Interest received 172 85
Purchases of property, plant and equipment (14,422) (12,963)
Sale of discontinued operation 44,138 –
1 1
Net cash from investing activities 33,744 (4,974)
1 1
Cash ﬂows from ﬁnancing activities
Bank revolving credit drawn 18,000 –
Bank loan repaid (44,000) (6,000)
Bank borrowing facilities fees paid (543) –
Interest paid (1,841) (4,189)
Dividends paid (2,021) (2,018)
1 1
Net cash from ﬁnancing activities (30,405) (12,207)
1 1
Increase in cash and cash equivalents 3,856 1,418
Currency exchange gain on sale of discontinued operation 1,007 –
Currency exchange movement (175) 486
Opening cash and cash equivalents 605 (1,299)
1 1
Closing cash and cash equivalents 28 5,293 605
5 5
Filtronic plc Annual Report 2006 37 38 Filtronic plc Annual Report 2006
Company
Income Statement
for the year ended 31 May 2006
Company
2006 2005
note £000 £000
Operating loss 10 (5,213) (3,243)
Gain on sale of investment in subsidiary 46,210 –
Impairment of investments in subsidiaries (2,572) (600)
Provision for doubtful group receivables (6,042) (2,000)
Dividends from subsidiaries – 2,789
Finance income 17 1,766 1,702
Finance costs 18 (4,406) (6,005)
1 1
Proﬁt/(loss) before taxation 29,743 (7,357)
Taxation 19 – –
1 1
Proﬁt/(loss) after taxation 29,743 (7,357)
1 1
Proﬁt/(loss) for the period 29,743 (7,357)
5 5
Company Statement of
Recognised Income and
Expense
for the year ended 31 May 2006
Company
2006 2005
£000 £000
Proﬁt/(loss) for the period 29,743 (7,357)
Actuarial loss on deﬁned beneﬁt pension scheme (2,849) (6,784)
1 1
Total recognised income and expense for the period 26,894 (14,141)
5 5 Company
2006 2005
note £000 £000
Non-current assets
Investments in subsidiaries 23 122,987 126,764
Property, plant and equipment 24 9,154 9,502
1 1
132,141 136,266
1 1
Current assets
Trade and other receivables 27 143,804 123,542
Cash and cash equivalents 28 2,960 4,000
1 1
146,764 127,542
1 1
1 1
Total assets 278,905 263,808
1 1
Current liabilities
Bank overdraft 29 – 6,022
Bank revolving credit 29 18,000 –
Bank loan 29 – 11,000
Trade and other payables 30 46,596 28,805
Income tax payable 1,491 1,487
1 1
66,087 47,314
1 1
Non-current liabilities
Bank loan 29 – 33,000
Deﬁned beneﬁt pension 32 20,585 16,149
1 1
20,585 49,149
1 1
1 1
Total liabilities 86,672 96,463
1 1
1 1
Net assets 192,233 167,345
5 5
Equity
Share capital 35 7,484 7,484
Share premium 36 139,172 139,172
Retained earnings 38 45,577 20,689
1 1
Total equity 192,233 167,345
5 5
Approved by the Board on 31 July 2006 and signed on its behalf by
Professor J D Rhodes CBE FRS FREng 
Group CEO
Filtronic plc Annual Report 2006 39
Company Balance Sheet
at 31 May 2006 40 Filtronic plc Annual Report 2006
Company Cash Flow
Statement
for the year ended 31 May 2006
Company
2006 2005
£000 £000
Cash ﬂows from operating activities
Proﬁt/(loss) for the period 29,743 (7,357)
Finance costs 4,406 6,005
Finance income (1,766) (1,702)
Dividends from subsidiaries – (2,789)
Provision for doubtful group receivables 6,042 2,000
Impairment of investments in subsidiaries 2,572 600
Gain on sale of investment in subsidiary (46,210) –
1 1
Operating loss (5,213) (3,243)
Share-based payment 15 113
Deﬁned beneﬁt pension operating charge/(credit) 1,063 (2,451)
Depreciation 390 384
Movement in trade and other receivables (14,985) 90,550
Movement in trade and other payables 17,791 24,623
1 1
Cash ﬂow from operations (939) 109,976
Tax received 4 –
1 1
Net cash from operating activities (935) 109,976
1 1 Company
2006 2005
note £000 £000
Net cash from operating activities (935) 109,976
1 1
Cash ﬂows from investing activities
Interest received 69 31
Dividends received from subsidiaries – 2,789
Purchases of property, plant and equipment (42) (175)
Group transfer of investments in subsidiaries – (120,736)
Capital repaid by subsidiary – 21,648
Sale of investment in subsidiary 35,089 –
1 1
Net cash from investing activities 35,116 (96,443)
1 1
Cash ﬂows from ﬁnancing activities
Bank revolving credit drawn 18,000 –
Bank loan repaid (44,000) (6,000)
Bank borrowing facilities fees paid (543) –
Interest paid (1,805) (4,189)
Dividends paid (2,021) (2,018)
1 1
Net cash from ﬁnancing activities (30,369) (12,207)
1 1
Increase in cash and cash equivalents 3,812 1,326
Currency exchange gain on sale of investment in subsidiary 1,007 –
Currency exchange movement 163 290
Opening cash and cash equivalents (2,022) (3,638)
1 1
Closing cash and cash equivalents 28 2,960 (2,022)
5 5
Filtronic plc Annual Report 2006 41
Company Cash Flow
Statement
for the year ended 31 May 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
1 Basis of preparation
Financial position and market conditions
The group currently has agreed facilities of £35m with its bankers consisting of a term loan of £15m, a revolving
multicurrency facility of £18m and an overdraft of £2m. Unless previously repaid, the term loan is required to be
repaid by 30 November 2006 and the revolving facility is required to be repaid by 31 August 2008.
These existing facility arrangements also require that, in the event that the proposed disposal of the Wireless
Infrastructure business to Powerwave (as referred to below) does not complete, the group is required to agree
revised ﬁnancial covenants in relation to its facilities by 30 September 2006.
The group has signed an agreement with Powerwave for the disposal of its Wireless Infrastructure business for a
consideration of $150m (approximately £81m) cash and 20.7m shares of Powerwave’s common stock, due for
completion before 30 September 2006. This has not been completed. On the assumption this completion occurs by
30 September 2006, the cash consideration received would be utilised to repay existing bank facilities and provide
additional capital for the remaining group. The directors have prepared business plans and forecasts for the
remaining group on this basis and believe there to be sufﬁcient working capital for the foreseeable future.
In the event that a sale does not complete as envisaged, the group would continue with its existing business plans
incorporating the Wireless Infrastructure business.
The group currently beneﬁts from sustained demand proﬁles for its volume product divisions that are providing
good visibility of key customers’ forecast demand well into the second half of the ﬁnancial year ending 31 May 2007.
The phased rate of increase in Compound Semiconductors’ production capacity, along with its current demand
continuing to be greater than the growth in its output, as capacity utilisation is increased, limits the uncertainty of
the ﬁnancial support required for this activity. 
The group though operates in fast-changing, demand-led markets with a limited number of sophisticated customers
who demand consistent high quality product. Thus the group remains exposed to changes in demand and issues
arising from its complex operating environment including achievement of target cost reduction plans.
As part of their assessment of the appropriateness of the preparation of the ﬁnancial statements on the going
concern basis, the directors have modelled various scenarios reﬂecting the dynamics referred to above. They are
therefore conﬁdent that the group’s current facility arrangements would be adequate and that revised ﬁnancial
covenants would be agreed with the company’s bankers.
On the bases above, the directors believe that the group will have sufﬁcient working capital for the foreseeable
future and therefore that it is appropriate for the ﬁnancial statements to be prepared on the going concern basis.
42 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
2 Basis of preparation
International Financial Reporting Standards
These ﬁnancial statements have been prepared on the basis of International Financial Reporting Standards as
adopted by the European Union (IFRS). The ﬁnancial statements for the year ended 31 May 2006 are the ﬁrst full IFRS
ﬁnancial statements for the group and the company. The date of transition to IFRS is 1 June 2004. The ﬁnancial
statements for the comparative period has been restated on the basis of IFRS. Reconciliations from UK GAAP to IFRS
of the proﬁt/(loss) for the period and total equity for the comparative period and total equity at the transition date
are set out in note 3. Explanations of the differences between the UK GAAP and the IFRS ﬁnancial statements are
provided in note 4. The group has elected to take certain IFRS ﬁrst-time adoption options and these are described
in note 5.
The accounting policies adopted when reporting under UK GAAP have been revised where necessary to comply
with IFRS. The accounting policies adopted by the group and the company under IFRS are laid out in note 6. The
accounting policies have been applied consistently to both the periods presented in these ﬁnancial statements.
3 Reconciliations from UK GAAP to IFRS
The reconciliations from UK GAAP to IFRS of the proﬁt/(loss) for the period and total equity for the comparative
period and total equity at the transition date 1 June 2004 are as follows:
Group Company
2005 2005
£000 £000
Proﬁt/(loss) for the period per UK GAAP 5,312 (9,303)
Goodwill amortisation 2,222 –
Share-based payments (248) (70)
Deﬁned beneﬁt pension operating (charge)/credit 2,451 2,451
Deﬁned beneﬁt pension net ﬁnance cost (435) (435)
11
Proﬁt/(loss) for the period per IFRS 9,302 (7,357)
55
Group Company
2005 2004 2005 2004
£000 £000 £000 £000
Total equity per UK GAAP 105,778 101,113 181,759 193,040
Proposed dividends 1,347 1,344 1,347 1,344
SSAP 24 pension accrual 388 388 388 388
Deﬁned beneﬁt pension liability (16,149) (11,381) (16,149) (11,381)
Goodwill amortisation 2,222–––
Goodwill currency translation movement (17) – – –
1111
Total equity per IFRS 93,569 91,464 167,345 183,391
5555
Filtronic plc Annual Report 2006 43 Notes to the
Financial Statements
for the year ended 31 May 2006
4 Differences between the UK GAAP and the IFRS financial statements
Explanations of the differences between the UK GAAP and the IFRS ﬁnancial statements are as follows:
Presentation of financial statements
The formats of the income statement, balance sheet and particularly the cash ﬂow statement are different under IFRS
as compared to those used for UK GAAP .
Segment reporting
The reportable business segments were redeﬁned to comply with the requirements of IAS 14 Segment Reporting.
Each reportable business segment is subject to risks and returns that are different from the other business segments.
Goodwill
Goodwill is not amortised under IFRS. Instead goodwill is subject to annual impairment testing, which indicated
there was no impairment.
Share-based payment
Under IFRS, the fair value of share options at the date of grant is expensed in the income statement over the vesting
periods of the options.
Defined benefit pension
IAS 19 Employee Beneﬁts requires the separate recognition of the operating and ﬁnancing costs of the deﬁned
beneﬁt pension scheme in the income statement. Service costs are spread systematically over the working lives of
the employees. Financing costs are recognised in the periods in which they arise. There was a past service credit in
the year ended 31 May 2005 as a result of a reduction in the beneﬁts payable under the scheme. The deﬁned beneﬁt
pension liability is the present value of the deﬁned beneﬁt obligation less the fair value of the pension scheme
assets. Actuarial gains and losses are recognised immediately in the statement of recognised income and expense.
Previously under UK GAAP the deﬁned beneﬁt pension scheme was accounted for in accordance with SSAP 24. The
SSAP 24 charge to the income statement for the comparative period was the same as the employers pension
contribution for the period.
The deﬁned beneﬁt pension costs and pension liability under IAS 19 are the same as disclosed under FRS 17 in the
UK GAAP ﬁnancial statements for the year ended 31 May 2005.
Dividends
Under IFRS, interim dividends are recognised in the period they are declared, and ﬁnal dividends are recognised in
the period they are approved by shareholders. Dividends are recognised directly in equity, and not in the income
statement.
Translation reserve
Under IFRS, currency translation movements arising from the consolidation of overseas subsidiaries are accumulated
in the translation reserve, which is a separate component of equity.
Revaluation reserve
The UK GAAP revaluation reserve of £106,000 has been reclassiﬁed to accumulated losses under IFRS. The amount
was the balance on the revaluation reserve at the transition date in respect of assets that are measured on the basis
of deemed cost under IFRS.
44 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
5 IFRS first-time adoption options
The group has elected to take certain IFRS ﬁrst-time adoption options as follows:
Business combinations
All prior business combination accounting has been frozen at the transition date. This includes goodwill on the
balance sheet and goodwill deducted from equity.
Share-based payments
Only share options granted since 7 November 2002 have been fair valued and expensed in the income statement
over the vesting periods.
Foreign exchange
The translation reserve arising from the consolidation of foreign subsidiaries was set to zero at the transition date.
Filtronic plc Annual Report 2006 45 Notes to the
Financial Statements
for the year ended 31 May 2006
6 Accounting policies
Basis of accounting
The ﬁnancial statements have been prepared in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRS).
The ﬁnancial statements have been prepared under the historical cost convention.
The accounting policies have been applied consistently throughout the group.
Basis of consolidation
The ﬁnancial statements consolidate the income statements, balance sheets and cash ﬂow statements of the
company and all of its subsidiaries.
Subsidiaries are all entities over which the group has the power to govern the ﬁnancial and operating policies.
Subsidiaries are consolidated from the date on which control is transferred to the group, and are not consolidated
from the date that control ceases.
Intra group transactions and balances are eliminated on consolidation.
Segment reporting
The business segments are the primary segments and the geographical origin segments are the secondary
segments. Each reportable segment is subject to risks and returns that are different from the other segments.
Foreign currency translation
The functional currency of each group company is the currency of the primary economic environment in which
the group company operates. The ﬁnancial statements are presented in sterling which is the functional and
presentational currency of the company.
Transactions denominated in foreign currencies are translated into the functional currency of each group company
at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are translated into sterling at the rate of exchange ruling at the balance sheet date.
Foreign exchange gains and losses arising on the settlement of such transactions and translation of monetary assets
and liabilities are recognised in the income statement.
On consolidation, the ﬁnancial statements of subsidiaries with a functional currency other than sterling are translated
into sterling as follows:
– The assets and liabilities in their balance sheets plus any goodwill are translated at the rate of exchange ruling at
the balance sheet date.
– The income statements and cash ﬂow statements are translated at the average rate of exchange for the period.
Currency translation movements arising on the translation of the net investments in foreign subsidiaries are
recognised in the translation reserve, which is a separate component of equity.
46 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
6 Accounting policies (continued)
Revenue
Revenue is recognised for goods and services provided to customers during the period. Revenue excludes any
related value added or sales tax.
Research and development
All research costs are expensed as incurred.
Development costs chargeable to the customer are recognised as an expense in the same period as the associated
customer revenue.
Development costs incurred on projects requiring product qualiﬁcation tests to satisfy customer speciﬁcations are
generally expensed as incurred, reﬂecting the technical risks associated with meeting the resultant product
qualiﬁcation test.
Development costs incurred on projects are capitalised where ﬁrstly the technical feasibility can be tested against
relevant milestones, secondly the probable revenue stream foreseen over the life of the resulting product can
support the development and thirdly sufﬁcient resources are available to complete the development. These
capitalised costs are amortised on a straight line basis over the expected life of the associated product.
Once a new product is qualiﬁed, further development costs are expensed as they arise because they are incurred in
response to continual customer demand to enhance the product functionality and to reduce product selling prices.
Government grants
Government grants related to operating expenditure are recognised in the income statement in the same period as
the expenditure. Government grants related to capital expenditure are recognised in the income statement over the
expected life of the assets.
Operating leases
Operating lease rentals are charged to the income statement on a straight line basis over the lease term.
Share-based payments
The group operates share option schemes, under which share options are granted to certain employees. The
granting of the share options is a share-based payment.
The fair value of the share options at the date of grant is calculated using an option pricing model, taking into
account the terms and conditions applicable to the option grant. The fair value of the number of share options
expected to vest is expensed in the income statement on a straight line basis over the expected vesting period.
Each reporting period these vesting expectations are revised as appropriate.
A credit is made to equity, equal to the share-based payment expense in the period.
Filtronic plc Annual Report 2006 47 Notes to the
Financial Statements
for the year ended 31 May 2006
6 Accounting policies (continued)
Goodwill
Goodwill represents the excess of the cost of acquisitions over the fair value of the net identiﬁable assets of the
subsidiary acquired at the date of acquisition. Goodwill is stated at cost less any accumulated impairment losses.
Goodwill, which is allocated to cash generating units, is tested for impairment annually and when there is an
indication of impairment. If impaired, the goodwill carrying value is written down to its recoverable amount.
Investments in subsidiaries
Investments in subsidiaries are stated in the company’s ﬁnancial statements at cost less any accumulated impairment
losses.
Investments in subsidiaries are tested for impairment when there is an indication of impairment.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and less any accumulated
impairment losses.
Depreciation is provided on a straight line basis over the estimated useful lives of the assets as follows:
Land Not depreciated
Buildings 50 years
Plant and equipment 3 to 10 years
Property, plant and equipment are tested for impairment when there is an indication of impairment. If impaired, the
carrying values of the assets are written down to their recoverable amounts.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises weighted average cost of
materials and components together with attributable direct labour and overheads. Net realisable value is the
estimated selling price less estimated costs of completion and sale.
Trade and other receivables
Trade and other receivables are stated net of any provision for doubtful debts.
Cash and cash equivalents
Cash and cash equivalents comprises cash balances and bank deposits with an original maturity of three months or
less. Bank overdrafts that are repayable on demand and form an integral part of the group’s cash management are
included as a component of cash and cash equivalents for the purpose of the cash ﬂow statement.
Net debt
Net debt is cash and cash equivalents less bank overdrafts, bank revolving credits and bank loans.
48 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
6 Accounting policies (continued)
Defined contribution pension schemes
Deﬁned contribution pension schemes are operated for overseas employees. Contributions are recognised as an
expense in the income statement as incurred.
Defined benefit pension scheme
A deﬁned beneﬁt pension scheme is operated for United Kingdom employees. The deﬁned beneﬁt pension liability
is the present value of the deﬁned beneﬁt obligation less the fair value of the pension scheme assets. The deﬁned
beneﬁt obligation is calculated by independent actuaries using the projected unit measure. The discount rate used
to calculate the present value of the deﬁned beneﬁt obligation is the yield on AA credit rated corporate bonds that
have maturity dates approximating the terms of the beneﬁt obligations.
Service costs are spread systematically over the working lives of the employees, and are recognised within operating
costs in the income statement. Financing costs are recognised in the periods in which they arise within ﬁnance costs
in the income statement.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised
immediately in the statement of recognised income and expense.
Deferred taxation
Deferred tax is provided using the balance sheet liability method. Provision is made for temporary differences
between the carrying amounts of assets and liabilities in the ﬁnancial statements and the amounts for taxation
purposes.
Temporary differences are not provided for the initial recognition of assets or liabilities that affect neither accounting
nor taxable proﬁt. No provision is made for differences relating to investments in subsidiaries to the extent that they
will probably not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying
amount of the assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.
Deferred tax assets are recognised only to the extent that it is probable that future taxable proﬁts will be available
against which the asset can be utilised.
Share capital
Ordinary shares issued are classiﬁed as share capital in equity.
Dividends
Interim dividends are recognised in equity in the period they are declared. Final dividends are recognised in equity
in the period they are approved by shareholders.
Filtronic plc Annual Report 2006 49 Notes to the
Financial Statements
for the year ended 31 May 2006
6 Accounting policies (continued)
Non-current assets held for sale and discontinued operations
Non-current assets and disposal groups classiﬁed as held for sale are recognised at the lower of carrying amount
and fair value less costs to sell. No depreciation is provided on property, plant and equipment once they are
classiﬁed as held for sale.
Non-current assets and disposal groups are classiﬁed as held for sale if their carrying amount will be recovered
through a sale transaction rather than continuing use. The condition is regarded as met only when the sale is highly
probable and the asset or disposal group is available for immediate sale in its present condition. The directors must
be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year
from the date of classiﬁcation.
A discontinued operation is a component of the group’s activities that represents a separate business operation.
Classiﬁcation as a discontinued operation occurs upon disposal or if earlier when the operation meets the criteria to
be classiﬁed as held for sale.
7 Accounting estimates and judgements
The preparation of the ﬁnancial statements requires the use of accounting estimates and judgements, that affect the
application of accounting policies and reported amounts of assets and liabilities, income and expenses.
The accounting estimates and judgements are continually evaluated. They are based on historical experience and
other factors, including expectations of the future, that are believed to be reasonable under the circumstances.
Actual results may differ from the expected results.
The accounting estimates and judgements that have a signiﬁcant effect on the ﬁnancial statements are considered
below. 
Goodwill
The carrying amount of goodwill is tested at least annually for impairment. The recoverable amount of the cash
generating unit has been determined based on value in use calculations using cash ﬂow forecasts. The cash ﬂow
forecasts require the use of estimates and judgements about the future performance of the cash generating unit.
Group receivables
At least annually an assessment is made of the recoverability of group receivables in the company’s balance sheet.
As a result of this assessment group receivables are provided for if impaired. The assessment of the recoverability
for certain group receivables is determined based on the cash ﬂow forecasts for the respective subsidiary. The cash
ﬂow forecasts require the use of estimates and judgements about the future performance of the subsidiary.
Deferred tax asset
The recognition of the deferred tax asset relating to tax losses carried forward depends on forecasts of the future
taxable proﬁts of certain subsidiaries. These forecasts require the use of estimates and judgements about the future
performance of the respective subsidiaries.
Defined benefit pension liability
The carrying amount of the deﬁned beneﬁt pension liability is based on actuarial valuations. The valuations are
based on estimates and judgements about the future, in particular the average life expectancy of pensioners.
50 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
8 Business segment analysis
The business segments were redeﬁned with effect from 1 June 2005. The business segment results for the
comparative period have been re-analysed to be consistent with the current period.
The group comprises the following business segments:
Wireless Infrastructure
Wireless Infrastructure designs and manufacturers RF transmit/receive ﬁlters, power ampliﬁers and back haul radio
products for base stations used in wireless telecommunication networks.
Defence Electronics
Defence Electronics designs and manufactures RF components and subsystems for military applications and digital
signal processing products.
Compound Semiconductors
Compound Semiconductors designs and manufactures compound semiconductors for mobile telephone handset,
wireless infrastructure and defence electronic applications.
Central Services
Central Services comprises a central research and development function, along with group management, ﬁnance
and legal functions.
Handset Products – discontinued operation
Handset Products designed and manufactured RF antennas for mobile telephone handsets. The business was sold
on 8 September 2005.
Filtronic plc Annual Report 2006 51 Notes to the
Financial Statements
for the year ended 31 May 2006
8 Business segment analysis (continued)
Group
2006 2005
£000 £000
Revenue
Wireless Infrastructure 172,700 177,733
Defence Electronics 32,079 31,590
Compound Semiconductors 20,756 8,572
Inter segment (4,572) (5,004)
1 1
Continuing operations 220,963 212,891
Handset Products – discontinued operation 13,645 49,974
1 1
234,608 262,865
5 5
Operating (loss)/proﬁt
Wireless Infrastructure 5,525 17,524
Defence Electronics 564 3,070
Compound Semiconductors (5,114) (11,701)
Central Services (4,150) (5,694)
Unallocated pension (charge)/credit (1,063) 2,451
1 1
Continuing operations (4,238) 5,650
Handset Products – discontinued operation 198 5,554
1 1
Operating (loss)/proﬁt (4,040) 11,204
Gain on sale of property 523 2,356
Finance income 1,706 1,988
Finance costs (4,934) (6,005)
1 1
(Loss)/proﬁt before taxation (6,745) 9,543
Taxation (1,390) (241)
1 1
(Loss)/proﬁt after taxation (8,135) 9,302
5 5
The operating (loss)/proﬁt is stated after crediting the release of deferred income as follows:
2006 2005
£000 £000
Wireless Infrastructure – government grants 416 62
Defence Electronics – government grants 64 2
Compound Semiconductors – licence fee 2,335 2,335
– government grants 3,440 629
1 1
6,255 3,028
5 5
52 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
8 Business segment analysis (continued)
Group
2006 2005
£000 £000
Depreciation
Wireless Infrastructure 5,792 5,662
Defence Electronics 1,269 1,824
Compound Semiconductors 4,293 3,840
Central Services 390 384
1 1
Continuing operations 11,744 11,710
Handset Products – discontinued operation – 2,862
1 1
11,744 14,572
5 5
Capital expenditure
Wireless Infrastructure 5,986 6,362
Defence Electronics 1,351 913
Compound Semiconductors 6,070 1,043
Central Services 42 175
1 1
Continuing operations 13,449 8,493
Handset Products – discontinued operation 973 4,470
1 1
14,422 12,963
5 5
Filtronic plc Annual Report 2006 53 Notes to the
Financial Statements
for the year ended 31 May 2006
8 Business segment analysis (continued)
Group
2006 2005
£000 £000
Assets
Wireless Infrastructure 101,674 104,456
Defence Electronics 18,790 23,674
Compound Semiconductors 41,153 33,995
Central Services 273 1,285
1 1
Continuing operations 161,890 163,410
Handset Products – discontinued operation – 50,509
1 1
Total segment assets 161,890 213,919
Business sale consideration receivable 11,319 –
Deferred tax 2,249 2,309
Income tax receivable 550 –
Cash and cash equivalents 5,293 6,563
1 1
Total assets 181,301 222,791
5 5
Liabilities
Wireless Infrastructure 26,902 29,021
Defence Electronics 8,842 6,245
Compound Semiconductors 8,789 12,690
Central Services 1,354 1,414
1 1
Continuing operations 45,887 49,370
Handset Products – discontinued operation – 11,204
1 1
Total segment liabilities 45,887 60,574
Bank overdraft – 5,958
Bank revolving credit 18,000 –
Bank loan – 44,000
Income tax payable 1,764 1,880
Deﬁned beneﬁt pension 20,585 16,149
Deferred tax 688 661
1 1
Total liabilities 86,924 129,222
5 5
54 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
9 Geographical origin segment analysis
Group
2006 2005
£000 £000
Revenue
United Kingdom 116,266 106,447
Finland 37,651 31,214
Hungary 3,402 –
United States of America 53,026 65,880
China 61,153 57,147
Australia 1,481 4,300
Inter segment (52,016) (52,097)
1 1
Continuing operations 220,963 212,891
1 1
Finland 4,405 23,220
China 11,067 29,841
Inter segment (1,827) (3,087)
1 1
Discontinued operation 13,645 49,974
1 1
234,608 262,865
5 5
Operating (loss)/proﬁt
United Kingdom (15,659) (20,798)
Finland 1,439 3,041
Hungary (412) –
United States of America 343 9,538
China 11,305 16,198
Australia (1,254) (2,329)
1 1
Continuing operations (4,238) 5,650
1 1
Finland (3,190) (2,923)
China 3,388 8,477
1 1
Discontinued operation 198 5,554
1 1
Operating (loss)/proﬁt (4,040) 11,204
Gain on sale of property 523 2,356
Finance income 1,706 1,988
Finance costs (4,934) (6,005)
1 1
(Loss)/proﬁt before taxation (6,745) 9,543
Taxation (1,390) (241)
1 1
(Loss)/proﬁt after taxation (8,135) 9,302
5 5
Filtronic plc Annual Report 2006 55 Notes to the
Financial Statements
for the year ended 31 May 2006
9 Geographical origin segment analysis (continued)
Group
2006 2005
£000 £000
Depreciation
United Kingdom 7,817 8,056
Finland 831 784
Hungary 68 –
United States of America 1,498 1,560
China 1,406 812
Australia 124 498
1 1
Continuing operations 11,744 11,710
1 1
Finland – 1,595
China – 1,267
1 1
Discontinued operation – 2,862
1 1
11,744 14,572
5 5
Capital expenditure
United Kingdom 8,106 4,285
Finland 492 273
Hungary 737 –
United States of America 2,188 1,549
China 1,888 2,336
Australia 38 50
1 1
Continuing operations 13,449 8,493
1 1
Finland 569 3,757
China 404 713
1 1
Discontinued operation 973 4,470
1 1
14,422 12,963
5 5
56 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
9 Geographical origin segment analysis (continued)
Group
2006 2005
£000 £000
Assets
United Kingdom 108,006 91,431
Finland 16,665 18,708
Hungary 6,097 –
United States of America 32,396 43,474
China 17,162 16,794
Australia 975 1,804
1 1
Continuing operations 181,301 172,211
1 1
Finland – 41,315
China – 9,265
1 1
Discontinued operation – 50,580
1 1
Total assets 181,301 222,791
5 5
Liabilities
United Kingdom 63,390 90,359
Finland 6,654 6,657
Hungary 1,952 –
United States of America 5,276 8,739
China 9,594 11,504
Australia 58 717
1 1
Continuing operations 86,924 117,976
1 1
Finland – 6,213
China – 5,033
1 1
Discontinued operation – 11,246
1 1
Total liabilities 86,924 129,222
5 5
Filtronic plc Annual Report 2006 57 Notes to the
Financial Statements
for the year ended 31 May 2006
10 Operating (loss)/profit
Continuing Discontinued
operations operation Group
2006 2006 2006
£000 £000 £000
Revenue 220,963 13,645 234,608
555
Raw materials and consumables 110,924 8,045 118,969
111
Wages and salaries 55,021 1,653 56,674
Social security costs 5,061 338 5,399
Pension costs 5,223 82 5,305
Share-based payments 59 181 240
111
Staff costs 65,364 2,254 67,618
111
Depreciation 11,744 – 11,744
111
Other operating charges 37,169 3,148 40,317
111
111
Operating costs 225,201 13,447 238,648
555
111
Operating (loss)/proﬁt (4,238) 198 (4,040)
555
The operating loss for continuing operations is stated after charging the costs described in note 12 and crediting
the income described in note 13.
58 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
10 Operating (loss)/profit (continued)
Continuing Discontinued
operations operation Group
2005 2005 2005
£000 £000 £000
Revenue 212,891 49,974 262,865
555
Raw materials and consumables 100,510 25,277 125,787
111
Wages and salaries 55,240 6,891 62,131
Social security costs 5,196 1,393 6,589
Pension costs 966 558 1,524
Share-based payments 228 63 291
111
Staff costs 61,630 8,905 70,535
111
Depreciation 11,710 2,862 14,572
111
Other operating charges 33,391 7,376 40,767
111
111
Operating costs 207,241 44,420 251,661
555
111
Operating proﬁt 5,650 5,554 11,204
555
Filtronic plc Annual Report 2006 59 Notes to the
Financial Statements
for the year ended 31 May 2006
10 Operating (loss)/profit (continued)
Company
2006 2005
£000 £000
Wages and salaries 2,356 1,932
Social security costs 242 213
Pension costs 203 161
Share-based payments 15 70
1 1
Staff costs 2,816 2,376
1 1
Depreciation 390 384
1 1
Other operating charges 2,155 2,226
1 1
Research and development costs recharged (to)/from other group companies (1,211) 708
1 1
Deﬁned beneﬁt pension operating charge/(credit) 1,063 (2,451)
1 1
1 1
Operating costs 5,213 3,243
5 5
1 1
Operating loss (5,213) (3,243)
5 5
11 Revenue analysis by destination
Group
2006 2005
£000 £000
United Kingdom 10,744 9,865
Europe 128,050 118,691
Americas 49,969 58,216
Asia Paciﬁc 32,200 26,119
1 1
Continuing operations 220,963 212,891
1 1
United Kingdom 734 1,582
Europe 9,631 21,562
Americas 1,814 1,396
Asia Paciﬁc 1,466 25,434
1 1
Discontinued operation 13,645 49,974
1 1
1 1
234,608 262,865
5 5
60 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
12 Reorganisation costs
Operating (loss)/proﬁt is stated after charging reorganisation costs:
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Closure costs of the Wireless Infrastructure facility
in Australia 1,080 – – –
Closure costs of the Compound Semiconductors
facility in California, USA 406 – – –
Inventory write down in the US Defence
Electronics business 1,516 – – –
1 1 1 1
3,002 – – –
5 5 5 5
The write down of the inventory in the US Defence Electronics business has arisen as a result of its strategic
repositioning and after its move to a new facility.
13 Government grants released
During the year £2,717,000 (2005 nil) of deferred government grants, related to the Compound Semiconductors
facility at Newton Aycliffe, County Durham, were released to income following the renegotiation of their
arrangements.
14 Operating items
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Operating proﬁt is stated after charging/(crediting):
Research and development costs 27,647 31,082 559 2,869
Loss/(gain) on sale of plant and equipment 402 (235) – –
Operating lease rentals 2,808 3,051 37 49
Licence fee released (2,335) (2,335) – –
Government grants released (see note 13) (3,920) (693) – –
Auditors’ remuneration
– audit services – statutory audit 315 216 92 63
– audit related regulatory reporting 15 44 15 44
– tax services – compliance 25 22 – –
– advisory 24 20 13 20
– further assurance services 22 75 – 75
5 5 5 5
In addition the auditors were remunerated £568,000 (2005 nil) for services provided in connection with the disposal
of the Handset Products business, and this is included in the sale costs.
Filtronic plc Annual Report 2006 61 Notes to the
Financial Statements
for the year ended 31 May 2006
15 Employees
The average number of people employed by the group comprised:
Group
2006 2005
Number Number
Business segment
Wireless Infrastructure 2,305 2,267
Defence Electronics 327 357
Compound Semiconductors 291 241
Central Services 30 34
1 1
Continuing operations 2,953 2,899
Handset Products – discontinued operations 333 1,019
1 1
3,286 3,918
5 5
Geographical segment
United Kingdom 991 1,194
Finland 350 319
Hungary 122 –
United States of America 447 461
China 1,023 816
Australia 20 108
Japan – 1
1 1
Continuing operations 2,953 2,899
Finland 64 249
China 269 770
1 1
Discontinued operation 333 1,019
1 1
3,286 3,918
5 5
The average number of people employed by the company was 30 (2005 34).
62 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
16 Compensation of directors and key management
Details of the remuneration, pension entitlements and share options of the individual directors are set out in the
remuneration report on pages 23 to 28. The compensation of the directors was:
2006 2005
£000 £000
Salary or fees 1,475 1,229
Bonuses 70 –
Beneﬁts 91 72
Compensation for loss of ofﬁce 163 –
1 1
Total remuneration excluding pension contributions and share-based payments 1,799 1,301
Pension contributions 334 89
Share-based payments 39 77
1 1
2,172 1,467
5 5
In addition to the directors of the company, the key management of the group also includes Geoffrey Fletcher,
Managing Director of the Wireless Infrastructure division. The compensation of Geoffrey Fletcher was:
2006 2005
£000 £000
Salary 173 135
Bonus – 25
Beneﬁts 9 8
1 1
Total remuneration excluding pension contributions and share-based payments 182 168
Pension contributions 15 13
Share-based payments 17 –
1 1
214 181
5 5
On 16 March 2006 Geoffrey Fletcher was granted 250,000 share options with an exercise price of 171p and exercise
period 1 October 2007 to 16 March 2016. Under the terms of his service contract, subject to certain performance
conditions, if he remains employed by the group until 1 October 2007 from that date he will have the right to
relinquish his share options in exchange for either 85,000 shares or a £200,000 cash payment.
The directors and key management are related parties.
Filtronic plc Annual Report 2006 63 Notes to the
Financial Statements
for the year ended 31 May 2006
17 Finance income
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Interest income 172 85 69 31
Expected return on pension scheme assets 1,534 1,381 1,534 1,381
Currency exchange gains – 522 163 290
1 1 1 1
1,706 1,988 1,766 1,702
5 5 5 5
18 Finance costs
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Interest expense 1,841 4,189 1,805 4,189
Bank borrowing facilities fees 543 – 543 –
Interest on pension scheme liabilities 2,058 1,816 2,058 1,816
Currency exchange losses 492 – – –
1 1 1 1
4,934 6,005 4,406 6,005
5 5 5 5
19 Taxation
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Current taxation
United Kingdom – 11 – –
Overseas 1,372 2,424 – –
1 1 1 1
1,372 2,435 – –
1 1 1 1
Deferred taxation
Overseas origination and reversal of timing differences 18 70 – –
Overseas tax losses recognised – (2,264) – –
1 1 1 1
18 (2,194) – –
5 5 5 5
1 1 1 1
1,390 241 – –
5 5 5 5
The current taxation charge arises primarily from the group’s operations in China and Finland, where taxable proﬁts
cannot be relieved by losses available in other jurisdictions.
The deferred taxation credit arose from the group’s operations in the United States of America, where a proportion
of the deferred tax asset relating to tax losses carried forward has been recognised.
64 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
19 Taxation (continued)
The reconciliation of the effective tax rate is as follows:
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
(Loss)/proﬁt before taxation (6,745) 9,543 29,743 (7,357)
1 1 1 1
(Loss)/proﬁt before taxation multiplied
by standard rate of corporation tax
in the UK (30%) (2,024) 30% 2,863 30% 8,923 (30%) (2,207)
Disallowable items 1% 57 1% 118 0% 27 0% 28
Disallowable share-based payments 1% 57 0% 21 –– ––
Depreciation in advance of capital
allowances 36% 2,422 37% 3,566 0% 46 1% 44
Tax allowance on impaired goodwill (41%) (2,784) (3%) (319) –– ––
Other temporary differences 3% 200 (5%) (464) –– 0% (30)
Deﬁned beneﬁt pension charge/(credit) 7% 476 (6%) (605) 2% 476 (8%) (605)
Allowable share-based payments
not recognised 0% 15 1% 54 0% 5 0% 21
Tax losses carried forward not recognised 93% 6,257 39% 3,713 2% 714 25% 1,873
Tax losses brought forward utilised –– (27%) (2,564) –– ––
Start-up years proﬁt exemption
and rate reduction in China (23%) (1,554) (26%) (2,509) –– ––
Overseas tax rate differences (26%) (1,732) (38%) (3,633) –– ––
Non-taxable gain on sale of subsidiary –– –– (47%) (13,863) ––
Impairment of investments subsidiaries –– –– 3% 772 2% 180
Provision for doubtful group receivables –– –– 6% 1,812 8% 600
Dividends from subsidiaries –– –– –– (11%) (836)
Group relief –– –– 4% 1,088 13% 932
11111111
21% 1,390 3% 241 0% – 0% –
55555555
Filtronic plc Annual Report 2006 65 Notes to the
Financial Statements
for the year ended 31 May 2006
20 Gain on sale of discontinued operation
On 8 September 2005 the Handset Products business was sold. The sale is analysed as follows:
Group
2006 2005
£000 £000
Consideration and costs
Cash consideration 47,113 –
Currency exchange gain on consideration 1,007 –
Additional cash consideration receivable in August 2006 11,433 –
Sale costs (2,881) –
Currency translation adjustment 42 –
1 1
56,714 –
5 5
Assets and liabilities sold
Goodwill 28,466 –
Property, plant and equipment 9,425 –
Inventories 4,064 –
Trade and other receivables 10,110 –
Cash and cash equivalents 208 –
Trade and other payables (9,667) –
Income tax payable (38) –
1 1
Net assets sold 42,568 –
Gain on sale of discontinued operation 14,146 –
1 1
56,714 –
5 5
The Handset Products business had the following cash ﬂows:
2006 2005
£000 £000
Cash ﬂows from operating activities (1,567) 10,358
5 5
Cash ﬂows from investing activities (973) (4,471)
5 5
66 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
21 (Loss)/earnings per share
Group
2006 2005
£000 £000
(Loss)/proﬁt for the period
– continuing operations (8,333) 3,748
– discontinued operation 14,344 5,554
1 1
(Loss)/proﬁt for the period 6,011 9,302
5 5
000 000
Weighted average number of shares 74,842 74,797
Dilution effect of share options 93 84
Dilution effect of contingently issuable shares – 45
1 1
Diluted weighted average number of shares 74,935 74,926
5 5
Basic (loss)/earnings per share
– continuing operations (11.13)p 5.01p
– discontinued operation 19.16p 7.43p
1 1
Basic earnings per share 8.03p 12.44p
5 5
Diluted (loss)/earnings per share
– continuing operations (11.13)p 5.00p
– discontinued operation 19.15p 7.41p
1 1
Diluted earnings per share 8.02p 12.41p
5 5
Filtronic plc Annual Report 2006 67 Notes to the
Financial Statements
for the year ended 31 May 2006
22 Goodwill
Group
Goodwill
£000
Cost
At 1 June 2004 30,902
Currency translation movement 498
1
At 31 May 2005 31,400
Disposal of Handset Products business (28,466)
Currency translation movement (211)
1
At 31 May 2006 2,723
5
The goodwill at 31 May 2006 relates to Sage Laboratories, Inc., which is located in the United States of America and
forms part of the Defence Electronics division.
Sage Laboratories, Inc. is a cash generating unit, and the recoverable amount was based on value in use calculations.
The calculations used cash ﬂow projections based on business plans for two years, followed by a further three years
assuming no growth. A discount rate of 10% has been used in discounting the projected cash ﬂows. The recoverable
amount resulting from those calculations exceeded the carrying amount of the cash generating unit. Therefore there
was no impairment of the goodwill at 31 May 2006.
68 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
23 Investments in subsidiaries
Company
Investments in
subsidiaries
£000
Cost
At 1 June 2004 36,006
Capital repaid by subsidiary (21,648)
Group transfers 120,736
1
At 31 May 2005 135,094
Disposals (1,205)
Group transfers (7,730)
1
At 31 May 2006 126,159
5
Impairment losses
At 1 June 2004 7,730
Impairment losses in the year 600
1
At 31 May 2005 8,330
Impairment losses in the year 2,572
Group transfers (7,730)
1
At 31 May 2006 3,172
5
Carrying amount at 31 May 2006 122,987
5
Carrying amount at 31 May 2005 126,764
5
Carrying amount at 1 June 2004 28,276
5
In the year ended 31 May 2005 the group transfers and capital repaid relate to a group reorganisation undertaken
to prepare for the disposal of the Handset Products division.
The impairment losses in the year ended 31 May 2005 relate to Filtronic Cable Communications Limited, Filtronic
Microtek Limited and Filtronic Broadband Limited. The investments in these subsidiaries were written down to nil
carrying amount as these subsidiaries had net liabilities and continued to make operating losses.
The impairment losses in the year ended 31 May 2006 relate to Filtronic Comtek (UK) Limited. The investment in this
subsidiary was written down to nil carrying amount, as this subsidiary had net liabilities and continued to make
operating losses.
All of the company’s investments in subsidiaries are subject to a registered debenture to secure bank borrowing
facilities.
The company’s subsidiaries are related parties.
A complete list of the company’s subsidiaries, all of which are wholly owned, is given in note 45.
Filtronic plc Annual Report 2006 69 Notes to the
Financial Statements
for the year ended 31 May 2006
24 Property, plant and equipment
Group
Land and Plant and
buildings equipment Total
£000 £000 £000
Cost
At 1 June 2004 47,544 134,425 181,969
Additions 77 12,886 12,963
Disposals (5,170) (4,141) (9,311)
Currency translation movement 264 913 1,177
111
At 31 May 2005 42,715 144,083 186,798
Additions 304 14,118 14,422
Disposals (3,373) (6,682) (10,055)
Disposals through sale of the Handset Products business – (25,170) (25,170)
Currency translation movement 65 (151) (86)
111
At 31 May 2006 39,711 126,198 165,909
555
Depreciation
At 1 June 2004 6,580 89,089 95,669
Depreciation 966 13,606 14,572
Disposals (500) (3,498) (3,998)
Currency translation movement 51 711 762
111
At 31 May 2005 7,097 99,908 107,005
Depreciation 925 10,819 11,744
Disposals (388) (5,932) (6,320)
Disposals through sale of the Handset Products business – (15,745) (15,745)
Currency translation movement 25 (48) (23)
111
At 31 May 2006 7,659 89,002 96,661
555
Carrying amount at 31 May 2006 32,052 37,196 69,248
555
Carrying amount at 31 May 2005 35,618 44,175 79,793
555
Carrying amount at 1 June 2004 40,964 45,336 86,300
555
The group’s United Kingdom land and buildings, with a carrying value of £22,402,000 (2005: £24,148,000), are subject
to a registered debenture to secure bank borrowing facilities.
70 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
24 Property, plant and equipment (continued)
Company
Land and Plant and
buildings equipment Total
£000 £000 £000
Cost
At 1 June 2004 10,867 776 11,643
Additions 32 143 175
111
At 31 May 2005 10,899 919 11,818
Additions 29 13 42
111
At 31 May 2006 10,928 932 11,860
555
Depreciation
At 1 June 2004 1,470 462 1,932
Depreciation 271 113 384
111
At 31 May 2005 1,741 575 2,316
Depreciation 273 117 390
111
At 31 May 2006 2,014 692 2,706
555
Carrying amount at 31 May 2006 8,914 240 9,154
555
Carrying amount at 31 May 2005 9,158 344 9,502
555
Carrying amount at 1 June 2004 9,397 314 9,711
555
All of the company’s land and buildings are subject to a registered debenture to secure bank borrowing facilities.
Filtronic plc Annual Report 2006 71 Notes to the
Financial Statements
for the year ended 31 May 2006
25 Deferred tax asset
Tax losses available for relief against
future taxable proﬁts
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Opening balance 2,309 – – –
Deferred tax credit – 2,264 – –
Currency translation movement (60) 45 – –
1 1 1 1
Closing balance 2,249 2,309 – –
5 5 5 5
Deferred tax assets which have not been recognised:
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Depreciation in advance of capital allowances
– United Kingdom 12,374 10,050 – –
Amortisation in advance of tax allowances
– Overseas – 3,255 – –
Deﬁned beneﬁt pension liability
– United Kingdom 6,176 4,845 6,176 4,845
Other temporary differences
– Overseas 965 903 – –
Tax losses available for relief against future
taxable proﬁts
– United Kingdom 17,770 14,962 7,266 6,023
– Overseas 12,072 8,902 – –
1 1 1 1
49,357 42,917 13,442 10,868
5 5 5 5
The deferred tax assets have not been recognised where the directors consider that it is unlikely that the underlying
temporary differences will reverse in the foreseeable future.
The tax losses available for relief against future taxable proﬁts in the United States of America, which have not been
recognised, amount to £9,645,000 of the total for overseas tax losses of £12,072,000. These amounts are in addition
to the deferred tax asset of £2,249,000, which has been recognised, relating to tax losses carried forward in the
United States of America. The tax losses in the United States of America expire in the period 14 to 20 years after 31
May 2006. The remaining tax losses do not have an expiry date. The other deferred tax assets, which have not been
recognised, do not expire.
72 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
26 Inventories
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Raw materials 20,869 19,539 – –
Work in progress 8,661 7,969 – –
Finished goods 4,093 7,294 – –
1 1 1 1
33,623 34,802 – –
5 5 5 5
Inventories are stated net of provisions 6,055 4,207 – –
5 5 5 5
27 Trade and other receivables
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Trade receivables 50,333 60,838 – –
Group receivables – – 132,452 122,601
Business sale consideration receivable 11,319 – 11,319 –
Other receivables and prepayments 5,963 7,086 33 941
1 1 1 1
67,615 67,924 143,804 123,542
5 5 5 5
Included in the group’s and company’s other receivables and prepayments at 31 May 2005 was £845,000 for costs
incurred to 31 May 2005 for professional fees relating to the preparation of the Handset Products division for
disposal. This included £220,000 of such fees paid to the group auditors, KPMG. These costs are included in the sale
costs of the transaction in accounting for the disposal in the year ended 31 May 2006.
The group’s United Kingdom trade receivables of £28,561,000 (2005 £23,350,000) are subject to a registered
debenture to secure bank borrowing facilities.
28 Cash and cash equivalents and net debt
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Cash and cash equivalents 5,293 6,563 2,960 4,000
Bank overdraft – (5,958) – (6,022)
1 1 1 1
Cash and cash equivalents in the
cash ﬂow statement 5,293 605 2,960 (2,022)
1 1 1 1
Bank revolving credit (18,000) – (18,000) –
Bank loan – current – (11,000) – (11,000)
– non-current – (33,000) – (33,000)
1 1 1 1
Debt (18,000) (44,000) (18,000) (44,000)
1 1 1 1
1 1 1 1
Net debt (12,707) (43,395) (15,040) (46,022)
5 5 5 5
Filtronic plc Annual Report 2006 73 Notes to the
Financial Statements
for the year ended 31 May 2006
29 Bank overdraft, revolving credit and loan
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Current liabilities
Bank overdraft – 5,958 – 6,022
Bank revolving credit 18,000 – 18,000 –
Bank loan – 11,000 – 11,000
1 1 1 1
18,000 16,958 18,000 17,022
5 5 5 5
Non-current liabilities
Bank loan due between one to two years – 33,000 – 33,000
5 5 5 5
The bank loan was repaid during the year with the proceeds from the sale of the Handset Products business.
The bank overdraft, revolving credit and loan are all denominated in sterling and bear interest at LIBOR plus 2.25%.
A new bank loan facility of £15,000,000 was made available on 31 May 2006, which bears interest at LIBOR plus
2.50%.
The bank overdraft, revolving credit and loan are all secured by ﬁxed and ﬂoating charges over material assets of
the group and company, including ﬁxed charges over the group’s land and buildings and trade receivables in the
United Kingdom and investments in subsidiaries.
At 31 May 2006 the group and company had a bank loan facility of £15,000,000, a bank overdraft facility of £2,000,000
and a bank revolving credit facility of £18,000,000. At 31 May 2006 the bank loan and overdraft facilities were
undrawn and all of the £18,000,000 bank revolving credit facility was drawn.
The bank loan facility expires on 30 November 2006. The bank revolving credit facility expires on 31 August 2008.
30 Trade and other payables
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Trade payables 27,654 37,875 – –
Group payables – – 45,242 27,391
Other payables and accruals 13,758 11,969 1,354 1,414
1 1 1 1
41,412 49,844 46,596 28,805
5 5 5 5
74 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
31 Defined contribution pension schemes
For employees in Finland contributions are made to a deﬁned contribution pension plan in accordance with Finnish
regulations and practices. The pension cost for the year was £1,332,000 (2005 £1,240,000).
For employees in Hungary contributions are made to a deﬁned contribution pension plan in accordance with
Hungarian regulations and practices. The pension cost for the year was £43,000 (2005 nil)
For employees in the United States of America contributions are made to a deﬁned contribution plan under section
401(k) of the Internal Revenue Code. The pension cost for the year was £400,000 (2005 £274,000).
For employees in Australia contributions are made to a deﬁned contribution superannuation fund operated by an
independent insurance company. The pension cost for the year was £81,000 (2005 £209,000).
32 Defined benefit pension scheme
A deﬁned beneﬁt pension scheme is operated for United Kingdom employees, which provides retirement beneﬁts
based on ﬁnal pensionable salary. The assets of the scheme are held in a separate trust fund which is managed by
independent professional investment managers. Contributions to the scheme are determined by a qualiﬁed actuary
on the basis of annual actuarial valuations using the projected unit measure. Employer’s contributions are 10.5% of
pensionable salary and employees’ contributions are 6.0% of pensionable salaries. The estimated amounts of the
contributions expected to be paid into the scheme in the year ending 31 May 2007 are employer’s contributions 
£2,386,000 and employees’ contributions £1,306,000.
The most recent actuarial valuation of the scheme was at 1 July 2005. The results of that valuation have been
projected to 31 May 2006 and then recalculated based on the following assumptions:
2006 2005
Rate of inﬂation 3.1% 2.6%
Rate of salary increase 3.0% 4.1%
Rate of increase of pensions in payment 2.8% 2.4%
Revaluation of deferred pensions 3.1% 2.6%
Liability discount rate 5.1% 5.0%
Expected return on scheme assets 7.0% 6.2%
The average life expectancy in years of a pensioner retiring at the age of 65 was as follows:
2006 2005
Male 21.6 18.6
Female 24.6 21.6
Filtronic plc Annual Report 2006 75 Notes to the
Financial Statements
for the year ended 31 May 2006
32 Defined benefit pension scheme (continued)
The amount charged/(credited) to pension operating costs was:
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Current service cost 3,127 2,934 3,127 2,934
Past service charge/(credit) 181 (3,133) 181 (3,133)
Curtailment charge/(credit) 316 (223) 316 (223)
Less group employers’ contributions – – (2,561) (2,029)
1 1 1 1
3,624 (422) 1,063 (2,451)
5 5 5 5
The amount charged to net pension ﬁnance cost was:
Group and
Company
2006 2005
£000 £000
Expected return on pension scheme assets 1,534 1,381
Interest on pension scheme liabilities (2,058) (1,816)
1 1
(524) (435)
5 5
The actuarial gain/(loss) recognised in the statement of recognised income and expense was:
Group and
Company
2006 2005
£000 £000
Actual return less expected return on pension scheme assets 2,249 1,210
Actuarial gain/(loss) on pension scheme liabilities (5,098) (7,994)
1 1
(2,849) (6,784)
5 5
The deﬁned beneﬁt pension liability was:
Group and
Company
2006 2005
£000 £000
Present value of deﬁned beneﬁt pension scheme liabilities 50,588 39,379
Fair value of deﬁned beneﬁt pension scheme assets (30,003) (23,230)
1 1
Deﬁned beneﬁt pension liability 20,585 16,149
5 5
76 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
32 Defined benefit pension scheme (continued)
Movements in the present value of the deﬁned beneﬁt pension scheme liabilities were:
2006 2005
£000 £000
Opening balance 39,379 29,683
Current service cost 3,127 2,934
Past service charge/(credit) 181 (3,133)
Curtailment charge/(credit) 316 (223)
Interest cost 2,058 1,816
Actuarial loss 5,098 7,994
Employees’ contributions 1,220 1,014
Beneﬁts paid (791) (706)
1 1
Closing balance 50,588 39,379
5 5
Movements in the fair value of the deﬁned beneﬁt pension scheme assets were:
2006 2005
£000 £000
Opening balance 23,230 18,302
Expected return on assets 1,534 1,381
Actual return less expected return on assets 2,249 1,210
Employer’s contributions 2,561 2,029
Employees’ contributions 1,220 1,014
Beneﬁts paid (791) (706)
1 1
Closing balance 30,003 23,230
5 5
The expected rate of return and the fair value of the deﬁned beneﬁt pension scheme assets at the balance sheet
date were:
Expected return Fair value
2006 2005 2006 2005
£000 £000
Equities 7.6% 6.5% 23,771 18,573
Bonds 4.8% 4.8% 5,866 4,397
Cash 4.5% 4.5% 366 260
1 1
7.0% 6.2% 30,003 23,230
5 5
Filtronic plc Annual Report 2006 77 Notes to the
Financial Statements
for the year ended 31 May 2006
32 Defined benefit pension scheme (continued)
The history of the deﬁned beneﬁt pension scheme liabilities and assets and the experience adjustments related to
them are as follows:
2006 2005 2004 2003
£000 £000 £000 £000
Present value of deﬁned beneﬁt pension scheme
liabilities 50,588 39,379 29,683 25,486
Fair value of deﬁned beneﬁt pension scheme
assets (30,003) (23,230) (18,302) (13,936)
1 111
Deﬁned beneﬁt pension liability 20,585 16,149 11,381 11,550
5 555
Experience adjustments on:
Pension scheme liabilities (5,098) (7,994) 532 (3,194)
5 555
Percentage of liabilities (10%) (20%) 2% (12%)
Pension scheme assets 2,249 1,210 933 (2,935)
5 555
Percentage of assets 7% 5% 5% (21%)
33 Deferred income
Group
Deferred Deferred Total
licence government deferred
fee grants income
£000 £000 £000
At 1 June 2004 9,145 3,763 12,908
Received during the year – 1,000 1,000
Repaid during the year – (150) (150)
Released to income during the year (2,335) (693) (3,028)
111
At 31 May 2005 6,810 3,920 10,730
Released to income during the year (2,335) (3,920) (6,255)
111
At 31 May 2006 4,475 – 4,475
555
The licence fee income is being recognised as revenue in the income statement in equal monthly amounts until
1 May 2008.
78 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
34 Deferred tax liability
Capital allowances in advance of depreciation
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Opening balance 661 582 – –
Deferred tax charge 18 70 – –
Currency translation movement 9 9 – –
1 1 1 1
Closing balance 688 661 – –
5 5 5 5
35 Share capital
Group and Company
Ordinary shares of 10p each
Authorised Issued and fully paid
Number £000 Number £000
At 1 June 2004 100,000,000 10,000 74,646,582 7,465
Shares issued as acquisition consideration – – 131,149 13
Shares issued as share-based payments – – 64,122 6
1111
At 31 May 2005 100,000,000 10,000 74,841,853 7,484
5555
At 31 May 2006 100,000,000 10,000 74,841,853 7,484
5555
36 Reserves
Group and Company Group
Share Shares to Translation Other
premium be issued reserve reserve
£000 £000 £000 £000
At 1 June 2004 137,641 2,255 – 2,020
Shares issued 1,531 (2,298) – –
Share-based payments – 43 – –
Transfer from accumulated losses – – – 3,552
Currency translation movement arising on
consolidation – – 1,302 12
111 1
At 31 May 2005 139,172 – 1,302 5,584
Transfer from accumulated losses ––– 622
Transfer to income related to business disposal – – (42) –
Currency translation movement arising on
consolidation – – (562) 31
111 1
At 31 May 2006 139,172 – 698 6,237
555 5
The other reserve is an undistributable surplus reserve and additional capital of the Chinese subsidiary, Filtronic
(Suzhou) Telecommunications Products Co. Limited.
Filtronic plc Annual Report 2006 79 Notes to the
Financial Statements
for the year ended 31 May 2006
37 Dividends
The dividends recognised in equity and paid during the year were as follows:
Group and
Company
2006 2005
Per share £000 £000
Final dividend year ended 31 May 2004 1.80p – 1,344
Interim dividend year ended 31 May 2005 0.90p – 674
Final dividend year ended 31 May 2005 1.80p 1,347 –
Interim dividend year ended 31 May 2006 0.90p 674 –
1 1
2,021 2,018
5 5
The ﬁnal dividend proposed for the year ended 31 May 2006 is 1.80p per share payable on 31 October 2006 to
shareholders on the register on 29 September 2006. The ﬁnal dividend will amount to £1,348,000 based on the
issued share capital of 74,870,956 10p ordinary shares as at 21 July 2006.
38 Accumulated losses and retained earnings
Group Company
Accumulated Retained
losses earnings
£000 £000
At 1 June 2004 (57,917) 36,030
Proﬁt/(loss) for the period 9,302 (7,357)
Acturial loss on deﬁned beneﬁt pension scheme (6,784) (6,784)
Share-based payments 996 818
Transfer to other reserve (3,552) –
Dividends (2,018) (2,018)
11
At 31 May 2005 (59,973) 20,689
Proﬁt for the period 6,011 29,743
Actuarial loss on deﬁned beneﬁt pension scheme (2,849) (2,849)
Share-based payments 240 15
Transfer to other reserve (622) –
Dividends (2,021) (2,021)
11
At 31 May 2006 (59,214) 45,577
55
39 Reconciliation of movements in total equity
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Opening total equity 93,569 91,464 167,345 183,391
Total recognised income and expense
for the period 2,589 3,832 26,894 (14,141)
Share-based payments 240 291 15 113
Dividends (2,021) (2,018) (2,021) (2,018)
1 1 1 1
Closing total equity 94,377 93,569 192,233 167,345
5 5 5 5
80 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
40 Share options
The share options outstanding and exercisable at 31 May 2006 were as follows:
Number Number
Exercise of options of options
Exercise period price outstanding exercisable
9/9/1999 – 9/9/2006 231p 7,014 7,014
30/9/1999 – 30/9/2006 181p 14,930 14,930
1/10/2000 – 2/12/2006 250p 400,000 400,000
30/4/2000 – 30/4/2007 309p 25,000 25,000
4/8/2000 – 4/8/2007 375p 428,650 428,650
1/10/1999 – 23/1/2008 439p 140,000 120,000
1/10/1999 – 26/6/2008 291p 12,265 12,265
1/10/1999 – 26/6/2008 318p 1,560 1,560
1/10/1999 – 26/6/2008 399p 38,840 –
1/10/1999 – 3/8/2008 413p 173,500 –
1/10/1999 – 3/8/2008 414p 837,950 –
1/10/1999 – 10/8/2008 537p 60,000 –
1/10/1999 – 17/9/2008 149p 58,205 58,205
1/10/1999 – 17/9/2008 450p 548,000 364,000
1/10/1999 – 5/10/2008 383p 504,000 24,000
1/10/1999 – 9/11/2008 461p 65,000 –
1/10/2000 – 1/1/2009 612p 45,000 –
1/10/2000 – 4/3/2009 805p 60,000 –
1/10/2000 – 10/5/2009 602p 40,000 –
1/10/2000 – 1/6/2009 732p 10,000 10,000
1/10/2000 – 14/6/2009 727p 117,415 –
1/10/2000 – 1/7/2009 745p 95,000 –
1/10/2000 – 18/7/2009 827p 20,000 –
1/10/2000 – 2/8/2009 823p 235,000 10,000
1/10/2000 – 27/8/2009 831p 40,000 –
1/10/2000 – 13/9/2009 903p 15,000 –
1/10/2000 – 27/9/2009 897p 15,000 –
1/10/2000 – 4/10/2009 899p 15,000 –
1/10/2000 – 11/10/2009 953p 15,000 –
1/10/2000 – 1/11/2009 1131p 45,300 –
1/10/2001 – 21/1/2010 1758p 17,500 17,500
1/10/2001 – 15/5/2010 1020p 58,021 –
1/10/2001 – 1/6/2010 946p 29,598 –
1/10/2001 – 4/12/2010 346p 248,056 23,972
1/10/2002 – 30/3/2011 149p 20,000 –
1/10/2003 – 14/3/2012 404p 657,337 74,000
1/10/2004 – 5/6/2012 191p 30,000 –
1/10/2004 – 7/4/2013 346p 3,600 –
1/10/2005 – 1/3/2014 451p 140,000 105,000
1/10/2006 – 14/12/2014 198p 200,000 –
1/10/2006 – 30/12/2014 190p 45,000 –
1/10/2006 – 29/4/2015 200p 200,000 –
1/10/2007 – 16/3/2016 171p 250,000 –
11
5,981,741 1,696,096
55
Filtronic plc Annual Report 2006 81 Notes to the
Financial Statements
for the year ended 31 May 2006
40 Share options (continued)
Weighted Weighted
average average
exercise Number exercise Number
price of options price of options
2006 2006 2005 2005
Outstanding at the beginning of the period 431p 6,392,107 471p 6,489,422
Forfeited during the period 343p (660,366) 518p (842,315)
Granted during the period 171p 250,000 178p 745,000
1 1
Outstanding at the end of the period 429p 5,981,741 431p 6,392,107
5 5
Exercisable at the end of the period 379p 1,696,096 317p 804,124
5 5
The options outstanding at 31 May 2006 have a weighted average remaining contractual life of 3.7 years.
Under the share option scheme the remuneration committee has a discretion to invite any full time employee who
is required to devote substantially all of his time to the business of the group to participate in the scheme. Options
granted under this scheme are generally exercisable in ﬁve equal annual tranches over a ﬁve year period and, except
in certain circumstances, only if certain performance targets have been satisﬁed. The exercise price for an option is
the average middle market quotation of Filtronic plc’s ordinary shares as derived from the Ofﬁcial List of the United
Kingdom Financial Services Authority for the three dealing days prior to the date of grant of the option.
41 Share-based payments
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Share options expense 240 248 15 70
Other share-based payments – 43 – –
1 1 1 1
240 291 15 70
5 5 5 5
The share options expense is for share options granted to employees since 7 November 2002. The share options
expense is the fair value of the share options at the date of grant spread over the expected vesting period of the
share options. The fair value of the share options at the date of grant is measured using the Black-Sholes model.
The inputs to the Black-Sholes model and the weighted average fair value of the share options granted during the
year were as follows:
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Number of options granted 250,000 745,000 – 550,000
Weighted average share price 171p 178p – 171p
Weighted average exercise price 171p 178p – 171p
Expected volatility 70% 70% – 70%
Expected life 4 years 4 years – 4 years
Risk free interest rate 5% 5% – 5%
Weighted average fair value 88p 95p – 92p
Expected volatility is the estimate of the volatility of the share price over the expected life of the share options.
82 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
42 Operating lease commitments
At the balance sheet date there were commitments for lease payments under non-cancellable operating leases,
which fall due as follows:
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Less than one year 2,240 2,612 40 39
Between one and ﬁve years 3,262 5,886 72 50
More than ﬁve years 850 2,774 – –
1 1 1 1
6,352 11,272 112 89
5 5 5 5
Operating leases are for land and buildings, equipment and motor vehicles and the lease terms are for periods of
four to ten years.
43 Capital expenditure commitments
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Capital expenditure contracted for at the
balance sheet date but not provided in the
ﬁnancial statements 5,655 4,130 – –
5 5 5 5
44 Financial instruments
Fair value
The carrying amount of all the ﬁnancial assets and liabilities approximate to their fair value as described below.
Cash and cash equivalents comprise bank balances and bank deposits with a maturity of one day.
Bank revolving credit drawn has a maturity of one month.
Trade and other receivables are all receivable in less than one year. Trade receivables are generally receivable within
60 days.
Trade and other payables are all payable in less than one year. Trade payables are generally payable within 60 days.
Credit risk
Credit risk is primarily related to trade receivables. The group’s businesses are concentrated on long term
relationships with a small number of larger and long established original equipment manufacturers. At 31 May 2006
the group’s largest customer accounted for 47% (2005 36%) of trade receivables. The group has historically incurred
only very low levels of unrecoverable receivables. Therefore credit risk is considered to be low.
Interest rate risk
The bank loan, revolving credit and overdraft facilities all bear interest at variable rates based on LIBOR. The bank
borrowing at 31 May 2006 was £18,000,000 drawn on the revolving credit facility. The amount of the bank borrowing
means that interest rate risk is not considered to be a material risk.
Filtronic plc Annual Report 2006 83 Notes to the
Financial Statements
for the year ended 31 May 2006
44 Financial instruments (continued)
Liquidity risk
At 31 May 2006 there were bank borrowing facilities in place totalling £35,000,000 of which £18,000,000 had been
drawn. These borrowing facilities reduce to £20,000,000 on 1 December 2006. The borrowing facilities are
considered sufﬁcient for the foreseeable future as set out in note 1. Short term liquidity is managed using short term
bank deposits, the bank overdraft and the revolving credit facility.
Foreign currency risk
The group’s and company’s reporting currency is sterling, which is also the company’s functional currency. The
functional currencies of the subsidiaries are sterling, euro, Hungarian ﬂorint, US dollar, Chinese yuan and Australian
dollars. 
The group’s results and ﬁnancial position are affected by ﬂuctuations in foreign currency exchange rates.
To reduce foreign currency risk, where the customer agrees, revenue is billed in the currency that best matches the
currency of the operating costs incurred. Revenues are predominantly denominated in US dollars and euros. Despite
matching the currency denomination of revenues and costs as far as possible, a surplus of US dollars and euros has
been generated over the last two ﬁnancial years, and this situation is expected to continue for the foreseeable
future. The nature of the group’s businesses means that there is limited visibility of future revenues in each currency.
Therefore when forward foreign exchange contracts are used to reduce the currency risk on the surplus US dollars
and euros expected to be generated, they are usually only for short term periods of no more than six months.
Forward foreign exchange contracts are also used to reduce the foreign currency risk on large transactions, for
example the disposal of the Handset Products business. Currency swap contracts are used when appropriate to
manage short term currency imbalances.
At 31 May 2006 and 31 May 2005 there were no forward foreign exchange contracts or currency swap contracts
outstanding.
Surplus cash is held in sterling to match with the sterling bank borrowings.
If sterling were to strengthen signiﬁcantly against the US dollar and the euro this would have the impact of materially
reducing the group’s revenue and operating result. Currently the Chinese yuan is closely linked to the US dollar. If
the Chinese yuan ceased to be linked and appreciated signiﬁcantly against the US dollar this would reduce
operating margins achieved by our Chinese operation, unless the customers agree to corresponding increases in
the US dollar denominated selling prices.
84 Filtronic plc Annual Report 2006 Notes to the
Financial Statements
for the year ended 31 May 2006
45 Subsidiaries
The subsidiaries at 31 May 2006 were as follows:
Name of Country of Description of Proportion Activity
subsidiary incorporation equity held held
or registration
Owned by Filtronic plc
Filtronic Comtek (UK) Limited England & Wales 12.2787p 100% Design and manufacture
ordinary shares of microwave products
Filtronic Broadband Limited England & Wales 1p ordinary shares 100% Design and manufacture
of microwave products
Filtronic Compound England & Wales £1 ordinary shares 100% Design and manufacture
Semiconductors Limited of compound
semiconductors
Filtronic Components Limited England & Wales £1 ordinary shares 100% Design and manufacture
of microwave products
Filtronic Properties Limited England & Wales £1 ordinary shares 100% Property company
Filtronic QUEST Trustees Limited England & Wales £1 ordinary shares 100% QUEST trustee company
Filtronic Executive Share Option England & Wales £1 ordinary shares 100% Dormant company
Trustees Limited
Filtronic Microtek Limited England & Wales £1 ordinary shares 100% Dormant company
Filtronic Cable Communications England & Wales 1p ordinary shares 100% Dormant company
Limited
Filtronic (Overseas Holdings) England & Wales £1 ordinary shares 100% Holding company
Limited
Owned by subsidiaries
Filtronic Comtek Oy Finland 13,364 ordinary 100% Design and manufacture
shares of microwave products
Filtronic Comtek (Hungary) Kft Hungary Ft1 ordinary shares 100% Manufacture of
microwave products
Filtronic (Suzhou) China £1 ordinary shares 100% Manufacture of
Telecommunication microwave products
Products Co Limited
Filtronic Pty Limited Australia A$1 ordinary shares100% Design of microwave
products
Filtronic Holdings, Inc. USA $1 common stock 100% Holding company
Filtronic Comtek, Inc. USA $1 common stock 100% Design and manufacture
of microwave products
Filtronic Signal Solutions, Inc. USA $1 common stock 100% Design and manufacture
of digital signal
processing products
Sage Laboratories, Inc. USA $0.10 common 100% Design and manufacture
stock of microwave products
Sage Laboratories USA $1 common stock 100% Dormant company
Active Microwave, Inc. stock
Sage Laboratories USA $1 common stock 100% Dormant company
Investment Corporation
Filtronic Compound USA $1 common stock 100% Dormant company
Semiconductors, Inc.
Filtronic plc Annual Report 2006 85 Corporate Directory
Company secretary
M Moynihan
Company number
2891064
Registered office
Filtronic plc
The Waterfront
Salts Mill Road
Saltaire
Shipley
West Yorkshire
BD18 3TT
Tel: 01274 530622
Fax: 01274 531561
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Tel: 0870 162 3100
Stockbrokers
JPMorgan Cazenove Limited
20 Moorgate
London
EC2R 6DA
Tel: 020 7155 5000
Auditors
KPMG Audit Plc
Chartered Accountants
1 The Embankment
Neville Street
Leeds
LS1 4DW
Bankers
Barclays Bank PLC
10 Market Street
Bradford
BD1 1NR
Financial public relations
Parkgreen Communications Limited
Ireland House
150 New Bond Street
London
W1S 2AQ
Tel: 020 7493 3713 
86 Filtronic plc Annual Report 2006