annual report  accounts
2006
pace micro technology plc
registered in england no 1672847
bringing
technology home
mktra2006
pace micro technology plc report  accounts 2006
pace micro technology plc
victoria road  saltaire
bd18 3lf  england
tel 44 01274 532000   
fax 44 01274 532010
wwwpacemicrocom
  pace micro technology plc
report  accounts 2006 70
the selected financial data set out below for each of the five years to 3 june 2006 have been extracted or derived from the audited financial statements
2006 2005 2004 2003 2002
£000 £000 £000 £000 £000
revenue 178095 253326 239949 166597 351794
lossprofit before tax 27450 8963 3880 48577 12010 
lossprofit before exceptional items and tax 15562 9108 5380 17554 10427
lossprofit after tax 28784 13680 8066 48031 34842
diluted lpseps 130p 61p 36p 213p 80p
diluted lpseps before exceptional items and goodwill amortisation 76p 61p 45p 68p 29p 
total equity attributable to equity holders of the parent excluding goodwill 33031 60316 45702 31590 61704 
 the comparatives for financial years 2002 to 2004 have been restated to reflect the impact of uitf38 accounting for esop trusts
the comparatives for 2005 and net assets for 2004 are stated under adopted international financial reporting standards all other figures are stated
on a uk gaap basis
shareholder information
annual general meeting
the company’s annual general meeting will be held at 1130 am thursday 2nd november 2006 at the company’s head office victoria road saltaire
west yorkshire bd18 3lf
lloyds tsb registrars
enquiries regarding shareholdings change of address or other particulars should be directed in the first instance to the company’s registrars lloyds
tsb registrars the causeway worthing bn99 6da or by telephone on 0870 600 3970 they also provide a range of online shareholder information
services at wwwshareviewcouk where shareholders can check their holdings and find practical help on transferring shares or updating their details
multiple accounts on the shareholder register
if you have received two or more copies of this document this means that there is more than one account in your name on the shareholder register
this may be caused by either your name or address appearing on each account in a slightly different way for security reasons the registrars will not
amalgamate the accounts without your consent if you would like any multiple accounts combined into one account please write to lloyds tsb
registrars at the address given above
unsolicited mail
the company is obliged by law to make its share register available upon request to the public and to other organisations which may use it as a mailing
list resulting in shareholders receiving unsolicited mail shareholders wishing to limit the receipt of such mail should write to the mailing preference
service dma house 70 margaret street london w1w 8ss or call 44 0 20 7291 3310 for an application form or visit wwwmpsonlineorguk
pace website
shareholders are encouraged to visit our website wwwpacemicrocom which has a wealth of information about the company
five year record and shareholder information pace micro technology plc
report  accounts 2006 02
contents
financial highlights
n revenues for the year of £1781m 2005 £2533m
n volume shipments of 22m settop boxes 2005 34m
n loss before tax and exceptional items of £156m 
2005 profit £91m
n full year gross margin of 180 2005 226 
restated basis 
n diluted loss per share of 13p 2005 earnings 
per share 61p
n net borrowings position £61m 2005 net cash £264m
all figures including comparatives are presented under ifrs
business highlights
n new executive management team in place
n organisational changes either underway 
or completed to
n resolve execution issues
n refocus business around customers
n reduce costs
n improve margin performance
n ensure pace is bestplaced to grow 
its business
n directv shipments commenced following 
product approval
02 highlights  04 chairman’s statement  07 chief executive officer’s review  13 finance director’s
review 17 board of directors  18 report of the directors  24 remuneration report  32 statement
of directors’ responsibilities 33 independent auditors’ report 34 financial statements
41 notes to the financial statements  69 directors secretary and advisers  70 five year record
and shareholder information
  pace micro technology plc
report  accounts 2006 03
“pace is a leading independent developer of digital tv
technologies for the paytv industry”
the company’s focus is on developing new technologies and
products for the constantly evolving digital tv industry as a
result pace technology has been installed in over 24 million
homes worldwide since the company was founded in 1982 
pace has achieved this through a partnership approach
creating intelligent and innovative products and services that
enable paytv operators worldwide to grow and develop their
businesses 
making it possible at the company’s headquarters in saltaire
and at bases in the us and france pace has a worldleading
engineering team the team’s expertise spans the digital
spectrum from basic digital tv through to interactive services
and innovations such as high definition home networking and
wireless technologies
pace is always working on new and innovative solutions to
exploit the full potential of digital television through its
technical vision pace aims to lead the digital tv marketplace
by exciting endusers and creating new business opportunities
for the company’s diverse customer base
n bskyb
n comcast
n directv
n foxtel
n kabel deutschland kdg
n ntl ireland
n ntltelewest
n optus
n premiere
n rogers cable
n sky italia
n sky new zealand
n time warner cable
n upc broadband the netherlands
n viasat
n vidéotron
major pace customers
  pace micro technology plc
report  accounts 2006 04
chairman’s statement
however as previously highlighted the delays in introducing leading edge products
for the us market have impacted this year’s results nevertheless the board is
confident in the strength of the underlying business as paytv operators continue their
longterm transition to digital systems and the migration to high definition hd
platforms
since the yearend the group has made important progress in the us pace is now
shipping its first satellite product an hd mpeg4 personal video recorder pvr to
directv the world’s largest satellite paytv operator pace’s hd pvr for us cable
networks has also received approval from a number of other operators and shipments
have started to some of these with approvals from other operators imminent pace’s
standard definition sd pvr for us cable networks is in the final stage of field trials
with comcast 
new chief executive officer neil gaydon has initiated a number of significant
organisational changes to resolve execution issues improve margin performance
reduce costs and ensure pace is bestplaced to grow its business 
over the last two months the group structure has been reshaped to improve
customer focus with a combined sales product and engineering team for each
customer group this approach is more efficient as management layers have been
greatly reduced while at the same time allowing new talent to come to the fore it has
also enabled a headcount reduction of over 10 greater transparency and
accountability and a marked reduction in the number of contractors without
impacting customer deliverables 
at the same time pace’s internal processes with particular emphasis on product
development are being overhauled pace’s development teams are widely recognised
as amongst the most talented and experienced in the industry nonetheless improved
processes are required to target the recent execution problems and reestablish a
more customer focussed approach to product development 
the changes taking place within pace are being driven by a strengthened executive
management team the board and executive team are implementing new appraisal
and remuneration systems to ensure pace’s people are appropriately managed and
incentivised to deliver significantly improved financial performance
the global market for digital settop boxes remains
strong and pace’s customer base within this market
includes some of the world’s largest and most
influential paytv operators 
pace is turning an important corner
mike mctighe
chairman pace micro technology plc
report  accounts 2006 05
results
in the year to 3 june 2006 pace shipped 22m units 2005
34m and generated revenues of £178m 2005 £253m the
underlying pretax trading loss for the year before exceptional
charges of £119m was £156m 2005 profit of £91m
the exceptional charges relate to writedowns in respect of the
us hd pvr for us cable reorganisation and restructuring
costs and an impairment of a trade investment these are
explained in more detail in the finance director’s review on
pages 13 to 16
after exceptional charges the group recorded a loss before
taxation of £275m 2005 profit of 90m
regional operating review
pace has had a disappointing year with delivery delays on a
number of new and highly complex settop box products the
year was further characterised by industrywide difficulties in
the development by third parties of silicon and software for the
new mpeg4h264 compression standard this combined
with delays in pace’s own software development held back
rollout of the group’s own advanced hd products pace has
however embraced this new compression standard as it will be
the industry’s core technology for the next 1015 years and
pace is now at the forefront of this change
emea
emea remains pace’s largest market with total shipments 
of 16m settop boxes 2005 29m in the uk pace has
continued to work with bskyb recently winning new
business for digibox and the sky pvr for shipment later 
this calendar year the group also shipped albeit in smaller
quantities into uk cable 
the group is now benefiting from its early investment in hd
with pace products being used to launch hd services by
premiere germany and sky italia two of the three major
european hd launches in the year the pace settop box used
by premiere was the world’s most advanced satellite 
hd box
pace also continues to lead in pvr which provides pace with
a higher average selling price and enables paytv operators
to deliver new services to their customers during the year two
operators sky italia and viasat selected pace products for
their pvr launches
the group commenced shipments to upc an important 
new customer and part of liberty global liberty is a leading
player in european cable and now owns another pace customer
ntl ireland the new cable platform for upc creates potential in
other markets
pace along with other set topbox manufacturers and
broadcasters has noted the potential reinterpretation 
by european union customs authorities of customs regulations
that could result in the extension of import duties to interactive
settop boxes manufactured outside but imported into the
pace also continues to lead in
pvr which attracts a higher
average selling price for pace
and enables paytv operators
to deliver new services to their
customers
  pace micro technology plc
report  accounts 2006 06
eu if and until any change is made and the timing of its
implementation clarified it is impossible to quantify any
possible impact 
americas
shipments into the americas increased to 174000 2005
138000 with shipments to time warner cable in the us and
rogers vidéotron and sasktel in canada   
since the yearend pace has made important progress with
shipments now being made to directv and a number of cable
operators several of which are new customers pace’s third
new us product a sd pvr for us cable is now approaching
the end of its comcast field trial as previously announced the
approval schedule for comcast deliveries as a result of the
delays is now outside the terms originally agreed in the
contract with this customer but the board continues to believe
that pace will generate substantial revenues from its
relationship with comcast
asia pacific
overall shipments increased to 400000 2005 350000
units pace’s main customers within this region are based in
australia and new zealand where pace is leading the rollout
of pvr products in australia the foxtel relationship continues
to be strong with pace its lead supplier shipping both
standard settop boxes and the iq pvr for both cable and
satellite customers pvr shipments also commenced to
optus which offers the foxtel digital service to its customers
pace was selected to launch the pvr service for sky new
zealand one of its longstanding customers  
board and executive appointments
there has been significant change to the board with the
appointment of neil gaydon as chief executive officer in 
april and mike mctighe as chairman in may at the same 
time pat chapmanpincher became the company’s senior
independent director 
new appointments to the strengthened executive
management team include david mckinney chief operating
officer jill ezard director of hr mike pulli president pace
americas ian sharp president emea  apac and helen
kettleborough director of corporate communications
future marketstechnologies
consumer demand for flat panel tvs hd pvr services and
high quality audio is growing as is the takeup of triple play
bundles of voice video and internet 
to support satellite cable and telco paytv operators as 
they work to win and retain high value customers seeking out
these new products and services pace is developing its
product range and investigating new technology opportunities
for example broadband ip capability is being built into pace’s
next generation settop boxes and the group is working with
conditional access partners on content protection for anytime
anywhere media consumption work also continues on
‘multiroom’ technology enabling content distribution around
the home which is expected to support high value customer
retention for operators additionally progress is being seen in
iptv markets and a new pace product is being launched
shortly  
outlook 
over the last 12 months pace has been through a difficult
period from which it is now emerging 
the board believes that with shipments to the us underway 
a strong performance of the business in emea and asia
pacific and the implementation of a new lower cost but more
effective organisational structure pace is turning an important
corner pace is in the final stage of field trials on the sd pvr
for us cable as the trials complete and shipments start
expected in the near future inventory commitments will be
realised and the group will benefit from its leading
technological and market position
the board acknowledges that there is still much work to do
but believes that the changes made since the start of the new
financial year will provide greater accountability within pace
better customer service and more predictable engineering
delivery
overall the markets remain strong and pace has good support
from its customers and partners therefore the board is
confident that the business has started to recover and will
move back into profit this financial year
mike mctighe
chairman
4 september 2006 
consumer demand for flat panel tvs high definition pvr
services and high quality audio is growing as is the takeup 
of triple play bundles pace’s ds810 
europe’s first mpeg4 
high definition settop box
neil gaydon
pace’s new chief executive officer
pace micro technology plc
report  accounts 2006 07
chief executive officer’s review
having taken on the role of chief executive officer in april i am now at the helm of an
organisation that has excellent customers and some of the most talented people in
the industry working alongside me the key to success is doing a better job for our
customers by pulling the pace team together to deliver what they need when they
need it and in a way that delivers value for all 
after nearly ten years at pace i can see that only now are we beginning to benefit
from the full potential of digital technology today consumers can watch what they
want when they want released from the confines of the schedule high definition
through a fourfold improvement in picture quality is delivering an even richer and more
vibrant experience equalling that of the cinema 
now with the promise of complete home systems that distribute high definition
anywhere in the home to flat screen displays in 51 dolby digital surround sound
consumers are waking up to a tv revolution 
we have played a major role defining today’s 
settop box industry through innovations that
have helped shape a generation of tv viewers’
experiences 
for over a decade pace has been a
world leader in digital tv technology
  pace micro technology plc
report  accounts 2006 08
pace has delivered world 
firsts in high definition
technology
it’s just 
like being there
the 2006 fifa world cup was the first major
sporting event with global high definition coverage pace micro technology plc
report  accounts 2006 09
we believe the market will continue to grow as paytv operators
compete to retain grow subscribers and manage take up
the traditional battle between satellite and cable operators continues as both seek
out new technologies to build their market position but new players and platforms are
bringing new challenges to the competitive environment telcos under pressure to
widen their offering beyond voice and data are finally starting to launch commercial
services 
moreover broadband internet is emerging as an important content delivery platform
this suggests technology demand will for the foreseeable future remain strong and i
believe pace is well placed to capitalise on operator requirements with innovative new
solutions
delivering settop box technology 
to paytv operators worldwide
david mckinney
chief operating officer with robert sagar 
in pace’s test laboratory
  pace micro technology plc
report  accounts 2006 10
the new pace organisation puts customers
right at the very heart of our business 
in the last year we have worked with customers in three core markets north america
western europe and australasia where demand has centred on pvr and high definition
with a growing interest in iptv and multiroom however a difficult 12 months with delays
in new product development for the us market means we have underperformed
identifying longterm
trends and opportunities
new technology is the lifeblood of 
the company as it paves the way 
to our future success a group of
some of our most gifted people 
are working together to ensure
we can always offer our customers
new ground breaking products
demonstration units that help 
them evaluate concepts as well 
as create new ideas that could
eventually turn into new revenue
streams 
developing the reach of
our us business
to grow our north american business
mike based at the group’s offices in
florida has expanded his team to
ensure a successful rollout of new
satellite products to directv and cable
products to operators across the
region we provide close support for
all of our north american customers
through engineering network and
sales people strategically placed 
in cities that include denver
philadelphia and los angeles 
changing the way 
we work 
our new approach at pace is to
ensure that the customer is at the
heart of our business to deliver we
have completely reorganised into
discrete teams each one responsible
for customer groups which in turn
are supported by crosscompany
groups such as quality and
operations this is enabling us to 
be much more efficient significantly
reduce the number of management
layers and promote new talent
moving ahead it will allow us to
improve execution quality and cost
effectiveness to create a more
successful and profitable business
mike pulli
president pace americas 
david gillies
director of technology 
neil gaydon pace micro technology plc
report  accounts 2006 11
the technology team by identifying proving and developing
innovative hardware and software solutions aims to expand
pace’s product range and market opportunities
we have three technology themes  home networks and
wireless in the home group significant advances have been
made in defining and prototyping architectures for secure
digital home networking solutions 
the networks group has developed a unique and scalable
content delivery solution to bring costeffective digital tv
pvr broadband voip and vod services to apartment
blocks channel coding research by the wireless group
should ensure we can create new wireless broadband content
delivery products pace’s rd expansion is supported by our
local regional development agency which has allocated over
£1m to our programmes
finally to bridge the gap between product and technology
development we have created a new advanced
development team dedicated to rapid prototyping of our
innovative new ideas
exploiting our internal competences close dialogue with
customers and technology partners and participation at 
the highest levels in major standardisation bodies will enable
pace to continue delivering world beating new technologies
and products 
anticipating technology trends our customers can exploit
to excite and retain their customers is a critical element
of pace’s service offering
the dc621 for upc in the
netherlands part of liberty 
global
the vegas standard definition
pvr for us cable operators pace micro technology plc
report  accounts 2006 12
to position pace for growth we have built what is probably
the best portfolio of customers in the paytv industry it
includes significant groups  news corporation liberty global
and us cable  plus other major operators such as viasat and
kdg we are focussed on delivering industry leading products
to help fuel their business growth and extend the all important
revenue per user arpu 
to ensure pace continues as an industry leader we have
restructured into highly focussed teams that place customers
at the heart of our business and will enable us to drive on time
delivery and improve margins this initiative has reduced
management layers brought new talent to the fore delivered
greater accountability and created new energy although there
is still much to do we are moving ourselves into position for
profit and future growth
neil gaydon
chief executive officer
4 september 2006
pace multiroom supports up to four networked settop boxes which
allow viewers to ‘shift’ their viewing around the home
our market is dynamic due to growing consumer appetite for new
technology led services and an imperative on our operator customers to 
grow businesses in markets where competition for subscribers is increasing pace micro technology plc
report  accounts 2006 13
pace shipped 22m units and generated revenues of £178m 
from the sales of settop boxes and associated engineering
consultancy and support services revenue
finance director’s review pace micro technology plc
report  accounts 2006 14
results for the period
in the 52 weeks ending 3 june 2006 pace shipped 22m units
2005 34m and generated revenues of £178m 2005
£253m from the sales of settop boxes and associated
engineering consultancy and support services revenue
the group recorded a trading loss before taxation and
exceptional items of £156m 2005 profit of 91m 
the board has considered the carrying values of the items in
the balance sheet at 3 june 2006 in particular development
expenditure inventory and other balance sheet values related
to those us products which had not been launched at the
yearend in considering these values the board has had
particular regard to the future competitiveness of the products
especially where firm orders have not yet been received 
delays in the development of the hd pvr for us cable mean
that the design uses components many of which were
ordered and prices fixed over a year ago newer and less
expensive components are now available to use on new
designs the delay also affects the anticipated product life of
the existing design therefore the board has decided to write
down the balance sheet carrying values at the yearend by
£90m this adjustment is shown as an exceptional inventory
writedown of £55m and an impairment charge against
capitalised development cost of £35m  
there are two further exceptional items restructuring and
reorganisation costs of £24m 2005 £03m and a loss of
£05m resulting from the writeoff of the investment in
vegastream limited 
after exceptional items the group recorded a loss before
taxation of £275m 2005 profit of £90m
gross margin
during the year to 3 june 2006 and excluding the exceptional
inventory and development costs writedown gross margin
decreased to 18 2005 rebased 226
we have reviewed the appropriateness of including within the
cost of sales the costs of running our operations department
responsible for product manufacture as more of our
manufacturing activity has been outsourced the nature of
these costs have changed and it is now considered more
appropriate to include them within overheads noting in
particular the fixed nature of these costs accordingly the
overheads have been increased by £38m and the prior year
increased by £37m for consistency with the gross profit
figures correspondingly increased
overheads
selling general and administrative expenditure excluding
exceptional charges rose to £269m 2005 restated £254m
engineering development expenditure excluding exceptional
costs was £214m 2005 £232m these figures are stated
david brocksom
with damien wilkinson 
financial controller the reorganisation undertaken
after the yearend and referred
to in the chairman’s statement
has resulted in a staff reduction
of over 10
pace micro technology plc
report  accounts 2006 15
after a net benefit resulting from the requirement under ias38
to capitalise commercially realisable development expenditure
and subsequently to charge this development expenditure
over the expected life of the projects concerned this year we
spent £171m 2005 £118m on qualifying expenditure and
amortised £98m 2005 £110m after the exceptional
development charge of £35m this resulted in a net
capitalisation in the balance sheet of £38m 2005 £08m
the net benefit reflects work on new product development
particularly although not exclusively for the north american
market where commercial product launches did not take
place before the end of the financial year or late in the year in
other cases
at the yearend our total headcount was 631 2005 621
which includes 349 people in engineering 2005 365 but
excludes 95 outsourced engineers at tata elxsi in india 2005
120 the reorganisation undertaken after the yearend and
referred to in the chairman’s statement has resulted in a staff
reduction of over 10
taxation
in the uk at the end of the year the group has accumulated
tax assets of approximately £38m of which £29m ie £96m
at a 30 tax rate are recognised as deferred tax assets and
£85m remains unrecognised at the end of the prior year
£40m £134m at a 30 tax rate was recognised as a result
of the fall in the board’s view of the amount of tax recoverable
against future profits chargeable to corporation tax that should
be recognised as a deferred tax asset it has made a charge
of £1m in the year to 3 june 2006 
in addition to the uk where all of the commercial risk in our
product strategy is taken the group has an exposure to us
french and other overseas jurisdictions this has resulted in a
charge to overseas tax of £02m 2005 £02m in the year
the group will start to incur a normal uk current tax charge
and recommence uk tax payments once available tax losses
both recognised and unrecognised are utilised 
cash flow and banking facilities
the group ended the year with net borrowings of £61m
2005 net cash of £264m
the cash flow in the year was affected by the recorded losses
and significant changes in working capital there was a
significant increase in finished goods and component
inventories due to delays in product approval preventing
shipments before the yearend the inventory increase from
£101m to £348m most of which took place at the end of the
year also affected the trade payables position which
increased from £223m to £387m the trading losses have
also been a significant factor in the year’s cash outflow
to accommodate product approval delays we have
renegotiated rescheduled or cancelled a number of purchase
commitments and trading terms this was only possible with
the cooperation of our suppliers to whom we would like to
express our thanks pace micro technology plc
report  accounts 2006 16
current provisions predominantly represent warranty
provisions that could fall due within 12 months
non current liabilities
noncurrent liabilities represent royalties where the position is
essentially unchanged and warranty provisions the warranty
provision relates to that element of the product warranty
provision which is in respect of warranty lives in excess of 12
months
foreign exchange
the majority of the group’s production costs are designated
in us dollars while the group endeavours to obtain as much
of its income as possible in us dollars a significant proportion
of income is currently received in sterling or euros
the group does not take a view or attempt to speculate on
how the foreign exchange markets will move currencies are
only purchased and sold in accordance with forecast cash
flow to minimise downside risk the group has a policy of
hedging progressively against movements in the value of
foreign currencies in respect of specific cash receipts and
payments expected over the next six months
as the group’s us sales grow our net exposure to the us
dollar will lessen and this income will form a hedge against us
dollar expenses and reduce the need for some foreign
exchange contract hedging the group’s exposure to income
in euros remains unchanged
yearend rates used in the accounts are 186£1 2005
181£1 and €146£1 2005 €148£1 average rates
used in the accounts are 176£1 2005 186£1
and€€146 £1 2005 €146 £1
business environment
note 1 to the financial statements contains a review of the
business environment in which pace operates and its financial
implications
international financial 
reporting standards ifrs
the consolidated results for the year ended 3 june 2006 are
reported under international financial reporting standards
ifrs all comparative figures have been restated in
accordance with ifrs 1 and full reconciliations that explain the
impact of the transition from uk gaap to ifrs have been
included in note 29 to the financial statements 
david brocksom
finance director
4 september 2006
the group put new banking facilities in place in january 2006
which run to september 2007 based upon a sales ledger
financing agreement these facilities are subject to product
approval and certain performance covenants
balance sheet
overall net assets or total equity attributable to equity holders
of the company fell from £698m to £425m reflecting the
year’s loss the fall in net assets was offset by £08m due to
the issue of shares upon option exercise charges in respect
of employee share incentive schemes of £05m were made in
the income statement but do not affect the balance sheet of
the group
non current assets
non current assets which include assets previously described
as tangible and intangible fixed assets as well as deferred tax
assets rose to £316m from £278m
there was a net increase in plant and equipment from £62m
to £77m the increase was principally from net investment in
headend and line test equipment for product manufacturing
and test laboratory facilities aimed at improving both our
development process and infield reliability we spent £59m
on new investment in the year 2005 £41m and depreciated
£41m 2005 £44m
the group had investments in two unquoted companies
vegastream limited and intamac limited the group has
written off its investment in vegastream limited which
encountered financial difficulties rather than invest new funds
the intangible fixed assets represent goodwill from the
purchase of pace europe in 2001 the balance net of
amortisation and prior year provisions was £94m 2005
£94m under ifrs no further amortisation takes place
although annual impairment reviews are carried out
current assets
current assets include inventories trade and other receivables
and cash and cash equivalents
overall current assets have fallen to £771m from £886m but
as previously mentioned there has been a marked change in
both inventories and cash balances trade and other
receivables also fell from £518m to £423m a change that
reflects the lower level of turnover in the final quarter of the
year compared to the prior year
current liabilities
total current liabilities being trade and other payables
interestbearing loans and borrowings and current provisions
have increased from £371m to £569m as noted above the
increase in the trade payables balances which was the major
influence in the increase of trade and other payables balances
from £316m to £454m was the result of the acquisition of
inventories near the yearend the interestbearing loans and
borrowings balance was similarly affected by working capital
changes and the losses incurred in the year pace micro technology plc
report  accounts 2006 17
meet the board
01 mike mctighe
mike aged 52 was appointed a nonexecutive director in june
2001 and became chairman on 1 may 2006 he is currently
chairman of a number of private equitybacked companies and
in addition is a director of london metal exchange holdings ltd
and a nonexecutive director of alliance  leicester plc mike also
advises a number of private equity partnerships previously he
was chairman  ceo of carrier1 international sa and before that
executive director  chief executive global operations of cable
 wireless plc prior to these experiences mike spent 5 years with
philips of the netherlands 5 years with motorola and 10 years
with ge
02 neil gaydon
neil aged 46 was appointed chief executive officer in april 2006
he was appointed to the board in june 2002 as worldwide sales
and marketing director he has been with the company since
1995 and as president pace americas spearheaded the
development of the company’s us business between 1999 and
december 2003 prior to this he was regional sales director
emea and head of new business development and product
marketing for the company
03 david brocksom
david aged 45 was appointed finance director in february
2004 previously group finance director of avesco plc he has
also held a number of other senior financial roles including group
finance director at telecine cell group plc and group finance
director at westport group plc he qualified as a chartered
accountant with price waterhouse
04 pat chapmanpincher
pat aged 59 was appointed a nonexecutive director in february
2005 and became senior independent director in may 2006 she
has over 30 years’ experience in the communications industry
from senior roles in multinational internet and telecoms companies
to participating in technology company startups a founding
partner of the cavell group which specialises in operational
consultancy ip and wireless technologies she is also chief
executive of cache logic ltd chairman of rapid mobile ltd and
a nonexecutive director of friends of the earth
05 rob fleming
rob aged 50 joined the company in 1983 and became
operations director in 1984 with responsibility for production and
distribution with effect from february 1999 he assumed
responsibility for the engineering function within the group and
became a nonexecutive director of the company in may 2001
he is chief executive of the franklyn group limited a care
property group and a board member of bradford urc
06 marten fraser
marten aged 60 was appointed a nonexecutive director in
february 2005 he was previously senior partner at
pricewaterhousecoopers nottingham where he worked in the
audit and business advisory services department and prior to
this he was the partner in charge of the east midlands practice of
price waterhouse
01
04 05 06
02 03 report of the directors
pace micro technology plc
report  accounts 2006 18
report of the directors
the directors present their report to shareholders on pages 18 to 23 together with the audited financial statements for the 52 week period
ended 3 june 2006 prior year 53 weeks ended 4 june 2005 
principal activities
the group’s principal activities are the development design and distribution of digital receivers and receiver decoders which provide a
gateway for the reception of digital television and the receptiontransmission of interactive services telephony and highspeed data the
group also provides engineering design support services and software applications to its settop box customers each of these services
may be delivered over satellite cable terrestrial and ip network transmission systems
business review and financial results
the information that fulfils the requirements of the business review including a review of the group’s activities developments and the
financial results for the year can be found in the chairman’s statement the chief executive officer’s review and finance director’s review
on pages 4 to 16 this information is incorporated in this report by reference furthermore an overview of the group’s strategy and the key
issuesuncertainties together with their management is set out in the “business environment” section in note 1 to the financial statements
the consolidated income statement for the 52 weeks ended 3 june 2006 is set out on page 35 the loss before tax was £275 million 2005
profit £90 million
the group’s results are now stated under international financial reporting standards see note 29 to the financial statements
dividend
no interim dividend was paid during the year the directors do not recommend the payment of a final dividend 2005 nil
share capital
changes in the company’s share capital during the year ended 3 june 2006 are set out in note 19 to the financial statements
significant shareholdings
the company has been notified in accordance with sections 198 to 208 of the companies act 1985 of the following significant
shareholdings as at 1 september 2006
number of shares  of issued share capital
david hood and related family trusts 44486957 196
fidelity investment mangement and related companies 23077637 99
barclays plc 8862917 39
deutsche bank proprietary account 9312732 405
legal  general investment management limited 8575949 378         
robert fleming and related family trusts 8880178 39
pace micro technology plc employee benefits trust 7100573 32
directors
the names of the current directors of the company are shown on page 17 all those listed held office throughout the year
during the year the following persons also held office as directors
john dyson retired 14 april 2006    sir michael bett retired 30 april 2006    bob lambourne retired 8 august 2005
mike mctighe and rob fleming will retire by rotation at the annual general meeting of the company and offer themselves for reelection
details of the executive directors’ service contracts and the nonexecutive directors’ letters of appointment are disclosed on page 26
payment to suppliers
it is the policy of the group to agree terms and conditions for its business transactions with suppliers which are varied from time to time
payment is made in accordance with those terms subject to the other terms and conditions being met by the supplier the group does not
follow any code or standard on payment practice creditor days at the end of the year for the group were 69 days 2005 37 days and for
the company were 68 days 2005 43 days
  report of the directors continued
pace micro technology plc
report  accounts 2006 19
research and development
the directors regard it as fundamental to the future success of the group to engage in a substantial ongoing programme of research and
development of new products spending £288 million in the year and charging £249 million 2005 £232million to the income statement
during the year following the treatment under ias38
donations
during the year the group donated £40000 2005 £37000 to charitable causes no political donations were made further details of the
charitable and communityrelated activities of the group are given on page 22
corporate governance
the directors believe that the company has complied throughout the year with the combined code on corporate governance dated june
2003 as revised and adopted by the financial reporting council save in relation to performance evaluation of the chairman the board
confirms that it has established the procedures necessary to implement the guidance internal control guidance for directors on the
combined code published by the internal control working party of the institute of chartered accountants and that there is an ongoing
process for identifying evaluating and managing the significant risks faced by the company
board of directors
the group is controlled through the board of directors which comprises two executive and four nonexecutive directors who bring a wide
range of skills and experience to the board biographical details of all directors are to be found on page 17 the chairman mike mctighe
is mainly responsible for the running of the board ensuring together with the company secretary that it receives timely and clear information
appropriate to enable it to discharge its duties the responsibilities of the chief executive officer neil gaydon focus on running the group’s
business and implementing group strategy the chief executive officer is assisted in managing the business on a daytoday basis by the
executive committee as further described below all the designated nonexecutive directors are deemed by the board to be independent
apart from rob fleming who was an executive director of the company within the last five years in addition the board has designated pat
chapmanpincher as the senior independent director all directors have access to the advice and services of the company secretary and
are able to take independent professional advice at the company’s expense in the furtherance of their duties if necessary all directors in
accordance with the combined code submit themselves for reelection at least once every three years new directors receive a programme
of tailored induction on joining the board and all directors are offered the opportunity to continually update their skills and knowledge
the board has a formal schedule of matters specifically reserved to it and normally meets monthly it is responsible for overall group strategy
acquisition and divestment policy approval of major capital expenditure projects and consideration of significant financing matters it reviews
the strategic direction of the group and conducts formal strategy reviews together with other senior executives within the group at least once
a year the chairman holds meetings with the nonexecutive directors without the executive directors being present at least twice during 
the year
each year the board undertakes a formal review and evaluation of its performance including the performance of its committees and 
individual directors  this is conducted by written feedback in standardised form from each director to the chairman following the retirement
of sir michael bett this year no performance evaluation of the chairman was conducted but the review and evaluation to be conducted in
the following year will include all directors
the board has established the following committees each of which has written terms of reference specifying its authority and duties and
copies of which are publicly available on the company’s website wwwpacemicrocom
n the audit committee is comprised of independent designated nonexecutive directors pat chapmanpincher and marten fraser who
is the chairman of the commitee mike mctighe served on the committee during the year before resigning in may 2006 upon his
appointment as chairman bob lambourne also served on the committee during the year until his retirement on 8 august 2005 the
committee has primary responsibility for making recommendations on the appointment reappointment or removal of the auditors and
receives and reviews reports from management and from the auditors relating to the interim and annual accounts and the control
systems in use throughout the group meetings are held by the committee with the auditors without executive management being
present at least once a year and the committee reviews arrangements by which staff may in confidence raise concerns about possible
improprieties including  review of the group whistleblowing policy
n the executive committee is chaired by neil gaydon as chief executive officer the committee generally meets twice a month and
ensures that the strategy plans and policies previously agreed or delegated by the board are implemented report of the directors continued
pace micro technology plc
report  accounts 2006 20
the executive committee comprises the two executive directors together with the following senior executives
anthony dixon general counsel
jill ezard director of human resources
david gillies director of technology
helen kettleborough director of corporate communications
michael pulli president pace americas
david mckinney chief operating officer
ian sharp president emeaapac
n the remuneration committee is comprised of independent designated nonexecutive directors marten fraser and pat chapman
pincher who is the chairman of the committee mike mctighe served on the committee during the year before resigning in may 2006
bob lambourne served on the committee before his retirement in august 2005 the committee is responsible for setting the
remuneration of the executive directors and other members of the executive committee including making recommendations regarding
the grant of share options the members of the committee have no personal interest other than as shareholders in the matters to be
decided no potential conflicts of interest arising from crossdirectorships and no daytoday involvement in the running of the business
n the nominations committee is comprised of nonexecutive directors pat chapmanpincher marten fraser and rob fleming together
with chief executive officer neil gaydon and is chaired by mike mctighe its purpose is to consider and make recommendations to
the board regarding the appointment of new directors
board and committee meetings attendance
audit remuneration nominations
board committee committee committee
total meetings 13 4 4 1
david brocksom 13 na na na
pat chapmanpincher 12 4 4 1
robert fleming 12 na na 1
marten fraser 12 4 4 1
neil gaydon 12 na na na
mike mctighe 11 3 4 1
directors’ remuneration
the remuneration committee reviews the performance of the executive directors and other members of the executive committee as a
prelude to recommending their annual remuneration bonus awards and award of share options to the board for final determination the final
determinations are made by the board as a whole but no director plays a part in any discussions concerning their own remuneration
the remuneration report of the directors to shareholders is set out on pages 24 to 31 and includes the remuneration policy of the company
and details of directors’ incentive payments and the related performance criteria
authority to purchase own shares
at the annual general meeting in 2005 the company was authorised by shareholders to purchase up to 22698874 of its own ordinary
shares representing 10 per cent of its issued share capital as at 5 august 2005 the company did not utilise this authority during the year
the authority for the company to purchase its own shares expires at the conclusion of the annual general meeting in 2006 and a resolution
to renew it will be proposed at that meeting
accountability and audit
a detailed review of the performance of the group’s business is contained in the chief executive officer’s review and the finance director’s
review these statements together with the chairman’s statement and the report of the directors are intended to present a balanced
assessment of the group’s position and prospects the directors’ responsibility for the financial statements is described on page 32 and the
responsibilities of the auditors are described on page 33
  report of the directors continued
pace micro technology plc
report  accounts 2006 21
internal controls
overall responsibility for the group’s system of internal control rests with the board of directors the board has delegated certain of its powers
to the audit committee to review the effectiveness of the systems of control and to receive reports from the auditors and from the management
relating to the interim and annual accounts and the control systems in use throughout the group
during the year and up to the date of this report the board carried out a review of the effectiveness of the group’s internal controls the reviews
were undertaken in accordance with the joint working group’s guidance under the following headings and were aimed at clearly identifying
the systems already in place and the action plans necessary to improve areas of control weakness
n the control environment subject to those powers and limits of authority reserved by the board and to the group policies and guidelines
they have established the conduct of the business of the group is delegated within a clearly defined organisational structure and
approved level of authority the board has also adopted a code of business ethics which has been incorporated into the employee
handbook issued to all employees
n risk assessment the directors and senior managers are responsible for identifying and monitoring sources of potential business risk and
financial risk and for taking such preventative and protective actions as they consider necessary to manage such risks effectively during
the year a risk assessment review of the group’s business has been conducted in conjunction with the executive committee the board
has received and considered this review as part of an annual risk and control assessment
the group’s systems are designed to identify and manage rather than eliminate significant business risks including the risk of failure to achieve
business objectives and can only provide reasonable not absolute assurance against material misstatement or loss business risks are
identified evaluated and managed through functional line management reporting to divisional meetings executive committee meetings and
board meetings as appropriate each member of the executive committee is required to highlight and report on any significant business risks
identified within their sphere of responsibility
the key business risks associated with the timely completion of longterm development projects and ongoing business risks including alleged
infringement of third party intellectual property rights are managed by crossfunctional teams of senior employees business continuity plans
addressing physical risks to the group’s development sites are reviewed and updated at least annually
companywide initiatives have been maintained including the pace quality committee review process with a view to attaining the highest
standards in quality and reliability
n financial control and information systems the group’s strategic direction is reviewed regularly by the board and plans budgets and 
performance targets are reviewed and approved at least annually directors receive monthly summaries of financial results which compare 
actual performance with targets together with detailed management reports that identify the reasons for variances and the progress 
achieved business planning documents are revised on a regular basis in line with actual and expected performance
n control procedures financial control procedures have been developed for all of the main business functions and have been documented
in a procedures manual authorisation limits for purchases and capital expenditure are specified and procedures are in place for
minimising exposure to potential weaknesses in the receipt handling and despatch of goods the group’s saltaire premises have
received accreditation for bsi iso 9001 2000 and this has been extended to include the boca raton site in florida
n monitoring systems monitoring of the internal control systems is carried out by designated employees on a periodic basis pursuant to a
programme agreed by the finance and quality departments the audit committee considers annually whether there is a need to appoint
a dedicated internal auditor and has determined that having regard to the monitoring systems referred to above there is no current
business requirement for such an appointment
although no system of internal financial control can provide absolute assurance against material misstatement or loss the group’s systems
are designed to provide the directors with reasonable assurance that transactions are authorised and completely and accurately recorded
that assets are safeguarded and that material errors irregularities and actions contrary to group policies and directions are either prevented
or promptly discovered
going concern
the directors having taken account of the group’s available bank facilities and the factors referred to in note 1 to the financial statements and
having reviewed the group’s budget and forecasts for the period to 30 september 2007 consider that the group has adequate resources to
continue in operational existence for the foreseeable future accordingly they continue to adopt the going concern basis in preparing the
financial statements report of the directors continued
pace micro technology plc
report  accounts 2006 22
corporate social responsibility
employment policies
the directors recognise the importance of the group’s employees to its success and future development and are committed to providing an
environment that will attract motivate and reward high quality employees the group continues to invest in a range of internal and external
initiatives to promote employee development this commitment has been acknowledged by investors in people iip recognition
employees are kept informed of matters affecting them as employees and factors affecting the performance of the group through employee
meetingsbriefings and a company newsletter pacesetter in the uk meetings of the employee consultation work group an elected forum
for the discussion of work related issues are held with members of the executive committee at least four times per year
the group welcomes applications for employment from all sectors of the community and is striving to promote equality of opportunity in
employment regardless of age sex sexual orientation disability or ethnic origin it is the group’s policy that training career development and
promotion opportunities should be available to all employees in the event that an employee becomes disabled the group makes reasonable
adjustments where any aspect of premises or working practices puts such a disabled employee at a substantial disadvantage compared with
a nondisabled employee
health and safety
the group has an established health and safety committee which conducts quarterly review meetings with group safety representatives
regarding health and safety issues relevant to the group’s business other safetyrelated committees also conduct periodic reviews of specific
work practices these actions complement the health and safety executive’s working well together initiatives implemented by the company 
site inspections and individual ergonomic risk assessments have been conducted in the uk by safety representatives and this has resulted
in several local workplace health and safety improvements generic and detailed risk assessments chemical assessments and safe systems
of work guidance are maintained for the benefit of employees on the company’s intranet site
the importance of ongoing health and safety awareness training for managers and safety representatives is recognised as part of this
process safety representatives have had refresher training and during the year a further three health and safety representatives have
successfully completed the iosh managing safely course
the number of uk workplace accidents during the year was 16 200518 none of which were reportable to the health  safety executive
a report concerning health and safety aspects of the groups business and copies of specific group safety policy documents can be obtained
from the company secretary
charitable and community support
the group has an established charitable donations committee comprising employees based at the group’s premises in the uk the usa
and france the committee which meets once a month considers all requests for charitable and community project assistance within a
financial budget and criteria approved by the board on an annual basis
the group’s support through the committee is focused on the local geographical area of pace’s premises in saltaire grenoble and boca
raton in florida as well as charitable and community initiatives of group employees the corporate charity policy focus is to support local
charities of benefit to the local area and people living close to each group site
during the year 160 requests for support were considered by the committee 141 of these satisfying the criteria and receiving financial support
amounting to £40000 the participation of employees of the group in community and charitable activities outside work hours has been
encouraged with the provision of funds to match individual sponsorship raised
further details of the charitable and community donations made during the year and criteria for awards made by the charitable donations
committee can be obtained from the company secretary
  report of the directors continued
pace micro technology plc
report  accounts 2006 23
environmental management
during the year the company commissioned its fourth independent environmental report prepared by consultants atkins environmental
services the company has achieved certification to the international management standard iso 14001 at its saltaire and florida sites and
the group environmental policy has been applied to all pace sites worldwide
the company is a signatory to the european code of conduct on energy efficiency of digital tv service systems and is committed to ensure
that products are designed to minimise energy consumption
the company continues to monitor the proportion by weight of its products that is recyclable and procedures to ensure that each product
is checked for certain hazardous materials in each case in anticipation of expected requirements of forthcoming eu regulations in addition
procedures have been implemented to require that the packaging the company specifies in the design process is recyclable the company
is preparing for compliance with new environmental legislation including regulations to be implemented pursuant to the waste from electrical
and electronic equipment weee directive the company has recently become compliant with the restriction of hazardous substances
rohs directive
the company has developed supplier assessment and approval procedures to evaluate the environmental performance of its suppliers and
subcontractors using the supplier assessment and approval process the company intends to influence environmental awareness of its
subcontractors and component vendors during the year the company set environmental targets and achieved the following outcomes in
respect of its chosen measures of environmental impact
objective 2003 200420052006
co2 emission tonnes 3000 2371 2115 3200
electricity kwh 35 million 31 million 37 million 38 million
gas kwh 21 million 18 million 14 million 22 million
water m3employee 247 221 210 193
the company is a member of the yorkshire wildlife trust and during the year participated in the yorkshire and humber regional index of
environmental engagement this scheme is administered by business in the community and ranks companies in terms of their environmental
performance in the 2006 index the company was ranked 4th 2005 index 9th and 1st in the it hardware sector
a copy of the group’s environmental policy statement and the environmental report referred to above can be obtained from the company
secretary
auditors
kpmg audit plc held office as auditors during the year a resolution for the reappointment of kpmg audit plc will be proposed at the
forthcoming annual general meeting
each of the directors who held office at the date of approval of this report of the directors comfirms that so far as they are aware there is
no relevant audit information of which the company’s auditors are unaware and the directors have each taken all the steps that they ought
to have taken as a director to make themselves aware of any relevant audit information and to establish that the company’s auditors are
aware of that information
relations with shareholders
the board has continued to establish and maintain relationships with institutional shareholders and communicates with investors through the
group’s web site wwwpacemicrocom a programme of meetings with institutional shareholders is in place and analyst presentations are
made following announcement of the interim and annual results shareholders are welcome to participate at the annual general meeting on
2 november 2006 at which the board will be available for questions
annual general meeting
the annual general meeting of the company will be held on 2 november 2006 at the offices of the company at salts mill victoria road
saltaire west yorkshire bd18 3lf full details of the business to be transacted at the meeting will be set out in the notice of annual general
meeting
by order of the board
anthony j dixon
company secretary
4 september 2006 directors’ remuneration report
pace micro technology plc
report  accounts 2006 24
the directors present their report to shareholders on pages 24 to 31 regarding remuneration matters in respect of the 52 week period ended
3 june 2006
remuneration committee
the remuneration committee the committee is responsible for setting the individual remuneration of the executive directors and other
members of the executive committee within the framework of the remuneration policy described below which is set by the board
the directors who were members of the committee at any time during the period ending 3 june 2006 were pat chapmanpincher marten
fraser and mike mctighe who retired from the committee in may 2006 for guidance the committee makes use of surveys of executive
pay and knowledge of market rates the committee was assisted in its consideration of remuneration matters by new bridge street
consultants who conducted a review of directors’ and executive remuneration during the year pinsent masons legal advisers to the
company also advised the committee regarding certain share option related issues
remuneration policy
the board believes that it is necessary to ensure that the remuneration packages of the executive directors remain competitive in order to
attract retain and motivate executive directors and senior managers of a high calibre and to reward them for performance the policy is for
a significant proportion of executive directors’ total remuneration to be capable of being earned from variable performancebased incentives
through annual bonuses and share options the objective of this policy is to provide rewards and incentives that reflect corporate and
individual performance and align management’s objectives directly with those of the group
the board’s policy in relation to nonexecutive directors continues to be to pay fees that are competitive with the fees paid by comparable
quoted companies nonexecutive directors’ fees are determined by the board as a whole within the limits set out in the company’s articles
of association nonexecutive directors are not eligible for performance bonuses or pension contributions and do not participate in the share
option schemes
salary
basic salary for each executive director is determined by the committee taking into account the performance of the individual and information
from independent sources on the rates of salary for comparable jobs in setting senior executives’ salaries the committee also takes into
account pay and employment conditions in the group as a whole
performance bonus
the company established a nonpensionable performancerelated bonus scheme for the executive directors and other key members of
management for the year ending 3 june 2006 which was based on the successful achievement of corporate and individual objectives the
corporate objectives were linked to the interests of shareholders and the key measure therefore was the profitability of the group for the full
financial year achievement of the bonus was dependent on the group’s pretax profits before certain exceptional items exceeding £11
million with the capacity to earn additional bonus increments upon achievement of higher profit targets up to a ceiling of £175 million in
addition a number of individual personal objectives were set for each director and manager which were aligned with the objectives of the
group for the year since the profit targets were not met no performance bonuses were awarded to any of the executive directors in respect
of the year ending 3 june 2006 a similarlystructured performancerelated bonus scheme for the executive directors and other key senior
executives is in effect in respect of the current financial year but with new pretax profit targets set in july 2006 in each year the maximum
bonus achievable by the executive directors in the event that all corporate and individual targets are met is 100 of basic salary
  directors’ remuneration report continued
pace micro technology plc
report  accounts 2006 25
benefits in kind
each executive director is entitled to benefits such as the provision of a fully expensed company car plus fuel or cash alternative private
medical insurance permanent health insurance and life insurance
pension contributions
in the year ending 3 june 2006 contributions were paid into the executive directors’ pension schemes at rates determined by the board
contributions have continued to be paid during the current year at the rate of 15 of each director’s basic salary subject to hmrc limits the
group does not operate any defined benefit schemes
share option schemes
the board believes that share ownership encourages employees to contribute further towards improvements in the group’s performance  to
this end the following share option schemes have been established by the company
n a regular savings scheme the “sharesave scheme” which is open to executive directors and employees of the group and under which
options granted at an initial discount of up to 20 against the quoted market price are normally exercisable on completion of a three
year saye contract
n an all employee share ownership plan “aesop” in terms prescribed by the legislation authorising such schemes no shares have yet
been issued under the aesop
n an hmrc approved discretionary scheme the “approved scheme” under which all employees including fulltime directors of the
company or any subsidiary who do not have and have not had within the previous twelve months a material interest in the company
and are not within six months of retirement are eligible to participate participation is at the discretion of the board acting in accordance
with the recommendations of the committee under the approved scheme options are granted at the prevailing quoted market price
and may usually be exercised between three and ten years from the date of the grant  the company adopted its first approved scheme
in 1996 and a new approved scheme at the agm in september 2005
n an unapproved discretionary scheme “unapproved scheme” which is similar to the approved scheme although certain rules of the
approved scheme are not included eg the exclusion of employees who have a material interest in the company  the company
adopted its first unapproved scheme in 1996 and a new unapproved scheme at the agm in september 2005
n a discretionary unapproved scheme 2000 “2000 unapproved scheme” under the 2000 unapproved scheme options have been
granted at the prevailing quoted market price and become exercisable “vest” as to 25 each anniversary after the grant over a four
year period under this scheme basic options may be granted up to a limit such that unvested options may not exceed four times annual
remuneration for a category of up to 55 key employees there was the ability to award options “super options” above the limit for basic
options the 2000 unapproved scheme was discontinued in august 2005 but outstanding options previously granted survive until
exercise or lapse directors’ remuneration report continued
pace micro technology plc
report  accounts 2006 26
in granting options under the approved schemes and the unapproved schemes the board may include objective performance targets or
other conditions as it thinks fit and has included such performance conditions based on growth in earnings per share eps of 1518 above
the retail prices index rpi over a threeyear period in all grants under the 1996 approved scheme and 1996 unapproved scheme prior
to 2005 under the 2000 unapproved scheme performance conditions of 6 per annum and 20 per annum compound above rpi were
applied to the grant of basic options and super options respectively thereunder initial performance targets for the 2005 approved and 2005
unapproved schemes required a minimum growth in eps of a compound 3 per annum above growth in inflation over a three year period
at which level there is 25 vesting  compound growth of 6 per annum above inflation is required for 100 vesting with vesting on a sliding
scale between these two target thresholds similar performance conditions were attached to the grant of options during the year pursuant
to the 1996 approved scheme and 1996 unapproved scheme
in setting targets for option grants in the current financial year the committee will be mindful of the need for targets to reflect a return to
profitability and significant improvements in earnings in order to assess whether the performance conditions have been met the committee
will utilise the earnings figures derived from the audited financial statements of the group
in addition a separate share option plan has been established for the benefit of the group’s us employees such plan operates within the
overall limit on issue of new shares of 10 of the company’s issued share capital applicable to all the group’s employee share schemes the
pace americas sharesave plan is based on the sharesave scheme rules and is designed to satisfy the us internal revenue service
requirements for such savingforshares plans
service contracts
company policy is that in normal circumstances executive directors’ notice periods should not exceed one year each of the executive
directors has a service contract with the company each of these agreements is terminable by the company on twelve months’ prior written
notice or by the relevant director on not less than six months’ prior written notice in respect of executive directors’ service agreements
entered into prior to 2006 at the option of the company each agreement may be terminated forthwith subject to the company paying a sum
equivalent to 12 months’ salary benefits and pension contributions the remuneration committee considers that compensation payments
on termination of employment should depend on individual circumstances 
it is the company’s policy to honour its obligations with regard to directors’ service agreements and where the employment of a director is
terminated in accordance with the aforementioned contractual process the company will pay the sum specified in the relevant service
agreement as payable or otherwise pay fair and reasonable compensation during the year the company teminated john dyson’s service
agreement without contractual notice in accordance with its terms and a termination payment of £320047 was paid to him representing 12
months’ basic salary benefits and pension contributions
the service agreement of neil gaydon was entered into on 4 may 2006 the service agreement of david brocksom was entered into on 13
november 2003 and became effective on 9 february 2004 subsequently amended on 1 june 2004 and 1 june 2006 save for the notice
periods referred to in the above paragraph these contracts have no unexpired term
each of the nonexecutive directors is appointed under a letter of appointment which is terminable at any time by the company without
contractual notice each of the directors has a letter of indemnity issued by the company which provides an indemnity in respect of liabilities
incurred in the course of their office to the extent permitted by the company’s articles of association and the provisions of section 309b of
the companies act 1985
copies of the service contracts of the executive directors and the letters of appointment of the nonexecutive directors together with the
letters of indemnity referred to above are available for inspection during normal business hours saturdays sundays and bank holidays
excepted at the registered office of the company
the company maintains directors’ and officers’ liability insurance in respect of senior employees including the directors the consent of the
board is required in the event that an executive director wishes to accept an external appointment it has been the practice of the company
to permit a director to retain nonexecutive fees arising from any such appointment but during the year neither of the current executive
directors held such external appointments directors’ remuneration report continued
pace micro technology plc
report  accounts 2006 27
the auditors are required to report on the information disclosed on pages 27 to 29
directors’ remuneration
total directors’ remuneration in respect of qualifying services for the year ending 3 june 2006 was as follows
2006 2005
£000 £000
fees 183 200
salaries benefits in kind and termination payments 930 675
performancerelated bonuses  85
pension contributions 77 73
1190 1033
the remuneration of individual directors in respect of qualifying services for the year ending 3 june 2006 is set out in the table below 
salaries performance benefits termination total remuneration pension contributions
and fees bonus in kind payment
2006 2005 2006 2005
executive directors £000 £000 £000 £000 £000 £000 £000 £000
david brocksom 151  1  152 176 20 23
john dyson 257  3 320 580 317 34 31
neil gaydon 197  1  198 267 23 19
605  5 320 930 760 77 73
nonexecutive directors
sir michael bett 60    60 65  
pat chapmanpincher 27    27 5  
robert fleming 27    27 29  
marten fraser 29    29 9  
bob lambourne 7    7 30  
mike mctighe 33    33 27  
788  5 320 1113 925 77 73
remuneration referable only to period of the financial year up to date of retirement from the board
figures for the 53 week period ended 4 june 2005 exclude fees of £26000 and £9000 paid respectively to former nonexecutive directors
marvin jones and david hood
a termination payment of £320047 was paid to john dyson by way of compensation for termination of employment and of such
compensation £39397 was paid by way of pension contribution
a summary of the benefits in kind provided to the executive directors is contained on page 25 directors’ remuneration report continued
pace micro technology plc
report  accounts 2006 28
directors’ interests in shares and share options
the interests of directors holding office at the yearend and those of their immediate families in the ordinary share capital of the company at
3 june 2006 and at the beginning of the year are set out below
3 june 2006 5 june 2005 
shares shares
beneficial non under option beneficial nonunder option
beneficial beneficial
david brocksom 14000  349635   349635
pat chapmanpincher     
robert fleming 8850990 29188  8850990 29188  
marten fraser 3000    
neil gaydon 28910  1526499 7462  917720
mike mctighe 20000   20000  
there were no changes in the directors’ interests in the ordinary share capital of the company between 3 june 2006 and 4 september 2006 directors’ remuneration report continued
pace micro technology plc
report  accounts 2006 29
share options
details of the options over the ordinary shares of 5p each in the company held by the directors who held office during the year were as follows
number of options
at 4 june 2005 granted exercised at 3 june exercise exercise period
2006 price from to
david brocksom
approved scheme 38461   38461 780p 160207 150214
2000 unapproved scheme 211539   211539 780p 160205 150214
2000 unapproved scheme 80000   80000 510p 170805 160814
1996 unapproved scheme  200000  200000 7425p 020808 010815
sharesave scheme 19635   19635 480p 011007 310308
neil gaydon
approved scheme 3498   3498 8575p 170703 160710
1996 unapproved scheme 75000   75000 640p 240901 230908
1996 unapproved scheme 75000   75000 2000p 070702 060709
1996 unapproved scheme  250000  250000 7425p 020808 010815
2000 unapproved scheme 93252   93252 3750p 240702 230711
2000 unapproved scheme 7023   7023 200p 210104 200113
2000 unapproved scheme 80000   80000 510p 170805 160814
2000 super option 56748   56748 3750p 240702 230711
2000 super option 492977  36000 456977 200p 210104 200113
2005 unapproved scheme  600000  600000 635p 180409 170416
sharesave scheme 14000  14000  180p 011005 310306
sharesave scheme 7448  7448  145p 010406 300906
sharesave scheme 9633   9633 355p 011006 310307
sharesave scheme 3141   3141 600p 010407 300907
john dyson
approved scheme 8000   8000 3750p 240704 230711
1996 unapproved scheme 150000   150000 2000p 070702 060709
1996 unapproved scheme  450000  450000 7425p 020808 010815
1996 unapproved scheme 17492   17492 8575p 170701 160710
2000 unapproved scheme 500000   500000 200p 210104 200113
2000 unapproved scheme 500000   500000 370p 020504 010513
2000 unapproved scheme 150000   150000 510p 170805 160814
2000 super option 32507   32507 8575p 170701 160710
sharesave scheme 14000  14000  180p 011005 310306
sharesave scheme 7448  7448  145p 010406 300906
sharesave scheme 9633   9633 355p 011006 310307
sharesave scheme 3141   3141 600p 010407 300907
in the case of john dyson information given as at date of cessation 14 april 2006 directors’ remuneration report continued
pace micro technology plc
report  accounts 2006 30
on 3 october 2005 neil gaydon exercised an option over 14000 shares under the sharesave scheme retaining such shares the share
price at this date was 4975p
on 3 april 2006 neil gaydon exercised an option over 7448 shares under the sharesave scheme retaining such shares the share price
at this date was 6325p
on 11 august 2005 neil gaydon exercised an option over 36000 super unapproved options and sold 18000 shares arising at a price of
765p per share creating a gain of £20340 on 11 august 2005 neil gaydon gifted 18000 shares to his wife
on 3 october 2005 john dyson exercised an option over 14000 shares under the sharesave scheme retaining such shares the share
price at this date was 4975p
on 3 april 2006 john dyson exercised an option over 7448 shares under the sharesave scheme retaining such shares the share price at
this date was 6325p
the midmarket price of shares in the company on 2 june 2006 the last dealing day before the financial year end was 4375p the lowest
and highest closing midmarket prices of shares in the company during the year were 4375p and 7975p respectively
information concerning the performance conditions attached to the above options is contained on page 26
employee trusts
the company has established the pace micro technology plc employee benefits trust which is capable of acquiring shares in the company
in the market and using them for the purposes of satisfying new share options granted under the company’s share option schemes no
shares were acquired by the trust during the year
during the year no options under the company’s share option schemes were exercised and satisfied by shares transferred by the trust
the company has established the pace quest qualifying employee share trust which is capable of acquiring shares in the company
either through purchases in the market or allotment and of using any such shares for the purposes of satisfying options under the company’s
sharesave scheme no shares were acquired by the quest during the year
during the year 64908 options under the company’s sharesave scheme were exercised and were satisfied by shares transferred by 
the quest directors’ remuneration report continued
pace micro technology plc
report  accounts 2006 31
performance graph
set out below is a performance graph showing the total shareholder return of the company for the five financial years ended 3 june 2006
compared to the total shareholder return of the ftse electronics and electrical equipment sector index which is considered by the board to
be an appropriate benchmark index against which to compare the company’s performance having regard to the principal activities of the
group
by order of the board
anthony j dixon
company secretary
4 september 2006 statement of directors’ responsibilities
pace micro technology plc
report  accounts 2006 32
the directors are responsible for preparing the annual report and the group and parent company financial statements in accordance with
applicable law and regulations
company law requires the directors to prepare group and parent company financial statements for each financial year under that law they
are required to prepare the group financial statements in accordance with ifrss as adopted by the eu and have elected to prepare the parent
company financial statements on the same basis
the group and parent company financial statements are required by law and ifrss as adopted by the eu to present fairly the financial position
of the group and the parent company and the performance for the financial year the companies act 1985 provides in relation to such financial
statements that references in the relevant part of that act to financial statements giving a true and fair view are references to their achieving
a fair presentation
in preparing each of the group and parent company financial statements the directors are required to
n select suitable accounting policies and then apply them consistently
n make judgements and estimates that are reasonable and prudent
n state whether they have been prepared in accordance with ifrss as adopted by the eu and
n prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company
will continue in business
the directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position
of the parent company and enable them to ensure that its financial statements comply with the companies act 1985 they have general
responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and
other irregularities
under applicable law and regulations the directors are also responsible for preparing a directors report directors remuneration report and
corporate governance statement that comply with that law and those regulations
a copy of the accounts of the company is posted on the pace micro technology plc website wwwpacemicrocom
the directors are responsible for the maintenance and integrity of the corporate and financial information included on the companys website
legislation in the uk governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions
  independent auditors’ report to the members of 
pace micro technology plc
pace micro technology plc
report  accounts 2006 33
we have audited the group and parent company financial statements the financial statements of pace micro technology plc for the 52
week period ended 3 june 2006 which comprise the consolidated income statement the consolidated and company balance sheets the
consolidated and company cash flow statements the consolidated and company statements of changes in shareholders equity and the
related notes these financial statements have been prepared under the accounting policies set out therein we have also audited the
information in the directors remuneration report that is described as having been audited this report is made solely to the companys
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 companys 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 companys members as a
body for our audit work for this report or for the opinions we have formed
respective responsibilities of directors and auditors
the directors responsibilities for preparing the annual report the directors remuneration report and the financial statements in accordance
with applicable law and international financial reporting standards ifrss as adopted by the eu are set out in the statement of directors
responsibilities on page 32 our responsibility is to audit the financial statements and the part of the directors remuneration report to be
audited in accordance with relevant legal and regulatory requirements and international standards on auditing uk and ireland
we report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the
part of the directors remuneration report to be audited have been properly prepared in accordance with the companies act 1985 and as
regards the group financial statements article 4 of the ias regulation we also report to you whether in our opinion the information given in
the report of the directors is consistent with the financial statements the information given in the report of the directors includes that specific
information presented in the chief executive officer’s review and finance director’s review that is cross referenced from the business review
and financial results section of the directors report  we also report to you if in our opinion the company has not kept proper accounting
records if we have not received all the information and explanations we require for our audit or if information specified by law regarding
directors remuneration and other transactions is not disclosed
we review whether the corporate governance statement reflects the companys 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 boards statements on internal control cover all risks and controls or form an opinion on the effectiveness
of the groups corporate governance procedures or its risk and control procedures we read the other information contained in the annual
report and consider whether it is consistent with the audited financial statements we consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the financial statements our responsibilities do not extend to any other
information
basis of audit opinion
we conducted our audit in accordance with international standards on auditing uk and ireland issued by the auditing practices board an
audit includes examination on a test basis of evidence relevant to the amounts and disclosures in the financial statements and the part of
the directors remuneration report to be audited it also includes an assessment of the significant estimates and judgments made by the
directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the groups and companys
circumstances consistently applied and adequately disclosed we planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial
statements and the part of the directors remuneration report to be audited are free from material misstatement whether caused by fraud
or other irregularity or error in forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial
statements and the part of the directors remuneration report to be audited
opinion
in our opinion
n the group financial statements give a true and fair view in accordance with ifrss as adopted by the eu of the state of the groups 
affairs as at 3 june 2006 and of its loss for the 52 weeks then ended 
n the parent company financial statements give a true and fair view in accordance with ifrss as adopted by the eu as applied in 
accordance with the provisions of the companies act 1985 of the state of the parent companys affairs as at 3 june 2006
n the financial statements and the part of the directors remuneration report to be audited have been properly prepared in accordance 
with the companies act 1985 and as regards the group financial statements article 4 of the ias regulation and
n the information given in the report of the directors is consistent with the financial statements
kpmg audit plc
chartered accountants 
registered auditor
leeds
4 september 2006 financial statements 2006
pace micro technology plc
report  accounts 2006 34
contents
35 financial statements  41 notes to the financial statements  69 directors secretary and advisers 
70 five year record and shareholder information
  note 52 weeks ended 3 june 2006 53 weeks ended 4 june 2005
results exceptional results for results exceptional results for
before items the year before items the year
exceptional exceptional
items items
£000 £000 £000 £000 £000 £000
revenue 3 178095  178095 253326  253326
cost of sales 5 145984 5500 151484 196109  196109
gross profit 32111 5500 26611 57217  57217
administrative expenses
research and development 
expenditure 5 21433 3500 24933 23160  23160
other administrative expenses 5 26864 2383 29247 25359 145 25504
total administrative expenses 48297 5883 54180 48519 145 48664
other operating expenses
impairment loss on trade investment 5  505 505 
operating lossprofit 16186 11888 28074 8698 145 8553
financial income  bank interest receivable 755  755 728  728
financial expenses  bank interest payable 131  131 318  318
lossprofit before tax 15562 11888 27450 9108 145 8963
tax chargecredit 8 1334 4717
lossprofit after tax 28784 13680
attributable to
equity holders of the company 28784 13680
basic lossearnings per ordinary share 9 130p 62p
diluted lossearnings per ordinary share 9 130p 61p
 the exceptional items relate principally to an inventory write down impairment of capitalised development expenditure restructuring costs and an
impairment of a trade investment these are explained in more detail in note 5
the accompanying accounting policies and notes form an integral part of these financial statements the comparatives have been restated as disclosed
in note 2
consolidated income statement
for the 52 weeks ended 3 june 2006
pace micro technology plc
report  accounts 2006 35 consolidated balance sheet
at 3 june 2006
note 3 june 2006 4 june 2005
£000 £000
assets
non current assets
property plant and equipment 10 7671 6185
intangible assets – goodwill 10 9436 9436
intangible assets – development expenditure 10 11286 7450
investments in other companies 11 349 674
deferred tax assets 12 2887 4009
total non current assets 31629 27754
current assets
inventories 13 34792 10135
trade and other receivables 14 42337 51827
cash and cash equivalents  26647
total current assets 77129 88609 
total assets 108758 116363
equity
issued capital 19 11576 11349
share premium 20 36246 35677
translation reserve 240 150
retained earnings 21 5595 22576
total equity attributable to equity holders of the parent 42467 69752
liabilities
non current liabilities
interest bearing loans and borrowings 16 154 205
provisions                                                       18 9284 9304
total non current liabilities 9438 9509
current liabilities
trade and other payables 15 45406 31561
current tax liabilities 3 49
interest bearing loans and borrowings 16 5937 56
provisions                                                         18 5507 5436
total current liabilities 56853 37102
total liabilities 66291 46611
total equity and liabilities 108758 116363
these financial statements were approved by the board of directors on 4 september 2006 and were signed on its behalf by
michael mctighe  nonexecutive chairman
neil gaydon  chief executive officer
pace micro technology plc
report  accounts 2006 36 note 3 june 2006 4 june 2005
£000 £000
assets
non current assets
property plant and equipment 10 6348 4956
intangible assets – development expenditure 10 11286 7450
investments in group and other companies 11 9749 10074
deferred tax assets 12 2887 4009
total non current assets 30270 26489
current assets
inventories 13 19160 9300
trade and other receivables 14 53594 50676
cash and cash equivalents  26744
total current assets 72754 86720 
total assets 103024 113209
equity
issued capital 19 11576 11349
share premium 20 36246 35677
retained earnings 21 10240 17210
total equity 37582 64236
liabilities
non current liabilities
provisions                                                   18 9284 9304
total non current liabilities 9284 9304
current liabilities
trade and other payables 15 43479 33586
current tax liabilities 275 647
interest bearing loans and borrowings 16 6897 
provisions                                                    18     5507 5436
total current liabilities 56158 39669
total liabilities 65442 48973
total equity and liabilities 103024 113209
these financial statements were approved by the board of directors on 4 september 2006 and were signed on its behalf by
michael mctighe  nonexecutive chairman
neil gaydon  chief executive officer
pace micro technology plc
report  accounts 2006 37
company balance sheet 
at 3 june 2006 group sharesharetranslation retained total 
capital premium reserve earnings equity
£000 £000 £000 £000 £000
balance at 29 may 2004 11339 35647  8152 55138
profit for the period    13680 13680
employee share incentive charges    744 744
issue of shares 10 30   40
currency translation adjustments   150  150
balance at 4 june 2005 11349 35677 150 22576 69752
loss for the period    28784 28784
employee share incentive charges    493 493
movement in employee share trusts    120 120
issue of shares 227 569   796
currency translation adjustments   90  90
balance at 3 june 2006 11576 36246 240 5595 42467
company 
balance at 29 may 2004 11339 35647  7020 54006
profit for the period    9446 9446
employee share incentive charges    744 744
issue of shares 10 30   40
balance at 4 june 2005 11349 35677  17210 64236
loss for the period    28063 28063
employee share incentive charges    493 493
movement in employee share trusts    120 120
issue of shares 227 569   796
balance at 3 june 2006 11576 36246  10240 37582
pace micro technology plc
report  accounts 2006 38
statements of changes in shareholders’ equity 
  52 weeks 53 weeks 
ended 3 june ended 4 june
2006 2005
£000 £000
cash flows from operating activities
lossprofit before tax 27450 8963
adjustments for 
share based payments charge 493 744
depreciation of property plant and equipment 4116 4419
amortisation and impairment of development expenditure 13296 11035
impairment of trade investments 505 
loss on sale of property plant and equipment 241 1
net financial income 624 410
movement in trade and other receivables 9490 9152
movement in trade and other payables 13871 9046
movement in inventories 24657 129
movement in provisions 51 1653
cash used in generated from operations 10668 23076
interest paid 142 385
tax paid 258 1378
net cash used in generated from operating activities 11068 21313
cash flows from investing activities
acquisition of trade investments 180 674
purchase of property plant and equipment ppe 5862 3594
development expenditure 17132 11851
proceeds from sale of ppe 5 6
proceeds from exercise of employee share options on own shares held 120 29
interest received 842 728
net cash used in investing activities 22207 15356
cash flows from financing activities
proceeds from issue of share capital 796 40
repayment of loans 50 38
net cash generated from financing activities 746 2
net change in cash and cash equivalents 32529 5959
cash and cash equivalents at start of period 26647 20705
effect of exchange rate fluctuations on cash held 2 17
cash and cash equivalents at end of period 5880 26647
consolidated cash flow statement 
for the 52 weeks ended 3 june 2006
pace micro technology plc
report  accounts 2006 39 company cash flow statement 
for the 52 weeks ended 3 june 2006
52 weeks 53 weeks 
ended 3 june ended 4 june
2006 2005
£000 £000
cash flows from operating activities
lossprofit before tax 27315 4487
adjustments for 
share based payments charge 493 744
depreciation of property plant and equipment 3600 3790
amortisation and impairment of development expenditure 13296 11035
impairment of trade investments 505 
provision against carrying value of investments  5739
lossprofit on sale of property plant and equipment 239 1
net financial income 717 440
movement in trade and other receivables 2994 10080
movement in trade and other payables 9892 7821
movement in inventories 9860 2100
movement in provisions 51 1653
cash used in generated from operations 12810 23860
interest paid 44 385
tax paid  1001
net cash used in generated from operating activities 12854 22474
cash flows from investing activities
acquisition of trade investments 180 674
purchase of property plant and equipment ppe 5236 3220
development expenditure 17132 11851
proceeds from sale of ppe 5 4
proceeds from exercise of employee share options on own shares held 120 29
interest received 838 758
net cash used in investing activities 21585 14954
cash flows from financing activities
proceeds from issue of share capital 796 40
net cash generated from financing activities 796 40
net change in cash and cash equivalents 33643 7560
cash and cash equivalents at start of period 26744 19201
effect of exchange rate fluctuations on cash held 2 17
cash and cash equivalents at end of period 6897 26744
pace micro technology plc
report  accounts 2006 40 notes
pace micro technology plc
report  accounts 2006 41
1 basis of preparation and business environment
the following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial
statements
basis of preparation
the financial statements have been prepared in accordance with applicable accounting standards and under the historical cost convention as modified
by the revaluation of derivative instruments
as referred to in the business environment section below the group customarily has a level of inventory and purchase commitments the realisation
of which is not certain as a result of delays in the launch of us products at 3 june 2006 these inventories and commitments were at much higher
levels than usual the group inventories included £23 million and there were purchase commitments of c£60 million in respect of these products the
sales of which were not certain either through pending approvals or through a lack of contractual certainty or both at 4 september 2006 approvals
and contracts had been obtained in respect of a significant proportion of this value of which there remains a total inventory and purchase commitment
value after provisions of c£16 million pending approvals and further c£14 million as yet unmatched by customer commitments the directors have
considered the ongoing approvals process and negotiations with customers and have concluded that this value is likely to be realised
the group has bank facilities to september 2007 based upon 50 of relevant trade debtors as adjusted up to a maximum of £25 million these
facilities are also subject to product approval and certain performance covenants which conditions by their nature introduce a degree of estimation
into the determination of facility availability
in managing the product manufacturing schedule to the approval process the group has and continues to reschedule cancel or otherwise
renegotiate with its suppliers the timing and value of purchase commitments and payments which has included the granting of security interests the
ability and willingness of suppliers to work with pace continues to be important to the management of the business
as noted in the chairmans statement no decision in respect of any changes in the eu import duty classification has yet been reached such a
decision could have a material impact on the future performance of the business in respect of its eu operations depending upon the nature of the
change and the timing of any implementation
the board has prepared a working capital forecast based upon assumptions as to trading and the realisation of inventory and the matters above as
well as building in the other circumstances noted in the business environment section below in particular the board has noted the importance of
shipments expected in the near future of the sd pvr for us cable the board has also modelled a number of alternative business scenarios based
upon these whilst recognising that there is uncertainty the board has concluded that the group has adequate working capital and that therefore it is
appropriate to use the going concern basis of preparation for these financial statements
international financial reporting standards
eu law ias regulation ec 16062002 requires that the annual consolidated financial statements of the company for the 52week period ending 3
june 2006 be prepared in accordance with international financial reporting standards ifrs adopted for use in the eu adopted ifrs
consequently these financial statements for both the parent company and the group have been prepared on the basis of the recognition and
measurement requirements of ifrs in issue that are either endorsed by the eu and effective or available for early adoption at 3 june 2006 being the
group’s first annual reporting date at which it is required to use adopted ifrs on publishing the parent company financial statements here together
with the group financial statements the company is taking advantage of the exemption in s230 of the companies act 1985 not to present its individual
income statement and related notes that form a part of these approved financial statements
an explanation of how the transition to adopted ifrs has affected the reported financial position and financial performance of the group and parent
is provided in note 29 this note includes reconciliations of equity and profit or loss for the comparative periods under uk generally accepted
accounting practices uk gaap to those reported for those periods under adopted ifrs
financial year end
the annual financial statements are drawn up to the saturday nearest to 31 may the current year’s financial statements are for the 52 weeks ended
3 june 2006 and the previous year’s financial statements are for the 53 weeks ended 4 june 2005 
basis of consolidation
the group financial statements consolidate those of the company and of its subsidiary undertakings note 11 drawn up to 3 june 2006 
the results of subsidiaries acquired in the period are included in the income statement from the date they are acquired on acquisition all of the
subsidiaries’ assets and liabilities that exist at the date of acquisition are recorded at their fair values reflecting their condition at that date
subsidiaries are entities controlled by the company control exists when the company has the power directly or indirectly to govern the financial and
operating policies of an entity so as to obtain benefits from its activities in assessing control potential voting rights that presently are exercisable or
convertible are taken into account  
the consolidated financial statements incorporate the financial statements of the company and all its subsidiaries intragroup transactions including
sales profits receivables and payables have been eliminated on the group consolidation 
business environment 
strategy
the group continues to develop its settop box strategy on three fronts
n to develop increasingly technologically advanced products
n to match the geographic spread of its business with that of the global paytv operator market
n to identify and exploit opportunities for additional recurring revenue streams
  notes continued
pace micro technology plc
report  accounts 2006 42
customers and markets
the global market for paytv products primarily settop box products is growing although concentrated within a limited number of operators some
of which are currently in an unprofitable business development phase the paytv market is attractive and as with most modern markets it is highly
competitive with pace’s competitors ranging from divisions of large multinational electronics companies to specialist smaller companies there are a
number of barriers to market entry in particular a requirement for complex postdeployment support to ensure deployed settop boxes can continue
to deliver over time a paytv service as this service grows in size and sophistication 
orders placed by pace’ s paytv customers are typically large oneoff orders for delivery over a number of months with supplemental orders for additional
volumes as the eventual deployment of the settop boxes can be unpredictable revenues can be volatile the difficulty in predicting pace’s business
flow and its risks can be exacerbated by a number of other factors including for example the development process for an advanced settop box which
can take over 12 months the group works on long lead times eg four months or more for component supply and manufacture typical of the
industry in the us market in particular customer firm order lead times may be less than the component lead times there are third party delivery risks
for example difficulties in the delivery of components or software code and the final go ahead for manufacture and firm contractual commitments is
usually dependent on product approvals and acceptance both from the operator and sometimes from third parties  in addition there is a requirement
for frequent design revisions that take into account price deflation and introduction of new more cost effective electronic components the revision
process places increased demand on engineering resources but at the same time provides a further barrier to entry to new competitors
the combined impact of these factors together with the need to meet customer delivery requirements imposes risk on pace’s product introduction
programme
currency risks
the standard ‘industry currency’ is the us dollar with the majority of components and manufacturing capacity purchased in this currency as a result
due to part of the group’s sales being in sterling and euros the sale prices of which will be fixed for months in advance the group remains exposed
to the risk of foreign currency movements t o manage this risk the group’ s treasury policy is progressively to cover cash flows over a six month period
and to seek a greater percentage of us dollar sales to provide a commercial hedge against currency exposures
interest rate risk
the group’s policy is to review regularly the terms of its available short term borrowing facilities and to assess individually and manage each long term
borrowing commitment accordingly the group does not currently take out any interest rate swaps
credit risk
management has a credit policy in place which provides cover over most debtors subject to excesses and the exposure to credit risk is monitored
on an ongoing basis the group does not require collateral in respect of financial assets 
deposit investments are allowed only in liquid securities and only with counterparties that have a credit rating equal or better than the group
transactions involving derivative financial instruments are with counterparties with whom the group has a signed netting agreement as well as sound
credit ratings
engineering
the group is dependent on the technological skills of its employees and is working to increase the average skill base at all of the main development
sites at the same time pace is seeking to outsource a larger part of its development and next generation cost down activity to independent
development centres and design and manufacturing partners during the year a significant number of new products for new customers have been
developed development costs directly attributable to these products are capitalised according to specified criteria and amortised over the product life
the nature of the development work and the new product launch dates have resulted in a significant capitalisation impact in this year
to improve business effectiveness so the group is better able to manage the significant volume of development work currently underway and in plan
there has been a significant internal reorganisation programme which is ongoing the programme has focussed on organisation structures and is now
focussed on business processes in particular improving the effectiveness of pace’s development process
third party and other risks
pace provides product warranties for its settop boxes although it is difficult to make accurate predictions of potential failure rates or the possibility of
an epidemic failure as a warranty estimate must be calculated at the outset of a project before field deployment data is available these estimates
improve during the lifetime of the product in the field
pace’s products incorporate third party technology usually under licence inadvertent actions may expose pace to the risk of infringing third party
intellectual property rights potential claims can still be submitted many years after a product has been deployed any such claims are always vigorously
defended 
the group outsources its manufacture to third party specialist electronics manufacturers in particular to solectron corporation inc solectron
manufactures a significant percentage of the group’ s products at plants in romania and shenzhen china with a further plant in mexico coming on line
for some of pace’s us products
regulatory
like all other businesses the group remains exposed to changes in the regulatory environment including potential modifications in import duty regimes
discussions on which have been and continue to be held within the year the company has continued to manage the implementation of the eu weee
and rohs directives
use of estimates 
the preparation of financial statements in conformity with adopted ifrs requires management to make judgements estimates and assumptions that
affect the application of policies and reported amounts of assets and liabilities income and expenses the estimates and associated assumptions are
based on historical experience and various other factors that are believed to be reasonable under the circumstances the results of which form the basis
of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources actual results may differ from
these estimates the note above business environment gives further detail on the nature of some these factors 2 accounting policies
goodwill 
all business combinations are accounted for by applying the purchase method goodwill represents the excess of the fair value of the consideration
paid on acquisition of a business over the fair value of the assets including any intangible assets identified and liabilities acquired goodwill is not
amortised but is measured at cost less impairment losses in determining the fair value of consideration the fair value of equity issued is the market
value of equity at the date of completion and the fair value of contingent consideration is based upon the extent to which the directors believe
performance conditions will be met and thus whether any further consideration will be payable 
as permitted by ifrs 1 goodwill arising on acquisitions before 29 may 2004 date of transition to adopted ifrs has been frozen at the uk gaap
amounts subject to being tested for impairment at that date goodwill is tested for impairment annually the group performs its annual impairment
review at the cashgenerating unit level for 2004 goodwill was assigned to the cashgenerating units of the group the subsequent impairment test
showed no goodwill impairment  
research and development expenditure 
all ongoing research expenditure is expensed in the period in which it is incurred where a product is technically feasible production and sales are
intended a market exists and sufficient resources are available to complete the project development costs are capitalised and subsequently amortised
on a straightline basis over the estimated useful life of the product concerned from commercial launch the expenditure capitalised includes the cost
of materials direct labour and an appropriate proportion of overheads where these conditions are not met development expenditure is recognised as
an expense in the period in which it is incurred capitalised development expenditure is stated at cost less accumulated amortisation and impairment
losses the estimated useful lives for development expenditure are estimated to be in a range of between 6 and 18 months
capitalised development expenditure is not treated as a realised loss for the purpose of determining the company’s distributable profits as the costs
meet the conditions required to be treated as an asset in accordance with ias 38
the amortisation of capitalised development expenditure is charged to the income statement in research and development expenditure within
administrative expenses category
impairment charges 
the company considers at each reporting date whether there is any indication that noncurrent assets are impaired if there is such an indication the
company carries out an impairment test by measuring an asset’ s recoverable amount which is the higher of its fair value less costs to sell and its value
in use effectively the expected cash to be generated from using the asset in the business if the recoverable amount is less than the carrying amount
an impairment loss is recognised and the asset is written down to its recoverable amount 
an impairment loss in respect of goodwill is not reversed
in respect of other assets an impairment loss is reversed when there is an indication that the impairment loss may no longer exist and there has been
a change in the estimates used to determine the recoverable amount
an impairment loss is reversed only to the extent that the asset’s carrying value does not exceed the amount that would have been determined net of
depreciation or amortisation if no impairment loss had been recognised
revenue recognition 
revenue comprises the value of sales of goods and services to third party customers occurring in the period stated exclusive of value added tax and
net of trade discounts and rebates 
revenue on the sale of goods is recognised when substantially all of the risks and rewards in the product have passed to the customer and substantially
all of the group’s work is completed which is usually upon delivery to the customer or his agent 
revenue in respect of services rendered including engineering consultancy and support and software services is recognised over the period over
which they are performed in relation to the level of work undertaken project milestones achieved and any future obligations remaining
government grants 
grants in respect of specific research and development projects are credited to research and development costs within the income statement or against
the capitalised development expenditure as appropriate to match to the project’s related expenditure 
cash and cash equivalents 
cash and cash equivalents comprise cash balances and call deposits the company considers all highly liquid investments with original maturity dates
of three months or less to be cash equivalents bank overdrafts that are repayable on demand and form an integral part of the group’s cash
management system are included as a component of cash and cash equivalents for the purpose of the statement of cash flows 
allowance for doubtful debts 
trade receivables are assessed individually for impairment or collectively where the receivables are not individually significant where necessary
provisions for doubtful debts are recorded in the income statement
inventory 
inventory is stated at the lower of cost and net realisable value cost is determined on a firstinfirstout basis and includes appropriate transport and
handling costs but excludes royalties due only on ultimate sale where necessary provision is made for obsolete slowmoving and defective inventory
property plant and equipment 
the cost of items of property plant and equipment is its purchase cost together with any incidental costs of acquisition
depreciation is calculated so as to write off on a straightline basis over the expected useful economic lives of the asset concerned the cost of property
plant and equipment less any estimated residual values which are adjusted if appropriate at each balance sheet date the principal economic lives
used for this purpose are
pace micro technology plc
report  accounts 2006 43
notes continued
  pace micro technology plc
report  accounts 2006 44
long leasehold properties  period of lease
short leasehold properties  period of lease
plant and machinery one to ten years
motor vehicles four years
provision is made against the carrying value of items of property plant and equipment where an impairment in value is deemed to have occurred
leased assets
leases in terms of which the group assumes substantially all the risks and rewards of ownership are classified as finance leases assets held under
finance leases and hire purchase contracts are capitalised in the balance sheet and depreciated over their expected useful lives the interest element
of leasing payments represents a constant proportion of the capital balance outstanding and is charged to the income statement over the period of
the lease
all other leases are regarded as operating leases and the payments made under them are charged to the income statement on a straightline basis
over the lease term 
currency translation 
transactions in foreign currencies are translated at the exchange rate ruling at the date of transaction monetary assets and liabilities denominated in
foreign currencies are translated at the rates of exchange ruling at the balance sheet date
exchange differences of a trading nature are dealt with in the income statement the assets and liabilities of foreign operations including goodwill and
fair value adjustments arising on consolidation are translated at foreign exchange rates ruling at the balance sheet date the revenues and expenses
of foreign operations are translated at an average rate approximate to the foreign exchange rate ruling at the date of the transactions 
exchange differences from the above and of related qualifying hedges are taken directly to the translation reserve they are released to the income
statement on disposal
derivative financial instruments 
the group uses derivative financial instruments usually forward foreign exchange contracts to hedge its exposure to foreign exchange and interest
rate risks arising from operational financing and investment activities in accordance with its treasury policy the group does not hold or issue derivative
financial instruments for trading purposes however derivatives that do not qualify for hedge accounting are accounted for as trading instruments 
derivative financial instruments are recognised and classified as held for trading at fair value the gain or loss on remeasurement to fair value is
recognised immediately in the income statement however where derivatives qualify for hedge accounting recognition of any resultant gain or loss
depends on the nature of the item being hedged
taxes 
current tax including uk corporation tax and foreign tax is provided at amounts expected to be paid or recovered using the tax rates that have been
enacted or substantively enacted by the balance sheet date 
deferred tax is provided using the balance sheet liability method providing for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes deferred tax is measured using the tax rates that have been
enacted or substantively enacted by the balance sheet date and are expected to apply when the asset is realised or the liability settled
a net deferred tax asset is recognised only when it is probable that sufficient taxable profits will be available in the foreseeable future from which the
reversal of the temporary differences can be deducted
sharebased payments 
the company issues equitysettled sharebased payments to certain employees equitysettled sharebased payments are measured at fair value at
the date of grant fair value is measured by use of the blackscholes pricing model the fair value determined at the grant date of the equitysettled
sharebased payments is expensed on a straightline basis over the vesting period based on the company’s estimate of the number of shares that
will eventually vest 
the company has applied the exemption available under ifrs 2 to apply its provisions only to those options granted after 7 november 2002 and
which were outstanding at 1 january 2005
employee share ownership plans 
the material assets liabilities income and costs of the pace micro technology plc employee benefits trust and the pace micro technology quest
are treated as being those of the company until such time as the company’s own shares vest unconditionally with employees the consideration paid
for the shares is deducted in arriving at equity
employee benefits
obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred the group has
no defined benefit arrangements in place
investments
investments in subsidiaries and other companies are carried at cost less provisions for any subsequent impairment
investment income
investment income relates to interest income which is accrued on a time basis by reference to the principal outstanding and at the effective interest
rate applicable
equity instruments 
equity instruments issued by the company are recorded at the proceeds received net of direct issue costs
notes continued
  3 segmental analysis
the groups principal activities are the development design and distribution of digital receivers and receiver decoders for the reception of digital
television and the receptiontransmission of interactive services telephony and high speed data “settop boxes” the group also provides
engineering design software applications and support services to multiple service operators broadcasters telecommunications companies and
retail markets worldwide each of these services may be delivered over satellite cable terrestrial and ip network transmission systems
the directors have undertaken a review of the group’s continuing operations and its associated business risks and consider that the continuing
operations should be reported as a single business segment the directors consider that the continuing operations represent one product offering
with similar risks and rewards and should be managed and reported as a single business segment in line with the group’s internal reporting
framework
the geographical analysis of revenue which arises from the sale of goods and the provision of software hardware and other consultancy services
to third party customers is as follows
revenue by destination 2006 2005
£000 £000
united kingdom 64446 106269
continental europe 56517 98095 
far east and australasia 38309 24547
north america 18823 23531
rest of the world  884
178095 253326
all revenue originates in the united kingdom from continuing operations and there is no material intersegment turnover
pace micro technology plc
report  accounts 2006 45
dividends payable 
distributions to equity holders are disclosed as a component of the movement in shareholders’ equity a liability is recorded for a final dividend when
the dividend is declared by the company’s shareholders and for an interim dividend when the dividend is paid
provisions 
a provision is recognised in the balance sheet when the group has a present legal or constructive obligation as a result of a past event and it is probable
that an outflow of economic benefits will be required to settle the obligation 
a royalties
a provision for royalties is recognised where the owners of patents covering technology allegedly used by the group have indicated claims for royalties
relating to the group’s use including past usage of that technology the provision is based on the latest information available
b warranties
a provision for warranties is recognised when the underlying products or services are sold the provision is based on historical warranty data and a
weighting of all possible outcomes against their associated probabilities the level of warranty provision required is reviewed on a product by product
basis and provisions adjusted accordingly in the light of actual performance
c restructuring 
a provision for restructuring is recognised when the group has approved a detailed and formal restructuring plan and the restructuring has either
commenced or has been announced publicly provisions are not recognised for future operating losses
d onerous contracts 
a provision for onerous contracts is recognised when the expected benefits to be derived by the group from a contract are lower than the unavoidable
cost of meeting its obligations under the contract
accounting standards issued but not adopted
no impact is expected upon the result or net assets of the group or company from any standards that are available for early adoption but have not
been early adopted
reclassification
during the period certain expenses relating to the operations department which is responsible for overseeing manufacturing have been reclassified
from cost of sales to administrative expenses and the prior period comparatives adjusted accordingly this classification better reflects the overhead
nature of the costs and the group’s move to outsource more of its manufacturing and supply chain function the amount reclassified was £3779000
2005 £3703000 there has been no overall impact on the reported result for the current or prior period in respect of this matter
notes continued
  pace micro technology plc
report  accounts 2006 46
notes continued
4 expenses and auditors’ remuneration
2006 2005
£000 £000
group auditors’ and their associates’ remuneration
 audit services 209 175
 taxation services 20 52
 other services 31 36
company auditors’ and their associates’ remuneration
 audit services 201 168
depreciation of plant property and equipment
 owned 4116 4419
other operating lease rental
 land and buildings 1372 1387
 motor vehicles 144 146
loss on disposal of plant property and equipment 241 1
5 exceptional items
2006 2005
£000 £000
exceptional charge in respect of us product 9000 
restructuring and reorganisation costs 2383 325
release regarding reference to financial services and markets tribunal  180
impairment loss on trade investment 505 
11888 145
an exceptional charge has been made following the delay in the delivery of us product which charge is reflected as a £55m inventory write down
and a £35m charge against capitalised development costs the us product relates to the hd pvr product for the us cable market where delays
have affected the anticipated product life
the restructuring and reorganisation charges relate to a restructuring programme within the group
previously the company was party to a reference to the financial services and markets tribunal following the settlement of the matter in the 53
weeks ended 4 june 2005 a net release was made from the provision originally established
the impairment loss relates to the company’s investment in vegastream limited this company encountered financial difficulties and following a
decision not to make any further investments a provision has been made against the carrying value of the investment 6 remuneration of the directors
the remuneration share options and pension entitlements of the directors are disclosed in the remuneration report on pages 24 to 31
7 staff numbers and costs
the average number of persons including directors employed by the group and company during the year analysed by category were as follows
group company
2006 2005 2006 2005
research and development 382 347 312 276
administration 108 118 85 82
sales and marketing 64 51 33 35
manufacturing and operations 75 79 65 59
629 595 495 452
the aggregate payroll costs of these persons were as follows
group company
2006 2005 2006 2005
£000 £000 £000 £000
wages and salaries 26916 24871 20031 19461
social security costs 3479 2968 3451 2948
other pension costs 1096 903 828 702
share based payments see note 24 493 743 493 743
redundancy costs 1284 313 958 273
33268 29798 25761 24127
pace micro technology plc
report  accounts 2006 47
notes continued
  pace micro technology plc
report  accounts 2006 48
notes continued
8 tax chargecredit
2006 2005
the tax chargecredit is based on the lossprofit for the year and comprises  £000 £000
current tax
adjustments in respect of previous periods  4760
overseas tax charge 212 240
total current tax chargecredit 212 4520
deferred tax
origination and reversal of timing differences note 12 1122 197
tax chargecredit in consolidated income statement 1334 4717
reconciliation of effective tax rate 2006 2005
£000 £000
lossprofit before tax 27450 8963
tax using domestic corporation tax rate at 30 2005 30 8235 2689
effects of
expenses not deductible for tax purposes 1180 616
tax losses utilised in period  2347
tax losses not recognised in period 9191 
research and development tax credit 938 975
overseas tax not at 30 53 60
adjustments to tax charge in respect of previous periods  4760
adjustments to tax charge in respect of overseas losses 83 
total tax chargecredit 1334 4717
no tax credit has been taken in respect of the exceptional items within the above tax charges on the grounds of the board’s assessment of the
recoverability of recognised deferred tax assets 9 lossearnings per ordinary share
2006 2005
basic and diluted lossearnings per share pence pence
basic lossearnings per share before exceptional items 76 63
effect of exceptional items 54 01
basic lossearnings per share 130 62
the calculation of basic lossearnings per share is based on a loss for the year of £28784000 2005 profit of £13680000 divided by the
weighted average number of ordinary shares in issue of 221742588 2005 219164009 excluding shares held by the quest and employee
benefits trust adjusted lossearnings per share before exceptional items is disclosed to indicate the underlying profitability of the group and is
based on a loss of £16896000 2005 profit £13825000
2006 2005
£000 £000
earnings before exceptional items 16896 13825
effect of charge in respect of us product 9000 
effect of impairment of trade investments 505 
effect of restructuring costs 2383 145
lossprofit for the year 28784 13680
2006 2005
number of shares m m
weighted average number of ordinary shares in issue during the year 2217 2192
dilutive effect of options outstanding 29 46
diluted weighted average number of ordinary shares in issue during the year 2246 2238
diluted earnings per ordinary share varies from basic earnings per ordinary share due to the effect of the notional exercise of outstanding share
options
pace micro technology plc
report  accounts 2006 49
notes continued
  pace micro technology plc
report  accounts 2006 50
notes continued
10 intangible assets and property plant and equipment
intangible assets property plant and equipment
short total
long leasehold property
development leasehold land and plant and motor plant and
goodwill expenditure buildings buildings machinery vechicles equipment
group £000 £000 £000 £000 £000 £000 £000
cost
at 30 may 2004 9436 6634 600 4450 24029 30 29109
exchange adjustments   7 3 1  11
additions  11851  186 3408  3594
retirement of assets  10048   10834  10834
disposals    6 253  259
at 5 june 2005 9436 8437 607 4633 16351 30 21621
exchange adjustments   9 9 11  11
additions  17132  698 5167  5865
retirement of assets  9579     
disposals    533 3326  3859
at 3 june 2006 9436 15990 616 4789 18181 30 23616
amortisationdepreciation
at 30 may 2004   209 3445 18415 30 22099
exchange adjustments   8 3 7  4
provided in the year  11035 23 441 3955  4419
retirement of assets  10048   10834  10834
disposals    6 246  252
at 5 june 2005  987 240 3883 11283 30 15436
exchange adjustments   3 8 11  6
provided in the year  9796 22 293 3801  4116
retirement of assets  9579     
impairment see note 5  3500     
disposals    481 3132  3613
at 3 june 2006  4704 265 3687 11963 30 15945
net book amount at 29 may 2004 9436 6634 391 1005 5614  7010
net book amount at 4 june 2005 9436 7450 367 750 5068  6185
net book amount at 3 june 2006 9436 11286 351 1102 6218  7671
an annual impairment test on goodwill has been carried out in accordance with the accounting policies set out in note 2 this review did not
indicate any evidence of impairment
development expenditure for the group and company comprises a number of projects at varying levels of completion such expenditure will be
amortised from the date of commercial launch in line with the accounting policies set out in note 2
retirements of development expenditure represent the deletions of the cost and related amortisation at the end of products commercial lives 10 intangible assets and property plant and equipment continued
intangible assets property plant and equipment
short total
long leasehold property
development leasehold land and plant and motor plant and
expenditure buildings buildings machinery vechicles equipment
company £000 £000 £000 £000 £000 £000
cost
at 30 may 2004 6634  4117 21011 30 25158
additions 11851  179 3041  3220
retirement of assets 10048   10834  10834
disposals   6 106  112
at 5 june 2005 8437  4290 13112 30 17432
additions 17132  680 4556  5236
disposals 9579  529 3319  3848
at 3 june 2006 15990  4441 14349 30 18820
amortisationdepreciation
at 30 may 2004   3228 16370 30 19628
provided in the year 11035  370 3420  3790
retirement of assets 10048   10834  10834
disposals   6 102  108
at 5 june 2005 987  3592 8854 30 12476
provided in the year 9796  253 3347  3600
retirement of assets 9579     
impairment see note 5 3500     
disposals   476 3128  3604
at 3 june 2006 4704  3369 9073 30 12472
net book amount at 29 may 2004 6634  889 4641  5530
net book amount at 4 june 2005 7450  698 4258  4956
net book amount at 3 june 2006 11286  1072 5276  6348
11 fixed asset investments
other 
investments
group £000
cost at 30 may 2004 625
additions 674
cost at 5 june 2005 1299
additions 180
cost at 3 june 2006 1479
provision at 30 may 2004 and 5 june 2005 625
impairment 505
provision at 3 june 2006 1130
net book value at 29 may 2004 
net book value at 4 june 2005 674
net book value at 3 june 2006 349
pace micro technology plc
report  accounts 2006 51
notes continued pace micro technology plc
report  accounts 2006 52
11 fixed asset investments continued
intra shares other total
group in group investments
loans undertakings
company £000 £000 £000 £000
cost at 30 may 2004 65945 6139 45 72129
additions   674 674
liquidation of subsidiaries  101  101
cost at 5 june 2005 65945 6038 719 72702
additions   180 180
cost at 3 june 2006 65945 6038 899 72882
provision at 30 may 2004 56945  45 56990
movement in period 5638   5638
provision at 5 june 2005 62583  45 62628
movement in period   505 505
provision at 3 june 2006 62583  550 63133
net book value at 29 may 2004 3362 6139  9501
net book value at 4 june  2005 3362 6038 674 10074
net book value at 3 june 2006 9000 6038 349 15139
additions in the period relate to an investment in vegastream limited this company encountered financial difficulties and following a decision not
to make any further investments a provision has been made against the carrying value of the investment
at 3 june 2006 the company had a beneficial interest in the equity of the following subsidiary undertakings
percentage country of country of class of share
holding incorporation operation capital held
eurl new com immobilier 100 france france ordinary
pace advanced consumer electronics limited 100 uk uk ordinary
pace asia pacific limited formerly pace asia limited 100 hong kong hong kong ordinary
pace distribution gmbh 100 germany germany ordinary
pace distribution overseas limited 100 uk uk ordinary
preference
pace micro technology hk limited 100 hong kong hong kong ordinary
pace micro technology australia pty limited 100 australia australia ordinary
pace americas limited 100 uk usa ordinary
formerly pace micro technology support services limited
pace micro technology asia pacific limited 100 hong kong hong kong ordinary
sci les 9 tilleuls 100 france france ordinary
pace europe sas  100 france france ordinary
pace micro technology gmbh 100 germany germany ordinary
 denotes company owned by pace micro technology hk limited
 denotes company owned by pace europe sas
 denotes company owned by pace distribution overseas limited
each of the subsidiary undertakings listed above have been consolidated in the group’s financial statements
notes continued
  12 deferred tax assets
deferred tax assets have been recognised in respect of differences between accounting and tax carrying values and trading losses where it is
probable that these assets will be recovered
all of the deferred tax assets were available for offset against deferred tax liabilities the movements in deferred tax assets and liabilities prior to
the offsetting of balances within the same jurisdiction as permitted by ias 12 income taxes during the period are shown below
property plant trading development
group and company  equipment losses costs ias 38 total
recognised asset £000 £000 £000 £000
at 4 june 2005 1598 4646 2235 4009
creditedcharged to income statement 31 2 1151 1122
at 3 june 2006 1629 4644 3386 2887
unrecognised deferred tax assets of £8500000 exist at the period end in respect of unutilised trading losses
13 inventories
group company
2006 2005 2006 2005
£000 £000 £000 £000
raw materials and consumable stores 7700 2354 7700 2287
finished goods 27092 7781 11460 7013
34792 10135 19160 9300
14 trade and other receivables
group company
2006 2005 2006 2005
£000 £000 £000 £000
trade receivables 33248 44785 30437 44364
amounts owed by subsidiary undertakings   14571 
other receivables 7318 5017 7158 4680
prepayments and accrued income 1771 2025 1428 1632
42337 51827 53594 50676
15 trade and other payables
group company
2006 2005 2006 2005
£000 £000 £000 £000
trade payables 38707 22259 38321 23300
amounts owed to subsidiary undertakings    2350
social security and other taxes 783 1821 715 1949
other payables 745 830 361 535
accruals 5171 6651 4082 5452
45406 31561 43479 33586
pace micro technology plc
report  accounts 2006 53
notes continued
  pace micro technology plc
report  accounts 2006 54
notes continued
16 interest bearing loans and borrowings
group company
2006 2005 2006 2005
borrowings consist mainly of bank loans and overdrafts falling due £000 £000 £000 £000
within one year 5937 56 6897 
after one and within two years 56 56  
after two and within three years 98 149  
6091 261 6897 
the banking facilities of £25 million 2005 £20 million are available until 30 september 2007 the facility is based on a percentage drawdown of
appropriate trade receivables as adjusted and is secured by a fixed and floating charge over the assets of pace micro technology plc and its
subsidiary undertakings
17 derivatives and other financial instruments
short term debtors and creditors that meet the definition of a financial asset or liability respectively have been excluded from all the following
analysis other than the currency risk exposures
this note provides information about the contractual terms of the group and company’s interest bearing loans and borrowings note16 for more
information about the group and company’s exposure to interest rate credit risk and foreign currency risk see note 2
a  interest rate risk profile of cashbank overdrafts
floating rate interest free total
currency £000 £000 £000
at 3 june 2006
sterling 2684 2 2686 
us dollar 2032 7 2025
euro 6631 1 6630
other 88 1 89
total 5891 11 5880
at 4 june 2005
sterling 24022 3 24025 
us dollar 1517  1517
euro 686 1 687
other 417 1 418
total 26642 5 26647
the interest rates on sterling us dollar euro and other floating rate financial assets and liabilities are linked to the relevant bank base rates
b  interest rate risk profile of bank loans
floating rate interest free total
currency £000 £000 £000
at 3 june 2006
euro 211  211
211  211
at 4 june 2005
euro 261  261
261  261
the interest rate on euro floating rate financial liabilities is linked to the relevant bank base rate 17 derivatives and other financial instruments
c  currency exposures
the table below shows the group’s currency exposures that give rise to the net currency gains and losses recognised in the income statement
such exposures comprise the monetary assets and monetary liabilities of the group which are not denominated in the operating or functional
currency of the operating unit involved
net foreign currency monetary assetsliabilities
us dollar euro other total
functional currency of group operation £000 £000 £000 £000
at 3 june 2006
sterling 10264 12905 501 22668
euro 47   47
other 1395 25  1370
total 11706 12880 501 24085
at 4 june 2005
sterling 7577 11782 107 4312
euro 166   166
total 7411 11782 107 4478
d  gains and losses on hedges
the majority of the group’s production costs are denominated in us dollars the group endeavours to obtain as much of its income as possible
in us dollars but a significant proportion of income is currently received in sterling or euros the group’s policy is to hedge forward progressively
against movements in the value of foreign currencies in respect of cash receipts and payments expected over the next 6 months
outstanding foreign currency hedge contracts
sell buy value average maturity
currency currency rate
at 3 june 2006 euro sterling £14m 144 julyaugust
2006
euro us dollar 20m 121 july 2006
at 4 june 2005 euro sterling £1m 144 june 2005
euro us dollar 73m 126 june  august 
2005
the unrealised loss on the above contracts in the current year as recognised in the income statement amounted to £442969  2005 £149249  
e  sensitivity analysis
in managing interest rate and currency risks the group aims to reduce the impact of shortterm fluctuations on the group’s earnings over the
longer term however permanent changes in foreign exchange and interest rates would have an impact on consolidated earnings 
pace micro technology plc
report  accounts 2006 55
notes continued
  pace micro technology plc
report  accounts 2006 56
18 provisions
royalties onerous warranties total
under negotiation contracts
£000 £000 £000 £000
group and company
at 4 june 2005 6440 1139 7161 14740
net charge for the year 245 443 4745 5433
utilised 423 1089 3870 5382
at 3 june 2006 6262 493 8036 14791
due within one year  493 5014 5507
due after one year 6262  3022 9284
the owners of patents covering technology allegedly used by the group have indicated claims for royalties relating to the group’s use including
past usage of that technology whilst negotiations over these liabilities continue they are not concluded the directors have made provision for
the potential royalties payable based on the latest information available having taken legal advice the board considers that there are defences
available that should mitigate the amounts being sought the group will vigorously negotiate or defend all claims but in the absence of agreement
the amounts provided may prove to be different from the amounts at which the potential liabilities are finally settled
19 share capital
2006 2005
number £000 number £000
authorised
ordinary shares of 5p each 300000000 15000 300000000 15000
allotted called up and fully paid
ordinary shares of 5p each 231521866 11576 226978749 11349
during the year the company allotted ordinary shares as follows
number nominal value consideration
£000 £000
employee share option scheme 180 pence 2446000 122 440
employee share option scheme 145 pence 1131667 56 164
employee share option scheme 158 pence 775550 39 122
employee share option scheme 510 pence 50000 3 26
employee share option scheme 315 pence 139900 7 44
4543117 227 796
notes continued
  19 share capital continued
the company has granted options which are subsisting including directors’ options and options granted prior to listing of the company in respect
of the following presently unissued ordinary shares of 5p each
number of ordinary exercise period price per share
shares subject to option pence
36629 25 june 1999 to 24 june 2006 1900
35000 19 august 2000 to 18 august 2007 425
485000 7 july 2002 to 6 july 2009 2000
484173 11 january 2003 to 10 january 2010 5995
101687 17 july 2003 to 16 july 2010 8575
46443 17 july 2001 to 16 july 2010 8575
25005 29 january 2004 to 28 january 2011 6100
131663 29 january 2002 to 28 january 2011 6100
258000 24 july 2005 to 23 july 2011 3750
790704 24 july 2002 to 23 july 2011 3750
213296 24 july 2004 to 23 july 2011 3750
37663 18 january 2003 to 17 january 2012 3570
30337 18 january 2005 to 17 january 2012 3570
684684 22 october 2003 to 21 october 2012 1575
80316 22 october 2005 to 21 october 2012 1575
130000 22 october 2006 to 21 october 2012 1575
50000 26 august 2007 to 25 august 2013 510
140000 26 august 2004 to 25 august 2013 510
50000 26 january 2004 to 25 november 2013 580
100000 3 february 2005 to 2 february 2014 750
25000 17 august 2008 to 16 august 2014 510
135000 17 august 2005 to 16 august 2014 510
62500 7 october 2007 to 6 october 2014 480
87500 7 october 2005 to 6 october 2014 480
73619 11 january 2008 to 10 january 2015 4075
26381 11 january 2006 to 10 january 2015 4075
159179 12 february 2007 to 12 may 2007 520
475000 2 august 2006 to 1 august 2015 7425
47430 23 january 2009 to 22 january 2016 6325
202570 23 january 2007 to 22 january 2016 6325
5204779
the pace micro technology plc employee benefits trust has granted options over existing shares and the quest has acquired shares to satisfy
certain sharesave options details of these additional options are shown in note 21
20 share premium account
group and company £000
at 5 june 2005 35677
premium on allotments 569
at 3 june 2006 36246
the shares allotted during the year are listed in note 19
pace micro technology plc
report  accounts 2006 57
notes continued
  pace micro technology plc
report  accounts 2006 58
notes continued
21 retained earnings
group £000
at 4 june 2005 22576
retained loss for the year 28784
employee share incentive charges 493
movement in employee share trusts 120
at 3 june 2006 5595
company £000
at 4 june 2005 17210
retained loss for the year 28063
employee share incentive charges 493
movement in employee share trusts 120
at 3 june 2006 10240
own shares held
the following amounts have been deducted from the retained earnings reserves of the group and company
at 3 june 2006 the pace micro technology plc employee benefits trust and quest held 7354894 2005 7662333 shares in the company
which cost £21304000  2005 £21421000 these shares are held to satisfy options granted to employees
the pace micro technology plc employee benefits trust has granted options to employees including directors’ options over ordinary shares of
5p each as follows
number of ordinary exercise period price per share
shares subject to option pence
819530 24 september 2001 to 23 september 2008 640
590919 26 january 2002 to 25 january 2009 845
292500 7 july 2002 to 6 july 2009 2000
44345 17 july 2001 to 16 july 2010 8575
502501 29 january 2002 to 28 january 2011 6100
75000 24 july 2002 to 23 july 2011 3750
839000 21 january 2004 to 20 january 2013 200
375000 2 may 2004 to 1 may 2013 370
1710072 26 august 2004 to 25 august 2013 510
250000 16 february 2005 to 15 february 2014 780
966263 17 august 2005 to 16 august 2014 510
975000 2 august 2008 to 16 august 2015 7425
600000 18 april 2009 to 17 april 2016 635
8040130
the quest has acquired shares in the company either through purchase in the market or by allotment for the purpose of satisfying the grant of
options under the following sharesave schemes
number of ordinary exercise period price per share
shares subject to option pence
141938 1 april 2006 to 30 september 2006 145
1083465 1 october 2006 to 31 march 2007 355
343037 1 april 2007 to 30 september 2007 600
181025 1 october 2007 to 31 march 2008 480
476407 1 april 2008 to 30 september 2008 320
430487 1 october 2008 to 31 march 2009 595
481959 1 april 2009 to 30 september 2009 490
3138318 22 lossprofit for the year
the parent company has taken advantage of section 230 of the companies act 1985 and has not included its own income statement in these
financial statements the group lossprofit after tax includes a parent company loss after tax of £28063000 2005 profit of £9446000
23 capital commitments
group and company
2006 2005
£000 £000
contracted but not provided for 990 997
24 employee benefits
pension plans
the group contributes to several defined contribution group personal pension plans which all executive directors and employees are entitled to
join the total expenses relating to these plans in the current year was £1096000 2005 £903000 at 3 june 2006 contributions of £nil 2005
£nil were outstanding
share based payments
details of the company’s share option schemes are included in notes 19 and 21 and the remuneration report
the number and weighted average exercise price of share options is as follows
weighted number weighted number
average of average of
exercise options exercise options
price price
2006 2006 2005 2005
outstanding at the beginning of the period 129p 20100228 154p 21912170
granted during the period 66p 4152476 46p 2901333
forfeited during the period 189p 3018921 210p 4361770
exercised during the period 19p 4850556 19p 351505
outstanding at the end of the period 134p 16383227 129p 20100228
exercisable at the end of the period 170p 6365303 207p 5788867
the options outstanding at 3 june 2006 have an exercise price in the range of 145p to 8575p and a weighted average contractual life of 7 years
the fair value of services received in return for share options granted are measured by reference to the fair value of share options granted the
estimate of the fair value of the services received is measured based on a blackscholes model the following table gives the assumptions applied
to the options granted in the respective periods shown expectations of early exercise are incorporated into the model where appropriate
2006 2005
average share price pence 614 456
weighted average exercise price pence 1340 1290
weighted average fair value of share options granted in the period pence 252 300
expected volatility  65 65
option life years 10 10
dividend yield  14 14
risk free interest rate  45 44
the expected volatility is based on the historic volatility calculated based on the weighted average remaining life of the share options adjusted
for any expected changes to future volatility due to publicly available information
the charge for share based payments in respect of share options is £493000 2005 £743000 which is comprised entirely of equity settled
transactions
pace micro technology plc
report  accounts 2006 59
notes continued
  pace micro technology plc
report  accounts 2006 60
notes continued
25 leasing commitments
total amounts payable under noncancellable operating lease rentals are as follows
group company
2006 2005 2006 2005
£000 £000 £000 £000
land and buildings
less than one year 77  47 
between one and five years 1404 1791 144 216
in five years or more 6320 6952 6320 6952
7801 8743 6511 7168
other
less than one year 36 25 36 25
between one and five years 142 196 142 196
178 221 178 221
7979 8964 6689 7389
26 contingencies
the european union has finalised the waste electrical and electronic directive which makes producers of electrical goods including settop
boxes financially responsible for specified collection recycling treatment and disposal of past and future electronic products as it is likely that
implementation of weee legislation will vary significantly between individual european member states until all individual member states have
implemented the directive and clarified the individual rules it is not possible to estimate the company’s existing liability or future expenses resulting
from such weee legislation 
a writ has been issued against the company by a former customer relating to the supply of settop boxes in 20002001 in respect of a claim to
a maximum liability of £75m the directors believe that they have good defences to such claim and that in the absence of any liability no provision
has been made
27 related parties
identity of related parties
the group has a related party relationship with its subsidiaries and with its directors and executive officers
transactions with subsidiaries
the main transaction between the company and its subsidiaries consist mainly of payments by the company for engineering and administrative
support services provided by pace americas limited and pace europe sas total recharges of £10438000 were made in the year in addition
inventory totalling £23m was sold from the company to pace americas limited during the year
the amounts due to and from these subsidiaries are shown within notes 14 and 15
transactions with key management personnel
key managment of the group is through the executive directors of the company the main transactions with these individuals are disclosed in the
remuneration report on pages 24 to 31 
of the share option charge of £493000 made in the period approximately 22 relates to options granted to the executive directors
28 post balance sheet events
there are no significant or disclosable post balance sheet events 29 restatement of comparative results under international financial
reporting standards ifrs
1 basis of restatement and summary of significant accounting policies
basis of restatement 
the group’s consolidated financial statements were prepared in accordance with uk gaap until 4 june 2005 the group has applied the same
accounting policies and methods of computation in these financial statements as those published by the group on 12 july 2005 within its 2005
annual report except as explained in parts 2 and 3 of this note where the effects of changes in accounting policies arising as a result of the
adoption of ifrs are set out reconciliations between previously reported financial statements prepared under uk gaap and the ifrs
equivalents are presented for the profit and loss account for the year ended 4 june 2005 and net assets as at 4 june 2005 and 29 may 2004
further disclosures required by ifrs 1 concerning the transition from uk gaap to ifrs are also given in parts 2 and 3 of this note 
ifrs 1 provides certain optional exemptions from full retrospective application of all accounting standards effective at the group reporting date
as discussed in more detail in the relevant sections below the group has taken advantage of the exemptions relating to business
combinations cumulative translation differences and sharebased payment transactions the group has not taken advantage of the available
optional exemption relating to fair value measurement of financial assets and financial liabilities at initial recognition
2 explanation of transition to ifrs
the group financial statements for the year ended 3 june 2006 are the first annual financial statements that comply with ifrs these financial
statements have been prepared as described in note 1 and 2 of the financial statements the group has applied ifrs 1 in preparing these
financial statements the last financial statements under uk gaap were for the 53 week period ended 4 june 2005 and the date of transition
was therefore 29 may 2004 presented below is the reconciliation of profit for the 53 week period ended 4 june 2005 and the reconciliations
of equity at 29 may 2004 being the start of that period transition date and at 4 june 2005 date of last uk gaap financial statements as
required by ifrs 1 for explanations of the nature and effect of the changes in accounting policies as a consequence of the transition to ifrs
refer to part 3 of this note
i reconciliation of uk gaap consolidated profit and loss account to ifrs consolidated income statement
53 weeks ended 4 june 2005 
end of last period presented under uk gaap
notes uk effect of ifrs 
gaap transition to
ifrs 
£000 £000 £000
revenue 253326  253326
cost of sales e 197001 892 196109
gross profit 56325 892 57217
administrative expenses
research and development b 23976 816 23160
other administrative expenses a d 25324 180 25504
total administrative expenses 49300 636 48664
operating profit 7025 1528 8553
goodwill write back a 360 360 
financial income 728  728
financial expenses 318  318
profit before tax 7075 1888 8963
tax credit 4717  4717
profit after tax 11792 1888 13680
notes continued
pace micro technology plc
report  accounts 2006 61 notes continued
pace micro technology plc
report  accounts 2006 62
29 restatement of comparative results under international financial
reporting standards ifrs continued
ii reconciliation of uk gaap profit to ifrs profit
notes group company
53 weeks 53 weeks 
ended ended
4 june 4 june 
2005 2005
£000 £000
profit after tax as reported under uk gaap 11792 8482
adjustments for
product development capitalisation and amortisation b 816 816
sharebased payments expensed to profit and loss d 744 744
fx contracts not revalued in period under uk gaap e 892 892
goodwill not amortised subsequent to transition date a 564 
goodwill write back a 360 
profit after tax as reported under ifrs 13680 9446 29 restatement of comparative results under international financial
reporting standards ifrs continued
iii reconciliations of consolidated equity and liabilities at 29 may 2004 from uk gaap to ifrs
group as at 29 may 2004
notes uk effect of ifrs 
gaap transition to
ifrs 
£000 £000 £000
assets
non current assets
property plant and equipment 7010  7010
intangible assets – goodwill a 9436  9436
intangible assets – development expenditure b  6634 6634
deferred tax assets f  3812 3812
total non current assets 16446 10446 26892
current assets
inventories 10006  10006
trade and other receivables 60912  60912
cash and cash equivalents 20705  20705
deferred tax assets f 3812 3812 
total current assets 95435 3812 91623
total assets 111881 6634 118515
equity
share capital 11339  11339
share premium account 35647  35647
retained earnings abde 2523 5629 8152
translation reserve c   
total equity attributable to equity holders of the parent 49509 5629 55138
liabilities
non current liabilities
borrowings 246  246
provisions f 20748 9580 11168
total non current liabilities 20994 9580 11414
current liabilities
trade and other payables 40738  40738
current tax liabilities 587  587
borrowings 53  53
provisions ef  10585 10585
total current liabilities 41378 10585 51963
total liabilities 62372 1005 63377
total equity and liabilities 111881 6634 118515
notes continued
pace micro technology plc
report  accounts 2006 63 notes continued
pace micro technology plc
report  accounts 2006 64
29 restatement of comparative results under international financial
reporting standards ifrs continued
iv reconciliations of  company equity and liabilities at 29 may 2004 from uk gaap to ifrs
company as at 29 may 2004
notes uk effect of ifrs 
gaap transition to 
ifrs 
£000 £000 £000
assets
non current assets
property plant and equipment 5530  5530
investments 15139  15139
intangible assets – development expenditure b  6634 6634
deferred tax assets f  3812 3812
total non current assets 20669 10446 31115
current assets
inventories 7200  7200
trade and other receivables 60689  60689
cash and cash equivalents 19201  19201
deferred tax assets f 3812 3812 
total current assets 90902 3812 87090
total assets 111571 6634 118205
equity
share capital 11339  11339
share premium account 35647  35647
retained earnings bde 1391 5629 7020
total equity attributable to equity holders of the parent 48377 5629 54006
liabilities
non current liabilities
provisions f 20748 9580 11168
total non current liabilities 20748 9580 11168
current liabilities
trade and other payables 41396  41396
current tax liabilities 1050  1050
provisions ef  10585 10585
total current liabilities 42446 10585 53031
total liabilities 63194 1005 64199
total equity and liabilities 111571 6634 118205 29 restatement of comparative results under international financial
reporting standards ifrs continued
v reconciliation of consolidated equity and liabilities at 4 june 2005 from uk gaap to ifrs
group as at 4 june 2005
notes uk effect of ifrs
gaap transition to 
ifrs 
£000 £000 £000
assets
non current assets
property plant and equipment 6185  6185
intangible assets – goodwill a 8872 564 9436
intangible assets – development expenditure b  7450 7450
investments in other companies 674  674
deferred tax assets f  4009 4009
total non current assets 15731 12023 27754
current assets
inventories 10135  10135
trade and other receivables 51827  51827
cash and cash equivalents 26647  26647
deferred tax assets f 4009 4009 
total current assets 92618 4009 88609
total assets 108349 8014 116363
equity
share capital 11349  11349
share premium account 35677  35677
retained earnings abde 14825 7751 22576
translation reserve c  150 150
total equity attributable to equity holders of the parent 61851 7901 69752
liabilities
non current liabilities
borrowings 205  205
provisions ef 14627 5323 9304
total non current liabilities 14832 5323 9509
current liabilities
trade and other payables 31561  31561
current tax liabilities 49  49
borrowings 56  56
provisions ef  5436 5436
total current liabilities 31666 5436 37102
total liabilities 46498 113 46611
total equity and liabilities 108349 8014 116363
notes continued
pace micro technology plc
report  accounts 2006 65 29 restatement of comparative results under international financial
reporting standards ifrs continued
vi reconciliation of company equity and liabilities as at 4 june 2005 from uk gaap to ifrs
as at 4 june 2005
notes uk effect of ifrs
gaap transition to 
ifrs 
£000 £000 £000
assets
non current assets
property plant and equipment 4956  4956
intangible assets – development expenditure b  7450 7450
investments in group and other companies 10074  10074
deferred tax assets f  4009 4009
total non current assets 15030 11459 26489
current assets
inventories 9300  9300
trade and other receivables 50676  50676
cash and cash equivalents 26744  26744
deferred tax assets f 4009 4009 
total current assets 90729 4009 86720
total assets 105759 7450 113209
equity
share capital 11349  11349
share premium account 35677  35677
retained earnings bde 9873 7337 17210
total equity attributable to equity holders of the parent 56899 7337 64236
liabilities
non current liabilities
provisions ef 14627 5323 9304
total non current liabilities 14627 5323 9304
current liabilities
trade and other payables 33586  33586
current tax liabilities 647  647
provisions ef  5436 5436
total current liabilities 34233 5436 39669
total liabilities 48860 113 48973
total equity and liabilities 105759 7450 113209
notes continued
pace micro technology plc
report  accounts 2006 66 29 restatement of comparative results under international financial
reporting standards ifrs continued
vii reconciliation of equity from uk gaap to ifrs
notes group group company company
29 may 4 june 29 may 4 june
2004 2005 2004 2005
£000 £000 £000 £000
total equity as reported under uk gaap 49509 61851 48377 56899
adjustments for
intangible assets product development 
capitalised b 6634 7450 6634 7450
fx contracts not revalued in period under uk gaap e 1005 113 1005 113
goodwill not amortised subsequent to transition date a  564  
total equity as reported under ifrs 55138 69752 54006 64236
3 explanation of material adjustments to equity at 4 june 2005 and 29 may 2004 and to
profit for the year ended 4 june 2005
the transition to ifrs resulted in the following changes in accounting policies
a goodwill
goodwill is not amortised under ifrs but is measured at cost less impairment losses under uk gaap  goodwill was amortised on a straightline
basis over the time that the group was estimated to benefit from it the change does not affect equity at 29 may 2004 because as permitted by
ifrs 1 goodwill arising on acquisitions before 29 may 2004 date of transition to ifrs has been frozen at the uk gaap amounts subject to being
tested for impairment at that date the results of which assessment indicated no such impairment 
under uk gaap goodwill on acquisitions prior to 1 july 1998 was eliminated directly against reserves the gain or loss on the disposal of a
previously acquired business reflects the attributable amount of purchased goodwill in respect of that business as the group has opted not to
restate business combinations prior to the date of transition the goodwill written off to reserves under uk gaap has been frozen and remains in
reserves during the period ended 4 june 2005 the group completed the liquidation of pace italia srl and goodwill previously written off to reserves
of £360000 was recycled to the income statement and charged to the loss on disposal under uk gaap this adjustment is not required under
ifrs with the result that no gain or loss from the liquidation of pace italia srl is reported in the ifrs income statement in contrast to the loss
reported under uk gaap 
b research and development ias 38 intangible assets
under uk gaap all expenditure on research and development was expensed as incurred under ias 38 research expenditure is recognised as
an expense as incurred but costs incurred on product development are capitalised as intangible assets when it is probable that the project will be
a success considering its commercial and technological feasibility resources are available to complete the development and costs can be
measured reliably other development expenditures are recognised as an expense as incurred capitalised product development expenditure is
amortised over the expected useful life
c other reserves 
as permitted by ifrs 1 the translation reserve has been reset to zero as at 29 may 2004 this has had no effect on net equity but has decreased
retained earnings by £473000 as at 4 june 2005 4 december 2004 and 29 may 2004 with equal and opposite adjustments to the translation
reserve 
d sharebased payments
the group issues equitysettled sharebased payments to certain employees in accordance with ifrs 2 equitysettled sharebased payments
are measured at fair value at the date of grant in respect of options granted after 7 november 2002 and which were outstanding at 1 january
2005 the fair value determined at the grant date of the equitysettled sharebased payments is expensed on a straightline basis over the vesting
period based on the group’s estimate of the shares that will eventually vest under uk gaap the charge recorded represented the difference
between the share price at the date of grant and the exercise price of the option in addition the group took advantage of an exemption under
which no charge was made in respect of saye options thus under uk gaap no charge was made in respect of sharebased payments
e derivative financial instruments
the ifrs standards relevant to the accounting for and presentation of financial instruments are ias 32 financial instruments disclosure and
presentation and ias 39 financial instruments recognition and measurement the differences between ifrs and uk gaap which are
immediately relevant to the group are the requirement to recognise all derivatives on the balance sheet which are then markedtomarket each
reporting period to reflect their fair value and the detailed requirements that have to be met to qualify for hedge accounting
notes continued
pace micro technology plc
report  accounts 2006 67 notes continued
pace micro technology plc
report  accounts 2006 68
29 restatement of comparative results under international financial
reporting standards ifrs continued
f balance sheet reclassifications
provisions have been reclassified into amounts falling due within one year and amounts falling due after more than one year
deferred tax assets have been reclassified as non current assets
g exemptions
ifrs 1 firsttime adoption of international financial reporting standards sets out the transition rules which must be applied when ifrs is
adopted for the first time the standard sets out certain mandatory exemptions to retrospective application and certain optional exemptions the
most significant optional exemptions available and taken by the group are as follows
i sharebased transactions the group adopted the exemption in ifrs 1 which allows a firsttime adopter to apply the new standard only to
share options and equity instruments granted after 7 november 2002 that have not vested by 1 january 2005
ii cumulative translation differences under ias 21 the effects of changes in foreign exchange rates cumulative translation differences within
reserves are recycled from equity to the income statement on disposal of a foreign operation in order to eliminate the need to retrospectively
apply this requirement the group took the exemption to set cumulative translation differences to zero at the date of transition
  directors secretary and advisers
pace micro technology plc
report  accounts 2006 69
directors company secretary
all of victoria road  saltaire bd18 3lf  england anthony john dixon
robert michael mctighe nonexecutive chairman
neil gaydon chief executive
david graham brocksom finance director
pat chapmanpincher nonexecutive director
robert arthur fleming nonexecutive director
marten charles fraser nonexecutive director
registered and auditors stockbrokers
head office kpmg audit plc hoare govett limited credit suisse first boston
victoria road 1 the embankment 250 bishopsgate 20 columbus courtyard
saltaire bd18 3lf neville street london ec2m 4aa london e14 4da
england leeds ls1 4dw
registered number 1672847
registrars principal bankers
lloyds tsb registrars barclays bank plc
the causeway po box 190
goringbysea  worthing barclays house
west sussex bn99 6da 6 east parade
leeds ls1 2ux pace micro technology plc
report  accounts 2006 70
the selected financial data set out below for each of the five years to 3 june 2006 have been extracted or derived from the audited financial statements
2006 2005 2004 2003 2002
£000 £000 £000 £000 £000
revenue 178095 253326 239949 166597 351794
lossprofit before tax 27450 8963 3880 48577 12010 
lossprofit before exceptional items and tax 15562 9108 5380 17554 10427
lossprofit after tax 28784 13680 8066 48031 34842
diluted lpseps 130p 61p 36p 213p 80p
diluted lpseps before exceptional items and goodwill amortisation 76p 61p 45p 68p 29p 
total equity attributable to equity holders of the parent excluding goodwill 33031 60316 45702 31590 61704 
 the comparatives for financial years 2002 to 2004 have been restated to reflect the impact of uitf38 accounting for esop trusts
the comparatives for 2005 and net assets for 2004 are stated under adopted international financial reporting standards all other figures are stated
on a uk gaap basis
shareholder information
annual general meeting
the company’s annual general meeting will be held at 1130 am thursday 2nd november 2006 at the company’s head office victoria road saltaire
west yorkshire bd18 3lf
lloyds tsb registrars
enquiries regarding shareholdings change of address or other particulars should be directed in the first instance to the company’s registrars lloyds
tsb registrars the causeway worthing bn99 6da or by telephone on 0870 600 3970 they also provide a range of online shareholder information
services at wwwshareviewcouk where shareholders can check their holdings and find practical help on transferring shares or updating their details
multiple accounts on the shareholder register
if you have received two or more copies of this document this means that there is more than one account in your name on the shareholder register
this may be caused by either your name or address appearing on each account in a slightly different way for security reasons the registrars will not
amalgamate the accounts without your consent if you would like any multiple accounts combined into one account please write to lloyds tsb
registrars at the address given above
unsolicited mail
the company is obliged by law to make its share register available upon request to the public and to other organisations which may use it as a mailing
list resulting in shareholders receiving unsolicited mail shareholders wishing to limit the receipt of such mail should write to the mailing preference
service dma house 70 margaret street london w1w 8ss or call 44 0 20 7291 3310 for an application form or visit wwwmpsonlineorguk
pace website
shareholders are encouraged to visit our website wwwpacemicrocom which has a wealth of information about the company
five year record and shareholder information annual report  accounts
2006
pace micro technology plc
registered in england no 1672847
bringing
technology home
mktra2006
pace micro technology plc report  accounts 2006
pace micro technology plc
victoria road  saltaire
bd18 3lf  england
tel 44 01274 532000   
fax 44 01274 532010
wwwpacemicrocom
 


Summary:
 pace micro technology plc
report  accounts 2006 02
contents
financial highlights
n revenues for the year of £1781m 2005 £2533m
n volume shipments of 22m settop boxes 2005 34m
n loss before tax and exceptional items of £156m 
2005 profit £91m
n full year gross margin of 180 2005 226 
restated basis 
n diluted loss per share of 13p 2005 earnings 
per share 61p
n net borrowings position £61m 2005 net cash £264m
all figures including comparatives are presented under ifrs
business highlights
n new executive management team in place
n organisational changes either underway 
or completed to
n resolve execution issues
n refocus business around customers
n reduce costs
n improve margin performance
n ensure pace is bestplaced to grow 
its business
n directv shipments commenced following 
product approval
02 highlights  04 chairman’s statement  07 chief executive officer’s review  13 finance director’s
review 17 board of directors  18 report of the directors  24 remuneration report  32 statement
of directors’ responsibilities 33 independent auditors’ report 34 financial statements
41 notes to the financial statements  69 directors secretary and advisers  70 five year record
and shareholder information
  pace micro technology plc
report  accounts 2006 03
“pace is a leading independent developer of digital tv
technologies for the paytv industry”
the company’s focus is on developing new technologies and
products for the constantly evolving digital tv industry as a
result pace technology has been installed in over 24 million
homes worldwide since the company was founded in 1982 
pace has achieved this through a partnership approach
creating intelligent and innovative products and services that
enable paytv operators worldwide to grow and develop their
businesses 
making it possible at the company’s headquarters in saltaire
and at bases in the us and france pace has a worldleading
engineering team the team’s expertise spans the digital
spectrum from basic digital tv through to interactive services
and innovations such as high definition home networking and
wireless technologies
pace is always working on new and innovative solutions to
exploit the full potential of digital television through its
technical vision pace aims to lead the digital tv marketplace
by exciting endusers and creating new business opportunities
for the company’s diverse customer base
n bskyb
n comcast
n directv
n foxtel
n kabel deutschland kdg
n ntl ireland
n ntltelewest
n optus
n premiere
n rogers cable
n sky italia
n sky new zealand
n time warner cable
n upc broadband the netherlands
n viasat
n vidéotron
major pace customers