where 
technology
and 
education
meet
rm plc
annual report 
and accounts 2005
vision
market
passion one
rm plc annual report and accounts 2005
rm is committed to improving the impact its activities have 
on the environment 
this report is printed on true recycledcontent coated paper with
an industry standard exceeding the 75 minimum deinked 
postconsumer waste content the recycled papers used in the
production of this report are a combination of totally chlorine free
tcf giving zero aox level and elemental chlorine free ecf
giving a resultant aox level of less than 05kg per 1000kg of
pulp conforming to government requirements
rm’s products
rm’ s products are protected by a comprehensive portfolio of registered patents or patent
applications including the following european patents – 13001714 13001722 13038872
1002781 022500599 022500581 022500615 903136794 903053544 893102095 and 
gb patents – 1002781 02003218 02202307 02268803 02257962 90174913 89176481
89136006 89116222  88236286 01199231 04151080
designed and produced by merchant in collaboration with
langsford corporate design printed by the midas press pn3274 1205
rm plc
new mill house
183 milton park
abingdon
oxfordshire 
ox14 4se
united kingdom
t 44 08709 200200
f 44 01235 826999
wwwrmcom many
values
one
company
the rm group is a leading provider of educational 
products and services to schools colleges and
universities local government and central 
government education departments and agencies
recognised as a leading innovator in the educational
information and communications technology ict 
arena rm works closely with educationalists to 
use new products processes and technology to 
improve teaching and learning
02 a passion for education
professor tim brighouse and sir mike t omlinson talk 
with tim pearson about the importance of education and 
rms role in the educational community
04 clear about our strategy
t echnical capability and relative scale combined with
unrivalled education focus mean that rm is uniquely well
positioned to address the opportunities presented by the
educational ict market
06 innovation and improvement
innovation is at the heart of products and services that are
improving the way in which education is delivered
10 not just a day job
engaging with the wider community and working to 
improve rms environmental performance brings something
extra back into the organisation
12 financial and operational highlights
13 chairman’s statement
14 ceo’s operating review
18 financial review
21 corporate governance report
23 audit committee report
26 board of directors
28 directors’ report
32 remuneration report
44 independent auditors’ report
45 consolidated profit and loss account
46 consolidated balance sheet
47 company balance sheet
48 consolidated cash flow statement
48 reconciliation of net cash flow to movement in net funds
49 notes to the financial statements
70 fiveyear summary
ibc shareholder information
customer success
high standards
innovation and improvement
openness
respect for others
enjoying ourselves
rm plc annual report and accounts 2005 2
financial calendar
annual general meeting
23 january 2006
payment of 2005 final dividend
3 february 2006
announcement of 2006 interim results
may 2006
announcement of 2006 preliminary results
november 2006
corporate web site
information about the group’ s activities is available from rm 
at wwwrmcom 
investor information
information for investors is available at wwwrmcominvestors
enquiries can be directed to phil hemmings director of
corporate affairs at the group head office address or by email at
phemmingsrmcom
registrars and shareholding information
shareholders can access the details of their holdings in rm plc via
the shareholder services option within the investor section of the
corporate w eb site at wwwrmcominvestors shareholders can
also make changes to their address details and dividend mandates
online 
all enquiries about individual shareholder matters should be
made to the registrars either via email at ssdcapitairgcom or
telephone 0870 162 3100 t o help shareholders the capita w eb
site at wwwcapitaregistrarscom contains a shareholders’
frequently asked questions section
directors
jp  leighfield chairman nonexecutive
tr pearson chief executive officer
md greig group finance director
ra sirs chief operating officer
sl coutu senior independent nonexecutive director
b carsberg independent nonexecutive director
jr windeler independent nonexecutive director
mj tomlinson independent nonexecutive director
trp  brighouse independent nonexecutive director
company secretary
aj robson
group head office and registered office
rm plc
new mill house
183 milton park
abingdon
oxfordshire ox14 4se
united kingdom
t elephone 44 0 8709 200200
fax 44 0 1235 826999
registered number 
1749877
advisers
bankers
barclays bank plc
t echnology  t elecoms t eam
1 churchill place
canary wharf
london e14 5hp
auditors
deloitte  t ouche llp
abbots house
abbey street
reading rg1 3bd
stockbrokers
ubs investment bank
1 finsbury avenue
london ec2m 2pp
registrars
capita registrars
the registry
34 beckenham road
beckenham
kent br3 4tu
solicitors
linklaters
one silk street
london ec2y 8hq
shareholder information one 
vision
rm is about improving
the life chances of
people –worldwide – by
delivering outstanding
educational products
and services that help
teachers to teach and
learners to learn 02 rm plc annual report and accounts 2005
tim pearson
mike i’ve heard you say that ict is one of the greatest forces
acting on education in the 21st century that’ s going a bit too
far isn’t it
mike tomlinson
i don’t think so ict can take learning out of the classroom
and into learners’ lives it takes the world’ s knowledge out 
of the library and puts it into the hands of anyone with a
computer over the next twenty or thirty years learning is
going to change out of all recognition compared with what 
we experienced at school
tim brighouse
w e’re at a point similar to the introduction of the printed
word then teachers needed to move from an oral tradition 
to a written tradition now they’re moving from print to
digital technologies and rm is at the forefront of making 
sure every teacher is digitally housed
tim pearson
it’ s easy to see ict as just a classroom delivery technology
because that’ s where it’ s come from there’ s much more to 
it than that isn’t there
tim brighouse
y ou should view it as the learning teaching and managerial
technology digital technologies touch all of those areas and
one of rm’ s roles is to ensure that teachers are liberated by
those digital technologies not enslaved by them
tim pearson
w e’re beginning to see what happens when you apply
technology outside of classroom delivery that’ s why i see 
the building schools for the future initiative as so important
it’ s the opportunity to rethink the way a school works with
technology as a fundamental part of it 
professor tim brighouse and sir mike t omlinson are two 
of the uk’ s most respected educationalists with careers
stretching from the classroom to the highest levels of
government policymaking they’re also members of rm’ s
board here they talk with tim pearson rm’ s ceo 
about the importance of education and rm’ s role in the
broader educational community
ict could be used 
to process
50
million exam 
scripts each year
a passion for
education rm plc annual report and accounts 2005 03
mike tomlinson
t ake assessment it was clear to me when i was looking at the
assessment system for the government that there was a role for
computers in delivering tests and providing learners with a
record of achievement just as important though was the
potential for ict to contribute behind the scenes – it makes
no sense to shuffle 50 million physical pieces of paper around
each summer
tim pearson
our work with the qualifications and curriculum authority
developing an ict test for thirteenyearolds has been
interesting the computerised test delivery gets most of the
attention but behind that is some very sophisticated workflow
technology – it’ s education process outsourcing really
mike tomlinson
it’ s hard to see how you could consider doing assessment now
without using ict simple things like distributing papers
collecting together marks communicating among schools
exam boards and examiners – they should all be automated
tim brighouse
and there are other processes that can also benefit if you look
at what rm is doing in scotland with the scottish schools
digital network ssdn project you begin to see what
happens when the digital technologies stretch to everyone 
in education – teachers pupils parents and administrators 
tim pearson
with the push for increased parental involvement in
education it’ s pretty clear that the w eb has a role to play
mike tomlinson
the ssdn project really points the way for education services
looking to ict to drive change education leaders across the
world are looking for ways to engage more effectively with
learners and looking for ways to improve life chances – and
that’ s the true purpose of education to identify and nurture the
talents of every young person rm will continue to be successful
if it delivers success for educationalists – in their terms
tim brighouse
it’ s a moral purpose if you don’t have educated people they
can’t be free obviously rm has a duty to serve its shareholders
but for me it also has a moral purpose
mike tomlinson
y ou need great products but you need passion as well 
what’ s important – really important – is that we need to be
seen to be on the educationalist’ s side we need to share their
determination to help young people achieve more than they
would otherwise have done
tim brighouse
if rm demonstrates that it can contribute to educational
outcomes then i think that we will be respected hugely for
the advances which we are making in teaching and learning
and we will find a ready demand for what we do
tim pearson
i think that our commercial success flows directly from 
our customers’ success – you can’t have one without the other
rm won’t be a successful business in the long term unless it
provides products and services that contribute to the success
of the education system products that educationalists can’t –
or won’t – do without this passion for customer success is 
an extension of the customer satisfaction drive i put in place
when i took over as ceo and it’ s something i’ve started
reinforcing in the culture of our business
from left to right sir mike tomlinson tim pearson and professor tim brighouse 04 rm plc annual report and accounts 2005
clear about our
strategy
a clear set of competitive advantages
our customers have very particular requirements from an
ict supplier clearly they expect a high level of technical
capability and the financial strength required to take on
increasingly large and complex projects crucially though
they also look for a supplier that can offer educational
understanding and empathy rm works hard to ensure that 
we lead the market across all three areas they’re our key
competitive advantages
a commitment to customer success
w e believe that the best way of ensuring rm’ s continued
business success is to deliver educational success for our
customers w e constantly measure – and seek to improve –
customer satisfaction but we aim to go beyond this
ultimately we want our products and services to be so valuable
that our customers wouldn’t want to work without them 
with an unrivalled track record of providing innovative
products and services that deliver measurable improvements
in educational outcomes we’re contributing to the success of
teachers and learners across the uk what’ s more we’re prepared
to commit to it by signing up to performancebased contracts
where payment is dependent on those educational outcomes
responding to changing educational needs
w e recognise that educational policymakers are looking 
to technology to transform teaching and learning the aim
must be for technology to move beyond simply being
accepted as useful but incidental in the classroom to the
point where it becomes a fundamental and essential part 
of the education process
changing educational landscape
then now soon
proportion of teachers 
routinely using ict 
for daytoday tasks none some all
proportion of lessons
delivered with ict few some most
use of ict for 
communication between
educational stakeholders none little lots
our commitment to innovation and improvement combined
with our education focus means that we’re not just responding
to educational needs we’re helping to transform the
educational landscape
rm’ s market position is based on clear competitive
advantages tim pearson rm’ s ceo sets out how 
technical capability and relative scale combined with
unrivalled education focus mean that rm is uniquely 
well positioned to address the opportunities available in 
the educational ict market
education
focus
technical
capability
relative
scale rm plc annual report and accounts 2005 05
a complete offer
w e provide our customers with a broad – and complete –
range of services it’ s a strategic decision we’ve made which
means that we can provide all of the ict that an educational
establishment needs – from hardware and network
infrastructure through learning content to educational
consultancy
for many of our customers we are their sole ict partner –
they look to us to make technology make sense in the
educational environment for large education projects 
we have the capability to conceive design and deliver
sophisticated new ictbased approaches to education
focusing on the bsf opportunity
the bsf building schools for the future initiative 
a 15year £45billion programme which will rebuild or
refurbish every english secondary school is the single biggest
driver of change in our market it will change the way in which
education services are specified and procured and we see it 
as a major catalyst for the development of educational ict 
w e’re working with a wide range of stakeholders to ensure
that schools of the future are underpinned by the best ict
partnering for opportunity
t ransforming teaching and learning will require the
engagement of a wide range of stakeholders – including bsf
building contractors and ict providers as well as 
policymakers teachers and learners 
rm is wellversed in working in partnership with all kinds of
organisations our strategic education projects typically
involve rm pulling together the efforts of a range of suppliers
our bsf activity will see us engage with building contractors
and support services companies and all of our products and
services are conceived developed and improved in
collaboration with our customers 
information and communications technology is part of the fabric of the school of the future
our customers 
look to us to 
make technology 
make sense in 
the educational
environment 06 rm plc annual report and accounts 2005
innovation
and improvement
innovation and improvement – they’re identified as part of
rm’ s set of core values and are at the heart of everything we
do it’ s innovation with a purpose though our products are
improving the way in which education is delivered in the
classroom and the way teachers organise their working life rm plc annual report and accounts 2005 07
a tradition of innovation with a purpose
innovation is deeply embedded in our culture rm was
formed in the 1970s with a clear purpose – exploiting the then
new technology of microprocessors to improve education
and as one of the top ten investors in research and development
in the uk software and computer services sector dti 2004
rd scoreboard we retain a clear commitment to
technological invention
customerfocussed investment makes rm an international
leader in applying information and communications
technology ict to the specific needs of education from the
first microcomputers in classrooms through the educational
use of the internet to today’ s largescale education enterprise
systems we have pioneered educational ict 
it’ s got to be technology with a purpose though innovation is
useful only if it delivers a practical benefit for us that means
improving education w orking closely with teachers and
learners we aim to develop products that genuinely meet 
the needs of teachers and learners
with products including the innovative rm one 
allinone pc and rm easiteach® the uk’ s most widely used
interactive wholeclass teaching software rm really is helping
teachers to teach and learners to learn 
customer success
innovative products alone are not enough helping teachers
to teach and learners to learn means providing the support
that they need to be successful in the classroom it also means
continuously improving that support 
improving customer satisfaction is part of our culture 
w e have a sophisticated – and externally audited – customer
satisfaction measure for many staff this measure has a direct
impact on their pay last year the score increased from 70 to
72 and for 2006 the target has been set even higher
engineering the education enterprise
t o date ict has had its biggest impact directly in the
classroom it’ s a great learning resource which motivates
learners and supports teachers increasingly though ict is
getting more and more ingrained in the process of education
itself and we are developing ict systems that have broader
roles underpinning the processes of education itself 
pioneering projects such as w elearn in w arwickshire and
the scottish schools digital network ssdn show the way
for the future of ict in education they go well beyond
‘point’ products products that serve a single purpose it’ s the
beginning of the education enterprise with ict supporting
school management and communications among teachers
pupils and parents as well as enhancing classroom delivery 
what will this education enterprise look like
• pupils with access to an online learning portfolio which
makes their work available anywhere where there’ s an
internet connection
• t eachers planning their work using detailed individual
diagnostic assessment information
• education managers with access to detailed comparative
performance data about individual education establishments
• parents connected more closely to the school community
through online access
the ssdn project shows the power of the education
enterprise ahead of anything else in the world it will provide
a single intranet connecting all 800000 learners and teachers
in scotland with the ssdn learners and teachers will
benefit from electronic communications and educational
workflow as well as from an enormous range of online
teaching and learning resources it’ s the most ambitious use 
of ict to ‘reengineer’ education ever undertaken
2003 2004 2005
customer
satisfaction
rm easiteach 
presentation software for wholeclass teaching 
with the growing use of interactive whiteboards and digital
projectors in classrooms teachers face a big challenge how 
to use digital presentation technology in a way which really
motivates and engages pupils 
rm’s educational designers knew that straightforward
presentation software wasn’t going to be enough if teachers
were to succeed with interactive whiteboards they would 
need software which could respond to the emerging needs 
of their pupils during the lesson not just reveal a regimented
set of visual aids rm easiteach which allows immediate
interaction as well as access to a library of curriculum
resources does just that – and it does it in over 10000 
schools in the uk
take a single example creating a map of the school and school
surroundings rm easiteach allows you to start with an aerial
photograph then layer on top of it standard map symbols –
during the lesson as a wholeclass exercise
65 70 72 08 rm plc annual report and accounts 2005
the rm one not all pcs are created equal
when it came to creating a pc that really reflects the
requirements of the classroom rm’s design team knew only 
one approach would work the team went back to school and
designed the product with teachers pupils and education
managers and with its vandalproof screen and casing single
box configuration and special security features the rm one
clearly demonstrates that customerfocussed innovation
creates a better classroom pc
taking a growing share of rm’s pc shipments the rm one is the
most popular pc in school and its sibling the rm mobile one 
is looking set to carry on the family tradition rm plc annual report and accounts 2005 09
examinations and assessment – online
if you were inventing the examinations system today you’d
want ict to be part of its fabric that’ s the proposition the
rm assessment team started with when it was awarded the
contract to produce a revolutionary new way of testing
thirteenyearolds 
focusing on the curriculum subject of ict the test takes
place solely on a computer the learner is presented with a
project to complete and some ict tools with which to
complete it the computer monitors the learner’ s progress 
and provides an accurate assessment of their ict abilities 
this year 45000 pupils took the test by 2007 all 600000
english key stage three pupils will be measured using it it’ s
been described as one of the most promising new assessment
approaches by the international partnership for 21st century
skills it’ s also being seen by the english qualifications and
curriculum authority qca as a pathfinder for how
examinations could work in the future
it’ s a joint adventure between rm’ s technologists and their
new colleagues at tts the education resources company 
rm acquired in 2004 the combination of rm’ s technical
knowledge and tts’ product vision has resulted in something
that directly meets a curriculum need and is significantly
better value than competing products no wonder then that 
it was an immediate bestseller
support online
t eachers can’t afford to spend time hanging on a telephone
line when they need to be in a classroom t echnical support
needs to be available at a time convenient to them which is
why w ebbased support is a good fit for educationalists 
it allows teachers to register their queries – and pick up the
answers – at any time
w ebbased support isn’t easy to deliver though all too often
it provides only generic answers or it’ s hard to find the answer
you want at all rm’ s support team has worked hard at
identifying the common questions providing straightforward
answers and making it easy to find out what you need to know
with a place in the w orld’ s t op t en best w eb support sites in
2004 and 2005 the support team has achieved a high standard 
top10
in the world
beebot
scurrying about the floor this black and yellow robot bee puts
fun into learning – and it is learning pupils construct strings
of instructions that make the beebot™ follow particular
paths there are even special mats with courses on for beebot
to follow it develops logical thinking sequencing and the
beginnings of computer programming
primary school children love beebot 10 rm plc annual report and accounts 2005
not just a
dayjob
is there more to life than the day job at rm we think 
that there is when our people engage with the wider
community or work to improve the group’ s environmental
performance we believe that they bring something extra
back into the organisation 
picture courtesy of volunteer reading help rm plc annual report and accounts 2005 11
a great place to work
w e’re proud of the people who work for rm – and in our 
most recent staff survey 82 of them said that they were proud 
to work here that compares with 66 in similar companies
whether it’ s through an extensive programme of sports and
social events involvement with charities and the community
or by engaging with environmental issues we’re keen to make
rm a great place to work crucial to our approach is staff
involvement we encourage our staff to get involved and
support their activities wherever we can
as a business rm has a relatively low environmental impact –
there are still ways to improve though our annual staff
surveys have consistently shown that our staff place a high
priority on green issues we asked a group of committed
individuals to take the lead in improving our environmental
performance with an initial focus on transport and the office
environment they’re making good progress
following an external audit from the carbon trust the
committee made recommendations to change the timings 
on heating and airconditioning systems in rm’s milton park
offices these changes have resulted in energy usage being
reduced by the equivalent of approximately 60 hours per week
the committee has also encouraged individuals to play their
role through green transport policies and has successfully
lobbied for the inclusion of environmentally friendly ‘dualfuel’
cars on rm’s company car list to keep staff informed and
involved the committee maintains the ‘green rm’ web site
providing details of progress and offering information about
paper usage recycling and energy savings
possibly rm’s largest environmental impact area is the pc
hardware which we supply to our customers we’re working
hard on an effective response to waste electrical and
electronic equipment legislation our experience with digital
links international shows that you can do more with a surplus
pc than simply dispose of it in an environmentally friendly
way rm is also investigating the possibility of developing
‘green’ pcs which consume less power and create less heat
the rm charitable foundation 
through the rm charitable foundation we support two
charities chosen by rm staff v olunteer reading help
vrh an educational charity with which
we are building a longterm relationship
and a charity of the year which in 2005 
was marie curie cancer care 
the foundation serves as a focus for
charitable fundraising with rm adding
33 to any money raised by staff 
the foundation also runs a communitysupport programme
this allows staff to apply for charitable donations to support
causes and projects in which they are personally interested in
or involved with
vrh helps disadvantaged children to develop a love of
reading and learning it recruits and trains volunteers to work
with children aged 6–11 who find reading a challenge and
need extra support and mentoring
marie curie cancer care provides highquality nursing
totally free to give terminally ill people the choice of dying 
at home supported by their family
supporting the community through better 
educational links
many rm staff serve as local school governors – and for 2006
we’ve set a target to increase this number of course it’ s giving
something to the education community but it’ s also giving
something to rm w e see it as a great way of making sure that
our people understand what it’ s really like for our customers
what do you do with 7000 surplus computers
that was the question which the dudley grid for learning
project faced when it reached its midterm ‘refresh’ and more
than 7000 computers were replaced with brandnew equipment
the rm project team – and the customer – thought that there
was a better solution than sending the surplus hardware to
landfill now  with the help of the charity digital links
international these computers are in 
use in schools in africa 
education is a key factor in breaking the poverty cycle
through our partnership with digital links international
rm is proud to play a part in improving the life chances of
thousands of children across africa 
chief executive of digital links international david sogan
says “rm’ s staff really got behind this project more than just
providing surplus equipment rm has engaged with the aims
of digital links and – through the donation of a wide range
of learning software – has made a real contribution to
education in africa”
7000
computers now 
in african schools
picture courtesy of digital links international 12 rm plc annual report and accounts 2005
2005 2004
t urnover £263m £263m
profit before tax before 
goodwill charges up 11 £128m £116m
profit before tax 
after goodwill charges £55m £71m
diluted eps before 
goodwill charges up 12 105p 94p
net funds after £104m 
of pfi capex during the year £218m £258m
dividend per share up 5 485p 46p
financial
highlights
operational
highlights
2002 2003 2004 2005
‘oneoff ’ turnover
2022 2155 2633 2627
turnover 
£ million
•11 growth 
in profit
before
goodwill
charges
•order growth
up 15 on 
last year
•successful
education
project
delivery
•customer
satisfaction
continues 
to increase
 goodwill amortisation and impairment of £74 million
2004 £45 million under uk gaap rm amortises
goodwill arising from acquisitions over five years under
ifrs goodwill amortisation will cease and be replaced 
by annual impairment tests rm plc annual report and accounts 2005 13
rm has achieved a lot since tim pearson took over as our 
ceo in 2002 in terms of financial results revenue has
increased and profit before tax before goodwill and
exceptional charges has more than doubled perhaps more
importantly for the longterm health of our business we have
achieved yearonyear increases in customer satisfaction and
reinvigorated our reputation for innovation
what we have achieved – in establishing a track record of
effective delivery in increasing customer satisfaction and in
creating unique educationally valuable intellectual property
– means that the group is very well positioned to respond to
the opportunities presented by the educational ict market
this is a testament to all tim pearson has done as ceo and to
the dedication and professionalism of the very strong
management team he leads
opportunity
early in its history rm made the strategic decision to focus its
activities at the point where education and technology meet in
particular on providing products and services that help teachers
to teach and learners to learn w e believe that the uk education
market now offers more opportunities for growth – and for
helping customers achieve their goals – than it has for many years
most obviously the building schools for the future bsf
programme is an excellent match for rm’ s competitive strengths
this 15year £45billion programme will rebuild or substantially
refurbish every english secondary school with £5 billion of this
spend allocated to information and communications technology
ict the programme will have farreaching effects on the role
which technology plays in education 
several of the education projects which rm is already delivering are
widely seen as examples of best practice in education technology 
as such they are helping to shape the ict requirements of the 
bsf programme
in the area of assessment and testing we are taking a lead in
applying 21stcentury technology to an activity which has barely
changed since the 19th century the online test delivery and
management environment which we are developing with the
qualifications and curriculum authority has been identified 
as one of the most innovative new approaches to assessment in
the world while our work with cambridge assessment formerly
ucles will fundamentally improve the way in which the exam
board administers highstakes examinations 
rm is also playing a pioneering role in the area of  ‘enterprise
systems’ for education the scottish schools digital network
ssdn project which we won during the year demonstrates the
rich set of resources that educationalists can expect in the future
ssdn is an ambitious national education intranet providing online
services for all 800000 learners and teachers across all of scotland
in time it will extend to parents as well delivering this project will
place scotland at the forefront of educational technology and
provide rm with unrivalled knowledge and experience
results
2005 has been a very successful year for rm tim pearson sets 
out the full details of the group’ s results in his operating review
in summary profit before tax before goodwill charges increased
by 11 to £128 million profit before tax after goodwill charges
was £55 million
w e are proposing a further increase in dividend which will bring
the fullyear dividend per share to 485p 2004 46p 
people
our staff believe that rm is a good place to work – they told us
so in this year’ s annual staff survey they also say that they are
proud to work here on behalf of the board and the management
team i extend my thanks to all of them rm’ s strength and our
customers’ success is dependent on the loyal committed and
creative people who choose to work here 
the future
the educational ict landscape continues to evolve new and
powerful ways of using technology to help teachers and learners
are emerging and at rm we believe that the role of ict in
improving educational standards will grow rapidly
this developing market presents enormous opportunities – and
challenges – for rm the biggest challenge is to ensure that the
products and services which we offer help our customers succeed
– on their own terms if we do this our business will continue to
prosper to the benefit of all of our stakeholders
john leighfield 
chairman 
18 november 2005
chairman’s 
statement
john leighfield – chairman
business review and financial section 14 rm plc annual report and accounts 2005
rm has delivered a strong performance in 2005 – particularly 
so against a background of budget pressures in schools and
falling selling prices in the pc hardware market financial
results for the year show good progress compared with last
year and customer satisfaction levels continue to improve 
looking ahead the educational landscape is evolving more
rapidly than it has for many years new and innovative uses for
educational technology are emerging and rm through our
education project activity is leading the world in many of
these areas the education market continues to provide
opportunities for further growth which rm is uniquely well
positioned to address
results
profit before tax before goodwill charges increased by 11 
to £128 million 2004 £116 million this increase is after 
£18 million of businessdevelopment expenditure related to the
building schools for the future bsf programme operating
profit margin before goodwill charges showed further progress
increasing to 44 2004 40 
group turnover was unchanged at £263 million however this
masks underlying growth in the group’ s business the ‘oneoff ’
turnover which we reported last year £15 million arising largely
from hardware sales related to a specific education project has
been replaced by a combination of longterm project turnover
and fullyear contributions from the businesses which we
acquired during 2004
group order intake was 15 higher than in 2004 and
significantly exceeded shipments in the year
cash management during the year was excellent at 
30 september 2005 net funds stood at £218 million 2004
£258 million this is after pfi project capital expenditure in the
year of £104 million which is now complete
after goodwill charges of £74 million profit before tax 
was £55 million 2004 £71 million the board is proposing 
an increased final dividend per share of 38p 2004 36p making
the total dividend per share for the year 485p 2004 46p
subject to approval at the agm the final dividend will be 
paid on 3 february 2006 to shareholders on the register on 
6 january 2006
individual schools
individual schools customers continued to contribute the
majority of rm’ s turnover during 2005 the average annual
amount spent by rm’ s primary and secondary school customers
increased during the year and more schools are choosing to use
our flagship community connect 3™ infrastructure product
although a strong year overall the individual schools market is
not without challenges with the last month of our 2005 financial
year which is also the first month of the academic year being
below our expectations head teachers in england are
experiencing budget pressures linked to both the workforce
remodelling programme and the introduction of teaching and
learning responsibility payments for teachers the education
software market was challenging with evidence that some of the
dedicated funding provided by the department for education
and skills is ‘leaking’ out of the market
education project delivery
w e entered 2005 having won several major education projects
these projects represent significant educational transformation
for our customers each of them is providing a highquality
service and all of them serve as reference sites for future bids
delivery highlights include
• qca 47000 pupils taking examinations online compared
with 1200 in 2004
• cambridge assessment 225000 exam scripts processed
electronically
• w arwickshire lea 1500 teachers using t ablet pcbased
teacher toolkits
ceo’s operating
review
tim pearson – chief executive officer rm plc annual report and accounts 2005 15
• newham lea 4200 laptop computers available for pupils to
take home
• lambeth lea full managed service supporting over 6000
users
• south lanarkshire council 9000 computers over 200 sites
• south y orkshire elearning programme 10500 new ict
qualifications achieved so far
• dudley grid for learning 8000 computers updated in over
100 schools 
education projects made an increased contribution to turnover
during the year also important is the reputation we are
developing for delivering successful outcomes for our customers
which increasingly differentiates us from our competition
during the year we won two further education projects scottish
schools digital network and lambeth pfi worth in total
£545 million as well as securing the renewal of our contract with
the south w est grid for learning which is expected to be worth
£10 million per year for up to five years 
scottish schools digital network
in september 2005 we were awarded a £375 million contract to
deliver the scottish schools digital network national intranet
ssdn this was a fiercely contested contract and we won it in
competition against some of the world’ s largest technology
companies rm was successful because we were able to
demonstrate an unrivalled combination of technical delivery
capability and educational focus
when the first stage of ssdn is complete more than 800000
learners teachers and educational managers in scotland will have
secure personalised access to a single intranet over time this
intranet will be extended to embrace parents as well 
the ssdn project will drive whole new ways of using
technology in education which will both save time for teachers
and improve facilities for learners functions available will
include curriculumplanning and delivery for teachers innovative
educational content for learners and sophisticated management
information systems for education managers as well as
collaboration and communication tools including email video
conferencing and chat for all users 
a reputation for innovation
w e see technical capability as one of our key competitive
advantages and during 2005 we have continued to build our
reputation for innovation
the education projects which we are delivering require technical
innovation they also play a key role in developing the group’ s
intellectual property each of these education projects
individually has built the knowledge skills and experience the
group has access to together they provide us with a rich and
deep understanding of designing and delivering technology that
makes a genuine contribution to educational outcomes
several of our products and services have been recognised for
their innovation during 2005 w e won four awards at bett
2005 the annual educational ict trade show two education
resources awards at the annual education show and awards at
the nursery w orld show these awards cover all aspects of our
product range including pc hardware educational software and
general educational resources produced by the recently acquired
tts subsidiary 
hardware and distribution
our innovative educationally differentiated pc the rm one
has been extremely well received by schools schools value the
rm one’ s educational features and robust spacesaving design
demonstrating the benefit of customerdriven innovation – even
in commodity product areas the rm one range has now been
extended with the rm mobile one which brings educational
benefits to the laptop computer 
shown with optional primary keyboard 16 rm plc annual report and accounts 2005
the commodity pc hardware market has continued to be
extremely competitive and this year has seen a significant decline
in average selling prices this effect has been most evident in our
universities business however we believe we have retained our
market share here despite reducing the level of sales and
marketing resource deployed
tts the general education resources supplier which we acquired
during 2004 has made an excellent firstyear contribution to the
group w orking in partnership with rm’ s hardware division tts
has begun to develop a highly innovative range of technology
products the first of these – beebot – has been a sales success and
further products will be introduced at bett 2006
online assessment
more than 50 million exam scripts circulate around the uk
examination system each year typically in the form of physical
pieces of paper there is a clear opportunity for ict to improve
the effectiveness and efficiency of these processes and it’ s an area
in which we have made good progress
our project with the qualifications and curriculum authority to
deliver an online key stage 3 13 to 14yearolds examination for
the curriculum subject of ict is progressing well the examination
went through volumetesting this summer and will be used next year
by a high proportion of all english key stage 3 pupils as well as
providing an innovative new way of testing ict  this project has also
created a national ict infrastructure for delivering administering
and marking tests for other subjects as well
w e are also working with cambridge assessment formerly
ucles to streamline the process of managing traditional
paperbased exams doms our digital online marking
software improves the efficiency and increases the accuracy of
marking through a sophisticated workflow engine completed
exam scripts are scanned at the earliest possible point with the
distribution marking and reporting then managed electronically
these two projects both have wider relevance and we are
exploring a range of further business opportunities
building schools for the future
bsf is a 15year programme which is intended to rebuild or
substantially refurbish every secondary school in england
partnerships for schools p4s the agency tasked with driving
the programme forward has indicated that over the life of the
programme capital investment could reach £45 billion 
t echnology will be a fundamental part of the ‘school of the
future’ – indeed educational ict is being seen as one of the key
drivers of educational transformation with as much as £5 billion
of the investment being focused on educational technology the
bsf programme is an unprecedented opportunity for rm
the potential benefits go beyond an increase in market size p4s
has provided strong guidance that bsf projects should procure
ict in the form of multiyear managed services this would allow
us to build even deeper partnerships with our customers as well as
providing greater longterm visibility of revenues as with any
major market change there are of course risks associated with the
bsf programme in particular the requirement to bid for projects
as part of a consortium means that decisions will not be made
entirely on the quality of an ict proposition 
the track record of educationproject delivery which we have
built up in recent years is directly relevant to the kind of business
which is likely to be available under bsf  w e have made some early
progress being appointed as preferred bidder for a £64 million
ict contract with solihull local education authority 
w e have chosen to increase our expenditure on business
development related to the bsf programme from the £18 million
that was spent in 2005 to approximately £4 million in 2006 with
the target of securing the position of leading ict partner to the
programme w e view this expenditure as a strategic investment
which will yield shareholder benefits over the next three to five
years as an increasing number of bsf contracts is awarded
international
the uk leads the world in the deployment of interactive
whiteboards in classrooms and rm has responded to the growing
use of this kind of technology with the further development of 
the easiteach product range easiteach – a suite of interactive
wholeclass teaching software – is equally as useful in international
markets as it is in the uk and during 2005 we have made progress
in establishing a customer base for the product range in the usa
by working in partnership with four of the leading interactive
whiteboard suppliers in america we have established a presence
for easiteach in american schools our partners bundle
easiteach studio – the core of the product range – with the
whiteboards which they sell to the us education market w e are
establishing a distribution channel to sell ‘addon’ modules to
those schools which experience the bundled product
ceo’s operating review rm plc annual report and accounts 2005 17
customer satisfaction
a key part of our strategy is to focus on continual improvement
of customer satisfaction levels in 2006 every permanent staff
member in our principal operating subsidiary will have some
element of their remuneration linked to customer satisfaction 
w e view our externally audited customer satisfaction score as our
most important nonfinancial measure in 2005 this score
increased again exceeding our target and reaching 721 on a scale
of 0 to 10 2004 70 with more than 58 of customers giving 
us a score of 8 9 or 10
the customer satisfaction target has been set higher again 
for 2006 if we achieve our 2006 target we will have seen 
yearonyear increases each year since we first started measuring
customer satisfaction in 2003 independent analysis by the
american customer satisfaction index of us companies which
measure customer satisfaction suggests that very few companies
increase their score in two consecutive years 
the quality of service which we deliver for our customers has
received external validation during 2005 support online our
w eb support service was identified by the association of
support professionals as one of the w orld’ s t en best w eb
support sites for the second consecutive year in 2005 our
telephone support team was a finalist in the helpdesk institute’ s
helpdesk support t eam excellence awards
w e are now extending our focus to include customer success as
well as customer satisfaction by this we mean achieving a
position where our customers not only view us as an exemplary
supplier but also consider that the products and services which
we supply are an essential tool to improve teaching and learning
our people
rm has a growing international presence and we now employ
185 people outside the united kingdom in north america and
australia we have regional sales offices and our software
development facility in t rivandrum india is making an
increasing contribution to product development
employee satisfaction based on our internal staff survey increased
during the year with 80 of staff responding that they thought
rm was a good organisation to work for similar companies 58
this is a very positive result and i echo john leighfield’ s comments
in his chairman’ s statement thanking my colleagues everywhere in
the group for their effort dedication and professionalism
there are as ever areas for improvement the most obvious this
year being staff training for 2006 we have increased our focus on
staff development
prospects
the recent education white paper higher standards better
schools for all identifies a central role for ict in education this
follows on from the publication of the department for
education and skills’ dfes elearning strategy earlier this year
and the appointment of the first ever director of t echnology to
the dfes board 
rm remains a seasonal business with more than half of our
revenues – and an even greater proportion of profits – occurring in
the second half of the year reflecting the peak in schools’ demand
in preparation for the start of the academic year in september
while we have improved the visibility of our revenues we still have
almost twothirds of the year’ s business to win and deliver 
as always at this time of our financial year it is too early in the year
to make any meaningful comment on rm’ s performance in 2006
however with english head teachers facing budget pressures as a
result of the workforce remodelling programme and the
introduction of teaching and learning responsibility payments for
teachers the weakness in the market that was evident at the start of
the new academic year has continued into the current financial year 
as previously mentioned we are choosing to increase our
investment in businessdevelopment expenditure to prepare for
the opportunities presented by bsf  w e believe that this is in the
longterm interests of shareholders however it will hold back
profit growth in 2006
in the longer term rm is very well positioned to deliver
innovative ict products and services that will help teachers to
teach and learners to learn 
tim pearson
chief executive officer
18 november 2005 18 rm plc annual report and accounts 2005
results in the year to 30 september 2005 show a strong
performance from the rm group profit before tax excluding
goodwill charges increased by 11 to £128 million whilst
diluted earnings per share excluding goodwill charges grew
12 to 105p t urnover was unchanged at £263 million the
proposed final dividend per share is 38p giving an increased
total dividend per share for the year of 485p 2004 46p 
net funds at 30 september 2005 were £218 million 
2004 £258 million a decrease of only £40 million despite
£104 million of capex investment in pfi contracts 
turnover and profits
at the group level turnover for the year was unchanged at 
£2627 million 2004 £2633 million however this position
masks significant developments in the group’ s underlying
business in 2004 we reported ‘oneoff ’ turnover of approximately
£15 million arising from the classroom 2000 project in northern
ireland in 2005 this has been replaced principally by a full year’ s
contribution from tts and sentinel the acquisitions made in
2004 and by an increase in the turnover recognised on longterm
education projects 2005 also saw a decline in the proportion of
turnover arising from pc hardware sales which now accounts for
less than onethird of the group’ s revenues this decline was
driven by a reduction in average unit selling prices for pcs an
effect that was particularly noticeable in the university sector 
the gross profit percentage increased to 281 2004 260
this increase is primarily a result of the increasing breadth of
activities inside the group and their differing business models
this year gross profit percentage has been particularly impacted
by the acquisition of tts which has higher than group average
gross margins and by an increase in the contribution made by
longterm contracts
t otal operating expenses excluding goodwill charges were up
£42 million at £622 million 2004 £580 million with the full
year impact of last year’ s acquisitions accounting for £33 million
of this increase investment in research and development
increased by £23 million to £168 million 2004 £145 million
reflecting increased project supported developments selling and
distribution costs increased by £14 million to £342 million
mainly as a result of increased business development expenditure
relating to the building schools for the future bsf contracts
£18 million in 2005 compared to £01 million last year 
operating profit excluding goodwill charges increased by 10
to £115 million operating profit margin before goodwill
charges made further progress increasing to 44 2004 40
net interest receivable increased by 24 to £13 million this
includes £07 million of income arising from leasing activities
2004 £nil the provision of lease finance options to customers
had previously been outsourced but was brought inhouse in
2005 in order to provide greater control and flexibility over our
offer to customers this change has resulted in a change in the
way in which income related to leasing is included in the
accounts there was lower interest receivable on the lower
average cash balances during the year 
profit before tax excluding goodwill charges increased by 11 to
£128 million 
goodwill charges increased from £45 million to £74 million
reflecting additional amortisation of £18 million on acquisitions
made in 2004 and an impairment charge of £11 million made 
in relation to the closure of peakschoolhaus under uk gaap  rm
writes off goodwill arising from acquisitions over five years profit
on ordinary activities before taxation was £55 million 2004 £71
million primarily as a result of this increase in goodwill charges
cash flow
cash generation continues to be strong with £172 million of
operating cash flow generated in the year 2004 £224 million
net capital expenditure was £145 million 2004 £97 million
comprising additions of £156 million less proceeds from sales of
£11 million £104 million was invested in the year in the pfi
contract asset bases for the midcontract refresh of the existing
dudley contract and in the new w arwickshire newham and
lambeth pfi contracts
net funds of £218 million comprise cash and investments of
£229 million less issued loan notes of £11 million in addition
there is deferred consideration of £36 million comprising loan
notes of £12 million that are issuable in 2007 and included in
provisions and deferred cash consideration of £24 million that is
payable in december 2006 and included in creditors falling due
after more than one year 
financial
review
mike greig – group finance director
2002 2003 2004 2005
before goodwill charges 
and exceptional items
50 86 116 128
profit before tax
£ million rm plc annual report and accounts 2005 19
the group’ s core business is seasonal and average net funds during
the year were £80 million 2004 £272 million with a minimum
for the year of a £12 million deficit 2004 surplus £71 million
the reduction in average net funds reflects the timing of the 2004
acquisitions the investment in fixed assets for longterm pfi
contracts and an increase in longterm work in progress
balance sheet
t angible fixed assets increased by £62 million to £264 million
arising from additions at a cost of £157 million net disposals of
£08 million and depreciation charged of £87 million intangible
fixed assets represent the net book value of goodwill arising on
acquisitions and amounts to £173 million 
stocks increased by £12 million to £177 million as a result of an
increase in longterm contract balances of £38 million debtors
decreased by £21 million to £495 million mainly due to
reductions in trade debtors and prepayments 
creditors decreased by £32 million to £833 million mainly due
to reductions in trade creditors and accruals offset by an increase
in payments on account related to a longterm contract 
tax and treasury
the group measures the tax rate as a percentage of profit before
goodwill charges because goodwill charges are not a tax
deductible expense in 2005 this tax rate was 269 compared to
273 in 2004 the tax rate continued to be below the standard
uk corporation tax rate of 30 because of the benefit of the
group undertaking research and development projects that
attract an enhanced tax deduction 
the board approves significant treasury transactions and reviews
treasury policy on a regular basis the treasury activities are
controlled and monitored by the group finance director and are
carried out in accordance with the approved policies surplus
cash which is predominantly held in sterling is invested for
appropriate periods with institutions that have a high credit
rating and have been approved by the board the objectives of
the t reasury function are largely
• to provide protection from the effects of foreign currency
volatility the group’ s major exposures arise from buying
products and components in us dollars or euros these
exposures are effectively hedged through the use of forward
foreign exchange contracts the group has operations in
australia india and north america although in relation to
the size of the group these operations are small and therefore
do not create a significant foreign exchange risk 
• to provide the group with cost effective and appropriate
liquidity the group’ s cash funds vary throughout the year
due to the seasonality of the business and its aim is to
maximise returns from surplus cash through very low risk
investments with defined institutions t reasury also works
with banks to ensure that cost effective committed borrowing
facilities are available to meet any forecast funding
requirements that arise from our seasonal trading pattern
pensions
the group has continued to account for its defined benefit
pension scheme using ssap 24 ‘ accounting for pension costs’ 
the latest triennial actuarial valuation was carried out at 31 may
2003 with another due in may 2006 at 30 september 2005
under frs 17 ‘retirement benefits’  the scheme’ s assets were
£565 million and its liabilities were £724 million this is a 
deficit before tax of £159 million 2004 £149 million 
or £111 million deficit after tax 2004 £104 million in 2005
the group has adopted more prudent mortality assumptions –
pma92–4 and pfa92–4 – which in summary added an
extra year’ s life expectancy and increased liabilities by 
£14 million over the year the yield on ‘ aa’ rated corporate
bonds which is used to discount the scheme’ s liabilities has fallen
by 055 to 505 and the assumption for future salary increases
has been reduced by 04 to 38 the impact of these changes
in assumptions is an increase in liabilities of £82 million and this
more than offset a good investment return on the scheme assets
during the year
the recent introduction of the pension protection fund and the
as yet unclear mechanisms for calculating future years’ payments
which will include the solvency of participating group
companies and the scheme’ s ppf deficit might mean significant
unplanned costs for the group the charge made for 2005 on 
a different basis from that going forward was £002 million
the group continues to closely monitor the position of the
pension scheme taking appropriate and prudent action when it
deems necessary 
changes to the group 
the group has made no material acquisitions in the financial
year ended 30 september 2005 compared with three acquisitions
during the preceding year in april 2005 the group announced
that peakschoolhaus an ofsted inspection business which was
acquired in october 2003 was an unsuccessful bidder for
regional inspection services as a consequence this business has
been closed and the group has taken an impairment charge equal
to the unamortised goodwill
on 30 september 2005 the company exercised an option to
acquire all the issued share capital in rm educational software
inc to enable further development in the us market the exercise
of the option entailed the payment of 100 and has not affected
the group’ s results as rm educational software inc had been
fully consolidated in prior years as a quasisubsidiary
shareholder return
the midmarket share price at the close of business on 
30 september 2005 was 16775p an increase of 177 over last
year end capitalising the group at £1522 million an interim
dividend of 105p per share was paid to shareholders in july the
proposed final dividend of 38p makes a total dividend return of
485p per share 2004 46p an increase of 54 dividend yield
for the year was 29 based on the share price at the close of the 20 rm plc annual report and accounts 2005
year diluted earnings per share excluding goodwill charges
were up 117 to 105p 2004 94p 
the company did not utilise the authority that it has in 
place to buy back up to 10 of the issued share capital during the
year it will seek reapproval of this authority at the agm in
january 2006
accounting policies and presentation
under uk gaap the group is required to amortise goodwill
arising on acquisitions it has continued to do this over a fiveyear
period this is significantly shorter than the period of 20 years
referred to in frs 10 as a result the profit and loss account
bears a significant noncash charge for goodwill amortisation
this charge is included in administrative expenses as noted 
in this review the group also bore an impairment charge on 
the goodwill arising on peakschoolhaus in the year ended 
30 september 2005 t o aid understanding of the underlying
business performance operating profit and profit before tax are
both shown before this charge on the face of the profit and loss
account for the same reason an additional eps measure
excluding goodwill charges is also included 
the group’ s accounting policies are set out in note 1 to the
financial statements the directors regularly review these
policies and consider them to be appropriate robust and
adequately disclosed
international accounting standards
this report for the year ending 30 september 2005 is the last
prepared under uk gaap in common with all listed companies
within the european union the next consolidated report and
accounts rm will prepare will be in accordance with
international financial reporting standards ifrs the group
intends to make a transition announcement on the impact of
moving to ifrs in december 2005 with a presentation being
made available on our w eb site at wwwrmcominvestors 
the following areas are likely to be significantly impacted by the
transition
goodwill annual impairment review of carrying
value no goodwill amortisation ias 38
sharebased income statement charge at fair value for 
payment equity instruments granted to employees
ifrs 2
pensions assets and liabilities of the defined benefit
pension scheme included on the group
balance sheet 
movements reflected in income statement
and statement of recognised income and
expenditure ias 19
research and expenditure meeting certain recognition 
development criteria must be capitalised amortised over
its useful life and subjected to annual
impairment reviews ias 38
holiday pay liability is recognised for holiday accrued
by employees ias 19
foreign exchange derivatives are fair valued with movements
derivatives taken to income or deferred until the
hedged item affects income ias 39
dividends the final dividend is not accrued until
approved and is therefore not included
within the year end accounts ias 10
t axation deferred tax is provided on temporary
differences which are expected to be
recovered including the pension scheme
surplusdeficit ias 12
mike greig
group finance director
18 november 2005
financial review
2002 2003 2004 2005
shareholders’ 
and net funds 
£ million
327 384 258 218
411 412
406
385
shareholders’ funds
net funds
2002 2003 2004 2005
415 435 460 485
dividends 
per share 
pence rm plc annual report and accounts 2005 21
statement of directors’ responsibilities
united kingdom company law requires the directors to prepare
financial statements for each financial year which give a true and
fair view of the state of affairs of the group and the company
and of the profit or loss of the group for that period in preparing
those financial statements the directors are required to
• select suitable accounting policies and then apply them
consistently
• make judgements and estimates that are reasonable and
prudent and
• state whether applicable accounting standards have been
followed
the directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the group and the company this enables
them to ensure that the financial statements comply with the
companies act 1985 they are also responsible for the system of
internal control for safeguarding the assets of the group and the
company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities
compliance with the combined code
the group has throughout the year complied with the
combined code on corporate governance july 2003 ‘the
code’ as published by the financial reporting council with 
the following exceptions
• combined code c34 a formal ‘whistle blowing’ policy
was not adopted by the group until 1 august 2005 prior to
this informal arrangements were in place for staff to raise
concerns about possible improprieties 
the company has applied the principles of good governance
set out in section 1 of the code further explanation of how the
principles have been applied is set out in the following text in
connection with directors’ remuneration in the relevant section
of the remuneration report and in connection with internal
controls and principal risks in the relevant section of the audit
committee report
board of directors
the board comprises the chairman three executive directors
and five nonexecutive directors biographies of board members
are provided on pages 26 and 27 nonexecutive directors are
appointed for a fixed term subject to reelection they can serve 
a maximum of three terms the division of responsibilities
between the chairman and chief executive officer has been
formally defined
john leighfield the group’ s chairman is not considered
independent under the terms of the combined code a31
because he has served on the board for more than nine years he
was independent at the time of his appointment all of the
group’ s other nonexecutive directors are considered
independent under the terms of the code sherry coutu is the
senior nonexecutive director
the board has formally adopted a schedule of matters that are
brought to it for discussion and decision this schedule includes
overall group strategy acquisition policy internal controls major
capital investment and risk management and is intended to ensure
that the board maintains full and effective control over appropriate
strategic financial and compliance issues and oversees operational
activities the board delegates the operational management of the
group to the executive committee 
there is an established procedure for all directors to take
independent professional advice at the expense of the group 
as necessary in the pursuit of their duties
board meetings
there is a formal schedule of 11 board meetings a year board
members also receive updates about group activities by email
and communicate informally by telephone and email 
directors receive a detailed information pack one week before
each board meeting which contains background papers on all the
agenda items executive managers are regularly invited to board
meetings to present and discuss strategic topics with the directors
during the year the nonexecutive directors met without the
executive directors present the nonexecutive directors led
by the senior independent nonexecutive director also met to
appraise the chairman’ s performance
board effectiveness
the board has put in place a formal process for annually
reviewing its effectiveness and the effectiveness of its committees
this review is led by the chairman and uses a process agreed by
the board as a whole each board member provides an individual
evaluation of performance against a series of criteria and these
evaluations are then used as the basis of a collective discussion
in conducting this year’ s annual review of board effectiveness a
small number of suggestions for improvement have been identified 
an assessment of the effectiveness of individual members of the
board was carried out
board committees
there are four board committees namely audit remuneration
nominations and t ransactions all of which apart from the
t ransactions committee comprise only nonexecutive directors
the audit committee 
the audit committee is chaired by sir bryan carsberg 
and comprises three independent nonexecutive directors 
it meets at least three times a year the company’ s external
auditors the group finance director group financial
controller and the head of internal audit normally attend part
of these meetings the audit committee is responsible for
reviewing the accounting policies internal control assessment
and the financial information contained in the annual and
interim reports it provides an opportunity for the 
corporate governance 
report 22 rm plc annual report and accounts 2005
nonexecutive directors to make independent judgements and
contributions thus furthering the effectiveness of rm’ s internal
financial controls further details of the audit committee’ s
activities are given in the audit committee report the terms 
of reference for the audit committee were made available for
inspection at the group’ s offices 
the remuneration committee 
the remuneration committee is chaired by sherry coutu and
comprises four independent nonexecutive directors it meets at
least twice a year executive directors and senior managers may
be invited to attend committee meetings but will not be present
during any discussion of their own pay arrangements the
remuneration committee sets the remuneration of rm’ s
executive directors and senior management it also considers
grants and performance conditions under the rm share option
schemes and reviews rm’ s employment strategy generally
further details of the remuneration committee’ s activities are
given in the remuneration report
the nominations committee 
the nominations committee is chaired by john leighfield 
and comprises the group chairman and four independent 
nonexecutive directors it meets at least once a year with 
more frequent meetings when the group is actively selecting
directors the nominations committee recommends to the
board candidates for appointment as directors during 2005 
the committee met once
the transactions committee 
the t ransactions committee is chaired by john leighfield and
comprises the group chairman plus any one other independent
nonexecutive director and any one executive director it meets
at such times as the chairman of the committee requires the
t ransactions committee approves enters into and executes all
deeds and documents and does all things that are necessary to give
effect to any ‘substantial t ransaction’ that has already been
approved in principle by the board
executive committee
the executive committee comprises tim pearson chairman
mike greig and rob sirs the committee meets weekly with the
group’ s human resources director invited to attend the
executive committee is responsible for implementing the
strategy set out by the group board preparing strategic proposals
to be considered by the board and providing daytoday
operational management and control for the business 
relations with shareholders
rm maintains regular contact with institutional shareholders
fund managers and investment analysts through an active
investor relations programme 
as part of this programme the group’ s chief executive officer
and group finance director provide detailed briefings for
investment analysts and institutional shareholders at the time of
the group’ s interim and preliminary results announcements
hold regular meetings with analysts institutional shareholders
and fund managers during the year and typically host two analyst
seminars and two investor seminars during the year the group
chairman attends at least one group meeting with investment
analysts during the year and also meets major shareholders the
senior independent nonexecutive director meets with major
shareholders at least annually the chair of the remuneration
committee consults with major shareholders annually about any
significant proposed changes to remuneration policy
private investors are encouraged to participate in the annual
general meeting in order to improve communications with
investors in general and private investors in particular the group
maintains a detailed investor relations w eb site at
wwwrmcominvestors
the board is provided with detailed independently produced
reports providing nonattributable feedback from analysts
institutional shareholders and fund managers following results
announcements and analystinvestor seminars discussion of
these reports is included as a formal agenda item at board
meetings the board is also provided with regular updates about
investor relations activities and receives analysts’ notes about rm
as they are published
all directors are available at the group’ s agm to address any
shareholder questions
rm has identified a senior manager the director of corporate
affairs with responsibility for managing the group’ s investor
relations programme
going concern
after making appropriate enquiries the directors have a
reasonable expectation that the group has adequate resources to
continue in operational existence for the foreseeable future for
this reason they continue to adopt the going concern basis in
preparing the accounts
aj robson
company secretary
18 november 2005
corporate governance report rm plc annual report and accounts 2005 23
the audit committee operates under terms of reference
approved by the board with the purposes of 
• appointing the group’ s internal and external auditors 
• reviewing the performance of and relationship with the
group’ s external auditors including considering fee levels and
the provision of nonaudit work
• reviewing the performance of the group’ s internal audit
function
• reviewing the group’ s financial reporting and internal control
processes
• monitoring the integrity of the group’ s financial statements
and announcements regarding performance
• ensuring that a system is operated for the assessment and
management of key risks as required by the t urnbull report
composition and qualifications of the audit committee
the audit committee comprises sir bryan carsberg msc
econ fca chair sherry coutu ba msc econ mba
and john windeler ba mba all of whom are independent
nonexecutive directors the group considers that sir bryan
carsberg has significant recent technical accounting experience
mike greig ma msc fcma group finance director
douglas muir bsc fca group financial controller and
edward w arwick meng aca head of internal audit are
invited to attend audit committee meetings 
schedule of meetings
the audit committee met three times during the year t wo of
these meetings were part of the regular schedule of meetings set
out in the committee’ s terms of reference
audit committee meetings have formal agendas which cover all
of the areas of responsibility set out in the committee’ s terms of
reference these agendas include meetings with the external
auditors without executive directors or managers of the
company present
appointment of external auditors
the audit committee recommended and shareholders approved
at the group’ s annual general meeting on the 24 january 2005 the
appointment of deloitte  t ouche llp as the group’ s external
auditors in accordance with section 385 of the companies act
1985 a resolution proposing that deloitte  t ouche llp be
reappointed as auditors of the company will be proposed at the
next annual general meeting
internal audit
the audit committee has approved the appointment of rm’ s
group reporting manager edward w arwick meng aca as
head of internal audit the audit committee with the advice
and support of the head of internal audit sets an internal audit
plan the head of internal audit reports on progress against this
plan at audit committee meetings a whistle blowing policy was
adopted by the group on 1 august 2005 
policy on nonaudit work
the audit committee has considered the issue of the provision
of nonaudit work by the external auditors and in march 2003
agreed a policy intended to ensure that the objectivity of the
external auditors is not compromised this policy limits the
amount of nonaudit activity undertaken by the external
auditors and requires that any significant activity is approved in
advance by at least two audit committee members
internal control
the combined code introduced a requirement on directors to
review at least annually the effectiveness of the group’ s system of
internal control and to report to shareholders that they have done
so the audit committee provides the information required by
the board to do this the board attaches considerable importance
to the group’ s systems of internal control and risk management
and confirms that throughout the period covered by these
accounts and up to the date of their approval it has regularly
reviewed these areas in accordance with the t urnbull guidance
following the publication of the ‘internal control guidance 
for directors on the combined code’ – the t urnbull guidance –
the board and the audit committee have reviewed annually the
process of risk management and internal control within the
group the board carries out an analysis to identify the major
risks that affect the group and the impact of those risks and
considers how those risks are managed the group has 
appointed a group risk manager who leads this work and has
continued to develop the group’ s approach towards risk
management which includes taking action to avoid or mitigate
the impact of each risk
the board recognises that exposure to risk is an inherent part 
of creating value the group’ s internal controls are designed to
meet the particular requirements of the group and address the
risks to which it is exposed in this context the controls can
provide reasonable but not absolute assurance against material
misstatement or loss the internal controls are designed to
manage rather than eliminate risk
the processes to identify assess and manage the risks to the
group’ s continued success are an integral part of the system of
internal control these processes include systems to assess
operational risks linkage with the business planning process
monthly forecasting appointment of senior managers and
controls over capital expenditure the process of enhancing and
improving these processes ensures that business risks and
opportunities are effectively managed principal risks are
identified in the statement of risks section within this report
principal risks are formally assessed by the board during the
annual planning process and steps are taken following this process
to ensure that such risks are monitored and managed going
forward the board delegates responsibility for operational risks
to the ceo and the executive committee who review the
effectiveness of internal controls on such risks on a regular basis
audit committee
report 24 rm plc annual report and accounts 2005
the key features of the internal control system that operated
throughout the period covered by the accounts are described
below
control environment 
the board has put in place an organisational structure with
clearly defined lines of responsibility and delegation of authority
to executive management individuals are formally made aware of
their level of authority and their budgetary responsibility which
enables them to identify and monitor financial performance
there are established policies and procedures which are subject
to regular review the boards of the operating companies work
within strict terms of reference and any matters outside those
terms or the agreed business plan are referred to the full board for
approval the group’ s selection and recruitment procedures are
set to exacting criteria and the performance management process
is supportive of these same criteria
identification and evaluation of business risks and 
control objectives
the board has the primary responsibility for identifying the
principal business risks facing the group and developing
appropriate policies to manage those risks the executive
committee meets weekly with an agenda of specific operational
measures for review
information systems
executive managers are required to produce a business plan for
approval at the beginning of each financial year and detailed
financial forecasts are formally compiled quarterly and reviewed
by the board consolidated management accounts are produced
each month and results measured against plan and previous year
to identify any significant variations
main control procedures
the financial systems and procedures established lead the board
to a high level of confidence in the completeness and accuracy of
financial transactions the well established processes in place and
the level of analytical detail given within the management
accounts facilitate the identification of unreliable data the
group’ s treasury function operates within a defined policy
designed to control the group’ s cash and to minimise its exposure
to foreign exchange risk 
monitoring
the board has an established audit committee that meets
periodically to review reports from management and the external
auditors so as to derive reasonable assurance on behalf of the
board that financial control procedures are in place and operate
effectively an internal audit function reports directly to the
audit committee and has terms of reference agreed by the audit
committee
statement of risks
as with any business rm is exposed to risks to the continued
success of the business as described the group has put in place
processes designed to identify these principal risks and to manage
and mitigate the effect of them the audit committee is
responsible for ensuring that risks are properly considered and the
board is responsible for deciding what risks should be taken and
how best to manage and mitigate against the risks
the audit committee is satisfied that the group’ s risk
management and internal control processes provide a high level
of confidence that the executive committee has identified and
addressed the principal risks affecting rm in the interests of
transparency this statement of risks contains a high level of detail
in order to give a more thorough analysis of the principal risks the
rm group is exposed to these risks can be categorised into
seven broad areas
1 education policy risk
the majority of rm’ s business is ultimately funded from uk
government sources a change in political administration – or 
a change in the policy priorities of the current administration –
might result in a reduction in education spending or reduced
commitment to ict within education spending for example
due to school staff salary pressures following the gershon
review the current government is seeking to improve efficiency
in public purchasing and the delivery of public services – this
might result in changes to the kinds of products education
customers purchase or the procurement methods they adopt for
example aggregated or centralised purchasing may become more
common the building schools for the future bsf initiative
might result in a fundamental shift in the way secondary schools
procure products and services the group seeks to understand
the education policy environment through regular monitoring of
the policy positions of the major political parties and through
building relationships with education policy makers 
2 market risk
rm operates in a highly competitive market the group’ s
reputation might be damaged by major project or product failure
by poor marketing or by poor business execution increased
market competition – both from major multinational ict
suppliers or smaller education specialists – might reduce the
margin potential of the market or erode rm’ s market share
educational practices may change – this might result in rm’ s
products no longer meeting customer requirements the pc
hardware market is subject to global competition and rm has to
react to continual average selling price reduction and margin
pressure as well as to us dollar rate fluctuations – this might
result in part of the group’ s operations becoming unprofitable
the bbc digital curriculum which is scheduled to launch in
january 2006 might have an adverse impact on the group’ s
ability to sell educational software products to uk schools
there is also a significant risk that the bbc may not meet the
condition set by the department of culture media and sport
audit committee report rm plc annual report and accounts 2005 25
that the digital curriculum should be distinctive from and
complementary to commercially provided products the group
seeks to mitigate these risks by maintaining a broad product and
service range and by investing to enhance the educational value 
of its offer bidding for bsf contracts is a large investment and
these bids have an element of risk that is not specifically in the
group’ s control specifically the group may invest a large amount
preparing and bidding for the ict element of a bsf contract and
yet not be successful despite clearly having the best ict solution
– this is a product of the consortium nature of this activity
3 technology risk
the ict market is subject to rapid and often unpredictable
change – inappropriate technology choices might result in the
group’ s products becoming unattractive to its chosen customer
base the group provides sophisticated products and services
which require a high level of technical expertise to develop and
support – this might result in a major product or project failure
the group closely monitors technology developments invests
continually in keeping its products up to date and maintains
strong relationships with key technology providers
4 execution risk
rm’ s business is more complex than that of most companies of 
a similar size – this adds to execution risk though also offers
some strategic advantage failing to achieve acceptable levels of
customer satisfaction which includes ensuring that its trading
ethics are of the highest standards might significantly damage
the group’ s reputation reducing the likelihood of existing
customers continuing to buy from the group rm bids for high
value multiyear education projects typically involving complex
ict systems these projects always carry risk and ultimately one
may not go according to plan – this might result in rm being
committed to a project that does not achieve acceptable financial
returns or that exposes the group to contract termination or
financial penalties 
rm has made and may make further acquisitions – whilst these
acquisitions reduce rm’ s exposure to any single product or
market area they might not make an acceptable financial
contribution to the group rm’ s business depends on highly
skilled employees – the group might not be able to recruit the
employees required to achieve its development plans the group
has strong internal management control processes in place
including detailed reporting to the board which are designed to
manage the risk associated with this complexity and the internal
audit function carries out regular review of subsidiaries to ensure
that the group has appropriate controls and management
structures in place as it grows
5 financial risk
the company has introduced procedures to ensure that it is not
exposed to bad debt and that its cash reserves are with safe and
secure banks the company has an exceptionally good record in
relation to bad debts because of the good credit standing of most
of its customers where the company deals with customers who
are not public bodies and those customers constitute significant
business the company usually asks thirdparties to take the credit
risk in accordance with the recommendations of the board no
more than twothirds of the company’ s cash may be held with any
one bank the internal audit function regularly considers areas of
the company’ s business that are vulnerable to fraud by customers
suppliers and employees and makes any appropriate
recommendations to avoid any possible fraud in respect of
foreign exchange risk the company enters into us dollar
denominated hedging contracts with approved banking
organisations that mitigate the transactional dollar exposure and
asset investments in foreign subsidiaries are regularly reviewed
with surplus cash being repatriated to the uk and held in sterling 
6 business recovery
the company would be significantly impacted if as a result of 
a natural disaster act of god act of terrorism or other similar
event its buildings systems and infrastructure could not
function for a long period an rm information security
committee has been established to oversee the security aspects 
of the group’ s information systems this covers data integrity
and protection defence against external threats and disaster
recovery the company has made significant investments in
protecting itself against a disaster the company has also piloted
its plans for dealing with a disaster the company has
comprehensive property insurance covering all of its properties
7 pension risk
the company operates a defined benefits pension scheme that is
closed to new entrants the deficit calculation is very sensitive to
the assumptions used in calculating the present value of future
liabilities and returns additionally the recent introduction of
the pension protection fund and the as yet unclear mechanisms
for calculating future years’ payments might mean significant
unplanned cost
sir bryan carsberg
chairman audit committee
18 november 2005 john leighfield cbe
chairman n
john leighfield age 67 was appointed chairman in 1994 having joined
rm as a nonexecutive director in 1993 until april 1993 he was
executive chairman of a tt istel he is a nonexecutive director of
getmapping plc he is chairman of the council and prochancellor of
w arwick university he is past president of both the bcs and the cssa
and current president of imis he is master of the w orshipful company
of information t echnologists
tim pearson
chief executive officer
tim pearson age 45 was appointed chief executive officer in february
2002 having joined the board in 1997  he previously held the role of
managing director – rm learning and had responsibility for the group’ s
internet and content strategy he joined rm in 1981 and has held a
number of senior technical and service management positions he
attended the harvard university business school advanced management
program he is past chairman of the internet service provider
association
mike greig
group finance director 
mike greig age 49 fcma ma msc joined rm and was appointed a
director in 1989 he is group finance director and also has
responsibility for information systems and legal affairs prior to joining
rm he was finance director at case group plc he is a nonexecutive
director of comino group plc a provider of softwarebased business
solutions for occupational pensions social housing and local authorities
he attended the harvard university business school program for
management development
rob sirs 
chief operating officer
rob sirs age 44 was appointed to the board as a director in march 2004
he joined rm in 1990 as manufacturing manager since then he has
performed a number of senior software development services and general
management roles including head of procurement pc division director
and rm schools managing director he was appointed to the role of
group director – products and services in 2002 he attended the
harvard university business school advanced management program
prior to rm rob worked for andersen consulting and mars
26 rm plc annual report and accounts 2005
board of
directors
john leighfield
tim pearson
a audit committee member
r remuneration committee member
n nominations committee member
mike greig
rob sirs sherry coutu
senior nonexecutive director arn
sherry coutu age 41 was appointed to the board as a nonexecutive
director in 1999 she is one of the uk’ s leading technology entrepreneurs
and was ceo and then chairman of interactive investor international plc
between 1995 and 2001 she is a member of several private company
boards the harvard business school european advisory board a member
of cambridge university development committee vice chairman of the
prince’ s t rust t echnology leadership group and a t rustee of the v enture
partnership foundation she holds degrees from the university of british
columbia ba hons the london school of economics msc with
distinction and harvard business school mba
sir bryan carsberg
nonexecutive director arn
sir bryan carsberg age 66 was appointed to the board as 
a nonexecutive director in september 2002 he was a nonexecutive
director of nynex cablecommscable  wireless communications plc
from 1996 to 2000 he is a nonexecutive director of svb holdings plc
a nonexecutive director of inmarsat plc an independent member of the
equality of access board of bt group plc a former director general of
oftel and a former director general of fair t rading he is chairman of
council and senior prochancellor of loughborough university he
served as secretary general of the international accounting standards
committee from 1996 to 2001
john windeler 
nonexecutive director arn
john windeler age 62 was appointed to the board as a nonexecutive
director in october 2002 he was chairman of alliance  leicester plc
and a nonexecutive director of bms associates ltd previously he was
with irving t rust for 20 years becoming an executive vice president in
1983 he also held several senior positions within national australia
bank between 1989 and 1994 he is a member of the board of governors
of demontfort university and has a ba in english and an mba in
finance both from ohio state university
sir mike tomlinson
nonexecutive director r
sir mike t omlinson age 63 was appointed to the board as 
a nonexecutive director in february 2004 mike is one of the uk’ s
leading educationalists and formerly chaired the department for
education and skills w orking group on educational reform for 14 to 
19yearolds he was her majesty’ s chief inspector for schools from
december 2000 until april 2002 during which time he was responsible
for the work of ofsted he is chair of the learning t rust a notforprofit
body responsible for running the education services for hackney london
professor tim brighouse
nonexecutive director n
tim brighouse age 65 was appointed to the board as a nonexecutive
director in may 2004 tim is one of the uk’ s leading educationalists and
chairs the group’ s education advisory council he is the former chief
education officer of birmingham city council a member of the
governing council of the national college for school leadership and a
visiting professor at the university of london’ s institute of education he
also served on rm’ s board between october 2002 and january 2003 but
stood down on his appointment as london schools commissioner
rm plc annual report and accounts 2005 27
professor tim brighouse
sir mike tomlinson
john windeler
sherry coutu
sir bryan carsberg 28 rm plc annual report and accounts 2005
main board audit committee remuneration committee nominations committee
eligible to eligible to eligible to eligible to
attend attended attend attended attend attended attend attended
executive
tr pearson 11 11––––––
md greig 11 11 ––––––
ra sirs 11 9––––––
nonexecutive
jp leighfield 11 11 –––– 1 1
sl coutu 11 11 335511
b carsberg 11 11 335511
jr windeler 11 11 335511
mj t omlinson 11 9 – – 5 5 – –
trp brighouse 11 10 – – – – 1 1
 rob sirs attended a harvard university business school advanced management program during the year and was unavailable to
attend two board meetings 
the directors present their report on the affairs of the group
rm and the company rm plc and the financial statements
and auditors’ report for the year ended 30 september 2005
1 principal activities and business review
the principal activities of the group are the supply of
information and communications technology ict software
systems and services to uk educational establishments and the
delivery of education services a review of the group’ s activities
and its prospects for the forthcoming year is contained in the
chairman’ s statement and the chief executive officer’ s
operating review
2 results and dividends
the group’ s profit for the year after taxation and goodwill
charges was £20 million 2004 £39 million the directors
recommend the payment of a final dividend per share of 380p
bringing the total dividend for the year to 485p per share 
2004 460p the final dividend is payable on 3 february 2006
to shareholders on the register on 6 january 2006
3 research and development
the group undertakes a programme of research and
development with the objective of making significant technical
advances to enhance the performance of existing product areas 
to develop new products related to existing markets and to
enhance access to potential new markets this activity involves
considerable innovation expenditure of £168 million was
incurred in 2005 2004 £145 million all research and
development costs are written off in the year in which they 
are incurred
4 directors and their interests
the names of the current directors of the company are given 
on pages 26 and 27 all of these directors held office throughout
the year
the interests of the directors of the company in the issued share
capital of the company including interests in share options are
shown in the remuneration report
no director of the company was materially interested in a
contract of significance other than a service contract involving
the company or any of its subsidiary undertakings during the year
5 directors’ attendance
in 2005 the board met formally 11 times the number of board
and committee meetings attended by the directors during the
year was as follows
directors’ 
report rm plc annual report and accounts 2005 29
6 directors proposed for reappointment
three directors are retiring from office by rotation and are
offering themselves for reelection mike greig sherry coutu and
john leighfield are retiring as under the articles of association
onethird of all directors are required to do so each year 
the directors who are proposed for election at the next annual
general meeting have either a letter of appointment or service
contract – details of which can be found within the
remuneration report biographical details for each of these
directors are on pages 26 and 27
7 annual general meeting
the annual general meeting of the company will take place at
2pm on monday 23 january 2006 at 140 milton park abingdon
oxfordshire ox14 4rs
in addition to the routine business of the meeting there are four
special resolutions
the first special resolution proposes that in accordance with
section 80 of the companies act 1985 the directors be granted
authority to issue shares in the capital of the company up to a
nominal amount of £604804 3333 of the issued share capital
as at 18 november 2005 the second special resolution proposes
that pursuant to section 95 of the companies act the directors
be authorised to allot further shares for cash by way of a rights
issue and other than by way of a rights issue up to an aggregate
amount of £90730 50 of the nominal value of the issued share
capital as at 18 november 2005 the directors have no present
intention of allotting further ordinary shares other than in
connection with employee share schemes both authorities being
sought expire on the date of the next annual general meeting or if
earlier 23 april 2007 the third special resolution proposes
authorising the company to make market purchases of up to 10
of its issued share capital this authority will expire on the date of
the next annual general meeting or on 23 april 2007 whichever
is the earlier the company will only exercise this authority
where it reasonably believes that repurchasing its shares will
increase earnings per share and is in the best interests of
shareholders generally the fourth special resolution proposes to
amend the articles of association of the company to allow the
company to indemnify its officers to the extent permitted by the
new sections 309 a to c of the companies act 1985
8 substantial shareholdings
as at 18 november 2005 the company had been notified of 
the following interests in 3 or more of its issued ordinary 
share capital
number percentage
of shares held
schroder investment 
management 22251801 2453
legal  general 3659653 403
barclays plc 3109731 343
zurich financial services 2741000 302
9 acquisition of the company’s own shares
further to the shareholders’ resolution at the annual general
meeting on 24 january 2005 the company purchased no shares
2004 nil during the year other than those purchased to fulfil
commitments to employees under sharebased payment awards
at the end of the year the directors had authority under the
shareholders’ resolution of 24 january 2005 to purchase through
the market up to 8970079 of the company’ s ordinary shares
being 10 of the issued share capital at prices ranging between
the nominal value and an amount equal to 5 above the average of
the middlemarket quotations of the company’ s ordinary share
for the five business days immediately preceding the day on which
such share is contracted to be purchased this authority expires at
the conclusion of the 2006 annual general meeting or on 24 april
2006 whichever is the earlier the directors will be seeking to
renew this authority at the next annual general meeting
10 equal opportunities
rm is an equal opportunities employer applications for
employment are always fully considered irrespective of gender
ethnic origin race age religion sexual orientation or disability
in the event of employees becoming disabled every effort is made
to ensure that their employment continues and that appropriate
training is arranged it is rm’ s policy that the training career
development and promotion of disabled employees should so far
as is possible be identical to that of other employees 30 rm plc annual report and accounts 2005
11 employment policies
rm has a policy of involving all employees in the success and
development of the group as a whole
the board has adopted a set of values and a vision statement that
apply to the whole group these are widely communicated across
the group and published on wwwrmcom the group’ s w eb site
and on rmi a groupwide corporate intranet the group values
and vision statement are set out in the opening pages of this annual
report the executive committee and a group of divisional
directors and senior managers participate in a ‘360 degree’
feedback process in order to understand the extent to which their
work behaviour supports the group’ s values 
the group operates an objectives driven performance
management process the executive committee sets group
corporate objectives at the start of each year these objectives
are designed to reinforce the group’ s culture as well as drive
financial performance the corporate objectives are introduced
and explained to all staff through a series of annual company
briefings individual employees’ personal objectives are ‘cascaded’
from the corporate objectives the group’ s policy is that all
staff should work towards agreed personal development
objectives as well as being set jobrelated objectives in 2005
personal development objectives were agreed with 99 of staff
for senior staff the group has also identified a set of preferred
‘management competences’  which are used in employee
development and recruitment 
the group’ s policy is that all employees should participate in an
appraisal process this involves both regular informal review
meetings and a formal halfyearly review of performance to assess
progress against personal objectives and identify personal and
professional development needs in 2005 95 of staff
participated in a formal appraisal session for senior staff
appraisal meetings address the development of the group’ s
preferred ‘management competences’ as well as personal
objectives senior staff are assessed on their ‘management
competences’ and rated relative to their peers these ratings are
used as an input into career development discussions
the management committee reports progress against the
corporate objectives at quarterly senior management meetings
these progress reports are onward briefed to all staff in the
organisation at the annual company briefing the ceo reviews
progress against objectives for the previous year and presents an
objectives ‘scorecard’ 
t echnical and personal skills training are provided for employees
at all levels in the organisation directors and managers receive
training in rm’ s key management methods selfinstructed
learning through teaching manuals computer programs and
formal training courses are used to provide technical training for
support employees all new employees attend an induction
programme designed to reinforce the group’ s commitment to
customer satisfaction rm also offers a learning for life scheme
which provides encouragement and funding to employees who
wish to follow personal learning goals outside of those related
specifically to their job
the group has an open communications policy designed to
involve employees and keep them informed about the
performance of the business and about matters affecting them as
employees employees receive news about the group and its
operations through formal and informal briefing meetings
frequent email notices internal noticeboards and through rmi
all officebased employees including directors and managers
share open plan office accommodation which provides good
opportunities for informal communication about issues
concerning the group’ s operations and development 
during 2005 following a ballot of all staff the group formally
adopted a communications charter this charter which was
drafted following input from staff is published on the group’ s
intranet and sets out in detail the kinds of communication staff
can expect and are entitled to the communications charter is a
‘preexisting agreement’ that has been approved by the group’ s
employees under the information and communications
regulations that came into force on 6 april 2005
rm runs an annual staff survey designed to help understand
attitudes of staff across the group the most recent survey
performed in july 2005 received an 84 response rate senior
divisional managers use the survey results to inform improvement
projects designed to address key issues and address staff concerns
employees share in the group’ s success through an element of
performancerelated pay and through the allocation of shares
under the rm plc 2002 staff share scheme share option
schemes and a longterm incentive plan the rm coinvestment
plan are an important factor in recruiting retaining and
motivating senior staff 
rm’ s employment policies are the responsibility of sherry
coutu senior nonexecutive board director
12 charitable and political donations
during the year the group made various charitable donations
totalling £33000 2004 £56000 a further £2000 was given to
locallybased community support projects 2004 £3000 the
group made no political donations during this year or the
previous year
13 social environmental and ethical matters see statement
rm recognises that those businesses that are successful in the
longterm will be those that not only achieve excellent financial
performance but also deal well with their corporate social
responsibilities although software and computer services is a
sector with relatively limited environmental impact rm believes
that it must take its responsibilities seriously rm has developed its
see policy to help ensure that these issues form an integral part of
the company’ s performance and decision making processes 
in terms of social performance rm believes that its responsibilities
start with its employees – details of our employment policies are
directors’ report rm plc annual report and accounts 2005 31
provided in section 11 the company is committed to protecting
and enhancing the health and safety of all of its employees and
others who may be affected by its activities 
rm aims to be a considerate and committed member of the
communities in which it operates during 2005 rm made
charitable donations totalling £35000 to various projects
however it is the willingness of our employees to engage in
community projects which has played a more important role in
establishing rm’ s reputation as a company that engages widely
with the broader community every employee can choose to
devote a small amount of work time each year to support one of
rm’ s two chosen charities in addition during the year the
group established the rm foundation to support the charitable
activities of employees through the rm foundation the group
will ‘topup’ funds raised by employees for our chosen charities 
rm is striving to improve its environmental performance 
t o achieve this we are committed to reducing the amount of
energy we consume and waste we generate our staff play an
important role in helping us to accomplish our goal and have been
instrumental in driving through process changes w e recognise that
customers increasingly favour environmentallyfriendly companies
and hope our actions over the past year will prove beneficial to all
during the year we underwent an external assessment of energy
saving opportunities at our milton park headquarters this survey
carried out on behalf of the carbon t rust identified measures and
recommended actions to allow us to save energy and reduce
associated carbon dioxide emissions a number of these have been
implemented including a suggestion to amend the timing controls
for the heating and airconditioning this has resulted in a saving
of 60 hours’ energy per week across the offices w e have also made
further changes to the company car fleet and have recently placed
our first order for a ‘dual fuel’ car which combines a petrol engine
with an electric motor to give greatly increased fuel efficiency w e
promote initiatives to reduce car usage and individuals are
encouraged by our environmental committee to car share cycle or
use public transport wherever possible 
w e have also focused on aspects of the office environment where
we can make environmental improvements staff are encouraged
to minimise their use of paper and printing technology this is
supported by the development of rmi which allows ‘paperless’
workflow processes to be used across the business
product design and lifecycle are important as well in addition to
ensuring we meet forthcoming legislation such as the w aste
electrical and electronic equipment weee directive we are
actively developing a ‘green’ pc which uses and emits less energy
than normal 
like most businesses of its size rm is continuing to develop its
ethical policies in line with best practice as well as the obvious
issues of conforming with all relevant regulations and legislation
rm is committed to transparency in its operations t o these ends
it is rm’ s policy to communicate openly about its business
practices and to be accountable for its actions for example the
group has a ‘no gifts for individuals policy’ with all gifts over 
£10 being donated to charitable causes 
mike greig group finance director is the main board director
with responsibility for see issues
14 relationships with other stakeholders
the group has a strong commitment to engaging with other
significant stakeholders particularly educationalists education
policy makers and nondepartmental public bodies this
engagement takes the form of direct personal contact formal
surveys and detailed research the board is regularly updated on
educational policy matters and board members have significant
contact with educational practitioners 
rm staff are encouraged to participate in educational
establishments as governors and the executive committee has set
a corporate objective to increase the number of rm staff who
serve as governors during 2006
the board has put in place an education advisory council
eac chaired by professor tim brighouse and including sir
mike t omlinson and rm’ s cofounders mike fischer and mike
o’regan the eac has the specific aim of ensuring the rm
group is kept up to date with educational policy and practice 
15 creditors payment policy
the group agrees terms and conditions for its business
transactions with suppliers payment is then made to these terms
subject to their being met by the supplier payment runs are made
on a weekly basis and wherever possible are made using the
bankers’ automated clearing service bacs t rade creditor
days which have not been adjusted for the seasonal nature of the
business of the group for the year ended 30 september 2005 were
31 days 2004 43 days based on the ratio of trade creditors at the
year end to the amounts invoiced by suppliers during the year
by order of the board
aj robson
company secretary
18 november 2005 32 rm plc annual report and accounts 2005
this report sets out the group’ s remuneration policy and
principles under which our executive directors are remunerated
it provides details of remuneration and share interests of all
executive and nonexecutive directors for the year ended 
30 september 2005 
2005 highlights
rm delivered a strong performance for shareholders during the
year diluted earnings per share eps before goodwill charges
grew 12 to 105p compared with 94p for 2004 there were also
improvements in customer satisfaction and market share
measures and therefore as a result of this strong performance
• executive directors achieved bonus awards of 55 55 of
the maximum achievable
• 100 of share options granted in december 2002 will become
exercisable as a result of eps growth
• the coinvestment plan cip awarded a 288 for 1 match
for the shares held by the executives for the criteria set in 2002
remuneration review
the remuneration committee reviews the group’ s remuneration
policy and practices annually to ensure continued alignment
between the executive directors’ and shareholders’ interests
advisers from pricewaterhousecoopers llp assist us w e have
not made any changes to the remuneration policies we had in place
in 2004 and the committee considers the changes made last year
to be operating effectively w e believe that the policies and
measures we have in place remain appropriate and are in line with
the company’ s circumstances business outlook and strategy w e
have however reviewed the detailed targets to ensure that they
remain appropriate in view of the company’ s circumstances full
details are given in this report 
1 remuneration policy
rm’ s remuneration policy is designed to attract retain and
motivate senior executives to achieve both the group’ s business
objectives and deliver outstanding shareholder returns the
committee believes that executive directors’ total remuneration
should be strongly linked to delivering shareholder returns t o do
this rm’ s remuneration package offers rewards that are ‘median’
compared to our competitors when acceptable levels of
performance have been delivered however they are at the ‘upper
quartile’ compared to competitors when outstanding performance
has been achieved higher payments are only made when improved
business performance customer satisfaction and superior
shareholder returns have been realised executive directors are
required to hold shares worth 100 of their base salary and to
make a personal commitment in shares from their own resources
before participating in the longterm incentive plan
the graph in the next column shows the way we structure the
total remuneration for our executive directors 
below target at target outstanding
nonvariable
salary median median median
pension standard standard standard
v ariable
annual bonus nil 50 of salary 100 of salary
coinvestment plan nil 1 for 1 match 3 for 1 match
if outstanding performance is achieved the value of the total
package almost doubles in comparison with an ontarget
performance and more than trebles what it would be in the event
that the group has not met the targets set these increases are
derived entirely from the incentive programmes it is clear that
the executive directors’ personal wealth rises and falls with
company performance and the impact of share price changes on
their shareholdings in rm the remuneration committee is
satisfied that this model provides appropriate alignment with
company performance and shareholder returns and therefore
acts as a real motivator to the executive directors 
the committee supports executive directors who wish to serve
as a nonexecutive director on the board of one other company
the committee believes that this can offer the executive valuable
additional experience which then benefits rm mike greig
serves as a nonexecutive director and chair of the audit
committee of comino group plc his remuneration for this
position is disclosed in section 4 of this report 
in setting executive directors’ reward the remuneration
committee takes account of the level and structure of reward
elsewhere within the company the committee strongly believes
that all employees should share in the success of the group 
• through the rm plc 2002 staff share scheme all uk
employees who have been in service for at least seven months
at the date of the annual award receive free shares 
• more than 56 of employees can earn bonuses linked to eps
customer satisfaction and personal objectives
• selected senior executives are invited to participate in the 
coinvestment plan though at lower levels of commitment
than the executive directors and are subject to minimum
shareholding guidelines
remuneration 
report
outstanding below t arget
structure of total remuneration
for executive directors
base salary 100
cip
annual bonus
pension
salary
120 208 369 rm plc annual report and accounts 2005 33
remuneration policy composition purpose and measures
executive directors’ remuneration comprises base salary annual bonus and a coinvestment plan linked to the company’ s
performance over a threeyear period in line with industry practice executive directors are provided with a range of benefits
including pension private medical insurance life assurance permanent health insurance and a company car or equivalent cash
allowance the role purpose and performance measures for each of these elements of the package for 2006 are summarised in the
table below
element purpose performance targets
base salary t o attract and retain role and contribution
pension and benefits competitive fixed benefits to provide role
security and protection and to retain
annual bonus
• 100 of salary maximum of which 40 provide upside potential to motivate 50 on eps
paid in shares and deferred for three years and to reward achievement of 20 on customer satisfaction
shortterm business plan 20 on market share
10 personal objectives
deferral supports retention and 
shareholder alignment
longterm incentives
• maximum investment of 33 provide further upside potential related to relative t otal shareholder 
of base salary per year longterm goals and to encourage leadership return tsr
and strategic actions supports retention eps
• maximum 3 for 1 match and strong alignment with shareholders
shareholding requirement
• 100 of salary ensure alignment between the interests 
of executive directors and shareholders
a high proportion of executive directors’ potential total remuneration is as shown performancerelated and a significant proportion
provided in the form of shares executive directors have the opportunity to earn high levels of reward but only if they enhance
shareholder returns by meeting the company’ s shortterm and longterm targets
a base salaries
the policy of the remuneration committee is that base salary is only one element of the entire package and should be considered
within this context the policy is that an average remuneration package should be received by executives for delivering average
performance to shareholders and an excellent remuneration package should be received by executives delivering upper quartile results
the leverage and alignment therefore comes entirely from the generous bonus and longterm incentives the base salary is set at or
below median in the market to achieve the desired leverage if our targets are exceeded then the executive has the opportunity to more
than treble the value of their remuneration package but this is delivered by the variable element in the package not the salary
w e benchmark remuneration packages with a group of 13 uk software and it companies identified as appropriate peers w e ensure
that they are of similar size and complexity in a similar business field 
as a result of the benchmarking exercise the salaries of tim pearson mike greig and rob sirs have been increased this year this is the
first time in four years that we have increased base salary following a realignment to a more performancebased reward structure and
the increase reflects the fact that the sector as a whole has undergone an adjustment
the level of annual bonus longterm incentive potential and pension benefit are all linked to base salaries and so the costs or potential
costs of these will increase proportionately the overall balance of the package remains unchanged 34 rm plc annual report and accounts 2005
b annual bonus 
the annual bonus potential is 100 of base salary with 40 of
any bonus paid in shares deferred for three years 
the bonus payment made to the executives depends on the
performance conditions set by the remuneration committee at
the beginning of the year being met the performance targets
reflect the factors that we believe to be critical to rm’ s business
success and the remuneration committee is satisfied that the
targets set are stretching and aligned to shareholders’ interests 
w e explain below what the performance targets are the
attainment of the targets is independently audited prior to any
rewards being made
bonus for 2006
the performance targets that the remuneration committee
believes are critical to achieve in 2006 are increases in eps
customer satisfaction and market share indicators and
attainment of personal objectives relating to rm’ s overall success 
the weighting of the different bonus measures is as follows
eps 50
customer satisfaction 20
market sharecustomer acquisition 20
personal objectives 10
w e have set targets for each parameter which range between
‘unacceptable’  ‘target’  and ‘outstanding’  these rewards are set so
that the remuneration package as a whole will be better than
most competitors’ packages if sufficient benefits have been
delivered to shareholders this ensures that executive directors
have the opportunity to earn high rewards relative to
competitors but only for superior performance
if there is an unacceptable level of eps no bonus other than
personal is awarded even if performance in the customer
satisfaction and market sharecustomer acquisition areas has
been achieved 
given the nature of the education market improving customer
satisfaction is critical to longterm shareholder returns therefore
achieving customer satisfaction targets could result in an annual
bonus payment of up to 20 of base salary if customer satisfaction
does not increase then none of the 20 bonus is paid w e measure
our customer satisfaction constantly and we set targets based on the
best data we can find on what outstanding companies achieve in
terms of improvement 
the committee believes that it is in shareholders’ interests that
bonuses are tied to an increase in market share and we consider a
variety of measures to inform our judgement on whether or not it is
clear that targets have been met achieving market share targets
could result in an annual bonus payment of 20 of base salary if
market share particularly with regard to the building schools for
the future programme does not increase then none of the 20
bonus is paid personal objectives are set by the ceo with
remuneration committee approval and related to business critical
issues in the executives’ specific area the ceo’ s personal
objectives are set by the chairman of the board and approved by
the remuneration committee
bonus for 2005
in 2005 the maximum bonus executive directors could earn was
100 of salary based on the performance for the year just passed
tim pearson mike greig and rob sirs each received on average an
annual bonus of 55 of their salary of which 40 was deferred into
shares this was based on eps growth of 12 which triggered the
customer satisfaction and market share targets to be taken into
consideration the cip also matched shares at 288 for 1 – given the
strong eps growth and tsr results over the preceding three years
c longterm incentives
in order to focus executive directors on longerterm performance
delivery and value creation the remuneration committee
employs a cip  for 2006 it is intended that this will be the sole
longterm incentive plan for executive directors in years prior to
2005 share options were also granted 
the cip operates on a threeyear cycle a new cycle is started
each year and executive directors are invited to commit shares
worth up to 33 of their base salary at the end of the threeyear
period up to three matching shares may be awarded for each
committed share subject to the achievement of performance
conditions therefore the maximum award of matching shares
that can be made under any plan cycle is 99 of salary
committed shares have to be retained throughout the plan cycle
to qualify for matching shares
the remuneration committee operates this plan on an annual
basis each year it will consider the appropriateness of the plan and
set performance conditions relevant to the circumstances that the
group faces at the time it will take into account competitive
market practice consensus expectations for eps growth and
group business plans such performance conditions will always be
established at levels that are demanding in the circumstances and
that are aligned with shareholder interests
as in previous years there will be two performance conditions for
the plan cycle starting in 2006 these will be based on eps growth
and relative tsr both of which will be measured over three years
tsr will be measured relative to the ftse software and
computer services index eps will be measured prior to goodwill
charges and exceptional items matching shares will be subject to
each condition as shown in the table below there is no retesting
of the performance conditions under the plan matching awards
vary on a sliding scale between the levels shown below
eps growth tsr relative to ftse software and computer services index
annual compound growth match relative ranking match
less than rpi  3 nil below median nil
rpi  5 05 for 1 median 05 for 1
rpi  85 15 for 1 upper quartile or above 15 for 1
remuneration report rm plc annual report and accounts 2005 35
the remuneration committee on taking advice from
pricewaterhousecoopers llp  understands that the eps growth
requirements set out above are broadly in line with the growth
rates required in longterm incentive arrangements recently
introduced by other quoted companies however the
remuneration committee is aware that these targets appear less
stretching than last year this reflects the fact that the board has
agreed a substantial expenditure to prepare the group for the
bsf programme this immediate and strategically crucial
business development expenditure of £4 million will not result in
revenues this year in light of this the remuneration committee
believes that the eps targets set for the 2006 plan are sufficiently
stretching in the context of rm’ s business environment over the
next three years
the remuneration committee will employ its discretion to
ensure that matching awards are affordable and justified in the
context of the group’ s underlying financial performance the
committee believes that the two measures operate in
shareholders’ interests because they reward executives for making
the extraordinary longterm investments in the bsf programme
the eps measure is based on audited figures and the tsr
measurement is independently verified by
pricewaterhousecoopers llp the remuneration committee
has the discretion to adjust the base or final year eps figures to
ensure a fair and consistent comparison in light of the
introduction of international financial reporting standards 
if a change of control of the company was to happen awards will
vest in line with the extent to which performance conditions have
been met at the point of change of control and prorata 
in line with the proportion of the performance period that 
has elapsed 
d share option scheme 
following a review of executive director remuneration during
2004 the remuneration committee decided that share options
would not be granted to executive directors this is kept under
review by the remuneration committee in light of evolving
market practice the remuneration committee believes
however that the grant of share options can be vital in attracting
highcalibre employees in our competitive marketplace and
therefore reserves the flexibility to use options at senior levels 
for this purpose 
details of prior year option grants and performance conditions
can be found in section 6
2 performance graphs 
the group’ s tsr is compared in the graph below against the
tsr of the ftse software and computer services index this
index has been chosen as the best benchmark of rm’ s
performance as this is the sector within which rm operates 
rm is a constituent of this index £100 invested in rm shares on 
1 october 2002 prior to the company’ s recovery plan being put
in place would have been worth £31585 at 1 october 2005 
an investor who had invested the same amount in the ftse
software and computer services index would have seen their
investment rise to £20551 over the same period 
the graph above shows the value over five years of £100 invested
in rm shares on 1 october 2000 assuming that all dividend
income is reinvested compared to the ftse software and
computer services index 
3 directors’ service contracts and letters of appointment 
the committee’ s policy on executive directors’ service contracts
is for them to contain a maximum notice period of one year all
executive directors’ service contracts can be terminated on one
year’ s notice each service contract expires at the respective
normal retirement date of the director but is subject to earlier
termination for cause or if notice is given under the contract the
contracts are designed to allow for flexibility to deal with each
case on its own particular merits in accordance with the law and
policy as they have developed at the relevant time in the event
that the company wishes to terminate the employment of a
director it will take into account the director’ s obligation to
mitigate when deciding on an appropriate level of compensation
0
20
40
60
80
100
2000 2001 2002 2003 2004 2005
total shareholder 
return – cumulative
ftse software and 
computer services index
rm 36 rm plc annual report and accounts 2005
a tim pearson
tim pearson has a service contract dated 15 february 2002 which provides for 12 months’ notice on the part of the company and six
months’ by the director the contract ends automatically when he reaches his retirement age of 60 under the terms of his contract
the company may at its sole and absolute discretion pay salary in lieu of any required period of notice
b mike greig
mike greig has a service contract dated 13 february 2002 which provides for 12 months’ notice on the part of the company and six
months’ by the director the contract ends automatically when he reaches his retirement age of 65 under the terms of his contract
the company may at its sole and absolute discretion pay salary in lieu of any required period of notice
c rob sirs
rob sirs has a service contract dated 13 february 2002 which provides for 12 months’ notice on the part of the company and six
months’ by the director the contract ends automatically when he reaches his retirement age of 65 under the terms of his contract
the company may at its sole and absolute discretion pay salary in lieu of any required period of notice
d chairman and nonexecutive directors
the chairman and the nonexecutive directors do not have service contracts with the company their appointments are governed
by letters of appointment which are for a specified term each nonexecutive director’ s date of appointment as a nonexecutive
director of the company and most recent date of reappointment are shown below nonexecutive directors receive an annual fee of
£24000 for the basic fiduciary duties of a director plus a per diem payment for time spent on additional rm business nonexecutive
directors are also entitled to reimbursement of reasonable business expenses
date of appointment as a date of last specified
nonexecutive director reappointment term
jp leighfield 3 november 1993 1 may 2005 2 years
sl coutu 18 october 1999 28 october 2004 3 years
b carsberg 1 september 2002 1 september 2004 3 years
jr windeler 1 october 2002 1 october 2005 3 years
mj t omlinson 2 february 2004 – 3 years
trp brighouse 20 may 2004 – 3 years
4 directors’ remuneration 
the total amounts for directors’ remuneration and other benefits were as follows
2005 2004
£000 £000
emoluments 1066 986
gains on exercise of share options 284 –
1350 986
remuneration report rm plc annual report and accounts 2005 37
directors’ emoluments in respect of the directors of the company who served during the year ended 30 september 2005 were 
as follows
fees and
other t axable annual 2005 2004
name remuneration benefits bonuses t otal total
£000 £000 £000 £000 £000
executive
tr pearson 239 – 123 362 329
md greig 165 1 85 251 224
ra sirs 168 1 87 256 220
nonexecutive
jp leighfield 55 22 – 77 77
sl coutu 24 – – 24 43
b carsberg 24 – – 24 25
jr windeler 24 – – 24 20
trp brighouse 24 – – 24 8
mj t omlinson 24 – – 24 16
md fischer –––– 11
mrhj o’regan –––– 13
747 24 295 1066 986
 in addition md greig received and retained £21000 2004 £21000 in respect of his position as a nonexecutive director 
of comino group plc 
60 of the annual bonus is paid in cash and 40 deferred into shares payable after three years
t axable benefits comprise provision of a company car private healthcare and the cost of providing additional lump sum life cover
the current base salary figures of the executive directors are
tim pearson £234000
mike greig £165000
rob sirs £195000
 the remuneration committee recommended a higher salary for tim pearson which he refused to accept he wished to hold his
salary to a 4 increase in line with other staff  rather than in line with the benchmarking exercise which otherwise would have
delivered a 10 increase 38 rm plc annual report and accounts 2005
5 directors’ longterm incentive plan – the coinvestment plan
a the coinvestment plan is described in section 1c of this remuneration report the performance conditions for the first
operation of the plan were approved by shareholders at the group’ s annual general meeting in january 2003 these conditions were
that the grant of matching shares be subject to two performance conditions over a threeyear period a maximum of three matching
shares can be awarded for each committed share with half of the matching shares subject to a condition based on real growth in eps
excluding goodwill and before exceptional charges and half subject to a relative tsr measure for the first grant the tsr measure
was based on the extent to which the company’ s tsr outperformed the ftse 250 measured in terms of standard deviations 
the performance measure for the plan cycle starting in 2006 has the same structure as the initial award except that relative tsr is
measured as a percentile ranking against the ftse software and computer services index previous year coinvestment plan
performance conditions are summarised in the table below the committee considers these performance conditions to be challenging
relative to the performance required
2005 grant 2004 grant 2003 grant
eps condition
3year average rpi  5  1 for1 match rpi  75  1 for1 match rpi  5  1 for1 match
annual eps growth rpi 12  3 for1 match rpi  175  3 for1 match rpi 12  3 for1 match
50 of grant sliding scale sliding scale sliding scale
relative tsr v ersus ftse scs v ersus ftse scs v ersus ftse 250
condition median  1 for1 match median  1 for1 match average  1 for1 match
50 of grant t op quartile  3 for1 match t op 15  2 for1 match 1 std deviation  2 for1 match
sliding scale t op 5  3 for1 match 2 std deviations  3 for1 match
sliding scale sliding scale
eps figures reported in 2006 and thereafter will be produced under the new international financial reporting standards ifrs the
remuneration committee has discretion to adjust for the impact of the introduction of ifrs in determining whether the
performance condition has been met
b the directors’ interests in the longterm incentive plan are listed below
date maximum potential market expected
of number of price on value if performance period
award matching shares award date full match† for matching shares
tr pearson 26032003 162597 1075p £272756 011002 – 300905
16122003 89040 1350p £149365 011003 – 300906
10122004 51297 1560p £86051 011004 – 300907
md greig 26032003 111198 1075p £186535 011002 – 300905
16122003 107607 1350p £180511 011003 – 300906
10122004 67011 1560p £112411 011004 – 300907
ra sirs 26032003 116946 1075p £196177 011002 – 300905
16122003 90000 1350p £150975 011003 – 300906
10122004 95268 1560p £159812 011004 – 300907
 the number of matching shares is the maximum a match of 3 for 1 that could be received by the executive director if performance
conditions outlined in the policy section are fully met
† using 16775p being the market price of an ordinary share at 30 september 2005
remuneration report rm plc annual report and accounts 2005 39
6 directors’ share options 
the remuneration committee has determined that executive directors will not be granted share options in 2006 however
executive directors have been granted options in previous years
a the company operates three executive share option schemes the rm plc 1994 executive share option scheme the ‘1994 scheme’
which was adopted at the time of the group’ s flotation in december 1994 the rm plc 2001 executive share option scheme 
the ‘2001 scheme’ which was adopted at the annual general meeting held on 24 january 2001 and the rm plc 2004 executive 
share option scheme the ‘2004 scheme’ which was adopted at the annual general meeting held on 28 january 2004 performance
conditions are set each year in light of the company’ s prospects over the coming three year period including giving consideration 
to analysts’ consensus forecasts for eps growth rm share options are not offered at a discount
1994 scheme
under the 1994 scheme which is now closed ordinary or super options were granted at market value at the time of grant and are
normally exercisable between three and ten years from the date of grant the proviso is however that the increase in the company’s
eps over a threeyear period exceeds rpi by 6 for ordinary options and 10 for super options executive directors only received
super options with no retesting of the performance condition on these 
2001 scheme
under the 2001 scheme options were granted at the market value at the time of grant and were exercisable three years after the date of
the grant provided performance conditions were met the performance conditions related to the group’ s eps excluding goodwill
and before exceptional charges growth relative to rpi with the number of options exercisable varying on a sliding scale depending on
the extent to which eps exceeds rpi the 2001 scheme had a life of three years and closed in 2004
the performance conditions for share options granted under the 2001 scheme are summarised in the following table
grant date performance condition  of options vesting
with sliding scale
november 2001 and 3year growth eps
march 2002 rpi  3 25
rpi  22 100
june 2002 2003 eps  551p  rpi 375
2003 eps  612p  rpi 50
2004 eps  796p  rpi 375
2004 eps  884p  rpi 50
december 2002 3year growth eps
rpi  3 25
rpi  22 100
december 2003 3year growth eps
rpi  75 33
rpi  175 100
there is no retesting of the performance conditions
2004 scheme
shareholder approval was obtained in january 2004 for an extension of the 2001 scheme with a reduced overall dilution limit of 13
down from 15 in the 2001 scheme rm has also committed to keep future years’ annual option grants to less than 1 pa dilution
maximum grants under the scheme are 200 of basic salary no options have been granted to executive directors under the 2004
scheme no options will be granted to executive directors under this scheme during 2006
as described elsewhere in this report it is intended that the 2004 scheme will only be used at director level in exceptional
circumstances for example recruitment in the event that the scheme is used for grants up to 100 of salary vesting will require eps
growth of rpi  5 pa over the fixed threeyear performance period for larger grants a sliding scale would be applied requiring
more stretching levels of performance for full vesting there will be no retesting of performance conditions  40 rm plc annual report and accounts 2005
the performance conditions for share options granted under the 2004 scheme are summarised in the following table
grant date performance condition  of options vesting
no sliding scale
december 2004 3year growth eps
rpi  5 100
the total number of options currently outstanding is 6437067 which represents 709 of rm’ s current shares in issue 
growth in eps compared with 2001 means that the options granted in december 2002 will become 100 exercisable
b the directors’ interests in share options are listed below
at at market price dates from
1 october granted exercised lapsed 30 september exercise at date which expiry
2004 in year in year in year 2005 price of exercise exercisable dates
tr pearson
options with an exercise price equal to or above £16775
146919 nil nil nil 146919 £4926 – 200501 – 240503 200508 – 240510
options with an exercise price below £16775
184940 nil nil nil 184940 £1100 – 170200 – 011206 170207 – 011213
options exercised and lapsed during the year
204637 nil 200544 4093 nil £0715 £1750 210605 210612
options lapsed during the year
54000 nil nil 54000 nil £2500 – 291104 291111
md greig
options with an exercise price equal to or above £16775
180259 nil nil nil 180259 £4318 – 031200 – 240503 031207 – 240510
options with an exercise price below £16775
106626 nil nil nil 106626 £1040 – 170200 – 011206 170207 – 011213
options lapsed during the year
54000 nil nil 54000 nil £2500 – 291104 291111
113687 nil nil 2274 111413 £0715 – 210605 210612
ra sirs
options with an exercise price equal to or above £16775
190922 nil nil nil 190922 £3807 – 031200 – 240503 031207 – 240510
options with an exercise price below £16775
231670 nil nil nil 231670 £0877 – 170200 – 011206 170207 – 011213
options exercised and lapsed during the year
75791 nil 74275 1516 nil £0715 £1750 210605 210612
options lapsed during the year
42000 nil nil 42000 nil £2500 – 291104 291111
25000 nil nil 8250 16750 £0735 – 050305 050312
 other than for exercised or lapsed options the price shown is the weighted average exercise price
options lapsed on performance testing
the gain on exercise of options for each director was tim pearson £207000 and rob sirs £77000
a significant proportion of executive directors’ share options have exercise prices significantly above current share price levels many
of these also have performance conditions that are now unlikely to be achieved
there have been no changes in the directors’ interests in the shares of the company during the period 1 october 2005 to 18 november 2005
the market price of the ordinary shares at 30 september 2005 was 16775p per share and the range during the year was 138p to 1955p
per share
remuneration report rm plc annual report and accounts 2005 41
7 directors’ shareholdings
the beneficial interests of the directors in the ordinary shares of rm plc as at 30 september 2005 or at their date of appointment if
later were
30 september 30 september
2005 2004
jp leighfield 148000 148000
tr pearson 101701 92186
md greig 96058 95985
ra sirs 101561 82389
sl coutu 44316 44316
b carsberg – –
jr windeler 29000 29000
mj t omlinson – –
trp brighouse 6000 6000
in addition to the interests listed above tim pearson has a nonbeneficial interest as a trustee of the rml staff share scheme in 
1364 shares 2004 132053
8 directors’ pensions 
a all executive directors are members of the group’ s principal pension scheme the research machines plc 1988 pension scheme
this scheme provides a pension of 160ths of a member’ s final pensionable salary for each year of service subject to inland revenue
limits only base salary is pensionable
with regard to the impending changes in the tax rules governing pensions effective 6 april 2006 the committee have decided 
to offer the three executive directors the flexibility to stop accruing pension under the existing plan at a time of their choosing and
instead take a cash supplement in lieu of pension this is in line with emerging practice whereby companies are maintaining the
existing pension framework and offering executives flexibility where possible
normal retirement age is 60 in respect of benefits accrued prior to 1 may 2002 for benefits accrued after 1 may 2002 normal
retirement age is 65 but members were able to choose to maintain the normal retirement age at 60 subject to paying a higher rate 
of contributions
contributions  salary normal retirement age normal retirement age
pre 1 may 2002 benefits post 1 may 2002 benefits
75 60 65
105 60 60
tim pearson has chosen to pay contributions at the higher rate whilst mike greig and rob sirs remain at the lower rate
the scheme also provides life insurance cover and dependant pensions member contributions are notionally held in individual
accounts that are increased in line with the fund’ s investment returns benefits received under the scheme are guaranteed to have a
value at least as high as the value of these individual accounts at retirement 42 rm plc annual report and accounts 2005
b the table below shows at the yearend the accrued pension should the directors leave employment the increase in the accrued
pension during the year the increase excluding inflation and the transfer value of that increase less member contributions and any
increasedecrease in this value assessed on the transfer value basis of the scheme
tr pearson md greig ra sirs
age 45 age 49 age 44
£000 £000 £000
accrued annual pension at 30 september 2005 64 39 35
director’ s contributions during the year 23 11 11
increase in accrued pension during the year 7 2 3
increase in accrued pension net of inflation 6 1 2
t ransfer value of increase net of inflation and director’ s contributions 47 10 5
t ransfer value of accrued pension at 30 september 2005 625 399 300
t ransfer value of accrued pension at 30 september 2004 471 326 237
increase in transfer value net of director’ s contributions 131 62 52
tim pearson joined the company prior to 1989 and so is not affected by the inland revenue earnings cap both mike greig and rob
sirs are potentially affected by the earnings cap mike greig joined the company at the time of the introduction of the earnings cap
in 1989 and received a commitment from the company that if the earnings cap does impact his actual pension then the company
will put him in the same position as if the earnings cap did not apply as mike greig’ s benefits are not currently restricted by the
earnings cap it has not been necessary to establish any special pension arrangements for him the manner in which this commitment
will be met is being reviewed in the context of the new pensions tax regime applying from 6 april 2006
no money purchase scheme contributions were paid by the company in respect of any directors during the year
9 compliance with regulations
this report has been prepared in accordance with the directors’ remuneration report regulations 2002 the report also meets the
relevant requirements of the listing rules of the uk listing authority and illustrates how the principles of the combined code
relating to directors’ remuneration are applied by the company
this report has been approved by the board and shareholders will be asked to consider and approve it at the annual general meeting to
be held on 23 january 2006
the group’ s auditors are required to comment on whether certain parts of the group’ s remuneration report have been prepared in
accordance with the companies act 1985 as amended by the regulations accordingly sections 4 5b 6b and 8b have been
audited by deloitte  t ouche llp
10 remuneration committee
the remuneration committee operates under terms of reference approved by the board with the purposes of determining on behalf
of the board and shareholders all elements of the remuneration of the company’ s executive directors and of overseeing major
changes to the overall reward policy structure throughout the group these terms of reference can be found on the group’ s w eb site
at wwwrmcominvestors the remuneration committee undertakes an annual appraisal and addresses any areas that have been
highlighted for improvement
none of the members of the committee has any personal financial interest in the company other than as a shareholder they are not
involved in the daytoday running of the business and have no personal conflicts of interest
the committee believes in regular dialogue with shareholders on remuneration matters and actively meets with leading shareholders
to discuss the company’ s reward programmes 
the fees of nonexecutive directors are a matter for the consideration of the board as a whole each director receives a fee for being a
director if committee work requires additional time commitment then the directors are paid on a per diem basis
remuneration report rm plc annual report and accounts 2005 43
a composition of the remuneration committee
rm’ s remuneration committee comprises sherry coutu
chair sir bryan carsberg john windeler and sir mike
t omlinson all of whom are independent nonexecutive
directors 
b schedule of meetings
the remuneration committee met five times during the year
details of attendance at remuneration committee meetings is as
follows sherry coutu five meetings sir bryan carsberg 
five meetings john windeler five meetings and sir mike
t omlinson five meetings
c advisers to the remuneration committee
during 2005 the committee asked a number of group
employees and external consultants for their views and advice 
tim pearson rm’ s ceo attends meetings of the remuneration
committee by invitation to provide background and context on
matters relating to the remuneration of the other executive
directors but does not participate in discussions relating to his
own remuneration the committee also received views and
advice from mike greig group finance director rob sirs
chief operating officer russell govan human resources
director and john leighfield chairman
pricewaterhousecoopers llp  who were appointed by the
committee provided advice on the executive directors’
remuneration and information on market practice
pricewaterhousecoopers llp were also employed by the group
to audit rm’ s internal customer satisfaction measure
this report was approved by the board of directors on 18
november 2005 and signed on its behalf by
sl coutu
chair remuneration committee
18 november 2005 44 rm plc annual report and accounts 2005
independent auditors’ report to the members of rm plc
w e have audited the financial statements of rm plc for the year
ended 30 september 2005 which comprise the consolidated
profit and loss account the balance sheets the consolidated cash
flow statement reconciliation of net cash flow to movement in
net funds and the related notes 1 to 28 these financial
statements have been prepared under the accounting policies set
out therein w e have also audited the information in the part of
the directors’ remuneration report that is described as having
been audited
this report is made solely to the company’ s members as a body
in accordance with section 235 of the companies act 1985 our
audit work has been undertaken so that we might state to the
company’ s members those matters we are required to state to
them in an auditors’ report and for no other purpose t o the
fullest extent permitted by law we do not accept or assume
responsibility to anyone other than the company and the
company’ s members as a body for our audit work for this
report or for the opinions we have formed
respective responsibilities of directors and auditors
as described in the statement of directors’ responsibilities the
company’ s directors are responsible for the preparation of the
financial statements in accordance with applicable united
kingdom law and accounting standards they are also responsible
for the preparation of the other information contained in the
annual report including the directors’ remuneration report 
our responsibility is to audit the financial statements and the part
of the directors’ remuneration report described as having been
audited in accordance with relevant united kingdom legal and
regulatory requirements and auditing standards
w e 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
described as having been audited have been properly prepared 
in accordance with the companies act 1985 w e also report to
you if in our opinion the directors’ report is not consistent
with the financial statements if the company has not kept
proper accounting records if we have not received all the
information and explanations we require for our audit or if
information specified by law regarding directors’ remuneration
and transactions with the company and other members of the
group is not disclosed
w e also report to you if in our opinion the company has not
complied with any of the four directors’ remuneration disclosure
requirements specified for our review by the listing rules of the
financial services authority these comprise the amount of each
element in the remuneration package and information on share
options details of longterm incentive schemes and money
purchase and defined benefit schemes w e give a statement to the
extent possible of details of any noncompliance
w e review whether the corporate governance statement reflects
the company’ s compliance with the nine provisions of the july
2003 frc combined code specified for our review by the
listing rules of the financial services authority and we report if
it does not w e are not required to consider whether the board’ s
statements on internal control cover all risks and controls or
form an opinion on the effectiveness of the group’ s corporate
governance procedures or its risk and control procedures
w e read the directors’ report and the other information
contained in the annual report for the above year as described in
the contents section including the unaudited part of the
directors’ remuneration report and consider the implications
for our report if we become aware of any apparent misstatements
or material inconsistencies with the financial statements
basis of audit opinion
w e conducted our audit in accordance with united kingdom
auditing standards issued by the auditing practices board an
audit includes examination on a test basis of evidence relevant to
the amounts and disclosures in the financial statements and the
part of the directors’ remuneration report described as having
been audited it also includes an assessment of the significant
estimates and judgements made by the directors in the preparation
of the financial statements and of whether the accounting policies
are appropriate to the circumstances of the company and the
group consistently applied and adequately disclosed
w e 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 described as having been 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 described as having been audited
opinion
in our opinion 
• the financial statements give a true and fair view of the state 
of affairs of the company and the group as at 30 september
2005 and of the profit of the group for the year then ended
and
• the financial statements and part of the directors’
remuneration report described as having been audited have
been properly prepared in accordance with the companies
act 1985
deloitte  touche llp
chartered accountants and registered auditors
reading
18 november 2005 rm plc annual report and accounts 2005 45
2005 2004
note £000 £000
turnover 2 262707 263264
cost of sales 188999 194757
gross profit 2 73708 68507
operating expenses
selling and distribution 34224 32746
research and development 16812 14546
administrative expenses 18536 15232
69572 62524
operating profit 3 4136 5983
operating profit analysed
– before goodwill charges 11522 10502
– goodwill charges 7386 4519
total operating profit 4136 5983
net interest receivable 5 1323 1071
profit on ordinary activities before taxation 5459 7054
profit on ordinary activities before taxation analysed between
– profit on ordinary activities before taxation and goodwill charges 12845 11573
– goodwill charges 7386 4519
5459 7054
t ax charge on profit on ordinary activities 6 3455 3162
profit on ordinary activities after taxation 2004 3892
dividends paid and proposed 7 4331 4075
retained loss for the year 2327 183
earnings per ordinary share 8
basic 23p 44p
diluted 22p 43p
diluted – before goodwill charges 105p 94p
all material activities relate to continuing operations
there are no material recognised gains or losses other than the profit or loss for each year accordingly a consolidated statement of
total recognised gains and losses has not been presented
the accompanying notes are an integral part of this consolidated profit and loss account
consolidated profit and loss account
for the year ended 30 september 2005 46 rm plc annual report and accounts 2005
2005 2004
note £000 £000
fixed assets
intangible fixed assets 9 17304 24737
t angible fixed assets 10 26357 20202
43661 44939
current assets
stocks 12 17658 16492
debtors 13 49456 51538
investments – shortterm cash deposits 500 5000
cash at bank and in hand 22442 22480
90056 95510
creditors
amounts falling due within one year 14 83273 86442
net current assets 6783 9068
total assets less current liabilities 50444 54007
creditors
amounts falling due after more than one year 14 9759 11086
provision for liabilities and charges 15 2170 2320
net assets 38515 40601
capital and reserves
calledup share capital 16 1815 1794
share premium account 22151 20349
capital redemption reserve 94 94
esop shareholding 17 1386 1010
profit and loss account 15841 19374
equity shareholders’ funds 18 38515 40601
these financial statements were approved by the board of directors on 18 november 2005
tr pearson md greig
director director
the accompanying notes are an integral part of this consolidated balance sheet
consolidated balance sheet 
as at 30 september 2005 rm plc annual report and accounts 2005 47
2005 2004
note £000 £000
fixed assets
investment in subsidiary undertakings 11 43324 44906
current assets
debtors 13 19300 14274
cash at bank and in hand 34 35
19334 14309
creditors
amounts falling due within one year 14 6244 5569
net current assets 13090 8740
total assets less current liabilities 56414 53646
creditors
amounts falling due after more than one year 14 2450 3012
provision for liabilities and charges 15 1200 1200
net assets 52764 49434
capital and reserves
calledup share capital 16 1815 1794
share premium account 22151 20349
capital redemption reserve 94 94
esop shareholding 17 1632 1063
profit and loss account 30336 28260
equity shareholders’ funds 18 52764 49434
these financial statements were approved by the board of directors on 18 november 2005
tr pearson md greig
director director
the accompanying notes are an integral part of this balance sheet
company balance sheet 
as at 30 september 2005 48 rm plc annual report and accounts 2005
2005 2004
note £000 £000
net cash inflow from operating activities 19 17204 22399
returns on investments and servicing of finance 20 1032 1071
taxation 3743 3532
capital expenditure and financial investment 21 14506 9691
acquisitions 22 – 16873
equity dividends paid 4127 3909
net cash outflow before use of liquid resources and financing 4140 10535
management of liquid resources 23 4500 8125
financing 24 403 2607
decrease in cash in the year 25 43 5017
the accompanying notes are an integral part of this consolidated cash flow statement
consolidated cash flow statement 
for the year ended 30 september 2005
2005 2004
note £000 £000
decrease in cash in the year 43 5017
cash outflow from change in liquid resources 4500 8125
settlement of loan notes 600 2208
change in net cash resulting from cash flows 3943 10934
issue of loan notes – 1699
exchange translation 5 3
movement in net funds in the year 3938 12636
net funds brought forward 25781 38417
net funds carried forward 25 21843 25781
rec0nciliation of net cash flow to movement in net funds 
for the year ended 30 september 2005 rm plc annual report and accounts 2005 49
1 statement of principal accounting policies
the principal group accounting policies are set out below and have been applied consistently throughout the current and preceding year
basis of accounting
the financial statements are prepared under the historical cost convention and in accordance with applicable united kingdom
accounting standards
basis of consolidation
the group financial statements consolidate the financial statements of rm plc and its subsidiary undertakings made up to 
30 september 2005 the results of subsidiaries acquired are included in the group profit and loss account from the date on which
control passed goodwill arising on acquisitions prior to 30 september 1998 was written off to a separate goodwill reserve in
accordance with the accounting standards then in force
turnover and revenue recognition
t urnover represents amounts receivable for goods supplied and services provided to third parties net of v a t and other salesrelated
taxes revenue on hardware and perpetual software licences is recognised on shipment providing there are no unfulfilled obligations
that are essential to the functionality of the delivered product if such obligations exist revenue is recognised as they are fulfilled
revenue from term licences is spread over the period of the licence reflecting the group’ s obligation to support the relevant software
products or update their content over the term of the licence revenue from contracts for maintenance support and other periodically
contracted products and services is recognised on a prorata basis over the contract period revenue from installation consultancy and
other services is recognised when the service has been provided 
t urnover on longterm contracts is recognised while contracts are in progress t urnover is recognised proportionally to the stage 
of completion of the contract based on the fair value of goods and services provided to date 
longterm contracts
profit on longterm contracts is recognised when the outcome of the contract can be assessed with reasonable certainty thereafter
profit is recognised based upon the expected outcome of the contract and the turnover recognised at the balance sheet date as 
a proportion of total contract turnover
if the outcome of a longterm contract cannot be assessed with reasonable certainty no profit is recognised any expected loss on a
contract as a whole is recognised as soon as it is foreseen the loss is calculated using a discounted cash flow model utilising a discount
rate that reflects the markets’ assessment of the time value of money and the risks specific to the liability any unwinding of the
discount is included in the profit and loss account as other finance costs within interest
the balance of total cost incurred on work carried out net of any amounts recognised in cost of sales is taken to the balance sheet
within stock as longterm contract balances
where the cumulative fair value of goods and services provided exceeds amounts invoiced the balance is included within debtors as
amounts recoverable on contracts where amounts invoiced exceed the fair value of goods and services provided the excess is first set
off against work in progress and then included in deferred income within creditors
precontract costs are expensed until the awarding of a contract to the group is considered to be virtually certain which is not before
the group has been appointed as sole preferred bidder once virtual certainty has been established and the contract is expected to be
awarded within a reasonable timescale and precontract costs are expected to be recovered from the contract’ s net cash flows costs
then precontract costs are recognised as an asset and accounted for as longterm contract costs
notes to the financial statements 50 rm plc annual report and accounts 2005
1 statement of principal accounting policies continued
tangible fixed assets
t angible fixed assets are shown at cost less accumulated depreciation and any provision for impairment depreciation is provided 
on tangible fixed assets at rates calculated to write off the cost less estimated residual value evenly over each asset’ s expected useful
economic life as follows
freehold property up to 50 years
leasehold building improvements up to 25 years
plant and equipment 4 – 10 years
computer equipment 2 – 4 years
v ehicles 2 – 4 years
assets purchased specifically for the delivery of longterm contracts are written off evenly over an appropriate period in accordance
with the terms of the contract
rm’ s computer units used for the purposes of administration research and development and customer demonstrations are capitalised
and carried at cost less accumulated depreciation
intangible fixed assets
intangible fixed assets are shown at cost less amortisation licence costs relate to research machines’ rights to use or otherwise deal
with software products goodwill relates to the acquisition of group subsidiaries and the purchase of assets from helicon publishing
limited by the group amortisation is provided at rates to write off the cost of goodwill and licences on a straightline basis over 
a period of five years provision is made for impairment where appropriate
goodwill arising on acquisitions in the year ended 30 september 1998 and earlier periods was written off to reserves in accordance
with the accounting standards then in force as permitted by the current accounting standard the goodwill previously written off to
reserves has not been reinstated in the balance sheet on disposal or closure of a previously acquired business the attributable amount
of goodwill previously written off to reserves is included in determining the profit or loss on disposal
derivative financial instruments
for a forward foreign exchange contract to be treated as a hedge the instrument must be related to actual foreign currency assets or
liabilities or to probable liabilities it must involve the same currency or similar currencies as the hedged item and must also reduce the
risk of foreign currency exchange movements on the group’ s operations gains and losses arising on these contracts are deferred and
recognised in the profit and loss account or as adjustments to the carrying amount of fixed assets only when the hedged transaction
has itself been reflected in the group’ s accounts
if an instrument ceases to be accounted for as a hedge for example because the underlying hedged position is eliminated the
instrument is marked to market and any resulting profit or loss recognised at that time
research and development
research and development costs relating to the advancement of technical knowledge and innovative solutions are written off to the
profit and loss account as permitted by ssap 13 in the year in which they are incurred
stocks
stocks are stated at the lower of cost and net realisable value costs include all costs incurred in bringing stocks to their present state
and location including an appropriate proportion of overheads provision is made for obsolete slow moving and defective items
where appropriate
taxation
current taxation including uk corporation tax and foreign tax is provided at amounts expected to be paid or recovered using the
tax rates and laws that have been enacted or substantially enacted by the balance sheet date
deferred taxation is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax or a
right to pay less tax at a future date at rates expected to apply when they crystallise based on current tax rates and law timing
differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in
which they are included in financial statements
deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered deferred tax
assets and liabilities are not discounted
notes to the financial statements rm plc annual report and accounts 2005 51
1 statement of principal accounting policies continued
investments
investments in subsidiary undertakings are stated at cost less provision for any impairment where appropriate
foreign currency
monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the rate of exchange ruling
at the balance sheet date or where appropriate at the rate of exchange in a related forward contract foreign currency transactions are
translated at the rate ruling on the date of the transaction or where appropriate at the rate in a related forward exchange contract
exchange gains and losses are charged or credited to the profit and loss account as they occur
leases
rentals under operating leases are charged on a straightline basis over the lease term
pension costs
for the defined benefit scheme it is the general policy of the group to provide for and to fund pension liabilities on the advice of
qualified independent actuaries by payment to independent trusts independent actuarial valuations are carried out every three years
the amount charged to the profit and loss account ‘the regular pension cost’ is calculated so as to produce a substantially level
percentage of current and future pensionable payrolls v ariations from the regular pension cost are allocated to the profit and loss
account over the average remaining service lives of current members
for the defined contribution scheme the amount charged to the profit and loss account in respect of pension costs and other 
postretirement benefits is the contributions payable in the year
any differences between amounts charged in the profit and loss account and paid to the pension funds are shown in the balance sheet
as a liability or asset
2 segment information
2005 2004
£000 £000
turnover by activity
infrastructure software and services 87595 79049
education software and services 47459 49686
hardware 127653 134529
262707 263264
gross profit by activity
infrastructure software and services 25054 22457
education software and services 28175 25833
hardware 20479 20217
73708 68507
all of the group’ s turnover profit and net assets relate to the group’ s main activities which are based principally in the united
kingdom sales by destination to nonuk countries of £32 million 2004 £25 million included europe £07 million 2004 
£08 million australasia £16 million 2004 £15 million and other countries £09 million 2004 £02 million
no profit before tax or net asset by class of business segment information has been disclosed because in the opinion of the directors
such disclosure would not be meaningful 52 rm plc annual report and accounts 2005
3 operating profit
the operating profit is stated after chargingcrediting
2005 2004
£000 £000
depreciation of tangible fixed assets
– owned 8682 7805
goodwill charges
– goodwill amortisation 6294 4519
– goodwill impairment 1092 –
total goodwill charges 7386 4519
operating leases
– plant and machinery 700 543
– other 2736 2968
auditors’ remuneration
services as auditors
– statutory audit 190 174
– further assurance services 95 –
tax services
– t ax compliance 70 60
– t ax advisory 14 –
other nonaudit services
– other accounting advice 7 13
total auditors’ remuneration 376 247
profit on sale of fixed assets 260 205
building schools for the future costs 1819 103
research and development 16812 14546
administrative expenses 18536 15232
administrative expenses including research and development 35348 29778
in addition to the amounts shown above the auditors received a fee of £5000 2004 £4800 for the audit of the group pension scheme
during the financial year group company peakschoolhaus limited was unsuccessful in its bid to be a preferred partner to ofsted for
regional inspection services an impairment review performed on the goodwill arising on the acquisition of peakschoolhaus limited
indicated that the unamortised goodwill of £11 million was impaired consequently an impairment charge of £11 million has been
recognised during the year
the group undertakes a programme of research and development in which advancement of technical knowledge and innovative
solutions are used to substantially improve the performance of product areas to develop new products related to existing markets and
to enhance access to potential new markets all research and development costs are written off in the year in which they are incurred
notes to the financial statements rm plc annual report and accounts 2005 53
4 staff costs
the monthly average number of persons including directors and temporary employees employed by the group during the year was
as follows
2005 2004
number number 
employed employed
products and services 1554 1281
marketing and sales 307 312
lifelong learning and higher education 43 59
corporate services 233 223
2137 1875
their aggregate remuneration comprised
2005 2004
£000 £000
w ages and salaries 73926 66515
social security costs 5715 5057
other pension costs 3799 3567
staff share scheme 70 130
83510 75269
information in relation to the directors’ remuneration and share options are shown in the remuneration report
5 net interest receivable
2005 2004
£000 £000
interest receivable and similar income 1359 1099
interest payable on loan notes 12 18
other interest payable and similar charges 24 10
1323 1071
included within interest receivable and similar income is £07 million 2004 £nil representing additional cash flows on sale of
finance lease debt at 30 september 2005 the group had no finance lease debt owed to it 2004 £nil 54 rm plc annual report and accounts 2005
6 tax charge on profit on ordinary activities
2005 2004
£000 £000
a analysis of tax charge on ordinary activities
current taxation
uk corporation tax at 30 2004 30 based on the profit for the year 3405 3375
adjustment in respect of prior years 155 4
t otal current tax 3250 3371
deferred taxation
timing differences origination and reversal 134 204
adjustment in respect of prior years 71 5
t otal deferred tax 205 209
t ax on profit on ordinary activities 3455 3162
b factors affecting the current tax charge for the period
the difference between the total current tax shown above and the amount calculated by applying the standard rate of uk corporation
tax to the profit on ordinary activities before tax is as follows
2005 2004
£000 £000
profit on ordinary activities before tax 5459 7054
t ax at 30 thereon 1638 2116
effects of
– goodwill charges not deductible for tax purposes 2216 1274
– other expenses not deductible for tax purposes 321 400
– timing differences between capital allowances and depreciation 133 189
– movement in shortterm timing differences – 30
– research and development tax credit 600 500
– effect of overseas lossesprofits 140 134
– gains on the exercise of share options 177 –
– prior period adjustments 155 4
current tax charge for period 3250 3371
7 dividends paid and proposed
2005 2004
£000 £000
ordinary shares
interim paid of 105p 2004 100p per share 932 880
final proposed of 380p 2004 360p per share 3399 3195
4331 4075
notes to the financial statements rm plc annual report and accounts 2005 55
8 earnings per ordinary share
basic earnings per share is calculated on the group’ s profit after taxation of £20 million 2004 £39 million divided by the weighted
average number of shares in issue during the year being 88923547 shares 2004 88894220 diluted earnings per share takes into
account the dilutive effect of share options
a reconciliation of basic earnings per share with diluted earnings per share is as follows
2005 2005 2005 2004 2004 2004
profit no of pence profit no of pence
after tax shares per share after tax shares per share
£000 ‘000 £000 ‘000
basic earnings per share 2004 88924 23 3892 88894 44
impact of share options – 434 01 – 779 01
diluted earnings per share 2004 89358 22 3892 89673 43
supplementary earnings per share
before goodwill charges
diluted earnings per share 2004 89358 22 3892 89673 43
effect of goodwill charges 7386 – 83 4519 – 51
diluted earnings per share before
goodwill charges 9390 89358 105 8411 89673 94
in the directors’ opinion earnings per ordinary share before goodwill charges as presented in the consolidated profit and loss account
represents a more consistent measure of underlying performance
9 intangible fixed assets
the movement in the year was as follows
licence goodwill t otal
£000 £000 £000
group
cost
beginning of the year 9643 35329 44972
adjustment to deferred consideration and net assets acquired – 47 47
end of the year 9643 35282 44925
amortisation
beginning of the year 9643 10592 20235
charged in the year – 6294 6294
impairment – 1092 1092
end of the year 9643 17978 27621
net book value at the end of the year – 17304 17304
net book value at the start of the year – 24737 24737
the group continues to amortise goodwill at rates estimated to write off the cost of goodwill on a straightline basis over a period of
five years the charge for the year has increased as a result of the inclusion of charges for the full period on goodwill arising on the
acquisitions of tts group limited and sentinel products limited and also an impairment of the goodwill arising on peakschoolhaus
limited see note 3 56 rm plc annual report and accounts 2005
10 tangible fixed assets
the movement in the year was as follows
freehold short
land and leasehold plant and computer
buildings improvements equipment equipment v ehicles t otal
£000 £000 £000 £000 £000 £000
group
cost
beginning of the year 957 2623 7785 33072 5934 50371
additions 1 42 857 12645 2076 15621
exchange rate translation – 3 20 36 5 64
disposals – 7 1963 12467 1812 16249
end of the year 958 2661 6699 33286 6203 49807
depreciation
beginning of the year 1 1076 4884 21429 2779 30169
charged in the year 44 139 1093 5929 1477 8682
exchange rate translation –16 161 24
disposals – 6 1781 12017 1621 15425
end of the year 45 1210 4202 15357 2636 23450
net book value at the end of the year 913 1451 2497 17929 3567 26357
net book value at the start of the year 956 1547 2901 11643 3155 20202
11 investment in subsidiary undertakings
2005 2004
£000 £000
company
equity investments in subsidiary undertakings at cost
beginning of the year 37829 19079
investments during the year 1 18750
impairment 1583 –
end of the year 36247 37829
loans to subsidiary undertakings 7077 7077
43324 44906
loans to subsidiary undertakings are not repayable in the forseeable future
notes to the financial statements rm plc annual report and accounts 2005 57
11 investment in subsidiary undertakings continued
all principal subsidiaries of the group are involved in the education market at 30 september 2005 these were as follows
proportion of
principal country of voting rights
activity incorporation and shares held
research machines plc software services and systems england 100
3t productions ltd software england 100
softease ltd software england 100
peakschoolhaus ltd services england 100
sir uk ltd ta forvus computer services data analysis and reporting england 100
sentinel products ltd software services and systems england 100
tts group ltd resource supply england 100
rm asiapacific pty ltd software services and systems australia 100
rm education solutions india private ltd software india 100
rm educational software inc software usa 100
on 30 september 2005 the group exercised its option to acquire rm educational software inc a company based in north america
for a consideration of 100 previously rm educational software inc had been consolidated into the group as a quasisubsidiary
other than the recognition of the amount paid on exercise of the option there is no change to the accounting for rm educational
software inc
12 stocks
group group company company
2005 2004 2005 2004
£000 £000 £000 £000
components 8464 10498 – –
w ork in progress 236 397 – –
finished goods 3167 3580 – –
11867 14475 – –
longterm contract balances – net costs less foreseeable losses 
and payments on account 5791 2017 – –
17658 16492 – – 58 rm plc annual report and accounts 2005
13 debtors
group group company company
2005 2004 2005 2004
£000 £000 £000 £000
amounts falling due within one year
t rade debtors 43364 44460 – –
amounts recoverable on contracts 1176 751 – –
other debtors 524 134 – –
prepayments and accrued income 3287 4883 – –
amounts owed from subsidiary undertakings – – 10920 11744
dividends receivable – – 8380 2530
48351 50228 19300 14274
amounts falling due after more than one year
deferred taxation comprising
– depreciation in excess of capital allowances 264 536 – –
– shortterm timing differences 841 774 – –
1105 1310 – –
49456 51538 19300 14274
movement on deferred taxation asset in the year
beginning of the year 1310 1101 – –
profit and loss account debitcredit 205 209 – –
end of the year 1105 1310 – –
the deferred tax asset arises from fixed asset and shortterm timing differences which will reverse in the future
14 creditors
group group company company
2005 2004 2005 2004
£000 £000 £000 £000
amounts falling due within one year
t rade creditors 20753 28903 – –
amounts due to subsidiary undertakings – – 1642 1073
uk corporation tax 1315 1779 90 90
other taxation and social security 8452 6588 – –
other creditors 1814 236 – –
accruals 20525 23850 14 74
payments received on account 4075 – – –
deferred income 21841 20754 – –
loan notes 1099 1137 1099 1137
proposed dividends 3399 3195 3399 3195
83273 86442 6244 5569
notes to the financial statements rm plc annual report and accounts 2005 59
14 creditors continued
group group company company
2005 2004 2005 2004
£000 £000 £000 £000
amounts falling due after more than one year
loan notes
– more than one year but not more than two years – 562 – 562
other creditors
– between one and two years 2450 – 2450 –
– between two and five years – 2450 – 2450
deferred income
– between one and two years 4979 4659 – –
– between two and five years 2330 3046 – –
– after five years – 369 – –
7309 8074 – –
9759 11086 2450 3012
other creditors – between two and five years
sir uk limited was acquired on 11 july 2003 an initial consideration in cash of £46 million was paid at acquisition with a further
deferred consideration of up to £25 million payable in december 2006 the vendors have provided a warranty against the deferred
consideration dependent upon certain financial targets being met the value of this warranty represents an asset to the group which
is contingent upon the performance of the business in the periods from acquisition to 30 september 2006 given the level of
uncertainty surrounding the measurement of the asset no value has been ascribed to it
15 provision for liabilities and charges
issuable loan restructuring
notes provision t otal
£000 £000 £000
group
beginning of the year 1200 1120 2320
utilised in the year – 150 150
end of the year 1200 970 2170
company
beginning of the year and end of the year 1200 – 1200
the issuable loan notes relate to the acquisition of sentinel products limited and are redeemable in 2007
the restructuring provision principally relates to onerous lease contracts identified during the rationalisation of facilities undertaken
in the year ended 30 september 2002 and will be utilised over the remaining life of the leases
the group and the company have no unprovided deferred taxation 2004 £nil 60 rm plc annual report and accounts 2005
16 calledup share capital
2005 2004
£000 £000
authorised
125000000 ordinary shares of 2p each 2004 125000000 at 2p each 2500 2500
allotted calledup and fully paid
90729696 ordinary shares of 2p each 2004 89700795 at 2p each 1815 1794
1028901 ordinary shares of 2p each were allotted in the year 2004 nil for consideration of £08 million these shares have a nominal
value of £002 million
rml staff share scheme
the rml staff share scheme is an inland revenue approved employee share scheme constituted under a trust deed as at 
30 september 2005 the trustees of the scheme held 1361 shares 2004 173956 on behalf of the employees which had a market
value on that date of £0002 million 2004 £02 million
rm plc 2002 staff share scheme
the rm plc 2002 staff share scheme is an inland revenue approved employee share scheme constituted under a trust deed and has
been introduced to replace the rml staff share scheme as at 30 september 2005 the trustees of the scheme held 255350 shares
2004 180281 on behalf of the employees which had a market value on that date of £04 million 2004 £03 million
the employee benefit trust
in 1993 the company established an employee benefit t rust ebt to operate in connection with the company’ s executive share
schemes the trustee of the ebt is rm employee share schemes t rustee limited a whollyowned subsidiary of the company
1028901 ordinary shares have been allotted for use by the ebt during the year 2004 nil
the ebt owns 14290 shares in rm plc 2004 14290 and has waived rights to the dividend on these shares on 30 september 2005
these shares had a market value of £002 million 2004 £002 million
the rm plc employee share trust
in march 2003 the company established the rm plc share t rust to hedge the future obligations of the group in respect of shares
awarded under the rm plc coinvestment plan for further details see note 17
notes to the financial statements rm plc annual report and accounts 2005 61
16 calledup share capital continued
share option schemes
as at 30 september 2005 the following options granted in respect of ordinary shares of 2p each were outstanding
exercise
calendar year number period price
scheme of issue of shares of option per share
a rm plc 1994 executive – ordinary 1995 12500 10 years £0802
1996 10000 10 years £1220
1998 147500 10 years £4415
1999 138000 10 years £5000
308000
b rm plc 1994 executive – super 1997 348640 10 years £1475 
1997 356370 10 years £1635
1998 683336 10 years £2933 
1998 164000 10 years £4415
1999 644010 10 years £5000
1999 358750 10 years £7615
2000 628149 10 years £5600
3183255
c rm plc 2001 executive – approved 2002 36850 10 years £0735
2002 133248 10 years £0715
2002 204583 10 years £0785
2003 10000 10 years £0950
2003 412500 10 years £1445
797181
d rm plc 2001 executive – unapproved 2002 23450 10 years £0735
2002 416442 10 years £0715
2002 1014239 10 years £0785
2003 272500 10 years £1445
1726631
e rm plc 2004 executive – approved 2004 314000 10 years £1536
f rm plc 2004 executive – unapproved 2004 108000 10 years £1536 62 rm plc annual report and accounts 2005
17 esop shareholding
the rm plc employee share t rust est was established in march 2003 to hedge the future obligations of the group in respect 
of shares awarded under the rm plc coinvestment plan the trustee of the est computershare t rustees ci limited purchases
the company’ s ordinary shares in the open market with financing provided by the company as required on the basis of regular
reviews of the anticipated share liabilities of the group the est has waived any entitlement to the receipt of dividends in respect 
of all of its holding of the company’ s ordinary shares the est’ s waiver of dividends may be revoked or varied at any time
as at 30 september 2005 1278814 2004 950000 ordinary shares of 2p each were held in trust at a cost of £16 million 
2004 £11 million the market value of these shares at 30 september 2005 was £21 million 2004 £14 million
18 reserves and reconciliation of movements in shareholders’ funds
share capital profit 
share premium redemption esop and loss 2005 2004
capital account reserveshareholding account total total
£000 £000 £000 £000 £000 £000 £000
group
beginning of the year 1794 20349 94 1010 19374 40601 41215
retained loss for the year –––– 2327 2327 183
share issues 21 745 – – – 766 –
t ransfer in respect of issue 
of shares to employee trusts – 1057 – – 1057 – –
purchase of shares – – – 569 – 569 399
esop shareholding transfer – – – 193 193 – –
currency translation differences –––– 44 44 32
end of the year 1815 22151 94 1386 15841 38515 40601
company
beginning of the year 1794 20349 94 1063 28260 49434 46867
profit for the year –––– 6407 6407 7041
share issues 21 1802 – 569 – 1254 –
purchase of shares –––––– 399
dividends paid and proposed –––– 4331 4331 4075
end of the year 1815 22151 94 1632 30336 52764 49434
the total amount of goodwill written off to reserves is £11 million which occurred in 1995
as permitted by section 230 of the companies act 1985 no separate profit and loss account is presented in respect of the parent
company the company made a profit for the year amounting to £64 million 2004 £70 million
notes to the financial statements rm plc annual report and accounts 2005 63
19 reconciliation of operating profit to operating cash flows
2005 2004
£000 £000
operating profit 4136 5983
depreciation charge 8682 7805
goodwill charges 7386 4519
profit on sale of fixed assets 260 205
increase in stocks 1166 1952
decreaseincrease in debtors 1992 5168
decreaseincrease in creditors 3566 11417
net cash inflow from operating activities 17204 22399
20 returns on investments and servicing of finance
2005 2004
£000 £000
interest received 1068 1249
interest paid 36 178
net cash inflow 1032 1071
21 capital expenditure and financial investment
2005 2004
£000 £000
purchase of tangible fixed assets 15590 11091
proceeds from sale of fixed assets 1084 1400
net cash outflow 14506 9691
22 acquisitions and disposals
2005 2004
£000 £000
investment in subsidiaries – 15839
net cash acquired with subsidiary undertakings – 1309
net borrowings repaid on acquisition – 2343
net cash outflow – 16873 64 rm plc annual report and accounts 2005
23 management of liquid resources
2005 2004
£000 £000
cash withdrawn from deposit accounts 4500 8125
24 financing
2005 2004
£000 £000
issue of ordinary share capital 766 –
repayment of loan notes 600 2208
purchase of own shares 569 399
net cash outflow 403 2607
25 analysis of net funds
at 1 oct cash noncash at 30 sept
2004 flow movements 2005
£000 £000 £000 £000
cash in hand at bank 22480 43 5 22442
current asset investments 5000 4500 – 500
cash at bank and shortterm deposits 27480 4543 5 22942
debt due within one year 1137 600 562 1099
debt due after one year 562 – 562 –
net funds 25781 3943 5 21843
26 financial instruments
the group’ s financial instruments other than derivatives comprise cash liquid resources and various items such as trade debtors and
trade creditors that arise directly from its operations the group also enters into derivatives transactions in the form of forward
foreign currency contracts the purpose of such transactions is to manage the currency risks arising from the group purchasing
significant amounts of its raw materials in us dollars it is and has been throughout the period under review the group’ s policy that
no trading in financial instruments shall be undertaken
the group does not hold or issue derivative financial instruments for speculative purposes
the main risks arising from the group’ s financial instruments are liquidity risk interest rate risk and foreign currency risk the board
reviews and agrees policies on a regular basis for managing each of these risks and they are summarised below
liquidity and interest rate risk
the group finances its operations through retained profits the group’ s policy is to maintain only the foreign currency balances
required to pay its suppliers any surplus sterling balances are invested on the money market or with financial institutions on
maturing terms from within 24 hours up to a period of three months with interest earned based on the relevant national interbank
rates available at the time of investing
notes to the financial statements rm plc annual report and accounts 2005 65
26 financial instruments continued
foreign currency risk
the group’ s policy is to limit exposure related to foreign exchange risk by purchasing foreign currencies through short to 
mediumterm forward foreign currency contracts
as permitted by frs 13 shortterm debtors and creditors have been excluded from disclosures other than the currency risk
disclosures
financial assets
floating interest floating interest
rate free t otal rate free t otal
2005 2005 2005 2004 2004 2004
£000 £000 £000 £000 £000 £000
sterling 21145 861 22006 19527 7027 26554
us dollar 250 46 296 394 13 407
australian dollar 180 166 346 286 91 377
euro –2828 –99
indian rupee 55 211 266 25 108 133
21630 1312 22942 20232 7248 27480
interest on the floating rate assets is based on the relevant money market or deposit rate
fair values
the group’ s floating rate financial assets comprise cash deposits on money markets or with financial institutions on maturing terms
from seven days to three months as all are shortterm the fair value of the assets is not considered to be materially different from the
book value in addition the group held us dollar forward purchase contracts with a maturing value of £166 million all of which
mature in less than one year 2004 £212 million the unrecognised gain on forward contracts yet to mature as at 30 september 2005
was £04 million all of which is expected to be recognised in the year ending 30 september 2006 2004 £03 million loss
currency exposures
as at 30 september 2005 after taking into account the effects of forward exchange contracts the group had no significant currency
liabilities at the balance sheet date other than those disclosed above there are no material unrecognised gains or losses as at 
30 september 2005
borrowing facilities
at 30 september 2005 the group had committed borrowing facilities expiring in february 2006 of £130 million 2004 £120 million
at the year end the amount of the committed facility drawn down was nil 2004 nil
financial liabilities
the group has loan notes as disclosed in notes 14 and 15 there is no material difference between the fair value and the book value of
these loan notes 66 rm plc annual report and accounts 2005
27 pension scheme
the group operates or contributes to a number of pension schemes all of which are defined contribution with the exception of the
research machines plc 1988 pension scheme that scheme which closed to new members with effect from 1 january 2003 provides
benefits based on both final pensionable salary and the value of individual accounts the assets of the scheme are held separately from
those of the group in a trusteeadministered fund contributions to the scheme are determined by a qualified independent actuary 
on the basis of valuations they are charged to the profit and loss account so as to spread these costs over employees’ working lives with
the group
statement of standard accounting practice 24 disclosures ssap 24
an actuarial valuation of the scheme was carried out as at 31 may 2003 for funding purposes using the projected unit method of
funding it was assumed that investment returns would be 64 pa preretirement 47 pa postretirement salaries would increase by
385 pa and pensions would increase by 15 pa in respect of service accrued before 1 april 1997 and 235 pa in respect 
of service accrued on or after 1 april 1997 assets were taken at their market value the next triennial valuation is due to take place 
at 31 may 2006
the 2003 valuation also showed that the expected longterm cost of the scheme to the group was 74 of pensionable salaries 
for service after 1 june 2005 the pension accrued will increase when in payment in line with increases in the retail prices index
rpi up to a maximum of 25 per annum prior to 1 june 2005 the pension increase for service after 6 april 1997 had been in line
with increases in the rpi but with a maximum of 5 per annum the longterm cost to the group has fallen to 71 of pensionable
salaries as a result of this change and this change is reflected in the regular cost for the year to 30 september 2005 the average
contribution rate over the year was therefore 72 of pensionable salaries
at 31 may 2003 the market value of the scheme’ s assets was estimated to be £313 million this represented 71 of the benefits 
that had accrued to the members after allowing for expected future increases in salaries 
additional annual contributions of £13 million are payable in order to recover the deficit in funding over 15 years from 
1 november 2004 employee contributions to the scheme for those over the age of 25 are 75 of pensionable salary
the pension charge for the year is disclosed in note 4
included in debtors falling due within one year is a net prepaid amount of £007 million this comprises outstanding pension
contributions of £043 million plus a prepaid contribution of £05 million 2004 £nil no amounts are outstanding in respect 
of the company
financial reporting standard 17 disclosure frs 17
the pension cost figures used in these accounts comply with the current pension cost accounting standard ssap 24 frs 17 has been
introduced with transition arrangements under which the company is required to disclose the following information about the
scheme and the figures that would have been shown under frs 17 in the balance sheet the profit and loss account and the statement
of total recognised gains and losses
the group operates a defined benefit scheme in the uk a full actuarial valuation was carried out at 31 may 2003 and updated 
to 30 september 2005 by a qualified independent actuary the service cost has been calculated using the projected unit method 
the major assumptions used by the actuary were in nominal terms
2005 2004 2003
rate of increase in salaries 380 420 400
rate of increase of pensions in payment 270 270 250
rate of increase of pensions in deferment 270 270 250
discount rate 505 560 540
inflation assumption 270 270 250
notes to the financial statements rm plc annual report and accounts 2005 67
27 pension scheme continued
financial reporting standard 17 disclosure frs 17 continued
the standard pma92 and pfa92 mortality tables have been adopted for pensioners and the same tables but with an age adjustment
of 4 years 2004 3 years for nonpensioners the change in age adjustment represents an allowance for improved mortality and
increased liabilities by £14 million
the fair value of the assets in the scheme and the expected rates of return were
2005 2005 2004 2004 2003 2003
£000 £000 £000
equities 680 42330 700 33600 700 26140
bonds 430 14200 450 9050 450 7770
t otal market value of scheme assets 56530 42650 33910
actuarial value of scheme liability 72420 57500 50610
shortfall in the scheme assets 15890 14850 16700
related deferred tax asset 4767 4455 5010
net pension shortfall 11123 10395 11690
analysis of the amount that would have been charged to operating profit
2005 2004
£000 £000
current service cost 1730 1830
t otal operating charge 1730 1830
analysis of amount that would have been charged to other finance income
2005 2004
£000 £000
expected return on pension scheme assets 2910 2350
interest on pension liabilities 3320 2820
net return and other finance costs 410 470
analysis of amount that would have been recognised in statement of total recognised gains and losses
2005 2004
£000 £000
actual return less expected return on assets 5900 1230
experience lossgain on liabilities – 1270
changes in assumptions 8200 680
net lossgain recognised in statement of total recognised gains and losses 2300 640 68 rm plc annual report and accounts 2005
27 pension scheme continued
movement in deficit during the year
2005 2004
£000 £000
deficit before tax in scheme at beginning of year 14850 16700
movement in year
– current service costs 1730 1830
– contributions including augmentations 3400 3510
– net return and other finance costs 410 470
– actuarial lossgain 2300 640
deficit before tax in scheme at end of year 15890 14850
history of experience gains and losses
2005 2004
difference between expected and actual return on scheme assets
– amount £000 5900 1230
– as a percentage of scheme assets 10 3
experience gains and losses on scheme liabilities
– amount £000 – 1270
– as a percentage of scheme liabilities – 2
t otal amount recognised in statement of total recognised gains and losses
– amount £000 2300 640
– as a percentage of scheme liabilities 3 1
if the pension shortfall was recognised in the financial statements the group’ s net assets and profit and loss reserve would be as
follows
2005 2004
£000 £000
net assets excluding pension liability 38515 40601
pension liability 11123 10395
net assets including pension liability 27392 30206
2005 2004
£000 £000
profit and loss reserve excluding pension liability 15841 19374
pension shortfall 11123 10395
profit and loss reserve 4718 8979
notes to the financial statements rm plc annual report and accounts 2005 69
28 commitments and contingencies
commitments under operating leases
the group leases certain assets under operating leases the terms of which are subject to renegotiation at various intervals as specified
in the lease agreements and is committed to the following payments in the coming year
land and
buildings other
2005 £000 £000
expiry date
– within one year 113 175
– between one and two years 116 23
– between two and five years 273 13
– after five years 2245 –
2747 211
land and
buildings other
2004 £000 £000
expiry date
– within one year 268 330
– between two and five years 173 252
– after five years 2221 –
2662 582
capital commitments
the group has the following capital expenditure commitments
2005 2004
£000 £000
contracted for but not provided for 3805 2499
contingent liabilities
the company has entered into guarantees relating to the performance and liabilities of its subsidiaries’ major contracts the directors
are not aware of any circumstances that would give rise to any liability under such guarantees and consider the possibility of any arising
to be remote 70 rm plc annual report and accounts 2005
£000 except where otherwise stated 2001 2002 2003 2004 2005
turnover 241916 202158 215494 263264 262707
operating profit 15860 4059 7567 10502 11522
profit on ordinary activities before taxation 16252 5042 8649 11573 12845
profitloss after taxation 10656 4819 4675 3892 2004
tax rate 28 28 18 27 27
diluted earnings per share 123p 38p 79p 94p 105p
diluted earnings per share at normalised tax rate of 28 123p 38p 69p 93p 103p
dividends per share 415p 415p 435p 460p 485p
balance sheet
– capital employed 23859 1934 590 13121 15573
– net cash 29165 39125 40625 27480 22942
– net funds 27068 32663 38417 25781 21843
– shareholders’ funds 53024 41059 41215† 40601 38515
operating profit as a percentage of
– turnover 66 20 35 40 44
– average capital employed 64 32 600 153 80
average number of employees 1738 1590 1545 1875 2137
 before goodwill charges and exceptional items
exceptional items comprise
2002 – £90 million exceptional administrative expenses related to restructuring and intangible asset impairment
t ax rate as a percentage of profit before goodwill charges
† restated for uitf 38
fiveyear summary rm plc annual report and accounts 2005 71
rm is committed to improving customer satisfaction and we regularly survey our customers via our corporate w eb site to see how
effectively we are meeting their needs 
w e’d also like to understand how we did with this annual report the two questions below closely match the questions we use in our
customer satisfaction survey
q 1 please indicate your level of satisfaction with this annual report by circling your choice
0123456789 10
v ery satisfied v ery 
dissatisfied satisfied
q 2 what single improvement would you like to see us make that would make the most impact for you
your details if you want to give them
title forename 
surname
position
establishment
address
postcode
telephone
 none of the contact information provided will be stored or retained in a computer database nor will it be used for any marketing purposes
please return to
phil hemmings
director of corporate affairs
rm
freepost of1321
new mill house
183 milton park
abingdon oxfordshire
ox14 4br
if you have any further comments or queries please send an email to investorsrmcom
thank you for your time
what do you think of our annual report  many
values
one
company
the rm group is a leading provider of educational 
products and services to schools colleges and
universities local government and central 
government education departments and agencies
recognised as a leading innovator in the educational
information and communications technology ict 
arena rm works closely with educationalists to 
use new products processes and technology to 
improve teaching and learning
02 a passion for education
professor tim brighouse and sir mike t omlinson talk 
with tim pearson about the importance of education and 
rms role in the educational community
04 clear about our strategy
t echnical capability and relative scale combined with
unrivalled education focus mean that rm is uniquely well
positioned to address the opportunities presented by the
educational ict market
06 innovation and improvement
innovation is at the heart of products and services that are
improving the way in which education is delivered
10 not just a day job
engaging with the wider community and working to 
improve rms environmental performance brings something
extra back into the organisation
12 financial and operational highlights
13 chairman’s statement
14 ceo’s operating review
18 financial review
21 corporate governance report
23 audit committee report
26 board of directors
28 directors’ report
32 remuneration report
44 independent auditors’ report
45 consolidated profit and loss account
46 consolidated balance sheet
47 company balance sheet
48 consolidated cash flow statement
48 reconciliation of net cash flow to movement in net funds
49 notes to the financial statements
70 fiveyear summary
ibc shareholder information
customer success
high standards
innovation and improvement
openness
respect for others
enjoying ourselves
rm plc annual report and accounts 2005 2
financial calendar
annual general meeting
23 january 2006
payment of 2005 final dividend
3 february 2006
announcement of 2006 interim results
may 2006
announcement of 2006 preliminary results
november 2006
corporate web site
information about the group’ s activities is available from rm 
at wwwrmcom 
investor information
information for investors is available at wwwrmcominvestors
enquiries can be directed to phil hemmings director of
corporate affairs at the group head office address or by email at
phemmingsrmcom
registrars and shareholding information
shareholders can access the details of their holdings in rm plc via
the shareholder services option within the investor section of the
corporate w eb site at wwwrmcominvestors shareholders can
also make changes to their address details and dividend mandates
online 
all enquiries about individual shareholder matters should be
made to the registrars either via email at ssdcapitairgcom or
telephone 0870 162 3100 t o help shareholders the capita w eb
site at wwwcapitaregistrarscom contains a shareholders’
frequently asked questions section
directors
jp  leighfield chairman nonexecutive
tr pearson chief executive officer
md greig group finance director
ra sirs chief operating officer
sl coutu senior independent nonexecutive director
b carsberg independent nonexecutive director
jr windeler independent nonexecutive director
mj tomlinson independent nonexecutive director
trp  brighouse independent nonexecutive director
company secretary
aj robson
group head office and registered office
rm plc
new mill house
183 milton park
abingdon
oxfordshire ox14 4se
united kingdom
t elephone 44 0 8709 200200
fax 44 0 1235 826999
registered number 
1749877
advisers
bankers
barclays bank plc
t echnology  t elecoms t eam
1 churchill place
canary wharf
london e14 5hp
auditors
deloitte  t ouche llp
abbots house
abbey street
reading rg1 3bd
stockbrokers
ubs investment bank
1 finsbury avenue
london ec2m 2pp
registrars
capita registrars
the registry
34 beckenham road
beckenham
kent br3 4tu
solicitors
linklaters
one silk street
london ec2y 8hq
shareholder information where 
technology
and 
education
meet
rm plc
annual report 
and accounts 2005
vision
market
passion one
rm plc annual report and accounts 2005
rm is committed to improving the impact its activities have 
on the environment 
this report is printed on true recycledcontent coated paper with
an industry standard exceeding the 75 minimum deinked 
postconsumer waste content the recycled papers used in the
production of this report are a combination of totally chlorine free
tcf giving zero aox level and elemental chlorine free ecf
giving a resultant aox level of less than 05kg per 1000kg of
pulp conforming to government requirements
rm’s products
rm’ s products are protected by a comprehensive portfolio of registered patents or patent
applications including the following european patents – 13001714 13001722 13038872
1002781 022500599 022500581 022500615 903136794 903053544 893102095 and 
gb patents – 1002781 02003218 02202307 02268803 02257962 90174913 89176481
89136006 89116222  88236286 01199231 04151080
designed and produced by merchant in collaboration with
langsford corporate design printed by the midas press pn3274 1205
rm plc
new mill house
183 milton park
abingdon
oxfordshire 
ox14 4se
united kingdom
t 44 08709 200200
f 44 01235 826999
wwwrmcom


Summary:
 14 rm plc annual report and accounts 2005
rm has delivered a strong performance in 2005 – particularly 
so against a background of budget pressures in schools and
falling selling prices in the pc hardware market financial
results for the year show good progress compared with last
year and customer satisfaction levels continue to improve 
looking ahead the educational landscape is evolving more
rapidly than it has for many years new and innovative uses for
educational technology are emerging and rm through our
education project activity is leading the world in many of
these areas the education market continues to provide
opportunities for further growth which rm is uniquely well
positioned to address
results
profit before tax before goodwill charges increased by 11 
to £128 million 2004 £116 million this increase is after 
£18 million of businessdevelopment expenditure related to the
building schools for the future bsf programme operating
profit margin before goodwill charges showed further progress
increasing to 44 2004 40 
group turnover was unchanged at £263 million however this
masks underlying growth in the group’ s business the ‘oneoff ’
turnover which we reported last year £15 million arising largely
from hardware sales related to a specific education project has
been replaced by a combination of longterm project turnover
and fullyear contributions from the businesses which we
acquired during 2004
group order intake was 15 higher than in 2004 and
significantly exceeded shipments in the year
cash management during the year was excellent at 
30 september 2005 net funds stood at £218 million 2004
£258 million this is after pfi project capital expenditure in the
year of £104 million which is now complete
after goodwill charges of £74 million profit before tax 
was £55 million 2004 £71 million the board is proposing 
an increased final dividend per share of 38p 2004 36p making
the total dividend per share for the year 485p 2004 46p
subject to approval at the agm the final dividend will be 
paid on 3 february 2006 to shareholders on the register on 
6 january 2006
individual schools
individual schools customers continued to contribute the
majority of rm’ s turnover during 2005 the average annual
amount spent by rm’ s primary and secondary school customers
increased during the year and more schools are choosing to use
our flagship community connect 3™ infrastructure product
although a strong year overall the individual schools market is
not without challenges with the last month of our 2005 financial
year which is also the first month of the academic year being
below our expectations head teachers in england are
experiencing budget pressures linked to both the workforce
remodelling programme and the introduction of teaching and
learning responsibility payments for teachers the education
software market was challenging with evidence that some of the
dedicated funding provided by the department for education
and skills is ‘leaking’ out of the market
education project delivery
w e entered 2005 having won several major education projects
these projects represent significant educational transformation
for our customers each of them is providing a highquality
service and all of them serve as reference sites for future bids
delivery highlights include
• qca 47000 pupils taking examinations online compared
with 1200 in 2004
• cambridge assessment 225000 exam scripts processed
electronically
• w arwickshire lea 1500 teachers using t ablet pcbased
teacher toolkits
ceo’s operating
review
tim pearson – chief executive officer rm plc annual report and accounts 2005 15
• newham lea 4200 laptop computers available for pupils to
take home
• lambeth lea full managed service supporting over 6000
users
• south lanarkshire council 9000 computers over 200 sites
• south y orkshire elearning programme 10500 new ict
qualifications achieved so far
• dudley grid for learning 8000 computers updated in over
100 schools 
education projects made an increased contribution to turnover
during the year also important is the reputation we are
developing for delivering successful outcomes for our customers
which increasingly differentiates us from our competition
during the year we won two further education projects scottish
schools digital network and lambeth pfi worth in total
£545 million as well as securing the renewal of our contract with
the south w est grid for learning which is expected to be worth
£10 million per year for up to five years 
scottish schools digital network
in september 2005 we were awarded a £375 million contract to
deliver the scottish schools digital network national intranet
ssdn this was a fiercely contested contract and we won it in
competition against some of the world’ s largest technology
companies rm was successful because we were able to
demonstrate an unrivalled combination of technical delivery
capability and educational focus
when the first stage of ssdn is complete more than 800000
learners teachers and educational managers in scotland will have
secure personalised access to a single intranet over time this
intranet will be extended to embrace parents as well 
the ssdn project will drive whole new ways of using
technology in education which will both save time for teachers
and improve facilities for learners functions available will
include curriculumplanning and delivery for teachers innovative
educational content for learners and sophisticated management
information systems for education managers as well as
collaboration and communication tools including email video
conferencing and chat for all users 
a reputation for innovation
w e see technical capability as one of our key competitive
advantages and during 2005 we have continued to build our
reputation for innovation
the education projects which we are delivering require technical
innovation they also play a key role in developing the group’ s
intellectual property each of these education projects
individually has built the knowledge skills and experience the
group has access to together they provide us with a rich and
deep understanding of designing and delivering technology that
makes a genuine contribution to educational outcomes
several of our products and services have been recognised for
their innovation during 2005 w e won four awards at bett
2005 the annual educational ict trade show two education
resources awards at the annual education show and awards at
the nursery w orld show these awards cover all aspects of our
product range including pc hardware educational software and
general educational resources produced by the recently acquired
tts subsidiary 
hardware and distribution
our innovative educationally differentiated pc the rm one
has been extremely well received by schools schools value the
rm one’ s educational features and robust spacesaving design
demonstrating the benefit of customerdriven innovation – even
in commodity product areas the rm one range has now been
extended with the rm mobile one which brings educational
benefits to the laptop computer 
shown with optional primary keyboard 16 rm plc annual report and accounts 2005
the commodity pc hardware market has continued to be
extremely competitive and this year has seen a significant decline
in average selling prices this effect has been most evident in our
universities business however we believe we have retained our
market share here despite reducing the level of sales and
marketing resource deployed
tts the general education resources supplier which we acquired
during 2004 has made an excellent firstyear contribution to the
group w orking in partnership with rm’ s hardware division tts
has begun to develop a highly innovative range of technology
products the first of these – beebot – has been a sales success and
further products will be introduced at bett 2006
online assessment
more than 50 million exam scripts circulate around the uk
examination system each year typically in the form of physical
pieces of paper there is a clear opportunity for ict to improve
the effectiveness and efficiency of these processes and it’ s an area
in which we have made good progress
our project with the qualifications and curriculum authority to
deliver an online key stage 3 13 to 14yearolds examination for
the curriculum subject of ict is progressing well the examination
went through volumetesting this summer and will be used next year
by a high proportion of all english key stage 3 pupils as well as
providing an innovative new way of testing ict  this project has also
created a national ict infrastructure for delivering administering
and marking tests for other subjects as well
w e are also working with cambridge assessment formerly
ucles to streamline the process of managing traditional
paperbased exams doms our digital online marking
software improves the efficiency and increases the accuracy of
marking through a sophisticated workflow engine completed
exam scripts are scanned at the earliest possible point with the
distribution marking and reporting then managed electronically
these two projects both have wider relevance and we are
exploring a range of further business opportunities
building schools for the future
bsf is a 15year programme which is intended to rebuild or
substantially refurbish every secondary school in england
partnerships for schools p4s the agency tasked with driving
the programme forward has indicated that over the life of the
programme capital investment could reach £45 billion 
t echnology will be a fundamental part of the ‘school of the
future’ – indeed educational ict is being seen as one of the key
drivers of educational transformation with as much as £5 billion
of the investment being focused on educational technology the
bsf programme is an unprecedented opportunity for rm
the potential benefits go beyond an increase in market size p4s
has provided strong guidance that bsf projects should procure
ict in the form of multiyear managed services this would allow
us to build even deeper partnerships with our customers as well as
providing greater longterm visibility of revenues as with any
major market change there are of course risks associated with the
bsf programme in particular the requirement to bid for projects
as part of a consortium means that decisions will not be made
entirely on the quality of an ict proposition 
the track record of educationproject delivery which we have
built up in recent years is directly relevant to the kind of business
which is likely to be available under bsf  w e have made some early
progress being appointed as preferred bidder for a £64 million
ict contract with solihull local education authority 
w e have chosen to increase our expenditure on business
development related to the bsf programme from the £18 million
that was spent in 2005 to approximately £4 million in 2006 with
the target of securing the position of leading ict partner to the
programme w e view this expenditure as a strategic investment
which will yield shareholder benefits over the next three to five
years as an increasing number of bsf contracts is awarded
international
the uk leads the world in the deployment of interactive
whiteboards in classrooms and rm has responded to the growing
use of this kind of technology with the further development of 
the easiteach product range easiteach – a suite of interactive
wholeclass teaching software – is equally as useful in international
markets as it is in the uk and during 2005 we have made progress
in establishing a customer base for the product range in the usa
by working in partnership with four of the leading interactive
whiteboard suppliers in america we have established a presence
for easiteach in american schools our partners bundle
easiteach studio – the core of the product range – with the
whiteboards which they sell to the us education market w e are
establishing a distribution channel to sell ‘addon’ modules to
those schools which experience the bundled product
ceo’s operating review rm plc annual report and accounts 2005 17
customer satisfaction
a key part of our strategy is to focus on continual improvement
of customer satisfaction levels in 2006 every permanent staff
member in our principal operating subsidiary will have some
element of their remuneration linked to customer satisfaction 
w e view our externally audited customer satisfaction score as our
most important nonfinancial measure in 2005 this score
increased again exceeding our target and reaching 721 on a scale
of 0 to 10 2004 70 with more than 58 of customers giving 
us a score of 8 9 or 10
the customer satisfaction target has been set higher again 
for 2006 if we achieve our 2006 target we will have seen 
yearonyear increases each year since we first started measuring
customer satisfaction in 2003 independent analysis by the
american customer satisfaction index of us companies which
measure customer satisfaction suggests that very few companies
increase their score in two consecutive years 
the quality of service which we deliver for our customers has
received external validation during 2005 support online our
w eb support service was identified by the association of
support professionals as one of the w orld’ s t en best w eb
support sites for the second consecutive year in 2005 our
telephone support team was a finalist in the helpdesk institute’ s
helpdesk support t eam excellence awards
w e are now extending our focus to include customer success as
well as customer satisfaction by this we mean achieving a
position where our customers not only view us as an exemplary
supplier but also consider that the products and services which
we supply are an essential tool to improve teaching and learning
our people
rm has a growing international presence and we now employ
185 people outside the united kingdom in north america and
australia we have regional sales offices and our software
development facility in t rivandrum india is making an
increasing contribution to product development
employee satisfaction based on our internal staff survey increased
during the year with 80 of staff responding that they thought
rm was a good organisation to work for similar companies 58
this is a very positive result and i echo john leighfield’ s comments
in his chairman’ s statement thanking my colleagues everywhere in
the group for their effort dedication and professionalism
there are as ever areas for improvement the most obvious this
year being staff training for 2006 we have increased our focus on
staff development
prospects
the recent education white paper higher standards better
schools for all identifies a central role for ict in education this
follows on from the publication of the department for
education and skills’ dfes elearning strategy earlier this year
and the appointment of the first ever director of t echnology to
the dfes board 
rm remains a seasonal business with more than half of our
revenues – and an even greater proportion of profits – occurring in
the second half of the year reflecting the peak in schools’ demand
in preparation for the start of the academic year in september
while we have improved the visibility of our revenues we still have
almost twothirds of the year’ s business to win and deliver 
as always at this time of our financial year it is too early in the year
to make any meaningful comment on rm’ s performance in 2006
however with english head teachers facing budget pressures as a
result of the workforce remodelling programme and the
introduction of teaching and learning responsibility payments for
teachers the weakness in the market that was evident at the start of
the new academic year has continued into the current financial year 
as previously mentioned we are choosing to increase our
investment in businessdevelopment expenditure to prepare for
the opportunities presented by bsf  w e believe that this is in the
longterm interests of shareholders however it will hold back
profit growth in 2006
in the longer term rm is very well positioned to deliver
innovative ict products and services that will help teachers to
teach and learners to learn 
tim pearson
chief executive officer
18 november 2005