ld l ld
connected
annual report and accounts 2003 2 arm at a glance
4 chairman’s statement
6 chief executive officer’s review
8 arm connected
8connected community
10 at the heart
12 setting the standard
14 directors and advisers
16 financial review
18 corporate governanceuk gaap
21 corporate social responsibility
22 directors’ reportuk gaap
24 remuneration reportuk gaap
30 statement of directors’ responsibilities
31 independent auditors’ report to the members of arm holdings plcuk gaap
32 consolidated profit and loss accountuk gaap
statement of group total recognised gains and lossesuk gaap
33 consolidated balance sheetuk gaap
34 company balance sheetuk gaap
35 consolidated cash flow statementuk gaap
36 notes to the financial statementsuk gaap
56 selected consolidated financial dataus gaap
57 operating and financial review and prospectsus gaap
61 consolidated statements of income and comprehensive incomeus gaap
62 consolidated balance sheetsus gaap
63 consolidated statements of cash flowsus gaap
64 consolidated statements of changes in shareholders’ equityus gaap
65 notes to the financial statementsus gaap
79 report of independent auditorsus gaap
80 group directory
contents arm annual report and accounts 2003 1
arm designs technology that lies at the heart of advanced digital products
we have a strong record of creating innovative products and industry
standards supported by a broad connected community of partners 
we develop and license our architecture to leading electronics companies
enabling them to develop reliable total system solutions
the arm architecture delivers highperformance lowcost powerefficient
processors data engines peripherals software and tools these solutions
are used in a wide range of applications including in the automotive
consumer entertainment digital imaging mass storage networking
security and wireless industries
whether at home in the office or on the move you are likely to be
connected using a product which has arm technology at its core 2 arm annual report and accounts 2003
arm at a glance
revenue analysis  royalty units  licence revenues by product 
total revenues £m
2003
2002
2001
2000
1999
1281
1509
1463
1007
621
0  50 100 150 200
2003
2002
2001
2000
1999
443
268
279
256
111
0 10 20 30 40 50
royalty revenues £m
•
total revenues of £1281 million in 2003 compared with £1509 million in 2002
•
our partners shipped a total of 782 million units in 2003 based on arm technology an increase of 71
•
rd expenditure maintained at high levels giving rise to introduction of further innovative products
licensing 40
royalties 34
development systems 14
support maintenance and training 10
consulting 2
arm7
tm
family 18
arm9
tm 
family 31
arm10
tm
arm11
tm
architecture 33
noncore licensing 18
automotive 1
consumer entertainment 7
imaging 7
microcontrollers 1
networking 10
secure 2
storage 4
wireless 68 arm annual report and accounts 2003 3
geographic revenue by market destination 
research and development expenditure £m
0 10 20 30 40 50
2003
2002
2001
2000
1999
481
487
389
275
170
net cash balance at year end £m
2003
2002
2001
2000
1999
1598
1303
1045
753
518
0 50 100 150 200
•
additional core arm926ej™ now available in the foundry programme
•
cash and shortterm investments of £1598 million at 31 december 2003 an increase of £295 million in the year
•
annual dividend introduced reflecting confidence in future cash flows
united states 51
austin texas
novi michigan
carlsbad california
los gatos california
northborough massachusetts
walnut creek california
europe 18
blackburn uk
cambridge uk
maidenhead uk
sheffield uk
leuven belgium
montigny le bretonneux france
sophia antipolis france
munich germany
kfar saba israel
asia pacific 31
seoul south korea
taipei taiwan
shinyokohama japan
shanghai pr china results and dividend
the decisions we took in the fourth quarter 
of 2002 to reduce our cost base but also 
to maintain our high level of research and
development expenditure throughout the
protracted industry downturn enabled us
during the year to introduce a number of new
products based on innovative technologies and
to strengthen our position in becoming the
architecture for the digital world
although our full year 2003 revenues were
down on the previous 12 months our revenues
in 2003 increased from the first quarter onwards
on total revenues of £1281 million we earned
profit before tax of £232 million after adjusting
for the cost of settlement of the dispute with
herodion of £64 million good cost control
and working capital management enabled 
us to convert this into net cash generation 
of £295 million
this strong cash generation together with our
confidence in the group’s longterm prospects
enabled us to continue to make significant
investments in technological innovation both
organic and through a “bolton” strategic
acquisition
2003 was a year of stable quarteronquarter progress continued
technological innovation and one in which the arm
®
architecture
gained increasing global acceptance
the board also decided at the end of 2003 
to initiate the payment of an annual dividend
we see a return of cash to shareholders
through a dividend as part of a package 
of measures to make the best use of the
business’s cash resources it is the board’s
intention to increase the dividend over 
time taking into account the opportunity for
continued investment in the business and the
group’s underlying operational performance
the market
activity in the semiconductor industry gradually
increased as 2003 progressed giving rise to
improving confidence among our partners
particularly in respect of the volume of
products shipped however tight financial
control by our partners continues to be 
exerted and it is expected that improvements
in licensing revenue will occur gradually during
2004 in the meantime the expansion of our
existing family of products together with new
products introduced in 2003 is expected to
contribute to a longterm trend of improving
licensing revenue
it is encouraging to see that our partners
shipped so many arm corebased products in
the year 782 million units 71 more than in
2002 this gives us confidence that we are
providing our semiconductor partners with the
right technologies to meet the expectations 
of their customers – the original equipment
manufacturers oems it also demonstrates
that consumers are more readily embracing 
the digital world
geographic expansion
arm’s business is increasingly global 
in 2003 the geographic source of our
revenues illustrated the global reach of 
the semiconductor industry as well as our 
role at its heart 51 of fullyear revenues
emanated from north america 31 from 
asia pacific and 18 from europe
the balance of world trade is however
shifting china is becoming an increasingly
influential player what was traditionally an
agrarian society is becoming an industrial one
which means that its need for electronics to
use in goods that it exports as well as in
those which it consumes domestically is
increasing rapidly 
currently most of the chips which are used in
china are bought from our partners and are
designed around our intellectual property ip
but we are establishing local relationships in
china as the country’s hightechnology
industry matures and its companies begin to
develop their own ip  we have been working
4 arm annual report and accounts 2003
chairman’s statement
 net cash generation is the movement in cash and shortterm
investments as per the balance sheets at the beginning and 
end of the year with companies in china for a number of
years we set up our first office in shanghai
in july 2002 in 2004 we plan to open a
second office in beijing 
during 2003 we signed seven licences in
china not only with semiconductor companies
but also with foundries and universities
watertek became the first arm approved
training centre in china in january we
extended our university programme when
southeast university licensed the arm7tdmi
®
core in may and when shanghai jiaotong
university licensed the arm922t™ core in
december we signed our first licensing deal
with a chinese governmentsupported
organisation shanghai icc in may in july 
we extended our foundry programme when
we signed an agreement with smic datang
licensed the arm946e™ microprocessor core in
september and in december shanghai fudan
microelectronics licensed the arm7tdmi core 
many entrepreneurial and innovative ventures
are emerging in other markets arm is
working to help these companies as they seek
the right technology to achieve timetomarket
and timetovolume advantage we have
signed a number of licences in israel within
the last two years and expect to announce
more licences during 2004 in addition we 
are increasingly active in india where many
engineers have experience of working with
our technology 
people
we made a conscious decision at the outset 
of 2003 that excluding acquisitions we would
keep our headcount stable throughout the
year our employees responded magnificently
to the challenge and achieved a lot while
under tight cost constraint we were delighted
to welcome 25 new employees to arm with
the acquisition of adelante technologies nv
now arm belgium nv in july 2003 
board changes
lawrence tesler will be retiring from the board
at the annual general meeting on 26 april
2004 having served two threeyear terms 
as a nonexecutive director with his strong
technology background and industry
experience he has made a significant
contribution over the past six years which 
the board has greatly appreciated
it is intended that jeremy scudamore who is
ceo of avecia group formerly the specialty
chemicals business of zeneca be appointed 
as a nonexecutive director of the company
immediately following the annual general
meeting on 26 april 2004 he has considerable
international business experience and will
bring a broad range of skills to the board that
extend beyond the semiconductor industry
current trading and prospects
we enter 2004 with confidence our business
continues to make good profits and to generate
cash throughout the toughest downturn that
our industry has witnessed for many years we
continue to invest in innovation and in products
for the future we believe that as the industry
emerges from the downturn our competitive
position is stronger than it was before 
the number of new products available for
licensing in 2004 and the momentum behind
our royalty revenues give us confidence that
this will be another successful year and 
that we will enjoy a return to revenue growth
many challenges lie ahead however and the
continuing weakness of the us dollar against
sterling will have an impact 
notwithstanding these challenges we 
are confident that the platform we have
established over the past 13 years together
with the passion and commitment of our
employees and the work of our partners
leave us well placed to benefit as the 
digital world gathers pace 
sir robin saxby chairman
arm annual report and accounts 2003 5 the global business climate improved in 2003
particularly towards the end of the year as a
result the technology industry appears to have
shaken off much of the uncertainty which
characterised the first two years of the new
decade and while we cannot be sure how
long it will take for these improvements to
result in increased licensing activity the change
in the economic environment is welcome
the improvement in the economy combined
with the adjustments to our cost base made 
in the fourth quarter of 2002 enabled us to
improve quarterly revenues throughout 2003
and to achieve strong net cash generation each
quarter our decision to maintain a high level
of investment in research and development
rd during the industry downturn enabled 
us to introduce a number of new products
these are already driving licence revenue and
are underpinning our confidence in our ability
to increase revenue during 2004
gradual increases in quarterly revenue and 
tight cost control gave rise to improving margins
excluding oneoff legal settlement costs as 
the year progressed the weakness of the
dollar had an impact on revenue growth
particularly in the second half but 2003 was
still a year of robust financial performance
licensing product development and 
new technology
licensing is fundamental to our business 
it drives royalties and underpins our future
profitability activity gradually picked up in 
the third quarter and continued into the fourth
in 2003 we signed a total of 51 licences for
microprocessors of these 25 were multiuse
licences and 26 peruse licences we signed
licences with 26 new companies bringing the
total number of semiconductor partners to
128 of the 26 new partners seven took
multiuse licences and 19 peruse licences
2003 was another busy and rewarding year 
in terms of our product development market
demand for microprocessor solutions that 
offer increased performance security and
power efficiency continues
we introduced a number of new products
during the year which incorporate new
technology features including the trustzone™
security extension the thumb®2 core
technology for improved code density and
intelligent energy manager iem hardware
and software for lowpower consumption
these underpin the opportunities for licensing
in 2004 and beyond
trustzone technology will greatly improve the
security of mobile devices which is a major
concern for handset suppliers and service
providers our iem technology is continuing 
our relentless push to improve the power
efficiency of batteryoperated devices and 
we are taking significant steps in enabling 
the development of complex and efficient
solutions partly through our work with nec 
in symmetrical multiprocessing smp 
these together with other technologies
announced in 2003 are complementary to 
the growing range of our cores
in october we launched two new arm11
family microprocessors the arm1156t2s™ 
core and the arm1176jzs™ core which
include a number of these new features they
are available for licensing now for delivery in 
mid2004 we delivered the first arm11 core
familybased product just over a year ago and
are encouraged by the rate at which this
technology is being adopted so far our
partners have taken a total of ten licences 
in december 2003 we announced a new
arm9 family core the arm968es™ core for
deeply embedded applications our smallest
lowestpower synthesizable arm9e™ family
core provides an ideal solution for networking
6 arm annual report and accounts 2003
chief executive officer’s review
during 2003 we continued to progress our business by developing 
our technology and products it was a year of stabilisation but one 
in which we achieved our major business goals applications but will also be appropriate 
for many applications in the automotive
consumer entertainment and wireless sectors
these new cores represent significant
extensions to our range at the same time 
we are working on our nextgeneration
architecture we signed our first lead partner
for this technology in the third quarter of 2003
the foundry programme
the introduction of the arm926ej core to 
our foundry programme which continues to
provide an excellent entry point for companies
which are licensing our technology for the first
time will help to maintain the momentum 
in the programme peruse licensees are now
able to have this product manufactured by 
two of our foundry partners tsmc and umc
royalty revenues
substantial licensing in recent years resulted 
in a much higher number of arm powered®
devices being shipped than in 2002 our
partners shipped 782 million arm powered
devices in 2003 at a value of £443 million
an increase of 71 on 2002’s record of
456 million units 
the fact that volumes increased across all
markets demonstrates that our corebased
designs are increasingly the architecture of
choice there was also a significant increase 
in the number of partners shipping arm
powered devices – from 43 at the end of
2002 to 60 by the end of 2003
part of this success can be attributed to the
improved economy but more important we
believe is the fact that more of our partners
began shipping more arm powered products
including an increasing proportion based on
our newer arm9 family cores
we have traditionally been very strong in the
wireless market but in recent years have
begun to mirror that success elsewhere and
as a result have improved the balance and
stability of our business unit shipments in
other markets are now growing at the same
rate as those in the wireless market
patent portfolio
the protection of our ip and the growth of 
our patent portfolio are key priorities for the
business in 2003 we filed twice as many
patents as in 2002 and we anticipate that the
rate of filing will continue to increase in 2004
it is imperative that we defend our ip
vigorously and in that context we were
encouraged that the partial summary
judgement ruling in nazomi’s case against us
for alleged patent infringement found in our
favour the partial summary judgement ruled
that products using the current commercial
design of the arm jazelle® technology do 
not infringe nazomi’s patent nazomi has
appealed against the ruling but we are
confident that the original ruling will be upheld
in march 2004 we settled all outstanding
issues with herodion picoturbo inc’s
successor entity relating to the outofcourt
settlement of the patent lawsuit against
picoturbo in december 2001 following the
findings of an arbitration panel established to
resolve the issues and subsequent discussions
between the parties arm agreed to pay
£64 million as part of the settlement
agreement this amount has been charged 
to the profit and loss account in 2003
the future
our commitment to rd keeps us ahead of
the competition we maintained high levels 
of investment in innovation in 2003 even
though it was a tough year and the fruits 
of our labours are being realised with the
introduction of our new technologies while
better economic conditions should help us to
progress much of the improvement we expect
in 2004 can be attributed to factors which are
in our control such as the availability of a
number of new products for licensing
we fully expect to build on our recent
successes in the coming year
warren east chief executive officer
arm annual report and accounts 2003 7 arm is connected – to its partners its
customers its suppliers its shareholders 
to governments to education to standards
bodies and to its employees it also
enables organisations and consumers to be
connected to one another and to innovative
technology and to transmit information
around the world – from home from work
or on the move
arm connected community
in the 13 years since we founded the
company we have developed a unique
partnership business model which in 2003
we formalised when we created the arm
connected community membership of the
community is open to any company that 
has a product that uses or complements our
technology or one which helps in the design
of arm powered devices 
these members include semiconductor and
systems companies that develop our ideas 
and innovations into digital products suppliers
of embedded operating systems os and
development environments providers of
application software vendors of electronic
design automation eda tools which enable
designers to test and verify circuits before
beginning production vendors of silicon 
based on our system platforms which provide
the tools and methodologies which enable 
our partners to differentiate their end 
products and tools developers which supply
hardware and software solutions for designers
to implement our architecture
we now have 128 semiconductor partners
50 development tools partners 30 os partners
and 40 technology partners which include
transdimension for usb on the go superscape
for swerve i3d applications safenet 
for wireless security and imagination for mbx
graphic acceleration
membership of the connected community
brings a range of benefits the most obvious 
is that members are connected to arm which
is widely regarded as one of the uk’s most
successful technology companies and one
which invests more than onethird of its income
in rd many members of the community are
aligning themselves with the arm brand to
demonstrate that connection other benefits
include access to a range of companies that 
can provide services or components sales 
leads and opportunities to network and to take
part in promotional programmes hundreds of
companies around the world now belong to this
global community that provides solutions from
design to manufacture for products based on
our architecture 
connected to employees
we value our people our investment in
training and retaining them enables us to
maintain our culture of continuous innovation
our policies on employment are set out in
more detail in the corporate social responsibility
report on page 21 of this document
connected to sharing information
our ip is a vital element in products which
enable consumers to share and store
information access and enjoy media content
and send and receive images from home
from work or on the move and to do it all
securely 
our architecture bridges the gap between
individuals and the informationrich outside
world it is at the heart of the wireless 
market it powers pdas and more than 75 
8 arm annual report and accounts 2003
arm connected
membership of the arm connected community brings a range of benefits 
which includes being connected to what is widely regarded as one of the 
uk’s most successful technology companies
connected community of the world’s mobile telephones it enables
consumers to use applications such as the
nintendo game boy advance and settop
boxes it plays a crucial role in creating a
secure infrastructure to protect personal
information in digital products
it is also popular with the automotive industry
because it is used by a wide range of partners
and thereby helps to simplify the supply 
chain and it is facilitating the progression 
of microcontrollers mcus used in domestic
products such as washing and dishwasher
machines and in industrial controllers 
from 4 and 8bit to 32bit solutions 
which can deliver more flexibility and 
greater performance
connected to performance 
in recent years the demand for technology to
be more efficient and indeed to do more has
increased beyond the imagination even of 
h g wells we already expect our washing
machines and dishwashers to be able to “read”
how big and how dirty the load is our cars to
lock by remote control our video and dvd
machines to record when we are out our
cameras to produce instant images and our
mobile telephones to be able to send and
receive voice and text data emails and images
there is no doubt that manufacturers will
continue to be under pressure to accommodate
more functions into their products 
every benefit that is built into a system brings
however its challenges these are principally
power consumption and security and we have
been paying particular attention to both 
power consumption has always been high 
on our agenda delivering more compute
power while at the same time reducing
arm annual report and accounts 2003 9
a growing partnership
● 128 semiconductor partners
● 50 development tools partners
● 30 operating systems partners
● 40 technology partners 10 arm annual report and accounts 2003
arm connectedcontinued
at the heart
power consumption brings benefits to a wide
range of applications achieving this continues
to be a driving force in our research and
development activities but extra functions 
on for example a mobile telephone simply
devour battery power and we saw the need 
to find a means of controlling this 
during the year we launched our intelligent
energy manager iem product which is
incorporated into our arm1176jzs core 
iem technology is what is called a closedloop
control system it monitors how much power
the application needs and adjusts the battery
power accordingly the principle is much the
same as installing a thermostat on a central
heating system by eliminating waste iem
technology enables equipment to be “always
on” without sacrificing usage time 
we made further strides in improving our
signal processing ip portfolio when we acquired
belgiumbased adelante technologies nv in
july 2003 the team now arm belgium nv is
established as our data engine business and is
already playing an important part in our future
the market for evermore sophisticated
multimedia and networking communications
continues to increase but the rapidlychanging
demands on the technology cannot always 
be met efficiently with conventional signal
processing in collaboration with other arm
businesses arm belgium is developing
optimode™ which comprises a configurable
data engine signal processor solution with
related ip and tools optimode technology will
be used in systems together with our existing
cores and other system ip 
the configurability of optimode technology
enables designers to match signal processing
the arm architecture is at the heart of advanced digital products it provides 
access to information at home in the office or on the move arm annual report and accounts 2003 11
page heads
solutions to the needs of a specific application
or algorithm this provides excellent processing
in a flexible solution which meets the power
and cost constraints set by the new generation
of algorithms in addition to high performance
optimode technology offers low power and a
fast route to implementation
connected to security
security is an issue for a wide range of people
and organisations from manufacturers service
providers and network operators to content
creators and end users and for a wide range
of products from smart cards settop boxes
and mobile telephones to cars and household
appliances hackers and viruses that corrupt
computers can equally corrupt other devices
and the more applications there are on for
example a mobile telephone the more
vulnerable it is to attack without the owner’s
knowledge a mobile telephone could send
thousands of text messages or voice calls to
other mobiles and by doing so could not only
corrupt or contaminate the other devices but
could also overload the network to the point
of collapse this clearly has huge financial
implications for everyone concerned
content providers such as movie companies
could be faced with unauthorised distribution –
a problem the music industry has contended
with for some time – and car manufacturers
need to be able to protect the computer
systems which control vehicles’ operating 
and safety systems
our engineers came up with an innovative
idea that we were able to convert into a new
product trustzone technology this creates 
a barrier – a secure area within a processor
and the system around it within which only
designated secure tasks can be performed
designers have historically tried to implement
secure systems by adding “logic” to a core
design this is complicated costly and in 
the end the product is never truly protected
our approach results in a reliable and secure
system which is integrated in the core is cost
effective and resistant to software hacks 
in november we expanded our smart card
portfolio when we launched our securjc™
technology the increasing demand for smart
cards has created a need for products that 
are secure as well as high performance our
securjc technology is appropriate for any type
of smart card including sim cards it enables
developers of cards based on javacard
technology to focus on application design by
eliminating what is usually the most time
consuming element of the design cycle – the
need to redevelop an entire implementation 
connected to software
we have always maintained the backwards
compatibility of software so that a partner’s
investment in our technology is protected
equally in addition to creating innovative new
products we upgrade and improve existing
technology
in 1995 we introduced our popular thumb
solution a breakthrough technology that
enabled software developers to create highly
compact code to run our architecture but 
the problem of providing high performance 
at low cost combined with long battery life
continued in may 2003 we launched thumb2
core technology an extension of our 32bit
architecture thumb2 technology improves
performance and saves power by enabling
system makers to condense software to fit
into a smaller memory device because the
code delivers more performance the processor
enabling technologies
● coresight
● intelligent energy
manager
● optimode
● securjc
● swerve
● thumb2
● trustzone setting the standard
can be run at a lower frequency but still
achieve the same amount of work
our significant presence in the wireless industry
has enabled us to work with a number of
leading companies to facilitate the availability
of highquality 3d games which have been
accessible on pcs since 1995 on wireless
devices in may 2003 we launched our
swerve solution which we developed in
collaboration with superscape group plc 
the swerve client engine is designed for small
screens and incorporates technology that saves
memory and download time making it ideal
for applications such as mobile telephones and
pdas it opens up a new range of applications
for consumers it specialises in facilitating
interactive 3d technology and enables designers
and programmers to create content quickly
without needing detailed knowledge of
techniques such as 3d rendering 
three of the world’s top five mobile telephone
manufacturers have chosen to incorporate
swerve technology into their handsets
software is becoming increasingly complex
chips in today’s products incorporate multiple
microprocessors and tens of megabytes of
program code to implement many more
functions in a single device 
to help oem product developers create
competitive products we developed
coresight™ lowcost debug and trace
technology which gives visibility into the
operation of highly complex embedded
products this enables developers to meet 
the imperatives of creating reliable high
performance products and of bringing them 
to market quickly 
connected to foundry partners
the connected community also includes our
foundry programme partners we created this
programme to give smaller semiconductor
manufacturers which do not have their own
facilities to fabricate silicon known as fabless
companies access to our technology by
licensing foundries to provide a range of
process technologies we are able to protect
our ip while at the same time making it
widely available
during the year we launched our new
arm926ej prime starter kit through the
foundry programme this provides an even
more costeffective way for these smaller
companies to move quickly from concept to
finished product the arm926ej prime starter
kit enables fabless companies to license a
combined package comprising the arm926ej
core and the primexsys platform together
with the embedded trace macrocell™ solution
connected to the future
innovation has always been and will continue
to be the key to arm’s success rd forms 
a large part of our work schedule and our
constant quest for the next “killer application”
frequently involves us in forming alliances
with other industryleading companies
in october 2003 we announced that in
collaboration with nec electronics we are
developing central processing unit cpu cores
based on symmetric multiprocessor smp
technology smp technology is about putting a
number of multiple processors on a single
chip if an application needs a great deal of
power the workload can be shared across the
processors but as in iem technology it is
scaleable if three processors are needed to
complete the task that is what is used if
12 arm annual report and accounts 2003
arm connectedcontinued
arm’s connected community gives our partners access to standard and proven
designs we focus on protecting their investment in technology we also create
innovative products which will set the standard for the future eight are needed they are available it’s about
using as much resource as is needed to create
exactly the right solution
we have always been evangelists for
digitalisation – we believe it delivers greater
opportunities efficiency and security – and
consumers’ demands for increasingly advanced
digital products are now driving the
semiconductor market
these and other developments emphasise
our culture of innovation make the best use 
of our partnership model and ensure that the
arm community continues to be connected to
the future for everyone’s benefit
arm annual report and accounts 2003 13
investing in the future
● more than onethird of revenue invested in rd
● 676 patent applications 290 granted
● leadership role in establishing standards sir robin saxby warren east tim score tudor brown mike inglis
sir robin saxby age 57
chairman
sir robin saxby joined arm in february 1991 
as chairman president and chief executive
officer he relinquished his roles as president
and ceo in october 2001 before joining arm
he was with european silicon structures sa
es2 where he was vice president northern
europe managing director es2 limited and
president of us2 es2’s us affiliate he was
previously with motorola semiconductors and
with henderson security systems limited he
has also served as chairman of the eu panel
open microprocessor initiative advisory group
which advised on collaborative rd activity in
2000 he was awarded an honorary doctorate
deng from liverpool university and was
appointed a visiting professor to the
university’s department of electronics in july
2001 he was awarded an honorary doctorate
dtech from loughborough university he was
knighted in the 2002 new year’s honours list
he is a nonexecutive director of glotel plc
warren east age 42
chief executive officer
warren east joined arm in 1994 he set up
arm’s consulting business and was vice
president business operations from february
1998 in october 2000 he was appointed to
the board as chief operating officer and in
october 2001 was appointed chief executive
officer before joining arm he was with texas
instruments
tim score age 43
chief financial officer 
tim score joined arm as chief financial officer
and director in march 2002 before joining
arm he was finance director of rebus group
limited he was previously group finance
director of william baird plc group controller
at lucasvarity plc and group financial
controller at btr plc
tudor brown age 45
chief operating officer
tudor brown was one of the founders of arm
before joining the company he was principal
engineer at acorn computers where he worked
on the arm rd programme at arm he was
engineering director and chief technical officer
from 1993 in october 2000 he was appointed
executive vice president global development
and in october 2001 he was appointed to the
board as chief operating officer
mike inglis age 44
executive vice president marketing
mike inglis joined arm as executive vice
president marketing in june 2002 and was
appointed to the board in august that year
before joining arm he led the uk
communications and high technology team 
at at kearney management consultants and
held a number of senior operational and
strategic marketing positions at motorola 
he previously worked in marketing design
and consultancy with texas instruments
fairchild camera and instruments and bis
macintosh he gained his initial industrial
experience with gec telecommunications 
he is a nonexecutive director of superscape
group plc
mike muller age 45
chief technology officer
mike muller was one of the founders of 
arm before joining the company he was
responsible for hardware strategy and the
development of portable products at acorn
computers he was previously at orbis
computers at arm he was vice president
marketing from 1992 to 1996 and executive
vice president business development until
october 2000 when he was appointed chief
technology officer in october 2001 he was
appointed to the board
peter cawdron age 60
independent nonexecutive director
peter cawdron joined the arm board in march
1998 from 1983 to 1998 he worked for grand
metropolitan plc where he served as group
strategy development director he was
previously chief financial officer and a director
of d’arcymacmanus  masius worldwide inc
and before that a member of the corporate
finance team at sg warburg  co ltd he
qualified as a chartered accountant at peat
marwick mitchell  co in 1966 he is
chairman of capital radio plc and is a non
executive director of a number of uk listed
companies including compass group plc 
the capita group plc christian salvesen plc 
arla foods uk plc and johnstone press plc
14 arm annual report and accounts 2003
directors and advisers mike muller peter cawdron doug dunn lawrence tesler john scarisbrick
doug dunn age 59
independent nonexecutive director
doug dunn joined the arm board in december
1998 he is president and chief executive
officer of asm lithography holding nv before
joining asml he was chairman and chief
executive officer of the consumer electronics
division of royal philips electronics nv and 
a member of the board he was previously
managing director of the plessey and gec
semiconductor divisions and held several
engineering and management positions at
motorola he was awarded an obe in 1992 
he is a nonexecutive director of st
microelectronics nv and sendo holdings plc
lawrence tesler age 58
independent nonexecutive director
lawrence tesler was a member of the arm
board from its foundation until august 1997
and rejoined as a nonexecutive director 
in march 1998 he is vice president
engineering for amazoncom holdings inc
before joining amazon he was vice president
and chief scientist for apple computer inc 
he was previously on the staff of the xerox
palo alto research center president of 
a software consulting firm and a research
associate at stanford university he will be
retiring from the board at the 2004 agm
having served two threeyear terms
john scarisbrick age 51
independent nonexecutive director
john scarisbrick joined the arm board in
august 2001 he is a venture partner at vortex
partners llp in dallas texas he worked for
texas instruments in the uk france and the
us for 25 years he was most recently
responsible for its 5 billion asp business
worldwide and had previously been president
of texas instruments europe ti before
joining ti he worked in design roles at rank
radio international and marconi space and
defence systems he is chairman of
cambridge positioning systems ltd serves on
the technical advisory board of venture
investor viventures and is a director of
intrinsity a fabless semiconductor company
and of sonim the leading developer of 253g
voice instant messaging applications
arm annual report and accounts 2003 15
arm holdings plc
secretary and registered office
patricia alsop
110 fulbourn road
cambridge cb1 9nj
united kingdom
registered number
2548782
stockbrokers
hoare govett limited
250 bishopsgate
london ec2m 4aa
united kingdom
morgan stanley  co international limited
25 cabot square
canary wharf
london e14 4qa
united kingdom
legal advisers 
uk law
linklaters
one silk street
london ec2y 8hq
united kingdom
us law
davis polk  wardwell
99 gresham street
london ec2v 7ng
united kingdom
auditors
pricewaterhousecoopers llp
abacus house
castle park
cambridge cb3 0an
united kingdom
registrars
lloyds tsb registrars
the causeway
worthing
west sussex bn99 6da
united kingdom
tel 44 0870 600 3984
depositary
the bank of new york
101 barclays street
new york
new york 10286
united states of america the cashgenerative nature of arm’s business
model enables us to address the significant
opportunities for ongoing investment in future
growth research and development activities
and strategic acquisitions
revenues
total revenues for the year ended 31
december 2003 amounted to £1281 million 
a decrease of 15 from total revenues of
£1509 million in the year ended 31 december
2002 the actual average dollar exchange rate
in 2003 was 164 compared with the
effective average exchange rate for arm of
161 compared with 150 in 2002 this had
the effect of reducing total reported revenues
by approximately £96 million
licensing revenues in 2003 were 
£508 million 40 of total revenues
compared with £830 million or 55 of total
revenues in the year to 31 december 2002
royalty revenues were £443 million
representing 34 of total revenues in the
year to 31 december 2003 compared with
£268 million or 18 of total revenues 
in the year to 31 december 2002 sales of
development systems were £179 million
14 of total revenues in 2003 compared 
with £231 million or 15 of total revenues
in 2002 service revenues which include
consulting services and revenues from support
maintenance and training were £151 million
in 2003 representing 12 of total revenues
compared with £180 million or 12 of 
total revenues in 2002
gross margin
gross margin for the year to 31 december
2003 was 91 the same as in 2002
operating expenses
total operating expenses in 2003 were
£986 million compared with £966 million 
in 2002
research and development rd expenses
in 2003 were £481 million 38 of revenues
compared with £487 million excluding
restructuring costs of £13 million or 32 of
revenues in 2002 sales and marketing costs
decreased from £245 million excluding
restructuring costs of £03 million or 16 
of revenues in the 12 months to 31 december
2002 to £230 million or 18 of revenues in
2003 general and administration expenses
were £275 million or 21 of revenues in 
the 12 months to 31 december 2003
compared with £215 million excluding
restructuring costs of £03 million or 14 
of revenues in 2002 the 2003 expenses
included £64 million in respect of the one
off cost of the settlement of the herodion 
dispute excluding this oneoff cost general
and administrative expenses in 2003 were
£211 million or 16 of revenues
operating margin
operating margin decreased to 144 in 2003
from 273 in 2002 as a result of reduced
revenues and increased legal costs
interest receivable
interest was £48 million for the year to
31 december 2003 compared with 
£44 million in 2002 reflecting the benefit 
of higher average cash balances in 2003
earnings and taxation
for the year ended 31 december 2003 
profit before tax was £232 million or 181
of revenues compared with £455 million 
or 301 of revenues in the year ended 
31 december 2002 the group’s taxation 
rate increased from 29 in the year to 
31 december 2002 to 34 in 2003 mainly 
as a result of increased costs that are non
deductible for tax purposes fully diluted
earnings for the year ended 31 december 
2003 were 15 pence per share compared 
with 32 pence per share for the year 
ended 31 december 2002
16 arm annual report and accounts 2003
financial review
careful management of our cost base contributed to sequential
improvements in profitability and good cash generation through 
the year balance sheet and cash flow
net cash inflow from operating activities of
£437 million was generated in the year capital
expenditure in the year was £36 million 
cash and shortterm investments increased 
by £295 million to £1598 million at 
31 december 2003
trade debtors decreased to £173 million at
31 december 2003 from £205 million at
31 december 2002 the provision for doubtful
debts decreased to £11 million at 31 december
2003 compared with £22 million at the end
of 2002 deferred revenues were £111 million
at 31 december 2003 compared with 
£144 million at 31 december 2002
dividend
the board reviews uses of the group’s cash
resources on an ongoing basis in light of the
group’s strong financial position and the cash
generative nature of its business the directors
intend to introduce an annual dividend with
effect from the 2003 financial year this will
enable us to use our strong cash generation to
return cash to shareholders while maintaining
significant investment in rd and satisfying
the ongoing capital requirements of the
business 
recognising that arm has significant
opportunities to invest in the business both
organically and through “bolton” acquisitions 
the directors recommend a combined interim
and final dividend in respect of the year to
31 december 2003 of 06 pence per share
which subject to approval at the annual
general meeting on 26 april 2004 will be 
paid on 7 may 2004 to shareholders on the
register at 2 april 2004
from 2004 onwards the directors intend that
an interim dividend will be paid in october of
each year commencing in october 2004 and
a final dividend will be paid in may of each
year commencing in may 2005 the interim
dividend is likely to represent 40 of the total
dividend for the year under this policy the
interim dividend for 2003 would have been
025 pence and the final dividend 035 pence
the board intends to adopt a progressive
dividend policy which will take into account
both the opportunity for continued investment
in the business going forward and the
underlying operational performance of 
the group
tim score chief financial officer
arm annual report and accounts 2003 17
selected financial datauk gaap
2003 2002 2001 2000 1999
£000 £000 £000 £000 £000
turnover 128070 150922 146274 100730 62120
cost of sales 11022 13185 17289 11647 9803
gross profit 117048 137737 128985 89083 52317
total operating expenses 98609 96608 83203 57927 35794
group operating profit 18439 41129 45782 31156 16523
share of loss of associated undertaking – –– 85 –
total operating profit 18439 41129 45782 31071 16523
net gain on disposals of trade investments – – 314 – –
gain on part disposal of associated undertaking – –– 512 –
interest receivable net 4801 4373 4470 3912 2266
profit on ordinary activities before taxation 23240 45502 50566 35495 18789
tax on profit on ordinary activities 7977 13031 15874 6007 261
profit on ordinary activities after taxation 15263 32471 34692 29488 18528
equity minority interest 105 232 303 192 64
profit attributable to shareholders 15158 32239 34389 29296 18464
dividends 6106 ––––
retained profit for the financial year 9052 32239 34389 29296 18464
capital expenditure 3605 15616 17349 11842 5900
research and development expenditure 48131 48674 38920 27518 16966
cash and shortterm investments 159786 130304 104467 75266 51804
shareholders’ funds 180435 172140 135723 98804 67113
employees at end of year number 740 721 722 619 443
 the prior years’ figures have been restated solely as a result of the adoption of uitf 38 “accounting for esop trusts” see note 20 compliance with the combined code
the group complies and complied throughout
2003 with the 1998 combined code appended
to the listing rules of the financial services
authority the group has reviewed the new
combined code on corporate governance
published in july 2003 which applies to
reporting years beginning on or after
1november 2003 and sets out below the
steps it has taken and intends to take in the
light of this new guidance
composition and operation of the board
the board comprises five executive directors
four independent nonexecutive directors and
the chairman the executive directors are the
chief executive officer chief operating officer
chief financial officer chief technology officer
and executive vice president marketing the
four independent nonexecutive directors are
independent in character and judgement and
there are no relationships or circumstances
which are likely to affect the judgement of any
of them they provide a blend of experience
and considerable knowledge to the board’s
deliberations peter cawdron who is the senior
independent director and the financial expert
has extensive knowledge of uk public group
issues and a strong financial background doug
dunn has experience of running large companies
in the semiconductor and electronics industries
lawrence tesler and john scarisbrick both 
have a broad understanding of the group’s
technology and the practices of major 
usbased technology companies
lawrence tesler will be retiring from the 
board at the annual general meeting agm
on 26 april 2004 having served two threeyear
terms as a nonexecutive director it is
intended that jeremy scudamore who is ceo
of avecia group formerly the specialty
chemicals business of zeneca be appointed
as a nonexecutive director of the company
immediately following the agm on 26 april
2004 he has considerable international
business experience and will bring a broad
range of skills to the board that extend 
beyond the semiconductor industry
peter cawdron who was last reelected as a
director at the 2003 agm will complete his
second threeyear term as a director of the
company in march 2004 the board is mindful
of the principles set out in the new combined
code following a review of the significant
contribution peter has made in his roles as
chairman of the audit committee and as the
senior independent director and also to the
general proceedings of the board the board
has decided that it is in the company’s best
interests for peter to be appointed for a third
threeyear term the directors are subject to
reelection every three years under article 79
of the articles of association
a resolution to change article 70 of the
company’s articles of association will be
proposed at the agm to increase the
maximum number of directors from ten to
twelve this will enable further nonexecutive
directors to be appointed with the intention
that they will comprise at least half the board
excluding the chairman in compliance with
the new combined code in addition this will
facilitate planning for orderly succession
among the nonexecutive directors 
the board had six scheduled meetings during
2003 which were all attended by all the
directors with the exception of the april
meeting when mike muller was absent and
the november meeting when tudor brown
was absent in both cases for business
reasons there is a procedure in place for
additional meetings on any pertinent issues 
to be organised as necessary during the year
in addition the chairman held two meetings
with the nonexecutive directors without the
executives present and the nonexecutive
directors met on one occasion without the
chairman being present 
the board is responsible for setting the
company’s strategic aims and ensuring that
the necessary financial and human resources
are in place for it to meet its objectives 
the board has a formal schedule of matters
specifically reserved for its decision which
includes the approval of major business
matters policies operating and capital
expenditure budgets and ensuring high
standards of corporate governance are
maintained the board is also responsible for
sanctioning unusual commercial arrangements
such as atypical licence agreements and
investments 
before each meeting the board is furnished
with information in a form and of a quality
appropriate for it to discharge its duties
concerning the state of the business and its
performance the ultimate responsibility for
reviewing and approving the annual report
and accounts and the quarterly reports and 
for ensuring that they present a balanced
assessment of the group’s position lies with
the board the board delegates daytoday
responsibility for managing the group to the
executive committee and has a number of
committees details of which are set out below
the board is aware of the principle in the 
new combined code that it should undertake
an annual evaluation of its own performance
and that of its committees and individual
directors and intends to proceed with such 
an evaluation during 2004 in 2003 the
executive committee which includes the
executive directors other than the chairman
undertook a board effectiveness programme
which included collective and individual
performance evaluation and was assisted 
by thirdparty facilitators
during 2003 mike muller and mike inglis
attended a threeday training course for plc
directors run jointly by henley management
college and ashridge and manchester business
schools further training for directors is planned
for 2004
executive committee
the executive committee is responsible for
implementing the strategy set by the board
among other things this committee is
responsible for approval of standard licence
agreements ensuring that the group’s budget
and forecasts are properly prepared that
targets are met and generally managing and
developing the business within the overall
budget variations from the budget and
changes in strategy require approval from the
main board of the group the executive
committee which meets monthly comprises
the executive directors excluding the
chairman and the directors of arm limited
and meetings are attended by the company
secretary and other senior operational
personnel as appropriate
audit committee 
the audit committee has written terms of
reference which were updated during the 
year to reflect the requirements of the new
combined code the committee has
responsibility for among other things
monitoring the integrity of the financial
statements of the company and any formal
announcements relating to the company’s
financial performance and for reviewing any
significant financial reporting judgements
contained in them reviewing the company’s
internal controls and risk management systems
18 arm annual report and accounts 2003
corporate governanceuk gaap making recommendations to the board in
relation to the appointment remuneration and
resignation or dismissal of the group’s external
auditors reviewing and monitoring the
external auditors’ independence and
objectivity and the effectiveness of the audit
process developing and implementing policy
on the engagement of the external auditors 
to supply nonaudit services and considering
compliance with legal requirements accounting
standards the listing rules of the financial
services authority and the requirements of the
securities and exchange commission 
the committee also keeps under review the
value for money of the audit and the nature
extent and costeffectiveness of the nonaudit
services provided by the auditors the
committee has discussed with the external
auditors their independence and has received
and reviewed written disclosures from the
external auditors as required by the auditing
standards board’s statement of auditing
standard no 610 “communication of matters
to those charged with governance” as well 
as those required by the us independence
standards board’s standard no 1
“independence discussions with audit
committees” to avoid the possibility of the
auditors’ objectivity and independence being
compromised the group’s tax consulting work
is carried out by the auditors only in cases
where they are best suited to perform the
work for example tax compliance and advisory
work relating to the audit in most cases the
group has engaged another independent firm
of accountants to perform tax consulting work
the group does not normally award general
consulting work to the auditors from time to
time however the group will engage the
auditors to perform advisory work on matters
relating to human resources and royalty audits
the group may also seek professional advice
from another firm of independent consultants
or its legal advisers 
the current audit committee comprises peter
cawdron chairman doug dunn and john
scarisbrick peter cawdron is the financial
expert as defined in the sarbanes oxley act
the committee met three times during 2003
once before the release of the preliminary
announcement of the 2002 results to review
the results and audit findings once to review
the halfyear interim results and once before
the year end to discuss the approach to the
audit of the 2003 results all committee
members attended all three meetings 
the external auditors chief executive officer
chief financial officer and the company
secretary attend all meetings in order to
ensure that all the information required by the
audit committee for it to operate effectively is
available the representatives of the group’s
auditors meet with the audit committee at
least once a year without any executive
directors being present
remuneration committee
a description of the composition responsibility
and operation of the remuneration committee
is set out in the remuneration report on 
page 24
nomination committee
the nomination committee leads the 
process for board appointments and makes
recommendations to the board in relation 
to any new appointments of executive and
nonexecutive directors and on board
composition and balance it is chaired by 
the chairman and is attended by the four
independent nonexecutive directors peter
cawdron doug dunn john scarisbrick and
lawrence tesler the committee met once
during 2003 the committee has written 
terms of reference which were updated during
2003 to reflect the requirements of the new
combined code in relation to the appointment
of jeremy scudamore the services of an
external search consultancy were used
internal controlrisk management 
the board of directors has overall responsibility
for ensuring that the group maintains an
adequate system of internal control and 
risk management and for reviewing its
effectiveness the board has reviewed the
system of internal control including internal
financial controls such systems are designed 
to manage rather than eliminate the risks
inherent in a fastmoving hightechnology
business and can therefore provide only
reasonable and not absolute assurance against
material misstatement or loss
at the beginning of 2002 a risk review team
was set up comprising members from the
board and the executive committee as well as
managers representing the different business
units and functions across the group during
2003 the risk review process was enhanced 
by the constitution of a risk review committee
consisting of the chief technology officer the
chief financial officer the financial controller
and the company secretary the team is
responsible for identifying and evaluating risks
which may impact on the group’s strategic
and business objectives and for monitoring
the progress of actions designed to mitigate
such risks the risk review team receives and
reviews quarterly reports from business unit
managers and corporate functions and its
findings are considered and challenged by the
risk review committee the team reports to
the executive committee once a year and in
turn the risk review committee reports to the
board once a year 
in july 2003 a disclosure committee was set
up in compliance with the sarbanesoxley act
2002 the committee which comprises the
chief executive officer the chief financial
officer the financial controller the general
counsel and the company secretary is
responsible for ensuring that disclosures made
by the company to its shareholders and the
investment community are accurate complete
and fairly present the company’s financial
condition in all material respects
in addition there is a series of interconnected
meetings that span the group from the
weekly management meeting chaired by the
chief executive officer and the weekly
business review meeting chaired by the vice
president operations the purpose of which is
to monitor and control all main business
activities sales forecasts and other matters
requiring approval that have arisen within the
week to the board meetings of the group
each month an operations meeting chaired by
the chief operating officer and attended by
managers representing different functions
across the group is held to review key
performance indicators such as revenues
orders booked costs product and project
delivery dates and levels of defects found in
products in development once a quarter the
annual operational plans for the different
disciplines within the group are reviewed at
the operations meeting the outputs of the
weekly business review meeting and the
monthly operations meeting are reviewed by
the executive committee which in turn raises
relevant issues with the board of the group
these processes for identifying evaluating and
managing the significant business operational
financial compliance and other risks facing the
group have been in place for the year under
review and up to the date of approval of the
annual report and financial statements they
accord with the guidance on internal control
issued in september 1999 by the internal
arm annual report and accounts 2003 19 control working party of the institute of
chartered accountants in england and wales
as required by the turnbull guidance the
board has considered whether it would be
appropriate for the company to have its own
financial internal audit function and has
concluded that taking account of its relatively
small size and a high degree of centralisation
in the way the business is run this is not
appropriate at present it does however have
an operational internal audit function that
audits the group’s business and product
project management processes these
processes are documented maintained and
continuously improved for effectiveness and
efficiency in addition they are audited
externally by independent auditors for
compliance with iso 90012000
corporate social and ethical policies
while the group is accountable to its
shareholders it also endeavours to take into
account the interests of all its stakeholders
including its employees customers and
suppliers and the local communities and
environments in which it operates the chief
financial officer takes responsibility for matters
relating to corporate social and ethical policies
and these matters are considered at board
level a corporate social responsibility report is
on page 21 of this report and also on the
group’s website wwwarmcom the group
joined the institute of business ethics in 2000
and following a process of independent
verification it received confirmation of its
admittance to the goodcorporation network 
in august 2001 this qualification provides
assurance that it has been independently
verified against a 21point charter covering 
the fair treatment and protection of its
employees customers suppliers shareholders
the community and the environment this
independent verification process is repeated
each year and during 2003 the group
successfully retained its membership 
as a company whose primary business is the
licensing of intellectual property ip employees
are highly valued and their rights and dignity
are respected the group strives for equal
opportunities for all its employees and does not
tolerate any harassment of or discrimination
against its staff in 2003 arm was named 
employer of the year in the uk national
business awards the group also endeavours
to be honest and fair in its relationships with
its customers and suppliers and to be a good
corporate citizen respecting the laws of the
countries in which it operates
environmental policies
the group’s premises are composed entirely of
offices since it has no manufacturing activities
staff make use of computeraided design tools
to generate intellectual property this involves
neither hazardous substances nor complex waste
emissions with the exception of development
systems products the majority of “products”
sold by the group comprise microprocessor
core designs that are delivered electronically
to customers 
the group does however recognise the
increasing importance of environmental issues
and these are discussed at board level where
the chief financial officer takes responsibility for
them a number of initiatives in this area have
continued in 2003 the group’s environmental
policy is published on its website an
environmental action plan is implemented
through various initiatives these include
monitoring resource consumption and waste
creation so that targets set for improvement are
realistic and meaningful ensuring existing
controls continue to operate satisfactorily and
working with suppliers to improve environmental
management along the supply chain
the group has continued to compile data on
energy use including estimates for international
business travel and an analysis of employee
transport to and from work energy usage and
resource consumption data for 2002 and 2003
are published in the group’s corporate social
responsibility report on its website the
provision of cycle sheds showers and
changing facilities at its uk offices facilitates
greener commuting and the extensive
provision of conference telephone and video
conferencing equipment offers an alternative
to international travel where appropriate
a document output study has been
established to examine paper consumption
within the group and to consider how an
extension of its electronic document
management systems might reduce the need
for paper documents the group can also
demonstrate an increase in paper and
packaging recycling and an improvement 
in the facilities in place to promote recycling 
of more materials energy usage is monitored
closely to understand how it is used which
aids the setting of new targets renewable
energy sources are also being investigated
health and safety
although arm operates in an industry and in
environments which are considered low risk
from a health and safety perspective the
safety of employees contractors and visitors 
is a priority in all arm workplaces worldwide
continual improvement in safety management
systems is achieved through detailed risk
assessments to identify and eliminate potential
hazards and occupational health assessments
for employees the uk offices are covered by 
a health and safety committee fire wardens
and first aiders each year the goodcorporation
verification ensures that the criteria in its
charter are met the uk offices are also
audited by the british safety council and the
company achieved three stars in the 2003
audit other offices have similar cover dependent
on local needs practices and customs 
relationships with shareholders
the board makes considerable efforts to
establish and maintain good relationships 
with institutional shareholders the group 
has a regular dialogue with institutional
shareholders throughout the year other 
than during close periods the board also
encourages communication with private
investors throughout the year and part of 
the group’s website is dedicated to providing
investor relations information at present
around 20 analysts write research reports 
on the group the group publishes telephone
numbers on its website enabling shareholders
to listen to earnings presentations and audio
conference calls with analysts 
all shareholders may register to receive the
group’s press releases via the internet and
internet links to recordings of earnings
presentations and audio conference calls are
available at the appropriate time on its website
the board actively encourages participation 
at the annual general meeting scheduled 
for 26 april 2004 which is the principal forum
for dialogue with private shareholders 
a presentation will be made outlining recent
developments in the business and an open
questionandanswer session will follow to
enable shareholders to ask questions about
the business in general
by order of the board
patricia alsop company secretary
20 arm annual report and accounts 2003
corporate governanceuk gaapcontinued arm considers itself to be a good corporate
citizen while we know that there will always
be more to do we strive to reduce the impact
we make on the environment and to increase
our connections with the communities in which
we operate we also work hard to connect with
our shareholders partners suppliers and
employees 
we are corporate members of the institute of
business ethics ibe and were one of the first
members of goodcorporation which was
founded in 2001 to help organisations to
develop manage and monitor their corporate
responsibilities based on principles set out by
the ibe the goodcorporation charter enables
companies to measure how effective they are
in achieving these responsibilities our
commitment to the charter includes being
verified against it each year
in addition we are listed on the ftse4good
index and take part in the business in the
environment index and the corporate
responsibility index
the environment 
our business focuses on designing ip which
enables devices to use less power and as a
result to be more environmentally friendly
our activities do not produce harmful waste 
or emissions and the ethical investment
research service eiris grades us as an
environmentally “low impact” business
nevertheless we monitor our environmental
performance to enable us to set targets for
reducing paper usage and increasing the
amount we recycle and controlling water
consumption there are recycling bins for
aluminium cans in the majority of our offices
and our air conditioning systems run on less
environmentally damaging refrigerants
we discourage the supply of company cars in 
a company of 740 people there are only 20
we encourage our people to cycle to work 
or to share car journeys and we measure
business travel 
connecting with local communities 
our aim is to be a good corporate citizen of the
communities in which we operate as such we
support local initiatives and fundraising in the
uk we tend to focus on educational projects –
particularly for pupils who are interested in
mathematics science it and business subjects
this support is sometimes financial sometimes
in the form of our employees’ time and skills
supporting education our support for
education stretches from funding an
information technology centre at a local junior
school to working on specific projects with
students at the judge institute cambridge
university’s business school we have helped
three schools near our cambridge uk offices
and one near our maidenhead uk offices to
achieve specialist school status we support
mathematics lectures for gifted school
students at the royal institution and contribute 
to the funding to train the uk team for the
international maths olympics in addition we
have relationships with a number of
universities our chairman for example is a
visiting professor at liverpool and we worked
with loughborough to design a degree course
which is based on the arm architecture with
the result that we now have a number of
loughborough graduates working with us
supporting good causes we encourage our
people to support their local communities
some are school governors some help
children improve their reading skills others
support charities our employees at our austin
texas office have for example helped with
special olympics texas and worked on a new
home for an underprivileged family and
employees at austin and at los gatos have
given their time to charities for the homeless
we “double the efforts” of employees who
raise money for approved charities by matching
the funds they raise with the exception of
political donations or other causes that might
damage arm’s good reputation charities for
cancer children cystic fibrosis and ms have
been some of the beneficiaries of this scheme
connecting with our investors
we take care to provide accurate and timely
information for our investors – large and small
board members and other senior managers
communicate regularly with our institutional
shareholders our retail investors are sent the
annual report and a sixmonthly report each
year in addition our website wwwarmcom
carries comprehensive information about our
business partners and products including all
press releases
connecting with employees
our aim is to attract and retain the best
people available by being a good and ethical
employer the skills knowledge and motivation
of our people are crucial to arm’s success we
promote and support individuals and teams
through onthejob and formal training
coaching and mentoring our staff turnover 
is approximately 5 a year
our employee assistance programme helps
staff and their families with issues such as
care for children or elderly relatives legal and
health advice and stress or other counselling
we were named employer of the year in both
the midlands and east of england regions and
in the uk national business awards 2003
equal opportunities we need highlyqualified
staff and do not see age colour disability
ethnic origin gender political or other opinion
religion or sexual orientation as a barrier to
employment if any member of staff becomes
disabled we assess their needs and abilities
with a view to their continuing in their current
role if this is impossible we seek to offer
them alternative employment
benefits employees receive private healthcare
permanent health travel and life insurance
pensions sabbaticals flexible working stock
options and a saveasyouearn share scheme
we encourage understanding and acceptance
of national and cultural diversity by giving
employees the opportunity to work in our
offices other than in their home country
accessibility
we endeavour to provide access to all whether
it be through building design to allow easy
disabled access or through improving access to
our website for those with visual impairments
health and safety
the safety of employees contractors and
visitors is a priority we measure and analyse
all accidents and “near misses” we have had
only one riddor reportable accident in the
company’s history by monitoring patterns or
trends we can identify potential problems and
work to avoid them we are verified by
goodcorporation each year to ensure that we
meet its health and safety requirements and
our uk offices are also audited by the british
safety council in the uk we have a health
and safety committee and each office has fire
wardens and first aiders our overseas offices
have the health and safety cover required by
local legislation health and safety is high on
our agenda we publicise workrelated matters
advise employees to be prepared for winter
driving and to take precautions to prevent hay
fever or flu
arm annual report and accounts 2003 21
corporate social responsibility the directors present their annual report and
audited financial statements for the year
ended 31 december 2003
principal activities and review of business
the principal activities of the group and its
subsidiaries are the licensing marketing
research and development of riscbased
microprocessors and systems the nature of
the global semiconductor industry is such that
most of its business is conducted overseas
and to serve its customers better the group
has sales offices around the world these
include six offices in the us and offices in
shanghai pr china tokyo japan seoul south
korea taipei taiwan tel aviv israel paris
france and munich germany design offices
are based in cambridge maidenhead
sheffield and blackburn uk sophia antipolis
france leuven belgium and austin texas in
the us more information about the business is
set out in the chairman’s statement on pages
4 and 5 the chief executive officer’s review
on pages 6 and 7 the review of operations on
pages 8 to 13 and the financial review on
pages 16 and 17
future developments 
the group’s stated objective is to establish 
a new global risc architecture standard for 
the embedded microprocessor market the
directors believe that to achieve this goal it 
is important to expand the number and range
of potential customers for its technology the
group intends to enter into licence agreements
with new customers and to increase the range
of new technology supplied to existing
customers relationships will continue to be
established with thirdparty tools and software
vendors to ensure that their products will
operate with the arm architecture as a result 
of its position as an emerging standard in its
industry the group is presented with many
opportunities to acquire complementary
technology or resources it continues to review
these opportunities and in july 2003 the group
acquired adelante technologies nv which 
is developing configurable data engine
technology optimode
going concern
after making enquiries the directors have a
reasonable expectation that the group and
company have adequate resources to continue
in operational existence for the foreseeable
future for this reason they have adopted the
going concern basis in preparing the financial
statements
dividends
the directors recommend a combined interim
and final dividend in respect of the year to
31 december 2003 of 06 pence per share
total cost £6106000 which subject to
approval at the annual general meeting on 
26 april 2004 will be paid on 7 may 2004 
to shareholders on the register at 2 april 2004 
research and development rd
rd is of major importance and as part of 
its research activities the group collaborates
closely with universities worldwide key 
areas of product development for 2004 include
the development of further power saving
technologies optimode and central processing
unit cpu cores based on symmetric
multiprocessor technology improved security
through the trustzone and securjc technologies
and developments in superscalar cpu
architectures
the group incurred rd costs of £481 million
in 2003 compared with £487 million in 2002
which have been charged to the profit and
loss account 
donations
during the year the group made donations 
for charitable purposes of £42486 2002
£27939 the total amounts given for each
such purpose were
local cambridge charities £9411
promotion of education £6687
wider understanding of science 
maths and information technology £12500
medical research £7439
relief of poverty £6449
the group does not make any political
donations arm employees are encouraged to
offer their time and expertise to help charities
and other groups in need the group operates a
gift matching system for employee fundraising
impact of international financial reporting
standards ifrs
during the year the group has considered 
the impact that implementing ifrs in 2005
will have on its financial statements and
reporting functions the project is ongoing and
the group continually monitors the new
announcements being made by the iasb 
in furthering its plans for implementation 
to date the key areas that the group has
reviewed and which may affect the financial
statements are derivatives and financial
instruments revenue recognition intangibles
sharebased payments acquisition accounting
and accounting for rd costs further areas
are currently being assessed and the group 
is confident that it is well positioned for the
transition
directors in the year
the following served as directors of the
company during the year ended 31 december
2003
sir robin saxby kbe chairman
warren east chief executive officer 
tim score chief financial officer 
tudor brown chief operating officer
mike muller chief technology officer
mike inglis executive vice president
marketing 
peter cawdron independent nonexecutive
senior independent director financial expert
doug dunn obe independent nonexecutive 
john scarisbrick independent nonexecutive 
lawrence tesler independent nonexecutive
election of directors
in accordance with the group’s articles of
association warren east will retire by rotation
at the company’s annual general meeting
agm and will seek reelection at that
meeting see page 14 for his biography
lawrence tesler has completed two threeyear
terms as a nonexecutive director and will
retire from the board at the agm on 26 april
2004 it is intended that jeremy scudamore
will be appointed as an additional non
executive director immediately following the
agm on 26 april 2004 further details are
included in the corporate governance report 
on page 18
22 arm annual report and accounts 2003
directors’ reportuk gaap directors’ shareholdings in the company
the interests of the directors in the company’s
ordinary shares of 005 pence all of which
were beneficially held are disclosed in the
remuneration report on page 26
substantial shareholdings
the directors are aware of the following
substantial interests in the issued share capital
of the company as at 17 february 2004
percentage of issued
ordinary share capital
capital group companies 101
fidelity investments 69
legal and general 
investment management 45
threadneedle asset management 43
janus capital corporation 38
aviva plc 30
save for the above the company has not
been notified as at 17 february 2004 of any
material interest of 3 or more or any non
material interest exceeding 10 of the issued
share capital of the company
disabled persons
the group has a strong demand for highly
qualified staff and as such disability is not
seen to be an inhibitor to employment or
career development in the event of any staff
becoming disabled while with the group their
needs and abilities would be assessed and the
group would where possible seek to offer
alternative employment to them if they were
no longer able to continue in their current role 
employee involvement
as the group is an intellectual property
enterprise it is vital that all levels of staff are
consulted and involved in its decisionmaking
processes to this end internal conferences
and communications meetings are held
regularly which involve employees from all
parts of the group in discussions on future
strategy and developments furthermore
employee share ownership is encouraged 
and all staff are able to participate in one 
of the group’s schemes to encourage share
ownership the group has a very informal and
delegated organisational structure it does not
presently operate any collective agreements
with any trade unions
policy on payment of creditors
the group’s policy is to pay suppliers before
the end of the month following receipt of the
invoice unless terms have been specifically
agreed in advance this policy and any specific
terms agreed with suppliers are made known
to the appropriate staff and to suppliers on
request trade creditors of the group at 
31 december 2003 were equivalent to 23 days’
purchases for the group 2002 19 days’ and
nil days for the company in both years 
annual general meeting agm
the agm will be held at the group’s offices 
in cambridge uk on 26 april 2004 at 2pm 
a presentation will be made at this meeting
outlining recent developments in the business
the group will convey the results of proxy
votes cast at the agm shareholders are
invited to submit written questions in advance
of the meeting questions should be sent to
the secretary arm holdings plc 110 fulbourn
road cambridge cb1 9nj
a resolution to reappoint pricewaterhousecoopers
llp as auditors to the group will be proposed
at the agm
notice of the agm is set out in the circular to
shareholders accompanying this annual report
by order of the board
patricia alsop company secretary
arm annual report and accounts 2003 23 remuneration committee
the remuneration committee has responsibility for determining and agreeing with the board within agreed terms of reference the group’s policy
for the remuneration of the executive directors and the individual remuneration packages for the executive directors including basic salary and
annual bonuses the level and terms of grants of options and awards and the terms of any performance conditions to apply to the exercise of such
rights pension rights and any compensation payments where the remuneration committee considers it appropriate the committee will make
recommendations in relation to the remuneration of senior management the committee also liaises with the board in relation to the preparation
of the board’s annual report to shareholders on the group’s policy on the remuneration of executive directors and in particular the directors’
remuneration report as required by the companies act 1985 as amended the combined code and the listing rules of the financial services
authority 
the committee is chaired by doug dunn and peter cawdron john scarisbrick and lawrence tesler are members the committee met three 
times during 2003 and all meetings were attended by all the committee members with the exception of the december 2003 meeting when
lawrence tesler was unable to attend given their diverse experience the four independent nonexecutive directors are able to offer a balanced
view with respect to remuneration issues for the group the committee has access to professional advice from external advisers generally appointed
by the executive vice president human resources in the furtherance of its duties and makes use of this during 2003 linklaters watson wyatt
deloitte  touche and the executive vice president human resources have provided advice or services to the committee linklaters provided other
legal services and watson wyatt provided pension advice to the company during this period the chairman chief executive officer and executive
vice president human resources normally attend for part of the remuneration committee meetings no director is involved in deciding his own
remuneration
remuneration policy
the remuneration committee in its deliberations on the remuneration policy for the group’s directors seeks to give full consideration to the
principles set out in the combined code the committee also monitors developments in the accounting for equitybased remuneration on an
ongoing basis
the group operates a remuneration policy for executive directors designed to ensure that it attracts and retains the management skills necessary
for it to remain a leader in its field this policy seeks to provide rewards and incentives for the remuneration of executive directors that reflect their
performance and align with the objectives of the group and comprise a mix of performancerelated and nonperformancerelated remuneration
the committee believes that a director’s total remuneration should seek to recognise his worth in the external market 
the nature of the group’s development has meant that there has been a good deal of focus on the attainment of shortterm objectives with a high
level of variable remuneration currently variable remuneration consists of three elements annual cash bonus discretionary share options and
conditional awards under the long term incentive plan all these incentives are performancerelated and as a result more than half of each
executive director’s remuneration is targeted to be performance linked following a review of the group’s variable remuneration structure the
remuneration committee concluded that in order to align better the interests of executive directors with those of shareholders and to ensure 
that these key individuals are appropriately incentivised to remain with the group a higher proportion of executive directors’ remuneration should
focus on longerterm objectives as a result in 2003 a shareholding guideline was introduced under which executive directors and certain senior
managers are required to build up a holding of shares in the company over a period of five years the shareholdings will be built up of shares
received under the company’s discretionary share option schemes andor the long term incentive plan and in the case of executive directors 
the required holding is 100 of basic salary
incentive arrangements
the remuneration committee aims to ensure that individuals are fairly rewarded for their contribution to the success of the group there is a strong
bonus element to executive directors’ remuneration with a bonus of up to 50 of basic pay being available through the executive bonus plan 
if all targets are met payment of bonus is subject to the achievement of targets set by the remuneration committee which are directly related 
to the group’s financial results no bonuses are payable to executive directors in respect of 2003
for the 2004 operation of the bonus plan three targets have been set by the remuneration committee namely growth in profit before tax 
and growth in revenues each of which account for 50 of total bonus potential with the proviso that no bonus will be payable unless earnings
per share exceed a defined target if the group’s targets are achieved bonuses will be payable on a linear basis between the minimum and the
maximum of the agreed range annual bonuses can be doubled under the deferred bonus plan if payment is deferred for three years details of
the deferred bonus plan are set out on page 29
the group operates a number of share option plans and employees generally receive a number of share options according to their grade past
performance and length of service typically share options are allocated to employees on an annual basis discretionary options under the
approved unapproved and incentive stock option schemes are always issued at market value while options issued under the save as you earn
and employee stock purchase plans are issued at a 15 discount to market value in line with practice among the group’s peers in the technology
sector there are generally no performance conditions attached to the issue or exercise of discretionary options except for those issued to executive
remuneration reportuk gaap
24 arm annual report and accounts 2003 directors share options issued to executive directors prior to their appointment to the board of the group do not have performance conditions
attached to them however discretionary options issued to executive directors after their appointment to the board of the group will have
performance conditions attached to them the executive directors do not currently receive options under the approved scheme and incentive stock
option scheme under the unapproved scheme share options with a value of up to five times base salary may be issued on the executive director
joining the group in addition discretionary options with a value of up to two times base salary may be issued each year these discretionary
options will vest after seven years but may vest after three years from grant if the performance conditions are satisfied 
for options granted before january 2003 the performance condition is that the group must achieve average real eps growth of at least 331 
ie 331 greater than the percentage increase if any in the retail prices index over a performance period of three years from the start of the
financial year in which the options were granted the “performance period” 
for options granted from january 2003 under the performance condition 50 of the shares under option will vest after three years if the 
group achieves average real eps growth of 93 over the performance period if average real eps growth of at least 331 is achieved over 
the performance period 100 of the shares under option will vest after three years where the average real eps growth over the performance
period is between 93 and 331 the number of shares which vest after three years increases on a straightline basis 
for options granted from january 2004 under the performance condition 50 of the shares under option will vest after three years if the group
achieves average real eps growth of 125 over the performance period if average real eps growth of at least 331 is achieved over the
performance period 100 of the shares under option will vest after three years where the average real eps growth over the performance period
is between 125 and 331 the number of shares which vest after three years increases on a straightline basis
pensions
the group does not operate its own pension scheme but makes payments into a group personal pension plan which is a money purchase
scheme the rate of group contribution is 10 of the executive’s basic salary 25 in the case of the chairman subject to the inland revenue
salary capping limits
service agreements
executive directors have “rolling” service contracts that may be terminated by either party on one year’s notice the service contracts also terminate
when executive directors reach age 65 with the exception of the chairman these agreements provide for each of the directors to provide services
to the group on a fulltime basis the agreements contain restrictive covenants for periods of three to six months following termination of
employment relating to noncompetition nonsolicitation of the group’s customers nondealing with customers and nonsolicitation of the group’s
suppliers and employees in addition each service agreement contains an express obligation of confidentiality in respect of the group’s trade
secrets and confidential information and provides for the group to own any intellectual property rights created by the directors in the course of
their employment
the dates of the service contracts of each person who served as an executive director during the financial year are as follows
director date
sir robin saxby 31 january 1996
warren east 29 january 2001
tim score 1 march 2002
tudor brown 3 april 1996
mike muller 31 january 1996
mike inglis 17 july 2002
where notice is served to terminate the appointment whether by the group or the executive director the group in its absolute discretion shall be
entitled to terminate the appointment by paying to the executive director his salary in lieu of any required period of notice
nonexecutive directors
during 2003 each nonexecutive director received a total fee of £24000 per annum this fee was arrived at by reference to fees paid by other
companies of similar size and complexity and reflected the amount of time nonexecutive directors were expected to devote to the group’s
activities during the year which is around 10 to 15 working days a year peter cawdron an independent nonexecutive director who currently
holds more than five directorships has devoted during his term of office and continues to be able to devote the agreed amount of time to the
group’s activities the remuneration of the nonexecutive directors is set by the board and their term of appointment is three years nonexecutive
directors do not have service contracts are not eligible to participate in bonus or share incentive arrangements and their service does not qualify
for pension purposes or other benefits no element of their fees is performancerelated
arm annual report and accounts 2003 25 performance graphs
a performance graph showing the company’s total shareholder return tsr together with the tsr for the ftse global technology index of 
50 companies from 31 december 1998 is shown below the tsr has been calculated in accordance with the directors’ remuneration report
regulations 2002 the tsr for the company’s shares was 101 over this period compared with 29 for the ftse global technology index for 
the same period
tsr on £100 of arm shares vs ftse global technology index £ sterling
the directors consider the ftse global technology index to be an appropriate choice as the index contains companies from the us asia and europe
which reflects the global environment in which the group operates in addition the index includes many companies that are currently the group’s
customers as well as companies which use arm technology in their end products 
directors’ shareholdings in the company
the directors’ beneficial interests in the company’s ordinary shares of 005 pence which excludes interests under its share option schemes are 
set out below 
31 december 31 december
2003 2002
director number number
sir robin saxby 22363060 25632860
warren east 174920 174920
tim score 10000 10000
tudor brown 1496460 1496460
mike muller 1891860 1891860
mike inglis 10000 10000
doug dunn 48000 48000
peter cawdron 98000 98000
john scarisbrick 10800 10800
lawrence tesler 111000 111000
in addition to the interests disclosed above all the executive directors together with all the employees of the group are potential beneficiaries 
of both the arm holdings plc employee share ownership plan and the arm holdings plc qualifying employee share ownership trust they are
therefore treated as interested in all the shares held by these trusts being 5000000 ordinary shares and 721080 ordinary shares respectively at
31 december 2003 and 5000000 and 1796754 shares respectively at 31 december 2002 sir robin saxby sold 1000000 shares in the company
on 3 february 2004 taking his interest to 21363060 at the date of this report there have been no other changes in directors’ interests in the
company’s shares to the date of approval of the remuneration report
auditable information
the following information has been audited by the company’s auditors pricewaterhousecoopers llp  as required by schedule 7a to the companies
act 1985
remuneration reportuk gaapcontinued
26 arm annual report and accounts 2003
0
200
400
600
arm share price 
800
1000
1200
1400
1600
1800
31 december 2003 31 december 2002 31 december 2001 31 december 2000 31 december 1999 31 december 1998         
ftse global technology index interests in share options
details of discretionary options beneficially held by directors are set out below
as at as at
1 january 31 december exercise earliest
2003 granted exercised 2003 price date of expiry
director number number number number £exercise date
sir robin saxby 600000 – 600000 – 002 150799 140703 
140000 – – 140000 1224 110302 100306 
25000 – – 25000 6155 220501 210507 †
765000 – 600000 165000
warren east 131520 – – 131520 1224 110302 100306
8480 – – 8480 1224 110302 100309 
3187 – – 3187 6155 220503 210510 
20962 – – 20962 6155 220501 210507 †
62909 – – 62909 3815 220504 220508 
100000 – – 100000 2465 190405 190409 
– 914285 – 914285 04375 300106 300110 
327058 914285 – 1241343
tim score 206896 – – 206896 2465 190405 190409 
– 777142 – 777142 04375 300106 300110 
206896 777142 – 984038
tudor brown 140000 – – 140000 1224 110302 100306 
3736 – – 3736 6155 220503 210510 
21264 – – 21264 6155 220501 210507 †
2091 – – 2091 335 140504 130511 
22909 – – 22909 335 140504 130508 †
50000 – – 50000 2465 190405 190409 
– 731428 – 731428 04375 300106 300110 
240000 731428 – 971428
mike muller 140000 – – 140000 1224 110302 100306 
3736 – – 3736 6155 220503 210510 
17615 – – 17615 6155 220501 210507 †
2091 – – 2091 335 140504 130511 
22909 – – 22909 335 140504 130508 †
50000 – – 50000 2465 190405 190409 
– 731428 – 731428 04375 300106 300110 
236351 731428 – 967779
mike inglis 223515 – – 223515 21475 270503 260509 †
– 731428 – 731428 04375 300106 300110 
223515 731428 – 954943
 denotes share options issued under the group’s approved share option scheme
 denotes share options issued under the group’s unapproved share option scheme
 denotes share options issued under the group’s unapproved share option scheme with performance conditions attached
† denotes share options issued under the group’s unapproved share option scheme which are exercisable as follows
25 maximum from first anniversary 50 maximum from second anniversary 75 maximum from third anniversary 100 maximum on fourth anniversary
no options lapsed in the year
on 22 april 2003 sir robin saxby exercised an option over 600000 shares and made a donation of such shares to the university of liverpool 
the gain calculated at the exercise date was £330000 2002 £nil the share price on the date of exercise was £057
arm annual report and accounts 2003 27 share options with performance conditions attached normally vest after seven years if however the group achieves an average eps growth of 
at least 331 greater than the percentage increase if any in the retail price index rpi over a period of three years from the start of the
financial year in which the options are granted then the options will be exercisable after three years from grant eps is defined as the group’s fully
diluted earnings per ordinary share the method of calculating eps will be adjusted if necessary so that the calculation of the eps for each relevant
financial period of the group is broadly comparable with that for any other financial period of the group taken for the purposes of the performance
condition
on 30 january 2004 discretionary share options were granted to the following executive directors warren east 400000 tim score 320000 tudor
brown 320000 mike muller 288000 and mike inglis 288000 the exercise price is 125 pence and all are subject to performance conditions 
these options vest after seven years but may vest after three years if the following performance condition is satisfied where the group achieves
an average eps growth of at least 125 greater than the percentage increase if any in the rpi over a performance period of three years from the
start of the financial year in which options are granted then 50 of the shares under option will vest three years from grant for an average eps
growth of at least 331 greater than the percentage increase if any in the rpi over the performance period 100 of the shares under option
will vest after three years from grant where the average eps growth is between 125 and 331 greater than the percentage increase if any
in the rpi over the performance period vesting increases on a straightline basis
details of options held by directors under the group’s save as you earn option schemes are set out below
as at as at 31
1 january december exercise
2003 granted lapsed 2003 price earliest date expiry
director number number number number £of exercise date
sir robin saxby 3157 – 3157 – 30685 010704 311204
–15771 – 15771 05865 010806 311206
3157 15771 3157 15771
warren east 3157 – 3157 – 30685 010704 311204
–15771 – 15771 05865 010806 311206
3157 15771 3157 15771
tim score – 27152 – 27152 05865 010808 311208
tudor brown 3157 – – 3157 30685 010704 311204
mike inglis 3626 – 3626 – 18254 010707 311207
–15771 – 15771 05865 010806 311206
3626 15771 3626 15771
long term incentive plan
a long term incentive plan was approved by shareholders at the 2003 annual general meeting conditional share awards were made on 
25 july 2003 to directors as follows 
as at as at
1 january conditional 31 december
2003 award 2003 vesting
director number number number date
warren east – 248447 248447 january 2006
tim score – 211180 211180 january 2006
tudor brown – 198758 198758 january 2006
mike muller – 198758 198758 january 2006
mike inglis – 198758 198758 january 2006
conditional awards will vest to the extent that the performance criteria are satisfied over a threeyear performance period from 1 january 2003 
to 31 december 2005 the performance conditions are based on the company’s tsr when measured against that of two comparator groups each
testing half of the shares comprised in the award the first index comprises uk companies across all sectors ftse 250 and the second comprises
predominantly us companies within the hi tech sector ftse global technology index for each comparator group the number of shares that may
vest may be up to a maximum of 200 of the shares if the company’s tsr ranks in the upper decile 50 will vest in the event of median
performance and between median and upper decile performance vesting will increase on a straightline basis no shares will be received for
belowmedian performance in addition no shares will vest unless the committee is satisfied that there has been a sustained improvement in the
underlying financial performance of the company 
remuneration reportuk gaapcontinued
28 arm annual report and accounts 2003 except as described above there have been no changes in directors’ interests under the group’s share option schemes since the end of the 2003
financial year up to the date of approval of the remuneration report
the company’s register of directors’ interests contains full details of directors’ shareholdings and options to subscribe
share prices
the market value of the shares of the company as at 31 december 2003 was 1285 pence the closing midprice ranged from 4375 pence to 
1360 pence during the year
deferred bonus plan
the deferred bonus plan was introduced in 2001 and enables directors to double their annual bonus if payment is deferred for three years and 
to receive 6 interest per annum on the deferred element warren east elected to participate in the plan in 2001 and deferred £12680 being
onethird of his bonus for three years provided warren east remains with the group until 31 december 2004 the bonus payable on that date 
will be £25360 representing an increase of 100 plus interest there are no other outstanding arrangements under this plan
directors’ emoluments
the emoluments of the executive directors of the group in respect of services to the group were paid through its whollyowned subsidiary 
arm limited whilst the nonexecutive directors were paid through arm holdings plc and were as follows
basic bonus pension total total 
fees salary benefits payments subtotal contributions 2003 2002
director ££££££ £ £
executive
sir robin saxby – 200000 11710 – 211710 24638 236348 235747
warren east – 200000 11710 – 211710 9855 221565 201281
tim score – 170000 10728 – 180728 9855 190583 159559
tudor brown – 160000 11710 – 171710 9855 181565 166281
mike muller – 160000 11710 – 171710 9855 181565 166281
mike inglis – 160000 11710 – 171710 9855 181565 68733
jonathan brooks–––––– – 38779
pete magowan –––––– – 100548
total –1050000 69278 –1119278 73913 1193191 1137209
nonexecutive
peter cawdron 24000 – – – 24000 – 24000 24000
doug dunn 24000 – – – 24000 – 24000 24000
john scarisbrick 24000 – – – 24000 – 24000 24000
lawrence tesler 24000 – – – 24000 – 24000 24000
total 96000 – – – 96000 – 96000 96000
total 96000 1050000 69278 – 1215278 73913 1289191 1233209
for t score and m inglis the comparative salaries shown are from their date of appointment in 2002 for j brooks and p magowan the comparative figures show the salary up to the date of their 
resignations from the board in 2002
 all the executive directors receive family bupa and annual travel insurance as part of their benefits in kind in addition t score has the use of a company car and r saxby w east t brown m muller and 
m inglis receive a car allowance
mike inglis was appointed as a nonexecutive director of superscape group plc on 16 july 2003 the group holds 12 of the issued share capital 
of superscape group plc and more details about this investment are included in note 13 on page 43 in this capacity mike inglis received
remuneration totalling £7000 up to 31 december 2003 and was awarded options over 20000 shares in superscape group plc at an option price 
of 33 pence on 7 january 2004 the shares will vest in thirds over the next three years providing that performance targets are met 
all the executive directors are accruing benefits under a money purchase pension scheme as a result of their services to the group contributions
for which were all paid during the year
doug dunn obe chairman of the remuneration committee
arm annual report and accounts 2003 29 company law requires the directors to prepare financial statements for each financial year that 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 apply them consistently
● make judgements and estimates that are reasonable and prudent
● state whether applicable accounting standards have been followed subject to any material departures disclosed and explained in the financial
statements and
● prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue 
in business
the directors confirm that they have complied with the above requirements in preparing the financial statements
the directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position 
of the group and company and for ensuring that the financial statements comply with the companies act 1985 they are also responsible for
safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities
the directors are responsible for the maintenance and integrity of the group’s website information published on the internet is accessible in many
countries with different legal requirements legislation in the uk governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions
statement of directors’ responsibilities
30 arm annual report and accounts 2003 we have audited the financial statements on pages 32 to 55 which have been prepared under the historical cost convention and the accounting
policies set out on pages 36 to 38 we have also audited the disclosures required by part 3 of schedule 7a to the companies act 1985 contained
in the directors’ remuneration report “the auditable part”
respective responsibilities of directors and auditors
the directors’ responsibilities for preparing the annual report and the financial statements in accordance with applicable united kingdom law 
and accounting standards are set out in the statement of directors’ responsibilities the directors are also responsible for preparing the directors’
remuneration report
our responsibility is to audit the financial statements and the auditable part of the directors’ remuneration report in accordance with relevant legal
and regulatory requirements and united kingdom auditing standards issued by the auditing practices board this report including the opinion 
has been prepared for and only for the company’s members as a body in accordance with section 235 of the companies act 1985 and for no
other purpose we do not in giving this opinion accept or assume responsibility for any other purpose or to any other person to whom this report 
is shown or into whose hands it may come save where expressly agreed by our prior consent in writing
we report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the
auditable part of the directors’ remuneration report have been properly prepared in accordance with the companies act 1985 we also report 
to you if in our opinion the directors’ report is not consistent with the financial statements if the group 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 is not disclosed
we read the other information contained in the annual report and consider the implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the financial statements the other information comprises only arm at a glance the chairman’s
statement the chief executive officer’s review arm connected directors and advisers financial review corporate governance corporate social
responsibility the directors’ report and the unaudited part of the remuneration report
we review whether the corporate governance statement reflects the company’s compliance with the seven provisions of the combined code
issued in june 1998 specified for our review by the listing rules of the financial services authority and we report if it does not we are not
required to consider whether the board’s statements on internal control cover all risks and controls or to form an opinion on the effectiveness 
of the group’s or company’s corporate governance procedures or its risk and control procedures 
basis of audit opinion
we conducted our audit in accordance with auditing standards issued by the auditing practices board an audit includes examination on a test
basis of evidence relevant to the amounts and disclosures in the financial statements and the auditable part of the directors’ remuneration report
it also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements
and of whether the accounting policies are appropriate to the group’s circumstances consistently applied and adequately disclosed
we planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide 
us with sufficient evidence to give reasonable assurance that the financial statements and the auditable part of the directors’ remuneration report
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
opinion
in our opinion
● the financial statements give a true and fair view of the state of affairs of the group and the company at 31 december 2003 and of the profit
and cash flows of the group for the year then ended
● the financial statements have been properly prepared in accordance with the companies act 1985 and
● those parts of the directors’ remuneration report required by part 3 of schedule 7a to the companies act 1985 have been properly prepared in
accordance with the companies act 1985
pricewaterhousecoopers llp chartered accountants and registered auditors
cambridge
10 march 2004
independent auditors’ report to the members of arm holdings plcuk gaap
arm annual report and accounts 2003 31 32 arm annual report and accounts 2003
2003 2002 2002
notes £000 £000 £000
turnover
– continuing operations 127207 150922
– acquisitions 2 863 –
2 128070 150922
cost of sales 3 11022 13185
gross profit 3 117048 137737
operating expenses
research and development 3 48131 48674
exceptional research and development 6 1327
50001
sales and marketing 3 23007 24516
exceptional sales and marketing 6 320
24836
administrative expenses 3 27471 21458
exceptional administrative expenses 6 313
21771
total operating expenses 98609 96608
operating profit
– continuing operations 18215 41129
– acquisitions 224 –
group operating profit 2 18439 41129
interest receivable and similar income 4801 4373
profit on ordinary activities before taxation 2 6 23240 45502
tax on profit on ordinary activities 7 7977 13031
profit on ordinary activities after taxation 15263 32471
equity minority interest 23 105 232
profit for the financial year 8 15158 32239
dividends proposed 9 6106 –
retained profit for the financial year 20 9052 32239
earnings per 005 pence ordinary share
basic 10 15p 32p
diluted 10 15p 32p
consolidated profit and loss accountuk gaap
for the year ended 31 december 2003
statement of group total recognised gains and lossesuk gaap
2003 2002
notes £000 £000
profit for the financial year 15158 32239
foreign exchange difference on consolidation 20 21 1425 807
total recognised gains for the year and since last annual report 13733 31432 arm annual report and accounts 2003 33
2003 2002
notes £000 £000
fixed assets
intangible assets 11 7547 9153
tangible assets 12 16583 25721
investments 13 4759 4229
28889 39103
current assets
stocks 14 931 1515
debtors 15 29829 33558
shortterm investments 17 129663 126013
cash at bank and in hand 17 30123 4291
190546 165377
creditors amounts falling due within one year 16 38937 31483
net current assets 151609 133894
total assets less current liabilities 180498 172997
provisions for liabilities and charges 18 63 16
net assets 2 180435 172981
capital and reserves
calledup share capital 19 512 511
share premium account 20 81137 80883
other reserves 20 2088 663
profit and loss account 20 100874 91409
equity shareholders’ funds 21 180435 172140
minority interest – equity 23 – 841
capital employed 180435  172981
 the prior year’s figures have been restated solely as a result of the adoption of uitf 38 “accounting for esop trusts” see note 20
the financial statements on pages 32 to 55 were approved by the board of directors on 10 march 2004 and were signed on its behalf by
sir robin saxby director
consolidated balance sheetuk gaap
as at 31 december 2003 2003 2002
notes £000 £000
fixed assets
investments 13 – –
current assets
debtors 15 44637 35340
shortterm investments 50223 48381
cash at bank and in hand 50 50
94910 83771
creditors amounts falling due within one year 16 6400 219
net current assets 88510 83552
total assets less current liabilities 88510 83552
net assets 88510 83552
capital and reserves
calledup share capital 19 512 511
share premium account 20 81137 80883
profit and loss account 20 6861 2158
equity shareholders’ funds 88510 83552
 the prior year’s figures have been restated solely as a result of the adoption of uitf 38 “accounting for esop trusts” see note 20
the financial statements on pages 32 to 55 were approved by the board of directors on 10 march 2004 and were signed on its behalf by
sir robin saxby director
company balance sheetuk gaap
as at 31 december 2003
34 arm annual report and accounts 2003 2003 2002
notes £000 £000
net cash inflow from operating activities 24 43740 52087
returns on investments and servicing of finance
interest received 4930 4187
net cash inflow from returns on investments and servicing of finance 4930 4187
taxation
withholding tax paid 2940 5011
uk corporation tax paid 6161 10592
overseas tax paid 824 1155
tax paid 9925 16758
capital expenditure and financial investment
purchase of fixed asset investments 13 1152 1500
purchase of tangible fixed assets 3311 15616
sale of tangible fixed assets 34 35
purchase of intangible fixed assets 11 655 855
proceeds received by quest on allocation of own shares held 263 222
net cash outflow for capital expenditure and financial investment 4821 17714
acquisitions
purchase of subsidiary undertakings 3413 –
net cash acquired with subsidiary undertaking 23 –
net cash outflow for acquisitions 27 3390 –
net cash inflow before management of liquid resources and financing 30534 21802
management of liquid resources
increase in shortterm investments 26 3650 31637
financing
issue of shares 19 255 4763
net cash inflow from financing 255 4763
increasedecrease in cash 26 27139 5072
details of the group’s net funds are shown in note 26
consolidated cash flow statementuk gaap
for the year ended 31 december 2003
arm annual report and accounts 2003 35 1  principal accounting policies
the financial statements have been prepared in accordance with the companies act 1985 and applicable accounting standards in the uk a summary 
of the more important accounting policies which have been reviewed by the board of directors in accordance with financial reporting standard frs 18
“accounting policies” is set out below together with an explanation of where changes have been made to previous policies on the adoption of new
accounting standards in the year
basis of accounting the financial statements are prepared in accordance with the historical cost convention
changes in accounting policies the group has adopted urgent issues task force uitf 38 “accounting for esop trusts” in these financial statements 
the adoption of this standard represents a change in accounting policy and the comparative figures have been restated accordingly see note 20 and 
the share schemes accounting policy below
basis of consolidation the consolidated profit and loss account and balance sheet include the financial statements of the company and its subsidiary
undertakings made up to 31 december 2003 intragroup transactions and profits are eliminated fully on consolidation the results of subsidiaries acquired in
the year are included in the consolidated profit and loss account from the date they are acquired on acquisition all of the subsidiaries’ assets and liabilities
that exist at the date of acquisition are recorded at their fair values reflecting their condition at that date
goodwill and intangible assets purchased goodwill being the difference between the fair value of consideration and the fair value of net assets acquired
is capitalised and amortised on a straightline basis over an estimate of the time that the group is expected to benefit from it goodwill amortisation periods
are determined on a casebycase basis see note 11 provision is made against the carrying value of goodwill where an impairment in value is deemed 
to have occurred 
licences and patents purchased for the use of technology are capitalised and amortised over the period in which the group is expected to benefit from
them these periods range from three to five years
trade investments trade investments are initially recorded at cost there is a regular review of the carrying value of investments with reference to
relevant financial information and industry conditions impairment charges are recorded if there is evidence of impairment in value to reduce the carrying
value of the investments to the market value of the shares held
shortterm investments bank deposits which are not repayable on demand are treated as shortterm investments in accordance with frs 1 “cash flow
statements” movements in such investments are included under “management of liquid resources” in the group’s cash flow statement
pension scheme arrangements the group contributes to defined contribution plans covering substantially all employees in europe and the united states
and to government pension schemes for employees in japan south korea taiwan pr china and israel the group contributes to these plans based upon
various fixed percentages of employee compensation and such contributions are expensed as incurred
tangible fixed assets the cost of tangible fixed assets is their purchase cost together with any incidental costs of acquisition
depreciation is calculated so as to write off the cost of tangible fixed assets less their estimated residual values on a straightline basis over the expected
useful economic lives of the assets concerned tangible fixed assets are carried at cost and are depreciated from the date that they come into use the
principal useful economic lives used for this purpose are
freehold buildings 25 years
leasehold improvements five years or term of lease whichever is shorter
computers and software three years
fixtures and fittings five to ten years
motor vehicles four years
provision is made against the carrying value of tangible fixed assets where an impairment in value is deemed to have occurred
operating leases costs in respect of operating leases are charged to the profit and loss account on a straightline basis over the lease term
stocks stocks are stated at the lower of cost and net realisable value in general cost is determined on a firstinfirstout basis and includes transport and
handling costs where necessary provision is made for obsolete slowmoving and defective stocks
turnover the group follows the principles of frs 5 application note g in determining appropriate revenue recognition policies in principle therefore
revenue is recognised to the extent that the group has obtained the right to consideration through its performance the adoption of frs 5 application note g
has had no impact on amounts received as revenue in this or the previous year
turnover excluding vat comprises the value of sales of licences royalties arising from the resulting sale of licensees’ armbased products revenues from
support maintenance and training and consulting contracts and the sale of boards and software toolkits revenue from standard licence products which 
are not modified to meet the specific requirements of each customer is recognised when the product is delivered and accepted by the customer
many licence agreements are for products which are designed to meet the specific requirements of each customer revenue from the sale of such licences
is recognised on a percentagetocompletion basis over the period from signing of the licence to customer acceptance under the percentagetocompletion
method provisions for estimated losses on uncompleted contracts are recognised in the period in which the likelihood of such losses is determined 
the percentage to completion is measured by monitoring progress using records of actual time incurred to date in the project compared with the total
estimated project requirement which approximates to the extent of performance 
notes to the financial statementsuk gaap
36 arm annual report and accounts 2003 1  principal accounting policies continued
where invoicing milestones on licence arrangements are such that the proportion of work performed calculated on the cost basis described above is
greater than the proportion of the total contract value which has been invoiced the group evaluates whether it has obtained through its performance to
date the right to the uninvoiced consideration and therefore whether revenue should be recognised in particular it considers
● whether there is sufficient certainty that the invoice will be raised in the expected timeframe particularly where the invoicing milestone is in some 
way dependent on customer activity
● whether it has sufficient evidence that the customer considers that the group’s contractual obligations have been or will be fulfilled
● whether there is sufficient certainty that only those costs budgeted to be incurred will indeed be incurred before the customer will accept that a future
invoice may be raised and
● the extent to which previous experience with similar product groups and similar customers support the conclusions reached
where the group considers that there is insufficient evidence that it has the right to consideration taking into account these criteria revenue is not
recognised until there is sufficient evidence that the group has obtained the right to consideration for its performance under such arrangements
where agreements involve multiple elements the entire fee from such arrangements has been allocated to each of the individual elements based on each
element’s fair value vendorspecific objective evidence of fair value is determined by reference to licence agreements with other customers where
elements are sold separately 
agreements including rights to unspecified products are accounted for using subscription accounting revenue from the arrangement being recognised over
the term of the arrangement or an estimate of the economic life of the products offered beginning with the delivery of the first product
certain products have been codeveloped by the group and a collaborative partner with both parties retaining the right to sell licences to the product 
in those cases where the group makes sales of these products the total value of the licence is recorded as turnover and the amount payable to the
collaborative partner is recorded as cost of sales where the collaborative partner makes sales of these products the group records as turnover the
commission it is due when informed by the collaborative partner that a sale has been made and cash has been collected
in addition to the licence fees contracts generally contain an agreement to provide postcontract support support maintenance and training which consists
of an identified customer contact at the group and telephonic or email support fees for postcontract support which take place after customer acceptance
are specified in the contract the fees are determined based on the group’s price list as if sold separately the price list is established and regularly reviewed
by management revenue for postcontract support is recognised on a straightline basis over the period for which support and maintenance is contractually
agreed by the group with the licensee
the excess of licence fees and postcontract support invoiced over revenue recognised is recorded as deferred income
sales of software including development systems which are not specifically designed for a given licence such as offtheshelf software are recognised
upon delivery at that time the group has no further obligations except that where necessary the costs associated with providing postcontract support
have been accrued services such as training that the group provides which are not essential to the functionality of the ip are separately stated and priced
in the contract and therefore accounted for separately revenue is recognised as services are performed and collectability is probable
royalty revenues are earned on sales by the group’s customers of products containing arm technology revenues are recognised when arm receives
notification from the customer of product sales or receives payment of any fixed royalties normally quarterly in arrears
revenue from consulting is recognised when the service has been provided and all obligations to the customer under the consulting agreement have been
fulfilled for larger consulting projects containing several project milestones revenue is recognised on a percentagetocompletion basis as milestones are
achieved consulting costs are recognised when incurred
as disclosed above in accordance with frs 18 “accounting policies” the group makes significant estimates in applying its revenue recognition policies 
in particular as discussed in detail above estimates are made in relation to the use of the percentagetocompletion accounting method which requires
that the extent of progress toward completion of contracts may be anticipated with reasonable certainty the use of the percentagetocompletion method 
is itself based on the assumption that at the outset of licence agreements customer acceptance is not uncertain in addition when allocating revenue 
to various elements of multielement arrangements it is assumed that the fair value of each element is reflected by its price when sold separately 
the complexity of the estimation process and issues related to the assumptions risks and uncertainties inherent with the application of the revenue
recognition policies affect the amounts reported in the financial statements if different assumptions were used it is possible that different amounts 
would be reported in the financial statements
deferred taxation provision is made for deferred taxation using full provision accounting when an event has taken place by the balance sheet date which
gives rise to an increased or reduced tax liability in the future in accordance with frs 19 “deferred taxation” deferred tax assets are recognised to the
extent that they are regarded as recoverable deferred tax assets and liabilities are not discounted
foreign currency the assets and liabilities of subsidiaries denominated in foreign currencies are translated into sterling at rates of exchange ruling at the
end of the financial year profit and loss accounts of overseas subsidiary undertakings are translated at the average exchange rate for the year differences
on exchange arising from the retranslation of the opening net investment in subsidiary companies are taken to reserves and reported in the statement 
of group total recognised gains and losses
other transactions denominated in foreign currencies have been translated into sterling at actual rates of exchange ruling at the date of the transaction
monetary assets and liabilities denominated in foreign currencies have been translated at rates ruling at the balance sheet date exchange differences have
been included in operating profit
arm annual report and accounts 2003  37 1  principal accounting policies continued
financial instruments the group attempts to reduce its foreign currency exposure by entering into forward contracts to sell us dollars and buy 
sterling the group accounts for these instruments by revaluing the financial instruments and the associated trade debtors and cash at the yearend rate 
the resulting gain or loss is credited or charged to the profit and loss account for the year
research and development all research and development expenditure is written off in the year in which it is incurred
share schemes the group’s employee share ownership plan esop and qualifying employee share ownership trust quest are separately administered
trusts which are funded by loans the esop and loans and gifts the quest from the group and the assets of which comprise shares in the company in
accordance with uitf 38 the company recognises the assets and liabilities of the esop and the quest in its own accounts and shares held by the trusts are
recorded at cost as a deduction in arriving at shareholders’ funds until such time as the shares vest unconditionally to employees see note 20
in accordance with the requirements of uitf 17 “employee share schemes” a charge is made in the profit and loss account representing the fair value at
the date of grant of shares awarded under the group’s long term incentive plan as the award is conditional on certain performance conditions being met
this is reflected in the number of shares on which the charge is calculated the charge is credited back to reserves
the company operates a save as you earn scheme together with a similar scheme for us employees that allows the grant of share options at a discount 
to the market price at the date of grant the company has made use of the exemption under uitf 17 not to recognise any compensation charge in respect
of these options
employer’s national insurance and similar taxes arise on the exercise of certain share options in accordance with uitf 25 a provision is made calculated
using the market price of the company’s shares at the balance sheet date prorated over the vesting period of the options
grants grants in respect of specific research and development projects are credited to the profit and loss account to match the projects’ related expenditure
provision for doubtful debts provision is made for doubtful debts following reviews of individual customer circumstances by management
2  segmental analysis
the directors are of the opinion that the group has only one class of business the group’s operations by geographic area are as follows
turnover by destination
2003 2002
£000 £000
europe 23118 26731
united states 65402 67086
asia pacific 39550 57105
128070 150922
turnover by origin
2003 2002
total intersegment external total intersegment external
sales sales sales sales sales sales
£000 £000 £000 £000 £000 £000
europe 127297 8412 118885 148578 10831 137747
united states 22702 17809 4893 29041 21753 7288
asia pacific 7995 3703 4292 9415 3528 5887
157994 29924 128070 187034 36112 150922
profit before taxation by origin
2003 2002
operating profit operating profit
profit interest before tax profit interest before tax
£000 £000 £000 £000 £000 £000
europe 14621 4591 19212 36815 4162 40977
united states 1373 9 1382 1558 15 1573
asia pacific 2445 201 2646 2756 196 2952
18439 4801 23240 41129 4373 45502
the analysis of operating profit and profit before tax for 2002 is stated after charging exceptional costs of £1509000 europe £412000 united states and
£39000 asia pacific
notes to the financial statementsuk gaapcontinued
38 arm annual report and accounts 2003 2  segmental analysis continued
net assets
2003 2002
£000 £000
europe 169305 159872
united states 7267 6787
asia pacific 3863 6322
180435 172981
 the prior year’s figures have been restated solely as a result of the adoption of uitf 38 “accounting for esop trusts” see note 20
the above analyses of turnover profit before tax and net assets in 2003 include contributions from the group’s acquisition arm belgium nv formerly
adelante technologies nv as follows turnover by destination and origin – europe £863000 profit before tax – europe £224000 net assets – europe
£1438000
3  cost of sales gross profit and operating expenses
in relation to the acquired entity arm belgium nv the total figures for continuing operations in 2003 include the following amounts cost of sales 
£nil gross profit £863000 research and development £1081000 sales and marketing £nil administrative expenses £40000 these figures exclude 
a credit of £482000 in relation to the release of the pension provision see note 18
4  directors’ emoluments
the aggregate emoluments of the directors of the group are set out below 
2003 2002
£ £
aggregate emoluments in respect of qualifying services 1215278 1160056
aggregate gains made on exercise of share options 330000 58240
1545278 1218296
aggregate group pension contributions to money purchase schemes 73913 73153
1619191 1291449
the emoluments of the highestpaid director of the group are set out below 
2003 2002
£ £
emoluments in respect of qualifying services 211710 211559
gains made on exercise of share options 330000 –
541710 211559
group pension contributions to money purchase schemes 24638 24188
566348 235747
detailed disclosures of directors’ emoluments are shown on page 29 details of directors’ interests in share options are shown on pages 27 and 28
arm annual report and accounts 2003 39 5  employee information 
the average monthly number of persons including executive directors employed by the group during the year was
2003 2002
number number
by activity
research and development 430 437
administration 96 100
sales and marketing 204 212
730 749
2003 2002
£000 £000
staff costs for the above persons
wages and salaries 35747 37732
social security costs 3584 3463
other pension costs 1848 1894
41179 43089
in addition to the above payments in 2002 totalling £1886000 were made to employees in respect of redundancy additionally due to a change in
pension scheme within arm belgium nv effected postacquisition the pension provision in existence at acquisition has been released to the profit and 
loss account and the credit of £1069000 is not included in the above numbers
of the total pension costs above £47000 2002 £nil remained unpaid at the year end
6  profit on ordinary activities before taxation
profit on ordinary activities before taxation is stated after chargingcrediting
2003 2002
£000 £000
depreciation charge for the year
tangible owned fixed assets 12908 12463
amortisation of goodwill 1299 1352
amortisation of other intangible assets 3342 2777
impairment of fixed asset investments 622 826
profit on disposal of fixed assets 6 14
auditors’ remuneration
audit services
– statutory audit company £5000 2002 £5000 166 157
– auditrelated regulatory reporting 51 42
further assurance services
– royalty audits 72 4
– other advisory work 13 7
tax compliance and advisory work 87 37
hire of plant and machinery – operating leases 4433 1736
leased buildings – operating leases 3736 3463
fees to other major firms of accountants for nonaudit services amounted to £260000 2002 £114000
exceptional items in 2002 relate to the cost of payments made for redundancy for 98 employees and for related outplacement services
notes to the financial statementsuk gaapcontinued
40 arm annual report and accounts 2003 7  tax on profit on ordinary activities
2003 2002
£000 £000
current
uk corporation tax at 30 2002 30 8162 12846
overseas corporation tax 1009 1106
underover provision in respect of prior years 
uk corporation tax 72 5
overseas corporation tax 18 68
9225 13889
deferred
uk deferred tax – origination and reversal of timing differences 1622 500
overseas deferred tax – origination and reversal of timing differences 374 358
subtotal 1248 858
7977 13031
the taxation charge for 2003 was reduced by £766000 2002 £754000 in relation to tax losses generated by overseas subsidiaries
under legislation introduced with effect from 1 april 2002 the tax charge is affected by the availability of uk research and development tax credits the tax
impact is a reduction in the tax charge for the year of £958000 2002 £781000
the current tax charge for the year is higher than the standard rate of corporation tax in the uk the differences are explained below
2003 2002
£000 £000
profit on ordinary activities before taxation 23240 45502
taxation charge at uk corporation tax rate of 30 6972 13651
effects of
underover provision in respect of prior years 54 63
accelerated capital allowances and other timing differences 1638 692
permanent differences 1202 267
higher average tax rates in overseas countries 8 8
losses utilised during the year 633 650
current tax charge for the year 9225 13889
the analysis of the deferred tax asset movement for the group is as follows
deferred deferred
tax asset tax asset
2003 2002
£000 £000
at 1 january 1697 839
asset relating to losses acquired with subsidiary undertaking see note 22 640 –
credited to the profit and loss account 1248 858
at 31 december 3585 1697
the analysis of deferred tax assets for the group is as follows
amount recognised amount not recognised
2003 2002 2003 2002
£000 £000 £000 £000
tax effect of timing differences because of 
excess of tax allowances over depreciation 2844 1193 – –
losses carried forward 395 – 420 544
other 346 504 83 15
3585 1697 503 559
no provision is made for taxation liabilities which would arise on the distribution of profits retained by overseas subsidiaries because there is no intention in
the foreseeable future that such profits will be remitted 
no deferred tax asset has been recognised for the amounts unprovided because of the uncertainty of utilising these losses in the future
the company has no potential liability for deferred taxation
arm annual report and accounts 2003 41 8  profit for the financial year
as permitted by section 230 of the companies act 1985 the parent company’s profit and loss account has not been included in these financial statements
the parent company’s profit after taxation including dividends receivable and before dividends payable was £10546000 2002 £772000
9  dividends proposed
2003 2002
£000 £000
interim and final proposed of 06 pence 2002 nil per ordinary share 6106 –
the esop trust has waived its right to receive dividends of over 001 pence per share and the quest has waived its right to receive any dividends as such
dividends will not be payable on the 5721080 shares currently held within these trusts
10  earnings per share
basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares 
in issue during the year excluding those held in the esop and the quest which are treated as cancelled
for diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary
shares the company had two categories of dilutive potential ordinary shares during the year being those share options granted to employees and directors
where the exercise price is less than the average market price of the company’s ordinary shares during the year and the contingently issuable shares under
the group’s long term incentive plan ltip for 2003 no shares that have been allocated for awards under the ltip have been included in the diluted eps
calculation as the performance criteria cannot be measured until the conclusion of the performance period
reconciliations of the earnings and weighted average number of shares used in the calculations are set out below
2003 2002
number per share number per share
earnings of shares amount earnings of shares amount
£000 thousands pence £000 thousands pence
basic eps
profit available to ordinary shareholders 15158 1016484 15p 32239 1012295 32p
effect of dilutive securities
options – 16797 –8465
diluted eps
adjusted earnings 15158 1033281 15p 32239 1020760 32p
11  intangible fixed assets
patents and
licences goodwill total
group £000 £000 £000
cost
at 1 january 2003 12245 5744 17989
additions see note 22 655 2380 3035
at 31 december 2003 12900 8124 21024
aggregate amortisation
at 1 january 2003 4102 4734 8836
charge for the year 3342 1299 4641
at 31 december 2003 7444 6033 13477
net book value
at 31 december 2003 5456 2091 7547
at 31 december 2002 8143 1010 9153
the group has patents and licences which are being amortised over three to five years goodwill arising on previous years’ acquisitions is being written off
over three years in the case of allant software corporation and noral micrologics limited goodwill arising on the current year’s acquisitions of arm korea
limited and arm belgium nv formerly adelante technologies nv is being written off over five years
the company does not own any intangible fixed assets
notes to the financial statementsuk gaapcontinued
42 arm annual report and accounts 2003 12 tangible fixed assets
fixtures
fittings
freehold leasehold computers and motor
buildings improvements and software vehicles total
group £000 £000 £000 £000 £000
cost
at 1 january 2003 190 18763 41906 3101 63960
exchange differences – 179 146 67 392
acquisitions see note 22 – 33 756 175 964
additions – 1737 1803 65 3605
disposals – 9 45 72 126
at 31 december 2003 190 20345 44274 3202 68011
aggregate depreciation
at 1 january 2003 33 8076 28304 1826 38239
exchange differences – 101 121 52 274
acquisitions see note 22 – 10 572 71 653
charge for the year 9 4539 7950 410 12908
disposals – 9 44 45 98
at 31 december 2003 42 12515 36661 2210 51428
net book value
at 31 december 2003 148 7830 7613 992 16583
at 31 december 2002 157 10687 13602 1275 25721
the company does not own any tangible fixed assets
13  fixed asset investments
listed other
investments investments total
group £000 £000 £000
cost 
at 1 january 2003 1500 4168 5668
additions 1152 – 1152
at 31 december 2003 2652 4168 6820
amounts written off
at 1 january 2003 –1439 1439
amounts written off during the year – 622 622
at 31 december 2003 –2061 2061
net book value
at 31 december 2003 2652 2107 4759
at 31 december 2002 1500 2729 4229
 as a result of the group’s adoption of uitf 38 amounts relating to the shares held in the group’s esop and quest are no longer classified as investments and prior year amounts have been restated
accordingly see note 20
listed investments during the year the group participated in a further financing round in superscape group plc a company listed on the london stock
exchange maintaining a 12 stake in the company the cost and market value of this investment as at 31 december 2003 were £2652000 and
£4139000 respectively 2002 £1500000 and £1500000 respectively the investment was made in order to broaden the scope of the group’s
collaboration with superscape group plc in the area of 3d technology for wireless devices
other investments included in other investments are the group’s less than 1 holding in the share capital of cambridge silicon radio holdings limited 
a company which develops bluetooth solutions and an investment representing 32 in the share capital of coware inc a company which develops
systemonchip software for a wide range of applications the group also has a 024 investment in the share capital of palmchip corporation a private
fabless chip company based in california and a 17 investment in the share capital of pixim inc also a private fabless chip company based in california 
provisions have been made against other investments to reflect any impairment in value all these investments are held by arm limited
arm annual report and accounts 2003 43 13  fixed asset investments continued
company
the cost and net book value of interests in group undertakings held by the company was £2 at 31 december 2003 and 31 december 2002
interests in group undertakings details of subsidiary undertakings are as follows
proportion of
nominal value
country of description of issued
name of undertaking registration of shares held shares held
arm limited england and wales ordinary £1 shares 100
arm quest trustees limited england and wales ordinary £1 shares 100
the principal activity of arm limited is the marketing research and development of riscbased microprocessors arm quest trustees limited is the trustee
company of the company’s quest
the group holds the following investments in subsidiaries via its subsidiary company arm limited
proportion of
nominal value
country of of issued
name of undertaking registration principal activity shares held
arm inc us marketing and development 100
of riscbased processors
arm kk japan marketing of riscbased processors 100
arm korea limited south korea marketing of riscbased processors 100
arm taiwan limited taiwan marketing of riscbased processors 999
arm consulting shanghai co ltd pr china marketing of riscbased processors 100
micrologic solutions limited england and wales dormant 100
advanced risc machines limited england and wales dormant 100
allant software corporation us dormant 100
arm france sas france development of riscbased processors 100
arm belgium nv belgium development of data engine processors 100
nominees of the company hold 100 of the ordinary share capital of arm employee benefit trustee ltd a company which acts as trustee to the group’s
esop 
14  stocks
2003 2002
group £000 £000
finished goods 931 1515
the company had no stocks at 31 december 2003 and 2002
15  debtors
group company
2003 2002 2003 2002
£000 £000 £000 £000
trade debtors 17320 20516 – –
amounts owed by group undertakings – – 44430 35091
other debtors 1580 1802 – –
deferred tax see note 7 3585 1697 – –
prepayments and accrued income 7344 9543 207 249
29829 33558 44637 35340
all amounts above fall due within one year except that included within prepayments and accrued income is £1036000 2002 £1606000 falling due after
more than one year
notes to the financial statementsuk gaapcontinued
44 arm annual report and accounts 2003 16  creditors amounts falling due within one year
group company
2003 2002 2003 2002
£000 £000 £000 £000
trade creditors 2691 4730 – –
corporation tax 3140 3828 240 190
other taxation and social security 1047 824 – –
other creditors 390 1027 – –
accruals and deferred income 25563 21074 54 29
dividends payable 6106 – 6106 –
38937 31483 6400 219
17  financial instruments
use of financial instruments – general the group has three primary objectives in its use of financial instruments namely the management of foreign
exchange risk the maximisation of returns on funds held on deposit and the use of strategic trade investments in companies in order to further establish
the arm architecture these are managed respectively through the use of hedging strategies primarily forward contracts money market instruments and
an ongoing process of assessing potential trade investments and current holdings 
to meet these objectives the group has used the policies described below which have been applied throughout the current year
management of foreign exchange risk the group’s earnings and liquidity are affected by fluctuations in foreign currency exchange rates principally in
respect of the us dollar reflecting the fact that most of its revenues and cash receipts are denominated in us dollars while the majority of its costs are
settled in sterling the group seeks to use forward contracts to manage the us dollarsterling risk as appropriate by monitoring the timing and value 
of anticipated us dollar receipts which tend to arise from lowvolume highvalue licence deals and royalty receipts in comparison with its requirement 
to settle certain expenses in us dollars the group reviews the resulting exposure on a regular basis and hedges this exposure using forward contracts for
the sale of us dollars as appropriate such contracts are entered into with the objective of matching their maturity with projected us dollar cash receipts 
as the timing of large cash receipts cannot be predicted with certainty the group enters into forward contracts which allow exercise between two dates
typically between three and four months from the invoice date in those cases where customers settle debts before the expiry of the foreign exchange
contract the group evaluates whether money market rates available for us dollar investments exceed those for sterling investments it then seeks to
maximise its returns by remitting us dollars against forward contracts at the beginning or end of the exercise period depending on the prevailing money
market rates for us dollars and sterling at the time 
at 31 december 2003 the group had outstanding forward contracts to sell 44000000 2002 54000000 the group had 28591000 2002
33293000 of trade debtors denominated in us dollars at that date and us dollar cash balances of 26340000 2002 28645000 thus 20 
2002 13 of the group’s us dollar current assets were not hedged by matching forward contracts at the year end a proportion considered appropriate 
in the light of the anticipated us dollar requirements to settle liabilities particularly in respect of overseas operations
in addition certain customers remit royalties and licence fees in other currencies primarily the euro the group is also required to settle certain expenses 
in euros primarily in its french and belgian subsidiaries and as the net amounts involved are not considered significant the group does not take out euro
forward contracts
the group where required invests profits in the subsidiary in which they were earned the group does not hedge any foreign net asset investment using
foreign currency loans as there is currently no requirement for external borrowings
after the year end the group has decided to consider the use of other financial instruments such as currency options
maximisation of return on funds held on deposit the group’s earnings may be affected by changes in interest rates available on bank deposits it aims to
maximise returns from funds held on deposit and uses money market deposits with major financial institutions to do so recent maturities have been up to
six months in length but this varies since close consideration is given to the uk and us money market yield curves before contracts are closed 
trade investments investment activity is intended to create longterm strategic alliances with development companies some of which may be unlisted 
at the time of the investment decision as there can be no guarantee that there will be a future market for these securities or that the value of such
investments will rise the directors evaluate each investment opportunity on its merits before committing arm’s funds the directors review holdings in such
companies on a regular basis to determine whether continued investment is in the best interests of the group funds for such ventures are strictly limited 
in order that the financial effect of any potential decline in the value of investments would not be substantial in the context of the group’s financial results
during 2003 the group made a further investment in superscape group plc a company listed on the london stock exchange
the group holds investments in four private companies pixim inc coware inc palmchip corporation and cambridge silicon radio holdings limited 
which all develop products based on arm technology
external borrowings the group had no longterm debt and no undrawn committed borrowing facilities at 31 december 2003 2002 £nil or during the
financial year
numerical disclosures numerical disclosures are set out in the tables below shortterm debtors and creditors have been excluded from all the following
disclosures other than currency risk disclosures
arm annual report and accounts 2003 45 17  financial instruments continued
interest rate risk of financial assets
group 2003 2002
cash at cash at
bank and shortterm bank and shortterm
in hand investments total in hand investments total
currency £000 £000 £000 £000 £000 £000
sterling 9063 129421 138484 89 102821 102910
us dollars 15663 – 15663 2452 17113 19565
european currencies other than sterling 1915 – 1915 610 2473 3083
other currencies 3482 242 3724 1140 3606 4746
at 31 december 30123 129663 159786 4291 126013 130304
floating rate 30123 – 30123 4291 – 4291
fixed rate – 129663 129663 – 126013 126013
at 31 december 30123 129663 159786 4291 126013 130304
the fixed rate cash and shortterm investments in sterling and us dollars were placed with banks for between one week and six months and earn interest
of between 098 and 40 2002 12 and 4625 floating rate cash earns interest based on relevant national libid equivalents
financial liabilities provisions for national insurance and similar taxes of £63000 2002 £16000 are financial liabilities in sterling on which no interest 
is paid maturity depends on when certain share options are exercised
fair values of financial instruments
cash and shortterm investments the carrying amount approximates to fair value because of the short maturity of those instruments
foreign currency forward contracts the fair value of foreign currency forward contracts is estimated using the settlement rates the fair value of forward
contracts is estimated at £2015000 at 31 december 2003 2002 £1061000 the increase is due to changes in the sterlingus dollar exchange rate 
in 2003
investments in unlisted companies those companies in which arm has invested are earlystage development enterprises which are generating value 
for shareholders through research and development activities and most do not currently report profits the directors do not consider it possible to estimate
with precision the fair value of the group’s investments in unlisted companies carrying value at 31 december 2003 £2107000 as they are by definition
not traded on an organised market and are unique in their activities however based on recent fundraising transactions by these companies and where
possible following review of relevant financial information prepared by the companies the directors are of the opinion that the fair value of these
investments approximates to carrying value
investments in listed companies the fair value of listed investments is determined with reference to prices quoted on the london stock exchange 
at 31 december 2003 on this basis the fair value of the group’s listed investment was £4139000 at 31 december 2003 2002 £1500000
provisions the carrying amount of £63000 approximates to fair value as this is the amount which would be payable if the liability had crystallized at the
balance sheet date
currency exposure the table below shows the extent to which group companies have monetary assets and liabilities in currencies other than their local
currency net of forward contracts foreign exchange differences on retranslation of these assets and liabilities are taken to the profit and loss account of the
individual companies and the group
european other
us dollars currencies currencies total
2003 £000 £000 £000 £000
functional currency of group operation
sterling 5489 1743 23 3723
other currencies 377 – – 377
total 5112 1743 23 3346
2002
functional currency of group operation
sterling 729 1755 145 881
other currencies 966 – – 966
total 237 1755 145 1847
notes to the financial statementsuk gaapcontinued
46 arm annual report and accounts 2003 17  financial instruments continued
hedges the group’s hedging policy is to hedge currency risk using forward foreign currency contracts for foreign currency debtors and cash details of
unrecognised and deferred gains and losses are shown below
unrecognised deferred
total net total net
gain loss gainloss gain loss gainloss
£000 £000 £000 £000 £000 £000
gains and losses on hedges at 1 january 2003 – – – 1061 – 1061
arising in previous years included in 2003 income – – – 1061 – 1061
gains and losses not included in 2003 income ––––––
arising in 2003 – – – 2015 – 2015
gains and losses on hedges at 31 december 2003 ––– 2015 – 2015
of which
gains and losses expected to be included in 2004 income – – – 2015 – 2015
gains deferred at 31 december 2003 will be matched by losses of the same amount on the underlying items being hedged
financial instruments held for trading purposes the group does not trade in financial instruments
18  provisions for liabilities and charges
the movements in the group’s provisions are as follows
share option pension share option
tax provision total tax
2003 2003 2003 2002
£000 £000 £000 £000
at 1 january 16 – 16 210
acquired with subsidiary undertaking see note 22 –1069 1069 –
chargedcredited to the profit and loss account 47 1069 1022 194
at 31 december 63 – 63 16
share option tax the share option tax provision relates to employer’s national insurance and similar taxes on certain share options provided in accordance
with uitf 25 the provision fluctuates with movements in share price and the exercise of the share options 
pension provision the pension provision acquired with arm belgium nv has been fully released to the profit and loss account postacquisition 
following the transfer by all relevant employees from the original defined benefit scheme to a new defined contribution scheme resulting in the deficit
being extinguished 
19  calledup share capital
2003 2002
company £000 £000
authorised
1580000000 ordinary shares of 005 pence each 2002 1580000000 790 790
allotted calledup and fully paid
1023345650 ordinary shares of 005 pence each 2002 1021758000 512 511
1587650 ordinary shares of 005 pence each were issued in the year for cash consideration of £254946 the issue of these shares occurred on the exercise
of share options at various times during the year
arm annual report and accounts 2003 47 19  calledup share capital continued
share options the company had the following ordinary share options outstanding at 31 december 2003
period of option
ordinary shares exercise price
of 005 pence each per share
date of issue number £ earliest date latest date
15 july 1996 320000 002 15 july 1999 14 july 2006
5 march 1997 615000 0026 5 march 2000 4 march 2007
29 may 1997 20000 00425 29 may 2000 28 may 2004
25 june 1997 20000 00625 25 june 2000 24 june 2004
1 october 1997 120000 00625 1 october 2000 30 september 2004
24 december 1997 230000 00625 24 december 2000 23 december 2004
7 march 1998 400000 01125 7 march 2001 6 march 2008
7 march 1998 5001 01125 7 march 1999 6 march 2005 
8 june 1998 35000 03875 8 june 2001 7 june 2005
8 june 1998 1504 03875 8 june 1999 7 june 2005 
17 august 1998 50000 05275 17 august 2001 16 august 2008
17 august 1998 10061 05275 17 august 1999 16 august 2005 
16 october 1998 51000 0405 16 october 2001 15 october 2008
11 march 1999 2499887 1224 11 march 2002 10 march 2009
11 march 1999 4471980 1224 11 march 2002 10 march 2006
11 march 1999 1194369 1224 11 march 2000 10 march 2004 
4 may 1999 120840 1338 4 may 2002 3 may 2009
4 may 1999 25160 1338 4 may 2002 3 may 2006
4 may 1999 26252 1338 4 may 2000 3 may 2004 
10 june 1999 85340 1099 1 july 2004 31 december 2004
10 august 1999 43495 1765 10 august 2002 9 august 2009
10 august 1999 3005 1765 10 august 2002 9 august 2006
10 august 1999 40002 1765 10 august 2000 9 august 2004 
12 november 1999 80570 426 16 november 2002 15 november 2009
12 november 1999 76680 426 16 november 2002 15 november 2006
1 february 2000 89000 7738 1 february 2003 31 january 2010
1 february 2000 43250 7738 1 february 2003 31 january 2007
1 february 2000 52500 7738 1 february 2001 31 january 2005 
18 april 2000 75215 6136 18 april 2003 17 april 2010
18 april 2000 36035 6136 18 april 2003 17 april 2007
18 april 2000 7500 6136 18 april 2001 17 april 2005 
25 april 2000 50000 627 25 april 2001 24 april 2005 
19 may 2000 597 565 1 july 2005 31 december 2005
22 may 2000 272599 6155 22 may 2003 21 may 2010
22 may 2000 2217329 6155 22 may 2001 21 may 2007 
22 may 2000 625000 6155 22 may 2001 21 may 2005 
7 august 2000 162500 670 7 august 2001 6 august 2007 
7 august 2000 24250 670 7 august 2001 6 august 2005 
13 october 2000 181250 633 13 october 2001 12 october 2007 
13 october 2000 114500 633 13 october 2001 12 october 2005 
13 october 2000 71250 633 13 october 2004 12 october 2007
15 february 2001 396500 443 15 february 2002 14 february 2008 
15 february 2001 83000 443 15 february 2002 14 february 2006 
15 february 2001 30000 443 15 february 2005 14 february 2008
14 may 2001 578959 335 14 may 2004 13 may 2011
14 may 2001 3472074 335 14 may 2002 13 may 2008 
14 may 2001 1193400 335 14 may 2002 13 may 2006 
14 may 2001 149500 335 14 may 2005 13 may 2008
19 may 2001 82822 3069 1 july 2004 31 december 2004
19 may 2001 16495 3069 1 july 2006 31 december 2006
22 may 2001 62909 3815 22 may 2004 22 may 2008 †
1 august 2001 58813 284 1 august 2004 31 july 2011
1 august 2001 20822 284 1 august 2002 31 july 2008 
1 august 2001 28000 284 1 august 2002 31 july 2006 
6 november 2001 139000 375 6 november 2004 5 november 2011
6 november 2001 42500 375 6 november 2002 5 november 2008 
6 november 2001 44750 375 6 november 2002 5 november 2006 
6 november 2001 8500 375 6 november 2005 5 november 2008
5 march 2002 161250 3145 5 march 2003 4 march 2009 
5 march 2002 62500 3145 5 march 2003 4 march 2007 
notes to the financial statementsuk gaapcontinued
48 arm annual report and accounts 2003 19  calledup share capital continued
period of option
ordinary shares exercise price
of 005 pence each per share
date of issue number £ earliest date latest date
5 march 2002 10000 3145 5 march 2006 4 march 2009
19 april 2002 1061888 2465 19 april 2005 18 april 2012
19 april 2002 3987212 2465 19 april 2003 18 april 2009 
19 april 2002 406896 2465 19 april 2005 19 april 2009 †
19 april 2002 1371575 2465 19 april 2003 18 april 2007 
19 april 2002 162375 2465 19 april 2006 18 april 2009
27 may 2002 223515 21475 27 may 2005 26 may 2009 
20 june 2002 85646 182537 1 july 2005 31 december 2005
20 june 2002 36262 182537 1 july 2007 31 december 2007
20 june 2002 15244 182537 1 july 2004 30 september 2004
15 august 2002 305750 1505 15 august 2003 14 august 2009 
15 august 2002 125000 1505 15 august 2003 14 august 2007 
15 august 2002 5000 1505 15 august 2006 14 august 2009
16 october 2002 108750 0425 16 october 2003 15 october 2009 
16 october 2002 68750 0425 16 october 2003 15 october 2007 
16 october 2002 11250 0425 16 october 2006 15 october 2009
8 november 2002 35000 05725 8 november 2003 7 november 2009 
8 november 2002 3500 05725 8 november 2003 7 november 2007 
30 january 2003 3705912 04375 30 january 2006 29 january 2013
30 january 2003 15759867 04375 30 january 2004 29 january 2010 
30 january 2003 3885711 04375 30 january 2006 30 january 2010 †
30 january 2003 5944771 04375 30 january 2004 29 january 2008 
30 january 2003 757300 04375 30 january 2007 29 january 2010
19 june 2003 4145776 05865 1 july 2006 31 december 2006
19 june 2003 634270 05865 1 july 2008 31 december 2008
19 june 2003 841945 05865 1 july 2005 30 september 2005
25 july 2003 248250 0805 25 july 2004 24 july 2010 
25 july 2003 31000 0805 25 july 2004 24 july 2008 
5 november 2003 56500 11475 5 november 2004 4 november 2010 
5 november 2003 10000 11475 5 november 2004 4 november 2008 
5 november 2003 3250 11475 5 november 2007 4 november 2010
5 november 2003 243200 11475 1 january 2007 4 november 2010
total 65491080
 these relate to options granted under the company’s savingsrelated share option schemes
 options are exercisable as follows 25 maximum on first anniversary 50 maximum on second anniversary 75 maximum on third anniversary 100 maximum on fourth anniversary
† these options will vest after seven years unless certain criteria are met in which case they will vest between three and seven years
under the group’s long term incentive plan a further 2572646 shares could be awarded to the extent that the performance criteria are satisfied over a
threeyear period as detailed in the remuneration report these shares will be awarded from shares already issued within the esop 
20  share premium account and reserves
share 
premium other profit and
account reserves loss account
group £000 £000 £000
at 1 january 2003 as previously reported 80883 663 93575
prior year adjustment –– 2166
at 1 january 2003 as restated 80883 663 91409
foreign exchange difference on consolidation – 1425 –
premium on exercise of share options 254 – –
shares allocated to satisfy exercises under saye schemes – – 263
credit in respect of employee share awards – – 150 
retained profit for the financial year –– 9052
at 31 december 2003 81137 2088 100874
other reserves represent exchange differences arising on consolidation of foreign subsidiary undertakings
arm annual report and accounts 2003 49 20  share premium account and reserves continued
prior year adjustment the group has adopted uitf 38 “accounting for esop trusts” during the year by means of a prior year adjustment there is no
effect on the current or prior year’s profit for either the group or company as a result of the change in accounting policy the cost of own shares held is
presented as a deduction in arriving at shareholders’ funds previously own shares held were included within investments and were stated at the lower 
of cost and amounts receivable from the exercise of options where applicable and market value the effect for 2002 is to decrease shareholders’ funds 
and investments at 31 december 2002 by £2166000 £1438000 in respect of the esop and £728000 in respect of the quest in both the group and
company balance sheets the effect for 2003 is to decrease shareholders’ funds and investments at 31 december 2003 by £1903000 in both the group
and company balance sheets
own shares held offset in the profit and loss reserve is an amount of £7569000 representing the cost of own shares held this balance consists of own
shares held by the group’s esop and quest
own shares held include £1438000 2002 £1438000 being the cost of 5000000 2002 5000000 shares in the company held by the group’s 
esop  the trust was set up in 1998 and purchased shares at the time of the company’s flotation using funds provided by the company conditional awards
under the group’s ltip have been granted over these shares at 31 december 2003 but no awards have been made since the trust was created as at 
31 december 2003 and 2002 the trust held 5000000 shares nominal value £2500 with a market value of £6425000 at 31 december 2003 2002
£2400000 all costs relating to the scheme are dealt with in the profit and loss account as they accrue and the trust has waived the right to receive
dividends of over and above 001 pence per share on all shares held 
own shares held also include £6131000 2002 £16596000 being the cost of 721080 shares nominal value £361 2002 1796754 shares nominal value
£898 held by the group’s quest which was established by the company during 1999 to acquire new shares in the company for the benefit of employees
and directors of the group of the £16596000 cost of shares held by the quest at 31 december 2002 £15868000 had originally been contributed by the
company by means of a gift and was written off against the profit and loss reserve in the years in which such contributions were made the gifted amounts
therefore do not form part of the prior year adjustment of £728000 during the year 1075674 shares 2002 220846 were allocated to satisfy employees’
and directors’ exercises under the company’s save as you earn scheme the market value of the shares at 31 december 2003 was £926588 2002
£862442 the trust has waived the right to receive dividends on the shares held by the quest and all costs relating to the scheme are dealt with in 
the profit and loss account as they accrue
share 
premium profit and
account loss account
company £000 £000
at 1 january 2003 as previously reported 80883 4324
prior year adjustment –2166
at 1 january 2003 as restated 80883 2158
premium on issue of new shares 254 –
shares allocated to satisfy exercises under saye schemes – 263
retained profit for the financial year – 4440
at 31 december 2003 81137 6861
21  reconciliation of movements in group shareholders’ funds
2003 2002
£000 £000
profit attributable to shareholders 15158 32239
equity dividends proposed 6106 –
9052 32239
other recognised gains and losses relating to the year 1425 807
credit in respect of employee share awards 150 –
new share capital issued 1 4
shares allocated to satisfy exercises under saye schemes 263 222
share premium on issue of new shares 254 4759
net addition to shareholders’ funds 8295 36417
opening shareholders’ funds as previously reported 174306 138111
prior year adjustment see note 20 2166 2388
opening shareholders’ funds as restated 172140 135723
closing shareholders’ funds 180435 172140
notes to the financial statementsuk gaapcontinued
50 arm annual report and accounts 2003 22 acquisition of subsidiary undertaking
in july 2003 the group acquired 100 of the issued share capital of adelante technologies nv a belgian company for total consideration of £390000 
the following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the group
accounting
policy fair value
book value revaluation alignment to group
£000 £000 £000 £000
fixed assets
tangible 380 69 – 311
current assets
debtors 647 – – 647
deferred tax asset – 640 – 640
cash 23 – – 23
total assets 1050 571 – 1621
creditors
trade creditors 135 – – 135
accruals and deferred revenue 434 – 104 330
provisions
pensions 482 587 – 1069
total liabilities 1051 587 104 1534
net liabilitiesassets 1 16 104 87
goodwill 303
satisfied by
cash consideration 312
expenses 78
total consideration 390
the book value of the assets and liabilities have been taken from the management accounts of the company at the date of acquisition at actual exchange
rates on that date revaluation adjustments were made to 
● the value of tangible fixed assets to reflect the fair market value of the company’s assets
● the pension provision to increase the liability to £1069000 as the scheme had a deficit at the time of acquisition the scheme was valued on
acquisition by qualified actuaries using the projected unit method and 
● to the deferred tax recognised to reflect the anticipated usage of the company’s brought forward tax losses
a fair value adjustment was made to deferred revenue to align the company’s revenue recognition policy with that of the group
the company’s loss after tax for the year ended 31 december 2002 was £11 million and for the period from 1 january 2003 until acquisition was 
£13 million
in april 2003 the group acquired the minority interest comprising 15 of issued share capital of arm korea limited already a subsidiary undertaking 
for cash consideration of £3023000 no fair value adjustments were made and goodwill arising on this acquisition amounted to £2077000
the acquisitions have been accounted for using acquisition accounting
23  minority interests
2003 2002
£000 £000
at 1 january 841 609
profit and loss account 105 232
acquisition of minority interest in subsidiary undertaking 946 –
equity minority interests at 31 december – 841
during the year the group acquired the minority interest in arm korea limited bringing its holding to 100 further details are shown in note 22
arm annual report and accounts 2003 51 24  reconciliation of operating profit to net cash inflow from operating activities
2003 2002
£000 £000
operating profit 18439 41129
depreciation on tangible fixed assets 12908 12463
profit on sale of tangible fixed assets 6 14
amortisation of goodwill 1299 1352
amortisation of other intangible assets 3342 2777
amounts written off unlisted investments 622 826
decreaseincrease in stocks 584 934
decrease in trade debtors 3458 4293
decreaseincrease in prepayments and accrued income 2689 4960
decreaseincrease in trade creditors 2468 2369
increase in other taxation and social security 223 40
increasedecrease in accruals deferred income and other creditors 2453 7060
movement in provisions for liabilities and charges 47 194
ltip compensation charge 150 –
net cash inflow from operating activities 43740 52087
25  reconciliation of net cash flow to movement in net funds
2003 2002
£000 £000
increasedecrease in cash for the year 27139 5072
cash outflow from purchase of shortterm investments 3650 31637
change in net funds from cash flows 30789 26565
noncash items
translation difference 1307 728
movement in net funds in the year 29482 25837
net funds at start of the year 130304 104467
net funds at end of the year 159786 130304
26  analysis of net funds
cash at bank shortterm
and in hand investments total
£000 £000 £000
at 1 january 2003 4291 126013 130304
cash flow 27139 3650 30789
translation differences 1307 – 1307
at 31 december 2003 30123 129663 159786
27  cash flow from acquisitions
2003 2002
£000 £000
acquisitions
purchase of shares 3335 –
acquisition expenses 78 –
cash at bank and in hand acquired 23 –
net cash outflow from acquisitions 3390 –
notes to the financial statementsuk gaapcontinued
52 arm annual report and accounts 2003 28  capital commitments
2003 2002
group £000 £000
capital expenditure that has been contracted for but has not been provided for in the financial statements 1365 1714
the company had no capital commitments at 31 december 2003 and 2002
29  financial commitments and contingencies
at 31 december 2003 the group had annual commitments under noncancellable operating leases as follows
2003 2002
land and land and
buildings other buildings other
£000 £000 £000 £000
expiring within one year 285 89 321 8
expiring between two and five years inclusive 1057 1333 894 1778
expiring in over five years 2114 – 2110 –
3456 1422 3325 1786
at 31 december 2003 and 2002 the company had no annual commitments under noncancellable operating leases
in may 2002 nazomi communications inc filed suit against arm alleging wilful infringement of nazomi’s us patent no 6332215 by arm’s jazelle
technology arm answered nazomi’s complaint in july 2002 denying infringement of the ‘215 patent asserting various affirmative defences and asserting
counterclaims arm moved for summary judgement and a ruling that the current version of its processor designs incorporating the jazelle technology does
not infringe the ‘215 patent the district court granted arm’s motion holding that the current version of its processor designs incorporating the jazelle
technology does not infringe the ‘215 patent nazomi has appealed the district court’s ruling the appeal court has not set a date to hear the appeal yet
arm is confident that the original ruling by the district court will be upheld on appeal
30  related party transactions
the company has taken advantage of the exemption from disclosure available to parent companies under frs 8 “related party disclosures” where
transactions and balances between group entities have been eliminated on consolidation
during the year the group invested a further £1152000 in superscape group plc a company in which mike inglis is a nonexecutive director additionally
the group purchased a licence for £500000 from superscape group plc and made crosslicence payments of £453000 to superscape group plc £392000
was owed to them at 31 december 2003
there were no other related party transactions during 2003 or 2002 which require disclosure
arm annual report and accounts 2003 53 31  summary of significant differences between united kingdom generally accepted accounting principles uk gaap followed by the group 
and united states generally accepted accounting principles us gaap
the financial information set out in this report has been prepared under uk gaap which differs in certain significant respects from us gaap  the principal
differences between the group’s accounting policies under uk gaap and those that would have been followed had the financial information been prepared
under us gaap are set out below
goodwill under uk gaap  goodwill is amortised on a straightline basis over an estimate of the time that the group is expected to benefit from it this 
was also the group’s accounting policy under us gaap prior to 1 january 2002 on which date following the provisions of sfas 142 “goodwill and other
intangible assets” the carrying value of goodwill was frozen and became subject to annual impairment reviews no writeoffs of goodwill arose as a result
of the group’s impairment reviews
amortisation of intangibles under uk gaap  intangible assets purchased as part of a business combination are included within the goodwill balance unless
the asset can be identified and sold separately without disposing of the business as a whole under us gaap  such intangible assets may meet the criteria
set out in sfas 142 “goodwill and other intangible assets“ for categorisation as intangible assets other than goodwill and are amortised over their useful
economic lives under us gaap  payments made to purchase intangible assets that are still in development are charged directly to the profit and loss
account thus differences arise in the amounts of goodwill recognised and the associated amortisation charge
marketable securities under us gaap  investments in availableforsale securities are marked to market where the market value is readily determinable
and gains and losses net of deferred taxation are recorded in other comprehensive income where an impairment is considered to be other than
temporary the security is written down through the profit and loss account to a new cost basis represented by the fair value of the security on the date 
the impairment was determined under uk gaap  the group’s accounting policy is to carry such investments at cost less any provisions for impairment
long term incentive plan ltip under uk gaap  the fair value of the shares awarded under the ltip is charged to compensation cost over the period in
respect of which performance conditions apply to the extent the award is adjusted by virtue of performance conditions being met or not the compensation
cost is adjusted in line with this under us gaap  the group follows variable plan accounting for these grants measuring compensation expense as the
difference between the exercise price and the fair market value of the shares at each period end over the vesting period of the options increases in fair
market value of the shares result in a charge and decreases in fair market value of the shares result in a credit subject to the cumulative amount previously
expensed 
save as you earn saye plans under uk gaap  the group has taken advantage of the exemption provided by uitf 17 “employee share schemes” not to
recognise any compensation charge in respect of options granted under saye plans under us gaap  the group follows the requirements of eitf 0023
which does not permit such an exemption in respect of plans where the savings period is in excess of 27 months as is the case with the group’s inland
revenue approved uk saye plans eitf 0023 applies only to new offers made since 24 january 2002 the compensation charge made under us gaap is
calculated as the difference between the market price of the shares at the date of grant and the exercise price of the option and is recorded on a straight
line basis over the savings period in addition certain options attract a charge under variable plan accounting under us gaap 
employer taxes on share options under uk gaap  employer’s taxes that are payable on the exercise of share options are provided for over the vesting
period of the options under us gaap such taxes are accounted for when the options are exercised
tax on uk and us share options in the us the group is entitled to a tax deduction for the amount treated as compensation under us tax rules for certain
employee share options which have been exercised during the year similarly in the uk the group is entitled to a tax deduction for the profit made 
by employees on certain options that have been exercised during the year in both cases the amount is equivalent to the difference between the option
exercise price and the fair market value of the shares at the date of exercise under uk gaap the tax benefit arising from this deduction is included in the
tax charge in the profit and loss account whilst under us gaap  the tax benefit is recorded as an increase in shareholders’ funds
embedded derivatives under us gaap  where the group enters into sales contracts denominated in a currency that is neither the functional currency of the
group nor the functional currency of the customer and where there are uninvoiced amounts on such contracts such derivatives are carried at fair value the
resulting gain or loss is recognised in the income statement embedded derivatives are not revalued to fair value under uk gaap 
cash under uk gaap  cash does not include shortterm deposits and investments which cannot be withdrawn without notice and without incurring 
a penalty such items are shown as shortterm investments under us gaap  deposits with a maturity of less than three months at inception which are
convertible into known amounts of cash are included as cash and cash equivalents deposits with a maturity at inception of between three months and 
one year are shown as shortterm investments
consolidated profit and loss account under uk gaap  gains and losses on disposal of fixed asset trade investments are shown after operating profit under
us gaap  gains and losses are reported in income from operations under uk gaap  profit before tax is stated before minority interests under us gaap 
income before income tax is stated after minority interests
consolidated statement of cash flows the consolidated statement of cash flows prepared under uk gaap presents substantially the same information 
as that required under us gaap  
notes to the financial statementsuk gaapcontinued
54 arm annual report and accounts 2003 31  summary of significant differences between united kingdom generally accepted accounting principles uk gaap followed by the group 
and united states generally accepted accounting principles us gaap continued
under uk gaap cash flows are presented separately for operating activities returns on investments and servicing of finance taxation capital expenditure
and financial investments acquisitions and disposals management of liquid resources and financing activities us gaap  however requires only three
categories of cash flow activity to be reported operating investing and financing cash flows from taxation and returns on investments and servicing of
finance shown under uk gaap are included as operating activities under us gaap 
dividends payable under uk gaap  dividends declared after the period end are recorded in the period to which they relate under us gaap  they are
recorded in the period in which they are declared
a reconciliation of uk gaap profit to us gaap net income
2003 2002
£000 £000
profit for the financial year as reported under uk gaap 15158 32239
adjustments for
employer’s taxes on share options 47 194
compensation charge in respect of saye schemes 310 56
compensation charge in respect of ltip 91 –
writeback of goodwill 1299 1352
amortisation of intangibles 42 –
embedded derivatives 1141 950
tax on uk and us employee share options 966 754
impairment of marketable security 938 –
net income as reported under us gaap 13016 31637
b reconciliation of shareholders’ equity from uk to us gaap
2003 2002
£000 £000
shareholders’ funds as reported under uk gaap 180435 172140
adjustments for 
employer’s taxes on share options 63 16
cumulative difference on amortisation of goodwill 2713 1414
cumulative difference on amortisation of intangibles 192 150
embedded derivatives 2091 950
unrealised gain on marketable security 1041 –
dividends payable 6106 –
shareholders’ equity as reported under us gaap 188075 172470
 the prior year’s figures have been restated solely as a result of the adoption of uitf 38 “accounting for esop trusts” see note 20
c reconciliation of uk gaap cash to us gaap cash and cash equivalents
2003 2002
£000 £000
cash as reported under uk gaap 30123 4291
adjustment for shortterm investments treated as cash equivalents under us gaap 100599 126013
cash and cash equivalents as reported under us gaap 130722 130304
d reconciliation of uk gaap shortterm investments to us gaap shortterm investments
2003 2002
£000 £000
shortterm investments as reported under uk gaap 129663 126013
adjustment for shortterm investments treated as cash equivalents under us gaap 100599 126013
shortterm investments as reported under us gaap 29064 –
arm annual report and accounts 2003 55 the following selected financial data should be read in conjunction with and is qualified in its entirety by reference to the financial statements of arm
holdings plc “the company” expressed in sterling set forth on pages 61 to 78 of this report
selected consolidated financial data – us gaap
1999 2000 2001 2002 2003
£000 £000 £000 £000 £000
revenues 62120 100730 146274 150922 128070
cost of revenues 9803 11647 17289 13185 11022
operating expenses 36530 57846 82848 96456 99785
income from operations 15787 31237 46137 41281 17263
interest net 2266 3912 4470 4373 4801
share of loss of equity affiliate – 85 – – –
gain on partial disposal of shares in equity affiliate – 512 – – –
minority interest 64 192 303 232 105
income before income tax 17989 35384 50304 45422 21959
provision for income taxes 1757 6007 16302 13785 8943
net income 16232 29377 34002 31637 13016
diluted earnings per common share 16p 29p 33p 31p 13p
research and development as a percentage of revenues 276 262 253 313 376
capital expenditure £5900 £11842 £17349 £15616 £3605
cash cash equivalents and shortterm investments £51804 £75266 £104467 £130304 £159786
shareholders’ equity £67113 £100972 £135845 £172470 £188075
total assets £83288 £127343 £175814 £205744 £222997
employees at year end number 443 619 722 721 740
selected consolidated financial dataus gaap
56 arm annual report and accounts 2003 the following discussion should be read in conjunction with the consolidated financial statements and notes thereto the matters addressed in this operating
and financial review and prospects with the exception of the historical information presented contain forwardlooking statements involving risks and
uncertainties
overview arm designs highperformance lowcost powerefficient reduced instruction set computing risc microprocessors and related technology and
software and licenses this ip to semiconductor companies which in turn manufacture market and sell microprocessors applicationspecific integrated
circuits asics and applicationspecific standard products assps based on the arm architecture to systems companies arm also licenses and sells
development systems directly to systems companies and provides consulting and support services to its licensees systems companies and other system
designers arm has developed an innovative intellectual propertycentred and marketdriven business model in which it neither manufactures nor sells the
products incorporating arm technology but concentrates on the research and development design and support of the arm architecture and supporting
development tools and software
market conditions the challenging economic environment in the semiconductor industry experienced in recent years persisted throughout 2003 and the
industry remained competitive despite this the outlook from our partners has developed a more positive tone supported by increased product shipments
resulting in increased royalty income for the company both our royalty revenues and units have increased significantly compared with 2002 and quarter on
quarter throughout 2003 partners have remained cautious though in licensing new technology and this has had a direct impact on our licensing activity
the decision in 2002 to adjust our cost base in line with our expectations of short to mediumterm revenue growth has ensured that the company 
has remained profitable through 2003 with operating margins also increasing quarter on quarter excluding oneoff legal settlement costs despite 
this decision we have continued to invest heavily in research and development which has resulted in a variety of new products being released during 
2003 including the arm1156™ and arm1176™ cores as well as new features and enhanced functionality with the trustzone security extension and
thumb2 core technology
as well as remaining profitable the company has been robustly cash generative with net cash inflows from operating activity of £387 million giving rise
to a yearend cash cash equivalents and shortterm investments balance of £1598 million
the table below sets forth for the periods indicated the percentage of total revenues represented by certain items reflected in the company’s consolidated
statements of income
year ended 31 december
2001 2002 2003
 
revenues
product revenues 875 881 882
service revenues 125 119 118
total revenues 1000 1000 1000
cost of revenues
product costs 56 43 48
service costs 62 44 38
total cost of revenues 118 87 86
gross profit 882 913 914
operating expenses
research and development 253 313 376
sales and marketing 147 164 179
general and administrative 154 149 224
restructuring costs – 13 –
amortization of goodwill 13 – –
total operating expenses 567 639 779
income from operations 315 274 135
interest net 31 29 37
minority interest 02 02 01
income before income tax 344 301 171
provision for income taxes 111 91 70
net income 233 210 101
total revenues total revenues were £1281 million in 2003 a decrease of 15 from £1509 million in 2002 which was a 3 increase from £1463 million
in 2001 the actual average dollar exchange rate in 2003 was 164 compared with the effective average rate for arm of 161 compared with £150 in
2002 this had the effect of reducing total reported revenues by approximately £96 million
operating and financial review and prospectsus gaap
arm annual report and accounts 2003 57 product revenues product revenues consist of license fees sales of development systems and royalties product revenues for 2001 2002 and 2003 were
£1280 million £1329 million and £1130 million representing 87 88 and 88 of total revenues respectively
license revenues increased from £768 million in 2001 to £830 million in 2002 and decreased to £508 million in 2003 representing approximately 52
55 and 40 of total revenues in 2001 2002 and 2003 respectively 
the continuing importance of the arm7 family was evident in 2003 accounting for 18 of licensing revenues in 2003 compared with 15 in 2002 and
20 in 2001 this proportion reflected the increasing volume of peruse licenses signed within the foundry programme revenues from the arm9 family
have declined accounting for 44 of revenues in 2001 43 in 2002 and 31 in 2003 partly due to more peruse licenses being taken than full
implementation licenses and partly due to the growing range of other cores available to license from the company these include a broadening number 
of arm9 arm10 and arm11 core family products including the arm926 in the foundry programme the arm 968 arm1156 and arm1176 the first 
core in the nextgeneration family of arm products and architectural licenses which give licensees more rights to modify the technology peripheral
technology models subsystems and application software 51 new licenses were signed in 2003 as well as 26 new licensees bringing the total number 
of semiconductor partners to 128 at the end of 2003 of the 51 new licenses 26 were peruse licenses within the foundry programme introduced in 2000
to enable small fabless chip companies to gain access to the company’s technology at a lower price point sales of licenses to the existing customer base of
semiconductor partners has become a more important part of the business accounting for more than 90 of total license fees in 2003 this compares with
approximately 89 in 2002 and 80 in 2001 these existing partners take licenses to new core families not previously licensed or derivatives of cores
already licensed
the sale of noncore licenses covering items such as platforms peripherals embedded trace modules models and subsystems decreased in 2003 to 
£89 million from £126 million in 2002 and £119 million in 2001 representing approximately 18 of license revenues in 2003 15 in 2002 and 15 
in 2001
revenues from the sale of development systems decreased from £233 million in 2001 to £231 million in 2002 to £179 million in 2003 representing
approximately 16 15 and 14 of total revenues in 2001 2002 and 2003 respectively the majority of arm’s sales of development systems are in 
us dollars and the us dollar value of sales of development systems in 2003 was approximately 16 lower than in 2002 sales of development systems
have continued to be affected by increased competition in the debug tools marketplace to assist in the future development of our development systems
business we have put in place a new management team and increased resource within this group to progress the products upgrades and releases
available the first indicators of these actions have shown through in the latter stages of the year and will continue further into 2004
royalties are either set as a percentage of the licensee’s net sales price per chip or less frequently as a fixed amount and are recognized when the
company receives notification from the customer of product sales in effect this means that it is normally in the quarter following the shipments that data
is received and so royalty data for a year reflects actual shipments made from the beginning of october of the previous year to the end of september of the
current year royalties decreased from £279 million in 2001 to £268 million in 2002 and increased to £443 million in 2003 representing 19 18 and
34 of total revenues in 2001 2002 and 2003 respectively volume shipments increased from 420 million units in 2001 to 456 million units in 2002 mainly
due to increased production of a wide range of electronic devices including wireless handsets secure products and automotive products unit shipments in
2003 were 782 million with the increase in volumes coming from all market segments we have seen the company becoming less reliant on the wireless
sector where although actual unit shipments have significantly increased in 2003 their contribution has consistently fallen below 70 of total reported
units the consumer entertainment and storage market segments have shown the largest relative growth in the year the company expects the trend of
increasing proportions of unit shipments into the nonwireless markets to continue into 2004 the company expects royalty revenues to grow year on year
although they may be subject to significant fluctuations from quarter to quarter 
service revenues service revenues consist of design consulting services and revenues from support maintenance and training service revenues decreased
from £183 million in 2001 to £180 million in 2002 to £151 million in 2003 representing 13 12 and 12 of total revenues in 2001 2002 and 
2003 respectively consulting revenues decreased from £74 million in 2001 to £44 million in 2002 and £24 million in 2003 as engineering resource 
was directed away from consulting projects to research and development activities revenues from support maintenance and training increased from 
£109 million in 2001 to £136 million in 2002 and decreased to £127 million in 2003 
geographic analysis operating in a global environment the geographic destinations of the company’s revenues fluctuate from period to period depending
upon the country of origin of its customers the pattern of revenues in 2003 was 51 of revenues coming from the us 19 from japan 12 from asia
pacific excluding japan and 18 from europe in 2002 revenues from the us represented 44 japan 25 asia pacific excluding japan 13 and europe
18 in 2001 49 of revenues came from the us 23 from japan 9 from asia pacific excluding japan and 19 from europe
product costs product costs are limited to variable costs of production such as the costs of manufacture of development systems amortization of our third
party technology licenses and crosslicense payments to collaborative partners product costs were £82 million in 2001 £65 million in 2002 and £62 million
in 2003 representing 6 4 and 5 of total revenues in 2001 2002 and 2003 respectively approximately twothirds of total product cost of sales were
made up of development systems costs in 2003 with the balance comprising additional costs related to the costs of thirdparty licenses and crosslicense
payments to collaborative partners this compares to approximately fourfifths of total product cost of sales being made up of development systems costs in
2001 and twothirds in 2002 with the balance being costs associated with thirdparty licenses product gross margin in 2003 was 95 compared to 95 in
2002 and 94 in 2001 the company does not currently expect a significant increase in product costs in 2004 although this would be subject to significant
fluctuations if management were obliged to port further operating systems to run on the arm architecture
service costs service costs include the costs of support and maintenance services to licensees of arm technology as well as the costs directly attributable 
to consulting work performed for third parties cost of services decreased from approximately £91 million in 2001 to £67 million in 2002 to £49 million in
2003 the gross margins earned on service revenues were approximately 50 in 2001 63 in 2002 and 68 in 2003 in 2003 the company elected to
allocate more engineering resource to research and development activities thus enabling the company to develop more innovative products and
technologies during the year
operating and financial review and prospectsus gaapcontinued
58 arm annual report and accounts 2003 research and development costs research and development costs increased from £369 million in 2001 to £473 million in 2002 and £481 million in 2003
representing 25 31 and 38 of total revenues in 2001 2002 and 2003 respectively continued investment in research and development remains an
essential part of the company’s strategy since the development of new products to license is key to its ongoing success key areas of product development
for 2004 include the development of further powersaving technologies optimode and central processing unit cpu cores based on symmetric
multiprocessor technology improved security through the trustzone and securjc technologies and developments in superscalar cpu architectures
total engineering headcount decreased from 429 at the end of 2001 to 420 at the end of 2002 and was 442 at the end of 2003 the increase in 2003 was
predominantly due to the acquisition of arm belgium nv
sales and marketing sales and marketing expenditure increased from £215 million in 2001 to £247 million in 2002 and was £230 million in 2003
representing 15 of total revenues in 2001 16 in 2002 and 18 in 2003 headcount in this area increased from 198 at 31 december 2001 to 208 at 
31 december 2002 and decreased to 203 at 31 december 2003 the total number of offices with sales people is currently 14 and this enables improved
contact with the company’s geographically diverse customer base in 2001 a further sales office was opened in the us and in 2002 a sales office was
opened in shanghai pr china additional sales offices are expected to be opened in india and pr china during 2004
general and administrative general and administrative headcount decreased from 95 at 31 december 2001 to 93 at 31 december 2002 and was 
95 at 31 december 2003 general and administrative costs were £225 million in both 2001 and 2002 and increased to £287 million in 2003 representing
15 15 and 22 of total revenues respectively costs in 2003 include £16 million of impairments made to investments 2002 £08 million 2001 
£06 million legal costs fluctuated from £55 million in 2001 to £25 million in 2002 and £91 million in 2003 largely as a result of annual variations in 
the amount of legal expenses relating to patent protection cases and other similar costs the primary reason for the increase in legal costs from 2002 to
2003 was the provision for settlement of the herodion arbitration expense in relation to provisions for doubtful debts was £14 million in 2002 compared
with £07 million in 2001 and a net release of £11 million in 2003 unrealized future foreign exchange losses on certain committed but not yet invoiced
future revenue streams of £11 million 2002 £10 million 2001 £nil were recorded in accordance with sfas 133 there was a loss on foreign exchange 
of £02 million in 2001 an exchange gain of £05 million in 2002 and an exchange gain of £09 million in 2003 see “foreign currency fluctuations” below
restructuring costs during 2002 the company incurred restructuring costs of £20 million comprising mainly severance payments substantially all of which
were paid during the fourth quarter of 2002 following a reduction in total headcount of 98 people representing 12 of the company’s workforce 
amortization of goodwill and intangible assets the company purchased the assets of infinite designs limited in march 2000 euromips systems sas in
june 2000 and allant software corporation in september 2000 in 2001 the company purchased the assets of noral micrologics limited a tenperson
company with expertise in debugging software for a consideration of £14 million amortization of goodwill of £19 million was charged to the income
statement in 2001 there was no charge for goodwill in 2002 or 2003 following the company’s adoption of sfas 142 “goodwill and other intangible assets”
during 2000 a license connected with the rights to use a certain debugging technology for use in the company’s development systems products was
purchased for £28 million this is being amortized over a period of three years with £07 million 2002 £09 million 2001 £09 million amortized during
2003 the company also purchased a new license for £11 million in 2001 to enable the company to produce and license java technologyrelated products
this is being amortized over a period of five years with £02 million amortized during 2001 £02 million amortized during 2002 and a further £02 million
amortized during 2003 a further license was purchased in 2002 for £02 million this is being amortized over three years with £01 million amortized during
2003 an additional two licenses were purchased in 2003 totalling £07 million and these are being amortized over three years with £02 million being
amortized in the year
following the outofcourt settlement of the company’s litigation against picoturbo inc in december 2001 picoturbo assigned its intellectual property rights
to the company for a payment of £75 million this is being amortized over four years and £15 million was charged to the income statement in 2002 and 
£20 million in 2003
the company also purchased a patent for £07 million in 2002 which is being amortized over five years the amortization charge for 2002 was £01 million
and for 2003 was £01 million
the adoption of sfas 142 “goodwill and other intangible assets” has not resulted in any impairment of the company’s goodwill or intangible assets
interest interest receivable fell from £45 million in 2001 to £44 million in 2002 and increased to £48 million in 2003 the growth in interest earned
between 2002 and 2003 was due to higher average cash balances and interest earned fell slightly between 2001 and 2002 reflecting the drop in market
interest rates during 2001 and 2002 the company invested cash balances over periods of up to six months during 2003
income before income tax income before income tax was £503 million in 2001 £454 million in 2002 and £220 million in 2003 representing 34 30
and 17 of total revenues respectively the drop in margins in 2002 was a result of lower than anticipated revenues in the second half of the year whilst
the drop in margin in 2003 was due to lower revenues and higher legal costs including oneoff settlement costs not being entirely offset by reduced other
operating expenses
tax charge the company’s effective tax rates were 324 in 2001 303 in 2002 and 407 in 2003 the effective tax rate fell in 2002 as a result of 
the company’s ability to claim research and development tax credits for most of the year but increased in 2003 due to the impact of certain cash and 
noncash accounting charges not being deductible for tax purposes
arm annual report and accounts 2003 59 liquidity and capital resources the company’s operating activities provided net cash of £520 million £395 million and £387 million in 2001 2002 and
2003 respectively in 2001 the significant items impacting on cash generated from operations were the increase in accounts receivable of £66 million and
the increase in deferred revenue of £67 million in 2002 accounts receivable decreased £29 million while deferred revenues fell by £50 million and in
2003 accounts receivable decreased by a further £45 million and deferred revenues fell by £34 million accounts payable in 2003 fell by £25 million
compared with increases in 2002 and 2001 of £24 million and £03 million respectively in 2003 prepaid expenses decreased by £28 million compared 
with an increase of £53 million and £14 million in 2002 and 2001 respectively the company entered into several leases for design automation tools
during 2002 which resulted in the large increase in prepaid expenses but fell in 2003 as a result of the lease payments being for shorter prepaid periods
than in previous years the company believes that given its current level of business it has sufficient working capital for the foreseeable future
at 31 december 2003 the company recorded approximately £111 million in deferred revenues which represented cash or receivables scheduled to be
recognized as revenues in varying amounts after 31 december 2003 at 31 december 2002 and 31 december 2001 the company recorded approximately
£144 million and £194 million respectively in deferred revenues
cash flow from operations has been used to fund the working capital requirements of the company as well as capital expenditure capital expenditure in
2003 was £36 million compared with £156 million in 2002 and £173 million in 2001 expenditure in 2001 was high due to the need to invest in new
design automation tools for a rapidly expanding workforce and the costs of establishing and improving the company’s design centers in the uk france and
the us in 2002 capital expenditure decreased as a result of the company leasing some of the design automation tools that would have previously been
purchased capital expenditure in 2003 was much lower as a result of the increased leasing of the design automation tools and the much lower level of
recruitment in 2001 £40 million was spent on office improvements with £134 million spent on computer equipment and software in 2002 £82 million
was spent on computer equipment and software and £74 million on leasehold improvements and fixtures and fittings in 2003 £18 million was spent on
computer equipment and software and £18 million on leasehold improvements and fixtures and fittings
in 2001 the company purchased part of the business of noral micrologics limited for £14 million in cash
in 2003 the company acquired the 15 minority interest in arm korea limited for cash consideration of £30 million bringing its holding to 100 the
company also acquired the entire share capital of adelante technologies nv now renamed arm belgium nv for total consideration of £04 million
the company envisages making strategic investments in the future in situations where the company can broaden its product portfolio where it can obtain
skilled engineering resources and where the potential for furthering arm corebased design wins is improved significantly
in 2001 the company made the following investments in availableforsale securities £03 million in linkup systems inc and £10 million in pixim inc
in addition in 2001 the company sold its investment in parthus for a profit of £01 million and its investment in sirius communications nv for a profit of
£05 million it recognized a loss on its investment in linkup systems of £03 million at the end of 2001 when linkup’s entire business was purchased by 
a third party in 2002 the company made one investment in an availableforsale security namely superscape group plc for a consideration of £15 million
in 2003 the company invested a further £12 million in superscape group plc as part of a further funding round thus maintaining its 12 holding
cash and shortterm investment balances at 31 december 2003 were £1598 million compared to £1303 million at 31 december 2002 at 31 december
2002 accounts receivable net of allowances for doubtful debts were £205 million and £173 million at 31 december 2003 which represented 14 and
14 of revenues respectively
foreign currency fluctuations the company’s earnings and liquidity are affected by fluctuations in foreign currency exchange rates principally the us dollar
rate reflecting the fact that most of the company’s revenues and cash receipts are denominated in us dollars while a high proportion of its costs are in
sterling 
the company reduces this us dollarsterling risk where possible by currency hedging due to the high value and timing of receipts on individual licenses
and the requirement to settle certain expenses in us dollars the company reviews its foreign exchange exposure on a transactionbytransaction basis it
then hedges this exposure using forward contracts for the sale of us dollars which are negotiated with major uk clearing banks the average size of each
forward contract was 30 million in 2001 72 million in 2002 and 46 million in 2003 the company does not currently use any other financial
instruments or derivatives although the company is reviewing the use of other financial instruments such as currency options the fair values of the
financial instruments outstanding at 31 december 2001 2002 and 2003 are disclosed in footnote 13 to the financial statements the settlement period of
the forward contracts outstanding at 31 december 2003 is between 12 january 2004 and 26 march 2004
risk factors the company operates in the intensely competitive semiconductor industry which is characterized by price erosion rapid technological change
short product life cycles cyclical market patterns and heightened foreign and domestic competition the company believes that its future operating results
will continue to be subject to quarterly variations based upon a wide variety of factors these include the timing of entering into agreements with new
licensees the mixture of license fees royalties and fees from services the introduction of new technology by the company the timing of orders from and
shipments to systems companies of arm corebased microprocessors from the company’s semiconductor partners and sudden technological change in the
microprocessor industry 
other risks include the reliance on semiconductor partners dependence upon systems companies patent protection attraction and retention of employees
management of growth competition and vulnerability to general economic conditions risk factors are more fully discussed in the company’s annual report
on form 20f for 2003
operating and financial review and prospectsus gaapcontinued
60 arm annual report and accounts 2003 2001 2002 2003 2003
£000 £000 £000 000
revenues
product revenues 127976 132911 112958 202195
service revenues 18298 18011 15112 27050
total revenues 146274 150922 128070 229245
cost of revenues
product costs 8209 6464 6171 11046
service costs 9080 6721 4851 8683
total cost of revenues 17289 13185 11022 19729
gross profit 128985 137737 117048 209516
operating expenses
research and development 36941 47299 48131 86155
sales and marketing 21457 24711 22960 41098
general and administrative 22521 22486 28694 51362
restructuring costs –1960 ––
amortization of goodwill 1929 – ––
total operating expenses 82848 96456 99785 178615
income from operations 46137 41281 17263 30901
interest net 4470 4373 4801 8594
minority interest 303 232 105 188
income before income tax 50304 45422 21959 39307
provision for income taxes 16302 13785 8943 16008
net income 34002 31637 13016 23299
net income 34002 31637 13016 23299
other comprehensive income
foreign currency adjustments net of tax 14 807 1425 2551
unrealised holding lossgain on availableforsale securities net of tax 2087 – 1979 3542
total comprehensive income 31929 30830 13570 24290
basic earnings per common share 34p 31p 13p
diluted earnings per common share 33p 31p 13p
 us dollar amounts have been translated from sterling at the 31 december 2003 closing rate of £1  179 and are unaudited see footnote 1
all activities relate to continuing operations
the accompanying notes are an integral part of the financial statements
consolidated statements of income and comprehensive incomeus gaap
arm annual report and accounts 2003 61 2002 2003 2003
£000 £000 000
assets
current assets
cash and cash equivalents 130304 130722 233992
shortterm investments – 29064 52025
accounts receivable net of allowances for doubtful debts of £1115000 2002 £2193000 20516 17320 31003
inventory finished goods 1515 931 1666
prepaid expenses and other assets 11345 8924 15974
total current assets 163680 186961 334660
deferred income taxes 1697 3139 5619
property and equipment net 25721 16583 29684
intangible assets 10417 10068 18022
investments 4229 6246 11180
total assets 205744 222997 399165
liabilities and shareholders’ equity
current liabilities
accounts payable 4730 2691 4817
income taxes payable 3828 3140 5621
personnel taxes 824 1047 1874
accrued liabilities 8636 16912 30272
deferred revenue 14415 11132 19926
total liabilities 32433 34922 62510
minority interest 841 ––
33274 34922 62510
shareholders’ equity
ordinary shares £00005 par value 1580000000 authorized 
2002 1580000000 1023345650 issued 2002 1021758000 511 512 916
additional paidin capital 69566 63321 113345
deferred compensation 313 2499 4473
treasury stock at cost 5721080 ordinary shares 2002 6796754 18034 7569 13548
retained earnings 121403 134419 240610
other comprehensive income
unrealized holding gain on availableforsale securities net of tax – 1979 3542
cumulative translation adjustment 663 2088 3737
total shareholders’ equity 172470 188075 336655
total liabilities and shareholders’ equity 205744 222997 399165
 us dollar amounts have been translated from sterling at the 31 december 2003 closing rate of £1  179 and are unaudited see footnote 1
the accompanying notes are an integral part of the financial statements
consolidated balance sheetsus gaap
62 arm annual report and accounts 2003 2001 2002 2003 2003
£000 £000 £000 000
cash flows from operating activities
net income 34002 31637 13016 23299
adjustments to reconcile net income to net cash provided by operating activities
depreciation and amortization of tangible and intangible assets 12347 15240 16292 29163
stock option compensation – 56 551 986
deferred income taxes 359 858 1248 2234
tax effect of disqualifying dispositions 428 754 966 1729
provision for doubtful accounts 673 1393 1078 1930
accounts receivable converted to trade investments 1361 – ––
amount written off investments 613 826 1560 2792
other 164 218 99 177
changes in operating assets and liabilities
accounts receivable 6569 2900 4536 8120
inventory 196 934 584 1045
prepaid expenses and other current assets 1354 5339 2806 5023
accounts payable 312 2369 2468 4418
income taxes payable 5322 2676 688 1231
deferred revenue 6743 5005 3397 6080
accrued liabilities and other creditors 613 1105 6991 12514
personnel taxes 194 40 223 399
net cash provided by operating activities 51962 39516 38745 69354
cash flows from investing activities
purchase of equipment 13377 8670 1574 2818
purchase of leasehold improvements 3972 6946 1737 3109
sale of equipment 71 35 34 61
purchase of patent and licenses 8568 855 655 1172
purchase of investments – 1500 1152 2062
purchase of shortterm investments – – 29064 52025
sale of investments 1936 – ––
purchase of subsidiaries and businesses net of cash acquired 1351 – 3390 6068
net cash used in investing activities 25261 17936 37538 67193
cash flows from financing activities
cash received on issue of shares on exercise of share options 1558 4763 255 456
proceeds received on issuance of shares 958 222 263 471
net cash provided by financing activities 2516 4985 518 927
effect of foreign exchange on cash and cash equivalents 16 728 1307 2340
net increase in cash and cash equivalents 29201 25837 418 748
cash and cash equivalents at beginning of the period 75266 104467 130304 233244
cash and cash equivalents at end of the period 104467 130304 130722 233992
supplemental disclosure of cash flow information
cash paid for income taxes 9643 16758 9925
cash received on interest 4604 4187 4930
 us dollar amounts have been translated from sterling at the 31 december 2003 closing rate of £1  179 and are unaudited see footnote 1 
the accompanying notes are an integral part of the financial statements
consolidated statements of cash flowsus gaap
arm annual report and accounts 2003 63 additional cumulative unrealized
ordinary shares
paidin translation treasury holding deferred retained
amount capital adjustment stock gain compensation earnings total
number £000 £000 £000 £000 £000 £000 £000 £000
balances
1 january 2001 1000235371 500 78035 130 35544 2087 – 55764 100972
shares issued on 
exercise of options 14531805 7 1551 1558
net income 34002 34002
realization of holding
loss on available
forsale securities 2087 2087
tax effect of 
disqualifying dispositions 428 428
currency translation
adjustment 14 14
issuance of shares 14652 15610 958
balances
31 december 2001 1014767176 507 65362 144 19934 – – 89766 135845
shares issued on 
exercise of options 6990824 4 4759 4763
net income 31637 31637
tax effect of 
disqualifying dispositions 754 754
deferred compensation 
arising on saye plan 369 369 –
amortization of 
deferred compensation 56 56
currency translation
adjustment 807 807
issuance of shares 1678 1900 222
balances
31 december 2002 1021758000 511 69566 663 18034 – 313 121403 172470
shares issued on 
exercise of options 1587650 1 254 255
net income 13016 13016
unrealized holding gains
on availableforsale
securities 1979 1979
tax effect of 
disqualifying dispositions 966 966
deferred compensation 
arising on share schemes 2737 2737 –
amortization of 
deferred compensation 551 551
currency translation
adjustment 1425 1425
issuance of shares 10202 10465 263
balances
31 december 2003 1023345650 512 63321 2088 7569 1979 2499 134419 188075
 the amount of shareholders’ equity available for distribution to shareholders is the amount of profits determined under uk gaap in the statutory accounts of the parent company at 31 december 2003 such
distributable profits amounted to £6861000 after taking into account the proposed dividend of £6106000 for 2003
the accompanying notes are an integral part of the financial statements
consolidated statements of changes in shareholders’ equityus gaap
64 arm annual report and accounts 2003 1  the company and a summary of its significant accounting policies
the business of the company arm holdings plc and its subsidiary companies “arm” or “the company” design reduced instruction set computing risc
microprocessors and related technology and software and sell development systems to enhance the performance costeffectiveness and powerefficiency
of highvolume embedded applications the company licenses and sells its technology and products to leading international electronics companies which in
turn manufacture market and sell microprocessors applicationspecific integrated circuits asics and applicationspecific standard processors assps based
on the company’s architecture to systems companies for incorporation into a wide variety of end products by creating a network of partners and working
with them to best utilize the company’s technology the company is establishing its architecture as a risc processor for use in many highvolume embedded
microprocessor applications including digital cellular phones modems and automotive functions and for potential use in many growing markets including
smart cards and digital video the company also licenses and sells development systems direct to systems companies and provides consulting and support
services to its licensees systems companies and other systems designers the company’s principal geographic markets are europe the us and asia pacific
incorporation and history arm is a public limited company incorporated under the laws of england and wales the company was formed on 16 october
1990 as a joint venture between apple computer uk limited and acorn computers limited and operated under the name advanced risc machines
holdings limited until 10 march 1998 when its name was changed to arm holdings plc its initial public offering was on 17 april 1998
group undertakings include arm limited incorporated in the uk arm inc incorporated in the us arm kk incorporated in japan arm korea limited
incorporated in south korea arm france sas incorporated in france arm belgium nv formerly adelante technologies nv incorporated in belgium 
and acquired and renamed during 2003 allant software corporation incorporated in the us advanced risc machines limited incorporated in the uk
micrologic solutions limited incorporated in the uk arm taiwan limited incorporated in taiwan and arm consulting shanghai co limited incorporated
in pr china
basis of preparation the accompanying consolidated financial statements have been prepared under the historical cost convention and in accordance with
accounting principles generally accepted in the united states us gaap
the company maintains its accounting records and prepares its financial statements in uk sterling purely for the convenience of the reader the 
31 december 2003 consolidated financial statements have been translated from sterling at the closing rate on 31 december 2003 of £100  179 such
translations should not be construed as representations that the sterling amounts represent or have been or could be so converted into us dollars at that
rate or at any other rate
use of estimates the preparation of financial statements in conformity with us gaap requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes actual results could differ from these estimates
principles of consolidation the consolidated financial statements incorporate the financial statements of the company and all its subsidiaries intragroup
transactions including sales profits receivables and payables have been eliminated on consolidation the results of subsidiaries acquired in the year are
included in the income statement from the date they are acquired on acquisition all of the subsidiaries’ assets and liabilities that exist at the date of
acquisition are recorded at their fair values reflecting their condition at that date
investments publicly traded investments are classed as available for sale in accordance with statement of financial accounting standards sfas no115
“accounting for certain investments in debt and securities” and are carried at fair value unrealized holding gains or losses on such securities are included
net of related taxes in other comprehensive income otherthantemporary impairment losses and realized gains and losses of such securities are reported
in earnings equity securities that are not publicly traded are recorded at cost less permanent diminution in value at 31 december 2003 and 2002 the
estimated fair value of these investments approximated their recorded basis based on estimates determined by management 
two trade investments were made in 2001 one of which was a 17 investment in pixim inc and the other was a 13 investment in linkup systems
inc both of these are fabless chip companies based in california equity shares in both companies were received in settlement of accounts receivable 
the company sold its 3 stake in sirius communications nv during 2001
during 2002 the company made a 12 investment in superscape group plc a company listed on the london stock exchange the company made an
additional investment in superscape group plc during 2003 maintaining its percentage shareholding
intangible assets purchased patents and licenses to use technology are capitalized and amortized on a straightline basis over a prudent estimate of the
time that the company is expected to benefit from them 
an independent valuation is made of any intangible assets purchased as part of a business combination and such assets are capitalized and amortized over
a period of two to five years being a prudent estimate of the time that the company is expected to benefit from them with the exception of inprocess
research and development which is written off immediately 
goodwill goodwill represents the excess of the fair value of the consideration paid on acquisition of a business over the fair value of the assets including
any intangible assets identified and liabilities acquired 
prior to 2002 purchased goodwill was capitalized and amortized on a straightline basis over a prudent estimate of the time that the company is expected
to benefit from it upon adoption of sfas 142 on 1 january 2002 the company ceased amortizing goodwill the value of goodwill carried forward at the
end of 2001 has been frozen at £2274000 and goodwill will be tested for impairment at least annually an annual impairment review in 2003 determined
by way of a comparison of the company’s market capitalization to shareholders’ equity that there was no indication of impairment with respect to goodwill
notes to the financial statementsus gaap
arm annual report and accounts 2003 65 1  the company and a summary of its significant accounting policies continued
impairment charges the company reviews longlived assets to be held and used for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable if the sum of the expected future cash flows undiscounted and without interest charges of
the longlived assets is less than the carrying amount of such assets an impairment loss would be recognized and the assets are written down to their
estimated fair value
revenue recognition revenue consists of license fees received under the terms of license agreements with customers to enable them to use the
company’s intellectual property ip which is customized to each customer’s manufacturing process the company receives royalties on sales by the
company’s customers of products containing arm technology it also supplies offtheshelf software tools boughtin boards and toolkits training and
consultancy services 
the company primarily earns revenues from licensing its ip to leading electronics companies which in turn manufacture market and sell microprocessors
asics and assps based on the company’s architecture to systems companies for incorporation into a wide variety of end products the company’s ip consists
of software and related documentation which enables a customer to design and manufacture microprocessors and related technology and software most
licenses are designed to meet the specific requirements of each customer and are generally not time limited in their application in general the time
between the signing of a license and final customer acceptance is between six and 15 months upgrades or modifications to the licensed ip are not
provided following customer acceptance the company has no further obligations under the license agreement revenue from peruse licenses is
recognized when the product is accepted by the customer
in accordance with sop 811 “accounting for performance of constructiontype and certain production type contracts” when license agreements include
deliverables that require “significant production modification or customization” contract accounting is applied revenues from license fees are recognized
based on the percentagetocompletion method over the period from signing of the license to customer acceptance and the completion of all outstanding
obligations the amount of revenue recognized is based on the total license fees under the license agreement and the percentagetocompletion achieved
the percentagetocompletion is measured by monitoring progress using records of actual time incurred to date in the project compared with the total
estimated project requirement revenues are recognized only when collectability is probable estimates of total project requirement are based on prior
experience of customization delivery and acceptance of the same or similar technology and are reviewed and updated regularly by management under
the percentagetocompletion method provisions for estimated losses on uncompleted contracts are recognized in the period in which the likelihood of 
such losses is determined
agreements that include rights to unspecified products are accounted for using subscription accounting revenue from the arrangement being recognized
over the term of the arrangement or an estimate of the economic life of the products offered if no term is specified beginning with the delivery of the 
first product 
in accordance with sop 972 “software revenue recognition” where agreements involve multiple elements that do not require “significant production
modification or customization” the entire fee from such arrangements has been allocated to each of the individual elements based on each element’s
relative fair value revenue for each element is then recognized when the revenue recognition criteria for that element is met
certain products have been codeveloped by the company and a collaborative partner with both parties retaining the right to sell licenses to the product 
in those cases where the company makes sales of these products the total value of the license is recorded as revenue and the amount payable to the
collaborative partner is recorded as cost of sales where the collaborative partner makes sales of these products the company records as revenue the
commission it is due when informed by the collaborative partner that a sale has been made and cash has been collected
in addition to the license fees contracts generally contain an agreement to provide postcontract support support and maintenance pcs which consists 
of an identified customer contact at the company and telephone or email support revenue related to pcs is recognized based on vendorspecific objective
evidence vsoe determined based on the price of pcs when sold separately revenue for pcs is recognized on a straightline basis over the period for
which support and maintenance is contractually agreed by the company with the licensee
sales of boards and toolkits are recognized upon delivery where necessary and in the circumstances permitted by sop 972 the costs associated with
providing post contract support have been accrued
services such as consulting and training which are not essential to the functionality of the ip  are accounted for separately based on vsoe revenue is
recognized as services are performed and collectability is probable the excess of fees invoiced over revenue recognized in respect of such fees is recorded
as a deferred revenue liability
royalty revenues are earned on sales by the company’s customers of products containing arm technology revenues are recognized when arm receives
notification from the customer of product sales or receives payment of any fixed royalties normally quarterly in arrears
revenue from consulting projects which are typically of a short duration is recognized when the service has been provided and all obligations to the
customer under the consulting agreement have been fulfilled for longerterm and more complex consulting projects typically containing several project
milestones where significant modification to arm corebased ip is required revenue is recognized on a percentagetocompletion basis as milestones are
achieved this method approximates to percentage to completion based on labor inputs
notes to the financial statementsus gaapcontinued
66 arm annual report and accounts 2003 1  the company and a summary of its significant accounting policies continued
research and development all ongoing research and development expenditure is expensed in the period in which it is incurred costs include salaries
relevant eda tools costs and other directly related expenditure as well as a proportion of central facilities costs
grants grants in respect of specific research and development projects are receivable from the european commission a european organization which funds
certain research and development activities on application to it for the purposes of furthering research and development activities within the european
union the company retains significant rights to ip developed under projects which are funded under these arrangements grants received are intended to
cover 50 of expected project costs grant income is recognized over the period of the project in line with the costs incurred unconditional undertakings
have been received from the european commission to provide the funding and there is no obligation to refund any amounts already received amounts
receivable under these arrangements in the year ended 31 december 2003 were £226000 2002 £199000 2001 £268000 and were netted against
related research and development costs
pension costs the company contributes to defined contribution plans substantially covering all employees in europe and the us and to government pension
schemes for employees in japan south korea taiwan pr china and israel the company contributes to these plans based upon various fixed percentages 
of employee compensation and such contributions are expensed as incurred the amount of contributions expensed by the company for the years ended 
31 december 2001 2002 and 2003 were £1591000 £1894000 and £1848000 respectively
cash equivalents the company considers all highly liquid investments with original maturity dates of three months or less to be cash equivalents
shortterm investments the company considers all highly liquid investments with original maturity dates of greater than three months but less than one
year to be shortterm investments
allowance for doubtful debts allowance is made for doubtful debts following reviews of individual customer circumstances by management 
inventory inventory is stated at the lower of cost and net realizable value in general cost is determined on a firstinfirstout basis and includes transport
and handling costs where necessary provision is made for obsolete slowmoving and defective inventory
property and equipment the cost of property and equipment is their purchase cost together with any incidental costs of acquisition
depreciation is calculated so as to write off the cost of property and equipment less their estimated residual values on a straightline basis over the
expected useful economic lives of the assets concerned the principal economic lives used for this purpose are
freehold buildings 25 years
leasehold improvements five years or term of lease whichever is shorter
computers and software three years
fixtures and fittings five to ten years
motor vehicles four years
provision is made against the carrying value of property and equipment where an impairment in value is deemed to have occurred
operating leases costs in respect of operating leases are charged on a straightline basis over the lease term
currency translation the functional currency for the company’s operations is the local currency in which it operates
the assets and liabilities of subsidiaries denominated in foreign currencies are translated into sterling at rates of exchange ruling at the balance sheet date
statements of income of overseas subsidiaries are translated at the average exchange rate for the period translation differences are taken to the cumulative
translation adjustment
the company utilizes forward exchange contracts to manage the exchange risk on actual transactions related to accounts receivable denominated in a
currency other than the functional currency of the business the company’s forward exchange contracts do not subject the company to risk from exchange
rate movements because the gains and losses on such contracts offset losses and gains respectively on the transactions being hedged because the
company does not meet the criteria for hedge accounting the forward contracts and the related accounts receivable are recorded at fair value at each
period end all recognized gains and losses resulting from the settlement of the contracts are recorded within general and administrative costs in the
income statement the company does not enter into foreign exchange contracts for the purpose of hedging anticipated transactions
other transactions denominated in foreign currencies have been translated into sterling at actual rates of exchange ruling at the date of transaction
monetary assets and liabilities denominated in foreign currencies have been translated at rates ruling at the balance sheet date exchange differences have
been included in general and administrative costs
from time to time the company enters into sales contracts denominated in a currency typically us dollars that is neither the functional currency of the
company nor the functional currency of the customer in accordance with sfas 133 “accounting for derivative instruments and hedging activities” where
there are uninvoiced amounts on such contracts the company carries such derivatives at fair value the resulting gain or loss is recognized in the income
statement under general and administrative costs for the year ended 31 december 2003 the loss on exchange is £1141000 2002 £950000 2001 £nil
arm annual report and accounts 2003 67 1  the company and a summary of its significant accounting policies continued
income taxes income taxes are computed using the liability method under this method deferred income tax assets and liabilities are determined based on
temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that will be
in effect when the differences are expected to reverse valuation allowances are established against deferred tax assets where it is more likely than not that
some portion or all of the asset will not be realized
earnings per share basic earnings per common share is computed based on the weighted average number of ordinary shares diluted earnings per
common share is computed by including potential common shares where the effect of their inclusion would be dilutive the diluted share base for the 
year ended 31 december 2003 excludes incremental shares of approximately 18948000 2002 19608000 2001 6258000 related to employee stock
options these shares are excluded due to their antidilutive effect as a result of the exercise price of these shares being higher than the market price 
the ordinary equivalent shares for share options were determined using the treasury stock method
accounting for stockbased compensation the company has elected to use the intrinsic valuebased method to account for all its employee stockbased
compensation plans under the recognition and measurement principles of apb opinion no 25 “accounting for stock issued to employees” and related
interpretations stockbased employee compensation cost in respect of certain saye options see below of £310000 and in respect of the ltip of £241000
is reflected in net income no compensation cost is recorded in respect of the other stock option plans as all options granted under those plans had an
exercise price equal to the market value of the underlying common stock on the date of grant apart from certain options issued to executive directors
there are no performance conditions attached to the exercise of options for executive directors discretionary share options of up to two times base salary
may be issued each year that will vest after seven years if however the company achieves defined levels of eps growth above the rate of inflation over 
a period of three years then the options are exercisable after three years
the following table illustrates the effect on net income and earnings per share if the company had applied the fair value recognition provisions of fasb
statement no 123 “accounting for stockbased compensation” to stockbased employee compensation
year ended 31 december 
2001 2002 2003
£000 £000 £000
net income
as reported 34002 31637 13016
deduct total stockbased compensation expense determined under fair valuebased method 
for all awards net of related tax effects 11610 11165 15794
add back total stockbased compensation expense determined under the intrinsic valuebased method – 56 551
pro forma net incomeloss 22392 20528 2227
basic earningsloss per common share pence
as reported 34p 31p 13p
pro forma 22p 20p 02p
diluted earningsloss per common share pence
as reported 33p 31p 13p
pro forma 22p 20p 02p
the fair value of options granted was estimated on the date of grant using the blackscholes option pricing model with the following weightedaverage
assumptions used for grants in 2003 2002 and 2001 riskfree interest rate of between 32 and 49 2002 51 2001 51 expected life of between
one and five years between 60 and 127 2002 80 2001 79 volatility and no dividends 
the company operates save as you earn saye schemes in the uk and an employee share purchase plan espp in the us options under these schemes
are granted at a 15 discount to market price of the underlying shares on the date of grant the uk saye schemes are approved by the inland revenue
which stipulates that the savings period must be at least 36 months during 2002 the emerging issues task force eitf reached a consensus contained
within eitf 0023 that savings plans which have a savings period in excess of 27 months should be treated as compensatory in accordance with eitf 0023
which applies to new offers after 24 january 2002 the company has recognized a compensation charge in respect of the uk saye plans offered since 
that date the compensation charge is calculated as the difference between the market price of the shares at the date of grant and the exercise price 
of the option and is recorded on a straightline basis over the savings period the compensation charge recorded in 2003 is £310000 2002 £56000 
the deferred compensation at 31 december 2003 was £1081000 2002 £313000 
in addition the eitf reached a consensus that an employer’s offer to enter into a new saye contract at a lower price than an existing contract causes
variable accounting for all existing awards subject to the offer variable accounting commences for all existing awards when the offer is made and for those
awards that are retained by employees because the offer is declined variable accounting continues until the awards are exercised are forfeited or expire
unexercised new awards are accounted for as variable to the extent that previous higher priced options are canceled the compensation charge recorded in
2003 as a result of these provisions is £109000 2002 £nil the number of options to which variable accounting applies is approximately 950000 2002
980000
the company has an ltip on which it is also required to recognize a compensation charge under the eitf calculated as the difference between the exercise
price and the fair market value of the shares at the period end over the vesting period of the options during 2003 a charge of £241000 was incurred and
deferred compensation at 31 december 2003 was £1418000
notes to the financial statementsus gaapcontinued
68 arm annual report and accounts 2003 1  the company and a summary of its significant accounting policies continued
employee share ownership plans treasury stock represents the cost of shares in the company held by the employee benefit trust esop and the quest 
the esop was set up on 16 april 1998 to facilitate the recruitment retention and motivation of employees under the group’s long term incentive plan
2572646 shares could be awarded from shares already issued within the esop  the market value of unearned shares at 31 december 2003 was £6425000 
all costs relating to the schemes are recognized in the income statement as they accrue and the esop has waived the right to receive dividends of over and
above 001 pence per share on all shares held for the purpose of earnings per share calculations the shares are treated as canceled until such time as they
vest unconditionally
treasury stock held also includes £6131000 relating to 721080 shares held by the company’s quest which was established by the company during 1999
the company established the quest to acquire new shares in the company for the benefit of employees and directors of the company no shares were
purchased in 2003 2002 or 2001
the shares rank pari passu in all respects with the existing ordinary shares they will be allocated to employees and directors to satisfy their options granted
under the company’s saye schemes
during 2003 1075674 shares 2002 220846 were allocated from the quest following the exercise of share options granted under the company’s saye
schemes under the terms of the trust deed dividends have been waived on the shares held by the quest and all costs relating to the scheme are dealt
with in the income statement as they accrue
employer’s taxes on share options employer’s national insurance in the uk and equivalent taxes in other jurisdictions are payable on the exercise of
certain share options issued to employees in certain tax jurisdictions in accordance with eitf 0016 no provision has been made for the employer’s taxes 
on these share options these amounts will be recognized in the consolidated income statement when payable
recently issued accounting standards in january 2003 the fasb issued fasb interpretation no 46 fin 46 “consolidation of variable interest entities” 
fin 46 clarifies the application of accounting research bulletin no 51 “consolidated financial statements” to certain entities in which the equity investors
do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties fin 46 applies immediately to variable interest entities created after 31 january 2003 and 
as of 1 january 2004 to variable interest entities in which an enterprise holds a variable interest that it acquired before 1 february 2003 fin 46 applies to
public enterprises as of the beginning of the applicable interim or annual period management does not expect the adoption of fin 46 to have a material
effect on its consolidated financial statements
in may 2003 the fasb issued sfas no 150 sfas 150 “accounting for certain financial instruments with characteristics of both liabilities and equity” the
statement addresses the accounting for certain financial instruments that under previous guidance issuers could account for as equity and requires that
these instruments be classified as liabilities in statements of financial position this statement is effective prospectively for financial instruments entered into
or modified after 31 may 2003 and otherwise is effective at the beginning of the first interim period beginning after 15 june 2003 this statement shall be
implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the
statement and still existing at the beginning of the interim period of adoption the adoption of sfas 150 has not to date had any significant impact on 
the company’s financial position or results of operations
companies act 1985 these financial statements do not comprise statutory accounts within the meaning of section 240 of the companies act 1985 of 
great britain the “companies act” the company’s statutory accounts which are its primary financial statements are prepared in accordance with
accounting principles generally accepted in the united kingdom uk gaap in compliance with the companies act and are presented in pounds sterling
statutory accounts upon which the auditors gave unqualified reports under section 235 of the companies act and which did not contain statements under
subsections 2372 and 3 of the companies act for the years ended 31 december 2001 and 2002 have been and those for the year ended 31 december
2003 will be delivered to the registrar of companies for england and wales dividends are required to be declared in sterling out of profits available for 
that purpose as determined in accordance with uk gaap and the companies act
2  related party transactions
during the year the company invested a further £1152000 in superscape group plc a company in which mike inglis is a nonexecutive director
additionally the company purchased a license for £500000 from superscape group plc and made crosslicense payments of £453000 to superscape 
group plc £392000 was owed to them at 31 december 2003
arm annual report and accounts 2003 69 3  income taxes
income before income tax is analyzed as follows
year ended 31 december
2001 2002 2003
£000 £000 £000
united kingdom 46394 40646 16356
foreign 3910 4776 5603
50304 45422 21959
the provision for income taxes consisted of
year ended 31 december
2001 2002 2003
£000 £000 £000
current
united kingdom 14502 12852 8434
foreign 1441 1791 1447
total current 15943 14643 9881
deferred
united kingdom 268 500 1622
foreign 91 358 684
total deferred 359 858 938
total provision for income taxes 16302 13785 8943
included in the payable for income taxes is a current tax benefit of £656000 2002 £814000 2001 £282000 and a deferred tax charge of £310000
2002 credit of £60000 2001 charge of £146000 in relation to employee stock options such benefits are reflected as additional paidin capital
total income tax expense differs from the amounts computed by applying the uk statutory income tax rate of 30 for 2003 2002 and 2001 to income
before income tax as a result of the following
year ended 31 december
2001 2002 2003
£000 £000 £000
uk statutory rate 30 2002 30 2001 30 15091 13627 6588
permanent differences – other 1150 186 1803
differences in statutory rates of foreign countries 99 115 92
other net 38 143 460
16302 13785 8943
 permanent differences comprise permanent adjustments and the uk research and development tax credit
significant components of the deferred tax assets are as follows
year ended 31 december
2001 2002 2003
£000 £000 £000
fixed asset temporary differences 584 1193 2844
temporary difference on availableforsale securities – – 446
nondeductible accruals and reserves 255 519 429
losses carried forward 1397 544 815
total deferred tax assets 2236 2256 3642
valuation allowance 1397 559 503
net deferred tax assets 839 1697 3139
uk income taxes have not been provided at 31 december 2003 on unremitted earnings of approximately £6891000 2002 £10142000 2001
£7401000 of subsidiaries located outside the uk as such earnings are considered to be permanently invested if these earnings were to be remitted
without offsetting tax credits in the uk withholding taxes would be approximately £347000 2002 £518000 2001 £385000 the valuation allowance
relates to net operating loss carryforwards of certain subsidiaries where management believes it is more likely than not such amounts will not be realized
none of the loss carryforwards expires before 2018 the future use of the net operating losses carried forward in arm inc may be restricted in the event 
of a purchase by a third party whereby the level of losses to be utilized on an annual basis would be limited to 4 of the market value of arm inc at the
date of the transaction there is no such restriction on the losses carried forward in arm belgium nv
notes to the financial statementsus gaapcontinued
70 arm annual report and accounts 2003 4  earnings per share
year ended 31 december 2001
income shares per share
£ number amount
net income 34002000
basic eps
income available to common stockholders 34002000 999741581 34p
effect of dilutive securities
stock options 24891393
diluted eps 
income available to common stockholders plus assumed conversion 34002000 1024632974 33p
year ended 31 december 2002
income shares per share
£ number amount
net income 31637000
basic eps
income available to common stockholders 31637000 1012295401 31p
effect of dilutive securities
stock options 8465051
diluted eps 
income available to common stockholders plus assumed conversion 31637000 1020760452 31p
year ended 31 december 2003
income shares per share
£ number amount
net income 13016000
basic eps
income available to common stockholders 13016000 1016484029 13p
effect of dilutive securities
stock options 16823410
diluted eps 
income available to common stockholders plus assumed conversion 13016000 1033307439 13p
the following table summarizes the company’s reported results along with the adjusted amounts as if the company had adopted sfas 142 and
discontinued goodwill amortization as of 1 january 2001
year ended 31 december
2001 2002 2003
£000 £000 £000
reported net income 34002 31637 13016
add back goodwill amortized 1929 – –
adjusted net income 35931 31637 13016
basic earnings per share
reported net income 34p 31p 13p
goodwill amortization 02p – –
adjusted basic earnings per share 36p 31p 13p
diluted earnings per share
reported net income 33p 31p 13p
goodwill amortization 02p – –
adjusted diluted earnings per share 35p 31p 13p
arm annual report and accounts 2003 71 5  business risks and credit concentration
the company operates in the intensely competitive semiconductor industry which has been characterized by price erosion rapid technological change short
product life cycles cyclical market patterns and heightened foreign and domestic competition significant technological changes in the industry could affect
operating results
financial instruments that potentially subject the company to concentrations of credit risk comprise principally cash and cash equivalents and accounts
receivable the company generally does not require collateral on accounts receivable as many of the company’s customers are large wellestablished
companies the company has not experienced any significant losses related to individual customers or groups of customers in any particular industry or
geographic area
the company markets and sells to a relatively small number of customers with individually large value transactions for further information see footnote 12
at 31 december 2001 2002 and 2003 no customers accounted for more than 10 of accounts receivable 
as of 31 december 2001 2002 and 2003 the company’s cash and cash equivalents and shortterm investments were deposited with major clearing banks
and building societies in the uk in the form of money market deposits for varying periods of up to six months
6  acquisitions
in july 2003 the company purchased the entire share capital of adelante technologies nv now arm belgium nv a belgian company for total consideration
of £390000 comprising £312000 cash consideration and £78000 of related acquisition expenses arm belgium nv is a developer of data engine
processors for data intensive tasks and will enable arm to provide innovative ip solutions to meet the growing challenges of our partners
the following table sets out the fair values of the assets acquired and liabilities assumed at the date of acquisition
fair value
to company
£000
cash and cash equivalents 23
accounts receivable 647
total current assets 670
deferred income taxes 640
property and equipment net 311
intangible assets 302
goodwill 1
total assets acquired 1924
current liabilities
accounts payable 135
accrued liabilities and deferred revenue 330
pension provision 1069
total liabilities assumed 1534
net assets acquired 390
of the £302000 of acquired intangible assets £167000 was assigned to developed technology that is being amortized over five years and £135000 
to customer relationships that is being amortized over two years the company’s loss after tax for the year ended 31 december 2002 was £11 million 
and for the period from 1 january 2003 until acquisition was £13 million
in april 2003 the company acquired the 15 minority holding in arm korea limited already a subsidiary undertaking net assets acquired of £946000 
for cash consideration of £3023000 bringing the company’s holding to 100 goodwill resulting from this acquisition amounted to £2077000 there were
no separately identifiable intangible assets
on 1 february 2001 the company purchased part of the business and assets of noral micrologics limited for cash consideration of £1351000 the purchase
consideration has all been treated as goodwill as the book and fair value of the assets acquired were negligible further to this cash consideration the
acquisition agreement provided for cash bonuses and payments for postacquisition predefined services provided by employees these are being treated 
as payroll costs of the periods to which the services relate
the combinations have been accounted for using the purchase method
notes to the financial statementsus gaapcontinued
72 arm annual report and accounts 2003 7  investments
in 2002 the company invested £1500000 in superscape group plc an availableforsale investment a further £1152000 was invested in superscape
group plc during 2003 as part of a further funding round 
in 2001 the company disposed of two availableforsale investments realizing a gain of £655000
impairments during 2003 against unlisted investments held at the year end amounted to £622000 2002 £826000 2001 £613000 and against listed
investments held at the year end amounted to £938000
8  property and equipment
31 december
2002 2003
£000 £000
owned buildings 190 190
leasehold improvements 18763 20345
computers 10811 11168
software 31095 33106
fixtures fittings and motor vehicles 3101 3202
63960 68011
less accumulated depreciation 38239 51428
property and equipment net 25721 16583
depreciation charged to income for the years ended 31 december 2001 2002 and 2003 was £9327000 £12463000 and £12908000 respectively
9  intangible assets
developed customer
goodwill patents licenses technology relationships total
£000 £000 £000 £000 £000 £000
cost
at 1 january 2003 5594 8196 4049 – – 17839
additions 2078 – 655 167 135 3035
at 31 december 2003 7672 8196 4704 167 135 20874
aggregate amortization
at 1 january 2003 3320 1595 2507 – – 7422
charge for the year – 2145 1197 14 28 3384
at 31 december 2003 3320 3740 3704 14 28 10806
net book value
at 31 december 2003 4352 4456 1000 153 107 10068
at 31 december 2002 2274 6601 1542 – – 10417
until the adoption of sfas 142 on 1 january 2002 see footnote 1 goodwill was being amortized on a straightline basis over periods of up to three years
determined in each case by reference to employee turnover rates in the industry and the individual technology acquired with the acquisitions in accordance
with sfas 142 goodwill is no longer amortized and is tested for impairment at least annually
licenses to use technology are being amortized over periods of three to five years the amortization periods for licenses have been determined according 
to their estimated useful economic life
patents are being amortized over four to five years developed technology the main ip of the company existent at acquisition and generating revenue 
over five years and customer relationships relationships with customers which were generating revenue at acquisition over two years being the periods
over which the company is expected to derive benefit from them
the estimated amortization expense of intangible assets in each of the next five years is set forth below
£000
2004 2700
2005 2652
2006 266
2007 79
2008 19
arm annual report and accounts 2003 73 10  shareholders’ equity
share options the board is authorized to issue options to acquire ordinary shares in the company up to a maximum of 10 of the issued ordinary share
capital in any fiveyear period options issued prior to the listing of the company are excluded from this calculation
under the uk inland revenue executive approved share option plan the “executive scheme” the company may grant options to directors and employees
meeting certain eligibility requirements options under the executive scheme are exercisable between three and ten years after their issue after which time
the options expire
under the company’s unapproved scheme the “unapproved scheme” for which it has not sought approval from the uk inland revenue options are
exercisable one to seven years after their issue after which time the options expire the company also operates the us iso share option plan which is
substantially the same as the unapproved scheme the main difference being that the options are exercisable one to five years after their issue under both
of these schemes options are exercisable as follows 25 maximum on first anniversary 50 maximum on second anniversary 75 maximum on third
anniversary 100 maximum on fourth anniversary
there are two further schemes for our french and belgian employees the “french scheme” and the “belgian scheme” in the french scheme options are
exercisable between four and seven years after their issue whilst in the belgian scheme options are exercisable from 1 january following the third
anniversary after their issue up to seven years from issue
in 1998 the company set up two savingsrelated share option schemes for all employees and executive directors of the company the number of options
granted is related to the value of savings made by the employee the period of savings is three or five years except for employees of arm inc where the
period is two years the option price is currently set at 85 of the market share price prior to the grant and the right to exercise normally only arises for a
sixmonth period once the savings have been completed except for arm inc where the right to exercise normally only arises for a threemonth period
once the savings have been completed the company set up two further savingsrelated option schemes in each of 1999 2000 2001 2002 and 2003 for
all employees and executive directors of the company which have the same characteristics as those schemes set up in 1998
outstanding options
weighted average
shares exercise price
number £
balances 31 december 2000 47002473 1214
granted in year 8189032 3398
lapsed in year 1283752 3433
exercised in year 18457205 0136
balances 31 december 2001 35450548 2199
granted in year 10081501 2290
lapsed in year 3269030 1965
exercised in year 7211670 0691
balances 31 december 2002 35051349 2557
granted in year 37537323 0468 
lapsed in year 4434268 2566
exercised in year 2663324 0194
balances 31 december 2003 65491080 1455
the weighted average grantdate fair value of options granted during 2003 was £030 for options in the executive scheme £027 for options in the
unapproved iso french and belgian schemes and £045 for sharesave options 
the weighted average exercise price of options exercisable at 31 december 2003 was £245 31 december 2002 £171
notes to the financial statementsus gaapcontinued
74 arm annual report and accounts 2003 10  shareholders’ equity continued
the following options over ordinary shares were in existence at 31 december 2003
ordinary exercise price exercisable at
shares per share remaining exercise 31 december
number £contractual life period 2003
320000 002 25 years 1999 – 2006 320000
615000 0026 32 years 2000 – 2007 615000
20000 00425 04 years 2000 – 2004 20000
20000 00625 05 years 2000 – 2004 20000
120000 00625 08 years 2000 – 2004 120000
230000 00625 10 years 2000 – 2004 230000
400000 01125 42 years 2001 – 2008 400000
5001 01125 12 years 1999 – 2005 5001
35000 03875 14 years 2001 – 2005 35000
1504 03875 14 years 1999 – 2005 1504
50000 05275 46 years 2001 – 2008 50000
10061 05275 16 years 1999 – 2005 10061
51000 0405 48 years 2001 – 2008 51000
2499887 1224 52 years 2002 – 2009 2499887
4471980 1224 22 years 2002 – 2006 4471980
1194369 1224 02 years 2000 – 2004 1194369
120840 1338 53 years 2002 – 2009 120840
25160 1338 23 years 2002 – 2006 25160
26252 1338 13 years 2000 – 2004 26252
43495 1765 56 years 2002 – 2009 43495
3005 1765 26 years 2002 – 2006 3005
40002 1765 06 years 2000 – 2004 40002
80570 426 59 years 2002 – 2009 80570
76680 426 29 years 2002 – 2006 76680
89000 7738 61 years 2003 – 2010 89000
43250 7738 31 years 2003 – 2007 43250
52500 7738 11 years 2001 – 2005 39375
75215 6136 63 years 2003 – 2010 75215
36035 6136 33 years 2003 – 2007 36035
7500 6136 13 years 2001 – 2005 5625
50000 627 13 years 2001 – 2005 37500
272599 6155 64 years 2003 – 2010 272599
2217329 6155 34 years 2001 – 2007 1662993
625000 6155 14 years 2001 – 2005 468750
162500 670 36 years 2001 – 2007 121875
24250 670 16 years 2001 – 2005 18187
181250 633 38 years 2001 – 2007 135937
114500 633 18 years 2001 – 2005 85875
71250 633 38 years 2004 – 2007 –
396500 443 41 years 2002 – 2008 198250
83000 443 21 years 2002 – 2006 41500
30000 443 41 years 2005 – 2008 –
578959 335 74 years 2004 – 2011 –
3472074 335 44 years 2002 – 2008 1736037
1193400 335 24 years 2002 – 2006 596700
149500 335 44 years 2005 – 2008 –
62909† 3815 44 years 2004 – 2008 –
58813 284 76 years 2004 – 2011 –
20822 284 46 years 2002 – 2008 10411
28000 284 26 years 2002 – 2006 14000
139000 375 78 years 2004 – 2011 –
42500 375 48 years 2002 – 2008 21250
44750 375 28 years 2002 – 2006 22375
8500 375 48 years 2005 – 2008 –
161250 3145 52 years 2003 – 2009 40310
62500 3145 32 years 2003 – 2007 15625
10000 3145 52 years 2006 – 2009 –
1061888 2465 83 years 2005 – 2012 –
3987212 2465 53 years 2003 – 2009 996803
arm annual report and accounts 2003 75 10  shareholders’ equity continued
ordinary exercise price exercisable at
shares per share remaining exercise 31 december
number £contractual life period 2003
406896† 2465 53 years 2005 – 2009 –
1371575 2465 33 years 2003 – 2007 342893
162375 2465 53 years 2006 – 2009 –
223515† 21475 54 years 2005 – 2009 –
305750 1505 56 years 2003 – 2009 76437
125000 1505 36 years 2003 – 2007 31250
5000 1505 56 years 2006 – 2009 –
108750 0425 58 years 2003 – 2009 27187
68750 0425 38 years 2003 – 2007 17187
11250 0425 58 years 2006 – 2009 –
35000 05725 59 years 2003 – 2009 8750
3500 05725 39 years 2003 – 2007 875
3705912 04375 91 years 2006 – 2013 –
15759867 04375 61 years 2004 – 2010 –
3885711† 04375 61 years 2006 – 2010 –
5944771 04375 41 years 2004 – 2008 –
757300 04375 61 years 2007 – 2010 –
248250 0805 66 years 2004 – 2010 –
31000 0805 46 years 2004 – 2008 –
56500 11475 68 years 2004 – 2010 –
10000 11475 48 years 2004 – 2008 –
3250 11475 68 years 2007 – 2010 –
243200 11475 68 years 2007 – 2010 –
85340 1099 10 years 2004 – 2004 –
597 565 20 years 2005 – 2005 –
82822 3069 10 years 2004 – 2004 –
16495 3069 30 years 2006 – 2006 –
85646 182537 20 years 2005 – 2005 –
36262 182537 40 years 2007 – 2007 –
15244 182537 08 years 2004 – 2004 –
4145776 05865 30 years 2006 – 2006 –
634270 05865 50 years 2008 – 2008 –
841945 05865 18 years 2005 – 2005 –
65491080 17749862
 these relate to options granted under the company’s savingsrelated share option schemes
 options are exercisable as follows 25 maximum on first anniversary 50 maximum on second anniversary 75 maximum on third anniversary 100 maximum on fourth anniversary
† these options will vest after seven years unless certain criteria are met in which case they will vest between three and seven years
under the company’s long term incentive plan a further 2572646 shares could be awarded to the extent that performance criteria are satisfied over 
a threeyear period these shares will be awarded from shares already issued within the esop 
notes to the financial statementsus gaapcontinued
76 arm annual report and accounts 2003 11  commitments and contingencies
the company leases its office facilities and certain equipment under noncancelable operating lease agreements which expire at various dates through
2018
future minimum lease commitments at 31 december 2003 are as follows
operating leases
years ending 31 december £000
2004 4877
2005 3409
2006 2357
2007 2114
2008 2114
thereafter 15606
total minimum lease payments 30477
rental expense under operating leases totalled £3101000 £5199000 and £8169000 for the years ended 31 december 2001 2002 and 2003 respectively
in may 2002 nazomi communications inc filed suit against arm alleging wilful infringement of nazomi’s us patent no 6332215 by arm’s jazelle
technology arm answered nazomi’s complaint in july 2002 denying infringement of the ‘215 patent asserting various affirmative defences and asserting
counterclaims arm moved for summary judgement and a ruling that the current version of its processor designs incorporating the jazelle technology does
not infringe the ‘215 patent the district court granted arm’s motion holding that the current version of its processor designs incorporating the jazelle
technology does not infringe the ‘215 patent nazomi has appealed the district court’s ruling the appeal court has not set a date to hear the appeal yet
arm is confident that the original ruling by the district court will be upheld on appeal
guarantees it is common industry practice for licensors of technology to offer to indemnify their licensees for loss suffered by the licensee in the event that
the technology licensed is held to infringe the intellectual property of a third party consistent with such practice the company provides such indemnification
to its licensees but subject in all cases to a limitation of liability the obligation for the company to indemnify its licensees is subject to certain provisos and
is usually contingent upon a third party bringing an action against the licensee alleging that the technology licensed by the company to the licensee infringes
such third partys intellectual property rights the indemnification obligations typically survive any termination of the license and will continue in perpetuity
the company does not provide for any such guarantees unless it has received notification from the other party that they are likely to invoke the guarantee
any such provision is based upon the directors’ estimate of the expected costs of any such claim
12  geographic and segment information
the company operates in and is managed as a single product segment
the following analysis is of revenues by geographic segment and origin and longlived assets by group companies in each territory
year ended 31 december
2001 2002 2003
£000 £000 £000
revenues by market destination
europe 27103 26731 23118
us 72271 67086 65402
japan 33548 38295 24135
asia pacific excluding japan 13352 18810 15415
total revenues 146274 150922 128070
the company’s exports from the uk were £128303000 £135713000 and £115072000 for the years ended 31 december 2001 2002 and 2003
respectively
arm annual report and accounts 2003 77 12  geographic and segment information continued
year ended 31 december
2001 2002 2003
£000 £000 £000
revenues by origin
europe 131136 137747 118885
us 8431 7288 4893
asia pacific 6707 5887 4292
total revenues 146274 150922 128070
longlived assets including deferred income taxes
europe 35626 38044 33085
us 3608 3751 2771
asia pacific 167 269 180
total longlived assets 39401 42064 36036
in 2003 2002 and 2001 no single customer accounted for more than 10 of total revenues 
13  fair values of financial instruments
the following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate 
that value
cash and cash equivalents shortterm investments and accounts receivable the carrying amount approximates fair value because of the short maturity
of those instruments
foreign currency forward contracts the fair value of foreign currency forward contracts is estimated using the settlement rates prevailing at the period end
the estimated fair values of the company’s financial instruments are as follows
year ended 31 december
2001 2002 2003
carrying fair carrying fair carrying fair
amount value amount value amount value
£000 £000 £000 £000 £000 £000
cash and cash equivalents 104467 104467 130304 130304 130722 130722
shortterm investments –––– 29064 29064
accounts receivable 24809 24809 20516 20516 17320 17320
foreign currency contracts 355 355 1061 1061 2015 2015
embedded derivatives – – 950 950 2091 2091
14  post balance sheet events
at the 2004 annual general meeting of the company on 26 april 2004 a dividend of 06 pence per share total cost £6106000 will be proposed in
respect of the 2003 financial year and if approved will be paid on 7 may 2004 to shareholders on the register at 2 april 2004
notes to the financial statementsus gaapcontinued
78 arm annual report and accounts 2003 to the board of directors and shareholders of arm holdings plc in our opinion the accompanying consolidated balance sheets and the related
consolidated statements of income changes in shareholders’ equity and of cash flow present fairly in all material respects the financial position of arm
holdings plc and its subsidiaries at 31 december 2003 and 2002 and the results of their operations and their cash flows for the years ended 31 december
2003 2002 and 2001 in conformity with accounting principles generally accepted in the united states of america these financial statements are the
responsibility of the company’s management our responsibility is to express an opinion on these financial statements based on our audits we conducted
our audit of these statements in accordance with auditing standards generally accepted in the united states of america which require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement an audit includes examining
on a test basis evidence supporting the amounts and disclosures in the financial statements assessing the accounting principles used and significant
estimates made by management and evaluating the overall financial statement presentation we believe that our audits provide a reasonable basis for our
opinion expressed above
pricewaterhousecoopers llp chartered accountants
cambridge england
10 march 2004
report of independent auditorsus gaap
arm annual report and accounts 2003 79 group directory
80 arm annual report and accounts 2003
arm limited
liberty house
moorbridge road
maidenhead
berkshire sl6 8lt
united kingdom
tel 44 0 1628 427700
fax 44 0 1628 427701
sheffield science park
new spring house
231 glossop road
sheffield s10 2gw
united kingdom
tel 44 0 114 282 8000
fax 44 0 114 282 8001
blackburn design centre
belthorn house
walker road
blackburn bb1 2qe
united kingdom
tel 44 0 1254 893900
fax 44 0 1254 893901
arm france
12 avenue des prés
montigny le bretonneux
78059 saint quentin en
yvelines cedex
france
tel 33 1 30 79 05 10
fax 33 1 30 79 05 11
les cardoulines b2
route des doline
sophia antipolis
06560 valbonne
france
tel 33 4 92 96 88 60
fax 33 4 92 96 88 79
arm belgium
geldenaaksebaan 329 
1st fl
3001 leuvenheverlee
belgium
tel 32 16 391 411
fax 32 16 406 076
arm germany
rennweg 33
85435 erding
germany
tel 49 8122 89209 0
fax 49 8122 89209 49
arm israel
23 hataaas st
44425 kfar saba
israel
tel 972 9 7678040
extension 201
fax 972 9 7677020
arm inc
1250 capital of texas
highway
building 3 suite 560
austin tx 78746
united states
tel 1 512 327 9249
fax 1 512 314 1078
1902 wright place
suite 200
carlsbad ca 92008
united states
tel 1 760 918 5536
fax 1 760 918 5539
750 university avenue
suite 150
los gatos ca 95032
united states
tel 1 408 579 2200
fax 1 408 579 1205
300 w main street
suite 215
northborough ma 01532
united states
tel 1 508 351 1670
fax 1 508 351 1667
walnut creek design center
1981 n broadway
suite 245
walnut creek ca 94596
united states
tel 1 925 944 9690
fax 1 925 944 9612
crystal glen center
39555 orchard hill place
suite 600
novi mi 48375
united states
tel 1 248 374 5055
fax 1 248 374 5056
arm kk
dainiueno building 8f
3718 shinyokohama
kohokuku yokohamashi
kanagawa 2220033
japan
tel 81 45 477 5260
fax 81 45 477 5261
arm korea limited
room 1115
hyundai building
94 soonaedong
boondangku
sungnam 
kyunggido 463020
south korea
tel 82 31 712 8234
fax 82 31 713 8225
arm taiwan limited
8f no 50
lane 10
kee hu road
nei hu
taipei 114
taiwan
tel 886 2 2627 1681
fax 886 2 2627 1682
arm consulting 
shanghai co ltd
room 1112–1113
building b
far east international plaza
no 317 xianxia road
shanghai 200051
pr china
tel 86 21 62351296
fax 86 21 62351207
arm holdings plc
110 fulbourn road
cambridge cb1 9nj
united kingdom
tel 44 0 1223 400400
fax 44 0 1223 400410 designed and produced by cfd 
directors’ photography by bob wheeler 
printed in england by st ives westerham press
this report is printed on hello silk which is made from virgin wood fibre from sawmill residues forest thinnings and sustainable forests 
in austria and from pulp which is totally chlorinefree tcf and elemental chlorinefree ecf it is recyclable and biodegradable arm holdings plc
110 fulbourn road
cambridge cb1 9nj
united kingdom
telephone 44 0 1223 400400
facsimile 44 0 1223 400410
further information available at
wwwarmcom
gp p
the architecture for the digital world
™


Summary:
 2 arm annual report and accounts 2003
arm at a glance
revenue analysis  royalty units  licence revenues by product 
total revenues £m
2003
2002
2001
2000
1999
1281
1509
1463
1007
621
0  50 100 150 200
2003
2002
2001
2000
1999
443
268
279
256
111
0 10 20 30 40 50
royalty revenues £m
•
total revenues of £1281 million in 2003 compared with £1509 million in 2002
•
our partners shipped a total of 782 million units in 2003 based on arm technology an increase of 71
•
rd expenditure maintained at high levels giving rise to introduction of further innovative products
licensing 40
royalties 34
development systems 14
support maintenance and training 10
consulting 2
arm7
tm
family 18
arm9
tm 
family 31
arm10
tm
arm11
tm
architecture 33
noncore licensing 18
automotive 1
consumer entertainment 7
imaging 7
microcontrollers 1
networking 10
secure 2
storage 4
wireless 68 arm annual report and accounts 2003 3
geographic revenue by market destination 
research and development expenditure £m
0 10 20 30 40 50
2003
2002
2001
2000
1999
481
487
389
275
170
net cash balance at year end £m
2003
2002
2001
2000
1999
1598
1303
1045
753
518
0 50 100 150 200
•
additional core arm926ej™ now available in the foundry programme
•
cash and shortterm investments of £1598 million at 31 december 2003 an increase of £295 million in the year
•
annual dividend introduced reflecting confidence in future cash flows
united states 51
austin texas
novi michigan
carlsbad california
los gatos california
northborough massachusetts
walnut creek california
europe 18
blackburn uk
cambridge uk
maidenhead uk
sheffield uk
leuven belgium
montigny le bretonneux france
sophia antipolis france
munich germany
kfar saba israel
asia pacific 31
seoul south korea
taipei taiwan
shinyokohama japan
shanghai pr china