Arm Holdings Plc Announces Results For The Second Quarter And Six Months Ended 30 June 2005

CAMBRIDGE, UK -- (MARKET WIRE) -- Jul 19, 2005 --

EMBARGOED UNTIL 7.00am BST 19 Jul 2005

ARM HOLDINGS PLC - RESULTS FOR THE SECOND QUARTER AND SIX MONTHS ENDED 30 JUNE
2005


First half 2005 dollar revenues up 22% year on year. Rolling share buyback
programme announced

CAMBRIDGE, UK, 19 July 2005-ARM Holdings plc [(LSE: ARM); (Nasdaq: 
ARMHY)]
announces its unaudited financial results for the second quarter and the six months ended 30 June 2005

HIGHLIGHTS (US GAAP)


Second quarter ended 30 June 2005

- Total revenues in Q2 2005 at GBP57.8 million, up from GBP55.0 million in
  Q1 2005. Total dollar revenues* in Q2 2005 at $105.5 million, up 21% on 
  the aggregate revenues of $87.3 million(see note 7.14) reported by ARM 
  and Artisan as independent companies in Q2 2004. The acquisition of 
  Artisan was completed on 23 December 2004

- At $81.9 million, dollar revenues* from the original ARM business 25%
  ahead of Q2 2004. Licensing and royalty revenues up in dollar terms* 
  28% and 26% respectively on Q2 2004. 20 licenses for microprocessor 
  cores signed in the quarter. Average royalty rate at 8.5 cents, up from 
  8.1 cents in Q1 2005 and 8.0 cents in Q4 2004

- At $23.6 million, dollar revenues* from the Physical Intellectual
  Property Division (PIPD), the former Artisan business, up 7% on Q2 2004.
  Licensing revenues of $17.9 million at record levels and 26% up on Q2 
  2004. PIPD royalty revenues at $5.7 million, down $2.1 million 
  sequentially due primarily to lower catch-up royalties in Q2 2005 and 
  lower foundry utilization levels in calendar Q1 2005

- Guidance for full year 2005 dollar revenue growth revised to 15-20%.  
  Expectation for full year 2005 sterling revenues and profits unchanged

- Operating margin, excluding acquisition-related charges of GBP6.2
  million and other deferred stock-based compensation of GBP0.5 million, 
  at 31.8%(7.1), comprising 32.1% in the original ARM business and 30.9% 
  in PIPD

- Income before income tax at GBP12.9 million, including acquisition-    
  related charges of GBP6.2 million and other deferred stock-based
  compensation of GBP0.5 million. Income before income tax, excluding   
  these charges, at GBP19.6 million

- Consolidated cash position of GBP154.6 million(7.6) at 30 June 2005.
  Net cash generation of GBP18.6 million in the quarter before payment of 
  the 2004 final dividend of GBP5.8 million

- Earnings per fully diluted share in Q2 2005 of 0.7 pence (3.8 cents
  per ADS**). Earnings per fully diluted share, before acquisition-
  related charges of GBP6.2 million and other deferred stock-based 
  compensation of GBP0.5 million, at 1.0 pence(7.9) (5.6 cents per ADS**)

- Interim dividend of 0.34 pence per share declared, up 21% on 2004
  interim dividend

- Rolling share buyback programme announced, reflecting the strength of
  the Group's balance sheet and the anticipated strong cash flow 
  generation going forward


* Dollar revenues are based on the group's actual dollar invoicing, where
applicable, and using the rate of exchange applicable on the date of the
transaction for invoicing in currencies other than dollars. Approximately 95% of
invoicing is in dollars.
** Each American Depositary Share (ADS) represents three shares.

Commenting on the results, Warren East, Chief Executive Officer, said:

"We are pleased to report 22% growth in dollar revenues across our business in
the first half of 2005. Strong licensing activity in Q2, both in the traditional
ARM(R) microprocessor business and in the Physical IP business, gives us
increased confidence in the potential for sustained growth in royalty revenues
into the future."

Tim Score, Chief Financial Officer, added:

"Given the Group's strong balance sheet, healthy operating margins and
consistent cash flow generation, the Board has decided to supplement the
progressive dividend introduced in 2004 with the announcement of a rolling share
buyback programme. The Group's commitment to revenue growth and investment in
innovative technology remains unchanged."

Operating review

Original ARM licensing and product development

Licensing revenues in the original ARM business have grown sequentially over the
last nine quarters. With 20 licenses for microprocessor cores being signed in
Q2, a total of 37 licenses for microprocessor cores were signed in the first
half of 2005, compared to 34 licenses in the first half of 2004. These 37
licenses comprised 12 multi-use licenses and 25 per-use licenses. As well as
signing licenses for some of our new technologies, our partners continue to sign
licenses for ARM technology that has been available for a number of years. Of
the 37 licenses signed in the first half, eight were for ARM7(TM) family products
and 20 were for ARM9(TM) family products, demonstrating again the longevity of the
ARM technology portfolio. 17 new companies joined the ARM partnership in the
first half, including our first licensee in India, bringing the total number of
semiconductor partners at the end of June 2005 to 157.
Original ARM royalty revenues and unit shipments
Royalty revenues earned in the original ARM business in the first half of 2005
were $62.8 million on 758 million units shipped, up 28% and 34% respectively on
the first half of 2004.

Royalty revenues recognized in Q2 2005 (we receive and report royalty data one
quarter in arrears) were $31.2 million on 369 million units shipped, up 26% and
29% respectively on the same period a year ago. The average royalty rate
reported in the second quarter was 8.5 cents, up for the second successive
quarter. Of the total reported unit shipments in Q2, 30% related to units based
on ARM9 family technology. The mobile segment accounted for 66% of unit
shipments in the second quarter. Units shipped in segments other than mobile
amounted to 124 million, up 44% on Q2 2004. The total number of partners
shipping ARM technology-based product at the end of Q2 is 62, with royalties
being received from one of our partners in China for the first time in the
quarter.

PIPD revenues

Total revenues earned by PIPD in Q2 2005 were $23.6 million, compared to $24.0
million in Q1 2005 and $22.0 million in Q2 2004. Reported revenues in Q2 2005
comprised record license revenues of $17.9 million and royalty revenues of $5.7
million, compared to $16.2 million and $7.8 million respectively in Q1 2005.

PIPD license revenues

As well as being a record quarter for license revenues for PIPD, Q2 has seen a
number of important developments with regard to the adoption of physical IP from
ARM. Having licensed PIPD technology to two traditional ARM semiconductor
partners in Q1, another ARM partner licensed technology from PIPD in Q2.
Further, there have been some important announcements of success in the
traditional PIPD business. In May 2005, ARM and UMC announced that they had
signed an agreement for ARM to provide its Artisan(R) Metro(TM) low-power IP
platform for UMC's advanced 130-nanometer process technology. Also in May, it
was announced that IBM and Chartered Semiconductor Manufacturing are offering
the ARM Artisan Metro low-power platform and the ARM Artisan Velocity(TM)
high-speed PHY series for their jointly developed 90-nanometer common process
platform. In June, it was announced that this collaborative development was
being extended in order to make the low-power platform available for
IBM-Chartered's 65-nanometer low-power common process platform. It was also
announced in June that the ARM Artisan Metro low-power standard cell libraries,
memory compilers and I/Os have been selected for IBM's newest 65-nanometer ASIC
product offering.

PIPD royalty revenues

As with the original ARM business, PIPD receives and reports royalty data one
quarter in arrears. PIPD carries out an ongoing dialogue with its foundry
partners to ensure that royalty payments are accurate and up to date. This
process includes regular audits being carried out by third party accounting
firms. As a result, reported quarterly royalty revenues will often include
amounts which relate to shipments made in prior periods ("catch-up" royalties).
Such amounts are hard to forecast and have varied significantly from quarter to
quarter.

Royalty revenues in Q1 2005 of $7.8 million included approximately $0.8 million
of "catch-up" royalties, implying an underlying level of royalties of $7
million. Royalty revenues in Q2 2005 of $5.7 million do not include any
meaningful "catch-up" royalties. Despite the market share gains made by PIPD in
the quarter, the combination of lower utilization levels and pricing pressure in
the foundries resulted in a sequential reduction of $1.3 million in the
underlying level of PIPD royalties. Underlying royalty revenues in Q2 2004,
excluding "catch-up" royalties, were $5.4 million.

Notwithstanding the sequential reduction in PIPD underlying royalty revenue in
Q2, we remain confident that the medium term trend in PIPD royalties will be
upwards based on the significant increase in the number of license downloads of
PIPD technology in the last 2 years (as with the original ARM business,
royalties typically accrue between 2 and 4 years after a license has been
signed), the increase in the average royalty rate inherent in the majority of
foundry license agreements signed in recent years and the increase in the number
of foundries that have taken licenses to manufacture PIPD technology-based
products.

Market conditions, current trading and prospects

Against the anticipated flatter trading environment in the semiconductor
industry in the first half of 2005, we are encouraged that dollar revenues have
grown in excess of 20% year on year.

Taking into account the first half performance, the level of order backlog at
the end of June and the healthy sales opportunity pipeline going into the second
half, we are confident of achieving year on year dollar revenue growth for  the
Group  as  a  whole  of  between  15%  and  20%  in  the  full  year  2005.  The  revision  to
our  previous  guidance  for  year  on  year  dollar  revenue  growth  of  at  least  20%
(assuming  a  normalised  base  for  PIPD  revenues  in  calendar  2004  of  approximately
$95  million),  takes  into  account  the  level  of  PIPD  royalty  revenues  reported  in
the  first  half  of  2005  and  the  likely  growth  trajectory  of  PIPD  royalties  in  the
second  half.

Although  we  have  revised  guidance  for  dollar  revenue  growth  our  expectations  for
sterling  revenues,  assuming  the  current  dollar/sterling  FX  rate  persists  through
the  second  half  of  2005,  are  unchanged.  This  is  because  approximately  95%  of  the
group's  invoicing  is  in  dollars  and  consequently  our  sterling  reported  revenues
benefit  from  the  strengthening  dollar.

Financial  review
(US  GAAP  unless  otherwise  stated)

Second  quarter  ended  30  June  2005

Total  revenues

Total  revenues  for  the  second  quarter  of  2005  amounted  to  GBP57.8  million.  In  US
dollar  terms*,  second  quarter  revenues  of  $105.5  million  were  21%  up  on  the
aggregate  ARM  and  Artisan  revenues  of  $87.3  million(7.14)  in  Q2  2004.  The
effective  US  dollar  to  sterling  exchange  rate  for  ARM  in  Q2  2005  was  $1.82
compared  to  $1.875  in  Q1  2005  and  $1.77  in  Q2  2004.

License  revenues

Total  license  revenues  in  the  second  quarter  were  GBP28.0  million  representing
48%  of  group  revenues.  License  revenues  comprised  GBP18.1  million  from  the
original  ARM  business  and  GBP9.9  million  from  PIPD.  In  US  dollar  terms*,  license
revenues  from  the  original  ARM  business  of  $33.0  million  in  Q2  2005  were  10%
ahead  of  Q1  2005  and  30%  up  on  Q2  2004.  License  revenues  in  PIPD  of  $17.9
million  in  Q2  2005  were  10%  up  on  Q1  2005  and  26%  up  on  Q2  2004.

20  licenses  for  microprocessor  cores  were  signed  in  the  second  quarter  of  2005.
Nine  new  partners  took  a  total  of  nine  per  use  licenses;  two  for  the  ARM7TDMI(R)
processor,  five  for  the  ARM926EJ(TM)  processor,  one  for  the  ARM946E(TM)
processor  and  one  for  the  ARM922T(TM)  processor.

A  further  11  licenses  were  signed  with  11  of  our  existing  partners.  These
comprised  one  derivative  and  one  upgrade  to  the  ARM7  family,  three  derivatives
and  two  upgrades  to  the  ARM9  family,  one  derivative  to  the  ARM11(TM)  family,  one
derivative  and  one  upgrade  to  the  SecurCore(TM)  family  and  one  upgrade  to  the
Cortex(TM)-M3  processor.

The  Group  order  backlog  at  the  end  of  Q2  was  approximately  5%  down  on  the  level
at  the  end  of  Q1  as  the  20  licenses  for  microprocessor  cores  signed  in  the
second  quarter  comprised  for  the  most  part  licenses  for  more  mature  products.
The  sales  pipeline  represents  a  more  typical  blend  of  opportunities  for  both
newer  and  more  mature  products  which  underpins  our  confidence  that  order  backlog
will  trend  upwards  in  the  medium  term.

Royalty  revenues

Total  royalty  revenues  in  the  second  quarter  were  GBP20.1  million  representing
35%  of  total  group  revenues.  Royalty  revenues  comprised  GBP17.0  million  from  the
original  ARM  business  and  GBP3.1  million  from  PIPD.  In  US  dollar  terms*,  royalty
revenues  from  the  original  ARM  business  of  $31.2  million  in  Q2  2005  were  at  a
similar  level  to  Q1  2005,  notwithstanding  the  impact  of  seasonality  in  mobile
shipments,  and  were  25%  up  on  Q2  2004.

Development  Systems  and  Service  revenues

Sales  of  development  systems  in  Q2  2005  were  GBP6.3  million,  representing  11%  of
total  group  revenues,  up  from  GBP5.7  million  in  Q1.  In  US  dollar  terms,
development  systems  revenues  were  $11.6  million  this  quarter,  33%  up  on  Q2  2004.
Service  revenues  in  Q2  2005  were  GBP3.4  million  representing  6%  of  total  group
revenues.

Gross  margins

Group  gross  margins  for  the  second  quarter  were  89%,  comprising  94%  for  the
original  ARM  business  and  73%  for  PIPD.

Operating  expenses  and  operating  margins

Total  group  operating  expenses  in  Q2  2005  were  GBP40.0  million,  including
acquisition-related  charges  of  GBP6.2  million  and  other  deferred  stock-based
compensation  of  GBP0.5  million.  Excluding  these  charges,  operating  expenses  in
the  quarter  were  GBP33.2  million,  comprising  GBP27.3  million  related  to  the
original  ARM  business  and  GBP5.9  million  to  PIPD,  compared  to  GBP30.9  million  in
Q1  2005.

Total  research  and  development  expenses  were  GBP15.8  million  in  Q2  2005,
representing  27%  of  revenues,  compared  to  GBP14.7  million  or  27%  of  revenues  in
Q1  2005.  Total  sales  and  marketing  costs  in  Q2  2005  were  GBP8.3  million  or  14%
of  revenues  compared  to  GBP8.3  million  or  15%  of  revenues  in  Q1  2005.  Total
general  and  administrative  expenses  in  Q2  2005  were  GBP9.2  million,  representing
16%  of  revenues  compared  to  GBP7.8  million  or  14%  of  revenues  in  Q1  2005.  Of  the
net  sequential  increase  in  general  and  administrative  expenses  of  GBP1.4  million
in  Q2  2005,  GBP1.0  million  relates  to  the  net  impact  of  foreign  exchange
movements.

Operating  margin  in  Q2  2005  was  20.2%  compared  to  20.9%  in  Q1  2005.  Operating
margin,  excluding  acquisition-related  charges  of  GBP6.2  million  and  other
deferred  stock-based  compensation  of  GBP0.5  million,  was  31.8%(7.1)  in  Q2  2005
compared  to  32.4%(7.2),  excluding  non-recurring  and  acquisition-related  charges
of  GBP6.0  million  and  other  deferred  stock-based  compensation  of  GBP0.3  million,in  Q1  2005.  Operating  margin  of  31.8%  in  Q2  2005  comprises  32.1%  in  the  original
ARM  business  and  30.9%  in  PIPD.

Interest  receivable

Interest  receivable  increased  to  GBP1.2  million  in  Q2  2005  compared  to  GBP1.0
million  in  the  first  quarter,  due  to  higher  average  cash  balances.

Earnings  and  taxation

Income  before  income  tax  in  Q2  2005  was  GBP12.9  million  compared  to  GBP12.5
million  in  Q1  2005.  Income  before  income  tax,  excluding  acquisition-related
charges  of  GBP6.2  million  and  other  deferred  stock-based  compensation  of  GBP0.5
million,  was  GBP19.6  million.  The  group's  effective  tax  rate  under  US  GAAP  in  Q2
2005  was  22.1%,  reflecting  the  availability  of  research  and  development  tax
credits  in  the  UK  and  the  US  and  certain  benefits  flowing  from  the  structuring
of  the  Artisan  acquisition.

Second  quarter  fully  diluted  earnings  per  share  prepared  under  US  GAAP  were  0.7
pence  (3.8  cents  per  ADS**)  compared  to  earnings  per  share  of  0.6  pence  (3.6
cents  per  ADS**)  in  Q1  2005.  Earnings  per  fully  diluted  share  in  Q2  2005,  before
acquisition-related  charges  of  GBP6.2  million  and  other  deferred  stock-based
compensation  of  GBP0.5  million,  were  1.0(7.9)  pence  per  share  (5.6  cents  per  ADS
**)  compared  to  1.0  pence(7.10)  (5.4  cents  per  ADS**)  in  Q1  2005,  before
non-recurring  and  acquisition-related  charges  of  GBP6.0  million  and  other
deferred  stock-based  compensation  of  GBP0.3  million.

People

At  30  June  2005  we  had  1,223  full  time  employees  compared  to  1,179  at  the  end  of
Q1.  At  30  June  2005,  the  Group  had  541  employees  based  in  the  UK,  463  in  the  US,
85  in  Continental  Europe,  90  in  India  and  44  in  the  Asia  Pacific  region.  Of  the
net  headcount  increase  in  the  quarter  of  44,  31  people  joined  the  design  centre
in  Bangalore.


Legal  matters

In  May  2002,  Nazomi  Communications,  Inc.  ("Nazomi")  filed  suit  against  ARM
alleging  willful  infringement  of  Nazomi's  US  Patent  No.  6,332,215.  ARM  answered
Nazomi's  complaint  in  July  2002  denying  infringement.  ARM  moved  for  summary
judgment  and  a  ruling  that  the  technology  does  not  infringe  Nazomi's  patent.  The
United  States  District  Court  for  the  Northern  District  of  California  granted
ARM's  motion,  and  Nazomi  appealed  the  District  Court's  ruling.  On  September  7,
2004,  the  Court  of  Appeals  for  the  Federal  Circuit  heard  the  appeal  and  issued
its  decision  on  April  11,  2005.  Because,  in  the  opinion  of  the  Court  of  Appeals
for  the  Federal  Circuit,  the  District  Court  did  not  construe  the  disputed  claim
term  in  sufficient  detail  for  appellate  review,  the  Court  of  Appeals  for  the
Federal  Circuit  remanded  the  dispute  back  to  the  District  Court  for  further
analysis.  The  Court  of  Appeals'  decision  does  not  reverse  the  original  decision
of  the  District  Court.  A  supplementary  Markman  hearing  to  assist  in  a  more
detailed  claim  construction  analysis  is  set  for  16  September  2005.  Based  on
legal  advice  received  to  date,  ARM  has  no  cause  to  believe  that  the  effect  of
the  original  ruling  by  the  District  Court  will  not  be  upheld.

Six  months  ended  30  June  2005


Revenues

Total  revenues  for  the  six  months  ended  30  June  2005  amounted  to  GBP112.9
million.  In  US  dollar  terms*,  first  half  revenues  of  $208.7  million  were  22%  up
on  the  aggregate  ARM  and  Artisan  revenues  of  $170.9  million(7.15)  in  H1  2004.
The  effective  average  dollar  to  sterling  exchange  rate  in  the  first  half  of  2005
was  $1.85  compared  to  $1.77  in  the  first  half  of  2004.

Total  license  revenues  in  the  first  half  of  2005  were  GBP52.8  million,  being  47%
of  total  revenues.  Total  royalty  revenues  were  GBP41.0  million,  representing  36%
of  total  revenue.  Sales  of  development  systems  were  GBP12.1  million,  being  11%
of  total  revenues.  Service  revenues  were  GBP7.0  million  in  the  first  half  of
2005,  representing  6%  of  total  revenues.

Gross  margins

Group  gross  margins  for  the  first  half  of  2005  were  89%,  comprising  93%  for  the
original  ARM  business  and  74%  for  PIPD.

Operating  expenses  and  operating  margins

Total  group  operating  expenses  in  H1  2005  were  GBP77.2  million,  including
acquisition-related  charges  of  GBP12.3  million  and  other  deferred  stock-based
compensation  of  GBP0.8  million.  Excluding  these  charges,  operating  expenses  in
the  first  half  were  GBP64.1  million,  comprising  GBP53.3  million  related  to  the
original  ARM  business  and  GBP10.8  million  to  PIPD.

Total  research  and  development  expenses  were  GBP30.5  million  in  H1  2005,
representing  27%  of  revenues.  Total  sales  and  marketing  costs  in  H1  2005  were
GBP16.6  million  or  15%  of  revenues.  Total  general  and  administrative  expenses  in
H1  2005  were  GBP17.0  million,  representing  15%  of  revenues.
Operating  margin  in  H1  2005  was  20.5%  compared  to  23.2%  in  the  ARM  standalone
business  in  the  first  half  of  2004.  Operating  margin,  excluding
acquisition-related  charges  of  GBP12.3  million  and  other  deferred  stock-based
compensation  of  GBP0.8  million,  was  32.1%(7.4)  in  H1  2005  compared  to  24.0%
(7.5),  excluding  acquisition-related  charges  of  GBP0.1  million  and  other
deferred  stock-based  compensation  of  GBP0.5  million,  in  H1  2004.  The  operating
margin  of  32.1%  in  H1  2005  comprises  31.9%  in  the  original  ARM  business  and
32.9%  in  PIPD.

Interest  receivable

Interest  receivable  was  GBP2.2  million  for  the  first  six  months  of  2005.

Earnings  and  taxation

Income  before  income  tax  in  H1  2005  was  GBP25.4  million.  Income  before  income
tax,  excluding  acquisition-related  charges  of  GBP12.3  million  and  other  deferred
stock-based  compensation  of  GBP0.8  million,  was  GBP38.5  million.  The  group's
effective  tax  rate  under  US  GAAP  in  H1  2005  was  24.8%,  reflecting  the
availability  of  research  and  development  tax  credits  in  the  UK  and  the  US  and
certain  benefits  flowing  from  the  structuring  of  the  Artisan  acquisition.

First  half  fully  diluted  earnings  per  share  prepared  under  US  GAAP  were  1.3
pence  (7.2  cents  per  ADS).  Earnings  per  fully  diluted  share  in  H1  2005,  before
acquisition-related  charges  of  GBP12.3  million  and  other  deferred  stock-based
compensation  of  GBP0.8  million,  were  2.0(7.12)  pence  per  share  (10.7  cents  per
ADS**).

Balance  sheet  and  cash  flow

Intangible  assets  at  30  June  2005  were  GBP434.3  million,  comprising  goodwill  of
GBP362.9  million  and  other  intangible  assets  of  GBP71.4  million,  compared  to
GBP348.8  million  and  GBP71.0  million  respectively  at  31  March  2005.  The  increase
in  goodwill  in  Q2  2005  is  due  primarily  to  foreign  exchange  movements.  Goodwill
is  no  longer  amortized  under  US  GAAP  but  is  subject  to  impairment  on  at  least  an
annual  basis.  The  other  intangible  assets  are  being  amortized  through  the  profit
and  loss  account  over  a  weighted  average  period  of  five  years.

Accounts  receivable  increased  to  GBP49.7  million  at  30  June  2005  from  GBP43.9
million  at  31  March  2005.  The  increase  in  receivables  at  the  end  of  Q2  compared
to  the  end  of  Q1  is  due  primarily  to  the  strengthening  of  the  dollar  against
sterling  and  to  a  lesser  extent  to  the  higher  revenues  reported  in  Q2.  The
allowance  against  receivables  increased  to  GBP1.5  million  at  the  end  of  June
from  GBP1.2  million  at  31  March  2005.  Deferred  revenues  were  GBP20.4  million  at
the  end  of  June  2005  compared  to  GBP21.8  million  at  31  March  2005.

Net  cash  generation  in  Q2  2005  was  GBP18.6  million,  before  payment  of  the  2004
final  dividend  of  GBP5.8  million  in  the  quarter,  giving  total  cash,  cash
equivalents,  short-term  investments  and  marketable  securities  of  GBP154.6
million  at  30  June  2005.

Share  buyback  programme  and  interim  dividend

It  has  been  ARM's  practice  to  maintain  a  strong  balance  sheet,  both  to  underpin
ongoing  investment  in  research  and  development  (typically  around  30%  of
revenues)  and  to  retain  a  cash  buffer  to  enable  bolt-on  acquisitions.  This
practice  remains  unchanged.  However,  the  enlarged  ARM  group  is  expected  to
remain  strongly  cash  generative  going  forward,  producing  cash  on  an  ongoing
basis  which  is  surplus  to  our  investment  requirements.

We  intend,  therefore,  to  supplement  the  payment  of  dividends  to  shareholders,
initiated  in  2004,  with  the  commencement  of  a  rolling  share  buyback  programme
under  the  shareholder  authority  conferred  on  the  company  at  the  Annual  General
Meeting.  The  quantum  and  frequency  of  share  purchases  is  not  predetermined  but
will  take  into  account  prevailing  market  conditions,  the  short  to  medium  term
cash  needs  of  the  business  and  the  level  of  employee  share-based  remuneration
going  forward.  Share  purchases  will  be  made  only  if  the  directors  believe  that
it  is  in  the  best  interests  of  shareholders  generally  and  will  increase  earnings
per  share.  The  company  intends  to  hold  such  shares  as  treasury  shares.

In  respect  of  the  year  to  31  December  2005,  the  directors  are  declaring  an
interim  dividend  of  0.34  pence  per  share,  an  increase  of  21%  over  the  2004
interim  dividend  of  0.28  pence  per  share.  This  interim  dividend  will  be  paid  on
7  October  2005  to  shareholders  on  the  register  on  2  September  2005.

International  Financial  Reporting  Standards  (IFRS)

ARM  reports  results  quarterly  in  accordance  with  US  GAAP.  At  30  June  and  31
December  each  year,  in  addition  to  the  US  GAAP  results,  ARM  has  historically
also  disclosed  results  under  UK  GAAP.  Following  the  introduction  of  IFRS  with
effect  from  1  January  2005,  ARM  will  continue  to  report  quarterly  results  under
US  GAAP  but  will  now  disclose  results  additionally  under  IFRS  at  30  June  and  31
December  each  year.  IFRS  results  for  the  six  month  periods  to  30  June  2005  and
30  June  2004,  together  with  balance  sheets  as  at  30  June  2005,  31  December  2004
and  30  June  2004  are  included  below.

The  operating  and  financial  review  commentary  above  on  the  US  GAAP  numbers  is
for  the  most  part  applicable  to  the  IFRS  numbers.  The  principal  impact  on  ARM's
results  of  the  introduction  of  IFRS  in  place  of  UK  GAAP  arises  from  the
introduction  of  IFRS  2  ("Share-based  Payment"),  whereby  the  fair  value  of
employee  stock  options  issued  after  7  November  2002  and  outstanding  at  31
December  2004  is  charged  to  the  profit  and  loss  account.  Under  UK  GAAP  the  fair
value  of  stock  options  was  not  charged  to  the  profit  and  loss  account.  The  fair
value  of  employee  stock  options  charged  to  the  profit  and  loss  accounts  for  the
six  months  to  30  June  2005  and  30  June  2004  is  GBP11.9  million  and  GBP3.6
million  respectively.  The  first  half  2005  charge  of  GBP11.9  million  includes
GBP6.7  million  relating  to  the  fair  value  of  the  Artisan  employee  stock  options
which  were  unvested  at  the  time  of  the  acquisition.  The  total  fair  value
attributed  to  these  unvested  options  of  GBP17.5  million  will  be  substantially
charged  to  the  profit  and  loss  account  over  a  period  of  3  years.  The  total
intrinsic  value  of  these  unvested  options  of  GBP9.6  million  is  already  being
charged  as  deferred  stock-based  compensation  under  US  GAAP,  with  GBP6.1  million
expected  to  be  charged  in  2005.

Based  on  product  development  to  date,  research  and  development  expenditure  has
been  written  off  to  the  profit  and  loss  account  as  incurred  under  IFRS.  Goodwill
and  other  intangible  assets  are  reported  differently  under  IFRS  than  under  UK
GAAP,  with  goodwill  being  capitalized  but  not  amortized  and  separately
identifiable  intangible  assets  being  capitalized  on  acquisition  and  amortized
over  their  estimated  useful  lives.  The  IFRS  treatment  is  similar  to  the  current
treatment  under  US  GAAP.

CONTACTS:
James  Melville-Ross/  Juliet  Clarke                          Tim  Score/Bruce  Beckloff
Financial  Dynamics                                                          ARM  Holdings  plc
+44  (0)  207  831  3113                                                      +44  (0)1628  427800





                                                                ARM  Holdings  plc
                                Second  Quarter  and  Six  Months  Results  -  US  GAAP

                                    Quarter          Quarter    Six  months    Six  months    Six  months
                                        ended              ended              ended              ended              ended
                                    30  June          30  June          30  June          30  June          30  June
                                          2005                2004                2005                2004          2005  (1)
                                Unaudited      Unaudited      Unaudited      Unaudited      Unaudited
                                    GBP'000          GBP'000          GBP'000          GBP'000              $'000
Revenues
      Product  
      revenues                54,485            33,296          105,857            64,678          189,696
      Service  
      revenues                  3,362              3,644              7,007              7,250            12,556
Total  revenues          57,847            36,940          112,864            71,928          202,252

Cost  of  revenues
      Product  
      costs                    (4,548)          (1,261)          (9,461)          (2,639)        (16,954)
      Service  
      costs                    (1,638)          (1,266)          (3,048)          (2,588)          (5,462)
Total  cost  of
revenues                    (6,186)          (2,527)        (12,509)          (5,227)        (22,416)

Gross  profit              51,661            34,413          100,355            66,701          179,836

      Research  
      and
      development      (15,787)        (12,356)        (30,510)        (24,455)        (54,674)
      Sales  and
      marketing            (8,305)          (5,883)        (16,589)        (11,587)        (29,727)
      General  and
      administrative  (9,157)          (7,129)        (16,994)        (13,420)        (30,453)
      Deferred
      stock-based
      compensation      (2,142)              (242)          (4,502)              (500)          (8,068)
      Amortization  
      of
      intangibles
      purchased  
      through
      business              
      combination        (4,608)                (25)          (8,575)                (50)        (15,366)
Total  operating
expenses                  (39,999)        (25,635)        (77,170)        (50,012)      (138,288)

Income  from
operations                  11,662              8,778            23,185            16,689            41,548
Interest,  net              1,230              1,638              2,239              3,142              4,012

Income  before
income  tax                  12,892            10,416            25,424            19,831            45,560
Provision  for
income  taxes            (2,852)          (3,114)          (6,305)          (5,896)        (11,299)

Net  income                  10,040              7,302            19,119            13,935            34,261

Net  income                  10,040              7,302            19,119            13,935            34,261
Other  
comprehensive
income:
      Foreign  
      currency
      adjustments          26,886                  127            35,630              (122)            63,849
      Unrealized  
      holding
      gain/(loss)  
      on
      available-for
      -sale
      securities,  
      net  of
      tax  of  
      GBP863,000
      (Q2  2004:
      GBP555,000;  
      1H  2005:
      GBP1,555,000;  
      1H  2004:  
      GBP706,000)        (1,980)              1,294          (3,594)            1,647            (6,440)

Total
comprehensive
income                          34,946              8,723            51,155          15,460            91,670

Earnings  per  share
(assuming  dilution)

Shares  outstanding
('000)                    1,426,944      1,043,053      1,425,572    1,042,691
Earnings  per
share  -  pence                  0.7                  0.7                  1.3                1.3
Earnings  per  ADS
(assuming  dilution)

ADSs  outstanding
('000)                        475,648          347,684          475,191        347,564
Earnings  per  ADS
-  cents                              3.8                  3.8                  7.2                7.3

(1)          US  dollar  amounts  have  been  translated  from  sterling  at  the  30  June  2005
closing  rate  of  $1.792=GBP1  (see  note  1)



                                                      ARM  Holdings  plc
                                Consolidated  balance  sheet  -  US  GAAP

                                                                                30  June  31  December            30  June
                                                                                      2005                2004            2005  (1)                                                                            Unaudited          Audited        Unaudited
                                                                                GBP'000          GBP'000                $'000
Assets
    Current  assets:
    Cash  and  cash  equivalents                          121,646          110,561            217,990
    Short-term  investments                                  10,437              5,307              18,703
    Marketable  securities                                    22,553            21,511              40,415
    Accounts  receivable,  net  of  
    allowance  of  GBP1,486,000  in  
    2005  and  GBP1,451,000  in  2004                    49,660            34,347              88,991
    Inventory:  finished  goods                              1,830                  897                3,279
    Prepaid  expenses  and  other  assets            14,036            16,001              25,152
    Total  current  assets                                    220,162          188,624            394,530

    Long-term  marketable  securities                          -              5,438                        -
    Deferred  income  taxes                                      4,206              2,529                7,537
    Prepaid  expenses  and  other  assets              1,847                      -                3,310
    Property  and  equipment,  net                        13,300            14,117              23,834
    Goodwill                                                            362,913          340,416            650,340
    Other  intangible  assets                                71,363            74,578            127,882
    Investments                                                          6,741            12,235              12,080
    Total  assets                                                    680,532          637,937        1,219,513

Liabilities  and  shareholders'  equity
    Accounts  payable                                                4,996              4,110                8,953
    Income  taxes  payable                                      11,045              6,345              19,792
    Personnel  taxes                                                  1,324              1,123                2,373    
    Accrued  liabilities  (see  note  2)              22,298            38,600              39,958
    Deferred  revenue                                              20,438            21,355              36,625
    Total  current  liabilities                            60,101            71,533            107,701

    Accrued  liabilities                                                  -              1,732                        -
    Deferred  income  taxes                                      5,573            12,345                9,987
    Total  liabilities                                            65,674            85,610            117,688

Shareholders'  equity
    Ordinary  shares                                                      691                  675                1,238
    Additional  paid-in  capital                        426,662          414,133            764,578
    Deferred  compensation                                  (7,493)        (12,083)          (13,428)
    Treasury  stock,  at  cost                              (7,485)          (7,485)          (13,413)
    Retained  earnings                                          166,781          153,421            298,872
    Accumulated  other  comprehensive  
    income:
    Unrealized  holding  gain  on
    available-for-sale  securities,  
    net  of  tax  of  GBP521,000  
    (2004:GBP2,077,000)                                          2,581              6,175                4,625

    Cumulative  translation  adjustment            33,121          (2,509)              59,353
    Total  shareholders'  equity                        614,858          552,327        1,101,825

    Total  liabilities  and  shareholders'  
    equity                                                                680,532          637,937        1,219,513

    (1)    US  dollar  amounts  have  been  translated  from  sterling  at  the  30  June  2005
              closing  rate  of  $1.792=GBP1  (see  note  1)




                                                    ARM  Holdings  plc
                              Consolidated  income  statement  -  IFRS

                                                                      Six  months      Six  months                    Year
                                                                                ended                ended                  ended
                                                                            30  June            30  June      31  December
                                                                                  2005                  2004                    2004
                                                                        Unaudited        Unaudited          Unaudited
                                                                            GBP'000            GBP'000              GBP'000

Revenues
    Product  revenues                                        105,857              64,678              138,732
    Service  revenues                                            7,007                7,250                14,165
Total  revenues                                                112,864              71,928              152,897

Cost  of  revenues
    Product  costs                                              (9,461)            (2,639)              (6,735)
    Service  costs  (see  note  4)                    (3,765)            (2,792)              (5,505)
Total  cost  of  revenues                              (13,226)            (5,431)            (12,240)

Gross  profit                                                      99,638              66,497              140,657

Operating  expenses
    Research  and  development  
    (see  note  4)                                              (41,486)          (26,428)            (54,674)
    Sales  and  marketing  (see  note  4)      (23,289)          (12,216)            (25,546)
    General  and  administrative  
    (see  note  4)                                              (19,675)          (14,197)            (32,108)
Total  operating  expenses                          (84,450)          (52,841)          (112,328)

Profit  from  operations                                  15,188              13,656                28,329
Investment  income                                              2,239                3,142                  6,944

Profit  before  tax                                            17,427              16,798                35,273
Tax                                                                      (5,965)            (5,450)              (9,398)

Profit  for  the  period                                    11,462              11,348                25,875

Dividends
-  final  2003  paid  at  0.6  pence  per  
share                                                                              -                6,118                  6,118
-  interim  2004  paid  at  0.28  pence  per
share                                                                              -                        -                  2,857
-  final  2004  paid  at  0.42  pence  per          
share                                                                      5,759                        -                          -
-  interim  2005  proposed  at  0.34  pence
per  share                                                              4,670                        -                          -

Earnings  per  share
Basic  and  diluted  earnings                          11,462              11,348                25,875

Number  of  shares  ('000)
Basic  weighted  average  number  of  
shares                                                            1,366,672        1,019,198          1,026,890
Effect  of  dilutive  securities:
    Share  options                                                58,212              22,644                22,179
Diluted  weighted  average  number  of    
shares                                                            1,424,884        1,041,842          1,049,069

Basic  EPS                                                                0.8p                  1.1p                    2.5p
Diluted  EPS                                                            0.8p                  1.1p                    2.5p

All  activities  relate  to  continuing  operations.

All  of  the  profit  for  the  period  is  attributable  to  the  equity  shareholders  of  the  parent.



                                                          ARM  Holdings  plc
                                      Consolidated  balance  sheet  -  IFRS

                                                                      30  June              30  June      31  December
                                                                            2005                    2004                    2004
                                                                  Unaudited          Unaudited          Unaudited
                                                                      GBP'000              GBP'000              GBP'000

Assets
Current  assets:
Cash  and  cash  equivalents                    121,646              100,256              110,561
Short-term  investments                            10,437                66,041                  5,307
Marketable  securities                              22,553                          -                21,511
Accounts  receivable                                  49,660                25,251                34,347
Inventories:  finished  goods                    1,830                  1,025                      897
Prepaid  expenses  and  other  assets      14,036                  9,978                16,001
Total  current  assets                              220,162              202,551              188,624

Non-current  assets:
Long-term  marketable  securities                    -                          -                  5,438
Prepaid  expenses  and  other  assets        1,847                          -                          -
Property,  plant  and  equipment              11,030                  8,466                  9,096
Goodwill                                                      446,721                  2,091              417,079
Other  intangible  assets                          77,248                  8,528                84,037
Available-for-sale  investments              6,741                  8,543                12,235
Deferred  tax  assets                                    5,041                  6,189                  2,396
Total  non-current  assets                      548,628                33,817              530,281

Total  assets                                              768,790              236,368              718,905

Liabilities  and  shareholders'  
equity
Current  liabilities:
Accounts  payable                                          4,996                  2,813                  4,110
Current  tax  liabilities                          11,045                  6,252                  6,345
Accrued  and  other  liabilities              24,659                14,809                42,049
Deferred  revenue                                        20,438                12,632                21,355
Total  current  liabilities                      61,138                36,506                73,859

Net  current  assets                                  159,024              166,045              114,765

Non-current  liabilities:
Deferred  tax  liabilities                                  -                          -                      776
Long-term  other  payables                                  -                          -                  1,732
Total  liabilities                                      61,138                36,506                76,367

Net  assets                                                  707,652              199,862              642,538

Shareholders'  equity
Share  capital                                                    691                      513                      675
Share  premium  account                            445,416                82,326              434,026
Share  option  reserve                                61,474                          -                61,474
Retained  earnings                                    157,199              114,457              140,291
Revaluation  reserve                                    1,643                  2,688                  5,237
Cumulative  translation  adjustment      41,229                  (122)                      835
Total  equity                                              707,652              199,862              642,538





                                                      ARM  Holdings  plc
                            Consolidated  cash  flow  statement  -  IFRS

                                                                      Six  months      Six  months                  Year
                                                                                ended                ended                ended
                                                                            30  June            30  June    31  December
                                                                                  2005                  2004                  2004
                                                                        Unaudited        Unaudited        Unaudited
                                                                            GBP'000            GBP'000            GBP'000

Operating  activities
Profit  from  operations                                  15,188              13,656              28,329
Depreciation  and  amortisation  of  
tangible  and  intangible  assets                  14,244                6,793              13,059
Loss  on  disposal  of  property,  plant  
and  equipment                                                            53                        2                      20
Impairment  of  available-for  sale
investments                                                              337                        -                        -
Compensation  charge  in  respect  of
share-based  payments                                      11,944                3,618                7,855
Provision  for  doubtful  debts                              35                  (85)                (321)
Accounts  receivable  converted  to
available-for-sale  investments                            -                (112)                (112)
Changes  in  working  capital:
Accounts  receivable                                    (15,348)            (7,846)            (1,358)
Inventories                                                          (933)                  (94)                      34
Prepaid  expenses  and  other  assets              2,808                    554            (3,659)
Accounts  payable                                                    886                    122                1,176
Deferred  revenue                                            (1,959)                1,500                3,013
Accrued  liabilities  and  other  
creditors                                                          (4,772)            (3,213)                2,811

Cash  generated  by  operations  before  
tax                                                                        22,483              14,895              50,847
Income  taxes  paid                                          (7,069)            (4,739)          (11,601)

Net  cash  from  operating  activities          15,414              10,156              39,246

Investing  activities
Interest  received                                                2,292                3,155                7,233
Purchases  of  property,  plant  and                
equipment                                                            (2,747)            (1,090)            (2,732)
Proceeds  on  disposal  of  property,  
plant  and  equipment                                                  37                      17                      23
Purchases  of  other  intangible  assets          (389)                (716)            (2,663)
Purchases  of  available-for-sale
investments                                                            (132)                        -                  (50)
Proceeds  on  disposal  of
available-for-sale                                                    96                        -                        -
investments
(Purchase)  /  maturity  of  short-term
investments                                                            (699)          (36,977)              24,677
Purchases  of  subsidiaries,  net  of  cash
acquired                                                            (14,350)                        -          (77,899)

Net  cash  used  in  investing  activities  (15,892)          (35,611)          (51,411)

Financing  activities
Issue  of  shares                                                  11,406                1,192                1,313
Expenses  of  issuing  share  capital                        -                        -                (360)
Dividends  paid  to  shareholders                  (5,759)            (6,118)            (8,975)

Net  cash  from  /  (used  in)  financing
activities                                                              5,647            (4,926)            (8,022)

Net  increase  /  (decrease)  in  cash  and
cash  equivalents                                                  5,169          (30,381)          (20,187)
Cash  and  cash  equivalents  at  beginning
of  period                                                            110,561            130,722            130,722
Effect  of  foreign  exchange  rate  
changes                                                                    5,916                  (85)                      26

Cash  and  cash  equivalents  at  end  of        121,646            100,256            110,561
period


Notes  to  the  Financial  Statements

(1)  Basis  of  preparation  -  reporting  currency

The  Group  prepares  and  reports  its  financial  statements  in  UK  sterling.  Purely
for  the  convenience  of  the  reader,  the  US  GAAP  income  statement  and  balance
sheet  have  been  translated  from  sterling  at  the  closing  rate  on  30  June  2005  of
$1.792=GBP1.  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  or  at  any  other  rate.

(2)  Accrued  liabilities

Accrued  liabilities  under  US  GAAP  of  GBP22.3  million  (2004:  GBP38.6  million)
includes:  GBPnil  million  (2004:  GBP14.3  million)  for  acquisition-related
expenses,  GBP2.3  million  (2004:  GBP4.4  million)  for  staff  costs  and  GBP1.2
million  (2004:  GBP2.8  million)  representing  the  fair  value  of  embedded
derivatives.

(3)  Consolidated  statement  of  changes  in  shareholders'  equity  (US  GAAP)

                                                                    Additional          
                                                      Share          paid-in          Deferred      Treasury
                                                  capital          capital  compensation            stock
                                                  GBP'000          GBP'000            GBP'000        GBP'000

At  1  January  2005                        675          414,133          (12,083)        (7,485)
Shares  issued
on  exercise  of
options                                              16            11,390                        -                    -
Net  income                                          -                      -                        -                    -
Dividends                                            -                      -                        -                    -
Unrealized  holding                          
    losses  on
    available-for-sale  
    securities                                      -                      -                        -                    -
Deferred
    compensation
    arising  on
    share  schemes                                -                    73                  (73)                    -
Tax  benefits
    on  exercise  of
    options  issued
    as  part
    consideration
    for  a
    business                                          
    combination                                    -              1,227                        -                    -
Amortization
of  deferred
compensation                                      -                      -                4,502                    -
Reversal  of
unearned
compensation                                      -              (161)                    161                    -
Currency  translation                      -                      -                        -                    -
adjustment
At  30  June
2005                                                  691          426,662            (7,493)        (7,485)



                                                                                                Cumulative        
                                        Retained            Unrealized      translation
                                        earnings        holding  gain        adjustment            Total
                                          GBP'000                  GBP'000              GBP'000        GBP'000
At  1  January
2005                                  153,421                      6,175              (2,509)        552,327
Shares  issued
on  exercise  of
options                                        -                              -                          -          11,406
Net  income                        19,119                              -                          -          19,119
Dividends                        (5,759)                              -                          -        (5,759)
Unrealized
    holding  losses
    on
    available-for-sale              -                  (3,594)                          -        (3,594)
securities
Deferred  compensation            
    arising  on                              -                              -                          -                    -
    share  schemes
Tax  benefits
    on  exercise  of
    options  issued
    as  part
    consideration
    for  a
    business                                  
    combination                            -                              -                          -            1,227
Amortization
of  deferred
compensation                              -                              -                          -            4,502
Reversal  of  unearned                
compensation                              -                              -                          -                    -
Currency
translation
adjustment                                  -                              -                35,630          35,630
At  30  June
2005                                  166,781                      2,581                33,121        614,858

(4)  IFRS  operating  expenses

Included  within  the  IFRS  income  statement  for  the  six  months  ended  30  June  2005
are  share-based  payment  costs  of  GBP0.7m  (six  months  ended  30  June  2004:
GBP0.2m;  year  ended  31  December  2004:  GBP0.4)  in  cost  of  revenues,  GBP6.9m  (30
June  2004:  GBP2.0m;  31  December  2004:  GBP4.3m)  in  research  and  development
costs,  GBP2.3m  (30  June  2004:  GBP0.6m;  31  December  2004:  GBP1.5m)  in  sales  and
marketing  costs  and  GBP2.0m  (30  June  2004:  GBP0.8m;  31  December  2004:  GBP1.7m)
in  general  and  administrative  costs.


Also  included  within  operating  costs  is  amortization  of  intangibles  of  GBP4.0m
(30  June  2004:  GBPnil;  31  December  2004  GBP0.3m)  in  research  and  development
costs,  GBP4.3m  (30  June  2004:  GBPnil;  31  December  2004  GBP0.2m)  in  sales  and
marketing  costs  and  GBP0.3m  (30  June  2004:  GBPnil;  31  December  2004  GBP0.1m)  in
general  and  administrative  costs.

(5)  Consolidated  statement  of  changes  in  shareholders'  equity  (IFRS)

                                                    Share    Share  premium      Share  option      Retained
                                                capital                account                reserve      earnings
                                                GBP'000                GBP'000                GBP'000        GBP'000

At  1  January
2005                                                675                434,026                  61,474        140,291
Shares  issued
on  exercise  of
options                                            16                  11,390                            -                    -
Profit  for  the
period                                                -                            -                            -          11,462
Dividends                                          -                            -                            -        (5,759)
Credit  in
respect  of
employee  share
schemes                                              -                            -                            -          11,944
Movement  on
    deferred  tax
    arising  on
    outstanding                                  
    share  options                              -                            -                            -          (5,551)
Tax  benefits
    on  exercise  of
    options  issued
    as  part
    consideration
    for  a  business
    combination                                  -                            -                            -              4,812
Unrealized  holding  losses          
  on  available-for-sale
  investments  (net  of
  deferred  tax  of
  GBP1,556,000)                                -                            -                            -                      -
Currency  translation                    
adjustment                                        -                            -                            -                      -
At  30  June
2005                                                691                445,416                  61,474          157,199



                                                                                                      Cumulative          Total
                                        Revaluation  reserve      translation  reserve
                                                                GBP'000                              GBP'000      GBP'000

At  1  January
2005                                                            5,237                                      835      642,538
Shares  issued
on  exercise  of
options                                                              -                                          -        11,406
Profit  for  the
period                                                                -                                          -        11,462
Dividends                                                          -                                          -      (5,759)
Credit  in
respect  of
employee  share
schemes                                                              -                                          -        11,944
Movement  on
    deferred  tax
    arising  on
    outstanding                                                
    share  options                                              -                                          -      (5,551)
Tax  benefits  on
    exercise  of
    options  issued
    as  part
    consideration
    for  a  business                                            
    combination                                                  -                                          -          4,812
Unrealized
    holding  losses
    on
    available-for-sale  
    investments  (net  of
    deferred  tax  of
    GBP1,556,000)                                  (3,594)                                          -      (3,594)
Currency
translation
adjustment                                                      -                                  40,394        40,394
At  30  June  2005                                    1,643                                  41,229      707,652

(6)  Summary  of  significant  differences  between  US  GAAP  and  IFRS

Goodwill  Under  both  IFRS  and  US  GAAP,  goodwill  is  not  subject  to  amortisation,
but  is  tested  annually  for  impairment.  As  permitted  by  IFRS  1,  the  Company's
goodwill  under  IFRS  has  been  frozen  at  the  amount  recorded  under  UK  GAAP  as  at  1
January  2004.  Under  US  GAAP,  following  the  provisions  of  SFAS  142,  "Goodwill  and
other  intangible  assets",  the  carrying  value  of  goodwill  was  frozen  at  the
amount  recorded  under  previous  US  GAAP  as  at  1  January  2002.  Under  both  previous
US  GAAP  and  UK  GAAP,  goodwill  was  amortised  over  its  useful  economic  life.  Thus,
while  ongoing  accounting  policies  in  respect  of  goodwill  are  similar  under  US
GAAP  and  IFRS,  the  difference  in  the  dates  of  transition  means  that  different
amounts  of  goodwill  are  recorded.

Under  US  GAAP,  certain  costs  to  be  incurred  on  restructuring  on  business
combination  are  treated  as  a  fair  value  adjustment  in  the  balance  sheet
acquired.  Under  IFRS,  these  costs  are  expensed  post-acquisition.  Additionally,
under  US  GAAP,  tax  benefits  arising  from  the  exercise  of  options  issued  as  part
of  the  consideration  for  a  business  combination  become  a  deduction  to  goodwill,
only  to  the  extent  that  those  benefits  do  not  exceed  the  fair  value  of  the
consideration  relating  to  those  options  at  the  appropriate  tax  rate.  Any  excess
tax  benefits  are  a  deduction  to  equity.  Under  IFRS,  the  full  tax  benefit  is  a
deduction  to  equity.

The  2004  annual  report  included  a  provisional  assessment  of  the  fair  values  of
assets  and  liabilities  acquired  on  acquisition  of  Artisan  Components  Inc.  on  23
December  2004.  Where  these  provisional  values  have  been  amended  as  estimates
have  been  refined  in  2005,  adjustments  to  fair  values  have  been  recorded  as
prior  year  adjustments  to  goodwill  for  IFRS  purposes.  Under  US  GAAP,  these  are
recorded  as  amendments  to  goodwill  in  the  current  period.

Recognition  and  amortisation  of  intangibles  The  Company  has  taken  advantage  of
the  exemption  under  IFRS  1  not  to  apply  IFRS  retrospectively  to  business
combinations  occurring  before  1  January  2004.  This  means  that  for  business
combinations  occurring  before  this  date,  the  previously  reported  UK  GAAP
treatment  has  continued  to  be  followed.  Under  previous  UK  GAAP,  intangible
assets  were  recognised  separately  from  goodwill  only  where  they  could  be  sold
separately  without  disposing  of  a  business  of  the  entity.  This  separability
criterion  does  not  apply  under  either  IFRS  or  US  GAAP.  Thus,  a  number  of
intangible  assets  which  are  required  to  be  recognised  separately  from  goodwill
under  both  IFRS  3  and  SFAS  142,  were  subsumed  within  goodwill  under  UK  GAAP.
Under  both  US  GAAP  and  IFRS,  such  intangible  assets  are  amortised  over  their
useful  economic  lives.  Except  in  relation  to  in-process  research  and  development
(see  below),  there  is  no  difference  in  accounting  policy  for  intangible  assets
recognised  as  a  result  of  business  combinations  entered  into  after  1  January
2004.

In-process  research  and  development  Under  IFRS,  in-process  research  and
development  projects  purchased  as  part  of  a  business  combination  may  meet  the
criteria  set  out  in  IAS  38,  "Intangible  assets",  for  recognition  as  intangible
assets  other  than  goodwill  and  are  amortised  over  their  useful  economic  lives
commencing  when  the  asset  is  brought  into  use.  Under  US  GAAP,  in-process
research  and  development  is  immediately  written-off  to  the  income  statement.
This  accounting  policy  difference  gives  rise  to  an  associated  difference  in
deferred  taxation.

Valuation  of  consideration  on  business  combination  Under  both  IFRS  and  US  GAAP,
the  fair  value  of  consideration  in  a  business  combination  includes  the  fair
value  of  both  equity  issued  and  any  share  options  granted  as  part  of  that
combination.  Under  IFRS,  any  equity  issued  is  valued  at  the  fair  value  as  of  the
date  of  completion,  whilst  under  US  GAAP,  the  equity  is  valued  at  the  date  the
terms  of  the  combination  were  agreed  to  and  announced.  For  options,  under  US
GAAP,  the  fair  value  is  based  upon  the  total  number  of  options  granted,  both
vested  and  unvested,  whilst  under  IFRS  the  fair  value  only  includes  those  that
have  vested,  together  with  a  pro-rata  value  for  partially  vested  options.
Furthermore,  where  there  is  contingent  consideration  for  an  acquisition,  under
IFRS  this  is  recognized  as  part  of  the  purchase  consideration  if  the  contingent
conditions  are  expected  to  be  satisfied,  whilst  under  US  GAAP  it  is  only
recognised  if  the  conditions  have  actually  been  met.

Deferred  compensation  Under  US  GAAP,  the  intrinsic  value  of  unvested  stock
options  issued  by  an  acquirer  as  part  of  a  business  combination  in  exchange  for
unvested  share  options  of  the  acquiree  is  recorded  as  a  debit  balance  within
shareholders'  funds.  This  amount  is  charged  to  the  profit  and  loss  account  over
the  vesting  period  of  the  share  options  in  accordance  with  FIN  28.  Under  IFRS,
no  such  adjustment  to  shareholders'  funds  is  made  on  acquisition.

Compensation  charge  in  respect  of  share-based  payments  The  Company  issues
equity-settled  share-based  payments  to  certain  employees.  In  accordance  with
IFRS  2,  equity-settled  share-based  payments  are  measured  at  fair  value  at  the
date  of  grant,  using  the  Black-Scholes  pricing  model.  The  fair  value  determined
at  the  grant  date  of  the  equity-settled  share-based  payments  is  expensed  on  a
straight-line  basis  over  the  vesting  period,  based  on  the  Company's  estimate  of
the  number  of  shares  that  will  eventually  vest.  Under  US  GAAP,  the  Company
accounts  for  share  option  compensation  expense  under  APB  25,  and  thus  no
compensation  expense  is  recorded  where  the  exercise  price  of  the  option  is  equal
to  the  share  price  on  the  date  of  grant.

Under  US  GAAP,  the  Company  recognises  a  compensation  charge  in  respect  of  the  UK
SAYE  plans.  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  straight-line  basis  over  the  savings  period.  In
addition,  certain  options  attract  a  charge  under  variable  plan  accounting  under
US  GAAP.  Under  IFRS,  this  charge  is  calculated  in  the  same  manner  as  other
share-based  payments,  as  detailed  above.

Under  US  GAAP,  the  Company  follows  variable  plan  accounting  for  the  LTIP  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.  Under  IFRS,  this  charge  is  calculated
in  the  same  manner  as  other  share-based  payments,  as  detailed  above.

Deferred  tax  on  UK  and  US  share  options  In  the  US  and  the  UK,  the  Company  is
entitled  to  a  tax  deduction  for  the  amount  treated  as  employee  compensation
under  US  and  UK  tax  rules  on  exercise  of  certain  employee  share  options.  The
compensation  is  equivalent  to  the  difference  between  the  option  exercise  price
and  the  fair  market  value  of  the  shares  at  the  date  of  exercise.

Under  IFRS,  deferred  tax  assets  are  recognised  and  are  calculated  by  comparing
the  estimated  amount  of  tax  deduction  to  be  obtained  in  the  future  (based  on  the
Company's  share  price  at  the  balance  sheet  date)  with  the  cumulative  amount  of
the  compensation  expense  recorded  in  the  income  statement.  If  the  amount  of
estimated  future  tax  deduction  exceeds  the  cumulative  amount  of  the  remuneration
expense  at  the  statutory  tax  rate,  the  excess  is  recorded  directly  in  equity,
against  the  profit  and  loss  reserve.  In  accordance  with  the  transitional
provisions  of  IFRS  2,  no  compensation  charge  is  recorded  in  respect  of  options
granted  before  7  November  2002  or  in  respect  of  those  options  which  have  been
exercised  or  have  lapsed  before  1  January  2005.  Nevertheless,  tax  deductions
have  arisen  and  will  continue  to  arise  on  these  options.  The  tax  effects  arising
in  relation  to  these  options  are  recorded  directly  in  equity,  against  retained
earnings.

Under  US  GAAP,  deferred  tax  assets  are  recognised  by  multiplying  the
compensation  expense  recorded  by  the  prevailing  tax  rate  in  the  relevant  tax
jurisdiction.  Where,  on  exercise  of  the  relevant  option,  the  tax  benefit
obtained  exceeds  the  deferred  tax  asset  in  relation  to  the  relevant  options,  the
excess  is  recorded  in  additional  paid-in  capital.  Where  the  tax  benefit  is  less
than  the  deferred  tax  asset,  the  write-down  of  the  deferred  tax  asset  is
recorded  against  additional  paid-in  capital  to  the  extent  of  previous  excess  tax
benefits  recorded  in  this  account,  with  any  remainder  recorded  in  the  income
statement.

Employer  taxes  on  share  options  Under  IFRS,  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.


Reconciliation  of  IFRS  profit  to  US  GAAP  net  income

                                                                        Six  months    Six  months                  Year
                                                                                  ended              ended                ended
                                                                              30  June          30  June    31  December
                                                                                    2005                2004                  2004
                                                                          Unaudited      Unaudited        Unaudited
                                                                              GBP'000          GBP'000            GBP'000

Profit  for  financial  period  as  
reported  under  IFRS                                          11,462            11,348              25,875
Adjustments  for:
Amortisation  of  intangibles                                358                (50)                  (65)
Write-off  of  in-process  research  and
development                                                            (335)                      -            (3,612)
Deduct:  US  GAAP  compensation  charge  in
respect  of  LTIP                                                    (611)              (317)                (619)
Deduct  :  US  GAAP  compensation  charge  in
respect  of  SAYE  schemes                                    (186)              (184)                (341)
Deduct  :  US  GAAP  deferred  stock-based
compensation  re  acquisition                        (3,706)                      -                        -
Add:  IFRS  compensation  charge  in  respect
of  all  share-based  payments                          11,944              3,618                7,855
Employer's  taxes  on  share  options                        -                (34)                  (36)
Utilisation  of  restructuring  provision          533                      -                        -Tax  on  UK  and  US  share  options                              -              (165)                (515)
Tax  difference  on  amortisation  of
intangibles                                                            (164)                      -                  (14)
Tax  difference  on  share-based  payments      (176)              (281)                (551)
Net  income  as  reported  under  US  GAAP        19,119            13,935              27,977



Reconciliation  of  shareholders'  equity  from  IFRS  TO  US  GAAP

                                                                              30  June          30  June    31  December
                                                                                    2005                2004                  2004
                                                                          Unaudited      Unaudited        Unaudited
                                                                              GBP'000          GBP'000            GBP'000


Shareholders'  equity  as  reported  under
IFRS                                                                      707,652          199,862            642,538
Adjustments  for:
Employer's  taxes  on  share  options                      27                    29                      27
Utilisation  of  restructuring  provision          533                      -                        -
Cumulative  difference  on  amortisation  of
goodwill                                                                  2,713              2,713                2,713
Cumulative  difference  on  amortisation  of
intangibles                                                                251                (92)                (107)
Cumulative  write-off  of  in-process
research  and  development                              (4,097)              (150)            (3,762)
Cumulative  difference  on  deferred  tax        (178)                      -                  (14)
Valuation  of  equity  consideration  on
acquisition                                                      (82,435)                      -          (82,435)
Valuation  of  option  consideration  on
acquisition                                                          17,476                      -              17,476
Deferred  compensation  on  acquisition      (9,579)                      -            (9,579)
Deferred  tax  on  share-based  payments      (7,899)          (3,089)          (13,274)
Portion  of  tax  benefit  arising  on  
exercise  of  options  issued  on  
acquisition  taken  to  goodwill  under  
US  GAAP                                                                (3,928)                      -                        -
Foreign  exchange  on  valuation  of
intangible  assets  and  deferred  tax          (5,678)                      -            (1,256)

Shareholders'  equity  as  reported  under  US
GAAP                                                                      614,858          199,273            552,327



Reconciliation  of  goodwill  from  IFRS  to  US  GAAP    

                                                                              30  June          30  June    31  December
                                                                                    2005                2004                  2004
                                                                          Unaudited      Unaudited        Unaudited
                                                                              GBP'000          GBP'000            GBP'000

Goodwill  as  reported  under  IFRS                446,721              2,091            417,079
Adjustments  for:
Amendments  to  provisional  fair  values        1,117                      -                (736)
Cumulative  difference  on  amortisation  of
goodwill                                                                  2,713              2,713                2,713
Cumulative  write-off  of  in-process
research  and  development                                  (150)              (150)                (150)
Amendment  following  revised  intangible
valuation  on  acquisition,  net  of  deferred
tax                                                                                    -                      -                    500
Separately  identifiable  intangible  
assets                                                                      (302)              (302)                (302)
Deferred  tax  on  capitalised  in-process
research  and                                                      (1,570)                      -            (1,318)
development
Portion  of  tax  benefit  arising  on  exercise
of  options  issued  on
acquisition  taken                                            (3,928)                      -                        -
to  goodwill  under  US  GAAP
Valuation  of  equity  consideration  on
acquisition                                                      (82,435)                      -          (82,435)
Valuation  of  option  consideration  on
acquisition                                                          17,476                      -              17,476
Deferred  compensation  on  acquisition      (9,579)                      -            (9,579)
Contingent  consideration                              (1,665)                      -            (1,665)
Foreign  exchange  on  revaluation  of
goodwill                                                              (5,485)                      -            (1,167)

Goodwill  as  reported  under  US  GAAP          362,913              4,352            340,416


(7)  Non-GAAP  measures

The  following  non-GAAP  measures,  including  reconciliations  to  the  US  GAAP
measures,  have  been  used  in  this  earnings  release.  These  measures  have  been
presented  as  they  allow  a  clearer  comparison  of  operating  results  that  exclude
one-off  non-recurring  charges  and  acquisition-related  charges.  All  figures  in
GBP'000  unless  otherwise  stated.



                                                                                      (7.1)          (7.2)                (7.3)
                                                                                  Q2  2005      Q1  2005            Q2  2004

Income  from  operations  (US  GAAP)                    11,662        11,523                8,778
Acquisition-related  charge  -  
amortization  of  intangibles                                4,608          3,967                      25
Acquisition-related  charge  -  deferred
stock-based  compensation                                      1,640          2,066                        -
Other  deferred  stock-based  compensation            502              294                    242
Pro  forma  income  from  operations                    18,412        17,850                9,045
As  %  of  revenue                                                          31.8%          32.4%                24.5%



                                                                                                            (7.4)              (7.5)
                                                                                                      1H  2005            1H  2004

Income  from  operations  (US  GAAP)                                        23,185              16,689
Acquisition-related  charge  -  amortization  
of  intangibles                                                                              8,575                      50
Acquisition-related  charge  -  deferred  
stock-based  compensation                                                          3,706                        -
Other  deferred  stock-based  compensation                                796                    500
Pro  forma  income  from  operations                                        36,262              17,239
As  %  of  revenue                                                                              32.1%                24.0%



                                                                                    (7.6)          (7.7)                (7.8)
                                                                                  30  June    31  March    31  December  
                                                                                        2005            2005                  2004
Cash  and  cash  equivalents                                121,646        93,816            110,561
Short-term  investments                                        10,437        24,956                5,307
Short-term  marketable
securities                                                                22,553        21,975              21,511
Long-term  marketable
securities                                                                          -          1,038                5,438
Pro  forma  cash                                                      154,636      141,785            142,817

                                                                                      (7.9)        (7.10)              (7.11)
                                                                                  Q2  2005      Q1  2005            Q2  2004

Net  income  (US  GAAP)                                            10,040          9,079                7,302
Acquisition-related  charge  -  amortization
of  intangibles                                                          4,608          3,967                      25
Acquisition-related  charge  -  deferred
stock-based  compensation                                      1,640          2,066                        -
Other  deferred  stock-based  compensation            502              294                    242
Estimated  tax  impact  of  above  changes        (1,875)      (1,831)                        -
Pro  forma  net  income                                            14,915        13,575                7,569
Dilutive  shares  ('000)                                  1,426,944  1,424,612        1,043,053
Pro  forma  diluted  EPS                                                1.0p            1.0p                  0.7p



                                                                                                        (7.12)                (7.13)
                                                                                                      1H  2005              1H  2004

Net  income  (US  GAAP)                                                                19,119                13,935
Acquisition-related  charge  -  amortization  of
intangibles                                                                                    8,575                        50
Acquisition-related  charge  -  deferred  stock-based
compensation                                                                                  3,706                          -
Other  deferred  stock-based  compensation                                796                      500
Estimated  tax  impact  of  above  changes                            (3,706)                          -
Pro  forma  net  income                                                                28,490                14,485
Dilutive  shares  ('000)                                                      1,425,572          1,042,691
Pro  forma  diluted  EPS                                                                    2.0p                    1.4p



                                                                                                        (7.14)                (7.15)
                                                                                                      1H  2005              1H  2004
                                                                                                          $'000                  $'000

ARM  reported  dollar  revenues                                                65,346              127,596
Artisan  reported  dollar  revenues  (quarter/half  year
ended  30  June  2004)                                                                  21,973                43,341
Aggregate  ARM  and  Artisan  dollar  revenues                      87,319              170,937

Appendix  -  additional  notes  to  the  IFRS  statements


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,  cost-effectiveness  and  power-efficiency  of
high-volume  embedded  applications.  The  Company  licences  and  sells  its  technology
and  products  to  leading  international  electronics  companies,  which  in  turn
manufacture,  market  and  sell  microprocessors,  application-specific  integrated
circuits  (ASICs)  and  application-specific  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  utilise  the  Company's  technology,  the  Company  is  establishing  its
architecture  as  a  RISC  processor  for  use  in  many  high-volume  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  licences  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.

The  Company's  wholly-owned  undertakings  include  ARM  Limited  (incorporated  in  the
UK),  ARM,  Inc.  (incorporated  in  the  US),  ARM  Physical  IP  Inc.  (formerly  Artisan
Components  Inc.,  incorporated  in  the  US),  Axys  Design  Automation  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  N.V.  (incorporated  in  Belgium),  ARM  Taiwan  Limited  (incorporated  in
Taiwan),  ARM  Consulting  (Shanghai)  Co.  Limited  (incorporated  in  PR  China)  and
ARM  Embedded  Solutions  Pvt.  Ltd.  (incorporated  in  India).

Basis  of  preparation  These  interim  financial  statements  have  been  prepared  in
accordance  with  the  accounting  policies  the  Company  expects  to  adopt  in  its  2005
annual  report.  These  accounting  policies  are  based  on  the  IASs,  IFRSs  and  IFRIC
interpretations  that  the  Company  expects  to  be  applicable  at  that  time.  The
IFRSs  and  IFRIC  interpretations  that  will  be  applicable  at  31  December  2005,
including  those  that  will  be  applicable  on  an  optional  basis,  are  not  known  with
certainty  at  the  time  of  preparing  these  interim  financial  statements.

The  Company's  consolidated  financial  statements  were  prepared  in  accordance  with
UK  GAAP  until  31  December  2004.  The  Company  has  applied  the  same  accounting
policies  and  methods  of  computation  in  these  interim  financial  statements  as
those  published  by  the  Company  on  4  March  2005  within  its  2004  Annual  Report,
except  as  explained  in  notes  2  and  3  of  this  appendix,  where  the  effects  of
changes  in  accounting  policies  arising  as  a  result  of  the  adoption  of  IFRS  are
set  out.  Reconciliations  between  previously  reported  financial  statements
prepared  under  UK  GAAP  and  the  IFRS  equivalents  are  presented  for  profit  for  the
year  ended  31  December  2004  and  the  six  months  ended  30  June  2004  and  net  assets
as  at  31  December  2004,  30  June  2004  and  1  January  2004.  Further  disclosures
required  by  IFRS  1  concerning  the  transition  from  UK  GAAP  to  IFRS  are  also  given
in  notes  2  and  3  of  this  appendix.

IFRS  1  provides  certain  optional  exemptions  from  full  retrospective  application
of  all  accounting  standards  effective  at  the  Company's  reporting  date.  As
discussed  in  more  detail  in  the  relevant  sections  below,  the  Company  has  taken
advantage  of  the  exemptions  relating  to:  business  combinations,  cumulative
translation  differences  and  share-based  payment  transactions.  The  Company  has
not  taken  advantage  of  the  available  optional  exemption  relating  to  fair  value
measurement  of  financial  assets  and  financial  liabilities  at  initial
recognition.

These  interim  financial  statements  have  been  prepared  under  the  historical  cost
convention  as  modified  by  the  revaluation  of  available-for-sale  investments  and
derivative  instruments.

Use  of  estimates  The  preparation  of  these  interim  financial  statements  has
required  management  to  make  estimates  and  assumptions  that  affect  the  amounts
reported.  Actual  results  could  differ  from  these  estimates.  Significant
estimates  in  these  interim  financial  statements  include,  but  are  not  limited  to,
revenue  recognition,  accounting  for  investments,  provisions  for  income  taxes,
allowance  for  doubtful  debts,  impairment  of  non-current  assets,  goodwill  and
purchased  intangible  assets  and  contingencies  and  legal  settlements.

Principles  of  consolidation  The  consolidated  interim  financial  statements
incorporate  the  interim  financial  statements  of  the  Company  and  all  its
subsidiaries.  Intra-group  transactions,  including  sales,  profits,  receivables
and  payables,  have  been  eliminated  on  consolidation.

Business  combinations  The  results  of  subsidiaries  acquired  in  the  period  are
included  in  the  income  statement  from  the  date  they  are  acquired.  On
acquisition,  all  of  the  subsidiaries'  assets  and  liabilities  that  exist  at  the
date  of  acquisition  are  recorded  at  their  fair  values  reflecting  their  condition
at  that  date.

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.  Goodwill  is  not
amortised  but  is  measured  at  cost  less  impairment  losses.  In  determining  the
fair  value  of  consideration,  the  fair  value  of  equity  issued  is  the  market  value
of  equity  at  the  date  of  completion,  the  fair  value  of  share  options  assumed  is
calculated  using  the  Black  Scholes  valuation  model,  and  the  fair  value  of
contingent  consideration  is  based  upon  whether  the  directors  believe  any
performance  conditions  will  be  met  and  thus  whether  any  further  consideration
will  be  payable.

As  permitted  by  IFRS  1,  goodwill  arising  on  acquisitions  before  1  January  2004
(date  of  transition  to  IFRS)  has  been  frozen  at  the  UK  GAAP  amounts  subject  tobeing  tested  for  impairment  at  that  date.  Goodwill  is  tested  for  impairment  at
least  annually.  The  Company  performs  its  annual  impairment  review  at  the
cash-generating  unit  level.  For  2004,  goodwill  was  assigned  to  the
cash-generating  units  of  the  Company.  The  subsequent  impairment  test  showed  no
impairment  with  respect  to  goodwill.

Available-for-sale  investments  Publicly  traded  investments  are  classified  as
available-for-sale  and  are  carried  at  market  value.  Unrealised  holding  gains  or
losses  on  such  securities  are  included,  net  of  related  taxes,  directly  in  equity
via  a  revaluation  reserve.  Impairment  losses  and  realised  gains  and  losses  of
such  securities  are  reported  in  earnings.  Equity  securities  that  are  not
publicly  traded  are  also  classified  as  available-for-sale  and  are  recorded  at
fair  value.  At  30  June  2005  and  2004  and  at  31  December  2004,  the  estimated  fair
value  of  these  investments  approximated  to  cost  less  any  permanent  diminution  in
value,  based  on  estimates  determined  by  management.  The  Company  has  applied  the
provisions  of  IAS  32,  "Financial  Instruments:  disclosure  and  presentation",  and
IAS  39,  "Financial  Instruments:  recognition  and  measurement",  from  the  date  of
transition  to  IFRS  and  has  therefore  not  taken  advantage  of  the  optional
exemption  available  under  IFRS  1,  under  which  the  Company  could  have  elected  to
apply  these  standards  only  from  1  January  2005.

Research  and  development  expenditure  All  on-going  research  expenditure  is
expensed  in  the  period  in  which  it  is  incurred.  Where  a  product  is  technically
feasible,  production  and  sale  are  intended,  a  market  exists,  and  sufficient
resources  are  available  to  complete  the  project,  development  costs  are
capitalised  and  amortised  on  a  straight-line  basis  over  the  estimated  useful
life  of  the  respective  product.  The  Company  believes  its  current  process  for
developing  products  is  essentially  completed  concurrently  with  the  establishment
of  technological  feasibility  which  is  evidenced  by  a  working  model.  Accordingly,
development  costs  incurred  after  the  establishment  of  technological  feasibility
have  not  been  significant  and,  therefore,  no  costs  have  been  capitalized  to
date.  Where  no  internally-generated  intangible  asset  can  be  recognised,
development  expenditure  is  recognised  as  an  expense  in  the  period  in  which  it  is
incurred.

Impairment  charges  The  Company  considers  at  each  reporting  date  whether  there  is
any  indication  that  non-current  assets  are  impaired.  If  there  is  such  an
indication,  the  Company  carries  out  an  impairment  test  by  measuring  the  assets'
recoverable  amount,  which  is  the  higher  of  the  assets'  fair  value  less  costs  to
sell  and  their  value  in  use.  If  the  recoverable  amount  is  less  than  the  carrying
amount  an  impairment  loss  is  recognised,  and  the  assets  are  written  down  to
their  recoverable  amount.

Revenue  recognition  The  Company  follows  the  principles  of  IAS  18,  "Revenue
recognition",  in  determining  appropriate  revenue  recognition  policies.  In
principle,  therefore,  revenue  is  recognised  to  the  extent  that  it  is  probable
that  the  economic  benefits  associated  with  the  transaction  will  flow  into  the
Company.

Revenue  (excluding  VAT)  comprises  the  value  of  sales  of  licences,  royalties
arising  from  the  resulting  sale  of  licensees'  ARM-based  products,  revenues  from
support,  maintenance  and  training,  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  risks  and  rewards
of  ownership  of  the  product  are  transferred  to  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  percentage  of  completion  basis  over  the  period  from  signing  of
the  licence  to  customer  acceptance.  Under  the  percentage  of  completion  method,
provisions  for  estimated  losses  on  uncompleted  contracts  are  recognised  in  the
period  in  which  the  likelihood  of  such  losses  is  determined.  The  percentage  of
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.

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  Company
evaluates  whether  it  has  obtained,  through  its  performance  to  date,  the
probability  that  the  economic  benefits  associated  with  the  transaction  will  flow
into  the  Company  and  therefore  whether  revenue  should  be  recognised  prior  to  the
issuance  of  invoices.  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;  and
-  whether  it  has  sufficient  evidence  that  the  customer  considers  that  the
    Company's  contractual  obligations  have  been,  or  will  be,  fulfilled;  and
-  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  Company  considers  that  there  is  insufficient  evidence  that  it  is
probable  that  the  economic  benefits  associated  with  the  transaction  will  flow
into  the  Company,  taking  into  account  these  criteria,  revenue  is  not  recognised
until  there  is  sufficient  evidence  that  it  is  probable  that  the  economic
benefits  associated  with  the  transaction  will  flow  into  the  Company.  If  the
amount  of  revenue  recognised  exceeds  the  amounts  invoiced  to  customers,  the
excess  amount  is  recorded  as  amounts  recoverable  on  contracts  within  debtors.

Where  agreements  involve  several  components,  the  entire  fee  from  such
arrangements  has  been  allocated  to  each  of  the  individual  components  based  on
each  component's  fair  value.  Vendor-specific  objective  evidence  (VSOE)  of  fair
value  is  determined  by  reference  to  licence  agreements  with  other  customers
where  components  are  sold  separately.

Agreements  including  rights  to  unspecified  products  are  accounted  for  using
subscription  accounting,  revenue  from  the  arrangement  being  recognised  on  a
straight-line  basis  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  co-developed  by  the  Company  and  a  collaborative
partner,  with  both  parties  retaining  the  right  to  sell  licences  to  the  product.
In  those  cases  where  the  Company  makes  sales  of  these  products  and  is  exposed  to
the  significant  risks  and  benefits  associated  with  the  transaction,  the  total
value  of  the  licence  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  licence  fees,  contracts  generally  contain  an  agreement  to
provide  post-contract  support  (support,  maintenance  and  training)  (PCS)  which
consists  of  an  identified  customer  contact  at  the  Company  and  telephonic  or
e-mail  support.  Fees  for  post  contract  support  which  take  place  after  customer
acceptance  are  specified  in  the  contract.  Revenue  related  to  PCS  is  recognised
based  on  VSOE,  which  is  determined  with  reference  to  contractual  renewal  rates,
or,  if  none  are  specified,  by  reference  to  the  rates  actually  charged  on  renewal
PCS  arrangements  for  the  same  level  of  support  and  for  the  same  or  similar
technologies.  Revenue  for  PCS  is  recognised  on  a  straight-line  basis  over  the
period  for  which  support  and  maintenance  is  contractually  agreed  by  the  Company
with  the  licensee.

The  excess  of  licence  fees  and  post-contract  support  invoiced  over  revenue
recognised  is  recorded  as  deferred  revenue.

Sales  of  software,  including  development  systems,  which  are  not  specifically
designed  for  a  given  licence  (such  as  off-the-shelf  software)  are  recognised
upon  delivery,  when  the  significant  risks  and  rewards  of  ownership  have  been
transferred  to  the  customer.  At  that  time,  the  Company  has  no  further
obligations  except  that,  where  necessary,  the  costs  associated  with  providing
post  contract  support  have  been  accrued.  Services  (such  as  training)  that  the
Company  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  it  is  probable
that  the  economic  benefits  associated  with  the  transaction  will  flow  into  the
Company.

Royalty  revenues  are  earned  on  sales  by  the  Company'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  percentage  of  completion  basis  as  milestones  are  achieved.
Consulting  costs  are  recognised  when  incurred.

The  Company  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  percentage  of  completion  accounting  method,  which
requires  that  the  extent  of  progress  toward  completion  of  contracts  may  be
anticipated  with  reasonable  certainty.  The  use  of  the  percentage  of  completion
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  components  of  arrangements  involving  several  components,  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.

Government  grants  Grants  in  respect  of  specific  research  and  development
projects  are  credited  to  research  and  development  costs  within  the  income
statement  to  match  the  projects'  related  expenditure.

Retirement  benefit  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.

Cash  and  cash  equivalents  The  Company  considers  all  highly  liquid  investments
with  original  maturity  dates  of  three  months  or  less  to  be  cash  equivalents.

Short-term  investments  and  marketable  securities  The  company  considers  all
highly  liquid  investments  with  original  maturity  dates  of  greater  than  three
months  but  less  than  one  year  to  be  short-term  investments.  Any  investments  with
a  maturity  date  of  greater  than  one  year  from  the  balance  sheet  date  are
classified  as  long-term.

Allowance  for  doubtful  debts  Trade  receivables  are  first  assessed  individually
for  impairment,  or  collectively  where  the  receivables  are  not  individually
significant.  Where  there  is  no  objective  evidence  of  impairment  for  an
individual  receivable,  it  is  included  in  a  group  of  receivables  with  similar
credit  risk  characteristics  and  these  are  collectively  assessed  for  impairment.
Movements  in  the  provision  for  doubtful  debts  are  recorded  in  the  income
statement.

Inventory  Inventory  is  stated  at  the  lower  of  cost  and  net  realisable  value.  In
general,  cost  is  determined  on  a  first-in-first-out  basis  and  includes  transport
and  handling  costs.  Where  necessary,  provision  is  made  for  obsolete,  slow-moving
and  defective  inventory.

Property,  plant  and  equipment  The  cost  of  property  and  equipment  is  their
purchase  cost,  together  with  any  incidental  costs  of  acquisition.  External  costs
and  internal  costs  are  capitalised  to  the  extent  they  enhance  the  future
economic  benefit  of  the  asset.
Depreciation  is  calculated  so  as  to  write  off  the  cost  of  property  and
equipment,  less  their  estimated  residual  values,  which  are  adjusted,  if
appropriate,  at  each  balance  sheet  date,  on  a  straight-line  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                              Three  to  five  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.

Acquired  intangible  assets  Computer  software,  purchased  patents  and  licences  to
use  technology  are  capitalised  at  cost  and  amortised  on  a  straight-line  basis
over  a  prudent  estimate  of  the  time  that  the  Company  is  expected  to  benefit  from
them,  which  is  typically  three  to  five  years.  Costs  that  are  directly
attributable  to  the  development  of  new  business  application  software  and  which
are  incurred  during  the  period  prior  to  the  date  that  the  software  is  placed
into  operational  use,  are  capitalised.  External  costs  and  internal  costs  are
capitalised  to  the  extent  they  enhance  the  future  economic  benefit  of  the  asset.

Although  an  independent  valuation  is  made  of  any  intangible  assets  purchased  as
part  of  a  business  combination,  management  is  primarily  responsible  for
determining  the  fair  value  of  intangible  assets.  Such  assets  are  capitalised  and
amortized  over  a  period  of  one  to  six  years,  being  a  prudent  estimate  of  the
time  that  the  Company  is  expected  to  benefit  from  them.

In-process  research  and  development  projects  purchased  as  part  of  a  business
combination  may  meet  the  criteria  set  out  in  IFRS  3,  "Business  combinations",
for  recognition  as  intangible  assets  other  than  goodwill.  Management  tracks  the
status  of  in-process  research  and  development  intangible  assets  such  that  their
amortisation  commences  when  the  assets  are  brought  into  use.  This  typically
means  a  write-off  period  of  one  to  five  years.

Operating  leases  Costs  in  respect  of  operating  leases  are  charged  on  astraight-line  basis  over  the  lease  term  even  if  payments  are  not  made  on  such  a
basis.

Currency  translation  The  functional  currency  of  each  group  entity  is  the
currency  of  the  primary  economic  environment  in  which  each  entity  operates.
These  interim  financial  statements  are  presented  in  sterling,  which  is  the
presentation  currency  of  the  Company.

Transactions  denominated  in  foreign  currencies  have  been  translated  into  the
functional  currency  of  each  group  entity  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.  Such
exchange  differences  have  been  included  in  general  and  administrative  costs.

The  assets  and  liabilities  of  subsidiaries  denominated  in  foreign  currencies  are
translated  into  sterling  at  rates  of  exchange  ruling  at  the  balance  sheet  date.
Income  statements  of  overseas  subsidiaries  are  translated  at  the  average  monthly
exchange  rates  during  the  period.  Translation  differences  are  taken  directly  to
equity  via  the  cumulative  translation  adjustment.  On  disposal  of  a  subsidiary
such  amounts  are  recycled  to  the  income  statement.

Goodwill  and  fair  value  adjustments  arising  on  the  acquisition  of  a  foreign
entity  are  treated  as  assets  and  liabilities  of  the  foreign  entity  and
translated  at  the  closing  rate.

As  permitted  by  IFRS  1,  the  balance  on  the  cumulative  translation  adjustment  on
retranslation  of  subsidiaries'  net  assets  has  been  set  to  zero  at  the  date  of
transition  to  IFRS.

Derivative  financial  instruments  The  Company  utilises  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.  The
forward  contracts  and  related  accounts  receivable  are  recorded  at  fair  value  at
each  period  end.  Fair  value  is  estimated  using  the  settlement  rates  prevailing
at  the  period  end.  All  recognised  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.

Embedded  derivatives  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.  Where  there
are  uninvoiced  amounts  on  such  contracts,  the  Company  carries  such  derivatives
at  fair  value.  The  resulting  gain  or  loss  is  recognised  in  the  income  statement
under  general  and  administrative  costs.

Income  taxes  Income  taxes  are  computed  using  the  liability  method.  Under  this
method,  deferred  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  rates  and  laws  that  will  be  in  effect
when  the  differences  are  expected  to  reverse.  The  deferred  tax  is  not  accounted
for  if  it  arises  from  initial  recognition  of  an  asset  or  liability  in  a
transaction,  other  than  a  business  combination,  that  at  the  time  of  the
transaction  affects  neither  accounting  nor  taxable  profit  or  loss.  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  realised.

Deferred  tax  is  provided  on  temporary  differences  arising  on  investments  in
subsidiaries  except  where  the  timing  of  the  reversal  of  the  temporary  difference
is  controlled  by  the  Company  and  it  is  probable  that  the  temporary  difference
will  not  reverse  in  the  foreseeable  future.  Deferred  tax  assets  and  liabilities
arising  in  the  same  tax  jurisdiction  are  off  set.

In  the  UK  and  the  US,  the  Company  is  entitled  to  a  tax  deduction  for  amounts
treated  as  compensation  on  exercise  of  certain  employee  share  options  under  each
jurisdiction's  tax  rules.  As  explained  under  "Share-based  payments"  below,  a
compensation  expense  is  recorded  in  the  Company's  income  statement  over  the
period  from  the  grant  date  to  the  vesting  date  of  the  relevant  options.  As  there
is  a  temporary  difference  between  the  accounting  and  tax  bases,  a  deferred  tax
asset  is  recorded.  The  deferred  tax  asset  arising  is  calculated  by  comparing  the
estimated  amount  of  tax  deduction  to  be  obtained  in  the  future  (based  on  the
Company's  share  price  at  the  balance  sheet  date)  with  the  cumulative  amount  of
the  compensation  expense  recorded  in  the  income  statement.  If  the  amount  of
estimated  future  tax  deduction  exceeds  the  cumulative  amount  of  the  remuneration
expense  at  the  statutory  rate,  the  excess  is  recorded  directly  in  equity,
against  retained  earnings.

As  explained  under  "Share-based  payments"  below,  no  compensation  charge  is
recorded  in  respect  of  options  granted  before  7  November  2002  or  in  respect  of
those  options  which  have  been  exercised  or  have  lapsed  before  1  January  2005.
Nevertheless,  tax  deductions  have  arisen  and  will  continue  to  arise  on  these
options.  The  tax  effects  arising  in  relation  to  these  options  are  recorded
directly  in  equity,  against  retained  earnings.

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  period,  excluding  those  held  in  the  ESOP  and
the  QUEST  which  are  treated  as  cancelled.  For  diluted  earnings  per  share,  the
weighted  number  of  ordinary  shares  in  issue  is  adjusted  to  assume  conversion  of
all  dilutive  potential  ordinary  shares.

Share-based  payments  The  Company  issues  equity-settled  share-based  payments  to
certain  employees.  In  accordance  with  IFRS  2,  "Share-based  payments",
equity-settled  share-based  payments  are  measured  at  fair  value  at  the  date  of
grant.  Fair  value  is  measured  by  use  of  the  Black-Scholes  pricing  model.  The
fair  value  determined  at  the  grant  date  of  the  equity-settled  share-based
payments  is  expensed  on  a  straight-line  basis  over  the  vesting  period,  based  on
the  Company's  estimate  of  the  number  of  shares  that  will  eventually  vest.

The  Company  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  saving  period  must  be  at  least  36  months.  The  Company  has  recognised  a
compensation  charge  in  respect  of  the  UK  SAYE  plans  and  US  ESPPs.  The  charges
for  these  are  calculated  as  detailed  above.

The  Company  also  has  an  LTIP  on  which  it  is  also  required  to  recognise  a
compensation  charge  under  IFRS  2,  calculated  as  detailed  above.

The  Company  has  applied  the  exemption  available,  and  has  applied  the  provisions
of  IFRS  2  only  to  those  options  granted  after  7  November  2002  and  which  were
outstanding  at  31  December  2004.

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.  In  accordance  with  IFRS  2,  this  is  treated  as  a  cash-settled
transaction.  A  provision  is  made,  calculated  using  the  fair  value  of  the
Company's  shares  at  the  balance  sheet  date,  pro-rated  over  the  vesting  period  of
the  options.

Employee  share  ownership  plans  The  Company'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  Company,  and  the  assets  of  which  comprise  shares  in  the
Company.  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  conditionally  to  employees.

Investment  income  Investment  income  relates  to  interest  income,  which  is  accrued
on  a  time  basis,  by  reference  to  the  principal  outstanding  and  at  the  effective
interest  rate  applicable.

Equity  instruments  Equity  instruments  issued  by  the  Company  are  recorded  at  the
proceeds  received,  net  of  direct  issue  costs.

Dividends  payable  Distributions  to  equity  holders  are  not  recognised  in  the
income  statement  under  IFRS,  but  are  disclosed  as  a  component  of  the  movement  in
shareholders'  equity.  A  liability  is  recorded  for  a  final  dividend  when  the
dividend  is  approved  by  the  Company's  shareholders,  and,  for  an  interim
dividend,  when  the  dividend  is  paid.

Provisions  Provisions  for  restructuring  costs  and  legal  claims  are  recognised
when:  the  Company  has  a  present  legal  or  constructive  obligation  as  a  result  of
past  events;  it  is  more  likely  than  not  that  an  outflow  of  resources  will  be
required  to  settle  the  obligation;  and  the  amount  has  been  reliably  estimated.
Restructuring  provisions  comprise  lease  termination  penalties  and  employee
termination  payments.  Provisions  are  not  recognised  for  future  operating  losses.

Interim  measurement  note

(a)  Current  tax  Current  income  tax  expense  is  recognised  in  these  interim
financial  statements  based  on  management's  best  estimates  of  the  weighted
average  annual  income  tax  rate  expected  for  the  full  financial  year.

(b)  Costs  Costs  that  are  incurred  unevenly  during  the  financial  year  are
anticipated  or  deferred  in  the  interim  report  only  if  it  would  also  be
appropriate  to  anticipate  or  defer  such  costs  at  the  end  of  the  financial  year.

2.  Explanation  of  transition  to  IFRS

The  Company's  financial  statements  for  the  year  ending  31  December  2005  will  be
the  first  annual  financial  statements  that  comply  with  IFRS.  These  interim
financial  statements  have  been  prepared  as  described  in  note  1  of  this  appendix.
The  Company  has  applied  IFRS  1  in  preparing  these  interim  financial  statements.
The  last  financial  statements  under  UK  GAAP  were  for  the  year  ended  31  December
2004  and  the  date  of  transition  was  therefore  1  January  2004.  Presented  below
are  the  reconciliation  of  profit  for  the  year  ended  2004  and  the  reconciliations
of  equity  at  1  January  2004  (date  of  transition  to  IFRS)  and  at  31  December  2004
(date  of  last  UK  GAAP  financial  statements)  as  required  by  IFRS  1.  In  addition,
the  reconciliation  of  equity  at  30  June  2004  and  the  reconciliation  of  profit
for  the  six  months  ended  30  June  2004  have  been  included  below  as  required  by
IFRS  1  to  enable  a  comparison  of  the  2005  interim  figures  with  those  published
in  the  corresponding  period  of  the  previous  financial  year.  For  explanations  of
the  nature  and  effect  of  the  changes  in  accounting  policies  as  a  consequence  of
the  transition  to  IFRS,  refer  to  note  3  of  this  appendix.


(i)  Reconciliations  of  UK  GAAP  profit  and  loss  account  to  IFRS  income  statement
                                            Six  months  ended  30  June  2004  (date  of  
                                                    corresponding  interim  financial  
                                                                              statements)
                                                                                    Effect  of          
                                                                    UK    transition  to
                                                                GAAP                      IFRS                IFRS
                                                      Unaudited            Unaudited      Unaudited  
                              Notes                  GBP'000                GBP'000          GBP'000
                                                      
Total  revenues                                71,928                            -            71,928
Total  cost  of
revenues              j                          (5,227)                    (204)          (5,431)

Gross  profit                                    66,701                    (204)            66,497

Operating
expenses
Research  and
development        b,j                    (24,455)                (1,973)        (26,428)
Sales  and
marketing            b,j                    (11,553)                    (663)        (12,216)
General  and
administrative  a,b,e,j,l        (13,341)                    (856)        (14,197)

Total
operating
expenses                                        (49,349)                (3,492)            52,841

Profit  from
operations                                        17,352                (3,696)            13,656
Investment
income                                                  3,142                          -                3,142

Profit  before
tax                                                      20,494              (3,696)              16,798
Tax                        b,j                      (5,731)                      281            (5,450)

Profit  after
tax                                                      14,763              (3,415)              11,348

Dividend              f                          (2,884)                  2,884                        -
Profit  for
period                                                11,879                  (531)              11,348



                                                  Year  ended  31  December  2004  (end  of  last  
                                                                period  presented  under  UK  GAAP)
                                                                                    Effect  of          
                                                                    UK    transition  to
                                                                GAAP                      IFRS                IFRS
                                                          Audited            Unaudited      Unaudited  
                              Notes                  GBP'000                GBP'000          GBP'000

Total  revenues                              152,897                            -          152,897
Total  cost  of
revenues              j                        (11,799)                    (441)        (12,240)

Gross  profit                                  141,098                    (441)          140,657

Operating
expenses
Research  and
development        b,j                    (50,133)                (4,541)        (54,674)
Sales  and
marketing            b,j                    (23,899)                (1,647)        (25,546)
General  and
administrative  a,b,e,j,l        (31,845)                    (263)        (32,108)

Total
operating
expenses                                      (105,877)                (6,451)      (112,328)

Profit  from
operations                                        35,221                (6,892)            28,329
Investment
income                                                  6,944                            -              6,944

Profit  before
tax                                                      42,165                (6,892)            35,273
Tax                        b,j                    (10,153)                        755          (9,398)

Profit  after
tax                                                      32,012                (6,137)            25,875

Dividend              f                          (8,542)                    8,542                      -
Profit  for
period                                                23,470                    2,405            25,875


(ii)  Reconciliation  of  UK  GAAP  profit  to  IFRS  profit



                                                        Notes      Six  months                                Year
                                                                                  ended                              ended
                                                                              30  June                  31  December
                                                                                    2004                                2004
                                                                              GBP'000                          GBP'000
Profit  for
period  as
reported  under
UK  GAAP                                                                  11,879                            23,470
Adjustments  for:
Amortisation
of  recognised
intangibles  on
Axys
acquisition                                  b                                -                              (167)
Amortisation
of  recognised
intangibles  on
Artisan
acquisition                                  b                                -                              (344)
Deferred  tax
on  intangibles                            b,g                            -                                  204
Goodwill  not
amortised
after  date  oftransition                                    a                            268                              2,103
Dividends
taken  directly
to  equity                                      f                        2,884                              8,542
Embedded
derivatives
measured  at
fair  value                                    e                        (179)                              (732)
Deduct:  IFRS
compensation
charge  in
respect  of  all
share-based
payments                                        j                    (3,618)                          (7,855)
Add:  UK  GAAP
compensation
charge  in
respect  of
LTIP                                                j                            225                                  495
Deferred  tax
on  share-based
payments                                        j                            281                                  551
Impairment  of
available-for-
sale
investment                                    l                        (392)                              (392)

Profit  for
period  as
reported  under
IFRS                                                                        11,348                            25,875


(iii)  Reconciliations  of  equity  at  1  January  2004  and  31  December  2004  from  UK
GAAP  to  IFRS


                                                                                  As  at  1  January  2004
                                                                                              Effect  of          
                                                                                UK  transition  to
                                                                            GAAP                    IFRS                  IFRS
                                                                      Audited          Unaudited        Unaudited  
                                              Notes              GBP'000              GBP'000            GBP'000

Assets
Current  assets:
Cash  and  cash
equivalents                            m,n                30,123                100,599          130,722
Short-term
investments                            m,n              129,663            (100,599)            29,064
Marketable  securities        m,n                          -                            -                      -
Accounts
receivable                                                    17,320                            -            17,320
Inventories:
finished  goods                                                  931                            -                  931
Prepaid
expenses  and
other  assets                          k                      8,924                            -              8,924
Deferred  tax
assets                                      g,j                  3,585                (3,585)                      -
Total  current
assets                                                          190,546                (3,585)          186,961

Non-current  assets
Long-term  marketable                                          -                            -                      -
securities
Property,
plant  and
equipment                                c                    16,583                  (6,408)          10,175
Goodwill                                  a                      2,091                              -            2,091
Other
intangible
assets                                      b,c                  5,456                      6,408          11,864
Available-for-
sale
investments                            d                      4,759                      1,487            6,246
Deferred  tax
assets                                      g,j                          -                      5,980            5,980
Total
non-current
assets                                                            28,889                      7,467          36,356

Total  assets                                              219,435                      3,882        223,317

Liabilities  and  shareholders'  equity
Current  liabilities:
Accounts
payable                                                            2,691                              -            2,691
Current  tax
liabilities                                                    3,140                              -            3,140
Accrued  and
other
liabilities                            e,h                15,868                      2,154          18,022
Deferred
revenue                                    k                    11,132                              -          11,132
Dividends  to
shareholders                          f                      6,106                  (6,106)                    -
Total  current
liabilities                                                  38,937                  (3,952)          34,985

Net  current
assets                                                          151,609                          367        151,976

Non-current  liabilities:

Deferred  tax                          g                              -                              -                    -
liabilities
Provisions                              h                            63                        (63)                    -
Long-term  other                                                    -                              -                    -
payables

Total
liabilities                                                  39,000                  (4,015)          34,985

Net  assets                                                  180,435                      7,897        188,332

Shareholders'  equity
Share  capital                                                    512                              -                512
Share  premium
account                                                          81,137                              -          81,137
Share  option  reserve                                          -                              -                    -
Retained
earnings                  a,b,e,f,j,l              100,874                      4,768        105,642
Revaluation
reserve                                    d,l                          -                      1,041            1,041
Cumulative
translation
adjustment                              b,i              (2,088)                      2,088                  -
Total  equity                                              180,435                      7,897      188,332



                                                                          As  at  31  December  2004

                                                                                              Effect  of          
                                                                                UK  transition  to
                                                                            GAAP                    IFRS                  IFRS
                                                                      Audited          Unaudited        Unaudited  
                                              Notes              GBP'000              GBP'000            GBP'000

Assets
Current  assets:
Cash  and  cash
equivalents                        m,n                    78,193                32,368            110,561
Short-term
investments                        m,n                    59,186            (53,879)                5,307
Marketable
securities                          m,n                              -                21,511              21,511
Accounts
receivable                                                    34,347                          -              34,347
Inventories:
finished  goods                                                  897                          -                    897
Prepaid
expenses  and
other  assets                      k                        16,448                  (447)              16,001
Deferred  tax
assets                                  g,j                    20,832            (20,832)                        -
Total  current
assets                                                          209,903            (21,279)            188,624

Non-current  assets
Long-term
marketable
securities                                                      5,438                          -                5,438
Property,
plant  and
equipment                            c                        14,117              (5,021)                9,096
Goodwill                              a                      459,413            (42,334)            417,079
Other
intangible
assets                                  b,c                      2,995                81,042              84,037
Available-for-
sale
investments                        d                          5,313                  6,922              12,235
Deferred  tax
assets                                  g,j                              -                  2,396                2,396
Total
non-current
assets                                                          487,276                43,005            530,281

Total  assets                                              697,179                21,726            718,905

Liabilities  and  shareholders'
equity
Current  liabilities:
Accounts
payable                                                                4,110                      -                4,110
Current  tax
liabilities                                                        6,345                      -                6,345
Accrued  and
other
liabilities                        e,h                        38,463              3,586              42,049
Deferred
revenue                                k                            22,301              (946)              21,355
Dividends  to
shareholders                      f                              5,673          (5,673)                        -
Total  current
liabilities                                                      76,892          (3,033)              73,859

Net  current
assets                                                              133,011        (18,246)            114,765

Non-current
liabilities:
Deferred  tax
liabilities                        g                                      -                  776                    776
Provisions                          h                                    27                (27)                        -
Long-term
other  payables                                                  1,732                      -                1,732

Total
liabilities                                                      78,651          (2,284)              76,367

Net  assets                                                      618,528            24,010            642,538

Shareholders'  equity
Share  capital                                                        675                      -                    675
Share  premium
account                                                            434,026                      -            434,026
Share  option
reserve                                                              61,474                      -              61,474
Retained
earnings                              a,b,e,f,j,l      124,851            15,440            140,291
Revaluation
reserve                                d,l                                  -              5,237                5,237
Cumulative
translation
adjustment                          b,i                      (2,498)              3,333                    835
Total  equity                                                  618,528            24,010            642,538



(iv)  Reconciliation  of  equity  as  at  30  June  2004  from  UK  GAAP  to  IFRS



                                                                                              Effect  of          
                                                                                UK  transition  to
                                                                            GAAP                    IFRS                  IFRS
                                                                  Unaudited          Unaudited        Unaudited  
                                              Notes              GBP'000              GBP'000            GBP'000

Assets
Current  assets:
Cash  and  cash
equivalents                        m,n                    15,202                85,054            100,256
Short-term
investments                        m,n                  151,095            (85,054)              66,041
Accounts
receivable                                                    25,251                          -              25,251
Inventories:
finished  goods                                              1,025                          -                1,025
Prepaid
expenses  and
other  assets                                                9,978                            -                9,978
Deferred  tax
assets                                  g,j                    4,084                (4,084)                        -
Total  current
assets                                                        206,635                (4,084)            202,551

Non-current  assets
Property,
plant  and
equipment                            c                      12,678                (4,212)                8,466
Goodwill                              a                        1,823                        268                2,091
Other
intangible
assets                                  b,c                    4,316                    4,212                8,528
Available-for-
sale
investments                        d                        5,263                    3,280                8,543
Deferred  to
assets                                  g,j                            -                    6,189                6,189
Total
non-current
assets                                                          24,080                    9,737              33,817

Total  assets                                            230,715                    5,653            236,368

Current  liabilities
Accounts
payable                                                          2,813                            -                2,813
Current  tax
liabilities                                                  6,252                                              6,252
Accrued  and
other
liabilities                        e,h                  12,510                    2,299              14,809
Deferred
revenue                                                        12,632                            -              12,632
Dividends  to
shareholders                      f                        2,872                (2,872)                        -
Total  current
liabilities                                                37,079                    (573)              36,506

Net  current
assets                                                        169,556                (3,511)            166,045

Non-current
liabilities:
Provisions                          h                              29                      (29)                        -

Total
liabilities                                                37,108                    (602)              36,506

Net  assets                                                193,607                    6,255            199,862

Share  capital                                                513                              -                    513
Share  premium
account                                                      82,326                              -              82,326
Retained
earnings            a,b,e,f,j,l                112,978                      1,479            114,457
Revaluation
reserve                                d,l                          -                      2,688                2,688
Cumulative
translation
adjustment                          b,i              (2,210)                      2,088                (122)
Total  equity                                          193,607                      6,255            199,862


(v)  Reconciliation  of  equity  from  UK  GAAP  to  IFRS



                                                            1  January              30  June          31  December
                                                                      2004                    2004                        2004
                                            Notes          GBP'000              GBP'000                  GBP'000
Total  equity
as  reported
under  UK  GAAP                                      180,435              193,607                  618,528
Adjustments  for:
Amortisation
of  recognised
intangibles  on
Axys
acquisition                      b                              -                          -                      (167)
Amortisation
of  recognised
intangibles  on
Artisan
acquisition                      b                              -                          -                      (344)
Deferred  tax
on  intangibles                g                              -                          -                          204
Goodwill  not
amortised
after  date  of
transition                        a                              -                      268                      2,103
Dividends  not
recognised  as
liability
until  declared                f                      6,106                  2,872                      5,673
Available-for-
sale
investments
measured  at
fair  value                        d                      1,487                  3,280                      6,922
Deferred  tax
on
available-for-
sale
investments                      g                      (446)                    (984)                (2,077)
Deferred  tax
on  share-based
payments                            g,j                  2,841                    3,089                13,274
Embedded
derivatives
measured  at
fair  value                        e                  (2,091)                (2,270)              (2,823)
Foreign
exchange  on
valuation  of
intangible
assets                                b                              -                            -                1,245

Total  equity
as  reported
under  IFRS                                            188,332                199,862            642,538


(vi)  Reconciliation  of  goodwill  from  UK  GAAP  to  IFRS



                                                            1  January                30  June    31  December
                                                                      2004                      2004                  2004
                                            Notes          GBP'000                GBP'000            GBP'000
Goodwill  as
reported  under
UK  GAAP                                                      2,091                    1,823            459,413
Adjustments  for:
Amendments  to
provisional
fair  values                      a                              -                            -                  736
Cumulative
difference  on
amortisation
of  goodwill                      a                              -                        268              2,103
Separately
identifiable
intangible
assets  (net  of
deferred  tax)                  b                              -                            -        (45,996)
Fair  value  of
deferred
revenue  and
costs                                  k                              -                            -              (499)
Foreign
exchange  on
valuation  of
intangible
assets                                b                              -                            -              1,322

Goodwill  as
reported  under
IFRS                                                            2,091                    2,091          417,079


3.  Explanation  of  material  adjustments  to  equity  at  31  December  2004,  30  June
2004  and  1  January  2004  and  to  profit  for  the  year  ended  31  December  2004  and
for  the  six  months  ended  30  June  2004

The  transition  to  IFRS  resulted  in  the  following  changes  in  accounting  policies:

a.                Goodwill  Goodwill  is  not  amortised  under  IFRS  but  is  measured  at  cost
less  impairment  losses.  Under  UK  GAAP,  goodwill  was  amortised  on  a  straight-line
basis  over  an  estimate  of  the  time  the  Company  was  to  benefit  from  it.  The
change  does  not  affect  equity  at  1  January  2004  because,  as  permitted  by  IFRS  1,
goodwill  arising  on  acquisitions  before  1  January  2004  (date  of  transition  to
IFRS)  has  been  frozen  at  the  UK  GAAP  amounts  subject  to  being  tested  for
impairment  at  that  date,  the  results  of  which  assessment  indicated  no  such
impairment.

The  2004  annual  report  included  a  provisional  assessment  of  the  fair  values  of
assets  and  liabilities  acquired  on  acquisition  of  Artisan  Components  Inc.  on  23
December  2004.  Where  these  provisional  values  have  been  amended  as  estimates
have  been  refined  in  2005,  adjustments  to  fair  values  have  been  recorded  as
prior  year  adjustments  to  goodwill  for  IFRS  purposes.  This  would  not  have  been
the  case  under  UK  GAAP.

b.              Other  intangible  assets  Under  IFRS,  intangible  assets  purchased  as  part
of  a  business  combination  may  meet  the  criteria  set  out  in  IFRS  3  for
categorisation  as  intangible  assets  other  than  goodwill  and  are  amortised  over
their  useful  economic  lives.  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.  In  August  and  December  2004,  the  Company  acquired  100%  of  the  issued
share  capital  of  Axys  Design  Automation  Inc.  and  Artisan  Components  Inc.respectively.  Both  of  these  business  combinations  have  been  accounted  for  under
IFRS  3.  The  Company  has  taken  advantage  of  the  exemption  under  IFRS  1  not  to
apply  IFRS  retrospectively  to  business  combinations  occurring  before  1  January
2004,  the  date  of  transition  to  IFRS.  Thus,  at  31  December  2004,  GBP76,658,000
of  intangible  assets  recognisable  under  IFRS  3,  but  subsumed  within  goodwill
under  UK  GAAP,  have  been  reclassified  as  intangible  assets.  Amortisation  expense
in  respect  of  these  intangible  assets  has  decreased  profit  for  the  year  ended  31
December  2004  by  GBP511,000.

Under  IFRS,  the  difference  between  the  book  value  of  the  intangible  assets  for
accounting  purposes  and  the  tax  value  of  these  assets  gives  rise  to  a  temporary
difference.  A  deferred  tax  liability  of  GBP30,409,000  at  31  December  2004  has
therefore  been  recorded.  The  deferred  tax  liability  is  released  to  the  income
statement  in  proportion  to  the  amortisation  of  the  related  intangibles.  The
impact  is  to  increase  the  profit  for  the  year  ended  31  December  2004  by
GBP204,000.

As  intangible  assets  and  goodwill  arising  on  overseas  acquisitions  are  treated
as  foreign  currency  assets  of  the  acquired  entities  under  IFRS  (but  not  under
the  Company's  UK  GAAP  accounting  policies),  related  foreign  exchange  movements
have  been  recorded  in  reserves.

c.                Computer  software  Under  IFRS,  computer  software  is  classified  within
intangible  assets.  Under  UK  GAAP,  computer  software  was  classified  as  a  tangible
fixed  asset.  This  change  in  accounting  policy  has  resulted  in  a  reclassification
between  plant,  property  and  equipment  and  intangibles  at  31  December  2004,  30
June  2004  and  1  January  2004.

d.              Publicly  traded  investments  Publicly  traded  investments  are  classified
as  available-for-sale  and  are  carried  at  fair  value.  Unrealised  holding  gains  or
losses  on  such  securities  are  included,  net  of  related  taxes,  directly  in  equity
via  a  revaluation  reserve.  Impairment  losses  and  realised  gains  and  losses  of
such  securities  are  reported  in  earnings.  Under  UK  GAAP,  these  investments  were
carried  at  cost  less  any  impairment  charges.

e.                Embedded  derivatives  Under  IFRS,  where  the  Company  enters  into  sales
contracts  denominated  in  a  currency  that  is  neither  the  functional  currency  of
the  Company  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  were  not  revalued  to  fair  value  under  UK  GAAP.

f.                  Dividends  payable  Dividends  to  shareholders  declared  after  the  period
end  but  before  the  interim  financial  statements  are  authorised  for  issue  are  not
recognised  as  a  liability  at  the  balance  sheet  date.  A  liability  for  a  final
dividend  is  recognised  when  the  dividend  is  approved  by  shareholders;  a
liability  for  an  interim  dividend  is  recognised  when  paid.  Furthermore,  under
IFRS,  dividends  are  not  shown  in  the  income  statement  but  are  recorded  directly
in  reserves  via  retained  earnings.  Under  UK  GAAP,  dividends  declared  after  the
period  end  are  recorded  in  the  profit  and  loss  account  in  the  period  to  which
they  relate.

g.              Deferred  tax  assets  and  liabilities  As  required  by  IAS  1,  "Presentation
of  financial  statements",  deferred  tax  assets  and  liabilities  have  been
classified  as  non-current  assets  and  liabilities  respectively.  Under  UK  GAAP,
these  were  included  within  current  assets  and  liabilities  respectively.
Additionally,  as  required  by  IAS  12,  "Income  taxes",  deferred  tax  liabilities
and  assets  have  been  offset  where  they  arise  in  the  same  tax  jurisdiction.  Under
UK  GAAP,  there  was  no  such  right  of  offset.  The  transition  to  IFRS  has  increased
the  Company's  deferred  tax  assets  and  liabilities  as  follows:
                                                                              
                                                                                1  January      30  June    31  December
                                                                                          2004            2004                  2004
                                                        Notes                  GBP'000      GBP'000            GBP'000
Deferred  tax
assets  as
reported  under
UK  GAAP                                                                          3,585          4,084              20,832
Adjustment  for:
Deferred  tax
on  share-based
payments                                                j                      2,841          3,089              13,274
Deferred  tax
arising  on
available-for-
sale
investments
measured  at
fair  value                                            d                      (446)          (984)            (2,077)
Netting-off  of
deferred  tax
assets  and
liabilities
arising  in
same  tax
jurisdiction                                        g                              -                  -          (29,633)

Deferred  tax
assets  as
reported  under
IFRS                                                                                5,980          6,189                2,396

Deferred  tax  liabilities  
as  reported  under                                                              -                  -                        -
UK  GAAP
Adjustments  for:
Deferred  tax
liability
arising  on
recognition  of
intangibles  on
Axys
acquisition                                          b                              -                  -                    795
Deferred  tax
liability
arising  on
recognition  of
intangibles  on
Artisan
acquisition                                          b                              -                  -              29,614
Netting-off  of
deferred  tax
assets  and
liabilities
arising  in
same  tax          
jurisdiction                                        g                                                              (29,633)

Deferred  tax
liabilities  as
reported  under
IFRS                                                                                        -                  -                    776

h.              Employer's  taxes  on  share  options  Under  IFRS,  employer's  taxes  that  are
payable  on  the  exercise  of  share  options  are  calculated  using  the  fair  value  of
the  Company's  shares  at  the  balance  sheet  date,  pro-rated  over  the  vesting
period  of  the  options.  Under  UK  GAAP,  this  calculation  uses  the  market  value  of
the  Company's  shares  at  the  balance  sheet  date.  Additionally,  under  UK  GAAP,
employer's  taxes  that  are  payable  on  the  exercise  of  share  options  are  included
within  provisions  for  liabilities  and  charges.  Under  IFRS,  this  is  included
within  accrued  and  other  liabilities.

i.                  Other  reserves  As  permitted  by  IFRS  1,  the  cumulative  translation
adjustment  has  been  re-set  to  zero  as  at  1  January  2004.  This  has  had  no  effect
on  net  equity  but  has  decreased  retained  earnings  by  GBP2,088,000  as  at  December
2004,  30  June  2004  and  1  January  2004  with  matching  offsetting  adjustments  to
the  cumulative  translation  adjustment.

j.                  Share-based  payments  The  Company  issues  equity-settled  share-based
payments  to  certain  employees.  In  accordance  with  IFRS  2  equity-settled
share-based  payments  are  measured  at  fair  value  at  the  date  of  grant,  in  respect
of  options  granted  after  7  November  2002  and  which  were  outstanding  at  31
December  2004.  The  fair  value  determined  at  the  grant  date  of  the  equity-settled
share-based  payments  is  expensed  on  a  straight-line  basis  over  the  vesting
period,  based  on  the  Company's  estimate  of  the  shares  that  will  eventually  vest.
Under  UK  GAAP,  the  charge  recorded  represented  the  difference  between  the  share
price  at  the  date  of  grant  and  the  exercise  price  of  the  option.  In  addition,
the  Company  took  advantage  of  an  exemption  under  which  no  charge  was  made  in
respect  of  SAYE  options.  Thus,  under  UK  GAAP,  a  charge  was  made  only  in  respect
of  the  LTIP  with  no  other  share-based  payments  charges  being  recognised.

As  a  consequence  of  accounting  for  share-based  payments,  a  temporary  difference
between  the  accounting  and  tax  bases  arises,  and  a  deferred  tax  asset  is
recorded.  The  deferred  tax  asset  arising  is  calculated  by  comparing  the
estimated  amount  of  tax  deduction  to  be  obtained  in  the  future  (based  on  the
Company's  share  price  at  the  balance  sheet  date)  with  the  cumulative  amount  of
the  compensation  expense  recorded  in  the  income  statement.  If  the  amount  of
estimated  future  tax  deduction  exceeds  the  cumulative  amount  of  the  remuneration
expense  at  the  statutory  rate,  the  excess  is  recorded  directly  in  equity,
against  retained  earnings.

k.                Prepayments  and  deferred  revenue  The  conventions  under  which  the  fair
value  of  assets  acquired  and  liabilities  assumed  in  a  business  combination  is
determined  differ  between  IFRS  and  UK  GAAP.  This  has  given  rise  to  a  difference
in  the  fair  value  of  prepayments  and  deferred  revenue  purchased  as  part  of  the
Artisan  acquisition.

l.                  Reversal  of  impairments  In  2004,  a  previous  impairment  of  an
available-for-sale  investment  was  reversed.  Under  UK  GAAP,  this  was  taken  as  a
credit  to  the  income  statement.  However,  under  IFRS,  this  was  taken  directly  to
equity  via  the  revaluation  reserve.

m.            Cash  Under  IAS  7,  "Cash  flow  statements",  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  short-term
investments.  Under  UK  GAAP,  cash  does  not  include  short-term  deposits  and
investments  which  cannot  be  withdrawn  without  notice  and  without  incurring  a
penalty.  Such  items  are  shown  as  short-term  investments.

n.              Changes  to  the  cash  flow  statement  The  consolidated  statement  of  cash
flows  prepared  under  IFRS  presents  substantially  the  same  information  as  that
required  under  UK  GAAP.

Under  IFRS  only  three  categories  of  cash  flow  activity  are  required  to  be
reported:  operating,  investing  and  financing.  Cash  flows  from  returns  on
investments  and  servicing  of  finance  and  cash  flows  from  taxation  shown  under  UK
GAAP  are  included  as  operating  activities  and  investing  activities  respectively
under  IFRS.  There  are  no  other  material  differences  between  the  cash  flow
statement  presented  under  IFRS  and  the  cash  flow  statement  presented  under  UK
GAAP.

Independent  review  report  to  ARM  Holdings  plc

Introduction

We  have  been  instructed  by  the  Company  to  review  the  financial  information  for
the  six  months  ended  30  June  2005  which  comprises  the  IFRS  consolidated  income
statement,  the  IFRS  consolidated  cash  flow  statement,  the  IFRS  consolidated
statement  of  changes  in  equity  and  the  IFRS  balance  sheet  at  30  June  2005.  We
have  read  the  other  information  contained  in  the  interim  report  and  considered
whether  it  contains  any  apparent  misstatements  or  material  inconsistencies  with
the  financial  information.

Directors'  responsibilities

The  interim  report,  including  the  financial  information  contained  therein,  is
the  responsibility  of,  and  has  been  approved  by,  the  directors.  The  directors
are  responsible  for  preparing  the  interim  report  in  accordance  with  the  Listing
Rules  of  the  Financial  Services  Authority.

As  disclosed  in  note  1,  the  next  annual  financial  statements  of  the  Group  will
be  prepared  in  accordance  with  accounting  standards  adopted  for  use  in  the
European  Union.  This  interim  report  has  been  prepared  in  accordance  with  the
basis  set  out  in  Note  1.

The  accounting  policies  are  consistent  with  those  that  the  directors  intend  to
use  in  the  next  annual  financial  statements.  As  explained  in  note  1,  there  is,
however,  a  possibility  that  the  directors  may  determine  that  some  changes  are
necessary  when  preparing  the  full  annual  financial  statements  for  the  first  time
in  accordance  with  accounting  standards  adopted  for  use  in  the  European  Union.
The  IFRS  standards  and  IFRIC  interpretations  that  will  be  applicable  and  adopted
for  use  in  the  European  Union  at  31  December  2005  are  not  known  with  certainty
at  the  time  of  preparing  this  interim  financial  information.

Review  work  performed

We  conducted  our  review  in  accordance  with  guidance  contained  in  Bulletin  1999/4
issued  by  the  Auditing  Practices  Board  for  use  in  the  United  Kingdom.  A  review
consists  principally  of  making  enquiries  of  Group  management  and  applying
analytical  procedures  to  the  financial  information  and  underlying  financial  data
and,  based  thereon,  assessing  whether  the  disclosed  accounting  policies  have
been  applied.  A  review  excludes  audit  procedures  such  as  tests  of  controls  and
verification  of  assets,  liabilities  and  transactions.  It  is  substantially  less
in  scope  than  an  audit  and  therefore  provides  a  lower  level  of  assurance.
Accordingly  we  do  not  express  an  audit  opinion  on  the  financial  information.
This  report,  including  the  conclusion,  has  been  prepared  for  and  only  for  the
company  for  the  purpose  of  the  Listing  Rules  of  the  Financial  Services  Authority
and  for  no  other  purpose.  We  do  not,  in  producing  this  report,  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.

Review  conclusion

On  the  basis  of  our  review  we  are  not  aware  of  any  material  modifications  that
should  be  made  to  the  financial  information  as  presented  for  the  six  months
ended  30  June  2005.

PricewaterhouseCoopers  LLP
Chartered  Accountants
Cambridge
19  July  2005

Notes:

(a)  The  maintenance  and  integrity  of  the  ARM  Holdings  plc  website  is  the
responsibility  of  the  directors;  the  work  carried  out  by  the  auditors  does  not
involve  consideration  of  these  matters  and,  accordingly,  the  auditors  accept  no
responsibility  for  any  changes  that  may  have  occurred  to  the  interim  report
since  it  was  initially  presented  on  the  website.

(b)  Legislation  in  the  United  Kingdom  governing  the  preparation  and
dissemination  of  financial  information  may  differ  from  legislation  in  other
jurisdictions.

Note

The  results  shown  for  Q2  2005,  Q2  2004,  H1  2005  and  H1  2004  are  unaudited.

The  results  for  ARM  for  Q2  2005  and  previous  quarters  as  shown  reflect  the
accounting  policies  as  stated  in  Note  1  to  the  US  GAAP  financial  statements  in
the  Annual  Report  and  Accounts  filed  with  Companies  House  in  the  UK  for  the
fiscal  year  ended  31  December  2004  and  in  the  Annual  Report  on  Form  20-F  for  the
fiscal  year  ended  31  December  2004.

This  document  contains  forward-looking  statements  as  defined  in  section  102  of
the  Private  Securities  Litigation  Reform  Act  of  1995.  These  statements  are
subject  to  risk  factors  associated  with  the  semiconductor  and  intellectual
property  businesses.  When  used  in  this  document,  the  words  "anticipates",  "may",
"can",  "believes",  "expects",  "projects",  "intends",  "likely",  similar
expressions  and  any  other  statements  that  are  not  historical  facts,  in  each  case
as  they  relate  to  ARM,  its  management  or  its  businesses  and  financial
performance  and  condition  are  intended  to  identify  those  assertions  as
forward-looking  statements.  It  is  believed  that  the  expectations  reflected  in
these  statements  are  reasonable,  but  they  may  be  affected  by  a  variety  of
variables,  many  of  which  are  beyond  our  control.  These  variables  could  cause
actual  results  or  trends  to  differ  materially  and  include,  but  are  not  limited
to:  failure  to  realize  the  benefits  of  our  recent  acquisitions,  unforeseen
liabilities  arising  from  our  recent  acquisitions,  price  fluctuations,  actual
demand,  the  availability  of  software  and  operating  systems  compatible  with  our
intellectual  property,  the  continued  demand  for  products  including  ARM's
intellectual  property,  delays  in  the  design  process  or  delays  in  a  customer'sproject  that  uses  ARM's  technology,  the  success  of  our  semiconductor  partners,
loss  of  market  and  industry  competition,  exchange  and  currency  fluctuations,  any
future  strategic  investments  or  acquisitions,  rapid  technological  change,
regulatory  developments,  ARM's  ability  to  negotiate,  structure,  monitor  and
enforce  agreements  for  the  determination  and  payment  of  royalties,  actual  or
potential  litigation,  changes  in  tax  laws,  interest  rates  and  access  to  capital
markets,  political,  economic  and  financial  market  conditions  in  various
countries  and  regions  and  capital  expenditure  requirements.

More  information  about  potential  factors  that  could  affect  ARM's  business  and
financial  results  is  included  in  ARM's  Annual  Report  on  Form  20-F  for  the  fiscal
year  ended  31  December  2004  including  (without  limitation)  under  the  captions,
"Risk  Factors"  and  "Management's  Discussion  and  Analysis  of  Financial  Condition
and  Results  of  Operations,"  which  is  on  file  with  the  Securities  and  Exchange
Commission  (the  "SEC")  and  available  at  the  SEC's  website  at  
  www.sec.gov  .

The  financial  information  contained  in  this  announcement  does  not  constitute
statutory  accounts  within  the  meaning  of  Section240  (3)  of  the  Companies  Act
1985.  Statutory  accounts  of  the  Company  in  respect  of  the  financial  year  ended
31  December  2004  have  been  delivered  to  the  Registrar  of  Companies,  upon  which
the  Company's  auditors  have  given  a  report  which  was  unqualified  and  did  not
contain  a  statement  under  Section  237(2)  or  Section  237(3)  of  that  Act.

About  ARM

ARM  designs  the  technology  that  lies  at  the  heart  of  advanced  digital  products,
from  wireless,  networking  and  consumer  entertainment  solutions  to  imaging,
automotive,  security  and  storage  devices.  ARM's  comprehensive  product  offering
includes  16/32-bit  RISC  microprocessors,  data  engines,  3D  processors,  digital
libraries,  embedded  memories,  peripherals,  software  and  development  tools,  as
well  as  analog  functions  and  high-speed  connectivity  products.  Combined  with  the
company's  broad  Partner  community,  they  provide  a  total  system  solution  that
offers  a  fast,  reliable  path  to  market  for  leading  electronics  companies.  More
information  on  ARM  is  available  at  
  http://www.arm.com/  

ARM  and  ARM7TDMI  are  registered  trademarks  of  ARM  Limited.  ARM7,  ARM9,
ARM926EJ-S,  ARM11,  SC100,  Cortex  and  DesignStart  are  trademarks  of  ARM  Limited.
Artisan  Components  and  Artisan  are  registered  trademarks  of  ARM  Physical  IP,
Inc.,  a  wholly  owned  subsidiary  of  ARM.  All  other  brands  or  product  names  are
the  property  of  their  respective  holders.  ARM  refers  to  ARM  Holdings  plc  (LSE:
ARM  and  Nasdaq:  ARMHY)  together  with  its  subsidiaries  including  ARM  Limited,  ARM
Inc.,  ARM  Physical  IP  Inc.,  Axys  Design  Automation  Inc.,  Axys  GmbH;  ARM  KK,  ARM
Korea  Ltd,  ARM  Taiwan  Ltd,  ARM  France  SAS,  ARM  Consulting  (Shanghai)  Co.  Ltd.;
ARM  Belgium  NV.;  and  ARM  Embedded  Solutions  Pvt.  Ltd.



                                            This  information  is  provided  by  RNS
                        The  company  news  service  from  the  London  Stock  Exchange
 







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