Unassociated Document

Component of remuneration package and how it supports business strategy	Operation and clawback	Maximum potential value	Performance conditions, targets assessment and areas of discretion
Base salary To provide an appropriately competitive level of base salary, to enable the Company to recruit, retain and motivate executive directors of the calibre required to achieve the Company’s business strategy and goal of sustained growth in corporate performance.	Base salaries are reviewed annually by the Committee and are paid monthly in cash Increases generally apply from January in each year. In its annual review or on promotion, the Committee considers the following: · pay levels at companies of similar size (by reference to market capitalisation and revenue) on a geographic and global basis. · external market conditions. · pay and benefits elsewhere in the Company. · individual performance, skills, experience and potential. · corporate performance on environmental, social and corporate governance issues . Clawback does not apply to base salary (in accordance with contractual agreements).	Base salaries are set at an appropriate level for each role, taking account of the factors described in this table. Generally salaries are no higher than market median although higher salaries may be paid, if necessary, to recruit externally or to retain key executives. In normal circumstances base salary increases will be determined by reference to average increases for employees across the Company. Greater increases may be approved if there is a substantial change in a director’s role or responsibilities or if the salary is significantly below the current market rate. In such circumstances, increases may be phased over a number of years and be conditional on performance.	None, although the overall performance of each executive director is considered by the Committee when reviewing base salaries. Maximum notice period is 12 months and pay in lieu of notice may be made at the discretion of the Company. This would include base salary and contractual benefits (pro-rated where applicable) and any untaken holiday. Fees for outplacement and legal advice may be also be paid by the Company.
Performance-related bonus (in respect of 2014 financial year onwards) To incentivise executive directors to achieve performance objectives that are directly linked to the Company’s short- term financial and strategic goals.	Bonus, if earned, is paid wholly in cash for 2014 onwards Paid annually after the Preliminary Announcement for the prior year end Bonus payments are not pensionable Individual performance measures are focused on objectives that are specific to each executive director. Clawback: provisions exist that require bonus to be forfeited (i.e. offset of bonus accruing in that year) or an equivalent value repaid in exceptional circumstances. These include material misstatement of published results and misconduct causing a material loss and would apply for two years from the payment of such bonus. The proportion of the bonus that would be repayable (and could be 100%) would depend on the extent to which the original bonus exceeds that which would have been paid if the results had been correctly stated, and also taking into account any negative impact of the re-statement.	Maximum bonus: 125% of base salary. Bonus payable at target: 85% of base salary . Target means the achievement of appropriate maximum targets in respect of both Normalized Operating Profit (NOP) and total revenue and prior to any personal performance adjustment. Bonus payable at threshold: 0% of base salary. Threshold means the minimum level of performance before bonus starts to accrue.	Amount is subject to achievement of two performance targets and then adjusted for individual performance: · Normalized Operating Profit (NOP) (50% of target bonus). · total revenue (50% of target bonus. · Individual performance measures specific to each executive director which flex the amount of bonus by a factor of 0.75 to 1.25. Revenue and profit growth are regarded as the most appropriate short-term metrics for continuing the Company’s performance. The Committee retains discretion to adjust bonus targets for any financial year to reflect intervening events including acquisitions or disposals. The numerical values of targets for any particular financial year will not be disclosed in advance or during that year as the Committee considers this information to be commercially sensitive. The actual targets will be disclosed in the following financial year.

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Performance-related bonus (in respect of years up to and including 2013) To incentivise executive directors to achieve performance objectives that are directly linked to the Company’s short-term financial and strategic goals. Revenue and profit growth are regarded as the best driversmost appropriate short-term metrics for continuing the Company’s performance.		Bonus earned in respect of 2013 was subject to the provisions of the DAB Plan. This was the final operation the DAB Plan. Bonus was split 50% cash and 50% deferred shares based on NOP, total revenue and individual performance. There is compulsory deferral into shares for three years. Bonus matching applies to deferred shares in the range of 0.3 for 1 to 2 for 1 match subject to three year EPS growth of CPI + 4% to CPI +12% p.a., respectively. Deferred and any matching shares in relation to 2013 performance will be received in February 2017 Dividend shares are added at vesting*. Provisions exist that could result in immediate forfeiture of shares in the event of dismissal for gross misconduct, as determined by the Committee and at its discretion.	Maximum and target bonus opportunity of 150% and 100% of salary respectively.	The targets for 2013 bonus were: 50% of target bonus was dependent on achieving a NOP target of £313.5m** with 0% payout at £257.7m rising in a linear way to 25% at £294.6m. The NOP portion of bonus can continue to accrue linearly above the target of £313.5m on a straight-line basis, subject to the overall maximum of 150% of base salary. 50% of bonus was dependent on achieving a US$ revenue target of US$1,096m with 0% payout at US$913.2m rising to 25% at US$1,030.1m The revenue portion of bonus can continue to accrue above the target of US$1,096m so that for every 1% increase in revenue, bonus is increased by 2.5% of the target, subject to the overall maximum of 150% of base salary Bonus amount is then subject to an individual performance multiplier which flexes the payment by 0.75 to 1.25 again subject to the overall maximum of 150% of base salary
Long-Term Incentive Plan 2013 (first operation in 2014) To incentivise executive directors to achieve performance objectives that are directly linked to the Company’s long- term financial and strategic goals. To align executive directors’ interests with shareholders through the performance conditions and share retention obligations .		Annual conditional share awards are made at 187.5% of base salary with the ability for vesting of between 0% to 200% after three years dependant on achievement of the performance conditions, with a maximum of 375% of base salary. 50% of the vested shares will be subject to additional holding periods with 25% released after four years and the remaining 25% released after five years. During these holding periods shares may not be sold even if the participant has left the Company. Dividend shares are added at vesting. Malus: The Committee has discretion to reduce a share award (including to nil) prior to vesting where there are exceptional circumstances which include a material misstatement in the Company’s published results, misconduct by the executive director that is deemed to have caused or contributed to a material loss as a result of reckless, negligent or wilful actions, or inappropriate values or behavior. Clawback: the Committee has discretion to clawback shares and executive directors have an obligation under the Rules to transfer shares or pay over the proceeds of sale in exceptional circumstances (as described above). If sold at less than market value, the obligation is to pay market value at the date of disposal. Clawback would be less any tax and social security paid or due to be paid. The Committee has discretion to set the length of the clawback period which would normally be two years from acquisition of the shares.	Maximum limit of 600% in exceptional circumstances as determined by the Committee. By way of example, exceptional circumstances could include the hiring of an exceptional senior executive director in a highly competitive market where we need to make an exceptional offer in order to recruit.	Vesting is based on: three year growth relative to the FTSE All World Technology Index (25%). three year TSR growth relative to the FTSE 350 (25%). three year EPS growth (50%) with threshold at 15 % annual growth (including CPI) and the upper performance target at 22% annual growth (including CPI). 25% of the respective TSR elements vest for median performance with 100% vesting for upper quintile performance. Similarly 25% of the EPS element vests at threshold performance with 100% vesting at the upper performance target with straight line interpolation between these two points. The Committee will review the performance conditions for new awards annually. The Committee has discretion to waive or change a performance condition if anything happens that causes the Committee reasonably to consider it appropriate, provided that any changed performance condition will be no more difficult to satisfy than the original condition was intended to be at the time the award was granted.

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Shareholding requirement To align executive directors’ interests with those of shareholders over a longer time period, they are required to build a shareholding of 200% of base salary.	Until 200% of salary is achieved, no more than 50% of shares received through the DAB Plan and LTIP (after the automatic sale of shares to satisfy tax liabilities) can be disposed of. Unvested DAB Plan shares do not count towards the shareholding requirements.
Long-Term Incentive Plan (in respect of years up to and including 2013) To incentivise executive directors to achieve performance objectives that are directly linked to the Company’s long term financial and strategic goals. To align executive directors’ interests with those of the shareholders through the performance conditions and share retention obligations.	Annual conditional awards normally at 100% of salary with the potential for the award to vest at between 0% and 200% of salary for upper decile performance at the end of the three-year performance period. Dividend shares are added at vesting.	Maximum award limit of 400% in exceptional circumstances was never used.	Vesting is based on: Three-year TSR growth relative to the FTSE All World Technology Index (50%). Three-year TSR growth relative to the FTSE 350 (50%). Threshold vesting commencing at median ranking of TSR group (25% of respective TSR elements rising to 100% vesting for an upper decile ranking on a straight-line basis). The Committee has discretion to waive or change a performance condition which cause the Committee to reasonably consider that: (a) The amended Performance Condition would be a fairer measure of performance and would be no easier to satisfy; or (b) The Performance Condition should be waived.
Pension To provide pension contributions in line with market practice, which will enable directors to plan for retirement.	10% of base salary for executive directors and 11% for the CEO is paid either into the Group Personal Pension Plan or overseas equivalent, or as a cash allowance (subject to payroll deductions) for those in excess of the lifetime allowance applicable in the UK.	11% of base salary.	Not applicable.
Other benefits To provide competitive benefits in line with market practice to enable the Company to recruit and retain high calibre executive directors To reward innovation and invention	Other benefits are provided appropriate to the location of the executive director and include provision of a car or car and fuel allowance, long term sickness and disability insurance, death in service benefit, healthcare insurance and travel insurance for the executive director and family Executive directors may also receive patent bonuses in line with the scheme operated by the Company from time to time for patent applications and on grants of patents.	Reasonable market cost of providing benefits. The Committee reserves the discretion to provide such situation-specific benefits as may be required in the interests of the Company’s business, such as relocation. Full details of the exercise of any such discretion would be provided to shareholders in the next remuneration report.	Not applicable.

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Overseas benefits/Relocation allowances To provide competitive benefits in line with market practice to enable the Company to recruit and retain high- calibre executive directors and move them to alternative locations when required by the needs of the business.		Executives based in countries outside their home country receive other benefits appropriate to the country in which they are working. In the event that an executive director agrees to move from their home country temporarily the relocation arrangements may include: Housing allowance or settlement of actual costs. Disturbance allowance to enable essential household purchases to be made. Cost of living and transportation allowance for the duration of the assignment . Flights home for executive and family. School fees for executive director’s children. Cost of personal tax advice. Cost of visas for executive and family. Cost of transporting executive and family’s personal effects. Legal and estate agents fees associated with properties in home and overseas locations.	Reasonable market cost of providing benefits for the duration of the term abroad.	Not applicable.
One-off recruitment cash/equity awards To provide an appropriately attractive package to persuade an external hire to accept an offer of employment and/or to buy out equity that would be lost on leaving previous employment.		An award of restricted stock units (RSUs) or a grant of options may be made under the Employee Equity Plan to a new recruit to compensate for equity awards foregone with previous employer and/or provide equity that vests in the three years prior to potential vesting of the first LTIP award. Alternatively a cash payment or an additional LTIP award may be made to compensate. Payment may be on taking up appointment or to coincide with vesting dates under the previous employer’s plan. Malus and clawback provisions would apply.	The maximum would be a sum equal to the value of equity foregone, taking account of performance conditions attached to the award, likelihood of vesting and accelerated payment.	The Committee has discretion to determine performance conditions for any award of RSUs, any LTIP award, or any grant of options taking into account of the circumstances of each individual case. Performance conditions would normally be applied on an equivalent basis to those applicable to awards made to other executive directors in the same calendar year. Performance conditions may, but would not necessarily be applied to any cash payment.

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Other Contributory Equity Plans Executive directors are eligible to participate in the share plan applicable to the country where they work. These plans provide an opportunity for executive directors to voluntarily invest in the Company.	ARM currently operates a Save as You Earn Option Scheme in the UK (and some other countries) and an Employee Stock Purchase Plan in the US (and some other countries), which enables employees to buy shares at a discount of up to 20% of market value through regular monthly or fortnightly payroll deductions.	The maximum participation limits will not exceed those set by the relevant tax authorities from time to time.	Not applicable.
Fees for non-executive roles held outside the Company To provide executive directors with opportunities to widen their knowledge and experience of the operation of other company boards and committees, they are permitted to hold non-executive positions at other companies.	Executive directors are permitted to retain any fees paid and/or shares offered in connection with external non-executive roles that they undertake.	The amounts received are disclosed annually.	Not applicable.
Non-Executive Directors’ (NED) and Chairman’s fees To attract and retain an appropriately experienced Chairman and independent non-executive directors of suitable calibre to fulfil a range of different roles including, financial expert/Audit Committee Chairman, Senior Independent Director, and Committee Chairmen. To pay fees that reflect responsibilities and workload undertaken, and which are competitive with peer companies.	NED fees are proposed by the executive directors and approved by the Board as a whole. The Chairman’s fee is proposed by the Committee and approved by the Board as a whole with the Chairman taking no part in the decision. NED appointments are terminable on three months’ notice. Fees are reviewed on an annual basis and take account of fees paid for similar roles by peer companies. The NEDs and the Chairman are not eligible to receive bonuses, pension contributions and nor can they to participate in the LTIP or other equity plans. The overall fees paid to non-executive directors will remain within the limit stated in our Articles of Association, currently £0.5m which we are seeking approval to increase to £1.0m at the 2014 AGM.	Fees are set at an appropriate level taking into account the factors outlined in this table. Additional fees are paid to the SID and Committee Chairmen. An additional fee is paid to NEDs based outside the UK who undertake long haul travel to attend Board meetings in the UK, to reflect the additional time commitment.	Not applicable.
Legacy arrangements (pre 27 June 2012)	None.

The significant accounting policies applied in the presentation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB, IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements were authorized for issue on February 17, 2015 by the Board of directors.

The consolidated financial statements have been prepared on a going concern basis and in accordance with the historical cost convention as modified by: the revaluation to fair value of available-for-sale (AFS) financial assets; financial assets and liabilities at fair value through the income statement (including embedded derivatives and derivative instruments).

Critical accounting estimates and judgments

The preparation of financial statements in accordance with IFRS requires the directors to make critical accounting estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates and judgments are continually evaluated and are based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Segment reporting

The Company’s internal operational structure was re-organized on January 1, 2014, to create an organization that is more scalable and more accountable, and that offers a more integrated product portfolio. As at December 31, 2014, the Company’s internal organization and management structure reflect this change and this is the primary way in which the Chief Operating Decision Maker (CODM) is provided with financial information. The CODM assesses performance and allocates resources based on consolidated results of operations. The directors believe that the CODM is the Chief Executive Officer and the Executive Committee of the Company. As a result, the Company now has one reportable segment.

Impairment of goodwill

The Company tests goodwill for impairment at least annually. This requires an estimation of the value-in-use of the assets to which goodwill is allocated. As discussed in detail in note 13, estimating the value-in-use requires the Company to make an estimate of the expected future cash flows from the assets and also to choose a suitable discount rate in order to calculate the present values of those cash flows. The discount rate is based on an estimate of the Company’s weighted average cost of capital. The Company uses a post-tax discount rate of 10% (2013: 10%) (pre-tax discount rate of approximately 11% (2013: 11%)). The Company now reviews the carrying value of its assets including goodwill at the operating segment level.

Revenue recognition

The Company makes significant estimates in applying its revenue recognition policies. In particular, as discussed in detail in the revenue recognition policy below, 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 can be anticipated with reasonable certainty. The use of the percentage-of-completion method is itself based on the assumption that, at the outset of license agreements, there is an insignificant risk that customer acceptance is not obtained. The Company also makes assessments, based on prior experience, of the extent to which future milestone receipts represent a probable future economic benefit to the Company. In addition, when allocating revenue to various components of arrangements involving several components, it is assumed that the fair value of

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each element can be estimated reliably. The complexity of the estimation process and issues related to the assumptions, risks and uncertainties inherent with the application of the revenue recognition policy 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.

Provisions for income taxes

The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the world-wide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Provisions are calculated based upon advice received from tax advisors and relevant correspondence received from tax authorities. Provisions are re-assessed at each period end date based upon any relevant new information received. Where the final tax outcome of these matters is different from the amounts recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Legal settlements and other contingencies

Determining the amount to be accrued for legal settlements requires the directors to estimate the committed future legal and settlement fees the Company is expecting to incur, either where suits are filed against the Company for infringement of patents, or where the Company may be required to indemnify a licensee. The directors assess the extent of any potential infringement based on legal advice and written opinions received from external counsel and then estimate the level of accrual required.

Contingent consideration for an acquisition is recognized at fair value as part of the purchase consideration if the contingent conditions are expected to be satisfied. This requires the directors to estimate the acquiree’s future financial performance, typically more than one year post-acquisition.

Participation in trust to acquire patent rights

During 2013, the Company participated in a consortium, via a trust, to acquire certain patent rights and has made various judgments regarding these transactions.

The directors believe that the Company does not control or have significant influence over the trust since, amongst other factors it does not have voting rights on the board or significant influence over the relevant activities of the trust. The results of the trust have therefore not been consolidated or equity accounted in the Company financial statements. The Company determined that the participation in the consortium conferred on the Company two separate rights: an intangible asset, conferring the right to use the assets in the Company’s own business, and an AFS financial asset conferring the right to certain potential future revenue streams arising from the licensing activities of the trust. The amount expected to be recovered through this licensing program was estimated by the Company in conjunction with the management of the trust, which has considerable experience of managing the assets of similar trusts.

The Company assesses its intangible assets for impairment at each reporting date and has reviewed the valuation of the patent rights acquired in this transaction. Given the design freedom that these rights provide and the size of the future opportunity afforded, the directors have concluded that no impairment of the patent rights is required.

In Q4 2013, the trust made a strategic decision not to pursue a licensing program and the portfolio was instead put up for sale by auction. The Company acquired the patents in January 2014 for $4.0 million (£2.4 million), which have been accounted for as an additional intangible asset.

The auction process means that there are no further potential cash flows in relation to the AFS financial asset and at the end of 2013, the asset was therefore impaired down to the value of the Company’s share of the auction proceeds, resulting in a non-cash exceptional charge of $98.5 million (£59.5 million).

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Provision for impairment of trade receivables

The Company assesses trade receivables for impairment which requires the directors to estimate the likelihood of payment forfeiture by customers.

New standards, amendments and interpretations

New and amended standards adopted by the Company

There are no new or amended standards adopted by the Company in the year which have had a material impact on the Company.

Standards, amendments and interpretations that are not yet effective and have not been early adopted

IFRS 9 “Financial instruments” addresses the classification and measurement of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortized cost, fair value through Other Comprehensive Income (OCI) and fair value through profit and loss. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit and loss with the irrevocable option at inception to present changes in fair value in OCI but not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit and loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and the hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually uses for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after January 1, 2018. Early adoption is permitted. The Company is currently assessing IFRS 9’s full impact.

IFRS15 “Revenue recognition” deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognized when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for annual periods beginning on or after January 1, 2017 and earlier application is permitted, subject to EU adoption. The Company is currently assessing the impact of IFRS 15.

Revenue recognition

The Company follows the principles of IAS 18, “Revenue”, in determining appropriate revenue recognition policies. In principle, therefore, revenue associated with the sale of goods is recognized when all of the following conditions have been satisfied:

the Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

the Company does not retain either continuing managerial involvement to the degree usually associated with ownership or effective control over the goods sold;

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the transaction will flow to the Company; and

the costs incurred or to be incurred in respect of the sale can be measured reliably.

Revenue associated with the rendering of services is recognized when all of the following conditions have been satisfied:

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the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the transaction will flow to the Company;

the stage of completion of the transaction at the end of the reporting period can be measured reliably; and

the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

Revenue is shown net of value added tax, returns, rebates and discounts, and after eliminating sales within the Company.

Revenue comprises the value of sales of licenses to ARM technology, royalties arising from the resulting sale of licensees’ ARM technology-based products, revenues from support, maintenance and training and the sale of development boards and software toolkits.

License revenues:

Revenue from standard license products that are not modified to meet the specific requirements of each customer is recognized when all of the conditions relevant to revenue associated with the sale of goods have been satisfied:

the significant risks and rewards of ownership are transferred when a license arrangement has been agreed and the IP has been delivered to the customer;

continuing managerial involvement and effective control over licensed IP is relinquished at the point at which the IP is delivered to the customer;

the amount of revenue can be measured reliably; any consideration due under the licensing arrangement that is not deemed to be reliably measurable is deferred until it can be measured reliably; and

it is probable that the economic benefits associated with the transaction will flow to the Company; any economic benefits of the transaction that are deemed unlikely to flow to the Company are deferred until it becomes probable that they will flow to the Company.

The majority of the Company’s revenues come from the licensing of IP and subsequent receipt of royalty revenues and there are therefore very few direct costs associated with the sale of goods; where there are direct costs of revenues, these are measured with reference to the purchasing agreements in place with the Company’s suppliers.

Many license agreements are for products which are designed to meet the specific requirements of each customer. Revenue from the sale of such licenses is recognized on a percentage-of-completion basis over the period from signing of the license to completion of ARM’s contractual obligations. Under the percentage-of-completion method, provisions for estimated losses on uncompleted contracts are recognized 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. After project completion, provisions for additional post-delivery warranty work are recognized in research and development expenses.

Where invoicing milestones in license arrangements are such that the receipts fall due significantly outside the period over which the customization is expected to be performed or significantly outside its normal payment terms for standard license arrangements, the Company evaluates whether it is probable that economic benefits associated with these milestones will flow to the Company and therefore whether these receipts should initially be included in the arrangement consideration.

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;

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whether it has sufficient evidence that the customer considers that the Company’s contractual obligations have been, or will be, fulfilled;

whether there is sufficient certainty that only those costs expected 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 supports the conclusions reached.

Where the Company considers that there is insufficient evidence that it is probable that the economic benefits associated with such future milestones will flow to the Company, taking into account these criteria, such milestones are excluded from the arrangement consideration until there is sufficient evidence that it is probable that the economic benefits associated with the transaction will flow to the Company. The Company does not discount future invoicing milestones, as the effect of so doing would be immaterial.

Where agreements involve several components, the entire fee from such arrangements is allocated to each of the individual components based on each component’s fair value, where fair value is the selling price of an item when sold separately. Where a component in a multiple-component agreement has not previously been sold separately, the assessment of fair value for that component is based on other factors including, but not limited to, the price charged when it was sold alongside other items and the book price of the component relative to the book prices of the other components in the agreement. If fair value of one or more components in a multiple-component agreement is not determinable (where such component is not considered incidental to the overall arrangement), the entire arrangement fee is deferred until such fair value is determinable, or the component has been delivered to the licensee. Where, in substance, two or more components of a contract are linked and fair values cannot be allocated to the individual components, the revenue recognition criteria are applied to the components as if they were a single component.

Agreements including rights to unspecified future products (as opposed to unspecified upgrades and enhancements) are accounted for using subscription accounting, with revenue from the arrangement being recognized on a straight-line basis over the term of the arrangement, or an estimate of the economic life of the products offered if no term is specified, beginning with the delivery of the first product.

Royalty revenues:

Royalty revenues are earned on sales by the Company’s customers of products containing ARM technology. Royalty revenues are recognized when it is probable that the economic benefits associated with the transaction will flow to the Company and the amount of revenue can be reliably measured, which the Company considers to be receipt of notification from the customer of product sales. Notification is typically received in the quarter following shipment of the products by the customer.

Other revenues:

In addition to license fees, contracts generally contain an agreement to provide post-delivery service support (in the form of support, maintenance and training) which consists of the right to receive services and/or unspecified product upgrades or enhancements that are offered on a when-and-if-available basis. Fees for post-delivery service support are generally specified in the contract. Revenue related to post-delivery service support is recognized based on fair value, which is determined with reference to contractual renewal rates. Where renewal rates are specified, revenue for post-delivery service support is recognized on a straight-line basis over the period for which support and maintenance is contractually agreed by the Company with the licensee. 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 recognized as services are performed and it is probable that the economic benefits associated with the transaction will flow to the Company.

Sales of software, including development systems, which are not specifically designed for a given license (such as off-the-shelf software) are recognized 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-delivery service support have been accrued.

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For all types of revenue, if the amount of revenue recognized exceeds the amounts invoiced to customers, the excess amount is recorded as amounts recoverable on contracts within accounts receivable. The excess of amounts invoiced over revenue recognized is recorded as deferred revenue.

Intangible assets

(a) 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 amortized 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 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.

(b) Other intangible assets Computer software, purchased patents and licenses to use technology are capitalized at cost and amortized on a straight-line basis over an estimate of the time that the Company is expected to benefit from them. Costs that are directly attributable to the development of new business application software and that are incurred during the period prior to the date that the software is placed into operational use, are capitalized. External costs and internal costs are capitalized to the extent they enhance the future economic benefit of the asset acquired.

Although an independent valuation is made of any intangible assets purchased as part of a business combination, the directors are primarily responsible for determining the fair value of intangible assets.

In-process research and development projects purchased as part of a business combination may meet the criteria set out in IFRS 3 (revised), “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 amortization commences when the assets are brought into use.

Order backlog is derecognized when it has been fully amortized.

Amortization is calculated so as to write off the cost of intangible assets, 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:

Computer software	Three to five years
Patents and licenses	Three to eleven years
In-process research and development	One to five years
Developed technology	One to seven years
Existing agreements and customer relationships	One to six years
Core technology	Five years
Trademarks and tradenames	One to five years
Order backlog	One year

Income taxes

The current income tax charge is calculated on the basis of tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company’s subsidiaries operate and generate taxable income. Management periodically evaluates individual positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

From April 2013, the benefit of UK research and development is recognized under the UK’s Research and Development Expenditure Credit (RDEC) scheme. The benefit is recorded as income included in profit before tax, netted against research and development expenses as the RDEC is of the nature of a government grant.

Deferred 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

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a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax assets are recognized to the extent that it is probable that future taxable profits will arise against which the temporary differences will be utilized.

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 offset, where the taxation authority permits a single net payment.

In 2013, a decision to elect into the UK patent box regime was made. The UK patent box regime seeks to tax all profits attributable to patented technology at a reduced rate of 10%. The rules are to be phased in over five years from April 1, 2013 – a company will be entitled to only 60% of the deduction in financial year 2013/14, rising to 100% by 2017/18. As ‘relevant’ patent box profits are taxed at 10% and other profits are taxed at UK statutory rates, deferred tax assets and liabilities are measured using the average rates expected to apply on realization or settlement.

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 or vest of share awards 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 and awards. 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 compensation expense at the statutory rate, the excess is recorded directly in equity, against retained earnings.

Impairment of non-financial assets

Non-financial assets that have an indefinite useful life, for example goodwill, are not subject to amortization but are tested annually for impairment.

Non-financial assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognized for the amount by which the non-financial asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

The annual impairment tests in 2014 and 2013 showed there was no impairment with respect to goodwill. Furthermore, no trigger events have been identified that would suggest the impairment of any of the Company’s other intangible assets.

The Company considers at each reporting date whether there is any indication that financial assets are impaired. If there is such an indication, the Company carries out an impairment test by measuring the assets’ recoverable amounts, which are the higher of the assets’ fair values less costs to sell and their values-in-use. If the recoverable amounts are less than the carrying amounts an impairment loss is recognized, and the assets are written down to their recoverable amounts.

In the case of equity securities classified as AFS, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are permanently impaired. If any such evidence exists for AFS financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any permanent impairment loss on that financial asset previously recognized in the income statement – is recognized in the income statement. Impairment losses recognized in the income statement on equity instruments are not reversed.

Impairment testing of trade receivables is described under “Accounts receivable” below.

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Provisions

Provisions for legal claims are recognized when: the Company has a present legal or constructive obligation as a result of past events; and it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount of the outflow can be reliably estimated.

Exceptional items

Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Company. They are material items of income or expense that have been shown separately due to the significance of their nature.

Segment reporting

The Company’s internal operational structure was re-organized on January 1, 2014, to create an organization that is more scalable and more accountable, and that offers a more integrated product portfolio. As at December 31, 2014, the Company’s internal organization and management structure reflect this change and this is the primary way in which the Chief Operating Decision Maker (CODM) is provided with financial information. The CODM assesses performance and allocates resources based on consolidated results of operations. As a result, the Company now has one reportable segment. The directors believe that the CODM is the Chief Executive Officer and the Executive Committee of the Company.

Principles of consolidation

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

Business combinations The results of subsidiaries acquired are included in the income statement from the date of acquisition. Assets and liabilities existing at the date of acquisition are recorded at their fair values reflecting their condition at that date. Earn-outs paid as part of an acquisition are assessed on an individual basis and treated as either part of the acquisition consideration or as employee compensation depending on the nature of the agreement.

Subsidiaries Subsidiaries are all entities (including structured entities) over which the Company has control. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases.

Associates Associates are all entities over which the Company has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the Company’s share of the profit or loss of the investee after the date of acquisition.

Joint ventures Joint ventures are all arrangements in which the Company has joint control with one or more other parties, whereby each party has a right to a share of the net assets of the arrangement. Investments in joint ventures are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the Company’s share of the profit or loss of the investee after the date of acquisition.

Research and development expenditure

All ongoing research expenditure is expensed in the period in which it is incurred. Where a product is technically feasible, production and sale are intended, a market exists, expenditure can be measured reliably, and sufficient resources are available to complete the project, development costs are capitalized and amortized on a

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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 recognized, development expenditure is recognized as an expense in the period in which it is incurred. Any collaborative agreement whereby a third-party agrees to partially fund the Company’s research and development is recognized over the period of the agreement as a credit within research and development expenses.

Government grants

Grants in respect of specific research and development projects are recognized as receivable when there is reasonable assurance that they will be received and the conditions to obtain them have been complied with. They are credited to the income statement in the same period as the related research and development costs for which the grant is compensating. The grant income is presented as a deduction from the related expense.

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 predominantly measured by use of the Black-Scholes pricing model. A Monte Carlo simulation is used for certain share awards that have market-based performance conditions. 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 United Kingdom and an Employee Share Purchase Plan (ESPP) in the US, India, Asia Pac countries and certain European countries. Options under the SAYE schemes are granted at a 20% discount to the market price of the underlying shares on the date of announcement of the scheme and at a 15% discount to the lower of the market prices at the beginning and end of the scheme for the ESPP. The UK SAYE schemes are approved by the UK tax authorities, which stipulates that the saving period must be at least 36 months. The Company has recognized a compensation charge in respect of the SAYE plans and ESPPs. The charges for these are calculated as detailed above.

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

The share-based payments charge is allocated to cost of sales, research and development expenses, sales and marketing expenses, and general and administrative expenses on the basis of headcount.

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 and vesting of share awards. In accordance with IFRS2, this is treated as a cash-settled transaction. A provision is made, calculated using the intrinsic value of the relevant options and awards at the balance sheet date, pro-rated over the vesting period of the options and awards.

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, Israel and India. The Company contributes to these plans based upon various fixed percentages of employee compensation, and such contributions are expensed as incurred.

Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Costs, net of any lease incentives, in respect of operating leases are charged on a straight-line basis over the lease term even if payments are not made on such a basis.

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Finance leases

Leases in which substantially all of the risks and rewards of ownership are transferred to the lessee are classified as finance leases. Assets held under finance leases are recognized as assets of the Company at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease liability. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the income statement.

Foreign currency translation

(a) Functional and presentation currency. The functional currency of each Company entity is the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in sterling, which is the presentation currency of the Company.

(b) Transactions and balances. Transactions denominated in foreign currencies have been translated into the functional currency of each Company entity at actual rates of exchange at the date of transaction. Monetary assets and liabilities denominated in foreign currencies have been translated at closing rates of exchange at the balance sheet date. Exchange differences have been included in general and administrative expenses.

(c) Group companies. The results and financial positions of all Company entities (none of which has the currency of a hyper-inflationary economy) not based in the UK are translated into sterling as follows:

(i)

assets and liabilities for each balance sheet presented are translated at the closing rates of exchange at the balance sheet date;

(ii)

income and expenses for each income statement presented are translated at the rates of exchange at the time of each transaction during the period; and

(iii)

all resulting exchange differences are recognized as a separate component of equity, being taken through other comprehensive income via the cumulative translation adjustment.

When a foreign operation is partially disposed of or sold, exchange differences that were recognized through other comprehensive income are recognized in the income statement as part of the gain or loss on sale.

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 rates of exchange.

Derivative financial instruments

The Company utilizes currency 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 currency 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 currency exchange contracts are recorded at fair value and the related foreign currency accounts receivable are revalued to spot rates at each period end. The fair value of forward exchange contracts is determined using quoted forward exchange rates at the balance sheet date. The fair value of foreign currency options is based upon valuations performed by management and the respective banks holding the currency instruments. All recognized gains and losses resulting from the settlement of the contracts are recorded within general and administrative expenses in the income statement. The Company does not enter into currency exchange contracts for the purpose of hedging anticipated transactions.

Embedded derivatives

In accordance with IAS 39, “Financial instruments: recognition and measurement,” the Company has reviewed all its contracts for embedded derivatives that are required to be separately accounted for if they do not meet certain requirements set out in the standard. From time to time, the Company may enter into contracts denominated in a currency (typically US dollars) that is neither the functional currency of the Company entity nor the functional currency of the customer or the collaborative partner. Where there are uninvoiced amounts on such contracts, the

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Company carries such derivatives at fair value. The resulting gain or loss is recognized in the income statement under general and administrative expenses.

Investment income, and interest payable and similar charges

Investment income, and interest payable and similar charges relate to interest income and expense, which is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Dividends

Distributions to owners of the Company are not recognized in the income statement under IFRS, but are disclosed as a component of the movement in shareholders’ equity. A liability is recorded for a dividend when the dividend is approved by the Company’s shareholders. Interim dividends are recognized as a distribution when paid.

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 treasury shares, which are treated as cancelled.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Company had two categories of dilutive potential ordinary shares during the year: those being share options granted to employees and directors where the exercise price is less than the average market price of the Company’s ordinary shares during the year and the awards and contingently issuable shares granted under the Company’s RSU, DAB plan, and LTIP schemes. As at 31 December 2014, no shares granted under the 2013 and 2014 LTIPs with market-based performance conditions were included since the current expectation is that these shares will not vest. Shares granted with EPS related performance conditions and those granted under the 2012 LTIP (for which the performance period is now concluded) have been included to the extent that it is expected that the shares will vest. Reconciliations of the earnings and weighted average number of shares used in the calculations are shown on the face of the consolidated income statement.

Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held with banks, and other short-term highly liquid investments with original maturities of three months or less. The carrying amount approximates to fair value because of the short-term maturity of these instruments.

Short- and long-term deposits and similar instruments

The Company considers all highly-liquid investments with original maturity dates of greater than three months and maturing in less than one year to be short-term deposits. Deposits with a maturity date of greater than one year from the balance sheet date are classified as long-term.

The Company has also placed money with certain banks in the form of Guaranteed Senior Secured Notes which have similar characteristics to term deposits and may be short- or long-term.

Accounts receivable

Accounts receivable are recognized initially at fair value. A provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables.

Accounts receivable are first assessed individually for impairment. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade receivable may be impaired.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.

In the case of impairment, the carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognized in the income statement within general and administrative expenses. When

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a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against general and administrative expenses in the income statement.

Property, plant and equipment

Property, plant and equipment is stated at historic cost less accumulated depreciation and any recognized impairment loss. The cost of property, plant and equipment is their purchase cost, together with any costs directly attributable to bringing the asset to its working condition for its intended use. External costs and internal costs are capitalized to the extent they enhance the future economic benefit of the asset.

Assets in the course of construction are carried at cost less any recognized impairment loss. Depreciation of these assets commences when the assets are ready for their intended use.

Depreciation is calculated so as to write off the cost of property, plant 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 to ten years or term of lease, whichever is shorter
Computer equipment	Three to five years
Fixtures, fittings and motor vehicles	Three to five years

Provision is made against the carrying value of property, plant and equipment where an impairment in value is deemed to have occurred. Asset lives and residual values are reviewed on an annual basis.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within general and administrative expenses in the income statement.

Financial assets

The Company classifies its financial assets in the following categories: at fair value through the income statement, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of financial assets at initial recognition.

(a) Financial assets at fair value through the income statement. Financial assets at fair value through the income statement are financial assets held for trading – that is, assets that have been acquired principally for the purpose of selling in the short-term. Assets in this category are classified as current assets. They are initially recognized at fair value with transaction costs being expensed in the income statement. Specifically, the Company’s currency exchange contracts and embedded derivatives fall within this category. Gains or losses arising from changes in the fair value of “financial assets at fair value through the income statement” are presented in the income statement within general and administrative expenses in the period in which they arise.

(b) Loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. “Accounts receivable”, “cash and cash equivalents” and “short- and long- term deposits and similar instruments” are classified as “Loans and receivables.” (See note 17).

Loans and receivables are measured initially at fair value and then subsequently measured at amortized cost.

(c) Available-for-sale financial assets. AFS financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the assets within 12 months of the balance sheet date.

Equity investments that are not publicly traded are also classified as AFS and are initially recorded at fair value plus transaction costs. Given that the markets for these assets are not active, the Company establishes fair value by using valuation techniques. The estimated fair value of these investments approximated to cost less any permanent diminution in value (based on estimates determined by management), except where independent valuation

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information is obtained. Unrealized holding gains or losses on such securities are recognized, net of related taxes, through other comprehensive income via a revaluation reserve, except where there is evidence of permanent impairment (in which case the loss is recognized through the income statement within general and administrative expenses or exceptional items where appropriate). When securities classified as AFS are sold, the accumulated fair value adjustments recognized through other comprehensive income are recycled through the income statement.

Accounts payable

Accounts payable are recognized at face value as they are settled within 12 months.

Treasury shares

Where the Company purchases its own equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs is deducted from equity attributable to the owners of the Company until the shares are cancelled or reissued. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to owners of the Company.

Share capital

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

1c Financial risk management

The Company operates in the intensely competitive semiconductor industry, which has been characterized by price erosion, rapid technological change, short product life cycles, cyclical market patterns, and heightened foreign and domestic competition. Significant technological changes in the industry could affect operating results.

The Company’s operations expose it to a variety of financial risks that include currency risk, interest rate risk, securities price risk, credit risk and liquidity risk.

Given the size of the Company, the directors have not delegated the responsibility for monitoring financial risk management to a sub-committee of the Board. The policies set by the directors are implemented by the Company’s finance and treasury departments. The Company has a treasury policy that sets out specific guidelines to manage currency risk, interest rate risk, credit risk and liquidity risk, and also sets out circumstances where it would be appropriate to use financial instruments to manage these.

Currency risk

The Company’s earnings and liquidity are affected by fluctuations in foreign currency exchange rates, principally in respect of the US dollar, reflecting the fact that most of its revenues and cash receipts are denominated in US dollars, while a significant proportion of its costs are settled in sterling. The Company seeks to use currency exchange contracts and currency options to manage the US dollar/sterling risk as appropriate, by monitoring the timing and value of anticipated US dollar receipts (which tend to arise from low-volume, high-value license deals and royalty receipts) in comparison with its requirement to settle certain expenses in US dollars. The Company reviews the resulting exposure on a regular basis and hedges this exposure using currency exchange contracts and currency options for the sale of US dollars as appropriate. Such contracts are entered into with the objective of matching their maturity with projected US dollar cash receipts.

The Company is also exposed to currency risk in respect of the foreign currency denominated assets and liabilities of its overseas subsidiaries. At present, the Company does not consider this to be a significant risk since the Company does not intend to move assets between group companies.

The Company has elected not to apply hedge accounting, and all movements in the fair value of derivative foreign exchange instruments are recorded in the income statement, offsetting the foreign exchange movements on the accounts receivable, cash and cash equivalents and short-term deposits balances being hedged.

In addition, certain customers remit royalties and license fees in other currencies, primarily the Euro and Japanese yen. The Company is also required to settle certain expenses in these currencies, primarily in its French,

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German and Japanese subsidiaries, and as the net amounts involved are not considered significant, the Company does not take out forward-settling currency exchange contracts in these currencies.

Interest rate risk

Floating rate cash earns interest based on relevant national LIBID or base rate equivalents and is therefore exposed to cash flow interest rate risk. The proportion of funds held in fixed rather than floating rate deposits is determined in accordance with the policy outlined under “Liquidity risk” below. Other financial assets, such as AFS financial assets, are not directly exposed to interest rate risk.

The Company had no derivative financial instruments to manage interest rate fluctuations in place at the year-end since the level of financing was not considered significant, and as such no hedge accounting is applied. The Company’s cash flow is carefully monitored on a daily basis. Excess cash, considering expected future cash flows, is placed on either short- or long-term deposits to maximize the interest income thereon. Daily surpluses are swept into higher-interest earning accounts overnight.

Securities price risk

The Company is exposed to equity securities price risk on AFS financial assets. As there can be no guarantee that there will be a future market for securities (which are generally unlisted at the time of investment) or that the value of such investments will rise, the directors evaluate each investment opportunity on its merits before committing the Company’s funds. The directors review holdings in such companies on a regular basis to determine whether continued investment is in the best interests of the Company. Funds for such ventures are limited in order that the financial effect of any potential decline of the value of investments will not be substantial in the context of the Company’s financial results.

Credit risk

Credit risk is managed on a Company basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions.

At December 31, 2013 and 2014, the Company had no significant concentrations of credit risk. The amount of exposure to any individual counterparty is subject to a limit, which is reassessed periodically by the directors.

The Company has implemented policies that require appropriate credit checks on potential customers before sales commence. The Company generally does not require collateral on accounts receivable, as many of its customers are large, well-established companies. The Company has not experienced any significant losses related to individual customers or groups of customers in any particular industry or geographic area.

The Company markets and sells to a relatively small number of customers with individually large value transactions. The Company performs credit checks on all customers (other than those paying in advance) in order to assess their creditworthiness and ability to pay its invoices as they become due. As such, the balance of accounts receivable not owed by large companies is still deemed by the directors to be of low risk of default due to the nature of the checks performed on them, and accordingly a relatively small allowance against these receivables is in place to cover this low risk of default.

No credit limits were exceeded during the reporting period and the directors do not expect any significant losses from non-performance by these counterparties, other than those already provided for.

Liquidity risk

The Company’s policy is to maintain balances of cash and cash equivalents and short- and long-term deposits and similar instruments, such that highly liquid resources exceed the Company’s projected cash outflows at all times. Surplus funds are placed on fixed- or floating-rate deposits depending on the prevailing economic climate at the time (with reference to forward interest rates) and also on the required maturity of the deposit (as driven by the expected timing of the Company’s cash receipts and payments over the short- to medium-term).

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5 Profit before tax: analysis of expenses by nature

The following items have been charged/(credited) to the income statement in arriving at profit before tax:

	2012 £ million		2013 £ million			2014 £ million
Staff costs, including share-based payments (note 4)		235.7		292.5			316.4
Cost of inventories recognized as an expense		3.2		2.8			3.8
Depreciation of property, plant and equipment – owned assets (note 12)		9.5		11.6			14.1
Depreciation of property, plant and equipment – under finance leases (note 12)		1.3		2.8			5.0
Amortization of other intangible assets (note 14)
Cost of revenues		0.3		0.3			0.3
Research and development expenses		2.3		6.9			7.5
Sales and marketing expenses		0.9		0.6			0.2
General and administrative expenses		3.1		5.8			8.5
Government grants – research and development expenditure credit		—		(5.8	)		(8.8	)
Exceptional items (note 6)
Impairment of current AFS asset		—		59.5			—
IP indemnity and similar charges		—		41.8			—
Impairment of non-current AFS financial assets (note 11)		1.4		6.8			1.0
Profit on disposal of AFS financial assets		(0.8)		(3.3)			(0.3)
Other operating lease rentals payable:
Plant and machinery		24.0		26.2			26.0
Property		7.6		8.7			11.3
Accounts receivables impairment (including movement in provision) (note 9)		0.4		4.0			0.3
Fair value movement on embedded derivatives		3.7		4.5			(9.6)
Other foreign exchange (gains)/losses		(1.9)		(3.3)			6.8

Services provided by the Company’s auditor and its associates

During the year the Company (including its overseas subsidiaries) obtained the following services from the Company’s auditor and its associates:

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	2012 £ million		2013 £ million		2014 £ million
Fees payable to the Company’s auditor and its associates for the audit of the Company and consolidated financial statements		0.3		0.3		0.3
Fees payable to the Company’s auditor and its associates for other services:
The audit of the Company’s subsidiaries		0.2		0.2		0.2
Audit related assurance services (services pursuant to Section 404 of the Sarbanes-Oxley Act)		0.3		0.3		0.4
Other assurance services		0.1		0.1		—
Statutory audit, financial reporting and other related services		0.9		0.9		0.9
Tax advisory services		0.2		0.1		0.1
Tax compliance services		0.1		—		—
All other non-audit services*		0.1		0.1		0.1
		1.3		1.1		1.1

* All other non-audit services includes the provision of advice relating to the Company’s procurement model in 2014 and fees for the performance of royalty audits in 2013.

6 Exceptional items

IP indemnity and similar charges

During 2013, the Company incurred indemnification costs amounting to $18.0 million. Further in relation to legal proceedings regarding the same patent portfolio, for a consideration of $45.4 million, the Group entered into a license agreement with a third party covering patents being asserted against ARM technology in litigation between the patentee and a number of licensees of ARM technology. The license was entered into in full and final settlement of any indemnity claims with respect to the asserted patents and will prevent any future assertion of the patents against ARM technology. Total indemnification, settlement and license costs of $63.4 million (£41.8 million) were expensed as an exceptional item in 2013, resulting in a tax deduction in current tax of £9.7 million.

Impairment of available for sale financial assets (current)

During 2013, the Company has participated in a consortium, via a trust, to acquire certain patent rights. These rights were not subject to actual or threatened legal proceedings. Of the Company’s total contribution to the consortium, $100.5 million was classified within current AFS financial assets (£60.7 million after translation at December 31, 2013 exchange rates) and $67 million, the residual, was classified within other intangible assets (£37.4 million after amortization to December 31, 2013). The AFS financial asset represented ARM’s right to receive cash from the Company's financial interest in the consortium as it was anticipated that a program of licensing the patents to third parties would be undertaken by the trust. The other intangible asset consists of IP rights that are being amortized over a period of eight and a half years from March 2013, being the average remaining life of the underlying patent portfolio.

In Q4 2013, the trust made a strategic decision not to pursue a licensing program and the portfolio was instead put up for sale by auction. The Company acquired the Patents in January 2014 for $4.0 million (£2.4 million) which have been accounted for as an additional intangible asset. As there was no longer an expectation of any future cash flows with respect to licensing of the patents by the trust at December 31, 2013, the AFS financial asset was impaired down to the value of the Company’s share of the auction proceeds, giving rise to a non-cash exceptional charge in 2013 of $98.5 million (£59.5 million). As disclosed in note 7, a deferred tax asset was not recognized in relation to this exceptional item, increasing the current tax charge by £18.3 million in 2013.

There were no exceptional items in 2014.

7 Tax

Analysis of charge in the year:

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	2012 £ million			2013 £ million			2014 £ million
Current tax:
Current tax on profits for the year		47.5			56.5			54.5
Adjustments in respect of prior years		(0.5	)		(0.2	)		(1.0	)
Total current tax		47.0			56.3			53.5
Deferred tax:
Origination and reversal of temporary differences		11.8			(4.1	)		8.6
Adjustment in respect of prior years		—			—			(1.0	)
Impact of change in the UK statutory tax rate		1.5			0.1			—
Impact of change due to UK patent box regime		—			5.5			—
Total deferred tax		13.3			1.5			7.6
Income tax expense		60.3			57.8			61.1

Analysis of tax on items charged to equity:

	2012 £ million			2013 £ million			2014 £ million
Deferred tax charge on outstanding share options and awards		9.7			4.8			10.6
Current tax benefit on share options and awards		(27.4	)		(27.0	)		(10.9	)
Deferred tax (credit)/charge on AFS financial assets		(0.1	)		—			1.1

The tax charge for the year was different from the standard rate of corporation tax in the UK as explained below:

	2012 £ million			2013 £ million			2014 £ million
Profit before tax		221.0			162.6			316.5
Profit before tax at the corporation tax rate of 21.5% (2013: 23.25%, 2012: 24.5%)		54.2			37.8			68.1
Effects of:
Adjustments tax in respect of prior years		(0.5	)		(0.2	)		(2.0	)
Adjustments in respect of foreign tax rates		5.0			4.1			6.3
Research and development tax credits		(5.5	)		(6.6	)		(3.7	)
Current impact of the UK patent box regime		—			(4.8	)		(15.9	)
Remeasurement of deferred tax assets due to reduction in UK statutory tax rates		1.5			0.1			—
Remeasurement of deferred tax assets due to the UK patent box regime		—			5.5			—
U.S. deferred tax assets not recognized*		3.4			17.5			0.9
Foreign withholding tax**		1.0			3.0			(2.5	)
Impact of share-based payments		0.3			(1.5	)		5.2
Other***		0.9			2.9			4.7
Total taxation		60.3			57.8			61.1

*	2014 amount includes California R&D tax credits not recognized as future California tax is not expected to absorb all of the tax benefit.

**	Includes a repayment of Taiwanese withholding taxes.

***	Includes expenditure disallowable for tax purposes and potential additional tax payable on income.

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Deferred tax

Deferred tax is calculated in full on temporary differences under the liability method using the tax rate relevant to each tax jurisdiction.

The movement on the deferred tax account is shown below:

	2012 £ million			2013 £ million			2014 £ million
At January 1		105.9			70.1			65.2
Amount acquired with subsidiary undertaking		—			(1.2	)		(0.4	)
Income statement charge		(13.3	)		(1.5	)		(7.6	)
Adjustment in respect of share-based payments		(9.7	)		(4.8	)		(10.6	)
Movement (to)/from current tax assets		(11.6	)		3.0			9.3
Exchange differences		(1.3	)		(0.4	)		0.7
Revaluation of AFS financial assets		0.1			—			(1.1	)
At December 31		70.1			65.2			55.5

Deferred tax assets have been partially recognized in respect of tax losses and other temporary differences giving rise to deferred tax assets because it is not probable that the unrecognized portion of these assets will be recovered.

The amount of deferred tax assets unrecognized at December 31, 2014 was £5.8 million (2013: £23.2 million, 2012: £4.4 million). The unrecognized deferred tax assets relate to historic losses of acquired subsidiaries and California research and development tax credits. The losses may remain unutilized due to restrictions imposed by local tax legislation and availability of relevant future profits.

No deferred tax has been recognized in respect of a further £43.1 million (2013: £33.2 million, 2012: £35.0 million) of unremitted earnings of overseas subsidiaries because the Company is in a position to control the timing of the reversal of the differences and either it is possible that such differences will not reverse in the foreseeable future or no tax is payable on the reversal.

During 2014, the UK Government announced that a new Patent Box regime based on the newly adopted modified nexus approach will be introduced for IP assets submitted after June 30, 2016. UK taxpayers that have already submitted assets under the current form of the Patent Box will be allowed to continue to claim benefit through the current regime until June 30, 2021 for those assets. If these taxpayers also submit assets post June 30, 2016 then the benefits relating to these assets will be claimed under the new regime. Such taxpayers will operate under both regimes until June 30, 2021 when all benefits claimed through the Patent Box will be through the modified nexus approach. These changes have not been enacted at the balance sheet date and therefore are not taken into account in the measurement of deferred tax.

The movements in deferred tax assets and liabilities (prior to offsetting of balances within the same tax jurisdiction as permitted by IAS 12) during the year are shown below. Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net.

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Deferred tax assets

	Amounts relating to share-based payments £ million		Temporary differences relating to fixed assets £ million		Tax losses and R&D tax credits carried forward £ million		Temporary differences relating to liabilities £ million		Other £ million		Total £ million
At January 1, 2014		32.8		3.9		22.1		8.0		0.9		67.7
Movement from current tax assets		—		—		9.3		—		—		9.3
Income statement credit/(charge)		2.1		(2.2)		(6.2)		0.1		(0.9)		(7.1)
Movement on deferred tax arising on outstanding share options and awards		(10.6)		—		—		—		—		(10.6	)
Exchange differences		—		—		0.7		—		—		0.7
At December 31, 2014 (prior to offsetting)		24.3		1.7		25.9		8.1		—		60.0
Offsetting of deferred tax liabilities												(4.1	)
At December 31, 2014 (after offsetting)												55.9
At January 1, 2013		43.5		2.6		15.1		9.5		0.6		71.3
Amount acquired with subsidiary undertaking		—		—		0.5		—		—		0.5
Movement from current tax assets		—		—		3.0		—		—		3.0
Income statement credit/(charge)		0.8		1.3		(2.8)		(1.5)		0.3		(1.9)
Movement on deferred tax arising on outstanding share options and awards		(4.8)		—		—		—		—		(4.8)
Unutilized current year share option deductions		(6.7)		—		6.7		—		—		—
Exchange differences		—		—		(0.4)		—		—		(0.4)
At December 31, 2013 (prior to offsetting)		32.8		3.9		22.1		8.0		0.9		67.7
Offsetting of deferred tax liabilities												(2.4)
At December 31, 2013 (after offsetting)												65.3

The deferred tax asset to be recovered after more than one year is £32.0 million (2013: £35.2 million)

Deferred tax liabilities

	Amounts relating to intangible assets arising on acquisition £ million		Temporary difference on AFS financial assets £ million		Other £ million		Total £ million
At January 1, 2014		2.5		—		—		2.5
Amount acquired with subsidiary undertaking		0.4		—		—		0.4
Income statement charge		0.2		—		0.3		0.5
Movement through reserves		—		1.1		—		1.1
At December 31, 2014 (prior to offsetting)		3.1		1.1		0.3		4.5
Offsetting of deferred tax assets								(4.1)
At December 31, 2014 (after offsetting)								0.4
At January 1, 2013		1.1		—		0.1		1.2
Amount acquired with subsidiary undertaking		1.7		—		—		1.7
Movement in respect on amortization of intangible assets		(0.2)		—		—		(0.2)
Other short-term differences		(0.1)		—		(0.1)		(0.2)
At December 31, 2013 (prior to offsetting)		2.5		—		—		2.5
Offsetting of deferred tax assets								(2.4)
At December 31, 2013 (after offsetting)								0.1

The deferred tax liability due after more than one year prior to offsetting is £1.0 million (2013: £1.2 million, 2012: £0.8 million).

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8 Dividends

	2012 £ million		2013 £ million		2014 £ million
Final 2011 paid at 2.09 pence per share		28.8		—		—
Interim 2012 paid at 1.67 pence per share		23.0		—		—
Final 2012 paid at 2.83 pence per share		—		39.5		—
Interim 2013 paid at 2.1 pence per share		—		29.4		—
Final 2013 paid at 3.6 pence per share		—		—		50.7
Interim 2014 paid at 2.52 pence per share		—		—		35.4
		51.8		68.9		86.1

In addition, the directors are proposing a final dividend in respect of the financial year ended December 31, 2014 of 4.5 pence per share, which will absorb an estimated £64 million of shareholders’ funds. Subject to approval at the 2015 AGM, it will be paid on May 15, 2015 to shareholders who are on the register of members on April 24, 2015.

9 Accounts receivable

	2013 £ million			2014 £ million
Trade debtors (including receivables from related parties – see note 25)		140.3			138.5
Less: Provision for impairment of trade debtors		(9.7	)		(9.0	)
Trade debtors, net		130.6			129.5
Amounts recoverable on contracts		5.6			9.1
Current accounts receivable		136.2			138.6

Movements in the Company’s provision for impairment of trade debtors are as follows:

	2012 £ million			2013 £ million			2014 £ million
At January 1		(1.7	)		(2.4	)		(9.7	)
Charge to income statement		(0.4	)		(4.0	)		(0.3	)
Utilized/(Reclassified from deferred income)		(0.4	)		(3.5	)		1.1
Foreign exchange		0.1			0.2			(0.1	)
At December 31		(2.4	)		(9.7	)		(9.0	)

See also note 17 for further disclosure regarding the credit quality of the Company’s gross trade debtors.

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10 Prepaid expenses and other assets

	2013 £ million		2014 £ million
Other receivables		18.1		19.3
Prepayments		21.7		23.9
Current prepaid expenses and other assets		39.8		43.2
Plus: non-current prepayments		1.6		1.7
Total prepaid expenses and other assets		41.4		44.9

11 Available-for-sale financial assets

Non-current available-for-sale financial assets	2013 £ million			2014 £ million
Net book value
At January 1		13.8			13.9
Additions		8.9			5.0
Revaluation recognized through other comprehensive income		—			5.4
Disposals		(1.7	)		—
Foreign exchange translation		(0.3	)		0.4
Impairment recognized through income statement (general and administrative expenses)		(6.8	)		(1.0	)
At December 31		13.9			23.7

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Current available-for-sale financial assets	2013 £ million			2014 £ million
Net book value
At January 1		—			1.2
Additions		63.4			—
Disposals		—			(1.2	)
Foreign exchange translation		(2.7	)		—
Impairment recognized through income statement (as an exceptional item, see note 6)		(59.5	)		—
At December 31		1.2			—

All investments noted above are considered to be level 3 financial assets (see note 17)

Non-current investments

Those unlisted companies in which the Company has invested are generally early-stage development enterprises, which are generating value for shareholders through research and development activities, and most do not currently report profits. The fair value of these investments is considered to approximate to cost or is determined using independent valuation information where available.

A permanent 10% fall in the underlying value of those unlisted companies in which the Company has invested and does not have independent valuation information (e.g. through the occurrence of transactions in the relevant entity’s equity instruments) as at December 31, 2014 would have reduced the Company’s post-tax profit by £1.5 million (2013: £1.1 million) and resulted in a £nil (2013: £nil) reduction in other components of equity.

The Company’s investments include the following companies:

Amantys Limited

Ambiq Micro Inc.

Cambridge Innovation Capital plc

Carbon Design Systems Inc.

Cyclos Semiconductor Inc.

Marmalade Technologies Ltd. (formerly Ideaworks 3D Limited)

Shanghai Walden Venture Capital Enterprise

Thunder Software Technology Co. Ltd.

Triad Semiconductor Inc.

At December 31, 2014 and 2013, the Company had no listed investments.

Available-for-sale financial assets include the following:

	2013 £ million		2014 £ million
Unlisted equity securities – UK		6.2		6.5
Unlisted equity securities – US		1.4		1.6
Unlisted equity securities – ROW		1.9		7.4
Convertible loan notes – UK		1.3		1.3
Convertible loan notes – US		3.1		6.9
Total non-current available-for-sale financial assets		13.9		23.7

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Non-current available-for-sale financial assets are held in the following currencies:

	2013 £ million		2014 £ million
Sterling		9.5		15.5
US dollars		4.4		8.2
Total non-current available-for-sale financial assets		13.9		23.7

12 Property, plant and equipment

	Freehold buildings £ million		Leasehold improvements £ million			Computer equipment £ million			Fixtures, fittings and motor vehicles £ million			Assets in the course of construction £ million			Total £ million
Cost
At January 1, 2014		0.2		24.2			49.4			7.0			0.7			81.5
Additions		—		3.0			21.8			1.6			1.9			28.3
Acquisitions		—		—			0.1			0.2			—			0.3
Transfers		—		—			1.0			—			(1.0	)		—
Reclassification*		—		—			—			—			(0.3	)		(0.3	)
Disposals		—		(7.8	)		(3.6	)		(0.6	)		—			(12.0	)
Exchange differences		—		0.6			1.8			—			(0.3	)		2.1
At December 31, 2014		0.2		20.0			70.5			8.2			1.0			99.9
Accumulated depreciation
At January 1, 2014		0.1		14.5			28.9			4.4			—			47.9
Charge for the year		—		2.8			15.1			1.2			—			19.1
Acquisitions		—		—			0.1			0.1			—			0.2
Disposals		—		(7.7	)		(3.3	)		(0.6	)		—			(11.6	)
Exchange differences		—		0.2			0.6			0.1			—			0.9
At December 31, 2014		0.1		9.8			41.4			5.2			—			56.5
Net book value At December 31, 2014		0.1		10.2			29.1			3.0			1.0			43.4

	Freehold buildings £ million		Leasehold improvements £ million			Computer equipment £ million			Fixtures, fittings and motor vehicles £ million			Assets in the course of construction £ million			Total £ million
Cost
At January 1, 2013		0.2		23.1			48.8			6.4			3.5			82.0
Additions		—		2.5			8.1			1.8			2.6			15.0
Acquisitions		—		—			0.1			0.1			—			0.2
Transfers		—		0.9			2.3			—			(3.2	)		—
Reclassification*		—		—			(3.2	)		—			(1.7	)		(4.9	)
Disposals		—		(1.7	)		(5.7	)		(1.0	)		(0.4	)		(8.8	)
Exchange differences		—		(0.6	)		(1.0	)		(0.3	)		(0.1	)		(2.0	)
At December 31, 2013		0.2		24.2			49.4			7.0			0.7			81.5
Accumulated depreciation
At January 1, 2013		0.1		13.9			27.5			4.4			—			45.9
Charge for the year		—		2.3			11.0			1.1			—			14.4
Acquisitions		—		—			0.1			—			—			0.1
Reclassification*		—		—			(3.2	)		—			—			(3.2	)
Disposals		—		(1.5	)		(5.7	)		(1.0	)		—			(8.2	)
Exchange differences		—		(0.2	)		(0.8	)		(0.1	)		—			(1.1	)
At December 31, 2013		0.1		14.5			28.9			4.4			—			47.9
Net book value At December 31, 2013		0.1		9.7			20.5			2.6			0.7			33.6

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Included within computer equipment are assets with net book value of £9.5 million (2013: £6.6 million) held under finance leases.

*Reclassification from property plant and equipment to intangible assets (software).

13 Goodwill

	£ million
At January 1, 2013		519.4
Exchange differences		(9.9	)
Acquisition – Sensinode (note 20)		6.4
Acquisition – Geomerics (note 20)		10.0
At December 31, 2013		525.9
Exchange differences		30.1
Acquisition – Duolog (note 20)		10.7
Acquisition – Offspark (note 20)		0.3
At December 31, 2014		567.0

The Company’s internal operational structure was re-organized on January 1, 2014, to create an organization that is more scalable and more accountable, and that offers a more integrated product portfolio. As a result, the Company has one reportable operating segment and now reviews the carrying value of its assets, including goodwill, at the operating segment level.

During the fourth quarter of 2014, the directors tested the Company’s balance of goodwill for impairment in accordance with IAS 36, “Impairment of assets.” The recoverable amount has been measured based on a value-in-use calculation.

The key assumptions in the value-in-use calculations were:

Period of projected cash flows The directors have used a ten-year forecast period with an assumed terminal growth rate after 2024 of 3% per annum. Given the long-term nature of the ARM licensing and royalty business model, it is considered appropriate to use a ten-year forecast period to assess the expected future cash flows to be generated from the assets under review.

Revenue growth Revenue growth assumptions are based on financial budgets and forecasts approved by senior management, taking into account typical semiconductor industry growth rates and ARM’s historical experience in the context of wider industry and economic conditions.

Operating margins Operating margins have been assumed to rise steadily over the period of the calculation.

Discount rate Future cash flows are discounted at a rate of 10% per annum post tax.

Conclusion The directors are confident that the amount of goodwill is appropriate and that the assumptions used in estimating its recoverable amount are appropriate. Whilst it is conceivable that a key assumption in the calculation could change, the directors believe that no reasonably foreseeable changes to key assumptions would result in an impairment of goodwill, such is the margin by which the estimated recoverable amount exceeds the carrying value.

14 Other intangible assets

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	Computer software £ million		Patents and licenses £ million		In-process research and development £ million		Developed technology £ million		Existing agreements and customer relationships £ million		Core technology £ million		Trademarks and tradenames £ million		Total £ million
Cost
At January 1, 2014		19.4		100.9		5.8		46.7		52.8		16.5		4.4		246.5
Additions		2.6		5.1		—		—		—		—		—		7.7
Acquisitions		—		—		—		2.7		—		—		—		2.7
Reclassification*		0.3		—		—		—		—		—		—		0.3
Disposals		(1.7)		(6.9)		—		—		—		—		—		(8.6)
Exchange differences		0.1		—		0.4		0.9		2.4		1.0		0.3		5.1
At December 31, 2014		20.7		99.1		6.2		50.3		55.2		17.5		4.7		253.7
Accumulated amortization
At January 1, 2014		14.3		31.4		5.8		39.0		52.6		16.1		4.4		163.6
Charge for the year		3.0		11.0		—		1.9		0.2		0.4		—		16.5
Disposals		(1.9)		(6.9)		—		—		—		—		—		(8.8)
Exchange differences		0.1		—		0.4		1.0		2.4		1.0		0.3		5.2
At December 31, 2014		15.5		35.5		6.2		41.9		55.2		17.5		4.7		176.5
Net book value at December 31, 2014		5.2		63.6		—		8.4		—		—		—		77.2

	Computer software £ million		Patents and licenses £ million		In-process research and development £ million		Developed technology £ million		Existing agreements and customer relationships £ million		Core technology £ million		Trademarks and tradenames £ million		Order backlog £ million		Total £ million
Cost
At January 1, 2013		14.1		26.8		5.9		39.6		53.3		16.8		4.5		2.0		163.0
Additions		2.0		74.1		—		7.5		0.3		—		—		—		83.9
Reclassification*		4.9		—		—		—		—		—		—		—		4.9
Disposals and derecognitions		(1.5)		—		—		—		—		—		—		(2.0)		(3.5)
Exchange differences		(0.1)		—		(0.1)		(0.4)		(0.8)		(0.3)		(0.1)		—		(1.8)
At December 31, 2013		19.4		100.9		5.8		46.7		52.8		16.5		4.4		—		246.5
Accumulated amortization
At January 1, 2013		10.3		23.1		5.9		37.7		52.8		15.5		4.5		2.0		151.8
Charge for the year		2.3		8.3		—		1.5		0.6		0.9		—		—		13.6
Reclassification*		3.2		—		—		—		—		—		—		—		3.2
Disposals and derecognitions		(1.5)		—		—		—		—		—		—		(2.0)		(3.5)
Exchange differences		—		—		(0.1)		(0.2)		(0.8)		(0.3)		(0.1)		—		(1.5)
At December 31, 2013		14.3		31.4		5.8		39.0		52.6		16.1		4.4		—		163.6
Net book value at December 31, 2013		5.1		69.5		—		7.7		0.2		0.4		—		—		82.9

*Reclassification from property, plant and equipment to intangible assets (software).

The net book value of patents and licenses includes a patent license agreement for interconnect technology used in SoCs, with a carrying value of £14.2 million at December 31, 2014 (2013: £16.0 million) and a remaining useful life of 8 years, and IP rights acquired in the prior year (see note 6) with a carrying value of £32.5 million at December 31, 2014 (2013: £37.4 million) and a remaining useful life of 7 years.

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15 Accrued and other liabilities

	2013 £ million		2014 £ million
Accruals
Provision for payroll taxes on share awards		15.1		12.8
Employee bonus and sales commissions		26.5		19.3
Other accruals (including £nil non-current (2013: £2.6 million))		40.0		37.3
Total Accruals		81.6		69.4
Other taxation and social security		4.4		4.7
Other payables		4.7		6.5
Total accrued and other liabilities		90.7		80.6

16. Finance lease liabilities

	2013 £ million			2014 £ million
Gross finance lease liabilities – minimum lease payments:
Within one year		2.9			4.1
In the second to fifth years inclusive		1.5			2.6
Less: future finance charges		(0.2	)		(0.2	)
Present value of lease obligations		4.2			6.5
Amounts due for settlement within 12 months		2.7			3.9
Amounts due for settlement after 12 months		1.5			2.6
Present value of lease obligations		4.2			6.5

The Company has entered into three- and four- year finance lease arrangements in respect of certain IT equipment.

17 Financial instruments

(a) Financial instruments by category

The accounting policies for financial instruments have been applied to the line items below:

Financial assets

	Loans and receivables £ million		Assets at fair value through the income statement £ million		Available-for-sale £ million		Total £ million
At December 31, 2014
Cash and cash equivalents		54.1		—		—		54.1
Short-term deposits and similar instruments		620.8		—		—		620.8
Embedded derivatives		—		2.6		—		2.6
Accounts receivable (gross of impairment provision)		147.6		—		—		147.6
Total current financial assets		822.5		2.6		—		825.1
Long-term deposits and similar instruments		191.4		—		—		191.4
Loans and receivables		3.0		—		—		3.0
Available-for-sale financial assets - unlisted		—		—		23.7		23.7
Total non-current financial assets		194.4		—		23.7		218.1
Total financial assets		1,016.9		2.6		23.7		1,043.2
At December 31, 2013
Cash and cash equivalents		43.8		—		—		43.8
Short-term deposits		544.1		—		—		544.1
Currency exchange contracts		—		5.1		—		5.1
Accounts receivable (gross of impairment provision)		145.9		—		—		145.9
Available-for-sale financial assets - unlisted		—		—		1.2		1.2
Total current financial assets		733.8		5.1		1.2		740.1
Long-term deposits		125.6		—		—		125.6
Loans and receivables		3.0		—		—		3.0
Available-for-sale financial assets - unlisted		—		—		13.9		13.9
Total non-current financial assets		128.6		—		13.9		142.5
Total financial assets		862.4		5.1		15.1		882.6

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Financial liabilities

	2013 £ million		2014 £ million
Liabilities at amortized cost at December 31:
Accounts payable		7.0		11.7
Accrued and other liabilities *		56.3		46.8
Finance lease liabilities		4.2		6.5
		67.5		65.0
Liabilities at fair value through the income statement at December 31:
Embedded derivatives		7.0		—
Fair value of currency exchange contracts		—		4.8
Total financial liabilities		74.5		69.8

*	Non-financial liabilities are excluded from the accrued and other liabilities balance as this analysis is required only for financial instruments

The Company has in the past issued share options under several additional schemes, whereby shares in the Company can be granted to employees and directors. Options are granted with a fixed exercise price equal to the market price of the shares under option at the date of grant. These schemes are the UK Inland Revenue Executive Approved Share Option Plan (the “Executive Scheme”), the Unapproved Scheme (the “Unapproved Scheme”), the French Scheme and various schemes that the Company assumed on the acquisition of Artisan in 2004. Share options in these schemes are no longer granted, although the Company reserves the right to award options to employees going forward. Shares relating to these schemes have all vested in prior years and therefore there is no share-based payment charge associated with them for 2012, 2013 or 2014. All shares issued under these schemes have either lapsed or been exercised as at December 31, 2014.

As disclosed in note 4, staff expenses arising from these share-based compensation schemes of £68.5 million (2013: £59.2 million; 2012: £37.1 million) were charged to the income statement in the year. This is in line with the Company’s policies for recognition and measurement of the costs associated with these remuneration schemes as outlined in note 1b.

The fair value of options granted was estimated on the date of grant using the Black-Scholes option pricing model, except for the ESPP whose fair value is the intrinsic value of the award at the date of vest. The following assumptions for each option grant during 2012, 2013 and 2014 were as follows:

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Grant date	Jun 23, 2014		Apr 30, 2014		Oct 31, 2014		Feb 16, 2013		Jun 23, 2013
Scheme	SAYE		ESPP		ESPP		ESPP		SAYE
Share price at grant date	£	8.89	£	9.095	£	8.385	£	9.25	£	7.725
Exercise price	£	7.344	£	7.73	£	7.13		4.964		7.9616
Number of employees		520		684		892		391		350
Shares under option		651,142		280,996		361,083		330,676		210,605
Vesting period (years)		3-5		—		—		—		3-5
Expected volatility		33%-35%		—		—		—		37%-40%
Expected life (years)		3-5		—		—		—		3-5
Risk-free rate		0.5%		—		—		—		0.5%
Dividend yield		0.64%		—		—		—		0.58%
Fair value per option	£	2.630-£3.180	£	1.365	£	1.258	£	4.286	£	1.828-2.510

Grant date	Apr 30, 2013		Oct 31, 2013		Feb 16, 2012		Jun 23, 2012		Aug 16, 2012
Scheme	ESPP		ESPP		ESPP		SAYE		ESPP
Share price at grant date	£	9.96	£	9.94	£	5.905	£	5.06	£	5.74
Exercise price		5.6525		8.449		4.42		3.916		4.876
Number of employees		151		605		373		490		372
Shares under option		35,386		228,335		333,464		720,922		306,497
Vesting period (years)		—		—		—		3-5		—
Expected volatility		—		—		—		38%-43%		—
Expected life (years)		—		—		—		3-5		—
Risk-free rate		—		—		—		0.5%		—
Dividend yield		—		—		—		0.69%		—
Fair value per option	£	4.3075	£	1.491	£	1.485	£	1.728-2.175	£	0.864

The fair value of RSUs and DAB awards granted was estimated on the date of grant using the Black-Scholes option pricing model. As all are share awards with no exercise price, all awards have been deemed to have an exercise price of £0.0000001 in the Black-Scholes model. The fair value of LTIP awards granted in 2013 and those granted in 2014 with non-market-based performance conditions (i.e. based on EPS performance) have also been estimated using the Black-Scholes option pricing model.

For LTIP awards with market-based performance conditions issued in 2014 the fair value was based upon Monte-Carlo simulation of the performance of the comparator companies in the FTSE 350 and the FTSE All World Technology Index (AWTI). The Monte Carlo simulation incorporates a range of other assumptions based on the TSR comparator companies; the assumptions given below relate to the Company.

The following assumptions for each grant during 2014, 2013 and 2012 were as follows:

Black-Scholes assumptions:

Grant date	Feb 8, 2014		Feb 8, 2014		Feb 8, 2014		Feb 8, 2014
Scheme	DAB		RSU		French RSU		LTIP (EPS)
Share price at grant date	£	8.96	£	8.96	£	8.96	£	8.96
Number of employees		54		2,625		114		59
Shares awarded		509,078		4,455,185		165,927		745,615
Vesting period (years)		3		1-4		2-4		3
Expected volatility		35%		31%-36%		31%-36%		35%
Expected life (years)		3		1-4		2-4		3-5
Risk-free rate		0.5%		0.5%		0.5%		0.5%
Dividend yield		0.64%		0.64%		0.64%		0.64%
Fair value per option	£	8.791	£	8.735-8.903	£	8.735-8.847	£	8.791

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Grant date	May 8, 2014			May 8, 2014			Aug 13, 2014			Aug 13, 2014
Scheme	RSU			French RSU			RSU			French RSU
Share price at grant date	£	8.715		£	8.715		£	8.95		£	8.95
Number of employees		149			6			170			2
Shares awarded		391,556			7,089			380,617			6,882
Vesting period (years)		1-4			2-4			1-4			2-4
Expected volatility		31%-36	%		31%-36	%		29%-35	%		30%-35	%
Expected life (years)		1-4			2-4			1-4			2-4
Risk-free rate		0.5	%		0.5	%		0.5	%		0.5	%
Dividend yield		0.65	%		0.65	%		0.68	%		0.68	%
Fair value per option	£	8.490-8.658		£	8.490-8.602		£	8.709-8.889		£	8.709-8.828
Grant date	Nov 12, 2014			Nov 12, 2014
Scheme	RSU			French RSU
Share price at grant date	£	8.745		£	8.745
Number of employees		333			2
Shares awarded		755,115			2,092
Vesting period (years)		1-4			2-4
Expected volatility		29%-34	%		30%-34	%
Expected life (years)		1-4			2-4
Risk-free rate		0.5	%		0.5	%
Dividend yield		0.70	%		0.70	%
Fair value per option	£	8.504-8.684		£	8.504-8.623

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Monte Carlo model assumptions:

Grant date	Feb 8, 2014			Feb 8, 2014
Scheme	LTIP (FTSE 350)			LTIP (FTSE AWTI)
Share price at grant date	£	8.96		£	8.96
Number of employees		59			59
Shares awarded		372,793			372,793
Vesting period (years)		3			3
Expected volatility		35	%		35	%
Expected life (years)		3-5			3-5
Risk-free rate		1.0	%		1.0	%
Dividend yield		0	%		0	%
Fair value per option	£	6.952		£	7.560

Grant date	Feb 8, 2013			Feb 8, 2013			Feb 8, 2013			Feb 8, 2013
Scheme	DAB			RSU			French RSU			LTIP
Share price at grant date	£	9.245		£	9.245		£	9.245		£	9.245
Number of employees		53			2,207			93			55
Shares awarded		466,174			7,686,539			286,900			742,469
Vesting period (years)		3			1-4			2-4			3
Expected volatility		37	%		30%-37	%		35%-37	%		37	%
Expected life (years)		3			1-4			2-4			3
Risk-free rate		0.5	%		0.5	%		0.5	%		0.5	%
Dividend yield		0.49	%		0.49	%		0.49	%		0.49	%
Fair value per option	£	9.111		£	9.067-9.200		£	9.067-9.155		£	9.111

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Grant date	May 8, 2013			May 8, 2013			Aug 13, 2013			Aug 13, 2013
Scheme	RSU			French RSU			RSU			French RSU
Share price at grant date	£	10.46		£	10.46		£	8.89		£	8.89
Number of employees		102			3			134			4
Shares awarded		258,224			6,645			318,934			6,347
Vesting period (years)		1-4			2-4			1-4			2-4
Expected volatility		30%-38	%		34%-38	%		31%-36	%		32%-36	%
Expected life (years)		1-4			2-4			1-4			2-4
Risk-free rate		0.5	%		0.5	%		0.5	%		0.5	%
Dividend yield		0.43	%		0.43	%		0.55	%		0.55	%
Fair value per option	£	10.282-10.415		£	£10.282-10.37		£	8.69-8.836		£	8.69-8.787
Grant date	Aug 13, 2013			Nov 12, 2013			Nov 12, 2013
Scheme	LTIP			RSU			French RSU
Share price at grant date	£	8.89		£	9.495		£	9.495
Number of employees		1			252			9
Shares awarded		11,280			494,746			16,478
Vesting period (years)		3			1-4			2-4
Expected volatility		36	%		31%-36	%		31%-36	%
Expected life (years)		3			1-4			2-4
Risk-free rate		0.5	%		0.5	%		0.5	%
Dividend yield		0.55	%		0.52	%		0.52	%
Fair value per option	£	8.738		£	9.30-9.446		£	9.30-9.397

Grant date	Feb 8, 2012			Feb 8, 2012			Feb 8, 2012			Feb 8, 2012			May 8, 2012
Scheme	DAB			RSU			French RSU			LTIP			RSU
Share price at grant date	£	5.68		£	5.68		£	5.68		£	5.68		£	5.07
Number of employees		50			1,918			91			54			108
Shares awarded		850,741			3,012,604			128,067			1,102,625			159,720
Vesting period (years)		—			1-4			2-4			3			1-4
Expected volatility		39	%		34%-45	%		39-45	%		39	%		37-42	%
Expected life (years)		3			1-4			2-4			3			1-4
Risk-free rate		0.5	%		0.5	%		0.5	%		0.5	%		0.5	%
Dividend yield		0.61	%		0.61	%		0.61	%		0.61	%		0.69	%
Fair value per share	£	5.577		£	5.542-5.671		£	5.542-5.611		£	5.577		£	4.933-5.035

Grant date	May 8, 2012			Aug 13, 2012			Aug 13, 2012			Nov 12, 2012			Nov 12, 2012
Scheme	French RSU			RSU			French RSU			RSU			French RSU
Share price at grant date	£	5.07		£	5.74		£	5.74		£	7.125		£	7.125
Number of employees		4			126			1			159			3
Shares awarded		4,230			213,201			960			275,270			2,490
Vesting period (years)		2-4			1-4			2-4			1-4			2-4
Expected volatility		38-42	%		35-41	%		38-41	%		31-40	%		38-40	%
Expected life (years)		2-4			1-4			2-4			1-4			2-4
Risk-free rate		0.5	%		0.5	%		0.5	%		0.5	%		0.5	%
Dividend yield		0.69	%		0.66	%		0.66	%		0.53	%		0.53	%
Fair value per share	£	4.933-5.001		£	5.592-5.703		£	5.592-5.665		£	6.976-7.087		£	6.976-7.05

The expected volatility was primarily based upon historical volatility adjusted for past one-time events that are not expected to re-occur. The expected life is the expected period to exercise.

A reconciliation of option and share award movements over the year to December 31, 2014 is shown below. Share awards do not have an exercise price and therefore the reconciliation below shows only the number of awards, with no corresponding weighted average exercise prices.

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	2013								2014
	Options Number			Weighted average exercise price		RSUs/ LTIP/DAB Number			Options Number			Weighted average exercise price		RSUs/ LTIP/DAB Number
Outstanding at January 1		3,738,922		£	1.994	£	23,255,834			1,969,919		£	3.385		20,227,656
Granted		805,002			6.765		14,972,806			1,293,221		£	7.368		9,666,289
Forfeited		(57,969	)		4.257		(974,255	)		(90,322	)	£	5.197		(667,923	)
Lapsed		(47,313	)		0.575		—			(29,458	)	£	0.725		—
Exercised		(2,468,723	)		2.414		(17,026,729	)		(1,568,291	)	£	4.329		(10,328,742	)
Outstanding at December 31		1,969,919		£	3.385		20,227,656			1,575,069		£	5.661		18,897,280
Exercisable at December 31		392,451		£	0.723		—			4,283		£	4.464		—

	2012
	Options Number			Weighted average exercise price		RSUs/ LTIP/DAB Number
Outstanding at January 1		6,581,438		£	1.221		35,215,062
Granted		1,360,883		£	4.280		14,448,979
Forfeited		(234,196	)	£	3.570		(914,068	)
Lapsed		(10,589	)	£	0.910		—
Exercised		(3,958,614	)	£	1.404		(25,494,139	)
Outstanding at December 31		3,738,922		£	1.994		23,255,834
Exercisable at December 31		985,557		£	0.685		—

The weighted average share price at the date of exercise or vest of the above share options and awards was £8.94 (2013: £9.29; 2012: £5.72).

The following options over ordinary shares were in existence at December 31:

2014 Exercise price (£)	Number outstanding		Weighted average exercise price £		Weighted average remaining life Expected Years		Weighted average remaining life Contractual Years
Outstanding options:
1.948–7.96		1,575,069		5.66		2.10		2.35
Total		1,575,069		5.66		2.10		2.35

Outstanding RSU/LTIP/DAB awards:
0.00 (RSUs)		14,702,277		—		1.26		1.26
0.00 (LTIP)		2,800,003		—		1.36		1.36
0.00 (DAB)		1,395,000		—		1.06		1.06
Total		18,897,280		—		1.26		1.26

2013 Exercise price (£)	Number outstanding		Weighted average exercise price £		Weighted average remaining life Expected Years		Weighted average remaining life Contractual Years
Outstanding options:
0.7–0.854		571,846		0.76		0.49		0.78
1.01–1.055		19,166		1.04		0.52		1.05
1.25		1,360		1.25		0.04		0.08
1.948–7.96		1,377,547		4.51		2.00		2.25
Total		1,969,919		3.38		1.55		1.81

Outstanding RSU/LTIP/DAB awards:
0.00 (RSUs)		16,792,567		—		1.20		1.20
0.00 (LTIP)		2,054,203		—		1.12		1.12
0.00 (DAB)		1,380,886		—		1.06		1.06
Total		20,227,656		—		1.18		1.18

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2012 Exercise price (£)	Number outstanding		Weighted average exercise price £		Weighted average remaining life Expected Years		Weighted average remaining life Contractual Years
Outstanding options:
0.47–0.854		1,514,873		0.72		0.87		1.37
1.005–1.055		46,114		1.04		1.03		2.05
1.25		32,813		1.25		0.54		1.08
1.325–4.464		2,145,122		2.93		1.77		1.97
Total		3,738,922		1.99		1.38		1.72

Outstanding RSU/LTIP/DAB awards:
0.00 (RSUs)		16,750,069		—		0.93		0.93
0.00 (LTIP)		4,189,314		—		0.82		0.82
0.00 (DAB)		2,316,451		—		1.06		1.06
Total		23,255,834		—		0.92		0.92

22 Capital and other financial commitments

	2013 £ million		2014 £ million
Contracts placed for future capital and other financial expenditure not provided in the financial statements		9.8		2.9
Other financial commitments (expenditure on investments)		-		5.4

Included in the amount for 2013 is £9.1 million relating to the expansion of the US high-performance computing cluster.

23 Operating lease commitments–minimum lease payments

At December 31, 2013 and 2014, the Company had commitments under non-cancellable operating leases as follows:

	2013						2014
	Land and buildings £ million		Other £ million		Total £ million		Land and buildings £ million		Other £ million		Total £ million
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Within one year		8.5		18.3		26.8		11.6		5.3		16.9
Later than one year and less than five years		23.1		5.3		28.4		31.7		—		31.7
After five years		9.0		—		9.0		9.3		—		9.3
At December 31		40.6		23.6		64.2		52.6		5.3		57.9

The Company leases office buildings and EDA tools software under non-cancellable operating lease agreements. The remaining lease terms are between one and nine years, and the majority of lease agreements are renewable at the end of the lease period at market rate.

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24 Financial contingencies

It is common industry practice for licensors of technology to offer to indemnify their licensees for loss suffered by the licensee in the event that the technology licensed is held to infringe the IP of a third-party. Consistent with such practice, the Company provides such indemnification to its licensees. The obligation for the Company to indemnify its licensees is subject to certain provisos and is usually contingent upon a third-party bringing an action against the licensee alleging that the technology licensed by the Company to the licensee infringes such third-party’s IP rights. The indemnification obligations typically survive any termination of the license and will continue in perpetuity.

The Company does not provide for any such indemnities unless it has received notification from the other party that they are likely to invoke the indemnity. A provision is made if both of the following conditions are met: (i) information available prior to the issuance of the financial statements indicates that it is probable that a liability had been incurred at the date of the financial statements; and (ii) the amount of the liability can be reasonably estimated. Any such provision is based upon the directors’ estimate of the fair value of expected costs of any such claim.

At present, the Company is not a party in any legal proceedings in which the directors believe that it is probable that the resolution of such proceedings will result in a material liability for the Company. Currently, there are legal proceedings against some of the Company’s licensees in which it is asserted that certain of the Company’s technology infringes third-party patents, but in each of those proceedings the Company either presently has no obligation to indemnify, because certain preconditions to indemnification have not been satisfied by such licensees, or to the extent that there is any present obligation to indemnify, the Company does not believe that it is probable that the resolution of such proceedings will result in a material liability for the Company. If preconditions to indemnification are satisfied then an indemnification obligation may arise which could result in a material liability for the Company.

25 Related party transactions

During the year ended December 31, 2014 the Company incurred subscription costs of £nil from Linaro Limited, an associated company of the Company, (2013: £7.0 million, representing ARM’s committed aggregate contributions to Linaro for a period of two years). In respect of the subscription fees, the Company was invoiced £4.0 million during the year to December 31, 2014 (2013: £4.3 million). As at December 31, 2014, £1.1million (2013: £1.0 million) was owing to Linaro.

In addition the Company provided consulting and other services to Linaro amounting to £1.3 million (2013: £1.6 million). All fees have been charged in accordance with the terms of the agreement. As at 31 December 2014, £0.3 million (2013: £0.3 million) was owed to the Company.

Further information relating to Linaro is disclosed in note 27.

Key management compensation is disclosed in note 3.

There were no other related party transactions during 2014 which require disclosure.

26 Post-balance sheet events

After the year end, the directors proposed payment of a final dividend in respect of 2014 of 4.5 pence per share. Subject to shareholder approval, the final dividend will be paid on May 15, 2015 to shareholders on the register on April 24, 2015. The final dividend has not been recognized as a distribution during the year ended December 31, 2014.

27 Principal subsidiaries, associates and joint ventures

Details of principal subsidiary undertakings which, in the opinion of the directors, principally affect the figures shown in the Company’s accounts are shown below. Not all subsidiaries are included as the list would be excessive in length. A full list is filed in the Company’s annual return. All investments are indirectly held unless otherwise shown.

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Name of undertaking	Country of registration	Principal activity	Proportion of total nominal value of issued shares held
ARM Limited	England and Wales	Marketing and research and development of RISC-based microprocessors and graphics IP.	100*
ARM Inc.	US	Marketing and research and development of RISC-based microprocessors and physical IP.	100
ARM France SAS	France	Marketing and research and development of RISC-based microprocessors and physical IP.	100
ARM Norway AS	Norway	Research and development of graphics IP.	100
ARM Embedded Technologies Pvt. Limited.	India	Marketing and research and development of RISC-based microprocessors and physical IP.	100
ARM Electronic Technology (Shanghai) Co. Limited.	PR China	Marketing and research and development of RISC-based microprocessors and graphics IP.	100

*	The Company itself owns less than 1% of the share capital of ARM Limited, the remaining shares are held indirectly through ARM Finance UK Limited and ARM Finance UK Three Limited. Both ARM Finance UK Limited and ARM Finance UK Three Limited are 100% owned within the Company.

Associate

During 2010, the Company became a founder member of Linaro, a not-for-profit engineering company created to foster innovation in the Linux community. Linaro (a company incorporated in the UK) is a company limited by guarantee and as such has no shareholders. The Company controls only 25% of the board and therefore considers Linaro to be an associate rather than a subsidiary. The Company has not recognized any associate profit or loss, or net assets on the basis that the entity is not-for-profit.

Joint venture

In 2012, the Company invested £7.5 million ($12.0m million) in a joint venture, Trustonic Limited (a company incorporated in the UK), representing a 40% shareholding. With the establishment of industry standards and demand for security enhanced services the focus of Trustonic is to accelerate the wide deployment of secure, smart devices. During 2013 the Company invested a further £3.7 million (€4.4 million) into the joint venture, maintaining the 40% shareholding.

Investment in joint venture	2012 £ million			2013 £ million			2014 £ million
At January 1		—			6.8			6.5
Investment		7.5			3.7			—
Share of results for period		(0.7	)		(4.0	)		(3.5	)
At December 31		6.8			6.5			3.0

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The Company’s share of the results of the joint venture, and its aggregated assets and liabilities are as follows:

	Current assets £ million		Non-current assets £ million		Current liabilities £ million			Non-current liabilities £million			Currency translation £ million			Income £ million		Expenses £ million			Tax £ million		Loss for the year £ million
Trustonic Limited
At December 31, 2014		2.6		4.6		(4.2	)		(0.3	)		0.3			3.2		(6.9	)		0.2		(3.5	)
At December 31, 2013		3.9		6.5		(3.9	)		—			(0.1	)		2.5		(6.7	)		0.2		(4.0	)
At December 31, 2012		3.7		4.6		(1.5	)		—			—			—		(0.7	)		—		(0.7	)

The Company’s share of joint venture capital commitments amount to £0.2 million at December 31, 2014 (2013: £0.1 million).

Title of each class		Name of each exchange on which registered
American Depositary Shares, each representing 3 Ordinary Shares of 0.05p each		The Nasdaq Stock Market LLC
Ordinary Shares of 0.05p each		The Nasdaq Stock Market LLC*

Introduction		1
Part I		2
	Item 1. Identity of Directors, Senior Management and Advisers	2
	Item 2. Offer Statistics and Expected Timetable	2
	Item 3. Key Information	2
	Item 4. Information on the Company	12
	Item 4A. Unresolved Staff Comments	24
	Item 5. Operating and Financial Review and Prospects	25
	Item 6. Directors, Senior Management and Employees	42
	Item 7. Major Shareholders and Related Party Transactions	85
	Item 8. Financial Information	86
	Item 9. Listing Details	87
	Item 10. Additional Information	89
	Item 11. Quantitative and Qualitative Disclosures About Market Risk	99
	Item 12. Description of Securities Other Than Equity Securities	101
Part II		103
	Item 13. Defaults, Dividend Arrearages and Delinquencies	103
	Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds	103
	Item 15. Controls and Procedures	103
	Item 16. Reserved	104
	Item 16A. Audit Committee Financial Expert	104
	Item 16B. Code of Ethics	104
	Item 16C. Principal Accountant Fees and Services	104
	Item 16D. Exemptions from the Listing Standards for Audit Committees	104
	Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers	104
	Item 16F. Change in Registrant’s Certifying Accountant	104
	Item 16G. Corporate Governance	104
	Item 16H. Mine Safety Disclosure	105
Part III		105
	Item 17. Financial Statements	105
	Item 18. Financial Statements	105
	Item 19. Exhibits	106

	Year ended December 31,
	2010			2011			2012			2013			2014
Income Statement Data:	(£ million, except per share data, percentages, number of shares and employees)
Revenues	£	406.6		£	491.8		£	576.9		£	714.6		£	795.2
Cost of revenues		(26.1	)		(27.7	)		(31.9	)		(39.3	)		(37.8	)
Operating expenses		(273.5	)		(315.2	)		(336.9	)		(420.5	)		(448.4	)
Exceptional items (1)		-			-			-			(101.3	)		-
Profit from operations		107.0			148.9			208.1			153.5			309.0
Investment income, net		3.1			8.0			13.6			13.1			11.0
Share of results in joint venture		-			-			(0.7	)		(4.0	)		(3.5	)
Profit before tax		110.1			156.9			221.0			162.6			316.5
Tax		(24.1	)		(44.3	)		(60.3	)		(57.8	)		(61.1	)
Profit for the year		86.0			112.6			160.7			104.8			255.4
Basic earnings per share (pence)		6.5	p		8.4	p		11.7	p		7.5	p		18.2	p
Diluted earnings per share (pence)		6.4	p		8.2	p		11.5	p		7.4	p		18.0	p
Dividends declared per share (pence)		2.90	p		3.48	p		4.50	p		5.70	p		7.02	p
Diluted weighted average number of shares (m)		1,352.2			1,376.0			1,395.8			1,411.8			1,421.1
Research and development as a percentage of revenues		34.4	%		32.2	%		28.8	%		28.4	%		28.2	%
Balance Sheet Data:
Capital expenditure		7.4			13.0			33.2			17.0			31.3
Cash and cash equivalents, short- and long-term deposits and similar instruments		291.8			429.0			527.6			713.5			866.3
Share capital		0.7			0.7			0.7			0.7			0.7
Shareholders’ equity		894.9			1,061.2			1,206.1			1,311.4			1,528.3
Total assets		1,084.7			1,299.8			1,466.8			1,638.4			1,837.2
Employees at year end (number)		1,889			2,116			2,392			2,833			3,294

USD/£1.00 Year Ended December 31,	Period Average		Period End
2010		1.5455		1.5657
2011		1.6039		1.5541
2012		1.5849		1.6255
2013		1.5646		1.6563
2014		1.6476		1.5593
2015 (through February 16, 2015)	1.5195		1.5387
USD/£1.00 Month	High		Low
August 2014		1.6896		1.6566
September 2014		1.6608		1.6096
October 2014		1.6228		1.5922
November 2014		1.5993		1.5639
December 2014		1.5718		1.5532
January 2015		1.5576		1.4980
February 2015 (through February 16, 2015)	1.5394		1.5052

Location	Freehold/Leasehold	Lease Term and Commencement Date	Approximate Area (square feet)	Principal Use
Cambridge, UK (110 Fulbourn Road)	Leasehold	20 years September 29, 1999	45,000	Executive offices and engineering, marketing and administrative operations
Cambridge, UK (130 Fulbourn Road)	Leasehold	20 years March 25, 2002	35,000	Executive offices and engineering, marketing and administrative operations
Cambridge, UK (100 Fulbourn Road)	Leasehold	13 years October 4, 2010	30,000	Executive offices and engineering, marketing and administrative operations
Maidenhead, UK	Leasehold	25 years July 7, 1998	17,000	Executive offices and design center
San Jose, California, US	Leasehold	8 years August 1, 2012	92,000	Executive offices and engineering, marketing and administrative operations
Austin, Texas, US	Leasehold	7.5 years August 1, 2009	57,400	Design center, marketing and support operations
Austin, Texas, US	Leasehold	10 years February 14, 2014	100,000
Bangalore, India	Leasehold	10 years March 1, 2013	113,800	Executive offices and engineering, marketing and administrative operations
Shanghai, China	Leasehold	3 years May 1, 2012	37,000	Executive offices and engineering, marketing and administrative operations
Trondheim, Norway	Leasehold	5 years December 1,2012	27,000	Design center, marketing and support operations
Sophia Antipolis France	Leasehold	9 years January 1, 2014	20,360	Design center, marketing and support operations

Company		Jurisdiction of Incorporation
ARM, Inc.		United States
ARM Limited		England and Wales
ARM France SAS		France
ARM Electronic Technology (Shanghai) Co. Ltd		China
ARM Norway AS		Norway
ARM Embedded Technologies Pvt. Ltd.		India

	Year ended December 31,
Royalties	2012		2013		2014
	£ million
Processor		264.4		317.5		326.0
Physical IP		35.4		40.8		36.5
	Units
			billion
Processor		8.7		10.4		12.0

Processor Series	2012 Unit Shipments			2013 Unit Shipments			2014 Unit Shipments
ARM7, ARM9 & ARM11		66	%		49	%		41%
Cortex-A		9	%		17	%		19%
Cortex-R		3	%		4	%		4%
Cortex-M		22	%		30	%		36%

Target Market	2012 Unit Shipments			2013 Unit Shipments			2014 Unit Shipments
Mobile		53	%		49	%		45	%
Enterprise		16	%		18	%		34	%
Home		5	%		5	%		16	%
Embedded		26	%		28	%		5	%

	At December 31,
Maturity profile of backlog	2013			2014
Next two quarters (Q1 and Q2)		25	%		29	%
Subsequent two quarters (Q3 and Q4)		19	%		21	%
Greater than twelve months		56	%		50	%
Total		100	%		100	%

	At December 31,
Backlog composition	2013			2014
Processors		76	%		75	%
Physical IP		12	%		12	%
Support & Maintenance and Others		12	%		13	%
Total		100	%		100	%

	Payments due by period (£ million)
	Total		Less than 1 year		2-3 years		4-5 years		Thereafter
Operating leases		57.9		16.8		18.9		12.9		9.3
Finance leases		6.5		3.9		2.6		-		-
Capital purchase commitments (including expenditure on investments)		8.3		8.3		-		-		-
Total		72.7		29.0		21.5		12.9		9.3

Name(1)	Age	Term Expires	Position
Stuart Chambers	58	2015 (2)	Chairman (from March 1, 2014)
Simon Segars	47	2015	Chief Executive Officer; Director
Tim Score	54	2015	Chief Financial Officer; Director (3)
Mike Muller	55	2015	Chief Technology Officer; Director
Kathleen O’Donovan	57	2015 (2)	Senior Independent Director (Non-Executive)
Janice Roberts	59	2015 (2)	Independent Non-Executive Director
Larry Hirst	63	2015 (2)	Independent Non-Executive Director
Andy Green	59	2015 (2)	Independent Non-Executive Director
John Liu	51	2015 (2)	Independent Non-Executive Director (from December 1, 2014)

	Board meetings attended/Board meetings eligible for	Conference calls & ad hoc meetings attended/calls and meetings eligible for
Number of scheduled meetings	6	5
Stuart Chambers (appointed January 27, 2014)	6/6	5/5
Simon Segars	6/6	5/5
Andy Green	6/6	4/5
Larry Hirst	6/6	5/5
John Liu (appointed December 1, 2014)	1/1	0/0
Mike Muller	6/6	5/5

2013 action areas identified		Action taken in 2014
Ensuring that the Board and Committees have the skills and experience they need going forward		We recruited John Liu as an additional non-executive director with extensive expertise in Asia, particularly in China. The membership of all committees was reviewed during 2014 and changes were made to the composition of the Audit, Remuneration and Nomination Committees. The Nomination Committee is developing candidate briefs for further searches in 2015 for independent non-executive directors with appropriate skills, experience and diversity to complement our existing Board members and maintain, collectively, an effective Board.
Further improving the culture and dynamics in the Boardroom, with each Board member developing a clear understanding of the Board’s role and their individual role		The consensus from the 2014 Board evaluation is that culture and dynamics in the Boardroom have improved during the year and Board members’ roles are better defined and understood. Board members agreed to aim to spend more time together outside formal meetings and the Board will continue to discuss and review this during 2015.
Reviewing the KPIs and board information and ensuring they are fit for purpose		The review concluded that the KPIs and information provided to the Board were broadly fit for purpose. However, some enhancements were proposed, trialled and have now been built into the Board reports. This action area has been removed from the priorities list for 2015.
Exiting the year with greater clarity and a more harmonised Board view on the long-term vision for the business and the consequent strategic priorities		ARM’s vision, mission and strategy were reviewed and refreshed during 2014. The consensus from the 2014 Board evaluation is that there is a better understanding of the long-term vision for the business and consequent strategic priorities. These were reviewed in detail at the September Strategy meeting which was unanimously agreed to have been well prepared and focused on appropriate areas for future development. These areas include developing technology to address servers and networking infrastructure and the market associated with the Internet of Things. The Chairman had a detailed individual discussion with each non-executive director during 2014, in addition to his regular conversations with the CEO. A process is in place for the Senior Independent Director to meet with each non-executive director individually to provide feedback on the Chairman and on any issues of concern.

Name of Director	Position	Meetings Attended/eligible meetings
Kathleen O’Donovan	Senior Independent Director, Committee Chairman	6/6
Janice Roberts	Independent non-executive director	6/6
Andy Green (appointed May 1, 2014)	Independent non-executive director	3/3
Philip Rowley (retired May 1, 2014)	Independent non-executive director	2/3
Eric Meurice (retired March 31, 2014)	Independent non-executive director	2/2

	Contractual provisions/Plan Rules	Exit Payment Policy
Service Contracts LTIP Bonus Plans Former DAB Plan	Payment of contractual entitlements, including payment in lieu of notice in appropriate circumstances, where certainty and protection of restrictive covenants are in the best interests of the Company. Termination payments would take into account the particular circumstances relevant to each individual situation. For good Leavers conditional awards under the LTIP would normally vest pro-rata to time served and the extent to which the performance conditions are satisfied at the date of termination of employment. For bad leavers, unvested share awards would lapse on termination of employment. There is no automatic entitlement to annual bonus. In the event of death or leaving as a result of disability or ill health, pro rata bonus may be paid for the year of cessation. Bad leavers would not receive performance-related bonus awards in relation to the year of cessation. Clawback provisions exist that require bonus to be forfeited (i.e. offset of bonus accruing in that year) or an equivalent value repaid should it be necessary for the Company to re-state to a material extent the financial results on which the bonus was awarded within two years of the payment of such bonus. The proportion of the bonus that would be repayable (which could be 100%) would depend on the extent to which the original bonus exceeds that which would have been paid if the results had been correctly stated, also taking into account any negative impact of the re-statement. Deferred shares under the former DAB Plan would vest on termination. Deferred shares can be forfeited in certain circumstances. Matching shares vest, to the extent the performance conditions are satisfied, for good leavers only.	Maximum notice period is 12 months and pay in lieu of notice may be made at the discretion of the Company. This would include base salary and contractual benefits (pro-rated where applicable) and any untaken holiday. Fees for outplacement and legal advice may also be paid by the Company. In relation to both the LTIP and Bonus Plan:in assessing whether an executive director is a good leaver in retirement circumstances, the executive director is required to confirm future intentions to the Committee (including that he or she will not accept a full time executive role in a commercial organization). If the Committee determines that the executive director is a good leaver and subject to satisfaction of performance targets, pro-rated vesting of entitlements under the old and new LTIPs and bonus plans would normally be approved. The holding periods described in the Remuneration Policy table would apply to any shares that vest under the LTIP.

	From January 1, 2014	% increase 2013-2014	From January 1, 2015	% increase 2014-2015
Simon Segars	£515,000	3.00%	£575,000	11.65%
Tim Score	£427,450	3.00%	£427,450	0.00%
Mike Muller	£293,550	3.00%	£302,360	3.00%

2014 Bonus targets	Threshold	Budget	Target	Actual	Bonus % of target achieved
NOP*	£332.6m	£421.2m	£449.6 m	£425.6 m	28.86%
Revenue	US$1,117.8m	$1,279.2m	US$ 1,354.2m	US$ 1,292.6m	29.46%
Total					58.32%

Director	Salary £	Bonus % of target achieved	Target bonus %	Individual multiplier	Total bonus % of Salary	Bonus paid £
Simon Segars	515,000	58.32	85	1.10	54.53	280,826
Tim Score	427,450	58.32	85	1.00	49.57	211,896
Mike Muller*	293,550	58.32	85	1.00	49.57	145,519

Simon Segars	Succession planning and key appointments Executive team effectiveness Progress in development of strategy
Tim Score	Organisational scaling Investment strategy
Mike Muller	IoT business strategy Investment strategy to complement R&D activities University programme

Name of Director		Date
Simon Segars		July 17, 2014
Tim Score		March 1, 2002
Mile Muller		January 31, 1996

Director	Fees		Basic salary		Bonus payments		Benefits (1)		Subtotal 2014		Pension contributions 2014		Share-based payments 2014 (2)		Total 2014		Subtotal 2013		Pension contributions 2013		Share-based payments 2013 (2)		Total 2013
	£		£		£		£		£		£		£		£		£		£		£		£
Executive
Simon Segars		—		515,000		280,826		154,655		950,481		56,024		946,292		1,952,797		1,016,640		44,000		476,327		1,536,967
Tim Score		—		427,450		211,896		27,004		666,350		45,481		1,169,203		1,881034		1,040,405		44,156		660,711		1,745,272
Mike Muller		—		293,550		146,019		14,924		454,493		33,112		793,450		1,281,055		703,658		32,148		446,211		1,182,017
Warren East (retired June 30, 2013)		—		—		—		—		—		—		—		—		292,041		—		833,019		1,125,060
Mike Inglis (retired March 31, 2013)		—		—		—		—		—		—		—		—		89,668		—		407,813		497,481
Total		—		1,236,000		638,741		196,583		2,071,324		134,617		2,908,945		5,114,886		3,142,412		120,304		2,824,081		6,086,797
Non-executive
Sir John Buchanan (retired May 1, 2014) )		76,897		—		—		—		76,897		—		—		76,897		390,000	—			—		390,000
Stuart Chambers (appointed February 1, 2014)		338,333		—		—		—		338,333		—		—		338,333		—		—		—		—
Andy Green		64,000		—		—		—		64,000		—		—		64,000		55,000		—		—		55,000
Larry Hirst		76,000		—		—		—		76,000		—		—		76,000		55,000		—		—		55,000
John Liu (appointed December 1, 2014)		5,000		—		—		—		5,000		—		—		5,000		—		—		—		—
Eric Meurice (resigned April 30, 2014)		20,000		—		—		—		20,000		—		—		20,000		27,500		—		—		27,500
Kathleen O’Donovan		92,000		—		—		—		92,000		—		—		92,000		70,000		—		—		70,000
Philip Rowley (retired May 1, 2014)		20,230		—		—		—		20,230		—		—		20,230		70,000		—		—		70,000
Janice Roberts		67,592		—		—		—		67,592		—		—		67,592		61,399		—		—		61,399
Total		760,052		—		—		—		760,052		—		—		760,052		728,899	—			—		728,899
Total		760,052		1,236,000		638,741		196,583		2,831,376		134,617		2,908,945		5,874,938		3,871,311		120,304		2,824,081		6,815,696

Director	Basic Salary		All taxable benefits		Bonus Payments		Money and other assets receivable for periods of more than one financial year		All pension related benefits		Total
	£		£		£		£		£		£
Simon Segars		515,000		154,655		280,826		1,277,508		56,024		2,284,013
Tim Score		427,450		27,004		211,896		1,825,432		45,481		2,537,263
Mike Muller		293,550		14,924		146,019		1,259,822		33,112		1,747,427
Total		1,236,000		196,583		638,741		4,362,762		134,617		6,568,703

Name	Beneficial Ownership Number(1)		Beneficial Ownership Percentage		Number of Shares underlying options		Weighted average exercise price (per Share)		Exercise prices and Expiration dates
Stuart Chambers (appointed January 27, 2014)		10,000	Less than 0.01%			—		—		—
Simon Segars		630,660		0.04%		—		—		—
Tim Score		799,388		0.06%		—		—		—
Mike Muller		1,305,760		0.09%		—		—		—
Andy Green		—		—		—		—		—
Larry Hirst		—		—		—		—		—
John Liu (appointed December 1, 2014)		—		—		—		—		—
Kathleen O’Donovan		—		—		—		—		—
Janice Roberts		—		—		—		—		—
Sir John Buchanan (retired May 1, 2014)		N/A		—		—		—		—
Philip Rowley (retired May 1, 2014)		N/A		—		—		—		—
Eric Meurice (retired March 31, 2014)		N/A		—		—		—		—
All current directors as a group (9 persons) (2)		2,745,808		0.19%		—		—		—

Director	Performance period ending December 31	Award date	Market price at date of award £		As at January 1 Number		Conditional award Number		Vested* Number			Lapsed Number		As at December 31 Number			Vesting date
Simon Segars	2013	February 8, 2011		6.11		43,863		—		(43,863	)		—		—		February 2014
	2014	February 8, 2012		5.68		49,295		—		—			—		49,295	**	February 2015
	2015	February 8, 2013		9.245		32,449		—		—			—		32,449		February 2016
	2015	August 13, 2013		8.865		11,280		—		—			—		11,280		August 2016
	2016	February 8, 2014		8.96		—		107,770		—			—		107,770		February, 2017
						136,887		107,770		(43,863	)		—		200,794
Tim Score	2013	February 8, 2011		6.11		62,684		—		(62,684	)		—		—		February 2014
	2014	February 8, 2012		5.68		70,422		—		—			—		70,422	**	February 2015
	2015	February 8, 2013		9.245		44,889		—		—			—		44,889		February 2016
	2016	February 8, 2014		8.96		—		89,449		—			—		89,449		February, 2017
						177,995		89,449		(62,684	)		—		204,760
Mike Muller	2013	February 8, 2011		6.11		43,372		—		(43,372	)		—		—		February 2014
	2014	February 8, 2012		5.68		48,415		—		—			—		48,415	**	February 2015
	2015	February 8, 2013		9.245		30,827		—		—			—		30,827		February 2016
	2016	February 8, 2014		8.96		—		61,429		—			—		61,429		February, 2017
						122,614		61,429		(43,372	)		—		140,671

Director	Conditional award Number		Vested award Number		Dividend shares Number		Total award Number		Market value at vesting £
Simon Segars		43,863		80,576		1,392		81,968		734,433
Tim Score		62,684		115,150		1,989		117,139		1,049,565
Mike Muller		43,372		79,674		1,376		81,050		726,208
Total		149,919		275,400		4,757		280,157		2,510,206

Comparator group	ARM TSR percentile rank			Implied vesting
FTSE 350 index		81.3	%		167.4	%
FTSE All World Technology index		90.0	%		200.0	%
Overall					183.7	%

Director	Conditional award Number		Vested award Number		Dividend shares Number		Total award Number		Market value at vesting £
Simon Segars		49,295		45,893		859		46,752		508,194
Tim Score		70,422		65,562		1,227		66,789		725,997
Mike Muller		48,415		45,074		843		45,917		499,118
Total		168,132		156,529		2,929		159,458		1,733,309

Director	Shares deferred as part of the 2012 bonus Number		Shares deferred as part of the 2013 bonus Number		Total awards Number
Simon Segars		20,045		30,327		50,372
Tim Score		28,637		33,447		62,084
Mike Muller		18,900		22,501		41,401
Total		67,582		86,275		153,857

Director	Shares deferred as part of the 2011 bonus Number		Matching Shares Number		Dividend shares Number		Total awards Number
Simon Segars		35,387		70,774		661		106,822
Tim Score		50,572		101,144		945		152,661
Mike Muller		34,991		69,982		654		105,627
Total		120,950		241,900		2,260		365,110

Beneficial owners (February 16, 2015)	Shares Beneficially Owned (Number)		Percent
BlackRock, Inc		71,623,478		5.07
Baillie Gifford & Co		70,361,012		5.01
Thornburg Investment Management		65,856,520		5.01
Fidelity Management and Research Corporation		67,972,760		4.92
Janus Capital Corporation		56,222,881		4.00

Beneficial owners (March 3, 2014)	Shares Beneficially Owned (Number)		Percent
Baillie Gifford & Co		70,530,313		5.05
Thornburg Investment Management		65,856,520		5.01
Fidelity Management and Research Corporation		67,972,760		4.92
The Capital Group Companies, Inc.		58,256,483		4.16
Janus Capital Corporation		42,639,790		3.05

Beneficial owners (February 25, 2013)	Shares Beneficially Owned (Number)		Percent
The Capital Group Companies, Inc.		95,690,311		6.95
BlackRock, Inc.		69,206,509		5.01
Fidelity Management and Research Corporation		68,672,912		4.99
Thornburg Investment Management		65,856,520		5.01
Legal & General Investment Management		49,884,833		3.80
Janus Capital Corporation		48,594,165		3.61

	Price per share (£)
	High		Low
Annual prices:
2010		4.40		1.84
2011		6.51		4.38
2012		7.83		4.69
2013		11.10		7.59
2014		10.95		8.06

Quarterly prices:
2013:
First Quarter		9.72		7.68
Second Quarter		10.97		7.59
Third Quarter		10.10		8.06
Fourth Quarter		11.10		9.24
2014:
First Quarter		10.95		8.75
Second Quarter		10.47		8.45
Third Quarter		9.86		8.33
Fourth Quarter		9.98		8.06
2015:
First Quarter (through February 16, 2015)	10.87		9.44

Monthly prices:
August 2014		9.71		8.41
September 2014		9.86		9.04
October 2014		8.87		8.06
November 2014		9.14		8.69
December 2014		9.98		8.91
January 2015		10.59		9.44
February 2015 (through February 16, 2015)	10.87		10.37