Pace plc Annual Report and Accounts 2012 - Financial Statements

Financial Statements34 Consolidated Income Statement35 Consolidated Statement of Comprehensive Income36 Consolidated Balance Sheet37 Company Balance Sheet38 Statements of Changes in Shareholders’ Equity39 Consolidated Statement of Cash Flows40 Company Statement of Cash Flows41 Notes76 Directors, Secretary and Advisers77 Five Year Record and Shareholder InformationAnnual Report and Accounts 2012 Pace plc 33

Financial StatementsConsolidated Income StatementFor the year ended 31 December 20122012 2011Notes $m $mRevenue 3 2,403.4 2,309.3Cost of sales (1,970.4) (1,866.0)Gross profit 433.0 443.3Administrative expenses:Research and development expenditure 4 (155.4) (160.6)Other administrative expenses:Before exceptional costs 4 (119.5) (141.3)Exceptional costs 5 (12.5) (12.7)Amortisation of intangibles 11 (51.8) (55.7)Total administrative expenses (339.2) (370.3)Operating profit 93.8 73.0Finance income – interest receivable 6 0.5 0.2Finance expenses – interest payable 6 (14.2) (18.5)Profit before tax 80.1 54.7Tax charge 8 (21.7) (15.9)Profit for the year 58.4 38.8Profit attributable to:Equity holders of the Company 58.4 38.8Earnings per ordinary shareBasic earnings per ordinary share (cents) 9 19.4 13.2Diluted earnings per ordinary share (cents) 9 18.5 12.534Annual Report and Accounts 2012 Pace plc

Financial StatementsConsolidated Statement of Comprehensive IncomeFor the year ended 31 December 20122012 2011$m $mProfit for the year 58.4 38.8Other comprehensive income:Exchange differences on translating foreign operations (2.7) (8.1)Net change in fair value of cash flow hedges transferred to profit or loss, gross of tax (11.2) 15.0Deferred tax adjustment on above 3.0 (4.0)Effective portion of changes in fair value of cash flow hedges, gross of tax 4.9 (8.1)Deferred tax adjustment on above (1.3) 2.2Other comprehensive income for the year, net of tax (7.3) (3.0)Total comprehensive income for the year 51.1 35.8Attributable to:Equity holders of the Company 51.1 35.8Annual Report and Accounts 2012 Pace plc 35

Financial StatementsConsolidated Balance SheetAt 31 December 2012ASSETSNon-current assets2012 2011Notes $m $mProperty, plant and equipment 12 62.8 63.0Intangible assets – goodwill 11 337.9 335.6Intangible assets – other intangibles 11 166.2 218.0Intangible assets – development expenditure 11 56.3 53.9Deferred tax assets 14 37.4 67.2Total non-current assets 660.6 737.7Current assetsInventories 15 182.1 150.0Trade and other receivables 16 558.7 402.3Cash and cash equivalents 18 74.7 48.7Current tax assets 12.0 4.6Total current assets 827.5 605.6Total assets 1,488.1 1,343.3EQUITYIssued capital 21 28.7 28.3Share premium 22 79.0 73.1Merger reserve 23 109.9 109.9Hedging reserve (1.7) 2.9Translation reserve (54.8) (52.1)Retained earnings 24 299.0 245.0Total equity 460.1 407.1LIABILITIESNon-current liabilitiesDeferred tax liabilities 14 70.3 95.7Provisions 20 51.5 41.6Borrowings 18 74.7 147.3Total non-current liabilities 196.5 284.6Current liabilitiesTrade and other payables 17 631.8 373.5Current tax liabilities 10.7 9.6Provisions 20 25.7 45.4Borrowings 18 163.3 223.1Total current liabilities 831.5 651.6Total liabilities 1,028.0 936.2Total equity and liabilities 1,488.1 1,343.3These Financial Statements were approved by the Board of Directors on 5 March 2013 and were signed on its behalf by:Michael PulliChief Executive OfficerRoddy MurrayChief Financial Officer36Annual Report and Accounts 2012 Pace plc

Financial StatementsCompany Balance SheetAt 31 December 2012ASSETSNon-current assets2012 2011Notes $m $mProperty, plant and equipment 12 33.7 29.5Intangible assets – development expenditure 11 51.9 35.9Investments in Group and other companies 13 448.6 448.6Loans to Group companies 13 174.3 190.6Deferred tax assets 14 5.0 2.2Total non-current assets 713.5 706.8Current assetsInventories 15 35.4 49.3Trade and other receivables 16 596.9 436.7Cash and cash equivalents 44.7 13.8Current tax assets 9.9 2.0Total current assets 686.9 501.8Total assets 1,400.4 1,208.6EQUITYIssued capital 21 28.7 28.3Share premium 22 79.0 73.1Merger reserve 23 109.9 109.9Hedging reserve (0.7) 2.8Translation reserve (52.5) (52.5)Retained earnings 24 245.6 235.8Total equity 410.0 397.4LIABILITIESNon-current liabilitiesDeferred tax liabilities 14 10.6 5.8Provisions 20 31.7 23.2Borrowings 18 74.7 147.3Total non-current liabilities 117.0 176.3Current liabilitiesTrade and other payables 17 695.4 385.1Current tax liabilities 2.6 1.7Provisions 20 12.1 25.0Borrowings 18 163.3 223.1Total current liabilities 873.4 634.9Total liabilities 990.4 811.2Total equity and liabilities 1,400.4 1,208.6These Financial Statements were approved by the Board of Directors on 5 March 2013 and were signed on its behalf by:Michael PulliChief Executive OfficerRoddy MurrayChief Financial OfficerPace plcRegistered number: 01672847Annual Report and Accounts 2012 Pace plc 37

Financial StatementsStatements of Changes in Shareholders’ EquityFor the year ended 31 December 2012Share Share Merger Hedging Translation Retained Totalcapital premium reserve reserve reserve earnings equityGroup $m $m $m $m $m $m $mBalance at January 2011 28.2 72.6 109.9 (2.2) (44.0) 211.4 375.9Profit for the year — — — — — 38.8 38.8Other comprehensive income — — — 5.1 (8.1) — (3.0)Total comprehensive income for the year — — — 5.1 (8.1) 38.8 35.8Transactions with owners:Deferred tax on share options — — — — — (2.9) (2.9)Dividends to equity shareholders — — — — — (10.1) (10.1)Employee share incentive charges — — — — — 7.8 7.8Issue of shares 0.1 0.5 — — — — 0.6Balance at December 2011 28.3 73.1 109.9 2.9 (52.1) 245.0 407.1Profit for the year — — — — — 58.4 58.4Other comprehensive income — — — (4.6) (2.7) — (7.3)Total comprehensive income for the year — — — (4.6) (2.7) 58.4 51.1Transactions with owners:Dividends to equity shareholders — — — — — (12.3) (12.3)Employee share incentive charges — — — — — 7.9 7.9Issue of shares 0.4 5.9 — — — — 6.3Balance at December 2012 28.7 79.0 109.9 (1.7) (54.8) 299.0 460.1Share Share Merger Hedging Translation Retained Totalcapital premium reserve reserve reserve earnings equityCompany $m $m $m $m $m $m $mBalance at January 2011 28.2 72.6 109.9 (5.3) (50.3) 133.7 288.8Profit for the year — — — — — 107.3 107.3Other comprehensive income — — — 8.1 (2.2) — 5.9Total comprehensive income for the year — — — 8.1 (2.2) 107.3 113.2Transactions with owners:Deferred tax on share options — — — — — (2.9) (2.9)Dividends to equity shareholders — — — — — (10.1) (10.1)Employee share incentive charges — — — — — 7.8 7.8Issue of shares 0.1 0.5 — — — — 0.6Balance at December 2011 28.3 73.1 109.9 2.8 (52.5) 235.8 397.4Profit for the year — — — — — 14.2 14.2Other comprehensive income — — — (3.5) — — (3.5)Total comprehensive income for the year — — — (3.5) — 14.2 10.7Transactions with owners:Dividends to equity shareholders — — — — — (12.3) (12.3)Employee share incentive charges — — — — — 7.9 7.9Issue of shares 0.4 5.9 — — — — 6.3Balance at December 2012 28.7 79.0 109.9 (0.7) (52.5) 245.6 410.038Annual Report and Accounts 2012 Pace plc

Financial StatementsConsolidated Statement of Cash FlowsFor the year ended 31 December 2012Cash flows from operating activities2012 2011$m $mProfit before tax 80.1 54.7Adjustments for:Share-based payments charge 7.9 7.8Depreciation of property, plant and equipment 21.0 29.0Amortisation of development expenditure 54.3 47.9Amortisation of other intangibles 51.8 55.7Loss on sale of property, plant and equipment — 1.6Net finance expense 13.7 18.3Movement in trade and other receivables (162.3) 30.3Movement in trade and other payables 258.5 (170.2)Movement in inventories (33.0) 72.2Movement in provisions 5.6 2.7Cash generated from operations 297.6 150.0Interest paid (11.6) (13.8)Tax paid (23.8) (29.7)Net cash generated from operating activities 262.2 106.5Cash flows from investing activitiesAcquisition of subsidiaries, net of cash acquired (15.7) (6.4)Purchase of property, plant and equipment (22.6) (41.5)Development expenditure (57.4) (57.0)Interest received 0.5 0.2Net cash used in investing activities (95.2) (104.7)Cash flows from financing activitiesRepayment of long-term debt (135.0) (75.0)Proceeds from issue of share capital 6.3 0.6Dividend paid (12.3) (10.1)Net cash used in financing activities (141.0) (84.5)Net change in cash and cash equivalents 26.0 (82.7)Cash and cash equivalents at the start of the year 48.7 131.4Cash and cash equivalents at the end of the year 74.7 48.7Annual Report and Accounts 2012 Pace plc 39

Financial StatementsCompany Statement of Cash FlowsFor the year ended 31 December 2012Cash flows from operating activities2012 2011$m $mProfit before tax 10.0 114.0Adjustments for:Share-based payments charge 7.9 7.8Depreciation of property, plant and equipment 11.6 10.8Loss on sale of property, plant and equipment — 0.1Amortisation of development expenditure 43.3 27.4Net finance expense 6.3 9.1Movement in trade and other receivables (166.8) (41.5)Movement in trade and other payables 323.1 81.8Movement in inventories 13.6 (15.7)Movement in provisions 10.9 (4.8)Cash generated from operations 259.9 189.0Interest paid (3.7) (11.9)Tax paid (0.9) (16.4)Net cash generated from operating activities 255.3 160.7Cash flows from investing activitiesAcquisition of subsidiaries, net of cash acquired (15.7) (97.7)Purchase of property, plant and equipment (15.8) (15.8)Development expenditure (52.1) (34.2)Interest received 0.2 7.5Net cash used in investing activities (83.4) (140.2)Cash flows from financing activitiesRepayment of long-term debt (135.0) (75.0)Proceeds from issue of share capital 6.3 0.6Dividend paid (12.3) (10.1)Net cash used in financing activities (141.0) (84.5)Net change in cash and cash equivalents 30.9 (64.0)Cash and cash equivalents at the start of the year 13.8 77.8Cash and cash equivalents at the end of the year 44.7 13.840Annual Report and Accounts 2012 Pace plc

Financial StatementsNotes1 Basis of preparation and business environmentThe following accounting policies have been applied consistently in dealing with items which are considered material in relationto the Financial Statements:Basis of preparationThe Financial Statements have been prepared in accordance with applicable accounting standards and under the historical costconvention as modified by the revaluation of derivative instruments.International Financial Reporting StandardsThe Group’s Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) asendorsed by the European Union and International Financial Reporting Interpretations Committee (IFRIC) interpretations and withthose parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Company’s Financial Statements havebeen prepared on the same basis and as permitted by Section 408 of the Companies Act 2006, no income statement ispresented for the Company. The result of the Company for the year is shown in Note 25.Financial year endThe current year’s Financial Statements are for the year ended 31 December 2012 and the previous year’s Financial Statementsare for the year ended 31 December 2011.Basis of consolidationThe Group Financial Statements consolidate those of the Company and of its subsidiary undertakings (Note 13) drawn up to31 December 2012. Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directlyor indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control,potential voting rights that presently are exercisable or convertible are taken into account. Intra-group transactions, including sales,profits, receivables and payables, have been eliminated on the Group consolidation. Investments in subsidiaries are carried at costless any impairment loss in the Financial Statements of the Company.Functional and presentational currencyItems included in the Financial Statements of each of the Group’s entities are measured using the currency of the primary economicenvironment in which the entity operates (the functional currency). The consolidated Financial Statements are presented in US Dollarswhich is the Company’s functional and presentational currency.The US Dollar/Pound Sterling exchange rate at 31 December 2012 was 1.62 (2011: 1.55).Significant judgements, key assumptions and estimation uncertaintyThe Group’s main accounting policies affecting its results of operations and financial condition are set out on pages 42 to 47.Judgements and assumptions have been required by management in applying the Group’s accounting policies in many areas.Actual results may differ from the estimates calculated using these judgements and assumptions. Key areas of estimationuncertainty and critical accounting judgements are as follows:WarrantiesPace provides product warranties for its products. Although it is difficult to make accurate predictions of potential failure rates orthe possibility of an epidemic failure, as a warranty estimate must be calculated at the outset of a product before field deploymentdata is available, these estimates improve during the lifetime of the product in the field.A provision for warranties is recognised when the underlying products are sold. The provision is based on historical warranty dataand a weighting of all possible outcomes against their associated probabilities. The level of warranty provision required is reviewedon a product by product basis and provisions adjusted accordingly in the light of actual performance.RoyaltiesPace’s products incorporate third party technology, usually under licence. Inadvertent actions may expose Pace to the risk of infringingthird party intellectual property rights. Potential claims can still be submitted many years after a product has been deployed.Any such claims are always vigorously defended.A provision for royalties is recognised where the owners of patents covering technology allegedly used by the Group have indicatedclaims for royalties relating to the Group’s use (including past usage) of that technology. Having taken legal advice, the Boardconsiders that there are defences available that should mitigate the amounts being sought. The Group will vigorously negotiateor defend all claims but, in the absence of agreement, the amounts provided may prove to be different from the amounts at whichthe potential liabilities are finally settled. The provision is based on the latest information available.Annual Report and Accounts 2012 Pace plc 41

Financial StatementsNotesContinued1 Basis of preparation and business environment continuedSignificant judgements, key assumptions and estimation uncertainty continuedOperating segmentsOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operatingsegments, has been identified as the Board of Directors. The Board of Directors has determined that, based on its current internalreporting framework and management structure, it has two reportable segments.Such determination is necessarily judgemental in its nature and has been determined for the preparation of the FinancialStatements. The level of disclosure of segmental and other information is determined by such assessment. Further details of theconsiderations made and the resulting disclosures are provided in Note 3 to the Financial Statements.Intangible assetsThe Group business includes a significant element of research and development activity. Under accounting standards, principallyIAS 38 ‘Intangible Assets’, there is a requirement to capitalise and amortise development spend to match costs to expectedbenefits from projects deemed to be commercially viable. The application of this policy involves the ongoing consideration bymanagement of the forecasted economic benefit from such projects compared to the level of capitalised costs, together withthe selection of amortisation periods appropriate to the life of the associated revenues from the product.Going concernThe Group has borrowing facilities in place until March 2014. At 31 December 2012 these are in the form of a $150 million term loan,which is subject to repayment through instalments of $37.5 million each, due every six months plus a final payment of $75 million,and a $150 million revolver credit facility. These facilities are subject to financial performance covenants which the Group currentlycomplies with.The Group has prepared a financial and working capital forecast based upon trading assumptions and other short-term andmedium-term plans. The Group has sensitised these plans for a number of potential scenarios, including working capital managementand revenue reduction and has concluded that the Group will continue to meet its financial performance covenants and will haveadequate working capital available to continue in operational existence for the foreseeable future.2 Accounting policiesBusiness combinationsControl is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessingcontrol, the Group takes into consideration potential voting rights that currently are exercisable. The acquisition date is the dateon which control is transferred to the acquirer. Judgement is applied in determining the acquisition date and determining whethercontrol is transferred from one party to another.GoodwillGoodwill that arises upon the acquisition of subsidiaries is included in intangible assets.Initial measurementThe Group measures goodwill as the fair value of the consideration transferred including the recognised amount of any non-controllinginterest in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed,all measured as of the acquisition date. Consideration transferred includes the fair values of the assets transferred, liabilities incurredby the Group to the previous owners of the acquiree and equity interests issued by the Group. Consideration transferred also includesthe fair value of any contingent consideration and share-based payment awards of the acquiree that are replaced mandatorily in thebusiness combination. If a business combination results in the termination of pre-existing relationships between the Group andthe acquiree, then the lower of the termination amount, as contained in the agreement, and the value of the off-market elementis deducted from the consideration transferred and recognised in other expenses.A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a present obligationand arises from a past event and its fair value can be measured reliably.The Group measures any non-controlling interest at its proportionate interest in the identifiable net assets of the acquiree.Transaction costs that the Group incurs in connection with a business combination such as finder’s fees, legal fees, due diligencefees and other professional and consulting fees, are expensed as incurred.42Annual Report and Accounts 2012 Pace plc

2 Accounting policies continuedGoodwill continuedSubsequent measurementGoodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying amountof goodwill is included in the carrying amount of the investment and an impairment loss on such an investment is not allocated toany asset, including goodwill, that forms part of the carrying amount of the equity accounted investee.As permitted by IFRS 1 ‘First-time Adoption of IFRS’, goodwill arising on acquisitions before 29 May 2004 (date of transitionto Adopted IFRS) has been frozen at the UK GAAP amounts subject to being tested for impairment annually. The Group performsits annual impairment review at the cash-generating unit level.Other intangiblesOther intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulatedamortisation and accumulated impairment losses.Amortisation of other intangibles is done on a straight-line basis over the estimated useful economic lives of the particular assetcategories as follows:Customer contracts and relationships three–ten yearsTechnology and patentsOtherResearch and development expenditureone–ten yearsthree yearsAll ongoing research expenditure is expensed in the period in which it is incurred. Where a product is technically feasible, productionand sales are intended, a market exists and sufficient resources are available to complete the project, development costs arecapitalised and subsequently amortised on a straight-line basis over the estimated useful life of the product concerned fromcommercial launch. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion ofoverheads. Where these conditions are not met, development expenditure is recognised as an expense in the period in which it isincurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. The estimateduseful lives for development expenditure are estimated to be in a range of between six and thirty months.Capitalised development expenditure is not treated as a realised loss for the purpose of determining the Company’s distributableprofits as the costs meet the conditions required to be treated as an asset in accordance with IAS 38.The amortisation of capitalised development expenditure is charged to the income statement in research and developmentexpenditure within the Administrative expenses category.Impairment chargesThe carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at eachreporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverableamount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, therecoverable amount is estimated each year at the same time. An impairment loss is recognised if the carrying amount of an assetor its related cash-generating unit (CGU) exceeds its estimated recoverable amount.The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing valuein use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing,CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects thelowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination isallocated to groups of CGUs that are expected to benefit from the synergies of the combination.The Group’s corporate assets do not generate separate cash inflows and are utilised by more than one CGU. Corporate assetsare allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to whichthe corporate asset is allocated. Impairment losses are recognised in profit or loss. Any impairment losses recognised in respectof CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce the carryingamounts of the assets in the CGU on a pro rata basis.Annual Report and Accounts 2012 Pace plc 43

Financial StatementsNotesContinued2 Accounting policies continuedImpairment charges continuedAn impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periodsare assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversedif there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to theextent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciationor amortisation, if no impairment loss had been recognised.Exceptional itemsItems which are significant by virtue of their size or nature and which are considered non-recurring are classified as exceptionaloperating items. Such items which include for instance the costs of opening or closing premises, costs of significant restructuringand profits and losses made on the disposal of properties, are included within the appropriate consolidated income statementcategory, albeit analysed as a separate line within that category, and are highlighted separately in the Notes to the Financial Statements.Exceptional operating items are excluded from the profit measures used by the Board to monitor underlying performance.Revenue recognitionRevenue comprises the value of sales of goods and services to third party customers occurring in the period, stated exclusiveof value added tax and net of trade discounts and rebates.Revenue on the sale of goods is recognised when substantially all of the risks and rewards in the product have passed to thecustomer and substantially all of the Group’s work is completed, which is usually upon delivery to the customer or his agent.Revenue in respect of services rendered, including engineering consultancy and support and software services, is recognisedover the period over which they are performed, in relation to the level of work undertaken, project milestones achieved and anyfuture obligations remaining.When a single sales transaction requires the delivery of more than one product or service (multiple components), the revenuerecognition criteria are applied to the separately identifiable components. A component is considered to be separately identifiableif the product or service delivered has standalone value to that customer and the fair value associated with the product or servicecan be measured reliably. The amount recognised as revenue for each component is the fair value of the element in relation to thefair value of the arrangement as a whole. This requires a degree of management judgement and the fair value allocations are, by theirnature, best estimates. The timing and amount of revenue recognition can vary depending on what assessments have been made.Where there is no separate selling price of an element, management determines fair value based on equivalent available products.The Group does not recognise revenue before delivery has occurred, the risks and rewards of ownership have been transferredto the customer, the amount of revenue can be measured reliably and collection of the related receivable is reasonably assured.The determination of whether the amount of revenue can be measured reliably or whether receivables are collectible isinherently judgemental.Finance income and finance costsFinance income comprises interest income on funds invested and dividend income. Interest income is recognised as it accruesin profit or loss, using the effective interest method. Finance costs comprise interest expense on borrowings and impairment lossesrecognised on financial assets. Borrowing costs that are not directly attributable to the acquisition, construction or productionof a qualifying asset are recognised in profit or loss using the effective interest method. Foreign currency gains and losses arereported on a net basis.Government grantsGrants in respect of specific research and development projects are credited to research and development costs within the incomestatement or against the capitalised development expenditure as appropriate to match to the project’s related expenditure.Cash and cash equivalentsCash and cash equivalents comprise cash balances and call deposits. The Company considers all highly liquid investments withoriginal maturity dates of three months or less to be cash equivalents. Bank overdrafts that are repayable on demand and form anintegral part of the Group’s cash management system are included as a component of cash and cash equivalents for the purposeof the statement of cash flows.Allowance for doubtful debtsTrade receivables are assessed individually for impairment, or collectively where the receivables are not individually significant.Where necessary, provisions for doubtful debts are recorded in the income statement.44Annual Report and Accounts 2012 Pace plc

2 Accounting policies continuedInventoryInventory is stated at the lower of cost and net realisable value. Cost is determined on a first-in-first-out basis and includesappropriate transport and handling costs but excludes royalties due only on ultimate sale. Where necessary, provision is madefor obsolete, slow-moving and defective inventory.Property, plant and equipmentThe cost of items of property, plant and equipment is its purchase cost, together with any incidental costs of acquisition.Depreciation is calculated so as to write off, on a straight-line basis over the expected useful economic lives of the assetconcerned, the cost of property, plant and equipment, less any estimated residual values, which are adjusted, if appropriate,at each balance sheet date. The principal economic lives used for this purpose are:Long leasehold propertiesShort leasehold propertiesPlant and machineryMotor vehiclesPeriod of leasePeriod of leaseOne–ten yearsFour yearsProvision is made against the carrying value of items of property, plant and equipment where an impairment in value is deemedto have occurred.Leased assetsLeases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases.Assets held under finance leases and hire purchase contracts are capitalised in the balance sheet and depreciated over their expecteduseful lives. The interest element of leasing payments represents a constant proportion of the capital balance outstanding andis charged to the income statement over the period of the lease.All other leases are regarded as operating leases and the payments made under them are charged to the income statementon a straight-line basis over the lease term.Foreign currencyTransactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchangerate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet dateare retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arisingon translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historicalcost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilitiesdenominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange ratesruling at the dates the fair value was determined.The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translatedto the Group’s presentational currency at foreign exchange rates ruling at the balance sheet date. The revenues and expenses offoreign operations are translated at an average rate for the year where this rate approximates to the foreign exchange rates rulingat the dates of the transactions. Exchange differences arising from this translation of foreign operations are taken directly to thetranslation reserve. When a foreign operation is disposed of such that control is lost, the cumulative amount in the translationreserve is reclassified to the income statement as part of the gain or loss on disposal.Derivative financial instrumentsThe Group uses derivative financial instruments, usually forward foreign exchange contracts, to hedge its exposure to foreignexchange risks arising from operational, financing and investment activities. In accordance with its treasury policy, the Group doesnot hold or issue derivative financial instruments for trading purposes. The directors have determined that the instruments qualifyfor cash flow hedge accounting.Derivative financial instruments are classified as cash flow hedges when they hedge the Group’s exposure to variability in cash flowsthat are either attributable to a particular risk associated with a recognised asset or liability, or a highly probable forecast transaction.Annual Report and Accounts 2012 Pace plc 45

Financial StatementsNotesContinued2 Accounting policies continuedDerivative financial instruments continuedDerivatives are reviewed quarterly for effectiveness. Where a derivative financial instrument is designated as a hedge of the variabilityin cash flows of a recognised asset or liability, or highly probable forecast transaction, the effective part of any gain or loss on themovement in fair value of the derivative financial instrument is recognised directly in equity.The gain or loss on any ineffective part of the hedge is immediately recognised in the income statement within finance income/costs.If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or liability, the associated cumulativegains or losses that were recognised directly in equity are reclassified into the income statement when the transaction occurs.TaxesCurrent tax, including UK Corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) usingthe tax rates that have been enacted or substantively enacted by the balance sheet date.Deferred tax is provided using the balance sheet liability method, providing where relevant for temporary differences betweenthe carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.Deferred tax is measured using the tax rates that have been enacted or substantively enacted by the balance sheet dateand are expected to apply when the asset is realised or the liability settled.A net deferred tax asset is recognised only when it is probable that sufficient taxable profits will be available in the foreseeablefuture from which the reversal of the temporary differences can be deducted.Share-based paymentsThe grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with acorresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amountrecognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditionsare expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meetthe related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vestingconditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-upfor differences between expected and actual outcomes.The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognisedas an expense with a corresponding increase in liabilities over the period that the employees unconditionally become entitledto payment. The liability is re-measured at each reporting date and at settlement date. Any changes in the fair value of the liabilityare recognised as personnel expenses in profit or loss.Employee share ownership plansThe material assets, liabilities, income and costs of the Pace plc Employee Benefits Trust are treated as being those of the Company.Until such time as the Company’s own shares vest unconditionally with employees, the consideration paid for the shares is deductedin arriving at equity.Employee benefitsObligations for contributions to defined contribution pension plans are recognised as an expense in the income statementas incurred. The Group has no defined benefit arrangements in place.Interest-bearing borrowingsInterest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition,interest-bearing borrowings are stated at amortised cost using the effective interest method, less any impairment losses.Equity instrumentsEquity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.Dividends payableDistributions to equity holders are disclosed as a component of the movement in shareholders’ equity. A liability is recorded for a finaldividend when the dividend is approved by the Company’s shareholders and, for an interim dividend, when the dividend is paid.46Annual Report and Accounts 2012 Pace plc

2 Accounting policies continuedProvisionsA provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a pastevent and it is probable that an outflow of economic benefits will be required to settle the obligation.(a) RoyaltiesA provision for royalties is recognised where the owners of patents covering technology allegedly used by the Group have indicatedclaims for royalties relating to the Group’s use (including past usage) of that technology. The provision is based on the latestinformation available.(b) WarrantiesA provision for warranties is recognised when the underlying products or services are sold. The provision is based on historicalwarranty data and a weighting of all possible outcomes against their associated probabilities. The level of warranty provisionrequired is reviewed on a product by product basis and provisions adjusted accordingly in the light of actual performance.(c) RestructuringA provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan and the restructuringhas either commenced or has been announced publicly. Provisions are not recognised for future operating losses.(d) Onerous contractsA provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lowerthan the unavoidable cost of meeting its obligations under the contract.(e) Deferred considerationA provision is recognised for deferred consideration relating to acquisitions, based on the expected fair value of the outflow.Changes in accounting policy and disclosures(a) New and amended standards adopted by the GroupThere are no new IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after1 January 2012 that would be expected to have a material impact on the Group.(b) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2012and not early adoptedIAS 1 ‘Presentation of Items of Other Comprehensive Income’ requires an entity to present the items of other comprehensiveincome that may be recycled to profit or loss in the future if certain conditions are met, separately from those that would neverbe recycled to profit or loss. The Group is yet to assess IAS 1’s full impact and intends to adopt IAS 1 no later than the accountingperiod beginning on or after 1 July 2012, subject to endorsement by the EU.IAS 19 ‘Employee Benefits’ was amended in June 2011. The amendment does not impact the Group.IFRS 10 ‘Consolidated Financial Statements’ builds on existing principles by identifying the concept of control as the determiningfactor in whether an entity should be included within the consolidated Financial Statements of the parent Company. The Groupis yet to assess IFRS 10’s full impact and intends to adopt IFRS 10 no later than the accounting period beginning on or after1 January 2014, subject to endorsement by the EU.IFRS 12 ‘Disclosures of Interests in Other Entities’ includes the disclosure requirements for all forms of interest in other entities,including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The Group is yet to assessIFRS 12’s full impact and intends to adopt IFRS 12 no later than the accounting period beginning on or after 1 January 2014,subject to endorsement by the EU.IFRS 13 ‘Fair Value Measurement’ aims to improve consistency and reduce complexity by providing a precise definition of fairvalue and a single source of fair value measurement and disclosure requirements for use across IFRS. The Group is yet to assessIFRS 13’s full impact and intends to adopt IFRS 13 no later than the accounting period beginning on or after 1 January 2013,subject to endorsement by the EU.There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impacton the Group.Annual Report and Accounts 2012 Pace plc 47

Financial StatementsNotesContinued3 Segmental analysisIn accordance with IFRS 8 ‘Operating Segments’, the chief operating decision-maker (CODM) has been identified as the Boardof Directors which reviews internal monthly management reports, budget and forecast information to evaluate the performanceof the business and make decisions.The Group determines operating segments on the basis of SBU areas, being the basis on which the Group manages itsworldwide interests.During the year the Group consolidated Pace Europe, Pace Enterprise and certain other immaterial operating segments into a newSBU named Pace International. This was done in order to reflect the management structure of those operating segments, whichchanged in the year.The Group has the following reportable segments:——Pace Americas;——Pace International; and——Other.Other include central and unallocated costs and other immaterial SBUs, which are operating segments that are allowed to beaggregated under IFRS 8.Reconciliations between Pace Americas, Pace International and the geographical revenue disclosure given are not possibledue to the different revenue streams which sit under each reportable segment.Performance is measured based on segmental adjusted EBITA, as included in the internal management information which is reviewedby the CODM. Adjusted EBITA is used to measure performance as management believes that such information is the mostrelevant in evaluating the results of certain segments, relative to other entities that operate within these industries.Revenues disclosed below materially represent revenues to external customers and, where appropriate, pricing is determinedon an arm’s length basis. There are no material inter-segment transactions.The tables below present segmental information on the revised basis, with prior periods amended to conform to the currentperiod presentation:PacePaceAmericas International Other TotalYear ended 31 December 2012 $m $m $m $mSegmental income statementRevenue 1,441.9 953.6 7.9 2,403.4Adjusted EBITA 144.0 72.3 (58.2) 158.1Exceptional items (12.5)Amortisation of other intangibles (51.8)Interest (13.7)Tax (21.7)Profit for the year 58.4PacePaceAmericas International Other TotalYear ended 31 December 2011 (restated) $m $m $m $mSegmental income statementRevenue 1,350.6 953.1 5.6 2,309.3Adjusted EBITA 157.9 60.3 (76.8) 141.4Exceptional items (12.7)Amortisation of other intangibles (55.7)Interest (18.3)Tax (15.9)Profit for the year 38.848Annual Report and Accounts 2012 Pace plc

3 Segmental analysis continuedMajor customersTransactions with the Group’s three (2011: two) largest customers represented 49% (2011: 27%) of the Group’s total revenuesand are disclosed within the Pace Americas reporting segment.Geographical analysisIn presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers.2012 2011Revenue by destination $m $mEurope 402.4 457.7North America 1,317.6 1,065.1Latin America 374.4 469.0Rest of World 309.0 317.52,403.4 2,309.3Segment assets are based on the geographical location of the assets. The split of non-current assets by location is as follows:2012 2011Non-current assets $m $mUK 134.4 65.7Europe 124.7 183.9Latin America 3.5 5.4North America 359.8 412.6Rest of World 0.8 2.9623.2 670.5Non-current assets relate to property, plant and equipment and intangible assets and, as required under IFRS 8, exclude deferredtax assets, financial instruments and post-employment benefit assets.The Group has three main revenue streams, being Set-top boxes & Media Servers, Gateways and Software & Services.These revenue streams arise in each operating segment and are not defined by geographical locations.The following table provides an analysis of the Group’s revenue streams according to those classifications:2012 2011$m $mSet-top boxes & Media Servers 1,826.0 1,775.4Gateways 469.4 433.5Software & Services 108.0 100.42,403.4 2,309.3Annual Report and Accounts 2012 Pace plc 49

Financial StatementsNotesContinued4 Expenses and auditors’ remuneration2012 2011$m $mFees payable to the Company’s auditors for the audit of:Company’s annual Financial Statements 0.4 0.6Fees payable to the Company’s auditors and its associates for other servicesto the Group:Audit of Financial Statements of subsidiaries of the Company 0.2 0.2Other services relating to taxation 0.1 0.2Services relating to corporate finance — —Other services pursuant to interim reporting legislation 0.1 0.1Other services — 0.2Depreciation of plant, property and equipmentOwned 21.0 29.0Other operating lease rentalsLand and buildings 8.1 9.7Loss on disposal of plant, property and equipment — 1.6Net foreign exchange losses recognised within operating profit 1.9 0.7Research and development expenditure recognised as an expense 155.4 160.65 Exceptional items2012 2011$m $mRestructuring and reorganisation costs 7.6 11.1Directors’ loss of office 1.4 1.6Aborted acquisition costs 3.5 —12.5 12.7Restructuring and reorganisation costs in 2012 and 2011 relate to different restructuring programmes within the Group and representthe costs of redundancy and associated professional fees. Aborted acquisition costs relate to professional services fees in respectof the aborted acquisition of the Motorola Home business.6 Finance income/(costs)2012 2011$m $mFinance income – interest on bank deposits 0.5 0.2Finance costsBank borrowings (10.7) (16.7)Other finance costs (3.5) (1.8)(14.2) (18.5)50Annual Report and Accounts 2012 Pace plc

7 Staff numbers and costsThe average number of persons (including directors) employed by the Group during the year, analysed by category, were as follows:RestatedGroup 2012 2011Research and development 1,001 1,113Administration 245 245Sales and marketing 64 80Manufacturing and operations 667 6641,977 2,102The 2011 comparative has been restated to include the impact of acquisitions at December 2010. The previously statedDecember 2010 total did not include these amounts, which lowered the 2011 average number of employees.The total number of persons (including directors) employed by the Group at 31 December 2012 was 1,864 (2011: 2,089).The aggregate payroll costs of these persons were as follows:2012 2011Group $m $mWages and salaries 122.5 137.7Social security costs 18.1 23.1Other pension costs 5.9 5.2Share-based payments (see Note 27) 7.9 7.8Redundancy costs — 2.7154.4 176.5Remuneration of directorsThe remuneration, share options and pension entitlements of the directors are disclosed in the Remuneration Reporton pages 23 to 30.8 Taxation2012 2011$m $mCurrent tax chargeCharge for the year 21.0 28.8Adjustment in respect of prior years (3.7) (1.3)Total current tax charge 17.3 27.5Deferred tax charge/(credit)Origination and reversal of timing differences in the current year (Note 14) — (9.0)Impact of change in tax rate (0.3) (1.1)Adjustment in respect of prior years 4.7 (1.5)Total deferred tax charge/(credit) 4.4 (11.6)Total tax charge 21.7 15.9Annual Report and Accounts 2012 Pace plc 51

Financial StatementsNotesContinued8 Taxation continuedReconciliation of effective tax rate to UK statutory rate of 24.5% (2011: 26.5%):2012 2011$m $mProfit before tax 80.1 54.7Tax using UK statutory tax rate at 24.5% (2011: 26.5%) 19.6 14.5Effects of:Expenses not deductible for tax purposes 11.7 3.6Research and development tax credit (6.3) (2.6)Overseas tax not at 24.5% (2011: 26.5%) (3.4) 4.3Losses not recognised for current or deferred tax (0.6) —Impact of change in tax rate (0.3) (1.1)Adjustments to tax charge in respect of previous years 1.0 (2.8)Total tax charge 21.7 15.9A change in the UK Corporation tax rate from 26% to 24% was substantively enacted on 17 July 2012 and is effective from1 April 2012. A further reduction from 24% to 23% was substantively enacted under the same legislation and will be effectivefrom 1 April 2013. The relevant deferred tax balances have therefore been re-measured.A reduction to the Corporation tax rate has been announced and is expected to be enacted subsequently to reduce the rateby 2% per annum to 21%, effective 1 April 2014. This change had not been substantively enacted at the balance sheet date and,therefore, is not recognised in these Financial Statements.9 Earnings per ordinary share2012 2011Basic earnings per ordinary share 19.4c 13.2cDiluted earnings per ordinary share 18.5c 12.5cAdjusted basic earnings per ordinary share 35.1c 29.7cAdjusted diluted earnings per ordinary share 33.4c 28.1cThe calculation of basic earnings per share is based on a profit after tax of $58.4 million (2011: $38.8 million) divided by theweighted average number of ordinary shares in issue of 300,344,669 (2011: 294,189,977), excluding shares held by the EmployeeBenefit Trust.Number of shares (million)2012 2011Weighted average number of ordinary shares in issue during the year 300.3 294.2Dilutive effect of options outstanding 15.1 16.8Diluted weighted average number of ordinary shares in issue during the year 315.4 311.0Diluted earnings per ordinary share varies from basic earnings per ordinary share due to the effect of the notional exercise ofoutstanding share options.52Annual Report and Accounts 2012 Pace plc

9 Earnings per ordinary share continuedTo better reflect underlying performance, adjusted earnings per share is also calculated (adjusting profit after tax to removeamortisation of other intangibles and exceptional items, post tax). The earnings amount is calculated as follows:2012 2011$m $mProfit after tax 58.4 38.8Amortisation charge 51.8 55.7Tax effect of above (14.0) (16.2)Exceptional items 12.5 12.7Tax effect of above (3.4) (3.7)Adjusted profit after tax 105.3 87.3The Group’s effective tax rate of 27.1% (2011: 29.1%) has been used to calculate the tax effect of adjusted items.10 Dividend per ordinary share` 2012 2011Per share $m Per share $m2011 Final: paid 4 July 2012 2.50c 7.5 2.25c 6.62012 Interim: paid 7 December 2012 1.44c 4.8 1.25c 3.53.94c 12.3 3.50c 10.1In addition, the directors are proposing a final dividend for 2012 of 3.06 cents per ordinary share. This will be payable on 5 July 2013to shareholders on the register at 7 June 2013, subject to approval by shareholders at the forthcoming Annual General Meeting,and has not been included as a liability in these Financial Statements.Annual Report and Accounts 2012 Pace plc 53

Financial StatementsNotesContinued11 Intangible assetsCustomercontracts TechnologyDevelopment and and OtherGoodwill expenditure relationships patents Other intangiblesGroup $m $m $m $m $m $mCostAt 31 December 2010 335.6 163.8 164.3 131.8 10.9 307.0Additions — 57.0 — — — —Retirement of assets — (10.9) — — — —At 31 December 2011 335.6 209.9 164.3 131.8 10.9 307.0Exchange adjustments 2.3 (0.4) — — — —Additions — 57.4 — — — —At 31 December 2012 337.9 266.9 164.3 131.8 10.9 307.0AmortisationAt 31 December 2010 — 119.2 18.3 14.4 0.6 33.3Exchange adjustments — (0.2) — — — —Provided in the year — 47.9 21.0 30.6 4.1 55.7Retirement of assets — (10.9) — — — —At 31 December 2011 — 156.0 39.3 45.0 4.7 89.0Exchange adjustments — 0.3 — — — —Provided in the year — 54.3 21.6 28.3 1.9 51.8At 31 December 2012 — 210.6 60.9 73.3 6.6 140.8Net book value at 31 December 2011 335.6 53.9 125.0 86.8 6.2 218.0Net book value at 31 December 2012 337.9 56.3 103.4 58.5 4.3 166.2GoodwillAll goodwill has arisen from business combinations and relates to the following acquisitions:——XCom Multimedia Communications SA (now Pace Europe SAS) in February 2001;——the STB and connectivity solutions business of Royal Philips Electronics (Pace France) in April 2008;——Bewan Systems SA (Bewan) in April 2010;——2Wire, Inc (2Wire) in October 2010; and——Latens Systems Limited (Latens) in November 2010.The carrying amount of goodwill is allocated across cash-generating units (CGUs) as follows:——$121.0 million within Pace International;——$191.2 million within Pace Americas; and——$25.7 million within Latens.54Annual Report and Accounts 2012 Pace plc

11 Intangible assets continuedGoodwill continuedThese CGUs are independent sources of income streams and represent the lowest level within the Group at which the associatedgoodwill is monitored for management purposes. The Group tests goodwill annually for impairment, or more frequently if there areindications that goodwill might be impaired.The recoverable amount of CGUs is determined from value in use calculations. These calculations use cash flow projections based onthe following year’s budget and the Group’s 3 year plan. These forecasts have been approved by the Board, and have an appropriatelong-term growth rate of 1% (2011: 1%) applied to them.To prepare value in use calculations, the cash flow forecasts are discounted back to present value using an appropriate market-baseddiscount rate. The pre-tax discount rate used to calculate the value in use was 10.14% (2011: 9.55%).The key assumptions in the value in use calculations are those regarding discount rates, sales growth rates and expected changesto selling prices and direct costs. Sales growth, selling prices and direct costs are built up within the budget and 3 year plan on aproduct by product basis utilising the knowledge and expertise of operational staff. The anticipated launch dates for new products, theachievable prices and direct costs to be incurred are therefore highly judgemental. The directors estimate discount rates using pre-taxrates that reflect current market assessments of the time value of money for the Group.The Directors have reviewed the recoverable amounts of the CGUs and have also considered the following reasonable changesin the assumptions:——movements in the pre-tax discount rate of up to an additional 10%; and——reductions in cash flows of up to $10 million per annum.The Directors consider that there is sufficient headroom within the value in use calculations at 31 December 2012.Other intangiblesOther intangibles relate to trademarks and licence agreements, customer contracts and relationships recognised as partof the acquisition of Pace France, 2Wire, Bewan and Latens.DevelopmentexpenditureCompany $mCostAt 31 December 2010 122.8Additions 34.2Retirement of assets (9.9)At 31 December 2011 147.1Additions 52.1Transfer 7.2At 31 December 2012 206.4AmortisationAt 31 December 2010 93.7Provided in the year 27.4Retirement of assets (9.9)At 31 December 2011 111.2Provided in the year 43.3At 31 December 2012 154.5Net book value at 31 December 2011 35.9Net book value at 31 December 2012 51.9Annual Report and Accounts 2012 Pace plc 55

Financial StatementsNotesContinued12 Property, plant and equipmentLong leasehold Short leasehold Plant, machinery andbuildings land and buildings motor vehicles TotalGroup $m $m $m $mCostAt 31 December 2010 0.6 26.0 105.3 131.9Exchange adjustments — — (1.1) (1.1)Additions — 13.0 28.5 41.5Disposals (0.6) (2.4) (11.6) (14.6)At 31 December 2011 — 36.6 121.1 157.7Exchange adjustments — (0.4) (0.8) (1.2)Additions — 2.2 20.4 22.6Disposals — — (0.7) (0.7)At 31 December 2012 — 38.4 140.0 178.4DepreciationAt 31 December 2010 0.2 11.4 67.6 79.2Exchange adjustments — — (0.5) (0.5)Provided in the year — 6.1 22.9 29.0Disposals (0.2) (1.4) (11.4) (13.0)At 31 December 2011 — 16.1 78.6 94.7Exchange adjustments — 0.2 0.4 0.6Provided in the year — 4.0 17.0 21.0Disposals — — (0.7) (0.7)At 31 December 2012 — 20.3 95.3 115.6Net book value at 31 December 2011 — 20.5 42.5 63.0Net book value at 31 December 2012 — 18.1 44.7 62.8During the year, an exercise was completed to align the useful economic lives of certain asset classes across the Group. These assetclasses have now been extended from a previous useful economic life of 1 to 3 years (depending on the asset class), to a reviseduseful economic life of 2 to 5 years. The directors believe that this change better reflects the manner in which these assets will beused by the business.The effect of this change has been a reduction in the current year depreciation charge in comparison to prior periods. The depreciationcharge in each period going forward will be lower as a result but the effect on future periods has not been disclosed due the numberof assets involved and the range of remaining useful economic lives.56Annual Report and Accounts 2012 Pace plc

12 Property, plant and equipment continuedShort leasehold Plant, machineryland and buildings and motor vehicles TotalCompany $m $m $mCostAt 31 December 2010 19.4 49.5 68.9Additions 3.9 11.9 15.8Disposals — (0.3) (0.3)At 31 December 2011 23.3 61.1 84.4Additions 2.0 13.8 15.8Disposals — (0.2) (0.2)At 31 December 2012 25.3 74.7 100.0DepreciationAt 31 December 2010 10.1 34.2 44.3Provided in the year 3.2 7.6 10.8Disposals — (0.2) (0.2)At 31 December 2011 13.3 41.6 54.9Provided in the year 3.1 8.5 11.6Disposals — (0.2) (0.2)At 31 December 2012 16.4 49.9 66.3Net book value at 31 December 2011 10.0 19.5 29.5Net book value at 31 December 2012 8.9 24.8 33.7Annual Report and Accounts 2012 Pace plc 57

Financial StatementsNotesContinued13 Investments in and loans to Group and other companiesShares inIntra-groupGrouploansundertakingsCompany $m $mCostAt 31 December 2010 295.6 354.5Conversion of intra-group loans to shares (94.1) 94.1Repayment (1.8) —At 31 December 2011 199.7 448.6Transfer to current assets (16.3) —At 31 December 2012 183.4 448.6ImpairmentAt 31 December 2010 98.4 —Reversal of impairment (89.3) —At 31 December 2011 and 31 December 2012 9.1 —Net book value at 31 December 2011 190.6 448.6Net book value at 31 December 2012 174.3 448.6During the prior year the Company converted $94.1 million of debt owed by Pace Distribution (Overseas) Limited into additionalequity in that entity. An impairment of $89.3 million, which had previously been charged against the loan through the incomestatement, was reversed as the conversion meant that the impairment was no longer required.58Annual Report and Accounts 2012 Pace plc

13 Investments in and loans to Group and other companies continuedAt 31 December 2012 the Company had a beneficial interest in the equity of the following subsidiary undertakings:DirectlyNature of owned by Percentage Country ofoperations (note a) holding incorporationPace Advanced Consumer Electronics Limited Dormant 1 100% UKPace Asia Pacific Limited Support 1 100% Hong KongPace Distribution GmbH Dormant 1 100% GermanyPace Distribution (Overseas) Limited Holding company 1 100% UKPace Micro Technology Limited Trading 1 100% UKPace (HK) Limited Dormant 1 100% Hong KongPace Australia Pty Limited Support 1 100% AustraliaPace Americas Limited Holding company 4 100% UKPace Americas, Inc Trading 5 100% USAPace Europe SAS Support 4 100% FrancePace Micro Technology GmbH Support 1 100% GermanyPace Micro Technology (India) Private Limited Support 1 100% IndiaPace Overseas Distribution Limited Trading 4 100% UKPace France SAS Trading 1 100% FrancePace USA Inc Trading 10 100% USAPace Belgium NV Dormant 3 100% BelgiumPace Asia Home Networks Sdn BHD Support 3 100% MalaysiaPace Software & Services Limited Trading 3 100% UKPace Brasil – Industria Electronica eComercio LtdaTrading 14 100% BrazilPace Iberia SL Trading 3 100% SpainSTB Anchor Mexicana SA DE CV Trading 13 100% MexicoPace China Operations Support 2 100% ChinaPace Operations South Africa (Propriety) Limited Support 6 100% South AfricaPace Americas Holdings Inc. Holding 1 100% USAPace Americas Investments LLC Holding 9 100% USALatens Systems Limited Trading 1 100% UKLatens Systems (Canada) Limited Support 8 100% CanadaLatens Services Limited Trading 8 100% UKLatens Systems LLC Trading 8 100% USALatens Systems (India) Private Limited Support 8 100% India2Wire, Inc Trading 11 100% USA2Wire Asia Pacific Limited Dormant 7 100% Hong Kong2Wire (B.C.) Limited Support 7 100% Canada2Wire International Limited Dormant 7 100% UKKenati Technologies Inc Holding 7 100% USA2Wire Singapore Pte Limited Support 7 100% Singapore2Wire Development Center Private Limited Support 12 100% IndiaLatens Systems Israel Limited Support 8 100% IsraelPace Netherlands NV Support 1 100% HollandAnnual Report and Accounts 2012 Pace plc 59

Financial StatementsNotesContinued13 Investments in and loans to Group and other companies continuedNote aDirectly owned by:1 Pace plc 8 Latens Systems Limited2 Pace Asia Pacific Limited 9 Pace Americas Holdings Inc.3 Pace France SAS 10 Pace Americas, Inc4 Pace Distribution (Overseas) Limited 11 Pace Americas Investments LLC5 Pace Americas Limited 12 Kenati Technologies Inc6 Pace Overseas Distribution Limited 13 Pace USA Inc (98%), Pace France SAS (2%)7 2Wire, Inc 14 Pace France SAS (99.99998%), Pace Distribution (Overseas) Limited (0.00002%)Each of the subsidiary undertakings listed above has been consolidated in the Group’s Financial Statements.Each of the subsidiary undertakings listed above has a financial year end of 31 December with the exception of Pace MicroTechnology (India) Private Limited, Latens Systems (India) Private Limited and 2Wire Development Center Private Limited (31 March).The class of share capital held is ordinary with the exception of Pace Distribution (Overseas) Limited where there is preferenceshare capital in addition to ordinary share capital.14 Deferred tax assets/(liabilities)The movements in deferred tax assets and liabilities during the year are shown below:Property,Short-termplant and Trading timingequipment losses Intangibles differences TotalGroup $m $m $m $m $mRecognised assets/(liabilities)At 31 December 2010 0.2 45.6 (115.4) 31.0 (38.6)Credited/(charged) to income statement (0.9) (7.5) 21.2 (1.2) 11.6Credited/(charged) to other comprehensive income — — — (1.5) (1.5)At 31 December 2011 (0.7) 38.1 (94.2) 28.3 (28.5)Credited/(charged) to income statement 1.9 (8.2) 25.4 (23.5) (4.4)At 31 December 2012 1.2 29.9 (68.8) 4.8 (32.9)Shown as deferred tax assets 2.7 29.9 — 4.8 37.4Shown as deferred tax liabilities (1.5) — (68.8) — (70.3)60Annual Report and Accounts 2012 Pace plc

14 Deferred tax assets/(liabilities) continuedProperty,Short-termplant and Trading timingequipment losses Intangibles differences TotalCompany $m $m $m $m $mRecognised assets/(liabilities)At 31 December 2010 0.2 — (5.4) 3.2 (2.0)Credited/(charged) to income statement 0.6 — (0.4) (0.3) (0.1)Credited/(charged) to other comprehensive income — — — (1.5) (1.5)At 31 December 2011 0.8 — (5.8) 1.4 (3.6)Credited/(charged) to income statement 1.9 — (4.8) 0.9 (2.0)At 31 December 2012 2.7 — (10.6) 2.3 (5.6)Shown as deferred tax assets 2.7 — — 2.3 5.0Shown as deferred tax liabilities — — (10.6) — (10.6)No deferred tax asset has been recognised on unused tax losses, outside the UK, of $3.3 million (2011: $3.5 million) as it is notconsidered probable that sufficient taxable profit will be available against which the tax losses can be utilised.15 InventoriesGroupCompany2012 2011 2012 2011$m $m $m $mRaw materials and consumable stores 22.8 38.9 8.0 26.2Finished goods 159.3 111.1 27.4 23.1182.1 150.0 35.4 49.316 Trade and other receivablesGroupCompany2012 2011 2012 2011$m $m $m $mTrade receivables 514.1 369.8 115.4 97.2Amounts owed by subsidiary undertakings — — 453.8 327.4Other receivables 35.2 22.8 23.2 7.0Prepayments and accrued income 9.4 9.7 4.5 5.1558.7 402.3 596.9 436.7Annual Report and Accounts 2012 Pace plc 61

Financial StatementsNotesContinued17 Trade and other payablesGroupCompany2012 2011 2012 2011$m $m $m $mTrade payables 547.3 287.9 475.2 194.7Amounts payable to subsidiaryundertakings — — 177.8 177.0Social security and other taxes 2.4 3.9 0.6 1.5Other payables 16.4 24.4 6.2 0.4Accruals 65.7 57.3 35.6 11.5631.8 373.5 695.4 385.118 Interest-bearing loans and borrowingsThe Group’s interest-bearing loans and borrowings are measured at amortised cost. For more information about the Group’sexposure to interest rate, foreign currency and liquidity risk, see Note 19.The Company has a facility underwritten by RBS and HSBC incorporating Lloyds TSB, Barclays, Santander and Yorkshire Bankin a syndicated deal.The main facilities at 31 December 2012, which are all denominated in US Dollars, consist of a $150 million term loan facilitytogether with a $150 million revolving credit facility.The facilities have a termination date of 31 March 2014. Amortisation of the original $300 million term loan commenced on 20 June 2011with repayments of $37.5 million made every six months until 20 December 2013. A final repayment of $75 million is due to bemade on 31 March 2014.Interest is payable on the facilities at LIBOR plus a specified margin. The margin is subject to a ratchet linked to overall leverageconditions of the Group.Facility arrangement and associated fees of $9 million were capitalised and are being amortised over the life of the facilitiesand included within the overall interest costs.There are certain financial covenants with regard to the facilities. These are principally linked to interest cover and net leverage.In addition to the main facilities, a Bi-lateral Bonding Facility with RBS was also entered into and covers bank guarantees,principally in respect of Duty and Deferment requirements ($155,000).The carrying value of the year-end borrowings position is as follows:2012 2011Group and Company $m $mNon-current liabilitiesBank term loans 74.7 147.3Current liabilitiesBank term loans 73.2 73.1Bank revolving credit facility 90.1 150.0163.3 223.1The face value of the borrowings was $75 million (2011: $150 million) in respect of the bank term loans within non-current liabilities,$75 million (2011: $75 million) in respect of the bank term loans within current liabilities and $90.1 million (2011: $150 million) in respectof the bank revolving credit facility.62Annual Report and Accounts 2012 Pace plc

18 Interest-bearing loans and borrowings continuedThe difference between the face value amounts and the amounts in the previous table is $0.3 million (2011: $2.7 million) in non-currentliabilities and $1.8 million (2011: $1.9 million) in current liabilities which represents facility arrangement fees and accrued interest costs.Reconciliation of net cash flow to movement in net debt2012 2011$m $mCash and cash equivalents at end of year 74.7 48.7Current borrowings (163.3) (223.1)Non-current borrowings (74.7) (147.3)Closing net debt (163.3) (321.7)19 Derivatives and other financial instrumentsShort-term debtors and creditors that meet the definition of a financial asset or liability respectively have been excluded fromall the following analysis, other than the currency risk exposures.This note provides information about the contractual terms of the Group and Company’s interest-bearing loans and borrowings.For more information about the Group and Company’s exposure to interest rate risk, credit risk and foreign currency risk,see page 15 of the Report of the Directors.(a) Interest rate risk profile of cash/bank overdraftsFloating rate Interest free TotalCurrency $m $m $mAt 31 December 2012:Sterling 23.9 7.4 31.3US Dollar (272.9) 45.7 (227.2)Euro 7.1 4.0 11.1Other 11.9 9.6 21.5Total (230.0) 66.7 (163.3)At 31 December 2011:Sterling 2.1 (0.4) 1.7US Dollar (372.0) 22.7 (349.3)Euro (15.2) 16.3 1.1Other 21.2 3.6 24.8Total (363.9) 42.2 (321.7)The interest rates on Sterling, US Dollar, Euro and other floating rate financial assets are linked to the relevant bank base rates.Annual Report and Accounts 2012 Pace plc 63

Financial StatementsNotesContinued19 Derivatives and other financial instruments continued(b) Currency exposuresThe table below shows the Group’s currency exposures that give rise to the net currency gains and losses recognised in the incomestatement. Such exposures comprise the monetary assets and monetary liabilities of the Group which are not denominated in theoperating or functional currency of the operating unit involved.Functional currency of Group operationAt 31 December 2012:Net foreign currency monetary assets/(liabilities)Sterling US Dollar Euro Other Total$m $m $m $m $mSterling — 1.2 2.8 — 4.0US Dollar 29.6 — 35.8 1.2 66.6Euro (0.3) (13.9) — (0.1) (14.3)Other 1.0 (8.4) (0.1) — (7.5)Total 30.3 (21.1) 38.5 1.1 48.8At 31 December 2011:Sterling — 0.3 1.4 (0.1) 1.6US Dollar (5.9) — 32.3 (0.3) 26.1Euro 2.8 (33.4) — (0.1) (30.7)Other — (4.9) — — (4.9)Total (3.1) (38.0) 33.7 (0.5) (7.9)(c) Gains and losses on currency derivativesThe majority of the Group’s production costs are denominated in US Dollars. The Group endeavours to obtain as much of its incomeas possible in US Dollars. The Group’s policy is to hedge forward progressively against movements in the value of foreign currencies,in respect of cash receipts and payments expected from transactions over the next twelve months.Outstanding currency derivatives:Sell Buy Principal Averagecurrency currency amount rate MaturityAt 31 December 2012 US Dollar GBP $20.4m 0.63 Mar 13 – Aug 13Euro US Dollar $99.9m 1.29 Jan 13 – Dec 13US Dollar Euro $3.9m 0.76 Jan 13At 31 December 2011 US Dollar GBP $101.9m 0.64 Jan 12 – Dec 12Euro US Dollar $105.5m 1.35 Jan 12 – Nov 12The Group’s derivatives contracts qualify for hedge accounting and have a fair value at the balance sheet date of $(1.3) million(2011: $4.5 million).(d) Credit riskThe Group’s credit risk is primarily attributable to its trade debtors. Credit risk is managed by monitoring the aggregate amountand duration of exposure to any one customer depending upon their credit rating. The Group does not require collateral in respectof financial assets. There were no significant impairments in the periods under review.64Annual Report and Accounts 2012 Pace plc

19 Derivatives and other financial instruments continued(d) Credit risk continuedExposure to credit riskThe carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at thereporting date was:2012 2011Carrying amount $m $mTrade receivables 514.1 369.8Cash and cash equivalents 74.7 48.7Forward exchange contracts used for hedgingAssets 0.4 4.8589.2 423.3The maximum exposure to credit risk for receivables at the reporting date by geographic region was:2012 2011Carrying amount $m $mDomestic 121.6 94.9Euro-zone countries 24.0 24.0United States 293.2 195.1Other regions 75.3 55.8514.1 369.8The credit risk on liquid funds is limited because counterparties are banks with high credit ratings. At each balance sheet datethere was no significant concentration of credit risk, other than those customers with revenues in excess of 10% of the Group’stotal revenues, as explained in Note 3.Of the trade receivables at 31 December 2012, 92% were within terms (2011: 94%). Of the balance 7% were less than 30 days pastdue, with the remaining amounts over 30 days due (2011: 4% less than 30 days past due). There were no material bad debtsprovisions deemed necessary against such balances, in the current or preceding years.(e) Liquidity riskThe Group manages liquidity risk by maintaining adequate cash balances and banking facilities, continuously monitoring forecastand actual cash flows and matching the maturity profiles of financial assets and liabilities.Annual Report and Accounts 2012 Pace plc 65

Financial StatementsNotesContinued19 Derivatives and other financial instruments continued(e) Liquidity risk continuedThe following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impactof netting arrangements:At 31 December 2012:Non-derivative financial liabilitiesCarrying Contractual 6 months 6–12 1–2 2–3 3–4amount cash flows or less months years years years$m $m $m $m $m $m $mTrade and other payables within one year 631.8 (631.8) (631.8) — — — —External borrowings 238.0 (247.8) (40.3) (39.9) (167.6) — —Derivative financial liabilitiesForward exchange contracts used for hedgingOutflow (1.3) (124.1) (82.7) (41.4) — — —Inflow — 122.8 81.7 41.1 — — —Total 868.5 (880.9) (673.1) (40.2) (167.6) — —At 31 December 2011:Non-derivative financial liabilitiesTrade and other payables within one year 373.5 (373.5) (373.5) — — — —External borrowings 370.4 (393.6) (42.6) (42.0) (82.5) (226.5) —Deferred consideration 15.7 (15.7) (15.7) — — — —Derivative financial liabilitiesForward exchange contracts used for hedgingOutflow — (207.4) (128.8) (78.6) — — —Inflow 4.5 211.9 131.3 80.6 — — —Total 764.1 (778.3) (429.3) (40.0) (82.5) (226.5) —It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.The directors have considered the periods in which the cash flows associated with derivatives that are cash flow hedges are expectedto occur, together with the timing of impact on profit or loss, and have determined that the timings are as disclosed in the above table.(f) Sensitivity analysisIn managing interest rate and currency risks the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings.The directors consider that a change of 100 basis points in interest rates during a twelve-month period would have a $0.8 millionimpact on cash flows (2011: $0.9 million).The Group’s key foreign exchange exposures are in respect of the Euro and Sterling. A 1% strengthening in the US Dollar againstthese would have an adverse impact of $0.2 million (2011: $0.9 million) on the profit reported in the year ended 31 December 2012and an adverse impact of $4.7 million (2011: $4.4 million) on equity.66Annual Report and Accounts 2012 Pace plc

19 Derivatives and other financial instruments continued(g) Capital managementCapital risk managementThe Group and Company manage their capital, being the net assets base, to ensure their ability to continue as a going concernand to maintain an optimal capital structure to reduce the cost of capital. The capital structure of the Group and Company comprisesequity attributable to equity holders of Pace plc, consisting of issued ordinary share capital, reserves and retained earnings as disclosedin Notes 21, 22 and 24 and cash and cash equivalents and borrowings as disclosed in Note 18.The Group and Company maintain or adjust their capital structure through the payment of dividends to shareholders, issue of newshares and buy-back of existing shares and issuing new borrowings or repaying existing borrowings.Note 21 to the Financial Statements provides details regarding the Company’s share capital and movements in the period.There were no breaches of any requirements with regard to any relevant conditions imposed by either the UKLA or the Company’sarticles of association during the periods under review.Details of the Company’s facilities are given in Note 18. Such facilities are subject to certain financial performance covenants.There have been no breaches of these covenants in the period under review.(h) Fair valueFair value versus carrying amountsThe directors have considered the fair values of financial assets and liabilities and have determined that these are not materiallydifferent from the carrying amounts shown in the Group balance sheet.Fair value hierarchyThe Group’s financial instruments, namely forward exchange contracts, have been determined to represent Level 2 instruments(characterised by the existence of quoted prices (unadjusted) in active markets for identical assets or liabilities).(i) Exchange ratesThe following significant exchange rates applied during the year:Average rateSpot rate2012 2011 2012 2011Euro 1.28 1.39 1.32 1.31Sterling 1.58 1.61 1.62 1.55Annual Report and Accounts 2012 Pace plc 67

Financial StatementsNotesContinued20 ProvisionsRoyaltiesunder negotiation Warranties Other TotalGroup $m $m $m $mAt 31 December 2010 15.0 45.1 26.7 86.8Net charge for the year 8.1 14.7 11.9 34.7Utilised (2.9) (24.7) (8.5) (36.1)Transfer 0.6 — 0.1 0.7Exchange adjustments — 0.7 0.2 0.9At 31 December 2011 20.8 35.8 30.4 87.0Net charge for the year 8.5 21.0 5.2 34.7Utilised (2.4) (18.9) (26.3) (47.6)Transfer — 1.6 — 1.6Exchange adjustments 0.6 0.5 0.4 1.5At 31 December 2012 27.5 40.0 9.7 77.2Due within one year — 18.9 6.8 25.7Due after one year 27.5 21.1 2.9 51.5Royaltiesunder negotiation Warranties Other TotalCompany $m $m $m $mAt 31 December 2010 13.4 24.8 15.5 53.7Net charge for the year 3.6 11.6 — 15.2Utilised (2.9) (18.0) — (20.9)Exchange adjustments — — 0.2 0.2At 31 December 2011 14.1 18.4 15.7 48.2Net charge for the year 5.6 13.2 4.0 22.8Utilised (1.8) (9.2) (15.7) (26.7)Transfer — (0.5) — (0.5)At 31 December 2012 17.9 21.9 4.0 43.8Due within one year — 8.1 4.0 12.1Due after one year 17.9 13.8 — 31.7Royalties under negotiationThe owners of patents covering technology allegedly used by the Group have indicated claims for royalties relating to the Group’suse (including past usage) of that technology. Negotiations over these liabilities continue for long periods of time. The directors havemade provision for the potential royalties payable based on the latest information available. Having taken legal advice, the Boardconsiders that there are defences available that should mitigate the amounts being sought. The Group will vigorously negotiateor defend all claims but, in the absence of agreement, the amounts provided may prove to be different from the amounts at whichthe potential liabilities are finally settled.Given the nature of the claims it is not possible to be more specific with regard to the timing of outflows.68Annual Report and Accounts 2012 Pace plc

20 Provisions continuedRoyalties under negotiation continuedThe directors consider that to disclose the amounts unused following the negotiation of royalty claims during the year would beseriously prejudicial to other royalty claims under negotiation, in litigation or dispute. Accordingly the directors have aggregatedamounts released unused with additional provisions made in order to arrive at the net charge for the year shown on page 68.Other provisionsOther provisions mainly relate to retirement and exceptional restructuring provisions within the Group, along with certain other provisions.WarrantiesPace provides product warranties for its STBs and Gateways from the point of sale and a provision for warranties is recognisedwhen the underlying products are sold. The provision is based on historical warranty data, principally historical failure rates andrelated cost of repair information and a weighting of all possible outcomes against their associated probabilities. The level of warrantyprovision required is reviewed on a product by product basis and provisions adjusted accordingly in the light of actual performance.Although it is difficult to make accurate predictions of potential failure rates or the possibility of an epidemic failure, as a warrantyestimate must be calculated at the outset of product shipment before field deployment data is available, these estimates improveduring the lifetime of the product in the field.The directors consider that to disclose the amounts unused following the settlement of warranty claims during the year would beseriously prejudicial to other claims under negotiation. Accordingly the directors have aggregated amounts released unused withadditional provisions made in order to arrive at the net charge for the year shown on page 68.It is expected that the expenditure with regard to warranties will be incurred within five years of the balance sheet date.21 Share capital2012 2011Number $m Number $mAuthorisedOrdinary shares of 5 pence each 500,000,000 38.8 500,000,000 38.8Allocated, called up and fully paidOrdinary shares of 5 pence each 309,842,308 28.7 305,046,066 28.3The ordinary share capital of Pace plc is designated in Sterling.Annual Report and Accounts 2012 Pace plc 69

Financial StatementsNotesContinued21 Share capital continuedDuring the year, the Company also allotted ordinary shares as follows:Nominal value ConsiderationNumber $000 $000Employee share option plan (67.0 pence) 425,896 36 485Employee share option plan (74.0 pence) 701,365 60 882Employee share option plan (128.0 pence) 6,251 1 14Employee share option plan (154.0 pence) 780 — 2Employee share option plan (172.0 pence) 846 — 1Employee share option plan (15.75 pence) 140,000 12 159Employee share option plan (85.5 pence) 1,773,736 151 2,578Employee share option plan (51.0 pence) 60,000 5 52Employee share option plan (58.75 pence) 98,999 8 99Employee share option plan (75.0 pence) 803,818 68 1,024Employee share option plan (73.25 pence) 546,075 46 680Employee share option plan (47.0 pence) 182,560 16 146Employee share option plan (135.6 pence) 55,916 5 1294,796,242 408 6,251There are no special rights or obligations attaching to the ordinary shares and there are no shares in the Company with specialrights with regard to control of the Company. The Articles of Association of the Company may be amended by special resolutionof the Company’s shareholders.The Company’s Articles of Association provide that the Company may refuse to transfer shares in the following customarycircumstances: where the share is not a fully paid share; where the Company has a lien; where the share transfer has not beenduly stamped with correct amount of stamp duty; where the transfer is in favour of more than four joint transferees; where the shareis a certified share and is not accompanied by the relevant share certificate(s) and such other evidence as the Board of Directorsmay reasonably require to prove the title of the transferor; or where the instrument of transfer is in respect of more than one classof share. These restrictions are in addition to any which are applicable to all UK listed companies imposed by law or regulation.The Notice of the Annual General Meeting specifies deadlines for exercising voting rights and appointing a proxy or proxies to votein relation to resolutions to be passed at the Annual General Meeting. All proxy votes are counted and numbers for, against orwithheld in relation to each resolution are announced at the Annual General Meeting and published on the Company’s websiteafter the meeting.At the Annual General Meeting to be held on 24 April 2013, shareholders will be asked to renew the directors’ power to allot sharesand buy back shares in the Company and to renew the disapplication of pre-emption rights.The Company is not aware of any agreements between shareholders which may result in restrictions on the transfer of securitiesand/or on voting rights.There are no significant agreements to which the Company is a party that may take effect, alter or terminate upon a change ofcontrols following a takeover bid other than in relation to: (i) employee share plans; and (ii) the Company’s borrowings, whichwould become repayable on a takeover being completed.70Annual Report and Accounts 2012 Pace plc

21 Share capital continuedThe Company’s Articles of Association provide that: (i) all directors must stand for election at the first Annual General Meetingafter having been appointed to the Board; and (ii) at each Annual General Meeting, one-third of the directors who are subjectto retirement by rotation must retire from office and may seek re-election. The Articles set out the procedure for determiningthe identity of the directors to retire at a particular Annual General Meeting.Shares in the Company are held in the Pace plc Employee Benefit Trust (the Trust) for the purpose of satisfying awards madeunder the Company’s employees’ share plans. The Trustees of the Trust may exercise the voting rights attaching to shares heldin the Trust in respect of which the beneficial interest has not vested in any beneficiary provided that they are satisfied that to doso is in the beneficiaries’ interests. The Trustees have waived their right to vote in respect of any such shares held above 5%.The Company has granted options which are subsisting (including directors’ options) and contingent share awards in respectof the following presently unissued ordinary shares of 5 pence each.Price per shareNumber of ordinary shares subject to option Exercise period (pence)131,992 1 June 2013 to 30 November 2013 154.0264,121 1 June 2014 to 30 November 2014 128.01,322,884 1 June 2015 to 30 November 2015 62.0598,295 3 June 2013 to 6 September 2013 58.020,000 26 August 2004 to 25 August 2013 51.0303,000 2 October 2009 to 1 October 2016 58.7550,000 19 February 2010 to 18 February 2017 69.5120,000 1 November 2010 to 31 October 2017 97.75687,334 24 June 2011 to 23 June 2018 85.5565,497 24 June 2011 to 23 June 2013 85.5154,233 24 June 2012 to 23 June 2014 85.586,675 24 June 2012 to 23 June 2018 85.5200,000 18 December 2012 to 17 December 2018 47.0201,519 11 March 2013 to 10 March 2019 75.0993,159 11 March 2012 to 10 March 2019 75.0501,882 30 July 2012 to 29 July 2019 199.251,767,795 8 March 2013 to 7 March 2020 176.7176,735 8 March 2014 to 7 March 2020 176.7150,000 14 April 2013 to 13 April 2020 196.891,346 7 September 2013 to 6 September 2020 208.090,000 17 March 2014 to 16 March 2021 165.8100,000 23 April 2015 to 22 April 2022 70.550,000 19 June 2015 to 18 June 2022 91.7550,000 19 June 2016 to 18 June 2022 91.75100,000 26 July 2015 to 25 July 2022 135.5100,000 11 October 2015 to 10 October 2022 160.0338,810 31 May 2014 – contingent share award 5.0600,000 31 May 2014 – contingent share award 5.09,815,277The Pace plc Employee Benefits Trust has granted options over existing shares to satisfy certain options. Details of theseadditional options are shown in Note 24.Annual Report and Accounts 2012 Pace plc 71

Financial StatementsNotesContinued22 Share premium accountGroup and Company $mAt 31 December 2011 73.1Premium on allotments 5.9At 31 December 2012 79.0The shares allotted during the year are listed in Note 21.23 Merger reserveGroup and Company $mAt 31 December 2011 and 31 December 2012 109.9The merger reserve was created upon the acquisition of the STB and connectivity solutions business of Royal Philips Electronics.24 Retained earningsGroup $mAt 31 December 2011 245.0Retained profit for the year 58.4Dividends to equity shareholders (12.3)Employee share incentive charges 7.9At 31 December 2012 299.0Company $mAt 31 December 2011 235.8Retained profit for the year 14.2Dividends to equity shareholders (12.3)Employee share incentive charges 7.9At 31 December 2012 245.6Own shares heldAt 31 December 2012, the Pace plc Employee Benefit Trust held 4,414,363 (2011: 9,744,470) shares in the Company which cost$12.2 million (2011: $16.0 million). These shares are held to satisfy options granted to employees.The amounts arising on settlement of share options from the employee share trust represents cash receipts from the exerciseof relevant share options.72Annual Report and Accounts 2012 Pace plc

24 Retained earnings continuedOwn shares held continuedThe Pace plc Employee Benefit Trust has granted options and contingent share awards to employees (including directors’ options)over ordinary shares of 5 pence each as follows:Price per shareNumber or ordinary shares subject to option Exercise period (pence)164,988 26 August 2004 to 25 August 2013 51.0105,000 17 August 2005 to 16 August 2014 51.038,829 2 October 2009 to 1 October 2016 58.8962,290 4 April 2014 to 3 April 2021 153.51,763,330 14 March 2014 to 13 March 2021 69.8814,285 14 March 2015 to 13 March 2022 91.03,848,722The Pace plc Employee Benefit Trust holds the following shares to satisfy the International Performance Share Plan, PerformanceShare Plan, Deferred Share Bonus and Share Award Plans operated by the Company:Number or ordinary shares subject to optionExercise period332,410 26 February 2012 to 25 February 20202,446,115 8 March 2013 to 7 March 202056,126 7 September 2013 to 6 September 20203,110,603 4 April 2014 to 3 April 2021635,765 18 March 2012 to 17 March 20141,032,609 28 February 2013 to 27 February 2021456,004 29 February 2014 to 28 February 20224,847,482 14 March 2015 to 14 March 202222,745 26 July 2015 to 25 July 202212,939,85925 Profit for the yearThe parent Company has taken advantage of Section 408 of the Companies Act 2006 and has not included its own incomestatement in these Financial Statements. The Group profit includes a parent Company profit after tax of $14.2 million(2011: profit after tax of $107.3 million).26 Capital commitments2012 2011Group and Company $m $mContracted but not provided for 1.1 2.0Annual Report and Accounts 2012 Pace plc 73

Financial StatementsNotesContinued27 Employee benefitsPension plansThe Group contributes to several defined contribution Group Personal Pension Plans, which all executive directors andemployees are entitled to join. The total expense relating to these plans in the current year was $5.9 million (2011: $5.2 million).At 31 December 2012 contributions of $Nil (2011: $Nil) were outstanding.Share-based paymentsDetails of the Company’s share option plans are included in Notes 21 and 24 and the Directors’ Remuneration Report. The numberand weighted average exercise price of share options is as follows:WeightedWeightedaverageaverageexercise Number exercise Numberprice of options price of options2012 2012 2011 2011Outstanding at the beginning of the period 165.6c 18,203,949 176.2c 16,240,965Granted during the period 121.7c 3,194,644 187.1c 5,629,830Forfeited during the period 205.9c (3,747,162) 271.4c (3,073,283)Exercised during the period 120.6c (4,926,242) 121.6c (593,563)Outstanding at the end of the period 171.1c 12,725,189 165.6c 18,203,949Exercisable at the end of the period 146.6c 4,090,597 119.8c 5,874,980Of the share options exercised during the year 130,000 were issued by the Pace plc Employee Benefit Trust (2011: Nil).Outstanding options were as follows:Weighted averageremainingNumber at contractual life Weighted averageRange of exercise prices (pence) 31 December 2012 months exercise price47 pence – 75 pence 5,861,004 91 107c85.5 pence – 97.75 pence 2,528,024 82 144c128 pence – 208 pence 4,336,161 58 278c12,725,189 78 172cThe weighted average exercise price of options granted in the period was 121.7 cents (2011: 187.1 cents).The weighted average fair value at the measurement date of options granted in the year was 57.1 cents (2011: 72.3 cents).The weighted average exercise price at the date of exercise for options exercised in the year was 120.6 cents (2011: 121.6 cents).The weighted average share price during the year was 202.8 cents (2011: 291.4 cents).The fair value of services received in return for share options granted are measured by reference to the fair value of share optionsgranted. The estimate of the fair value of the services received is measured based on a Black-Scholes model. The following tablegives the assumptions applied to the options granted in the respective periods shown. Expectations of early exercise areincorporated into the model, where appropriate.2012 2011Average share price (cents) 202.3c 191.9cWeighted average exercise price (cents) 172.0c 165.6cExpected volatility (%) 50% 50%Option life (years) 10 10Dividend yield (%) 1.4% 1.4%Risk free interest rate (%) 5.0% 5.0%The expected volatility is based on the historic volatility (calculated based on the weighted average remaining life of the shareoptions), adjusted for any expected changes to future volatility due to publicly available information.The charge for share-based payments is $7.9 million (2011: $7.8 million) which is comprised entirely of equity settled transactions.74Annual Report and Accounts 2012 Pace plc

28 Leasing commitmentsTotal amounts payable under non-cancellable operating lease rentals are as follows:Land and buildingsGroupCompany2012 2011 2012 2011$m $m $m $mWithin one year 8.6 9.2 1.1 1.2Between two and five years 23.5 24.1 2.3 4.8In five years of more 6.2 9.6 — —38.3 42.9 3.4 6.029 Related partiesIdentity of related partiesThe Group has a related party relationship with its subsidiaries and with its directors.Transactions with subsidiariesThe main transactions between the Company and its subsidiaries consist mainly of payments by the Company for distribution,engineering and administrative support services provided by Pace Americas Inc, Pace France and Pace Micro Technology (India)Private Limited. Total transactions of $1,224.6 million were made in the year (2011: $759.5 million).The amounts due to and from these subsidiaries are shown within Notes 16 and 17.Transactions with key management personnelKey management of the Group is through the executive directors of the Company. The main transactions with these individualsare disclosed in the Directors’ Remuneration Report on pages 23 to 30.Of the share-based payments charge of $7.9 million (2011: $7.8 million) made in the period, 19% (2011: 42%) relates to optionsgranted to the executive directors.30 Free cash flow and cash investment in acquisitions2012 2011$m $mFree cash flowCash generated from operations 297.6 150.0Tax paid (23.8) (29.7)Purchase of property, plant and equipment (22.6) (41.5)Development expenditure (57.4) (57.0)Net interest paid (11.1) (13.6)Free cash flow 182.7 8.2Cash investment in acquisitions in the year2012 2011$m $mAcquisition of subsidiaries, net of cash acquired (15.7) (6.4)Cash investment in acquisitions in the year (15.7) (6.4)31 Post balance sheet eventsThere are no significant or disclosable post balance sheet events.Annual Report and Accounts 2012 Pace plc 75

Financial StatementsDirectors, Secretary and AdvisersDIRECTORSAll of Victoria Road, Saltaire BD18 3LF, EnglandAllan LeightonMike PulliRoddy MurrayPatricia Chapman-PincherJohn GrantMike InglisAmanda MeslerNon-executive ChairmanChief Executive OfficerChief Financial OfficerNon-executive DirectorNon-executive DirectorNon-executive DirectorNon-executive DirectorAUDITORSKPMG Audit Plc1 The EmbankmentNeville StreetLeeds LS1 4DWREGISTRARSCapita Registrars LtdThe Registry134 Beckenham RoadBeckenhamKent BR3 4TUCOMPANY SECRETARYAnthony DixonREGISTERED AND HEAD OFFICEVictoria RoadSaltaire BD18 3LFEnglandSTOCKBROKERSJefferies Hoare GovettVintners Place68 Upper Thames StreetLondon EC4V 3BJJP Morgan Cazenove25 Bank StreetCanary WharfLondon E14 5JPREGISTERED NUMBER0167284776Annual Report and Accounts 2012 Pace plc

Financial StatementsFive Year Record and Shareholder InformationFive year recordYear Year Year Year Yearended ended ended ended ended31 31 31 31 31December December December December December2012 2011 2010 2009 2008$m $m $m $m $mRevenue 2,403.4 2,309.3 2,062.9 1,779.6 1,371.7Profit before tax 80.1 54.7 110.2 109.8 25.4Adjusted EBITA 158.1 141.4 160.6 120.0 53.7Profit after tax 58.4 38.8 77.3 80.8 20.4Basic EPS 19.4c 13.2c 26.4c 27.8c 7.4cBasic adjusted EPS 35.1c 29.7c 37.1c 30.3c 14.4cTotal equity 460.1 407.1 375.9 315.9 264.8Shareholder informationAnnual General MeetingThe Company’s Annual General Meeting will be held on 24 April 2013 at the Company’s head office, Victoria Road, Saltaire,West Yorkshire BD18 3LF.Capita RegistrarsEnquiries regarding shareholdings, change of address or other particulars should be directed in the first instance to theCompany’s Registrars, Capita Registrars Ltd, The Registry, 134 Beckenham Road, Beckenham, Kent BR3 4TU, or by telephoneon 0871 664 0300. They also provide a range of online shareholder information services at www.capitashareportal.com whereshareholders can check their holdings and find practical help on transferring shares or updating their details.Multiple accounts on the shareholder registerIf you have received two or more copies of this document, this means that there is more than one account in your name on theshareholder register. This may be caused by either your name or address appearing on each account in a slightly different way.For security reasons, the Registrars will not amalgamate the accounts without your consent. If you would like any multipleaccounts combined into one account, please write to Capita Registrars at the address given above.Unsolicited mailThe Company is obliged by law to make its share register available upon request to the public and to other organisations, which mayuse it as a mailing list, resulting in shareholders receiving unsolicited mail. Shareholders wishing to limit the receipt of such mailshould write to the Mailing Preference Service, DMA House, 70 Margaret Street, London W1W 8SS, or call +44 (0) 20 7291 3310for an application form or visit www.mps-online.org.uk.Pace websiteShareholders are encouraged to visit our website, www.pace.com, which has a wealth of information about the Company.Annual Report and Accounts 2012 Pace plc 77