Final Results

ARC International Plc
                  

 ARC International plc Announces Unaudited Preliminary Results for the
Year Ended 31 December 2005; Industry Continues Its Adoption of ARC's Patented
                        Configurable Technology

ARC International (LSE:ARK), the world leader in configurable CPU/DSP processor
cores and application subsystems, today announced its unaudited financial
results for the full year ended 31 December 2005.

Highlights for the Year Ended 31 December 2005:

    --  Shift in revenue mix continued

        --  At least 70% of core processor revenues came from new
            products

        --  The company received no revenue from its peripherals
            business, which was sold in 2004

    --  Larger customer agreements, and longer sales cycles for ARC's
        new products

        --  7 contracts (valued at GBP 2 million+) were still in
            negotiations at the end of year 2005

        --  3 have closed, others are imminent for 1H 2006

        --  Year-end 2005 contractual backlog grew to GBP 1.3 million
            from GBP 0.2 million

    --  Delay in release of the ARC(TM) Video Subsystem

        --  Growth in processor revenue was less than expected

        --  ARC will launch the Video Subsystem on Monday, 20 February
            2006

    --  Result: 14% decline in overall year-on-year revenue

        --  GBP 10.5 million overall revenues compared to GBP 12.2
            million in 2004 (GBP 10.9 million on a comparable basis,
            excluding GBP 1.3 million from the company's peripherals
            business sold in 2004)

        --  Net loss improved to GBP 4.3 million from GBP 5.1 million

Commenting on the company's performance, Carl Schlachte, president and chief
executive officer, said, "During the past twelve months, we continued to make
progress toward achieving our strategic goals. Year on year, processor and
subsystem licensing agreements increased, and our newer products grew as a
percentage of overall processor contracts. Median deal size for the new product
lines was up, and the strong backlog now provides a solid foundation for the
company as we enter a new financial year. While there are promising indicators
of ARC's progress, the board is not satisfied with the 2005 financial results.

During the year, many customers continued the trend of making larger commitments
to ARC. This resulted in extended evaluation periods and payment terms, which
pushed the completion of a number of agreements into the first quarter of 2006.
The official introduction of ARC's Video Subsystem was delayed to the first
quarter of 2006. For 2006, management will increase its efforts to grow the top
line by expanding ARC's customer base globally. We will deliver our new products
in time to meet customer requirements; the Video Subsystem will be launched on
20 February 2006."

Commenting on the financial results, Victor Young, chief financial officer,
said, "We experienced a delay in closing several license opportunities and the
launch of the Video Subsystem product. GBP 1.3 million of revenue from our
discontinued peripherals business, which we sold in 2004, was not replaced.
However, demand for our new products is evident in the increase in our backlog
and sales pipeline. Costs were in line with plan, and we will look for
opportunities to reduce certain expenses in 2006 through improved processes and
controls. A reduction in headcount of 7% was initiated in January 2006."

Statement from the President and Chief Executive Officer

Overview

Throughout calendar year 2005, the semiconductor market continued its rapid
adoption of configurable technology. This trend was driven, in part, by a growth
of consumer applications requiring low cost, highly optimised solutions that are
protected from cloning and piracy. As the leader in configurability, ARC
benefited from the market's increasing appetite for our products. We added new
companies to the community of ARC licensees and crossed the 100th customer
milestone faster than any of our competitors.

ARC grew its position as the technology-of-choice for multimedia applications:
the ARC Sound Subsystem continued to attract interest from customers; we
announced a program providing early access to companies interested in our Video
Subsystem and disclosed details of the product.

The Age of Configurability

Chip designers throughout the worldwide semiconductor industry are adopting
configurability at a rate faster than that of fixed architecture technology.
According to Semico Research Corporation of Arizona, chips incorporating a
configurable 32-bit core will grow at a 45% compound annual growth rate (CAGR)
between 2003 and 2009, compared to a CAGR of less than 10% for chips
incorporating a 32-bit fixed processor. Together with ARC's improving image in
the embedded industry, this trend helped ARC surpass the 100 customer milestone
in 2005. Customers that adopted ARC's configurable products for their
next-generation chips included:

    --  ChipX, Inc. -- is bringing the power of ARC's patented configurable CPU
        technology to a high-growth embedded market. ChipX will use an ARC core
        to create new, customer-specific chip with an on-board processor.

    --  SiPORT, Inc. -- has taken a license for multiple configurable CPU and
        DSP cores from ARC. After an extensive evaluation of several
        configurable core vendors, SiPORT chose ARC because of our leadership
        position in the embedded IP market and the cost savings ARC's
        configurable technology provides SoC developers.

    --  Undisclosed satellite chip provider -- a major U.S. defense contractor
        has taken a license for a configurable ARC processor core. The aerospace
        contractor will use the ARC CPU to develop a radiation hardened
        semiconductor chip that will handle data encryption functions for a U.S.
        government satellite. The contractor is a leading developer and
        manufacturer of cryptographic microcircuits used in applications such as
        space communications for ground and flight units and the President's
        White House "red phone."

    --  Undisclosed smart card technology provider -- a leading smart card
        technology company has signed an agreement that gives it wide-ranging
        access to ARC's patented configurable technology.

Multimedia Market Leadership

There is an explosion of devices delivering audio and video content to
consumers. This is fuelling demand from design companies for an integrated
multimedia solution that meets the cost and functional requirements of a range
of media rich applications. ARC predicted the market need for audio and video
solutions, and for close to two years our engineering team has been developing
products that meet the stringent needs of these next-generation multimedia
devices.

Today, ARC is the only embedded IP company offering pre-verified, configurable
multimedia subsystems to customers servicing this high-growth market. We already
are seeing healthy demand for our solutions. For the first time in ARC's
history, licensees are committing to a product that has yet to ship to market --
the ARC Video Subsystem, which will be officially introduced next week.

For years ARC's configurable processors have enabled chips with media-rich
features. ARC's patented configurable technology allows customers to create low
cost devices that are highly optimized to a wide range of applications.
Customers that announced in 2005 they were using ARC's products for multimedia
devices included:

    --  Altek Labs -- an ARC licensee since 2003, Altek announced that they have
        extended their license for ARC's configurable products by taking a new
        license for use in Altek's next-generation digital still camera (DSC)
        chip. The company's previous ARC-Based(TM) DSC design is shipping to
        market with multiple ARC cores.

    --  Chips & Media, Inc. -- has taken a license for an ARC core for use in a
        new MPEG2 codec design. Targeted at high volume set-top box
        applications, Chips & Media selected the ARC processor because it is
        smaller, consumes less power and provides up to twice the MHz
        performance than competitive cores.

    --  Skymedi Corporation -- a provider of multimedia flash memory
        controllers, Skymedi has taken a license for the ARC Sound Subsystem for
        their next-generation controllers. After a thorough review of available
        audio solutions, Skymedi found the ARC Sound Subsystem and ARC's
        comprehensive Media Subsystem roadmap to be the industry's superior
        multimedia solution.

Fuelling Innovation through Configurability

During the financial year 2005, ARC continued to develop new and innovative
products based upon our configurable technology. We introduced new capabilities
for the 600 and 700 core families, and an award-winning media-processing engine
that will be incorporated into the upcoming ARC Video Subsystem. Announcements
during this time of customers using ARC's processors to create leading-edge
products included:

    --  Aarohi Communications -- an ARC licensee since 2002, Aarohi will use a
        new ARC core in its next-generation Intelligent Storage Component.
        Aarohi's current ARC-Based processor recently won the Network Storage
        Conference's 'Interconnect Product of the Year' award and incorporates
        multiple configurable ARC cores.

    --  Conexant Systems, Inc. -- is using a configurable ARC processor in new
        chipsets for multi-function printing and copying devices. Conexant's
        multi-function peripheral semiconductor line targets high volume,
        consumer applications incorporating printer/scanner/copier/fax
        solutions.

    --  IPWireless, Inc. -- a leader in the development of very high performance
        packet-based wireless networks, IPWireless has taken a license for the
        configurable ARC processor for use in their latest chip. It will be part
        of the company's next generation broadband wireless devices, and the
        third in a series of successful ARC-Based designs from IPWireless.

    --  Upek, Inc. -- an innovative developer of biometric fingerprint
        solutions, UPEK is using a configurable ARC processor in its successful
        line of TouchStrip(TM) sensors. The ARC-Based TouchStrip product line is
        shipping to ODMs and OEMs globally in applications such as laptop
        computers, mobile phones and flash drives.

Bringing Configurability to Asia

Asia represents one of the fastest growing semiconductor markets. Increasing our
penetration of this region is key to ARC's overall growth strategy, and during
2005 we made significant progress toward achieving this goal. In the past twelve
months, ARC took a number of steps to establish demand for its configurable
cores and subsystems throughout Japan, Korea and Taiwan. As a result, revenue
from Asia was higher than any point in the company's history. Companies that
helped ARC bring its patented configurable products to Asia in 2005 included:

    --  Global Unichip Corporation (GUC) -- a full-service SoC design company
        based in Taiwan, GUC announced a partnership with ARC that will speed
        time to market for Greater China's increasing number of fabless startup
        companies. GUC will provide ARC Sound Subsystem licensees a range of
        services. It will be part of the GUC product library and available to
        GUC customers, but sold by ARC's sales force.

    --  Kogent, Inc. -- in an effort designed to expand market share of Japan's
        consumer electronics industry, ARC signed an agreement with Kogent to
        help promote ARC's configurable cores and subsystem products to new
        customers in Japan. Kogent also will serve as the local distributor for
        ARC's embedded software products.

    --  Maojet Technology Corporation -- was appointed ARC's third party sales
        representative for Greater China. Maojet is a leading distributor in
        Taiwan, and will assist ARC's local sales force with developing
        strategic relationships with Taiwan's design-services companies and
        foundries.

    --  MiSPO -- a leading supplier of operating system technology used in
        Japanese devices, MiSPO announced that they have ported their product to
        ARC's configurable architecture.

    --  Nippon SystemWare Company, Ltd. (NSW) -- one of Japan's leading design
        services firms, NSW will offer design services for ARC's products and
        provide software distribution services to ARC's licensees in Japan. NSW
        extends the reach and appeal of ARC-Based technology with tier-one
        system OEMs and semiconductor companies throughout Japan.

    --  Semiconductor Manufacturing International Corporation (SMIC)

        --  one of the leading semiconductor foundries in the world, SMIC
            entered into a strategic partnership that will bring the benefits of
            ARC's patented configurable technology to mainland China. SMIC, the
            first announced China-based foundry providing services to ARC
            licensees, will offer one-stop design and manufacturing capabilities
            for ARC's configurable processor technology.

Partnerships with Best-in-Class Companies

To help ensure ARC provides more of a total solution to customers without
dramatically increasing our research and development costs, ARC is working with
industry leaders within the electronic design automation (EDA), embedded
software tools and consumer applications industries. Below is a list of some of
the third party partners who announced relationships and solutions with ARC
during calendar year 2005:

    --  Cadence Design Systems -- one of the world's largest EDA companies,
        Cadence signed an agreement with ARC that will increase collaboration
        between the two companies. Cadence's designers are working closely with
        ARC's engineering team to simplify the design process for ARC's
        customers using Cadence tools.

    --  Corelis Corporation -- a provider of emulation and debugging
        technologies, Corelis ported their debugger product to ARC's
        configurable 600 and 700 core families. Now ARC customers have access to
        industry-leading high speed debug technology, which will assist in the
        development of "right first time" design with ARC's processors.

    --  Express Logic, Inc. -- the leader in royalty-free real time operating
        system (RTOS), Express Logic announced they have ported their operating
        system to the ARC 700 family of configurable processors. All Express
        Logic products now support the ARC 600 and ARC 700 core families.

    --  Fraunhofer Institute -- announced a wide-ranging partnership with ARC
        that expands Fraunhofer's use of configurable processors. The
        partnership with ARC will further Fraunhofer's development and
        commercialization of consumer products based on Digital Video Broadcast
        Handheld (DVB-H) technology.

    --  Green Hills Software, Inc. -- a technology leader in embedded software
        development tools and RTOS, Green Hills announced the next step in an
        expanding partnership with ARC. Now, enhanced versions of Green Hills'
        products are available for the ARC 600 and 700 families of configurable
        processors.

    --  Sonic Network, Inc. -- is a worldwide provider of audio synthesis
        technology to the handheld consumer device and musical instrument
        markets. Sonic Network's Embedded Audio Synthesis (EAS(TM)) technology
        is now available for the ARC Sound Subsystem. EAS is ideal for designers
        of high volume mobile devices where low power consumption and a small
        memory footprint are critical to developing cost-effective applications.

    --  Tao Group -- using Tao's intent Java(TM) platform, an ARC core achieved
        the best performance-to-power ratio of any 32-bit processor in the
        embedded industry. With the ARC/Tao Java solution, designers now can
        create portable consumer devices that achieve maximum Java efficiency
        while consuming very low power.

MetaWare(TM) Development Toolkit and MQX(R) RTOS

The MetaWare Development Toolkit and MQX RTOS -- part of ARC's Embedded Systems
Business Unit (ESBU) -- comprised 30% of overall revenue for year 2005.

The MetaWare toolkit is available directly from ARC, sold as part of the
company's standard license agreements and through our partner Green Hills
Software. In the second half of year 2005, the MetaWare toolkit was enhanced to
support new features in ARC's family of configurable cores. The MQX RTOS has
been powering embedded systems for more than 15 years. Today it is used in key
markets such as networking, industrial controls, telecom, instrumentation and
aerospace. During the second half of 2005, the MQX RTOS added new capabilities
that enable customers to create more feature-rich and optimized ARC-Based chips.

Outlook for 2006

There is abundant evidence that configurability is being adopted at a pace that
far exceeds the growth of fixed architectures, and that ARC is winning against
competitive and legacy processors. As we begin the new financial year, ARC is
well positioned for continued growth in our configurable processor core and
subsystem businesses. In 2006 management will continue its efforts to improve
the company's financial results and deliver configurable products to high-growth
embedded markets. We will add to our industry-leading Media Subsystem product
portfolio and expand in key global markets.

CHIEF FINANCIAL OFFICER'S REVIEW

Year ended 31 December 2005

Revenue

Total revenue in 2005 was GBP 10.5 million, down 14% over the same period last
year (2004: GBP 12.2 million) which includes the effects of the peripheral
business disposal. Prior to currency translation, with virtually all sales in US
dollars, revenue was down 15% over 2004. License and engineering revenue was GBP
6.1 million (2004: GBP 7.6 million). Maintenance and service revenue was GBP 1.7
million (2004: GBP 1.7 million). Royalties were GBP 2.7 million (2004: GBP 2.9
million). Royalty income in 2005 includes two advance non-refundable payments
which represented 41% of the total royalties for the year.

Sales in Europe were 28% of total sales, North America 64% and Asia 8%. From a
product line perspective, 78% of revenue was from the SoC products and the
remaining 22% was from the embedded software products. Within the SoC business,
GBP 1.3 million in 2004 revenue was generated by peripheral products that
represented the business sold to TransDimension Inc. Removing this revenue from
the comparisons, year on year revenue declined in 2005 by 3% in sterling and 4%
in US dollars.

Costs

Cost of revenue was GBP 1.6 million (2004: GBP 1.7 million). Total headcount in
the business at 31 December 2005 was 127 employees compared with 131 at 31
December 2004. Research and development costs, net of amounts capitalised, were
down 19% to GBP 6.4 million (2004: GBP 8.0 million); sales and marketing costs
were down 5% to GBP 4.5 million (2004: GBP 4.7 million), and general and
administration costs were down 18% to GBP 3.0 million (2004: GBP 3.7 million).

Operating expenses (excluding share based award expense, gain on sale of
business disposal, restructuring provision, amortisation of goodwill and
depreciation) decreased 13% to GBP 15.6 million (2004: GBP 18.1 million). Total
operating expenses decreased 10% to GBP 17.4 million (2004: GBP 19.4 million).

Interest

Interest income was GBP 1.5 million (2004: GBP 1.4 million).

Net loss

Net loss was GBP 4.3 million (2004: GBP 5.1 million). Loss per share improved to
3.05p (2004: 3.65p).

Net loss of GBP 4.3 million in 2005 includes goodwill impairment of GBP 0.2
million and gain on business disposal of GBP 0.3 million. The gain represents
the net cash proceeds received in 2005 for payment of the note due from
TransDimension, Inc.

Net loss of GBP 5.1 million in 2004 includes goodwill impairment of GBP 0.8
million, a net restructuring provision of GBP 0.6 million and gain on business
disposal of GBP 2.6 million. The gain represents the net cash proceeds received
in 2004 for payment of the note due from TransDimension, Inc.

Cash flow and balance sheet

The net cash outflow from operations was GBP 4.3 million (2004: GBP 8.3
million). Capital expenditure was GBP 0.8 million (2004: GBP 0.7 million). The
outflow of cash and short-term investment was GBP 1.5 million (2004: GBP 3.2
million). Net assets at 31 December 2005 were GBP 32.8 million (31 December
2004: GBP 35.9 million), including cash and short-term investment of GBP 32.0
million.

Dividend

No dividend payment will be made for the year ended 31 December 2005.

International Financial Reporting Standards

These results are in accordance with International Financial Reporting Standards
(see note 1, basis of presentation). We restated comparative results in
accordance with IFRS accounting policies as set forth in our press release dated
27 July 2005 and titled "Restatement of financial information under
International Financial Reporting Standards," containing the impact of the IFRS
on the group's financial statements for the six and twelve months ended December
2004. The introduction of IFRS has no impact on the underlying cash flows of the
group, but had the most significant impact on the following areas: Employee
share-based compensation arrangements, development expenditures, the treatment
of goodwill, and classification of lease obligations. See press release dated 27
July 2005 for overview of impact.

Consolidated profit and loss account
For the year ended 31 December 2005

                                              Year ended    Year ended
                                             31 December   31 December
                                                    2005          2004
(unaudited)                                     GBP '000      GBP '000
----------------------------------------------------------------------

Revenue                                          10,494        12,162
Net operating expenses (note 2)                 (17,442)      (19,448)
----------------------------------------------------------------------
Operating loss                                   (6,948)       (7,286)
----------------------------------------------------------------------
Interest receivable                               1,530         1,445
Interest payable and similar charges                  -            (5)
----------------------------------------------------------------------
Loss before income tax                           (5,418)       (5,846)
----------------------------------------------------------------------
Tax (expense)/credit                              1,077           790
----------------------------------------------------------------------
Loss for the period                              (4,341)       (5,056)
----------------------------------------------------------------------

 Basic and diluted loss per share (pence)         (3.05)        (3.65)


Consolidated balance sheet
as at 31 December 2005

                                             31 December   31 December
                                                    2005          2004
(unaudited)                                     GBP '000      GBP '000
----------------------------------------------------------------------
Non current assets
Property, plant and equipment                       329           423
Goodwill                                              -           195
Intangible assets                                 1,284         1,688
----------------------------------------------------------------------
Total non current assets                          1,613         2,306
----------------------------------------------------------------------

Current assets
Trade and other receivables                       3,679         3,491
Short term investments                           10,534         8,700
Cash and cash equivalents                        21,476        24,832
----------------------------------------------------------------------
Total current assets                             35,689        37,023
----------------------------------------------------------------------

Total assets                                     37,302        39,329

Current liabilities
Financial liabilities                                 -             4
Trade and other payables                          4,009         2,540
Other liabilities                                   218           325
Provision (note 5)                                   77           237
----------------------------------------------------------------------
Total current liabilities                         4,304         3,106
----------------------------------------------------------------------
Net current assets                               31,385        33,917
Total assets less current liabilities            32,998        36,223
----------------------------------------------------------------------

Provision (note 5)                                  209           287
----------------------------------------------------------------------
Total non-current liabilities                       209           287
----------------------------------------------------------------------
Total assets less total liabilities              32,789        35,936
----------------------------------------------------------------------

Called-up share capital                             149           145
Share premium account                             2,923         1,674
Exchangeable shares                                   -           643
Capital redemption reserve                          162           162
Merger reserve                                      107           107
Other reserves                                   60,205        59,767
Retained earnings                               (30,757)      (26,562)
----------------------------------------------------------------------
Total equity (note 4)                            32,789        35,936
----------------------------------------------------------------------


Consolidated cash flow statement
For the year ended 31 December 2005

                                              Year ended    Year ended
                                             31 December   31 December
                                                    2005          2004
(unaudited)                                     GBP '000      GBP '000
----------------------------------------------------------------------

Cash flows from operating activities
Cash used in operations (note 3)                 (4,330)       (8,299)
Interest received                                 1,535         1,414
Interest paid                                         -            (5)
Taxes paid                                          (83)         (117)
Tax credit                                        1,059         1,228
----------------------------------------------------------------------
Net cash used in operating activities            (1,819)       (5,779)
----------------------------------------------------------------------

Cash flows from investing activities
Purchase of property, plant and equipment          (221)          (85)
Disposal of property, plant and equipment             -             8
Purchase of intangible assets                      (466)         (347)
Capitalisation of R&D assets                        (96)         (244)
(Increase)/decrease in short term
 investments                                     (1,834)       20,978
Proceeds from sale of business (note 6)             327         3,058
----------------------------------------------------------------------
Net cash generated/(used) from investing
 activities                                      (2,290)       23,368
----------------------------------------------------------------------

Cash flows from financing activities
Net proceeds from issue of ordinary share
 capital                                            728           197
Finance lease principal payments                     (4)          (54)
----------------------------------------------------------------------
Net cash generated from financing
 activities                                         724           143
----------------------------------------------------------------------
Effects of exchange rate changes                     29            24
----------------------------------------------------------------------

Net increase/(decrease) in cash and cash
 equivalents                                     (3,356)       17,756
Cash and cash equivalents at beginning of
 period                                          24,832         7,076
----------------------------------------------------------------------
Cash and cash equivalents at end of period       21,476        24,832
----------------------------------------------------------------------

1. Basis of preparation

These financial statements have been prepared in accordance with
International Financial Reporting Standards and IFRIC interpretations
endorsed by the European Union (EU) and with those parts of the
Companies Act, 1985 applicable to companies reporting under IFRS. The
financial statements have been prepared under the historical cost
convention. A summary of the more important group accounting policies
is set out in our press release dated 27 July 2005 and our interim
report dated 04 October 2005, together with an explanation of where
changes have been made to previous policies on the adoption of new
accounting standards in the year.

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Although these
estimates are based on management's best knowledge of the amount,
event or actions, actual results ultimately may differ from those
estimates.


2. Summary of operating expenses

                                              Year ended    Year ended
                                             31 December   31 December
                                                    2005          2004
(unaudited)                                     GBP '000      GBP '000
----------------------------------------------------------------------
Operating expenses
Cost of sales                                    (1,638)       (1,661)
Research and development                         (6,528)       (8,205)
   less capitalised R&D costs                        96           244
Sales and marketing                              (4,523)       (4,744)
General and administrative                       (3,033)       (3,697)
Share based award expense                          (431)         (419)
Depreciation of fixed assets                       (318)         (563)
Impairment of goodwill                             (195)         (803)
Amortisation of capitalised R&D                    (182)         (131)
Amortisation of software and other
 intangibles                                     (1,017)       (1,421)
Provision release                                     -           441
Restructuring provision                               -        (1,067)
Gain on business disposal (note 6)                  327         2,578
----------------------------------------------------------------------
Net operating expenses                          (17,442)      (19,448)
----------------------------------------------------------------------


3. Cash used in operations

                                              Year ended    Year ended
                                             31 December   31 December
                                                    2005          2004
(unaudited)                                     GBP '000      GBP '000
----------------------------------------------------------------------

Net loss                                         (4,341)       (5,056)
Adjustments for:
Gain on business disposal (note 6)                 (327)       (2,578)
Interest receivable                              (1,530)       (1,445)
Interest payable                                      -             5
Tax expense/(credit)                             (1,077)         (790)
Amortisation                                      1,199         1,552
Depreciation                                        318           563
Goodwill impairment                                 195           803
Loss on disposal of property, plant and
 equipment                                            -           206
Share based award expense                           431           419
(Increase) in inventories                             -           (17)
(Increase)/decrease in trade and other
 receivables                                        (56)          177
Increase/(decrease) in payables                   1,096        (1,744)
(Decrease) in provisions                           (238)         (394)
----------------------------------------------------------------------
Cash used in operations                          (4,330)       (8,299)
----------------------------------------------------------------------


4. Statement of changes in equity

                                                               Capital
                       Share    Share Exchangeable   Merger redemption
Group                capital  premium       shares  reserve    reserve
(unaudited)         GBP '000 GBP '000     GBP '000 GBP '000   GBP '000
----------------------------------------------------------------------
At 1 January 2005
 as restated            145    1,674          643      107        162

Shares issued             3      607
Exchangeable shares
 exercised                1      642         (643)
Change in value of
 ESOP reserve
Share based award
 reserve
Exchange gain
Loss for the period

----------------------------------------------------------------------
At 31 December 2005     149    2,923            -      107        162
----------------------------------------------------------------------

                                  Cumulative  Profit &
                           Other translation      loss
Group                   reserves  adjustment   account    Total
(unaudited)             GBP '000    GBP '000  GBP '000 GBP '000
---------------------------------------------------------------
At 1 January 2005
 as restated             59,767        (219)  (26,343)  35,936

Shares issued                                              610
Exchangeable shares
 exercised                                                   -
Change in value of
 ESOP reserve                                     117      117
Share based award
 reserve                    438                            438
Exchange gain                            29                 29
Loss for the period                            (4,341)  (4,341)

---------------------------------------------------------------
At 31 December 2005      60,205        (190)  (30,567)  32,789
---------------------------------------------------------------


5. Provisions

                                                      Non-      Total
                                       Current     current   provision
(unaudited)                          GBP '000s   GBP '000s   GBP '000s
----------------------------------------------------------------------

At 1 January 2005                         237         287         524
Utilised                                 (238)          -        (238)
Reclassified from non-current to
 current                                   78         (78)          -
----------------------------------------------------------------------
At 31 December 2005                        77         209         286
----------------------------------------------------------------------

The utilisation of the provisions in 2005 relates to onerous lease
commitments in Santa Cruz, USA and Elstree, UK. The provision for the
Santa Cruz facility has been fully utilised as of December 2005. The
balance in provision at 31 December 2005 represents an onerous lease
commitment and the associated restoration costs for the Elstree, UK
facility. Management anticipates the utilisation of the provision over
the next two years.

6.  Gain on business disposal

On 30 June 2004, the Company completed an agreement to sell the
peripherals business and certain associated assets and liabilities to
TransDimension, Inc ("TDI") for a purchase price of GBP 3.6 million
($6.65 million). Net cash consideration of GBP 3.1 million ($5.6
million) was received in 2004. In addition, GBP 184k of deferred
profit in respect of deferred revenue was recognised in the second
half of 2004.

The remainder of the consideration was in the form of a promissory
note for $650k payable on 15 June 2005. On 16 June 2005, the Company
received a payment in the amount of GBP 108k ($195k) from TDI. TDI
made claims against the remaining balance due. The Company disputed
the assertions and a settlement agreement was reached in 2H 2005. On
30 September 2005, the Company accepted a payment of GBP 219k ($392k)
from TDI as payment in full for the remainder of the $650k promissory
note.

7. Subsequent Event

The Company initiated a reduction in employees in January 2006.
Staffing will be reduced by approximately 7%, with a total cost impact
estimated at GBP 200k in 2006.

About ARC International plc

ARC International is the world leader in low-power, high-performance 32-bit
configurable CPU/DSP processor cores, subsystems, real-time operating systems
and development tools for embedded system design. ARC's patented configurable
CPU technology assists customers in the development of next generation digital
media, consumer and communications devices, resulting in lower cost, higher
performance SoC products.

ARC International maintains a worldwide presence with corporate offices in San
Jose, California, USA and Elstree, UK. The company has research and development
offices located in England and the United States. For more information please
visit the ARC website at: www.ARC.com. ARC International is listed on the London
Stock Exchange as ARC International plc (LSE:ARK).

ARC, ARC-Based, MQX, MetaWare and the ARC logo are trademarks or registered
trademarks of ARC International. All other brands or product names contained
herein are the property of their respective owners. This press release may
contain certain "forward-looking statements" that involve risks and
uncertainties. For factors that could cause actual results to differ, visit the
company's Website as well as the listing particulars filed with the United
Kingdom Listing Authority and the Registrar of Companies in England and Wales.
    CONTACT: ARC International
             Lee Garvin Flanagin, 408-437-3433 (Media)
             or
             Tulchan Communications
             Julie Foster and Tim Lynch, [phone] (Investors)