Sarantel Group PLC - Morningstar, Inc.

Sarantel Group PLC Annual Report and Accounts 2005

Sarantel Group PLCUnit 2 Wendel PointRyle DrivePark Farm SouthWellingborough NN8 6AQ

Tel: +44 (0)1933 670560Fax: +44 (0)1933 401155

Web: www.sarantel.comEmail: [email protected]

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Sarantel develops and manufactures the world’s most advanced antennas for mobile, wireless and handheld devices. The Group has invested more than 20 years of research and development into its award-winning PowerHelix® antennas, resulting in more than 200 patents world-wide. Over 1,000,000 antennas have been shipped to date.

Sarantel antennas are to be found in leading-edge products such as the TomTom Bluetooth® GPS receiver which, because of its technology, is accurate to two metres, even when in a bag or pocket.

Sarantel listed on AIM in March 2005 when it raised £16.7m net to fund the development and commercialisation of its world-leading technology and to position Sarantel as a major supplier to the wireless devices market world-wide.

IFC Corporate Statement

01 Highlights

02 About Us

04 Chairman’s Statement

06 Chief Executive’s Review

10 Financial Review

14 Directors

16 Advisers

17 Directors’ Report

19 Corporate Governance Report

20 Report of the Remuneration Committee

23 Report of the Independent Auditors

24 Principal Accounting Policies

26 Consolidated Profit and Loss Account

27 Consolidated Balance Sheet

28 Company Balance Sheet

29 Consolidated Cash Flow Statement

30 Notes to the Financial Statements

40 Statutory Consolidated Profit and Loss Account

41 Notice of Annual General Meeting

47 Form of Proxy

T H E D E S I G N P O R T F O L I Oa member of the flathill communications group plcwww.flathillplc.com

designed & produced by

Sarantel Group PLC Annual Report and Accounts 2005 1

� Turnover increased by 234% to £2.8m (2004: £0.8m)

� 937,000 antenna units shipped, up 450% year on year

� Loss before tax of £5.6m (2004: £4.0m) as the Group invests for the future

� New wins with satellite navigation companies such as TomTom and Medion

� Successful expansion into satellite radio markets

� Senior management team in place

� Net cash at the year end of £13.1m

“ 2005 has been a challenging year, but we have resolved the issues in our manufacturing processes, made progress in the design of our products, penetrated new markets and strengthened the senior management team. Our priority in 2006 is to successfully launch our new GPS products with existing customers and expand the business with new customers. We look forward to another year of strong growth.”

David Wither, Chief Executive Offi cer

2 Sarantel Group PLC Annual Report and Accounts 2005

About Us

Sarantel focuses its efforts on meeting customer needs. Our business is making antennas for diffi cult applications and that’s why shipments more than quadrupled in the 2005 fi nancial year.

How We’re DifferentOur market share and opportunity is growing as our product is unique and delivers unparalleled performance:

� our antennas don’t de-tune when near people or objects;

� they’re easy for the designer to embed in a radio;

� they provide the best reception for their size;

� they’re small, and easy to design into attractive consumer products; and

� they act as their own fi lter, keeping out interfering signals from competing radios.

The Case For SarantelFor all the advances in silicon, it still takes a good antenna to make a radio work. And the more challenging the service and conditions of use, the better an antenna has to be. Our business is making antennas for diffi cult applications and that’s why shipments more than quadrupled in the 2005 fi nancial year.

Global Positioning System (GPS) Putting GPS radios in small, handheld devices is challenging as the slightest attenuation of radio reception can mean the difference between knowing where you are going and becoming lost. Sarantel’s patented PowerHelix® fi ltering antenna technology

stabilises the antenna even when it’s held very near the user. The use of advanced materials allows the antenna to be shrunk to a small size that is easily embedded inside a device to provide an attractive consumer design.

Digital AudioDigital audio broadcasts have rapidly begun to move into portable, handheld devices. This trend has created opportunities for Sarantel. The sensitivity of the receiver to impairments caused by the proximity of the user to the antenna is a problem Sarantel can solve. We recently announced the receipt of an order for a new, non-GPS antenna that would deliver satellite audio broadcasts. Sarantel expect to begin high-volume shipments of this new product in the 2006 fi nancial year.

Our OpportunityServices and devices making use of location technology like GPS are exploding in the market. Sarantel addresses a signifi cant portion of that market with unique products offering device manufacturers real product differentiation. Sarantel GeoHelix® GPS antennas can be found in handheld navigation devices, recreational GPS, smart-phones, personal tracking devices and a range of other products. Sarantel’s antennas are on consumer labels such as Medion, TomTom, Empus, and GlobalSat throughout Europe, Asia, and North America. Sarantel’s addressed portion of the GPS market is expected to grow by 38% from 2004 to 2005, and continue at a compound annual growth rate of 45% through to 2010.

GeoHelix®-SMP (Passive GPS Antenna)This dielectrically loaded, quadrifi lar helix antenna with its high performance and balanced design is ideal for applications requiring tight integration.

Product Summary� GPS L1 antenna� Very small size� Rejects conducted noise from application� Balanced design – low interaction with platform� Wide cardioid beamwidth (>120° typical)� Negligible detuning close to user’s hand� Internal and external mounting� SMT compatible

GeoHelix®-S (Active GPS Antenna)This dielectrically loaded, quadrifi lar helix antenna offers high performance with tight integration and an integral high gain/low noise amplifi er.

Product Summary� GPS L1 antenna� Very small size� Rejects conducted noise from application� Balanced design – low interaction with platform� Wide cardioid beamwidth (>120° typical)� Negligible detuning close to user’s hand� Internal and external mounting� SMT compatible� Low voltage/current� High gain (24dBic typical)

3Sarantel Group PLC Annual Report and Accounts 2005

Intellectual PropertyProtecting our competitive advantage is a key component of Sarantel’s market strategy. Sarantel has a patent portfolio consisting of over a dozen core patents with hundreds of international fi lings that cover key elements of our technology and manufacturing processes. Sarantel believes this base of intellectual property represents a formidable barrier to competition and that an aggressive defence of this base coupled with continuous innovation in our product line will keep us ahead of the market.

The FutureMobile multimedia applications have grown tremendously, packing dense, high bit-rate digital streams of data into compressed channels, competing for frequency space with voice, Bluetooth®, Wi-Fi, GPS and other wireless services. Wherever multiple radios are integrated into small devices that require stable, effi cient transmission or reception, there are opportunities for Sarantel.

Sarantel antennas provide excellent reception and stable performance in situations where other antennas

de-tune and fail to perform.


Chairman’s Statement

“ We believe a foundation has been built for continued success in the years ahead.”

David Dey Non-executive Chairman

IntroductionI am pleased to present my fi rst report as Chairman of Sarantel Group PLC for the year ended 30 September 2005, the Group having achieved a successful quotation on the Alternative Investment Market (AIM) on 2 March 2005.

Sarantel designs, manufactures and sells patented, ceramic, fi ltering antennas for use in portable wireless devices such as personal digital assistants (PDAs), laptops and smart phone devices. These antennas solve a performance impairment problem that is faced by conventional antennas, by reducing the amount of energy that is absorbed into the body by approximately 90%. The antennas simplify system design, thus allowing design standardisation and reduced time to market and cost for manufacturers.

Results We shipped over 937,000 units in the year, compared with 170,000 in 2004 and our revenue increased by 234% to £2.8m. Loss before taxation increased to £5.6m from £4.0m in 2004 as the Group continued to invest for the future.

The greatest challenge during the year was to build very robust manufacturing systems to achieve the quality, yield and volumes to meet customer demand. Sarantel has worked with suppliers to design and build specialised equipment, including the three-dimensional photo-lithography equipment required to produce our antennas. These processes and tools are unique

in world-wide high-tech manufacture and give us signifi cant additional protection in addition to our strong patents.

Customer demand continued to grow throughout the past year as the two major applications for our original GPS antenna, that is navigation and asset tracking, became signifi cant industries. In addition, as announced on 5 September, we achieved a major breakthrough in winning our largest ever single order which can now be disclosed as for the North American satellite radio market. This confi rmed that the Sarantel antenna technology can bring real benefi ts to major industries beyond the GPS market.

The BoardFollowing the fl otation, in June 2005 we appointed John Uttley to the Board. John’s previous positions include fi nance director of National Grid Group and more recently chairman of a number of smaller public and private companies. His active involvement provides the Group with very deep and valuable experience in many areas. I am pleased to welcome our Chief Operating Offi cer, Bill Taylor, who joined the Board on the 30 November 2005. Bill brings with him extensive experience of high-volume, sub-contract manufacturing and his experience will be invaluable as Sarantel moves to the next stage of its development.

EmployeesOn behalf of the Board I would like to thank all our employees for their enormous contribution, hard work and support during our fi rst year as a listed company. My thanks also go to my fellow Board members and senior management for all their efforts.


SummaryIn the face of manufacturing frustrations earlier this year, your Board has learned and responded to those diffi culties and is very proud of the achievements of the Sarantel team. We believe a foundation has been built for continued success in the years ahead.

David DeyChairman

Case Study 1: TomTom Mobile 5The ProductThe TomTom Mobile 5 Bluetooth® GPS Receiver turns smartphones into personal navigators. Compatible with dozens of smartphones and PDAs, it provides a simple, intuitive way to navigate directly from your device’s address book.

The ChoiceSarantel’s GeoHelix®-SMP GPS antenna solved problems of design and usage fl exibility for TomTom. The GeoHelix antenna’s constrained near-fi eld and omni-directional pattern made it easy for TomTom to conceive and design a product with a completely embedded GPS antenna. The antenna would retain its effi ciency and pass the maximum signal strength to the GPS receiver, even when the product was sitting next to the user’s body under layers of clothing in unpredictable orientations.

The ProcessEmbedding an antenna is usually an iterative engineering exercise in which the antenna is tuned and retuned for changes in the electronics, case materials, shape and size of the device. Fortunately, Sarantel’s GeoHelix antenna tunes predictably with materials in very close proximity.

“ The Sarantel GPS antenna ensures the accuracy of the TomTom Bluetooth® GPS receiver, even when it is in a bag or a pocket.”

Harold GoddijnChief Executive Offi cer, TomTom BV

5


The Initial Public Offering 2005 was an exciting year, for both the Group and its employees. We became a quoted company in March 2005, following a successful listing on AIM. Our admission to AIM was completed on 2 March 2005 raising £18.0m before expenses, giving a free fl oat of 41.6% of the shares in issue. We joined AIM to raise the Group’s profi le and take advantage of the growing opportunities in our target markets.

Financial ResultsSarantel grew its turnover by 234% to £2.8m as shipments rose by 450% year-on-year to 937,000 units. Loss before taxation increased to £5.6m compared with £4.0m in 2004 as the Group made investments in the resources necessary to address the targeted volume markets. Cash balances at the end of September were £13.1m.

Year in ReviewNew Customers, Markets and ProductsThe satellite navigation market continues to grow strongly and GPS remains our core market. We are very proud of the business we have won with leading satellite navigation companies such as TomTom and Medion. During the year we developed a number of new customer relationships and we expect these to lead to future growth in our share of the rapidly growing navigation market.

We have also been successful in winning a very signifi cant design-in for the North American satellite radio market. Although this is an emerging market, it is growing at a very fast rate and this win confi rms the capability of our technology to provide substantial improvements in antenna performance to markets beyond GPS.

We have continued to develop new products and improve existing ones to target new markets and applications, and during the fi rst half of 2006 in addition to the satellite radio antenna, we plan to release a new GPS antenna which has a smaller footprint.

Manufacturing Sarantel manufactures antennas at its factory in Wellingborough. During 2005, output was increased over three-fold from 50,000 units per month to 160,000 units per month by the end of the fi nancial year. We worked with our key suppliers to design and develop new high volume manufacturing equipment capable of producing up to 200,000 units per month. The fi rst set of such equipment was delivered late by our suppliers but was in full production in July and the second set is already installed as scheduled and will be producing at full capacity by the end of December.

The process to produce the Sarantel antenna is unique, innovative and leading edge. We have overcome many

Chief Executive’s Review

“ During the year we developed a number of new customer relationships and we expect these to lead to future growth in our share of the rapidly growing navigation market.”

David WitherChief Executive Offi cer

7

challenges during 2005 and have been successful in stabilising the manufacturing process, increasing throughput and making signifi cant gains in productivity. We believe that we now own a scaleable production process that is capable of high volumes.

These signifi cant improvements achieved in our production processes have eliminated the need to move to a larger facility and provided the Group with the ability to explore outsourcing additional manufacturing capacity to meet future growth in demand. Selecting the right outsourcing partner is critical in order to ensure that our intellectual property is protected and to gain credibility with potential top-tier customers.

Patented TechnologyThe Board places great emphasis on the importance of the quality, proper maintenance and growth of its intellectual property. During 2005, Sarantel fi led fi ve new patent applications to protect our existing position and extend the application of our products. As the scope of our business grows, we naturally address new technical problems which require adaptations of our existing intellectual property to provide new solutions. These innovations are particularly interesting as they are stimulated by real market needs and complement the original research-based intellectual property of the Group.

Case Study 1: Flextrack LommyThe CompanyFlextrack, located in Denmark and a subsidiary of the Jax Corporation, develops and manufactures advanced telemetric equipment based on GPS, GSM and GPRS. Flextrack devices are small, easily confi gurable, and excel in ease-of-use by the end user. Flextrack’s vision is to implement technology for the sake of the user, not for the sake of the technology.

The ProductFollowing that vision, the Lommy™ personal tracker needed to be small, easily confi gurable, have a long battery life and provide excellent tracking performance in all conditions. The Lommy offers tracking through GPRS and SMS messaging to a central server and has simple one-button dialing to emergency services with GSM voice. For GPS, Flextrack turned to two leaders in providing high-sensitivity GPS receiver and antenna technology for diffi cult user environments: Orcam and Sarantel.

The ProofTo demonstrate the robustness of its innovative personal tracking solution, Flextrack organised “the Tour de Lommy,” a 150 mile trip via the Danish postal service from Hedensted to Aalborg.

“ Orcam and Sarantel have delivered a tracking performance that enables some amazing applications. Taken together, this will ensure a broad adoption for the Lommy.”

Carsten GroenDevelopment Manager, Flextrack



Management and StaffDuring the year, we strengthened the senior management team with the recruitment of Bill Taylor as Chief Operating Offi cer, Andrew Christie as Vice President of Engineering and Ben Sandford as Vice President of Sales. We increased our engineering resources both for product development and manufacturing process development and recruited two direct sales managers. The total number of staff at the end of the fi nancial year was 93 (including 46 direct labour) compared with 44 (including 15 direct labour) at September 2004.

StrategySarantel’s strategy is to continue developing its core technology to become the leading antenna supplier in those sectors of the wireless market where its products have clear competitive advantages. We believe that our technology can bring substantial benefi ts to many emerging markets and we will continue to develop our technology and design new products to enable us to enter these new market segments. The higher profi le and additional customer confi dence achieved through our fl otation on AIM will greatly support the execution of this strategy.

SummarySarantel has had a very challenging year, but we have emerged a stronger and more capable Group:

� We have built a world-class management team that is capable of taking the Group to a leadership position in the supply of electronic antenna components;

� We have stabilised and developed our manufacturing process to give us a scaleable production process capable of high volumes;

� We have continued to develop our well-protected core technology, and added engineering talent that will enable us to enter new high growth markets; and

� We have built up the direct sales team and strengthened our relationship with our customers and distributors around the world.

OutlookThe Group’s top priority is to successfully launch its new GPS products with existing customers and expand the business with new customers. The initial response to our new GPS product has been positive and we expect to see increasing price pressure in our core GPS markets as volumes grow. However, we believe that during 2006 we will be able to meet this challenge by reducing our costs through further design improvements and supply chain management, while continuing to explore increased use of outsourcing. We look forward to another year of strong growth.

On 20 December the Company released the following trading update:

“In September 2005, Sarantel announced a substantial order for the North American satellite radio market, with volume shipments expected to commence in the fi rst half of the Company’s fi nancial year beginning 1 October 2005.

“ Sarantel’s strategy is to continue developing its core technology to become the leading antenna supplier in those sectors of the wireless market where its products have clear competitive advantages.”

Chief Executive’s Review


Sarantel has now been informed that the programme has been delayed for reasons not related to its antenna and new shipments dates are still to be confi rmed. It is unlikely that volume shipments will begin before the end of March 2006.

The Company will produce antenna for stock during the next three months to meet the demand from the satellite radio customer when it arises.

As a consequence of the above, the Board expects fi rst half revenues to be materially below market expectations, but not less than those in the fi rst half of the prior year.

A further trading update will be given at the AGM on 3 February 2006.”

David WitherChief Executive Offi cer

Case Study 2: S-911 by Laipac Technology IncThe ApplicationLaipac applied its GPS tracking and GSM communications expertise to address a rapidly growing demand for safety and security appliances. The S-911 combines a GSM/GPRS radio with a cutting edge GPS receiver capable of indoor sensitivity and innovative “geo-fencing” software for a complete emergency beacon solution.

The ChallengeLaipac knew that users of such a device depend upon reliable service in situations of duress, when the user couldn’t be counted on to remember the “do’s and don’t’s” of conventional GPS receiver technology. The device would often be carried in a purse or backpack and would be called upon to get an instant position fi x when the user pulled it out to make an emergency call.

The SolutionLaipac turned to Sarantel’s active GeoHelix®-S GPS antenna as the optimum antenna solution for the S-911. The GeoHelix-S combines a high-gain, low-noise amplifi er with a very low noise fi gure with the GeoHelix quadrifi lar helix GPS antenna. The GeoHelix antenna produces the very broad, omni-directional pattern characteristic of quadrifi lar helix antennas for the best GPS reception possible in all orientation angles. As a balanced antenna, it rejects common mode noise generated by the GSM/GPRS radio electronics inside the S-911, fi ltering out unwanted signals before they reach the GPS receiver and isolating it from the rest of the device.

“ The Sarantel antenna provided a level of performance that ensures the S-911 will be there when it’s needed.”

Diego LaiChief Executive Offi cer, Laipac Technology Inc

Sarantel has built a scalable, world-class manufacturing process

capable of producing antennas in a very high volume around

unique, innovative, and leading-edge technologies.

9


Organisation and StructureSarantel operates out of three offi ces around the world based in the UK, Singapore and the United States. The manufacturing, engineering, research and development and administrative teams are based in Wellingborough, UK, consisting of a team of 88 people, including 46 direct labour and two direct sales staff covering Europe and Asia. Our US offi ce consists of three direct sales and marketing personnel based in the states of New York, Washington and Texas. Our Singapore offi ce consists of one direct sales staff and one development engineer. Sarantel also sells through a network of distributors and local representatives supported by our own direct sales team.

Product MixThe Group currently manufactures and ships two products for the GPS market and is in the fi nal stages of releasing a third product, targeted at the North American satellite radio market, which is expected to be shipped in volume during the fi rst half of the 2006 fi nancial year. A new GPS product is also due to be launched in our fi rst quarter. During 2005, the Group began volume shipments of its passive antenna which was launched during our fi nal quarter of 2004. This product contains fewer components and is consequently priced lower than the active antenna. The choice of which antenna to use is dependent on the customer’s ability to integrate these components into their own design. Shipments of passive antennas accounted for approximately 70% of total shipments in our fi nancial year 2005 (2004: 5%).

Review of OperationsTurnover increased to £2.8m representing a 234% increase over 2004 turnover (£0.8m). The Group shipped around 40% of its turnover in the fi nal quarter, in line with the build-up of stocks for the Christmas period and the timing of the increase in production capacity. Our customers were mainly in the GPS personal navigation and asset tracking sectors.

The average selling price achieved for 2005 was higher than expected although lower than in 2004 as the Group transitioned from a niche to a more mainstream volume supplier of antennas. The Group continued to face signifi cant price pressure, but in the face of restricted supply, was able to contain price erosion to around 6% for the largest volume product and customer.

In 2005, material and consumables costs as a percentage of turnover were continuously reduced to end the year at 56%. This was achieved mainly by improving yields and reducing material cost. The comparative percentage for 2004 of 35% was much lower due to the different mix of products sold in that year, particularly niche, higher-priced products. Cost reduction is a key element of the Group’s strategy and overall, the Group continued to make strong progress in reducing unit cost.

As the Group is addressing fast growing markets, investment in resources needs to be made in advance in order to win designs for our antenna that will generate orders in future periods. Overall,

“ Turnover increased to £2.8m representing a 234% increase over 2004 turnover (£0.8m).”

Sitkow YeungChief Financial Offi cer

Financial Review


costs excluding raw material and other operating costs rose by 60% compared with 2004. Staff costs doubled as the Group strengthened the senior management team and recruited additional sales, engineering and production staff. Whilst units shipped grew by 450%, external costs, which represent sub-contractors’ costs, grew by only 379% and direct labour costs increased by 109% to £0.9m, refl ecting the beginnings of productivity gains from investments in automation and higher throughput. Other operating charges grew by 7%.

Loss before taxation was £5.6m compared with £4.0m in 2004 after a depreciation charge of £1.1m compared with £0.9m in 2004. During 2005, the Group has continued to invest in resources and infrastructure to build the capability and capacity to address volume customers and new markets, including new product development and manufacturing process improvements.

Exceptional CostsThe exceptional non-recurring costs of £0.3m arose during the fi rst half year and relate to the write-off of raw materials amounting to £0.1m for a discontinued product, £0.1m for professional costs for an aborted fund raise and £0.1m of additional consideration in shares for an investment which was disposed of during the previous fi nancial year.

Depreciation and AmortisationDepreciation and amortisation amounted to £1.1m and includes a net additional charge of £0.3m arising on a change

in the estimated useful lives of certain categories of plant and intellectual property. The Directors have reviewed the fi xed assets and are of the opinion that it would be more prudent to write off certain categories of production equipment over fi ve years instead of ten years previously, and that the investment in intellectual property should be written off over ten years instead of fi ve years.

InterestNet interest receivable increased to £0.3m following the receipt of funds from the IPO in March.

TaxationThe Group estimates that it is entitled to a refund for research and development tax credit amounting to approximately £0.2m for 2005.

Loss Per ShareThe loss per share was 12.3 pence compared with 17.1 pence for 2004.

Capital ExpenditureThe total capital expenditure for the year amounted to £3.2m, of which £3.0m was invested in plant and machinery to increase production capacity and to automate and improve production processes. The Group plans to continue to invest in further plant capacity during 2006. A total of £0.2m was invested in intellectual property.


Turnover (£’000)

Movement in Cash and Liquid ResourcesThe Group raised £16.7m net of expenses from the proceeds of the fl otation in March 2005. During the year, net cash used amounted to £5.7m, of which £2.2m was used to pay for capital items, hence net cash used by operations was £3.5m compared with £2.8m during 2004. The cash balances at the year end amounted to £13.1m.

Funding StrategyDuring the year, the Group fi nanced £0.9m of plant and equipment through leasing agreements. The Group intends to use lease fi nance for new investments in plant and equipment where it is able to obtain a competitive rate of interest. In addition, in anticipation of growing turnover, a revolving £0.5m invoice discounting facility has been arranged, which remained unused during the year.

Operational and Treasury Risk ManagementTreasury Risk ManagementThe Group has a well-defi ned and consistently applied policy for the management of cash and foreign currencies exposure, which was approved by the Board. The Group’s fi nancial instruments comprise cash, cash deposits and option contracts for the purchase of currency at certain rates. It is the Group’s policy not to enter into speculative transactions.

Bank DepositsThe Group’s policy is to place long-term deposits with reputable banks or other fi nancial institutions that have at least an AA rating.

Foreign Exchange RiskSubstantially all of the Group’s sales are denominated in US Dollars or Euros. However, the cost of sales and most of the overheads are denominated in UK Sterling. Consequently, there exists a risk that movements in exchange rates could have a material impact on the Group’s fi nancial results. The Group holds foreign currency option contracts to help protect against the downside risk whilst giving the opportunity to participate in any appreciation of the foreign currency up to a pre-set limit. These transactions necessarily involve judgements and as a result do not entirely eliminate exposure to exchange rate fl uctuations.

International Accounting StandardsThe Group is reviewing the impact of adopting IFRS in preparation for a move to this by the fi nancial year ending 30 September 2008. Further details will be communicated in due course.

Business RisksSarantel is a high-technology Group that operates at the leading edge of its sector and consequently, the Directors consider that the Group is subject to the following specifi c business risks that could affect its results:

Emerging MarketsSarantel operates in emerging markets at the leading edge of technology. Consequently, the Group is vulnerable to product launch delays and uncertainty about the likely demand for the product which makes forecasting product demand and the timing of orders diffi cult in the short-term.

“ The cash balances at the year end amounted to £13.1m.”

Financial Review cont...

106 205

2,802

2002 2003 2004 2005

839

H2

H1


Units Shipped (’000)

Declining PricesSarantel increasingly sells antennas to large ODM manufacturers who possess high leverage on prices and terms of trade. The Group has been able to minimise price erosion up to now, but continued increase in turnover depends on Sarantel’s ability to contain price erosion whilst at the same time increase volumes.

Short Visibility of OrdersSarantel operates in the consumer sector with customers who themselves are subject to short-term variations in market demand. As a result, they do not enter into long-term purchasing agreements but instead issue purchase orders for a maximum of one to three months forward and are very likely to amend these purchase orders (both upward and downward) at short notice. As a result, backlog may not be an accurate indicator of future turnover and customer order cancellations and changes could result in a loss of turnover and excess inventory.

Production ProcessesThe Group continuously seeks to improve its production processes to reduce unit cost or increase throughput. These improvements involve designing production equipment or methods that are innovative and leading-edge. Whilst the Group always aims to minimise the risks that the equipment design may not work, may not work as expected or may take longer than expected to bring into production, such risks still exist and may impact on the Group’s ability to ramp-up production.

Production Ramp-up of New ProductsThe Group relies on a continuous programme of antenna development and introduction to maintain its technological leadership and protect margins. There are risks associated with the industrialisation of new products and as Sarantel is focused on large volume markets, the impact of production ramp-up delays may have a material impact on the results for the year.

SeasonalitySarantel’s antennas are incorporated into devices for the consumer market. As a result, the Group expects its business to be subject to seasonal fl uctuations, with increased turnover during the last two quarters of the fi nancial year in line with the build-up of stocks for the Christmas period.

Sitkow YeungFinance Director

19 32

168

937

2002 2003 2004 2005

Cash Balances (£’000)

1021,270

2,069

13,134

2002 2003 2004 2005


Directors

David Dey# Non-executive ChairmanDavid was appointed to the Board of Sarantel in June 2003 and has over 30 years’ experience in telecoms and technology companies, having worked at senior levels in companies such as British Telecom, Energis, IBM and Plessey. Recently, he has been executive chairman of a number of early stage ventures such as Alpha Telecom Communications Limited and Neos Networks Limited.

David WitherChief Executive Offi cerDavid was appointed to the Board of Sarantel in January 2004 and has assumed primary responsibility for accelerating the Company’s sales into high-volume mobile device manufacturers. From 1998 to 2003, he was a director at RF Micro Devices Inc. with responsibility for European sales and the Bluetooth product line. Previously, he worked for Baxter Healthcare Inc. He holds a Master of Science degree in Engineering Management and spent seven years as an offi cer with the US Army Corps of Engineers.

Sitkow YeungChief Financial Offi cerSitkow is a chartered accountant with over 20 years’ experience of high-growth technology companies. He was a divisional fi nance director with Ericsson prior to becoming the controller, Western Europe, for Ericsson’s mobile systems business. He has also worked as regional director in the Asia-Pacifi c region and for the past fi ve years has held senior fi nance roles at a number of venture capital-backed technology companies.


David Ward*#Non-executive DirectorDavid, who joined the Board of Sarantel in February 2003, is a senior partner and Director of MTI Partners, the private equity fi rm, which has provided signifi cant funding for Sarantel, where he has worked since 1999. David currently holds a number of non-executive positions on the boards of MTI investees. Previously he was a director of Calder Aluminium Limited, EMP Technologies Limited, iBase Image Systems Limited and Phocis Limited.

John Uttley*#Non-executive DirectorJohn was appointed as non-executive Director and Chairman of the Audit Committee on 6 June 2005. Until 1997 he was fi nance director of National Grid Group and non-executive Director of Energis after a 26 year career in electricity supply. Since then he has held a wide portfolio of non-executive chairmanships and directorships of smaller companies at both start-up and growth phases.

* Member of the Audit Committee

#Member of Remuneration and Nominations Committee

Dr Oliver Leisten Chief Technology Offi cerOliver founded the Group in September 2000 and has 25 years’ experience in the radio communications industry. He is responsible for the development of over a dozen patents for miniature dielectric loaded antennas, which form the existing intellectual property rights owned by Sarantel. Previously, Oliver was chief technologist at Symmetricom Limited, responsible for leading a team of specialist radio systems and design engineers.

Bill TaylorChief Operating Offi cerBill oversees Sarantel’s operations, managing supply chain, manufacturing, logistics and operational strategy, positioning Sarantel for massive growth. Bill has over 25 years of experience in electronics manufacturing and managing high-growth, high-volume environments. Prior to joining Sarantel, Bill was European Senior Director of Operations at Jabil, a contract electronic manufacturer with a number of blue-chip, communications OEM customers including Nokia and Philips. Bill also held senior logistics and operations roles at Motorola PCS.

Advisers


Company SecretarySitkow Yeung

Company Registration Number05299925

Registered OfficeUnit 2 Wendel PointRyle DrivePark Farm SouthWellingborough NN8 6AQ

AuditorsGrant Thornton UK LLPGrant Thornton House202 Silbury BoulevardMilton Keynes MK9 1LW

Nominated Adviser and BrokerArbuthnot Securities LimitedArbuthnot House20 Ropemarket StreetLondon EC2Y 9AR

SolicitorsPinsent Masons3 Colmore CircusBirmingham B4 6BH

Financial Public RelationsSmithfield Consultants Limited10 Aldersgate Street London EC1A 4HJ

BankNational Westminster Bank PLC501 Silbury BoulevardMilton Keynes MK9 3ER

RegistrarsComputershare Investor Services PLCPO Box 82The PavilionsBridgwater RoadBristol BS99 7NH

Directors’ Report

The Directors submit their report and the audited financial statements of Sarantel Group PLC for the year ended 30 September 2005.

Principal ActivityThe principal activity of the Company is that of a holding company. The principal activity of the Group is the design, manufacture andsale of patented, ceramic, filtering antennas for use in portable wireless devices.

Review of Developments and Future ProspectsThe Company was incorporated on 30 November 2004 as PINCO 2231 PLC and changed its name to Sarantel Group PLC on2 February 2005.

The Company’s authorised share capital upon incorporation of £50,000 was divided into 50,000 shares of £1 each. Pursuant to awritten resolution dated 2 February 2005, the share capital was further subdivided into 500,000 Ordinary shares of ten pence eachand re-designated into 500,000 “A” Ordinary shares of ten pence each and the share capital was increased to £6,500,000 by thecreation of 62,500,000 new A Ordinary shares of ten pence each and 2,000,000 new B ordinary shares of ten pence each.

On 23 February 2005, 30,803,473 A Ordinary shares of 10p each were issued to the existing shareholders of Sarantel Limited pro rata to their respective shareholdings in Sarantel Limited in consideration for the transfer of the entire issued share capital of Sarantel Limited to the Company.

On 2 March 2005, the shares of the Company were admitted to trading on AIM, a market operated by the London Stock Exchange.

Results and DividendsThe Group’s consolidated results are set out on pages 26 to 40. The Directors do not recommend the payment of a dividend inrespect of the year ended 30 September 2005.

Statement of Directors’ ResponsibilitiesCompany law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the stateof affairs of the Group and of the profit or loss of the Group for that period. In preparing those financial statements, the Directors arerequired to:

select suitable accounting policies and then apply them consistently;make judgements and estimates that are reasonable and prudent;state whether applicable accounting standards have been followed, subject to any material departures disclosed and explainedin the financial statements; andprepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continuein business.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time thefinancial position of the Group and to enable them to ensure that the financial statements comply with the requirements of theCompanies Act 1985. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable stepsfor the prevention and detection of fraud and other irregularities.


Directors’ Report

DirectorsThe Directors in office during the period under review and their beneficial interests in the equity of the Company were:

Ordinary shares of 10p eachDate of Date of 30 September 2005 30 September 2004*

appointment resignation Options Shares Options Shares

Pinsent Masons Director Ltd 30/11/04 4/2/05 — — — —Pinsent Masons Secretarial Ltd 30/11/04 4/2/05 — — — —David Dey 4/2/05 444,900 17,470 593,200 —David Wither 4/2/05 2,135,218 22,575 2,846,957 —Oliver Leisten 4/2/05 1,283,851 121,264 1,728,702 121,264John Uttley 6/6/05 — — — —David Ward 4/2/05 — — — —Sitkow Yeung 4/2/05 225,000 — 300,000 —

* 30 September 2004 refers to holdings in Sarantel Limited. No Director held shares in the Company at the date of their appointment.

Bill Taylor was appointed to the Board on 30 November 2005.

Further details on share options are included in the report of the Remuneration Committee.

No Director had, during or at the end of the year, a material interest in any contract which was significant in relation to theCompany’s business.

Substantial ShareholdingsAt the date of this report the Company has been informed of the following substantial shareholdings in the issued ordinary shares ofthe Company:

Number of ordinary shares Holding %

Foresight Venture Partners Group 15,683,555 29.27%MTIP Nominees Limited 11,217,682 20.93%Gartmore Investment Management plc 5,330,191 9.99%

Payment PolicyIt is the Group’s policy to pay suppliers in accordance with agreed terms, provided the supplier has also complied with agreed termsand conditions. At 30 September 2005, the trade creditors of the Group represented 45 days of purchases (2004: 46 days).

AuditorsGrant Thornton UK LLP, who were the auditors of Sarantel Limited, were appointed as auditors to the Company on incorporationunder Section 285(3) of the Companies Act 1985. A resolution to reappoint Grant Thornton UK LLP as auditors will be proposedat the Annual General Meeting (“AGM”).

By order of the Board

Sitkow YeungSecretary29 November 2005


Corporate Governance Report

IntroductionSarantel Group PLC was listed on AIM on 2 March 2005. Although the AIM Rules do not require the Group to comply with theCombined Code on Corporate Governance (“the Code”), the Group supports the principles set out in the Code and will attempt tocomply wherever possible, given both the size and resources available to the Group. Details are provided below of how the Groupapplies the Code.

The BoardThe Board of Directors comprises four executive Directors, and three independent non-executive Directors, one of whom is the Chairman.

The Board meets each month and receives a Board pack comprising reports from each of the executive Directors together with anyother material deemed necessary for the Board to discharge its duties. It is the Board’s responsibility for formulating, reviewing andapproving the Group’s strategy, budgets, major items of expenditure and acquisitions.

Board CommitteesThe Board has established two committees: the Audit Committee and the Remuneration and Nominations Committee, each of whichhas written terms of delegated responsibilities.

Audit CommitteeThe Audit Committee comprises two non-executive Directors and is scheduled to meet twice a year with the Chief Executive and theFinance Director in attendance. It is the Audit Committee’s role to provide formal and transparent arrangements for considering howto apply the financial reporting and internal control requirements of the Code, whilst maintaining an appropriate relationship withthe independent auditors of the Group. The Audit Committee assists the Board in the discharge of its duties concerning theannouncements of results, the Annual Report and Accounts and the maintenance of proper internal controls. It reviews the scope andplanning of the audit and the auditor’s findings and considers Group accounting policies and the compliance of those policies withapplicable legal and accounting standards.

Remuneration and Nominations CommitteeThe Remuneration and Nominations Committee comprises the three non-executive Directors and meets at least twice a year. It is theRemuneration and Nominations Committee’s role to establish a formal and transparent policy on executive remuneration and to setremuneration packages for individual executive Directors. The committee also meets as required to formulate and review proposalsfor the appointment of Directors and making recommendations thereon to the Board.

Shareholder RelationsThe Group meets with its institutional shareholders on a regular basis and will use the Annual General Meeting to encouragecommunication with private shareholders. In addition, the Group intends to use the Annual Report and Accounts, Interim Report andits web site (www.sarantel.com) where there is a specific section for investor relations, to provide further information to shareholders.

Internal Control and Risk ManagementThe Board is responsible for the system of internal control and for reviewing its effectiveness. The Group maintains a system ofinternal control consistent with a Group at its stage of development, and as it grows the Board intends to continue to enhance itsprocesses to identify risks facing the business and implement procedures to eliminate, mitigate and monitor those risks.

The Group does not currently have an internal audit function due to the small size of the administrative function and the high levelof Director review and authorisation of transactions.

A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board. The Group’s results,as compared against budget, are reported to the Board on a monthly basis and discussed in detail at each meeting of the Board.

The Group maintains appropriate insurance cover in respect of legal actions against the Directors as well as against material lossor claims against the Group and reviews the adequacy of the cover regularly.


Report of the Remuneration Committee

IntroductionCompanies trading on AIM are not required to provide a formal remuneration report. However, in line with current best practicethis report provides information to enable shareholders to obtain a greater level of understanding as to how Directors’ remunerationis determined.

The Remuneration and Nominations Committee is responsible for considering Directors’ remuneration packages and makes itsrecommendations to the Board.

Remuneration PolicyRemuneration packages are designed to be competitive and to attract the high calibre of staff required to achieve the objectives ofthe Group. Executive Directors receive salary, car allowance, death in service benefit and medical cover, annual bonuses and areeligible to participate in the Group’s share option arrangements.

Rotation of DirectorsUnder the Articles of Association of the Company, at the first Annual General Meeting, all Directors retire and are eligible forreappointment. Subsequently, each Director must retire from office and shall be eligible for reappointment at the third Annual GeneralMeeting following the general meeting at which he was appointed or reappointed. Initially, a few Directors may be put forward forre-election earlier than three years so that a smooth process results.

Service ContractsThe executive Directors have service agreements with Sarantel Limited, the wholly-owned subsidiary of the Group which are subjectto termination upon six months’ notice being given by either party. The executive Directors were appointed to the Board of SarantelGroup PLC on 4 February 2005 and their appointments to that Board are terminable at the will of the parties so that either party canterminate the appointment at any time without giving notice or a payment in lieu of notice.

PensionsThe Group operates a group personal pension plan (a money purchase arrangement) for the benefit of its employees. The assets ofthe scheme are administered by trustees in a fund independent from those of the Group.

Performance IncentivesThe Group operates an annual cash bonus, which provides for individual bonuses of between a maximum of 20% and 50% of basicsalary to be paid by reference to the achievement of Group and individual personal targets.

The Group currently operates two share incentive schemes under which tax-favoured enterprise management incentive (“EMI”)options may be granted together with non-tax favoured unapproved options.

The Sarantel 2000 unapproved Share option Scheme was established prior to the flotation of Sarantel Group PLC and all optionsgranted became vested at flotation. No further grants have been made under this scheme following flotation.

At the Extraordinary General Meeting held on 22 February 2005, Sarantel Group PLC obtained shareholder approval for theestablishment of The Sarantel 2005 Unapproved Share Option Scheme. Options granted under this scheme to date have beengranted on a time-vesting basis, with one-third of the options becoming exercisable on each anniversary of the grant. Since flotation,time-vesting options have not been granted to executive Directors of the Group.


The following options have been granted pursuant to the schemes to the following Directors:

Name Option type*** 1 Oct 2004 Granted Exercised Cancelled**** 30 Sept 2005 Exercise price £ Expiry date

David Dey* Unapproved 296,600 — — — 296,600 0.10 3/8/2014David Dey* Unapproved 296,600 — — 148,300 148,300 0.25 3/8/2014David Wither EMI 833,333 — — — 833,333 0.10 3/8/2014David Wither** Unapproved 590,146 — — — 590,146 0.10 3/8/2014David Wither** Unapproved 1,423,478 — — 711,739 711,739 0.25 4/8/2014Oliver Leisten EMI 5,675 — — — 5,675 0.10 25/2/2013Oliver Leisten EMI 739,000 — — 369,500 369,500 0.25 25/2/2013Oliver Leisten EMI 833,325 — — — 833,325 0.10 3/8/2014Oliver Leisten Unapproved 150,702 — — 75,351 75,351 0.25 4/8/2014Bill Taylor EMI — 333,330 — — 333,330 0.275 16/2/2015Bill Taylor Unapproved — 16,670 — — 16,670 0.275 16/2/2015Sitkow Yeung EMI 150,000 — — — 150,000 0.10 3/8/2014Sitkow Yeung EMI 150,000 — — 75,000 75,000 0.25 3/8/2014

Total 5,468,859 350,000 — 1,379,890 4,438,969

The holdings at 1 October 2004 relate to share options originally granted over Sarantel Limited shares, which were rolled over intooptions over Sarantel Group PLC shares on 23 February 2005.

David Ward and John Uttley were not granted nor held any share options during the year.

* David Dey’s options were granted prior to flotation. Since flotation, no options have been granted to non-executive Directors.** On 30 November 2005, David Wither exercised options over 50,000 shares at 10p per share.*** Options indicated as being EMI are within the individual EMI limits, applying the market value at the original grant date.**** Prior to the rollover of options, as part of the pre-flotation restructuring, certain performance options were partially cancelled for no consideration.

Non-Executive DirectorsAll the non-executive Directors have specific terms of engagement provided in formal letters of appointment and their remuneration isdetermined by the Board based on independent surveys of fees paid to non-executive Directors of similar companies. The details ofthe appointment of the non-executive Directors are set out below. Mr David Dey as Chairman of the Board receives a fee of £40,000per annum. The services of Mr David Ward are provided by MTI Partners Ltd at a fee of £20,000 per annum. Mr John Uttley receivesa fee of £25,000 per annum. The non-executive Directors are not entitled to participate in the Group’s annual bonus scheme, andsince flotation have not received any option grants under the Group’s share option schemes. They are entitled to be reimbursedexpenses in accordance with the Group’s Travel and Expenses Policy. Under the terms of their appointment, Mr David Dey andMr John Uttley use one third of their net pay to purchase shares in the Group.

Name of Director Date of letter of appointment Duration of appointment

David Dey 4 February 2005 Indefinite*

John Uttley 7 June 2005 Indefinite*

David Ward 4 February 2005 Indefinite*

* All Directors are subject to re-election at the first AGM after appointment and every three years thereafter. Initially a few Directors may be put forward for re-election earlierthan three years so that a smooth process results.


Report of the Remuneration Committee


Directors’ RemunerationDetails of Directors’ remuneration are set out below:

Salary Benefits Bonus Total Pensions 2004£ £ £ £ £ £

Executive DirectorsDavid Wither 114,800 17,087 52,000 183,887 17,186 95,493Oliver Leisten 69,400 1,234 17,500 88,134 9,164 80,704Sitkow Yeung* 65,667 1,131 10,000 76,798 — —

Non-executive DirectorsDavid Dey 30,000 — — 30,000 — 20,000John Uttley** 8,183 — — 8,183 — —David Ward*** 12,083 — — 12,083 — —

Total 300,133 19,452 79,500 399,085 26,350 196,197

* From 11 January 2005.** From 7 June 2005.*** Payment in respect of David Ward’s services is made to MTI Partners Limited.

Mr Bill Taylor was appointed to the Board on 30 November 2005.

Report of the Independent Auditors to the members of Sarantel Group PLC

We have audited the financial statements of Sarantel Group PLC for the year ended 30 September 2005 which comprise the principal accounting policies, the consolidated profit and loss account, the balance sheets, the consolidated cash flow statement and notes 1 to 32. The financial statements have been prepared under the accounting policies set out therein.

This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985. Ouraudit work has been undertaken so that we might state to the Company’s members those matters we are required to state to themin an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility toanyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions wehave formed.

Respective Responsibilities of Directors and AuditorsThe Directors’ responsibilities for preparing the report of the Directors and the financial statements in accordance with UnitedKingdom law and accounting standards are set out in the statement of Directors’ responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and UnitedKingdom auditing standards.

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordancewith the Companies Act 1985. We also report to you if, in our opinion, the Directors’ report is not consistent with the financialstatements, if the Company has not kept proper accounting records, if we have not received all the information and explanationswe require for our audit, or if information specified by law regarding Directors’ remuneration and transactions with the Group arenot disclosed.

We read other information contained in the Directors’ report, the Chairman’s statement, the Chief Executive’s review, the FinanceDirector’s review, the corporate governance report, the report of the Remuneration Committee and consider whether it is consistentwith the audited financial statements. We consider the implications for our report if we become aware of any apparent misstatementsor material inconsistencies with the financial statements. We are not required to consider whether the Board’s statements on internalcontrol cover all risks and controls or form an opinion on the effectiveness of the Group’s corporate governance or its risk and controlprocedures. Our responsibilities do not extend to any other information.

Basis of OpinionWe conducted our audit in accordance with United Kingdom auditing standards issued by the Auditing Practices Board. An auditincludes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includesan assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, andof whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order toprovide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement,whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of thepresentation of information in the financial statements.

OpinionIn our opinion the financial statements give a true and fair view of the state of affairs of the Group and the Company at 30 September 2005and of the loss of the Group for the period then ended and have been properly prepared in accordance with the Companies Act 1985.

Grant Thornton UK LLPRegistered AuditorsChartered AccountantsCentral Milton Keynes29 November 2005


Principal Accounting Policies

Basis of AccountingThe financial statements have been prepared under the historical cost convention, and in accordance with applicableaccounting standards.

The principal accounting policies of the Group have remained unchanged from those used in the previous period by Sarantel Limited.Changes in the estimates of the useful economic lives of certain tangible fixed assets and patents are described below.

Basis of ConsolidationThe consolidated financial statements incorporate the financial statements of the Company and all Group undertakings (see note 12).

Merger accounting has been applied in respect of the acquisition of Sarantel Limited via a share for share exchange on 23 February 2005as part of a Group reconstruction. The investment has been recorded in the Company’s balance sheet at the nominal value of theshares issued.

As Sarantel Group PLC was not incorporated until 30 November 2004, these financial statements are proforma financial statementswhich have been prepared as though the Company and the Group had existed throughout the current and prior year. Statutoryfinancial statements are required for the period from incorporation to 30 September 2005. This information is given in note 32.

The comparative information for 2004 is derived from the statutory financial statements of Sarantel Limited for the year ended30 September 2004. The share capital has been restated as though the merger had been in effect throughout the period. The difference between this and the nominal value of Sarantel Limited’s actual shares has been taken to other reserves.

TurnoverThe turnover shown in the profit and loss account represents amounts receivable for goods supplied during the year, exclusive ofValue Added Tax.

Research and DevelopmentResearch and development expenditure is written off in the year in which it is incurred.

Intangible Fixed AssetsPatents are included at cost, representing third party costs of registering.

Purchased goodwill representing the excess of the fair value of the consideration given over the fair value of the identifiable net assetsacquired, is capitalised and is amortised on a straight line basis over its estimated useful economic life.

AmortisationAmortisation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of thatasset as follows:

Goodwill – five yearsPatents – ten years from year following acquisition

From October 2004, the Company reviewed its amortisation policy on patents and has revised its estimate of the useful economiclives of patents from five years to ten. The impact on the loss for the period is detailed in note 3.


DepreciationDepreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of thatasset as follows:

Leasehold improvements – 10%Plant and machinery – 20%–33% from date asset is put into useFixtures and fittings – 20%Computer equipment – 33%

From October 2004, the Company reviewed its depreciation policy on all tangible assets, and has reduced its estimate of the usefuleconomic life of heavy plant and machinery from ten years to five. The impact on the loss for the period is detailed in note 3.

StocksStocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.

Leasing and Hire Purchase CommitmentsAssets held under finance leases, which are leases where substantially all the risks and rewards of ownership of the asset havepassed to the Company, and hire purchase contracts, are capitalised in the balance sheet and are depreciated over their useful lives.The capital elements of future obligations under the leases and hire purchase contracts are included as liabilities in the balance sheet.

The interest elements of the rental obligations are charged in the profit and loss account over the periods of the leases and hirepurchase contracts and represent a constant proportion of the balance of capital repayments outstanding.

Rentals payable under operating leases are charged in the profit and loss account on a straight line basis over the lease term.

Deferred TaxationDeferred tax is recognised on all timing differences where the transactions or events that give the Company an obligation to pay moretax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax assets are recognisedwhen it is more likely than not that they will be recovered. Deferred tax is measured using rates of tax that have been enacted orsubstantively enacted by the balance sheet date.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timingdifferences reverse, based on tax rates and laws enacted or substantially enacted at the balance sheet date.

Foreign CurrenciesAssets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date.Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Exchangedifferences are taken into account in arriving at the operating loss.

PensionsThe Company operates a Group personal pension plan (a money purchase arrangement) for the benefit of certain Directors andemployees. Pension costs are charged to the profit and loss account in the period to which they relate.

Financial InstrumentsFinancial assets are recognised in the balance sheet at the lower of cost and net realisable value.

Interest receivable and payable is accrued and charged or credited to the profit and loss account in the period to which it relates.


Consolidated Profit and Loss Account for the year ended 30 September 2005

2005 2004Note £ £

Turnover 2 2,802,454 839,325

Operating costs:

Change in stocks of finished goods and work in progress 92,319 (74,674)

Raw materials and consumables 1,464,061 364,398

Other operating costs 4 115,000 (94,736)

Other external charges 677,930 141,565

Staff costs 5 3,034,483 1,500,398

Other operating charges 2,220,937 2,072,289

Depreciation and other amounts written off tangible and intangible assets 10/11 1,087,982 920,411

8,692,712 4,829,651

Operating loss 3 (5,890,258) (3,990,326)

Operating loss before depreciation, amortisation and exceptional items (4,497,310) (3,164,651)

Exceptional non-recurring costs 4 (304,966) 94,736

Depreciation and other amounts written off tangible and intangible assets (1,087,982) (920,411)

Net interest 6 328,447 34,617

Loss on ordinary activities before taxation (5,561,811) (3,955,709)

Tax on loss on ordinary activities 7 150,215 200,228

Loss for the financial year 23 (5,411,596) (3,755,481)

Basic loss per share 9 (12.3)p (17.1)p

During the year, the Group carried out a corporate restructuring including the introduction of a new holding company. The consolidatedprofit and loss account has been prepared using merger accounting and is presented on a proforma basis as if the Group has beenin existence throughout both the current and prior periods. Further information is given in note 1.

A consolidated profit and loss account from the date of incorporation of the new holding company is given in note 32.

There were no recognised gains or losses other than the loss for the financial year.

All the activities of the Group are classed as continuing.

The accompanying accounting policies and notes form an integral part of these financial statements.


Consolidated Balance Sheet as at 30 September 2005

2005 2004Note £ £

Fixed assets

Intangible assets 10 576,619 543,914

Tangible assets 11 4,671,031 2,593,351

5,247,650 3,137,265

Current assets

Stock 13 126,281 363,816

Debtors 14 1,046,655 613,352

Cash at bank and in hand 27 13,134,412 2,069,046

14,307,348 3,046,214

Creditors: amounts falling due within one year 15 2,009,708 811,014

Net current assets 12,297,640 2,235,200

Total assets less current liabilities 17,545,290 5,372,465

Creditors: amounts falling due after more than one year 16 460,257 27,127

Provisions for liabilities and charges 19 — —

17,085,033 5,345,338

Capital and reserves

Called-up equity share capital 22 5,355,891 3,064,477

Share premium account 23 14,341,907 —

Other reserves 23 13,389,536 12,871,566

Profit and loss account 23 (16,002,301) (10,590,705)

Shareholders’ funds 24 17,085,033 5,345,338


These financial statements were approved by the Board of Directors on 29 November 2005 and are signed on its behalf by:

John UttleyDirector


Company Balance Sheet as at 30 September 2005

2005 2004Note £ £

Fixed assets

Investments 12 3,080,348 —

Current assets

Debtors 14 6,154,394 —

Cash at bank and in hand 10,914,530 —

17,068,924

Creditors: amounts falling due within one year 15 107,769 —

Net current assets 16,961,155 —

Total assets less current liabilities 20,041,503 —

Capital and reserves

Called-up equity share capital 22 5,355,891 —

Share premium account 23 14,341,907 —

Profit and loss account 23 343,705 —

Shareholders’ funds 20,041,503 —


These financial statements were approved by the Board of Directors on 29 November 2005 and are signed on its behalf by:

John UttleyDirector


Consolidated Cash Flow Statement for the year ended 30 September 2005

2005 2004Note £ £

Net cash outflow from operating activities 25 (3,950,835) (3,064,036)

Returns on investments and servicing of finance

Interest received 406,803 34,617

Interest paid (31,980) —

Finance lease interest paid (46,376) —

Net cash inflow from returns on investments and servicing of finance 328,447 34,617

Taxation received 165,215 235,228

Capital expenditure

Payments to acquire tangible fixed assets (2,007,309) (338,671)

Payments to acquire intangible fixed assets (241,216) (145,794)

Net cash outflow from capital expenditure (2,248,525) (484,465)

Cash outflow before financing (5,705,698) (3,278,656)

Financing

Issue of shares 18,099,187 4,077,424

Expenses paid in connection with issue of shares (1,481,735) —

Issue of shares in subsidiary prior to reconstruction 345,198 —

Capital element of finance lease rentals (191,586) —

Net cash inflow from financing 16,771,064 4,077,424

Increase in cash 26 11,065,366 798,768



Notes to the Financial Statements

1 Corporate RestructuringDuring the year, the Group carried out a corporate restructuring including the introduction of a new holding company, Sarantel Group PLC,incorporated on 30 November 2004. On 23 February 2005, the Company acquired the full share capital of its subsidiary, Sarantel Limited,by way of a share for share exchange. On 2 March 2005, the Company was admitted to AIM following a successful placing.

2 TurnoverAn analysis of turnover by geographical market or segmental information has not been disclosed as, in the opinion of the Directors,it would be seriously prejudicial to the Group.

3 Operating LossOperating loss is stated after charging:

2005 2004 £ £

Amortisation of intangible fixed assets 208,511 235,734Depreciation of owned tangible fixed assets 811,991 412,383Impairment of owned tangible fixed assets — 271,802Depreciation of assets held under finance leases and hire purchase agreements 67,480 492

Depreciation and amortisation includes a net charge of £296,059 arising on the change in estimated useful lives of certain categoriesof fixed assets. The additional depreciation arising in the year on certain categories of plant and machinery was £352,442 and thereduced level of amortisation arising from the change to the useful life of patents amounted to £56,383.

2005 2004 £ £

Auditors’ fees:Audit 18,000 12,500Tax compliance 1,800 1,447Tax advisory 21,150 3,600Other non-audit services 6,820 —

In addition, remuneration paid to the auditors in respect of the flotation totalling £84,500, has been included within the sharepremium account.

2005 2004 £ £

Research and development costs 259,949 787,213Operating lease costs:Land and buildings 101,170 101,170

4 Exceptional Non-Recurring Items Charged in Arriving at Operating Loss2005 2004

£ £

Stock write-off 109,198 —Non-recurring professional charges 80,768 —Variation of Share Exchange Agreement 115,000 (94,736)

304,966 (94,736)


4 Exceptional Non-Recurring Items Charged in Arriving at Operating Loss (continued)Stock Write-Off:The stock write-off relates to one discontinued product and other stock rendered obsolete through continuing process improvement.

Professional Charges:Non-recurring legal and professional charges re aborted fundraising prior to flotation.

Variation of Share Exchange Agreement: During the year ended 30 September 2004, Sarantel Limited purchased and subsequently sold a company, recognising a profit on disposal, after associated costs, of £94,736. The purchase was via a share for share exchange which on 23 February 2005 wasvaried, following shareholders’ consent, and additional shares were issued to the parties to the Share Exchange Agreement to thevalue of the consideration received for the sale of the subsidiary amounting to £115,000. This has been recognised as an exceptionalcost in the current year.

5 Directors and EmployeesThe average number of staff employed by the Group during the financial year amounted to:

2005 2004 Number Number

Management 2 1Technical 6 6Finance and administration 5 3Sales and marketing 4 2Operations 55 21

72 33

The aggregate payroll costs (including Directors emoluments) were:

2005 2004 £ £

Wages and salaries 2,654,923 1,367,327Social security costs 299,488 133,071Pension costs 80,072 —

3,034,483 1,500,398

Remuneration in respect of Directors was as follows:

2005 2004 £ £

Emoluments 377,002 291,116Compensation for loss of Directorship — 61,528Pension contributions to money purchase pension scheme 26,350 —Payment to third parties for Directors services 22,083 45,000

425,435 397,644



5 Directors and Employees (continued)The amounts set out above include remuneration in respect of the highest paid Director as follows:

2005 2004 £ £

Emoluments 183,887 146,447Pension contributions to money purchase pension schemes 17,186 —

201,073 146,447

No Director exercised any share options during the year or the prior year. Details of the share options granted to Directors in the year,together with further details of their remuneration, are shown in the report of the Remuneration Committee.

During the year two Directors (2004: Nil) participated in money purchase pension schemes.

6 Net Interest2005 2004

£ £

Interest receivable and similar income 406,803 34,617Finance charges in respect of finance leases (46,376) —Other interest payable and similar charges (31,980) —

328,447 34,617

7 Taxation on Ordinary Activities2005 2004

£ £

Current tax:UK corporation tax based on the results for the year at 19% (2004: 19%) (150,000) (165,000)Adjustment in respect of prior year (215) (35,228)

Total current tax (150,215) (200,228)

The taxation credit arises in respect of research and development expenditure and is subject to agreement with the Inland Revenue.

The standard rate of tax for the year based on the UK standard rate of corporation tax is 19% (2004: 19%). The actual tax credit forthe year differs from the standard rate for the reasons set out in the following reconciliation:

2005 2004 £ £

Loss on ordinary activities before taxation (5,561,811) (3,955,709)

Loss on ordinary activities multiplied by rate of tax (1,056,744) (751,585)Effect of:Expenses not deductible for tax purposes 222,870 198,427Depreciation for the period in excess of capital allowances 144,572 130,738Tax losses carried forward 689,302 422,420Research and development tax credit (150,000) (165,000)Prior year over provision (215) (35,228)

Total current tax (150,215) (200,228)

Tax losses available, subject to agreement with the Inland Revenue, to offset future taxable trading income amount to approximately£10.0m. See note 19.


8 Result for the Financial YearThe parent company has taken advantage of Section 230 of the Companies Act 1985 and has not included its own profit and lossaccount in these financial statements. The parent company’s profit for the year was £343,705.

9 Loss Per Share The calculation of basic loss per share is based on the loss attributable to ordinary shareholders of £5,411,596 (2004: £3,755,481)divided by the weighted average number of shares in issue during the year which was 43,867,040 (2004: 22,024,352).

The issue of additional shares on the exercise of options would decrease the basic loss per share and there is, therefore, no dilutiveeffect of share options.

10 Intangible Fixed AssetsThe Group

Goodwill Patents Total£ £ £

CostAt 1 October 2004 760,632 563,833 1,324,465Additions — 241,216 241,216

At 30 September 2005 760,632 805,049 1,565,681

AmortisationAt 1 October 2004 608,504 172,047 780,551Charge for the year 152,128 56,383 208,511

At 30 September 2005 760,632 228,430 989,062

Net book valueAt 30 September 2005 — 576,619 576,619

At 30 September 2004 152,128 391,786 543,914

11 Tangible Fixed AssetsThe Group

Leasehold Plant and improvements machinery Total

£ £ £

CostAt 1 October 2004 196,646 3,476,376 3,673,022Additions — 2,957,151 2,957,151

At 30 September 2005 196,646 6,433,527 6,630,173

DepreciationAt 1 October 2004 49,162 1,030,509 1,079,671Charge for the year 19,664 859,807 879,471

At 30 September 2005 68,826 1,890,316 1,959,142

Net book valueAt 30 September 2005 127,820 4,543,211 4,671,031

At 30 September 2004 147,484 2,445,867 2,593,351

Fixtures and fittings and computer equipment are not significant and so are included in plant and machinery.

Included within the net book value of £4,671,031 is £642,526 (2004: £59,150) relating to assets held under finance leases and hirepurchase agreements. The depreciation charged to the financial statements in the year in respect of such assets amounted to£67,480 (2004: £492).



12 InvestmentsThe GroupAt 30 September 2005, the Group held more than 20% of a class of the allotted share capital of the following:

Country of incorporation Class of share held Proportion held Nature of business

Sarantel Limited England and Wales Ordinary shares 100% Design and manufacture of antennas

Sarantel USA Inc* USA Ordinary shares 100% DormantSarantel Asia Pacific Pte. Ltd* Singapore Ordinary shares 100% Distributor of antennas

* Owned by Sarantel Limited

The CompanyShares in subsidiary

undertakings£

Cost and net book amountAt 1 October 2004 —Additions 3,080,348

At 30 September 2005 3,080,348

The Company purchased 100% of the issued share capital of Sarantel Limited on 23 February 2005 in a share for share exchange inorder to facilitate the subsequent flotation of Sarantel Group PLC on the Alternative Investment Market.

13 StocksThe Group The Company

2005 2004 2005 2004 £ £ £ £

Raw materials 107,941 253,157 — —Work in progress 15,457 36,109 — —Finished goods 2,883 74,550 — —

126,281 363,816 — —

14 DebtorsThe Group The Company

2005 2004 2005 2004 £ £ £ £

Trade debtors 566,158 247,259 — —VAT recoverable 159,549 51,233 — —Amounts owed by Group undertakings — — 6,153,706 —Corporation tax recoverable 150,000 165,000 — —Other debtors 66,195 90,508 688 —Prepayments and accrued income 104,753 59,352 — —

1,046,655 613,352 6,154,394 —

The debtors above include the following amounts falling due after more than one year:

The Group The Company2005 2004 2005 2004

£ £ £ £

Other debtors 59,938 59,938 — —


15 Creditors: Amounts Falling Due Within One YearThe Group The Company

2005 2004 2005 2004 £ £ £ £

Trade creditors 1,053,475 399,955 — —Other taxation and social security 193,531 46,344 107,769 —Amounts due under finance leases and hire purchase agreements 351,151 26,025 — —Other creditors 8,810 179,930 — —Accruals and deferred income 402,741 158,760 — —

2,009,708 811,014 107,769 —

16 Creditors: Amounts Falling Due After More Than One YearThe Group The Company

2005 2004 2005 2004 £ £ £ £

Amounts due under finance leases and hire purchase agreements 460,257 27,127 — —

17 BorrowingsBorrowings are repayable as follows:

The Group The Company2005 2004 2005 2004

£ £ £ £

Within one year:Finance leases and hire purchase agreements 351,151 26,025 — —After one year and within two years:Finance leases and hire purchase agreements 233,008 27,127 — —After two years and within five yearsFinance leases and hire purchase agreements 227,249 — — —

811,408 53,152 — —

18 Financial InstrumentsThe Group uses financial instruments comprising borrowings, cash, liquid resources and various items such as trade debtors, tradecreditors, etc. that arise directly from its operations. The Group uses derivatives which are limited to those described under currencyexchange risk below. The main purpose of these financial instruments is to raise finance for the Group’s operation.

The main risks arising from the Group financial instruments are interest rate risk, currency exchange risk and liquidity risk and thepolicies for managing these are regularly reviewed and agreed by the Board.

Short-term debtors and creditorsShort-term debtors and creditors have been excluded from the following disclosures, other than currency risk disclosures.

Interest rate riskThe Group finances its operations through share capital and leasing. The Group mixes the duration of its deposits to reduce theimpact of interest rate fluctuations.

Liquidity riskThe Group seeks to manage financial risk by ensuring that sufficient financial liquidity is available to meet foreseeable needs andto invest cash assets safely and profitably.




18 Financial Instruments (continued)Currency exchange riskThe Group operates in overseas markets and is subject to currency exposures on transactions undertaken during the year. The Grouphas options to sell currency at certain defined rates, and these option contracts are reviewed quarterly. There were no material optioncontracts in place at the year end.

BorrowingsThe Group has purchased some fixed assets through finance leasing and hire purchase agreements at fixed interest rates.

Financial assetsAt 30 September 2005 £10.7m was on three month deposit at Anglo Irish Bank paying interest at 4.52%.

The Directors have given serious consideration and have reached the conclusion that there is no significant difference between thebook and the fair value of assets and liabilities of the Group at the balance sheet date.

19 Deferred TaxationA deferred tax asset amounting to approximately £3.0m (2004: £1.8m) arising from taxable trading losses has not been recogniseddue to continued losses being budgeted for the near future.

20 Leasing CommitmentsAt 30 September 2005 the Company had aggregate annual commitments under non-cancellable operating leases as set out below.

Land and buildings2005 2004

£ £

Operating leases which expire:After more than five years 101,170 101,170

21 Related Party TransactionsUnder an agreement dated 24 February 2005 between the Company and MTI Partners Limited (“MTI”), MTI provides an authorisedrepresentative to serve as a non-executive Director of the Company for a fee of £20,000 per annum payable quarterly. MTI controls20.93% of the share capital of the Company. At 30 September 2005, the amount outstanding to MTI was £965 (2004: £Nil).

22 Share CapitalAuthorised share capital:

2005 2004 No £ No £

A ordinary shares of £0.10 each 63,000,000 6,300,000 63,000,000 6,300,000B ordinary shares of £0.10 each 2,000,000 200,000 2,000,000 200,000

65,000,000 6,500,000 65,000,000 6,500,000

Allotted, called-up and fully paid:

2005 2004 No £ No £

A ordinary shares of £0.10 each 52,522,562 5,252,257 30,644,770 3,064,477B ordinary shares of £0.10 each 1,036,340 103,634 — —

53,558,902 5,355,891 30,644,770 3,064,477

Although the Company was not incorporated until 30 November 2004, comparative balances have been prepared on a proformabasis as though it had existed throughout the period. This is to comply with the requirements of merger accounting. The sharesissued at 30 September 2004 therefore reflect the share for share exchange explained below, less the shares issued by thesubsidiary between 1 October 2004 and the date of the share for share exchange.

22 Share Capital (continued)Allotments during the yearThe Company made the following allotments in the period:

Share for share exchangeOn 23 February 2005, the Company issued 30,803,473 A Ordinary shares of £0.10 each to the existing shareholders of Sarantel Limitedpro rata to their respective shareholdings in consideration for the transfer to the Company of the entire issued share capital ofSarantel Limited. The investment was recorded at its nominal value of £3,080,348.

Stock exchange flotationOn admission to AIM, the Company issued 21,951,220 shares as follows:

(i) 20,854,880 A Ordinary £0.10 shares were issued at £0.82. The difference of £15,015,514 between the total consideration of£17,101,002 and the total nominal value of £2,085,488 has been credited to the share premium account.

(ii) 1,096,340 B Ordinary £0.10 shares were issued at £0.82. The difference of £789,365 between the total consideration of £898,999and the total nominal value of £109,634 has been credited to the share premium account.

During the year, 60,000 B Ordinary shares were transferred and in accordance with the Articles of Association of the Company, theseshares were automatically converted into A Ordinary shares on transfer.

The costs associated with the admission to AIM totalling £1,481,735 have been debited to the share premium account.

A and B shares rank pari passu in all respects, save that the subscribers for B Ordinary shares are only entitled to receive ten cleardays notice from the Directors requiring payment of any moneys unpaid on their shares, whereas the holders of A Ordinary sharesare entitled to 14 clear days’ notice. The B Ordinary shares will automatically convert into A Ordinary shares forthwith on thesubscribers thereof transferring or disposing of the shares.

Exercise of OptionsDuring the year employees of the group exercised share options and the Company issued 804,209 shares for a total consideration of£99,186. The difference of £18,765 between the total consideration and the nominal value of £80,421 has been credited to the sharepremium account.

Share Options2005 2004

Number of Share Options at the beginning of the year 8,806,740 2,816,772Options granted during the year 1,360,202 5,989,968Number of Options lapsed and eliminated (2,260,652) —Number of Options exercised during the year (804,209) —

Balance at end of the year 7,102,081 8,806,740



22 Share Capital (continued)Share Options (continued)Share options at 30 September 2005 are exercisable as follows:

Date of grant Number of shares Exercise price (pence) Last date for exercise

26/02/2003 128,841 10 25/02/201326/02/2003 389,000 10 31/03/200626/02/2003 431,082 25 25/02/201326/02/2003 369,500 25 31/03/200604/08/2004 1,859,158 10 03/08/201404/08/2004 207,000 25 03/08/201417/02/2005 640,330 27.5 16/02/201520/09/2005 110,000 86.5 19/09/201504/08/2004 1,391,488 10 03/08/201404/08/2004 296,571 10 03/08/201405/08/2004 787,090 25 04/08/201417/02/2005 416,670 27.5 16/02/201517/02/2005 75,351 25 31/03/2006

Details of the share options granted to the Directors are shown in the report of the Remuneration Committee.

23 ReservesThe Group

Share premium Other Profit and account reserves loss account

£ £ £

At 1 October 2004 — 12,871,566 (10,590,705)Loss for the year — — (5,411,596)Issue of shares in subsidiary prior to reconstruction — 517,970Premium arising on shares issued 15,823,642 — —Expenses incurred re shares issued (1,481,735) — —

At 30 September 2005 14,341,907 13,389,536 (16,002,301)

The CompanyShare premium Profit and

account loss account£ £

At 1 October 2004 — —Profit for the year — 343,705Premium arising on shares issued 15,823,642 —Expenses incurred re shares issued (1,481,735) —

At 30 September 2005 14,341,907 343,705

24 Reconciliation of Movements in Shareholders’ FundsEquity shareholders’ funds

2005 2004 £ £

Loss for the financial year (5,411,596) (3,755,481)Issue of new shares (net of issue expenses) 16,617,450 4,077,424Issue of shares in subsidiary prior to reconstruction 533,841 —

Increase in shareholders’ funds in the year 11,739,695 321,943Opening shareholders’ equity funds 5,345,338 5,023,395

Closing shareholders’ equity funds 17,085,033 5,345,338


25 Reconciliation of Operating Profit to Net Cash Inflow From Operating Activities2005 2004

£ £

Operating loss (5,890,258) (3,990,326)Depreciation and amortisation 1,087,982 920,411Decrease/(increase) in stocks 237,534 (136,199)Increase in debtors (448,303) (156,701)Increase in creditors 947,210 298,779Non-cash item re exceptional item – see note 4 115,000 —

Net cash outflow from operating activities (3,950,835) (3,064,036)

26 Reconciliation of Net Cash Flow to Movement in Net Funds2005 2004

£ £

Increase in cash in the period 11,065,366 798,768Cash outflow in respect of finance leases and hire purchase 191,586 —New finance leases and hire purchase agreements (949,842) (53,152)

Change in net funds resulting from cash flows 10,370,110 745,616Net funds at 30 September 2004 2,015,894 1,270,278

Net funds at 30 September 2005 12,323,004 2,015,894

27 Analysis of Changes in Net FundsAt 1 October At 30 September

2004 Cash flows Other changes 2005£ £ £ £

Net cash:Cash in hand and at bank 2,069,046 11,065,366 — 13,134,412Debt:Finance leases and hire purchase agreements (53,152) 191,586 (949,842) (811,408)

Net funds 2,015,894 11,256,952 (949,842) 12,323,004

28 Cash at BankCash balances of £13,134,412 at the end of the year include an amount of £1,000,000 on an interest bearing deposit account with afinancial institution which can only be repaid when the amounts owed to it under hire purchase agreements are settled in full. At theyear end, the amount owed was £726,000 (2004: £Nil).

29 Capital CommitmentsAmounts contracted for but not provided in the financial statements at 30 September 2005 amounted to £827,409 (2004: £302,000).

30 PensionsThe Group makes payments into a Group personal pension scheme for certain employees and Directors. The assets of the schemeare administered by trustees in a fund independent from those of the Group.

31 AcquisitionOn 23 February 2005, the entire issued share capital of Sarantel Limited was acquired via a share for share exchange. The combinationhas been accounted for using the merger method of accounting. Further details of the transaction are included in note 1.

32 Statutory Financial StatementsThese financial statements are proforma financial statements which reflect the Group as though it had existed in the prior year whichwas before the incorporation of the Company. Statutory financial statements are however required to reflect the Group’s profit andloss account from the date of incorporation and are presented below. Notes to the statutory profit and loss account have not beengiven because in the opinion of the Directors they would not provide useful information to the users of the accounts.


Statutory Consolidated Profit and Loss Account ten months to 30 September 2005

2005Note £

Turnover 2,463,222Operating costs:Raw materials and consumables 1,400,309Other operating costs 4 115,000Other external charges 643,283Staff costs 2,671,193Other operating charges 1,745,456Depreciation and other amounts written off tangible and intangible assets 971,569

7,546,810

Operating loss (5,083,588)Operating loss before depreciation, amortisation and exceptional items (3,807,053)Exceptional non-recurring costs (304,966)Depreciation and other amounts written off tangible and intangible assets (971,569)Net interest 328,477

Loss on ordinary activities before taxation (4,755,111)Tax on loss on ordinary activities 150,215

Loss on ordinary activities after taxation (4,604,896)


Notice of Annual General Meeting

Notice is hereby given that the first Annual General Meeting of Sarantel Group PLC (the “Company”) will be held at The Castle Theatre,Castle Way, Wellingborough NN8 1XA on Friday 3 February 2006 at 11.30 am for the following purposes:

Ordinary Business1. To receive the Directors’ report and the accounts for the period ended 30 September 2005.

2. To approve the Directors’ Remuneration Report for the period ended 30 September 2005.

3. To re-elect David Dey as a Director (due for re-election at the second Annual General Meeting).

4. To re-elect David Wither as a Director (due for re-election at the fourth Annual General Meeting).

5. To re-elect Sitkow Yeung as a Director (due for re-election at the third Annual General Meeting).

6. To re-elect Oliver Paul Leisten as a Director (due for re-election at the fourth Annual General Meeting).

7. To re-elect David Russell Ward as a Director (due for re-election at the second Annual General Meeting).

8. To re-elect John Richard Uttley as a Director (due for re-election at the third Annual General Meeting).

9. To re-elect Bill Taylor as a Director (due for re-election at the fourth Annual General Meeting).

10. To re-appoint Grant Thornton UK LLP as auditors of the Company to hold office until the conclusion of the next general meeting at which accounts are laid before the Company and to authorise the Directors to determine the auditors’ remuneration for the yearending 30 September 2006.

Special BusinessTo consider and, if thought fit, pass the following resolutions, of which Resolutions 11 and 14 will be proposed as OrdinaryResolutions and Resolutions 12 and 13 will be proposed as Special Resolutions:

11. AUTHORITY TO ALLOT RELEVANT SECURITIES

THAT the Directors be generally and unconditionally authorised in accordance with section 80 of the Companies Act 1985 (the“Act”) to allot relevant securities (within the meaning of section 80(2) of the Act) up to a maximum aggregate nominal amount of£1,129,988.50 provided that this authority shall expire at the conclusion of the Company’s Annual General Meeting to be held incalendar year 2007 (unless previously revoked, varied or extended by the Company in general meeting) save that the Company maymake offers or agreements before the expiry thereof which would or might require relevant securities to be allotted after the expiry ofsuch authority and the Directors may allot relevant securities in pursuance of such an offer or agreement as if the authority conferredby this resolution had not expired.

12. EMPOWERMENT TO MAKE ALLOTMENTS OF EQUITY SECURITIES

THAT, subject to the passing of Resolution 11, the Directors be empowered pursuant to section 95 of the Act to allot equity securities(within the meaning of section 94(2) of the Act) for cash as if section 89(1) of the Act did not apply to any such allotments. This poweris limited to:

(a) the allotment of equity securities where such securities have been offered (whether by way of a rights issue, open offer orotherwise) to holders of A Ordinary shares and B Ordinary shares in the capital of the Company made in proportion (as nearlyas may be) to their existing holdings of A Ordinary shares and B Ordinary shares (such shares being treated as one class forthese purposes) but subject to the Directors having a right to make such exclusions or other arrangements in connection withthe offering as they deem necessary or expedient:

i. to deal with equity securities representing fractional entitlements; and

ii. to deal with legal or practical problems under the laws of any territory or the requirements of any regulatory body or stockexchange; and

(b) the allotment of equity securities for cash otherwise than pursuant to paragraph (a) up to an aggregate nominal amountof £537,001.15;

and will expire 15 months after the date of the passing of this resolution or at the conclusion of the next Annual General Meeting ofthe Company after the passing of this resolution, whichever first occurs, but the Company may, before such expiry, make an offer oragreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securitiesin pursuance of that offer or agreement as if the power conferred by this resolution had not expired.

For the purposes of this resolution:

i. references (except in paragraph ii below) to an allotment of equity securities shall include a sale of treasury shares; and

ii. the power in the first paragraph of this Resolution, in so far as it relates to the allotment of equity securities rather than thesale of treasury shares, is granted pursuant to the authority referred to in Resolution 11.


Notice of Annual General Meeting

13. AUTHORITY TO MAKE MARKET PURCHASES

THAT the Company be and is hereby generally and unconditionally authorised for the purposes of section 166 of the Act to makemarket purchases (within the meaning of section 163(3) of the Act) of A Ordinary shares and B Ordinary shares of 10p each in theCompany (“Ordinary shares”) provided that:

(a) the maximum number of ordinary shares so authorised to be purchased shall not exceed 5,370,012 shares representing 10%of the present issued share capital of the Company;

(b) the minimum price (excluding expenses) which may be paid for an ordinary share shall be 10p;

(c) the maximum price, exclusive of expenses, which may be paid for an ordinary share is an amount equal to 105% of theaverage of the middle market quotations for an ordinary share as derived from the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which the ordinary share is contracted to be purchased;

(d) the authority hereby conferred shall expire at the conclusion of the Annual General Meeting of the Company for the calendaryear 2007 or on 3 May 2007 whichever is the earlier (unless previously renewed, varied or revoked by the Company in generalmeeting); and

(e) the Company may enter into contract(s) to purchase its Ordinary shares under this authority prior to the expiry of this authoritywhich would or might be completed wholly or partly after the expiry of this authority and may make a purchase of Ordinaryshares in pursuance of any such contract(s).

14. SARANTEL SHARESAVE SCHEME

That the Directors be authorised:

(a) to establish the Sarantel Sharesave Scheme (the “Sharesave Scheme”), a copy of the draft rules of which has been producedto the meeting and initialled by the Chairman (for the purposes of identification only) and a summary of the main provisions ofwhich is set out in the attachment to this Notice of Meeting;

(b) to do all such acts and things as may be necessary or expedient to give effect to the Sharesave Scheme, including amendingthe rules of the Sharesave Scheme in such a manner as may be necessary to ensure that the Sharesave Scheme is approvedby HM Revenue & Customs; and

(c) to exercise the powers of the Company to establish other share schemes for employees resident or working outside theUnited Kingdom, based on the Sharesave Scheme but modified to take account of local tax, exchange control and securitieslaws, provided that any shares issued, or which may be issued under such other share schemes, are treated as countingagainst the overall limit on the issue of new shares under the Sharesave Scheme.

By Order of the Board

Sitkow Yeung Registered Office:Chief Financial Officer & Company Secretary Unit 2 Wendel Point,20 December 2005 Ryle Drive,

Park Farm South,Wellingborough NN8 6AQ


NOTES(a) A member entitled to attend and vote at the meeting may appoint one or more proxies to attend and, on a poll, vote on his or her

behalf. A proxy need not be a member of the Company.

(b) A form of proxy is enclosed which, to be effective, must be completed and delivered to the Registrars of the Company,Computershare Investor Services PLC, PO Box 82, The Pavilions, Bridgwater Road, Bristol BS99 7NH, together with any powerof attorney or other authority under which it is executed (or a notorially certified copy of such authority), so as to be received byno later than 48 hours before the time the meeting is scheduled to begin. The completion and return of the form of proxy will notaffect the right of a member to attend and vote at the meeting.

(c) Pursuant to regulation of 41 of the Uncertificated Securities Regulations 2001, the time by which a person must be entered on theregister of members of the Company in order to have the right to attend and vote at the meeting is 11:30 am on 1 February 2006(being not more than 48 hours prior to the time fixed for the meeting) or, if the meeting is adjourned, such time being not morethan 48 hours prior to the time fixed for the adjourned meeting. Changes to entries on the register of members after that time willbe disregarded in determining the right of any person to attend or vote at the meeting.

(d) Copies of the draft rules of the Sarantel Sharesave Scheme, the Directors’ letters of appointment, the register of Directors’interests in Ordinary shares of the Company kept in accordance with section 325 of the Companies Act 1985 and a copy of thememorandum and articles of association of the Company will be available for inspection at the registered office of the Companyduring usual business hours on any weekday from the date of this notice until the meeting, and at the meeting itself for at least15 minutes prior to the commencement of the meeting until its conclusion. The draft rules of the Sarantel Sharesave Scheme willalso be available for inspection at the offices of Pinsent Masons, Dashwood House, 69 Old Broad Street, London EC2M 1NRduring normal business hours on any weekday from the date of this notice until the meeting.


Explanatory Notes

Resolution 1 The Report and Accounts. The Directors will present their report and the audited accounts for the period ended30 September 2005 together with the auditors’ report thereon.

Resolution 2 The Remuneration Report. Approval of the Directors’ remuneration report is proposed as an ordinary resolution.

Resolutions 3 – 9 Election of Directors. Article 94 of the Company’s articles of association allows the Board to appoint a personto the Board during the year, subject to their re-appointment at the subsequent Annual General Meeting.Accordingly, all Directors offer themselves for re-election. Subsequently, each Director must retire from officeand will be eligible for re-election at the third annual general meeting after the general meeting at which he wasappointed or re-appointed. Directors’ biographical details are shown on pages 14 and 15.

Resolution 10 Appointment of Auditors. The Company is required to appoint auditors at each general meeting at whichaccounts are laid before shareholders, to hold office until the next such meeting. The resolution proposes thatGrant Thornton UK LLP be re-appointed as auditors for the current year and that the Directors are authorisedto set their fees.

Resolution 11 Authority to allot relevant securities. Under section 80 of the Companies Act 1985 the Directors cannot generallyallot shares in the Company unless they are authorised to do so by the Company in general meeting. Thisresolution will, if passed, confer on the Directors authority to allot new shares pursuant to section 80 of theCompanies Act 1985, amounting to an aggregate nominal amount of £1,129,988.50 , which is equivalent toapproximately 21% of the total issued ordinary share capital as at the date of this notice. The Directors haveno present intention of exercising this authority, other than pursuant to the exercise of options and warrants.

Resolution 12 Disapplication of Pre-emption rights. If the Directors wish to allot any of the unissued shares of the Company forcash, the Companies Act 1985 requires that the new shares must generally be offered first to shareholders inproportion to their existing shareholdings. These are the statutory pre-emption rights of shareholders. In certaincircumstances, it may be in the interests of the Company for the Directors to be able to allot some shares forcash without having to offer them first to existing shareholders. This resolution, which will be proposed as aspecial resolution, therefore seeks authority to exclude the statutory pre-emption rights for issues of sharesfor cash in connection with a rights issue and other offers to shareholders and, otherwise, up to a maximumaggregate nominal value of £537,001.15, representing 10% of the Company’s issued share capital as at thedate of the notice of annual general meeting.

Resolution 13 Authority to make market purchase. With the authority of the shareholders of the Company in general meeting,the Company is empowered by its articles of association to purchase its own shares subject to the provisionsof the Companies Act 1985. The Directors believe that, in common with many other AIM listed companies, it isprudent to seek general authority from its shareholders now in order that they may act if circumstances arisein which they consider such purchases to be desirable. Resolution 13, which will be proposed as a specialresolution, authorises the purchase by the Company of up to 10% of its issued share capital as at the date ofthe notice of annual general meeting and the minimum and maximum prices at which those shares may bebought. The Directors intend only to exercise this authority where, after considering market conditions prevailingat the time, they believe that the effect of such exercise would be to increase the earnings per share and be inthe best interests of shareholders generally. The authority will be valid until the conclusion of the next annualgeneral meeting in 2007 or, if earlier, 15 months from the date of the resolution and the Directors intend to seekthe renewal of these powers at subsequent annual general meetings. Pursuant to the Companies Act 1985, theCompany now has the choice of either cancelling shares which have been repurchased or holding them intreasury (or a combination of both). The Company would consider holding any of its own shares that may bepurchased pursuant to the authority conferred by this resolution (if passed) as treasury shares. Shares held intreasury may subsequently be cancelled, sold for cash or used to satisfy share options and share awards undera company’s employee share scheme. Once held in treasury, a company is not entitled to exercise any rightsincluding the right to attend and vote at meetings in respect of the shares held in treasury, nor may dividendsbe paid on such shares. As at the date of this notice, there were options and warrants outstanding over7,869,959 shares in the Company, representing 14.7% of the issued share capital at that date. If the authorityproposed to be given by this resolution were used in full, these would represent 16.3% of the resulting issuedshare capital.

Resolution 14 Sarantel Sharesave Scheme. Resolution 14 proposes that a new Sharesave Scheme be established so that theCompany can offer the benefit of an HM Revenue & Customs-approved Sharesave Scheme to UK employeesof the Company. Shareholders are also asked to authorise the Directors to extend the Sharesave Schemeto overseas employees, by adopting other share schemes which are based on the Sharesave Scheme.A summary of the principal terms of the proposed Sarantel Sharesave Scheme is provided on page 45.


Summary of the Sarantel Sharesave Scheme (the “Sharesave Scheme”)

The Sharesave Scheme is intended to be approved by Her Majesty’s Revenue & Customs (“HMRC”) under Schedule 3 of the IncomeTax (Earnings and Pensions) Act 2003. Options under the Sharesave Scheme can be granted by the Company or any employee trustestablished by the Company from time to time. Options are not transferable (except on death) and are not pensionable benefits.

EligibilityAny UK-based employee (including any full-time Director) of the Sarantel Group of companies (the “Group”) who has been so employedfor a qualifying period of one month or for such other qualifying period (not exceeding five years) as the Directors may determine fromtime to time and any other employee who is nominated by the Directors is eligible to participate in the Sharesave Scheme.

Issue of InvitationsThe first invitations to apply for options may be issued within a period of 42 days after the fourth dealing day following the formalapproval of the Sharesave Scheme by HMRC. After this, invitations may normally be issued within the period of 42 days after thefourth dealing day following an announcement of the Company’s results for any period.

Exercise PriceThe price per share at which shares may be acquired upon exercise of an option is determined by the Directors before options aregranted on any occasion. It must not be less than the higher of:

100% of the market value of a share, as agreed in advance with HMRC Shares Valuation; and

in the case of options to subscribe for shares, the nominal value of any ordinary share.

Monthly SavingsAny employee who applies for an option under the Sharesave Scheme must enter into an HMRC-approved “save as you earn”contract (the “Savings Contract”). The employee agrees to make monthly savings contributions of a fixed amount, currently of notless than £5 or more than £250 for a period of three, five or seven years. Upon expiry of the Savings Contract, the employee will beentitled to receive a tax-free bonus in addition to repayment of the employee’s savings contributions. The employee may elect toapply the proceeds of the Savings Contract to exercise the option and acquire shares. Alternatively, the employee may choose towithdraw the proceeds of the Savings Contract.

Exercise of OptionsOptions under the Sharesave Scheme will normally be exercisable only during the period of six months following the third, fifth orseventh anniversary of the commencement of the Savings Contract.

Early ExerciseEarly exercise is permitted following death or cessation of employment by reason of injury, disability, redundancy, retirement onreaching a specified retirement age, retirement with the consent of the Directors more than three years from grant, or where theemployer company ceases to be within the Group or ceases to be an associated company.

In such cases, options may be exercised within six months of leaving, to the extent that the funds then available in the employee’sSavings Contract permit. In the case of death, personal representatives may normally exercise within 12 months of the date of death.Otherwise options will lapse on cessation of employment.

Early exercise is also permitted in the event of a takeover, amalgamation, reconstruction or voluntary winding-up of the Company or ifthe employee reaches the specified retirement age but remains employed by the Group.

Issue of New SharesIn any ten year period, there is a dilution limit of 10% of the issued Ordinary share capital of the Company then in issue. The limitapplies to shares which may be issued pursuant to options to subscribe for new shares granted under the Sharesave Scheme duringthe preceding ten years and to shares which may be issued under options or other rights granted during that period under any otheremployees’ share scheme of the Company. The limit excludes shares that have been or may be issued under options or other rightsgranted prior to the Company’s flotation.

Rights Attaching to SharesShares issued or transferred upon the exercise of options will rank equally in all respects with all other ordinary shares of the Companyfor the time being (save as regards any rights by reference to a record date prior to the allotment or transfer of such shares).


Summary of the Sarantel Sharesave Scheme (the “Sharesave Scheme”)

Variation of Share CapitalIf there is a variation of the issued Ordinary share capital of the Company, the Directors may make such adjustments as theyconsider appropriate to the total number of Ordinary shares subject to any option and the exercise price payable upon the exerciseof any option. However, no adjustment may take effect without the prior approval of HMRC and, except in the case of a capitalisationissue, sub-division or consolidation, any such adjustment must be confirmed in writing by the auditors of the Company to be in theiropinion fair and reasonable.

Alteration of the Sharesave SchemeThe Directors may amend the Sharesave Scheme in any respect. However, they may not make any alteration or addition to theadvantage of the existing or new optionholders to the provisions relating to eligibility, the individual limits or the overall limits on theissue of new shares, the basis for determining optionholders’ entitlements to shares, or the adjustment of such entitlements on avariation of share capital, without the prior approval of shareholders in a general meeting. Shareholder approval is not required forminor amendments to benefit the administration of the Sharesave Scheme, or to take into account of any change in legislation or toobtain or maintain favourable tax, exchange control or regulatory treatment for optionholders or any member of the Group.Amendments to certain key features of the Sharesave Scheme require the prior approval of HMRC.

Overseas PlansThe Directors may, at any time, without further reference to shareholders, establish further share schemes based on the SharesavePlan, but modified to take account of local securities laws, exchange controls or tax laws, provided any shares made available undersuch further share schemes are treated as counting against the overall limit on the issue of new shares under the Sharesave Scheme.

The above summary of the principal terms of the Sharesave Scheme do not form part of the rules of the Sharesave Scheme and shouldnot be taken as affecting the interpretation of its detailed terms and conditions. The Directors reserve the right, up to the time of theforthcoming Annual General Meeting, to make such amendments and additions to the rules of the Sharesave Scheme as they considernecessary or appropriate, provided that any such amendment does not conflict in any material respect with the above summary.


Form of Proxy Sarantel Group plc – First Annual General Meeting – 3 February 2006

I/We..............................................................................................................................................................................................................

(block capitals please)

of..................................................................................................................................................................................................................

being member(s) of Sarantel Group plc, hereby appoint ..........................................................................................................................

or failing him/her the Chairman of the meeting to be my/our proxy and vote for me/us on my/our behalf at the First Annual GeneralMeeting of the Company to be held on 3 February 2006, notice of which was sent to shareholders with the Directors’ report and theaccounts for the period ended 30 September 2005, and at any adjournment thereof. The proxy will vote as indicated below in respectof the resolutions set out in the notice of meeting:

Resolution Number For Against Withheld1. To receive the Directors’ report and the accounts for the period ended

30 September 2005.

2. To approve the Directors’ Remuneration Report for the period ended 30 September 2005.

3. To re-elect David Dey as a Director (due for re-election at the second Annual General Meeting).

4. To re-elect David Wither as a Director (due for re-election at the fourth Annual General Meeting).

5. To re-elect Sitkow Yeung as a Director (due for re-election at the third Annual General Meeting).

6. To re-elect Oliver Paul Leisten as a Director (due for re-election at the fourth Annual General Meeting).

7. To re-elect David Russell Ward as a Director (due for re-election at the second Annual General Meeting).

8. To re-elect John Richard Uttley as a Director (due for re-election at the third Annual General Meeting).

9. To re-elect Bill Taylor as a Director (due for re-election at the fourth Annual General Meeting).

10. To re-appoint Grant Thornton as auditors and to authorise the Directors to determine the auditors remuneration.

11. To authorise the Directors to allot shares (Ordinary Resolution).

12. To disapply Section 89(1) of the Companies Act 1985 (Special Resolution).

13. To authorise the Directors to make market purchases of its own shares (Special Resolution).

14. To authorise the Directors to adopt the Sarantel Sharesave Scheme (Ordinary Resolution).

Signed: ......................................................................Dated: ..............................................................................................................2005

NOTES1. A member wishing to appoint a person other than the Chairman of the meeting as proxy should insert the name and address

of such person in the space provided.2. Use of this form of proxy does not preclude a member from attending and voting in person.3. Where this form of proxy is executed by a corporation it must be either under its seal or under the hand of an officer or attorney

duly authorised.4. In the case of joint holders, the signature of any one holder will be sufficient, but the names of all joint holders should be stated.

In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to theexclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the namesof the holders stand in the Company’s register of members in respect of the joint holding.

5. If this form of proxy is signed and returned without any indication as to how the proxy shall vote, the proxy will exercise his/herdiscretion as to whether and how he/she votes.

6. To be valid, this form of proxy duly completed together with the power of attorney or other authority (if any) under which itis signed (or a notorially certified copy thereof) must be received by the Registrars, Computershare Investor Services PLC, PO Box 82, The Pavilions, Bridgwater Road, Bristol BS99 7NH no later than 48 hours before the commencement of the meeting.


COMPUTERSHARE INVESTOR SERVICES PLC

PO BOX 1075

BS99 3FA

BUSINESS REPLY SERVICE

License SWB1002

FOLD 3 AND TUCK IN

FOLD 2

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Sarantel develops and manufactures the world’s most advanced antennas for mobile, wireless and handheld devices. The Group has invested more than 20 years of research and development into its award-winning PowerHelix® antennas, resulting in more than 200 patents world-wide. Over 1,000,000 antennas have been shipped to date.

Sarantel antennas are to be found in leading-edge products such as the TomTom Bluetooth® GPS receiver which, because of its technology, is accurate to two metres, even when in a bag or pocket.

Sarantel listed on AIM in March 2005 when it raised £16.7m net to fund the development and commercialisation of its world-leading technology and to position Sarantel as a major supplier to the wireless devices market world-wide.

IFC Corporate Statement

01 Highlights

02 About Us

04 Chairman’s Statement

06 Chief Executive’s Review

10 Financial Review

14 Directors

16 Advisers

17 Directors’ Report

19 Corporate Governance Report

20 Report of the Remuneration Committee

23 Report of the Independent Auditors

24 Principal Accounting Policies

26 Consolidated Profit and Loss Account

27 Consolidated Balance Sheet

28 Company Balance Sheet

29 Consolidated Cash Flow Statement

30 Notes to the Financial Statements

40 Statutory Consolidated Profit and Loss Account

41 Notice of Annual General Meeting

47 Form of Proxy

T H E D E S I G N P O R T F O L I Oa member of the flathill communications group plcwww.flathillplc.com

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Tel: +44 (0)1933 670560Fax: +44 (0)1933 401155


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Tel: +44 (0)1933 670560Fax: +44 (0)1933 401155


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Sarantel Group PLC - Morningstar, Inc.

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Transcript of Sarantel Group PLC - Morningstar, Inc.