Interim Results

Arc International PLC
1 August 2001



                            ARC INTERNATIONAL PLC

                      INTERIM RESULTS FOR THE SIX MONTHS

                              ENDED 30 JUNE 2001

            TRADING RESULTS IN LINE WITH 6 JULY TRADING STATEMENT



Elstree, UK - 1 August 2001: ARC International plc (LSE: ARK.L), a leading
designer and developer of customisable, high-performance microprocessors and
related intellectual property solutions, announces its unaudited financial
results for the second quarter and the six months ended 30 June 2001.



KEY POINTS



Second quarter ended 30 June 2001

  * Turnover up 43% to £3.5 million (2000: £2.4 million)
  * Net loss before exceptional charge was £6.1 million (Q1 2001: £4.4
    million)
  * 7 design licences and 6 additional customers won in Q2
  * Major new licences signed with Cypress Semiconductor and Qlogic and
    re-licensing by Conexant Systems; licences announced with Stream Machine
    and RF Micro Devices
  * Strong cash position; £132.1 million in hand
  * Bill Caparelli appointed Senior Vice President Worldwide Sales
  * As previously announced, semiconductor industry market conditions
    resulted in delays in concluding licence agreements at the end of the
    period
  * Decisive action underway to reduce costs and maintain progress towards
    profitability; during Q2 reduction in personnel and property provision
    resulted in exceptional costs of £3.3 million
  * Additional exceptional costs will be incurred in the second half of
    2001; £0.8 million for further staff reductions and approximately £2.5-3.5
    million for rationalising facilities



Six months ended 30 June 2001

  * Turnover up 85% to £7.2 million (2000: £3.9 million)
  * Net loss before exceptional charge was £10.5 million (2000: £6.4
    million)
  * 14 design licences and 12 additional customers won in first half 2001
  * Licences announced with Austria Mikro Systeme, IBM, Infineon
    Technologies, Jennic, Neuricam, Palmchip Corporation, Telesoft
    Technologies, Vaishali Semiconductor and Vtech Communications in addition
    to those above
  * Announcements of fully configurable Bluetooth product, ARCangel 3
    development system and ARCompact

Commenting on the results, Bob Terwilliger, Chief Executive Officer, said:

'Market interest in ARC's technology continues to increase and recent licence
agreements with major industry players, Cypress Semiconductor, Qlogic and
Conexant, are significant indicators of this. However, the challenging market
conditions have resulted in customer hesitancy over concluding licence
agreements and a number of significant deals were deferred at a very late
stage in the second quarter of 2001 due to uncertainty in our customers'
markets.

'A review of the cost base of the business has identified opportunities for
productivity improvement and we are implementing a substantial cost reduction
programme to maintain our progress towards profitability. While the visibility
in our market is currently limited, we remain confident about the longer-term
prospects for our innovative technology.'



For further information, please contact:



Bob Terwilliger

CEO, ARC International plc

020 8236 2800



Simon Poulton

CFO, ARC International plc

020 8236 2800



Peter Aubusson

Investor Relations Manager, ARC International plc

020 8236 2800



Sue Pemberton

Citigate Dewe Rogerson

020 7638 9571



ARC's management will be available on 020 7638 9571 on 1 August.



ARC will host an analysts briefing meeting at 9.30 a.m. on 1 August for which
there will be a dial-in facility for those not able to attend. The dial in
number will be:

[phone]; reference: ARC International.

The slides to be used in the briefing presentation may be accessed on the
presentations page of the Investor Relations section of ARC's website:
www.arccores.com from 9.25 a.m. on 1 August.

An audio replay of the briefing will be available on ARC's website and on the
following number until 8th August: [phone]; Access code 657882



Chief Executive's Review

Market interest in ARC's technology continues to grow and recent licence
agreements with Cypress Semiconductor, Qlogic and Conexant, are significant
indicators of this. We have identified opportunities for productivity
improvement within the business and are taking decisive measures to lower
costs and maintain progress towards profitability in the face of challenging
market conditions.



Licensee Development

We have had a positive response to our recent new product announcements and
have been pursuing a healthy number of business prospects. We added 12 new
customers and 14 new licence agreements during the first half of 2001,
bringing our total design licences to 87 licences from 56 customers.

During the first half of 2001, we announced the following companies as
licensees of ARC's technology: Austria Mikro Systeme, IBM, Infineon
Technologies, Jennic, Neuricam, Palmchip, RF Micro Devices, Stream Machine,
Telesoft, Vaishali and Vtech. During July we also announced significant
agreements concluded during the second quarter with semiconductor
manufacturers Cypress Semiconductor (NYSE:CY) and Qlogic Corporation (NASDAQ:
QLGC) who both selected ARC's microprocessor to replace a proprietary
processor due to ARC's small size, manufacturing cost advantages and technical
superiority. One of our top-tier existing licensees, Conexant Systems (NASDAQ:
CNXT), re-licensed our technology to produce its next generation digital
camera chipset.

The main impact on our business of the semiconductor industry slowdown has
been that adverse market conditions affecting our customers' businesses have,
in some instances, resulted in a more extended approval process for concluding
licence agreements.

Our licensees are using ARC's technology for a wide range of applications
across our three target vertical markets: wireless telecommunications, wired
networking and consumer products. In the wireless sector, RF Micro Devices
(NASDAQ:RFMD), a leading provider of proprietary radio frequency integrated
circuits for wireless communications, licensed ARC's processor and Universal
Serial Bus (USB) controller for its Bluetooth TM baseband controller. RF Micro
Devices' new Bluetooth radio chip set includes the RF2968 transceiver and the
RF3001 ARC-based digital baseband controller.

In wired networking, Telesoft Technologies selected ARC's processor for its
most advanced multipurpose broadband access card to date. ARC's technology
enables the processor to be downloaded to a programmable chip on the access
card at boot-up so the functionality of the board can be readily changed,
making it one of the most flexible and future-proof cards available in recent
years.

Stream Machine is using ARC's technology in the consumer product sector for
its SM2288 chip for use in DVD players. The players will use an MPEG format to
provide high quality digital video recording capability onto a normal
recordable CD, costing a fraction of normal recordable DVD media.

We also concluded four new revenue generating partner agreements through which
we will work with other intellectual property (IP) companies to develop new
ARC-based products.



Technological Development

ARC's technology continues to lead the field in user-customisable processing
and there is rapidly growing interest in both the benefits of configurability
and the platform approach we provide to our customers. ARC's processor
provides a level of configurability unmatched by competitors. Not only can
customers add instructions but they may also remove instructions not required
for their end product or alter the existing instructions. The customer is able
to have the processor manufactured at the foundry of their choice and the
processor is supported by industry standard tools and software. Our platform
approach enables customers to integrate other hardware and software IP and
tools available from ARC that have been pre-verified to work together.

We continue to extend the capabilities of our technology. Our fully
configurable BluetoothTM product solution, known as BlueFormTM, includes all
the elements for a customer to build a complete Bluetooth system-on-chip
implementation that can be configured to include the exact set of processor
and Bluetooth features required for an application. The ARCangel 3 development
system enables designers to evaluate rapidly their product designs based on
the ARCtangentTM-A4 microprocessor. ARCompactTM , an innovative instruction
set architecture, that will be available in the fourth quarter of 2001, will
enable designers to mix 16 and 32-bit instructions on ARC's 32-bit processor.
This development is particularly significant for developing wireless
communications and high-volume consumer products that require lower product
costs and power consumption.



Employees

Total employees in the business at 30 June 2001 was 292 compared with 302 at
31 March 2001. We continued to recruit high calibre people to develop the
business but during the quarter we reduced staff in a number of functions
across the business to increase operational efficiency.



Cost Reduction Programme

Following the acquisitions we made during late 1999 and 2000 and investment in
the business to achieve rapid growth, we have now identified opportunities for
productivity improvement within the Company. The requirement to realise these
improvements has been accelerated by current market conditions. In
implementing changes, we recognise the vital importance of research and
development to the future health of the business and our actions will not
jeopardise the delivery of our research and development programme.

The measures we are taking will include reducing the size of our workforce by
approximately 20% and cutting our occupancy costs by rationalising facilities
and removing surplus property capacity. This programme will lower our costs
across all areas of the business and at all our major geographic locations. We
expect our actions to benefit our operating costs progressively throughout the
second half of 2001. In the second quarter we incurred exceptional costs of £
3.3 million for a reduction in personnel and property provisions. We expect to
incur additional exceptional charges in the second half of 2001 of £0.8
million in respect of further staff reductions and approximately £2.5-3.5
million for rationalising facilities.



Worldwide Sales Organisation

Bill Caparelli joined the company as Senior Vice President Worldwide Sales in
July 2001, adding extensive experience of growing businesses within the
semiconductor industry, having held senior sales and general management
positions in Advanced Micro Devices, VLSI Technology, Alliance Semiconductor
and Cirrus Logic Inc. A number of changes are being made to streamline our
sales organisation and focus its efforts on our key customers and target
market sectors.



Outlook

We fully expect our market to return to its strong growth trend in due course
but the timescale for that is uncertain. The action we are taking on costs
will conserve our more than adequate cash resources and maintain our progress
towards profitability. We remain confident about the longer-term prospects for
our innovative technology.



Financial Review



Second Quarter ended 30th June 2001

Turnover

Total turnover for the second quarter was £3.5 million, up 43% on the second
quarter 2000 but slightly lower than in the first quarter 2001 (£3.7 million).
Licence income was slightly down from the previous quarter at £2.9 million (Q1
2001: £3.0 million). Maintenance and service income was similar to that in the
previous quarter at £522,000 (Q1 2001: 546,000). The number of designs being
shipped by our customers and contributing to royalties was unchanged from the
previous quarter with 9 customers shipping 12 products but total royalties
were lower at £97,000 (Q1 2001: £128,000) as a result of lower sales volumes.



Costs

Cost of sales increased to £0.5 million (Q1 2001: £0.3 million) due to
increased customer support costs principally on hardware and software licences
which, when combined with the lower turnover for the quarter, resulted in a
reduced gross margin of 85% (Q1 2001: 92%). Total operating expenses excluding
exceptional costs but including cost of sales, amortisation of goodwill and
depreciation, increased by 15% to £11.3 million (Q1 2001: £10.0 million).

Research and development costs were slightly lower at £3.3 million (Q1 2001: £
3.5 million). Engineering headcount fell during the quarter by 2% to 166 (end
of Q1: 170). Research and development activities are being focused on the key
short and longer-term development projects that will contribute to future
growth.

Sales and marketing costs increased to £4.4 million (Q1 2001: £3.8 million)
due to additional staff related costs over the quarter as a whole. Sales and
marketing headcount fell to 79 (end of Q1: 82).

General and administration costs were unchanged at £1.8 million. General and
administration headcount fell by 6% to 47 (end of Q1: 50).

Exceptional costs relating to staff reductions in June and provisions for
onerous property lease obligations amounted to £3.3 million.

The provision for National Insurance contributions on the exercise of share
options has been reduced, principally due to the lower level of the share
price, and this has resulted in a credit of £0.1 million (Q1 2001: a credit of
£0.8 million) to the profit and loss account.

Total operating expenses excluding the provision for National Insurance
contributions, depreciation and amortisation of goodwill increased to £9.9
million (Q1 2001: £9.4 million).



Interest

Interest income was £1.7 million (Q1 2001: £2.0 million). This reduction was
principally as a result of the lower cash balance and the fall in average
interest rates.



Net loss

The net loss before exceptional costs was £ 6.1 million (Q1 2001: £4.4
million). The net loss including exceptional costs was £9.4 million.



Cashflow and balance sheet

The net cash outflow from operations was £8.2 million (Q1 2001 an outflow of £
6.0 million). Capital expenditure was £2.1 million. The movement in net funds
during the quarter was an outflow of £8.3 million. Net assets at 30 June 2001
were £151.9 million, including net cash of £132.1 million.



Six months ended 30 June 2001



Turnover

Total turnover increased by 85% to £7.2 million (2000: £3.9 million). Licence
income was £5.9 million (2000: £2.8 million), reflecting the rapid development
of the customer base of the business. Maintenance and service income was £1.1
million (2000: £0.9 million) and royalties were £0.2 million (2000: £0.2
million).



Costs

Cost of sales was £0.9 million (2000: £0.3 million), resulting in a gross
margin of 88% (2000: 92%). Total operating expenses, excluding exceptional
costs but including cost of sales, amortisation of goodwill and depreciation
increased to £21.4 million (2000: £10.5 million) due to the acquisitions of
Precise Software Technologies and VAutomation in March 2000 and the
development of the resources of the business to drive future growth.

Research and development costs were £6.8 million (2000: £3.2 million), sales
and marketing costs were £8.0 million (2000: £3.7 million) and general and
administration costs were £3.6 million (2000: £1.7 million).

Total employees in the business at 30 June 2001 was 292 compared with 206 at
30 June 2000.

Exceptional costs relating to staff reductions in June and onerous property
lease obligations amounted to £3.3 million.

The provision for National Insurance contributions on the exercise of share
options has been reduced, principally as a result of the lower level of the
share price, and this has resulted in a credit of £0.9 million (2000: a charge
of £44,000) to the profit and loss account.



Interest

Interest income was £3.7 million (2000: £0.3 million). The increase was
related to the Company's increased cash balances, principally resulting from
the funds raised at the IPO in September 2000.



Net loss

The net loss before exceptional costs was £10.5 million (2000: £6.4 million).
The net loss including exceptional costs was £ 13.8 million.



Cashflow and balance sheet

The net cash outflow from operations was £14.2 million (2000: £7.4 million).
Capital expenditure was £3.6 million (2000: £1.1 million). The movement in net
funds during the half year was a £13.7 million outflow compared with an inflow
of £18.9 million in the first half of 2000 resulting from a private placement.
Net assets at 30 June 2001 were £151.9 million (30 June 2000: £48.3 million),
including net cash of £132.1 million (2000: £24.7 million).



Dividend

The board of directors does not recommend the payment of an interim dividend
in respect of the six months ended 30 June 2001. We currently intend to retain
future earnings, if any, to fund the development and growth of our business
and do not anticipate paying cash dividends.



ARC International plc

Consolidated profit and loss account
for the six months ended 30 June 2001

                    Note    3 months   3 months   6 months   6 months      Year
                               ended      ended      ended      ended     ended
                             30 June    30 June    30 June    30 June        31
                                                                       December
                                2001       2000       2001       2000      2000
                          (unaudited)(unaudited)(unaudited)(unaudited) (audited)
                               £'000      £'000      £'000      £'000     £'000
Turnover                       3,489      2,447      7,162      3,863    10,564
Operating costs
Goodwill                     (1,020)    (1,019)    (2,039)    (1,340)   (3,379)
amortisation
Exceptional costs     5      (3,290)          -    (3,290)          -         -
Other operating             (10,323)    (5,883)   (19,334)    (9,173)  (26,550)
costs
                            (14,633)    (6,902)   (24,663)   (10,513)  (29,929)
Loss before                 (11,144)    (4,455)  (17, 501)    (6,650)  (19,365)
interest and tax
Interest receivable            1,745        159      3,721        261     3,008
and similar income
Interest payable                   -        (9)          -       (10)      (18)
and similar charges
                          ---------- ---------- ---------- ---------- ----------
Loss on ordinary             (9,399)    (4,305)   (13,780)    (6,399)  (16,375)
activities before
tax
Tax on loss on                   (3)        (1)        (3)        (1)         -
ordinary activities
                          ---------- ---------- ---------- ---------- ----------
Retained loss for            (9,402)    (4,306)   (13,783)    (6,400)  (16,375)
the period
                          ========== ========== ========== ========== =========
                                  
Basic loss per               (3.40)p    (2.46)p    (4.98)p    (3.67)p   (7.72)p
share
Diluted loss per             (3.40)p    (2.46)p    (4.98)p    (3.67)p   (7.72)p
share



Summary of operating expenses
Operating costs
Cost of sales            (515)        (223)        (891)       (297)      (862)
Research and           (3,263)      (1,839)      (6,774)     (3,177)    (9,298)
development
Sales and              (4,361)      (2,380)      (8,043)     (3,661)   (10,218)
marketing
General and            (1,792)      (1,291)      (3,632)     (1,749)    (4,351)
administration
NIC on share               120            -          900        (44)    (1,116)
options
Depreciation of          (512)        (150)        (894)       (245)      (705)
fixed assets
Goodwill               (1,020)      (1,019)      (2,039)     (1,340)    (3,379)
amortisation
Exceptional costs      (3,290)            -      (3,290)           -          -
                    ----------   ----------   ----------  ---------- ----------
Total operating       (14,633)      (6,902)     (24,663)    (10,513)   (29,929)
expenses
                    ----------   ----------   ----------  ---------- ----------


ARC International plc

Consolidated statement of total reorganised gains and losses
for the six months ended 30 June 2001

                         3 months    3 months    6 months   6 months Year ended
                            ended       ended       ended      ended
                          30 June     30 June     30 June    30 June         31
                                                                       December
                             2001        2000        2001       2000       2000
                      (unaudited) (unaudited) (unaudited) (unaudited)  (audited)
                            £'000       £'000       £'000      £'000      £'000
Loss for the period       (9,402)     (4,306)    (13,783)    (6,400)   (16,375)
Currency translation         (39)       (121)         247      (149)      (381)
difference
                       ----------  ----------  ----------  --------- -----------
Total loss for the        (9,441)     (4,427)    (13,536)    (6,549)   (16,756)
period
                       ==========  ==========  ==========  =========  =========


ARC International plc

Consolidated balance sheet
As at 30 June 2001

                                           30 June         30 June  31 December
                                              2001            2000         2000
                                       (unaudited)     (unaudited)    (audited)
                                             £'000           £'000        £'000
Fixed assets
Intangible assets                           14,316          18,394       16,355
Tangible assets                              6,989           1,821        4,060
                                        ----------     -----------   ----------
                                            21,305          20,215       20,415
                                        ----------     -----------   ----------
                                    
Current assets
Stock                                          380               -            -
Debtors                                      7,954           8,019        6,561
Cash at bank and in hand                     1,195           1,038        2,569
Investments - bank deposits                130,890          23,712      143,289
                                        ----------     -----------   ----------
                                           140,419          32,769      152,419
Creditors - amounts fully due              (6,966)         (4,674)      (8,180)
within one year
Provisions for liabilities and             (3,000)               -            -
charges
                                        ----------     -----------   ----------
Net current assets                         130,453          28,095      144,239
Total assets less current                  151,758          48,310      164,654
liabilities
Creditors - amounts fully due after            (5)            (23)         (17)
more than one year
                                        ----------     -----------   ----------
Net assets                                 151,753          48,287      164,637
                                         =========      ==========    =========
Capital and reserves
Called up share capital                        277              68          273
Share premium account                      149,693          22,841      149,061
Exchangeable shares                          5,025           5,025        5,025
Merger reserve                                 107             107          107
Other reserves                              24,679          24,531       24,663
Profit and loss account                   (28,028)         (4,285)     (14,492)
                                        ----------     -----------   ----------
Total shareholders' funds                  151,753          48,287      164,637
                                        ==========      ==========    =========



ARC International plc

Consolidated cash flow statement
For the six months ended 30 June 2001

                     Note    3 months   3 months   6 months   6 months     Year
                                ended      ended      ended      ended    ended
                              30 June    30 June    30 June    30 June       31
                                                                       December
                                 2001       2000       2001       2000     2000
                          (unaudited) unaudited)(unaudited)(unaudited) (audited)
                                £'000      £'000      £'000      £'000    £'000
Net cash outflow              (8,177)    (6,492)   (14,186)    (7,426) (14,299)
from operating
activities             2
Returns on
investments and
servicing of finance
Interest received               1,577        159      3,300        261    2,869
Bank interest paid                  -        (8)          -        (8)     (13)
Interest element on                 -        (3)          -        (3)      (5)
finance lease
rentals
                           ---------- ---------- ---------- ---------- ---------
                                1,577        148      3,300        250    2,851
                           ---------- ---------- ---------- ---------- ---------

                          
Capital expenditure
and financial
investment
Purchase of tangible          (2,080)      (632)    (3,645)    (1,118)  (3,820)
fixed assets
                           ---------- ---------- ---------- ---------- ---------

Acquisitions
Purchase of                         -          -          -    (3,167)  (3,167)
subsidiary
undertakings
Net cash acquired                   -          -          -        186      186
                           ---------- ---------- ---------- ---------- ---------

                                    -          -          -    (2,981)  (2,981)
                           ---------- ---------- ---------- ---------- ---------

Net cash outflow              (8,680)    (6,976)   (14,531)   (11,275) (18,249)
before management of
liquid resources and
financing
                           ---------- ---------- ---------- ---------- ---------

Management of liquid
resources
Movement on term       4        6,114   (15,770)     12,399   (18,382) (137,959)
deposits
                           ---------- ---------- ---------- ---------- ---------

Financing
Financing - issue of              291     21,090        636     30,141  126,355
ordinary share
capital - IPO and
options
Financing - issue of                -          -          -          0   31,971
ordinary share
capital - Private
placings
Capital element of               (11)        (1)       (14)        (2)      (8)
finance lease
rentals
Decrease in                      (10)        (7)       (18)        (7)     (21)
borrowings
                           ---------- ---------- ---------- ---------- ---------

Net cash inflow from              270     21,082        604     30,132  158,297
financing
                           ---------- ---------- ---------- ---------- ---------

Increase in cash       4      (2,296)    (1,664)    (1,528)        475    2,089
during the period
                           ---------- ---------- ---------- ---------- ---------




1. Basis of preparation

The interim financial statements comprise the unaudited consolidated accounts
of ARC International plc group at 30 June 2001 and for the six months then
ended.

The interim financial statements of ARC International plc have been prepared
on the basis of the accounting policies set in the Annual Report of ARC
International plc dated 31 December 2000. The prior year comparatives are
derived from audited financial information for ARC International plc as set
out in the Annual Report for the year ended 31 December 2000 and the
prospectus for the initial public offering of ARC International plc.

The interim financial statements for the 6 months ended 30 June 2001 are
unaudited but have been reviewed by the Auditors. The report of the Auditors
to the directors is set out on page 14

The interim financial statements for the six months ended 30 June 2001 were
approved by the directors on 31 July 2001.



2. Reconciliation of operating profit to net cash flow from operating
activities
                         3 months     3 months   6 months   6 months Year ended
                            ended        ended      ended      ended
                          30 June      30 June    30 June    30 June         31
                                                                       December
                             2001         2000       2001       2000       2000
                      (unaudited)  (unaudited)(unaudited) (unaudited)  (audited)
                            £'000        £'000      £'000      £'000      £'000
Operating profit         (11,144)      (4,455)   (17,501)    (6,650)   (19,365)
Depreciation                  512          150        894        245        705
Amortisation of             1,020        1,019      2,039      1,340      3,379
goodwill
Share option grant           (11)           75         16         97        230
credit
(Increase) in stocks         (87)            -      (383)          -          -
(Increase) in debtors       (335)      (2,653)    (1,232)    (3,442)    (4,189)
Increase/(decrease)         1,868        (628)      1,981        984      4,941
in creditors
Net cash flow from
operating
activities                (8,177)      (6,492)   (14,186)    (7,426)   (14,299)
                      ----------- ------------ ---------- ---------- ----------



3. Analysis of net funds

(unaudited)      Cash at Bank loans Investments - bank      Finance       Total
                    bank                      deposits       leases
                    £000       £000               £000         £000        £000
At 31              2,569       (15)            143,289         (27)     145,816
December 2000
Exchange             154        (3)                  -            -         151
Cash flow        (1,528)         18           (12,399)           14    (13,895)

              ---------- ----------       ------------  ----------- -----------
At 30 June         1,195          -            130,890         (13)     132,072
2001
              ---------- ----------       ------------  ----------- -----------



4. Reconciliation of net cash flow to movement in net funds

                             3 months   3 months   6 months   6 months     Year
                                ended      ended      ended      ended    ended
                              30 June    30 June    30 June    30 June       31
                                                                       December
                                 2001       2000       2001       2000     2000
                          (unaudited)(unaudited)(unaudited)(unaudited) (audited)
                                £'000      £'000      £'000      £'000    £'000
(Decrease) in cash in the     (2,296)    (1,664)    (1,528)        475    2,089
period
Cash (inflow)/outflow from    (6,114)     15,770   (12,399)     18,382  137,959
increase in liquid
resources                  ---------- ---------- ---------- ---------- ---------
                              (8,410)     14,106   (13,927)     18,857  140,048
(Borrowings) acquired with          -          -          -       (56)     (56)
subsidiaries
Movement in borrowings             21          9         32          9       29
Exchange movements                 64         92        151         62     (20)

                           ---------- ---------- ---------- ---------- ---------
Movement in funds             (8,325)     14,207   (13,744)     18,872  140,001
Net funds at beginning of     140,397     10,480    145,816      5,815    5,815
period
                           ---------- ---------- ---------- ---------- ---------
Net funds at end of period    132,072     24,687    132,072     24,687  145,816

                           ---------- ---------- ---------- ---------- ---------



5. Exceptional costs

The exceptional costs of £3,290,000 represent restructuring costs including
costs relating to staff reductions in June 2001 and provision for onerous
property lease obligations on unutilised space in the North American
subsidiaries.



6. Copies of this report are being sent to shareholders and are available to
the public at the Company's Registered Office; ARC House, Waterfront Business
Park, Elstree Road, Elstree, Hertfordshire WD6 3BS.



Independent review report to ARC International plc

Introduction

We have been instructed by the company to review the financial information
which comprises consolidated profit and loss, consolidated statement of total
recognised gains and losses, consolidated balance sheet, consolidated cash
flow statement and the notes supporting these primary statements. We have read
the other information contained in the interim report and considered whether
it contains any apparent misstatements or material inconsistencies with the
financial information.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the interim report in accordance with the
Listing Rules of the Financial Services Authority which require that the
accounting policies and presentation applied to the interim figures should be
consistent with those applied in preparing the preceding annual accounts
except where any changes, and the reasons for them, are disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999
/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than
an audit performed in accordance with United Kingdom Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly we do
not express an audit opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2001.



PricewaterhouseCoopers

Chartered Accountants

West London

31 July 2001



Notes to editors



ARC International plc, is a leading designer and developer of customisable,
high-performance microprocessor cores and related intellectual property
technology for telecommunications, voice and data networking, and consumer
electronics embedded systems. The ARCtangentTM processor is an application
specific processor (ASP) which can be customised for use in a wide variety of
increasingly sophisticated products. The innovative configurability of the
processor enables ARC to license its technology directly to original equipment
manufacturers (OEMs) as well as to semiconductor merchant vendors. ARC's
technology enables designers to reduce time to market and to work with the
semiconductor manufacturers and technologies of their choice.

ARC's 56 licensees include: Austria Mikro Systeme, BrightCom, Chameleon
Systems, Conexant Systems, Cypress Semiconductor, Fujitsu Microelectronics,
Hyperchip, IBM, Infineon Technologies, Qlogic, RF Micro Devices, SanDisk,
Texas Instruments, Vtech Communications and Xemics.

  With headquarters in Elstree, England, ARC International plc and its group
companies employ 292 people in research and development, sales, and marketing
   offices across North America and Europe. MetaWare Incorporated., Precise
Software Technologies Inc. and VAutomation Inc. are wholly owned subsidiaries
   of ARC International, providing software development tools, hardware and
   software intellectual property and real time operating systems offering
        multiple integrated products for system on a chip development.

ARC International plc is listed on the London Stock Exchange (LSE:ARK). The
company's website is located at www.arccores.com



Statements made in this press release that are not historical facts include
forward-looking statements that involve risks and uncertainties. Important
factors that could cause actual results to differ from those indicated by such
forward-looking statements include, among others, market acceptance of the ARC
technology; fluctuations in and unpredictability of the Company's quarterly
results; general economic and business conditions; regulatory policies adopted
by governmental authorities; assumptions regarding the Company's future
business strategy; changes in technology; competition; ability to attract and
retain qualified personnel; risks associated with the Company's international
operations; and other uncertainties that are discussed in the 'Investment
Considerations' section of the Company's listing particulars dated 28
September 2000 filed with the United Kingdom Listing Authority and the
Registrar of Companies in England and Wales.



ARC International (UK) Ltd. and ARC Cores Inc., both of which are wholly owned
  subsidiaries of ARC International plc, trade under the name of ARC Cores.

         ARC Cores is a trademark of ARC International (UK) Limited.

All other brands or product names are the property of their respective holders