Oxford Instruments plc Annual Report and Accounts 2004

Group Profile

Oxford Instruments comprises three business areas, providing solutions and components forcustomers in life sciences, research and industry.
Analytical
A leading specialist in thedesign, supply and supportof instruments, systems andcomponents, primarily basedon X-ray technology, for thechemical analysis of a wide
range of industrial materials.
Also a leader in the supplyof products for semiconductor,
telecommunications andoptoelectronics markets forthe deposition and etchingof materials.

MedicalAn international supplierof measuring instruments
and accessories for the routine
monitoring of certain physiologicalproperties of the human body,
including muscle and nerve
impulses. Customers are hospitals
and doctors’ clinics worldwide.

Superconductivity
The world leader in the
supply and maintenance ofsuperconducting materials,
intense magnetic fields andlow temperatures for use inchemical and biochemical
analysis, scientific researchand various industrial andmedical applications.

Analytical Results

Medical Results

Superconductivity Results

2004£ million

2003£ million

2004£ million

2003£ million

2004£ million

2003£ million

Turnover +

58.5

61.6

34.7

36.3

89.1

88.7

Operating profit/(loss) + *

3.7

2.9

0.1

(1.3)

4.2

5.2

Net operating assets

24.6

29.6

11.8

17.7

30.2

31.3

Employees

549

536

274

299

684

725

2004
£ million

2003£ million

177.9
182.3
8.0
5.7
11.9
20.7
92.9

185.7
186.6
6.8
3.9
2.4
3.3
89.2

2004
pence per share

2003
pence per share

Earnings + *Earnings
Dividends
Net assets

11.4
21.3
8.4
193.1

7.9
2.6
8.4
186.0

Employees at year end

1,507

1,560

Group Results
OrdersTurnover +Operating profit + *Group operating profit
Profit before tax
Net cash
Shareholders’ funds+ From continuing wholly owned operations* Before exceptional items, terminated business and goodwill amortisation

Contents

02
04
12
16
17
60
63
64
65

Chairman’s Statement
Operating Review
Financial Review
Directors and Advisers
Reports and Financial Statements
Notice of the 2004 Annual General Meeting
Shareholder Information
Five Year Record
Worldwide DirectoryOxford Instruments has for over forty years been a global
leader in advanced instrumentation, with customers in industry,
research and healthcare. The Company today employs 1,500
people in 16 countries and has been listed on the London
Stock Exchange since 1983.
We are known for our outstanding innovative capabilities
and have a string of technical ‘firsts’ to our name. We havesuccessfully built a sound operational platform from whichto lever our technical strengths and we are now directing
our business activities towards solving problems for customers
in attractive worldwide markets such as life sciences,
nanotechnology and environmental quality control.
Our strategy is to increase our ability to supply complete
solutions to customer problems by growing our businesses
which offer full materials measurement and processing
capability. The technical differentiation provided by ourcomponents and sub-systems businesses are key to our success.
We are confident that we can continue to build value for ourshareholders and all the other stakeholders in our business.

02

Chairman’s Statement

Since our reorganisation, we have focussed on creating astrong operational platform for each of the businesses as abase from which to drive the strategic future of the Company.
In the past year we have made further substantial
improvements in operating performance, including returning
our Medical business to profitability. We have increased net
cash by £17.4m during the year, including a reduction ofworking capital of £9.0m. A range of actions has delivered
higher margins and profitability despite difficult trading
conditions, compounded by the severe adverse impact of
currency movements and increased pension costs. These
two items impacted profits by £3.0m in the year.
Following the successful realisation of the value from ourinvestment in Oxford Magnet Technology (OMT), we havestarted to change the portfolio of products in order to focus
our technical strengths to address end user markets where
we can create value for our customers. Actions include theacquisition in October 2003 of VG Semicon and the recent
trade announcement of an exclusive licence agreementwith GE Healthcare for the development of new tools formolecular analysis.
Orders received during the year of £178m (2003 £186m)
were in line with our forecasts. Recently introduced
products in the Medical and Analytical businesses havegenerated an encouraging level of orders, while orders
for the Superconductivity business were down on last year,
partly as a result of reduced demand for high-field magnets.
New orders from the semiconductor sector were unchangedon the previous year, reinforcing our belief that businesslevels from this sector have stabilised.
Despite lower orders, turnover of the continuing businessesof £182m (2003 £187m) was down only slightly on theprevious year, even after the impact of currency movements.

At constant currency rates turnover in 2003/04 would havebeen approximately £5m higher than reported. This result
reflects continued progress in reducing our order backlog
and shortening our lead times to customers. Along withother improvement programmes, the introduction of `lean’manufacturing techniques is contributing strongly to themore reliable and responsive timing of customer deliveries.
Margins improved again, with gross profit for the continuingbusinesses increasing to 33% from 32% of sales as a resultof continued efforts to reduce product costs. This was despite
the weakening dollar, which increased pressure on selling
prices in many major markets during the second half oflast year.
Operating profits of continuing wholly-owned operations
before exceptional items, terminated business and goodwill
amortisation increased by 18% to £8.0m (2003 £6.8m).
Improved profit performance in the Medical and Analyticalbusinesses reduced the impact of a weaker result fromthe Superconductivity business. Currency movements andincreased pension costs had a major effect on profits during
the year and at 2002/03 exchange rates and pension charges
operating profit would have been £3.0m higher at £11.0m.
Profit before tax, but after exceptional costs, terminatedbusiness, the result of the termination of OMT and a muchreduced interest charge of £0.2m (2003 £1.6m), increased
substantially to £11.9m (2003 £2.4m). Exceptional items
included redundancy costs of £1.1m, primarily associatedwith reorganisation of the Medical business. A loss of £0.5m
was incurred from the operation of a new venture in the
Superconductivity business prior to the external financingof this activity and its relaunch as ARKeX in March 2004.
A profit of £6.3m (net of costs and operating losses) was
made on the disposal of our investment in OMT, the joint
venture with Siemens.

Oxford Instruments plc

The momentum in our operational improvement programmes
is shown by the significant reduction in working capital from
23% to 19% of sales, an improvement of £9.0m. Inventory
levels were reduced by £8.0m in the year, a reduction of
20%. This follows a decrease in the previous year of £12.1m.
Closing net cash was £20.7m, an increase of £17.4m.
Cash inflows from operations (£17.8m) and the disposalof shares in OMT (£8.5m) were partially offset by payments
for capital expenditure (£2.2m), taxation (£2.4m), acquisitions(£0.2m) and dividends to shareholders (£3.9m). The strong
cash generation from operations was achieved by improved
profits, better working capital management and careful
control of expenditure on fixed assets.
The tax rate of continuing businesses was 34%, as aresult of the mix of profits generated in the USA and the
UK. Total reported profits for the financial year of £10.0m(2003 £1.2m) included after-tax profits of £4.8m (2003£3.5m) from continuing wholly-owned businesses, losses
from exceptional items and terminated business of £1.2m(2003 £1.7m) and profits of £6.4m from our interest in
the OMT joint venture.
Earnings per share from continuing wholly-owned businesses
before exceptional items, terminated business and goodwill
amortisation were 11.4 pence (2003 7.9 pence). The Board
has recommended a final dividend of 6.0 pence, making
a total dividend for the year of 8.4 pence, unchanged fromlast year.

03

Peter Hill left the Board on 31 May 2004 as he does
not meet the criteria for independence set out in the new
Combined Code. This is because he and I have a common
directorship in another UK-listed public company. We would
like to thank Peter for his valuable contribution over thelast five years.
Looking ahead, we have identified a number of valueenhancing options for the business and have establisheda sound operational base from which to implement them.
We will continue to focus on improving profitability andreturns across our businesses by building on the momentum
generated over recent years. We are also assessing carefully
the value that each of our businesses contributes tothe whole and how this will be optimised. The progress
we have made towards our goals is due to our talented
workforce and I would like to thank all our employees
for their hard work in delivering a creditable improvementin performance. By anticipating the evolving demandsof our customers and meeting these through innovative,
cost-effective and rapid solutions we are confident in ourability to generate long-term value for shareholders.

Nigel Keen
Chairman
3 June 2004

The Company continues to account for pensions in accordancewith SSAP 24. The charge to profits calculated under thisstandard was £1.4m higher at £3.8m (2003 £2.4m), basedon the 2003 actuarial valuation. This valuation also led to
an increase in contribution rates in the UK for both Company
and employees during the year.

“Looking ahead, we have identified a numberof value-enhancing options for the businessand have established a sound operationalbase from which to implement them. We willcontinue to focus on improving profitability andreturns across our businesses by building on
the momentum generated over recent years.”

04

Operating Review

Improved performance
The Company has increased profits in a year when markets
remained subdued, pension costs increased significantly
and adverse currency movements had a severe impact.
The translation and transaction effects of changes in currency
strength can be estimated, but the biggest impact on thebusiness arising from a weak US dollar is the effect on
product volumes and margins in the market place. Ouroperational focus has helped us to remain competitive andincrease margins despite the strength of sterling relative to
the US dollar – the currency used in our biggest markets.
Our work on supply chain management has entered a newphase over the past year, with increasing volumes of our
low-volume high-variety components being sourced fromlower-cost countries. We estimate that some £15m of our
product cost currently sourced locally can potentially be
procured overseas at significantly reduced cost. Volumes
procured by these routes in the past year were less than £5m.
We have continued to maintain a focus on improving
our new product introduction processes, concentratingin particular on the front end – translating customer needs
into innovative and cost-effective product specifications.
We have maintained our investment in R&D during theyear at £13m (2003 £13m), representing 7% of sales.
Our worldwide sales coverage is a key strength of thebusiness. In the past year, we have increased our support
for our customers in China by opening a new operations
facility in Shanghai. While initially to be used for therebuilding of detectors, this will ultimately serve as a basefor a range of assembly activities for the local market. We
have also opened a small office in Russia and are alreadyseeing the benefits of an increased local presence.

We have continued our strategy of streamlining our portfolio
to simplify our business and to exit non-core markets. We
have been successful in obtaining external financing to create`ARKeX’, a new business exploiting proprietary technology
under licence from Oxford Instruments which enables thesearch for oil, gas and mineral deposits to be carried out
from the air. We retain a 24% stake in ARKeX and this adds
to our small but important portfolio of spin-out investments.
Analytical
Turnover for the year was £59m (2003 £62m), with second
half turnover including £2.1m from the VG Semicon businessacquired in October 2003. Asia continues to be the primary
driver of growth in the market for our Analytical products.
Operating profits before exceptional items and goodwill
amortisation improved to £3.7m (2003 £2.9m) following
the cost reduction programmes instigated in the previous
year and including a £0.5m contribution from VG Semicon,
which exceeded its early financial forecasts.
The segment of our business which serves the semiconductor
industry accounted for approximately 20% of sales. This
segment remained profitable in the year, with productcost reduction initiatives helping to offset significant pricereductions in a quiet market. A brief rise in order and enquiry
levels from the semiconductor segment at the end of 2003
has not been sustained, but under new management weare making selective investments in order to ensure that
we benefit from an eventual market upturn.
In other industrial markets, our `Twin-X’ product platform,
which was launched in February 2003 for a range of quality
control applications requiring chemical analysis, exceededinternal forecasts during the year. Sales in the UK and the
USA were particularly strong and the product platform is“Our operational focus has helped us toremain competitive and increase margins
despite the strength of sterling relative to
the US dollar – the currency used in ourbiggest markets.”Oxford Instruments plc

establishing itself as a market leader. The growing reputationof `Twin-X’ has also boosted sales of the older productsin the portfolio. In the last quarter we have responded
to impending changes in the laws controlling the sulphur
content of petrol and diesel by launching an innovative newversion of `Twin-X’ aimed at this legislation-driven market.
Sales in France of our `Horizon’ hand-held spectrometer
continue to be affected by issues relating to the securingof the necessary government approvals for this technology.
Although customer reaction to our product is enthusiastic,
we are not expecting a rapid resumption of activity in thissegment. However we are confident in the product concept
and are therefore investing in other variants of `Horizon’in order to take the product into new markets.
Sales of our microanalysis product line were stable during
the year. We continue to improve the attractiveness of
this market-leading product with software upgrades. For
example, we launched during the year an improved version
of a dedicated package that allows police and forensic
customers to detect and analyse the microscopic particles
that are emitted when a gun is fired.

05

amortisation of £0.1m (2003 £1.3m loss) in the year.
Following on from our strategic review, we have taken anumber of actions aimed at releasing value from the business.
We have further reduced the volume of non-core third party
products being sold through our overseas sales channels.
Turnover has therefore dropped, but gross margins have
improved significantly – helped by growth in overseas
sourcing – and overheads are lower.
Our operational improvement programmes have been
particularly successful, with nearly £5m cash being generated
from the business during the year as stock reduction andoutsourcing programmes took effect.
In the last quarter we implemented the second phase ofa simplification of the organisational structure in the UK
and overseas into discrete product groups. When complete
over the next few months this will reduce headcount by
21, or 7%. We are now starting to deliver product direct tocustomers in northern Europe from our UK factory, enabled
by internal improvements and an extension of our IT system
to those countries.

Sales of low-power X-ray tubes increased 35% over the
past year. We have established ourselves as a leading
independent supplier of products in this small, but technicallyimportant market. Technology relationships with NASA andother partners will underpin our continued strength in thissegment going forward.

We have been responding to customer demands for new
products with a series of upgrades designed to improve
our competitiveness. We have increased sales of our Synergy
EMG (electromyography) product, our FM800 labour anddelivery monitor and our EMG needles accessories during
the year following the introduction of new variants
requested by the market.

MedicalTurnover for the year of £35m (2003 £36m) was aheadof our forecasts. The business has returned to profitability,with a profit before exceptional items and goodwill

While the operating performance of the business is improving,
we continue to review our strategic options to ensure that
we generate an acceptable return for our shareholders fromthe business.

06

Operating Review

Superconductivity
Despite lower orders during the year, turnover for the yearof £89m (2003 £89m) was stable as product lead times
were further reduced. Operating profit before exceptional
items, terminated business and goodwill amortisation was£4.2m (2003 £5.2m). Although profits of £3.1m in thesecond half were ahead of the previous year (2003 £2.6m),
this was not enough to make up for a poor first half.

equipment which do not need refilling with liquid helium,
thereby reducing running costs and increasing ease of use
for the customer.

We have made excellent technical progress with the`Discovery’ magnet, used for new drug discovery research.
Three systems are being used by customers, while following
successful testing in the factory two more systems are being
delivered to customer sites. The high price of these complex
systems is currently limiting the size of the market and
we are presently looking at a number of alternative sales
channels and business models for ‘Discovery’ and related
products. The temporary problems reported earlier in theyear with other high-field magnets have now been resolved.

Following a long period of technical collaboration, we haverecently announced an agreement with GE Healthcare which
gives us exclusive rights to develop certain applicationsof a novel magnet-based sample preparation technique inthe life sciences market. This ground-breaking technology is
attracting a great deal of interest in the research community
because it holds out the promise of increasing significantly
the sensitivity of existing measurements. Under the termsof the agreement, Oxford Instruments will be responsible
for the instrumentation development, while GE Healthcare
will supply the proprietary reagents which are central to
the technique.

Overall, following major investments in technology
development over the past 4 years, we have again madematerial improvements in both our magnet quality and ourinstallation processes this year, improving the predictabilityof our installation of these complex products by a further
40%, to a level which we believe leads the industry. Overthe past year we have started to see the benefits of thisinvestment coming through in many areas of the business.
While the manufacturing efficiency of existing products is
improving – also reducing product cost and lead times –we are in turn able to accelerate the launch of new anddifferentiated products. For example, in recent months
we have announced both magnets and low-temperature

The intellectual property we create through this investment
can also be valuable to other companies. In the past year wehave received royalty income for our intellectual property
and will continue to pursue such opportunities in future.

Since the year end we have restructured our magnet business
into three market-facing product groups to enable more
focus on this opportunity and the others in the businesswhile controlling costs. As a result of this change headcountwill fall by approximately 30 or 4% over the coming months.
A significant proportion of the output of the magnet businesscurrently goes to OEM customers, whose performance istherefore important to us. Our new supply relationship with
Thermo Electron is growing ahead of expectations. However,business has been slower in the past year in the traditional

Contribution to improvement in pre-tax profit
2003

£5.6m

Analytical£0.8m

Medical£1.4m

Superconductivity£(1.0)m

Goodwill£(0.6)m

Interest

£1.0m

2004

£7.2m

Continuing wholly owned operations before exceptional items and terminated business.

Oxford Instruments plc

market for NMR spectrometers – equipment which uses
superconducting magnets. As a result Varian – one of ourmajor customers – has recently implemented a significant
inventory reduction programme. This will hold back magnet
shipment volumes in the first half of 2004/05.
Our US-based superconducting wire business has had achallenging year, as the growth in wire volume has not beenenough to compensate for lower prices. Local profits wereconsequently slightly lower than the previous year. Volumesof wire delivered to OMT were down in the first half of theyear as previously reported, while in the last quarter margins
of one specific product for OMT were affected by quality
problems in our supply base. Shipments of material to thecustomer have continued during this period, while margins
should start to recover over the next few months now thatthe cause has been identified.

07

Prospects
The year has started encouragingly, with very early results
being ahead of last year. While we anticipate that volumes
in the Superconductivity business will be lower in the first
half, both the Superconductivity business and the Medical
business will be operating from a lower cost base in thesecond half of the year as a result of actions already taken.
This will help us to make further overall progress during theyear. We are confident that our world class technologies
and strong market positions will enable us to deliver
improved returns for shareholders.

Andrew Mackintosh
Chief Executive
3 June 2004

We are currently processing evaluation quantities of novel
wire product for the new `ITER’ programme (a $5bn
multinational project designed to generate clean energy
from fusion reactions). The programme has widespreadgovernment support and when the final site decision istaken it is expected that this project will generate verysignificant additional requirements for superconducting
wire over the next few years.
Our US-based MRI magnet field service business received
a supplier award from Siemens Medical Systems (SMS) fora third year in a row. Following the end of the OMT joint
venture, we continue to work closely with SMS to add
value to their customer offerings in the USA.

“We are confident that our world classtechnologies and strong market positions
will enable us to deliver improved returns
for shareholders.”

Nanotechnology
Nanotechnology is merely a new word for what
scientists and engineers have been doing for years:
controlling the design and manufacture of materials
and structures on an ever-smaller scale. Worldwide
over two billion pounds a year is now being spent
on developing new products and services using
nanotechnology. From the creation of microscopic

structures such as the triggering devices for car air-bags,
to the low-temperature environmental control ofquantum computers with enormous potential processing
power, to the chemical analysis of new man-madematerials on a near-atomic scale, instrumentation
solutions from Oxford Instruments are at the heart ofa new world of research and commercial opportunities.

Life Sciences
Fundamental new discoveries in the life sciences withthe potential for transforming healthcare continue
to excite researchers and clinicians. The ongoing
revolution in the fields of drug discovery, genomics
and proteomics has created an expanding market
for instrumentation solutions worth over six billion
pounds in 2003. From the supply of the special wire

used in body scanner magnets, to the creation of
innovative magnetic field environments for new
experiments in molecular medicine, to sophisticateddiagnostic equipment for hospital use, Oxford
Instruments is a leader in helping customers in thelife sciences solve important scientific and medical
problems.

12

Financial Review

Trading resultsGroup turnover for continuing wholly-owned operations forthe year to 31 March 2004 of £182.3m was £4.3m lower
than the previous year and Group operating profit of thecontinuing wholly-owned operations, before goodwill
amortisation, exceptional items and terminated business,was £8.0m, up 18% from the previous year.
Both turnover and profit were significantly impacted by
the overall change in exchange rates during the year. If
the same exchange rates had applied during the year to
31 March 2004 as in the previous year, turnover would
have been £5.3m higher at £187.6m and operating profit
of continuing wholly-owned businesses before goodwill
amortisation and exceptional items £1.6m higher at £9.6m.
Profits were further affected by an increase of £1.4m in the
SSAP 24 pension charge compared with the previous year.
The results summarised by individual businesses are set
out in Note 1 on the Financial Statements. Despite the fallin turnover of the wholly-owned businesses there was an
improvement in gross margin and operating profit margin,
both up 1%.
Sales to overseas customers of £160.0m, including sales
by overseas businesses of £109.1m, represented 87.8%
of total Group turnover. UK exports of £94.5m produced
a net benefit to the UK balance of payments of £82.6m,
after deducting imports of £11.9m. Turnover by region isshown in the chart on page 14.
Profitability
Higher operating profit and lower operating assets improved
the return on operating assets to 12% (2003 8.7%). The
operating profit return on sales rose from 3.6% to 4.4%.
Accounting policies
The policies applied in preparing the Financial Statements are
set out on pages 32 and 33. The main areas of judgement
in applying the policies relate to the estimation of the costto complete on long term contracts, which represent lessthan 3% of annual turnover, and to the assessment of therisk of stock obsolescence. The appropriateness of thesepolicies is reviewed regularly.
Going concern
The Financial Statements have been prepared on a going
concern basis, based on the Directors’ opinion, after making
reasonable enquiries, that the Group has adequate resources
to continue in operational existence for the foreseeable future.
Exceptional items, terminated businessand goodwill amortisation
Exceptional items included redundancy costs of £1.1m
incurred as the Medical business reduced its overseas costbase during the year as well as the costs of £0.5m incurredby the Cambridge operation of Superconductivity prior to thespin out of ARKeX Limited, an independent and separately
financed exploration gravity gradiometer business.
Amortisation of goodwill amounted to £0.7m, an increaseover last year, reflecting no further benefit in the period fromnegative goodwill amortisation that had arisen from theacquisition of part of Vickers Medical in December 1997,
now fully depreciated, and the additional positive goodwill
amortisation following the VG Semicon acquisition in theyear. The average period over which goodwill is being
amortised is seven years.
Acquisitions and disposals
The Group’s 49% shareholding in Oxford Magnet Technology
Limited (OMT) was sold to Siemens plc in December 2003
for £8.5m. In addition a further £0.6m was received inrelation to related technology. Software licence incomeof £0.4m was recognised on the date of the transaction,with the remaining £0.2m for associated support andmaintenance being recognised over the support period.
The profit on disposal after goodwill was £6.6m. Prior
to disposal the Group’s interest in the joint venture’s loss
before tax was £0.3m. The Group continues to provide
under contract various goods and services to Siemens for
the MRI market.

Orders
2004£177.9m

2003£185.7m

2002£189.4m

Continuing wholly owned operations.

Turnover2004£182.3m

2003£186.6m

2002£211.9m

Continuing wholly owned operations.

Operating profit
2004

£8.0m

2003

£6.8m

2002

£6.7m

Continuing wholly owned operations before exceptional items, terminated business and goodwill amortisation.

Return on operating assets
2004

12.0%

2003

8.7%

2002

7.5%

Continuing wholly owned operations before exceptional items, terminated business and goodwill amortisation.

Oxford Instruments plc

In October 2003 the Group acquired the business and assetsof VG Semicon, a leading supplier of molecular beam epitaxy
equipment used in the mass production of electronic devices
for the latest generation of mobile and cellular phones.
A cash consideration of US$0.3m was paid with a further
agreed consideration of US$0.2m payable in the next
two years.
In March 2004 the Group acquired 24% of the ordinary
share capital of ARKeX Limited, the spin out from theSuperconductivity business referred to above. As part ofthe deal, the Group has licensed intellectual property to
ARKeX Limited.
In addition during the year the Group increased its stakein Target Systemelectronic GmbH from 20% to 25% andsubscribed for 25% of the issued share capital of Target
Systemelectronic Inc on its formation.
Interest
Net interest payable of the wholly-owned businesses was£0.1m, down from £1.2m last year, reflecting the improved
net cash position and the transfer of surplus funds from the
USA to the UK following the restructuring of the financing of
the USA operations, thereby eliminating the cost of the dollar
swap arrangement which had been in place for some years.
Taxation
The underlying tax rate on continuing profits before
exceptional items was 34% (2003 37%). The key factors
influencing the rate of tax are the UK corporate tax rateof 30% and higher tax rates in overseas jurisdictions suchas USA, Germany and Japan. The Group has significant
tax losses in the UK to set off against future taxable profits.
A deferred tax asset of £5.2m has been recognised against
timing differences and unused capital allowances leaving
a further £5.5m still unrecognised.

13

Exchange rates
The principal exchange rates used to convert foreign currencies
are set out in Note 34 on the Financial Statements.
Cashflow
The Group began the year with net cash of £3.3m andended the year with net cash of £20.7m, an inflow of£17.4m. Principal contributors to the inflow were £8.5m
related to the disposal of our shares in OMT and the
reduction in stock of £8.0m.
Balance sheet
The year end net cash position of £20.7m was made up
of cash and short term deposits of £23.2m offset by bankloans and overdrafts of £2.5m.
Net operating assets reduced by £12.0m to £66.6m. Thiswas primarily due to a reduction in net working capital,
excluding net cash, taxation and accrued dividends which
decreased by £9.0m to £34.0m. Overall the net working
capital to sales ratio reduced from 22.9% to 18.7%. Yearend stocks reduced by £8.0m. There was also a significant
improvement in debt collection, with the number of days
debt outstanding falling to 54 days from 66 days.
An analysis of tangible fixed assets is shown in Note 14
on the Financial Statements. The decrease in net book valueof fixed assets of £3.0m reflected the low level of capital
expenditure in the year.
The Group continues to own the majority of its factories
in the UK and the USA. Overseas sales offices are all leased.
Following the rationalisation of the UK factories, the longleasehold property in Abingdon is in the process of disposal
as is the factory in Oak Ridge, Tennessee.

Employees
The number of employees at 31 March 2004 was 1,507
compared with 1,560 at 31 March 2003, a reduction of 3.4%.

Pre-tax profit
2004£11.9m

2003

£2.4m

2002

£12.0mNet cashflow from operating activities
2004£17.8m2003£14.9m

2002

£6.6m

Net cash/(borrowings)
2004£20.7m

2003

£3.3m

2002

£(4.0)m14

Financial Review

Contingent liability
During the year the contingent liability highlighted lastyear in relation to one of the new Analytical products fora specific application has been addressed following industry
discussions with the government departments of the country
concerned. It is now considered most unlikely a future loss
will arise from this matter. As a result this issue is no longer
referred to in Note 32 on the Financial Statements in respectof contingent liabilities.
Pension schemes
The Company continues to account for pensions in accordancewith SSAP 24. However, the combined deficit of the twolargest defined benefit pension plans under the FRS 17
accounting standard has increased from £23m to £26m
after deducting the related deferred tax asset. The increasein asset values in the year has been more than offset by theincrease estimated for liabilities following a rise in assumed
salary growth and pension increases and the adoption ofrevised mortality tables. The principal (UK) scheme wasclosed to new members in 2001 and contributions fromboth the Company and employees were increased last year
in line with the actuary’s recommendation in the March 2003
Actuarial Valuation. These new contribution rates were set
with the expectation that the deficit would be recovered
over the average working life of members of sixteen years.
Financing
At the year end the Group’s bank facilities were morethan sufficient for its short term needs. In addition to
the multi-currency overdraft and short term borrowing
facilities of £32.4m (or the foreign currency equivalent)available to the Group at 31 March 2004, the Group had
contractually committed unsecured facilities of £15.0m
at the financial year end. At 31 March 2004 none of thecommitted facilities and only £2.5m of the uncommitted
facilities were in use. There is no known restriction
on the Group’s ability to transfer funds within theorganisation.

Following the sale of the shareholding in OMT, the Company
is no longer contracted by guarantee to secure 49% of theexternal borrowings of OMT.
Treasury management and policyGroup Treasury acts as a service to the businesses of theGroup, not as a profit centre. It operates under policies
approved by the Board. A formal report on Treasury activities
is prepared for the Board at least twice each year. Group
Treasury seeks to reduce financial risk and to ensure that
the Group has sufficient liquidity available to meet allforeseeable needs. It is responsible for all of the Group’s
funding requirements, cash management and other treasury
business. Group Treasury makes limited use of derivative
instruments to hedge foreign currencies; speculativetransactions are not permitted.
All of the Group’s borrowing facilities are arranged byGroup Treasury and the funds raised are then lent tooperating subsidiaries on an arms length basis. In a few
cases operating subsidiaries have external borrowings
but these are supervised and controlled centrally. Group
Treasury also manages the location and investment of
surplus funds which, when appropriate, are invested
predominantly in short term deposits with major financial
institutions meeting the credit criteria approved by the
Board. At the present time the Group has decided not
to enter into any arrangements to hedge against future
movements in interest rates.
Given the high level of net exports, the Group faces
currency exposures on trading transactions undertakenby its UK subsidiaries in foreign currencies. To eliminate
uncertainty, the Group has a policy of selling forward
known and forecast net foreign currency receivables
for up to 12 months ahead. Note 31 on the Financial
Statements shows the value at 31 March 2004 of contracts
for forward sale of the major currencies in which theGroup trades.

Group turnover by region
2004
2003
2002

North America£76.0m
£78.3m
£83.4m

2004
2003
2002

Japan

2004
2003
2002
2004
2003
2002

UK

2004
2003
2002
2004
2003
2002

£22.3m£23.2m£26.5mGermany

2004
2003
2002

£25.3m£23.2m£28.4m

£10.0m£9.6m£16.6mRest of Europe

Rest of Far East

Rest of World

Continuing wholly owned operations.

£27.7m£28.8m£31.7m£17.1m
£17.6m£18.8m
£3.9m
£5.9m
£6.5m

Oxford Instruments plc

15

Subsidiaries are encouraged to manage all materialtransactional foreign currency exposures using forward
contracts. Our overall policy of selling forward net currency
receivables provides short term predictability but not longterm protection from sterling movements against othercurrencies. Any items of a more complex nature requireapproval by Group Treasury.
Currency translation risks are controlled centrally. The policy
is to manage the translation exposure of major overseas
net assets by seeking to match partially the currency ofborrowings with the currency in which the net assets aredenominated. The objective is to maintain a low cost of
borrowings overall whilst permitting the transfer of the
profits of overseas subsidiaries to the Company throughregular dividends. The Group does not hedge its currency
exposure on the translation of profits earned in overseas
subsidiaries.
Earnings and dividends
The profit on ordinary activities before tax of £11.9m
included a profit of £7.2m from continuing operations,
exceptional losses of £1.6m and a net combined profit on
disposal and operating losses of OMT of £6.3m. After a
total tax charge of £1.9m the net profit for the financial
year was £10.0m.
The Group’s proposed final dividend of 6.0p per share(2003 6.0p), payable on 29 October 2004, makes a total
dividend for the year of 8.4p and remains the same as lastyear. Ignoring exceptional items, the terminated businessand OMT, the total dividend for the year was covered 1.4
times by earnings, before goodwill amortisation.
Share price
The closing mid-market price of the ordinary shares at theend of the financial year was £2.38, compared with £1.20
at the beginning of the year, an increase of 98%. The highest
and lowest prices recorded in the financial year were £2.425

Group turnover by sector
2004
2003
2002

Life sciences

2004
2003
2002

Scientific research

2004
2003
2002

Industrial processes

2004
2003
2002

Semiconductors and communications

Continuing wholly owned operations.

and £1.20 respectively. At the close of trading on 2 June
2004 the share price was £2.35.
Shareholders’ funds and share capital
Shareholders’ funds at the year end were £92.9m, or £1.93
per share. There were no net borrowings. After provision
for the proposed final dividend, distributable reserves of theCompany were £100.7m.
There was no change in the capital structure of theCompany during the year. At the year end the issued sharecapital was 48.1 million ordinary shares of 5p each.
164,063 new ordinary shares were issued in the year
under the Company’s Savings Related Share Option Scheme
representing 0.34% of the total issued share capital. Undervarious share option schemes, set out in Note 25 on the
Financial Statements, a further 3.5 million new shares may
be issued if performance conditions, where applicable,
are met and the options are exercised. This would givea maximum increase in issued share capital of 7.3%.
In addition 1.1 million issued shares are held in trust in
relation to the share option schemes.
International Accounting Standards (‘IFRS’)The Group has been assessing the changes that will be
required under IFRS in order to plan the transition from
UK Accounting Standards and to be in a position to report
its results under IFRS for the year to 31 March 2006. A
transition plan has been presented to and approved by
the Audit Committee. Key areas of focus include intangible
assets and financial instruments.

Martin Lamaison
Financial Director
3 June 2004

Earnings per share£99.8m£94.1m£102.1m

2004

11.4p

2003

7.9p

£35.5m£46.8m£43.7m2002

9.6p£36.1m£35.2m£39.1m£10.9m£10.5m
£27.0mContinuing wholly owned operations before exceptional items, terminated business and goodwill amortisation.

Dividends per share
2004

8.4p

2003

8.4p

2002

8.4p

Net assets per share
2004

193p

2003

186p

2002

199p

16

Directors and Advisers

ChairmanNigel Keen, 57, Non-Executive
Director, joined the Board in 1999.
He is Chairman of The Laird Group
PLC, Axis-Shield plc and Deltex
Medical Group plc.

Executive Directors
Andrew Mackintosh, 48, wasappointed Chief Executive in February
1998. He joined Oxford Instruments
plc in 1984 after an early careerwith Courtaulds, EMI and in university
research, including a year spent inJapan. He has a BSc in Chemical
Physics and PhD in Solid State Physics.

Non-Executive Directors
Peter Morgan, 68, Independent
Non-Executive Director, joined the Board
in 1999. He is Chairman of Technetix
plc and a Director of Hyder plc. He isa member of the Council of Lloyd’s
and a Director of the Association of
Lloyd’s Members.

Deputy Chairman
Professor Sir Michael Brady, 59,
Senior Independent Director, joined
the Board in 1995 and is BP Professorof Information Engineering at Oxford
University. He is a founding Directorof Guidance and Control Systems
Limited, and Mirada Solutions Limited,
now part of CTI Molecular Imaging(NASDAQ listed) and a Director of
ISIS Innovation Limited.

Martin Lamaison, 60, joined Oxford
Instruments plc in 1985 as Group
Financial Director. Previously he waswith Glaxo Group plc and BOC
Limited. He has a BA in Industrial
Economics.

Bernard Taylor, 47, Independent
Non-Executive Director, joined theBoard in 2002 and is Vice Chairmanof JP Morgan plc. He is a memberof The Council of the University of
Oxford, Chairman of ISIS Innovation
Limited, and a Non-Executive Director
of TI Automotive Limited. He is also a
fellow of the Royal Society of Chemistry.

Directors
The following Directors served throughout the year except as noted:
N J Keen FCA, Chairman
M Brady FREng FRS, Deputy Chairman
A J Mackintosh, Chief Executive
M Lamaison FCA, Financial Director and Company Secretary
P J Hill (until 31 May 2004)
P W L Morgan
B J Taylor
Board Committees
Audit: Peter Morgan, Chairman; Mike Brady; Peter Hill (until 31 May 2004);
Nigel Keen (until 1 April 2004); Bernard Taylor
Remuneration: Nigel Keen, Chairman; Mike Brady; Peter Hill (until 31 May 2004);
Peter Morgan
Nomination: Nigel Keen, Chairman; Mike Brady; Peter Hill (until 31 May 2004);
Peter Morgan; Bernard Taylor

Advisers
Financial Advisers: JP Morgan plc
Stockbrokers: Cazenove & Co. Ltd
Auditors: KPMG Audit Plc
UK Solicitors: Laytons
USA Counsel: Holland & Knight
Principal Bankers: Barclays Bank PLC;
HSBC Bank plc; Fortis Bank S.A./N.V.
Honorary President
Sir Martin Wood OBE FRS Hon FREng DL

Contents

18
20
22
25
31
31
32
34
35
35
36
37
37
38

Report of the Directors
Corporate Social Responsibility Statement
Corporate GovernanceDirectors’ Remuneration Report
Directors’ Responsibilities in relation to the Financial Statements
Report of the Independent Auditors
Accounting Policies
Group Profit and Loss Account – 2004
Group Profit and Loss Account – 2003
Group Statement of Total Recognised Gains and Losses
Balance Sheets
Group Cash Flow Statement
Reconciliation of Net Cash Flow to Movement in Net Funds
Notes on the Financial Statements

Oxford Instruments plc Reports and Financial Statements 2004

17

18

Report of the Directors

The Directors present their Report and the Financial Statementsof Oxford Instruments plc for the year ended 31 March 2004.
Principal activity and business reviews
The Company is the ultimate holding company of a group of
subsidiary undertakings (‘the Group’) engaged in the research,development, manufacture and sale of advanced instrumentation.
The business and likely future prospects are reviewed in the
Chairman’s Statement on pages 2 and 3, the Operating Review
on pages 4 to 7 and the Financial Review on pages 12 to 15.
Acquisitions and disposals
Details of acquisitions and disposals are set out within the
Financial Review on pages 12 to 15 and within Notes 16 and 17
on the Financial Statements.
Results and dividends
The results for the year are shown in the Group Profit and Loss
Account on pages 34 and 35. The Directors recommend a final
dividend of 6.0p per ordinary share, which together with theinterim dividend of 2.4p per ordinary share paid on 26 March
2004 makes a total of 8.4p per ordinary share for the year (20038.4p). Subject to shareholder approval, the final dividend will be
paid on 29 October 2004 to shareholders registered at close ofbusiness on 1 October 2004.
Directors
Profiles of all the Directors at the date of this report, including the
Non-Executive Directors, appear on page 16. All the Directors
served on the Board for the whole year under review. Since theyear end Peter Hill resigned as a Director. Peter Hill resigned as a
Director since he does not meet the criteria for independence set
out in the new Combined Code because he and Nigel Keen areboth Directors of the same UK-listed public company.
Nigel Keen and Mike Brady who retire by rotation, offer themselves
for re-election at the 2004 Annual General Meeting. Neither of
the Non-Executive Directors offering themselves for re-election
has a service contract with the Company or any of its subsidiaries.
Their existing letters of appointment for three years terminate on
25 February 2005 and 31 July 2004 respectively. It is the Board’s
intention to offer both Nigel Keen and Mike Brady a further threeyear term of appointment on the expiry of their current term.
Nigel Keen’s appointment for a further three year term, effectivefrom 25 February 2005 will be subject to retirement by rotation.
Nigel Keen was first elected at the Annual General Meeting in1999 having been appointed to the Board as an Independent
Non-Executive Director in February of that year. It is the Board’s
intention to offer Nigel Keen a further three year term of
appointment on the expiry of his current term. Having been

Oxford Instruments plc

Chairman during a substantial reorganisation of the Company,
the Board believes he will be best placed to contribute to thedevelopment and implementation of the next stage of theCompany’s Strategy.
Mike Brady first became a Non-Executive Director of the Company
in 1995; accordingly the Board has considered whether it isappropriate in view of his length of service that he continue in office
and if so whether he should be considered to be independent.
Having taken into account his technical expertise as the only NonExecutive Director from a scientific profession; the value of thatexpertise to Board discussions; the strength of his professionaland business interests unrelated to the Group or other membersof the Board; his continual constructive probing from the technicalaspect of proposals considered by the Board; the composition of
the Board generally and the fact that he qualifies as independent
in all other criteria referred to in the Combined Code, the Board
has concluded that it is appropriate that he continue in office andthat he should properly be considered to be independent. This
year, Mike Brady retires by rotation under the Articles of
Association. In subsequent Annual General Meetings, in addition
to other Directors retiring by rotation, he will retire in accordancewith the provisions of the Combined Code and may offer himself
for re-election.
Directors’ interests
The beneficial interests of the Directors in the Company’s sharecapital, all in fully paid up shares at 31 March 2004 are shown
below. There were no changes in the Directors’ holdings between
the year end and 3 June 2004. Details of share options are shownin the Directors’ Remuneration Report on pages 25 to 30.

Mike Brady
Peter Hill
Nigel Keen
Martin Lamaison
Andrew Mackintosh
Peter Morgan
Bernard Taylor

2004
Shares

2003
Shares2,500
8,000
45,00048,75158,752
10,000
190

2,500
8,000
45,00048,621
57,31810,000190

No Director was beneficially interested in the shares of any subsidiarycompany at any time during the year. Nor did any Director, in theyear to 31 March 2004, have a material interest in any contractof significance with the Company or any of its subsidiaries.
Share capital
During the year 164,063 new shares were issued (2003 24,734)
under the Company’s Savings Related Share Option Scheme.
Details are set out in Note 25 on the Financial Statements.

Report of the Directors

Oxford Instruments plc

Substantial shareholdings
The following are beneficial interests of 3% or more and any
non-material interests of 10% or more, of which the Directors havebeen notified, of the Company’s issued ordinary share capital, theonly class of voting capital, at 3 June 2004:

Aberforth Partners
Co-operative Insurance Society Limited (forms part of Aberforth Partners holding)
Britel Fund Trustees Limited (of which 5.7% forms part of Aberforth Partners holding
and 5% forms part of Hermes Pension Managment holding)
Hermes Pension Management
Devon County Council (forms part of Hermes Pension Management holding)
Post Office Pension Trustees Limited* (forms part of Hermes Pension Management holding)
Nottinghamshire County Council (forms part of Hermes Pension Management holding)
Railways Pension Trustee Company Limited(of which 4.9% forms part of Hermes Pension Management holding)
Sir Martin and Lady Audrey WoodGAM London Limited
HBOS plc
Fleming Mercantile Investment Trust Plc
Legal & General* PossFund Custodian Trustee Limited, as custodian, is also considered to have an interest in these shares
Payment of suppliers
The Group does not follow a standard payment practice but agrees
terms and conditions for its business transactions with each of its
suppliers. Payment is then made to these terms, subject to theterms and conditions being met by the supplier. Trade creditors of
the Company and the Group’s UK subsidiaries at 31 March 2004
were equivalent to 35 days’ and 45 days’ purchases respectively,
based on the average daily amount invoiced by suppliers to theCompany and Group’s UK subsidiaries during the year.
Annual General Meeting
The Notice of the Annual General Meeting to be held on 21
September 2004 is set out on pages 60 to 62 together with
explanatory notes relating to the resolutions.
A resolution to re-appoint KPMG Audit Plc as Auditor will be
proposed at the Annual General Meeting.
The Directors believe that the proposed resolutions are in the bestinterests of the Company and its shareholders, and accordingly
unanimously recommend shareholders to vote in favour of resolutions
numbered 1 to 10 inclusive to be proposed at the Annual General
Meeting, as they propose to do in respect of their beneficial
shareholdings.

By Order of the Board
Martin Lamaison
Company Secretary
3 June 2004

Shares
000

% of
total

11,034
2,413

23.0
5.0

5,274
2,404
2,404
2,404
2,404

11.0
5.0
5.0
5.0
5.0

2,946
3,644
2,959
1,906
1,547
1,475

6.1
7.6
6.1
4.0
3.2
3.1

19

20

Corporate Social Responsibility Statement

Oxford Instruments plc is the parent of a number of subsidiarycompanies which operate around the world. Overall responsibility
for developing policies on social, ethical and environmental mattersand for reviewing their effectiveness lies with the Board. The Board
is aware of the guidelines issued by the Association of British
Insurers on corporate and social responsibility. As set out below,
these matters are addressed currently in several ways. It is then the
responsibility of the operational management teams to ensurethat policies are communicated, implemented and maintained
within their particular businesses, whilst taking into account local
legislation and potential risks.
Health and safety policy
Oxford Instruments is committed to ensuring the health, safety
and welfare of its employees and to the continual improvement
in its health and safety performance. The achievement of this aim
is dependent on the establishment and maintenance of effective
health and safety management systems, integrated into allbusiness processes and line management functions within eachof the Group’s businesses. Health and safety is an area where allparts of the Group can learn from each other. The health andsafety managers from each of our manufacturing businesses in
the UK meet regularly as the Health and Safety Committee toshare knowledge and best practice.
All businesses within the Group recognise the importance of
keeping all employees updated on health and safety issues, andbringing to the notice of their employees a written statement of
their policy relating to health and safety at work. In addition
employees are kept informed of current issues through staff
notice boards and bulletins. Employees are encouraged to submit
observations or concerns relating to improvements that can bemade in work conditions and practices. In order to maintain highstandards throughout the Group training courses are run
focussing in particular on manual handling training and fork lift
truck driving. Risk assessments are conducted at employees’
workstations to ensure staff are working in a comfortable andsafe environment. Action is taken when required.

Oxford Instruments plc

Overall the number of days lost during the year through work
related occupational ill health as well as the recorded accidents
were both lower than in the previous year.
Audits of health and safety procedures are undertaken at all major
locations by external assessors on a regular basis. All businesses
report to the Board on a regular basis progress with their healthand safety objectives and goals, including actions taken.
Environmental policy
The Board is responsible overall for environmental policy andprocedures. Responsibility for implementing and maintaining
effective environmental practices is assigned to the operational
management teams. As with all businesses the Group’s products,
activities and services impact on the environment. Oxford
Instruments is committed to taking steps to reduce adverse
impacts and thereby deliver continual improvement in its
environmental performance. Systems are in place to meet therequirements of all applicable environmental laws and regulations,and the Group seeks to reduce waste and environmental impact
by the adoption of appropriate practices in its operations.
All businesses report on environmental issues and compliancewith local legislation. Action is taken to correct any unsatisfactory
issues disclosed by these reviews.
As part of the Group’s ongoing development, ways of improving
efficiency so as to minimise the use of materials, energy andgeneration of waste and harmful emissions are sought constantly.
There are a number of recycling initiatives operated at site level
throughout the Group. Examples include the recovery of helium
gas, the encouragement of staff to recycle paper and packaging
including bottles and cans, reduction in energy consumption
through the use of timing switches, the reuse and recycling of
packaging and increased use of telephone and video conferencing
instead of travel.

Corporate Social Responsibility Statement

Social and ethics policy
Employment
Ability and contribution are the determining factors in the selection,
training, career development and promotion of all employees.
The Group is committed to continuing professional development
and to managing actively individual and team performance anddeveloping and valuing core skills. Having the right skills mix
ensures that the business grows through producing innovative
products that meet or exceed customers’ expectations.
It is the Group’s policy to provide competitive remunerationreferenced against external market data. Business and individual
performance determine actual remuneration. Salaries arereviewed on an annual basis. Financial participation by all
employees in the Group is encouraged through the Savings
Related Share Option Scheme in the UK and by executive shareoptions granted to senior management worldwide.
The Group’s policy is to ensure that in all countries where it operates
it complies with all legislation and recognised codes of practicerelating to employment rights, health and safety and equal
opportunities.
EthicsAn open culture is fostered in which individual’s views andcontributions are encouraged and respected. The aim is toensure there are equal opportunities for all employees with nodiscrimination on account of race, age, gender, sexual orientation,
disability, political or religious beliefs. A confidential reporting
process is in place through which our employees can raise any
concerns they may have with any aspect of Company or fellow
employee behaviour.
It is the Group’s policy to minimise compulsory redundancy throughredeployment and re-training of employees where possible.

Oxford Instruments plc

Community involvement
For many years Group businesses have contributed and supported
local charities and community activities. Total donations made by
the Group during the year amounting to £23,000 (2003 £29,000)
were made to a range of community organisations. It is the Group’s
policy to prohibit donations to any political party or similar organisation and therefore no donations to political parties were made.
Employees are encouraged to contribute to local charities using
the Give-As-You-Earn scheme and the Company makes anadditional donation to the chosen charities. The Group also
regularly provides work placement experience for students and in
the year ended 31 March 2004 spent £77,000 providing student
sponsorship in the UK. The Group encourages its UK employees
to participate in the Business in the Community scheme.
Communication
The Group shares with its employees information on businessactivities, priorities and performance through regular team briefings.
In addition the Group distributes to all employees an electronic
newsletter, “Business News”, which keeps the employees updated
on the Group’s progress. All employees receive a copy of theAnnual Report and Accounts.

Nigel Keen
Chairman
3 June 2004

21

22

Corporate Governance

The Board recognises the importance of good corporate governanceand has, over the years, ensured that appropriate corporate
governance procedures are in place within the Company and are
kept under regular review. During the year the Financial
Reporting Council published a new Combined Code on
Corporate Governance (“the new code”) which applies to theCompany for the year commencing 1 April 2004 and replaces the1998 Combined Code. A full review of the new code has been
undertaken and where appropriate steps have been taken tochange policies and procedures to comply with the new code.
ComplianceDuring the period under review, the Company has applied theprinciples set out in the 1998 Combined Code on corporate
governance and has complied throughout the year with eachof the provisions set out in Section 1 of the 1998 Combined
Code, except where it has been explained in the Directors’
Remuneration Report on pages 25 to 30 in respect of provisions
B.1.6 and B.1.7. These provisions relate to the inclusion of alimited amount of cash bonuses for pension purposes and thelength of notice in service contracts.
Principles of corporate governance
Board of Directors
The Board’s principal responsibility is to look after and act in thebest interests of the shareholder group as a whole. The Board
establishes aims and objectives for the Group and agrees thestrategic directions and plans and annual budget proposed by theGroup’s senior management. The Board is also responsible for the
exercise of proper and appropriate corporate governance for theGroup and for ensuring that there are effective systems of internal
control in place. There is a schedule of matters reserved for the
Board’s decision, covering matters of the structure of the Board,
operations and financial matters. There is also a written statement
as to the division of responsibility between the Chairman and theChief Executive, with day-to-day management of the businessdelegated to the Chief Executive.
The Board comprises the Chairman and Deputy Chairman (bothNon-Executive Directors), two Executive Directors and two further
Non-Executive Directors. All the Non-Executive Directors, areconsidered by the Board to be independent. The Non-Executive
Directors are appointed for an initial term of three years, renewableby mutual consent. All Directors are required to seek re-election
at the first Annual General Meeting following appointment, andsubsequently at intervals of no more than three years.
Nigel Keen, the Chairman, was appointed to the Board as anindependent Non-Executive Director in 1999 and was still considered
to be independent when appointed Chairman of the Board in
July of that year, as recommended by the new Code. The Deputy
Chairman, Mike Brady, is also the Senior Independent Non-Executive
Director. Mike Brady is to continue to hold these two positions
after the renewal of his term of appointment on 1 August 2004.
At that time Mike Brady will have served the Company as a
Non-Executive Director for nine years, however the Board believethat in action and in judgement Mike Brady continues to bring
independence to bear on issues of strategy, performance andresources, including key appointments and standards of conduct.

Oxford Instruments plc

A timetable for Board meetings is agreed annually. The Board meetsformally ten times a year and additionally as necessary. There isan agenda of matters specifically reserved for discussion by the
Board. The Board also delegates certain of its responsibilities to
Committees which are described below. Membership andChairmanship of the Committees are determined by the Board.
All Directors receive Board Papers in advance of each meeting
which contain appropriate information relating to matters fordiscussion at the meeting. During the year the Chairman met
once with the Non-Executive Directors without the Executive
Directors present. In future years such meetings will take place atleast twice a year. In addition the Senior Independent Director
met the Non-Executive Directors without the Chairman present
once during the year.
The Company’s Articles authorise any Director to take independent
professional advice if necessary at the Company’s expense andhave access to the advice and services of the Company Secretary,
or if appropriate, the Assistant Company Secretary. Any Director
becoming a Director of a listed company for the first time is given
the choice of external or internal training. A programme offamiliarisation with the Company’s businesses is also arranged for
all new Directors.
In the year ended 31 March 2004 the Board commenced a formal
performance review process the results of which have been
circulated to and discussed by all Directors. In the current financial
year this evaluation process will be extended to include theCommittees of the Board and individual Directors.
During the year the Board has met eleven times, of which Mike
Brady was unable to attend two meetings and Bernard Taylor was
unable to make one meeting, an absence which was known about
in advance of his appointment as a Director. In such instances the
Director consults with the Chairman prior to the meeting and isbriefed by the Chairman after the meeting.
Board Committees
Membership of Board Committees is given on page 16. The written
Terms of Reference of the Committees detailed below are available
from the Company on request and will be on display at the Annual
General Meeting.
During the year the Audit Committee, chaired by Peter Morgan,
comprised the Chairman and all the Non-Executive Directors.
With effect from 31 March 2004 Nigel Keen stood down as amember of the Committee. The members of the Committee areappointed by the Board and the membership of the Committee isreviewed regularly. The Board ensures that at least one member
has recent and relevant financial experience. Only members of theCommittee have the right to attend Committee meetings. Otherssuch as the Chief Executive and Financial Director are invited toattend all or part of any meeting as required. The external auditors
are invited to attend meetings of the Committee on a regularbasis, including once at the planning stage before the audit andonce after the audit at the reporting stage. At least once a year
the Committee meets with the external auditors without the
Executive Directors present. The Audit Committee met five times
in the year ended 31 March 2004. Both Peter Hill and Bernard
Taylor were unable to attend one meeting.

Corporate Governance

The Audit Committee is responsible for monitoring the integrityof the financial statements of the Company and the Group. The
Committee reviews the Group’s financial statements and internalfinancial controls and considers the scope and planning of internaland external audits and the findings of the audits.
The Committee’s main responsibilities are set out in its written
Terms of Reference and include: reviewing the interim and annual financial statements before

submission to the Board, including consideration of the significant
financial issues and judgements which they contain;
 making recommendations to the Board regarding the external

auditors and their terms of appointment; co-ordinating the activities of external and internal auditors

and reviewing the major external and internal audit findings;
 keeping under review compliance with accounting standards

and any changes in accounting policies and practices;

Oxford Instruments plc

changes in salary structure and terms and conditions affecting
other employees at senior executive level. Further details of theRemuneration Committee are included in the Directors’
Remuneration Report set out on pages 25 to 30.
The Nomination Committee currently comprises of the Chairman
and all the Non-Executive Directors. Chaired by Nigel Keen theCommittee met once during the year at which there was full
attendance, and is responsible for recommending to the Board all
Board appointments and for ensuring that the Board has an
appropriate balance of expertise and ability among the NonExecutive Directors. It also recommends to the Board whether the
Non-Executive Director’s appointment should be renewed for afurther three years at the end of each three year term. In doing
so the Committee takes into account the need to refresh theBoard as required by the new Code.
In addition there is an Administration Committee which consistsof any two or more Directors and deals with items of a routine
and administrative nature.

 monitoring the adequacy and effectiveness of the internalfinancial controls and compliance procedures; and reviewing the Company’s arrangements for employees to raise

concerns about possible wrong doings in financial reportingor other matters.
The Committee is also responsible for keeping under review thescope and results of the external audit and its cost effectivenessand the independence and objectivity of the external auditors. As
part of its remit, the Audit Committee also keeps under review thenature and extent of non-audit services provided to the Group by
the external auditors. The fees for these non-audit services in theyear have been minimal. The non-audit services were not put out
to tender as the tender process was considered out of proportion
to the nature and cost of the services to be provided. Details of
the audit fees, together with fees for non-audit services for theyear, are set out in Note 6 on the Financial Statements.
The Remuneration Committee, chaired by Nigel Keen, met fourtimes in the year ended 31 March 2004 at which there was full
attendance on all occasions. The members of the Committee areappointed by the Board and the membership of the Committee
is reviewed regularly. Under its terms of reference the Chairmanof the Board may be chairman of the Committee. The
Remuneration Committee is responsible for recommending to
the Board the remuneration packages for Executive Directors andthe bonus and share option strategy for the Group’s executive
management. The Chairman, Nigel Keen, who fulfilled the
independence criteria at the time of his appointment as set out
in the new Code on Corporate Governance, is currently
Chairman of the Committee as the Board considers it essentialthat the Chairman be involved in setting remuneration policy.
The Board as a whole is responsible for fixing the remunerationof the Non-Executive Directors, including the Chairman.
Only members of the Committee have the right to attend Committee
meetings. Others such as the Chief Executive are invited to attend
all or part of any meetings as and when required. In particular the
Chief Executive will report to the Committee on the performanceof other Executive Directors and on significant group-wide

Shareholder relations
The Chief Executive and Financial Director meet regularly withshareholders to develop an understanding of their views and tocommunicate and explain the Group’s strategy and performance.
The Chairman and Senior Independent Director make themselves
available.
All shareholders are invited to attend and participate in the Annual
General Meeting (AGM). Shareholders are invited to ask questions
and are given the opportunity to meet the Directors informallyafter the meeting. The number of proxy votes cast for, against orin abstention on the resolutions are reported to the meeting after
each resolution has been dealt with on a show of hands and,following the 2004 annual General Meeting, will be published on
the Company’s website (www.oxford-instruments.com).
All major announcements are made available promptly on the
Company’s website.
Risk management
Within the Group there is an ongoing process for identifying,evaluating and managing the significant risks faced by the Group.
A standard process has been introduced throughout the Group
which requires the senior management of each business to identify
significant business risks and to classify them both as to probabilityof occurence and potential impact. Once identified, mitigating
action is decided and responsibility within the management teamassigned. On a regular basis each business reviews and updates
its risk summary which is then reported to the Group Head office.
If a material risk changes or arises, the Managing Director of thebusiness reports this in writing to the Chief Executive at whichtime there is a discussion on the adequacy of the mitigating actions
taken. Details of all major risks identified and the mitigating
actions in place are reported to and reviewed by the Board.
In addition, the Board considers risks to the Group’s strategic
objectives which are not addressed within the Group’s businesses
and develops appropriate actions to manage and mitigate these risks.

23

24

Corporate GovernanceOxford Instruments plc

Internal control
The Board is ultimately responsible for the Group’s system ofinternal controls and for reviewing its effectiveness. However,such a system is designed to manage rather than eliminate therisk of failure to achieve business objectives, and can provide
only reasonable and not absolute assurance against material
misstatement or loss.

 the businesses prepare monthly management accounts which

There is an ongoing process for identifying, evaluating andmanaging any significant risks faced by the Group. This process
has been in place during the year and up to the date of approvalof the Annual Report and Accounts. It is regularly reviewed by the
Board and accords with the Turnbull guidance.

and there are established procedures for the planning,approval and monitoring of capital expenditure;

During the year the Directors have reviewed the effectiveness of
the Group’s system of internal controls. These controls include
financial, operational, compliance and risk management (asreferred to above).
It is the Group’s aim to maintain effective financial disciplines withthe object of providing reasonable assurance of the safeguardingof assets against unauthorised use or disposition, the maintenanceof proper accounting records and the reliability of financial andnon-financial information within the business for both internaland external use.

compare the actual operating result with both the budget andthe prior year; the businesses also prepare rolling reforecasts
for orders, turnover, operating profit and cash covering at least
the next six months in detail and from time to time a further
six months in summary; both are reviewed by the Board monthly; the Board approves all acquisition and divestment proposals,

 for all major investments the performance of the first 12

months against the original proposal is reviewed by the Board; the Board maintains an internal control framework defining

for each control area, the reporting mechanics and the
responsibility; each Group site, except for representative sales offices, submits

a self assessment internal control questionnaire every six months;
 internal audit is carried out through a system of regularreviews of the internal controls at each site by accountantsfrom other parts of the Group and in Japan, due to language
issues, by the local external auditors;
 work performed is based on a standardised Group format but

The key components designed to provide effective internal control
within the Group are as follows:

involves random testing, together with a review of the internal
control questionnaire; a formal schedule of matters is reserved to the Board for where required, action plans are drawn up by the businesses

decision with appropriate delegation of authority throughout
the management structure;in conjunction with Group to remedy any significant control
weaknesses that are identified from completion of the internal
control questionnaire or as a result of the internal audit; checks
on the progress of the action items arising are then made; theresults of audit reviews are reported to local management,Group management and the Audit Committee; the process
requires that any serious weakness is reported immediately tomembers of the Audit Committee; no such weaknesses wereidentified in the year; the Group’s management structure is based on the identificationof separate businesses for each of the Group’s activities; theheads of these businesses together with the Chief Executive
and the Financial Director form the Group’s Management‘Top Team’; there are clearly defined lines of management
responsibilities at all levels up to and including the Group
Board; the Group’s accounting and reporting functions reflect
this organisation;
 financial executives within Group businesses report to their

 in addition the Board receives regular updates on treasury, tax,

property, insurance and health and safety matters;

own operational head but there is also a well established andacknowledged functional reporting relationship through to
the Financial Director;

 authorisation limits are set at appropriate levels throughout

 the Board reviews strategic issues and options formally once a all requests to quote for substantial fixed price contracts areyear during the annual strategic planning process and during
the year as appropriate;

reviewed by a multi-disciplinary team to assess both technicaland financial risk. However, no procedure can guarantee theavoidance of losses on fixed price contracts of a technical nature.

 annual budgets are prepared for each of the Group’s businesses

which include monthly figures for turnover, profit, capital
expenditure, cash flow and borrowings; the budgets arereviewed through the Group management structure andresult in a Group financial budget which is considered andapproved by the Board;

the Group; compliance with these limits is monitored by theGroup management structure and internal audit; andDirectors’ Remuneration Report

The Directors’ Remuneration Report sets out the Company’s policyon the remuneration of Executive and Non-Executive Directors
together with details of the Directors’ remuneration packages
and service contracts.
Remuneration Committee
The Remuneration Committee, which met four times during theyear, consisted of Nigel Keen (Chairman), Mike Brady, Peter
Morgan and Peter Hill (until 31 May 2004), all independent
Non-Executive Directors. Nigel Keen, who as Chairman fulfilled
the independence criteria at date of appointment, as set out inthe new Code on Corporate Governance, is a member of theCommittee because the Board considers it essential that he be
involved in setting remuneration policy. The members of theCommittee are appointed by the Board and the membership of
the Committee is reviewed regularly. The Chairman of theCommittee may be the Chairman of the Board.
The principal function of the Committee is to define andcommunicate to the Executive Directors the Company’s policy on
the remuneration, benefits and terms of employment for each
Executive Director. The Board, as a whole is responsible for fixing
the remuneration of the Non-Executive Directors, including the
Chairman.
The Committee also reviews the granting of share options andgeneral increases in salaries and bonus arrangements for staff
and the Executive Directors. Over the past year the Committee
appointed New Bridge Street Consultants to provide independent
external professional advice on Executive Directors’ remunerationand option schemes. The Committee also consults the Chief
Executive about the remuneration of the Financial Director. In
addition the Chairman maintains contact with principal shareholders regarding remuneration policy as appropriate.
Remuneration policy
The Remuneration Committee has established a policy on the
remuneration of Executive Directors and the Board has establisheda policy for the Non-Executive Directors for the current andsubsequent financial years. The Committee regularly seeks external
advice to benchmark policy and procedures against best-in-class.
Executive Directors
The Company has an incentive-driven Executive Director
remuneration policy that seeks to promote the alignment ofinterests of directors and shareholders and reflects the performanceof each Director. A significant proportion of total potential
rewards is provided through performance-based schemes. Overall
the remuneration package aims to be appropriate to attract andretain high calibre executives.

Oxford Instruments plc

Service contracts
Each of the Executive Directors has a service contract. Company
policy is to enter into service contracts with Executive Directorsthat have a notice period of one year. The Remuneration
Committee’s policy on early termination is to provide compensation
which reflects the Company’s contracted obligations, whilst
recognising the principle of mitigation of damages.
The service contracts in force for the two Executive Directors do
not comply with the Remuneration Committee’s current policy on
Executive Directors’ Service Contracts, as the current policy was
not in place at the time their contracts commenced. The
Company entered into a service contract with Andrew
Mackintosh on 1 April 1996 and with Martin Lamaison on 31
December 1985. These contracts expire at age 65 and have a twoyears’ notice period. Since the year end, in order to comply withcorporate governance standards, steps have been taken to reduce
to one year the two year notice periods presently applicable
under the service contracts of the Executive Directors. The notice
periods in the new service contracts will reduce progressively over
the year to 30 June 2005, after which the agreements will beterminable on one year’s notice.
The Non-Executive Directors do not have service contracts but
their appointments are subject to review every three years andthe rotation provisions of the Company’s Articles of Association.
Non-Executive Directors
The Company’s policy is to appoint Non-Executive Directors to theBoard with a breadth of international skills and experience that isrelevant to Oxford Instruments’ global business. Appointments
are made by the Board upon the recommendations and advice
from the Nominations Committee.
Executive Directors’ remuneration
Basic remuneration
The Executive Directors receive base salary, annual performance
awards, pensions and other benefits, and long term performance
awards. Base salaries, benefits and performance awards of the
Executive Directors are reviewed annually by the Remuneration
Committee. Base salaries are determined with reference to an
appropriate comparator group of companies, which is reviewed
annually. Consideration is also given to the Director’s experience,
performance and responsibilities. Benefits comprise provision of a
car allowance, life, disability and health insurance, participation
in a bonus scheme and a pension. A contributory pension at theage of sixty of up to two thirds of pensionable salary is provided,
related to the length of service, together with a dependants
pension on death in service or retirement.

25

26

Directors’ Remuneration Report

Oxford Instruments plc

Emoluments of the Executive Directors showing the breakdown between basic and performance related remuneration:
Salary£000

Benefits£000

Performance related
remuneration
£000

2004
£000

Total remuneration
2003
£000

Andrew Mackintosh
Martin Lamaison

250
165

13
13

125
57

388
235

283
199

Total

415

26

182

623

482

Annual Performance Incentive Bonus
The annual bonus is set at a percentage of base salary on a sliding
scale with a maximum in normal circumstances of 75% of basesalary. Bonuses are earned primarily on the achievement of target
economic added value, with further elements payable on meeting
specific personal goals and on comparative share price performance in the financial year. Bonuses are paid after the completionof the statutory annual audit.
The Executive Directors’ bonus scheme for the year ended 31 March
2004 set performance targets which would pay bonuses for on
target performance at the rate of 50% of base salary for Andrew
Mackintosh and 35% of base salary for Martin Lamaison.
Performance in excess of the targeted economic added value
would attract incremental payments. The actual performanceachieved provided Andrew Mackintosh with a bonus equal to
50% of base salary and Martin Lamaison 35% of base salary.
Pensions
Both Executive Directors are members of the Oxford Instruments
Pension Scheme and the Oxford Instruments 1998 Executive
Pension Scheme. The Government’s proposed changes to the tax
regime applying to occupational pension schemes to take effectfrom 6 April 2006 are being reviewed.
Oxford Instruments Pension Scheme
All employees, including the Company’s Executive Directors, whowere engaged before April 2001 were entitled to become membersof the defined benefit Oxford Instruments Pension Scheme. Thisis a contracted-out contributory pension scheme which provides
benefits based on earnings at or near retirement and is fundedthrough a separate trust. Salary eligible for pension under thisscheme is defined as base salary received in the last scheme year
plus average annual variable earnings received in the last fiveconsecutive scheme years, provided that the annual variableearnings do not exceed 50% of base salary. Variable earnings for
the Executive Directors are cash bonuses only, which are deemed
an integral part of their remuneration.

With effect from 1 April 2004 the Company contributed to thescheme at a rate of 14.5% of pensionable salary. Employees canchoose to contribute at rates of 6.0%, 7.0%, 9.5% or 10.5% of
pensionable salary, with the higher rates earning benefits at thefaster rate of 2% per year (1/50ths) of service instead of 1.67%(1/60ths).
All benefits may be taken at age 60. However the normal retirement
age for all UK employees is 65 and continued accrual of service
in the pension schemes can continue until 65. Early retirement ispossible on a reduced pension from age 50 with the consent of
the Company. Pensions in payment are guaranteed to increase by
a level of inflation up to a maximum of 3% per year on pension
earned before 1 April 1997 and a maximum of 5% per year
thereafter, subject to any applicable statutory requirements.
For death before retirement a spouse’s pension of one half of themember’s prospective pension is payable plus a capital sum of
three times the member’s pensionable salary and a refund of themember’s contributions. For death after retirement a spouse’s
pension of one half of the member’s pension is payable plus thebalance of a five year guarantee if applicable. In the event ofdeath after leaving service but before commencement of pension
a spouse’s pension of one half of the accrued preserved pension
revalued to the date of death is payable plus a refund of themember’s contributions. In all circumstances children’s allowances
are also payable if applicable.
Following the closure of the Company’s defined benefit scheme to
new members in April 2001, any Executive Directors appointed
now would be offered membership of the Oxford Instruments
Stakeholder Plan, a defined contribution scheme. Under thisscheme only base salary is pensionable.
The following table shows for the Oxford Instruments Pension
Scheme the compulsory member’s contributions, the increase inaccrued entitlement during the year in excess of inflation and theaccrued entitlement at the end of the reporting period, together
with the transfer value of the accrued pensions:Directors’ Remuneration Report

Oxford Instruments plc

Age as at
31 March 2004
Years

Accrued yearsof service
Years

Member’s
contributions
duringthe year
£000

48
60

19
19

20
14

Andrew Mackintosh
Martin Lamaison

Andrew Mackintosh
Martin Lamaison

Additional annual
pension earned
during the year
£000

Additional
annual pension
earned during theyear in excess
of inflation£000

Accrued annual
entitlement
at year end
£000

13
6

11
4

93
66

2004
£000

Transfer value of accrued pension
2003
£000

Change in transfer value overyear less member contributions
£000

1,002
1,190

757
1,028

225
148

Oxford Instruments 1998 Executive Pension Scheme
The Oxford Instruments 1998 Executive Pension Scheme is adefined contribution ‘top-up’ arrangement providing a lump sum
at retirement and also an additional capital sum of one times themember’s pensionable salary for death before retirement. Only
the Company makes contributions to this scheme. The scheme is
not currently available to new members.
Company contributions to the Oxford Instruments 1998
Executive Pension Scheme during the year were £16,000 (2003£15,000) for each of the Executive Directors.
Share Incentive Schemes
The Company has a number of share option schemes for the
incentivisation of Executive Directors and employees of the Group: the Executive Share Option Scheme (ESO); the Senior Executive Long Term Incentive Scheme (SELTIS);
 Individual Options (Individual); and Save-As-You-Earn Scheme (SAYE).

The ESO scheme is the principal vehicle used to incentivise the
Executive Directors and senior management. The SELTIS andIndividual schemes are used at the discretion of the Remuneration
Committee. The SAYE scheme is open to all permanent staff
employed for at least 6 months on the date of invitation to join
the scheme.
ESO schemes (1985, 1995 and 2001)
These shareholder and Inland Revenue approved schemes grant
options over new shares to be issued at the time of exercise (andin the case of the 1995 and 2001 schemes also over existing
shares). Options granted to an individual in excess of £30,000 areclassified as unapproved options.
All future awards of ESO share options will be made under the
2001 ESO scheme. The aggregate market value of shares overwhich options under the 2001 ESO scheme may be granted to anindividual participant in any financial year may not normallyexceed twice base salary. However, in exceptional circumstances
the limit is three times base salary, provided that to the extent an

individual is granted options in excess of the standard limit, there
will be a corresponding reduction in the number of shares underoptions granted in the next two years. For the purpose of calculatingthese limits, the Company’s share price will be averaged over thethree months before the options are granted.
Options are granted at the middle market price on the last dealing
day prior to grant and are exercisable after three years but not
more than ten years from the date of grant.
Performance conditions
1985 ESO
None – in line with general market practice at the time ofestablishing the scheme.
1995 ESOOver a period of three consecutive years the growth in earnings
per share (EPS) of the Company expressed as a percentage to
exceed the growth in the Retail Price Index (RPI) expressed asa percentage plus a further 2% per year over the same period.
2001 ESO
The performance conditions are based equally on the
Company’s total shareholder return (TSR) performance and on
its EPS performance (adjusted to exclude exceptional items
and goodwill amortisation).
The Committee considers that the combination of TSR andEPS performance conditions will encourage shareholder value
creation and improved financial performance. In selecting
appropriate targets the Committee takes into account both
the recent performance of the Company and its projections
for future growth.
When the 2001 ESO scheme was established the Remuneration
Committee set the initial conditions for the full vesting ofoptions at 30% per year growth in EPS and TSR. This wasconsidered consistent with the recovery phase of the business.
It was intended that over time the performance conditions
would revert to a lower target, appropriate to a more stablebusiness. For financial years after 2003 the expectation wasthat the target for full exercise of options would reduce from30% per year growth to around 15% per year growth.

27

28

Directors’ Remuneration Report

The options granted in September 2001 will become exercisable
proportionately by reference to the levels of both TSR and EPS
target growth performance achieved as follows:
EPS/TSR growth performance

Proportion of total options
exercisable against each criteria

Average of 30% or more p.a.

50%

Average of 15% – 29.99% p.a.

Pro-rata between
12.25% and 50%

Average of 15% p.a.

12.25%

Less than an average of 15% p.a.

Nil

For the options granted in July and December 2002 both the
TSR and EPS target performance levels are:
EPS/TSR growth performance

Proportion of total options
exercisable against each criteria

Average of 25% or more p.a.

50%

Average of 12.5% – 24.99% p.a.

Pro-rata between
12.25% and 50%

Average of 12.5% p.a.

12.25%

Less than an average of 12.5% p.a. Nil

For the options granted in July 2003 both the TSR and EPS
target performance levels are:
EPS/TSR growth performance

Proportion of total options
exercisable against each criteria

Average of 20% or more p.a.

50%

Average of 10% – 19.99% p.a.

Pro-rata between
12.25% and 50%

Average of 10% p.a.

12.25%

Less than an average of 10% p.a.

Nil

The performance conditions for options to be granted in 2004
have been set by the Remuneration Committee as set out
below:EPS/TSR growth performance

Proportion of total options
exercisable against each criteria

Average of 15% or more p.a.

50%

Average of 7.5% – 14.99% p.a.

Pro-rata between
12.25% and 50%

Average of 7.5% p.a.

12.25%

Less than an average of 7.5% p.a.

Nil

Oxford Instruments plc

The performance conditions for options under the 2001 ESO
scheme are measured over a single three year period. No
extension of the performance period is permitted although
once performance conditions have been met participants
have the remainder of the ten year period of the option inwhich to exercise the option.
SELTISThe SELTIS scheme is similar to the ESO schemes, with the exceptionthat options are exercisable at no cost to the option holder.
The value of shares over which options may be granted under the
SELTIS scheme to any one participant in a financial year may notexceed 50% of base salary. For the purpose of calculating thislimit, the market value is the closing middle market price of theCompany’s shares on the day before the date of grant.
Performance conditions
SELTIS options granted prior to the establishmentof the 2001 ESO scheme
The growth in EPS of the Company expressed as a percentage
must exceed the growth in the RPI expressed as a percentage
plus a further 4% per year over the same period.
SELTIS options granted since the establishmentof the 2001 ESO scheme
The performance conditions are the same as those applying toawards under the 2001 ESO scheme in the same financial year
as detailed above.
Individual options
Individual options are granted at the discretion of theRemuneration Committee.
Performance conditions
Individual options granted in March 1998
A market price of greater than £4.50 per ordinary share mustbe achieved at some time during the four months preceding
the date upon which notice to exercise is given. This price isabsolute and is not linked to general Stock Exchange or Stock
Exchange sector price movements.
Individual options granted in December 2001
The performance conditions are the same as those applying toawards under the 2001 ESO scheme in that financial year as
detailed above.
SAYE options
The SAYE scheme is administered in accordance with Inland
Revenue guidelines. There are no performance conditions.

Directors’ Remuneration Report

Oxford Instruments plc

The Executive Directors have outstanding options under the 1995 and 2001 ESO schemes, the SELTIS scheme, Individual options and
SAYE (1985 and 1995) as follows:

SchemeAndrew Mackintosh

Martin Lamaison

2004

Number of options during the year
GrantedExercised
Lapsed

2003

SAYE
SAYE
SAYE
SAYE
SAYE
2001 ESO
2001 ESO
2001 ESO
1995 ESO
1985 ESOSELTISSELTISSELTISSELTISSELTIS
Individual
Individual
Individual

280
–
–
–
–
217,097
148,678
333,333
25,000–49,751
49,38344,00044,000–165,500
151,613100,000–––––
217,097
–
–
–
–
–
–
–
–
–
–
–
–

–
(654)
–
(780)
–
–
–
–
–
–
–
–
–
–
–
–
–
–

–
280
–
654
(1,201)1,201–
780(1,809)1,809––– 148,678– 333,333–
25,000(5,000)5,000–
49,751–
49,383–44,000–44,000(25,000)* 25,000– 165,500– 151,613– 100,000

SAYE
SAYE
SAYE
SAYE
SAYE
2001 ESO
2001 ESO
2001 ESOSELTISSELTISSELTIS
Individual

636
280
568
–
1,716
154,340
105,726
256,250
33,00033,000–50,000636––––
154,340
–
–
–
–
–
–

–
–
–
(130)
–
–
–
–
–
–
–
–

–
–
–
280
–
568
–
130
–
1,716
–
–
– 105,276– 256,250–
33,000–33,000(20,000)* 20,000–
50,000Exercise
price

Date forearliest
exercise

Date forlatestexercise£1.35

01/02/06

31/07/06

£1.88
£2.22
£1.59
£4.13

15/07/06
15/07/05
28/09/04
28/11/98

14/07/13
14/07/12
27/09/11
27/11/05

Nil
Nil
Nil
Nil

17/07/05
20/12/04
20/12/03
14/07/02

16/07/09
19/12/08
20/12/07
13/07/06

Nil
£2.05
£2.95

20/12/04
20/12/04
06/03/03

20/12/08
20/12/08
06/03/08

£1.74
£1.35
£1.87

01/02/07
01/02/06
01/02/05

31/07/07
31/07/06
31/07/05

£1.77
£1.88
£2.22
£1.59
Nil
Nil

01/02/05
15/07/06
15/07/05
28/09/04
21/12/03
14/07/02

31/07/05
14/07/13
14/07/12
27/09/11
20/12/07
13/07/06£2.95

06/03/03

06/03/08*Lapsed as the performance condition had not been met in the required timeframe.
Andrew Mackintosh and Martin Lamaison respectively realised
gains of £1,053 and £113 on exercise of share options during theyear to 31 March 2004 (2003 £nil). Andrew Mackintosh and Martin
Lamaison have 44,000 and 33,000 options respectively under
SELTIS capable of exercise. In addition Andrew Mackintosh has
25,000 options under the 1995 ESO scheme technically capable ofexercise, although currently the option price is above the current
market price.
Outside appointments
The Board allows Executive Directors to accept appropriate outside
non-executive appointments provided the aggregate commitment
is compatible with their duties as Executive Directors. The Executive
Director concerned may retain fees paid for these services.
The Executive Directors currently hold no outside non-executive
appointments.

Independent Non-Executive Directors
ChairmanUnder an arrangement between the Company and Imperialise
Limited, Nigel Keen is retained to act as chairman of the Company.
Nigel Keen’s fees were £66,000 (2003 £66,000) for his services
for which he must account to Imperialise Limited. In addition, since
July 2003, Imperialise Limited has been paid a sum equivalent to
the National Insurance on these fees of £6,300 (£8,400 per
annum). Imperialise Limited is responsible for the cost of National
Insurance on payments to Nigel Keen whereas National Insurance
payments in respect of the other Non-Executive Directors are madedirectly to the UK Inland Revenue and therefore not included in
the table below. Nigel Keen’s initial period of appointment as a
Non-Executive Director was for three years commencing 25
February 1999, subject to retirement by rotation. He became
Chairman on 27 July that year. His term of appointment was
extended by the Oxford Instruments Board for a further three
years commencing 25 February 2002 subject to retirement byrotation. The appointment may be terminated by either party
giving not less than six months notice. It is the intention of theBoard to offer Nigel Keen in February 2005 a further three year
term of appointment, again subject to retirement by rotation.

29

30

Directors’ Remuneration Report

Oxford Instruments plc

Non-Executive Directors
Non-Executive Directors receive fixed fees agreed by the full Board
after reference to similar roles in an appropriate comparatorgroup of companies and reimbursement of expenses incurred inattending Board and other meetings. It is the Board’s policy for
the Non-Executive Directors to be paid a level of fee that reflects
market conditions and is sufficient to attract individuals withappropriate knowledge and experience. The Chairman and NonExecutive Directors receive no other benefits.
On 31 July 2004 Mike Brady will have served as a Non-Executive
Director for nine years. Upon the recommendation of theNomination Committee, it has been agreed by the full Board, toextend Mike Brady’s term of appointment by a further three years
commencing 1 August 2004. This appointment is to be subject
to annual approval by shareholders.
Remuneration of the Chairman and Non-Executive Directors:
2004
£000

2003
£000

Nigel Keen, Chairman
Mike Brady
Peter Hill
Peter Morgan
Bernard Taylor

72
25
25
25
25

66
25
25
25
9

Total

172

150

Performance graph
The graph below shows for the five years ended 31 March 2004 theTotal Shareholder Return on a holding of the Company’s ordinary
shares compared with a hypothetical holding of shares made up
of shares of the same kind and number as those by reference towhich the FTSE Techmark and FTSE Electronic and Electrical
Equipment are calculated. These indices have been chosen as they
are considered to be the most appropriate comparator groups for
the Company. TSR has been calculated by reference to the relevant
share price for each constituent company assuming dividends are
reinvested.
300
275
250
225
200
175
150
125
100
75
50
25
Source: Thomson Financial Datastream
0
April 1999

Oxford Instruments
FTSE Techmark
FTSE E&EE

March 2004

In accordance with the Directors’ Remuneration Report Regulations,the four tables setting out the Directors’ remuneration, pensions
and share options contained within the report have been audited;the statements of policy have not been audited.
This report was adopted by the Remuneration Committee at a
meeting on 25 May 2004 and has been approved subsequently
by the Board for submission to shareholders at the Annual General
Meeting to be held on 21 September 2004.

Nigel Keen
Chairman of the Remuneration Committee
3 June 2004

Directors’ Responsibilities in relation to the Financial Statements

Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view ofthe state of affairs of the Company and Group and of the profit
or loss for that year.
In preparing those financial statements, the Directors are required to: select suitable accounting policies and then apply themconsistently;
 make judgements and estimates that are reasonable and prudent; state whether applicable accounting standards have been

followed, subject to any material departures disclosed andexplained in the financial statements; andOxford Instruments plc

 prepare the financial statements on the going concern basis

unless it is inappropriate to presume that the Company andGroup will continue in business.
The Directors are also responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time thefinancial position of the Company and enable them to ensurethat the financial statements comply with the Companies Act
1985. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of theCompany and Group and to prevent and detect fraud and otherirregularities.

Report of the Independent Auditors to the members of Oxford Instruments plc

We have audited the financial statements on pages 32 to 59. We
have also audited the information in the Directors’ Remuneration
Report that is described as having been audited.
This report is made solely to the Company’s members, as a body,in accordance with section 235 of the Companies Act 1985. Our
audit work has been undertaken so that we might state to theCompany’s members those matters we are required to state to themin an auditor’s 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 asa body, for our audit work, for this report, or for the opinions wehave formed.
Respective responsibilities of Directors and auditors
The Directors are responsible for preparing the Annual Report andthe Directors’ Remuneration Report. As described above, thisincludes responsibility for preparing the financial statements inaccordance with applicable United Kingdom law and accounting
standards. Our responsibilities, as independent auditors, areestablished in the United Kingdom by statute, the Auditing Practices
Board, the Listing Rules of the Financial Services Authority, and by
our profession’s ethical guidance.
We report to you our opinion as to whether the financial statements
give a true and fair view and whether the financial statements
and the part of the Directors’ Remuneration Report to be audited
have been properly prepared in accordance with the Companies
Act 1985. We also report to you if, in our opinion, the Directors’
Report is not consistent with the financial statements, if the Company
has not kept proper accounting records, if we have not received
all the information and explanations we require for our audit, or
if information specified by law regarding Directors’ remunerationand transactions with the Group is not disclosed.
We review whether the statement on pages 22 to 24 reflects theCompany’s compliance with the seven provisions of the Combined
Code specified for our review by the Listing Rules, and we report
if it does not. We are not required to consider whether the
Board’s statements on internal control cover all risks and controls,
or form an opinion on the effectiveness of the Group’s corporate
governance procedures or its risk and control procedures.

We read the other information contained in the Annual Report,
including the Corporate Governance Statement and the unauditedpart of the Directors’ Remuneration Report, and consider
whether it is consistent with the audited financial statements. We
consider the implications for our report if we become aware of
any apparent misstatements or material inconsistencies with thefinancial statements.
Basis of audit opinion
We conducted our audit in accordance with Auditing Standards
issued by the Auditing Practices Board. An audit includes examination,
on a test basis, of evidence relevant to the amounts and disclosuresin the financial statements and the part of the Directors’
Remuneration Report to be audited. It also includes an assessmentof the significant estimates and judgements made by the Directors
in the preparation of the financial statements, and of whether theaccounting policies are appropriate to the Group’s circumstances,consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all theinformation and explanations which we considered necessary inorder to provide us with sufficient evidence to give reasonableassurance that the financial statements and the part of the Directors’
Remuneration Report to be audited are free from material
misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion we also evaluated the overall adequacy ofthe presentation of information in the financial statements andthe part of the Directors’ Remuneration Report to be audited.
OpinionIn our opinion:
 the financial statements give a true and fair view of the stateof affairs of the Company and the Group as at 31 March 2004
and of the profit of the Group for the year then ended; and the financial statements and the part of the Directors’

Remuneration report to be audited have been properly preparedin accordance with the Companies Act 1985.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
3 June 2004

31

32

Accounting Policies

The following principal accounting policies have been appliedconsistently in dealing with items which are considered material
to the Group’s financial statements. The policies are unchanged
from last year.
Basis of presentation of financial statements
The financial statements have been prepared under the historicalcost convention and in accordance with applicable accounting
standards. There is no material difference between reported andhistorical profit.
As defined in FRS 3 ‘Reporting Financial Performance’ discontinued
operations are clearly separate operations which materially affectthe nature and focus of the reporting entity’s operations andwhich have been sold or permanently terminated either during
the financial year or during the subsequent period up to the dateof approval of the accounts. The comparatives are restated toreflect those businesses as discontinued. All other operations areclassified as continuing operations.
Basis of consolidation
The consolidated financial statements include the accounts of theCompany and its subsidiary undertakings made up to 31 March
2004. Unless otherwise stated, the acquisition method of
accounting has been adopted. Under this method, the results ofsubsidiary undertakings acquired or disposed of in the year are
included in the consolidated profit and loss account from thedate of acquisition or up to the date of disposal.
An associate is an undertaking in which the Group has a longterm interest, usually from 20% to 50% of the equity voting
rights and over which it exercises significant influence. A joint
venture is an undertaking in which the Group has a long terminterest and over which it exercises joint control. The Group’s
share of the profits less losses of associates and of joint ventures
is included in the consolidated profit and loss account and its
interest in their net assets is included in investments in the
consolidated balance sheet, whilst it is considered that joint control
exists. During the year ended 31 March 2004, the Group disposedof its interest in its joint venture, Oxford Magnet Technology
Limited (see Note 4 on the Financial Statements).
All significant intra-group transactions have been eliminated on
consolidation. Under Section 230(4) of the Companies Act 1985
the Company is exempt from the requirement to present its own
profit and loss account. The profit for the financial year dealt within the financial statements of the holding company was £7.6m(2003 £19.0m).
Goodwill
Purchased goodwill (both positive and negative) arising on
consolidation in respect of acquisitions before 1 April 1998, when
FRS 10 ‘Goodwill and intangible assets’ was adopted, was written
off to reserves in the year of acquisition. When a subsequentdisposal occurs any related goodwill previously written off toreserves is written back through the profit and loss account as
part of the profit or loss on disposal.

Oxford Instruments plc

Purchased goodwill (representing the excess of the fair value ofthe consideration given and associated costs over the fair valueof the separable net assets acquired) arising on consolidation in
respect of acquisitions since 1 April 1998 is capitalised. Positive
goodwill is amortised to nil by equal annual instalments over its
estimated useful life. Negative goodwill arising on consolidation in
respect of acquisitions since 1 April 1998 is included within fixed
assets and released to the profit and loss account in the periods
in which the fair values of the non-monetary assets purchased on
the same acquisition are recovered, whether through depreciationor sale. On the subsequent disposal or termination of a businessacquired since 1 April 1998, the profit or loss on disposal or
termination is calculated after charging (crediting) the unamortisedamount of any related goodwill (negative goodwill).
In the Company’s financial statements, investments in subsidiary
undertakings, associates and joint ventures are stated at cost, lessprovisions.
TurnoverTurnover, which excludes value added tax and similar sales basedtaxes, represents sales to external customers of products and services
and is stated before commissions payable to agents. Turnover isrecognised on shipment, except for service contracts and longterm contracts. Turnover from contracts for maintenance andsupport is recognised on a pro-rata basis over the contract period.
Turnover recorded at the time of shipment includes an allowance
for installation where the estimated warranty and installation
costs are accrued in full at the same time. Warranty costs are
based on the historical relationship between actual costs incurred
and the relevant turnover exposure.
The Group has reviewed its policy regarding revenue recognition
during the year, in light of the publication of Application Note G
to FRS 5: Reporting the Substance of Transactions: Revenue
Recognition. The application note does not have a significant
effect on the revenue recognition policy of the Group.
Long term contracts
Contracts which take more than six months to complete and are
significant in size are included in the financial statements toreflect progress towards completion. Turnover includes the valueof work carried out during the year in respect of these long term
contracts including amounts not invoiced to customers. Profit
recognition reflects the stage reached, the estimated costs tocomplete and the degree of risk remaining on each long term
contract.
StocksStocks and work in progress are valued at the lower of cost,
including materials, direct labour and an attributable proportion of
production overheads, and net realisable value, net of payments
on account. Provision is made for obsolete, slow moving anddefective stock where appropriate in the light of recent usage,
expected future requirements, new product introduction plans andlikely realisable values. The Group uses demonstration equipment

Accounting Policies

to sell to customers. The majority of demonstration equipment isheld within stock. All categories of demonstration equipment are
written down during use and then are actively marketed fromtime to time in order to rotate assets so that as the older items
are sold they are replaced, as necessary, by new equipment.
Work in progress on long-term contracts is valued at cost, net ofamounts taken to cost of sales, after deducting foreseeable
losses and progress payments not matched with turnover.
Amounts recoverable on contracts are included in debtors andrepresent turnover recognised in excess of payments on account.
Work in progress usually includes costs incurred on fixed pricecontracts to deliver technically complex unique custom built
products. To ascertain whether any provision for future contract
losses is needed, regular technical and financial reviews of thesecontracts are undertaken. These reviews involve estimating the
likely cost to complete the contract based on an assessment of
the outstanding technical risks and the resources required using
the best information available at the time.
Cash and liquid resources
Cash, for the purpose of the cash flow statement, comprises cashin hand and deposits repayable on demand, less overdrafts
payable on demand.
Liquid resources are current asset investments which are disposable
without curtailing or disrupting the business and are either readily
convertible into known amounts of cash at or close to their carrying
values or traded in an active market. Liquid resources compriseterm deposits of less than one year (other than cash).
Research and development and grants
Research and development expenditure, net of the relevant
proportion of grants receivable, is charged to the profit and loss
account in the year in which it is incurred, unless it is recoverable
under a customer contract when it is carried forward as work inprogress at the lower of cost and net realisable value.
Depreciation
Depreciation is calculated on a straight line basis to write off thecost less estimated residual value of tangible fixed assets in equal
instalments over their estimated useful lives using the following
annual rates:
Freehold land
Nil
Freehold buildings, long leasehold land and buildings
2%
Furniture and fittings
10%
Machinery and other equipment
10% to 20%
Computer equipment
25%
Vehicles25%
Leasehold land and buildings where the period of the lease is lessthan 50 years are written off on a straight line basis over theremaining period of the lease.

Oxford Instruments plc

Taxation
The charge for taxation is based on the profit for the year andtakes into account taxation deferred because of timing differences
between the treatment of certain items for taxation and accounting
purposes. Deferred tax is recognised, without discounting, inrespect of all timing differences between the treatment of certain
items for taxation and accounting purposes which have arisen
but not reversed by the balance sheet date, except as otherwise
required by FRS 19.
LeasesOperating lease rentals are charged to the profit and loss accounton an accruals basis. The Group has no significant leases of acapital nature.
Pensions
Under the transitional arrangements of FRS 17, the Group has
continued to account for pensions in accordance with SSAP 24.
The cost of providing retirement pensions and related benefits is
assessed in accordance with the advice of qualified independentactuaries and is charged to the profit and loss account as a constantpercentage of employees’ earnings over the periods benefitingfrom the employees’ services. The difference between the charge
to the profit and loss account and the contributions paid to theschemes is shown as an asset or liability in the balance sheet andan appropriate deferred tax adjustment is made.
Foreign currencies and financial derivatives
The Group enters into forward exchange contracts to mitigate thecurrency exposures that arise on sales and purchases denominatedin foreign currencies.
Transactions in foreign currencies are translated into sterling at
appropriate forward contract rates or the rate ruling on the dateof transaction where no forward cover exists. Monetary assets andliabilities denominated in foreign currencies are translated at therates ruling at the balance sheet date or at appropriate forward
contract rates. Exchange profits and losses arising from the above
are dealt with in the profit and loss account with the exceptionof differences on foreign currency borrowings to the extent thatthey are used to finance the net assets of foreign subsidiaries.
These are taken directly to reserves together with the exchange
difference on the net assets of the related investments.
For foreign entities, profits and losses are translated at the averageexchange rate for the year, and assets and liabilities are translated
at the rates ruling at the balance sheet date. The exchange
differences arising from translating overseas investments are taken
directly to reserves.

33

34

Group Profit and Loss Account year ended 31 March 2004

Notes

TurnoverGroup and share of joint venture turnoverLess share of joint venture turnoverGroup turnover (including acquisition of £2.1m)
Cost of sales

Total operating profit/(loss)
Group and share of joint venture
Loss on disposal of discontinued business
Gain on disposal of joint venture before goodwill
Goodwill previously written off against reserves
Profit/(loss) before interest and tax
Total net interest payable
Profit/(loss) on ordinary activities before tax
Tax on profit/(loss) on ordinary activities

Interest in
joint venture£ million

2004£ million

–
–

10.8
(10.8)

193.1(10.8)

3

182.3(121.8)

–
–

–
–

182.3
(121.8)3

60.5(53.2)

–
(1.6)

–
–

60.5
(54.8)

8.0
(0.7)

(1.6)
–

–
–

6.4
(0.7)

7.3
–

(1.6)
–

–
(0.2)

5.7
(0.2)

7.3
–
–
–

(1.6)
–
–
–

(0.2)
–
6.8
(0.2)

5.5
–
6.8
(0.2)

7.3
(0.1)

(1.6)
–

6.4
(0.1)

12.1
(0.2)

7.2
(2.4)

(1.6)
0.4

6.3
0.1

11.9
(1.9)

4.8

(1.2)

6.4

10.0

1,2

Group operating profit/(loss) before goodwill amortisation
Goodwill amortisation
Group operating profit/(loss)(including acquisition profit of £0.5m)
Share of operating (loss)/profit of joint venture

Continuing operations
BeforeExceptional items
exceptional
and terminateditemsbusiness£ million£ million

182.3
–

4

Gross profit
Net operating expenses

Oxford Instruments plc

4

4
17
1
5
2,6
9

Profit/(loss) for the financial year
attributable to shareholders
Dividends payable to shareholders

11

(3.9)

Retained profit for the financial year

27

6.1

Earnings per share
Basic earnings per share before goodwill amortisation
Basic and diluted earnings per share

12

Dividends per share

11

pence

pence

pence

pence

11.4
10.0

(2.4)
(2.4)

13.7
13.7

22.7
21.3

8.4

Group Profit and Loss Account year ended 31 March 2003

Notes

TurnoverGroup and share of joint venture turnoverLess share of joint venture turnoverGroup turnover
Cost of sales
Gross profit/(loss)
Net operating expenses

Total operating profit/(loss)
Group and share of joint venture
Loss on disposal of discontinued business
Gain on disposal of joint venture before goodwill
Goodwill previously written off against reserves
Profit/(loss) before interest and tax
Total net interest payable
Profit/(loss) on ordinary activities before tax
Tax on profit/(loss) on ordinary activities

Continuing operations
Beforeexceptional
Exceptional
items
items
£ million£ million

Interest in
joint venture£ million

Sub-total£ million

Discontinued
operations£ million

2003£ million

186.6
–

–
–

44.1
(44.1)

230.7(44.1)

0.7
–

231.4
(44.1)

3

186.6(126.7)

–
(0.4)

–
–

186.6
(127.1)

0.7
(0.6)

187.3
(127.7)3

59.9(53.2)

(0.4)
(1.7)

–
–

59.5
(54.9)

0.1
(0.8)

59.6
(55.7)

6.8
(0.1)

(2.1)
–

–
–

4.7
(0.1)

(0.5)
(0.2)

4.2
(0.3)

6.7
–

(2.1)
–

–
1.6

4.6
1.6

(0.7)
–

3.9
1.6

6.7
–
–
–

(2.1)
–
–
–

1.6
–
–
–

6.2
–
–
–

(0.7)
(1.5)
–
–

5.5
(1.5)
–
–

6.7
(1.1)

(2.1)
–

1.6
(0.4)

6.2
(1.5)

(2.2)
(0.1)

4.0
(1.6)

5.6
(2.1)

(2.1)
0.4

1.2
(0.3)

4.7
(2.0)

(2.3)
0.8

2.4
(1.2)

3.5

(1.7)

0.9

2.7

(1.5)

1.2

4
1,2

Group operating profit/(loss)
before goodwill amortisation
Goodwill amortisation
Group operating profit/(loss)
Share of operating (loss)/profit of joint venture

Oxford Instruments plc

4

17

1
5
2,6
9

Profit/(loss) for the financial year
attributable to shareholders
Dividends payable to shareholders

11

(3.9)

Retained loss for the financial year

27

(2.7)

Earnings per share
Basic earnings per share before goodwill amortisation
Basic and diluted earnings per share

12

Dividends per share

11

pence

pence

pence

pence

pence

pence

7.9
7.5

(3.7)
(3.7)

2.0
2.0

6.2
5.8

(3.0)
(3.2)

3.2
2.6

8.4

Group Statement of Total Recognised Gains and Losses year ended 31 March 2004
2004
£ million

2003£ million

Profit for the financial year
Exchange differences on foreign currency net investments of the Group

10.0
(2.8)

1.2
(3.3)

Total recognised gains and losses relating to the financial year

7.2

(2.1)

The joint venture has no recognised gains or losses other than the share of loss for the year of £0.2m (2003 profit £0.9m).

35

36

Balance Sheets as at 31 March 2004

Oxford Instruments plc

Group
2004
£ million

Group
2003
£ million

Company
2004£ million

Company
2003£ million

2.6
32.6

2.7
35.6

–
0.6

–
0.5

–
–
–

–
20.1
(18.3)

66.6
–
–

66.6
–
–

–
2.4

1.8
2.3

–
1.9

1.6
2.3

2.4

4.1

68.5

70.5

37.6

42.4

69.1

71.0

28.5
58.9
23.2

36.5
61.1
6.4

–
68.0
18.9

–
50.7
31.7

110.6

104.0

86.9

82.4

(2.5)
(47.5)(3.1)(48.8)(0.7)(25.4)(16.0)(11.7)(50.0)(51.9)(26.1)(27.7)

60.6

52.1

60.8

54.7

98.2
(5.3)

94.5
(5.3)

129.9
(0.1)

125.7
–

92.9

89.2

129.8

125.7

26

2.4
19.0
16.0
55.5

2.4
18.8
16.0
52.0

2.4
19.0
7.7
100.7

2.4
18.8
7.7
96.8

27

92.9

89.2

129.8

125.7

Notes

Fixed assets
Intangible assets
Tangible assets
Investments
Subsidiary undertakings
Share of gross assets of joint venture
Share of gross liabilities of joint venture

13
14

4
4

Net investment in joint venture
Other investments
Total investments

15

Total fixed assets
Current assets
Stocks
Debtors
Cash at bank and in hand

19
20
21

Creditors: amounts falling due within one year
Bank loans and overdrafts
Other creditors

22
22

Net current assets
Total assets less current liabilities
Provisions for liabilities and charges

23

Net assets employed

Capital and reserves
Called up share capital
Share premium account
Other reserves
Profit and loss accountEquity shareholders’ funds

25
26
26

The financial statements were approved by the Board of Directors on 3 June 2004 and signed on its behalf by:Andrew Mackintosh Director

Martin Lamaison Director

Group Cash Flow Statement year ended 31 March 2004

Oxford Instruments plc

Notes

Net cash inflow from operating activities
Dividend from joint venture
Returns on investments and servicing of financeTaxation
Capital expenditure and financial investment
Acquisitions and disposals
Equity dividends paid
Cash inflow before management of liquid resources and financing
Management of liquid resources
Financing

28

29

29
16,17

29
29

Increase in cash in the year

2004
£ million

2003£ million

17.8
–
(0.1)
(2.4)
(2.2)
8.3
(3.9)

14.9
2.5
(1.2)
(2.0)
(2.8)
(0.4)
(3.9)

17.5
(14.8)
0.2

7.1
(5.8)
–

2.9

1.3

2004
£ million

2003£ million

2.9
14.8
(0.3)

1.3
5.8
0.2

17.4
3.3

7.3
(4.0)

20.7

3.3

Reconciliation of Net Cash Flow to Movement in Net Funds year ended 31 March 2004

Notes

Increase in cash in the year
Change in liquid resources
Translation difference

29

Movement in net funds in the year
Opening net funds/(debt)
Closing net funds

30

37

38

Notes on the Financial Statements

Oxford Instruments plc

1 SEGMENTAL INFORMATION – ANALYSIS BY WHOLLY-OWNED BUSINESSContinuing operations
Beforeexceptional
items£ million

Exceptional
items andterminatedbusiness£ million

2004£ million

58.5
34.7
89.1

–
–
–

58.5
34.7
89.1

182.3

–

182.3

Profit/(loss) before interest and tax
Analytical
MedicalSuperconductivity

3.7
0.1
4.2

–
(1.1)
(0.5)

3.7
(1.0)
3.7

Goodwill amortisation

8.0
(0.7)

(1.6)
–

6.4
(0.7)

7.3

(1.6)

5.7

24.6
11.8
30.2

–
–
–

24.6
11.8
30.2

66.6

–

66.6

Exceptional
items£ million

Sub-total£ million

Discontinued
operations£ million

2003£ million

61.6
36.3
88.7

–
–
–

61.6
36.3
88.7

0.7
–
–

62.3
36.3
88.7

186.6

–

186.6

0.7

187.3

Profit/(loss) before interest and tax
Analytical
MedicalSuperconductivity

2.9
(1.3)
5.2

(0.8)
(0.7)
(0.6)

2.1
(2.0)
4.6

(2.0)
–
–

0.1
(2.0)
4.6

Goodwill amortisation

6.8
(0.1)

(2.1)
–

4.7
(0.1)

(2.0)
(0.2)

2.7
(0.3)

6.7

(2.1)

4.6

(2.2)

2.4

29.6
17.7
31.3

–
–
–

29.6
17.7
31.3

–
–
–

29.6
17.7
31.3

78.6

–

78.6

–

78.6

TurnoverAnalytical
MedicalSuperconductivity

Net operating assets
Analytical
MedicalSuperconductivity

Continuing operations
Beforeexceptional
items£ million

TurnoverAnalytical
MedicalSuperconductivity

Net operating assets
Analytical
MedicalSuperconductivity

Details of the businesses are set out on the inside front cover and on pages 4 to 7. Exceptional items and terminated business aredetailed in Note 3. Discontinued operations comprise the On-line Process Systems business sold in October 2002 (see Note 17).

Notes on the Financial Statements

Oxford Instruments plc

1 SEGMENTAL INFORMATION – ANALYSIS BY WHOLLY-OWNED BUSINESS continued
The net operating assets comprise:
2004£ million

2003£ million

Tangible assets
Net working capital

32.6
34.0

35.6
43.0

Net operating assets

66.6

78.6

2004
£ million

2003£ million

Net operating assets
Current taxation
Deferred taxation
Dividends payable
Closing net cash
Goodwill
Investments

66.6
(1.8)
5.2
(2.8)
20.7
2.6
2.4

78.6
(0.7)
4.0
(2.8)
3.3
2.7
4.1

Group net assets employed

92.9

89.2

The net operating assets reconcile to Group net assets as follows:

2 SEGMENTAL INFORMATION – GEOGRAPHICAL ANALYSIS

UK£ million

Continental
Europe£ million

North
America£ million

Far
East£ million

Rest ofWorld£ million

2004£ million

20.5

49.8

76.5

42.4

3.9

193.1

1.9
(0.1)

–
(12.1)

–
(0.5)

–
–

–
–

1.9
(12.7)

Group turnover to third parties

22.3

37.7

76.0

42.4

3.9

182.3

Group turnover by origin
Group and share of joint venture
Less share of joint venture turnover

144.9(10.8)

–
–

48.2
–

–
–

–
–

193.1
(10.8)

Group turnover to third parties

134.1

–

48.2

–

–

182.3

0.9
(0.2)
(0.7)

–
–
(0.7)

6.4
–
(0.2)

–
–
–

–
–
–

7.3
(0.2)
(1.6)

–

(0.7)

6.2

–

–

5.5

Group turnover by destination
Group and share of joint venture
Adjustment for share of trading between
Group and joint venture
Less share of joint venture external turnover

Profit/(loss) before tax by origin
Group operating profit by origin
Share of operating loss of joint venture
Exceptional items
Operating (loss)/profit
Gain on disposal of joint venture before goodwill
Goodwill previously written off against reserves
Total net interest payable

6.8
(0.2)
(0.2)

Profit on ordinary activities before tax

11.9

Net assets employed by location

67.8

9.1

14.1

1.9

–

92.9

39

40

Notes on the Financial Statements

Oxford Instruments plc

2 SEGMENTAL INFORMATION – GEOGRAPHICAL ANALYSIS continuedUK£ million

Continental
Europe£ million

North
America£ million

Far
East£ million

Rest ofWorld£ million

2003£ million

16.9

84.0

82.6

41.9

6.0

231.4

6.6
(0.3)

–
(45.4)

–
(4.0)

–
(0.9)

–
(0.1)

6.6
(50.7)

23.2

38.6

78.6

41.0

5.9

187.3

Including discontinued operations

–

0.2

0.3

0.2

–

0.7

Group turnover by origin
Group and share of joint venture
Less share of joint venture turnover

191.2(44.1)

–
–

40.2
–

–
–

–
–

231.4
(44.1)

Group turnover to third parties

147.1

–

40.2

–

–

187.3

–

–

0.7

–

–

0.7

Profit/(loss) before tax by origin
Group operating (loss)/profit by origin
Share of operating profit of joint venture
Exceptional items

(2.2)
1.6
(2.1)

–
–
–

8.2
–
–

–
–
–

–
–
–

6.0
1.6
(2.1)

Operating (loss)/profit

(2.7)

–

8.2

–

–

5.5

–

–

(0.7)

–

–

(0.7)

Group turnover by destination
Group and share of joint venture
Adjustment for share of trading between
Group and joint venture
Less share of joint venture external turnoverGroup turnover to third parties

Including discontinued operations

Including discontinued operations
Loss on disposal of discontinued businessTotal net interest payable

(1.5)
(1.6)

Profit on ordinary activities before tax

2.4

Net assets employed by location

45.0

12.1

30.4

1.7

–

89.2

3 COST OF SALES, NET OPERATING EXPENSES AND EXCEPTIONAL ITEMS
Continuing operations
BeforeExceptional items
exceptional
and terminateditemsbusiness£ million£ million

2004£ million

Cost of sales

121.8

–

121.8

Distribution costs
Research and development costs
Administrative expenses
Goodwill amortisation

28.9
12.5
11.1
0.7

–
0.4
1.2
–

28.9
12.9
12.3
0.7

Net operating expenses

53.2

1.6

54.8

Exceptional
items£ million

Sub-total£ million

Discontinued
operations£ million

2003£ million

Continuing operations
Before exceptional
items£ million

Cost of sales

126.7

0.4

127.1

0.6

127.7

Distribution costs
Research and development costs
Administrative expenses
Goodwill amortisation

30.9
12.7
9.5
0.1

–
–
1.7
–

30.9
12.7
11.2
0.1

0.4
–
0.2
0.2

31.3
12.7
11.4
0.3

Net operating expenses

53.2

1.7

54.9

0.8

55.7

Notes on the Financial Statements

Oxford Instruments plc

3 COST OF SALES, NET OPERATING EXPENSES AND EXCEPTIONAL ITEMS continued
Cost of sales and net operating expenses of the continuing operations for the year ended 31 March 2004 include in relation toacquisitions: cost of sales £1.3m, distribution costs £0.1m and administration expenses £0.2m.
Exceptional items and terminated business
Exceptional items for the year ended 31 March 2004 relate to continuing operations. They comprise redundancy costs of £1.1m
incurred as the Medical business reduced its overseas cost base during the year. The terminated business reflects the costs of theCambridge based operations of Superconductivity prior to the spin out of ARKeX Limited, an independent and separately financed
gravity gradiometer business.
Exceptional items for the year ended 31 March 2003 relate to continuing operations. They comprise redundancy costs of £1.7m across all
businesses and £0.4m costs incurred by Medical on the termination of its distribution agreement of its loss making sleep product line.
Research and development costs
In addition to the £12.9m (2003 £12.7m) charged against research and development, no further costs (2003 £nil) have been charged
to cost of sales in respect of funded projects. These figures are stated net of grants receivable of £0.1m (2003 £0.4m). The total
research and development costs, gross of funding and stock movements, were £13.1m (2003 £13.2m).

4 JOINT VENTURE
On 4 December 2003 the Company sold its 49% interest in Oxford Magnet Technology Limited (OMT) to Siemens plc. The proceeds
on disposal were £8.5m giving rise to a gain on disposal of £6.8m, before goodwill previously written off against reserves (see Note 17).
The results of OMT were equity accounted in accordance with FRS 9 for the three months ended 30 June 2003, up to which date it
was considered joint control existed, and from this date when it was considered that joint control ceased until the date of disposal,
the investment was accounted for as a minority investment in accordance with FRS 2.
The year end of OMT is 30 September. The summary financial details set out below have been extracted both from the management
accounts and from the audited financial statements for OMT in respect of the periods relevant to the Group’s financial year ended 31 March
2004 and show the Group’s 49% share of the OMT results for the 3 months to 30 June 2003 and the year ended 31 March 2003:
2004£ million

2003£ million

Turnover

14.0

56.5

Operating (loss)/profit
Net interest payable

(0.2)
(0.1)

1.6
(0.4)

(Loss)/profit on ordinary activities before tax
Taxation

(0.3)
0.1

1.2
(0.3)

(Loss)/profit for the financial year attributable to shareholders (see Note 15)

(0.2)

0.9

Fixed assets
Current assets
Creditors: amounts falling due within one year

–
–
–

3.2
16.9
(17.9)Net current liabilities

–

(1.0)

Total assets less current liabilities
Provisions for liabilities and charges

–
–

2.2
(0.4)

Net assets employed–

1.8

The Group share of the joint venture turnover as shown in the Group Profit and Loss Account on pages 34 and 35 has been derived
after adjusting for trading between the Group and OMT as follows:
2004£ million

2003£ million

49% of joint venture turnoverLess 49% of sales of materials and services by OMT to GroupLess 49% of sales of materials and services by Group to OMT

14.0
(1.3)
(1.9)

56.5
(5.8)
(6.6)

Group share of joint venture turnover

10.8

44.1

41

42

Notes on the Financial Statements

Oxford Instruments plc

5 TOTAL NET INTEREST PAYABLE
2004£ million

2003£ million

Interest receivable on deposits at short callInterest payable and similar charges on bank loans and overdrafts

0.2
(0.3)

–
(1.2)

Group net interest payable
Share of joint venture net interest payable

(0.1)
(0.1)

(1.2)
(0.4)

Total net interest payable

(0.2)

(1.6)

The interest payable and similar charges on bank loans and overdrafts includes a £0.2m (2003 £0.6m) charge arising from US dollar:
Sterling swap arrangements that were in place during the year. This is the cost of managing cash and borrowings between the UK
and USA and arises from the interest rate differential between Sterling and US dollar. This expense ceased during the year following
the restructuring of the financing of the USA operations.

6 PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAX
2004£ million

2003£ million

(4.7)
(0.2)
(0.7)
0.1

(5.5)
(0.2)
(0.3)
(0.1)

(1.0)
(2.3)

(1.0)
(2.4)

Fees paid to auditor and its associates:
Services as auditors
Non-audit services

(0.2)
–

(0.2)
–

Total fees paid to auditor and its associates

(0.2)

(0.2)

Profit/(loss) on ordinary activities before tax is stated after (charging)/crediting:
Depreciation of tangible fixed assets
Amortisation of Oxford Instruments plc shares held under the Long Term Incentive Plan
Amortisation of goodwill
Net profit/(loss) on disposal of fixed assets
Rentals payable in respect of operating leases:
Hire of plant, machinery and vehicles
Other operating leases

The fees for auditing the parent company’s accounts were £48,000 (2003 £50,000). Fees paid to the auditor in respect of non-audit
services totalled £13,000 (2003 £10,000). These services related to the provision of tax advice.

7 EMPLOYEESThe average number of people employed by the Group (including Directors) during the year was as follows:

Production
Sales and marketing
Research and development
Administration
Total average number of employees

2004

2003

777
364
229
167

844
392
257
181

1,537

1,674

Notes on the Financial Statements

Oxford Instruments plc

7 EMPLOYEES continued
The number of employees at 31 March was:By country

2004

2003

By business

2004

2003

UK
USA
Germany
Japan
FranceItaly
Spain
Rest of world

867
438
44
49
27
15
15
52

908
441
46
46
25
17
22
55

Analytical
MedicalSuperconductivity

549
274
684

536
299
725

Total employees

1,507

1,560

Total employees

1,507

1,560

The average number of employees for 2003 included 13 people employed in operations that were discontinued by 31 March 2003.
The aggregate payroll costs (including Directors) were as follows:
2004£ million

2003£ million

Wages and salaries
Social security costs
Other pension costs

48.3
4.8
4.2

52.4
5.0
2.9

Total payroll costs

57.3

60.3

2004
£ million

2003£ million

The total pension cost for the Group was as follows:
Defined benefit scheme – UK
Defined benefit scheme – Others
Defined contribution schemes

3.4
0.4
0.4

1.9
0.5
0.5

Total pension costs

4.2

2.9

8 PENSIONSThe Group operates a number of pension schemes throughout the world. The major schemes, covering the majority of the Group’s
employees, are of the defined benefit type. The assets of such schemes are held in separate trustee administered funds.
Defined benefit scheme - United Kingdom
In the UK the Group and all participating employees hired before 1 April 2001 contribute to the defined benefit Oxford Instruments Pension
Scheme. The cost of this scheme is assessed in accordance with the advice of a qualified independent actuary using the projected unit
method. The last actuarial valuation of this scheme was at 31 March 2003 when the actuary advised that the regular company funding
rate for the Scheme on current market conditions should be 11.6% over the long term. The principal assumptions underlying this rate
were that the return on investments held in respect of liabilities before and after members retire would be 7.5% and 5.25% perannum respectively, salary increases would average 3.5% per annum and future pensions in payment would increase by 2.3% per annum.
At 31 March 2003, the date of the last actuarial valuation, the market value of the assets of this scheme was £69.9m (estimated at£70.3m at the time of last year’s Annual Report prior to completion of full actuarial valuation). The Minimum Funding Requirement
funding level at 31 March 2003 was 106%. The assets represented 76% of the value of the benefits that had accrued to members
at that date based on the assumptions set out above including assumed future increases in earnings. This shortfall is being fundedover the remaining working life of the scheme members, estimated to be 16 years giving rise to an overall charge for the year of
17.2% (2003 8.5%) of pensionable salaries.
During the year the Group contributed to the Scheme at a rate of 13% (2003 11.5%) of pensionable salary. The increased charge
has resulted in the prior year prepayment of £1.0m reducing to £0.2m at 31 March 2004.

43

44

Notes on the Financial Statements

Oxford Instruments plc

8 PENSIONS continued
Defined benefit scheme - Others
The Group also provides defined benefit pension schemes in the USA and Japan, of which the USA is the largest.
Defined contribution schemes
Since 1 April 2001 all new joiners in the UK have been offered participation in the defined contribution Oxford Instruments
Stakeholder Plan. During the year ended 31 March 2004 the Company paid contributions to the scheme on a variable scale up to a
maximum of 4% for members who contributed at a rate of at least 2%. Employees make contributions at a rate of their choice.
Other defined contribution schemes are the Oxford Instruments 1998 Executive Pension Scheme, a UK scheme, and the 401k defined
contribution plan in the USA.
FRS 17 retirement benefits
The two largest defined benefit schemes in the UK and USA have been assessed as at 31 March 2004 in the manner prescribed by
FRS 17 in order to provide an indication of how these schemes would have been reflected in the Group Accounts under FRS 17. Thesefurther disclosures are included below. Details in respect of the Japanese defined benefit pension scheme were disclosed under FRS
17 last year, but given the relative insignificance of this scheme compared with the UK and USA defined benefit schemes, it has been
removed.
For FRS 17 purposes, the last full valuations of the main schemes were updated to 31 March 2004 by qualified independent actuaries.
The full actuarial valuation for the USA scheme at 31 December 2001 was updated to 31 December 2003. Results at 31 March 2004
have been taken to be the same as those at 31 December 2003. The following assumptions were used:

Rate of general increase in salaries
Rate of increase of pensions in payment
Discount rate for scheme liabilities
Inflation

2004
%

2003
%

United Kingdom
2002
%

2004
%

2003
%

USA
2002
%

3.9
2.7
5.6
2.9

3.5
2.3
5.5
2.5

3.8
2.6
5.9
2.8

4.0
0.0
6.0
3.0

4.0
0.0
6.0
3.0

4.0
0.0
6.0
3.0

The assets and liabilities of the schemes, together with the expected return on the schemes’ assets, are shown below:
United Kingdom
Expected long term rate of return
2003
2002
%
%

2004
%

Equities
Bonds
Corporate bonds
Gilts
Absolute return funds
Property
Cash and other assets

8.0
–
5.6
4.7
7.5
6.5
4.0

8.0
5.0
–
–
–
6.5
4.0
United Kingdom
Market value
2002£ million

8.0
5.5
–
–
–
6.5
4.0

8.5
6.0
–
–
–
7.0
–

8.5
–
–
–
–
–
–

10.0
–
–
–
–
–
–

2004
£ million

2003£ million

USA
Market value
2002£ million

2004£ million

2003£ million

Total
Market value
2002£ million

66.0
10.2
–
–
–
4.8
4.2

1.5
1.0
–
–
–
0.2
–

2.2
–
–
–
–
–
–

2.5
–
–
–
–
–
–

51.2
1.0
10.2
10.3
8.1
7.7
3.0

51.4
10.0
–
–
–
4.1
7.0

68.5
10.2
–
–
–
4.8
4.2

70.3
(101.5)85.2(90.8)

2.7
(4.4)

2.2
(4.5)

2.5
(4.3)

91.5
(128.7)72.5(106.0)87.7(95.1)(35.5)
10.7(31.2)
9.4

(5.6)
1.7

(1.7)
0.7

(2.3)
0.9

(1.8)
0.7

(37.2)
11.4(33.5)
10.3

(7.4)
2.4

(24.8)(21.8)

(3.9)

(1.0)

(1.4)

(1.1)

(25.8)(23.2)(5.0)

2004£ million

2003£ million

49.7
–
10.2
10.3
8.1
7.5
3.0

49.2
10.0
–
–
–
4.1
7.0

Total scheme assets
Present value of scheme liabilities

88.8(124.3)

Deficit in the schemes
Related deferred tax asset
Net pension liability

Equities
Bonds
Corporate bonds
Gilts
Absolute return funds
Property
Cash and other assets

2004
%

USA
Expected long term rate of return
2003
2002
%
%

Notes on the Financial Statements

Oxford Instruments plc

8 PENSIONS continued
Balance sheet presentation:
Group
2004
£ million

Group
2003
£ million

Net assets employed
Net assets employed
Adjust for SSAP 24 pension assets and liabilities
Net pension liability under FRS 17

92.9
0.7
(25.8)

89.2
0.1(23.2)Net assets employed including FRS 17 pension liability

67.8

66.1

Capital and reserves
Profit and loss account
Adjust for SSAP 24 pension assets and liabilities
Net pension liability under FRS 17

55.5
0.7
(25.8)

52.0
0.1(23.2)

Profit and loss including FRS 17 pension liability

30.4

28.9

An analysis of the approximate defined benefit cost for the year to 31 March 2004 pursuant to FRS 17 is:2004£ million

UK
2003£ million

2004£ millionUSA
2003£ million

2004£ million

Total
2003
£ million

Current service cost
Past service cost

(3.0)
–

(3.8)
–

(0.4)
–

(0.4)
–

(3.4)
–

(4.2)
–

Total operating charge

(3.0)

(3.8)

(0.4)

(0.4)

(3.4)

(4.2)

Expected return on pension investments
Interest on pension liabilities

5.0
(5.6)

6.5
(5.5)

0.2
(0.3)

0.2
(0.2)

5.2
(5.9)

6.7
(5.7)

Net return

(0.6)

1.0

(0.1)

–

(0.7)

1.0

Total charge to profit and loss accountbefore deduction of tax if FRS 17 is applied

(3.6)

(2.8)

(0.5)

(0.4)

(4.1)

(3.2)

Analysis of amount which would be recognised in the Statement of Total Recognised Gains and Losses (STRGL) if FRS 17 applied:2004£ million

UK
2003£ million

2004£ millionUSA
2003£ million

2004£ million

Total
2003
£ million

Actual return less expected return on pension scheme assets
Experience gains arising on the scheme liabilities
Loss on change of assumptions

11.8
1.1
(16.0)(23.5)
–
(1.8)

0.3
–
–

(0.7)
–
–

12.1
1.1
(16.0)(24.2)–(1.8)

Total actuarial (loss)/profit recognised in STRGL(3.1)(25.3)

0.3

(0.7)

(2.8)

(26.0)

2004£ million

UK
2003£ million

2004£ millionUSA
2003£ million

2004£ million

Total
2003
£ million

Deficit at 1 April 2003
Foreign exchange adjustment
Current service cost
Net return
Contributions
Actuarial (loss)/gain(31.2)
–
(3.0)
(0.6)
2.4
(3.1)

(5.6)
–
(3.8)
1.0
2.5
(25.3)

(2.3)
0.4
(0.4)
(0.1)
0.4
0.3

(1.8)
0.1
(0.4)
–
0.5
(0.7)

(33.5)
0.4
(3.4)
(0.7)
2.8
(2.8)

(7.4)
0.1
(4.2)
1.0
3.0
(26.0)

Deficit at 31 March 2004

(35.5)(31.2)

(1.7)

(2.3)

(37.2)(33.5)

Analysis of FRS 17 movements in deficit during the year:

45

46

Notes on the Financial Statements

Oxford Instruments plc

8 PENSIONS continued
For the UK scheme, the full actuarial valuation at 31 March 2000 updated to March 2003 showed a deficit of £31.2m. Company
contributions net of expenses of £2.4m (12.0% of pensionable earnings) were made during the year ended 31 March 2004.
Contributions for the next year will be at the rate of 14.5% of pensionable earnings, inclusive of expenses. As the scheme is closed to
new members, under the projected unit method, the current service cost will increase as the members of the scheme approach retirement.
For the USA scheme contributions of £0.4m (6.7% of pensionable earnings) were made during the year ended 31 December 2003.
It is likely that the contributions for the next year will remain at that level.
It is emphasised that the schemes’ assets are not intended to be realised in the short term and may be subject to significant change
before they are realised. In addition, the schemes’ liabilities are derived from cash flow projections over long periods and are affectedby changes in the assumptions adopted.
History of experience gains and losses if FRS 17 were to be fully adopted:
2004

UK
2003

2004

USA
2003

2004

Total
2003

Difference between the expected and actual return:
Amount £m% of scheme assets

11.8
13%

(23.5)
(34%)

0.3
9%

(0.7)
(27%)

12.1
13%

(24.2)(33%)

Experience gains and losses on scheme liabilities:
Amount £m% of the present value of the scheme liabilities

1.1
1%

–
–

–
–

–
–

1.1
1%

–
–

Total amount recognised in statementof total recognised gains and losses:
Amount £m% of the present value of the scheme liabilities

(3.1)
(3%)

(25.3)
(25%)

0.3
5%

(0.7)
(14%)

(2.8)
(2%)

(26.0)(25%)

9 TAX ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES
Analysis of tax charge in the year
The charge based on the profit/(loss) for the year comprises:
2004£ million

2003£ million

–
0.4
(0.1)

(1.0)
(0.3)
0.3

0.3

(1.0)

3.1
–

2.8
(0.2)

3.1

2.6

Total current tax

3.4

1.6

Deferred tax:
Origination and reversal of timing differences in respect of:Profit/(loss) in the period
Adjustment to the estimated recoverable amount of deferred assets arising in previous periods

(0.8)
(0.7)

0.3
(0.7)

Total deferred tax (Note 24)

(1.5)

(0.4)

Total tax on profit on ordinary activities

1.9

1.2

UK corporation tax:
Tax on profit/(loss) in the period
Adjustments relating to prior years
Tax on share of profit of joint venture

Foreign tax:
Tax on profit in the period
Adjustments relating to prior years

Notes on the Financial Statements

Oxford Instruments plc

9 TAX ON PROFIT ON ORDINARY ACTIVITIES continued
For discontinued and exceptional items and terminated business the tax credit has been calculated by comparing the computed
taxation charge as if these items did not exist to the overall tax charge for the period.
Factors that may affect future tax charges
The Group’s overseas tax rates are generally higher than those in the UK. The Group provides for deferred tax assets if it is more likely
than not that they will reverse in the future. Deferred tax assets estimated at £5.5m (2003 £6.0m) have not been recognised due tothe degree of uncertainty about the utilisation of the underlying tax losses and deductions.
Factors affecting tax charge for the period
2004£ million

2003£ million

Group profit on ordinary activities before tax

11.9

2.4

Group profit on ordinary activities before tax at 30% (UK corporation tax rate)
Effects of:Permanent differences
Goodwill amortised
Short term timing differences
Accounting depreciation (less than)/in excess of tax depreciation
Current tax losses not utilised
Adjustments relating to prior years’ corporation tax
Net cost of different rates of taxation in overseas undertakings
Tax losses utilised in the year
Differences in UK and overseas accounting policies

3.6

0.7

(2.3)
0.2
0.6
(0.3)
0.4
0.4
0.6
–
0.2

0.6
(0.2)
(0.7)
1.2
0.1
(0.5)
0.7
(0.1)
(0.2)

Total current tax

3.4

1.6

10 DIRECTORS’ REMUNERATION AND INTERESTS
Information on Directors’ remuneration, pensions, shareholdings and options is set out on pages 25 to 30 and forms part of these
Financial Statements.

11 DIVIDENDS
2004£ million

2003£ million

Interim dividend of 2.4p (2003 2.4p) per share, paid on 26 March 2004
Proposed final dividend 6.0p per share (2003 6.0p), payable on 29 October 2004

1.1
2.8

1.1
2.8

Total dividend of 8.4p per share (2003 8.4p)

3.9

3.9

Subject to the approval of the shareholders at the Annual General Meeting on 21 September 2004, the proposed final dividend will
be paid on 29 October 2004 to shareholders registered at the close of business on 1 October 2004. The ordinary shares will be quoted
ex-dividend on 29 September 2004. The dividends payable on the shares held in trust under the Senior Executive Long Term Incentive
Scheme and the Executive Share Option Scheme have been waived (see Note 15).

47

48

Notes on the Financial Statements

Oxford Instruments plc

12 EARNINGS PER SHARE
Earnings per share has been calculated as follows:
2004£ million

2003£ million

Continuing operations
Profit for the financial year
Exceptional items and terminated business
Interest in joint venture
Net profit on disposal of joint venture
Discontinued operations - loss for the financial year

4.8
(1.2)
(0.2)
6.6
–

3.5
(1.7)
0.9
–
(1.5)

Net profit for the financial year

10.0

1.2

Shares000

Shares000

Weighted average ordinary shares in issue during year
Dilutive effect of employee share options

46,887
243

46,803269

Diluted weighted average ordinary shares

47,13047,072

Goodwill£ million

Negativegoodwill£ million

Group
Total
£ million

Cost
At 31 March 2003
Addition

4.1
0.6

(2.5)
–

1.6
0.6

At 31 March 2004

4.7

(2.5)

2.2

Amortisation
At 31 March 2003
Amortisation

(1.4)
(0.7)

2.5
–

1.1
(0.7)

At 31 March 2004

(2.1)

2.5

0.4

Net book value
At 31 March 2003

2.7

–

2.7

At 31 March 2004

2.6

–

2.6

13 INTANGIBLE ASSETS – GOODWILL

Goodwill arose on the acquisition of the assets of VG Semicon during the year and is being written off to the profit and loss accountover five years (see Note 16).

Notes on the Financial Statements

Oxford Instruments plc

14 TANGIBLE FIXED ASSETSGroup

Company

Property£ million

Other fixed
assets£ million

Total£ million

Property£ million

Other fixed
assets£ million

Total£ million

Cost
At 31 March 2003
Exchange adjustments
Additions
Acquisitions
Disposals

25.8
(0.5)
–
–
(0.1)

46.5
(1.4)
2.4
0.3
(3.1)

72.3
(1.9)
2.4
0.3
(3.2)

0.3
–
–
–
–

1.7
–
0.2
–
–

2.0
–
0.2
–
–

At 31 March 2004

25.2

44.7

69.9

0.3

1.9

2.2

Depreciation
At 31 March 2003
Exchange adjustments
Amounts provided
Disposals

4.8
(0.3)
0.5
(0.1)

31.9
(1.0)
4.2
(2.7)

36.7
(1.3)
4.7
(2.8)

0.1
–
–
–

1.4
–
0.1
–

1.5
–
0.1
–

At 31 March 2004

4.9

32.4

37.3

0.1

1.5

1.6

Net book value
At 31 March 2003

21.0

14.6

35.6

0.2

0.3

0.5

At 31 March 2004

20.3

12.3

32.6

0.2

0.4

0.6

Group
2004
£ million

Group
2003
£ million

Company
2004£ million

Company
2003£ million

3.7
10.9
5.6
0.1

3.7
11.4
5.8
0.1

–
0.2
–
–

–
0.2
–
–

20.3

21.0

0.2

0.2

6.0
4.9
1.3
0.1

6.7
6.0
1.6
0.3

–
–
0.4
–

–
–
0.3
–

12.3

14.6

0.4

0.3

Net book value is analysed by fixed asset category as follows:

Property
Freehold land
Freehold buildings
Long leasehold land and buildings
Short leasehold land and buildings

Other fixed assets
Machinery and other equipment
Fixtures and fittings
Computer equipment
VehiclesThe Directors believe the open market value of freehold land and buildings exceeds the book value by approximately £5.6m (2003£4.5m), which if realised through disposal would create a tax liability of approximately £1.7m (2003 £0.5m). Freehold land is notdepreciated, but the remainder of the property gross cost of £21.8m (2003 £22.1m) is depreciated.

49

50

Notes on the Financial Statements

Oxford Instruments plc

15 INVESTMENTS

Shares in subsidiary undertakings
Shares in joint venture
Investment in joint venture
Oxford Instruments plc shares held in trust
Minority investments

Group
2004
£ million

Group
2003
£ million

Company
2004£ million

Company
2003£ million

–
–
–
0.8
1.6

–
–
1.8
1.0
1.3

66.6
–
–
0.8
1.1

66.6
1.6
–
1.0
1.3

2.4

2.3

1.9

2.3

2.4

4.1

68.5

70.5

In December 2003, the Group sold its investment in its joint venture (see Note 4).
In total 1,051,497 shares (2003 1,080,497) are now held in the Employee Benefit Trust in relation to Executive Share Option, Senior
Executive Long Term Incentive and Savings Related Share Option schemes. Dividends on these shares are being waived.
As part of the transfer of the exploration gravity gradiometer business to ARKeX Limited (ARKeX), an investment of £0.2m was madein ARKeX which resulted in the Group holding 24% of the ordinary share capital of ARKeX.
In addition the Group increased its stake in Target Systemelectronic GmbH from 20% to 25% and subscribed for 25% of the issued
share capital of Target Systemelectronic Inc on its formation during the year.
Movements during the year in the investments summarised in the table above were as follows:
Shares in
subsidiary
undertakings£ million

Shares injoint venture£ million

Investment injoint venture£ million

Executive
incentive
scheme shares£ million

Minority
investments£ million

Cost or valuation
At 31 March 2003
Share of retained loss for the year
Amount written off
Additions
Disposals

66.6
–
–
–
–

1.6
–
–
–
(1.6)

1.8
(0.2)
–
–
(1.6)

1.0
–
(0.2)
–
–

1.3
–
–
0.3
–

At 31 March 2004

66.6

–

–

0.8

1.6

Minority investments at 31 March 2004 comprise:
Percentage ofordinary sharecapital held

Minority investment

Principal activity

ARKeX Limited

Supply of exploration gravity gradiometry and related services to the oil,gas and minerals industries

24%

Advanced signal processing and neural network technology delivering
advanced health monitoring solutions to medical and engineering markets

7%

X-ray diffraction systems and ancillary products for chemical crystallography
and protein structure determination

25%

Business accommodation and support for start-ups and early-stage
bioscience companies

3%

Target Systemelectronic GmbH

Measurement instruments for nuclear radiation detection

25%

Target Instruments Incorporated

Measurement instruments for nuclear radiation detection

25%

Oxford BioSignals Limited

Oxford Diffraction Limited

Oxfordshire Biotechnet Limited

Notes on the Financial Statements

Oxford Instruments plc

16 ACQUISITIONThe Group acquired the business and assets of VG Semicon based in East Grinstead, UK, on 3 October 2003 for a net cash considerationof £0.2m ($0.3m). A further £0.1m payment is deferred and payable over the next two years.
Book value£ million

Accounting policy
adjustment£ million

Fair value
adjustment£ million

Fair value
to the Group£ million

Tangible fixed assets
StocksCreditors
Provisions

0.3
0.3
(0.2)
(0.4)

–
0.1
(0.5)
–

–
0.1
–
–

0.3
0.5
(0.7)
(0.4)

Net assets/(liabilities)

–

(0.4)

0.1

(0.3)

Goodwill

0.6

Total purchase costLess consideration deferred

0.3
(0.1)

Net cash outflow in respect of the purchaseLess net cash acquired

0.2–

Net cash outflow on acquisition

0.2

The book value of the assets acquired are based on the management accounts at the date of acquisition. The accounting policy
adjustment reflects the reversal of a sale previously recognised under the prior revenue recognition policy. The Group recognises revenue
on product shipment. The fair value adjustment reflects the revaluation of stocks to reflect the write up to estimated realisable value.

17 DISPOSALS
On 4 December 2003 the Company sold its interest in Oxford Magnet Technology Limited (OMT) for a cash consideration of £8.5m.
£ million

Gain on sale of 49% shareholding of OMTLess goodwill previously written off against reserves

6.8
(0.2)

Net profit on disposal of OMT

6.6

On 16 March 2004 the Cambridge based exploration gravity gradiometer business was transferred to ARKeX Limited (ARKeX) in returnfor shares in ARKeX. There was no profit or loss on disposal. The intellectual property connected with this business has been licenced
to ARKeX with Oxford Instruments potentially benefiting from a royalty stream from any future commercial developments. Given thedevelopmental stage of the project at the time of the business transfer, no future benefit of royalty income has been recognised.
As part of the arrangement further investment has also been made by Oxford Instruments in ARKeX (see Note 15).
In the prior year ended 31 March 2003 the Group disposed of its On-Line Process Systems and its Thin Films businesses. The resultsof the On-Line Process Systems business are shown as discontinued in the year ended 31 March 2003.

51

52

Notes on the Financial Statements

Oxford Instruments plc

18 PRINCIPAL SUBSIDIARY UNDERTAKINGS

Oxford Instruments Superconductivity Holdings Ltd
Oxford Instruments Medical Holdings Ltd
Oxford Instruments Analytical Holdings Ltd
Oxford Instruments Overseas Holdings Ltd
Oxford Instruments Superconductivity Ltd
Oxford Instruments Medical Ltd
Oxford Instruments Analytical Ltd
Oxford Instruments Plasma Technology Ltd
Oxford Instruments Overseas Marketing Ltd
Oxford Instruments Holdings Inc
Oxford Instruments Inc
Oxford Medical Inc
Oxford Superconducting Technology
Austin Scientific Company
Oxford Instruments Medical Inc
Oxford Instruments America Inc
Oxford Instruments (Tennessee) Inc
Oxford Instruments X-Ray Technology Inc
Oxford Instruments Measurement Systems LLC
Oxford Instruments GmbH
Oxford Instruments SARL
Oxford Instruments BV
Oxford Instruments Nederland BVOxford Instruments SA
Oxford Instruments SpA
Oxford Instruments NV
Oxford Instruments KK
Oxford Magnet KK
Oxford Instruments Pte Ltd

Equity owned by
the company %Country ofincorporation

Principal
activity

100
100
100
100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100

EnglandEnglandEnglandEnglandEnglandEnglandEnglandEnglandEngland
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Germany
FranceThe Netherlands
The Netherlands
Spain
Italy
BelgiumJapan
Japan
Singapore

Holding
Holding
Holding
Holding
Trading
Trading
Trading
Trading
MarketingHolding
Holding
Holding
Trading
Trading
Distribution
Distribution
Trading
Trading
Trading
Distribution
Distribution
Distribution
Distribution
Distribution
Distribution
Distribution
Distribution
Distribution
Distribution

A full list of the Group companies as at 31 March 2004 is available for inspection at the Company’s registered office.
With the exception of holding companies, all the above companies are engaged in advanced instrumentation. Equity owned bysubsidiary companies is indicated by an asterisk (*). All the above companies are included in the Group accounts.

19 STOCKS
Group
2004
£ million

Group
2003
£ million

Raw materials and consumables
Work in progress
Finished goods and goods for resale

11.8
10.7
6.0

16.0
12.8
7.7

Total stocks

28.5

36.5

Notes on the Financial Statements

Oxford Instruments plc

20 DEBTORS

Amounts falling due within one year
Trade debtors
Amounts recoverable on contracts
Amounts owed by subsidiary undertakings
Amounts owed by joint venture
Other debtors
Prepayments and accrued income

Group
2004
£ million

Group
2003
£ million

Company
2004£ million

Company
2003£ million

40.5
8.4
–
–
2.2
2.6

42.4
6.8
–
1.8
3.0
3.1

–
–
67.0
–
0.3
0.4

–
–
50.3
–
0.1
0.3

53.7

57.1

67.7

50.7

Amounts falling due after one year
Deferred tax (see Note 24)

5.2

4.0

0.3

–

Total debtors

58.9

61.1

68.0

50.7

Group
2004
£ million

Group
2003
£ million

Company
2004£ million

Company
2003£ million

23.2

6.4

18.9

31.7

Group
2004
£ million

Group
2003
£ million

Company
2004£ million

Company
2003£ million

Bank loans and overdrafts

2.5

3.1

0.7

16.0

Payments received on accountTrade creditors
Amounts owed to subsidiary undertakings
Amounts owed to joint venture
Other creditors
Corporation tax, UK and overseas
Payroll tax, social security and sales related taxes
Accruals and deferred income
Proposed dividends

4.1
19.4
–
–
1.2
2.1
1.9
16.0
2.8

7.0
12.5
–
4.9
1.9
1.9
1.7
16.1
2.8

–
0.3
20.7
–
–
0.2
–
1.4
2.8

–
0.3
6.4
–
–
1.5
0.1
0.6
2.8

Other creditors

47.5

48.8

25.4

11.7

21 CASH AT BANK AND IN HAND

Cash at bank and in hand

22 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

53

54

Notes on the Financial Statements

Oxford Instruments plc

23 PROVISIONS FOR LIABILITIES AND CHARGES
Warranty
provisions£ million

Pensionobligations£ million

Other
provisions£ million

Group
Total
£ million

At 31 March 2003
Provided in the year
Utilised in the year
Released unused
Acquisition
Exchange movements

4.0
4.0
(2.8)
(1.3)
0.4
(0.1)

1.1
0.3
(0.4)
–
–
(0.1)

0.2
0.1
(0.1)
–
–
–

5.3
4.4
(3.3)
(1.3)
0.4
(0.2)

At 31 March 2004

4.2

0.9

0.2

5.3

Warranty provisions reflect the Group’s standard terms and conditions. In general these apply for a year, and, as a result, the majorityof the provision is expected to be utilised within a twelve month period. The provision for pension obligations relates to pension costs
charged to the profit and loss account, but under IRS regulations, not yet paid into the USA defined benefit scheme. These pension
payments are expected to be made over several future accounting periods. Other provisions relate primarily to surplus leases andreflect the discounted value of the expected shortfall in rental income against rental costs. The provision will be used over the relatedlease periods. The £0.1m provision in the Company balance sheet relates to a surplus lease.

24 DEFERRED TAX
Group
2004
£ million

Group
2003
£ million

Company
2004£ million

Company
2003£ million

Deferred tax asset
At 31 March 2003
Transfer to profit and loss accountExchange movements

4.0
1.5
(0.3)

3.8
0.4
(0.2)

–
0.3
–

–
–
–

As at 31 March 2004

5.2

4.0

0.3

–

Group
Recognised
2004£ millionGroup
Recognised
2003£ millionGroup
Unrecognised
2004£ millionGroup
Unrecognised
2003£ million

1.6
3.4
0.2

1.1
2.7
0.2

0.4
–
5.1

1.1
0.2
4.7

5.2

4.0

5.5

6.0

Company
Recognised
2004£ million

Company
Recognised
2003£ million

Company
Unrecognised
2004£ million

Company
Unrecognised
2003£ million

0.2
0.1

–
–

–
–

0.3
–

0.3

–

–

0.3

The amounts for deferred tax assets,
representing the full potential liability, are set out below:
Excess of depreciation over corresponding capital allowances
Other timing differences
Carried forward losses

The amounts for deferred tax assets,
representing the full potential liability, are set out below:
Excess of depreciation over corresponding capital allowances
Other timing differences

A deferred tax asset of £5.2m (2003 4.0m) has been recognised in the accounts. This asset relates to short term timing differences,
mainly in the USA, deferred capital allowances which have not been fully claimed in the UK and losses in some of the Group’s overseas
operations. The Group has recognised the assets only to the extent that there will be suitable taxable profits from which the future
reversal of the underlying differences can be deducted and the losses utilised.

Notes on the Financial Statements

Oxford Instruments plc

25 CALLED UP SHARE CAPITAL

Authorised
Ordinary shares of 5p each
Allotted, called up and fully paid
Ordinary shares of 5p each

2004
Shares 000

2004£ million

2003
Shares 000

2003£ million

58,0002.9

58,0002.9

48,0902.4

47,926

2.4

Numberof shares

Aggregate
nominal value

Consideration
per share

164,063£8,203£1.48 – £1.73

New issues of ordinary shares of 5p each during the year
Exercise of Savings Related Share Options
2004
Numberof shares

Optionprice
range

Periodwhen
exercisable

2003
Numberof shares

Options subsisting at the year end
on unissued ordinary shares
Executive Share Option Schemes
Savings Related Share Option Scheme

2,900,649
607,684£1.48 – £4.87£1.27 – £1.87

01/04/04 – 14/07/13
01/04/04 – 31/07/09

2,236,112
954,832

Total options subsisting on unissued ordinary shares

3,508,333

3,190,944

7.3%

6.7%

Percentage of issued share capital
Options subsisting at the year end on existing
ordinary shares held in trust
Senior Executive Long Term Incentive Scheme
Executive Share Option Scheme
Individual Options
Savings Related Share Option Scheme

319,134
119,750
467,113
95,182

Total options subsisting on existing ordinary shares
held in trust

1,001,179

Nil£1.941/2 – £1.96
Nil – £2.95£1.64

01/04/04 – 16/07/09
01/04/04 – 23/12/09
01/04/04 – 19/12/08
01/02/09 – 31/07/09

395,134
174,750
487,113–
1,056,997

26 RESERVES
Share premium
account£ million

Capital redemption
reserve£ million

Other
reserves£ million

Group
Profit and loss
account£ million

At 31 March 2003
Premium on issued shares
Retained profit for the financial year
Goodwill written back to the profit and loss account
Other exchange adjustments

18.8
0.2
–
–
–

0.1
–
–
–
–

15.9
–
–
–
–

52.0
–
6.1
0.2
(2.8)

At 31 March 2004

19.0

0.1

15.9

55.5

Purchased goodwill of £39.5m (2003 £39.7m), previously eliminated against reserves, has been offset against the profit and loss account.
Share premium
account£ million

Capital redemption
reserve£ million

Other
reserves£ million

Company
Profit and loss
account£ million

At 31 March 2003
Premium on issued shares
Goodwill written back to the profit and loss account
Retained profit for the financial year

18.8
0.2
–
–

0.1
–
–
–

7.6
–
–
–

96.8
–
0.2
3.7

At 31 March 2004

19.0

0.1

7.6

100.7

Distributable reserves of the Company at 31 March 2004 were £100.7m (2003 £96.8m).

55

56

Notes on the Financial Statements

Oxford Instruments plc

27 RECONCILIATIONS OF MOVEMENTS IN EQUITY SHAREHOLDERS’ FUNDS
Group
2004
£ million

Group
2003
£ million

Company
2004£ million

Company
2003£ million

Profit for the financial year
Dividends paid and proposed

10.0
(3.9)

1.2
(3.9)

7.6
(3.9)

19.0
(3.9)

Retained profit/(loss) for the financial year
Exchange differences on foreign currency net investments
Goodwill written back to the profit and loss accountNew share capital subscribed

6.1
(2.8)
0.2
0.2

(2.7)
(3.3)
–
–

3.7
–
0.2
0.2

15.1
–
–
–

Net increase/(reduction) in equity shareholders’ funds
Opening equity shareholders’ funds

3.7
89.2

(6.0)
95.2

4.1
125.7

15.1
110.6

Closing equity shareholders’ funds

92.9

89.2

129.8

125.7

2004
£ million

2003£ million

Group operating profit
Depreciation charges
Amortisation of goodwill
Net (profit)/loss on disposal of fixed assets
Change in stocks
Change in debtors
Change in creditors
Change in provisions

5.7
4.9
0.7
(0.1)
6.9
1.2
(1.4)
(0.1)

3.9
5.7
0.3
0.1
10.9
5.4
(10.7)(0.7)

Net cash inflow from operating activities

17.8

14.9

28 NET CASH FLOW FROM OPERATING ACTIVITIES

Included in net cash flows from operating activities are outflows of £0.9m (2003 £1.7m) relating to exceptional items.

29 CASH FLOWS NETTED IN THE CASH FLOW STATEMENT
2004£ million

2003£ million

Interest received
Interest paid

0.2
(0.3)

–
(1.2)

Net cash outflow from returns on investments and servicing of finance

(0.1)

(1.2)

Purchase of fixed assets
Sale of fixed assets
Investments acquired

(2.4)
0.5
(0.3)

(3.0)
0.3
(0.1)

Net cash outflow for capital expenditure and financial investment

(2.2)

(2.8)

Increase in term deposits
Decrease in term loans(14.0)
(0.8)

–
(5.8)

Net cash outflow from management of liquid resources(14.8)(5.8)

Issue of ordinary shares including share premium

0.2–

Net cash inflow from financing

0.2–Notes on the Financial Statements

Oxford Instruments plc

30 MOVEMENT IN NET FUNDS
At 31 March2004£ million

Exchange rate
effect£ million

Cash movement
in year£ million

At 31 March2003£ million

Cash at bank and in handBank overdrafts

9.2
(0.9)

(0.6)
–

3.4
(0.5)

6.4
(0.4)

Net cashCash on short-term deposit
Debt due within one year

8.3
14.0
(1.6)

(0.6)
–
0.3

2.9
14.0
0.8

6.0
–
(2.7)

Net funds

20.7

(0.3)

17.7

3.3

31 DERIVATIVES AND FINANCIAL INSTRUMENTS
Forward foreign currency contracts
The Group enters into forward foreign currency contracts to reduce the currency exposures that arise on sales and purchases
denominated in foreign currencies.
Changes in the fair value of foreign currency contract hedges are not recognised in the financial statements until the hedged position
matures. An analysis of these unrecognised gains and losses at 31 March 2004 was as follows:Gains£ million(Losses)£ million

Net total£ million

Unrecognised gains and losses at 31 March 2003
Gains and losses arising in previous year recognised in current year
Gains and losses arising in current year and not recognised in current year

0.4
(0.4)
0.8

(0.7)
0.7
–

(0.3)
0.3
0.8

Unrecognised gains and losses at 31 March 2004

0.8

–

0.8

All unrecognised gains and losses are expected to be recognised within one year.
The gross contract values of the forward contracts which the Group had not yet recognised at 31 March 2004 were:

US Dollars
Japanese Yen
Euros

Gross contract
value
millionBook value£ million

Fair value£ million

11
810
15

–
–
–

0.2
0.1
0.5

The net foreign currency monetary assets after taking account of contract hedges at 31 March 2004 were:Net monetary
assets£ million

US Dollars
Japanese Yen
Euros

–
–
–

These net monetary assets relate only to items that are not denominated in the reporting currency of the operating company in which
they are recorded.

57

58

Notes on the Financial Statements

Oxford Instruments plc

31 DERIVATIVES AND FINANCIAL INSTRUMENTS continued
Financial assets and financial liabilities
Other than short term debtors and short term creditors the Group had the following financial assets and financial liabilities at the
31 March 2004:

Cash in hand and short-term deposits
Cash in hand
Cash in hand
Cash in hand and short term deposits
Cash in hand and short term deposits

Currency

Interest rate

Sterling
US Dollar
Singapore Dollar
Euro
Japanese Yen

floating
floating
floating
floating
noneBook andfair value£ million

17.4
2.4
0.1
1.3
2.0

Total financial assets
Bank loans
Bank overdraft

23.2
US DollarEuro

floating
floating

1.6
0.9

Total financial liabilities

2.5

Maturity of financial assets and liabilities
All financial assets and liabilities mature within one year or on demand.
Interest rates
Interest rates for financial assets are based on money market rates for the terms involved. Interest rates on the financial liabilities are
determined by reference to LIBOR and EURIBOR rates.
The Euro cash and overdraft balances are netted for interest calculation purposes under a pan-European notional pooling agreement.
Borrowing facilities
The Group had committed borrowing facilities at 31 March 2004 of £15.0m (2003 £15.0m) of which the following were undrawn:

Expiring in less than 1 year
Expiring in more than 2 years but less than 5 years

2004£ million

2003£ million

5.0
10.0

10.0
5.0

32 CONTINGENT LIABILITIESGuarantees in respect of subsidiary undertakings’ indebtedness
Guarantees in respect of joint venture indebtedness

Group
2004
£ million

Group
2003
£ million

Company
2004£ million

Company
2003£ million

–
–

–
–

2.5
–

1.0
7.6

–

–

2.5

8.6

Certain subsidiaries of the Group have, in the normal course of business, given guarantees in respect of performance bonds. Where
the Company has issued guarantees to secure bank facilities for its subsidiary undertakings, the value of these guarantees are only
shown to the extent that these facilities were being used by its subsidiary undertakings at the year end.
Other than disclosed in Notes 8 and 23 there are no unfunded pension or post retirement medical costs. No security has been given
in respect of any contingent liability.
In an international group of companies a variety of legal claims arise from time to time. The Board, having taken legal advice, are of
the opinion that the ongoing actions and investigations will not have a material impact on the Group’s financial position.

Notes on the Financial Statements

Oxford Instruments plc

33 OTHER COMMITMENTS
Group
2004
£ million

Group
2003
£ million

Company
2004£ million

Company
2003£ million

1.0

0.2

–

–

Group
2004
£ million

Group
2003
£ million

Company
2004£ million

Company
2003£ million

Land and buildings
Other

0.5
0.2

0.1
0.1

–
–

–
–

Total

0.7

0.2

–

–

Land and buildings
Other

0.7
0.6

1.0
0.6

–
0.1

–
0.1

Total

1.3

1.6

0.1

0.1

Land and buildings
Other

0.6
–

0.8
–

–
–

–
–

Total

0.6

0.8

–

–

Capital commitments
Contracted for but not provided
Leasing commitments
Annual commitments under non-cancellable operating leases expiring within:

1 year2 to 5 years

Thereafter

34 EXCHANGE RATESThe principal exchange rates to sterling used were:Average translation rates

2004

2003

Year end rates

2004

2003

US Dollar
Euro
Yen

1.69
1.45
191

1.54
1.56
188

US Dollar
Euro
Yen

1.84
1.50
191

1.58
1.45
187

Average contract rates

2004

2003

US Dollar
Euro
Yen

1.63
1.49
183

1.50
1.59
176

59

60

Notice of the 2004 Annual General Meeting

Oxford Instruments plc

The formal notice convening the Company’s 2004 Annual General Meeting (AGM) and explanations of the resolutions the Directors
will be proposing at the meeting are set out below.
NOTICE OF THE 2004 ANNUAL GENERAL MEETING
Notice is hereby given that the fortieth Annual General Meeting of Oxford Instruments plc will be held at 2.30pm on 21 September
2004 at the offices of Oxford Instruments plc, Old Station Way, Eynsham, Witney, Oxon OX29 4TL to transact the following business:
1 Directors’ Remuneration Report
To approve the Directors’ Remuneration Report set out on pages 25 to 30 of the Reports and Financial Statements for the year
ended 31 March 2004.
2 Directors’ Report and Accounts
To receive and adopt the Reports and Financial Statements for the year ended 31 March 2004 and the Report of the Auditors thereon.
3 Final dividend
To declare the final dividend for the year to 31 March 2004.
4 Re-election of Directors(a) To re-elect Nigel Keen who retires by rotation but, being eligible, will be proposed for re-election.
(b) To re-elect Mike Brady who retires by rotation but, being eligible, will be proposed for re-election.
5 Appointment and remuneration of Auditors(a) To appoint KPMG Audit Plc as Auditors to the Company for the period until the next Annual General Meeting.
(b) To authorise the Directors to agree the remuneration of the Auditors.
6 Permission for the Directors to allot further shares
To consider as an Ordinary Resolution that the authority conferred by Article 10.1 of the Articles of Association be renewed until
the earlier of the expiry of the next following Annual General Meeting of the Company and the date which is fifteen months fromthe date of the passing of this Resolution and that the Section 80 amount be £801,498.
7 Amendment to the Company’s Articles of Association – applying the relaxation of the restrictions which normally
apply when ordinary shares are issued for cash to the sale of treasury shares
To consider as a Special Resolution that the Articles of Association of the Company be amended by:(a) adding the words, “and to sell relevant shares (as so defined) which are at any time held by the Company as treasury shares(“Treasury Shares”)” between the words “pursuant to that authority” and “as if” in the first paragraph of Article 10.2;(b) by adding the words “or the sale of Treasury Shares” between the words “allotment of equity securities” and “whereby there
will be an offer” in the first line of Article 10.2(a);(c) by deleting the words “all such securities” in Article 10.2(a) and replacing them with “the same”;(d) by adding the words “and / or the sale of Treasury Shares” between the words “allotment of equity securities” and “up to an
aggregate nominal amount” in the first line of Article 10.2(b); and(e) by adding the words “or Treasury Shares to be sold” between the words “equity securities to be allotted“ and “after it expires”
in Article 10.2(ii)
8 Relaxation of the restrictions which normally apply when ordinary shares are issued for cash
To consider as a Special Resolution that the authority conferred by Article 10.2 of the Articles of Association be renewed until theearlier of the expiry of the next following Annual General Meeting of the Company and the date which is fifteen months from thedate of the passing of this Resolution and that the Section 89 amount be £120,224.
9 Authority to buy back up to 10% of the Company’s issued share capital
To consider as a Special Resolution that pursuant to Article 4 of the Articles of Association of the Company and subject to theprovisions of the Companies Act 1985 (“the Act”) the Company be generally and unconditionally authorised to purchase by market
purchase (as defined by Section 163 of the Act) up to 4,808,988 ordinary shares of 5p each in its own capital subject to the following:(i) the purchase price for any shares so purchased shall not exceed a sum (exclusive of all expenses) equal to 105% of the averageof the middle market quotations for ordinary shares for the five business days immediately preceding the day of purchase (asderived from the London Stock Exchange Daily Official List) and shall not be less than the nominal value of the share;(ii) the authority shall expire on the earlier of the close of the following Annual General Meeting or the expiry of fifteen months
from the date of the passing of the Resolution(iii) the Company may make a contract for purchase which would, or might, be executed wholly or partly after the expiry of theauthority(iv) any shares purchased pursuant to the authority may be selected by the Directors in any manner as they from time to time
deem appropriate.
10 Donations to EU political organisations and EU political expenditure
To consider as an Ordinary Resolution that the Company be and is hereby authorised to:(i) make donations to any one or more EU political organisations which is not a registered party; and(ii) incur EU political expenditure
in an aggregate amount not exceeding £100,000 per annum during the period commencing on the date of this Resolution andending on the date of the Annual General Meeting in 2005. For the purposes of this Resolution, the expressions “Donations”, “EU
political organisations”, “EU political expenditure” and “registered party” have the meanings set out in section 347A of theCompanies Act 1985 (as amended by the Political Parties, Elections and Referendums Act 2000).

Notice of the 2004 Annual General Meeting

Oxford Instruments plc

MEETING NOTES
1 A member entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and, on a poll, to voteinstead of him. Such proxy or proxies need not be a member or members of the Company. A Form of Proxy is enclosed.
2 To be effective the Form of Proxy must be lodged with the Company’s Registrar at Capita Registrars, The Registry, 34 Beckenham
Road, Beckenham, Kent BR3 4TU no later than forty-eight hours before the time fixed for the Meeting.
3 Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those Shareholders
registered in the register of members of the Company as at the close of business on 19 September 2004 shall be entitled to attend
or vote at the Meeting in respect of the number of Ordinary Shares registered in their name at that time. Changes to entries on
the relevant register of securities after the close of business on 19 September 2004 shall be disregarded in determining the rights
of any person to attend or vote at the Meeting.
4 Copies of the following documents will be available for inspection at the Registered Office of the Company and at the offices of
the Company’s solicitors, Laytons, Carmelite, 50 Victoria Embankment, London EC4Y 0LS during normal business hours on any
weekday (Saturdays and public holidays excepted) from the date of this Notice until the conclusion of the Meeting:(i) the service contracts of Andrew Mackintosh and Martin Lamaison;(ii) the register of interests of Directors (and their families) in the shares of the Company.
By Order of the Board
Martin Lamaison
Company Secretary
23 August 2004
EXPLANATORY NOTES ON THE PROPOSED RESOLUTIONSThe explanatory notes below summarise the purpose of the Resolutions to be voted upon by Shareholders at this year’s AGM.
Resolutions 1 to 6 and 10 will be proposed as ordinary resolutions. More than 50% of the votes cast must support these resolutions
in order for them to be passed. Resolutions 7, 8 and 9 will be proposed as special resolutions and 75% or more of the votes cast must
support them in order for these resolutions to be passed.
Resolution 1 – Shareholders will be asked to approve the adoption of the Directors’ Remuneration Report for the year ended 31 March
2004. Under the “Directors Remuneration Report Regulations 2002” Directors are required to ask shareholders to vote on the
Directors’ Remuneration Report (shown on pages 25 to 30). The Directors, who have unanimously endorsed the Directors’
Remuneration Report, consider that asking the shareholders to vote on this report facilitates accountability and transparency.
Resolution 2 – Shareholders will be asked to approve the adoption of the Reports and Financial Statements for the year ended 31
March 2004.
Resolution 3 – Shareholders will be asked to approve payment of a final dividend of 6.0p per ordinary share for 2004. If approved at
the AGM the dividend will be paid on 29 October 2004 to shareholders registered at the close of business on 1 October 2004.
Resolutions 4 (a) and (b) – In reviewing the recommendations of the Nominations Committee concerning these elections, the Board has
concluded that each of the Non-Executive Directors is independent in character and judgement and continues to make effective andvaluable contribution to the Board and to demonstrate commitment to the role. The Board unanimously recommends their re-election.
The Company’s Articles of Association state that every director shall retire from office at the third AGM after the AGM at which they
were last elected. All directors take it in turn to retire in this way. This gives shareholders the chance to confirm their re-appointments.
At the 2004 AGM Nigel Keen and Mike Brady are retiring under this provision and being eligible are standing for re-election.
Nigel Keen, Chairman, was first elected at the Annual General Meeting in 1999, having been appointed to the Board as an
Independent Non-Executive Director in February of that year. Nigel Keen is currently Chairman of the Nomination and Remuneration
Committees. It is the Board’s intention to offer Nigel Keen a further three year term of appointment on the expiry of his current term.
Having been Chairman during a substantial reorganisation of the Company, the Board believes he will be best placed to contributeto the development and implementation of the next stage of the Company’s Strategy.
Mike Brady is Deputy Chairman and Senior Independent Director and as of 1 August 2004 has served on the Board for nine years. He
is currently a member of the Audit, Remuneration and Nomination Committees. Mike Brady first became a Non-Executive Director of
the Company in 1995; accordingly the Board has considered whether it is appropriate in view of his length of service that he continue
in office and if so whether he should be considered to be independent.Having taken into account his technical expertise as the only
Non-Executive Director from a scientific profession; the value of that expertise to Board discussions; the strength of his professionaland business interests unrelated to the Group or other members of the Board; his continual constructive probing from the technicalaspect of proposals considered by the Board; the composition of the Board generally and the fact that he qualifies as independent in allother criteria referred to in the Combined Code, the Board has concluded that it is appropriate that he continue in office and that he should
properly be considered to be independent. This year, Mike Brady retires by rotation under the Articles of Association. In subsequent
Annual General Meetings, in addition to other Directors retiring by rotation, he will retire in accordance with the provisions of the
Combined Code and may offer himself for re-election to allow shareholders the opportunity to express their views on the matter.

61

62

Notice of the 2004 Annual General Meeting

Oxford Instruments plc

The biographical details of all the Directors standing for re-election are set out on page 16.
Resolutions 5 (a) and (b) – The Company is required to appoint auditors at each general meeting at which accounts are laid before
the shareholders. The auditors are appointed from the conclusion of the forthcoming AGM until the conclusion of next year’s AGM.
Following the recommendation of the Audit Committee, shareholders will be asked to appoint KPMG Audit Plc as the Company’s
auditors until next year’s AGM and to authorise the Directors to set their fees.
Resolution 6 – This Resolution lifts the restrictions which would apply to the Directors’ power to allot or agree to allot new sharesand will allow the Directors to allot or agree to allot further relevant securities up to an aggregate nominal amount of £801,498. This
represents one-third of the issued ordinary share capital on 31 March 2004. This authority replaces the previous power of the Directors
to allot relevant securities and, if passed, will lapse at the earlier of the AGM following its passing or, if later, on 20 December 2005. The
Directors have no present intention of allotting new ordinary shares, other than pursuant to the exercise of options under employees’
share schemes. The Company presently holds no Treasury Shares.
Resolution 7 – These amendments to the Articles of Association ensure that the authority proposed to be given to the Directors fordisapplication of pre-emption rights (which this year is contained in Resolution 8) applies equally to the sale of treasury shares as tothe allotment of shares authorised to be allotted pursuant to Resolution 6.
Resolution 8 – Unless they are given an appropriate authority, Directors may allot new equity shares for cash (excluding shares issued
under employees’ share schemes) only if they have first been offered to existing shareholders in proportion to their holdings. Theremay however be occasions when in order to act in the best interests of the shareholders and the Company, the Directors will need
the flexibility to finance business opportunities as they arise by the issue of a small number of shares for cash in circumstances suchas the acquisition of a new company or business by the Group. The maximum amount of ordinary shares to be covered under the
power, with the exception of a rights issue or other pre-emptive offers, is 2,404,494 which represents 5% of the issued ordinary sharecapital on 31 March 2004. This Special Resolution replaces the Directors’ existing authority and, if passed, will lapse at the earlier ofthe AGM following its passing or if later, on 20 December 2005.
Resolution 9 – This is a renewal of the authority granted to Directors at the 2003 AGM. It allows the Company to buy back up to
4,808,988 of its issued ordinary shares on the stock market. This is equal to 10% of the Company’s issued share capital on 31 March
2004. The Resolution sets out the lowest and highest prices the Company can pay for the shares.
The Directors are committed to creating shareholder value. Buying back the Company’s shares is one of the options they keep underreview. The Directors will only implement such purchases if they think it is in the shareholders’ best interests. Before making such a
decision they would consider the effect on earnings per share.
The Treasury Shares Regulations allow companies to hold shares acquired by way of market purchase in treasury, rather than having
to cancel them. The Company may now therefore consider holding any of its own shares that it purchases pursuant to the authority
conferred by this Resolution as treasury shares as an alternative to cancelling them. This would give the Company the ability to re-issue
such shares quickly and cost effectively, and would provide the Company with additional flexibility in the management of its capitalbase. The Directors believe that it is desirable for the Company to have this flexibility.
Unless the Directors determine that they are to be held as treasury shares (see above) any shares in its own capital purchased by theCompany shall be cancelled and the number of shares in issue will be reduced accordingly. Shares held in treasury will not automaticallybe cancelled and will not be taken into account in future calculations of earnings per share (unless they are subsequently resold ortransferred out of treasury).
No dividends will be paid on shares whilst held in treasury and no voting rights will be exercisable in respect of treasury shares.
This power will automatically lapse at the end of the Company’s next AGM or on 20 December 2005 whichever is earlier.
Resolution 10 –The Company did not make any donations to political parties in the European Union (“EU”) in the year under review
and it is the Company’s current policy not to do so. However, the Political Parties, Elections and Referendums Act 2000 (“PPERA”)
effective from February 2001, defines EU Political Organisations very widely and, as a result, in certain circumstances, donations
intended for charitable or similar purposes may now be regarded as political in nature.
In order to comply with its obligations and to avoid any inadvertent infringement of PPERA, the Company considers it is prudent toseek shareholders’ approval for a maximum aggregate level of donation. Resolution 10 seeks authority for the Company to makedonations to EU Political Organisations or incur EU Political Expenditure not exceeding £100,000 per annum. The Company has nopresent intention of using this authority for any purpose other than a continuation of normal business and employment practices. In
particular this authority will not be used to make any political donations as that expression would have been understood before PPERA
became law.
This authority would last until the conclusion of the Company’s AGM in 2005.

Shareholder Information

Financial calendar
31 March 2004
3 June 2004
21 September 2004
29 September 2004
1 October 2004
29 October 2004
Mid November 2004
End March 2005
31 March 2005

Financial year end
Announcement of preliminary results
Annual General Meeting
Ordinary shares quoted ex-dividendRecord date for final dividend
Payment of final dividend
Announcement of half year results
Payment of interim dividend
Financial year end

Administrative enquiries
Administrative enquiries concerning shareholdings in Oxford
Instruments plc, such as the loss of a share certificate, dividend
payments, or a change of address should be directed, in the first
instance, to the Registrar whose address is:
Capita Registrars
The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU
Tel 0870 1623100
Fax 020 8639 2342
E-mail ssd@capitaregistrars.com
Correspondence should refer to Oxford Instruments plc and stateclearly the registered name and address of the shareholder. Please
notify the Registrar promptly of any change of address.
Dividend bank mandates
If you wish dividends to be paid directly into a bank or building
society account and notification to be sent to your shareholder
register address, please contact the Company’s Registrar for adividend mandate form.
Consolidation of share certificatesIf your total registered ordinary shareholding is represented byseveral share certificates, you may wish to have these replaced by
one consolidated certificate. There is no charge for this service. You
should send your share certificates to the Company’s Registrar,
together with a letter of instruction.

Oxford Instruments plc

Shareholder enquiries
Shareholders who have questions relating to the Group’s businessor who wish to have additional copies of the Report and Accounts
or Interim Statement should apply to:Company Secretary
Oxford Instruments plc,
Old Station Way, Eynsham,
Witney, Oxon OX29 4TL
Tel 01865 881437
Fax 01865 881944
E-mail info.oiplc@oxinst.co.uk
Website www.oxford-instruments.com
Company registration
Registered office: Old Station Way,
Eynsham, Witney, Oxon OX29 4TL
Registered number: 775598
Registered in EnglandWebsite – www.oxford-instruments.com
The Oxford Instruments website allows users of the site to see ourlatest news, to check out a product range, to look for a job or
simply find out about our company - and move between all thesein just a few clicks. In addition, shareholders can browse theInvestor Information section, find out who to contact regarding
enquiries and share dealings, download recent trading reports,
and obtain the latest share price. This and other developments arepart of a continuing move towards improving communications
between Oxford Instruments and its shareholders.
Share dealing scheme
In association with Cazenove & Co a low cost share dealing service
has been introduced providing shareholders with a simple way ofbuying and selling Oxford Instruments plc ordinary shares. Further
information is available from the Company Secretary or:
Cazenove & Co. Ltd
20 Moorgate, London, EC2R 6DA
Tel 020 7588 2828
Fax 020 7155 9000

Analysis of shareholders as at 31 March 2004
Size of shareholding

Number of holders% of total

Total holding% of total

Up to 5,000 shares
5,001 to 50,000 shares
50,001 to 200,000 sharesOver 200,000 shares

3,133
205
43
39

91.6
6.0
1.3
1.1

2,036,207
2,902,633
4,275,135
38,875,912

4.2
6.0
8.9
80.9

Total

3,420

100.0

48,089,887

100.0

63

64

Five Year Record

Oxford Instruments plc

2000£ million

2001£ million

2002£ million

2003£ million

2004£ million

Profit and loss accountGroup and share of joint venture turnoverLess share of joint venture turnover

201.1(40.4)

221.9(36.8)

260.3(46.6)

231.4(44.1)

193.1(10.8)

Group turnover

160.7

185.1

213.7

187.3

182.3

(5.1)
(7.3)
(2.4)
0.1

2.2
(1.4)
(2.1)
(0.1)

6.7
–
(1.1)
(0.3)

6.8
(2.1)
(0.5)
(0.3)

8.0
(1.6)
–
(0.7)

Group operating profit/(loss)
Group share of operating profit/(loss)of joint venture(14.7)

(1.4)

5.3

3.9

5.7

5.8

4.4

5.2

1.6

(0.2)

Total operating profit/(loss)
Profit/(loss) on sale of businessProfit on disposal of investment
Profit on disposal of properties
Goodwill previously written off
Net interest receivable/(payable)

(8.9)
2.9
–
–
(12.0)
0.2

3.0
0.6
–
–
–
(0.8)

10.5
–
–
3.0
–
(1.5)

5.5
(1.5)
–
–
–
(1.6)

5.5
–
6.8
–
(0.2)
(0.2)

Profit/(loss) on ordinary activities before tax
Taxation(17.8)
(1.6)

2.8
(2.9)

12.0
(2.7)

2.4
(1.2)

11.9
(1.9)

Profits/(losses) attributable to shareholders(19.4)

(0.1)

9.3

1.2

10.0

Balance sheet
Intangible assets – goodwill
Tangible fixed assets
Investments

1.6
40.8
5.0

4.4
43.8
5.0

4.4
38.9
5.7

2.7
35.6
4.1

2.6
32.6
2.4

Stocks
Debtors
Other creditors

36.1
63.2
(53.3)

43.7
69.3(61.9)

48.5
67.4(59.7)

36.5
61.1(48.8)

28.5
58.9(47.5)Net current assets, excluding net cash/(debt)

46.0

51.1

56.2

48.8

39.9

Cash at bank and on short term deposits
Bank loans and overdrafts

5.7
(3.1)

1.6
(9.9)

4.8
(8.8)

6.4
(3.1)

23.2
(2.5)

Net cash/(debt)

2.6

(8.3)

(4.0)

3.3

20.7

Provisions for liabilities and charges

(8.5)

(6.2)

(6.0)

(5.3)

(5.3)

Net assets employed

87.5

89.8

95.2

89.2

92.9

Equity shareholders’ funds

87.5

89.8

95.2

89.2

92.9

Cash flow
Net cash inflow/(outflow) from operating activities
Interest and dividends, paid and received
Taxation
Investing activities

(1.6)
(0.2)
(0.1)
(1.6)

(1.9)
(0.7)
(0.2)
(8.2)

6.6
(2.2)
(0.2)
0.1

14.9
(2.6)
(2.0)
(3.2)

17.8
(4.0)
(2.4)
6.1

Net cash (outflow)/inflow before managementof liquid resources and financing(3.5)(11.0)

4.3

7.1

17.5

pence

pence

pence

pence

pence

Group operating profit/(loss) before goodwill,
exceptional items and discontinued businesses
Exceptional items
Discontinued businesses before goodwill
Goodwill amortisation

Per ordinary share
Earnings/(losses)
Earnings from continuing operations before
exceptional items
Dividends
Net assets attributable to shareholders(41.3)

(0.1)

19.9

2.6

21.3

(3.4)
8.4
183.0

6.3
8.4
187.7

14.6
8.4
198.7

9.5
8.4
186.0

18.9
8.4
193.1

Employees
Average number of employees

1,619

1,551

1,773

1,674

1,537

Worldwide Directory

Head Office
Old Station Way, Eynsham,
Witney, Oxon OX29 4TL, UK
Tel +44 (0) 1865 881437
Fax +44 (0) 1865 881944
info.oiplc@oxinst.co.uk
Analytical
Halifax Road, High Wycombe,
Bucks HP12 3SE, UK
Tel +44 (0) 1494 442255
Fax +44 (0) 1494 524129
analytical@oxinst.co.uk
Batiment Ariane, Domaine
Technologique de Saclay
4 rue René Razel
91892 Saclay cedex, France
Tel +33 (0)1 69 85 25 25
Fax +33 (0)1 69 41 86 80
info@oxford-instruments.fr
Velvarska 13, CZ-160 00 Praha
Czech Republic
Tel +420 233 343 264
Fax +420 224 311 724
Augusztus 20 u6
HU-2440 Szazhalombatta,
Hungary
Tel/Fax +36 (06) 233 50157
Dubravska cesta 9
SK-841 04 Bratislava 4,
Slovakia
Tel/Fax +421 254 791 423

Designed and produced by Simplifydesign (www.simplifydesign.com). Printed by Moore.

Denisovskiy per. 26
105005 Moscow
Russian Federation
Tel +7 (095) 933 51 23
Fax +7 (095) 933 51 24
Measurement Systems
945 Busse Road,
Elk Grove Village, Illinois
60007, USA
Tel +1 847 439 4404
Fax +1 847 439 4425
info@msys.oxinst.com
Plasma Technology
North End, Yatton,
Bristol BS49 4AP, UK
Tel +44 (0) 1934 837000
Fax +44 (0) 1934 837001
plasma.technology@oxinst.co.uk

Oxford Instruments plc

Unit 2, The Birches Industrial
Estate, Imberhorne Lane,
East Grinstead,West Sussex RH19 1XZ
Tel +44 (0) 1342 325011
Fax +44 (0) 01342 315800
plasma.technology@oxinst.co.uk
X-Ray Technology
275 Technology Circle,
Scotts Valley,
California 95066, USA
Tel +1 831 438 5742
Fax +1 831 438 5629
sales@oxfordxtg.com
MedicalManor Way, Old Woking,
Surrey GU22 9JU, UK
Tel +44 (0) 1483 770331
Fax +44 (0) 1483 727193
sales.msd@oxinst.co.uk
12 Skyline Drive, Suite 230,
Hawthorne, New York10532-2133, USA
Tel +1 914 593 7100
Fax +1 914 593 7290
sales@ms.oxinst.com
BP 546, 10 Avenue du Quebec
Batiment C5, 91140
Villebon sur Yvette, France
Tel +33 (0)1 69 85 25 00
Fax +33 (0)1 69 85 25 09
info@oxford-instruments.fr
Avelingen West 1,
4202 MS Gorinchem,
The Netherlands
Tel +31 183 692111
Fax +31 183 692119
sales-nl@oxinst.beGroene Hofstraat 31,
2850 Boom, Belgium
Tel +32 3 880 8280
Fax +32 3 844 7842
info@oxinst.be
Via Leone Tolstoi 86
20098 S. Giuliano Milanese,
Milano, Italy
Tel +39 02 98 2531
Fax +39 02 98 241407
sales@oxinst.it
Avda Mata Piñonera 228700 San Sebastian de losReyes, Madrid, Spain
Tel +34 91 659 2950
Fax +34 91 654 6794
oxinst.mad@oxinst.es

Superconductivity
Tubney Woods, Abingdon,
Oxon OX13 5QX, UK
Tel +44 (0) 1865 393200
Fax +44 (0) 1865 393333
superconductivity@oxinst.co.uk
Old Station Way, Eynsham,
Witney, Oxon OX29 4TL, UK
Tel +44 (0) 1865 884500
Fax +44 (0) 1865 884501
superconductivity@oxinst.co.uk
Superconducting Technology
600 Milik Street, P O Box 429,
Carteret, New Jersey
07008-0429, USA
Tel +1 732 541 1300
Fax +1 732 541 7769
sales@ost.oxinst.com
Austin Scientific4114 Todd Lane, Austin,
Texas 78744, USA
Tel +1 512 441 6893
Fax + 1 512 443 6665
ASCSales@ost.oxinst.com
Regional Sales andService Offices
China
Room 714, Tower 3,
Henderson Centre,
No. 18 Jianguomennei Avenue,
Beijing 100005, China
Tel +86 (0)10 6518 8162
Fax +86 (0)10 6518 8155
postmaster@
oxford-instruments.com.cn
Room 14-F, No. 1 Plaza,No. 800 Nanjing East Road,
Shanghai 200001, China
Tel +86 (0)21 63608530/1/2/3
Fax +86 (0)21 63608535
postmaster@
oxford-instruments.com.cn

Japan
Haseman Bldg.,
2-11-6 Tomioka, Koto-ku,
Tokyo 135-0047, Japan
Tel +81 (0)3 5245 3251
Fax +81 (0)3 5245 4472
oi-japan@oxinst.co.jp
Shin-Osaka Nishiura Bldg.,
2-7-38 Nishi-Miyahara,
Yodogawa-ku,
Osaka 532-0004, Japan
Tel +81 (0)6 6350 0555
Fax +81 (0)6 6350 0880
oi-japan@oxinst.co.jp
Singapore
371 Beach Rd,#02-07 Keypoint
Singapore 199597
Tel +65 6337 6848
Fax +65 6337 6286
oi.admin@oxford-instruments.com.sg
Taiwan1F, No. 23, Jing-Shang 19thStreet, Hsinchu Taiwan
Tel +886 3 5788696
Fax +886 3 5789993
oi.admin@oxford-instruments.com.tw
USA
130A Baker Avenue Ext.,
Concord, MA 01742, USA
Tel +1 978 369 9933
Fax +1 978 369 6616
info@ma.oxinst.com
47865 Fremont Blvd.,
Fremont, CA 94538, USA
Tel +1 510 656 8820
Fax +1 510 656 8944
info@ma.oxinst.com

Latin America
13575 58th Street N.
Right House, No.129– Suite 154, Clearwater,
Pingbei Road, Xinzhuang
Florida 33760, USA
Industrial Park, Minghai District,
Tel +1 727 538 7702
Shanghai 201109, China
Fax +1 727 538 4205
Tel +86 (0)21 6490 8280
oxford@gate.net
Fax +86 (0)21 6490 4042
Germany
Otto-von-Guericke-Ring 10,65205 Wiesbaden, Germany
Tel +49 6122 937 0
Fax +49 6122 937 100
info@oxford.de65

Oxford Instruments plc
Old Station Way
Eynsham, Witney
Oxon OX29 4TL UK

Tel +44 (0) 1865 881437
Fax +44 (0) 1865 881944
email info.oiplc@oxinst.co.uk
www.oxford-instruments.com