Oxford Instruments plc
Annual Report and Accounts 2007

The Business of ScienceTMTechnology supporting the world
today and in the future

Contents
Group Financial Summary

02-03

Oxford Instruments plc Group Structure

04-05

Chairman’s Statement

06-07

Chief Executive’s Statement

08-11

Financial Review

12-15

Directors’ Biographies

16

Directors and Advisers

17

Reports and Financial Statements

18-49

Notes to the Financial Statements

50-81

Parent Company Financial Statements

82-90

Notes of 2007 Annual General Meeting andExplanatory Notes

91-96

Historical Financial Summary under UK GAAP

97

Historical Financial Summary under IFRS

98

Shareholder Information

99

Worldwide Directory

100



Group Financial Summary 2007

About us
Oxford Instruments specialises in the supply ofhigh technology instruments for industry andresearch. The company employs over 1,300
people worldwide, and has been listed on the
London Stock Exchange since 1983.
Innovation has been at the heart of Oxford
Instruments since it was founded by Sir Martin
Wood over 40 years ago, and it is the driving
force behind our growth and success. Together
with our skills and expertise, we have a solid
foundation from which to turn our science
into commercially successful products.
Our ability to observe and manipulate matterat the smallest scale will allow us to exploit the
emerging potential to be found in bioscienceand nanotechnology.
Our products will
support those customers who address theglobal issues of protecting the environment,
conserving energy, security and healthcare.

Group Orders
from continuingbusinesses

+16%

2007

2007 £163.0 m

2006£140.2m

2007

2007 £163.0 m

2006
2007

Revenuefrom continuing
2006
businesses+21%£140.2m£161.6m£134.0m

2007

2007 £163.0 m

2007
2007
2006

£161.6m£7.5m£140.2m

2006
2006£134.0m
£4.0m

2007
2007
2007
2006
Profit before tax,
2006

£7.5m
£161.6m
9.6 p£4.0m£134.0m

exceptional items
2006+£3.5m3.9 p

and goodwill (£m)



2007
2007
2007
2006
2006
2006

£7.5m
9.6 p
5.1%
£4.0m
3.9 p
3.0%

2007
2007

5.1%
9.6 p

2006
2006

3.0%
3.9 p

Group Results
Year ended 31 March
Orders
Revenue
Trading profit
Adjusted Profit before tax
Net CashEquity

2007
2006

2007

2007 £163.0 m

2006£140.2m

Adjusted earnings
Total basic earnings
Dividends
Net assets

2007
2006

2007
2006
£m
£m
163.0
159.9
161.6
147.4
2007
£163.0
m
8.3
4.4
7.5
4.0
£140.2m
1.8
9.8
55.8
46.4
2007
pence per
share
9.6
(3.2)
8.4
115.8

2006
pence pershare
£161.6m
3.9£134.0m
(7.2)
8.4
97.3

1,315

1,290
£7.5m

Employees at year end
2007£161.6m

2007

2006

£134.0m

2006

£4.0m

2007

£7.5m

2007

9.6 p

2006

Adjusted EPS

+5.7p
£4.0m

Trading Profit.
2006
Return on Sales
(%)

+2.1%
3.9 p

2007

9.6 p

2007

5.1%

2006

3.9 p

2006

3.0%

2007

5.1%

2006

3.0%



Oxford Instruments plc Group Structure

Analytical
NanoAnalysis

Industrial Analysis

Leading supplier of X-ray microanalysis andelectron back-scatter diffraction systems,
providing detailed structural and chemical
analysis at the nano scale.

Leading supplier of a range of analytical
instruments designed for demanding quality
control applications using the core technologies
of X-ray Fluorescence (XRF) and OpticalEmission Spectroscopy (OES).

Key markets include researchand development, quality
control and failure analysis.

Key applications include
environmental monitoring,
metals analysis, coating
thickness measurement,
measurement of low sulfur
in petroleum and generalelemental analysis.

Superconductivity
NanoScience

Superconducting Technology

Leading provider of high performanceenvironments for low temperature and highmagnetic field applications in physical science
research and development down to thenano scale.

World leading developer and supplier ofsuperconducting wire and cable for a wide
range of magnet applications including
Magnetic Resonance Imaging (MRI),
Nuclear Magnetic Resonance (NMR),
subatomic particle acceleratorsand fusion energy research.

Key market is research anddevelopment.

A supplier of MRI magnet
support services in the USA
and Japan.

Innovation (OII)
Incubator for new ideas, new product innovations and acquisitions.
OII works with and supports all theOxford Instruments business groups.

X-ray Technology

Plasma Technology

World-class manufacturer of low power, small
form factor X-ray tubes for use in a range ofmeasurement equipment.

Supplier of process tools for the precise,controllable and repeatable etching, deposition
and growth of nano structures.

Key markets include analysis,
industry, research anddevelopment, healthcare andspace.

These tools provide process solutions
for the nanometre engineeringof materials for semiconductors,
optoelectronics, high quality
optical coating and manyother applications in micro andnanotechnology.

Austin Scientific

Molecular Biotools

Specialises in the manufacture and repair ofcryogenic vacuum pumps, cryo-coolers, helium
compressors and MRI cold heads.

Core technologies include NMR and Dynamic
Nuclear Polarisation (DNP).

key market is the semiconductor
industry.

Develops and manufactures tools
for life science and drug discovery
applications and industrial quality
control processes.

Chairman’s Statement“The continuing businesses performed
strongly throughout the year, withorders up 16.3% to £163.0 million. On
the same basis revenues grew 20.6%
to £161.6 million.”

Our objective is to generate shareholder value by
becoming a leading provider of tools and systems foruse by customers who need to observe and manipulatematter at the smallest scale.
The continuing businesses performed strongly
throughout the year, with orders up 16.3% to £163.0
million. On the same basis revenues grew 20.6% to£161.6 million. Trading profit increased by £3.9 million
to £8.3m. This encouraging performance was despite
the adverse effects of movements in foreign exchange
rates and the price of copper which together adversely
impacted profits by £4.0 million.
Our strategy to reposition the Group towards future
growth markets is delivering tangible results. The
increasing requirement of compliance to environmental
legislation across the world is a major growth driverfor sales of our products. Our other industrial andcommercial businesses, which provide tools for quality
control and small-scale production, also continue togrow. Our sales to the life science sector have increasedin the year with the success of our new HyperSense®



product. Other important sectors such as security andenergy will provide opportunities for further growthin the future. We have also begun the process of
converting the opportunities offered by new scientificfields such as nanoscience into technologies needed
for a broad range of new industries.
Oxford Instruments now stands as a much morecommercially orientated business. Significant culturalchange in the Group has been supported by ourtalented and enthusiastic workforce, and I would liketo thank them for their positive response to the newstrategy and resulting changes. They have delivered
an appreciable improvement in performance.
The year 2006/07 represents the first full year of ourmore focused strategy. We have made good progress
during the year and we believe our stronger commercial
focus and improving operational efficiency have laid
the foundations for long-term profitable growth.
Nigel Keen Chairman
13 June 2007

Qu
al

ity

• 2007 official enquiry requires all refining,

petrochemical and chemical industries
adopt positive material identification (PMI) in
maintenance proceduresty
fe

the wrong alloy steel pipes being used inroutine maintenanceco n t r ol/sa• 2005 Texas City oil refinery fire caused by• Recommended X-ray Fluorescence ( XRF) as the preferred
method for PMI• Oxford Instruments’ X-MET3000 range of hand-held XRF spectrometers
give fast, accurate results for metal detection and analysis• Lighting produces 1900 megatons of CO

2

E
ne

• 20% of all electricity consumption in the
UK is for lighting.

• Replacing light sources with highly

efficient High Brightness Light Emitting
Diodes (HB LEDs) would save c £1.7bn inannual UK energy costs• Oxford Instruments Plasma TechnologynioPlasmaLab range of process tools are usedin the development of HB LEDsy Conservargtannually. This is equivalent to 70% of global
emissions of cars and 3x the emissions fromaviationChief Executive’s Statement“We are confident that our strategy
of commercialising our technology
under our world renowned Oxford
Instruments’ brand will generateincreased shareholder value.”
Operational Review
Starting from 2005/06, our target is to double theturnover of Oxford Instruments over five years byorganic growth and acquisitions. We plan to achieve
this by becoming a more customer focused business,increasingly concentrating on new products andmarkets, such as nanotechnology and biotechnology.
Our products will increasingly consist of complete
systems sold directly to end-users.
Sales from the continuing businesses increased by
20.6% to £161.6 million. The products we havelaunched this year have been well received by ourcustomers and have contributed to our growth. This,
together with continuing strong demand driven byenvironmental legislation around the world and astrong performance in Asia means that our internal
targets for this first year of our five year plan, havebeen met entirely from organic growth.
We have invested significantly in our global sales
infrastructure, which works with our highly motivatedteam of engineers and scientists. We plan to achieve
our objectives by using our world-renowned capabilities
in magnetic fields, cryogenics, X-ray technology andsoftware to develop high performance tools to meetcustomer needs. We are committed to a coherent
product development programme, exploiting ourworldwide distribution channels and strong brandimage to successfully commercialise our technological
lead.



At the same time as increasing the top line, work has
been underway to improve the percentage returnon sales to the mid-teens from a base of 3.0% in thefinancial year 2005/06. We expect to achieve this byobtaining better value from our fixed costs througha higher volume of sales, whilst at the same time
improving operational performance. Our strategy has
been to exit unprofitable product lines and to focus on
margin improvement in those businesses which havea strong market position. These activities have beensuccessful this year we exceeded our internal target
for improving return on sales, which improved by 2.1
percentage points to 5.1% in the year, from a low
base.
Building on the improvements made to date weare putting additional resources behind identifying
acquisitions which will support our strategy. In generalthese will be small or medium sized and will provide
technological or market synergy with our existing
business.
Whilst the overall financial performance of the businesshas been in line with our plan, movements in thecurrency markets (particularly the US$ and YEN) andincreases in the price of copper, have adversely affected
our profitability this year. These two effects between
them accounted for a reduction in profits of around£4.0m, compared to that which would have been
generated had the values remained at their 2005/06
levels. This reduced profitability was offset by better
than expected trading and efficiency improvements
across the business.

• Nano scale Magneto resistive sensors have many applications

Re
s

r
ea

2

microscopes is used in the development of
MR-sensors

Ten
Analytical Businesses
Orders and revenue for the year were £106.7 million(2006: £85.5 million) and £100.7 million (2006: £80.7
million) respectively. Trading profit was £10.1 million(2006: £6.1 million).
Our Analytical Businesses provide measurement andfabrication instruments for industrial and researchcustomers. The business units are: Industrial Analysis,
X-Ray Technology, NanoAnalysis and Plasma
Technology.
Our Industrial Analysis business, which produces
tools that enable our industrial customers to analysematerials, had a successful year. Order intake and sales
reached record levels. This was fuelled by customers
buying equipment to comply with RoHS (Restrictionof Hazardous Substances) legislation, and increasing
sales to customers in sectors such as the oil and gas
industry, where there is growing demand for tools thatcan positively confirm that the correct materials havebeen used in safety-critical applications.

ch & Develop• INCADryCool LN free detector for electronm• Wheel speed sensors for motor management systems• Sensors to obtain biometric eye data for
medical applications• Angular sensors in movie cameras for
integration of computer animated special
effects and real picturesdetector based on new technology which makes it
smaller and easier to use whilst maintaining highperformance levels. Sales of INCAx-act have exceeded
our expectations in the second half of the year andhave contributed to the growth. In May 2007 we wereawarded the Queen’s Award for Enterprise:Innovationfor our new INCADryCool™ detector, which offersa method of safe, high sensitivity chemical analysis
without the use of liquid nitrogen.
Plasma Technology provides a range of products forthe manufacture of high performance semiconductors
for specialist applications. This business showed strongorganic growth supported by the introduction of our
new Atomic Layer Deposition (ALD) products. Dr David
Robbins Chief Technology Officer of Cenamps, a UK
centre of excellence for nanotechnology at Newcastle
University, and one of our first ALD customers, said
“ALD is an extremely exciting technique. The coatings
can be accurately controlled down to a thickness of 1
nanometer which is about 100,000 times thinner than asheet of paper, holding exciting possibilities for a range
of industries from electronics to food packaging”.

Our X-Ray Technology business, which provides X-ray
sources for the industrial market, had a very strong
year driven by the RoHS legislation. We are also
undertaking a research contract for NASA (National
Aeronautics & Space Administration) to develop
technology for a forthcoming mission to Mars.

Superconductivity Businesses
Orders and revenue for the year were £56.3 million(2006: £63.9 million) and £60.9 million (2006: £66.7
million) respectively. Trading profit was £1.6 million(2006: £0.3 million).

Our NanoAnalysis business is the market-leading
provider of a range of detectors for users of electron
microscopes who need to understand chemical andstructural properties. This business enjoyed good sales
growth driven by the introduction of new products.
At the half year we announced our new INCAx-act

Our superconductivity businesses provide materials,
tools and systems for industrial and government
customers working at the frontiers of science. The
businesses in Superconductivity are: NanoScience,Superconducting Wire, MRI Service, Austin Scientificand Molecular Biotools.

Chief Executive’s Statement

Our NanoScience business provides superconducting
magnets and cryogenic systems for our research andacademic customers. This business has shown significant
improvement over last year, although there is stillsome way to go to achieve the desired performance.
Reorganisation and efficiency improvement within
NanoScience mean that on a like for like basis, sales
grew significantly in the year. The long standing
historical and technical difficulties that the businessfaced have been addressed. As previously reported,
we negotiated an exit from the long running Hybrid
contract with the High Magnetic field laboratory
in Grenoble. We have also written off a number of
Nuclear Magnetic Resonance assets relating to ourprevious trading with NMR OEMs.

Our MRI Service business maintains MRI scanners
throughout the United States and in Japan. Thisbusiness was steady throughout the year and efficiency
has improved with the introduction of GPS monitoringof the fleet of service vehicles.

This clears the way for us to concentrate on new
products with a more commercial focus. In March
2007 we launched our Triton™ dilution refrigerator,
a new type of cooling device that does not requireliquefied gases to operate. This opens up previously
inaccessible markets where very cold detectors would
be required, such as airport security. We also launched
the Integra™ re-condensing device, which significantly
reduces liquid helium requirements for existingcustomers and opens up new market possibilities, suchas quantum computing where customers require very
low operating temperatures.

Molecular
Biotools,
which
supplies
novel
analytical instrumentation to the life sciences andpharmaceutical communities, has generated highlevels of growth. This has been driven by the strong
customer pull for the HyperSense® product whichallows significant improvements in sensitivity for
NMR experiments. HyperSense occupies a uniqueposition in this marketplace and has received strong
customer acceptance. A user of HyperSense, Professor
Craig Malloy M.D, Professor of Radiology and Internal
Medicine, University of Texas Southwestern Medical
Center, commented, “In the short time it has been in
our hands, the HyperSense has fulfilled all expectations.
This remarkable and reliable instrument enabled newexperiments in metabolism. The results strongly
suggest that new clinical diagnostic methods are on
the horizon.”

Our Superconducting Wire business is a marketleading producer of wire for MRI (Magnetic ResonanceImaging) and other industries. Although sales grewin the year this business was adversely affected by
the rise in the price of copper, which is a significant
component in the manufacturing process. Financial
instruments and customer contract renegotiation meanthat exposure to commodity price fluctuation is now
reduced. The intergovernmental ITER programme,
which seeks to generate large-quantities of energy
without any associated carbon emissions, is expected
to lead to orders for our high performance wire in thelast quarter of the 2007/8 financial year.

10

Our Austin Scientific business produces, refurbishes andmaintains high technology pumps and refrigerators forindustrial and research customers. Trading was difficultin the first half of the year, particularly in the researcharea. An increased focus on industrial customers and arevamping of our network of sales representatives has
meant that order intake picked up towards the end of
the year and we expect to see improved trading in thecurrent year.

Innovation
Oxford Instruments Innovation (OII) is tasked withidentifying key growth areas for the business, which falloutside the current portfolio of the trading businesses.
For our chosen targets, OII then implements support
to the acquisition process, or early stage internal
development. In the year £3.4m (2006: £2.0m) wasinvested in OII and three early stage products weresuccessfully transferred into the trading divisions for
exploitation in the coming years.

• Increased demand for tools to aid the developmentof new drugs• Research into how pharmaceuticals really work in
the human bodydetection of diseases• Oxford Instruments’ HyperSense instruments
support R&D in lifesciences and bioscience

China
This year we celebrated the 10th anniversary of
our operations in China where we now have sales
offices in three sites around the country and a low
cost manufacturing facility in Shanghai. Demand in
China for our products is strong and sales rose by 35%
this year. In the year, we have moved production ofseveral product lines to China. Early signs are positive,
but there is still some way to go to transfer a costeffective volume to this facility. Our repair facility
for cryopumps for the Chinese semiconductor market
is now operational. We have also launched the first
product incorporating software designed by our teamin Shanghai.
Property
Followingsite
consolidations
andefficiency
improvements, we have two sites in the Oxford area
which are available for disposal. As reported at thehalf year, in North America we have moved into larger
premises for our X-Ray Technology business to copewith increased demand. Our sales office in Boston
has also moved to larger premises to facilitate a new
applications laboratory, which will enable us to sellour biotechnology products more effectively in the US.
Our Plasma Technology business will move to a new,
purpose built site in 2008.
Risks to be managed
Oxford Instruments provides high technology
equipment and systems. There is necessarily sometechnical risk associated with implementing advanced
programmes. This risk has reduced in recent years as thebusiness moves away from large scale single customer
development programmes, towards commerciallyorientated products. Our business plan requires theintroduction of new products to gain market share to
support our growth. The product introductions madeso far have been successful. However, there is therisk that future product introductions may not yield
the sales forecast, especially when new markets areaccessed.

H
ALT
HE

• Demand to find instruments to aid early

A significant proportion of Oxford Instruments’ profit
is made in foreign currencies and we will therefore
continue to have exposure to exchange fluctuations
going forward. We aim to mitigate this risk bynatural hedges where possible and the use of forward
contracts. We also rely on purchase of a number ofcommodity materials and when prices rise, we cannot
always pass this cost directly onto customers. Steps
have been taken in the current year to introduce
hedging on key commodity purchases. Finally, ourcalculated pension deficit is sensitive to changes in theactuarial assumptions that may have an appreciable
effect on the reported pension deficit.
Looking Ahead
Following a year of strong sales growth we expect
the reorganisations we have made in the businessto continue to deliver organic growth, although thegrowth rate driven by RoHS legislation in Europe
will reduce. In due course new legislation in Asia is
expected to drive global demand for environmental
compliance equipment. Elsewhere commercial markets
for our new products are expected to remain strong.
Further new product introductions are planned andwe will continue to seek out appropriate acquisition
opportunities.
We are confident that our strategy of commercialising
our technology under our world renowned Oxford
Instruments’ brand will generate increased shareholder
value.
Jonathan Flint Chief Executive
13 June 200711

Financial Review“Trading profit increased by£3.9 million to £8.3 million(2006: £4.4 million). Adjusted profit
before tax was £7.5 million(2006: £4.0 million)”

Trading Performance
On a like for like basis, at constant currency, orderintake was up 20.2% and revenues increased by
26.1%. This headline number excludes the effects of a
weakened US Dollar and Japanese Yen which reduced
revenues by £7.4 million, and the revenue lost with theclosure of the volume magnet business at the end of
the previous year. Reported revenues grew 9.6% to£161.6 million (2006: £147.4 million).
Gross margins improved from 40.6% to 41.2%, despite
unfavourable movements in exchange rates and anincrease in the average price of copper from US$1.88/lb
last year to US$3.16/lb this year. The combined adverse
effect of currency and copper price movements at the,gross margin level is estimated to be approximately£6.1 million compared with last year.
Total operating expenses increased by £2.9 million
to £58.3 million (2006: £55.4 million). Operating
expenses benefited by approximately £1.3 million
from the translation of our overseas operations’
expenses at weaker exchange rates and £0.9 million
from hedging. Of the total underlying increase of £5.1
million, approximately £0.5 million was in R&D and £2.7
million was in additional selling expenses, supportingthe £22.8 million growth in orders taken in the period.
Administrative and shared services expenses increasedby £1.9 million, a large proportion of which was due toan increased IAS19 pension charge.

12

Trading profit increased by £3.9 million to £8.3 million(2006: £4.4 million). Adjusted profit before tax (note2) was £7.5 million (2006: £4.0 million).
Amortisation of acquired intangibles
This consists of a £0.2 million charge relating to
the amortisation of acquired intangibles (2006:£0.2 million), and a £0.9 million charge due to theadjustment, in accordance with IAS12, to the carrying
value of goodwill arising from the utilisation of tax
losses that had not previously been recognised as adeferred tax asset.
Non-recurring costs
In our April trading statement we announced that wewere in negotiations that we expected to result in an
asset write-down of approximately £3 million. These
negotiations, though still to be concluded, are at anadvanced stage and as a result we have provided £2.9
million in this year’s accounts.
We announced at the half-year that we had provided
for a settlement with a customer over a long runningonerous contract, which resulted in a non-recurring
charge of £2.2 million in the first half. This matter
is now finalised and at an amount less than originally
anticipated. As a result £0.5 million of the provision
released to the income statement in the second halfof the year, through “restructuring and non recurringcosts”.

• Prof Leonid Kuzmin and his team, from the Quantum Device Physics Laboratory
•

ity

•

S

ur
ec

•

of Chalmers University (Sweden), have been working on the developmentof ultra high sensitivity, low temperature detectors, operating attemperatures close to absolute zeroPotential applications from security scanning, battlefieldimaging, to the remote measurements of ozone andatmospheric pollutants.
Detectors that do not require liquid cryogens are vitalto these applications
Oxford Instruments’ Heliox range of refrigerators areused in this research

Financial income and expenditureWithin financial income and expenditure total net
interest payable was £0.1 million (2006: £0.3 million
receivable). The interest charge on pension scheme
liabilities exceeded the expected return on pension
scheme assets by £0.7 million (2006: £0.7 million).
Taxation
The underlying tax rate on the profit before tax for thecontinuing businesses before other operating income,
restructuring and non-recurring costs and amortisationof acquired intangibles was 38% (2006: 55%). The key
factors influencing the rate of tax are high tax rates inoverseas jurisdictions such as USA, Germany and Japan
coupled with the inability to offset losses arising in one
jurisdiction against profits arising in another. The tax
rate fell in the year due to our ability to utilise brought
forward losses in our subsidiary in Finland.
The Group has significant tax losses in the UK available
to set off against future taxable profits from certain
business streams. A deferred tax asset of £11.6 million(2006: £19.1 million) has been recognised against
timing differences and unused capital allowances, of
this £9.4 million (2006: £16.2 million) relates to thedeficit in the pension schemes. No deferred tax asset
has been recognised against past UK tax losses.
Earnings
After a total tax charge of £2.8 million (2006: £2.5
million) the net loss for the financial year was £1.5
million (2006: loss £3.4 million).

With a weighted average number of shares of 48.2
million (2006: 47.7 million), the basic loss per share
was 3.2 pence (2006: 7.2 pence). After adjusting for
non-recurring items and amortisation of acquired
intangibles the earnings per share of the underlying
business was 9.6 pence (2006: 3.9 pence).
Dividends
The Group’s proposed final dividend of 6.0p per share(2006: 6.0p), payable on 25 October 2007, gives a total
dividend for the year of 8.4p per share (2006: 8.4p).
Dividend cover for the underlying business before
other operating income, non-recurring items andamortisation of acquired intangibles amortisation was
1.1 times.
Investment in research and development (R&D)
The total cash spent on research and development in
the year was £16.2 million, up £2.8 million on the prioryear in line with the Group’s medium term goal of
keeping R&D spend at approximately 10% of revenues.
This was made up as follows:

Total cash spent on research and development during the year
Less: amount capitalised
Add: amortisation of amounts previously capitalised
Research and development charged to the income statement

2007£ million
16.2
(5.6)
1.5
12.1

2006
£ million
13.4
(2.6)
1.1
11.9

13

Financial Review

The net book value of capitalised R&D at the end of
the financial year was £9.4 million (2006: £5.5 million).
Balance sheet
Net operating assets, excluding acquired intangibles,
increased by £1.2 million to £58.7 million. Net working
capital increased by £0.1 million. The net working
capital to sales ratio reduced from 18.6% to 17.0%.
Inventories reduced from prior year by £1.5m million.
Debtor days decreased from 66 days to 61 days.
The net book value of “Property, plant and equipment”
reduced by £1.9 million due to a transfer of a property,
with a net book value of £2.0 million into “Held for saleassets”, a £0.5 million adverse movement in foreignexchange and additions exceeding depreciation anddisposals by £0.6 million.
Intangible assets rose by £2.5 million primarily as aresult of increased R&D as explained above.
Assets held for sale represent two properties in
Oxfordshire. These are expected to be sold within thenext twelve months.
Pensions
The deficit in the Group’s pension schemes decreasedby £22.6 million to £30.8 million, as measured under theprovisions of IAS19. Assets of the scheme at 31 March
2007 were £135.1 million. The reduction in deficit isdue to better than expected asset performance andan increase in the discount rate applied to liabilities,
which is based on corporate bond yields.
The triennial actuarial valuation of the UK scheme
as at 31 March 2006 was completed during the year
resulting in a deficit of £17.7 million. A long-termplan for recovering the deficit over 10 years was
agreed between the Company and the Pension Trustee
Directors.

14

As a result £2.1 million was paid into the pension fundbefore year-end, together with a further £2.1 million in
April 2007. Taken together with the £1.8 million paidin financial year 2005/06, this completes the funding of£6.0 million agreed with Pension Trustee Directors at
the time of the sale of the Medical business in March
2005.
Cash
Before Restructuring costs of £2.9 million (2006: £3.1
million) cash generated by operations at £10.9 million
was £12.5 million higher than the previous year.
Working capital increased by £2.0 million in the year
compared with an increase of £10.2 million in the prioryear. Working capital as a percentage of sales fell from
18.6% to 17.0%.
As discussed above, a payment of £2.1 million was madeto reduce the pension deficit, capital expenditure andtaxation remained relatively constant at £4.4 millionand £2.5 million respectively (2006: £4.2 million and £2.7
million), dividend payments increased from £2.9 million
to £4.0 million due to the timing of the payments, theunderlying dividend per share remaining constant. As
discussed below R&D capitalisation increased by £3.0
million to £5.6 million as total R&D expenditure rose.
The cash balance at year-end was £2.8 million.
Employees
The number of employees at 31 March 2007 was 1,315
compared with 1,290 at 31 March 2006, an increase of
2.0%.
Share price
The closing mid-market price of the ordinary shares atthe end of the financial year was £2.47, compared with
£2.00 at the beginning of the year. The highest andlowest prices recorded in the financial year were £2.86
and £1.94 respectively.

•	100,000 sq kilometres of cultivated land in China ispollutedEnv•	12 million tonnes of grain contaminated by heavy
metals each yearoir

• Oxford Instruments’ X-MET3000 range

Revenue growth
As reported
At constant currencies, continuing businesses
Return on sales
Trading profit as a percentage of revenue
R&D
R&D cash spend as a percentage of revenueoltrChanges in Accounting Treatment
We have made two significant changes to thepresentation of the accounts this year which wehope give shareholders clearer information on theperformance of the Group. The first, which wasannounced in our Interim Statement, was to treat
certain revenues as agency transactions rather thanaccounting for them with the Group as principal.
Whilst this has no effect on profit, it reduced revenuenHedge Accounting
The Group uses derivative products to hedge its
exposure to fluctuations in foreign exchange rates
and the price of copper. In common with a number ofother companies, we decided that the additional costsof meeting the extensive documentation requirementsof IAS39 to apply hedge accounting cannot be justified.
Accordingly the Group will not use hedge accounting
for these derivatives. Net gains and losses on marking
to market such derivatives at the balance sheet dateare disclosed in the income statement in Financial
Income (note 9).

nt
nme al coof hand-held spectrometers are used
for instant soil analysis for hazardous
substancesand cost of sales for the year by £15.2 million. The
prior period has been restated, an adjustment of£19.8 million.
The second change involved a review of the allocationof infrastructure and support costs between operating
expenses and cost of sales to add more transparency
to the Group’s gross margins. The prior year has been
restated to be comparable which reduced cost of sales
and increased operating expenses by £11.7 million.
Key Performance Indicators
The following key performance indicators show how
we have progressed against our priorities.

2007

2006

+9.6%
+26.1%+8.5%+12.7%

5.1%

3.0%

10.0%

9.1%

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 forthe foreseeable future.
Kevin Boyd Group Finance Director
13 June 200715

Directors’ Biographies

ChairmanNigel Keen, 60, Non-Executive Chairman, joined theBoard in 1999. He is Chairman of the Laird Group PLC,
Axis-Shield plc and Deltex Medical Group plc. He is alsoa Director of ISIS Innovation Ltd. (Oxford Instruments
and Oxford University maintain a close relationship andthe Group’s Directors are strongly represented on the
Board of ISIS Innovation, the Universities intellectual
property company.)

Non-Executive Directors
Professor Sir Michael Brady, 62, Deputy Chairman andSenior Independent Non-Executive Director, joined
the Board in 1995 and is BP Professor of Information
Engineering at Oxford University. He is also a Fellow of
the Royal Society. He is a founding Director of Guidance
and Control Systems Ltd and Mirada Solutions Ltd, nowpart of Siemens AG, a Director of ISIS Innovation Ltd
and Senior Independent Director of Ixico Ltd.

Executive Directors
Jonathan Flint, 46, became Chief Executive in April
2005. He has a BSc in Physics from Imperial College andan MBA from Southampton University. He has held
senior management positions within Vislink plc, BAE
Systems, GEC Marconi and Matra Space Systems.

Professor Michael Hughes, 62, independent NonExecutive Director, appointed July 2006, joined theboard in November 2004. He is Chairman of EA
Technology Ltd, a Non-Executive Director of South
Staffordshire Group plc and Non-Executive Chairmanof Cyan Holdings plc. He will be Senior Non-Executive
Director as from July 2007

Kevin Boyd, 42, joined Oxford Instruments in August
2006 as Group Finance Director. He has a BEng inElectronic and Information Engineering from Queen’s
University Belfast and is a Chartered Engineer andChartered Accountant, having qualified with Arthur
Andersen. Prior to joining Oxford Instruments he wasGroup Finance Director of Radstone Technology plc,
Finance Director of Siroyan Ltd and held senior financepositions in the TI Group (now Smiths Group plc).

Peter Morgan, 71, Independent Non-Executive
Director, joined the Board in 1999. He is Chairman ofTechnetix Group Ltd, Strategic Thought Group plc and
IXICO Ltd and a Director of Hyder Consulting plc. He
is a member of the Council of Lloyd’s and a Directorof the Association of Lloyd’s Members. He is a former
Director of IBM UK and IBM Europe and a former
Director General of the Institute of Directors.

Charles Holroyd, 51, was appointed to the Board asGroup Business Development Director in November
2005, having joined Oxford Instruments in 1999. He
has a BSc in Electrical and Electronics Engineeringfrom Bristol University, and is a Chartered Engineer. He
has an MBA from INSEAD. Previously he held senior
management positions within United Industries plc, B
Elliott plc, Bowthorpe plc and Chloride Group plc.

Bernard Taylor, 50, Independent Non-Executive
Director, joined the Board in 2002 and is Vice-Chairmanof Evercore Partners. He is a member of the Councilof the University of Oxford and is Chairman of the
University’s Audit Committee. He is Chairman of ISIS
Innovation Ltd, and a Non-Executive Director of TI
Automotive Limited. He is also a Fellow of the Royal
Society of Chemistry.

Steven Parker, 56, was appointed to the Board asGroup Commercial Director in November 2005, having
joined Oxford Instruments in July 2002. He has an MBAfrom Wake Forest University and BA in Economics
from Randolph-Macon College. Previously he was with
Compagnie de Saint-Gobain and AlliedSignal Inc (nowHoneywell Inc).

16

Directors and Advisers

Directors
The following Directors served throughout
the year except as noted:
N J Keen, Chairman
M Brady, Deputy Chairman
D J Flint, Chief Executive
K J Boyd, Group Finance Director (from 8 August 2006)
M Lamaison, Financial Director and Company Secretary (retired 7 August 2006)
C J A Holroyd, Executive Director
S M Parker, Executive Director
M A Hughes
P W L Morgan
B J Taylor
Board Committees
Audit: P Morgan, Chairman; M Brady; M Hughes; B Taylor
Remuneration: N Keen, Chairman; M Brady; M Hughes; P Morgan (B Taylor from July 2007)
Nomination: N Keen, Chairman; M Brady; M Hughes; P Morgan; B Taylor
Administration: Any two Directors.
Honorary President
Sir Martin Wood OBE FRS Hon FREng DL
Company Secretary
Susan Johnson-Brett
Advisers
Auditors: KPMG Audit Plc
Principal Bankers: Barclays Bank PLC; Fortis Bank S.A./N.V.; HSBC Bank plc; The Royal Bank of Scotland plc
Financial Advisers: JPMorgan Cazenove Limited
Stockbrokers: JPMorgan Cazenove Limited
UK Solicitors: Laytons
USA Counsel: Holland & Knight

Nigel Keen, Jonathan Flint, Kevin Boyd,Charles Holroyd, Steven Parker, Michael Brady
Michael Hughes, Peter Morgan, Bernard Taylor

17Report of the Directors

The Directors present their Report and the Financial
Statements of Oxford Instruments plc for the year
ended 31 March 2007.
Principal activity and business reviews
The Company is the ultimate holding company of agroup of subsidiary undertakings (‘the Group’) engaged
in the research, development, manufacture and sale ofhigh technology instruments. The Company is required
to set out in this report a fair view of the business of
the Group during the financial year ended 31 March
2007, the position of the Group at the end of thefinancial year and a description of the principal risks
and uncertainties facing the Group. The information
which fulfils these requirements includes a business andfinancial review on pages 6-15, risk and uncertainties
on page 11 and corporate and social responsibilities on
pages 20-21 ,which are incorporated in this report byreference. The business, the strategy, the research anddevelopment activities and likely future prospects arereviewed in the Chairman’s Statement on page 6, theChief Executive’s Review on page 8, and the Financial
Review on pages 12 to 15.
Results and dividends
The results for the year are shown in the Group Income
Statement on page 46. The Directors recommend
a final dividend of 6.0p per ordinary share, which
together with the interim dividend of 2.4p per ordinary
share makes a total of 8.4p per ordinary share for theyear (2006: 8.4p). Subject to shareholder approval,
the final dividend will be paid on 25 October 2007
to shareholders registered at close of business on 28
September 2007.
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 wholeyear under review except for Martin Lamaison who
resigned on 7 August 2006 and Kevin Boyd who was
appointed on 8 August 2006.
On 3 July 2007, Professor Mike Hughes will be
appointed the Senior Independent Director in place ofProfessor Mike Brady, who remains Deputy Chairmanof the Board.

Oxford Instruments plc

Directors’ interests
The beneficial interests of the Directors in the
Company’s share capital, all in fully paid up shares at 31
March 2007 are shown below. Details of share options
are shown in the Directors’ Remuneration Report on
pages 28 to 35.

Kevin Boyd
Mike Brady
Jonathan Flint
Charles Holroyd
Mike Hughes
Nigel Keen
Martin LamaisonPeter Morgan
Steve Parker
Bernard Taylor
1

2007
Shares
2,500
35,477
12,216
116,580
1
61,215
10,000190

2006
Shares
2,500
24,561
111,580
51,135
10,000190

As at date of resignation, 7 August 2006

No Director was beneficially interested in the sharesof any subsidiary company at any time during theyear. In the year to 31 March 2007 no Director had amaterial interest in any contract of significance with
the Company or any of its subsidiaries other thanthe contract between Imperialise Limited and theCompany for the services of Nigel Keen,as described in
the directors remuneration on page 34.
To the extent permitted by UK law, the Group also
indemnifies its Directors and Officers.
Insurance cover
For some years the Group has purchased insurance
to cover its Directors and Officers against their costs
in defending themselves in civil legal proceedings
taken against them in that capacity and in respect ofdamages resulting from the unsuccessful defence ofany proceedings.
Neither the insurance nor the indemnity provided coversituations where the Director has acted fraudulently or
dishonestly.
During the year, in line with current best practice, therole of Company Secretary and Group Finance Director
has been separated and Susan Johnson-Brett has been
appointed Company Secretary.

18

Report of the Directors

Oxford Instruments plc

Share capital
During the year 459,304 new shares were issued (2006:
430,375). Details are set out in Note 27 on the Financial
Statements.
Substantial shareholdings
The following are beneficial interests of 3% or more ofwhich the Directors have been notified in accordancewith Chapter 5 of the Disclosure and Transparency
Rules, of the Company’s issued ordinary share capital,
the only class of voting capital, at 23 May 2007:

Schroder Investment
Management Limited
Hermes Pension Management Limited
Aberforth Partners
Sir Martin and Lady Audrey WoodGAM London Limited
Aviva plc
Howson Tattersall Invest Council
Legal & General Investment
Management Limited (UK)

Shares
000

% of
total

5,330
5,276
4,611
3,509
2,910
2,461
2,361

10.8
10.7
9.4
7.1
5.9
5.0
4.8

1,917

3.9

Disclosure of Information to Auditors
Pursuant to Section 234ZA(2) Companies Act 1985 theDirectors who held office at the date of approval of thisDirectors’ Report confirm that, so far as they are eachaware, there is no relevant audit information of which
the Company’s Auditors are unaware; and each Director
has taken all the steps that he might reasonably havebeen expected to have taken as a Director to makehimself aware of any relevant audit information andto establish that the Company’s Auditors are aware ofthat information.
Annual General Meeting
The Notice of the Annual General Meeting to beheld on 25 September 2007 is set out on pages 91 to
96 together with explanatory notes relating to theresolutions.
A resolution to re-appoint KPMG Audit Plc as Auditor
will be proposed at the Annual General Meeting.
By Order of the Board
Susan Johnson-Brett, Company Secretary
13 June 2007

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 isthen made to these terms, subject to the terms andconditions being met by the supplier. Trade creditorsof the Company and the Group’s UK subsidiaries at
31 March 2007 were equivalent to 31 days’ (2006: 39)
and 61 days’ (2006: 61) purchases respectively, basedon the amounts invoiced by suppliers during the year
and the amounts owed to trade creditors at the endof the year.

19Corporate and Social Responsibility

The Group is committed to enhancing shareholder
value in an ethical and socially responsible manner byconsidering the interests of all of its wide communityof stakeholders including investors, employees,
customers, suppliers and local communities.
The Group’s products and services provide solutions
which address the global issues of environmental
control, energy conservation, healthcare and security
through the development of high technology,
innovative instruments and systems. Many of
Oxford Instruments’ systems are used to protect theenvironment, including the screening and detectionof hazardous substances in soils, electronic goods andpetroleum. The Group is part of a global project toresearch into alternative clean, sustainable energy
sources, and its superconducting wire could be a key
enabling factor in such programmes. The Groupis continuously looking for new applications for its
existing technologies to produce instruments andsystems that will support the growing need to protect
the world and the people who live in it.
Ethical Operations
There are formal codes of behaviour in place for theGroup, which promote a commitment to maintaining
the highest standard of ethics and integrity in the
conduct of its business within each of the territories
and jurisdictions in which it conducts its business.
These codes include requirements for the personal
conduct of all employees, including recognising anddealing with conflict of interests, business gifts, andbribery and corruption. Contributions to politicalparties or organisations are not made. A code of ethics
and a business malpractice policy is in place and details
are given to all new employees. The code of ethics is
updated regularly and is available on the corporatewebsite or from the Company on request.
A fair and open culture is fostered throughout thebusiness in which everyone’s views and contributions
are encouraged and respected. New employees are
introduced to the Company’s culture and style which
actively support corporate strategy. Business managers
are provided with practical guidance explaining theGroup’s policies and standards of conduct to ensurethat these are maintained. The business malpractice
policy provides employees with the opportunity toreport unethical or illegal corporate conduct.The
independent position of the Group’s Senior NonExecutive Director provides an alternative channel ofcommunications for those employees who require it.
The Board believes that operating in this way is an
important part of efficient and profitable business
management, but recognises its success depends on
the involvement and commitment of everyone in theorganisation.

20

Oxford Instruments plc

Health and Safety
Oxford Instruments is committed to ensuring thehealth and safety of its employees and to the continual
improvement of its health and safety performance.
Responsibility for Health and Safety lies with the Board.
In 2006, a Group Health, Safety and Environment
Manager was appointed, reporting to Steve Parker, an
Executive Director. He is responsible for formulating
the Group’s H&S strategy and objectives, reviewing
performance against these objectives and for ensuringthat key H&S issues are effectively identified andmanaged.
The Board also reviews the health and safety
performance of all the Group’s operations. These
operations promote employee involvement by open
communication and active participation. Employees
are kept informed of current issues through staff
notice boards, bulletins and announcements on the
Company intranet, and are encouraged to suggest
improvements that can be made in working conditions
and practices.
Environment
Oxford Instruments is committed to pursuing highstandards of environmental performance, including
the maintenance of safe and healthy working
environments.
The Group looks to improve efficiency to minimise theeffect of its operational processes on the environment.
For example, a recent innovative improvement to theprocess of cleaning detector crystals has led to the useof a natural chemical extracted from the peel of anorange instead of Trichlorethylene, a greenhouse gas
being phased out under the Montreal protocol. This
is not only more environmentally friendly and safer touse; it has also reduced costs by 88%.
In 2006, the Group introduced a policy requiring all new
product introductions to take environmental issues
into account. Recently launched products include a
new Cryofree® range of dilution refrigerators, which
do not rely on the use of liquid helium - an expensive
and limited natural resource which cannot be re-cycled.
The Cryofree products are also safer to use.
All corporate literature is now printed on
environmentally friendly paper, using Forestry Security
Council (FSC) accredited printers. This, together withthe vegetable oils used to coat the paper, means thatthese documents are bio-degradable and re-cyclable.
Employees are encouraged to recycle paper andpackaging, including bottles and cans, and there
are recycling initiatives at site level throughout theGroup.

Corporate and Social Responsibility

Employees
The Board recognises that the Group’s employees are
the Group’s most important asset and critical to theoverall delivery of its business strategy. All employees
are kept informed of progress against strategy andinvolved in any changes to the business through halfyearly Chief Executive presentations, monthly teammeetings, the company intranet and newsletter.
Relations with employees are based on respect. The
Group is committed to a working environment where
there is mutual trust and where everyone is accountable
for their own actions and share responsibility for the
performance and reputation of the Group.
The Group aims to recruit, employ and promote
employees on the sole basis of their ability andis committed to developing and enhancing each
employee’s skills and capabilities. Policies are designed
to provide employees with safe and healthy working
conditions and practices.
The Group’s aim is to ensure there are equal
opportunities for all employees with no discriminationon account of race, age, gender, sexual orientation,
disability, and political or religious beliefs. In return,
employees are expected to act with integrity andmaintain high ethical standards.
Ability and contribution are the determining factors
in the selection, training, career development andpromotion of all employees. The Group is committed
to continuing professional development, managing
individual and team performance and developing andvaluing core skills. Having the right skills-mix ensuresthat the business grows through producing innovative
products that meet or exceed customer requirements.
It is the Group’s policy to provide competitive
remuneration referenced against external market
data. Business and individual performance determine
actual remuneration and salaries are reviewed on anannual basis. Financial participation in the Group is
encouraged through the Savings Related Share Option
Scheme in the UK, Executive Share Options granted to
management, and through bonus schemes based on
financial performance.

Oxford Instruments plc

The Group’s Voice of the Customer work ensuresthat the interests of all customers are at the core of
the business. Oxford Instruments’ customers expect
and receive high quality, reliable goods and services.
Innovative and commercially successful products aredeveloped to meet current and future requirements.
These products are offered at competitive prices, andare backed by a global network of skilled support
teams.
Business Partners
All companies in the Group work hard to establish
mutual trust, respect and mutually beneficial relations
with its business partners, including suppliers, banks
and collaborative associates.
A full audit process, which covers good business andcorporate practice, is carried out when considering a
new business partner.
Communities
The well-being of the communities in which the Group
operates is important to its long term development
and success. The Group offers worthwhile and valuable
employment in a safe and well cared for working
environment, and encourages a healthy work/lifebalance.
Business groups and employees are supported in any
activities that promote good relations with the local
communities by contributing to, and supporting,
local charities and community activities. The focus ison supporting science in business, and encouraging
innovation and the promotion of science in schools
and universities.
Employees are encouraged to contribute to local
charities using the Give-As-You-Earn scheme and theGroup makes an additional donation to the chosencharity.
The Group also sponsors a number of international andnational awards and events including the prestigious
Sir Martin Wood Prize through the Millennium Science
Forum in Japan.
Jonathan Flint Chief Executive

Customers
The Group believes that integrity in dealing withcustomers is a prerequisite for a successful and sustained
business relationship. This principle governs all aspectsof the business. The Group values its customers and thetrust that they place in the Group, and will safeguard
the information provided by customers in accordancewith relevant laws and contractual commitments.

21

Corporate GovernanceIntroduction
The Board is committed to ensuring that high standardsof corporate governance are maintained by the Group.
The Board endorses the main and supporting principles
and the provisions set out in the Combined Codeon Corporate Governance which is appended to the
Listing Rules of the Financial Services Authority (“theCode”).

The Board retains control over strategy, investments
and capital expenditure, and limits the decisions
which can be taken by management in the areas ofgovernance, strategic and financial management
and reporting, capital structure, corporate actions,mergers and acquisitions, major contracts and othercommitments, litigation and regulatory proceedings,
remuneration and share plans.

The Board’s policies and procedures are documented
in a Board Reference File that sets out the roles anddelegated authorities applying to the Directors, theBoard and the Board Committees.

Where the Board delegates authority to management
it is on a structured basis, which requires that proper
management oversight exists at the appropriate level.
Within management, the General Committee meetsat least twice a month and the Executive Committee
meets once a month. They meet either physicallyor by video or telephone conference and focus ongroup-wide performance and risk management. Eachof the individual strategic businesses holds monthly
management meetings.

Compliance
The Board considers that, throughout the period underreview, the Group has complied with the provisions
recommended in Section 1 of the Code.
Board of Directors and management structure
Board of Directors
The Board comprises the Chairman, four Non-Executive
Directors and four Executive Directors. The Directors’
biographies and details of length of service are shownon page 16. All the Directors have written letters of
appointment that have been approved by the Board.
The division of responsibilities between the role of
Chairman and the Chief Executive has been set out inwriting and agreed by the Board.
Management Team
General Committee
The Board delegates management of the business to
the Chief Executive. To assist in this, the Chief Executive
has created a General Committee that consists of, inaddition to the executive Board members, the GroupOperations Director, the Group Technical Director and
the Group Human Resources Director.
Executive Committee
The General Committee is supported by an Executive
Committee that comprises the members of the General
Committee with the addition of the Managing
Directors of each of the individual strategic customer
facing businesses.
Operation of the Board
The Board is responsible to shareholders for delivering
sustainable shareholder value through entrepreneurial
leadership within a framework of controls for
managing risk. The Board sets the Group’s strategy,
maintains the policy and decision making frameworkin which this strategy is implemented, ensures that thenecessary financial and human resources are in place
to meet strategic aims, monitors performance against
key financial and non-financial indicators, oversees
the system of risk management and sets values andstandards in governance matters. The details of theway the Board operates, including a schedule ofmatters reserved to the Board for decision, are set out
in a Board Reference File.

22

Oxford Instruments plc

The Board meets on a regular basis, at least ten times
a year, and otherwise as required. Of the ten regularmeetings, typically eight are held at Group locations,and the remaining two are held by telephone
conference. During the year one additional Main Board
meeting was scheduled bringing the total number ofBoard meetings held for the year to eleven.
Board meetings involve reviews of financial andbusiness performance against the plan approved by
the Board and of risk management, both at Grouplevel and also for each of the strategic businesses.
On a rotating basis, the Board receives presentations
from the strategic businesses and key functional areas
enabling it to explore specific issues in more detail.
Any matter requiring a decision by the Board will
be supported by a pre-circulated paper analysing all
relevant aspects of the proposal.
Board papers are distributed in advance of the relevant
meeting in sufficient time to allow the Directors to
prepare for meetings. Minutes of Committee meetings
are circulated to the relevant Directors. In the very
few instances when a Director has not been able toattend Board or Committee meetings, his commentson the papers to be considered at the meeting arecommunicated in advance to the relevant Chairman.
The Non-Executive Directors meet without the Executive
Directors at least annually, with the Chairman leadingthese meetings. The Non-Executive Directors also meet
annually without the Chairman in attendance. The
Deputy Chairman chairs these meetings.
The Company Secretary and the Company Secretary’s
Office are responsible for implementing Board
procedures and for advising the Board on corporate
governance matters.
Board balance and independence
The Code requires the Board should be of sufficient
size that the balance of skills and experience isappropriate for the requirements of the business andCorporate Governancethat there is a balance of Executive and Non-Executive
Directors such that no individual or small group ofindividuals can dominate the Board’s decision making.
The composition of the Board and the combinationof diverse backgrounds and expertise of the NonExecutive Directors meet these principles.
The Chairman, Nigel Keen, who fulfilled the
independence criteria at the time of his appointment
as set out in the Code, and continues to fulfil thesecriteria, is currently Chairman of the Remuneration
Committee as the Board considers that in a small
company it is essential that the Chairman be actively
involved in setting remuneration policy. Nigel Keenalso serves as Chairman of Oxford Instruments Pension
Trustees Limited, which is the UK defined benefit
pension scheme.
Mike Brady, Deputy Chairman, has been a memberof the Board since June 1995. He is BP Professor ofInformation Engineering at Oxford University andis one of the UK’s leading engineers. He brings adepth of technical expertise to Board discussions.
The breadth of his professional and business interests
unrelated to the Group or other members of the Board,
his continual constructive probing of the technicalaspect of proposals being considered by the Board,the composition of the Board generally and the factthat he qualifies as independent in all other criteria
referred to in the Combined Code, leads the Board
to conclude that it is appropriate that he continue
in office and that he should properly be considered
as independent despite the fact that he has been a
Director for more than 10 years. Mike Brady has been
the Senior Independent Non-Executive Director for anumber of years and it is proposed he will relinquish
this role in July 2007.
Mike Hughes, has been a member of the Board sinceNovember 2001. He spent 25 years at GEC in Technical
Director and Managing Director roles. He is currently
the Chairman of EA Technology Ltd and Cyan Holdings
Limited and a Non-Executive director of the South
Staffordshire Group plc. It is proposed Mike Hughes
will become the Senior Independent Non-Executive
Director from July 2007.
Peter Morgan, Chairman of the Audit Committee,
joined the Board in April 1999. He had a 30 year careerwith IBM UK and IBM Europe and in 1989 became
Director General of the Institute of Directors in London.
He is presently Chairman of Strategic Thought Groupplc and of Technetix Group Limited. He is also a nonexecutive director of Hyder Consulting plc. He is anunderwriting member of Lloyd’s and was elected amember of the Lloyd’s governing Council in 2000.
Bernard Taylor was appointed to the Board as a NonExecutive director in 2002. He has worked at various
City institutions, inlcuding Robert Fleming & Co. Ltd
where he was Deputy Chairman and Chief Exeuctive
and at J.P. Morgan plc where he was Vice-Chairman

Oxford Instruments plc(Investment Banking). He is Vice Chairman of Evercore
Partners and Chief Executive of its European business.
He is also a fellow of the Royal Society of Chemistry,
Chairman of ISIS Innovation and a member of The
Council of the University of Oxford.
In the opinion of the Board each of the Non-Executive
Directors is currently independent under the guidelines
set out in the Combined Code. This opinion is basedon current participation and performance on both theBoard and Board Committees including considerationof the length of service at Oxford Instruments plc.
Term of appointment of Non-Executive Directors
Each Non-Executive Director is appointed for an
initial term of three years. The requirement to submit
Directors for reappointment at regular intervals is
met by applying the Company’s articles of association.
These require that at each Annual General Meeting:(1) not less than one-third of the Directors who aresubject to retirement by rotation must retire; and (2)any Director has to retire who was not appointed ateither of the two previous Annual General Meetings
and who has served as a Director for more than two
years since appointment or last reappointment.
In addition Directors who have been appointed since
the previous Annual General Meeting have to resubmit
themselves for election at the first Annual General
Meeting following their appointment.
Board development and evaluation
Board development
On appointment Directors undertake an induction
process which is designed to develop knowledge andunderstanding of the Group’s businesses, throughvisits to various Group operating sites, discussion of
relevant technology as well as product demonstrations,briefings from management and familiarisation withinvestor perceptions of the Group.
The operating businesses’ senior management teams
present to the Board on a regular basis. Non-Executive
Directors are encouraged to meet individual membersof the senior management team and have done soduring the year under review. Throughout the year,
Non- Executive Directors attend Oxford Instruments’
events, exhibitions and award presentations.
The Company Secretary and her office act as advisers
to the Board on matters concerning governance andensure compliance with Board procedures. All Directors
have access to this advice and a procedure also exists
for Directors to take independent professional advice
at the Group’s expense. No such advice was sought
during the year. The appointment and removal of
the Company Secretary are matters for the Board asa whole.

23

Corporate GovernanceOxford Instruments plc

During the year, in line with current best practice, therole of Company Secretary and Group Finance Director
has been separated and a Company Secretary has been
appointed.
Board evaluation
In the year ended 31 March 2007 the Board completed
its annual effectiveness evaluation exercise, including
a specific review of the effectiveness of its principal
committees and members. This was an internal
exercise using a detailed questionnaire completed

Questionnaires completed by
Self
Other (1)Yes
Deputy Chairman
Yes
Chairman
Yes
Chairman
Yes
Chairman
Yes
ChairmanRole being reviewed
Chairman
Non-Executive Directors
Chief Executive
Finance Director
Executive Directors

Attendance at meetings
No one other than the Committee Chairman andmembers is entitled to be present at a meeting of theNomination, Audit or Remuneration Committee, butothers may attend by invitation of the Committee.
No Director votes on matters where he has a conflict ofinterest. Further details of the individual Committees’
activities are described below.
The following table sets out the frequency of, andattendance at, Board and principal Board Committee
meetings for the year to 31 March 2007:

Main
Audit Remuneration Nomination
Board Committee1
Committee Committee

No. of meetings
held
Nigel Keen
Jonathan Flint
Martin Lamaison2
Kevin Boyd3
Charles Holroyd
Steve Parker
Mike Brady
Mike HughesPeter Morgan
Bernard Taylor

11

6

3

1

11
11
4
7
11
11
11
11
10
9

6
6
6
6

3
3
3
3
-

1
1
1
1
1

Note:
1
Board Directors attend the Audit Committee by invitation2
resigned 7 August 2006
3
appointed 8 August 2006

24

by all Directors in relation to the key areas of Board
accountability and the arrangements in place toenable effective focus on these areas. Topics covered
included Group strategy, performance, delegation andaccountability, success, development and reward, Board
and Committee composition, Board induction andtraining, internal control and risk management. The
following table explains the Board assessment process
and highlights which Board members completed
another’s assessment questionnaire:

Other (2)Chief Executive
Chief Executive
Deputy Chairman
Chief Executive
Chief Executive

Board Committees
The Board has formed the following Committees:
Nomination, Remuneration, Audit and Administration.
Membership of the Board Committees is set out on page
17. Membership of Board Committees is determined by
the Board and is reviewed regularly. The written termsof reference of the Board Committees are available
from the Group on request and will be on display at
the Annual General Meeting.
Nomination Committee
The Nomination Committee comprises all the
independent Non-Executive Directors, under thechairmanship of the Chairman of the Board. The
Nomination Committee is responsible for assisting
the Board in the formal selection and appointment
of Directors and considers succession planning for
the Board. It also considers potential candidates andrecommends appointments of new Directors to theBoard. The appointments are based on merit andagainst objective criteria including the time available,
and the commitment that will be required of thepotential Director.
There is a formal, rigorous and transparent procedure
for the appointment of new Non-Executive Directors
to the Board, the prime responsibility for which
is delegated to the Nomination Committee. Eachappointment process begins with an evaluation of
the balance of skills, knowledge and experience
existing on the Board that is effected through a seriesof one-on-one meetings between the Committee
Chairman and Directors. The Nomination Committee
takes external advice when considered appropriate.
A description of the role and capabilities required isprepared using the information gathered. Candidates
meet with the Chairman and the Deputy Chairman andCorporate Governancea final selection of potential appointees meets several
Directors individually.
Following these meetings,
the Nomination Committee considers each Director’s
feedback and makes a final recommendation to theBoard concerning any appointment.
On joining the Board, new Non-Executive Directors are
given an induction programme including site visits andmeetings with senior management. This induction
is supported by briefing papers prepared by theCompany Secretary. Major shareholders are provided
with an opportunity to meet any new Non-Executive
Directors.
The Nomination Committee recommends to the Board
whether a Non-Executive Director’s appointment
should be renewed for a further three years at theend of each three year term, taking into account theperformance of the individual.
The Nomination Committee also annually reviews theperformance of the Chief Executive and succession
planning within the business.
Remuneration Committee
The Remuneration Committee comprises all the
independent Non-Executive Directors. The Chairman of
the Board, Nigel Keen, who fulfilled the independence
criteria at the time of his appointment as set out in
the Code, is currently Chairman of the Remuneration
Committee as the Board considers it essential that the
Chairman be involved in setting remuneration policy.
The members of the Committee are appointed by the
Board.
The Remuneration Committee is responsible forrecommending to the Board the remuneration
packages for Executive Directors and the bonus
and share option strategy for the Group’s executive
management. Independent professional advice issought when considered necessary. Under its terms ofreference the Chairman of the Board may be Chairmanof the Committee. The Board as a whole is responsible
for fixing the remuneration of the Non-Executive
Directors, including the Chairman.

Oxford Instruments plc

and Finance Director are invited to attend all or partof any meetings or to present such reports as are
required for the Committee to discharge its duties.
The external auditors are invited to attend meetingsof the Committee on a regular basis, including once atthe planning stage before the audit and once after theaudit at the reporting stage. At least once a year theCommittee meets with the external auditors without
the Executive Directors present.
The primary objective of the Audit Committee is to assist
the Board of Directors in fulfilling its responsibilities
relating to external financial reporting and associatedannouncements, oversight of the external audit processincluding consideration of the independence of theGroup’s external auditors, the resourcing and plansof the Internal Audit function and the adequacy andeffectiveness of the financial control environment.
The Audit Committee’s terms of reference include all
matters indicated by the Combined Code. The termsof reference are considered annually by the Audit
Committee and are then referred to the Board forapproval. The Audit Committee structure requires theinclusion of one member with relevant recent financial
experience, currently the Committee Chairman, andexpects all Audit Committee members to be financiallyliterate.
The Audit Committee Chairman reports the outcomeof meetings to the Board and the Board receives
minutes of all Audit Committee meetings. The Audit
Committee has unrestricted access to Group documents
and information, as well as to employees of the Groupand the external auditor.
The Committee reviews the interim and annual financial
statements, together with the related Stock Exchangeannouncements, having received information on theaccounting principles, policies and practices adopted
in the Group’s accounts, changes proposed to thoseprinciples, policies and practices, significant accounting
issues, litigation and contingent liabilities affecting theGroup, potential tax contingencies and the Group’s
compliance with statutory tax obligations.

The Chief Executive is invited to attend Remuneration
Committee meetings as deemed appropriate, forexample when consideration is being given to theperformance of other Executive Directors and on
significant group-wide 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 28 to 35.

The Audit Committee is responsible for thedevelopment, implementation and monitoring of theGroup’s policy on external audit. The Audit Committee
reserves oversight responsibility for monitoring
the independence and objectivity of the external
auditors and compliance with ethical and regulatory
requirements. The policy states that the external
auditors are jointly responsible to the Group Board andthe Audit Committee and that the Audit Committee isthe primary contact.

Audit Committee
The Audit Committee comprises all the independent
Non-Executive Directors and is chaired by Peter
Morgan. The Chairman of the Board and membersof senior management such as the Chief Executive

A review takes place annually of the performance ofthe external auditors following the completion of theannual audit.

25

Corporate GovernanceTo assess the effectiveness of the external auditors, theAudit Committee reviews:• The external auditors’ fulfilment of the agreed
audit plan and variations from the plan
• The robustness and perceptiveness of the auditors
in their handling of key accounting and audit
judgements• The external auditors’ comments in respect offinancial controls
To fulfil its responsibility regarding the independenceof the external auditors, the Audit Committee reviews
the changes in key external audit staff in the external
auditor’s plan for the current year, the arrangements
for day-to-day management of the audit relationship,a report from the external auditors describing theirarrangements to identify, report and manage any
conflicts of interest and the overall extent of non-audit
services provided by the external auditors, in addition
to case-by-case approval of the provision of non-audit
services by the external auditors.
Details of the audit fees, together with fees for nonaudit services for the year, are set out in Note 3 (page53) to the Financial Statements.
The Audit Committee is required to assist the Group
Board to fulfil its responsibilities relating to theadequacy and effectiveness of the financial control
environment. This includes consideration of theadequacy of both the resourcing and the plans of theInternal Audit function.
To fulfil these duties the Committee reviews:• The Group’s risk framework and risk policies• The external auditors’ annual internal control
report• The Internal Audit function’s terms of reference,
reporting lines and access to the Audit Committee
and all members of the Board, and its plans andachievement of the planned activity• Internal Audit reports on key audit areas andsignificant control environment deficiencies• Reports on the systems of financial controls andfinancial risk management• Reports on fraud perpetrated against the Groupand current fraud trends
The Group’s business malpractice policy contains
arrangements for the members of the Board to be
involved in confidence by the investigating officer
in the event of complaints on accounting, risk issues,internal controls, auditing issues and related mattersfrom the Group’s employees. During the year no suchcomplaints were received.
Administration Committee
The Administration Committee consists of a minimumof two Directors and deals with items of a routine andadministrative nature. The Board receives copies ofthe minutes of the Administration Committee.
26

Oxford Instruments plc

Investor relations
The Group places considerable importance on regularcommunications with its shareholders. The Group has
an ongoing programme of dialogue and meetings
with its shareholders, where a wide range of relevant
issues including strategy, performance, management
and governance are discussed.
All investors are encouraged to participate in the
Annual General Meeting at which the Chairman andChief Executive present an overview of the Group’sbusiness and review the results and make comments
on strategy and current business activity.
The Non-Executive Directors meet informally withshareholders both before and after the Annual
General Meeting and respond to shareholder queries
and requests. The Chairman makes himself available tomeet any shareholders, as required.
All Group announcements are posted on the Groupwebsite, www.oxford-instruments.com, as soon as they
are released. The website provides financial and otherbusiness information on the Group.
Annual General Meeting (AGM)
The Board welcomes the move towards a moreconstructive use of Annual General Meetings
and regards the AGM as an opportunity to meetshareholders. At its AGM, the Group complies withthe provisions of the Combined Code relating to thedisclosure of proxy votes, the separation of resolutions
and the attendance of Committee Chairmen. The
Group arranges for the Annual Report and Accounts
and related papers to be posted to shareholders so
as to allow at least 20 working days for consideration
prior to the AGM. The next AGM will be held on 25
September 2007.
Risk management
Within the Group there is an ongoing embedded
process for identifying, evaluating and managing
the significant risks faced by the Group. Day-to-day
management of this process has been delegated by
the Board to the Executive Directors.
A standard process is in place throughout the Group
that requires the senior management of each businessto identify significant business risks and to classify
them both as to probability and potential impact.
Once identified, mitigating action, where possible, isdecided and responsibility within the management
team assigned. On a regular basis each business reviews
and updates its risk summary which is then reported
to the Chief Executive. If a material risk changes orarises, the Managing Director of the business reports
this in writing to the Chief Executive at which time
there is a discussion on the adequacy of the mitigating
actions taken. Details of all major risks identified andthe mitigating actions in place are reported to andreviewed by the Board.

Corporate GovernanceIn addition, the Board considers risks to the Group’s
strategic objectives which are not addressed within theGroup’s businesses and develops appropriate actions
to manage and mitigate these risks.
Internal control
The Board is ultimately responsible for the Group’ssystem of internal controls and for reviewing its
effectiveness. However, such a system is designed to
manage rather than eliminate the risk of failure toachieve business objectives, and can provide only
reasonable and not absolute assurance against material
mis-statement or loss. Day-to-day responsibility for
maintaining adequate systems of internal control isdelegated to the Executive Directors.
During the year the Directors have reviewed theeffectiveness of the Group’s system of internal controls
and believe that these provide assurances that problems
have been identified and dealt with appropriately
throughout the period under review. These controls
include financial, operational, compliance and risk
management.
The key components designed to provide effective
internal control within the Group are as follows:• a formal schedule of matters is reserved to theBoard for decision with appropriate delegation of
authority throughout the management structure;• the Group’s management structure comprises theGeneral Committee whose members have Groupwide financial responsibilities and to whom dayto-day responsibility for the management of theGroup is delegated. The responsibility is basedon the identification of separate businesses foreach of the Group’s activities, the heads of thesebusinesses together with the Chief Executive, theGroup Finance Director and certain other membersof the senior management team form the Group’s
Executive Committee. There are clearly definedlines of management responsibilities at all levels up
to and including the Group Board and the Group’s
accounting and reporting functions reflect thisorganisation;• financial executives within Group businesses reportto their own operational head but there is also awell established and acknowledged functional
reporting relationship through to the Group
Finance Director;• the Board reviews strategic issues and options
formally once a year during the annual strategicplanning process and during the year as appropriate.
In addition the Executive Directors maintain a five
year planning model of the Group and its individual
strategic businesses;• annual budgets are prepared for each of theGroup’s businesses which include monthly figures
for turnover, profit, capital expenditure, cash flow
and borrowings. The budgets are reviewed throughthe Group management structure and result in aGroup financial budget which is considered andapproved by the Board;

Oxford Instruments plc

•

•

•
•
•

•
•

•
•

•

•

the businesses prepare monthly management
accounts which compare the actual operating
result with both the budget and the prior year.
The businesses also prepare rolling reforecasts fororders, turnover, operating profit and cash. Bothare reviewed by the Board monthly;
the Board approves all acquisition and divestment
proposals and there are established procedures forthe planning, approval and monitoring of capital
expenditure;
for all major investments the performance of atleast the first twelve months against the original
proposal is reviewed by the Board;
each Group site, except for representative sales
offices, is required to submit a self assessment
internal control questionnaire on a regular basis;internal audit is carried out through a system ofregular reviews of the internal controls at each siteby accountants from other parts of the Group andin Japan and China, due to language difficulties, by
the local external auditors;
work performed is based on a standardised Group
format but involves random testing, together witha review of the internal control questionnaire;
where required, action plans are drawn up by
the businesses in conjunction with the Group
Finance Director to remedy any significant control
weaknesses that are identified from completion of
the internal control questionnaire or as a result of
the internal audit. The results of audit reviews arereported to local management, the Group FinanceDirector and the Audit Committee and checks on
the progress of the action items arising are made;the Board receives regular updates on treasury, tax,
property, insurance and health and safety matters;
authorisation limits are set at appropriate levels
throughout the Group; compliance with theselimits is monitored by the Group Finance Director
and internal audit;
all requests to quote for substantial fixed pricecontracts are reviewed by a multi-disciplinary teamto assess both technical and financial risk andto fix an appropriate balance between risk andreward. However, no procedure can guarantee theavoidance of losses on fixed price contracts of atechnical nature; andwith respect to the UK pension scheme the Grouphas its own trustee representatives, involves its
own independent actuary with whom actuarial
assumptions are reviewed, agrees the investment
policy with trustees, ensures there is an independentactuarial valuation every three years, reviews
members benefits and contributions regularly andaudits the annual changes in pensionable salaries.

Susan Johnson-Brett, Company Secretary
13 June 200727

Directors’ Remuneration Report

Oxford Instruments plc

Remuneration Committee
Details of the composition of the Remuneration
Committee are set out on page 22. The principal functionof the Committee is to define and communicate to
the Executive Directors the Company’s policy on the
remuneration, benefits and terms of employment foreach Executive Director. As part of this process, theCommittee aims to provide a formal and transparent
framework for the development of remuneration
policy for the Executive Directors and for fixing the
remuneration packages of individual Directors.
The Board, as a whole, is responsible for fixing the
remuneration of the Non-Executive Directors, including
the Chairman.
No Director isremuneration.

involvedin

deciding

hisown

The Committee also reviews and approves new longterm incentive schemes and significant changes toexisting schemes, together with awards under theseschemes, and general increases in salaries and bonus
arrangements for staff, with input as required fromthe Chief Executive. The Chairman maintains contact
with principal shareholders regarding remuneration
policy as appropriate.
Over the past year the Committee continued touse New Bridge Street Consultants to provide
independent external advice on the Executive Directors’
remuneration.
Remuneration policy
The Remuneration Committee has established a policyon the remuneration of Executive Directors and theBoard has established a policy for the remuneration of
the Chairman and the Non-Executive Directors.
Executive Directors
The Company has an incentive-driven Executive Director
remuneration policy that promotes the delivery of theGroup strategy, seeks to align the interests of Directors
and shareholders and reflects the performance of each
Director. A significant proportion of total potential
rewards is provided through performance-based
schemes. Overall the remuneration package aims to beappropriate to attract, motivate and retain high calibre
executives. The Remuneration Committee’s policy on
early termination is to provide compensation whichreflects the Company’s contracted obligations, whilst
recognising the principle of mitigation of losses.
Service contracts
Each of the Executive Directors has a service contract.
Company policy is to enter into service contracts with
Executive Directors that have a notice period of one
year.

28

The Non-Executive Directors do not have service
contracts but their appointments are subject to review
every three years and the rotation provisions of theCompany’s Articles of Association.
Non-Executive Directors
The Company’s policy is to appoint Non-Executive
Directors to the Board with a breadth of international
skills and experience that is relevant to Oxford
Instruments’ global business. Appointments are madeby the Board upon the recommendations and advice
from the Nomination Committee.
Executive Directors’ remuneration
Executive Directors receive base salary, annual
performance awards, pensions and other benefits, andlong term performance awards. Base salaries, benefits
and performance awards of the Executive Directors arereviewed annually by the Remuneration Committee.
Compensation is determined with reference to an
appropriate comparator group of companies, which isreviewed annually. Consideration is also given to the
Director’s experience, performance and responsibilities.
Benefits comprise provision of a car or car allowance,life and health insurance, participation in a bonus
scheme and contributions towards a pension.
For UK based Executive Directors appointed up to April
2001, a contributory pension of up to two thirds ofpensionable salary is provided on retirement related
to the length of service, together with a dependants’pension on death. UK Executive Directors joining sinceApril 2001 are entitled to Company contributions
into the Company’s group stakeholder scheme orinto a defined contribution scheme of their choice inaccordance with contractually agreed contribution
rates.
Steve Parker, who is based in the USA, is a member of
the Oxford Instruments Holdings Inc Defined Benefit
Pension Plan. This Plan is non-contributory on the partof the participant and requires five 1,000 hour years of
employment before the participant realises any vested
interest in the plan. Upon Normal Retirement Date(age 65), Steve Parker is then entitled to a monthly
pension benefit based on an actuarial calculation
taking into account his years of service, age, and thesalary earned over the last five years of employment.
He is also a member of the Oxford Instruments Holdings
Inc 401k Savings Plan, in which the Company matchesat half the employee’s contribution rate up to thefirst 6% of salary. Employees over the age of 50 canmake an additional US$5,000 contribution, which theemployer also matches at half that rate. Employees’
contributions fully vest after three years of service.

Directors’ Remuneration Report

Oxford Instruments plc

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

Jonathan Flint* Martin Lamaison** Kevin Boyd
Steve Parker
Charles Holroyd
Total

Salary
£000
263
69
118
147
150
747

Benefits
£000
13
5
9
7
13
43

Performance
relatedremuneration
£000
133
21
47
38
70
309

2007
£000
409
95
175
192
233
1,103

Total
Remuneration
2006
£000
350
263
0
195
193
1,001

* Resigned 7 August 2006** Appointed 8 August 2006
Annual Performance Incentive Bonus
Bonuses are earned primarily on the achievement offinancial targets, with further elements payable on
meeting specific objectives. Bonuses are paid after thecompletion of the statutory annual audit.
The Executive Directors’ bonus scheme for the year
ended 31 March 2007 set performance targets which
would pay bonuses for on-target performance at therate of 50% of base salary for Jonathan Flint, 35% ofbase salary for Martin Lamaison, Kevin Boyd and Charles
Holroyd and 45% of base salary for Steve Parker, witha maximum of between 60% to 75% of base salary,dependant on the role of the participant. The level ofaward for 2006/07 took account of the improvement
in financial performance reflected in achievement
against specific financial targets in relation to orders,profit and cash generation and a measurable progressin meeting defined strategic objectives for the Group.
For the coming financial year, bonus potential will bea maximum of 100% of salary for Jonathan Flint and
75% of salary for the other Executive Directors, whichis in line with the median for the sector comparatorgroup. On target bonuses will remain at 50% of salaryfor Jonathan Flint and will be 35% of salary for theother Executive Directors.
Pension Plans
Oxford Instruments Pension Scheme
All employees, including the Company’s UK based
Executive Directors, who were engaged before
April 2001 were entitled to become members of thedefined benefit Oxford Instruments Pension Scheme.
This is a contracted-out contributory pension scheme
which provides benefits based on earnings at or nearretirement and is funded through a separate trust.
Charles Holroyd is the only current Executive Director
who is a member of the defined benefit scheme. His
pensionable pay is capped at £112,800.

With effect from 1 April 2004 the Company contributed
to the scheme at a rate of 14.5% of pensionable salary.
Employees can choose to contribute at rates of 6.0%,
7.0%, 9.5% or 10.5% of pensionable salary, with thehigher rates earning benefits at the faster accrual
rate of 2% per year (1/50ths) of service instead of
1.67% (1/60ths). The additional 1.0% paid by thosecontributing 7.0% and 10.5% entitles the member totake all benefits at the lower age of 60. However thenormal retirement age for all UK employees is 65 andaccrual of service in the pension schemes can continue
until retirement.
Early retirement is possible on a reduced pension fromage 50 with the consent of the Company. Pensions
in payment are guaranteed to increase by a level ofinflation up to a maximum of 3% per year on pension
earned before 1 April 1997 and a maximum of 5% peryear thereafter, subject to any applicable statutory
requirements.
For death before retirement a spouse’s pension of one
half of the member’s prospective pension is payable plus
a capital sum of three times the member’s pensionablesalary and a refund of the member’s contributions. For
death after retirement a spouse’s pension of one halfof the member’s pension is payable plus, if applicable,
the balance of a five-year guarantee. In the event ofdeath after leaving service but before commencementof pension a spouse’s pension of one half of the accrued
preserved pension revalued to the date of death ispayable plus a refund of the member’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, Executive
Directors appointed now are offered membership of
the Oxford Instruments Stakeholder Plan, a defined
contribution scheme or the Executive Director can electthat contributions be made into a defined contribution
plan of his or her choice. Under this arrangement onlybase salary is pensionable.
29

Directors’ Remuneration Report

Oxford Instruments Holdings Inc
Defined Benefit Pension Plan (USA)All employees of Oxford Instruments Superconducting
Technology and Austin Scientific engaged before 1
February 2006 were entitled to become members of
the Oxford Instruments Holdings Inc defined benefit
Pension Scheme. The scheme provides a benefit toeligible participants with effect from the date that theemployee has completed one thousand (1,000) hours ofservice in any one year. Employees remain participants
until the entire amount of benefit is distributed (if any)
to the employee or to a beneficiary in the event of thedeath of the participant.
Employees do not contribute to this scheme.
The benefit terms are complex but in summary the plan
provides accrued benefit equal to 1.6% of averageannual base salary multiplied by the number of yearsof credited service (not to exceed 35 years).
Vesting, or the opportunity to have a monetary interestin the plan, is based on cliff vesting. The participantmust have five years each with one thousand hours
of service at the termination of employment or after
having reached normal retirement date, in order toreceive any retirement benefit from the plan.
Oxford Instruments 1998 Executive Pension Scheme
The Oxford Instruments 1998 Executive Pension
Scheme is a defined contribution ‘top-up’ arrangement
providing a lump sum at retirement and also an
additional capital sum of one times the member’s
pensionable salary for death before retirement. The
scheme is not available to new members and following
the retirement of Martin Lamaison, the Scheme has noactive members.
The Oxford Instruments Holdings Inc Savings &Investment Plan 401K (USA)This is a savings plan open to all USA employees ofOxford Instruments. It is viewed by the US government
as a pension plan that supplements the US Social
Security system. Therefore, all monies contributed tothe plan on a calendar year basis are tax deferred until
the monies are withdrawn by the participant.

30

Oxford Instruments plc

A committee consisting of two company Trustees andthree Plan Administrators administers the plan. This
committee uses an elected outside 401K administration
firm that provides fiduciary advice and counsel tothe committee as well as advising on a selection of
investment vehicles to the participants.
Provided the employee does not exceed the maximum
dollar value for contributions that the US government
allows, the employer matches at half the employee’s
contribution up to the first 6% of base salary. The
employee may contribute more than 6% of basesalary on a non-matched basis, unless over the ageof 50 where an extra US$5,000 contribution from theemployee is allowable, also matched at half this rateby the company.
Vesting is as follows:
2 Years of Service = 25% vested in the employer’s
contributions
3 Years of Service = 100% vested in the employer’s
contributions
Executive Director pension arrangements
Under the terms of their service contracts Jonathan
Flint and Kevin Boyd can ask the Company to contributeto a pension plan of their own choice. The Company
contributes a maximum of 14% of base salary ifmatched by a contribution of 10% by the director. Cashbonuses are excluded from contribution calculations.
During the year the Company contributed £36,313(2006: £35,000) into a personal defined contribution
plan in respect of Jonathan Flint and £16,343 (2006:nil)
into the UK Oxford Instruments Stakeholder pension
plan in respect of Kevin Boyd.
Martin Lamaison and Charles Holroyd are membersof the UK Oxford Instruments Pension Scheme. On
31 May 2005 Martin Lamaison withdrew from thePension Scheme as an active member and ceased to
accrue benefit from this date. He started to draw hisentitlement with effect from 1 July 2006.
With respect to the UK Pension Scheme the following
table shows the compulsory member’s contributions,the increase in accrued entitlement during the year inexcess of inflation and the accrued entitlement at theend of the reporting period, together with the transfer
value of the accrued pensions:Directors’ Remuneration ReportCharles Holroyd

Charles Holroyd

Oxford Instruments plc

Age as at
31 March
2007
Years

Accruedyears ofservice
Years

Member’s
contributions
during the
year
£000

51

7

10

Steve Parker is a member of the Oxford Instruments
Holdings Inc Pension Scheme and Oxford Instruments
Holdings Inc Savings and Investment Plan (401K). The
Company contributed an estimated US$23,000 to the
Oxford Instruments Holdings Inc Pension Scheme inrespect of Steve Parker. No entitlement to benefits
arises under this scheme until the individual has worked
for the Group for five years. At the end of 2007 Steve
Parker will be fully vested in this scheme. The Company
also contributed US$10,000 to a defined contribution(USA 401K) plan on behalf of Steve Parker.
Share Incentive Schemes
The Company has a number of share option schemes
for the incentivisation of Executive Directors andemployees of the Group:••

Additional
annual pension
earned during
the year in excess
of inflation£000 pa

AccruedannualPensionentitlement
at year end£000 pa

3

2

16Transfer value of accrued pension
2007
2006
£000
£000
152
130

During the year the Company did not contributeto the Oxford Instruments 1998 Executive Pension
Scheme in respect of Martin Lamaison (2006:£26,000). He took the benefits from the scheme on
1 July 2006.

••

Additional
annualPensionearnedduring theyear£000 pathe Executive Share Option Scheme (ESO);
the Senior Executive Long Term Incentive Scheme(SELTIS);
Individual Options (Individual); andSave-As-You-Earn Scheme (SAYE).

The ESO scheme is the principal vehicle used to incentivise
the Executive Directors and senior management. TheSELTIS and Individual schemes are used at the discretionof the Remuneration Committee. The SAYE scheme isopen to all UK permanent staff employed for at least 6months on the date of invitation to join the scheme.
ESO schemes (1995 and 2001)
These shareholder and Inland Revenue approved
schemes grant options over new shares to be issued
at the time of exercise and also over existing shares.
Options granted to an individual in excess of £30,000
are classified as unapproved options.

Change in transfer value overyear less member contributions£000
12

All future awards of ESO share options will be madeunder the 2001 ESO scheme. The aggregate market
value of shares over which options under the 2001 ESO
scheme may be granted to an individual participant
in any financial year may not normally exceed twicebase salary. However, in exceptional circumstances
the limit is three times base salary, provided that tothe extent an individual is granted options in excessof the standard limit, there will be a corresponding
reduction in the number of shares under options
granted in the following two years. For the purpose of
calculating these limits, the Company’s share price will
be averaged over the three months before the options
are granted.
Options are granted at the middle market price on thelast dealing day prior to grant and are exercisable after
three years but not more than ten years from the dateof grant.
Performance conditions
1995 ESOOver a period of three consecutive years the growth inearnings per share (EPS) of the Company expressed asa percentage is to exceed the growth in the Retail Price
Index (RPI) expressed as a 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) performanceand on its EPS performance (adjusted to exclude nonrecurring items amortisation of acquired intangible
assets, and the effects of financial instruments.).
The Committee considers that the combination of
TSR and EPS performance conditions will encourage
shareholder value creation and improved financial
performance. In selecting appropriate targets theCommittee takes into account both the recent
performance of the Company and its projections for
future growth.

31

Directors’ Remuneration Report

Oxford Instruments plc

When the 2001 ESO scheme was established the Remuneration Committee set the initial conditions for the fullvesting of options at 30% per year growth in EPS and TSR. This was considered consistent with the recovery
phase of the business. It was intended that over time the performance conditions would revert to a lower target,
more appropriate to the business going forward. For 2002 and 2003 full exercise of options requires 25% and
20% per year growth respectively in EPS and TSR. For 2003 onwards 15% growth in EPS and TSR is required.
Details are set out in the tables below.
Only 50% of the options granted in September 2001 are exerciseable, as the TSR performance test failed, none ofthe options granted in 2002 are exerciseable due to failure of both tests and 50% of the options granted in 2003
are exercisable as the TSR performance test failed, non of the options granted in 2002 are exercisable due tofailure of both tests and 50% of the options granted in 2003 are exercisable as the EPS performance test failed.
The options granted in July 2004 will become exercisable proportionately by reference to the level of both TSR
and EPS target growth performance achieved as follows:
EPS / TSR performance
Average of 15% or more p.a.
Average of 7.5% - 14.99% p.a.
Average of 7.5% p.a.
Less than an average of 7.5% p.a.
The performance conditions for options under the
2001 ESO scheme are measured over a single threeyear period. No extension of the performance period
is permitted although once performance conditions
have been met participants have the remainder of theten year period of the option in which to exercise theoption.
Options granted under the scheme maybe exercised
according to the following schedule: one third of
the original grant being exercisable from the third
anniversary of grant; a further third on the fourthanniversary; and the final third on the fifth anniversaryof the grant. Proposals are being put to the shareholders
at this year’s Annual General Meeting to simplify thesearrangements. Further details of the proposed changes
are to be found on pages 91-96.
At the Annual General Meeting in 2005, shareholders
gave their approval to the granting of Share
Appreciation Rights (SAR) and to the satisfaction ofoutstanding options with share appreciation rights
under unapproved options of the scheme. Under SAR,in effect, an option is settled by only issuing shares tothe value of the gain and these shares are issued at no
consideration. This means that the number of shares towhich an option holder may become entitled depends
on the Company’s share price at the time of exercise.
The Company has not granted any SAR or satisfied
options with SAR during the year.
SELTISThe SELTIS scheme is similar to the ESO schemes, withthe exception that 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 afinancial year may not exceed 50% of base salary. For

32

Proportion of options exercisable against each criteria
50%
Pro-rata between 12.25% and 50%
12.25%
Nilthe purpose of calculating this limit, the market value
is the closing middle market price of the Company’s
shares on the day before the date of grant.
Performance conditions
SELTIS options granted prior to the establishment of
the 2001 ESO scheme
The growth in EPS of the Company expressed as apercentage exceeds the growth in the RPI expressed
as a percentage plus a further 4% per year over thesame period.
SELTIS options granted since the establishment of the2001 ESO scheme
The performance conditions are the same as those
applying to awards under the 2001 ESO scheme in thesame financial year as detailed above.
Retention conditions
SELTIS options granted under the scheme are subject
to a retention condition, to the effect that on exercise
the option holder must retain ownership of sharesequivalent to half of the market value of the shares(after tax) until the sixth anniversary of the date of
grant.
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 is achieved at some time during the four months
preceding the date upon which notice to exercise
is given. This price is absolute and is not linked togeneral Stock Exchange or Stock Exchange sector pricemovements.

Directors’ Remuneration Report

Oxford Instruments plc

SAYE options
The SAYE scheme is administered in accordance with Inland Revenue guidelines. There are no performance
conditions.
As at the 31 March 2007 the outstanding options for Jonathan Flint, Kevin Boyd, Charles Holroyd, Steve Parker
and Martin Lamaison under the 1995 and 2001 ESO schemes, the SELTIS scheme, Individual options and SAYE
were as follows:

Name
Jonathan Flint

Martin Lamaison *Kevin BoydCharles Holroyd

Steven Parker

SchemeESOESO
SELTISSELTIS
SAYE
ESO
ESO
ESO
SELTISSELTIS
Individual
ESO
SELTIS
SAYE
SAYE
SAYE
SAYE
SAYE
ESO
ESO
ESO
ESO
ESO
SELTISSELTIS
ESO
ESO
ESO
ESO
ESO
SELTISSELTIS

2007
100,000
200,000
50,00050,000145,128
77,17050,00066,667
12,500
1,032
699
649
25,00040,00050,00025,00012,50020,00025,00040,00060,00035,00030,00012,50020,000Movements During the Year
Granted Exercised
Lapsed100,000
50,000(636)- **(77,170)- (128,125)(33,000)(33,000)
66,667
12,500
1,032
(636)
(280)
25,000- **(25,000)(26,500)
12,50025,000- **(35,000)
12,500-Mar
2006
200,000
50,000636
145,128
154,340
128,125
33,00033,00050,000
699
649
636
280
40,00050,00050,00026,50020,00040,00060,00070,00030,00020,000Exercise
Price
£2.10
£2.19
Nil
Nil
£1.74
£2.18
£1.875£1.585
Nil
Nil
£2.95
£2.0375
Nil
£1.83
£2.14
£1.75
£1.74
£1.35
£2.10
2.19
2.18
1.875
1.585
Nil
Nil
£2.10
2.19
2.18
1.875
1.48
Nil
Nil

Date for
Earliest
Exercise
15/7/09
15/7/08
15/7/09
15/7/08
1/2/0715/7/07
15/7/06
28/9/04
21/12/03
14/7/02
6/3/03
4/9/094/9/091/2/10
1/2/09
1/2/081/2/07
1/2/06
15/7/09
15/7/08
15/7/07
15/7/06
28/9/04
15/7/09
15/12/08
15/7/09
15/7/08
15/7/07
15/7/06
15/7/05
15/7/09
15/12/08

Date for
LatestExercise
15/7/16
15/7/15
15/7/13
15/7/12
lapsed06/08/07
06/08/07
06/08/07
exercised
exercised
06/08/07
3/9/16
3/9/13
31/7/1031/7/09
exercised
exercised
31/7/08
15/7/13
15/7/15
15/7/14exercised
27/9/11
15/7/13
14/12/12
15/7/13
15/7/15
15/7/14
15/7/13
14/7/12
15/7/13
14/12/12* Position shown as at 7 August 2006, the date of Martin Lamaison’s retirement.
** Lapsed as performance conditions were not met.

Martin Lamaison retired on 7 August 2006. On
retirement the latest date of exercise of his SAYE, ESO
and individual options will become 6 February 2007,
6 August 2007 and 6 August 2007 respectively.
Charles Holroyd made gains of £33,789 on the exerciseof share options, selling all bar 10,000 shares during
the year to 31 March 2007 (2006: £30,408), and Martin

Lamaison made gains of £133,650 (2006: £267). As
at 31 March 2007, Martin Lamaison, Charles Holroyd
and Steve Parker have cumulatively 222,298, 25,000
and 65,000 options respectively under various schemes
capable of exercise. Since the year end, Martin
Lamaison has exercised options over 109,272 sharesand made gains of £85,822 and options over 113,026
shares have lapsed.

33

Directors’ Remuneration Report

Outside appointments
The Board allows Executive Directors to accept
appropriate outside commercial 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, which will be subject to approval by
the Board.
At 31 March 2007, the Executive Directors currently
hold no such outside appointments.
Independent Non-Executive Directors
ChairmanUnder an arrangement between the Company andImperialise Limited, Nigel Keen is retained to act as
Chairman of the Company. Nigel Keen’s fees were£80,000 (2006: £81,282) for his services for which
he must account to Imperialise Limited. In addition
Imperialise Limited has been paid a sum equivalent
to the national insurance on these fees of £10,239
per annum. Imperialise Limited is responsible for thecost of national insurance on payments to Nigel Keen,
whereas national insurance contributions in respect of
the other Non-Executive Directors are made directly to
the UK Inland Revenue and therefore not included in
the table below.
Nigel Keen’s initial period of appointment as a NonExecutive Director was for three years commencing
25 February 1999, subject to retirement by rotation.
His term of appointment was extended by the
Oxford Instruments Board for a further three years
commencing in February 2002 and again in February
2005, subject to retirement by rotation. The
appointment may be terminated by either party giving

Oxford Instruments plc

not less than six months’ notice. The Nomination
Committee has reviewed the renewal of Nigel Keen’s
arrangement and has put forward its recommendationthat the appointment be renewed for a further three
years in February 2008. The Board has approved thisrecommendation.
Non-Executive Directors
Non- Executive Directors are appointed for an initialperiod of three years with subsequent reviews. They
do not have a contract of employment and their
appointment can be terminated without notice.
Non-Executive Directors receive fixed fees agreed
by the full Board after reference to similar roles in
an appropriate comparator group of companies andreimbursement of expenses incurred in attending
Board and other meetings. It is the Board’s policy for
the Non-Executive Directors to be paid a level of feethat reflects the time commitment and responsibilitiesof the role and is sufficient to attract individuals
with appropriate knowledge and experience. The
Chairman and Non-Executive Directors receive noother benefits.
Mike Brady has served as a Non-Executive Director
for 12 years and this appointment is due for renewal
on 1 August 2007. Mike Hughes has served as a NonExecutive Director for 3 years and this appointment isdue for renewal in November 2007. The Nomination
Committee has recommended that these appointments
be renewed for a further three years and the Board
has approved this recommendation. The appointmentof Mike Brady is subject to annual approval byshareholders.
Remuneration of the Chairman and Non-Executive

Directors:

Nigel Keen, Chairman
Mike Brady
Mike HughesPeter Morgan
Bernard Taylor
Total

34

2007
£000
90
30
25
30
25
200

2006
£000
92
29
25
29
25
200

Directors’ Remuneration Report

Oxford Instruments plc

Performance graph
The graph below shows for the five years ended 31
March 2007 the Total Shareholder Return (TSR) on a
holding of the Company’s ordinary shares comparedwith a hypothetical holding of shares made up of sharesof the same kind and number as those by reference
to which the FTSE Techmark and FTSE Electronic andElectrical Equipment indices are calculated. These
indices have been chosen as they are considered tobe the most appropriate comparator groups for theCompany. TSR has been calculated by reference tothe relevant share price for each constituent company
assuming dividends are reinvested.

In accordance with the Directors’ Remuneration Report
Regulations, the four tables setting out the Executive
and Non-Executive Directors’ remuneration, pensions
and share options contained within the report havebeen audited; the statements of policy have not been
audited.
This report was adopted by the Remuneration
Committee at a meeting on 5 June 2007 and has been
approved subsequently by the Board for submission
to shareholders at the Annual General Meeting to beheld on 25 September 2007.
Nigel Keen Chairman of the Remuneration Committee
13 June 2007

180
Oxford Instruments

FTSE Techmark

FTSE E&EE

160
140
120
100
80
60
40
20
0

Source: Thomson Financial Datastream
April 1 2002

March 31 200735

Directors’ Responsibilities in relation to the Annual Report and Financial Statements

The Directors are responsible for preparing the Annual Report and the Group and parent company financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and parent company financial statements for each financial
year. Under that law they are required to prepare the Group financial statements in accordance with IFRSs as
adopted by the EU and applicable law and have elected to prepare the parent company financial statements inaccordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).
The Group financial statements are required by law and IFRSs as adopted by the EU to present fairly the financial
position and the performance of the Group; the Companies Act 1985 provides in relation to such financial
statements that references in the relevant part of that Act to financial statements giving a true and fair view arereferences to their achieving a fair presentation.
The parent company financial statements are required by law to give a true and fair view of the state of affairsof the parent company.
In preparing each of the Group and parent company financial statements, the Directors are required to:• select suitable accounting policies and then apply them consistently;• make judgments and estimates that are reasonable and prudent;• for the Group financial statements, state whether they have been prepared in accordance with IFRSs as
adopted by the EU;• for the parent company financial statements, state whether applicable UK Accounting Standards havebeen followed, subject to any material departures disclosed and explained in the parent company financial
statements; and• prepare the financial statements on the going concern basis unless it is inappropriate to presume that theGroup and the parent company will continue in business.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at
any time the financial position of the parent company and enable them to ensure that its financial statementscomply with the Companies Act 1985. They have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors’ Report,
Directors’ Remuneration Report and Corporate Governance Statement that comply with that law and thoseregulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the company’s website. Legislation in the UK governing the preparation and dissemination offinancial statements may differ from legislation in other jurisdictions.

36

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

We have audited the group and parent company
financial statements (the ‘’financial statements’’) of
Oxford Instruments plc for the year ended 31 March
2007 which comprise the Group Income Statement,
the Group and Parent Company Balance Sheets, theGroup Cash Flow Statement, the Group Statement of
Recognised Income and Expense and the related notes.
These financial statements have been prepared under
the accounting policies set out therein. 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 theCompanies Act 1985. Our audit work has been
undertaken so that we might state to the company’s
members those matters we are required to state tothem in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other thanthe company and the company’s members as a body,for our audit work, for this report, or for the opinions
we have formed.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing theAnnual Report and the group financial statementsin accordance with applicable law and International
Financial Reporting Standards (IFRSs) as adopted by theEU, and for preparing the parent company financial
statements and the Directors’ Remuneration Reportin accordance with applicable law and UK AccountingStandards (UK Generally Accepted Accounting
Practice) are set out in the Statement of Directors’
Responsibilities on page 36.
Our responsibility is to audit the financial statements
and the part of the Directors’ Remuneration Report
to be audited in accordance with relevant legal andregulatory requirements and International Standards
on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial
statements give a true and fair view and whether thefinancial statements and the part of the Directors’
Remuneration Report to be audited have been properly
prepared in accordance with the Companies Act 1985
and, as regards the group financial statements, Article
4 of the IAS Regulation. We also report to you whether
in our opinion the information given in the Directors’
Report is consistent with the financial statements. The
information given in the Directors’ Report includes
that specific information presented in the Chairman’s
Statement, Chief Executive’s Statement and Financial
Review that is cross referred from the Business Review
section of the Director’s Report.

In addition we report to you if, in our opinion, thecompany has not kept proper accounting records, if wehave not received all the information and explanations
we require for our audit, or if information specified
by law regarding directors’ remuneration and othertransactions is not disclosed.
We review whether the Corporate GovernanceStatement reflects the company’s compliance with thenine provisions of the 2006 Combined Code specified
for our review by the Listing Rules of the Financial
Services Authority, and we report if it does not. We
are not required to consider whether the board’s
statements on internal control cover all risks andcontrols, 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 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 the financial statements. Our responsibilities do
not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with
International Standards on Auditing (UK and Ireland)issued by the Auditing Practices Board. An audit
includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in thefinancial statements and the part of the Directors’
Remuneration Report to be audited. It also includes anassessment of the significant estimates and judgments
made by the directors in the preparation of thefinancial statements, and of whether the accounting
policies are appropriate to the group’s and company’s
circumstances, consistently applied and adequately
disclosed.
We planned and performed our audit so as toobtain all the information and explanations which
we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance thatthe financial statements and the part of the Directors’
Remuneration Report to be audited are free frommaterial misstatement, whether caused by fraud orother irregularity or error. In forming our opinion wealso evaluated the overall adequacy of the presentationof information in the financial statements and the partof the Directors’ Remuneration Report to be audited.

37

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

OpinionIn our opinion:•

the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the EU, ofthe state of the group’s affairs as at 31 March 2007 and of its loss for the year then ended;•

the group financial statements have been properly prepared in accordance with the Companies Act 1985
and Article 4 of the IAS Regulation;•

the parent company financial statements give a true and fair view, in accordance with UK Generally Accepted
Accounting Practice, of the state of the parent company’s affairs as at 31 March 2007;•

the parent company financial statements and the part of the Directors’ Remuneration Report to be audited
have been properly prepared in accordance with the Companies Act 1985; and•the information given in the Directors’ Report is consistent with the financial statements.

KPMG Audit Plc
Chartered Accountants
Registered Auditor
2 Cornwall Street
Birmingham
B3 2DL13 June 200738

Accounting Policies

Oxford Instruments plc (the Company) is a company
incorporated in Great Britain.
The Group financial statements consolidate those of
the Company and its subsidiaries (together referred
to as the “Group”). The parent company financial
statements present information about the Company asa separate entity and not about the Group.
The Group financial statements have been prepared
and approved by the Directors in accordance with
International Financial Reporting Standards as adopted
by the EU (“Adopted IFRSs). The Company has elected
to prepare its parent company financial statementsin accordance with UK GAAP; these are presented on
pages pages 82 to 90.
The accounting policies set out below have, unlessotherwise stated been applied consistently to all periods
presented in these Group financial statements.
(a) Prior year adjustment
The Group has adopted two new accounting treatmentsin the year.
The directors now consider that a more appropriate
treatment of a certain revenue stream is as an agency
arrangement. Previously the Group had accounted forthe revenue as if it were the principal. The change has
the effect of reducing both revenue and cost of salesby £15.2m (2006: £19.8m).
The directors have reviewed the classification ofoperating costs between cost of goods sold andoverhead categories. The new classification has been
applied to the current and previous years. Thereis no change to trading profit in either year. In theprior year the effect has been to reduce cost of salesby £11.7m, and increase selling and marketing costs,
administration and shared services and research anddevelopment by £2.8m, £8.7m and £0.2m respectively.
There is no change to the balance sheet or equity ateither reporting date.
(b) Basis of preparation
The financial statements are presented in £ sterlingrounded to the nearest £100,000. They are prepared on
the historical cost basis except that the following assets
and liabilities are stated at their fair value: derivative
financial instruments and financial instruments
classified as available-for-sale.
The preparation of financial statements in conformity
with IFRS’s requires management to make judgements,
estimates and assumptions that affect the application ofpolicies and reported amounts of assets and liabilities,
income and expenses. The estimates and associatedassumptions are based on historical experience andvarious other factors that are believed to be reasonable

Oxford Instruments plc

under the circumstances, the results of which form thebasis of making the judgements about carrying valuesof assets and liabilities that are not readily apparent
from other sources. Actual results may differ fromthese estimates.
The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate isrevised if the revision affects only that period or in the
period of the revision and future periods if the revisionaffects both current and future periods. Further detailof the estimates and judgements made can be foundin Note 37.
The accounting policies have been applied consistently
by all of the Group’s entities.
(c) Basis of consolidation(i) Subsidiaries
Subsidiaries are entities controlled by the Company.
Control exists when the Company has the power,
directly or indirectly, to govern the financial andoperating policies of an entity so as to obtain benefits
from its activities. In assessing control, potential voting
rights that presently are exercisable or convertible
are taken into account. The financial statements ofsubsidiaries are included in the consolidated financial
statements from the date that control commences
until the date that control ceases.
(ii) Transactions eliminated on consolidation
Intragroup balances and any unrealised gains
and losses or income and expenses arising fromintragroup transactions are eliminated in preparing
the consolidated financial statements. Unrealised
gains arising from transactions with associates andjointly controlled entities are eliminated to the extent
of the Group’s interest in the entity. Unrealised losses
are eliminated in the same way as unrealised gains,but only to the extent that there is no evidence ofimpairment.
(d) Foreign currency(i) Foreign currency transactions
Transactions in foreign currencies are translated
at the foreign exchange rate ruling at the dateof the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance
sheet date are translated to £ sterling at the foreignexchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in
the income statement. Non-monetary assets andliabilities that are measured in terms of historical costin a foreign currency are translated using the exchange
rate at the date of the transaction. Non-monetary
assets and liabilities denominated in foreign currencies
that are stated at fair value are translated to £ sterlingat foreign exchange rates ruling at the dates the fairvalue was determined.

39

Accounting Policies(ii) Financial statements of foreign operations
The assets and liabilities of foreign operations,
including goodwill and fair value adjustments arisingon consolidation are translated to £ sterling at foreignexchange rates ruling at the balance sheet date. The
revenues and expenses of foreign operations aretranslated to £ sterling at rates approximating to
the foreign exchange rates ruling at the dates of thetransactions. Foreign exchange differences arisingon translation are recognised directly in equity.
Differences arising prior to 1 April 2004 are presented
within retained earnings. Differences arising after
1 April 2004 are presented as a separate componentof equity.
(e) Derivative financial instruments
The Group uses derivative financial instruments tohedge its exposure to foreign exchange arising fromoperational and financing activities. In accordancewith its treasury policy, the Group does not hold or
issue derivative financial instruments for trading
purposes. Derivative financial instruments arerecognised initially at fair value. Subsequent to initialrecognition, derivative financial instruments are stated
at fair value. The gain or loss on remeasurement tofair value is recognised immediately in the income
statement unless hedge accounting applies. However,where hedge accounting is applied recognition of any
resultant gain or loss depends on the nature of theitem being hedged (see accounting policy f). The fairvalue of forward exchange or option contracts is theirquoted market price at the balance sheet date, being
the present value of the quoted forward price.
In the prior year, the Group hedge accounted for its
derivative financial instruments in order to minimise
the potential volatility in the income statement.
However, IAS 39 requires certain stringent criteria tobe met in order to continue to hedge account, which,in the particular circumstances of the Group, areconsidered by the Board not to bring any significant
economic benefit. Accordingly, with effect from 1 April
2006, the Group has ceased to hedge account for all
new derivative financial instruments acquired afterthat date.
(f) Hedging(i) Cash flow hedges
Where a derivative financial instrument is designated asa hedge of the variability in cash flows of a recognised
asset or liability, or a highly probable forecasted
transaction, the effective part of any gain or loss on thederivative financial instrument is recognised directly inequity. When the forecasted transaction subsequently
results in the recognition of a non-financial asset or
non-financial liability, or a forecast transaction fora non-financial asset or non-financial liability the
associated cumulative gain or loss is removed from40

Oxford Instruments plc

equity and included in the initial cost or other carrying
amount of the non-financial asset or liability. If ahedge of a forecasted transaction subsequently resultsin the recognition of a financial asset or a financial
liability, the associated gains and losses that wererecognised directly in equity are reclassified into theincome statement in the same period or periods during
which the asset acquired or liability assumed affects
the income statement (i.e. when financial income or
expense is recognised). For cash flow hedges, otherthan those covered by the preceding two policy
statements, the associated cumulative gain or loss isremoved from equity and recognised in the income
statement in the same period or periods during which
the hedged forecast transaction affects the income
statement. The ineffective part of any gain or loss isrecognised immediately in the income statement.
When a hedging instrument expires or is sold,terminated or exercised, or the entity revokes
designation of the hedge relationship but thehedged forecast transaction is still expected to occur,
the cumulative gain or loss at that point remains inequity and is recognised in accordance with the above
policy when the transaction occurs. If the hedgedtransaction is no longer expected to take place, thecumulative unrealised gain or loss recognised in equity
is recognised immediately in the income statement.
(ii) Hedge of monetary assets and liabilities
Where a derivative financial instrument is used tohedge economically the foreign exchange exposureof a recognised monetary asset or liability, no hedge
accounting is applied and any gain or loss on thehedging instrument is recognised in the income
statement.
(g) Property, plant and equipment(i) Owned assets
Items of property, plant and equipment are stated atcost, or at deemed cost, less accumulated depreciation(see below) and impairment losses (see accounting
policy l). The cost of self-constructed assets includes
the cost of materials, direct labour and any other costs
directly attributable to bringing the asset to a working
condition for its intended use.
Certain items of property, plant and equipment that
had been revalued to fair value on or prior to 31 March
2004, the date of transition to IFRS, are measured on
the basis of deemed cost, being the revalued amountat the date of that revaluation.
Where parts of an item of property, plant andequipment have different useful lives, they areaccounted for as separate items of property, plant andequipment.

Accounting Policies

Oxford Instruments plc(ii) Depreciation
Depreciation is charged to the income statement on astraight line basis to write off the cost less estimatedresidual value of property, plant and equipment inequal instalments over their estimated useful lives ofeach part of an item of property plant and equipment
as follows:
Freehold land
Freehold buildings, long leasehold
land and buildings
Furniture and fittings
Machinery and other equipment
Computer equipment and software
VehiclesNil
50 years
10 years
5 to 10 years
4 years
4 years

Leasehold land and buildings, where the period of thelease is less than 50 years, are written off on a straightline basis over the remaining period of the lease.
(h) Intangible assets(i) Goodwill
All business combinations are accounted for by applying
the purchase method. Goodwill represents amounts
arising on acquisition of subsidiaries. In respect ofbusiness acquisitions that have occurred since 31 March
2004, goodwill represents the difference between
the cost of the acquisition and the net fair value ofthe identifiable net assets, liabilities and contingent
liabilities acquired.
In respect of acquisitions prior to this date, goodwill
is included on the basis of its deemed cost, which
represents the amount recorded under previous GAAP.
The classification and accounting treatment of businesscombinations that occurred prior to 31 March 2004
has not been reconsidered in preparing the Group’s
opening IFRS balance sheet at 31 March 2004.
Goodwill is stated at cost less any accumulated
impairment losses. Goodwill is allocated to cashgenerating units and is tested annually for impairment(see accounting policy l). In respect of associates, thecarrying amount of goodwill is included in the carrying
amount of the investment in the associate.
(ii) Research and development (R&D)
Expenditure on research activities, undertaken withthe prospect of gaining new scientific or technicalknowledge and understanding, is recognised in theincome statement as an expense as incurred.
Expenditure on development activities, whereby
research findings are applied to a plan or design forthe production of new or substantially improved
products and processes, is capitalised if the productor process is technically and commercially feasible, if

future economic benefits are probable, the costs canbe measured reliably and the Group has sufficient
resources to complete development. The expenditure
capitalised includes the cost of materials, direct labour
and any other cost directly attributable to preparing
the asset for its intended use. Capitalised development
expenditure is stated at cost less accumulated
amortisation (see below) and impairment losses (seeaccounting policy l). Other development expenditureis recognised in the income statement as an expense
as incurred.
Research and development expenditure is accounted
for after deducting the relevant proportion of any
related grants receivable. If R&D expenditure isrecoverable under a customer contract it is carriedforward as work in progress at the lower of cost and
net realisable value.
(iii) Other intangible assets
Other intangible assets that are acquired by the Groupare stated at cost less accumulated amortisation(see below) and impairment losses (see accounting
policy l).
(iv) Amortisation
Amortisation of capitalised development expenditureis charged to the income statement on the basis of unit
shipments over a product’s estimated useful economic
life. Amortisation in respect of other intangible assets
is charged to the income statement on a straight-line
basis over the estimated useful lives of intangible
assets unless such lives are indefinite. Goodwill andintangible assets with an indefinite useful life aresystematically tested for impairment at each balance
sheet date. Other intangible assets are amortised fromthe date they are available for use.
The estimated useful lives are as follows:
Capitalised development costs
3 to 5 years
Acquired intangible assets
6 months to 5 years(i) Trade and other receivables
Trade and other receivables are stated at their cost less
impairment losses (see accounting policy l).
(j) Inventories
Inventories are stated at the lower of cost and net
realisable value. Cost includes materials, direct labour,
an attributable proportion of production overheads
based on normal operating capacity and all otherexpenditure incurred in acquiring the inventories andbringing them to their existing location and condition.
Net realisable value is the estimated selling price in theordinary course of business, less the estimated costs ofcompletion and selling expenses.

41

Accounting Policies

Provision is made for obsolete, slow moving anddefective stock where appropriate in the light of recent
usage, expected future requirements, new productintroduction plans and likely realisable values. The
Group uses demonstration equipment to market its
products to customers. The majority of demonstrationequipment is held within inventory. All categories ofdemonstration equipment are written down during
use and then are actively marketed from time to time inorder to rotate assets so that as the older items are soldthey are replaced, as necessary, by new equipment.

When a decline in the fair value of an availablefor-sale financial asset has been recognised directlyin equity and there is objective evidence that theasset is impaired, the cumulative loss that had beenrecognised directly in equity is recognised in theincome statement even though the financial asset has
not been derecognised. The amount of the cumulativeloss that is recognised in the income statement is thedifference between the acquisition cost and current
fair value, less any impairment loss on that financial
asset previously recognised in the income statement.

Work in progress on long-term contracts is valued
at cost, net of amounts taken to cost of sales, after
deducting foreseeable losses and progress payments
not matched with revenue. Amounts recoverable oncontracts are included in debtors and represent revenue
recognised in excess of payments on account. Work inprogress 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 andfinancial reviews of these contracts are undertaken.
These reviews involve estimating the likely cost tocomplete the contract based on an assessment of theoutstanding technical risks and the resources required
using the best information available at the time.

(i) Calculation of recoverable amountThe recoverable amount of the Group’s investments
in held-to-maturity securities and receivables carriedat amortised cost is calculated as the present value of
estimated future cash flows, discounted at the original
effective interest rate (i.e. the effective interest ratecomputed at initial recognition of these financial
assets). Receivables with a short duration are notdiscounted.

(k) Cash and cash equivalents
Cash and cash equivalents comprise cash balances andcall deposits. Bank overdrafts that are repayable on
demand and form an integral part of the Group’s cash
management are included as a component of cash andcash equivalents for the purpose of the statement ofcash flows.
(l) Impairment
The carrying amount of the Group’s assets, other thaninventories (see accounting policy j) and deferred tax
assets (see accounting policy r), are reviewed at eachbalance sheet date to determine whether there is any
indication of impairment. If any such indication exists,
the asset’s recoverable amount is estimated (see (i)below).
An impairment loss is recognised whenever the
carrying amount of an asset or its cash-generating unit
exceeds its recoverable amount. Impairment losses arerecognised in the income statement.
Impairment losses recognised in respect of cashgenerating units are allocated first to reduce thecarrying amount of any goodwill allocated to cashgenerating units (group of units) and then, to reducethe carrying amount of the other assets in the unit
(group of units) on a pro rata basis.

42

Oxford Instruments plc

The recoverable amount of other assets is the greaterof their fair value less cost to sell and value in use. In
assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessmentsof the time value of money and the risks specific to
the asset. For an asset that does not generate largely
independent cash inflows, the recoverable amount isdetermined for the cash-generating unit to which theasset belongs.
(ii) Reversals of impairment
An impairment loss in respect of a held-to-maturity
security or receivable carried at amortised cost isreversed if the subsequent increase in recoverable
amount can be related objectively to an event occurring
after the impairment loss was recognised.
An impairment loss in respect of an investment in
an equity instrument classified as available for saleis reversed through equity. If the fair value of a debt
instrument classified as available-for-sale increases
and the increase can be objectively related to an event
occurring after the impairment loss was recognised in
the income statement, the impairment loss shall bereversed, with the amount of the reversal recognisedin the income statement.
An impairment loss in respect of goodwill is notreversed.
In respect of other assets, an impairment loss is reversed
if there has been a change in the estimates used todetermine the recoverable amount.

Accounting Policies

An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed thecarrying amount that would have been determined,
net of depreciation or amortisation, if no impairment
loss had been recognised.
(m) Employee benefits(i) Defined contribution plans
Obligations for contributions to defined contribution
pension plans are recognised as an expense in theincome statement as incurred.
(ii) Defined benefit plans
The Group’s net obligation in respect of defined
benefit pension plans is calculated separately for eachplan by estimating the amount of future benefit that
employees have earned in return for their service in thecurrent and prior periods; that benefit is discounted todetermine its present value, and the fair value of any
plan assets is deducted. The discount rate is the yield at
the balance sheet date on AA credit rated bonds. The
calculation is performed by a qualified actuary using
the projected unit credit method.
Differences between the actual and expected returns
on assets and experience gains and losses arising on
scheme liabilities during the year, together withdifferences arising from changes in assumptions, arerecognised in the statement of recognised income andexpense in the year.
Contributions to the scheme are paid in accordancewith the scheme rules and the recommendation of theactuary. The charge to the income statement reflects
the current service cost of such obligations. The
expected return on scheme assets and the interest
cost on scheme liabilities are included within financial
income or financial expenditure in the income
statement.
(iii) Share-based payment transactions
The Group operates various equity settled share option
programmes. These share option programmes allow
Group employees to acquire shares of the Company.
The fair value of options granted is recognised as an
employee expense with a corresponding increase inequity. The fair value is measured at grant date andspread over the period during which the employees
become unconditionally entitled to the options. The
fair value of the options granted is measured using
the most appropriate models for each scheme, taking
into account the terms and conditions upon which theoptions were granted. The amount recognised as an
expense is adjusted to reflect the actual number ofshare options that vest except where forfeiture is only
due to market performance conditions not being met.

Oxford Instruments plc(n) Provisions
A provision is recognised in the balance sheet when theGroup has a present legal or constructive obligation
as a result of a past event and it is probable that an
outflow of economic benefits will be required to settle
the obligation. If the effect is material, provisions are
determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market
assessments of the time value of money and, whereappropriate, the risks specific to the liability.
(i) Restructuring
A provision for restructuring is recognised when theGroup has approved a detailed and formal restructuring
plan and the restructuring has either commenced or
has been announced publicly. Future operating costs
are not provided for.
(ii) Onerous contracts
A provision for onerous contracts is recognised whenthe expected benefits to be derived by the Group froma contract are lower than the unavoidable cost of
meeting its obligations under the contract.
(o) Trade and other payables
Trade and other payables are stated at amortised cost.
(p) Revenue(i) Goods sold and services rendered
Revenue is recognised in the income statement when
the significant risks and rewards of ownership havebeen transferred to the buyer.
Revenue, which excludes value added tax andsimilar sales based taxes, represents sales to externalcustomers of products and services and is stated before
commissions payable to agents. Revenue is recognised
on shipment, except for installation, service contracts
and long term contracts. Revenue from installation isseparately recognised on completion of the installation.
Revenue from contracts for maintenance and support
is recognised on a pro-rata basis over the contract
period.
(ii) Long term contracts
Contracts which take more than six months to complete
and are significant in size are included in the financial
statements to reflect progress towards completion.
Revenue includes the value of 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 estimatedcosts to complete and the degree of risk remaining oneach long term contract.

43

Accounting Policies(iii) Government grants
Government grants are recognised in the balance sheet
initially as deferred income when there is reasonableassurance that it will be received and that the Groupwill comply with the conditions attaching to it. Grantsthat compensate the Group for expenses incurred arerecognised as revenue in the income statement ona systematic basis in the same periods in which theexpenses are incurred. Grants that compensate theGroup for the cost of an asset are recognised in theincome statement as other operating income on asystematic basis over the useful life of the asset.

(r) Income tax
Income tax on the profit or loss for the year comprises
current and deferred tax. Income tax is recognisedin the income statement except to the extent that it
relates to items recognised directly in equity, in whichcase it is recognised in equity.

(q) Expenses(i) Operating lease payments
Payments made under operating leases are recognisedin the income statement on a straight line basis over
the term of the lease. Lease incentives received arerecognised in the income statement as an integral partof the total lease expense.

Deferred tax is provided using the balance sheet
liability method, providing for temporary differences
between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts
used for taxation purposes. The following temporary
differences are not provided for: goodwill not
deductible for tax purposes, the initial recognition ofassets or liabilities that affect neither accounting nor
taxable profit, and differences relating to investments
in subsidiaries and associates to the extent that they
will probably not reverse in the foreseeable future.
The amount of deferred tax provided is based on the
expected manner of realisation or settlement of thecarrying amount of assets and liabilities, using tax
rates enacted or substantively enacted at the balance
sheet date.

(ii) Foreign exchange gains and losses
Foreign exchange gains and losses and gains andlosses on hedging instruments that are recognisedin the income statement (see accounting policy f)
are recognised within administrative expenses andseparately disclosed in the notes to the accounts.
(iii) Financial income
Financial income comprises interest receivable on funds
invested, gains on derivative financial instruments anddividend income.
Interest income is recognised in the income statement
as it accrues, using the effective interest method.
Dividend income is recognised in the income statementon the date the entity’s right to receive payments isestablished.
(vi) Financial expenditure
Financial expenditure comprises interest payable on
borrowings calculated using the effective interest rate
method.
The interest expense component of finance lease
payments is recognised in the income statement using
the effective interest rate method.
(v) Warranty costs
Warranty costs are based on the historical relationshipbetween actual costs incurred and the relevant revenue
exposure.

44

Oxford Instruments plc

Current tax is the expected tax payable on the taxable
income for the year, using tax rates enacted or
substantively enacted at the balance sheet date, andany adjustment to tax payable in respect of previous
years.

A deferred tax asset is recognised only to the extent
that it is probable that future taxable profits will
be available against which the asset can be utilised.
Deferred tax assets are reduced to the extent that it
is no longer probable that the related tax benefit will
be realised.
Additional income taxes that arise from the distributionof dividends are recognised at the same time as theliability to pay the related dividend.
(s) Segment reporting
A segment is a distinguishable component of theGroup that is engaged in providing products or services
in a particular business segment (business segment), orin providing products or services within a particular
economic environment (geographic segment), which
is subject to risks and rewards that are different fromthose of other segments.

Accounting Policies

The Group’s primary reporting format is businesssegments and its secondary format is geographicalsegments. Segment results, assets and liabilities,
include items directly attributable to a segment aswell as an allocation of central items. Transfer prices
between business segments are set on an arms length
basis.
(t) Held for sale assets
Immediately before classification as held for sale,the measurement of the assets is brought up-to-datein accordance with applicable IFRS’s. Then, on initialclassification as held for sale, non-current assets arerecognised at the lower of carrying amount and fairvalue less costs to sell.
Impairment losses on initial classification as held for sale
are included in the income statement, even when theasset has previously been revalued. The same applies
to gains and losses on subsequent remeasurement.

Oxford Instruments plc(u) Adopted IFRS not yet applied
The following adopted IFRSs were available for early
application but have not been applied by the Group inthese financial statements:(i) Amendment to IAS 1, Capital Disclosures; applicablefor years commencing on or after 1 January 2007(ii) IFRS 7, Financial Instruments: Disclosures; applicablefor years commencing on or after 1 January 2007(iii) IFRIC 8, Scope of IFRS 2; applicable for years
commencing on or after 1 May 2006(iv) IFRIC 10, Interim Financial Reporting andImpairment; applicable for years commencing on
or after 1 November 2006(v) IFRIC 11, Group and Treasury Share Transactions;applicable for years commencing on or after
1 March 2007
The Group does not expect the above amendments tohave any significant impact on the financial statements
for the period commencing 1 April 2007.

45

Group Income Statement year ended 31 March 2007

Oxford Instruments plc

2007

Revenue
Cost of sales
Gross profit
Trading expenses excluding cost of goods soldTrading profit
Other operating income
Amortisation of acquired intangibles
Restructuring and non-recurring costs
Operating profit/(loss)
Financial income
Financial expenditure
Profit/(loss) before income tax
Income tax expense
Loss for the year
attributable to equity shareholdersof the parent

3
2
5
6
7
11
12
13

£m
161.6
(95.0)
66.6(58.3)
8.3
(1.1)
(5.2)
2.0
8.5
(9.2)
1.3
(2.8)

(1.5)

(3.4)

pence

pence

Earnings per share
Basic earnings per share
Diluted earnings per share

14
14

(3.2)
(3.2)

(7.2)
(7.2)

Dividends per share
Dividends paid
Dividends proposed

15
15

8.4
8.4

6.0
8.4

£m
4.0
4.0

£m
2.9
4.0

Total dividends
Dividends paid
Dividends proposed

46

Notes
2

2006
As restated£m
147.4(87.6)
59.8(55.4)
4.4
2.0
(0.2)
(6.7)
(0.5)
8.1
(8.5)
(0.9)
(2.5)

Group Statement of Recognised Income and Expense year ended 31 March 2007

Note
Foreign exchange translation differences for foreign
operations
Cash flow hedges – effective portion
Deferred tax on the above
Actuarial gain/(loss) in respect of post retirement benefits
Deferred tax on the above
Recycling of fair value movements/(impairment of carrying
value) of held for sale equity securities
Net income/(expense) recognised directly in equity
Loss for the year
Total recognised income/(expense) for the year – attributable
to equity shareholders of the parent

29

2007
£m

2006
£m

(1.7)
22.1
(6.7)
0.2

0.9
(0.3)
0.1
(10.3)
3.1
(0.2)

13.9
(1.5)

(6.7)
(3.4)

12.4

(10.1)

47

Group Balance Sheet as at 31 March 2007

Oxford Instruments plc

2007
£m

2006
£m

17
18
19
20

21.5
18.1
0.6
11.6
51.8

23.4
15.6
1.0
19.1
59.1

21
22

25.6
45.1
0.5
0.5
3.9
7.0
82.6

27.1
45.3
0.9
0.1
13.9
5.0
92.3

134.4

151.4

Notes
AssetsNon-current assets
Property, plant and equipment
Intangible assets
Available for sale equity securities
Deferred tax assets

Current assets
Inventories
Trade and other receivables
Current income tax recoverable
Derivative financial instruments
Cash and cash equivalents
Held for sale assets

23
24
25

Total assets
EquityCapital and reserves attributable to the Company’s equity
shareholders
Share capital
Share premium
Other reserves
Translation reserve
Retained earnings

26
26
26
26
26

2.5
20.9
0.1
(0.8)
33.1
55.8

2.4
20.2
0.1
0.9
22.8
46.4

Liabilities
Non-current liabilities
Other payables
Retirement benefit obligations

30
29

0.2
30.8
31.0

0.5
53.4
53.9

28
24
30

1.0
1.1
40.2
1.8
0.2
3.3
47.6

2.9
1.2
38.7
1.9
0.3
6.1
51.1

Total liabilities

78.6

105.0

Total liabilities and equity

134.4

151.4

Current liabilities
Borrowings
Bank overdrafts
Trade and other payables
Current income tax payables
Derivative financial instruments
Provisions

23
31

The financial statements were approved by the Board of Directors on 13 June 2007 and signed on its behalf by:

Jonathan Flint			Director				48

Kevin Boyd
Director

Group Statement of Cash Flows

year ended 31 March 2007

Oxford Instruments plc

2007
£m
(1.5)

2006
£m
(3.4)

2.8
0.7
5.2
1.1
3.4
1.5
13.2
0.2
0.2
(2.9)

2.5
0.4
6.7
0.2
(2.0)
3.7
1.1
9.2
0.3
0.3
(3.1)

(0.7)
10.0
0.6
(2.3)
(0.3)
8.0
(0.3)
(2.5)
5.2

(1.2)
5.5
(6.5)
2.0
(5.4)
(0.3)
(4.7)
(0.6)
(2.7)
(8.0)

0.1
0.3
0.2
(0.3)
(4.4)
(5.6)
(9.7)

0.6
2.2
0.9
(3.9)
(4.2)
(2.6)
(7.0)

Cash flows from financing activities
Proceeds from issue of share capital
Proceeds from the disposal of own shares(Decrease)/increase in short term borrowings
Dividends paid
Net cash from financing activities

0.8
(1.9)
(4.0)
(5.1)

0.8
0.1
0.8
(2.9)
(1.2)

Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate fluctuations on cash held

(9.6)
12.7
(0.3)

(16.2)
28.5
0.4

Cash and cash equivalents at end of the year

2.8

12.7

Loss for the year
Adjustments for:
Income tax expense
Net financial expense
Restructuring and non-recurring costs
Amortisation of acquired tangibles
Other operating income
Depreciation of property, plant and equipment
Amortisation of research and development
Earnings before interest, tax, depreciation and amortisation
Loss on disposal of property, plant and equipment
Cost of equity settled employee share schemes
Restructurings costs paid
Cash payments to the pension scheme
more than the charge to the income statement
Operating cash flows before movements in working capital
Decrease/(increase) in inventories(Increase)/decrease in receivables
Decrease in payables
Decrease in provisions
Cash generated from operations
Interest paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Proceeds from sale of held for sale assets
Proceeds from sale of available for sale equity securities
Interest received
Acquisition of subsidiaries, net of cash acquired
Acquisition of property, plant and equipment
Capitalised development expenditure
Net cash from investing activities

49

Notes to the Financial Statements

1

Oxford Instruments plc

Reconciliation between profit and adjusted profit
2007
£m
1.3
1.1
5.2
(0.1)
7.5

Profit/(loss) before income tax
Other operating income
Amortisation of acquired intangibles
Restructuring and non-recurring costs (note 7)
Financial instruments (see below)
Adjusted profit before income tax

2006
£m
(0.9)
(2.0)
0.2
6.7
4.0

Under IAS 39, derivative financial instruments are recognised initially at fair value – this includes the fixed forward
and option based foreign exchange contracts the Group has entered into in order to manage its exposure
to foreign exchange rate movements. Subsequent to initial recognition, derivative financial instruments aremeasured at fair value. In the prior year, the Group hedge accounted for its derivative financial instruments inorder to minimise the potential volatility in the income statement. However, IAS 39 requires certain stringent
criteria to be met in order to continue to hedge account, which in the particular circumstances of the Group,
are considered by the Board not to bring any significant economic benefit. Accordingly, with effect from 1 April
2006, the Group has ceased to hedge account for all of its existing derivative financial instruments and instead
will account for them as trading instruments with the profit or loss on remeasurement to fair value being taken
immediately to the income statement. Adjusted profit for the year is stated before changes in the valuation ofthese instruments so that the underlying performance of the Group can more clearly be seen.
2

Segment information

Information is presented in the consolidated financial statements in respect of the Group’s two business segments.
These are the primary basis of our segmental reporting. Our Analytical business provides measurement andfabrication instruments for industrial and commercial customers. Our Superconductivity business provides
materials, tools and systems for industrial and government customers working at the frontiers of science.
Segment results include items directly attributable to a segment as well as those which can be allocated on areasonable basis.
a)Analysis by BusinessYear to 31 March 2007

Revenue

Trading profit before costs of OII
Costs of OII
Trading profit
Amortisation of acquired intangibles
Restructuring and non-recurring costs
Operating profit
Net financial expense
Income tax expense
Loss for the year

Analytical
£m
100.7

Superconductivity
£m
60.9

Total
£m
161.6

10.1

1.6

11.7
(3.4)
8.3
(1.1)
(5.2)
2.0
(0.7)
(2.8)
(1.5)

Research and development to enhance and develop existing products is undertaken within both the Analyticaland Superconductivity business segments. In addition, Oxford Instruments Innovation (OII) carries out initialinvestigations into new product lines that would not normally be undertaken by the operating businesses. Trading
profit is shown both before and after OII costs so as to give a more meaningful indication of the performanceof the business segments.

50Notes to the Financial Statements

2

Segment information Continueda)Analysis by Business Continued

Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities

Oxford Instruments plc

Analytical£m
64.0Superconductivity
£m
46.8

Total
£m
110.8
23.6
134.4

26.4

17.0

43.4
35.2
78.6

Analytical£m

Superconductivity
£m

Total
£m

Depreciation charge

1.9

1.6

3.5

Amortisation charge

2.4

0.2

2.6

Capital expenditure, including capitalised
research and development

8.3

1.7

10.0

Year to 31 March 2006 (as restated)
Analytical£m
80.7

Superconductivity
£m
66.7

Total
£m
147.4

Trading profit before costs of OII
Costs of OII
Trading profit
Other operating income
Amortisation of acquired intangibles
Restructuring and non-recurring costs
Operating loss
Net financial expense
Income tax expense
Loss for the year

6.1

0.3

6.4
(2.0)
4.4
2.0
(0.2)
(6.7)
(0.5)
(0.4)
(2.5)
(3.4)

Segment assets
Unallocated assets
Total assets

55.6

55.9

111.5
39.9
151.4

Segment liabilities
Unallocated liabilities
Total liabilities

21.7

22.2

43.9
61.1
105.0

RevenueSuperconductivity includes revenue of £13.4m and a trading loss of £2.5m in respect of the magnet businessrestructured at the end of 2006.

51

Notes to the Financial Statements

2

Segment information Continueda)Analysis by Business Continued

Oxford Instruments plc

Analytical£m

Superconductivity
£m

Total
£m

Depreciation charge

1.8

2.2

4.0

Amortisation charge

1.0

0.3

1.3

-

3.7

3.7

4.6

2.2

6.8

Other significant non-cash expenses – end ofline inventory write down
Capital expenditure, including capitalised
research and developmentb) Geographical Analysis
Year to 31 March 2007
UK

Revenue fromexternal customers
Segment assets
Unallocated assets
Total
Capital expenditure,including capitalised
research anddevelopment

Continental

North

EuropeAmerica

£m

£m

£m

18.5

41.5

55.7

5.7

Japan

Rest ofRest of

Asia

World

Total

£m

£m

£m

£m

54.2

18.2

25.4

3.8

161.6

15.6

32.8

6.0

0.7

-

110.8
23.6
134.4

1.2

2.9

0.1

0.1

-

10.0

Continental

North

Japan

Rest ofRest of

Total

EuropeAmerica

Asia

World

£m

£m

£m

£m

£m

£m

£m

18.8

29.2

59.9

15.0

19.9

4.6

147.4

60.3

12.7

31.1

6.9

0.5

-

111.5
39.9
151.4

4.2

0.8

1.7

0.1

-

-

6.8

Year to 31 March 2006 (as restated)
UK

Revenue fromexternal customers
Segment assets
Unallocated assets
Total
Capital expenditure,including capitalised
research anddevelopment

52

Notes to the Financial Statements

3

Oxford Instruments plc

Trading expenses excluding cost of goods sold2007

Selling and marketing costs
Administration and shared services
Foreign exchange (gain)/loss
Research and development (note 4)

£m
26.7
20.3
(0.8)
12.1
58.3

2006
as restated
£m
24.6
18.8
0.1
11.9
55.4

£’000
86

£’000
80

146
1
2
235

130
12
28
250

Auditor’s remuneration
Audit of these financial statements
Amounts received by auditors and their associates in respect of:
Audit of financial statements of subsidiaries pursuant to legislation
Tax advisory services
IFRS advisory work
Other services
Total fees paid to auditor and its associates

4

RESEARCH AND DEVELOPMENT

The total research and development spend by the Group is as follows:
2007

Total cash spent on research and development during
the yearLess: amount capitalised
Add: amortisation of amounts previously capitalised
Research and development charged to income
statement

Analytical

Superconductivity

Total

£m

£m

£m

10.6
(5.3)
1.4

5.6
(0.3)
0.1

16.2
(5.6)
1.5

6.7

5.4

12.1
2006

as restatedTotal cash spent on research and development during
the yearLess: amount capitalised
Add: amortisation of amounts previously capitalised
Research and development charged to income
statement

Analytical

Superconductivity

Total

£m

£m

£m

7.8
(2.4)
0.9

5.6
(0.2)
0.2

13.4
(2.6)
1.1

6.3

5.6

11.9

53

Notes to the Financial Statements

5

Oxford Instruments plc

Other operating income

Profit on disposal of available for sale equity securities
Profit on disposal of held for sale assets

2007
£m
-

2006
£m
1.8
0.2
2.0

The profit on disposal of available for sale equity securities in 2006 comprises a profit of £1.7m on the disposalof the Group’s entire holdings in Target Systemelectronic GmbH and Target Instruments Inc and a profit of £0.1m
in respect of a part disposal of the Group’s interest in ARKeX Limited.

6

Amortisation of acquired intangibles

Amortisation of acquired intangibles
Adjustment to carrying value of goodwill as required by IAS12

2007
£m
0.2
0.9
1.1

2006
£m
0.2
0.2

The adjustment to the carrying value of goodwill arises due to the utilisation of tax losses which were notrecognised as a deferred tax asset at the time of acquisition. IAS12 requires that when such losses are utilised
subsequent to acquisition the carrying value of goodwill is reduced so that it reflects the carrying value thatwould have arisen had a deferred tax asset been recognised at the time of acquisition.

7

RESTRUcturing and non-recurring costs

Restructuring and non-recurring costs for the year comprise £1.7m in respect of the settlement of an onerous
contract, £2.9m in respect of the exit from the high field magnet business, £0.3m in respect of the disposal of
the Group’s interest in Oxford BioSignals Ltd and £0.3m in respect of costs associated with the exit from the held
for sale factory which became surplus to requirements following the restructuring of the UK magnet business in2006 (see below).
Restructuring costs for the year ended 31 March 2006 relate to restructuring of the UK magnet business andrestructuring at Plasma Technology in Yatton, Bristol. The cost comprises inventory write-downs of £3.7m,
redundancy and similar costs of £1.0m, halted research and development costs of £0.8m, supplier commitmentsof £0.7m and other costs of £0.5m.

54Notes to the Financial Statements

Oxford Instruments plc

8	personnel COSTS

Wages and salaries
Social security costs
Charge in respect of defined benefit pension schemes
Contributions to defined contribution pension plans
Charge in respect of employee share options

2007
£m
43.1
4.1
3.7
1.2
0.2
52.3

2006
£m
42.2
3.9
2.9
1.1
0.3
50.4

Directors’ emoluments are disclosed in the Directors’ Remuneration Report on pages 28 to 35 of this document.

9

Employees

The average number of people employed by the Group (including Directors) during the year were as follows:

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

2007
Number
633
272
218
171
1,294

2006
Number
741
234
197
159
1,331

55

Notes to the Financial Statements

Oxford Instruments plc

10 SHARE OPTION SCHEME EXPENSE
Administrative expenses include a charge of £0.2m (2006 £0.3m) in respect of the cost of providing share options.
The cost is calculated by estimating the fair value of the option at grant date and spreading that amount overthe vesting period. Further details of the assumptions used in these calculations are given below.
The terms and conditions of all awards and grants made since 7 November 2002 are as follows; all awards andoption exercises are settled by physical delivery of shares:
Grant date

Plan

Employees
Entitled

December 2006

UK Save As You
Earn scheme 21
Senior Executive
Long Term
Incentive Scheme
Executive Share
Option Scheme

All UK employees

September 2006

Number of
instruments
granted
250,043

Certain senior
executives

12,500Certain senior
executives

66,667

Senior Executive
Long Term
Incentive Scheme
Executive share
Option Scheme

Certain senior
executives

75,000Certain senior
executives

450,550

Senior Executive
Long Term
Incentive Scheme
Executive Share
Option Scheme

Certain senior
executives

40,000Certain senior
executives

6,000

UK Save as You
Earn scheme 20
Senior Executive
Long Term
Incentive Scheme
Executive Share
Option Scheme

All UK employees

156,881

Certain senior
executives

50,000Certain senior
executives

540,300

UK Save as You
Earn scheme 19
Executive Share
Option Scheme

All UK employees

221,749

Certain senior
executives

786,213

UK Save as You
Earn scheme 18
Executive Share
Option Scheme

All UK employees

227,157

Certain senior
executives

932,037

December 2002

Executive Share
Option Scheme

Certain senior
executives

60,000December 2002

UK Save as You
Earn scheme 17

All UK employees

120,552

September 2006

July 2006

July 2006

December 2005

December 2005

December 2005
July 2005

July 2005

December 2004
July 2004

December 2003
July 2003

Vesting conditions

Contractual
Life of option

Three or five years ofserviceThree years of service
plus satisfaction of
performance conditions
Three years of service
plus satisfaction of
performance conditions
Three years of service
plus satisfaction of
performance conditions
Three years of service
plus satisfaction of
performance conditions
Three years of service
plus satisfaction of
performance conditions
Three years of service
plus satisfaction of
performance conditions
Three or five years ofserviceThree years of service
plus satisfaction of
performance conditions
Three years of service
plus satisfaction of
performance conditions
Three or five years ofserviceThree years of service
plus satisfaction of
performance conditions
Three or five years ofserviceThree years of service
plus satisfaction of
performance conditions
Three years of service
plus satisfaction of
performance conditions
Three or five years ofservice

3.5 or 5.5 years
7 years

10 years

7 years

10 years

7 years

10 years

3.5 or 5.5 years
7 years

10 years

3.5 or 5.5 years
10 years

3.5 or 5.5 years
10 years

10 years

3.5 or 5.5 years

Full details of the performance conditions can be found in the Directors’ Remuneration Report on pages
28 to 35.

56

Notes to the Financial Statements

Oxford Instruments plc

10 SHARE OPTION SCHEME EXPENSE Continued
Fair value of share options and assumptions
Executive Share Option Scheme
September
2006

July
2006

December
2005

July
2005

July
2004

July
2003

December
2002

Fair value atmeasurement date
Share price
Exercise price

44.6p£2.05½£2.03¾

46.6p
£2.10
£2.10

64.0p
£2.42¼£2.42½

56.5p£2.17½£2.19

64.5p£2.18½£2.18

47.5p£1.87½£1.88

31.5p£1.47½£1.48

Expected volatility

33.5%

34.3%

37.3%

38.4%

41.9%

41.7%

40.4%

Expected option
life (expressed asweighted average
life used in themodelling)
Expected dividend
yield
Risk free interestrate

6 years

6 years

6 years

6 years

6 years

6 years

6 years

4.1%

4.0%

3.5%

3.9%

3.8%

4.5%

5.7%

4.6%

4.7%

4.3%

4.2%

5.1%

3.9%

4.4%

31.4%

33.6%

24.2%

23.0%

21.0%

26.0%

31.0%

Performance
condition discountin respect of TSR
condition

Senior Executive Long Term Incentive Scheme

Fair value at measurement date
Share price
Exercise price
Expected volatility
Expected option life (expressed as weighted
average life used in the modelling)
Expected dividend yield
Risk free interest rate
Performance condition discount in respect of TSR
condition

September
2006
138.6p£2.05½
£nil
25.5%

July
2006
141.9p
£2.10
£nil
26.5%

December2005£1.62£2.42¼
£nil
32.2%

July
2005
£1.46
£2.17½£nil
34.8%

3 years
4.1%
4.8%

3 years
4.0%
4.7%

3 years
3.5%
4.3%

3 years
3.9%
4.2%

47.6%

47.7%

51.5%

23.0%

57

Notes to the Financial Statements

Oxford Instruments plc

10 SHARE OPTION SCHEME EXPENSE Continued
UK Save as You Earn scheme – 3 year

Fair value at measurement date
Share price
Exercise price
Expected volatility
Expected option life (expressed asweighted average life used in themodelling)
Expected dividend yield
Risk free interest rate

December
2006
83.7p
£2.55
£1.83
25.8%

December
2005
65.0p
£2.44
£2.14
33.3%

December
2004
63.0p
£2.14
£1.75
35.0%

December
2003
55.0p
£1.95
£1.74
40.1%

December
2002
37.0p£1.47½£1.35
41.6%

3.25 years
3.3%
5.1%

3.25 years
3.4%
4.3%

3.25 years
3.9%
4.4%

3.25 years
4.3%
4.5%

3.25 years
5.7%
4.1%

December
2006
98.5p
£2.55
£1.73
31.0%

December
2005
79.0p
£2.44
£2.02
34.2%

December
2004
78.0p
£2.14
£1.65
39.8%

December
2003
69.0p
£1.95
£1.64
43.7%

December
2002
43.0p£1.47½£1.27
41.5%

5.25 years
3.3%
4.9%

5.25 years
3.4%
4.2%

5.25 years
3.9%
4.4%

5.25 years
4.3%
4.7%

5.25 years
5.7%
4.3%

UK Save as You Earn scheme – 5 year

Fair value at measurement date
Share price
Exercise price
Expected volatility
Expected option life (expressed asweighted average life used in themodelling)
Expected dividend yield
Risk free interest rate

In all cases expected volatility has been based on historical volatility over a period of time of the same length as
the expected option life and ending on the grant date. The volatility has been used to incorporate a discount for
TSR market condition in the ESO and SELTIS schemes.
The Executive Share Option and Senior Executive Long Term Incentive Schemes have been valued using a MonteCarlo stochastic model. The Save as You Earn schemes have been valued using a modified Black-Scholes model.

58

Notes to the Financial Statements

Oxford Instruments plc

10 SHARE OPTION SCHEME EXPENSE Continued
The number and weighted average exercise prices of share options are as follows:
Weighted
average
exercise price
2007
£1.85
£1.78
£2.42
£1.21
£1.25

Numberofoptions
2007
3,289,600
854,760(234,166)(685,627)(398,044)

Weighted
average
exercise price
2006
£1.89
£1.92
£1.75
£1.44
£2.26

2006
4,321,458
793,181(57,273)(596,351)(1,171,415)

Outstanding at the year end£1.93

2,826,523£1.85

3,289,600

Exercisable at the year end£2.12

424,589£1.38

636,787

Outstanding at the beginning of the period
Granted during the year
Forfeited during the year
Exercised during the year
Lapsed during the year

Numberof options

11	financial income

Bank interest receivable
Expected return on pension scheme assets
Mark to market gain in respect of derivative financial instruments

2007
£m
0.2
8.2
0.1
8.5

2006
£m
0.9
7.2
8.1

2007
£m

2006
£m

0.3
8.9
9.2

0.6
7.9
8.5

12	financial expenditure

Interest payable and similar charges on bank loans and overdrafts
Interest charge on pension scheme liabilities

59

Notes to the Financial Statements

Oxford Instruments plc

13 Income tax expense
Recognised in the income statement
2007
£m

2006
£m

2.4
2.4

2.4
0.1
2.5

0.6
(0.2)
0.4

(0.8)
0.8
-

2.8

2.5

Profit/(loss) before income tax

1.3

(0.9)

Income tax using the UK corporation tax rate (30%)
Effect of:Tax rates in foreign jurisdictions
Amortisation of intangible assets
Non-tax deductible expenses
Tax incentives not recognised in the income statement – mainly US
manufacturing deductions
Temporary differences not recognised for deferred tax
Effect of current tax losses not utilised
Effect of previous tax losses now utilised(Over)/under provided in prior years
Total tax expense

0.4

(0.3)

0.4
0.3
0.2

0.5
0.1
0.1

(0.2)
0.2
2.6
(0.9)
(0.2)
2.8

(0.4)
0.7
1.7
0.1
2.5

(6.7)
(6.7)

3.1
0.1
3.2

Current tax expense
Current year
Adjustment for prior years

Deferred tax expense
Origination and reversal of temporary differences
Adjustment in respect of prior years
Benefit of tax losses recognised

Total tax expense
Reconciliation of effective tax rate

Deferred tax recognised directly in equity
Relating to employee benefits
Relating to cash flow hedges

60Notes to the Financial Statements

Oxford Instruments plc

14 Earnings per sharea) Basic
The calculation of basic earnings per share is based on the profit or loss for the year after taxation and a weighted
average number of ordinary shares outstanding during the year, excluding shares held by the Employee ShareOwnership Trust, as follows:

Loss for the year

Weighted average number of shares outstanding
Less shares held by Employee Share Ownership Trust
Weighted average number of shares used in calculation of earnings
per share

2007
£m
(1.5)

2006
£m
(3.4)

Sharesmillion
48.9
0.7

Sharesmillion
48.6
0.9

48.2

47.7

b) Diluted
The following table shows the effect that options would have had on the calculation of diluted basic earnings
per share. However, since there was a loss in the year that effect was antidilutive and so has been excluded fromthe calculation of diluted basic earnings per share. This effect has been included in the calculation of diluted
adjusted earnings per share – see (c) below.
2007
Sharesmillion2006
SharesmillionNumber of ordinary shares per basic earnings per share calculations
Effect of shares under option

48.2
0.3

47.7
0.5

Number of ordinary shares per diluted earnings per share calculations

48.5

48.2

c) Adjusted
The earnings per share before other operating income, amortisation of acquired intangibles, restructuring andnon-recurring costs and mark to market gains or losses in respect of certain derivatives are as follows:

Basic
Diluted

2007
pence
9.6
9.5

2006
pence
3.9
3.8

A reconciliation of the profit for the years used to calculate basic earnings per share to the adjusted
profit used to calculate the adjusted earnings per share shown above is set out below:

Adjusted profit before income tax (Note 1)
Taxation
Adjusted profit

2007
£m
7.5
(2.8)
4.7

2006
£m
4.0
(2.2)
1.8

61

Notes to the Financial Statements

Oxford Instruments plc

15	dividends per share
The following dividends per share were paid by the Group:

Previous year interim dividend
Previous year final dividend

2007
Pence
2.4
6.0
8.4

2006
Pence
6.0
6.0

The following dividends per share were proposed by the Group in respect of each accounting year
presented:

Interim dividend
Final dividend

2007
pence
2.4
6.0
8.4

2006
pence
2.4
6.0
8.4

The final proposed dividend of 6.0 pence per share (2006: 6.0 pence) will not be provided for until authorised byshareholders at the forthcoming annual general meeting.
Interim dividends of 2.4 pence per share (2006: 2.4 pence) are provided for when the dividend is paid.
Subject to the approval of the shareholders at the Annual General Meeting on 26 September 2007, the proposed
final dividend will be paid on 25 October 2007 to shareholders registered at the close of business on 28 September
2007. The ordinary shares will be quoted ex-dividend on 26 September 2007. The latest date for exercising the
Scrip Dividend alternative is 25 September 2007. The dividends payable on the shares held in trust have been
waived.

62

Notes to the Financial Statements

Oxford Instruments plc

16 Acquisitions
HKL Technologies A/S
On 4 April 2005 the Group acquired HKL Technologies A/S based in Hobro, Denmark for a net cash considerationof £2.1m. Further consideration of up to £0.7m is payable based on post acquisition sales revenue growth. The
Group’s best estimate of this deferred consideration at the current time is £0.3m. HKL contributed turnover of£1.8m and profit before income tax of £0.1m to the Group in the year to 31 March 2006.

Property, plant and equipment
Inventories
Receivables
PayablesTotal net assets/(liabilities)

Book value
£m
0.2
0.3
0.6
(0.7)

Accounting
policyadjustments
£m
(0.1)
(0.1)
-

Fair value
to the Group
£m
0.1
0.2
0.6
(0.7)

0.4

(0.2)

0.2

Goodwill

2.2

Total purchase costLess consideration deferred
Net cash outflow in respect of the purchase *Less net cash acquired
Net cash outflow on acquisition

2.4
(0.3)
2.1
2.1

* Includes costs associated with the acquisition of £0.1m.

The book value of the assets acquired is based on the management accounts at the date of acquisition. The
accounting policy adjustments reflect the alignment of accounting policies in respect of stock provisioning andproject based contracts. There were no fair value adjustments.
Goodwill arose on the above acquisition as the criteria for the recognition of any intangible assets are not met
at the date of acquisition. It is recorded as a component of intangible assets.

63

Notes to the Financial Statements

Oxford Instruments plc

17	property, plant anD equipment

64

Land andbuildings£mPlant andequipment£mFixtures andfittings
£m

Total

Cost
Balance at 1 April 2005
Acquisitions through business combinations
Other acquisitions
Disposals
Effect of movements in foreign exchange
Balance at 31 March 2006

16.6
0.2
(0.1)
0.2
16.9

29.5
0.1
3.9
(1.9)
0.8
32.4

7.5
0.1
(0.1)
0.1
7.6

53.6
0.1
4.2
(2.1)
1.1
56.9

Balance at 1 April 2006
Acquisitions
Disposals
Transfers to held for sale assets
Effect of movements in foreign exchange
Balance at 31 March 2007

16.9
0.2
(2.9)
(0.3)
13.9

32.4
3.8
(3.4)
(0.1)
(1.4)
31.3

7.6
0.4
(0.1)
7.9

56.9
4.4
(3.4)
(3.0)
(1.8)
53.1

Depreciation and impairment losses
Balance at 1 April 2005
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 March 2006

3.3
0.3
(0.1)
0.2
3.7

22.6
2.9
(1.7)
0.5
24.3

4.7
0.8
5.5

30.6
4.0
(1.8)
0.7
33.5

Balance at 1 April 2006
Depreciation charge for the year
Disposals
Transfers to held for sale assets
Effect of movements in foreign exchange
Balance at 31 March 2007

3.7
0.3
(1.0)
(0.1)
2.9

24.3
2.7
(3.1)
(1.1)
22.8

5.5
0.5
(0.1)
5.9

33.5
3.5
(3.1)
(1.0)
(1.3)
31.6

Carrying amounts
At 31 March 2005

13.3

6.9

2.8

23.0

At 31 March 2006

13.2

8.1

2.1

23.4

At 31 March 2007

11.0

8.5

2.0

21.5

£m

Notes to the Financial Statements

Oxford Instruments plc

18	intangible assets
Goodwill

Development
costs

Total

£m

Customer
relatedacquiredintangibles
£m

£m

£m

7.9
2.2
(0.8)

1.9
-

5.4
-

15.2
2.2
(0.8)

0.3
9.6

0.1
2.0

2.6
8.0

2.6
0.4
19.6

Balance at 1 April 2006
Acquisitions - internally developed
Disposals
Effect of movements in foreign exchange
Balance at 31 March 2007

9.6
(0.3)
9.3

2.0
2.0

8.0
5.6
(0.2)
(0.2)
13.2

19.6
5.6
(0.2)
(0.5)
24.5

Amortisation and impairment losses
Balance at 1 April 2005
Amortisation for the year
Impairment charge
Balance at 31 March 2006

0.2
0.2

1.1
0.2
1.3

1.4
1.1
2.5

2.7
1.1
0.2
4.0

0.2
0.9

1.3
0.2
-

2.5
1.5
-

4.0
1.5
0.2
0.9

1.1

1.5

(0.2)
3.8

(0.2)
6.4

Carrying amounts
At 31 March 2005

7.7

0.8

4.0

12.5

At 31 March 2006

9.4

0.7

5.5

15.6

At 31 March 2007

8.2

0.5

9.4

18.1

Cost
Balance at 1 April 2005
Acquisitions through business combinations
Adjustment relating to recognition of deferred
tax asset
Acquisitions – internally developed
Effect of movements in foreign exchange
Balance at 31 March 2006

Balance at 1 April 2006
Amortisation charge for the year
Impairment charge
Adjustment relating to recognition of deferred
tax asset
Disposals
Balance at 31 March 200765

Notes to the Financial Statements

Oxford Instruments plc

18	intangible assets Continued
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs)
that are expected to benefit from that business combination. The carrying amount of goodwill was allocated togroups of CGU’s as follows:
2007
£m
4.6
3.6
8.2

Analytical
Superconductivity

2006
£m
5.6
3.8
9.4

The group tests goodwill annually for impairment, or more frequently if there are indications that goodwill
might be impaired.
The recoverable amounts are determined from value in-use calculations. Three year cash flow forecasts preparedby the management of each CGU are used as a basis for the value in-use calculations which are prepared over a
five year period. The key assumptions are those regarding discount rates, growth rates and expected changes toselling prices and direct costs during the period. Management estimates discount rates using rates that reflectcurrent market assessments of the time value of money and the risks specific to the CGU. The growth rates are
based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices andexpectations of future changes in the market.
The rate used to discount the forecast cash flows is 10%.
19	available for sale equity securities

Available for sale equity securities

2007
£m
0.6

2006
£m
1.0

Percentage ofcompany
owned

Carrying value

Available for sale equity securities at 31 March 2007 comprise:
Security

ARKeX Limited

Link Nordiska AB

Oxford Diffraction
LimitedPrincipal activity

Supply of gravity-gradiometry exploration andrelated services to the oil, gas and minerals
industries
Scandinavian distributor of Oxford Instruments
Microanalysis X-ray systems for chemicalelemental analysis
X-ray diffraction systems and ancillary products
for chemical crystallography and protein
structure determination

16.70%£m
0.3

10.00%-

23.00%

0.3

The Group considers that ARKeX Limited and Oxford Diffraction Limited are not associates because in both cases
the Group is unable to exert significant influence over their financial and operating policies due to the dominant
influence exerted by other investors.
The investments are unlisted and engaged in the development of new high technology products. Due to theinherent uncertainties this creates, the Group considers that it is not possible to reliably estimate the fair valueof these investments.

66

Notes to the Financial Statements

Oxford Instruments plc

19	available for sale equity securities Continued
During the year the Group disposed of its investment in Oxford BioSignals Limited. The proceeds of disposal were£0.4m. No profit on disposal arose. A fair value movement taken to the statement during 2007 of recognised
income and expenditure during 2006 has been recycled through the income statement.
During the year additional “B” round funding resulted in the Group’s percentage holding in ARKeX Ltd being
reduced from 18.9% to 16.7%.
During the prior year the Group sold its investments in Target Systemelectronic GmbH and Target Instruments
Incorporated. The carrying value at the time of sale was £0.4m and the profit on disposal was £1.7m.
20	deferred TAX
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:

Property, plant and equipment
Deferred revenue
Inventories
Employee benefits
Provisions
Intangible assets
Other items
Tax value of loss carry-forwards
recognised
Tax assets/(liabilities)
Set off of tax
Net tax assets

Assets
2007
£m
2.5
0.3
1.2
9.7
0.4
-

2006
£m
1.9
0.4
1.5
16.5
0.4
-

Liabilities
2007
2006
£m
£m
(0.1)
(0.3)
(2.5)
(1.3)
(0.1)
(0.1)

Net
2007
£m
2.4
0.3
1.2
9.7
0.4
(2.5)
(0.1)

2006
£m
1.6
0.4
1.5
16.5
0.4
(1.3)
(0.1)

0.2
14.3
(2.7)
11.6

0.1
20.8
(1.7)
19.1

(2.7)
2.7
-

0.2
11.6
11.6

0.1
19.1
19.1

(1.7)
1.7
-

Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:

Deductible temporary differences
Tax losses

2007
£m
2.5
7.8
10.3

2006
£m
1.7
7.3
9.0

Tax losses amounting to £1.6m (2006: £1.5m) expire between the year end and 2015. The balance do not expire
under current tax legislation. The deductible temporary differences do not expire under current tax legislation.
Deferred tax assets have not been recognised in respect of these items as it is not probable that future taxable
profits will be available against which the Group can utilise the benefits there from.

67

Notes to the Financial Statements

Oxford Instruments plc

20	deferred tax Continued
Movement in temporary differences during the year
Balance
1 April2005£m

Recognised
in income£m

Recognisedin equity£m

Recognised
in respect ofacquisitions£m

Foreignexchange
adjustment£m

Balance
31 March
2006
£m

1.4
0.3
1.0
13.1
0.2
(1.2)
(0.1)
0.2
0.1

0.2
0.1
0.5
0.2
0.2
(0.1)
(0.3)
(0.8)

3.1
0.1
-

0.8

0.1
-

1.6
0.4
1.5
16.5
0.4
(1.3)
(0.1)
0.1

15.0

-

3.2

0.8

0.1

19.1

Balance
1 April
2006£m

Recognised
in income£m

Recognisedin equity£mForeignexchange
adjustment£m

Balance
31 March
2007
£m

1.6
0.4
1.5
16.5
0.4
(1.3)
(0.1)
0.1
19.1

0.8
(0.1)
(0.3)
0.2
(1.1)
0.1
(0.4)

(6.7)
(6.7)

(0.3)
(0.1)
(0.4)

2.4
0.3
1.2
9.7
0.4
(2.5)
(0.1)
0.2
11.6

Property, plant and equipment
Deferred revenue
Inventories
Employee benefits
Provisions
Intangible assets
Cash flow hedges
Other items
Tax value of loss carry forwards
recognised

Property, plant and equipment
Deferred revenue
Inventories
Employee benefits
Provisions
Intangible assets
Other items
Tax value of loss carry forwards recognised

Out of the £11.6m deferred tax asset, £9.6m relates to the UK and is calculated at a rate of 30%. The UK
government has proposed a rate of 28% and should this become law a part of the deferred tax asset will be
released to either income or equity as appropriate.
21 INVENTORIES

Raw materials and consumables
Work in progress
Finished goods

2007
£m
8.6
11.7
5.3
25.6

2006
£m
9.9
10.9
6.3
27.1

The amount of inventory recognised as an expense comprises cost of sales and £0.7m included within restructuring
and non-recurring costs.

68Notes to the Financial Statements

Oxford Instruments plc

22	trade and other receivables

Trade receivables
Less provision for impairment of receivables
Net trade receivables
Prepayments
Other receivables

2007
£m
40.5
(0.4)
40.1
2.5
2.5
45.1

2006
£m
38.8
(0.4)
38.4
2.9
4.0
45.3

Other receivables includes £nil (2006 £2.6m) due from customers in respect of long term contracts. Related
revenue recognised during the year in respect of long term contracts was £nil (2006 £1.3m). Revenue is recognisedin accordance with the long term contracts accounting policy which requires management to set milestones andassociated cumulative revenue at the start of each contract. The aggregate costs to date plus recognised profits(less recognised losses) in respect of long term contracts in progress at the balance sheet date were £nil (2006£5.9m). Advances received were £nil. In prior year advances of £0.2m were offset against other receivables.

23	derivative financial instruments
Exposure to credit, interest rate and currency risk arises in the normal course of the Group’s business. Derivative
financial instruments are used to hedge exposure to fluctuations in foreign exchange rates.
Credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit
evaluations are performed on all customers requiring credit over a certain amount. The Group does not require
collateral in respect of financial assets.
Surplus cash is deposited and derivative financial instruments are made only with banks with credit ratingsof at least AA. Given their high credit rating, management do not expect any counterparty to fail to meet its
obligations.
At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit
risk is represented by the carrying amount of each financial asset, including derivative financial instruments, inthe balance sheet.
Interest rate risk
The Group has minimal borrowing at present and consequently does not hedge interest rate risk.
Foreign currency risk
The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in acurrency other than Sterling. The currencies giving rise to this risk are primarily US Dollar, the Euro and Japanese
Yen.
Given the high level of net exports, the Group faces currency exposures on trading transactions undertaken by
its UK subsidiaries in foreign currencies. To eliminate uncertainty the group maintains a rolling hedge equivalent
to 80% of the exposure expected to arise over the next 12 months. The hedging comprises a mixture of fixed
forwards and option based products. The remaining 20% is sold on the spot market as it arises.
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 of borrowings with the currency in which the
net assets are denominated. The objective is to maintain a low cost of borrowings overall whilst permitting thetransfer of the profits of overseas subsidiaries to the Company through regular dividends. The Group does nothedge its currency exposure on the translation of profits earned in overseas subsidiaries.

69

Notes to the Financial Statements

Oxford Instruments plc

23	derivative financial instruments Continued
Forecasted transactions
At 1 April 2005 the Group classified its forward exchange contracts hedging forecasted transactions as cash flow
hedges and stated them at fair value. The fair value of forward exchange contracts at that date was adjusted
against the opening balance of the hedging reserve at that date. As at 1 April 2006 the group decided to cease
hedge accounting for all new contracts. Hedging gains and losses at that time have all been released to incomein the current year.
Recognised assets and liabilities
Changes in the fair value of forward exchange contracts that economically hedge monetary assets and liabilities
in foreign currencies and for which no hedge accounting is applied are recognised in the income statement.
Both the changes in fair value of the forward contracts and the foreign exchange gains and losses relating to themonetary items are recognised in the Income statement.
Fair values of financial assets and liabilities
The fair values of financial assets and liabilities together with the carrying amounts shown in the balance sheet
are as follows:

Available for sale equity securities
Trade and other receivables
Cash and cash equivalents
Forward exchange contracts:
AssetsLiabilities
Unsecured bank borrowings
Trade and other payables
Bank overdrafts

Carrying
amount
2007
£m
0.6
45.1
3.9

Fair
value
2007
£m
0.6
45.1
3.9

Carrying
amount
2006
£m
1.0
45.3
13.9

Fair
value
2006
£m
1.0
45.3
13.9

0.5
(0.2)
(1.0)
(40.4)
(1.1)

0.5
(0.2)
(1.0)
(40.4)
(1.1)

0.1
(0.3)
(2.9)
(39.2)
(1.2)

0.1
(0.3)
(2.9)
(39.2)(1.2)

Effective interest rates and repricing analysis
In respect of income earning financial assets and interest-bearing financial liabilities, the following table indicates
their effective interest rates at the balance sheet date and the periods in which they reprice:
Year end 31 March 2007
Unsecured bank borrowings
Bank overdrafts
Cash and cash equivalents

Year end 31 March 2006

Unsecured bank borrowings
Bank overdrafts
Cash and cash equivalents

70

Effective
interest rate
6.12%
6.09%
2.73%

Total

Six months
or less
1.0
1.1
3.9

Six to twelve
months-

Effective
interest rate

Total

Six months
or less

2.9
1.2
13.9

2.9
1.2
13.9

Six toTwelveMonths
-

5.56%
2.64%
3.63%

1.0
1.1
3.9

Notes to the Financial Statements

Oxford Instruments plc

23	derivative financial instruments Continued
Estimation of fair values
The following summarises the major methods and assumptions used in estimating the fair values of financial
instruments reflected in the table.
Available for sale equity securities
See Note 19
Derivatives
Forward exchange contracts are either marked to market using listed market prices or by discounting thecontractual forward price and deducting the current spot rate.
Interest-bearing loans and borrowings
Fair value is calculated based on discounted expected future principal and interest cash flows.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect thefair value. All other receivables/payables are discounted to determine the fair value.
24 Reconciliation of Cash and Cash equivalents to net cash

Cash outflow from decrease in debt
Cash inflow from increase in debt
Movement in net cash in the year
Net cash at start of the year
Net cash at the end of the year

2007
£m
(9.6)
(0.3)
(9.9)
1.9
(8.0)
9.8
1.8

2006
£m
(16.2)
0.4(0.1)(16.0)(0.8)(16.8)
26.6
9.8

Analysed as:
Cash and cash equivalents (per Balance Sheet)
Bank overdrafts

3.9
(1.1)

13.9
(1.2)

Cash and cash equivalents(per Statement of cash flows)
Borrowings
Net cash at end of the year

2.8
(1.0)
1.8

12.7
(2.9)
9.8

Decrease in cash and cash equivalents
Effect of foreign exchange rate changes on cash and cash equivalents
Revaluation of cash balances on adoption of IAS 32 and IAS 39

71

Notes to the Financial Statements

Oxford Instruments plc

25	held for sale assets
At the year end held for sale assets comprised a property in Eynsham, UK with a carrying value of £2m and aproperty in Abingdon, UK with a carrying value of £5m.
The Eynsham property became surplus to operating requirements during the year and was transferred to held
for sale assets from property, plant and equipment. On transfer its carrying value was adjusted to fair value lesscosts to sell. No profit or loss arose as a result.
At the year end a buyer was being actively sought for both properties and they were expected to be sold for aconsideration in excess of carrying value within the next year.
On 4 June 2007 the group entered into a binding contract for the sale of the Abingdon property at a price of£5.5m with completion expected in July 2007.
26	reconcilation of movement in capital and reserves

Total recognised (expense)/
income for the year
Credit in respect of employee
service costs settled by award of
share options
Proceeds from shares issued
Disposal of own shares held
Dividends paid
Opening equity shareholders’funds at 1st April 2005 (asrestated)
Closing equity shareholders’funds at 31st March 2006

Total recognised (expense)/
income for the year
Credit in respect of employee
service costs settled by awardof share options
Proceeds from shares issued
Dividends paid
Opening equity shareholders’funds at 1st April 2006
Closing equity shareholders’funds at 31st March 2007

Share
capital£mSharepremium
account£m

Capitalredemption
reserve£m

Cash flow
hedge
reserve£m

Foreignexchangetranslation
reserve£m

Retainedearnings
£m

Total
£m

-

-

-

(0.2)

0.9

(10.8)(10.1)

-

0.8
-

-

-

-

0.3
0.1
(2.9)

0.3
0.8
0.1
(2.9)

2.4

19.4

0.1

0.2

-

36.1

58.2

2.4

20.2

0.1

-

0.9

22.8

46.4

£m

£m

£m

£m

£m

£m

£m

-

-

-

-

(1.7)

14.1

12.4

0.1
-

0.7
-

-

-

-

0.2
(4.0)

0.2
0.8
(4.0)

2.4

20.2

0.1

-

0.9

22.8

46.4

2.5

20.9

0.1

-

(0.8)

33.1

55.8

The capital redemption reserve represents the nominal value of shares repurchased and then cancelled during
the year ended 31 March 1999.
The foreign exchange translation reserve comprises all foreign exchange differences arising since 1 April 2004
from the translation of the Group’s net investments in foreign subsidiaries into sterling.
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow
hedging instruments related to hedged transactions that have not yet occurred.
The group holds 595,749 (2006 826,441) of its own shares in an employee benefit trust. The cost of these sharesis included within retained earnings.

72Notes to the Financial Statements

Oxford Instruments plc

27 CALLED UP SHARE CAPITAL
Issued and fully paid ordinary shares:
2007
Number of shares
48,738,592
459,304
49,197,896

At the beginning of the year
Issued for cash
At the end of the year

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

2007
Number ofshares2007

2006
Number of shares
48,308,217
430,375
48,738,592

2006

£m

2006
Number ofshares

58,000,000

2.9

58,000,000

2.9

49,197,896

2.5

48,738,592

2.4

£m

Numberof shares

Aggregate
nominal value

Consideration
per share

87,208372,096£4,360£18,605£1.27 - £2.02£1.585 - £1.875

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

2007
Numberof shares

Optionprice
range

Periodwhen
exercisable

2006
Numberof shares

Savings Related Share Option Scheme

1,856,707
608,745£1.48 - £3.58£1.27 - £2.14

01/04/07 – 03/09/16
01/04/07 – 31/07/12

2,171,670
492,705

Total options subsisting on unissued ordinary
sharesPercentage of issued share capital

2,465,452
5.0%

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

Options subsisting at the year end on existing
ordinary shares held in trust
Senior Executive Long Term Incentive Scheme

Savings Related Share Option Scheme

179,500
52,25050,00079,321

Total options subsisting on existing ordinary
shares held in trust

361,071

Executive Share Option Scheme
Individual Options

2,664,375
5.5%

Nil£1.94 - £1.96£2.95£1.64 - £1.75

01/04/07 – 03/09/13
01/04/07 – 23/12/09
01/04/07 – 08/08/07
01/02/08 – 31/07/09

294,692
81,250150,000
99,283625,22573

Notes to the Financial Statements

Oxford Instruments plc

28	borrowings
Borrowings of £1.0m (2006: £2.9m) relate to a US dollar bank loan made in the US to the Group’s US operation.
It is repayable on demand and carries an interest rate of LIBOR plus 1%. It is not secured on the assets of theGroup.
29	retirement benefit obligations
The Group operates defined benefit plans in the UK and US, both offer pensions in retirement and death benefit
to members. Pension benefits are related to members’ final salary at retirement and their length of service. Bothschemes are now closed to new members.
The Group has opted to recognise all actuarial gains and losses immediately via the Statement of Recognised
Income and Expense (SORIE).
The amounts recognised in the balance sheet are:Present value of funded obligations
Fair value of plan assets
Recognised liability for defined
benefit obligations

UK
2007
£m
159.4
(130.7)

USA
2007
£m
6.5
(4.4)

Total
2007
£m
165.9
(135.1)

UK
2006
£m
173.2
(123.3)

USA
2006
£m
7.6
(4.1)

Total
2006
£m
180.8
(127.4)

28.7

2.1

30.8

49.9

3.5

53.4

Reconciliation of the opening and closing balances of the present value of the defined benefit obligation

Benefit obligation at the beginningof the year
Interest on obligation
Current service cost
Past service cost
Contributions paid by plan
participants
Benefits paid
Actuarial (gain)/loss on obligation
Exchange rate adjustment
Benefit obligation at the end of the
year

74

UK
2007
£m

USA
2007
£m

Total
2007
£m

UK
2006
£m

USA
2006
£m

Total
2006
£m

173.2
8.5
3.1
-

7.6
0.4
0.6
-

180.8
8.9
3.7
-

139.1
7.6
2.2
0.1

6.0
0.3
0.6
-

145.1
7.9
2.8
0.1

1.0
(3.2)
(23.2)
-

(0.2)
(0.9)
(1.0)

1.0
(3.4)
(24.1)
(1.0)

1.1
(2.0)
25.1
-

(0.3)
0.4
0.6

1.1
(2.3)
25.5
0.6

159.4

6.5

165.9

173.2

7.6

180.8

Notes to the Financial Statements

Oxford Instruments plc

29	retirement benefit obligations Continued
Reconciliation of the opening and closing balances of the fair value of plan assets

Fair value of plan assets at the
beginning of the year
Expected return on plan assets
Contributions by employers
Contributions paid by plan
participants
Benefits paid
Actuarial (loss)/gain on assets
Exchange rate adjustment
Fair value of plan assets at the endof the year

UK
2007
£m

USA
2007
£m

Total
2007
£m

UK
2006
£m

USA
2006
£m

Total
2006
£m

123.3
7.9
3.8

4.1
0.3
0.6

127.4
8.2
4.4

98.6
7.0
3.4

3.2
0.2
0.7

101.8
7.2
4.1

1.0
(3.2)
(2.1)
-

(0.2)
0.1
(0.5)

1.0
(3.4)
(2.0)
(0.5)

1.1
(2.0)
15.2
-

(0.3)
0.3

1.1
(2.3)
15.2
0.3

130.7

4.4

135.1

123.3

4.1

127.4

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 2007 the Company paid contributions to thescheme 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 distribution plan in the USA.
Expense recognised in the Income Statement

Current service cost
Past service cost
Interest on obligation
Expected return on plan assets
Total – defined benefit
Contributions to defined contribution schemes

2007
£m
3.7
8.9
(8.2)
4.4
1.2
5.6

2006
£m
2.8
0.1
7.9
(7.2)
3.6
1.1
4.7

2007
£m
1.6
0.8
1.6
0.9
(8.2)
8.9
5.6

2006
£m
1.6
0.5
1.3
0.6
(7.2)
7.9
4.7

The pension costs are recorded in the following lines of the income statement:

Cost of sales
Selling and marketing costs
Administration and shared services
Research and development
Financial income
Financial expenditure

Actuarial gains and losses shown in the Statement of Recognised Income and Expense:

Actuarial (gain)/loss

2007£m(22.1)

2006
£m
10.3

75

Notes to the Financial Statements

Oxford Instruments plc

29	retirement benefit obligations Continued
Actual return on plan assets
2007
£m
8.2
(2.0)
6.2

Expected return on plan assets
Actuarial (loss)/gain
Actual return on plan assets

2006
£m
7.2
15.2
22.4

History of experience gains and losses are as follows:

Difference between the expected and actual return:
Amount £m% of scheme assets
Experience gains/(losses) on scheme liabilities:
Amount £m% of the present value of the scheme liabilities

Difference between the expected and actual return:
Amount £m% of scheme assets
Experience gains/(losses) on scheme liabilities:
Amount £m% of the present value of the scheme liabilities

2007

2006

UK
2005

(2.1)
(2%)

15.2
12%

1.9
2%

23.2
(15%)

(25.1)
15%

(6.8)
5%

2007

2006

US
2005

0.1
2%

-

-

0.9
12%

(0.4)
5%

(1.2)
20%

Defined benefit scheme - United Kingdom
A full actuarial valuation of the UK plan was carried out as at 31 March 2006 and has been updated to 31 March
2007 by a qualified independent actuary. The major assumptions used by the actuary were (in nominal terms):

Discount rate
Rate of salary increase
Rate of increase to pensions in payment (pre 1997)
Rate of increase to pensions in payment (post 1997)
Rate of inflation
Mortality – pre-retirement – males
Mortality – pre-retirement – females
Mortality – post-retirement – males
Mortality – post-retirement – females

As at
31 March
2007
%
5.4
4.0
2.8
2.5
3.0

As at
31 March
2006
%
4.9
4.0
2.8
2.8
3.0

PA92 – year of birth

PA91c2030

PA92 – year of birth

PA91c2030

PA92 – year of birth

PA92c2015

PA92 – year of birth

PA92c2015

The assumptions used in determining the overall expected rate of return of the plan have been set with reference
to yields available on government bonds and appropriate risk margins.

76Notes to the Financial Statements

Oxford Instruments plc

29	retirement benefit obligations Continued
The mortality assumptions imply the following expected future lifetime from age 65:

Pre-retirement – males
Pre-retirement – females
Post-retirement – males
Post-retirement – females

2007

2006

20.9
23.9
19.9
22.9

20.5
23.4
19.4
22.4

The assumptions have been chosen by the Directors from a range of possible actuarial assumptions, which dueto the timescales covered, may not be borne out in practice.
The assets in the plan and the expected rate of return were:

Equities
Corporate bonds
Gilts
Property
Cash and other assets
Absolute return fundLong-term rateof return
expected at
31 March
2007
%
8.0
5.4
4.5
5.3
7.3

Value at
31 March
2007
£m
70.4
19.9
27.0
2.8
10.6
130.7

Long-term rateof return
expected at
31 March
2006
%
7.5
4.9
4.2
6.0
4.5
7.0

Value at
31 March
2006
£m
66.5
8.4
26.9
10.6
0.9
10.0
123.3

Defined benefit scheme - United States
A full actuarial valuation of the US plan was carried out as at 1 January 2005 and has been updated to 31
December 2006 by a qualified independent actuary. Results at 31 March 2007 have been taken to be the same as
those at 31 December 2006. The major assumptions used by the actuary were (in nominal terms):

Discount rate
Rate of salary increase
Rate of increase to pensions
in payment
Rate of inflation
Mortality – pre-retirement
Mortality – post-retirement

As at
31 March
2007
%
5.75
4.00

As at
31 March
2006
%
5.25
4.00

0.00
3.00
RP-2000 combined mortality table, male andfemale projected to 2005 with scale AA
RP-2000 combined mortality table, male andfemale projected to 2005 with scale AA

0.00
3.00
1983 Group Annuity Table,
male and female
1994 Group Annuity
Reserving Table, split 50%
for males and females

The assumptions used in determining the overall expected rate of return of the plan have been set with reference
to yields available on government bonds and appropriate risk margins.

77Notes to the Financial Statements

Oxford Instruments plc

29	retirement benefit obligations Continued
The assets in the plan and the expected rate of return were:

Equities
Bonds
PropertyLong term
rate of return
expected at
31 March
2007
%
9.20
6.00
8.40

Long term
rate of return
expected at
31 March
2006
%
8.05
5.25
7.30

Value at
31 March
2007
£m
2.3
1.8
0.3
4.4

Value at
31 March
2006
£m
2.2
1.6
0.3
4.1

30 TRADE AND OTHER PAYABLES
2007
£m
22.3
1.1
13.9
3.1
40.4
0.2
40.2

Trade payables
Social security and other taxes
Accrued expenses
Other creditors (including deferred consideration)
Amounts due after more than one year – other creditors

2006
£m
21.9
1.0
12.4
3.9
39.2
0.5
38.7

Payables include accrued costs of nil (2006 £0.7m) in respect of long term contracts. Deferred consideration
relates to amounts payable in respect of acquisitions made in 2005 and 2006.

31	provisions for other liabilities and charges

Balance at 1 April 2006
Provisions made during the year
Provisions used during the year
Provisions released/transferred during
the year
Balance at 31 March 2007

Warranties
£m
2.6
2.1
(2.0)

Restructuring
£m
3.1
(1.4)

Other
£m
0.4
0.4
-

Total
£m
6.1
2.5
(3.4)

(0.2)
2.5

(1.7)
-

0.8

(1.9)
3.3

Warranty provisions reflect the Group’s standard terms and conditions. In general these apply for a year and, asa result, the majority of the provision is expected to be utilised within a twelve-month period. Other provisions
relate to obligations in respect of onerous leases and obligations to employees in Japan on termination of theiremployment.

78

Notes to the Financial Statements

Oxford Instruments plc

32	operating leases
Non-cancellable operating lease rentals are payable as follows:
2007
£m
0.2
4.0
2.3
6.5

Less than one year
Between one and five years
More than five years

2006
£m
0.5
3.6
2.7
6.8

33	capital commitments
During the year ended 31 March 2007, the Group entered into contracts to purchase property, plant andequipment for £0.2m (2006 £0.5m). These commitments are expected to be settled in the following financialyear.
34	contingencies
Certain subsidiaries of the Group have, in the normal course of business, given guarantees in respect ofperformance bonds.
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.
35 RELATED PARTIESThe Group has a related party relationship with its Directors and Executive officers.
Transactions with key management personnel are disclosed in the Director’s Remuneration Report on pages 28
to 35. There were no other significant transactions with key management personnel in either the current or
preceding year other than the following.
During the year the Company had the following transactions with Imperialise Limited of which Nigel Keen is a
Director:

Transactions with Directors

2007
Purchases£m2007
Current liabilities£m2006
Purchases£m

2006
Current
liabilities
£m

0.1

-

0.1

-

79

Notes to the Financial Statements

Oxford Instruments plc

36 GROUP ENTITIESOxford Instruments Analytical Holdings Ltd
Oxford Instruments Overseas Holdings Ltd
Oxford Instruments Superconductivity Holdings Ltd
Oxford Instruments Overseas Marketing Ltd
Oxford Instruments Analytical Ltd
Oxford Instruments Molecular Biotools Ltd
Oxford Instruments Plasma Technology Ltd
Oxford Instruments Superconductivity Ltd (trading as
Oxford Instruments NanoScience)
Oxford Instruments America Inc
Oxford Instruments OST Holdings LLC
Oxford Instruments (Tennessee) Inc
Oxford Instruments Holdings Inc
Austin Scientific Company
Oxford Instruments X-Ray Technology Inc
Oxford Superconducting Technology
Oxford Instruments (Shanghai) Company Ltd
Oxford Instruments HKL Technologies A/S
Oxford Instruments Analytical Oy
Oxford Instruments SAS
Oxford Instruments GmbH
Oxford Instruments Measurement Systems GmbH
Oxford Instruments KK
Oxford Instruments Pte Ltd

Equity owned by
the company
%
100
100
100
*100
*100
*100
*100
*100

Country ofincorporation

Principal
activity

Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain

Holding
Holding
Holding
MarketingTrading
Trading
Trading
Trading

*100
*100
*100
*100
*100
*100
*100
*100
*100
*99.1
*100
*100
*100
*100
*100

USA
USA
USA
USA
USA
USA
USA
China
Denmark
FinlandFranceGermany
GermanyJapan
Singapore

Distribution
Holding
Holding
Holding
Trading
Trading
Trading
Trading
Trading
Trading
Distribution
Distribution
Distribution
Distribution
Distribution

A full list of the Group companies as at 31 March 2007 is available for inspection at the Company’s registeredoffice.
With the exception of holding companies, all the above companies are engaged in advanced instrumentation.
Equity owned by subsidiary companies is indicated by an asterisk (*). All the above companies are included in
the Group accounts.
Oxford Instruments Analytical Oy is accounted for as though it is a 100% subsidiary since the 0.9% minority
interest is not considered material.

80Notes to the Financial Statements

Oxford Instruments plc

37 ACCOUNTING ESTIMATES AND JUDGEMENTSManagement discussed with the Audit Committee the development, selection and disclosure of the Group’s
critical accounting policies and estimates and the application of these policies and estimates.
Provisions
Note 31 contains information about provisions. Provisions are judgemental by their nature. Amounts provided
are the Group’s best estimate of exposure based on currently available information.
Impairment of goodwill
Note 18 contains information about the assumptions relating to goodwill impairment tests.
Foreign currency exposure
Note 23 contains information about the foreign currency exposure of the Group and risks in relation to foreignexchange movements.
Pension assumptions
The principal actuarial assumptions applied to pensions are shown in Note 29. The actuarial evaluation of pension
assets and liabilities is based on assumptions in respect of inflation, future salary increases, discount rates, returns
on investments and mortality rates. Due to their sizes relatively small changes in the assumptions underlying theactuarial valuation of pension schemes can have a significant impact on the net pension liability included in thebalance sheet and the associated deferred tax asset.
Tax
Note 20 contains information regarding the impact on the carrying value of deferred tax of changes in tax
rates.
38	subsequent events
The interim dividend of 2.4p per share (total cost £1.1m) was paid after the balance sheet date. In addition on 13
June 2007 the Director’s proposed a final dividend of 6.0p per ordinary share (total cost £2.9m). The total amountof £4.0m has not been provided for and there are no income tax consequences.
39 EXCHANGE RATESThe principal exchange rates to sterling used were:Average translation rates
US Dollar
Euro
Yen

2007
1.89
1.47
221

2006
1.79
1.46
202

Year end rates
US Dollar
Euro
Yen

2007
1.96
1.47
232

2006
1.73
1.43
205

81

Parent Company Balance Sheet as at 31 March 2007

Oxford Instruments plc

2007

2006

Notes

£m

£m

c
d
d

1.5
51.4
0.6
53.5

1.3
66.7
1.0
69.0

e

60.2
19.3
79.5

48.1
26.8
74.9

(1.4)
(12.6)(14.0)(4.4)(18.0)(22.4)Net current assets

65.5

52.5

Total assets less current liabilities

119.0

121.5

(0.3)

(0.1)

118.7

121.4

2.5
20.9
7.7
87.6

2.4
20.1
7.7
91.2

118.7

121.4

Fixed assets
Tangible assets
Investments in subsidiary undertakings
Other investments

Current assets
Debtors
Cash at bank and in hand

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

Provisions for liabilities and chargesfg

Net assets

Share capital
Share premium account
Other reserves
Profit and loss account

i
i
i
i

Equity shareholders’ funds

The financial statements were approved by the Board of Directors on 13 June 2007 and signed on its behalf by:
Jonathan Flint
Director82

Kevin Boyd
Director

Notes to the Parent Company Financial Statementsa)Oxford Instruments plc

Accounting Policies

The following accounting policies have been applied consistently in dealing with items which are consideredmaterial in relation to the Company’s financial statements, except as noted below.
Basis of preparation
The financial statements have been prepared in accordance with applicable UK GAAP accounting standards andunder the historical cost accounting rules. In accordance with S230(4) of the Companies Act 1985, the Company
is exempt from the requirement to present its own profit and loss account.
In accordance with FRS 1 the company is exempt from preparing its own cash flow statement.
In accordance with FRS 8: Related Parties, the company is exempt from such disclosure requirements.
Going concern
The Financial Statements have been prepared on a going concern basis, based on the Directors’ opinion, after
making reasonable enquiries, that the Company has adequate resources to continue in operational existence forthe foreseeable future.
Taxation
The charge for taxation is based on the result for the year and takes into account taxation deferred because oftiming differences between the treatment of certain items for taxation and accounting purposes. Deferred tax
is recognised, without discounting, in respect 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 asotherwise required by FRS 19.
LeasesOperating lease rentals are charged to the profit and loss account on a straight-line basis over the life of thelease.
Fixed assets and depreciation.
Depreciation is provided to write off the valuation or the cost less estimated residual value of tangible fixed
assets by equal instalments over their estimated useful economic lives as follows:
Freehold buildings 		
Machinery and equipment
Computer equipment 		
Motor vehicles 			
Furniture and fittings 		

50 years
5 to 10 years
4 years
4 years
10 years

Leasehold land and buildings, where the period of the lease is less than 50 years, are written off on a straight-line
basis over the remaining period of the lease. Freehold land is not depreciated.
Post retirement benefits
The Company participates in a group wide pension scheme providing benefits based on final pensionable pay.
The assets of the scheme are held separately from those of the Company. The Company is unable to identify its
share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis and therefore, as
required by FRS 17 Retirement benefits, accounts for the scheme as if it were a defined contribution scheme. As
a result, the amount charged to the profit and loss account represents the contributions payable to the scheme
in respect of the accounting period. Refer to Note j for the additional disclosures required by FRS 17.
Foreign currencies
The Company enters into forward exchange contracts to mitigate the currency exposures that arise on sales andpurchases denominated in foreign currencies. Transactions in foreign currencies are converted into Sterling at therate ruling on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies aretranslated at the rates ruling at the balance sheet date or at the appropriate forward contract rates. Exchange
profits and losses arising from the above are dealt with in the profit and loss account.

83

Notes to the Parent Company Financial Statementsa)Oxford Instruments plc

Accounting Policies

Classification of financial instruments issued by the Company
Following the adoption of FRS 25, financial instruments issued by the Company are treated as equity (ie. forming
part of shareholders’ funds) only to the extent that they meet the following two conditions:i) they include no contractual obligation upon the Company to deliver cash or other financial assets or to exchange
financial assets or financial liabilities with another party under conditions that are potentially unfavourable to
the Company; andii) Where the instrument will or may be settled in the Company’s own equity instruments, it is either a nonderivative that includes no obligation to deliver a variable number of the Company’s own equity instruments or
is a derivative that will be settled by the Company’s exchanging a fixed amount of cash or other financial assets
for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where
the instrument so classified takes the legal form of the Company’s own shares, the amounts presented in thesefinancial statements for called up share capital and share premium account exclude amounts in relation to thoseshares.
Finance payments associated with financial liabilities are dealt with as part of interest payable and similar charges.
Finance payments associated with financial instruments that are classified as part of shareholders’ funds (seedividend policy), are dealt with as appropriations in the reconciliation of movements in shareholders’ funds.
Hedging instruments and hedged items are accounted for separately in the balance sheet. Gains and losses inboth are included in profit for the year when they arise (fair value hedges) or when the hedged transaction occurs
having first recorded those on the hedging instrument in equity (cash flow hedges, to the extent effective).
Own shares held by ESOP trust
Transactions of the Group-sponsored ESOP trust are included in the Group financial statements. In particular, thetrust’s purchase of shares in the company are debited directly to equity.
Share-based payments
The share option programme allows employees to acquire shares of the Company. The fair value of options
granted after 7 November 2002 and those not yet vested as at 1 April 2005 is recognised as an employee expensewith a corresponding increase in equity. The fair value is measured at grant date and spread over the period
during which the employee become unconditionally entitled to the options. The fair value of the options granted
is measured using an option pricing mode, taking into account the terms and conditions upon which the options
were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options
that vest except where forfeiture is only due to share prices not achieving the threshold for vesting.
When options are granted to employees of subsidiaries of the Company, the fair value of options granted isrecognised as an employee expense in the financial statements of the subsidiary undertaking together with thecapital contribution received. In the financial statements of the Company, the options granted are recognised as
an investment in subsidiary undertakings with a corresponding increase in equity.
Dividends on shares presented within shareholders’ funds
Dividends unpaid at the balance sheet date are only recognised as a liability at that date to the extent that they
are appropriately authorised and are no longer at the discretion of the Company. Unpaid dividends that do notmeet these criteria are disclosed in the notes to the financial statements.
Financial guarantee contracts
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies
within its group, the Company considers these to be insurance arrangements, and accounts for them as such. In
this respect, the Company treats the guarantee contract as a contingent liability until such time as it becomesprobable that the Company will be required to make a payment under the guarantee.

84Notes to the Parent Company Financial Statementsb)

Oxford Instruments plc

Profit for the year

The Company’s profit for the financial year was nil (2006 £0.1m).
The auditor’s remuneration comprised £65,000 (2006 £60,000) for the statutory audit and £6,000 (2006 £5,000)
for tax advice. Additionally in 2006 the auditors were paid £28,000 for IFRS advisory work.
The average number of people employed by the Company (including Directors) during the year was 45 (2006 40).
All of these individuals were involved in administration.
The aggregate payroll costs (including Directors) of these people were as follows:
2007
£m
2.8
0.3
0.4
3.5

Wages and salaries
Social security costs
Other pension costs

2006
£m
2.2
0.2
0.3
2.7

The share based payment expense was nil (2006: nil).
Full details of the emoluments paid to Directors can be found in the Directors’ Remuneration Report on pages
28 to 35.
c)

Tangible fixed assets
Property£m

Other fixed
assets
£m

Total

Cost
Balance at 1 April 2006
Additions
Disposals
Balance at 31 March 2007

0.3
0.3

2.6
0.6
(0.3)
2.9

2.9
0.6
(0.3)
3.2

Depreciation
Balance at 1 April 2006
Charge for year
Eliminated on disposals
Balance at 31 March 2007

0.1
0.1

1.5
0.4
(0.3)
1.6

1.6
0.4
(0.3)
1.7

Net book value
At 31 March 2006

0.2

1.1

1.3

At 31 March 2007

0.2

1.3

1.5

2007
£m

2006
£m

Property
Freehold buildings

0.2

0.2

Other fixed assets
Computer equipment

1.3

1.1

£m

Net book value is analysed by fixed asset category as follows:85

Notes to the Parent Company Financial Statementsd)

Oxford Instruments plc

Investments
Shares in
subsidiary
undertakings
£m

Other
investments
£m

Total
£m

66.7
0.4
67.1

1.2
(0.6)
0.6

67.9
0.4
(0.6)
67.7

Shares in
subsidiary
undertakings
£m
-

Other
investments
£m

Total
£m

15.7
15.7

0.2
(0.2)
-

0.2
15.7
(0.2)
15.7

Net book value at 31 March 2006

66.7

1.0

67.7

Net book value at 31 March 2007

51.4

0.6

52.0

Cost or valuation
Balance at 1 April 2006
Additions
Disposals
Balance at 31 March 2007

Amortisation
Balance as at 1 April 2006
Impairment
Disposals
Balance at 31 March 2007

Other investments at 31 March 2007 comprise:
Investment

Principal activity

ARKeX Limited

Supply of gravity-gradiometry exploration and related services
to the oil, gas and minerals industries
X-ray diffraction systems and ancillary products for chemical
crystallography and protein structure determination

Oxford Diffraction
Limited

Percentage ofcompany
owned
16.7%
23.00%

During the year the company disposed of its investment in Oxford BioSignals Ltd. The proceeds of disposal were£0.4m. There was no profit on disposal.
During the year additional “B” round funding resulted in the Company’s percentage holding in ARKeX Ltd
being reduced from 18.9% (2006: 24.9%) to 16.7% (2006: 18.9%). During the prior year the Company reduced
its percentage holding ARKeX Limited by 3.6% from 28.5% to 24.9%. The gain on disposal was £0.1m. The
percentage holding was then further reduced as a result of “B” round funding as explained above.
The addition to subsidiary investments of £0.4m relates to the awarding of share options to employees ofsubsidiary companies. Details of the subsidiary investments are given in Note 36.
The impairment during the year relates to the write down of the Company’s investment in Oxford Instruments
Exmed Holdings Ltd to its estimated recoverable amount.

86Notes to the Parent Company Financial Statementse)Debtors

Amounts falling due within one year:
Amounts owed by subsidiary undertakings
Other debtors
Derivative financial instruments
Prepayments and accrued income
Amounts falling due after one year:
Deferred tax

f)

2007
£m

2006
£m

58.9
0.3
0.3
0.3
59.8

47.2
0.3
0.2
47.7

0.4
60.2

0.4
48.1

2007
£m
0.4
10.2
0.7
0.8
0.2
0.3
12.6

2006
£m
0.5
15.8
0.5
0.6
0.6
18.0

Creditors: Amount falling due within one year

Trade creditors
Amounts owed to subsidiary undertakings
Corporation tax
Tax, social security and sales related taxes
Accruals and deferred income
Derivative financial instruments
Other creditorsg)

Oxford Instruments plc

Provisions for liabilities and charges

At beginning of the year
Additional provision madeAt end of the year

Vacant leaseprovision
£m
0.1
0.2
0.3

87

Notes to the Parent Company Financial Statements

Oxford Instruments plch) Deferred Tax

Deferred tax asset
At beginning of the year
Transfer to profit and loss account

2007
£m

2006
£m

0.4
0.4

0.4
0.4

The amounts of deferred tax assets, representing the full potential liability, are as follows:

Excess of depreciation over corresponding
capital allowances
Other timing differences

2007
£m

Recognised
2006
£m

2007
£m

Unrecognised
2006
£m

0.4
0.4

0.4
0.4

0.1
0.1

0.1
0.1

A deferred tax asset has been recognised in the accounts relating to short-term timing differences and accelerated
capital allowances. The Company has recognised the assets only to the extent that there will be suitable taxable
profits from which the future reversal of the underlying timing differences can be deducted.
i)

Reserves

Balance at 1 April 2006
Retained profit for the year
Premium of issued shares
Share options awarded to employees ofsubsidiaries
Dividends paid
Balance at 31 March 2007

88

Share
capital£mSharepremium
account£m

Capitalredemption
reserve£m

Otherreserves£m

Profit andlossaccount
£m

Total
£m

2.4
0.1

20.1
0.8

0.1
-

7.6
-

91.2
-

121.4
0.9

2.5

20.9

0.1

7.6

0.4
(4.0)
87.6

0.4
(4.0)
118.7

Notes to the Parent Company Financial Statementsj)

Oxford Instruments plc

Pension commitments

The Company and its employees contribute to the Oxford Instruments Pension Scheme, a defined benefit scheme.
Contributions are based on pension costs across the Group as a whole. The assets of the Scheme are held in a
separate trustee administered fund.
The Oxford Instruments Pension Scheme was closed to new members from 1 April 2001. Since this date new
employees have been invited to join the Oxford Instruments Stakeholder Plan, a defined contribution scheme.
The company maked contributions to this scheme of £0.1m (2006: £0.2m) during the year.
The Directors do not believe it possible to allocate the assets and liabilities of the scheme to individual groupmembers on a consistent and responsible basis. Accordingly, under FRS 17 the Company is exempt from recognising
its share of the net pension deficit and accounts for the scheme as though it were a defined contribution scheme.
The following disclosures relate to the pension commitments for the whole scheme.
The latest actuarial valuation was carried out at 31 March 2006 and updated to 31 March 2007 by a qualified
independent actuary.
The major assumptions used by the actuary were (in nominal terms):

Rate of increase in salaries
Rate of increase in pensions in payment (pre 1997)
Rate of increase in pensions in payment (post 1997)
Discount rate
Inflation assumptions

At 31 March
2007
%
4.0
2.8
2.5
5.4
3.0

At 31 March
2006
%
4.0
2.8
2.8
4.9
3.0

89

Notes to the Parent Company Financial Statementsj)

Oxford Instruments plc

Pension commitments continued

Equities
Corporate bonds
Gilts
Property
Cash and other assets
Absolute return fundLong term
Rate of
ReturnExpected at
31 March
2007
%

8.0
5.4
4.5
5.3
7.3

Value at
31 March
2007£mLong term
Rate of
ReturnExpected at
31 March
2006
%

70.4
19.9
27.0
2.8
10.6

7.5
4.9
4.2
6.0
4.5
7.0

Value at
31 March
2006£mLong term
Rate of
ReturnExpected at
31 March
2005%

Value at
31 March
2005
£m

66.5
8.4
26.9
10.6
0.9
10.0

8.0
n/a
4.7
6.5
4.0
7.5

56.1
23.6
8.8
1.6
8.5

Total market value of
assets

130.7

123.3

98.6

Present value ofscheme liabilities(159.4)(173.2)(139.1)

Deficit in the scheme(28.7)(49.9)(40.5)

Related deferred tax
asset *

8.6

15.0

12.2

Net pension liability(20.1)(34.9)(28.3)* Based on 30% rate of tax.

The contributions paid by the Company to the Oxford Instruments Pension Scheme were £0.3m (2006 £0.1m)k)Guarantees

The Company has given a guarantee to the pension scheme in respect of the liability of its UK subsidiaries to thepension scheme.
l)Commitments

Operating leases which expire:Within one year
In the second to fifth years inclusive
Over five years

There were no capital commitments as at 31 March 2007 (2006 £nil).
m) Subsequent events
See Note 38 for details of dividends paid or declared after the balance sheet date.

90

2007
£m

2006
£m

-

0.1
0.1

0.1
0.1

Notice of the 2007 Annual General Meeting

THIS DOCUMENT IS IMPORTANT
If you are in any doubt as to what action you
should take, you are recommended to consult yourstockbroker, bank manager, solicitor, accountant orother independent professional adviser authorised
under the Financial Services and Markets Act 2000. If
you have recently sold or transferred all your shares in
Oxford Instruments plc please pass this document andthe accompanying Form of Proxy to the purchaser ortransferee, or to the agent through whom the sale ortransfer was effected for transmission to the purchaser
or transferee.
Notice is hereby given that the forty-third Annual
General Meeting of Oxford Instruments plc will beheld at 2.30pm on 25 September 2007 at the officesof Oxford Instruments Group Head Office, Tubney
Woods, Abingdon, Oxon, OX13 5QX to transact thefollowing business:
1

Directors’ Report and Accounts
To receive and adopt the Reports and Financial
Statements for the year ended 31 March 2007 andthe Report of the Auditors thereon.

2

Final dividend
To declare the final dividend for the year to 31
March 2007.

3

Directors’ Remuneration Report
To approve the Directors’ Remuneration Report set
out on pages 28 to35 of the Reports and Financial
Statements for the year ended 31 March 2007.

4

Re-election of Directors(a) To re-elect Jonathan Flint who retires byrotation but, being eligible, will be proposed
for re-election.
(b) To re-elect Bernard Taylor who retires byrotation but, being eligible, will be proposed
for re-election.
(c) To re-elect Peter Morgan who retires byrotation but, being eligible, will be proposed
for re-election.
(d) To re-elect Mike Brady who is required toretire annually as he has been a Non-Executive
Director for more than 9 years.

5

Appointment and remuneration of Auditors(a) To appoint KPMG Audit Plc as Auditors to theCompany for the period until the next Annual
General Meeting.
(b) To authorise the Directors to agree theremuneration of the Auditors.

Oxford Instruments plc

6. Permission for the Directors to allot further shares
To consider as an Ordinary Resolution that theauthority conferred by Article 10.1 of the Articles
of Association be renewed until the earlier ofthe expiry of the next following Annual General
Meeting of the Company and the date which isfifteen months from the date of the passing of
this Resolution and that the Section 80 amount be£440,105.
7. Relaxation of the restrictions which normally apply
when ordinary shares are issued for cash
To consider as a Special Resolution that theauthority conferred by Article 10.2 of the Articles
of Association be renewed until the earlier ofthe expiry of the next following Annual General
Meeting of the Company and the date which isfifteen months from the date of the passing of
this Resolution and that the Section 89 amount be£122,995.
8. 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 theCompany and subject to the provisions of theCompanies Act 1985 (“the Act”) the Company
be generally and unconditionally authorised topurchase by market purchase (as defined by Section
163 of the Act) up to 4,919,790 ordinary shares of
5p each in its own capital subject to the following:(i) the purchase price for any share so purchased
shall not exceed a sum (exclusive of all expenses)
equal to 105% of the average of the middle
market quotations for ordinary shares for thefive business days immediately preceding the
day of purchase (as derived 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 theclose of the following Annual General Meetingor the expiry of fifteen months from the dateof the passing of the Resolution;(iii) the Company may make a contract for purchasewhich would, or might, be executed wholly or
partly after the expiry of the authority; and(iv) any shares purchased pursuant to the authority
may be selected by the Directors in any manneras they from time to time deem appropriate.

91Notice of the 2007 Annual General Meeting

Oxford Instruments plc

9. Donations to EU political organisations and EU
political expenditure
To consider as an Ordinary Resolution that theCompany be and is hereby authorised to:(i) make Donations to any one or more EU Political
Organisation 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 ofthis Resolution and ending on the date of theAnnual General Meeting in 2008.

(b) Notices, Documents and Communications
The current Article 145 shall be deleted andthe following paragraphs shall be inserted inreplacement:

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).
10. Amendments to the 2001 Executive Share Option
SchemeTo consider as an Ordinary Resolution that therules of the Oxford Instruments 2001 Executive
Share Option Scheme (the “Scheme), be amended
as marked on the rules of the Scheme produced
to the meeting and signed by the Chairman forthe purposes of identification. The proposed
amendment to the rules of the Scheme is detailed in
the explanatory note to this Resolution 10 below.
11. Amendments to the Company’s Articles of
Association
To consider as a Special Resolution that the Articles
of Association of the Company be amended asfollows:(a) References(i) In Article 2.1 insert the year “1985” between
the words “The” and “Act” in the first line of
the table of Words and Meanings, and insert
the following after the first line of that table:“The 2006 Act : The Companies Act 2006”;(ii) In line six of Article 31.5 the words “Section
207, Companies Act 1989” shall be deleted andthe words “Section 785 of the 2006 Act” shallbe inserted.
(iii) In line two of Article 68.1 the words “Section
212 of the 1985 Act” shall be deleted and thewords “Section 793, of the 2006 Act” shall beinserted.
(iv) In lines three and six of Article 68.5(1) and line
two of Article 68.5(2) the words “Section 212”
shall be deleted and the words “Section 793”
shall be inserted.
(v) In line three of Article 68.7 the words “Part
VI of the Act” shall be deleted and the words“The 2006 Act” shall be inserted.

92“Notices, Documents and Communications
145.1 The Company shall send to a member any noticeor other document or information pursuant to these
Articles, legislation or other rules and regulations
applicable to the Company by whichever of thefollowing methods it may determine at its discretion:(a) Personally; or(b) By posting the notice or other document or
information in a prepaid envelope addressed, inthe case of a member, to his registered address, orin any other case, to the person’s usual address; or(c) By leaving the notice or other document at that
address; or(d) If the member has agreed (generally or specifically)that the document or information may be sent
using electronic means (and has not revokedthat agreement), by sending the notice or otherdocument or information using electronic means
to such address (if any) for the time being notified
to the Company by or on behalf of the member forthat purpose (generally or specifically); or(e) In accordance with Article 145.2 below; or(f) By any other method approved by the board.
145.2 Subject to the provisions of the 2006 Act, theCompany may also send to a member any notice orother document or information pursuant to these
Articles, legislation or other rules and regulations
applicable to the Company by making that notice orother document or information, available on a website
where:(a) the member has agreed (or is deemed to haveagreed in accordance with the provisions of the2006 Act) to such method of communication;(b) the notice or document is one to which thatagreement applies;(c) the member is notified, in writing, of:(i) the publication of the notice, document or
information on a website;(ii) the address of that website;(iii) the place on that website where the notice or
document may be accessed and how it may beaccessed; andNotice of the 2007 Annual General Meeting(d) the notice or document is published on thatwebsite for the applicable notice period provided
in these Articles, legislation or other rules andregulations applicable to the Company, or a periodof not less than 28 days beginning on the day that
notice pursuant to paragraph 145.2(c) is sent or (iflater) deemed sent. Provided that, if the notice or
document is published on that website for a part,but not all of, the applicable period, the noticeor document shall be treated as being publishedthroughout that period if the failure to publishthat notice or document throughout that period
is wholly attributable to circumstances which were
not reasonably avoidable or preventable by theCompany.
145.3 Where a member has been sent a notice,
document or other information by the Company
otherwise than in hard copy form, the Company will at
the written request of such member send a hard copyof such notice, document or other information to thatmember within twenty-one days of receipt of such
written request by the Company.
145.4 Where a notice or other document or informationis served in an electronic communication other than awebsite, service shall be deemed to be effected at the
expiration of 48 hours after the time it was sent. Proof
that a notice contained in an electronic communication
was sent in accordance with guidance issued by theInstitute of Chartered Secretaries and Administratorsfrom time to time shall be conclusive evidence thatthe notice was given. An electronic communication
shall not be treated as received by the Company if it isrejected by computer virus protection arrangements.
In the case of a notice served by first class post, service
shall be deemed to be effected twenty-four hours(or, where second-class mail is employed, forty-eight
hours) after the time when the letter containing thesame is posted (save that, if the foregoing provisionsof this sentence would otherwise result in a notice orother document being deemed to have been served
on a Sunday or a Bank Holiday (as defined in the Act),
such service shall be deemed to be effected at 9.00amon the next following day which is not a Sunday or
a Bank Holiday) and in proving such service it shallbe sufficient to prove that such letter was properly
addressed, stamped and posted. Any notice or otherdocument delivered or left at a registered address
otherwise than by post shall be deemed to have been
served or delivered at the time when it is so deliveredor left.”(c) Directors’ Age
By amending Article 85.2 by deleting the existing
paragraph (b) and relettering the existing
paragraph (c) as (b) and by amending Article 86 bydeleting paragraph (d)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 vote instead of him.
Such proxy or proxies need not be a member ormembers 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 thetime fixed for the Meeting.
3. Pursuant to Regulation 41 of the UncertificatedSecurities Regulations 2001, the Company specifies
that only those shareholders registered in theregister of members of the Company as at 2.30pm
on 23 September 2007 shall be entitled to attend
or vote at the Meeting in respect of the numberof Ordinary Shares registered in their name at thattime. Changes to entries on the relevant registerof securities after 2.30pm on 23 September 2007
shall be disregarded in determining the rights ofany person to attend or vote at the Meeting.
4. Copies of the following documents will beavailable 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 andpublic holidays excepted) from the date of thisNotice until the conclusion of the Meeting:(i) the service contracts of the Executive
Directors;(ii) the register of interests of Directors (and theirfamilies) in the shares of the Company; and(iii) the written terms of reference of the Board
Committees.
The Directors believe that the proposed resolutions
are in the best interests of the Company and its
shareholders, and accordingly unanimously recommend
shareholders to vote in favour of resolutions 1 to
11 inclusive to be proposed at the Annual General
Meeting, as they propose to do so in respect of theirbeneficial shareholdings.

By Order of the Board
Susan Johnson-Brett, Company Secretary
Date of Posting93

Notice of the 2007 Annual General Meeting

Explanatory Notes on the Proposed Resolutions
The explanatory notes below summarise the purposeof the Resolutions to be voted upon by shareholders at
this year’s Annual General Meeting.
Resolutions 1 to 6 and 9 to 10 will be proposed asordinary resolutions. More than 50% of the votes castmust support these resolutions in order for them to bepassed. Resolutions 7, 8 and 11 will be proposed as
special resolutions and 75% or more of the votes castmust support them in order for these resolutions to bepassed.
Resolution 1 –Shareholders will be asked to approve
the adoption of the Reports and Financial Statements
for the year ended 31 March 2007.
Resolution 2 – Shareholders will be asked to approve
payment of a final dividend of 6.0p per ordinary sharefor the year ended 31 March 2007. If approved at theAnnual General Meeting, the dividend will be paid on
25 October 2007 to shareholders registered at the closeof business on 28 September 2007.
Resolution 3 – Shareholders will be asked to approve
the adoption of the Directors’ Remuneration Reportfor the year ended 31 March 2007. Under the
Directors’ Remuneration Report Regulations 2002,
Directors are required to ask shareholders to vote on
the Directors’ Remuneration Report (shown on pages
xx to xx of the Annual Report and Accounts 2007).
The Directors, who have unanimously endorsed the
Directors’ Remuneration Report, consider that asking
the shareholders to vote on this Report facilitatesaccountability and transparency.
Resolution 4 – The Company’s Articles of Association
state that at each Annual General Meeting, thefollowing Directors must retire from office: (i) any
Director who has held office for three years or moresince his last election or for whom the Meeting is thethird Annual General Meeting since he was last elected,
and (ii) one third of the Directors at the commencementof the Annual General Meeting. All Directors take it inturn to retire in this way. This gives shareholders the
chance to confirm their re-appointments. At the 2007
Annual General Meeting Jonathan Flint, Bernard Taylor
and Peter Morgan are retiring under this provision
and, being eligible, are standing for re-election.
(a)		 Jonathan Flint, Chief Executive, was first elected
at the Annual General Meeting in 2005, having
been appointed by the Board as an Executive
Director in April of that year.

94

Oxford Instruments plc(b)		 Bernard Taylor is an Independent Non-Executive
Director and joined the Board in 2002. He is amember of the Audit and Nomination Board
Committees.
(c)		 Peter Morgan is an Independent Non-Executive
Director and joined the Board in 1999. He is
Chairman of the Audit Committee and a memberof the Remuneration and Nomination Board
Committees.
(d) 		 Mike Brady is Deputy Chairman and Senior
Independent Director and as of June 2007 hadserved on the Board for twelve years. He iscurrently a member of the Audit, Remuneration
and Nomination Board Committees. Mike Brady
first became a Non-Executive Director of theCompany 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 continue to be considered
to be independent. Having taken into accounthis technical expertise as the only Non-Executive
Director from a scientific profession; the value ofthat expertise to Board discussions; the strength of
his professional and business interests unrelated
to the Group or other members of the Board; his
continual constructive probing of the technicalaspect of proposals considered by the Board;the composition of the Board generally and thefact that he qualifies as independent in all othercriteria referred to in the Combined Code, theBoard has concluded that it is appropriate that hecontinues in office and that he should properly
be considered to be independent. This year, Mike
Brady retires in accordance with the provisionsof the Combined Code and offers himself for reelection to allow shareholders the opportunity to
express their views on the matter.
In reviewing the recommendations of the Nomination
Committee concerning these re-elections, the Board has
concluded that each of the Non-Executive Directors inquestion is independent in character and judgment andcontinues to make effective and valuable contribution
to the Board and to demonstrate commitment to therole. The formal performance evaluations has shownthat each of their performances are still effective
and the Board feel that they have all demonstrated
commitment to the role. The Board unanimously
recommends their re-election.
The biographical details of all the Directors standing
for re-election are set out on pages xx to xx of theAnnual Report and Accounts 2007.

Notice of the 2007 Annual General Meeting

Oxford Instruments plc

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
Annual General Meeting until the conclusion ofnext year’s Annual General Meeting. 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 Annual
General Meeting and to authorise the Directors to set
their fees.

The Directors are committed to creating shareholder
value. Buying back the Company’s shares is one of theoptions they keep under review. The Directors will
only implement such purchases if they think it is in
the shareholders’ best interests. Before making sucha decision they would consider the effect on earnings
per share.

Resolution 6 – This Resolution lifts the restrictions
which would apply to the Directors’ power to allot or
agree to allot new shares and will allow the Directors
to allot or agree to allot further relevant securities
up to an aggregate nominal amount of £440,105.
This represents the unissued ordinary share capital on
31 March 2007. This authority replaces the previous
power of the Directors to allot relevant securities
and, if passed, will lapse at the earlier of the Annual
General Meeting following its passing or, if later, on
25 December 2007. The Directors have no present
intention of allotting new ordinary shares, other thanpursuant to the exercise of options under employees’
share schemes. The Company presently holds notreasury shares.
Resolution 7 – Unless they are given an appropriate
authority, Directors may allot new equity shares(including treasury shares) for cash (excluding sharesissued under employees’ share schemes) only if they
have first been offered to existing shareholders inproportion to their holdings. There may however beoccasions when in order to act in the best interests ofthe shareholders and the Company, the Directors willneed the flexibility to finance business opportunities
as they arise by the issue of a small number of sharesfor cash in circumstances such as the acquisition of a
new company or business by the Group. The maximum
number of ordinary shares to be covered under the
power, with the exception of a rights issue or otherpre-emptive offers, is 2,459,895 which represents 5%of the issued ordinary share capital on 31 March 2007.
This Special Resolution replaces the Directors’ existing
authority and, if passed, will lapse at the earlier of theAnnual General Meeting following its passing or iflater, on 25 December 2007.
Resolution 8 – This Special Resolution is a renewal of
the authority granted to Directors at the 2005 Annual
General Meeting. It allows the Company to buy backup to 4,919,790 of its issued ordinary shares on thestock market. This is equal to 10% of the Company’s
issued share capital on 31 March 2007. The Resolution
sets out the lowest and highest prices the Company
can pay for the shares.

The Companies (Acquisition of Own Shares) (Treasury
Shares) Regulations 2003 allow companies to holdshares acquired by way of market purchase in treasury,
rather than having to cancel them. The Company may
therefore consider holding any of its own shares thatit purchases pursuant to the authority conferred bythis Resolution as treasury shares as an alternative
to cancelling them. This would give the Company
the ability to re-issue such shares quickly and costeffectively, and would provide the Company withadditional flexibility in the management of its capitalbase. The Directors believe that it is desirable for theCompany to have this flexibility.
Unless the Directors determine that they are to beheld as treasury shares (see above) any shares in
its own capital purchased by the Company shall becancelled and the number of shares in issue will be
reduced accordingly. Shares held in treasury will not
automatically be cancelled and will not be taken into
account in future calculations of earnings per share(unless they are subsequently resold or transferred outof treasury).
No dividends will be paid on shares whilst held intreasury and no voting rights will be exercisable inrespect of treasury shares.
This power will automatically lapse at the end of theCompany’s next Annual General Meeting or on 25
December 2007 whichever is earlier.
Resolution 9 –The Company did not make any donations
to political parties in the European Union 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 fromFebruary 2001, defines EU Political Organisations
and Donations very widely and, as a result, in certain
circumstances, donations intended for charitable orsimilar purposes may now be regarded as political innature.

95

Notice of the 2007 Annual General Meeting

Oxford Instruments plc

In order to comply with its obligations and to avoid
any inadvertent infringement of PPERA, the Company
considers it is prudent to seek shareholders’ approval
for a maximum aggregate level of donation. Resolution
9 seeks authority for the Company to make Donations
to EU Political Organisations or incur EU Political
Expenditure not exceeding £100,000 per annum.
The Company has no present intention of using thisauthority for any purpose other than a continuationof 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.

Resolution 11 – In January 2007 certain parts of theCompanies Act 2006 came into force. The amendmentsin paragraphThis authority would last until the conclusion of theCompany’s Annual General Meeting in 2008.
Resolution 10 – The Company operates the Oxford
Instruments 2001 Executive Share Option Scheme(the “Scheme”) as part of its long-term incentive
arrangement strategy for selected senior executives,
including the Company’s Executive Directors.
Currently, options granted under the scheme may
ordinarily be exercised as to one third from the third
anniversary of the grant. The vesting options is ordinarily
subject to the grantee’s continued employment within
the Company’s group until such anniversary of grant
and the satisfaction of a mix of total shareholder
return and earnings per share growth performance
conditions.
Following a review of the principal terms of the
Scheme the Remuneration Committee of the Boardof Directors propose that for future options granted
under the Scheme there be a single vesting point at
the third anniversary of the grant. The performance
conditions would remain unchanged (and, as to date,
will ordinarily be assessed over a single three year
period).
The Remuneration Committee will also introduce
formal share ownership guidelines requiring Executive
Directors to build up and retain a holding of shares in
the Company with value of at least one times annual
salary.
The Remuneration Committee considers that a threeyear vesting period for future grants in conjunction
with share ownership guidelines would be reflectiveof current market practice.
Assuming shareholder approval is secured for the
proposed amendment to the Scheme, it is currently
anticipated that the first grants under the Scheme as
amended will be made shortly following the AGM.

96(a) of Resolution 11 delete references to legislation nolonger in force and replace these with the references
to the new legislation.
(b) An important part of the Companies Act 2006
(the “2006 Act”) now in force relates to electronic
communications with shareholders. The proposed
resolutions bring the Company’s Articles into line withthe 2006 Act and give the Company the option to takeadvantage of using electronic means to communicate
with its shareholders. The 2006 Act allows the Company
to use its website to communicate with shareholders if
authorised to do so by its Articles and provided eachshareholder agrees or is deemed to have agreed tosuch communication.
If the resolutions are passed, shareholders will be asked
to indicate their preferred method of communicationby the Company to them, using the form on theenclosed letter from the Chairman relating to electronic
communications.
The Directors of the Company believe that the proposed
amendments will be of benefit to those shareholders
who do not wish to receive all documents in hard
copy, and also to the Company by saving considerable
printing and delivery costs. The reduced use of paper
will also be of benefit to the environment.
(c) The amendments proposed in paragraph (c) of
Resolution 11 reflect the abolition by the Companies
Act 2006 of the statutory provisions relating todirectors aged seventy years or more and delete therequirements of the existing Articles that relate to a
director’s age.

Historical financial summary under UK GAAP

Profit and loss accountGroup and share of joint venture turnoverLess share of joint venture turnoverGroup turnover *Oxford Instruments plc

2003
£m

2004
£m

231.4
(44.1)
187.3

193.1(10.8)
182.3

Group operating profit before goodwill, exceptional items anddiscontinued businesses **Exceptional items
Discontinued businesses before goodwill **Goodwill amortisation
Group operating profit
Group share of operating profit/(loss) of joint venture
Total operating profit
Loss on sale of business before goodwill
Profit on disposal of investment before goodwill
Goodwill previously written off
Net interest payable
Profit on ordinary activities before tax
Taxation
Profits attributable to shareholders

6.8

7.9

(2.1)
(0.5)
(0.3)
3.9
1.6
5.5
(1.5)
(1.6)
2.4
(1.2)
1.2

(1.6)
0.1
(0.7)
5.7
(0.2)
5.5
6.8
(0.2)
(0.2)
11.9
(1.9)
10.0

Balance sheet
Intangible assets – goodwill
Tangible fixed assets
Investments

2.7
35.6
4.1

2.6
32.6
1.6

Stocks
Debtors
Other creditors
Net current assets, excluding net cash

36.5
61.1
(48.8)
48.8

28.5
58.9
(47.5)
39.9

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

6.4
(3.1)
3.3

23.2
(2.5)
20.7

Provisions for liabilities and charges
Net assets employed

(5.3)
89.2

(5.3)
92.1

Equity shareholders’ funds ***

89.2

92.1

Cash flow
Net cash inflow from operating activities
Interest and dividends, paid and received
Taxation
Investing activities
Net cash inflow before management of liquid resources and financing

14.9
(2.6)
(2.0)
(3.2)
7.1

17.8
(4.0)
(2.4)
6.1
17.5

pence

pence

2.6
9.5
8.4

21.3
25.7
8.4

1,674

1,537

Per ordinary share
Earnings
Earnings from continuing operations before exceptional items **Dividends
Employees
Average number of employees* Not adjusted for change of accounting policy regarding revenue in 2007.
** After adjusting for disposal of Medical business 2004 only.
*** After deducting investment in own shares 2004.

97

Historical financial summary under IFRS

Oxford Instruments plc

2005
£m

2006
£m

2007
£m

135.8

147.4

161.6

Trading profit
Other operating income
Amortisation of acquired intangibles
Restructuring and non-recurring costs
Operating profit/(loss)
Net financing costs
Profit/(loss) before taxation
Income tax expense
Loss after taxation but before profit on discontinued operations
Profit from discontinued operations, net of tax
Profit/(loss) for the year

7.4
0.2
(1.3)
(6.2)
0.1
0.1
(1.7)
(1.6)
7.2
5.6

4.4
2.0
(0.2)
(6.7)
(0.5)
(0.4)
(0.9)
(2.5)
(3.4)
(3.4)

8.3
(1.1)
(5.2)
2.0
(0.7)
1.3
(2.8)
(1.5)
(1.5)

Balance sheet
Property, plant and equipment
Intangible assets
Available for sale equity securities
Deferred and current tax
Inventories
Trade and other receivables
Held for sales assets
Trade and other payables
Net current assets excluding net cash
Cash and cash equivalents
Bank borrowings
Net cash
Provisions and other items
Retirement benefit obligations
Net assets employed
Capital and revenues attributable to the company’s equity holders

23.0
12.5
1.6
14.1
23.9
46.5
5.4
(44.3)
82.7
28.6
(2.1)
26.5
(7.9)
(43.3)
58.0
58.0

23.4
15.6
1.0
18.1
27.1
45.4
5.0
(39.0)
96.6
12.7
(2.9)
9.8
(6.6)
(53.4)
46.4
46.4

21.5
18.1
0.6
10.3
25.6
45.6
7.0
(40.4)
88.3
2.8
(1.0)
1.8
(3.5)
(30.8)
55.8
55.8

Cash flow
Net cash from operating activities
Net cash from investing activities
Net cash from financing activities
Net increase/(decrease) in cash equivalents

5.9
15.3
(14.7)
6.5

(8.0)
(7.0)
(1.2)
(16.2)

5.2
(9.7)
(5.1)
(9.6)

Income statement
Revenue

pence

pence

pence

Per ordinary share
Earnings – continuing
Adjusted earnings *Dividends – excluding special dividend
Dividends – special

(3.0)
13.9
8.4
25.0

(7.2)
3.9
8.4
-

(3.2)
9.6
8.4
-

Employees
Average number of employees

1,325

1,412

1,294

* Before other operating income, amortisation of acquired intangibles, restructuring and non-recurring costs and mark to market gains or losses
in respect of certain derivatives.

98

Shareholder Information

Oxford Instruments plc

Financial calendar
31 March 2007
Financial year end
13 June 2007
Announcement of preliminary results
25 September 2007 Annual General Meeting
25 September 2007 Scrip Date
26 September 2007 Ordinary shares quoted ex-dividend
28 September 2007 Record date for final dividend
25 October 2007
Payment of final dividend
Mid November 2007 Announcement of half year results
31 March 2008
Financial year end
Early April 2008
Payment of interim dividend
Administrative enquiries
Administrative enquiries concerning shareholdingsin Oxford Instruments plc, such as the loss of a sharecertificate, dividend payments, or a change of address
should be directed, in the first instance, to the Registrar
whose address is:
Capita Registrars
Northern House, Woodsome Park, Fenay Bridge,
Huddersfield, West Yorkshire HD8 0LA
Tel 0870 1623100
Fax 0208 639 2342
Correspondence should refer to Oxford Instruments plc
and state clearly the registered name and address ofthe shareholder. Please notify the Registrar promptlyof any change of address.
Dividend bank mandates
If you wish dividends to be paid directly into a bank orbuilding society account and notification to be sent toyour shareholder register address, please contact theCompany’s Registrar for a dividend mandate form.
Consolidation of share certificatesIf your total registered ordinary shareholding isrepresented by several share certificates, you may wish
to have these replaced by one consolidated certificate.
There is no charge for this service. You should send yourshare certificates to the Company’s Registrar, together
with a letter of instruction.

Shareholder enquiries
Shareholders who have questions relating to theGroup’s business or who wish to have additional copiesof the Report and Accounts or Interim Statement
should apply to:Company Secretary
Oxford Instruments plc
Tubney Woods, Abingdon, Oxon OX13 5QX
Tel 01865 393200
Fax 01865 393442
E-mail info.oiplc@oxinst.co.uk
Website www.oxford-instruments.com
Company registration
Registered office: Tubney Woods
Abingdon Oxon OX13 5QXRegistered number: 775598
Registered in Great Britain
Website – www.oxford-instruments.com
Oxford Instruments has an extensive website
which gives details of all our products and services,
contact information, vacancies and latest news
announcements. An interactive investor relations
section gives information on recent trading reports,
share price data and up and coming events. During
2007, the web site will be extended to offer an ecatalogue option for our spares and accessories and apassword controlled extranet for use by our partners
and customers. This and other developments are partof our strategy of improving communications between
Oxford Instruments and its stakeholders.
Share dealing scheme
In association with JPMorgan Cazenove Limited a
low cost share dealing service has been introduced
providing shareholders with a simple way of buying
and selling Oxford Instruments plc ordinary shares.
Further information is available from the Company
Secretary or:
JPMorgan Cazenove Limited
20 Moorgate, London, EC2R 6DA
Tel 020 7588 2828
Fax 020 7155 9000

Analysis of shareholders as at 31 March 2006
Size of shareholding
Up to 5,000 shares
5,001 to 50,000 shares
50,001 to 200,000 sharesOver 200,000 shares
Total

Number of holders% of total

Total holding% of total

2,731
193
45
37
3,006

90.85%
6.42%
1.50%
1.23%
100%

1,829,940
2,762,929
4,856,633
39,748,394
49,197,896

3.72%
5.62%
9.87%
80.79%
100%

99

Oxford Instruments Directory

Oxford Instruments plc

Oxford Instruments plc

Head OfficeTubney Woods, Abingdon
Oxon OX13 5QX, UK
Tel +44 (0) 1865 393200
Fax +44 (0) 1865 393422
email info.oiplc@oxinst.co.uk

Analytical

Plasma Technology

Innovation

Industrial Analysis
X-ray Fluorescence, X-ray
Technology, Optical Emission
Spectroscopy, Coating Thickness
Measurement
Halifax Road, High Wycombe,
Bucks HP12 3SE, UK
Tel +44 (0) 1494 442255
Fax +44 (0) 1494 524129
email analytical@oxinst.com

Plasma etching, deposition
equipment and nanostructure
fabrication
North End, Yatton, Bristol
BS49 4AP, UK
Tel +44 (0) 1934 837000
Fax +44 (0) 1934 837001
email plasma.technology@oxinst.com

Tubney Woods, Abingdon,
Oxon OX13 5QX, UK
Tel +44 (0) 1865 393200
Fax +44 (0) 1865 393333
email: innovation@oxinst.co.uk

NanoScience

P.O. Box 85 (Nihtisillankuja 5)
FI-02631 Espoo, Finland
Tel: +358 9 329 411
Fax:+358 9 32941 300
Email info@oxinst.fi

Physical Science : low temperatureand high vacuum environments
Tubney Woods, Abingdon,
Oxon OX13 5QX, UK
Tel +44 (0) 1865 393200
Fax +44 (0) 1865 393333
email nanoscience@oxinst.com

Superconducting wire and/MRI
support services
600 Milik Street, P O Box 429,
Carteret,
New Jersey 07008-0429, USA
Tel +1 732 541 1300
Fax +1 732 541 7769
email sales@ost.oxinst.com

945 Busse Road,
Elk Grove Village,
Illinois 60007, USA
Tel +1 847 439 4404
Fax +1 847 439 4425
email info@msys.oxinst.com
360 El Pueblo Road
Scotts Valley, CA, 95066, USA
Tel +1 831 439 7929
Fax +1 831 439 6051
email sales@oxfordxtg.com

NanoAnalysis
X-ray Microanalysis and Electron
Backscatter Diffraction
Halifax Road, High Wycombe,
Bucks HP12 3SE, UK
Tel +44 (0) 1494 442255
Fax +44 (0) 1494 524129
email nanoanalysis@oxinst.co.uk
Majsmarken 1
Hobro
DK 9500
Denmark
TEL: +45 9657 2600
FAX: +45 9657 2609
email hkl@oxinst.com

100

Molecular Biotools
In-vitro dynamic nuclear
polarising (DNP) systems, NMR, andimaging systems
Tubney Woods, Abingdon,
Oxon OX13 5QX, UK
Tel +44 (0) 1865 393200
Fax +44 (0) 1865 393333
email: molecularbiotools@oxinst.com
8403 Cross Park Drive, Suite 3F
Austin, Texas 78754, USA
Tel +1 512 339 0640
Fax +1 512 339 0620
email benchtopNMR@ma.oxinst.com

Oxford Superconducting
Technology

Austin Scientific
Cryogenic pumps and compressors
4114 Todd Lane, Austin,
Texas 78744, USA
Tel +1 512 441 6893
Fax + 1 512 443 6665
email cryo-sales@oxinst.com

Oxford Instruments Directory

Oxford Instruments plc

Regional Sales and Service Offices
China
Room 714, Tower 3
Henderson Centre,
No. 18 Jianguomennei Avenue,
Beijing 100005, China
Tel: 86 (0)10 6518 8160/1/2
Fax: 86 (0)10 6518 8155
email bj@oichina.cn
Room 14-F,
No. 1 Plaza,No. 800 Nanjing East Road
Shanghai 200001, P. R. China
Tel : +86 (0)21 6360 8530/1/2/3
Fax: +86 (0)21 6360 8535
email sh@oichina.cn
No.129, Lane 150
Pingbei Road, Xinzhuang
Industrial Area,
Minhang District, Shanghai,
201109, China
Tel: +86 (0)21 6490 8580/8280
Fax: +86 (0)21 6490 4042
email sh@oichina.cn
Room2112 Bai Hui Plaza,
193 Zhong Shan Wu Road,
Guangzhou 510030, China
Tel : +86 (0)20 8364 9990/1
Fax: +86 (0)20 8364 9996
email gz@oichina.cn
Czech Republic
Velvarska 13, CZ-160 00 Praha
Czech Republic
Tel +420 233 343 264
Fax +420 224 311 724
email info@oxford.de

FranceBâtiment Ariane
Domaine Technologique de Saclay
4 rue René Razel
91892 Saclay
FranceTel : +33 1 69 85 25 25
Fax +33 1 69 41 46 80
Email info@oxford-instruments.fr
Germany
Otto-von-Guericke-Ring 10,65205 Wiesbaden, Germany
Tel +49 6122 937 0
Fax +49 6122 937 100
email info@oxford.de
India
Office no 17, Shreeji Arcade,
Almeida Road, Panchapakhadi,
Thane 400 602 India
Tel/Fax +91 22 25452424
email india.analytical@oxinst.com
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
email info@oxinst.co.jp

Latin America
13575 58th Street N. - Suite 154,
Clearwater, Florida 33760, USA
Tel +1 727 538 7702
Fax +1 727 538 4205
email oxford@gate.net
RussiaDenisovskiy per. 26
105005 Moscow
Russian Federation
Tel +7 (095) 933 51 23
Fax +7 (095) 933 51 24
email info@oxford.de
Singapore
371 Beach Rd,#17-07 Keypoint
Singapore 199597
Tel +65 6337 6848
Fax +65 6337 6286
email oi.admin@oxford-instruments.com.sg
Taiwan1F, No. 23, Jing-Shang 19th Street,
Hsinchu Taiwan
Tel +886 3 5788696
Fax +886 3 5789993
email oi.admin@oxford-instruments.com.tw

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
email info@oxinst.co.jp

101

Oxford Instruments plc

Tubney Woods, Abingdon
Oxon OX13 5QX, UK
Tel +44 (0) 1865 393200
Fax +44 (0) 1865 393422
email info.oiplc@oxinst.co.uk

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