<PAGE>
 
               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                      ***

                                   FORM 10-K

       (Mark One)

       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934 [FEE REQUIRED] For the fiscal year ended  December 31, 1995
                                                             -------------------

                                       OR

       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

   For the transition period from  ___________________ to ______________________

                       Commission File Number    0-1649
                                                 ------

 
                              NEWPORT CORPORATION
  ---------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

                  Nevada                               094-0849175
  ---------------------------------------------------------------------------
     (State or other jurisdiction                   (I.R.S. Employer 
      of incorporation or organization)            Identification No.)


       1791 Deere Avenue, Irvine, CA                      92714
  ---------------------------------------------------------------------------
   (Address of principal executive offices)            (Zip Code)

     Registrant's telephone number, including area code     (714) 863-3144
                                                            --------------

    Securities registered pursuant to Section 12(b) of the Act:     None
                                                               -------------

          Securities registered pursuant to Section 12(g) of the Act:

                   Common Stock, Stated Value $0.35 per Share
                   ------------------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d)  of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                Yes   X   No 
                                    -----    -----
                                        
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K  [  ]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $76,485,105 as of March 8, 1996.

The number of shares outstanding of each of the issuer's classes of common stock
as of March 8, 1996, was 8,743,266.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on June 5, 1996, are incorporated by reference into Part
III.

                              Page 1 of 95 Pages

                Exhibit Index on Sequentially Numbered Page 33
<PAGE>
 
                               INTRODUCTORY NOTE

       This Annual Report on Form 10-K contains certain forward-looking
       statements within the meaning of Section 27A of the Securities Act of
       1933 and Section 21E of the Securities Exchange Act of 1934 and the
       Company intends that such forward-looking statements be subject to the
       safe harbors created thereby.  These forward-looking statements include
       (i) the existence and development of the Company's technical and
       manufacturing capabilities, (ii) anticipated competition, (iii) potential
       future growth in revenues and income, (iv) potential future decreases in
       costs, and (v) the need for, and availability of, additional financing.

       The forward-looking statements included herein are based on current
       expectations that involve a number of risks and uncertainties.  These
       forward-looking statements are based on assumptions that the Company will
       not lose a significant customer or customers or experience increased
       fluctuations of demand or rescheduling of purchase orders, that the
       Company's markets will continue to grow, that the Company's products will
       remain accepted within their respective markets and will not be replaced
       by new technology, that competitive conditions within the Company's
       markets will not change materially or adversely, that the Company will be
       successful in integrating the operations of its RAM Optical
       Instrumentation, Inc., Light Control Instruments, Inc. and MikroPrecision
       Instruments, Inc. subsidiaries with the rest of the Company's operations,
       that the Company will retain key technical and management personnel, that
       the Company's forecasts will accurately anticipate market demand, that
       there will be no material adverse change in the Company's operations or
       business and that the Company will not experience significant supply
       shortages with respect to purchased components, sub-systems or raw
       materials.  Assumptions relating to the foregoing involve judgments with
       respect to, among other things, future economic, competitive and market
       conditions, and future business decisions, all of which are difficult or
       impossible to predict accurately and many of which are beyond the control
       of the Company.  Although the Company believes that the assumptions
       underlying the forward-looking statements will be realized.  In addition,
       the business and operations of the Company are subject to substantial
       risks which increase the uncertainty inherent in the forward-looking
       statements.  In light of the significant uncertainties inherent in the
       forward-looking information included herein, the inclusion of such
       information should not be regarded as a representation by the Company or
       any other person that the objectives or plans of the Company will be
       achieved.

                                     PART I
       ITEM 1 BUSINESS
       ------ --------

       GENERAL DESCRIPTION OF BUSINESS
       -------------------------------

       Newport Corporation (the "Company" or "Newport") operates in one business
       segment.  It designs, develops, manufactures and markets on a worldwide
       basis precision equipment for scientists and engineers who develop and
       apply technology involving lasers, optics and integrated motion control.
       The Company designs and manufactures a broad line of vibration isolation
       systems, electronic and optical instruments and precision mechanical,
       electronic and optical components and systems.  These products are used
       predominantly in research laboratories and test and measurement
       applications for industrial, government and university customers,
       domestically and internationally.

       In June 1991, the Company acquired the micro-positioning business of
       Micro-Controle S.A. ("Micro-Controle"), a privately held company
       headquartered in Evry, France for a total purchase price of $43.0 million
       cash financed through $23.9 million in debt and $19.1 million in cash,
       and the assumption of $16.0 million of existing liabilities.  The
       acquisition included the purchase of the assets and liabilities
       associated with the manufacture, sale, maintenance, marketing and
       distribution of its high-precision mechanical components and optics,
       motion devices, high stability materials and microscopy equipment.
       Although Newport and Micro-Controle served similar markets, the acquired
       Micro-Controle business complemented the Company's geographic strengths,
       products, distribution and customer bases.

       In response to the low level of sales experienced in Europe in 1993, the
       Company recorded restructuring and other special charges totaling $6.3
       million ($5.1 million after taxes) a majority of which was related to its
       European operations.  These charges included $3.3 million of non-cash
       charges to revalue surplus real estate in the U.S. and Europe, $2.2
       million for severance and related costs and $0.8 million for

                                       2
<PAGE>
 
       equipment relocation costs, and carrying and selling costs associated
       with the real estate.  Cash items totaled $3.0 million of which $1.2
       million and $1.3 million were expended during 1995 and 1994,
       respectively, for severance and other related payroll liabilities, and
       costs to close facilities.  It is expected that the balance of $0.5
       million will be expended by March 31, 1996.

       In February 1995, the Company acquired all the outstanding capital stock
       of RAM Optical Instrumentation, Inc. ("ROI"), a manufacturer of video
       inspection systems, in exchange for 1,251,000 shares of its common stock.
       Additionally, an option to purchase ROI common shares was exchanged for
       an option to purchase 72,975 shares of the Company's common stock.  In
       March 1995, the Company acquired all the outstanding stock of Light
       Control Instruments, Inc. ("LCI"), a manufacturer of laser-diode
       instruments, in exchange for 128,000 shares of the Company's common
       stock.

       These transactions have been accounted for as poolings of interests.
       Costs associated with these acquisitions totaling $0.1 million were
       charged to operations in the first quarter of 1995.

       On January 2, 1996, the Company acquired, for cash plus additional
       consideration based upon future operating profit, substantially all the
       assets and selected liabilities of MikroPrecision Instruments, Inc.
       ("MikroPrecision"), a manufacturer of precision equipment for high
       technology industries such as semiconductor and disk drive markets.  The
       company is located in a suburb of Minneapolis, Minnesota.  The
       acquisition will be accounted for as a purchase.

       The Company's products are sold to thousands of companies and
       institutions throughout the world and are marketed primarily by means of
       a technical catalog, a technically trained marketing staff and a
       worldwide network of subsidiary sales offices and sales representatives.
       The Company manufactures its products in Irvine, California and several
       locations in France.  With the acquisition of ROI and LCI, the Company
       acquired manufacturing facilities in Huntington Beach, California and San
       Luis Obispo, California.

       The Company resells some components and sub-systems purchased from other
       vendors.  Raw materials are purchased from several sources.  Certain of
       such components, sub-systems and raw materials are purchased from sole
       source suppliers.  These and other sources are, and management believes
       will continue to be, adequate to meet its currently foreseeable needs.
       However, the Company does not have guaranteed supply agreements from its
       sole source suppliers and there is no assurance that the Company will not
       experience supply shortages for such material.

       Manufacturing, sales, technical and administrative personnel employed
       worldwide by Newport totaled 662 persons at December 31, 1995.

       PRODUCTS
       --------

       The Company manufactures and distributes two major product groups to its
       laboratory and industrial customers.  These product groups are broadly
       defined by the Company as Laser Electro-Optical equipment and peripherals
       and Precision Systems.

       Laser Electro-Optical equipment and peripherals consist of Vibration
       Isolation Products, Components, Optics and Instruments and account for
       approximately one-half of the Company's annual sales.

          Vibration Isolation Products.  Laser and certain other high technology
          ----------------------------                                          
          experiments and applications require a relatively vibration-free
          environment.  The Newport isolation systems provide a working surface
          for experiments and applications with greatly reduced vibration
          environment due to noise, ground motion and excitations caused by
          external forces or active components mounted to the table itself.  The
          Company's isolation systems provide dynamically rigid surfaces using
          internally damped honeycomb tops mounted on pneumatic supports.  The
          Company also distributes active vibration isolation systems.

          The Company believes that its technology and its ability to
          manufacture competitively priced quality products have allowed it to
          become a major supplier of isolation systems for laser research and
          development and other applications requiring a high degree of
          stability.  The Company's product line

                                       3
<PAGE>
 
          includes over 350 standard isolation systems in addition to the
          capability to manufacture custom systems. While these products are
          built to rigid quality standards, they are comprised of standard
          materials and consequently, there are no unusual supply requirements.

          Components.  Newport offers a comprehensive line of mechanical
          ----------                                                    
          components compatible with, and complementary to, its vibration
          isolation systems.  These mechanical components include products such
          as mirror mounts, holders, positioners, and other accessories which
          are basic building blocks for experimental or prototype laser and
          optical systems.  The Company has developed and sells components for
          fiber optics, telecommunications and sensors experimentation.
          Newport's products include a micro interferometer, laser-to-fiber
          couplers and fiber-optic positioners.  The Company's line of fiber-
          optic components includes selected products manufactured by others.
          While the Company encounters substantial competition in the related
          accessory component area, Newport is one of the leading suppliers of
          such accessory components.

          Optics.  The Company manufactures and markets a line of laser-quality
          ------                                                               
          optics and optomechanical components.  This includes lenses, mirrors,
          prisms, laser beam expanders, collimators, attenuators, variable
          beamsplitters and spatial filters.  The Company has the capability to
          provide custom coatings for specific applications.

          Instruments.  Newport offers several lines of electronic instruments
          -----------                                                         
          to complement its other products in serving the optical laboratory.
          These products are concentrated in the areas of light measurement and
          control, light sources and holography.  The Company not only designs
          and manufactures a majority of its electronic products but also
          distributes the products of others.  Examples of these products
          include power meters, laser diode instruments, spectrum analyzers,
          electronic shutters and modulators, lasers, lamps and accessories.

       Precision Systems consist primarily of Motion Control Devices and
       Systems, Process Automation Workstations for Photonics Packaging and
       Video-Based Measurement and Inspection Systems.  These products account
       for approximately one-half of the Company's annual sales.

          Motion Control Devices and Systems.  Newport offers an extensive line
          ----------------------------------                                   
          of manually operated and motorized positioning devices serving both
          the research laboratory and industrial application areas.  Examples of
          these products include linear and rotational stages; elevational
          devices and actuators, as well as simple and programmable motion
          controllers for stepping and DC motors.  The Company also manufactures
          a line of positioning sub-systems, serving both laboratory and
          industrial application areas.  Newport's system integration capability
          allows it to serve application-specific research, test and
          measurement, and inspection markets and to satisfy a wide variety of
          industrial process application needs.

          Process Automation Workstations for Photonics Manufacturing.  Newport
          -----------------------------------------------------------          
          has developed several advanced process automation workstations for
          packaging and testing of photonics devices used in communications and
          sensing applications. Integrating core vibration control, motion
          control, and light measurement instrumentation technologies, the
          AutoAlign(TM) system utilizes sophisticated control software to
          completely automate fiber-optic alignment and device characterization
          for any photonic device.  The LaserWeld(TM) system adds laser-welded
          attachment capability and is the industry's only industrial-class
          laser welding workstation for automated pigtailing of opto-electronic
          components, and features Newport's proprietary LaserHammer(TM) weld-
          adjustment technology and fully automated process sequencing
          capabilities.

          Video-Based Measurement and Inspection Systems.  With the acquisition
          ----------------------------------------------                       
          of ROI, Newport offers a line of video-based measurement and
          inspection systems and accessories.  These products include video
          direct microscopes, Sprint, OMIS II(TM) and OMIS III(TM) optical
          measurement inspection systems, Polaris(TM) magnetic head pole
          geometry system and LaserMAP(TM) software. The Polaris(TM) magnetic
          head pole geometry system is specifically designed to measure pole
          geometry features on thin film disk drive sliders. The LaserMAP(TM)
          software integrates video and laser technology for electronic
          packaging applications.

                                       4
<PAGE>
 
       MARKETING
       ---------

       Newport believes that it is one of the leading suppliers of products in
       the laser research field.  No single unaffiliated customer accounted for
       more than 5% of the Company's sales in 1995.  Approximately 42% of its
       1995 sales were to domestic industrial users, 7% to educational
       institutions in the United States, 5% to domestic governmental agencies
       and 46% to foreign purchasers.  This compares with 38%, 9%, 6% and 47%
       for 1994, respectively.  Foreign purchasers in 1995 were located in
       France (35%), other European countries (37%), Pacific Rim (20%), and
       other areas of the world (8%).  This compares in 1994 with France (32%),
       other European countries (34%), Pacific Rim (25%), and other areas of the
       world (9%).  The market focus for products manufactured in France has
       been industrial, which is complementary to the United States emphasis on
       the laboratory market.  The Company's ability to provide customized
       integrated solutions for the industrial customer augments its
       capabilities in serving the general needs of the laser electro-optical
       laboratory market worldwide.

       Newport uses a Company-employed marketing staff domestically and
       internationally in France, Germany, the United Kingdom, Switzerland,
       Italy, the Netherlands, Canada and Taiwan.  Elsewhere, Newport uses
       approximately twenty independent sales representatives.  ROI products are
       distributed utilizing independent distributors throughout the United
       States and other countries in the world.  During 1994 the Company closed
       its subsidiaries in Spain and Belgium and sold its Japanese subsidiary to
       its independent sales representative in that country.  The Company also
       opened a branch in Taiwan at the end of 1994.

       The Company's products compete with products from a large number of
       companies domestically and internationally, none of which has a dominant
       worldwide market position.

       Sales and orders for the Company's products historically were generally
       not affected by seasonal demand; however, the Company anticipates that
       future patterns may experience more of a seasonal variation as a
       significant portion of the Company's sales and orders now come from
       Europe where business activity during the summer has traditionally been
       slower than other times of the year.

       Newport's principal marketing tool is its comprehensive catalog of
       products.  This document, numbering approximately 600 pages, provides
       detailed product information as well as extensive technical and
       applications data.  The catalog is mailed to more than 100,000 potential
       customers worldwide.

       The Company also publishes separate short-form catalogs that emphasize
       product and market areas, such as comprehensive German- and Japanese-
       language catalogs, a newly issued photonics catalog, optics catalogs and
       components catalogs.  These materials are further augmented by new
       product brochures and customer newsletters.  Newport advertises in
       technical journals serving many technical disciplines.  Selected product
       literature is published in Chinese, French, German and Japanese.  Further
       product exposure and contact with existing and potential clients are
       developed and maintained at trade shows and technical conferences.

       The Company has initiated a number of new marketing efforts aimed both
       inside and outside the traditional laboratory market.  One such
       initiative is a telemarketing initiative.  This new program targets new
       product brochures to potential customers, coordinates new order leads
       with salesmen and utilizes focused mailing lists for selected niche
       markets.  In addition, the Company is focusing its advertising into new
       market niches related to high growth, high technology industries such as
       fiber optic communications for which the Company has developed the
       AutoAlign(TM) and LaserWeld(TM) fiber alignment and packaging systems.

       The Company has also initialized an interactive homepage within the World
       Wide Web (http://www.newport.com).  This marketing venture specifically
       addresses the large Internet-savvy portion of the Company's customer base
       - those in academia and research.  As the World Wide Web gains acceptance
       within our other core markets, this tool will provide even greater
       advantages to the Company and our customers.  Available on the Company's
       World Wide Web page are the latest products, a literature and information
       request format, technical/tutorial and application related material,
       market surveys, sales information and comprehensive company and financial
       overviews.

                                       5
<PAGE>
 
       RESEARCH AND PRODUCT DEVELOPMENT
       --------------------------------

       The Company is developing a number of new products and product
       enhancements to complement its AutoAlign fiber alignment system for the
       fiber optic communications market.  During 1995 the Company developed a
       prototype LaserWeld(TM) packaging system for manufacturing optoelectronic
       devices for the high growth fiber optic communication industry. The
       Company's ROI subsidiary introduced the PolarisTM magnetic head pole
       geometry measurement system for the disk drive industry and LaserMAP
       software which integrates laser metrology into its video inspection
       systems for applications in the electronics packaging industry.  The
       Company also introduced a series of X-ray goniometers for sale to the
       high energy physics research market.  In addition, during 1995 the
       Company introduced a number of new products for the photonics research
       market and the traditional Laser Electro-Optical market.  Management is
       committed to continued product development and intends to increase R&D
       spending by approximately one million dollars in 1996 over 1995 for
       development of new products and product improvements.

       PATENTS
       -------

       The Company has a number of patents, trademarks, exclusive marketing
       rights and licenses.  Although these rights are considered to have value
       and the Company intends to defend such rights vigorously, the Company
       believes that its business relies primarily on its product performance,
       experience and marketing skill, and is not dependent upon patent rights.

       BACKLOG
       -------

       The consolidated backlog of all the Company's products was $19.3 million,
       $16.7 million and $14.6 million at December 31, 1995, 1994 and 1993,
       respectively.  Approximately 31% of the consolidated backlog at December
       31, 1995 was attributable to products manufactured in France.

       A significant portion of the products manufactured by the Company are
       manufactured for inventory with the goal of being able to make shipments
       upon receipt of an order.  The remainder of the Company's products are
       made to order with typical lead times of three to twelve weeks.  Because
       of these short response times and because orders are cancelable with
       little or no penalty, the Company does not believe that its backlog of
       orders at any particular date is a meaningful indicator of the Company's
       sales for any succeeding period.

       OPERATIONS BY GEOGRAPHIC AREA
       -----------------------------

       Upon the acquisition of the micro-positioning business of Micro-Controle
       in 1991, the existing Company European operations were supplemented by
       the Micro-Controle manufacturing operations in France and sales offices
       in France, Germany, the United Kingdom, Belgium, Italy and Spain.  The
       Company closed its Spanish subsidiary and began distributing its products
       in Spain through a distributor during the fourth quarter of 1994. The
       Company also closed its subsidiary in Belgium during the fourth quarter
       of 1994 and is serving those customers with its sales personnel in the
       Netherlands and France. During the fourth quarter of 1994 the Company
       opened a branch office in Taiwan.

       The Newport European Distribution Company ("NEDCO") was established in
       the Netherlands in May 1991 to serve as a centralized distribution
       service for customers in Europe.  In addition, the Company has a
       subsidiary in Canada, which operates primarily as a sales office.  The
       Company reached an agreement with Hakuto Company, Limited, for the
       distribution of its products in Japan and as a consequence, the Company
       closed its sales office in Japan during the second quarter of 1994.

       In the United States the Company has manufacturing operations in
       Huntington Beach, Irvine and San Luis Obispo, California.  Subsequent to
       the end of 1995 the Company acquired MikroPrecision with its
       manufacturing operations in a suburb of Minneapolis, Minnesota.  The
       Company intends to relocate the ROI Huntington Beach operation into its
       Irvine, California facility during the second quarter of 1996.

                                       6
<PAGE>
 
       For information regarding the Company's operations by geographic area
       refer to Note 14 of Notes to Consolidated Financial Statements on page
       30.

       INVESTMENTS
       -----------

       Marketable securities at December 31, 1994 and 1993 consisted of shares
       of common stock of publicly traded companies which were sold during 1995
       and/or 1994.  The shares were stated at fair market value in accordance
       with Statement of Financial Accounting Standards 115, Accounting for
       Certain Investments in Debt and Equity Securities (refer to Note 8 of
       Notes to Consolidated Financial Statements on page 26).  Apart from the
       ownership of subsidiaries detailed in Exhibit 21 of this Form 10-K,
       Newport has minority ownership interests in several domestic companies
       involved in manufacturing laser-related and other high technology
       products.

       ITEM 2 PROPERTIES
       ------ ----------

       The Company's headquarters and principal California manufacturing
       operations are located at 1791 Deere Avenue, Irvine, California.  The
       Company entered into a fifteen-year lease for the Deere Avenue property
       commencing in March 1992.  In addition, the Company has manufacturing
       operations in leased facilities at Huntington Beach and San Luis Obispo,
       California and leases office space in Mountain View, California for its
       Western Region sales, service and application center.  The company leases
       sales and service offices in Germany, England, Switzerland, Italy, the
       Netherlands, Canada and Taiwan, with leases expiring at various dates
       through 2011.  The Company's centralized European distribution center is
       located at leased facilities in the Netherlands.  The Company acquired in
       1991, in connection with the acquisition of Micro-Controle, a building
       and land in Garden City, New York and several properties and buildings at
       various locations in France.  During the first quarter of 1995 the
       Company relocated its New York manufacturing operations to Irvine,
       California and has leased the Garden City, New York property.

       ITEM 3 LEGAL PROCEEDINGS
       ------ -----------------

       The Company is not a party to any material legal proceedings other than
       ordinary routine litigation incidental to its business.

       ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
       ------ ---------------------------------------------------

       No matters were submitted to a vote of security holders during the fourth
       quarter of the year ended December 31, 1995.


                                    PART II

       ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY
       ------ --------------------------------------------------------------
              HOLDER MATTERS
              --------------

       Price Range of Common Stock
       ---------------------------

       The Company's common stock is traded on the Nasdaq National Market under
       Nasdaq symbol NEWP.  As of December 31, 1995, the Company had 1,659
       common stockholders of record.  Refer to Note 16, Supplementary Quarterly
       Consolidated Financial Data (Unaudited), of Notes to Consolidated
       Financial Statements on page 31 for quarterly share price and dividend
       payments.

                                       7
<PAGE>
 
       ITEM 6 SELECTED FINANCIAL DATA
       ------ -----------------------

       The following table presents selected financial data of the Company and
       its subsidiaries as of and for the years ended December 31, 1995, 1994
       and 1993, the five months ended December 31, 1992 and the years ended
       July 31, 1992, and 1991 restated to include financial information of ROI
       and LCI which were accounted for as poolings of interests (In thousands,
       except percent, per share and employment information):
<TABLE>
<CAPTION>
                                                       1995        1994       1993       1992T*       1992        1991
                                                     --------    -------    --------    -------    ---------    -------
<S>                                                  <C>         <C>        <C>         <C>        <C>          <C>
FOR THE YEAR:
Net sales                                            $101,961    $94,201     $93,573    $39,398     $ 94,925    $65,109
Cost of sales                                          55,421     51,811      51,747     21,887       53,378     35,882
                                                     --------    -------     -------    -------     --------    -------
Gross margin                                           46,540     42,390      41,826     17,511       41,547     29,227
Selling, general and administrative                    34,441     32,240      31,735     14,161       34,699     20,814
Research and development                                6,765      5,371       5,219      2,498        6,471      4,194
Restructuring expense and other special charges             -          -       6,263          -       13,795          -
                                                     --------    -------     -------    -------     --------    -------
Income (loss) from operations                           5,334      4,779      (1,391)       852      (13,418)     4,219
Interest expense                                       (1,593)    (1,782)     (2,321)    (1,540)      (2,911)      (570)
Other income (expense)                                  1,137      1,839       1,463        905        2,021      1,431
                                                     --------    -------     -------    -------     --------    -------
Income (loss) before income taxes                       4,878      4,836      (2,249)       217      (14,308)     5,080
Provision (benefit) for taxes                           1,003      1,654         951        744         (333)     1,398
                                                     --------    -------     -------    -------     --------    -------
 Net income (loss)                                   $  3,875    $ 3,182     $(3,200)   $  (527)    $(13,975)   $ 3,682
                                                     ========    =======     ========   ========    ========    =======
Percent to sales:
   Gross margin                                          45.6       45.0        44.7       44.4         43.8       44.9
   Selling, general and administrative                   33.8       34.2        33.9       35.9         36.6       32.0
   Research and development                               6.6        5.7         5.6        6.3          6.8        6.4
   Income (loss) from operations                          5.2        5.1        (1.5)       2.2        (14.1)       6.5
   Net income (loss)                                      3.8        3.4        (3.4)      (1.3)       (14.7)       5.7

PER SHARE:
Earnings (loss) per share                            $   0.45    $  0.38     $ (0.38)   $ (0.06)    $  (1.67)   $  0.44
Dividends paid per share                                 0.04       0.04        0.04       0.04         0.16       0.16
Equity per share                                         6.06       5.53        5.20       5.66         5.78       7.79

AT YEAR END:
Cash and marketable securities                       $  1,524    $ 3,624     $ 4,311    $ 3,436     $  6,593    $20,601
Customer receivables                                   20,547     18,755      16,946     18,678       21,065     16,009
Inventories                                            22,744     21,432      21,655     24,531       27,452     20,322
Other current assets                                    4,088      4,512       4,941      5,939        7,603      6,122
                                                     --------    -------     -------    -------     --------    -------
Current assets                                         48,903     48,323      47,853     52,584       62,713     63,054
Investments and other assets                            4,557      4,441       5,185      5,177        5,074     12,340
Property, plant and equipment                          22,327     23,044      24,145     30,415       31,175     14,189
Goodwill, net                                           8,161      8,846       8,852      9,747       10,893          -
                                                     --------    -------     -------    -------     --------    -------
   Total assets                                      $ 83,948    $84,654     $86,035    $97,923     $109,855    $89,583
                                                     ========    =======     =======    =======     ========    =======

Current liabilities                                  $ 20,330    $26,604     $24,085    $29,358     $ 34,893    $19,019
Deferred taxes                                          1,032        282       2,302      2,083        2,054      1,531
Long-term debt                                          9,899     11,117      16,005     19,246       24,704      4,047
Stockholders' equity                                   52,687     46,651      43,643     47,236       48,204     64,986
                                                     --------    -------     -------    -------     --------    -------
   Total liabilities and equity                      $ 83,948    $84,654     $86,035    $97,923     $109,855    $89,583
                                                     ========    =======     =======    =======     ========    =======

MISCELLANEOUS STATISTICS
Working capital                                      $ 28,573    $21,719     $23,768    $23,226     $ 27,820    $44,035
Average equivalent shares                               8,679      8,469       8,385      8,345        8,345      8,456
Common stock outstanding                                8,699      8,441       8,400      8,345        8,345      8,345
Worldwide employment at end of period                     662        650         676        743          805        552
Sales per employee (annualized)                      $    155    $   142     $   132    $   122     $    140    $   126
</TABLE>

         * Transition period of five months ended December 31, 1992 because of
         change in year end.

                                       8
<PAGE>
 
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS
------ ------------------------------------
       OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
       ------------------------------------------------

OVERVIEW
--------

The following is management's discussion and analysis of certain significant 
factors which have affected the results of operations and financial condition of
the Company during the period included in the accompanying financial statements.
This discussion should be read in conjunction with the financial statements and
associated notes. This discussion includes the impact of the acquisition of RAM 
Optical Instrumentation, Inc. ("ROI") and Light Control Instruments, Inc.
("LCI") which were accounted for using the pooling of interests method,
described more fully in Note 3 to the financial statements on page 23 of this
Form 10-K. The discussion herein is qualified by reference to the Introductory
Note above.

ACQUISITIONS In February 1995, the Company acquired all the outstanding 
------------
capital stock of RAM Optical Instrumentation, Inc. ("ROI"), a manufacturer of
video inspection systems, in exchange for 1,251,000 shares of its common stock.
Additionally, an option to purchase ROI common shares was exchanged for an
option to purchase 72,975 shares of the Company's common stock. In March 1995,
the Company acquired all the outstanding stock of Light Control Instruments,
Inc. ("LCI"), manufacturer of laser-diode instruments, in exchange for 128,000
shares of the Company's common stock.

These transactions have been accounted for as poolings of interests.  Costs 
associated with these acquisitions totaling $0.1 million were charged to 
operations in the first quarter of 1995.

On January 2, 1996, the Company acquired, for cash plus additional consideration
based upon future operating profit, substantially all the assets and selected 
liabilities of MikroPrecision Instruments, Inc. ("MikroPrecision"), a 
manufacturer of precision equipment for high technology industries such as 
semiconductor and disk drive markets.  The company is located in a suburb of 
Minneapolis, Minnesota.  The acquisition will be accounted for as a purchase.

RESTRUCTURING  In response to the low level of sales experienced in Europe in 
-------------
1993, the Company recorded restructuring and other special charges totaling $6.3
million ($5.1 million after taxes) a majority of which was related to its 
European operations.  These charges included $3.3 million of non-cash charges to
revalue surplus real estate in the U.S. and Europe, $2.2 million for severance
and related costs and $0.8 million for equipment relocation costs, and carrying 
and selling costs associated with the real estate.  Cash items totaled $3.0 
million of which $1.2 million and $1.3 million were expended during 1995 and 
1994, respectively, for severance and other related payroll liabilities, and 
costs to close facilities. It is expected that the balance of $0.5 million will
be expended by March 31, 1996.

RESULTS OF OPERATIONS
---------------------

FINANCIAL ANALYSIS The following table sets forth, for the periods indicated,
------------------
certain income and expense items expressed as a percentage of the Company's
total sales:

<TABLE>
<CAPTION>
                                                             PERIOD-TO-PERIOD
                           PERCENTAGE OF TOTAL SALES        INCREASE (DECREASE)
                           -------------------------        -------------------
                            1995     1994      1993          1995         1994
                           ------   ------    ------        ------      -------
<S>                        <C>      <C>       <C>           <C>         <C> 
Net sales                  100.0%   100.0%    100.0%          8.2%         0.1%
Cost of sales               54.4     55.0      55.3           7.0            -
 Gross margin               45.6     45.0      44.7           9.8          1.3
Selling, general and
 administrative expense     33.8     34.2      33.9           6.8          1.6
Research and
 development expense         6.6      5.7       5.6          26.0          2.9
Restructuring expense          -        -       6.7             -       (100.0)
 Income from operations      5.2      5.1      (1.5)         11.6        443.6
Interest expense            (1.5)    (1.9)     (2.5)        (10.6)       (23.2)
Other income, net            1.1      2.0       1.6         (38.2)        25.7
Income taxes                 1.0      1.8       1.0         (39.4)        73.9
 Net income                  3.8      3.4      (3.4)         21.8        199.4
</TABLE>

                                       9
<PAGE>
 
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS
------ ------------------------------------
       OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CON'T)
       --------------------------------------------------------

NET SALES  For 1995, 1994 and 1993, the Company's net sales totaled $102.0 
---------
million, $94.2 million and $93.6 million, respectively.  Net sales for 1995 
increased $7.8 million compared with 1994, represented by increases of $5.6 
million in domestic markets and $0.6 million in international markets combined 
with a favorable exchange rate effect of $1.6 million on sales denominated in 
foreign currencies.  Net sales for 1994 increased modestly versus 1993, 
reflecting improvements in both domestic and international markets.

Domestic sales totaled $55.5 million, $49.9 million and $49.5 million for 1995, 
1994 and 1993, respectively.  Sales for 1995 increased $5.6 million compared 
with sales for 1994.  The increase was attributable principally to increased 
sales revenue at ROI and LCI and to growth across core product lines.  For 1994,
domestic sales increased modestly compared with sales for 1993, primarily the 
result of strengthening sales of core precision micropositioning systems and 
continued improvement in newer growth markets.

International sales totaled $46.5 million, $44.3 million and $44.1 million for 
1995, 1994 and 1993, respectively.  The increase in 1995 compared with 1994 was 
attributable principally to strengthened sales in the major markets of Europe 
and the $1.6 million favorable exchange rate effect offset in park by declines 
in sales to the Pacific Rim.  The Company believes the international sales 
decline in the Pacific Rim resulted primarily from the weak economic environment
in Japan. International sales for 1994 increased compared with 1993 primarily
the result of the growth in sales of ROI's products internationally.

The order rate in the U.S. continues to show moderate strength in response to 
the increasing sales and marketing emphasis on higher growth market niches in 
such industries as fiber optic communications, semiconductor and disk drive 
industries and on new products introduced in 1995.  Management expects 
improvements in sales to the Pacific Rim (primarily Japan) as these economies 
strengthen in 1996. However, the order rate in Europe is not showing strength.  
Overall, management anticipates continued sales growth through 1996 from 
acquisitions, an improving U.S. economy and increased sales of ultrahigh 
precision positioning products.

OPERATING INCOME  Total costs and expenses for 1995, 1994 and 1993, were $96.6 
----------------
million, $89.4 million and $95.0 million (including $6.3 million of 
restructuring and other special charges), respectively.

Gross margin when stated as a percentage of sales was 45.6%, 45.0% and 44.7% for
1995, 1994 and 1993, respectively.  The improvements in gross margin were 
primarily attributable to restructuring activities and increased sales volume.  
Management anticipates that gross margin will improve further in 1996 as a 
result of increased sales volume and continued productivity improvements.

Selling, general and administrative (SG&A) expenses totaled $34.4 million, $32.2
million and $31.7 million for 1995, 1994 and 1993, respectively.  SG&A expenses 
represented 33.8%, 34.2% and 33.9% of net sales in 1995, 1994 and 1993,
respectively. Although SG&A expenses increased in 1995, they decreased as a
percentage of sales. The increase in dollars was attributable in large part to
non-recurring expenses related to an acquisition which was not consummated ($0.5
million), severance expenses ($0.4 million), the strengthening of the Company's
operating management in Europe ($0.3 million) and an unfavorable exchange rate
effect ($0.7 million). The increase in 1994 was attributable to the costs
associated with strengthening the operating management of the Company.
Management anticipates SG&A expenses in total will increase in 1996 but will be
reduced further as a percent of sales as a result of increased sales volume.

Research and development (R&D) expenses totaled $6.8 million, $5.4 million and 
$5.2 million for 1995, 1994 and 1993, respectively.  R&D expenses represented 
6.6%, 5.7% and 5.6% of net sales in 1995, 1994 and 1993, respectively.  The 
increases in R&D expenses in 1995 compared with 1994 and 1994 compared with 
1993, were attributable primarily to the development of a number of new products
and product enhancements to complement the AutoAlign(TM) fiber alignment system
for the fiber optic communications market, a prototype LaserWeld(TM) packaging
workstation and new products and software by the Company's ROI subsidiary.
Management is committed to continued product development and intends to

                                       10
<PAGE>
 
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS
------ ------------------------------------
       OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CON'T)
       --------------------------------------------------------

increase R&D spending by approximately one million dollars in 1996 over 1995 for
development of new products and product improvements.

Excluding the restructuring and other special charges, operating income totaled
$5.3 million, $4.8 million and $4.9 million for 1995, 1994 and 1993,
respectively.  Operating income excluding restructuring and other special
charges represented 5.2%, 5.1% and 5.2% of net sales in 1995, 1994 and 1993,
respectively.  Management anticipates that operating income will improve in 1996
primarily as a result of the anticipated sales growth.

During the past three years, inflation has not had any material effect on the
Company's net sales, operating income or other results of operations.

INTEREST EXPENSE    Interest expense totaled $1.6 million, $1.8 million and $2.3
----------------
million for 1995, 1994 and 1993, respectively.  The decreases in interest
expense for the years 1995 and 1994 were attributable to a reduction in the
average debt outstanding and reduced interest rates offset in part by the impact
of the strengthening of the French franc against the US dollar.  The Company
anticipates interest expense will increase in 1996 primarily because of funds
expended on the acquisition of MikroPrecision Instruments, Inc. offset in part
by lower interest rates primarily as a result of the new credit agreement signed
in the fourth quarter of 1995.  This new credit agreement is described more
fully in Note 9 to the financial statements on page 27 of this Form 10-K.

OTHER INCOME (EXPENSE)    Interest and dividend income totaled $0.1 million,
----------------------
$0.1 million and $0.2 million for 1995, 1994 and 1993, respectively.

Realized exchange gains (losses) were less than $0.1 million, and totaled $0.2
million, and $(0.2) million for 1995, 1994 and 1993, respectively.  The gain in
1994 and the loss in 1993 were attributable primarily to the strengthening in
1994, and the weakening in 1993, of the European currencies compared with the
U.S. dollar on current receivables denominated in European currencies.

The Company recorded investment gains and other income totaling $1.0 million,
$1.5 million and $1.4 million in 1995, 1994 and 1993, respectively.  The gains
were attributable primarily to the sale of investments.

TAXES BASED ON INCOME    The effective tax rates for 1995, 1994 and 1993 were
---------------------
20.6%, 34.2% and 142.3%, respectively.  The decrease in the 1995 effective tax
rate was due in part to a $0.4 million reduction in the valuation reserve
attributable to the net operating loss carryforwards of certain of its European
subsidiaries because of an improvement in earnings.  Approximately $0.4 million
and $0.5 million of foreign income tax benefit was recorded because of the
utilization of foreign losses in 1995 and 1994, respectively.  Prior to 1994,
net losses, principally in Europe, did not have a tax benefit recorded.

EMPLOYMENT    Worldwide employment of the Company totaled 662, 650 and 676 at
----------
December 31, 1995, 1994 and 1993, respectively.  The increase in employment at
December 31, 1995, was a result of the increased sales volume.  The declines in
employment at December 31, 1994 and 1993 were primarily the result of the
restructuring activities.  Sales per employee approximated $155,000, $142,000
and $132,000 during 1995, 1994 and 1993, respectively.

STOCKHOLDER'S EQUITY    The Company paid dividends totaling $0.3 million during
--------------------
1995, 1994 and 1993, respectively.  This represents 4 cents per share during
each of the respective periods.

Stockholders' equity increased from $43.6 million ($5.20 per share), at December
31, 1993 to $46.7 million ($5.53 per share) as of December 31, 1994 and to $52.7
million ($6.06 per share) as of December 31, 1995.  The increases in 1995 and
1994 were attributable to the respective year earnings, issuance of stock under
stock option and stock purchase plans, and unrealized exchange gains, offset in
part by dividend payments.

                                       11
<PAGE>
 
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS
------ ------------------------------------
       OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CON'T)
       --------------------------------------------------------


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

WORKING CAPITAL AND LIQUIDITY    Net cash provided by operating activities of
-----------------------------
$5.7 million in 1995 was primarily attributable to the Company's operating
income for 1995, non-cash items principally depreciation and amortization, and
changes in operating assets and liabilities.

Net cash used in investing activities of $1.0 million in 1995 was attributable
principally to the Company's purchases of property, plant and equipment,
partially offset by proceeds from sales of investments and marketable
securities.

Net cash used in financing activities of $6.0 million in 1995 was attributable
principally to cash paid to reduce debt, partially offset by proceeds from the
issuance of common stock under employee agreements.

Cash paid to reduce debt totaled $7.4 million, $2.9 million and $3.5 million
during 1995, 1994 and 1993, respectively.  The debt reductions in 1995 and 1994
were offset in part by translation losses of $1.2 million in 1995 and $1.7
million in 1994 as a result of the weakening of the U.S. dollar versus the
French franc.

On December 20, 1995, the Company signed a credit agreement with a bank for a
$15.0 million unsecured line of credit to support the Company's domestic
operation and a $2.0 million unsecured line of credit to support the Company's
European requirements.  This new credit agreement with interest at prime plus
0.5%, or LIBOR plus 2.0%, was used to repay amounts owed on credit agreements
with two U.S. financial institutions and provide funds for the acquisition of
MikroPrecision Instruments, Inc. on January 2, 1996.  At December 31, 1995, the
amount outstanding under this line of credit was $7.0 million with the remaining
$9.8 million available after reflecting outstanding letters of credit.  During
the first quarter of 1996, the Company reached an agreement in principle for
$20.0 million of long-term financing from an insurance company which, if
consummated, would refinance a significant portion of its outstanding debt
during the first half of 1996 and could reduce its after-tax borrowing.

The Company believes its current working capital position together with
estimated cash flows from operations, its existing financing availability and
anticipated refinancing are adequate for operations in the ordinary course of
business, acquisitions, anticipated capital expenditures and debt payment
requirements.

CAPITAL EXPENDITURES    Capital expenditures for plant improvements and new
--------------------
equipment, aggregated $2.5 million, $2.1 million, and $2.1 million for 1995,
1994 and 1993, respectively.  The Company anticipates significant increases in
capital expenditures in 1996 compared with 1995 primarily for capacity expansion
at MikroPrecision.

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
------ -------------------------------------------

Consolidated financial statements of the Company as of December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995, the
report of independent auditors thereon and the Company's unaudited quarterly
financial data for 1995 and 1994 are referenced in Item 14 herein.

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
------ -------------------------------------------------------------------------
       DISCLOSURE
       ----------

Not applicable.

                                   PART III

ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------- --------------------------------------------------

The information required hereunder is incorporated by reference to the Company's
Proxy Statement to be filed within 120 days of December 31, 1995 in connection
with its June 5, 1996, Annual Meeting of Stockholders.

                                       12
<PAGE>
 
       ITEM 11 EXECUTIVE COMPENSATION
       ------- ----------------------

       The information required hereunder is incorporated by reference to the
       Company's Proxy Statement to be filed within 120 days of December 31,
       1995 in connection with its June 5, 1996, Annual Meeting of Stockholders.

       ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
       ------- --------------------------------------------------------------

       The information required hereunder is incorporated by reference to the
       Company's Proxy Statement to be filed within 120 days of December 31,
       1995 in connection with its June 5, 1996, Annual Meeting of Stockholders.

       ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
       ------- ----------------------------------------------

          There were no relationships or transactions required to be reported
       under Item 404 of Regulation S-K.


                                    PART IV

       ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 10-K
       ------- ----------------------------------------------------------------

        (a)  1. Financial Statements and Financial Statement Schedules
             ---------------------------------------------------------
<TABLE>
<CAPTION>
 
       <S>                                                   <C>
       Report of Independent Auditors                         16

       FINANCIAL STATEMENTS:
       ---------------------
       Consolidated statement of operations for the years     
        ended December 31, 1995, 1994 and 1993                17
 
 
       Consolidated balance sheet at December 31, 1995 and
        1994                                                  18
 
       Consolidated statement of cash flows for the years 
        ended December 31, 1995, 1994 and 1993                19
 
 
       Consolidated statement of stockholders' equity for
        the years ended December 31, 1995, 1994 and 1993      20
 
 
       Notes to consolidated financial statements             21 - 31
 
       FINANCIAL STATEMENT SCHEDULES:
       ------------------------------
       II - Consolidated valuation accounts                   32
</TABLE>

       All other schedules are omitted as the required information is not
       present or is not present in amounts sufficient to require submission of
       the schedule, or because the information required is included in the
       consolidated financial statements or notes thereto.


       2. Exhibits
       -----------

            The exhibits set forth below are filed as part of this Annual
       Report:
<TABLE>
<CAPTION>
       <S>           <C>
       Exhibit 3.1   Restated Articles of Incorporation of Newport Corporation,
                     a Nevada corporation, as amended to date (incorporated by
                     reference to exhibit in the Company's 1987 Proxy
                     Statement).

       Exhibit 3.2   Restated Bylaws of Newport Corporation, a Nevada
                     corporation, as amended to date (incorporated by
                     reference to Exhibit 3.2 of the Company's Annual Report on
                     Form 10-K for the year ended July 31, 1992).
</TABLE> 

                                       13
<PAGE>
 
       ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
               ------------------------------------------------------
               FORM 10-K (CON'T)
               -----------------
<TABLE>
<CAPTION>
       <S>           <C>
       Exhibit 10.1  Lease Agreement dated March 27, 1991, as amended,
                     pertaining to premises located in Irvine, California
                     (incorporated by reference to Exhibit 10.1 of the Company's
                     Annual Report on Form 10-K for the year ended July 31,
                     1992).

       Exhibit 10.3  1992 Incentive Stock Plan (incorporated by reference to
                     exhibit in the Company's 1992 Proxy Statement).

       Exhibit 10.4  Loan and Security Agreement dated June 23, 1993, with
                     exhibits and Promissory Note (incorporated by reference to
                     Exhibit 10.4 of the Company's Form 10-Q for the quarter
                     ended June 30, 1993).

       Exhibit 10.5  Acquisition of subsidiaries of Micro-Controle S.A.,
                     with exhibits (incorporated by reference to Form 8-K filed
                     June 28, 1991, and amended July 23, 1992).

       Exhibit 10.6  Acquisition of Micro-Controle S.A., with exhibits
                     (incorporated by reference to Form 8-K filed September 18,
                     1991, and amended July 23, 1992).
 
       Exhibit 10.7  Form of Severance Compensation Agreement between Newport
                     Corporation and certain Executive Officers (incorporated
                     by reference to Exhibit 10.7 of the Company's Annual Report
                     on Form 10-K for the year ended December 31, 1993).

       Exhibit 10.8  Severance Compensation Agreement dated as of April 1, 
                     1994, between Newport Corporation, a Nevada Corporation,
                     and Edmund K. Langley, Executive Vice President and Chief
                     Operating Officer (incorporated by reference to Exhibit
                     10.8 of the Company's Form 10-Q for the quarter ended June
                     30, 1994).

       Exhibit 10.9  Stock Purchase Agreement dated as of February 14, 1995,
                     among Newport Corporation as Purchaser, RAM Optical
                     Instrumentation, Inc. and Mark G. Arenal, Harry J. Brown,
                     The Harry & Patricia Brown Living Trust 1994, John G.
                     Hartwell, and The John G. Hartwell Family Trust Established
                     1/3/90 as Sellers (incorporated by reference to Exhibit 2.1
                     of the Company's Form 8-K filed March 15, 1995).

       Exhibit 10.10 Credit Agreement dated as of December 20, 1995 between
                     Newport Corporation and ABN AMRO Bank N.V., Los Angeles
                     International Branch                                    34
 
       Exhibit 21    Subsidiaries of Registrant                              93

       Exhibit 23    Consent of Independent Auditors                         94

       Exhibit 27    Financial Data Schedule (Article 5 of Regulation S-X)   95
</TABLE>

       (b) Reports on Form 8-K
           -------------------
       The Company filed no Reports on Form 8-K during the quarter ended
       December 31, 1995.

                                       14
<PAGE>
 
                                   SIGNATURES

       Pursuant to the requirements of Section 13 or 15(d) of the Securities
       Exchange Act of 1934, the Registrant has duly caused this amendment to be
       signed on its behalf by the undersigned, thereunto duly authorized.

                              NEWPORT CORPORATION

       /s/ RICHARD E. SCHMIDT
       ---------------------
       Richard E. Schmidt, Chairman of the Board
        (Principal Executive Officer)


       /s/ ROBERT C. HEWITT
       --------------------
       Robert C. Hewitt, Vice President, Chief Financial Officer, Secretary and
       Treasurer
        (Chief Financial Officer)
        

       /s/ GERALD A. DECICCIO
       ---------------------
       Gerald A. DeCiccio, Corporate Controller
         (Principal Accounting Officer)

                                 Date:  March 28,1996
                                        -------------

       Pursuant to the requirements of the Securities Exchange Act of 1934, this
       report has been signed below by the following persons on behalf of the
       Registrant and in the capacities and on the dates indicated.


       /s/ R. JACK APLIN                                       March 28, 1996
       -----------------                                       --------------
       R. Jack Aplin, Member of the Board                           Date


       /s/ ROBERT L. GUYETT                                    March 28, 1996
       --------------------                                    --------------
       Robert L. Guyett, Member of the Board                        Date


       /s/ LOUIS B. HORWITZ                                    March 28, 1996
       --------------------                                    --------------
       Louis B. Horwitz, Member of the Board                        Date


       /s/ DAN L. MCGURK                                       March 28, 1996
       -----------------                                       --------------
       Dan L. McGurk, Member of the Board                           Date


       /s/ C. KUMAR N. PATEL                                   March 28, 1996
       ---------------------                                   --------------
       C. Kumar N. Patel, Member of the Board                       Date


       /s/ JOHN T. SUBAK                                       March 28, 1996
       -----------------                                       --------------
       John T. Subak, Member of the Board                           Date

                                       15
<PAGE>
 
                         Report of Independent Auditors



       The Board of Directors and Stockholders
       Newport Corporation


       We have audited the accompanying consolidated balance sheet of Newport
       Corporation as of December 31, 1995 and 1994, and the related
       consolidated statements of operations, stockholders' equity, and cash
       flows for each of the three years in the period ended December 31, 1995.
       Our audits also included the financial statement schedule listed in the
       Index at Item 14(a).  These financial statements and schedule are the
       responsibility of the Company's management.  Our responsibility is to
       express an opinion on these financial statements and schedule based on
       our audits.

       We conducted our audits in accordance with generally accepted auditing
       standards.  Those standards require that we plan and perform the audit to
       obtain reasonable assurance about whether the financial statements are
       free of material misstatement.  An audit includes examining, on a test
       basis, evidence supporting the amounts and disclosures in the financial
       statements.  An audit also includes assessing the accounting principles
       used and significant estimates made by management, as well as evaluating
       the overall financial statement presentation.  We believe that our audits
       provide a reasonable basis for our opinion.

       In our opinion, the consolidated financial statements referred to above
       present fairly, in all material respects, the consolidated financial
       position of Newport Corporation at December 31, 1995 and 1994, and the
       consolidated results of its operations and its cash flows for each of the
       three years in the period ended December 31, 1995, in conformity with
       generally accepted accounting principles.  Also, in our opinion, the
       related financial statement schedule, when considered in relation to the
       basic financial statements taken as a whole, presents fairly in all
       material respects the information set forth therein.





                                                      ERNST & YOUNG LLP

       Orange County, California
       February 9, 1996

                                       16
<PAGE>
 
                              NEWPORT CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
(In thousands except
per share amounts)
                                                     Years Ended December 31,
                                                 -------------------------------
                                                   1995       1994        1993
                                                 --------    -------     -------
<S>                                              <C>         <C>        <C>
Net sales                                        $101,961    $94,201     $93,573
Cost of sales                                      55,421     51,811      51,747
                                                 --------    -------     -------
Gross profit                                       46,540     42,390      41,826
Selling, general and administrative expense        34,441     32,240      31,735
Research and development expense                    6,765      5,371       5,219
Restructuring and other special charges                 -          -       6,263
                                                 --------    -------     -------
Income (loss) from operations                       5,334      4,779      (1,391)
Interest expense                                   (1,593)    (1,782)     (2,321)
Other income, net                                   1,137      1,839       1,463
                                                 --------    -------     -------
Income (loss) before income taxes                   4,878      4,836      (2,249)
Income tax provision                                1,003      1,654         951
                                                 --------    -------     -------
Net income (loss)                                $  3,875    $ 3,182     $(3,200)
                                                 ========    =======     =======
Net income (loss) per share                         $0.45      $0.38      $(0.38)
                                                 ========    =======     =======
Number of shares used to calculate
net income (loss) per share                         8,679      8,469       8,385
                                                 ========    =======     =======
Dividends per share                                 $0.04      $0.04       $0.04
                                                 ========    =======     =======
</TABLE>
                            See accompanying notes.

                                       17
<PAGE>
 
                              NEWPORT CORPORATION
                           CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
       (Dollars in thousands, except stated value per share)
                                                                                 December 31,
                                                                             -------------------
                                                                              1995        1994
                                                                             -------     -------
       <S>                                                                   <C>         <C>
       ASSETS
       Current assets:
         Cash and cash equivalents                                           $ 1,524     $ 3,014
         Marketable securities                                                    --         610
         Customer receivables, net                                            19,767      18,755
         Other receivables                                                       780       1,912
         Inventories                                                          22,744      21,432
         Deferred tax assets                                                   2,570         693
         Other current assets                                                  1,518       1,907
                                                                             -------     -------
          Total current assets                                                48,903      48,323
       Investments, notes receivable and other assets                          4,557       4,441
       Property, plant and equipment, at cost, net                            22,327      23,044
       Goodwill, net                                                           8,161       8,846
                                                                             -------     -------
                                                                             $83,948     $84,654
                                                                             =======     =======
       LIABILITIES AND STOCKHOLDERS' EQUITY
       Current liabilities:
         Accounts payable                                                    $ 5,054     $ 5,393
         Accrued payroll and related expenses                                  5,143       4,679
         Taxes based on income                                                 1,261       1,308
         Accrued restructuring liabilities, net                                  513       2,364
         Current portion of long-term debt                                     5,286      10,316
         Other accrued liabilities                                             3,073       2,544
                                                                             -------     -------
          Total current liabilities                                           20,330      26,604
       Deferred taxes                                                          1,032         282
       Long-term debt                                                          9,899      11,117
       Commitments (Note 10)

       Stockholders' equity:
         Common stock, $.35 stated value, 20,000,000 shares authorized;
          8,699,000 shares issued and outstanding at December 31, 1995;
          8,441,000 shares at December 31, 1994                                3,045       2,954
         Capital in excess of stated value                                     7,609       5,771
         Unamortized deferred compensation                                      (369)       (251)
         Unrealized gain on marketable securities                                 --         343
         Unrealized translation loss                                          (1,773)     (2,778)
         Retained earnings                                                    44,175      40,612
                                                                             -------     -------
          Total stockholders' equity                                          52,687      46,651
                                                                             -------     -------
                                                                             $83,948     $84,654
                                                                             =======     =======
</TABLE>
                            See accompanying notes.

                                       18
<PAGE>
 
                              NEWPORT CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                 (In thousands)
                                                                            Years Ended December 31,
                                                                         ------------------------------
                                                                           1995       1994       1993
                                                                         --------   --------   --------
       <S>                                                               <C>        <C>        <C>
       OPERATING ACTIVITIES:
         Net income (loss)                                               $ 3,875    $ 3,182    $(3,200)
         Adjustments to reconcile net income (loss)
          to net cash provided by operating activities:
           Depreciation and amortization                                   4,940      4,622      5,638
           Net gains from sales of investments                              (832)    (1,685)    (1,260)
           Increase in provision for losses on
             receivables, inventories and investments                      1,940      1,129      1,366
           Deferred income taxes                                            (889)    (1,126)        (2)
           Realized foreign currency (gains) losses, net                      (8)      (175)       158
           Restructuring and other special charges                             -          -      6,263
           Other non-cash (income) loss                                      (86)        79          -
           Changes in operating assets and liabilities:
            Receivables                                                      561     (1,799)     1,471
            Inventories                                                   (2,492)       234      1,660
            Other current assets                                             232       (517)       171
            Accounts payable and other accrued expenses                   (2,488)    (3,358)    (6,807)
            Taxes based on income                                            (50)     2,203        (19)
            Translation gain (loss) related to operating activities        1,127        (19)    (1,989)
            Other, net                                                      (132)       222       (207)
                                                                         -------    -------    -------
       Net cash provided by operating activities                           5,698      2,992      3,243
                                                                         -------    -------    -------
 
       INVESTING ACTIVITIES:
         Proceeds from sales of investments
             and marketable securities                                     1,319      2,205      1,386
         Purchases of property, plant and equipment                       (2,513)    (2,142)    (2,139)
         Disposition of property, plant and equipment                         50        434        454
         Other, net                                                           97        164         20
                                                                         -------    -------    -------
       Net cash provided by (used in) investing activities                (1,047)       661       (279)
                                                                         -------    -------    -------
 
       FINANCING ACTIVITIES:
         Increase (decrease) in short-term borrowings                     (5,512)     2,450        (76)
         Repayment of long-term borrowings                                (1,859)    (5,394)    (3,455)
         Cash dividends paid                                                (312)      (299)      (304)
         Issuance of common stock under
             employee agreements including
             associated tax benefit                                        1,675         99         91
                                                                         -------    -------    -------
       Net cash used in financing activities                              (6,008)    (3,144)    (3,744)
 
       Effect of foreign exchange rate changes on cash                      (133)       (32)      (119)
       INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                   (1,490)       477       (899)
       Cash and cash equivalents at beginning of year                      3,014      2,537      3,436
                                                                         -------    -------    -------
       CASH AND CASH EQUIVALENTS AT END OF YEAR                          $ 1,524    $ 3,014    $ 2,537
                                                                         =======    =======    =======
</TABLE>
                            See accompanying notes.

                                       19
<PAGE>
 
                              NEWPORT CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
 
 
(Amounts in thousands, except
share and per share amounts)                                                       Unrealized
                                                    Capital in      Unamortized      gain on      Unrealized
                                     Common          excess of       deferred      marketable    translation    Retained
                                     stock         stated value    compensation    securities    adjustments    earnings     Total
                                ----------------   -------------   -------------   -----------   ------------   ---------   --------

<S>                             <C>                <C>             <C>             <C>           <C>            <C>         <C>
Balance at December 31, 1992         $2,920          $5,265           $   -         $   -          $(2,181)      $41,233    $47,237
----------------------------
Cash dividends to Newport
 shareholders ($0.04 per share)           -               -               -             -                -          (280)      (280)
Cash dividends to ROI
 shareholders                             -               -               -             -                -           (24)       (24)
Issuance of common stock
 under employee agreements
 for cash                                 6              85               -             -                -             -         91
Grants of restricted stock               13             204            (217)            -                -             -          -
Amortization of deferred
 compensation                             -               -              43             -                -             -         43
Unrealized gain on marketable
 equity securities, net of
 income taxes                             -               -               -           979                -             -        979
Net loss                                  -               -               -             -                -        (3,200)    (3,200)
Unrealized translation loss               -               -               -             -           (1,203)            -     (1,203)

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


Balance at December 31, 1993          2,939           5,554            (174)          979           (3,384)       37,729     43,643
----------------------------
Cash dividends to Newport
 shareholders ($0.04 per share)           -               -               -             -                -          (281)      (281)
Cash dividends to ROI
 shareholders                             -               -               -             -                -           (18)       (18)
Issuance of common stock
 under employee agreements
 for cash                                 7              92               -             -                -             -         99
Grants of restricted stock               11             169            (180)            -                -             -          -
Forfeiture of restricted
 stock grants                            (3)            (44)             47             -                -             -          -
Amortization of deferred
 compensation                             -               -              56             -                -             -         56
Reduction in unrealized gain
 on marketable equity
 securities, net of income
 taxes                                    -               -               -          (636)               -             -       (636)
Net income                                -               -               -             -                -         3,182      3,182
Unrealized translation gain               -               -               -             -              606             -        606
                                ----------------   -------------   -------------   -----------   ------------   ---------   --------

 
Balance at December 31, 1994          2,954           5,771            (251)          343           (2,778)       40,612     46,651
----------------------------
Cash dividends ($0.04 per share)          -               -               -             -                -          (312)      (312)
Issuance of common stock
 under employee agreements
 for cash including
 associated tax benefit                  55           1,134               -             -                -             -      1,189
Issuance of common stock
 under employee stock purchase
 plan for cash                           25             461               -             -                -             -        486
Grants of restricted stock               14             293            (307)            -                -             -          -
Forfeiture of restricted
 stock grants                            (3)            (50)             53             -                -             -          -
Amortization of deferred
 compensation                             -               -             136             -                -             -        136
Reduction in unrealized gain on
 marketable equity securities,
 net of income taxes (note 8)             -               -               -          (343)               -             -       (343)
Net income                                -               -               -             -                -         3,875      3,875
Unrealized translation gain               -               -               -             -            1,005             -      1,005
                                ----------------   -------------   -------------   -----------   ------------   ---------   --------

BALANCE AT DECEMBER 31, 1995         $3,045          $7,609           $(369)        $   -          $(1,773)      $44,175    $52,687
                                ================   =============   =============   ===========   ============   =========   ========

</TABLE>
                            See accompanying notes.

                                       20
<PAGE>
 
NOTE 1   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Organization  Newport Corporation (the "Company") is a leading 
         worldwide manufacturer and marketer of precision equipment for
         scientists and engineers who develop and apply technology involving
         lasers and optics. The Company also uses its precision positioning
         expertise to serve such high technology industries as semiconductor
         manufacturing, telecommunications, data storage, life science and
         health care and analytical instrumentation. Customers include Fortune
         500 corporations, national research laboratories, government and
         educational institutions.

         Consolidation  The accompanying financial statements consolidate the
         accounts of the Company and its wholly-owned subsidiaries and have been
         restated for all periods presented to reflect the acquisitions of ROI
         and LCI (Note 3) which have been accounted for using the pooling of
         interests method. The accounts of the Company's subsidiaries in Europe,
         and for 1993 in Japan, have been consolidated using a one-month lag.
         All significant intercompany transactions and balances have been
         eliminated. Certain reclassifications have been made to prior year
         amounts to conform to current year presentation.

         Use of estimates  The preparation of financial statements in conformity
         with generally accepted accounting principles requires management to
         make estimates and assumptions that affect the amounts reported in the
         financial statements and accompanying notes. Actual results could
         differ from those estimates. Significant estimates made in preparing
         the consolidated financial statements include the allowance for
         doubtful accounts, inventory obsolescence reserves, income tax
         valuation allowance, investment reserves, litigation settlement costs
         and future undiscounted cash flows used in the analysis of the
         impairment of long-lived assets.

         Sales  A sale is recorded when title passes to customers.

         Income taxes  The Company recognizes the amount of current and deferred
         taxes payable or refundable at the date of the financial statements as
         a result of all events that have been recognized in the financial
         statements and as measured by the provisions of enacted laws.

         Depreciation and amortization  The cost of buildings, machinery and
         equipment, and leasehold improvements is depreciated generally using an
         accelerated method based on a declining balance formula over estimated
         useful lives ranging from three to thirty one years. Leasehold
         improvements are generally amortized over the term of the lease.

         Net income (loss) per share  Net income (loss) per share is based on
         the weighted average number of shares of common stock, and for periods
         with income, the dilutive effects of common stock equivalents (stock
         options), determined using the treasury stock method, outstanding
         during the periods.

         Cash and cash equivalents  Cash and cash equivalents consist of cash-
         on-hand, short-term certificates of deposit and other securities
         readily convertible to cash.

         Fair Values of Financial Instruments  Fair values of cash and cash
         equivalents, short-term borrowings and the current portion of long-term
         debt approximate the carrying value because of the short period of time
         to maturity. The fair value of long-term debt approximates its carrying
         value because of their variable rates of interest. The carrying amounts
         of the forward exchange contracts, if any, equal fair value and are
         adjusted each balance sheet date for changes in exchange rates.

         Investments  Marketable securities are considered available-for-sale
         and are stated at fair market value. The excess of fair market value
         over cost is included as a separate component of Stockholders' Equity.
         Nonmarketable investments are stated at cost, adjusted for the
         Company's proportionate share of undistributed earnings or losses.

                                       21
<PAGE>
 
         Intangible Assets  Goodwill, representing the excess of the purchase
         price over the fair value of the net assets of the acquired entities,
         is amortized on a straight-line basis over its estimated useful life of
         twenty years. Patents are amortized using the straight-line method over
         the lives of the patents. Licenses are amortized on a straight-line
         basis over the estimated economic lives of the related assets. At
         December 31, 1995, accumulated amortization of intangible assets,
         principally goodwill, aggregated $2.7 million.

         Long-Lived Assets  The Financial Accounting Standards Board issued
         Statement of Financial Accounting Standards No. 121, "Accounting for
         the Impairment of Long-Lived Assets and for Long-Lived Assets to be
         Disposed Of" (SFAS No. 121), in March 1995. The Company adopted SFAS
         No. 121 during 1995. In accordance with SFAS No. 121, the Company
         reviewed its long-lived assets and certain identifiable intangibles for
         impairment. Based on its analysis, the Company believes that no
         impairment of the carrying value of its long-lived assets, including
         goodwill, existed at December 31, 1995.

         Foreign currency  Balance sheet accounts denominated in foreign 
         currency are translated at exchange rates as of the date of the balance
         sheet and income statement accounts are translated at average exchange
         rates for the period. Translation gains and losses are accumulated as a
         separate component of Stockholders' Equity. The Company has adopted
         local currencies as the functional currencies for its subsidiaries
         because their principal economic activities are most closely tied to
         the respective local currencies.

         The Company may enter into foreign exchange contracts as a hedge
         against foreign currency denominated receivables. It does not engage in
         currency speculation. Market value gains and losses on contracts are
         recognized currently, offsetting gains or losses on the associated
         receivables. Foreign currency transaction gains and losses are included
         in current earnings. There were no foreign exchange contracts at
         December 31, 1995.

         Stock Option Plans  The Financial Accounting Standards Board issued
         Statement of Financial Accounting Standards No. 123, "Accounting for
         Stock-Based Compensation" (SFAS No. 123), in October 1995. SFAS No. 123
         establishes financial accounting and reporting standards for stock-
         based compensation plans and for transactions in which an entity issues
         its equity instruments to acquire goods and services from nonemployees.
         The new accounting standards prescribed by SFAS No. 123 are optional,
         and the Company may continue to account for its plans under previous
         accounting standards. The Company does not expect to adopt the new
         accounting standards, consequently, SFAS No. 123 will not have an
         impact on the Company's consolidated results of operations or financial
         position. However, pro forma disclosures of net earnings and earnings
         per share will be made in 1996 as if the SFAS No. 123 accounting
         standards had been adopted.

NOTE 2   RESTRUCTURING

         In response to the low level of sales experienced in Europe in 1993,
         the Company recorded restructuring and other special charges totaling
         $6.3 million ($5.1 million after taxes) a majority of which was related
         to its European operations. These charges included $3.3 million of non-
         cash charges to revalue surplus real estate in the U.S. and Europe,
         $2.2 million for severance and related costs and $0.8 million for
         equipment relocation costs, and carrying and selling costs associated
         with the real estate. Cash items totaled $3.0 million of which $1.2
         million and $1.3 million were expended during 1995 and 1994,
         respectively, for severance and other related payroll liabilities, and
         costs to close facilities. It is expected that the balance of $0.5
         million will be expended by March 31, 1996.

                                       22
<PAGE>
 
NOTE 3   ACQUISITIONS

         In February 1995, the Company acquired all the outstanding capital
         stock of RAM Optical Instrumentation, Inc. ("ROI"), a manufacturer of
         video inspection systems, in exchange for 1,251,000 shares of its
         common stock. Additionally, an option to purchase ROI common shares was
         exchanged for an option to purchase 72,975 shares of the Company's
         common stock. In March 1995, the Company acquired all the outstanding
         stock of Light Control Instruments, Inc. ("LCI"), a manufacturer of
         laser-diode instruments, in exchange for 128,000 shares of the
         Company's common stock.

         These transactions have been accounted for as poolings of interests.
         Costs associated with these acquisitions totaling $0.1 million were
         charged to operations in the first quarter of 1995.

         Net sales and net income (loss) of Newport, ROI and LCI for the periods
         preceding the acquisitions were:

<TABLE>
<CAPTION>
         (In thousands)
                                           Newport     ROI       LCI      Combined
                                          --------   -------   --------   ---------
         <S>                              <C>        <C>       <C>        <C>
         Year ended December 31, 1994:
            Net sales                     $85,637    $8,039    $   525     $94,201
            Net income (loss)               3,339      (145)       (12)      3,182

         Year ended December 31, 1993:
            Net sales                      84,147     9,069        357      93,573
            Net income (loss)              (3,746)      566        (20)     (3,200)
</TABLE>
 
NOTE 4   CUSTOMER RECEIVABLES
 
         Customer receivables consist of the following:
 
<TABLE> 
<CAPTION> 
         (In thousands)                                 December 31,
                                                    -------------------
                                                       1995        1994
                                                    -------     -------
         <S>                                        <C>         <C> 
         Customer receivables                       $20,304     $19,215
         Less allowance for doubtful accounts           537         460
                                                    -------     -------
                                                    $19,767     $18,755
                                                    =======     =======
</TABLE>
         The Company maintains adequate reserves for potential credit losses.
         Such losses have been minimal and within management's estimates. 
         Receivables from customers are generally unsecured.

NOTE 5   INVENTORIES

         Inventories are stated at cost, determined on either a first-in, first-
         out (FIFO) or average cost basis and do not exceed net realizable
         value.

         Inventories consist of the following:
<TABLE>
<CAPTION>
 
         (In thousands)                               December 31,
                                                 ----------------------
                                                  1995         1994
                                                 -------   ------------
         <S>                                    <C>       <C>
         Raw materials and purchased parts      $ 6,027        $ 7,350
         Work in process                          4,103          3,541
         Finished goods                          12,614         10,541
                                                -------        -------
                                                $22,744        $21,432
                                                =======        =======
</TABLE>

                                       23
<PAGE>
 
NOTE 6   INCOME TAXES

         The provision (benefit) for taxes based on income (loss) consists of
         the following:
<TABLE>
<CAPTION>

          (In thousands)              Years Ended December 31,
                                ------------------------------------
                                 1995            1994          1993
                                ------         -------        ------
          <S>                   <C>              <C>             <C>
          Current:
            Federal             $  935         $ 2,615        $ 877
            State                   85             (35)          90
            Foreign                303             200           (7)
          Deferred:
            Federal                 74          (1,114)        (364)
            State                   14             (12)         355
            Foreign               (408)              -            -
                                ------         -------        -----
                                $1,003         $ 1,654        $ 951
                                ======         =======        =====
</TABLE>

         The provision (benefit) for taxes based on income (loss) differs from
         the amount obtained by applying the statutory tax rate as follows:

<TABLE>
<CAPTION>
        (In thousands)
                                                                          Years Ended December 31,
                                                                     ---------------------------------
                                                                       1995         1994         1993
                                                                     ------        ------       ------
       <S>                                                           <C>              <C>           <C>
       Income tax provision (benefit) at statutory rate              $1,658        $1,644       $ (765)
       Increase (decrease) in taxes resulting from:
         Foreign losses not currently benefited                          90           432        1,508
         Non deductible goodwill amortization                           191           182          174
         Utilization of foreign loss carryforwards                     (422)         (527)           -
         Reduction in valuation allowance                              (408)            -            -
         State income taxes, net of federal income tax benefit           65           (31)         294
         Foreign Sales Corporation income                              (156)          (79)         (14)
         Other, net                                                     (15)           33         (246)
                                                                     ------        ------       ------
                                                                     $1,003        $1,654       $  951
                                                                     ======        ======       ======
</TABLE>

       Deferred tax assets and liabilities determined in accordance with SFAS
       109 reflect the impact of temporary differences between amounts of assets
       and liabilities for tax and financial reporting purposes.  Such amounts
       are measured by tax laws and the expected future tax consequences of net
       operating loss carryforwards.

       In 1995, the Company reduced the valuation allowance applicable to
       foreign net operating loss carryforwards by $408,000 due to an
       improvement in earnings of certain of its European subsidiaries.

                                       24
<PAGE>
 
       Temporary differences and net operating loss carryforwards which give
       rise to deferred tax assets and liabilities recognized in the balance
       sheet are as follows:
<TABLE>
<CAPTION>

       (In thousands)                                                  December 31,
                                                                   ---------------------
                                                                    1995         1994
                                                                   -------    ----------
       <S>                                                         <C>        <C>
       Deferred tax assets:
         Net operating loss carryforwards                          $ 9,834      $ 10,677
         Accrued restructuring liabilities                             188           785
         Accruals not currently deductible for tax purposes          1,958         1,932
         Other                                                         100           142
         Valuation allowance                                        (9,375)      (11,462)
                                                                   -------      --------
           Total deferred tax asset                                  2,705         2,074
       Deferred tax liabilities:
         Accelerated depreciation methods used for tax purposes        922         1,033
         Unrealized gain on marketable securities                        -           228
         Other                                                         245           402
                                                                   -------      --------
           Total deferred tax liability                              1,167         1,663
                                                                   -------      --------
       Net deferred tax asset                                      $ 1,538      $    411
                                                                   =======      ========
</TABLE>

         The Company has foreign net operating loss carryforwards totaling
         approximately $25.8 million at December 31, 1995, of which
         approximately $0.2 million expires in 1996, $0.1 million expires in
         1998, with the balance principally expiring in the years 2007 through
         2010. The Company also has California net operating loss carryforwards
         totaling approximately $0.8 million, which expire in 1998. For
         financial reporting purposes, a valuation allowance has been recorded
         primarily to offset the deferred tax asset related to foreign net
         operating loss carryforwards. Approximately $2.9 million of the
         valuation allowance will be allocated to reduce goodwill when realized.
         Approximately $0.2 million and $0.4 million of the valuation allowance
         realized was allocated to goodwill for 1995 and 1994, respectively.

         Net income taxes paid for 1995, 1994 and 1993 totaled $1.0 million,
         $0.3 million and $1.1 million, respectively.

NOTE 7   PROPERTY, PLANT AND EQUIPMENT

         Property, plant and equipment, at cost, including capitalized lease
         assets, consist of the following:

<TABLE>
<CAPTION>

         (In thousands)                        December 31,
                                            ------------------
                                             1995       1994
                                            -------   --------
         <S>                                <C>       <C>
         Land                               $ 2,238   $ 2,115
         Buildings                           13,366    12,671
         Leasehold improvements               7,500     7,176
         Machinery and equipment             19,510    19,119
         Office equipment                     8,865     7,596
                                            -------   -------
                                             51,479    48,677
         Less accumulated depreciation       29,152    25,633
                                            -------   -------
                                            $22,327   $23,044
                                            =======   =======
</TABLE>

                                       25
<PAGE>
 
NOTE 8   INVESTMENTS,  NOTES RECEIVABLE AND OTHER ASSETS

         Investments,  notes receivable and other assets consist of the
         following:
 
<TABLE>
<CAPTION>
         (In thousands)                                     December 31,
                                                       ---------------------
                                                        1995           1994
                                                       ------         ------
         <S>                                           <C>            <C>
         Marketable securities available-for-sale      $    -         $  610
         Nonmarketable investments                      3,966          3,840
         Notes receivable                                   -             97
         Other assets                                     591            504
                                                       ------         ------
                                                        4,557          5,051
         Less current portion                              -             610
                                                       ------         ------
                                                        4,557         $4,441
                                                       ======         ======
</TABLE>

         Marketable securities available-for-sale which consisted of shares of
         common stocks of publicly traded companies, were sold in 1995. At
         December 31, 1994 they were stated at fair market which resulted in
         gross unrealized gains of $0.5 million. The excess of fair market value
         over cost (net of deferred income taxes of $0.2 million at December 31,
         1994) is included as a separate component of Stockholders' Equity.
         Gross proceeds resulting from the sale of these securities were $0.9
         million, $1.2 million and $1.4 million 1995, 1994 and 1993,
         respectively. Realized gains and losses on sale of these securities are
         based on the difference between the selling price and historical cost.
         Realized gains of $0.8 million, $1.1 million and $1.3 million are
         reflected as other income for 1995, 1994 and 1993, respectively.

         Nonmarketable investments consist primarily of investments in private
         companies, including a 25% interest in a US supplier and a 29% interest
         in a company active in laser and electro-optical technology, stated at
         cost, adjusted for the Company's proportionate share of undistributed
         earnings or losses. The Company made purchases of approximately $3.8
         million, $3.8 million, and $4.2 million from that supplier during 1995,
         1994 and 1993, respectively.

         Notes receivable are carried at lower of amortized cost or net
         realizable value. Other assets consist primarily of patents and license
         agreements.

                                       26
<PAGE>
 
NOTE 9   LONG-TERM DEBT

         Long-term debt consists of the following:
<TABLE>
<CAPTION>
         (Dollar amounts in thousands)                                                    December 31,
                                                                                       ------------------
                                                                                         1995      1994
                                                                                       -------   --------
         <S>                                                                           <C>       <C>
         Credit agreements:
           Prime + 0.5%, maturing December 1997                                        $ 4,555   $     -
           Prime + 1%, maturing June 1996                                                    -     6,378
           PIBOR + 1%, maturing March 31, 1996, payable in French francs               $     -     2,434
           Prime + 1%, maturing August 1995                                                  -       249
         Term notes:
           PIBOR + 1.35%, maturing October 1997, payable in French francs                5,097     7,024
           LIBOR + 2%, maturing March 1996                                               2,448         -
           Prime + 1%, maturing June 1996                                                    -     1,185
         Capitalized lease obligations, payable in varying installments to 2005,
           in French francs                                                              2,991     3,015
         Equipment loans                                                                    94         -
         Mortgages payable:
           Various (9.2% to 12.75%), maturing from 1995 to 1999,
             payable in French francs                                                        -     1,148
                                                                                       -------   -------
                                                                                        15,185    21,433
         Less current portion                                                            5,286    10,316
                                                                                       -------   -------
                                                                                       $ 9,899   $11,117
                                                                                       =======   =======
</TABLE>

         On December 20, 1995, the Company signed a credit agreement with a bank
         for a $15.0 million unsecured line of credit to support the Company's
         domestic operations and a $2.0 million unsecured line of credit to
         support the Company's European requirements. This new credit agreement
         provides for interest at prime plus 0.5%, or LIBOR (London Interbank
         Offered Rate) plus 2.00%, proceeds from the line were used to repay
         amounts owed on credit agreements with two U.S. financial institutions
         as well as provide funds for the acquisition of MikroPrecision
         Instruments, Inc. on January 2, 1996. The line has no annual facility
         fee and an unused line fee of 0.375 percent. At December 31, 1995, the
         amount outstanding under this line of credit was $7.0 million and
         amounts available for borrowing under the line totaled $9.8 million
         after reflecting outstanding letters of credit. The prime rate was 8.5%
         at December 31, 1995. The weighted average interest rate was 9.9% and
         10.2% for 1995 and 1994, respectively. Under the terms of the
         agreement, the Company is required to comply with various covenants,
         including covenants limiting the ability of the Company and its
         subsidiaries to pledge assets or incur liens on assets, requiring the
         Company to maintain specified ratios, and levels of tangible net worth
         and net income, and limiting the amount of capital expenditures and
         dividends.

         The Company has a line of credit with a consortium of foreign banks
         which provides for advances up to a limit of 25.0 million French francs
         (approximately $5.1 million) with interest at 1% above PIBOR (Paris
         Interbank Offered Rate), collateralized by eligible receivables. There
         were no borrowings outstanding under this agreement at December 31,
         1995. During the first quarter of 1996, the Company anticipates that
         this line will be replaced by the $2 million available under the new
         credit agreement. The weighted average interest rate was 8.5% and 7.6%
         for 1995 and 1994, respectively.

         The Company has term notes with the same consortium of foreign banks
         which, at December 31, 1995, totaled 25.0 million French francs
         (approximately $5.1 million) with interest at 1.6% above PIBOR prior to
         October 1, 1995 and 1.35% above PIBOR after that date, secured
         generally by assets of Micro-Controle with a carrying value of 110.8
         million French francs (approximately $22.6 million) at December 31,
         1995. The six-month PIBOR was 6.3% at December 31, 1995. Repayment is
         due in two annual installments commencing in October 1996.

                                       27
<PAGE>
 
         Capitalized lease obligations of 14.7 million French francs
         (approximately $3.0 million) relate to real estate and equipment. The
         book value of assets under capital leases at December 31, 1995, was
         19.1 million French francs (approximately $2.5 million), net of
         accumulated amortization of 6.7 million French francs (approximately
         $1.4 million).

         Required annual payments are as follows:
<TABLE>
<CAPTION>

          (In thousands)                    Capitalized     Borrowings,
                                                Lease      Mortgages and
          For years ending December 31,     Obligations      Term Notes
                                            -----------    -------------
          <S>                                <C>           <C>
          1996                                  $  519         $ 4,997
          1997                                     523           7,103
          1998                                     527              94
          1999                                     531               -
          2000                                     464               -
          Thereafter                             1,561               -
                                                ------         -------
                                                 4,125         $12,194
                                                               =======
          Less interest                          1,134
                                                ------
                                                $2,991
                                                ======
</TABLE>

         Interest paid for 1995, 1994 and 1993, totaled $1.4 million, $1.5
         million and $2.4 million, respectively.

NOTE 10  COMMITMENTS

         The Company leases certain of its manufacturing and office facilities
         and equipment under non-cancelable operating leases. Minimum rental
         commitments under terms of these leases are as follows (in thousands):

<TABLE>
<CAPTION>
         For years ending December 31,
         <S>                                <C>
         1996                               $ 2,297
         1997                                 2,114
         1998                                 1,882
         1999                                 1,745
         2000                                 1,641
         Thereafter                          10,624
</TABLE>

         The principal lease expires in 2007. Future sublease income is
         estimated at $1.6 million. Rental expense under all leases totaled $2.6
         million, $2.6 million and $2.4 million for 1995, 1994 and 1993,
         respectively.

NOTE 11  STOCK OPTION PLANS

         The Company's stock option plan provides that the number of shares
         available for issuance as either stock options or restricted stock
         increases on the last day of each fiscal year by an amount equal to 2%
         of the then outstanding shares. Options have been granted to directors,
         officers and key employees at a price not less than fair market value
         at the dates of grants. Accordingly, no charges have been made to
         income in accounting for these options. The tax benefits, if any,
         resulting from the exercise of options are credited to capital in
         excess of stated value. The fair market value of restricted stock at
         date of grant is amortized to expense over the vesting period of five
         years.

                                       28
<PAGE>
 
         The following table summarizes option plan and restricted stock
         activity for the years ended December 31, 1995 and 1994:

<TABLE>
<CAPTION>

                                                       Restricted
                                                          Stock       Options        Total
                                                       -----------   ----------   -----------
         <S>                                           <C>           <C>          <C>
         Amounts outstanding at December 31, 1993          37,000      970,900     1,007,900
         Granted                                           32,000      181,470       213,470
         Exercised                                        (10,250)     (16,750)      (27,000)
         Canceled                                          (8,000)    (132,864)     (140,864)
                                                       -----------   ----------   -----------
         Amounts outstanding at December 31, 1994          50,750    1,002,756     1,053,506
         Granted                                           41,000      320,475       361,475
         Exercised                                        (10,000)    (155,520)     (165,520)
         Canceled                                          (8,250)    (149,196)     (157,446)
                                                       -----------   ----------   -----------
         Amounts outstanding at December 31, 1995          73,500    1,018,515     1,092,015
                                                       ===========   ==========   ===========

         At December 31, 1995:
         Exercise prices of outstanding options                              $5.00 to $13.50
         Shares available for future grants                                          540,190
         Options exercisable                                                         648,265
</TABLE>

         Effective January 1, 1995 the Company adopted an Employee Stock
         Purchase Plan (the "Purchase Plan") to provide employees of the Company
         and selected subsidiaries with an opportunity to purchase common stock
         through payroll deductions. The purchase price is the lower of 85% of
         the fair market value of the stock on the first or last day of each
         quarter. The Purchase Plan expires on December 31, 2005. An aggregate
         of 250,000 shares of common stock is available for purchase under the
         Purchase Plan. There were 70,850 shares issued under the Purchase Plan
         during 1995.

NOTE 12  OTHER INCOME

         Other income consisted of the following:

<TABLE>
<CAPTION>

         (In thousands)                                         Years Ended December 31,
                                                            -------------------------------
                                                             1995        1994        1993
                                                            ------     ---------   --------
         <S>                                                <C>        <C>         <C>
         Interest and dividend income                       $   95        $  143     $  229
         Realized foreign currency gains (losses), net           8           175       (158)
         Gains on sale of investments, net                     832         1,404      1,260
         Other                                                 202           117        132
                                                            ------        ------     ------
                                                            $1,137        $1,839     $1,463
                                                            ======        ======     ======
</TABLE>
NOTE 13  ADVERTISING

         The Company expenses the costs of advertising as incurred, except for
         direct-response advertising, which is capitalized and amortized over
         its expected period of future benefits.

         Direct-response advertising consists primarily of sales brochures and
         catalogues. The capitalized costs are amortized over estimated future
         benefit periods ranging from three months to two years.

         Advertising materials of $0.6 million and $0.3 million were reported as
         assets at December 31, 1995 and 1994, respectively. Advertising expense
         was $1.6 million, $1.6 million and $1.3 million for 1995, 1994 and
         1993, respectively.

                                       29
<PAGE>
 
NOTE 14  BUSINESS SEGMENT INFORMATION

         The Company operates in one business segment. It designs, manufactures
         and markets on a worldwide basis precision equipment for scientists and
         engineers who develop and apply technology involving lasers, optics and
         integrated motion control. The Company designs and manufactures a broad
         line of vibration isolation systems, electronic and optical instruments
         and precision mechanical, electronic and optical components and
         systems. These products are used predominately in research laboratories
         and test and measurement applications for industrial, government and
         university customers, domestically and internationally.

         Information concerning the Company's operations by geographic segment
         is as follows:
<TABLE>
<CAPTION>

         (In thousands)                                                             Years Ended December 31,
                                                                              -----------------------------------
                                                                                1995          1994         1993
                                                                              --------      --------     --------
         <S>                                                                  <C>           <C>          <C>
         Sales to unaffiliated customers:
         United States                                                        $ 64,769      $ 59,211     $ 55,469
         Europe                                                                 35,087        30,926       32,595
         Other areas                                                             2,105         4,064        5,509
                                                                              --------      --------     --------
                                                                              $101,961      $ 94,201     $ 93,573
                                                                              ========      ========     ========

         Sales between geographic areas (based on invoiced prices):
         United States                                                        $  7,233      $  7,784     $  8,951
         Europe                                                                 11,489         9,095        8,251
         Intercompany eliminations                                             (18,722)      (16,879)     (17,202)
                                                                              --------      --------     --------
                                                                              $     --      $     --     $     --
                                                                              ========      ========     ========

         Income (loss) before taxes:
         United States                                                        $  4,215      $  4,693     $  2,501
         Europe                                                                    735          (244)      (5,446)
         Other areas                                                               (46)          493          282
         Intercompany eliminations                                                 (26)         (106)         414
                                                                              --------      --------     --------
                                                                              $  4,878      $  4,836     $ (2,249)
                                                                              ========      ========     ========

         Assets:
         United States                                                        $ 94,376      $ 91,129     $ 86,950
         Europe                                                                 40,160        48,516       50,577
         Other areas                                                               770           720        2,145
         Intercompany eliminations                                             (51,358)      (55,711)     (53,637)
                                                                              --------      --------     --------
                                                                              $ 83,948      $ 84,654     $ 86,035
                                                                              ========      ========     ========
</TABLE>

         The Company's manufacturing facilities are located in the United States
         and France. United States revenues include exports to unaffiliated
         customers totaling $9.3 million, $9.2 million and $5.9 million for
         1995, 1994 and 1993, respectively.

NOTE 15  DEFINED CONTRIBUTION PLAN

         The Company sponsors a defined contribution plan. Generally, all U.S.
         employees are eligible to participate and contribute in this plan.
         Contributions to the plan are determined based on a percentage of
         contributing employees' compensation.

         Expense recognized for the plan totaled $0.8 million, $0.9 million and
         $0.9 million for 1995, 1994 and 1993, respectively.

                                       30
<PAGE>
 
NOTE 16  SUPPLEMENTARY QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>

         (In thousands, except per share amounts)
                                                                                  Net       Dividends     High       Low
                                                    Net      Gross     Net     Income Per      Per       Share      Share
         Three months ended                        Sales    Profit    Income     Share        Share      Price      Price
                                                  -------   -------   ------   ----------   ---------   --------   -------
         <S>                                      <C>       <C>       <C>      <C>          <C>         <C>        <C>
         DECEMBER 31, 1995                        $27,867   $12,973   $1,450        $0.17   $      --   $ 9 1/2    $ 7 1/2
         SEPTEMBER 30, 1995                        24,253    11,174      743         0.08        0.02    12 3/8      8 7/8
         JUNE 30, 1995                             25,525    11,597      854         0.10          --     9 3/8      7 1/2
         MARCH 31, 1995                            24,316    10,796      828         0.10        0.02     9 1/8      7
 
         December 31, 1994                         25,285    11,332    1,090         0.13          --     8 1/8      6 7/8
         September 30, 1994                        23,031    10,590      698         0.08        0.02     8 1/4      5 7/8
         June 30, 1994                             23,596    10,675      862         0.10          --     6 1/4      5 1/4
         March 31, 1994                            22,289     9,794      532         0.06        0.02     6          5
</TABLE>

         Net income per share is computed independently for each of the quarters
         presented and the summation of quarterly amounts may not equal the
         total net income per share reported for the year.

NOTE 17  SUBSEQUENT EVENT (UNAUDITED)

         On January 2, 1996, the Company acquired, for cash plus additional
         consideration based upon future operating profit, substantially all the
         assets and selected liabilities of MikroPrecision Instruments, Inc.
         ("MikroPrecision"), a manufacturer of precision equipment for high
         technology industries such as semiconductor and disk drive markets. The
         company is located in a suburb of Minneapolis, Minnesota. The
         acquisition will be accounted for as a purchase.

                                       31
<PAGE>
 
                              NEWPORT CORPORATION
                                  Schedule II
                        Consolidated Valuation Accounts

<TABLE>
<CAPTION>
           (In thousands)

                                                   Balance at      Additions                                            Balance
                                                   Beginning    Charged to Costs                     Other Charges      at End
                    Description                    of Period      and Expenses      Write-Offs (1)   Add (Deduct) (2)  of Period
                    -----------                    ----------   ----------------   ---------------  -----------------  ---------
           <S>                                     <C>          <C>                <C>              <C>                <C>
           Year ended December 31, 1995:
           Deducted from asset accounts:
           Allowance for doubtful accounts             $  460             $  190         $  (138)             $  25       $  537
           Reserve for inventory obsolescence           3,380              1,750          (1,984)               149        3,295
           Reserve on investments                         457                  -               -                  -          457
                                                       ------             ------         -------              -----       ------
           Total                                       $4,297             $1,940         $(2,122)             $ 174       $4,289
                                                       ======             ======         =======              =====       ======

           Year ended December 31, 1994:
           Deducted from asset accounts:
           Allowance for doubtful accounts             $  717             $   90         $  (203)             $(144)      $  460
           Reserve for inventory obsolescence           2,786                715            (313)               192        3,380
           Reserve on investments                         133                324               -                  -          457
                                                       ------             ------         -------              -----       ------
           Total                                       $3,636             $1,129         $  (516)             $  48       $4,297
                                                       ======             ======         =======              =====       ======

           Year ended December 31, 1993:
           Deducted from asset accounts:
           Allowance for doubtful accounts             $1,439             $  150         $  (786)             $ (86)      $  717
           Reserve for inventory obsolescence           2,298              1,216            (625)              (103)       2,786
           Reserve on investments                         133                  -               -                  -          133
                                                       ------             ------         -------              -----       ------
           Total                                       $3,870             $1,366         $(1,411)             $(189)      $3,636
                                                       ======             ======         =======              =====       ======
</TABLE>
           (1)  Amounts are net of recoveries.
 
           (2)  Amounts reflect the effect of exchange rate changes on 
                translating valuation accounts of foreign subsidiaries in
                accordance with FASB Statement No. 52, "Foreign Currency
                Translation" and certain reclassifications between balance sheet
                accounts.

                                       32
<PAGE>
 
                              NEWPORT CORPORATION
                                   FORM 10-K
                                 Exhibit Index
                                 -------------

<TABLE>
<CAPTION>
                                                               Sequential
                                                               Page Number
                                                               -----------
<S>             <C>                                            <C>
Exhibit 10.10   Credit Agreement dated as of December 20,
                1995 between Newport Corporation and ABN           
                AMRO Bank N.V., Los Angeles International
                Branch                                              34
 
Exhibit 21      Subsidiaries of Registrant                          93

Exhibit 23      Consent of Independent Auditors                     94

Exhibit 27      Financial Data Schedule (Article 5 of               
                Regulation S-X)                                     95
</TABLE>

                                       33