Diagnostic systems for a global testing market · Drew Scientific Group PLC – Diagnostic systems...

Annual Report 2000

Diagnostic systems for a global testing market

Drew Scientific Group PLC

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• Sales increase of 18.3% to £2.8m, the best performance in

the Group’s history

• Robust sales of all products world-wide

• Current record order book of £2.5m

• Sales achieved in first 3 months of the current financial

year exceed £960,000

• Three multi-national distributors appointed for new

homocysteine and glycated haemoglobin systems

• New diabetes point of care product launched

• Joint venture with Medisys PLC for Alzheimer’s test.

Highlights

DiagnosticsLaboratory tests performed on samples of body fluids and

tissues collected from patients. Doctors use the results of

these tests to help them make a diagnosis which will define

the treatment required.

InstrumentationComputer-controlled machines that carry out diagnostic

tests in a laboratory or doctor’s surgery.

ConsumablesSpecific chemicals, reagents and disposable items, such as

micro-columns, that are used when carrying out diagnostic tests.

HomocysteineA naturally occurring chemical in blood (specifically, an

amino acid) that is a by-product of protein metabolism.

Higher than normal levels of homocysteine in blood have

been shown to be associated with arterial disease and with

Alzheimer’s disease.

HPLCHigh performance liquid chromatography. A technology for

separating mixtures of chemicals from each other in order

to measure them separately.

Glycated HaemoglobinHaemoglobin is the red protein in blood cells whose natural

function is to carry oxygen around the body. Sugar

(glucose) in blood can become chemically attached to

haemoglobin which is then said to be ‘glycated’. Although

everyone’s blood contains some glycated haemoglobin, the

amount in people who have diabetes is increased and its

measurement can be used to determine how well the

patient’s diabetes is being controlled.

HbA1cHaemoglobin A1c is a particular chemical form of glycated

haemoglobin that is measured in order to determine how

well the patient’s diabetes is being controlled.

Haemoglobin VariantsDifferent forms of haemoglobin that arise as the result of

genetic mutations, for example, sickle cell haemoglobin,

which causes sickle cell disease.

Alzheimer’s DiseaseA gradual, progressive, degenerative disease of the brain

that leads to memory loss and dementia.

Glossary of Terms

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1 Corporate Statement and Structure2 Chairman’s Statement3 Board of Directors4 Product Review6 Chief Executive’s Review

14 Financial Review15 Report of the Remuneration Committee17 Directors’ Report22 Auditors’ Report23 Consolidated Profit and Loss Account24 Consolidated Balance Sheet25 Company Balance Sheet26 Consolidated Cash Flow Statement26 Reconciliation of Movements in Equity

Shareholders’ Funds27 Notes to the Accounts38 Notice of Meeting40 Investors’ Information

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Registered Office and Advisers

Contents

DREW SCIENTIFIC GROUP PLC ANNUAL REPORT 2000

Corporate Statement and Structure1

Drew Scientific Group PLC – Diagnostic systemsfor a global testing market.

Drew Scientific is a diagnostics companyspecialising in the design, manufacture anddistribution of analytical systems for laboratorytesting world-wide. The Group is focused onproviding instrumentation and consumables forthe diagnosis and monitoring of medicaldisorders in the rapidly growing areas ofdiabetes and cardiovascular diseases. Inaddition, Drew Scientific supplies otherdiagnostic systems which perform other bloodcomponent tests.

The Group is committed to enhancingshareholder value by maximising the organicgrowth of the Group, complemented bysuitable acquisitions which meet strict pre-determined criteria. Organic growth willbe achieved by sustaining its research anddevelopment programme and investing in itsworld-wide distribution network.

Drew Scientific Limited

Drew Scientific, Inc

Counting Technology Limited

Drew Scientific Distribution Limited

Drew Scientific Investment Limited

Drew Scientific Developments Limited


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The results for the year ended 31 March 2000 show

a loss of £1.1 million (1999: £0.9million) on

turnover of £2.8m (1999: £2.4m). The directors are

not recommending the payment of a dividend.

I would like to outline to you my own role within

your Company. By the summer of 1999 I had

effectively transferred all operational responsibility

for running the Company to Mike Asher. This

transition has been extremely successful and

much of what you will read about in this annual

report is due to Mike’s tenacious commitment to

the business. Having divested myself of these

responsibilities I had more time to review our

overall performance. I suspect that many of you

on reading of our plans to open a US subsidiary

received the news with a degree of apprehension

and concern. For my own part I was, and remain,

certain of the soundness of the decision. Success

in the US, however, can be expensive and elusive.

We have of course been doing business in the US

for many years, we are familiar with the

regulatory rigours that this market demands and

setting up our own infrastructure was a necessary

next step. This decision was predicated in large

measure by the appointment of Fisher Scientific

for our homocysteine testing product. This

product has now been launched by Fisher

Scientific under our own branding and our base

here in the US gives us the contact and closeness

to the market that is essential for our growth

and success.

In late summer 1999 I paid a visit to our US offices

with the intention of assisting with the initial

demonstrations and evaluations that were taking

place. This temporary arrangement became

permanent towards the end of last year. I now

reside in the US. We have a single US secretarial

employee and I have two members of staff on

secondment from the UK who provide sales and

service support. I now head the US operation. I

continue to hold the position of Executive

Chairman and attend our UK Board meetings on a

regular quarterly basis. Kit Madden chairs the

interim Board meetings and has assumed the title

of Deputy Chairman to reflect this additional role.

Along with the changes that I have outlined

above we have seen a dramatic shift in emphasis

within the Company. That emphasis is now clearly

focused on moving out of the high R&D

expenditure phase and into a position of cash

generation and net profit. We now have the

means at our disposal to achieve this. Our

manufacturing capability is excellent, both for

instrumentation and for the high margin

consumables. Currently we are seeing a dramatic

sales increase and our ability to keep pace with

this demand is a credit to all of our staff. We have

increased our product portfolio over the past year

both through products from our own R&D pipeline

as well as those licensed in from other

manufacturers. The current year will see further

expansion of our product portfolio as we continue

to maximise the return from our extensive

distribution network.

I am certain that this year will see a dramatic

increase in sales across all products and that this

will flow through to the bottom line. This success is

due to the enormous commitment and energy

from all within the Company and I would like to

take this opportunity to thank all of our employees

for their support.

Keith Drew

Executive Chairman29 June 2000

Chairman’s Statement2



Board of Directors3

Keith Drew, Chairman

KEITH DREW B.Sc. MIEE CEng, co-founded Drew Scientific. Keith was an engineerin the Royal Navy between 1967-1980, before leaving to set up the Company.Keith’s ambition and entrepreneurial skills, combined with his electricalengineering enterprise, have been a powerful driving force behind thedevelopment of the company since its foundation. He has overall responsibilityfor the Group and is based in Rhode Island, USA, to concentrate on the launch ofthe homocysteine products and run the Group’s US subsidiary as President.

Michael Asher, Chief Executive

MICHAEL ASHER BA BA MBA, aged 38, joined Drew Scientific in July 1998. Mikepreviously worked for Coulter (UK) where he was responsible for the internationalsales and marketing of a range of Coulter’s products. Coulter is the world-widemarket leader in the supply of cell counting instrumentation. This experiencecombined with his previous expertise in international sales of blood chemistryinstrumentation provides a sound background for the further growth anddevelopment of the Group.

David Blain, Finance Director and Company Secretary

DAVID BLAIN ACA, aged 38. David joined Drew Scientific in April 1993. Afterqualifying as a Chartered Accountant, he joined Price Waterhouse in 1984 wherehe experienced a wide range of business activities through audit, tax andacquisition work. David works closely with Mike Asher on strategic andcommercial activities and is responsible for the ongoing development of DrewScientific’s financial and administrative systems and controls.

Conor Maxwell, Technical Director

CONOR MAXWELL B.Sc. aged 51, co-founded Drew Scientific in 1980. Conor was anengineer in the Royal Navy between 1967–1979 before leaving to pursue a careerin computer programming. His programming expertise was essential for thedevelopment of software in the early years of the Company. He was the ProductionDirector for four years. He is now Technical Director with special responsibilitiesfor introducing the computerised manufacturing system (MRP) and year 2000compliance.

Dr Andrew Kenney, Research and Development Director

ANDREW KENNEY B.Sc. PhD, Director, aged 43, joined Drew Scientific in 1991.Andrew has over fifteen years’ experience in research and developmentmanagement with biotechnology and bioscience companies. Having trained as aresearch biochemist, Andrew has spent much of his career working with thedevelopment of novel chromatographic methods and instruments for the analysis,purification and manufacture of proteins for both pharmaceutical and clinicaldiagnostic applications. Andrew has overall responsibility for all of DrewScientific’s research and development activities.

Kit Madden, Deputy Chairman

CHRISTOPHER MADDEN B.Sc. OBE, aged 61, joined the Board of Drew Scientific inAugust 1995. Kit brings to the board extensive experience of the in vitrodiagnostics market having worked for the Wellcome Foundation Limited for 24years, sixteen of which as managing director of Wellcome Diagnostics, andhaving been involved with the European Diagnostics Manufacturers Associationsince its foundation in 1979. He is currently President of the British In VitroDiagnostics Association and holds a number of non-executive directorships in theindustry. He was awarded the OBE for services rendered to the diagnostic industryin the 1998 birthday honours.



Product Review4

Areas of Expertise

Homocysteine

Homocysteine (Hcy) is a naturally occurring amino acid found in the circulating blood and its measurement is attracting highinterest from both researchers and hospital clinicians alike.

Since its discovery in the 1960’s it has been realised that increased levels of Hcy are linked to an increased risk of coronary heartdisease and thrombosis.

Patient treatment, in most cases of raised Hcy, is effected by vitamin B6, B12 & folate supplements or their increased intake as partof a balanced diet.

With the low cost of effective patient treatment, health services world-wide can see the benefits and cost justification of earlydetection of raised Hcy levels and avoid expensive drug and surgical treatments in the future.

Haematology Cell Counting

Blood cell counting over the last 40 years has become more and more sophisticated and is established as the primary requestedhaematology diagnostic test. Today the world-wide market is worth over £1 billion per year.

With the speed and accuracy of automation, laboratories in virtually every country in the world can quantify all blood cell typesand quickly detect abnormalities for further investigation into pathological disease.

The number of test parameters provided can vary from more than 20 for hospital laboratories to 7 parameters for smaller clinicsor doctor’s offices. Instrumentation can also provide a high degree of automation for efficient processing of high test numbers orit can be semi-automated to provide low cost solutions in situations where basic test results are needed.

Cell measurements can provide some information on virtually all disease conditions and help the clinician in the process ofdiagnosing disease and specifying treatment.

Diabetes & Haemoglobin Measurement

Diabetes world-wide is increasing by 7%–10% per year as a result of both better detection and population dietary changes. Thereare 100 million diabetics world-wide with the incidence set to double in the next 10–15 years. Its diagnosis and long-termmonitoring not only leads to better patient prognosis but can also reduce health care costs by maintaining the patient in acontrolled and lower risk state. Health services world-wide realise that by the measurement of glycated haemoglobin (HbA1c) theyhave an accurate way of deciding on the level of treatment.

HbA1c levels are raised in uncontrolled diabetics and it is recognised that the longer the diabetic is left with raised HbA1c levelsthe worse the long-term complications will be. This control is not achievable by just measuring glucose levels alone.

The function of haemoglobin, which is found in the red blood cells, is to transport oxygen. Genetic variants exist around the worldwhich can affect its function and performance leading to diseases such as sickle cell anaemia and thalassaemia disease.

Severe forms of these diseases will lead to reduced life expectancy. In some countries the levels of these haemoglobin variantsare endemic and the governments of these countries are seeing the benefit of diagnostic testing and screening prior to marriageto reduce the incidence of the controlling genes being passed on to future generations.


Hb-GoldHaemoglobin AnalysisThe Hb-Gold instrument and associatedreagent kit is intended for the in vitromeasurement of HbA1c, HbA2/HbF andthe detection of haemoglobin variantsin blood samples.

• Assays for HbA1c, HbA2, HbF andhaemoglobin variants

• Simple to use

• One column and one set of reagentsfor all assays

• Automatic identification and calculation of Hb fractions

• 100 capacity autosampler with statsample facility

DS30 HcyHomocysteine MeasurementHomocysteine is rapidly developing asa recognised indicator for risk ofcardiovascular disease. The DS30 Hcysystem provides “Gold Standard” HPLCperformance in a cost effective easy touse format.

• Automated total plasmahomocysteine measurement

• Precise, easy to use method

• Easy to use icon driven software

• FDA 510 (k) cleared

• Sample stability for up to 3 dayswithout centrifugation using 3-deazaadenosine

DS5Quick and easy HbA1c MeasurementThe DS5 instrument and associatedreagent kit is intended for the in vitromeasurement of HbA1c in blood samples.The system’s small size and ease of usemake it ideal for main laboratory, clinicor satellite laboratory settings.

• HbA1c measurement in only 5 minutes

• Integrated RS232 interface

• Immediate labile fraction removedusing the DS5 Dispenser

• Simple to use system with icon driventouch screen

• 15 position autosampler makes itideal for small labs and clinics

• Detects presence of HbS or HbC

DS1 GLYCOMAT®

HbA1c MeasurementThe DS1 GLYCOMAT® system providesrapid HbA1c testing for near patienttesting. The system is simple to use andbrings easy HbA1c testing capability tothe doctors’ offices and clinics.

• HbA1c result in only 4 minutes

• No interference from variants

• Very cost effective for low volume users

• Reliable results using provenchromatographic technology


5

G15HbA1c MeasurementThe Glycomat G15 and associatedreagent kit is intended for the in vitromeasurement of HbA1c in blood samples.

The G15 is the forerunner to the DS5 andis still widely used around the world.

• HbA1c assay in just 10 minutes

• Automatic labile fraction removal injust 1 minute when using the G15dispenser

• Simple to use with icon driven touch screen

• 15 place autosampler, ideal for smalllaboratories or clinics

• Identifies presence of HbS or HbC

• On board storage for 15 results

Product Name

µCount-7 (in development)Haematology Cell CounterThe µCount-7 instrument and associatedreagent pack is intended for the in vitromeasurement of blood cell parametersin human and veterinary blood samples.Blood chemistry applications for thisplatform are also under development.

• Results produced for; RBC WBC Hb MCV MCH MCHC Hct

• Results in just 90 seconds

• Patented design enables on-board dilution of blood samples, in a very small instrument

• Ideal for back-up or primary care situations

• Integral fluid pack contains bothreagents and waste



Review of Results to 31 March 2000

I am delighted to report that sales in the year were £2.8million

(1999: £2.4m) representing a growth in sales of just under 20%, and

our highest sales performance ever. Furthermore, we started our

new fiscal year with open orders to a value of some £2.5 million.

Sales in the first quarter of our new fiscal year already total

£0.9 million, putting us well ahead of last year’s sales position to

date. Between our first quarter sales and the open order book, we

are ahead of last year’s full year sales by in excess of 20%. This

dramatic increase in sales reflects the great efforts put into

expanding the Group’s global sales and distribution network, as

well as growing world-wide demand for Drew’s diagnostic products.

The operating loss before R & D and interest was £392,000 (1999:

profit £29,000) reflecting primarily costs for operating our newly

opened US subsidiary office and the expanded world-wide sales

and marketing activities. Research and Development expenditure

was £756,000 (1999: £1,028,000) and this lower amount reflects the

completion in the year of the homocysteine products. Work on

developing new products for the Diabetes line and the continuing

development of the cell counting and blood chemistry products

accounts for the bulk of the R & D investment. The loss for the year

after R & D and interest receivable was £1.1m (1999: £944,000) which

was in line with expectations.

Sales

The past year has seen strong sales of all of Drew’s products. In

particular, sales of our homocysteine testing system represent fully

60% of the reported growth in sales. This early performance is very

encouraging and clearly reflects the strength of the homocysteine

product. The result serves to highlight the continued outstanding

prospects for this new product. Our newly established distribution

agreements with Helena Biosciences and Fisher Scientific are now

fully operational. Interestingly, while North America still represents

the largest single market for homocysteine testing, demand for the

test is growing around the world. Apart from sales to the United

States, the UK and Western Europe, we have shipped instruments

into Australia, China, Czech Republic, Greece and Turkey. Clearly,

strengths of the Drew homocysteine system are its compact size,

ease of use and outstanding analytical performance. The product is

highly attractive to both large laboratories in the more developed

Chief Executive’s Review6

90 91 92 93 94 95 96 97 98 99 00

2000 units

0 units

1000 units

2500 units

1500 units

500 units

Key to the Group’s success ismaximising the number of instrumentplacements in order to generate highmargin consumable revenues forfuture years. The graph clearlydemonstrates the recent successes ininstrument sales.

Cumulative instrument sales



diagnostic markets, as well as to smaller centres in the world’s many

emerging economies.

Sales of G15, DiaSTAT and DS 5 instruments, used for diabetes

monitoring, have broken all records. In the year to 31 March 2000 we

sold over 450 new and refurbished units, an increase of 20% over

the previous year. Of the units sold, just over two thirds went

to Bio-Rad and their distributors, with the balance sold to

various new distribution partners around the world. This

outstanding result comes as a direct effect of the broader

distribution network, tighter control over the sales

activities of the Group’s partners and the continued

growth in the incidence of diabetes itself. It also bears

out last year’s prediction that the Group would continue to

see robust demand for this range of products. As a result of

the strong performance over the year with the mid range

diabetic products, Drew Scientific now has an installed base of

over 1,750 instruments in this segment. Drew Scientific is clearly a

major player in the mid range segment of the glycated

haemoglobin market, and we are demonstrating our continued

ability to consolidate this position. Indeed, based on results to date

and open orders, the Company expects to enjoy another record year

in the mid range diabetic market segment.

The HbGold product, used for measuring haemoglobin variants, has

sold well over the year, with unit volumes increasing by 188% to 52

units (1999: 18 units). This result demonstrates success in

re-launching the product. We have shipped over 15 HbGold units

into the UK, Spain and Portugal over the course of the year. On top of

last year’s success in Thailand, the Group has secured a second

order for twenty instruments of which ten have already been

delivered. The aggressive strategy to enter the Thai market has

been highly successful and in the space of twelve months, we have

secured a 60% market share of the haemoglobinopathy screening

segment. We are now targeting other developing markets with the

HbGold, as its analytical performance and attractive cost per test

makes it an ideal candidate for these countries. It should be noted

that the current HbGold instrument is ageing and we are

developing a replacement instrument that we expect to be selling in

2001. This project is well advanced and results to date are encouraging.

In conclusion, I am delighted with the progress of Drew Scientific

over the past year. The organisation has developed as planned, and

our sales and marketing strategies have been successful. We set the

goal to broaden our global distribution network and in the year we

have appointed new distributors covering over twenty new

countries. In addition, we set the goal to accelerate sales of

instrumentation and significantly broaden our installed base of

7

AustraliaAustriaBangladeshBelgiumBrazilCanadaChinaCyprusCzech RepublicDenmarkEgyptFinlandFranceGermanyGreeceHollandHong KongHungaryIcelandIndiaIreland

ItalyKoreaMexicoNigeriaNorwayPolandPortugalRussiaSaudi ArabiaSingaporeSlovakiaSouth AfricaSpainSwedenTaiwanThailandTurkeyUAEUKUSA

Drew products are sold world-wide



analytical systems and in the year we sold just under 700

instruments, an all time record for the Company.

Our long-term sales strategy is to build our installed base of

instrumentation, ensuring the broadest mix of systems possible,

spread over a wide selection of markets and territories. This stable

base is an asset and franchise, delivering a steady and predictable

flow of income to the Company. Tremendous progress has been

made over the year towards realizing this goal, and Drew Scientific

is stronger, more secure and better positioned for further growth

than ever before.

Gross Profit

In the year, gross profits have remained constant as a percentage of

sales reflecting the increase in consumables sales being offset by

the larger number of lower margin instruments being sold. It is

interesting to note that sales of reagents, consumables,

refurbishment and spare parts increased over last year by 23%. This

increase in sales is a direct result of the growing installed base of

instrumentation world-wide. Additionally, these sales are strong

contributors to profits as the margins are typically higher than those

earned on the sales of new instrumentation.

The rise in sales of consumables and spares supports the strategy of

focusing on the placement of as many instruments as possible

albeit at relatively low margins in order to generate future sales of

the more profitable consumables. The benefits of this strategy are

starting to be seen now, and we expect that as we continue to place

an ever greater number of systems into the world market, we will see

continued sales growth in our more profitable product lines.

Operating Expenses

Operating expenses in the year were £1m, and reflect the increased

activities of the Group around the world. The emphasis on Sales and

Marketing has resulted in strong sales growth through several new

distribution partners. The Group’s US subsidiary company, Drew

Scientific Inc., provides a sound sales and technical support base

for our products and commercial activities in the world’s largest

healthcare market, and is fundamental to the management of the

homocysteine product launch in the US.

R & D

R & D investment in the year was £756,000, down from £1m the

previous year. The decrease in expenditure is accounted for

primarily by the completion of the homocysteine project. The

Company will continue to invest in this product as required to

maintain its competitiveness, but our primary focus has now shifted


“The Group’s USsubsidiary company,Drew Scientific, Inc,provides a soundsales and technicalsupport base for our products.”



to other projects including the cell counter, our Alzheimer’s project

and the replacement for the HbGold instrument.

The cell counter project continues to account for approximately one

half of the Company’s R & D budget. We have encountered some

significant technical challenges, which have delayed the

introduction of the system, but we remain optimistic that the project

will yield an exciting product within the next 18 months. Indeed, the

parallel project at Birkbeck College continues at full force, and

progress on developing the panel of chemistry tests is good. Three

of the first five tests are now complete and we expect the remaining

two tests to be completed within the next year. It is unlikely that we

will be introducing the cell counter and chemistry tests for sale in

the next year, but every effort is being made to bring this exciting

new product to market soon.

The balance of the R & D budget was spent on the HbGold

replacement instrument, reagent and column development work

and various other smaller projects. With the current HbGold system

ageing, we are well advanced in the development of its

replacement. The new system will address the needs of both the

higher volume glycated haemoglobin market as well as the

haemoglobinopathy screening market. The Company will be

focusing on this project over the course of the next year and looks

forward to a saleable system in the first half of fiscal 2001.

Manufacturing

The consumables manufacturing plant has now been operational

for a full year. Having the plant has allowed the Company to

manufacture an ever increasing volume of product, whilst

maintaining the highest level of quality that is demanded by today’s

market. We now supply Drew branded reagent and consumables

kits directly to all sixteen Bayer subsidiaries that sell Drew products,

and in addition we are supplying and shipping goods to our

distributors in the rest of Europe, the Middle East, the Far East, China

and the United States. It is the Company’s policy to supply complete

reagent kits to all newly appointed distributors, so we fully expect to

see demand for all consumables increase in line with the growth in

instrument installations.

We have ample capacity in the consumables plant to cater for the

rising demand for our products, and can increase capacity further

as required. Indeed, we have recently installed a new set of reagent

mixing tanks that have effectively doubled our capacity. All

consumables manufacturing has been consolidated in the new

plant, and this has freed up significant space elsewhere for other

activities. The consumables plant is an integral part of the Company's

growth strategy, and to date, it has fulfilled all our expectations.

9

“The consumablesplant is an integralpart of theCompany’s growthstrategy, and to date,it has fulfilled allour expectations.”



Instrument manufacturing remains at the core of our activities and

in the past year, has distinguished itself by producing a record unit

volume. The rising manufacturing volume has fully justified the

investment in a new computerised MRP system, and has allowed the

Company to take advantage of some economies of scale. As

instrument manufacturing volume continues to grow, the Company

will be looking closely at the capacity provided by the current plant

and evaluating how best to continue meeting demand. At the

moment, the Company anticipates moving to a second shift as the

most likely short-term change to increase output. All current

indications are that a second shift will provide the additional

productive capacity that is needed.

Corporate Development

During the last quarter of the year, Drew Scientific entered into a

Joint Venture agreement with Medisys PLC. This Joint Venture has

been created for the development of a diagnostic assay for the

detection of Alzheimer’s disease. With the incidence of Alzheimer's

on the rise, this JV opens an exciting opportunity for the Company.

There are over five million people suffering from Alzheimer's in the

United States and a further 700,000 with the disease in the United

Kingdom. Today, there are several major pharmaceutical

companies working on treatments for Alzheimer’s disease, but there

is no simple blood test currently available. The Group’s objective is

to develop such a blood test, thereby closing the loop between the

rising incidence of the disease, its early diagnosis and therapy. Of

particular interest is that some recent research work in

homocysteine has revealed some compelling evidence of a link

between elevated levels of homocysteine and the onset of

Alzheimer’s. The complementary nature of these two areas of

research raises some very exciting possibilities for the future.

The Joint Venture agreement has been structured around two newly

created and wholly owned subsidiaries of the Group. Drew Scientific

Investment Limited (DSIL) is the holding company for Drew Scientific

Developments Limited (DSDL), the operating company charged with

developing the Alzheimer’s test. The Group has paid Medisys PLC a

total consideration of £1.25 million for a license to certain patents to

be used in the development of a test for Alzheimer’s. Medisys in turn

has subscribed to preference shares in DSIL to a value of

£1.25 million, provided an interest free loan of £375,000 to DSDL to

fund the development work and at the same time subscribed to

522,099 new Drew ordinary shares at a price of 181p raising an

additional £945,000 for Drew. Medisys has the option to convert its

investment into a 50% share of the Joint Venture Company at any

time over the next eight years. Drew staff are heading up the


“Our organisationhas matured andstrengthened overthe past year.Significant emphasishas been put onSales and Marketing,Quality andManufacturing.”

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research and development work, and the target is

to have a working immunoassay test using the

licensed technology within the next two years.

The market potential for this test is very large and

growing. With average life expectancy rising, an

ever growing number of people will fall into the

“at risk” category for Alzheimer’s disease. The

need for an accurate and simple screening test is

significant today, and will undoubtedly increase

over the next few years. Screening for Alzheimer’s

will become routine when there is a simple test

available. It is the Group’s belief that once

developed, the test will be widely adopted and

could become a highly significant generator of

revenues and profits for the Company.

Drew Scientific has also entered into an original

equipment manufacturer (OEM) distribution

agreement with Provalis PLC. Under the terms of

this agreement, Drew will market and sell an

instrument and test system, developed by

Provalis, for the Point of Care measurement of

glycated haemoglobin. The distribution

agreement covers the entire world with the

exception of the UK and Japan. The instrument is

small and compact, offering an ideal

semi-automated approach to diabetic care for

the practicing physician and small volume

laboratory. Drew will market the system under the

brand name DS1 Glycomat, and both the unit and

test cartridges will be presented entirely in Drew

Scientific livery. This approach will help to

integrate the product into the Drew range of

diabetic testing systems, and support our strategy

of offering a complete range of analytical systems.

The segment addressed by the DS1 Glycomat is

the largest within the glycated haemoglobin

testing market. With diabetes growing at, on

average, 8% – 10% per year world-wide, there are

an ever increasing number of sites performing the

test. Drew is able to address the large market

opportunity through this OEM agreement, and

expects significant commercial results to accrue

to the Group. Already, the Group has seen

significant interest in the product from potential

distribution partners both in Europe and the

United States. Furthermore, with a relatively low

capital cost for the instrument, there are

significant opportunities in the developing world

for this system.

Organisation

Our organisation has matured and strengthened

over the past year. Significant emphasis has

been put on Sales and Marketing, Quality and

Manufacturing. These three departments, led by

Brian Robb, Stephanie Smith and Bill Sharp

respectively, have expanded significantly over

the year.

With growing sales and expanding commercial

activities, we have strengthened our sales and

marketing team to include a technical service

function and additional technical support. There

are now four people working at Drew Scientific,

Inc. in Rhode Island, USA, up from just one a year

ago. Keith Drew has relocated to the United States

and is now heading up the US Company. Don

Black has left the Company to pursue other

opportunities. Keith remains Executive Chairman

and will chair the Group’s quarterly Board

meetings whilst Kit Madden has been appointed

Deputy Chairman and in this capacity will chair

all interim Board meetings.

The tasks facing Drew’s quality team have grown

in line with our commercial activities. Increasing

sales of instruments, reagents and kits has meant

a rising workload on this team. The team has

grown by two people, and there are now 5 people

in the Quality Department. During the year the

Company successfully passed a re-certification

audit for its ISO accreditation.

Manufacturing has seen the greatest growth over

the year. An additional twenty people have been

recruited into the instrument manufacturing plant

and a further three people into the consumables

plant. We are fortunate to be located in an area

rich in skilled human resources and we are using

that local resource to help drive the dramatic

increase in manufacturing output that is required.

11

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The ProductsHomocysteine

The DS30 homocysteine testing system has been

very well received. It is clear that while

homocysteine testing is not yet widespread, it is

well established in some markets and promises to

be a major test for years to come. Significant

feedback on the system has been received to

date, with users finding the system to be easy to

operate, efficient and analytically superior to

alternative methods.

Our new distribution relationships in Europe, the

United States, Australia and China are all starting

to generate results. In Europe, our agreement

with Helena Biosciences has been extended to

include the United Kingdom, reflecting

confidence in the long-term strengths of the

relationship. Sales to Helena started in late 1999

and the comprehensive product training process

in the 23 separate countries where they are

selling on the Company’s behalf is almost

complete. With the training process due to be

completed within the next six weeks, all the

Helena territories will be fully prepared to focus

on maximising DS30 unit placements. Results in

the last quarter with Helena were strong, with the

Company entering the new year with open orders

to Helena. It is our expectation that sales results

will continue to grow at an increasing rate

throughout the new year, giving confidence that

our aggressive budget for the new year will be

achieved.

In the United States training has been completed

for all seventeen regional Fisher sales teams. The

first shipment of ten DS30 instruments was in

March, representing the first half of Fisher’s first

order for instruments. The Group’s US office

reports significant levels of continuing activity

demonstrating the instrument and feedback from

the demo sites has been positive. A fast start has

been made with Fisher at a time when the market

is buoyant and demand for homocysteine testing

is rising. Most labs contacted are very interested

in performing homocysteine tests, but many have

not yet started. Where a lab is performing the test,

in many cases it is on an in-house developed

system utilising HPLC as the enabling technology.

This fact puts Drew and Fisher in a strong position

as we are offering a comparable technological

platform, with all of the added value of an

automated systems approach.

Cell Counter

The cell counter project has progressed, albeit

slowly over the course of the year. Drew has

encountered some technical issues, which have

delayed the projected dates for product

completion and launch. It should be noted that

there remains a degree of technical risk within

the development of an integrated haematology /

chemistry product, but we remain confident the

project will result in a market leading product in

due course. A team within the R & D group is

working to ensure a consistently high level of

analytical performance is obtained once the

instrument enters full-scale production.

Blood Chemistry Tests

The development of blood chemistry tests with

Birkbeck College has made significant progress

over the past year. Of the first five tests scheduled

for launch, three tests are through development

and into prototype stage. The remaining two tests

are now in development and the research team

expects these two tests to be prototyped within the

next six months. The cartridge mechanism to

house the tests is now being designed and a

complete working prototype with all five tests

running together is expected within the new year.

DS5

The DS5 system has as expected, proven to be a

success. Distribution agreements have been

signed with several partners for the distribution of

the DS5 around the world, and the product is

currently actively marketed across some 25

countries and territories. As the market for

glycated haemoglobin moves towards the

point of care, so demand for fast, accurate and

simple to use analytical systems grows. DS5

instruments have been placed across Europe and

Asia, and further significant instrument

placements over the new year are expected.


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Introduction of the DS5 into the Americas is planned for next year

and with that done, 90% of the market for the product will have

been addressed.

Haemoglobin Controls

The glycated haemoglobin controls are now well established and

Drew is selling these kits to most of its international distribution

partners. Demand for the controls has doubled in the past six

months, and is expected to continue growing at this rate over the

next year. Drew’s controls are the only such product on the market

that have been specifically assayed for use on all of Drew

Scientific’s instruments. This feature makes the product very

attractive to Drew’s customer base, and is helping to drive the

growing demand we are experiencing.

Conclusion

I believe the Company has made significant progress towards

realising our long-term goals over the year. Drew has achieved its

highest level of sales ever, the number of instruments manufactured

and sold is the highest ever and we have the broadest distribution

network in place with more products to sell than ever before. In

addition, the Company starts the current financial year with strong

sales and a healthy order book. Through our Corporate

Development activities, Drew has secured access to technology for

the development of a routine test for Alzheimer’s and we have

entered into a distribution agreement that brings a complementary

product to our diabetes testing portfolio. Our homocysteine product

is launched, and has accounted for the majority of the growth in

sales achieved this year. Finally, as measured from March 1999 to

March 2000, we enhanced shareholder value by adding over

£25 million (103%) to the market capitalisation of the Group.

Notwithstanding the success of the past year, Drew Scientific has a

great deal more to offer and achieve. I am confident we will

continue to improve our performance, and am greatly looking

forward to the new year ahead, during which I am sure we will bring

further success to the Company and reward to you, our shareholders.

Mike Asher

Chief Executive29 June 2000

13

“Drew has achievedits highest level ofsales ever, thenumber of instrumentsmanufactured andsold is the highestever and we havethe broadestdistribution networkin place with moreproducts to sell thanever before.”

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14

Turnover for the year to 31 March 2000 increased

by 18% to £2.8m (1999: £2.4m). Sales of the new

DS30 homocysteine testing system accounted for

60% of the growth in turnover compared to the

previous year. Sales of diabetes testing products

continue to grow with the introduction of two new

products during the year.

Gross profit was £623,000, up 17%, (1999: £532,000),

with gross margins remaining constant at 22%.

This reflects the continuing strength of both

instrument and consumables revenues which are

achieved at very different gross margins.

Instrument sales are achieved at low gross

margins in order to maximise the installed base of

instruments which will then provide a revenue

stream for an average of five to seven years for

the high margin consumable products. The new

reagent and consumable manufacturing

premises opened in early 1999 are fully operational

and has proven to be a very cost effective means of

increasing our production capacity.

Trading expenses before research and

development costs increased by 102% to £1m

(1999: £0.5m). This increase primarily reflects the

additional investment of £300,000 in our sales and

marketing activities both in Europe and in the

United States of America. In Europe we have

invested in additional personnel as well as a

major conference to promote homocysteine as a

major risk factor for cardiovascular disease. We

opened an office in the United States during 1999

and this required a signifcant investment,

primarily in personnel costs, during the year. The

US office will be the cornerstone of the launch of

our homocysteine product in that territory.

Expenditure on research and development was

£756,000, down 27%, (1999: £1,028,000). The

reduction in research and development

expenditure reflects primarily the end of the

homocysteine development programme during

1999 and the reduction in the usage of external

organisations for specialist input in certain

development areas. Research and development

expenditure on cell counting, blood chemistries

and other new products continued during the

year representing the bulk of the investment

made. The work on the development of a test for

Alzheimers disease, in conjunction with Medisys PLC

is about to commence in the current year and

will contribute to additional research and

development expenditure.

The Group reported a net loss of £1.1m (1999: £0.9m)

and losses per share were 3.8p (1999: loss 3.3p).

Cashflow from operations during the year was

negative as a result of the losses incurred and a

build up of working capital at the year end which

will be released during the first few months of the

current year. Additional funds were raised during

the year by way of a 10% placing of shares during

October 1999, a five year bank loan secured on

the assets of the Group and a loan of £375,000

from Medisys PLC to fund the Alzheimer’s test

development work. The intangible assets

acquired during the year primarily relate to the

know-how licenced for the Alzheimer’s test. This

was funded by Medisys PLC’s subscription to

preference shares in Drew Scientific Investment

Limited. An additional placing of shares to

Medisys PLC in May 2000 raised a further £0.9m

cash for the Group.

Accordingly the balance sheet position remains

healthy with sufficient resources to implement the

strategy going forward. In addition to this the

order book is very strong with orders outstanding

of some £2.5m in addition to the £0.9m of sales

already achieved in the current financial year.

David Blain

Finance Director29 June 2000

Financial Review

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Report of the Remuneration Committeefor the year ended 31 March 2000

Members

The membership of the Remuneration Committee during the year ended 31 March 2000 comprised:

KR Drew (Chairman)CJF Madden

Policy Statement

The Remuneration Committee seeks to provide the remuneration packages necessary to attract, retain andmotivate Executive Directors of the quality required to manage the business of the Group.

Directors’ Remuneration

The remuneration received by each Director is as follows:

2000 1999

Salaryand fees Benefits

£'000 £'000 Total Total(Note 1) (Note 2) £'000 £'000

Executive Directors

KR Drew 77 4 81 72

MJ Sipple-Asher 69 6 75 47

JC Maxwell 46 — 46 51

DJ Blain 62 5 67 59

AC Kenney 62 5 67 59

Non-executive Directors

CJF Madden 13 — 13 10

WH Fulton — — — 25

Total Remuneration 329 20 349 323

Notes1. Executive Directors are paid a salary for their work as executives of the Group and are not paid fees in

respect of their Directorship. Non-executive Directors are paid a fee for their services.

2. The principal benefits received by each Executive Director are those of a motor vehicle.

3. In addition the Group operates a defined contribution pension scheme and the value of the benefit receivedby each Director is the value of the Group's contribution on their behalf to this scheme or to the Director'snominated personal pension scheme. Pension contributions during the year were: DJ Blain £7,000 and AC Kenney £3,000.

4. The Directors' long term incentive is provided in the form of share options which is considered to be the bestway to align the interest of the Directors with those of the shareholders.


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16

Share Options

An analysis of the share options held by each Director is set out below:

Date fromAt 1 April Granted Exercised At 31 March Exercise which

1999 during year during year 2000 price exercisable Expiry date

MJ Sipple-Asher 500,000* — — 500,000 112.5 08/06/01 08/06/05

DJ Blain 149,500* — — 149,500 38p 20/08/99 19/08/03

* Unapproved options.

No Directors' options lapsed during the year. The closing price of the Company's shares was 156p on 31 March 2000. The Company's share price has fluctuated in the year in a range between 78p and 176p perordinary share.

The Remuneration Committee considers that the best way to align the interests of Directors and shareholdersis by means of share options to the Directors and senior managers linked to demanding performance targetsset by the Remuneration Committee and, accordingly, has decided to grant, subject to shareholders’ approval,the share options listed in the table below at an exercise price of 147.5p which was the price of the ordinaryshares of the Company at the close of business on 29 June 2000.

Name Position Number of Options

Keith Drew Chairman 200,000

Michael Asher Chief Executive 300,000

David Blain Finance Director 200,000

Dr Andrew Kenney Research and Development Director 200,000

Christopher Madden Deputy Chairman 100,000

Brian Robb Sales and Marketing Director of Drew Scientific Limited 100,000

William Sharp Production Director of Drew Scientific Limited 100,000

Resolutions will be put to the Annual General Meeting to approve the grant of these options. The terms ofenjoyment and exercise of these options follow those commonly extended under executive share options andin particular provide that they may only be exercisable in normal circumstances during years four to seveninclusive following grant and provide for equitable adjustment in the event of appropriate alterations in thecompany's issued share capital. Exercise of all of these options (except those for Christopher Madden) isdependent upon the achievement of demanding performance targets. The Deeds of Grant of these options willbe available for inspection as indicated in the notice of the Annual General Meeting.

Service Contracts

The notice period which may be given by the Company or relevant Director, in each case is not less than twelvemonths.

There are no provisions for predetermined compensation on termination which exceed twelve months’ salaryor fees and benefits.

KR Drew

Chairman29 June 2000

Report of the Remuneration Committeefor the year ended 31 March 2000


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Directors’ Report

The Directors have pleasure in presenting their report and accounts for the year ended 31 March 2000.

Results and Dividends

The trading results for the year and the amount transferred to reserves are set out on page 23. The Directors donot propose to declare any dividends for the year ended 31 March 2000 (1999 : £Nil).

Activities

The Group's principal activities during the year were the design, manufacture and sale of analyticalinstrumentation and related consumables based on low pressure micro-column liquid chromatography.

Review of Business

The loss on ordinary activities before taxation was £1,145,000 (1999: £944,000) on a turnover of £2,802,000 (1999:£2,368,000). A review of operations of the Group during the year appears on pages 6 to 13 and an indication offuture prospects is contained in the Chairman's statement on page 2.

Directors and their Interests

The Directors during the year and the interests of the Directors at 31 March 2000 in the ordinary share capitalof the Company were as follows:

31 March 2000 31 March 19991p ordinary shares 1p ordinary shares

Non Options over Non Options over Beneficial beneficial ordinary shares Beneficial beneficial ordinary shares

K R Drew 2,841,284 2,600,000 — 5,031,284 450,000 —

MJ Sipple-Asher 64,000 — 500,000 — — 500,000

JC Maxwell 2,121,620 48,000 — 2,625,620 64,000 —

DJ Blain 229,800 — 149,500 244,800 — 149,500

AC Kenney 792,900 — — 807,900 — —

CJF Madden — — — — — —

In addition to the interests set out above, KR Drew and JC Maxwell have a non-beneficial interest in a further881,300 ordinary shares in their capacity as trustees of the Drew Scientific Limited Employee Trust.

There have been no changes in the Directors' interests in the share capital of the Group between 31 March 2000 and 29 June 2000.

No other Director had a material interest in any contract, other than a service contract, with the Company orany of its subsidiaries at any time during the year

Research and Development

During the year the Group has continued to invest in research and development primarily to introduce newproducts which can be brought onto the market in the near future.

Substantial Shareholdings

Other than the holdings detailed under Directors and their interests above, at 22 June 2000 the Board wasaware of the following substantial shareholdings:

Holding %

Fidelity Investments Ltd 1,632,600 4.9

Chase Nominees Ltd CMIG160 Acct 1,050,000 3.2

DGW Towler

Beneficial 1,278,376 3.9

Non-beneficial 675,148 2.1

Apart from those listed above, the Board was not aware of any member who had an interest of 3% or more inthe share capital of the Company at 29 June 2000.


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18

Corporate Governance

Statement of Compliance with the Combined CodeIn September 1999 the Turnbull Committee presented its final report on internal control which completes therequirements of “The Combined Code – Principles of Good Governance and Code of Best Practice”.

The Board of Drew Scientific Group PLC is committed to the principles of good corporate governance andsupports the enhancements to the Combined Code delivered by the Turnbull Committee recommendations.

The Turnbull Report addresses the adoption of a risk-based approach to establishing a system of internalcontrol and the subsequent ongoing review of its effectiveness. Such an approach when adopted will providea mechanism by which the Group will be better prepared to implement its strategies and cope with anyunforeseen event. The Turnbull Report suggests that such a system of internal control should be embeddedformally in the organisation and become a management tool to assess the risks associated with running andexpanding the whole business.

The Board has reviewed the report and its requirements and considers that many of the Group’s currentpractices and values are in line with the approach to internal control described by the Turnbull Report. Suchpractices which are embedded throughout the Group, not only in the traditional area of financial control,embrace many areas of risk including:

– Regulatory compliance of products – Customer care

– Health and Safety – Insurance management

– Environment policies – Foreign currency management

– Organisational development – Personnel development

– Operational audit – Quality control

In June 2000 the board completed its final review of the Turnbull Report and has assessed a full and completemethodology to enable existing best practice to be adopted within an internal control framework which willassess and address risk in an ongoing manner.

The Group has therefore adopted the transitional approach for the internal controls aspects of the CombinedCode as set out in the letter from the London Stock Exchange dated 27 September 1999. The Board hasaddressed internal financial controls in accordance with the Rutteman guidelines.

The Company has complied throughout the year with the detailed provisions set out in the Combined Codeexcept for those matters detailed below. These are as follows (with references in parentheses being referencesto the specific provisions of the Combined Code):

1. (A.3.1) The number of non-executive Directors during the year was less than the required one-third ofthe Board.

2. (A.5) During the period the entire Board has acted as a Nominations Committee for the purpose of Boardappointments and the Board considers this appropriate for the operation of the Group.

3. (B.2.2) During the year the Remuneration Committee did not consist exclusively of independentNon-Executive Directors as defined by the Combined Code.

4. (B.1.4 and B.1.6) The Board considers that having regard to the size of the Company it is not practical to aligna significant proportion of the remuneration package of executive Directors to corporate or individual performance.

5. (D.2.1) The Directors have reviewed the effectiveness of the Group's system of internal financial controlsutilising the process set out below.

Directors’ Report DREW SCIENTIFIC GROUP PLC ANNUAL REPORT 2000

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Corporate Governance (continued)

Internal Financial Control and AuditThe Directors believe that the Group has adequate resources to continue in operational existence for theforeseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts.

The Directors are responsible for the Group's system of internal financial control. The system is designed toensure the maintenance of proper accounting records and the reliability of the financial information usedwithin the business or for publication but such systems can only provide reasonable, but not absolute,assurance against material misstatement or loss.

Key procedures that have been established and are designed to provide effective internal financial control are:

a) Control Environment

Control is exercised through an organisation structure with clearly defined levels of responsibility andauthority and appropriate reporting procedures, particularly with respect to capital expenditure,investment, granting of guarantees and the use of treasury products.

b) Financial Reporting and Information Systems

The Group has a comprehensive budgeting system with an annual budget approved by the Board. Monthlytrading results, balance sheets and cashflow statements are reported against the corresponding figures forthe budget and the previous year with any significant variances examined by management and actiontaken as appropriate.

The forecast for the full year is reviewed regularly in the light of actual trading results.

c) Risk Management

The identification of major business risks is carried out and appropriate steps taken to monitor and mitigaterisks.

d) Control Procedures

The Company maintains documented financial controls and procedures appropriate to its own businessenvironment and conforming to overall standards and guidelines.

The Board of Directors

On 31 March 2000 the Board of Drew Scientific Group PLC comprised six Directors, of whom one is Non-Executive. The Board, which meets at least nine times a year, is responsible for the Company's long-termgoals and strategy and provides overall financial and organisational control. The Board retains full andeffective control over the Company and monitors the executive management.

The Non-Executive Director has been appointed for a specified term.

CJF Madden is an independent Non-Executive Director as defined in the Combined Code, biographical noteson whom are included on page 3.

The Audit CommitteeThe Audit Committee is chaired by KR Drew and comprises KR Drew and CJF Madden. It meets at least once ayear and is established with written terms of reference, which include the review and monitoring of theCompany's external financial reporting process, including audit activities and the financial controlenvironment of the Company.

The Nominations CommitteeDuring the period the whole Board has, with KR Drew as Chairman, constituted the Nominations Committee forthe purpose of future Board appointments and the Board considers this to be appropriate for the operation ofthe Group.

The Remuneration CommitteeThe Remuneration Committee comprises KR Drew and CJF Madden and is chaired by KR Drew. It is responsiblefor making recommendations to the Board on all elements of the remuneration of the Executive Directors,including base salaries, performance related elements, share options and other benefits. It also reviews andcomments to the Board on the remuneration of the senior management of the Company.


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20

Directors’ Responsibilities

The Directors are required by the Companies Act 1985 to prepare financial statements for each financial yearwhich give a true and fair view of the state of affairs of the Company and the Group as at the end of thefinancial year and of the profit or loss and cash flows of the Group for that year. It is also the Directors'responsibility to maintain adequate records for safeguarding the assets of the Company and Group and forpreventing and detecting fraud and other irregularities.

The Directors confirm that the financial statements have been prepared on the going concern basis and thatsuitable accounting policies, consistently applied and supported by reasonable and prudent judgementshave been used in the preparation of the financial statements and that applicable accounting standards havebeen followed.

Policy Regarding Payment of Suppliers

The Group's policy regarding the payment of suppliers is either to agree terms of payment at the start ofbusiness with each supplier or to ensure that the supplier is made aware of the payment terms, and in eithercase to pay in accordance with its contractual or legal obligations. At 31 March 2000 trade creditorsrepresented 39 (1999: 44) days purchases outstanding.

Year 2000

Many computer systems express dates using only the last two digits of the year. These systems requiredmodification or replacement to accommodate the year 2000 and beyond in order to avoid malfunctions andresulting widespread commercial disruption. The operation of the Company’s business depends not only on itscomputer systems, but also to some degree on those of suppliers and customers. There is, therefore an exposureto risk in the event that there is a failure by other parties to remedy their own year 2000 issues.

The instruments manufactured by the Group were checked for Year 2000 compliance well before the end of1999 and brought into compliance where necessary. There were no problems or complaints with Year 2000 fromany of the Group’s customers.

The Company experienced no disruption or malfunctions since the turn of the year arising from its ownbusiness computer systems or equipment with embedded date-reliant computer chips. To date the Companyhas experienced no disruption as a result of third parties’ inability to successfully manage their year 2000projects.

The costs incurred in dealing with the year 2000 are not significant and have been charged to the profit andloss account as incurred.

Auditors

A resolution to re-appoint PricewaterhouseCoopers as the Group's auditors will be put to the members at theAnnual General Meeting.

Directors’ Report DREW SCIENTIFIC GROUP PLC ANNUAL REPORT 2000

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Annual General Meeting

The Notice of the seventh Annual General Meeting of Drew Scientific Group PLC to be held on 25 September2000 is set out on pages 38 and 39.

A form of proxy is enclosed for your use which should be returned no later than 11.30 am on 23 September 2000.

KR Drew and DJ Blain will retire by rotation at the Annual General Meeting in accordance with Article 111 ofthe Articles of Association and being eligible offer themselves for re-election.

In addition to the ordinary business of the meeting the following resolutions will be proposed by the Board asspecial business:

(i) Renewal of allotment authority (Resolution 6): The current authority of the Directors to allot shares wasgranted at last year's Annual General Meeting and this authority is due to expire at the conclusion of thisyear's Annual General Meeting. Shareholders are therefore being asked to renew the authority of theDirectors to allot up to 5,493,201 ordinary shares, which authority will continue until the conclusion of thenext Annual General Meeting. This number represents the current unissued ordinary share capital of theCompany and amounts to approximately 14.4% of the total share capital in issue as at 29 June 2000. Savein respect of shares represented by existing and proposed options in favour of Directors and employeesand in respect of any prospective share issue to Medisys PLC, the Directors do not have any presentintention to exercise this authority, but think it prudent to maintain a degree of flexibility for the future.

(ii) Disapplication of pre-emption rights (Resolution 7): Your Board also seeks your approval to disapply the pre-emption provisions of the Companies Act 1985 in relation to the allotment of new ordinary shares forcash. If Resolution 7 is passed, your Directors will have authority, (until the conclusion of the next AnnualGeneral Meeting or 15 months after passing of the resolution whichever is the first to occur), to allot for cash(i) ordinary shares in connection with an issue or offer other than strictly in accordance with the statutoryprovisions, but with adjustments to deal with fractional entitlements and overseas regulatory problems,and (ii) generally up to an aggregate number of 3,270,179 ordinary shares. This latter disapplicationrepresents 10% of the Company's issued ordinary share capital as at 29 June 2000 and accords withInvestor Protection Committee guidelines.

(iii) Authority to grant options to certain Directors and senior employees (resolution 8): it is proposed, subject toshareholders' approval, to grant 1,200,000 options to certain Directors and senior employees at 147.5p pershare being the price of an ordinary share of the Company on 29 June 2000. Resolution 8 will be proposedto grant to the Directors the requisite authority under the Companies Act to allow the Board to grant theseoptions and to approve the grant themselves.

By Order of the Board

DJ Blain

Company Secretary29 June 2000


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22

We have audited the financial statements on pages 23 to 37 which have been prepared under the historicalcost convention and the accounting policies set out on pages 27 and 28.

Respective Responsibilities of Directors and Auditors

The Directors are responsible for preparing the Annual Report. As described on page 20, this includesresponsibilities for preparing the financial statements in accordance with applicable United Kingdomaccounting standards. Our responsibilities, as independent auditors, are established in the United Kingdom bystatute, the Auditing Practices Board, the Listing Rules of the Financial Services Authority and our profession'sethical guidance.

We report to you our opinion as to whether the financial statements give a true and fair view and are properlyprepared in accordance with the United Kingdom Companies Act. We also report to you if, in our opinion, theDirectors' report is not consistent with the financial statements, if the Company has not kept proper accountingrecords, if we have not received all the information and explanations we require for our audit, or if informationspecified by law or the Listing Rules regarding Directors' remuneration and transactions is not disclosed.

We read the other information contained in the Annual Report and consider the implications for our report ifwe become aware of any apparent misstatements or material inconsistencies with the financial statements.

We review whether the statement on pages 18 and 19 reflects the Company’s compliance with the sevenprovisions of the Combined Code specified for our review by the Financial Services Authority, and we report ifit does not. We are not required to consider whether the Board’s statement on internal control covers all risksand controls, or to form an opinion on the effectiveness of the Company’s or Group’s corporate governanceprocedures or its risk and control procedures.

Basis of Audit Opinion

We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. Anaudit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in thefinancial statements. It also includes an assessment of the significant estimates and judgements made by theDirectors in the preparation of the financial statements, and of whether the accounting policies areappropriate to the Company’s circumstances, consistently applied and adequately disclosed.

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

Opinion

In our opinion the financial statements give a true and fair view of the state of affairs of the Company and theGroup at 31 March 2000 and of the loss and cash flows of the Group for the year then ended and have beenproperly prepared in accordance with the Companies Act 1985.

PricewaterhouseCoopers

Chartered Accountants and Registered AuditorsNewcastle upon Tyne29 June 2000

Auditors’ Reportto the members of Drew Scientific Group PLC


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Consolidated Profit and Loss AccountFor the year ended 31 March 2000

2000 1999Note £’000 £’000

Turnover 2 2,802 2,368

Cost of sales 3 (2,179) (1,836)

Gross profit 623 532

Net operating expenses

Trading expenses before research and development costs (1,015) (503)

Research and development (756) (1,028)

3 (1,771) (1,531)

Operating loss

Operating (loss)/profit before research and development costs (392) 29

Research and development costs (756) (1,028)

2 & 3 (1,148) (999)

Interest receivable 5 29 65

Interest payable 5 (26) (10)

Loss on ordinary activities before taxation (1,145) (944)

Taxation on loss on ordinary activities 6 — —

Loss for the financial year attributable to shareholders and

amount transferred to reserves 15 (1,145) (944)

Loss per share – basic 20 (3.8p) (3.3p)

diluted (3.8p) (3.3p)

All of the Group’s operations are continuing.

There is no difference between the loss on ordinary activities and the retained loss for the year and their historical cost equivalents.

There are no recognised gains or losses for the year other than the profit and loss for the year.


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24

2000 1999Note £’000 £’000 £’000 £’000

Fixed assets

Intangible assets 7 1,481 258

Tangible assets 8 1,008 923

2,489 1,181

Current assets

Stocks 10 1,337 995

Debtors 11 1,385 855

Cash at bank and in hand 1,547 569

4,269 2,419

Creditors: amounts falling due within one year 12 (864) (814)

Net current assets 3,405 1,605

Total assets less current liabilities 5,894 2,786

Creditors: amounts falling due after

more than one year 13 (817) (62)

Net assets 5,077 2,724

Capital and reserves

Called up equity share capital 14 322 290

Share premium 14 8,746 6,530

Profit and loss account 15 (5,241) (4,096)

Equity shareholders’ funds 3,827 2,724

Minority interest – non-equity 14 1,250 —

Capital employed 5,077 2,724

Consolidated Balance SheetAs at 31 March 2000


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Company Balance SheetAs at 31 March 2000

2000 1999Note £’000 £’000 £’000 £’000

Fixed assets

Tangible assets 8 374 382

Investments 9 3,210 3,209

3,584 3,591

Current assets

Debtors 11 4,043 2,583

Cash at bank 864 173

4,907 2,756

Creditors: amounts falling due within one year 12 (1) —

Net current assets 4,906 2,756

Total assets less current liabilities 8,490 6,347

Capital and reserves

Called up equity share capital 14 322 290

Share premium 14 8,746 6,530

Profit and loss account 15 (578) (473)

Equity shareholders’ funds 8,490 6,347

The financial statements on pages 23 to 37 were approved by the Board of Directors on 29 June 2000 and weresigned on its behalf by:

DJ Blain

Director

KR Drew

Director


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2000 1999£’000 £’000 £’000 £’000

Net cash outflow from operating activities (1,906) (901)

Returns on investments and servicing of finance

Interest received 29 65

Interest paid (26) (10)

3 55

Capital expenditure

Purchase of tangible fixed assets (197) (181)

Purchase of intangible fixed assets (5) (32)

(202) (213)

Management of liquid resources

Short term deposits — 1,000

Net cash outflow before financing (2,105) (59)

Financing

Repayment of loans (30) (40)

Repayment of principal on hire purchase loans (10) (3)

Shares issued 2,248 67

Loans received 875 —

3,083 24

Increase/(decrease) in cash 978 (35)

The notes to the consolidated cash flow statement are shown in note 21 to the accounts.

Reconciliation of Movements in Equity Shareholders’ FundsFor the year ended 31 March 2000

2000 1999£’000 £’000

Opening equity shareholders’ funds 2,724 3,601

Loss for the year attributable to equity shareholders transferred from reserves (1,145) (944)

New shares issued 2,248 67

Closing equity shareholders’ funds 3,827 2,724

Consolidated Cash Flow StatementFor the year ended 31 March 2000


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Notes to the Accounts

1. Accounting Policies

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

b) Basis of ConsolidationThe financial statements of the Group comprise the financial statements of the Company and its subsidiaries prepared to 31 March. Any goodwill written off against reserves will be charged to the profit and loss account in the event of the sale ordisposal of the related business.

c) Intangible AssetsIntangible assets are stated at cost. Amortisation of intangible assets is provided at rates estimated to write off the cost of eachasset over its expected useful life as follows:

Patents/licences – over the period of the patent/licence

Regulatory approval costs – over two years

d) Tangible AssetsTangible assets are stated at cost. Depreciation on tangible fixed assets is provided at rates estimated to write off the cost, lessestimated residual value, of each asset over its expected useful life as follows:

Freehold buildings – 50 years

Leasehold improvements – over the period of the lease

Plant and machinery – 10% to 33.3% reducing balance

Motor vehicles – 25% straight line basis

Office equipment – 15% reducing balance

e) StocksThe basis of valuation is as follows:

i) Raw materials and bought in components at the lower of cost and net realisable value on a first in, first out basis.

ii) Work in progress and finished stocks at the lower of cost, which includes an appropriate element of production overhead costs,and net realisable value.

Cost includes all expenditure incurred in bringing each product to its present condition and location. Net realisable value isbased on estimated selling prices less further costs expected to be incurred in bringing the stocks to completion and sale.

f) TurnoverTurnover represents the invoiced value of goods sold and services provided net of Value Added Tax.

g) Deferred TaxationDeferred taxation is accounted for under the liability method in respect of the taxation effects of all timing differences whichare expected to reverse in the foreseeable future, calculated at the rate at which it is estimated that tax will be payable.

h) Foreign CurrenciesTransactions denominated in foreign currencies are translated into sterling at the rate of exchange ruling at the date of thetransaction. Assets and liabilities denominated in foreign currencies are translated into sterling at rates of exchange rulingat the end of the financial year. All exchange differences are dealt with in the profit and loss account.

i) Research and DevelopmentResearch and Development expenditure is written off in the year in which it is incurred.

j) Leasing and Hire Purchase CommitmentsAssets held under finance leases and hire purchase contracts are capitalised in the balance sheet and are depreciated overtheir useful lives. The interest element of the rental obligations is charged to the profit and loss account over the period of thelease on a straight line basis.


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1. Accounting Policies (continued)

k) Pension Schemes ArrangementThe Company’s contributions to its pension scheme are charged to the profit and loss account as they become payable.

l) Government GrantsRevenue related government grants received in respect of research projects are credited to the profit and loss account whenthey become receivable.

m) Financial Instruments and DerivativesThe Group’s accounting policy for derivatives is to defer and only recognise in the Group profit and loss account gains andlosses on hedges of revenues, operating payments and capital expenditure to match the underlying transactions.

Forward foreign exchange contracts entered into as hedges of future purchases and sales denominated in foreign currenciesare recorded at cost. Gains and losses are deferred and matched to the underlying transaction when it matures.

2. Segment Information

The Directors consider there to be only one class of business and therefore only geographical segment information isgiven below:

a) The geographical analysis of turnover derived from external customers by destination is as follows:

2000 1999£’000 £’000

United Kingdom 568 433

Mainland Europe 714 315

United States of America 1,197 1,620

Rest of world 323 —

2,802 2,368

b) Turnover, operating loss and net assets by geographical segment by origin have not been disclosed as the Directors believethis to be seriously prejudicial to the Group.

3. Operating Loss

a) Operating loss is stated after charging/(crediting):

2000 1999£’000 £’000

Research and development (including staff costs) 756 1,028

Foreign exchange losses/(gains) 6 (2)

Depreciation of tangible fixed assets – owned 103 61

– leased 5 1

Amortisation of intangible assets 32 40

Loss on disposal of fixed assets 4 —

Operating lease rentals – plant and machinery 15 7

– other 93 73

Auditors’ remuneration 15 10

Government grants (28) (79)

Auditors’ remuneration shown above includes £2,000 (1999: £2,000) in respect of the Company. Non-audit services supplied bythe Company’s auditors in the year amounted to £7,000 (1999: £3,000).

Notes to the AccountsDREW SCIENTIFIC GROUP PLC ANNUAL REPORT 2000

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3. Operating Loss (continued)

b) Analysis of Expenses2000 1999£’000 £’000

Cost of sales 2,179 1,836

Net operating expenses:

Sales and marketing 522 202

Administration expenses 521 380

Research and development 756 1,028

Other operating income (28) (79)

1,771 1,531

4. Employees and Directors

a) EmployeesThe average number of persons employed by the Group (including Executive Directors) in the United Kingdom during the yearwas:

2000 1999

Sales and marketing 8 4

Administration 5 4

Manufacturing 36 30

Product development 9 10

58 48

Their total remuneration was: £’000 £’000

Wages and salaries 1,339 997

Social security costs 122 94

Other pension costs 30 23

1,491 1,114

b) Directors2000 1999

Directors’ remuneration for the year was: £’000 £’000

Aggregate emoluments 349 323

Pension contributions for 2 Directors’ money purchase schemes 10 9

359 332

Highest paid Director

Aggregate emoluments 81 72

Further details of Directors’ emoluments and share options are set out in the Report of the Remuneration Committee on pages15 and 16.


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5. Interest2000 1999£’000 £’000

Interest receivable

Interest receivable on cash balances and deposits 29 65

Interest payable

Interest payable on bank loans and overdrafts 26 10

6. Taxation

There was no liability to UK Corporate Tax in respect of the year ended 31 March 2000 (1999: £Nil) due to the existence of tax losses.

Tax losses carried forward amount to £5,200,000 (1999: £4,100,000).

7. Intangible Fixed Assets

Intangible fixed assets relate to costs of patents, licences, trade marks and similar rights and assets.

GroupCost £’000

At 1 April 1999 432

Additions 1,255

At 31 March 2000 1,687

Amortisation

At 1 April 1999 174

Charge for year 32

At 31 March 2000 206

Net book amount

At 31 March 2000 1,481

At 31 March 1999 258


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8. Tangible Fixed Assets

a) GroupShort

Freehold leasehold land and land and Plant and Office Motor buildings buildings equipment equipment vehicles Total

£’000 £’000 £’000 £’000 £’000 £’000

Cost

At 1 April 1999 422 48 819 173 3 1,465

Additions 5 — 169 18 5 197

Disposals — — (4) — — (4)

At 31 March 2000 427 48 984 191 8 1,658

Depreciation

At 1 April 1999 45 44 363 88 2 542

Charge for the year 11 4 75 16 2 108

At 31 March 2000 56 48 438 104 4 650

Net book amount

At 31 March 2000 371 — 546 87 4 1,008

At 31 March 1999 377 4 456 85 1 923

Assets held under finance leases, capitalised and included in plant and equipment:

2000 1999£’000 £’000

Cost 50 50

Aggregate depreciation 6 1

44 49

b) CompanyFreehold land Office and buildings Equipment Total

£’000 £’000 £’000

Cost

At 1 April 1999 422 16 438

Additions 5 — 5

At 31 March 2000 427 16 443

Depreciation

At 1 April 1999 45 11 56

Charge for the year 11 2 13

At 31 March 2000 56 13 69

Net book amount

At 31 March 2000 371 3 374

At 31 March 1999 377 5 382


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9. InvestmentsCompany

2000 1999£’000 £’000

Cost of shares in Group undertakings 3,210 3,209

The principal subsidiary undertakings at 31 March 2000 were as follows:

Proportion ofCountry of ordinary share

registration capital heldCompany & nature of business and operation Direct Indirect

Drew Scientific LimitedDesign & manufacture of analytical instrumentation England 100%

Counting Technology LimitedDevelopment, production and marketing of medical electronic instruments England 100%

Drew Scientific Distribution LimitedSales and marketing of analytical instrumentation England 100%

Drew Scientific, Inc.Sales, marketing and support for analytical instrumentation USA 100%

Drew Scientific Investment LimitedHolding company of Drew Scientific Developments Limited England 100%

Drew Scientific Developments LimitedDevelopment of a test for Alzheimer's disease England 100%

10. StocksGroup

2000 1999£’000 £’000

Raw materials and components 700 583

Work in progress 420 308

Finished goods 217 104

1,337 995

11. DebtorsGroup Company

2000 1999 2000 1999£’000 £’000 £’000 £’000

Trade debtors 1,150 684 — —

Amounts owed by group undertakings — — 4,030 2,568

Other debtors 71 118 9 9

Prepayments 164 53 4 6

1,385 855 4,043 2,583

Included in trade debtors are amounts falling due after more than one year of £179,000 (1999: £Nil).


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12. CredItors: Amounts Falling Due Within One Year

Group Company2000 1999 2000 1999£’000 £’000 £’000 £’000

Bank loans and overdrafts 100 20 — —

Hire purchase creditors 10 10 — —

Amounts owed to to Group undertakings — — 1 —

Trade creditors 603 584 — —

Other taxes and social security costs 46 34 — —

Accruals 105 166 — —

864 814 1 —

The bank loans and overdraft are secured by a fixed and floating charge over the Group’s undertaking and assets. A legalcharge over the freehold premises is also held by the Bank.

13. CredItors: Amounts Falling Due Within One YearGroup

2000 1999£’000 £’000

Bank loans 390 —

Hire purchase creditors 27 37

Other loans 400 25

817 62

Details of the nature of security of the bank loan is set out in note 12. The loan is repayable in equal monthly instalments over5 years at an interest rate of the bank’s base rate plus 1.25%.

Hire purchase creditors are as follows:

Group2000 1999£’000 £’000

Net obligations under hire purchase contracts 37 47

Less current instalments due in one year (10) (10)

27 37

Repayable as follows:

Group2000 1999£’000 £’000

Between one and two years 10 10

Between two and five years 17 27

27 37

Other loans comprise:

Group2000 1999£’000 £’000

Former Director of Counting Technology Limited 25 25

Medisys PLC 375 —

400 25

The loan from a former Director of Counting Technology Limited is repayable at a rate of 0.75% of sales of the products ofCounting Technology Limited. The loan is unsecured and interest free.

The loan from Medisys PLC is intended to fund the initial development work for the Alzheimer's disease test and is unsecuredand interest free. The loan is to be repaid in eight equal quarterly instalments between 30 June 2003 and 31 March 2005.


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13. CredItors: Amounts Falling Due Within One Year (continued)Borrowings can be analysed as follows:–

Group Company2000 1999 2000 1999£’000 £’000 £’000 £’000

Due within 5 years:

Within 1 year

– bank loans and overdrafts 100 20 — —

– other 10 10 — —

From 1 – 2 years

– bank loans 100 — — —

– other 10 10 — —

From 2 – 5 years

– bank loans 290 — — —

– other 417 52 — —

927 92 — —

14. Called up Equity Share Capital and Share Premium Account

a) Ordinary share capitalAllotted and fully paid

2000 1999£’000 £’000

32,179,700 (1999: 28,994,300) ordinary shares of 1p each 322 290

The authorised share capital of the Company at 31 March 2000 is £381,950 (1999: £381,950) comprising 38,195,000 (1999:38,195,000) ordinary shares of 1p each.

On 4 November 1999, 2,899,400 new ordinary shares were issued via a placing for cash consideration of 75.5p per share.

During May 2000, 522,099 new ordinary shares were issued to Medisys PLC for cash consideration at 181p per share.

During the year 36,000 ordinary shares were issued at a nominal value of £360 in respect of options exercised under the DrewScientific Limited Executive Share Option Scheme, at an exercise price of 2p. During the year 250,000 unapproved optionswere exercised at an exercise price of 44p. During the year 500,000 options were granted at an exercise price of 94p but 250,000of these options have lapsed due to failure to achieve performance criteria. During April 2000 a further 125,000 options lapsed.

The following unapproved share options were in issue at 31 March 2000:

Option price Number of Date option granted per share Period exercisable ordinary shares

19/08/96 38.0p 20/08/99 – 19/08/03 149,500

08/06/98 112.5p 08/06/01 – 08/06/05 50,000

08/06/98 112.5p 08/06/01 – 08/06/05 500,000

30/6/99 94.0p 30/06/02 – 30/06/06 250,000

b) Share premiumGroup and Company

£’000

At 1 April 1999 6,530

On new issues during the year 2,216

At 31 March 2000 8,746

c) Minority InterestsOn 31 March 2000 Medisys PLC subscribed for redeemable preference shares in Drew Scientific Investment Limited for a totalsubscription price of £1.25 million. The shares are redeemable at par plus a premium of 8 percent per annum at any timebetween the first and eighth anniversaries of their issue, although the Group has the right to apply the proceeds of redemptionin the issue to Medisys PLC of new ordinary shares at a price per share of 164.5p or, if the price of the ordinary share on the datewhich Medisys PLC gives notice of redemption is not less than 164.5p, at 246.75p. Medisys PLC may, as an alternative to a cash orshare redemption, require that the proceeds of redemption of the preference shares be applied towards the purchase by MedisysPLC from Drew Scientific Investment Limited of 50 percent of the issued share capital of Drew Scientific Developments Limited.


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15. Profit and Loss AccountsGroup Company

Retained losses £’000 £’000

Accumulated losses at 1 April 1999 4,096 473

Loss for the year 1,145 105

Adverse balance at 31 March 2000 5,241 578

16. Parent Company Profit and Loss Accounts

Drew Scientific Group PLC has not presented its own profit and loss account, as permitted by section 230 (1) of the CompaniesAct 1985. The amount of the consolidated loss for the financial year dealt with in the accounts of the parent company is£105,000 (1999: £89,000).

17. Operating Lease ObligationsThe annual commitment under non-cancellable operating leases comprises:

GroupLand and buildings Other

2000 1999 2000 1999£’000 £’000 £’000 £’000

Expiring

Within 1 year 41 38 1 8

Between 1 and 2 years 14 — 10 6

Between 2 and 5 years — 14 49 94

55 52 60 108

18. Capital Commitments and Contingent Liabilities

The Group had no capital commitments at 31 March 2000 (1999: Nil). The Group had no contingent liabilities at 31 March 2000(1999: Nil).

19. Pension CommitmentsThe Group operates a defined contribution pension scheme.

20. Loss Per Share

2000 1999

Weighted Weighted Losses average no Per share Losses average no Per share

£’000 of shares Amount-pence £’000 of shares Amount-pence

Basic EPS

Loss attributable to shareholders (1,145) 30,214,009 (3.8) (944) 28,735,355 (3.3)

Effect of dilutive securities

Options 111,517 242,566

Diluted EPS (1,145) 30,325,526 (3.8) (944) 28,977,921 (3.3)


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21 Consolidated Cash Flow Statement

a) Reconciliation of operating loss to net cash outflow from operating activities2000 1999£’000 £’000

Operating loss (1,148) (999)

Depreciation and amortisation charges 140 102

Loss on sale of fixed assets 4 —

Increase in stocks (342) (433)

(Increase)/decrease in debtors (530) 42

(Decrease)/increase in creditors (30) 387

Net cash outflow from operating activities (1,906) (901)

b) Reconciliation to net funds2000 1999£’000 £’000

Increase/(decrease) in cash during the period 978 (35)

(Increase)/decrease in debt and finance leases (835) 43

Decrease in liquid resources — (1,000)

Change in net debt from cash flow 143 (992)

Non-cash debt — (50)

143 (1,042)

Net funds at 1 April 477 1,519

Net funds at 31 March 620 477

c) Analysis of net funds31 March 1999 Cash flow 31 March 2000

£’000 £’000 £’000

Cash in hand, at bank 569 978 1,547

Debt due after 1 year (62) (755) (817)

Debt due within 1 year (30) (80) (110)

Total 477 143 620

22. Derivatives and Other Financial Instruments

Set out below are the narrative and numerical disclosures required by Financial Reporting Standard 13 “Derivatives and otherfinancial instruments”. The Group has taken advantage of the exemption available under FRS 13 not to provide numericaldisclosures in relation to short term debtors and creditors.

The Group’s financial instruments other than derivatives, comprise borrowings, some cash and liquid resources, and variousitems such as trade debtors and trade creditors, that arise directly from its operations. The main purpose of these financialinstruments is to manage the finance for the Group’s operations. The Group also enters into derivative transactions(principally foreign exchange contracts), the purpose of these transactions is to manage the currency risks arising from theGroup’s operations. It is,and has been for the period under review, the Group’s policy that no trading in financial instrumentsshall be undertaken.


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22. Derivatives and Other Financial Instruments (continued)

The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk and foreign currency risk. TheBoard reviews and agrees policies for managing each of these risks and they are summarised below. These policies haveremained unchanged throughout the year.

i) The Group finances its operations through net cash and available bank facilities.

ii) The Group has transactional currency exposures which arise from sales or purchases in currencies other than the Group’sfunctional currency. The main exposure relates to sales to the United States of America and the Group has foreignexchange contracts in place to reduce the currency exposure associated with the movements in the US$. After taking intoaccount foreign exchange contracts and matching of payments and receipts, these other exposures are not consideredmaterial to the Group.

The interest rate and currency profile of the Group’s financial liabilities at 31 March 2000 was:

Currency Floating rate Fixed rate Interest freefinancial financial financial

Total liabilities liabilities liabilities£’000 £’000 £’000 £’000

Sterling 927 490 37 400

Floating rate financial liabilities bear interest based on the UK bank base rate. Fixed rate financial liabilities related tofinance leases with a weighted average interest rate of 6.5% for 5 years.

The maturity profile of the Group’s financial liabilities at 31 March 2000 was as follows:

Financial liabilities2000 1999£’000 £’000

In 1 year or less 110 30

Between 1 and 2 years 110 10

Between 2 and 5 years 707 52

927 92

Set out below is a comparison by category of book values and fair values of the Group’s financial assets and liabilities:

2000 1999Book value Fair value Book value Fair value

£’000 £’000 £’000 £’000

Cash at bank and in hand 1,547 1,547 569 569

Bank loans 490 490 20 20

Other loans 437 437 72 72

Foreign currency contracts — (35) — (20)

Foreign exchange contracts have been marked to market to produce fair value figures. Changes in the fair value ofinstruments used as hedges are not recognised in the financial statements until the hedged position matures. An analysis ofthese unrecognised gains and losses is as follows:

Total netgains/(losses)

£’000

Unrecognised gains and losses on hedges:

At 1 April 1999 (20)

Recognised in the year 6

Not recognised in the year (14)

Arising in the year not recognised (21)

At 31 March 2000 (expected to be recognised in 2000) (35)


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The Annual General Meeting will be held at the offices of Bird & Bird, 90 Fetter Lane, London, EC4A 1JP on 25 September 2000at 11.30 am. The full notice of this meeting is set out below and a proxy card accompanies this report.

Ordinary Business

1. To receive and adopt the Report of the Directors and the financial statements for the year ended 31 March 2000.

2. To receive and adopt the Report of the Remuneration Committee accompanying the Report of the Directors for the yearended 31 March 2000.

3. To re-appoint PricewaterhouseCoopers as auditors and to authorise the Directors to fix their remuneration.

4. To re-elect KR Drew as a Director who is eligible for re-election and offers himself for re-election.

5. To re-elect DJ Blain as a Director who is eligible for re-election and offers himself for re-election.

Special Business

To consider and, if thought fit, pass the following resolutions, which will be proposed, as to Resolution number 6 as anOrdinary Resolution and, as to Resolution Numbers 7 and 8 (a) to (g) as Special Resolutions:

6. THAT the Directors be and are hereby generally and unconditionally authorised in accordance with section 80 of theCompanies Act 1985 ("the Act") to exercise all the powers of the Company to allot relevant securities (as defined by section80(2) of the Act) up to an aggregate nominal amount of £54,932 such authority to expire at the conclusion of the nextAnnual General Meeting of the Company unless previously renewed, varied or revoked by the Company in generalmeeting but so that the Company may, before such expiry, make an offer or agreement which would or might requirerelevant securities to be allotted after such expiry and the Directors may allot relevant securities pursuant to any suchoffer or agreement as if the authority conferred hereby had not expired and provided further that this authority is insubstitution for and revokes, to the extent not already utilised, all other authorities conferred upon the Directors in relationto the allotment of relevant securities.

7. THAT, in addition to the existing pre-emption rights granted pursuant to the special resolution passed at the ExtraordinaryGeneral Meeting held on 12 May 2000, the Directors be and are hereby generally and unconditionally authorised andempowered pursuant to section 95 of the Act, to allot equity securities (as defined in section 94 of the Act) for cashpursuant to the authority referred to in Resolution Number 6 above as if section 89 (1) of the Act did not apply to any suchallotment, provided that such authority and power shall be limited to:

(i) the allotment of equity securities in connection with an issue or offer in favour of ordinary shareholders where theequity securities respectively attributable to the interests of all ordinary shareholders on a fixed record date areproportionate (as nearly as may be) to the respective numbers of ordinary shares held by them, but subject to suchexclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractionalentitlements or to deal with any legal or practical problems under the laws of any overseas territory, and

(ii) the allotment (otherwise than pursuant to the power referred to in (i) above) of equity securities up to an aggregatenominal amount of £32,701

and shall expire at the conclusion of the next Annual General Meeting of the Company or 15 months following thepassing of this resolution whichever is the first to occur, save that the Company may before such expiry make an offer,agreement or other arrangement which would or might require equity securities to be allotted after such expiry and thedirectors may allot equity securities pursuant to any such offer or agreement as if the authority conferred hereby had not expired.

Notice of MeetingDREW SCIENTIFIC GROUP PLC ANNUAL REPORT 2000

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8. THAT subject to the passing of Resolution Number 6 and in addition to the power given pursuant to Resolution Number 7and as separate authorities and powers, in addition to the existing pre-emption rights granted pursuant to the specialresolution passed at the Extraordinary General Meeting held on 12 May 2000, the directors be and are hereby generallyand unconditionally authorised and empowered pursuant to section 95 of the Act, to allot equity securities (as defined insection 94 of the Act) for cash pursuant to the authority referred to in Resolution Number 6 above as if section 89(1) of theAct did not apply to any such allotment, provided that such authority and power shall be limited to the allotment of equitysecurities up to an aggregate nominal amount ("ANA") of £12,000 (subject to the proviso below) and shall expire at theconclusion of the next Annual General Meeting of the Company, save that the Company may before such expiry makean offer, agreement or other arrangement which would or might require equity securities to be allotted after such expiryand the directors may allot equity securities pursuant to any such offer or agreement as if the authority conferred herebyhad not expired and accordingly:

(a) the grant to KR Drew of options to acquire 200,000 Ordinary Shares;

(b) the grant to MJ Asher of options to acquire 300,000 Ordinary Shares;

(c) the grant to DJ Blain of options to acquire 200,000 Ordinary Shares;

(d) the grant to Dr AC Kenney of options to acquire 200,000 Ordinary Shares;

(e) the grant to CJF Madden of options to acquire 100,000 Ordinary Shares;

(f) the grant to BA Robb of options to acquire 100,000 Ordinary Shares; and

(g) the grant to W Sharp of options to acquire 100,000 Ordinary Shares

all as summarised in the Report of the Remuneration Committee accompanying the Report of the Directors for the yearended 31 March 2000 be and are hereby approved provided that in the event that any of the foregoing grants of optionsare not approved by virtue of the relevant resolution 8 (a) to 8 (g) not being passed then the ANA shall be reduced by anamount equal to the nominal amount represented by the Ordinary Shares to which the relevant option relates.

By order of the Board

Registered office:Sowerby Woods Industrial Estate DJ BlainPark Road SecretaryBarrow in Furness 29 June 2000Cumbria LA14 4QR

Notes:(i) A member entitled to attend and vote may appoint one or more proxies to attend and vote instead of him. A proxy

member need not also be a member. A Form of Proxy is enclosed.

(ii) To be valid, a Form of Proxy, must be completed and returned to the Registrar of the Company, Independent RegistrarsGroup Limited, Balfour House, 390/398 High Road, Ilford, Essex 1G1 1BR, not less than 48 hours before the time appointedfor the meeting. The completion and return of a Form of Proxy will not prevent a member who wishes to do so fromattending and voting in person.

(iii) Copies of the Directors’ service contracts and of the drafts of the proposed Deeds of Grant of share options in favour of thenamed individuals referred to in Resolutions 8 (a) to (g) above, are available for inspection at the Company’s registeredoffice during normal business hours on any weekday (Saturday excepted) and will also be available for inspection for15 minutes prior to the meeting and during the meeting.

(iv) Resolutions 8 (a) to (g) inclusive (and accordingly the various proposed individual grants of options contained therein)will be proposed as separate special resolutions.


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Shareholder ProfilePercentage of

Number of number of Number of Percentage ofSize of shareholding as at 31 March 2000 shareholders shareholders ordinary shares Ordinary shares

1 – 1,000 1,219 48.0% 722,797 2.2%

1,001 – 10,000 1,095 43.1% 3,588,273 11.2%

10,001 – 100,000 178 7.0% 5,237,424 16.3%

100,001 – 1,000,000 40 1.6% 12,163,826 37.8%

Above 1,000,000 7 0.3% 10,467,380 32.5%

2,539 100.0% 32,179,700 100.0%

Company Secretary and Registered Office

DJ BlainDrew Scientific Group PLCSowerby Woods Industrial EstatePark RoadBarrow in FurnessCumbria LA14 4QR

Registrar

Administrative enquiries about the holding of Drew Scientific Group PLC shares should be directed in the first instance to theRegistrar whose address is

Independent Registrars Balfour House390/398 High Road IlfordEssex IG1 1NQ

Amalgamation of Accounts

Shareholders who receive duplicate sets of company mailings owing to multiple accounts in their name should write toIndependent Registrars to have their accounts amalgamated.

Financial Diary2000 2001

Year end 31 March 31 March

Results announced June June

Annual Report posted July July

AGM September September

Half year end 30 September 30 September

Interim results announced November November

Investors’ InformationDREW SCIENTIFIC GROUP PLC ANNUAL REPORT 2000

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T H E D E S I G N P O R T F O L I Owww.design-portfolio.co.uk

designed & produced by

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Sowerby Woods Industrial Estate

Park Road, Barrow In Furness,

Cumbria LA14 4QR

United Kingdom

Tel: +44 (0)1229 432089

Fax: +44 (0)1229 432096

www.drew-scientific.com


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