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Report on Directors' remuneration

This report complies with the Directors’ Remuneration Report Regulations 2002, FSA Listing Rules and the principles and provisions of the Combined Code on Corporate Governance. A resolution inviting shareholders to approve the Report will be tabled at the AGM.

The information in sections F and G is subject to audit.

A	The Remuneration Committee and its advisors
	The Remuneration Committee has responsibility from the Board to agree the remuneration of the Chairman, the Executive Directors and selected senior managers. Its terms of reference are available on the Company’s website. Membership in the year ending 31 March 2008, during which time the Committee met four times, was as follows, all of whom are independent Non–Executive Directors:      Dr Paul Golby, Chairman      Dr Leslie Atkinson      Lord Moonie
	The Company Secretary acts as the Committee’s Secretary. The Chairman and the CEO attended parts of meetings during the year by invitation to respond to specific questions raised by the Committee and on matters relating to the assessment and remuneration of other Directors and senior managers.
	The Committee has utilised the services of New Bridge Street Consultants LLP, Kepler Associates and KPMG LLP to assist in the discharge of its responsibilities during the year.
B	Executive Directors
B1	Remuneration policy and approach
	The Committee reviews Executive Director remuneration annually, with the benefit of external advice and data, to ensure consistency with Group business objectives, relevant comparator companies, and with any change in relevant legislation or best practice guidelines.
	The Committee’s policy is that the level and structure of executive remuneration is to be competitive and performance–related. Specifically, the objectives are to take account of remuneration for similar job functions in comparable companies; that packages should attract, motivate and retain executives with the experience, skills and talents to operate and develop the Group to its maximum potential; and that a significant element of the potential reward is to be related to Group performance, ensuring direct alignment with the interest of shareholders.
	The Committee is currently undertaking a review of the variable performance related elements of executive remuneration, with the benefit of external advice, to ensure that the arrangements best match the Group going forward.
B2	Remuneration packages
	Individual packages comprise a mix of fixed and variable performance–related elements, with the latter representing a significant part of the potential total reward.
	Fixed elements:
a)	Basic salary: Basic salaries are reviewed annually, or when changes in responsibilities occur, taking into account relevant external market comparisons for similar job functions, the level of responsibility of each executive, individual skills and experience, salary levels throughout the Group, and movements in basic pay in the Group.
b)	Pension: see Section F2.
c)	Other benefits: These include a company car (fully expensed for Andrew McCree), health care and, for Andrew McCree, death in service benefits in respect of earnings above the pensions earnings cap. The taxable value of these benefits is included in the Directors’ emoluments table in Section F1. They are eligible to participate in the Company’s all–employee share plans, namely Save As You Earn (SAYE) and the Share Incentive Plan (called Buy As You Earn or BAYE). Neither involves performance conditions.

Variable performance related elements:

Individual remuneration packages include a large variable performance–related component, payable only if, and to the extent that, demanding conditions have been met that have increased shareholder value and contributed significantly to corporate strategy and development.

a)	Annual cash bonus: The executives are eligible to earn a non–pensionable cash bonus of up to 70% of basic salary. The Committee set measures and targets relating to improving shareholder value. These included meeting and beating operating performance targets for orders, profit and debt; and promoting an awareness of the Company in the market and by building its brand.
b)	Longer-term share based incentive: The Committee did not make an award this year under the Company’s Performance Share Plan pending the outcome of its review of long-term incentives appropriate for the Group following its restructuring. The three-year performance period for the awards made in 2004 ended in August 2007. The Plan did not vest. The three-year performance periods for the awards made in 2005 continue.
B3	Performance Share Plan
	Shareholders approved a Performance Share Plan (PSP) at the 2004 AGM. This enables the Committee to award to the Executive Directors and other selected senior managers an interest over shares equal to a certain value of base salary. Vesting is dependant upon continued employment and the achievement of a stretching Company performance condition over a three–year period based on Total Shareholder Return (TSR). The Company’s TSR is measured against that of over 200 companies comprising the constituents of the FTSE Mid 250, excluding investment trusts, as at the date of the grant. The extent to which an award will vest will depend on how well the Company growth in TSR over the three years compares with that of the companies in the comparator group. If performance is better than that of half of them, 25% of the award can vest, rising to 100% of the award if TSR performance betters that of 80% of the comparator group companies, with vesting pro-rata in between. For awards to vest, the Committee must also be satisfied that the TSR performance is reflective of underlying Company financial performance. In making this assessment the Committee will have regard to profit and return on capital against internal targets. It will explain to shareholders why it considers there to have been a sustained improvement in underlying financial performance in any accounts notifying a vesting of an award. The PSP rules do not allow for retesting if the performance condition is not satisfied in the three–year performance period.
	2005 PSP award
	The Committee made awards to an Executive Director worth 80% of basic salary at the time. In addition, as part of the Placing and Open offer in July 2005, shareholders approved use of the PSP to incentivise Directors and selected senior staff, who were invited to invest between £10,000 and £50,000 of their own money in the purchase of ordinary shares in the Company under the re-financing. The Company used the PSP to offer an interest in further shares on a three to one matching basis against shares purchased under this invitation. Andrew McCree invested £50,000. His total award was an interest over 415,277 shares. Alice Cummings has an interest over 42,808 shares. Shareholders also approved that, in the event of a takeover during the three-year performance period, and assuming that the TSR performance condition had been met at the date of takeover, half of the award would vest automatically with vesting of the other half being at the discretion of the Committee. The three-year performance period ends in July 2008.
	CSOP
	Awards were made to Executives and others between 2000 and 2003 under a Company Share Option Plan with vesting subject to an EPS three-year Company performance period. Options awarded in 2001 at an exercise price of £2.965 per share vested in 2004 and participants have until June 2011 to exercise their options. The interests of the Executives are shown in the table in section G2.
B4	Executive service contracts
	Contract dates as at 31 March 2008 are as follows

	Contract Date	Retirement date	Unexpired term at 31/3/08
Andrew McCree	27 November 2000	19 August 2022	14 years, 4 months
Alice Cummings	22 November 2006	1 November 2028	20 years, 7 months

	Both contracts provide for a retirement date of 65 and for a rolling twelve–month notice period from the Group, with provision for reduced or no notice in the event of dismissal for defined circumstances. The Executives are required to give six months’ notice.
	The Committee accepts and endorses the principle of mitigation of damages on early termination of appointment. Guaranteed termination payments are limited to payment of salary and benefits in respect of the notice period, with all variable elements of compensation (bonus payments, outplacement support and vesting of share options) being at the discretion of the Remuneration Committee. In the specific event of dismissal within twelve months of a change of control, Andrew McCree’s contract provides for payment of outplacement support and half of the maximum bonus payable, with any other payment being at the discretion of the Committee.
B5	Shareholding guidelines
	The Committee has agreed the principle that Executive Directors are expected to build up and maintain significant shareholdings in the Company over time, allowing for differences in individuals’ circumstances, particularly as awards under variable incentive plans vest.
B6	External Directorships
	Executive Directors are allowed to hold external Non–Executive Director appointments subject to prior Board agreement, and are allowed to retain any fees payable to them with the consent of the Committee, except where the appointment is as a representative of AEA. At present, neither of the Executives holds any external Non–Executive appointment that has a fee payable.
C	Senior Managers
	The Committee’s remit extends to senior managers as determined by the Board, currently executive managers immediately below board level. Their contract structure is similar to that of the Executive Directors, with salaries determined in line with market comparisons and with a split between fixed and variable performance–related elements.
D	Non–Executive Directors
	Non–Executive Directors are appointed for fixed terms, normally three years at a time, renewable if re–elected by shareholders. None has a service contract with the Company. Their appointments provide for payment of a fee. The Board has delegated the responsibility for approving fees within the limits in the Articles of Association as follows:
	a)     to the Remuneration Committee for the Chairman; and
	b)     to the Executive Directors for the other Non–Executives.
	In this way, no Director is involved in the setting of their own remuneration. Non–Executive Directors, including the Chairman, are paid a basic fee plus a fee as appropriate for chairing Board Committees or for acting as the Senior Independent Director, determined by reference to market comparisons. The basic fee in the year was £31,000. Dr Bernard Bulkin’s fee as Chairman in the year was £95,000. Non–Executive Directors do not receive share options, performance related bonus or pension entitlements and are not eligible to participate in all–employee share plans. They are entitled to be reimbursed for reasonable expenses in line with the policies applying to Group employees.
E	Performance Graph
	The following graph compares the performance of AEA Technology plc, by reference to TSR, with that of the FTSE Support Services sector for the five years ending 31 March 2008. The Group has been in this sector throughout this period and many of the component companies are used by the Committee as market comparators. TSR is shown as the value of £100 invested in the Company and in the FTSE Support Services sector over the same period, measuring share price growth plus dividends paid.
F	Details of Directors’ remuneration
	Sections F and G have been externally audited.
F1	Directors’ emoluments
	Details of individual Directors’ emoluments, excluding contributions by the Group into a pension scheme (see section F2), for the year are as follows:

	Salary or Fee £000	Benefits £000	Annual bonus £000	2008 total Emoluments £000	2007 total Emoluments £000
Executive
Andrew McCree 1	314	82	220	616	575
Alice Cummings	188	27	132	347	222
David Lindsay	–	–	–	–	531
Non Executive
Dr Bernard Bulkin	95	–	–	95	92
Dr Leslie Atkinson	35	–	–	35	34
Dr Paul Golby	36	–	–	36	35
Lord Moonie	31	–	–	31	30
Rodney Westhead	36	–	–	36	35
	735	109	352	1,196	1,554

1 Salary includes pension contributions made by the Company under a salary sacrifice arrangement.

The Benefits column includes, variously as appropriate, provision of a company car and fuel, health care, and a cash salary supplement payment in lieu of pension benefits in respect of salary above the earnings cap, see section F2.

F2	Pensions
	General
	The Senior Executive Section of the AEA Technology Pension Scheme was closed to future accrual after 30 June 2005. This provided for a two–thirds pension less retained benefits at normal pension age provided that 30 years’ service was completed. Andrew McCree accrued pension at a rate of 1/45th Final Pensionable Earnings for each year of service. The Section provided a 37.5% pension payable to dependants on death of the Scheme member. Pension increases were in line with movements in the RPI subject to a limit of 6%.
	Pension accrual up to that date was not affected by the closure. Section members, including Andrew McCree, were given the option to join one of the other sections of the AEA Technology Pension Scheme for service after that date. The options were designed to make the Scheme more affordable for the Group.
	Individual arrangements
	Features of the pension and associated arrangements for each Executive Director since July 2005 are set out below. The value of cash salary supplements paid in the year is shown in the table at F1. Andrew McCree’s pension now accrues at 1/60th Final Pensionable Earnings up to the earnings cap for each year of Pensionable Service, which, for the year ending 31 March 2008, was £112,800. A pension of 1/160th Final Pensionable earnings is payable to a dependant on his death. Accrued pension benefits increase each year in line with RPI up to 5%. He receives a taxable cash salary supplement in lieu of pension benefits above the earnings cap, worth 30% of salary above the earnings cap. The Group also takes out insurance to provide additional death in service benefits in respect of salary above the earnings cap (2008 cost: £967). Alice Cummings is not a member of a Group pension scheme. She receives a taxable cash salary supplement worth 20% of salary above the earnings cap in lieu of pension benefits.
	Value of pension benefits
	The information in the following table shows the total value of pension benefits for Andrew McCree. Columns (a) and (b) show the deferred pension benefit entitlements at 31 March 2008 and 31 March 2007 respectively. Column (c) is the transfer value of the deferred pension benefit in (a) calculated at 31 March 2008 by the Scheme Actuary. Column (d) is the equivalent transfer value at 31 March 2007 of the deferred benefits in (b) on the assumption that the Director left service at that date, again calculated by the Scheme Actuary. Column (e) shows the difference between (c) and (d). Column (f) is the increase in benefit built up during the year, recognising the additional service completed and the effect of pay changes in “real” (inflation adjusted) terms on the benefit already earned at the start of the year. Column (g) is the capital value of the deferred pension benefit in column (f). The transfer values are calculated in accordance with actuarial guidance note GN11.

	(a) Accrued benefit at 31/3/08 £	(b) Accrued benefit at 31/3/07 £	(c) Transfer value at 31/3/08 £	(d) Transfer value at 31/3/07 £	(e) Change in transfer value (c) – (d) £	(f) Additional benefit earned in year £	(g Transfer value of the increase £
Andrew McCree 1
Approved pension	34,785	31,675	537,444	429,089	108,355	1,875	18,635
Approved lump sum	24,998	24,067	–	–	–	–	–

1 Separate lump sum benefits accrue under the Closed Section of the Company’s pension scheme. The transfer values shown include the value of
  pension and lump sum benefits.

F3	Payment to former directors
	Unfunded top-up arrangements transferred to AEA on separation from UKAEA in 1996 to provide benefits in excess of the HMRC earnings cap for a former director. AEA also has unfunded top-up arrangements in place to provide benefits to certain former employees. The Company makes a provision in the accounts in order to cover these benefits. Details of payments made to former directors in the year are:
	Unfunded Pension 2008 £000 2007 £000 Ray Proctor 43 42 Dr Peter Watson 111 107 Dr Chris Wright 9 9   163 158

G	Directors’ interests in shares and options
G1	Interests in shares

The interests of the Directors in the shares of the Company are:

	31 March 2008	1 April 2007
Andrew McCree	72,794	70,869
Alice Cummings	8,042	6,501
Dr Bernard Bulkin	10,487	10,487
Dr Leslie Atkinson	16,276	16,276
Dr Paul Golby	17,396	17,396
Lord Moonie	18,016	18,016
Rodney Westhead	10,487	10,487

The holdings of Andrew McCree and Alice Cummings increased by 475 and 379 shares respectively in the period 1 April 2007 to 12 June 2008 through their participation in the AEA Technology Buy As You Earn Plan.

No Director had an interest at any time in the year in the share capital or loan stock of other Group companies.

G2 Interests in share options and awards

The interests of Executive Directors over Ordinary Shares of the Company under the SAYE scheme, the Company Share Option Plan (CSOP) and the Performance Share Plan (PSP) are set out below:

	1 April 1007	Options granted in year	Options lapsed in year	31 March 2008	Exercise price	Date from which exercisable	Expiry date	Scheme
Andrew McCree	90,923	–	–	90,923	£2.965	26/06/04	26/06/11	CSOP
	85,490	–	(85,490)	–	£0.00	18/08/07	17/02/08	PSP
	299,633	–	–	299,633	£0.00	08/07/08	07/01/09	PSP
	115,644	–	–	115,644	£0.00	19/07/08	18/01/09	PSP
	2,622	–	–	2,622	£1.87	01/04/09	30/09/09	SAYE
Alice Cummings	15,177	–	–	15,177	£2.965	26/06/04	26/06/11	CSOP
	13,835	–	(13,835)	–	£0.00	18/08/07	17/02/08	PSP
	42,808	–	–	42,808	£0.00	08/07/08	07/01/09	PSP
	1,008	–	(1,008)	–	£1.87	01/04/07	30/09/07	SAYE
	2,122	–	–	2,122	£1.25	01/04/08	30/09/08	SAYE
	5,064	–	–	5,064	£0.96	01/04/09	30/09/09	SAYE
	2,362	–	–	2,362	£0.80	01/04/10	30/09/10	SAYE
	–	3,840	–	3,840	£0.70	01/04/11	30/09/11	SAYE

The market price of the Company’s shares at 31 March 2008 was 70.0 pence. During the year, the share price varied between 143.5 pence and 64.0 pence.

By order of the Board

Dr Paul Golby

Chairman of the Remuneration Committee
12 June 2008

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