As filed with the Securities and Exchange Commission on July 30, 2004

Registration No. 333-            

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

CAMBRIDGE DISPLAY TECHNOLOGY, INC.

(Exact name of Registrant as specified in its charter)

Delaware	8731	13-4085264
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

c/o Corporation Trust Center

1209 Orange Street

Wilmington, Delaware 19801

(Registered office)

c/o Cambridge Display Technology Limited

Greenwich House

Madingley Rise, Madingley Road

Cambridge CB3 OTX, United Kingdom

011 44 1223 723 555

(Address, including ZIP code, and telephone number, including area code, of principal executive offices)

Stephen Chandler

Secretary

Cambridge Display Technology, Inc.

c/o Cambridge Display Technology Limited

Greenwich House

Madingley Rise, Madingley Road

Cambridge CB3 OTX, United Kingdom

011 44 1223 723 555

(Name, address, including ZIP code, and telephone number, including area code, of Registrant’s agent for service)

Copies to:

Richard D. Bohm Steven Ostner Debevoise & Plimpton LLP 919 Third Avenue New York, New York 10022 (212) 909-6000 Todd W. Eckland Pillsbury Winthrop LLP 1540 Broadway New York, New York 10036 (212) 858-1000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. ¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)	Amount of Registration Fee
Common Stock, $.01 par value	$40,250,000	$5,100

(1) Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) promulgated under the Securities Act of 1933, as amended. Includes shares of Common Stock subject to the underwriters’ over allotment option.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion)

Dated July 30, 2004

                       Shares

Common Stock

We are selling              shares of common stock. This is an initial public offering of our common stock. Prior to this offering, there has been no public market for our common stock. See “Underwriting” for a discussion of the factors considered in determining the initial public offering price. The common stock has been approved for quotation on the Nasdaq National Market under the symbol “OLED” subject to official notice of issuance. We currently estimate that the initial public offering price of our common stock will be between              and              per share.

Our business and an investment in our common stock involve significant risks. These risks are described under the caption “ Risk Factors” beginning on page 6 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

	Per Share	Total
Public offering price	$	$
Underwriting discounts and commissions	$	$
Proceeds, before expenses, to us	$	$

The underwriters may also purchase up to              shares of our common stock from us at the public offering price, less underwriting discounts and commissions, to cover over allotments.

The underwriters expect to deliver the shares in New York, New York on                     , 2004.

SG Cowen & Co.

CIBC World Markets

Adams Harkness

                , 2004

TABLE OF CONTENTS

	Page
Prospectus Summary	1
Risk Factors	6
Forward-Looking Statements	19
Use of Proceeds	20
Dividend Policy	20
Capitalization	21
Dilution	23
Selected Consolidated Financial and Other Data	24
Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Business	37

Management	54
Principal Stockholders	66
Certain Relationships and Related Transactions	68
Description of Capital Stock	70
Shares Eligible for Future Sale	73
Certain United States Federal Tax Considerations	75
Underwriting	78
Legal Matters	80
Experts	80
Where You Can Find More Information	80
Index to Consolidated Financial Statements	F-1

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different. We are offering to sell and seeking offers to buy shares of our common stock only in jurisdictions where offers and sales are permitted. The distribution of this prospectus and the offering and sale of our common stock in certain jurisdictions may be restricted by law. Persons into whose possession this prospectus comes are required by us and by the underwriters to inform themselves about and to observe any such restrictions. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.

This prospectus contains references to a number of trademarks which are our registered trademarks or trademarks for which we have pending registration applications or common law rights. These include P-OLED, CDT and Cambridge Display Technology.

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements and related notes thereto appearing elsewhere in this prospectus. Before you decide to invest in our common stock, you should read this entire prospectus carefully, including the risk factors and financial statements and notes. Unless otherwise indicated, all information in this prospectus assumes no exercise of the underwriters’ over allotment option. In this prospectus, the terms “our company,” “CDT,” “we,” “us” and “our” refer to Cambridge Display Technology, Inc. and its subsidiaries, unless the context otherwise requires.

Our Company

Overview

We are a pioneer in the development of Polymer Organic Light Emitting Diodes, or P-OLEDs, and their use in next-generation flat panel displays and other applications. P-OLEDs are part of the family of Organic Light Emitting Diodes, or OLEDs, which are thin, lightweight and power efficient devices that emit light when an electric voltage is applied. Our P-OLEDs offer an enhanced visual experience and superior performance characteristics compared to other flat panel display, or FPD, technologies such as liquid crystal display, or LCD. We believe we hold the most extensive and significant intellectual property, or IP, portfolio for P-OLED materials and devices, including the fundamental patents for the use of polymers in electroluminescent devices, essential for use in P-OLED displays and other applications.

Our objective is to establish P-OLEDs as the leading technology for the FPD industry through the use of our extensive IP portfolio, manufacturing process and engineering expertise and commercialization partnerships. Our business model is focused on licensing our P-OLED and related technologies to FPD manufacturers on a non-exclusive basis. We believe this approach best enables us to capitalize on our IP position, generating license fees and royalty payments from sales by third parties of devices using our IP or P-OLED materials. Our business model allows us to concentrate on our core strengths of technology development and innovation, while at the same time providing significant operating leverage.

We are targeting leading display manufacturers as potential licensees of our P-OLED IP and have already licensed our technology to leading international companies such as Dai Nippon Printing, Delta Optoelectronics, DuPont Displays, OSRAM Opto Semiconductors, Royal Philips Electronics, or Philips, and Seiko Epson for display manufacture. Several products which incorporate our P-OLED technology in their displays, have been introduced into the commercial marketplace, including a mobile phone and an electric shaver with Philips displays, an MP3 player with a Delta Optoelectronics display and medical devices and a range of point-of-purchase and other promotional items with OSRAM Opto Semiconductor displays.

Our Industry

The overall FPD industry has experienced strong growth in recent years. According to DisplaySearch, an independent market research firm tracking the FPD industry, the worldwide FPD market is expected to reach an estimated $97.0 billion in 2008 from $43.5 billion in 2003. Revenue growth in the FPD industry has been driven both by the proliferation of mobile consumer electronic devices which have rapidly incorporated small, thin, color screens and the trend to replace older technology such as traditional cathode ray tube televisions and desktop monitors with sleek, flat panel displays. A number of technologies have emerged to serve the FPD industry, with LCDs currently established as the dominant technology accounting for approximately 83% of total FPD sales in 2003, according to DisplaySearch. Given the enormous market and the substantial cost of building fabrication facilities for displays, a number of new technologies are seeking to capture a share of the growing FPD market by offering enhanced features beyond those of LCDs with reduced manufacturing costs.

1

OLED technology is emerging as one of the more promising entrants among the next generation of FPD technologies. According to DisplaySearch, sales from OLED displays are expected to increase from approximately $216.8 million in 2003 to an estimated $3.1 billion by 2008, representing a compounded annual growth rate of 70%, as OLED displays continue to penetrate the FPD market. While DisplaySearch’s current forecast anticipates that OLED displays will initially be adopted for small- to medium-sized product applications such as portable consumer electronic devices because of their brightness and power efficiency, we believe that larger display applications represent a significant potential market for OLED displays. OLED displays may have greater advantages over LCDs in larger applications such as laptop computers, desktop computer monitors and televisions because of their sharper picture image and graphics, higher contrast ratios, superior video response time, wider viewing angle, slimmer form factor and potentially lower manufacturing cost, all of which are particularly important in larger display applications.

Our Solution

We design, develop and market P-OLED technology that enables the manufacture of P-OLED displays which have enhanced features and capabilities for use in numerous consumer and industrial applications. We believe that our technology leadership and IP position will enable us to share in the revenues from OLED displays as they enter the mainstream consumer electronics market. The key elements of our solution include:

Technology Leadership.    We are a recognized leader in OLED technology and believe we have the most comprehensive portfolio of OLED IP in the areas of P-OLED devices incorporating fluorescent materials, high efficiency phosphorescent dendrimer and other materials, and solution processing know-how. The strength of our IP position is illustrated by our roster of licensees and our demonstrated track record of commercial adoption. In May 2004, one of our licensees, Seiko Epson, unveiled a prototype 40-inch full-color P-OLED display and announced that it plans to offer displays for televisions up to 41 inches in size in 2007. We believe that our IP strength will require third-party manufacturers making or selling P-OLED displays in countries where we maintain patent protection to acquire a license from us.

Commercially Viable Lifetimes and Color Spectrum.    Through intensive research and development efforts, we have achieved the minimum lifetimes and color coordinates of the red, green and blue colors required by manufacturers for full-color mobile devices. We continue to focus our development efforts to ensure that P-OLED technology will be suitable for display types requiring longer service lifetimes and brighter screens, including large screen televisions. Given the rate of our progress, particularly on lifetime of the color blue, we expect to satisfy the lifetime requirements of these more demanding large screen applications.

Manufacturing Cost Advantages.    In comparison to LCDs and competing OLED technologies, devices using our self-emissive P-OLEDs are simpler in structure and, unlike LCDs, do not require the use of either backlights or color filters. We believe that the simpler structure of devices based on our P-OLED technology in comparison to LCDs and competing OLED technologies will lead to significantly lower capital and material costs, shorter manufacturing cycles and higher manufacturing yields. In addition, P-OLED materials are solution processable, enabling them to be deposited on panels using conventional printing processes such as high precision ink jet printing. We believe solution processing is inherently more efficient than the complex vacuum deposition processes used by competing OLED technologies and requires fewer processing steps than required in the production of LCDs. The ability to scale these processes will also be instrumental in allowing P-OLEDs to be utilized in larger panel sizes which is key to the adoption of OLEDs beyond smaller portable devices. We believe that FPD manufacturing plants that use our P-OLED technology can be built at a significantly lower cost than equivalent LCD manufacturing plants and, therefore, could alter the competitive dynamics of the FPD industry by enabling new entrants.

2

Our Strategy

To accomplish our strategic objectives, we currently have established relationships with many of the major display manufacturers in the industry, including formal relationships with Philips, Samsung Electronics, Seiko Epson and Thomson and informal relationships with Casio Computer, LG.Philips and Toshiba Matsushita Displays. We currently have eight licensees for display devices. In order to further P-OLED development, we have licensed our materials IP to four primary suppliers, Covion, Dow Chemical, H.C. Starck (a subsidiary of Bayer) and Sumitomo Chemical, in exchange for a royalty on their sales of P-OLED materials to our display manufacturer licensees. In addition, we have active technology development and evaluation agreements with six companies. We seek to expand these relationships and develop additional relationships to increase our revenues and promote the adoption of our technology.

As part of our strategy and in order to further establish our position as a leader in OLED technologies, we are focused on enhancing and protecting our IP portfolio through significant research and development and patent application efforts. As of July 12, 2004, we had 146 published or unpublished patent families, including eight joint filings, with over 50 issued United States patents and extensive patent protection in Europe, Japan and China. Our research and development team is focused on ensuring that our technology roadmap is aligned to customer needs and market trends and is currently concentrating on the development of additional P-OLED materials and device structures which extend lifetimes, increase power efficiencies and enhance color spectrums to allow P-OLED technology to be used in a broader array of FPD applications. We intend to encourage expanded use of P-OLED technology in other addressable markets such as signage and poster-type displays that incorporate multimedia capabilities, sensors, solid state lighting and photovoltaic cells. For example, we have licensed our core P-OLED technology to OSRAM Opto Semiconductors and Philips, two of the largest lighting companies in the world, for lighting applications. In addition, in January 2002, we opened our Technology Development Center to enable us to develop P-OLED display manufacturing processes in a commercial scale facility to further the adoption of P-OLED technology.

Our History

We were founded in 1992 as a company organized under the laws of England and Wales by two of the inventors of our fundamental P-OLED technology, with the support of the University of Cambridge. In July 1999, we were acquired by Cambridge Display Technology, Inc. (formerly known as CDT Acquisition Corp.), a Delaware corporation, under the direction of two private investment firms, Kelso & Company, or Kelso, and Hillman Capital Corporation, or Hillman Capital.

Our principal executive offices are located at the offices of our principal U.K. subsidiary, Cambridge Display Technology Limited, Greenwich House, Madingley Rise, Madingley Road, Cambridge, CB3 OTX, United Kingdom. Our phone number is 011 44 1223 723 555. Our website is located at www.cdtltd.co.uk. The information on our website is not incorporated into and is not intended to be part of this prospectus.

3

The Offering

Common stock offered by us.	shares
Common stock to be outstanding after the offering.	shares
Use of proceeds	We intend to use the net proceeds from this offering for general corporate purposes, including working capital and capital expenditures. We may also use a portion of the net proceeds to acquire businesses, technologies or other assets or to repay any outstanding borrowings under our credit facility. See “Use of Proceeds.”
Proposed Nasdaq National Market symbol	OLED

The number of shares of common stock to be outstanding after this offering is based on the number of shares outstanding as of March 31, 2004 and excludes:

• 1,469,008 shares of common stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $12.43 per share with exercise prices ranging from $10.43 to $16.15 per share; of these shares, 539,599 shares are subject to currently vested stock options at a weighted average exercise price of $11.90 per share with exercise prices ranging from $10.43 to $16.15 per share;

• up to              shares of common stock reserved for future grant under our new stock incentive plan, our annual incentive plan and our special bonus plan;

•                      shares of common stock issuable to a strategic investor, based on the initial public offering price, assumed to be $                , the midpoint of the range set forth on the cover page of this prospectus, in consideration for an aggregate purchase price of $1.0 million in conjunction with a joint project;

•                      shares of common stock under a formula based, in part, on the initial public offering price, assumed to be $                , the midpoint of the range set forth on the cover page of this prospectus, issuable pursuant to the terms of our possible acquisition of either, respectively, all outstanding shares of CDT Oxford that we do not already own or Opsys Limited, described under Note 3 to our consolidated financial statements and “Business—Acquired Businesses”; and

• 5,500 shares of common stock issuable upon the exercise of an outstanding warrant at an exercise price of $10.43 per share.

Unless we specifically state otherwise, all information in this prospectus:

• assumes that all outstanding shares of our class B common stock, series A convertible preferred stock and series B convertible preferred stock are converted into shares of our common stock immediately prior to completion of this offering as described under “Certain Relationships and Related Transactions—Conversion of Preferred Stock”;

• gives effect to a              for              reverse stock split of our common stock to be effected in connection with this offering; and

• assumes no exercise of the underwriters’ over allotment option.

Risk Factors

You should consider carefully all the information included in this prospectus and, in particular, the specific factors set forth under “Risk Factors” beginning on page 6 for risks involved in investing in our common stock.

4

Summary Financial Data

The following table summarizes our consolidated financial data for the periods presented. You should read this information in conjunction with “Capitalization,” “Selected Consolidated Financial and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

	Years Ended December 31,															Three Months Ended March 31, (Unaudited)
	1999			2000			2001			2002			2003			2003			2004
(In thousands, except per share data)
Consolidated Statement of Operations Data:
Operating revenues	$	513		$	629		$	22,391		$	7,053		$	10,680		$	516		$	1,316
Gross profit		513			629			22,391			5,261			9,153			271			1,077
Operating expenses		(39,557	)		(24,203	)		(28,252	)		(40,195	)		(29,632	)		(9,331	)		(6,656	)
Loss from operations		(39,044	)		(23,574	)		(5,861	)		(34,934	)		(20,479	)		(9,060	)		(5,579	)
Other income (expense)		378			177			661			(379	)		(3,230	)		(496	)		(294	)
Net loss	$	(38,694	)	$	(23,452	)	$	(5,250	)	$	(31,718	)	$	(22,777	)	$	(9,039	)	$	(17,710	)
Net loss per share—basic and diluted	$	(3.81	)	$	(1.89	)	$	(0.36	)	$	(1.96	)	$	(1.78	)	$	(0.63	)	$	(1.17	)
Weighted average common shares outstanding:
Basic and diluted		10,161			12,414			14,473			16,346			16,584			16,650			16,563

	As of March 31, 2004 (Unaudited)
	Actual			Pro Forma			Pro Forma As Adjusted
(In thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	7,763		$	7,763		$
Working capital		7,722			7,722
Total assets		116,253			116,253
Redeemable convertible preferred stock		40,238			—			—
Accumulated deficit		(136,817	)		(136,817	)
Total common shareholders’ equity		43,336			83,574

The preceding table presents a summary of our balance sheet data as of March 31, 2004:

• on an actual basis;

• on a pro forma basis to reflect the conversion of all outstanding shares of our convertible preferred stock into shares of our common stock as if such conversion took place on March 31, 2004; and

• on a pro forma as adjusted basis to give effect to the sale by us of              shares of our common stock in this offering at an assumed initial public offering price of $             per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, as if such offering took place on March 31, 2004.

5

RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this prospectus before making an investment decision. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we may currently deem immaterial, may become important factors that harm our business, financial condition or results of operations. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in those forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this prospectus.

Risks Relating to Our Business and Industry

We have a history of losses, do not expect to be profitable in the foreseeable future and may never be profitable.

Since inception, we have generated limited revenues while incurring significant losses. We expect to incur losses for the foreseeable future until such time, if ever, as we are able to achieve sufficient levels of revenue from the commercial exploitation of our Polymer Organic Light Emitting Diode, or P-OLED, technology to support our operations. You should note that:

• P-OLED technologies may never be broadly commercially adopted;

• markets for flat panel displays, or FPDs, using P-OLED technologies may be limited; and

• we may never generate sufficient revenues from the commercial exploitation of our P-OLED technology to become profitable.

We license our P-OLED technology to P-OLED materials manufacturers and display manufacturers, which then incorporate our technology into the materials and products they sell. Even if we and our display manufacturer licensees develop commercially viable applications for our P-OLED technologies, we may never recover our research and development expenses. We had net losses of $5.3 million, $31.7 million and $22.8 million for the years ended December 31, 2001, December 31, 2002 and December 31, 2003, respectively, and as of March 31, 2004, we had an accumulated deficit of $136.8 million. We expect to report net losses in future periods. We cannot predict what impact continued net losses might have on our ability to finance our operations in the future or on the market value of our common stock.

We are at an early stage of development and have a limited operating history.

Our future success is uncertain because we have a limited operating history and face many risks and uncertainties. If we are unsuccessful in addressing these risks and uncertainties, we may be unable to generate sufficient revenue growth to support ongoing operations. We were formed in 1992 to research and develop P-OLED technology. We began licensing P-OLED technology to original equipment manufacturers, or OEMs, in 1996, and in 2002 this technology was initially commercialized. Accordingly, there is only a limited amount of past experience upon which to evaluate our business and prospects, and a potential investor should consider the challenges, expenses, delays and other difficulties involved in the development of our business, including the continued development of our P-OLED technology, refinement of processes and components for commercial products using our P-OLED technology, formation of additional commercial relationships and achievement of market acceptance for products using P-OLED technology.

6

If our P-OLED technology is not feasible for broad-based product applications, we may never generate revenues sufficient to support ongoing operations.

Before display manufacturers will agree to use our P-OLED technology for wide-scale commercial production, they will likely require us to demonstrate to their satisfaction that our P-OLED technology is feasible for their particular product applications. This, in turn, would require additional advances in our research and development efforts, as well as those of others, for applications in a number of areas, including:

• device reliability;

• the development of P-OLED materials with sufficient lifetimes, brightness and color coordinates for full-color P-OLED displays in more demanding applications, such as televisions; and

• issues related to scalability and cost-effective fabrication technologies for product applications.

Currently, P-OLED displays are being used or tested for small- to medium-sized product applications such as mobile phones, PDAs, or personal digital assistants, digital cameras and camcorders (including electronic viewfinders), portable DVD players, electric shavers, MP3 players, in-car entertainment and navigation displays and other applications. P-OLED displays have not yet been commercially introduced in larger applications such as laptop computers, desktop computer monitors or televisions other than in prototypes. To date, we have not attained the service lifetimes required by the manufacturers of these more demanding larger applications.

Our research and development efforts remain subject to all of the risks associated with the development of new products based on emerging and innovative technologies, including, for example, unexpected technical problems or the possible insufficiency of funds for completing development of these products. Technical problems may result in delays in the implementation of our technologies in specific applications and cause us to incur additional expenses that would increase our losses. If we cannot complete research and development of our P-OLED technology successfully, or if we experience delays in completing research and development of our P-OLED technology for use in potential commercial applications, particularly after incurring significant expenditures, our business may fail.

Even if our P-OLED technology is technically feasible, it may not be adopted by display manufacturers.

The potential size, timing and viability of market opportunities targeted by us through our display manufacturer licensees are uncertain at this time. Market acceptance of our P-OLED technology will depend, in part, upon this technology providing benefits comparable to or greater than those provided by cathode ray tube, or CRT, display and liquid crystal display, or LCD, technology (the current standard display technologies) at an advantageous cost to manufacturers, and the adoption of products incorporating this technology by consumers.

Display manufacturers make the determination during their product development programs whether to incorporate our P-OLED technology or pursue other alternatives, and they may be forced to make significant investments of time and cost well before they introduce their products incorporating our technology to the consumer market and before they can be sure that they will generate any significant sales to recover their investment. Moreover, many potential licensees of our P-OLED technology currently manufacture FPDs using competing technologies, and they may, therefore, be reluctant to redesign their products or manufacturing processes or invest in new or converted facilities to incorporate our P-OLED technology.

During a display manufacturer licensee’s entire product development process, we face the risk that our technology will fail to meet our licensee’s technical, performance or cost requirements or will be replaced by a competing product or alternative technology. Even if we offer technology that is satisfactory to a display manufacturer licensee, they may choose to delay or terminate their product development efforts for reasons unrelated to our technology. The occurrence of any of these events would adversely affect our royalty revenues and may make it difficult to attract additional licensees.

7

There are alternatives to P-OLEDs for FPDs, which may limit our ability to commercialize our P-OLED technology.

The FPD market is currently, and will likely continue to be for some time, dominated by displays based on LCD technology. Numerous companies have made and are continuing to make substantial investments in, and are conducting research to improve characteristics of, LCDs. Several other FPD technologies have been, or are being, developed, including technologies for the production of field emission, inorganic electroluminescence and gas plasma. Advances in LCD technology or any of these other technologies may overcome their current limitations and permit them to remain or become more attractive technologies for FPDs, either of which could limit the potential market for FPDs using our P-OLED technology. This, in turn, would cause display manufacturers to avoid entering into commercial relationships with us, or to renegotiate, terminate or not renew their existing relationships with us, causing our business strategy to fail.

Other OLED technologies may be more successful than ours.

Other companies have developed OLED technologies that differ from and compete with our P-OLED technology. Certain of these competing OLED technologies entered the marketplace prior to ours and may become entrenched in the flat panel industry before our P-OLED technologies have a chance to become widely adopted. Moreover, competitors may succeed in developing new OLED technologies or new manufacturing techniques that are more cost-effective or have fewer limitations than our P-OLED technology or other existing OLED technologies. If our P-OLED technology is unable to capture a substantial portion of the OLED display market, our business strategy may fail.

Because we do not manufacture or sell any products to end users, we depend on the manufacturing capabilities of our display manufacturer licensees, and any difficulties or delays affecting their manufacturing processes could harm our business.

We license our P-OLED technology to display manufacturers, who then incorporate our technology into the products that they sell. Because we do not manufacture any commercial products, our success depends on the ability of our licensees to develop, manufacture and sell commercial products integrating our technology, and any significant disruption or increase in cost of the manufacturing processes of our display manufacturer licensees would adversely affect our royalty revenues and thus our business.

Mass production of P-OLED displays will require the availability of suitable manufacturing equipment, components and materials. Equipment is currently available for many of the required process steps, but the processes and equipment that will be required to deposit P-OLED materials for large-sized, full-color displays are still under development. High precision ink jet printing equipment that could be used to deposit P-OLED materials is being developed by some companies, but, to our knowledge, is only being made available for sale at this time by Litrex Corporation, our 50%-owned former subsidiary. The availability of suitable ink jet printing equipment will be contingent on the continued technical success of and sufficient funding for Litrex’s or another manufacturer’s development program. In addition, certain of the components, such as low temperature poly silicon, or LTPS, backplanes, used in the production of our licensees’ display products are available only from a limited number of suppliers.

If display manufacturers are unable to obtain ink jet printing or other suitable P-OLED deposition equipment or are unable to source other key equipment for the manufacture of large panel sizes, or if they experience unanticipated difficulties, expenses or delays with respect to additional required technologies, components or other materials, they may experience increased costs or manufacturing delays and may not be able to manufacture larger-sized, full-color P-OLED displays. This would adversely affect our license fees or royalty payments from them.

8

We expect to derive an increasing portion of our revenues from royalties on sales of products commercialized by our licensees that incorporate our technology. Our display manufacturer licensees operate in a highly competitive environment, and they may not be able to achieve and sustain market position. If they fail to compete successfully, our royalties will be reduced or eliminated.

Because we do not sell any products to end-users, our success depends upon the ability of our display manufacturer licensees to market commercial products integrating our technology and the widespread acceptance of those products. Any slowdown in the demand for our licensees’ products would adversely affect our royalty revenues and thus our business. The markets for our display manufacturer licensees’ products are highly competitive, with pressure on prices and profit margins due largely to additional and growing capacity from FPD industry competitors. The principal elements affecting our licensees’ competitive performance in the market for end-user products include their abilities to:

• access required capital;

• conduct research and development;

• reduce time-to-market;

• reduce production costs;

• offer a competitive price;

• offer attractive product features and quality;

• offer customer service, including product design support; and

• provide sufficient quantity of products to fulfill end-user demand.

Success in the market for end-user products that may integrate our P-OLED technology also depends on factors beyond the control of our licensees and us, including the cyclical and seasonal nature of the end-user markets that our licensees serve, as well as industry and general economic conditions.

Many of our competitors have greater resources, which may make it difficult for us to compete successfully against them.

The FPD industry is characterized by intense competition. Many of our LCD and OLED competitors have better name recognition and greater financial and personnel resources and technical, marketing and research capabilities than us, and because of these differences, we may never be able to compete successfully in the FPD market.

LCD is currently the dominant technology in the FPD market. Many of the leading LCD panel manufacturers, such as AU Optronics, Chunghwa Picture Tubes, LG.Philips, Samsung Electronics and Sharp, are large, established companies with global marketing capabilities, widespread brand recognition and extensive financial resources.

Eastman Kodak Company, or Kodak, is our principal competitor in the OLED industry, with several licensees already in commercial production of displays incorporating its passive matrix small molecule OLED, or SMOLED, technology. In addition, Kodak manufactures active matrix SMOLED displays under a joint venture with Sanyo Electric. We also compete to a lesser extent with Universal Display Corporation, which licenses rights to its proprietary phosphorescent materials for use in SMOLED displays.

The leading LCD panel manufacturers, who use competing technologies but are also potential licensees of our P-OLED technology, are considerably larger and more established companies, with global marketing capabilities and substantially greater financial resources to devote to research and development than we have. If our technology does not compete effectively with these and other display technologies, our business strategy will fail.

9

If our materials supplier licensees fail to make advances in their research, or if they exit that business or otherwise terminate or elect not to renew their relationships with us, we might not succeed in commercializing our P-OLED technology.

Research and development of commercially viable applications for our P-OLED technology depends substantially on the success of work relating to P-OLED materials, including resolution of issues relating to materials lifetimes and efficiencies at the brightness levels required for large panel applications. We cannot be certain that we or our materials supplier licensees will make sufficient additional advances in the research and development of P-OLED materials to satisfy these requirements. Moreover, if our materials supplier licensees are unable to meet the requirements of our display manufacturer licensees, our business strategy may fail.

If we cannot form and maintain lasting business relationships with P-OLED display manufacturers, our business strategy will fail.

Our business strategy depends upon our development and maintenance of commercial licensing relationships with high-volume manufacturers of P-OLED displays. As of June 30, 2004, we had entered into eight licenses with display manufacturers, and have six other relationships with manufacturers which are limited to technology development and the evaluation of our P-OLED technology for possible use in commercial production. Any of these relationships may fail to result in the display manufacturers entering into a licensing arrangement or, subsequently, commercial production, as applicable, of devices using our P-OLED technology on a scale sufficient for our business strategy to succeed.

Under our existing technology development and evaluation agreements, we are working with display manufacturers to incorporate our technology into their products for the commercial production of P-OLED displays. However, these technology development and evaluation agreements typically last for limited periods of time, and these relationships may never lead to development of products and entry into license agreements.

For the foreseeable future, a significant portion of our royalty revenues will be derived from a concentrated number of licensees. Our future success will depend upon our ability to establish and maintain relationships with key licensees and to attract new licensees. If our royalty revenues are derived from a concentrated few licensee relationships, our operating results will be harmed if those licensees experience operating difficulties or curtail or terminate their use of our licensed technology, and we are not able to obtain replacement royalty sources. Replacement royalty sources may be difficult to obtain because of the lengthy periods required to attract and sign-up new licensees and have them enter commercial production.

Our ability to enter into additional commercial licenses, or to maintain our existing technology development and evaluation relationships, may require us to make financial or other commitments. We might not be able, for financial or other reasons, to enter into or continue these relationships on commercially acceptable terms, or at all. Failure to do so would have a material adverse effect on us.

Conflicts may arise with our licensees or joint development partners, resulting in renegotiation or termination of, or litigation related to, our agreements with them.

Conflicts could arise between us and our licensees or joint development partners as to royalty rates, milestone payments or other commercial terms. Similarly, the parties may disagree as to which party owns or has the right to commercialize intellectual property that is developed during the course of the relationship or as to other non-commercial terms. If such a conflict were to arise, a licensee or joint development partner might attempt to compel renegotiation of certain terms of their agreement or terminate their agreement entirely, and we might lose the royalty revenues and other benefits of the agreement. Either we or the licensee or joint development partner might initiate litigation to determine commercial obligations, establish intellectual property rights or resolve other disputes under the agreement. Such litigation could be costly to us and require substantial attention of management. If we were unsuccessful in such litigation, we could lose the commercial benefits of the agreement, be liable for other financial damages and suffer losses of intellectual property or other rights that are the subject of dispute.

10

If we do not receive additional financing in the future, we might not be able to continue the research, development and commercialization of our P-OLED technology.

Our capital requirements have been, and will continue to be, significant. Substantial additional funds will be required in the future to maintain current levels of expenditure for research, development and commercialization of our P-OLED and related technologies, to obtain and maintain patents and other intellectual property, or IP, rights in these technologies, and for working capital and other purposes, the timing and amount of which are difficult to forecast. Our cash on hand will not be sufficient to meet all of our future needs. When we need additional funds, such funds may not be available on commercially reasonable terms, or at all. If we cannot obtain more money when needed, we might be forced to cut back our current activities and our business might fail. In July 2004, we secured a line of credit in a maximum amount of $15.0 million, of which $0.5 million may not be borrowed, available for one year and extendible for up to two additional years to meet our short term capital requirements. There are financial costs associated with maintaining and accessing this facility. In addition, any borrowing under this facility is secured by a letter of credit issued by Wells Fargo Bank, which is secured by our IP portfolio and results in the imposition of certain financial and operating restrictions by the lender. If we attempt to raise money in an offering of shares of our common stock, preferred stock or warrants, or if we engage in acquisitions involving the issuance of such securities, our then-existing stockholders will be diluted.

As part of our agreement with Ulvac, Inc., or Ulvac, for the sale to Ulvac of a 50% interest in Litrex, we granted Ulvac a call, and obtained a put, on our remaining 50% interest in Litrex, exercisable in August 2005, with the closing to occur within 90 days of exercise. We anticipate that the sale of our remaining 50% interest in Litrex to Ulvac will occur in November 2005 and that we will receive a minimum of $10.0 million from Ulvac. Nevertheless, under certain circumstances such as infringement, impairment or unavailability of intellectual property required for Litrex to operate, or the departure of a group of key employees from Litrex, this sale may not proceed. If the sale does not proceed, we will not receive the anticipated proceeds from the sale of Litrex stock to Ulvac. In addition, in certain circumstances, we may be required to repurchase Ulvac’s 50% interest in Litrex for $15.1 million, the price Ulvac paid for their 50% interest, plus any additional funding that Ulvac provided to Litrex. If Ulvac were to fail to perform its obligations to continue to support Litrex’s development of ink jet printers for the display manufacturer industry, we may exercise our rights under a fallback license to obtain the necessary IP to develop, manufacture and supply ink jet printing equipment for use by manufacturers using our P-OLED technology independent of Litrex. In any such circumstance, we may incur substantial additional costs in order to ensure that ink jet printing equipment is made available for P-OLED display manufacturers. Under certain circumstances, we and Ulvac may each be required to provide financial support for Litrex of up to $1.25 million if necessary to ensure Litrex’s continued operations over the next twelve months.

We or our licensees may incur substantial costs or lose important rights as a result of litigation or other proceedings relating to our patent and other intellectual property rights.

In recent years, there has been significant litigation involving patents and other IP rights in many technology-related industries, including our own. Until recently, many patent applications were retained in secrecy by the United States Patent Office until and unless a patent issued. As a result, there may be United States patent applications pending that may be infringed by the use of our technology or a part thereof, thus substantially interfering with the future conduct of our or our licensees’ business. In addition, there may be issued patents in the United States or other countries that are pertinent to our or our licensees’ business of which we are not aware. Our licensees could be sued by other parties for patent infringement in the future. Such lawsuits could subject them to liability for damages or require our licensees to obtain additional licenses that could increase the cost of their products, which might have an adverse affect on their sales and thus our royalties or cause them to seek to renegotiate our royalty rates.

In addition, in the future we may assert our IP rights by instituting legal proceedings against others. We cannot assure you that we will be successful in enforcing our patents in any lawsuits we may commence. Defendants in any litigation we may commence to enforce our patents may attempt to establish that our patents are invalid or are unenforceable. Thus, any patent litigation we commence could lead to a determination that one

11

or more of our patents are invalid or unenforceable. If a third party succeeds in invalidating one or more of our patents, that party and others could compete more effectively against us. Our ability to derive licensing revenues from products or technologies covered by these patents could also be adversely affected.

Whether our licensees are defending the assertion of third party IP rights against their businesses arising as a result of the use of our technology, or we are asserting our own IP rights against others, such litigation can be complex, costly, protracted and highly disruptive to our or our licensees’ business operations by diverting the attention and energies of management and key technical personnel. As a result, the pendency or adverse outcome of any IP litigation to which we or our licensees are subject could disrupt business operations, require the incurrence of substantial costs and subject us or our licensees to significant liabilities, each of which could severely harm our business.

Plaintiffs in IP cases often seek injunctive relief. Any IP litigation commenced against our licensees could force them to take actions that could be harmful to their business and thus to our royalties, including the following:

• stop selling their products that incorporate or otherwise use technology that contains our allegedly infringing IP;

• attempt to obtain a license to the relevant third-party IP, which may not be available on reasonable terms or at all; or

• attempt to redesign their products to remove our allegedly infringing IP to avoid infringement of the third-party IP.

If our licensees are forced to take any of the foregoing actions, they may be unable to manufacture and sell their products that incorporate our technology at a profit or at all. Furthermore, the measure of damages in IP litigation can be complex, and is often subjective or uncertain. If our licensees were to be found liable for infringement of proprietary rights of a third party, the amount of damages they might have to pay could be substantial and is difficult to predict. Decreased sales of our licensees’ products incorporating our technology would adversely effect our royalty revenues under existing licenses. Any necessity to procure rights to the third party technology might cause our existing licensees to renegotiate the royalty terms of their license with us to compensate for this increase in their cost of production or, in certain cases, to terminate their license with us entirely. Were this renegotiation to occur, certain of our license agreements that contain “most favored nation” provisions, requiring that we offer at least as favorable terms to the holder of such a license as we offer to any other licensee, would be affected and we would also receive reduced royalties from those licenses. These developments would also harm our ability to compete for new licensees and would adversely affect the terms of the royalty arrangements we could enter into with any new licensees.

As is commonplace in technology companies, we employ individuals who were previously employed at other technology companies. To the extent our employees are involved in research areas that are similar to those areas in which they were involved at their former employers, we may be subject to claims that such employees or we have, inadvertently or otherwise, used or disclosed the alleged trade secrets or other proprietary information of the former employers. Litigation may be necessary to defend against such claims.

If we cannot obtain and maintain appropriate patent and other intellectual property rights protection for our P-OLED technology, our business will suffer.

The value to us of our P-OLED and related technologies is dependent on our ability to secure and maintain appropriate patent and other IP rights protection. Although we own or license many patents covering our technology that have already been issued, there can be no assurance that additional patents applied for will be obtained, or that any of these patents, once issued, will afford commercially significant protection for our technology, or will be found valid if challenged. Moreover, we have not obtained patent protection for some of our technology in all foreign countries in which P-OLED displays or materials might be manufactured or sold. In

12

any event, the patent laws and enforcement regimes of other countries may differ from those of the United States as to the patentability of our P-OLED and related technologies and the degree of protection afforded.

The strength of our current IP position results primarily from the essential nature of our fundamental patents covering the P-OLED device and its manufacturing process and electroluminescent devices containing conjugated polymers. These patents expire in 2010 and 2011. While we hold a wide range of additional patents and patent applications whose expiration dates extend (and in the case of patent applications, will extend) well beyond 2011, many of which are also of key importance in the OLED industry, none are of an equally essential nature as our fundamental patents, and therefore our competitive position after 2011 may be less certain.

We may become engaged in litigation to protect or enforce our patent and other IP rights or in International Trade Commission proceedings to abate the importation of goods that would compete unfairly with those of our licensees. In addition, we may have to participate in interference or reexamination proceedings before the U.S. Patent and Trademark office, or in opposition, nullity or other proceedings before foreign patent offices, with respect to our patents or patent applications. All of these actions would place our patents and other IP rights at risk and may result in substantial costs to us as well as a diversion of management attention. Moreover, if successful, these actions could result in the loss of patent or other IP rights protection for the key P-OLED and related technologies on which our business strategy depends.

In addition, we rely in part on unpatented proprietary technology, and others may independently develop the same or similar technology or otherwise obtain access to our unpatented technology. To protect our trade secrets, know-how and other proprietary information, we require employees, consultants, financial advisors and strategic partners to enter into confidentiality agreements. These agreements may not ultimately provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of those trade secrets, know-how or other proprietary information. In particular, we may not be able to fully or adequately protect our proprietary information as we conduct discussions with potential strategic partners. If we are unable to protect the proprietary nature of our technology, it will harm our business.

We are exposed to currency fluctuations, which may have an adverse effect on us.

A substantial majority of our licensing revenues are denominated in U.S. dollars. These licensing revenues include royalties based on revenues or production costs of our licensees that may be denominated in U.S. dollars or other currencies. Where such revenues or production costs of our licensees are denominated in other currencies, they are converted to U.S. dollars for the purpose of calculating any licensing royalties due to us. Our licensing royalty revenues may decrease as a result of any appreciation of the U.S. dollar against these other currencies. The majority of our current expenditures are incurred in British pounds in order to fund our operations in the United Kingdom. If the U.S. dollar depreciates versus the British pound, additional U.S. dollars will be required to fund our operations in the United Kingdom.

We take out forward currency contracts to cover future projected currency conversions. At present, forward contracts are only committed to when funds are already on hand to settle the forward contracts. Although we do not currently enter into currency option contracts or engage in other hedging activities, we may do so in the future. There can be no assurances that any such hedging activities will be successful in reducing the risks to us of our exposure to foreign currency fluctuations.

We are a holding company with no significant independent operations, and we therefore rely on our subsidiaries to make funds available to us.

We are a holding company with no significant independent operations and no significant assets other than the capital stock of our subsidiaries. We, therefore, will be dependent upon the receipt of dividends or other distributions from our subsidiaries. Our inability to receive funds from our operating subsidiaries would

13

adversely affect our ability to meet our obligations and to make dividend payments and other distributions, if any, to holders of our common stock.

The declaration of dividends by our subsidiaries will be subject to the discretion of their boards of directors and will depend on a number of factors, including their results of operations, financial condition, liquidity requirements and indebtedness and restrictions imposed by applicable law.

Due to our significant level of international operations, we are subject to international operational, financial, legal and political risks.

A substantial part of our operations are in the United Kingdom, and many of our licensees have a majority of their operations in countries other than the United States. Risks associated with our doing business outside of the United States include:

• compliance with a wide variety of foreign laws and regulations, particularly labor, environmental and other laws and regulations that govern our operations in the United Kingdom;

• legal uncertainties regarding taxes, tariffs, quotas, export controls, export licenses and other trade barriers;

• economic instability in the countries of our licensees, particularly in the Asia-Pacific region, causing delays or reductions in orders for their products and therefore our royalties;

• political instability in the countries in which our licensees operate, particularly in South Korea relating to its disputes with North Korea and in Taiwan relating to its disputes with China;

• difficulties in collecting accounts receivable and longer accounts receivable payment cycles; and

• potentially adverse tax consequences.

Any of these factors could harm our or our licensees’ existing international operations and business and impair our or our licensees’ ability to continue expanding into international markets.

A significant portion of our assets, certain of our directors and most of our executive officers are located outside of and are not residents of the United States. As a result, it may be difficult or impossible for U.S. investors to effect service of process upon such non-resident directors or officers within the United States or to realize against them in the United States upon judgment of courts of the United States predicated upon civil liabilities under the federal securities laws of the United States or the securities or blue sky laws of any state within the United States. In addition, courts of another country may not enforce judgments of United States courts obtained in actions against us, our directors or our officers predicated upon the civil liability provisions of the United States federal securities laws or the securities or blue sky laws of any state within the United States or enforce, in original actions, liabilities against us, our directors or our officers predicated upon the United States federal securities laws or any state securities or blue sky laws.

Our agreements with our licensees and joint development partners are subject to regulation by the European Commission, and particularly to antitrust provisions of such regulations, which could result in fines to us or in those agreements being declared void in whole or in part.

Our IP licensing agreements and joint development agreements fall under the antitrust provisions of the Treaty of Rome, and related regulations. While our agreements are generally non-exclusive and without geographic restriction, and while these licensing and joint development relationships generally represent lower market shares than would result in the application of the regulations’ remedies, any violation of the regulations could result in the anti-competitive provisions or the entire relevant agreement being declared void and unenforceable. In addition, we could be subject to a fine of up to 10% of the income of our worldwide group.

14

If we cannot keep our key employees or hire other talented persons as we grow, our business might not succeed.

Our performance is substantially dependent on the continued services of senior management and other key personnel and on our ability to offer competitive salaries and benefits to our employees. We do not carry key person life insurance on any of our senior management or other key personnel. Additionally, competition for highly skilled technical, managerial and other personnel is intense. We might not be able to attract, hire, train, retain and motivate the highly skilled managers and employees that we might need to be successful. If we fail to attract and retain the necessary technical and managerial personnel, our business will suffer and might fail. We currently have fewer than 120 employees, and we may encounter increasing difficulty in attracting enough qualified personnel as our operations expand and the demand for their services increases. This difficulty could impede the attainment of our research and development objectives.

Our Technology Development Center and our research and development laboratories are critical to our success.

Our Technology Development Center in Godmanchester, England and our research and development laboratories are critical to our success. These facilities currently house our principal research, development, engineering and design operations. Any event that causes a disruption of the operation of these facilities for even a relatively short period of time would adversely affect our ability to conduct research and development operations and to provide technical support for our licensees. Our research and development activities involve the controlled use of hazardous substances as well as other potentially harmful materials, waste and chemicals, which could cause interruption of our research and development efforts or injury to our employees, resulting in liabilities under federal, state, local or foreign laws or regulations governing the use, storage and disposal of these materials.

We can issue shares of preferred stock that may adversely affect your rights as a shareholder of our common stock.

Our certificate of incorporation authorizes us to issue up to 46,667 shares of preferred stock with designations, rights and preferences determined from time-to-time by our board of directors. Accordingly, our board of directors is empowered, without shareholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights superior to those of stockholders of our common stock. For example, an issuance of shares of preferred stock could:

• adversely affect the voting power of the stockholders of our common stock;

• make it more difficult for a third party to gain control of us;

• discourage bids for our common stock at a premium;

• limit or eliminate any payments that the stockholders of our common stock could expect to receive upon our liquidation; or

• otherwise adversely affect the market price of our common stock.

We may issue additional shares of authorized preferred stock at any time in the future.

If we acquire any companies or technologies in the future, they could prove difficult to integrate, disrupt our business, dilute stockholder value or have an adverse effect on our results of operations.

We intend to expand our business primarily through internal growth, but from time to time we may consider strategic acquisitions. Any future acquisition would involve numerous risks including:

• potential disruption of our ongoing business and distraction of management;

• difficulty integrating the operations and products of the acquired business;

15

• unanticipated expenses related to technology integration;

• exposure to unknown liabilities, including litigation against the companies we may acquire;

• additional costs due to differences in culture, geographic locations and duplication of key talent; and

• potential loss of key employees or customers of the acquired company.

If we make acquisitions in the future, acquisition-related accounting charges may affect our balance sheet and results of operations. We may not be successful in addressing these risks or any other problems encountered in connection with any acquisitions.

Risks Relating to this Offering

There currently exists no market for our common stock. We cannot assure you that an active trading market will develop for our common stock. If we fail to meet the expectations of securities analysts or investors, our stock price could fluctuate significantly after this offering, and you could lose a significant part of your investment.

Prior to this offering, there was no public market for shares of our common stock. An active market may not develop following the completion of this offering or, if developed, may not be maintained. We negotiated the initial public offering price with the underwriters. The initial public offering price may not be indicative of the price at which our common stock will trade following completion of this offering. The market price of our common stock may also be influenced by many factors, some of which are beyond our control.

Due to the current stage of commercialization of our technology and the significant development and manufacturing objectives that we and our licensees must achieve to be successful, our quarterly operating results will be difficult to predict and may vary significantly from quarter to quarter.

We believe that period-to-period comparisons of our operating results are not a reliable indicator of our future performance at this time. Among other factors affecting our period-to-period results, our license fees often consist of large one-time payments in the period during which we enter into a new license, followed by smaller recurring payments in later periods, resulting in significant fluctuations in our revenues. If, in some future period, our operating results or business outlook fall below the expectations of securities analysts or investors, our stock price would be likely to decline and investors in our common stock may not be able to resell their shares at or above the initial offering price. Broad market, industry and global economic factors may also materially reduce the market price of our common stock, regardless of our operating performance.

The market price of our common stock might be highly volatile.

The market price of our common stock might be highly volatile, as has been the case with the securities of many other emerging growth companies. Factors such as the following may have a significant impact on the market price of our common stock in the future:

• our operating results and capital resources;

• announcements by us or our competitors of technological developments, new product applications or license arrangements; and

• other factors affecting the FPD and related industries in general.

In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies like us.

16

A few stockholders own significant amounts of our common stock. If the ownership of our common stock continues to be highly concentrated, it will prevent you and other stockholders from influencing significant corporate decisions.

Following the completion of this offering, affiliates of Kelso & Company, or Kelso, and affiliates of Hillman Capital Corporation, or Hillman Capital, will beneficially own, respectively, over 40% and 20% of the outstanding shares of our common stock and also are represented on our board. As a result, Kelso and Hillman Capital will exercise significant control over matters requiring stockholder approval. The concentrated holdings of Kelso and Hillman Capital may result in the delay or deterrence of possible changes in control of our company, which may negatively impact the market price of our common stock. The interests of these and other of our existing stockholders may conflict with the interests of our other stockholders.

Purchasers of our common stock will experience immediate and substantial dilution resulting in their shares being worth less on a net tangible book value basis than the amount they invested.

The initial public offering price is expected to be significantly higher than the net tangible book value per share of our common stock. Accordingly, based on an offering price of $             per share, purchasers of common stock in this offering will experience immediate and substantial dilution of approximately $             per share in the pro forma net tangible book value of the common stock as of              . In the past, we issued options to acquire shares of common stock at prices that are below the initial public offering price. To the extent that these outstanding options are exercised, there may be further dilution to investors. Accordingly, in the event we are liquidated, investors may not receive the full amount of their investment. See “Dilution.”

Management will have broad discretion as to the use of the proceeds from this offering, and may not use the proceeds effectively.

We have not designated the amount of net proceeds we will use for any particular purpose. Accordingly, our management will have broad discretion as to the application of the net proceeds and could use them for purposes other than those contemplated at the time of this offering. Our stockholders may not agree with the manner in which our management chooses to allocate and spend the net proceeds. Moreover, our management may use the net proceeds for corporate purposes that may not lead to profitability or increase the market value of our common stock.

Because we do not intend to pay dividends, stockholders will benefit from an investment in our common stock only if it appreciates in value.

We have never declared or paid any cash dividends on our common stock. We currently intend to retain our future earnings, if any, to finance the operation and growth of our business and do not expect to pay any cash dividends in the foreseeable future. As a result, the success of an investment in our common stock will depend upon any future appreciation in its value. There is no guarantee that our common stock will appreciate in value or even maintain the price at which stockholders have purchased their shares.

Our share price may decline due to the large number of shares eligible for future sale.

Sales of substantial amounts of common stock, or the possibility of such sales, may adversely affect the price of our common stock and impede our ability to raise capital through the issuance of equity securities.

Upon the consummation of this offering, based on the number of shares of our common stock outstanding as of                     , 2004, there will be              shares of common stock outstanding. In addition, we may in the future issue additional shares of our common stock that might become freely salable, including shares that may be issued upon the exercise of warrants and options. The shares of common stock sold in the offering will be freely transferable without restriction or further registration under the Securities Act of 1933. Of the remaining          shares of our outstanding common stock after this offering,          shares, or     %, are currently restricted as

17

a result of lock-up agreements. However, the underwriters can release all or any portion of the shares subject to the lock-up agreements and allow stockholders to sell these shares at any time and without prior notice or announcement. Immediately after the expiration of the lock-up period in these agreements,          shares will be freely tradeable pursuant to Rule 144(k) under the Securities Act and          shares will be eligible for resale under Rule 144, subject to the volume, manner of sale, holding period and other limitations of Rule 144. See “Shares Eligible for Future Sale” for a discussion of the shares of common stock that may be sold into the public market in the future.

In addition, stockholders currently representing all of the shares of our common stock have certain registration rights. See “Description of Capital Stock—Registration Rights.” We also intend to file a registration statement covering shares of our common stock issuable under our incentive plans. Once we register these shares, they can be freely tradeable, subject to the lock-up agreements described in “Underwriters.”

The price of our common stock can be expected to decrease if we issue additional shares of our common stock that might be or become freely salable, including shares that would be issued pursuant to our plans and other agreements, or upon the exercise of warrants or options, as described under “Capitalization.”

We will incur increased costs as a result of being a public company.

We will face increased legal, accounting, administrative and other costs and expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the Securities and Exchange Commission, the Public Company Accounting Oversight Board and The Nasdaq National Market, or Nasdaq, require changes in the corporate governance practices of public companies. We expect these new rules and regulations to increase our legal and financial compliance costs, to divert management attention from operations and strategic opportunities and to make legal, accounting and administrative activities more time-consuming and costly. We also expect to incur substantially higher costs to maintain directors and officers insurance. In addition, we will be required under these new rules and regulations to attract and retain additional independent directors to serve on our board of directors. We may encounter difficulty in attracting qualified independent directors to serve on our board of directors and our audit committee, in particular, within the phase-in periods specified in these rules. If we fail to attract and retain independent directors within these phase-in periods, we may be subject to Securities and Exchange Commission enforcement proceedings and delisting by Nasdaq.

Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in their best interests.

Provisions in our certificate of incorporation and by-laws may delay, defer, prevent or render more difficult a takeover attempt that our stockholders might consider in their best interests. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future. See “Description of Capital Stock” for additional information on the anti-takeover measures applicable to us.

18

FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements.” You should not place undue reliance on these statements. Forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategies. These statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “seek,” “will,” “may” or similar expressions. These statements are based on certain assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate in these circumstances. As you read and consider this prospectus, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties and assumptions. Many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. Some important factors in addition to those set forth above under “Risk Factors,” include:

• the outcomes of our ongoing and future research and development activities, and those of our licensees, related to our P-OLED technology;

• the potential commercial applications of our P-OLED technology, and of OLED products in general;

• our ability to form and continue strategic relationships with manufacturers of P-OLED materials and displays;

• successful commercialization of products including our P-OLED technology by our licensees;

• future demand for products using our P-OLED technology;

• the comparative advantages and disadvantages of our technology versus competing technologies currently on the market;

• the nature and potential advantages of any competing technologies that may be developed in the future;

• our ability to compete against third parties with resources greater than ours;

• our ability to maintain and improve our competitive position following the expiration of our fundamental patents;

• the adequacy of protections afforded to us by the patents that we own or license and the cost to us of enforcing those protections;

• our ability to obtain, expand and maintain patent protection in the future and to protect our unpatentable intellectual property;

• the payments that we expect to receive in the future under our existing contracts and the terms that we are able to enter into with new licensees of our technology;

• exposure of our international operations and those of our licensees to significant risks;

• our future capital requirements and our ability to obtain additional financing when needed; and

• our future P-OLED technology licensing and other revenues and results of operations.

In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus might not occur and you should not place undue reliance upon them. All forward-looking statements speak only as of the date of this prospectus. We undertake no obligation to update beyond that required by law any forward-looking statements, whether as a result of new information, future events or otherwise.

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements included in this prospectus.

19

USE OF PROCEEDS

We estimate that our net proceeds from the sale of              shares of common stock being offered by us at an assumed initial public offering price of $             per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and estimated offering expenses, will be approximately $             million.

We intend to use the net proceeds from this offering for general corporate purposes, including:

• research and development expenses and selling, general and administrative expenses;

• capital expenditures;

• repayment of any outstanding borrowings under our credit facility; and

• possible acquisitions of businesses, technologies or other assets.

Although we may use a portion of the net proceeds to acquire businesses, technologies or other assets, we have no agreements or arrangements with respect to any such material transactions at the present time. Our management may apply the net proceeds of this offering in ways that the stockholders may not deem desirable. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the growth of our business.

The principal purposes of this offering are as follows:

• to obtain additional capital;

• to create a public market for our common stock;

• to facilitate our future access to public equity markets;

• to provide liquidity for our existing stockholders;

• to improve the effectiveness of our stock option plans in attracting and retaining key employees;

• to increase the visibility of our company in a marketplace in which several of our competitors are publicly-held companies;

• to enhance our ability to acquire other businesses, products or technologies; and

• to provide our licensees greater assurances as to our long-term viability, which is enhanced by being subject to the financial reporting and disclosure obligations of a public company.

Pending its use for the purposes described above, we intend to invest the net proceeds in this offering in short-term, investment grade, interest bearing securities.

DIVIDEND POLICY

We have not paid, and do not expect for the foreseeable future to pay dividends on our common stock. Instead, we anticipate that all of our earnings in the foreseeable future will be used for the operation and growth of our business. Any future determination to pay dividends on our common stock is subject to the discretion of our board of directors and will depend upon various factors, including our results of operations, financial condition, liquidity requirements, restrictions imposed by applicable law and our contracts, and other factors deemed relevant by our board of directors.

20

CAPITALIZATION

The following table sets forth as of March 31, 2004 on a consolidated basis:

• our actual capitalization;

• our pro forma capitalization that gives effect to the conversion of all of our outstanding shares of class B common stock, series A convertible preferred stock and series B convertible preferred stock into shares of our common stock, an amendment to our certificate of incorporation to increase the amount of our authorized common stock to 100,000,000 shares and a              for              reverse stock split, which will occur immediately prior to the completion of this offering; and

• our pro forma capitalization as adjusted that gives effect to our sale of              shares of common stock in this offering at an assumed initial public offering price of $             per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

This table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto included elsewhere in this prospectus.

	As of March 31, 2004 (Unaudited)
	Actual			Pro Forma			Pro Forma As Adjusted
(In thousands, except share data)
Cash and cash equivalents	$	7,763		$	7,763		$
Revolving credit facility		—			—			—
Series A redeemable convertible preferred stock, $0.01 par value (6,000 authorized shares; 6,000 issued and outstanding shares, actual; no shares issued and outstanding, pro forma and pro forma as adjusted)	$	8,347			—		$	—
Series B redeemable convertible preferred stock, $0.01 par value (38,667 authorized shares; 25,871 issued and outstanding shares, actual; no shares issued and outstanding, pro forma and pro forma as adjusted)		31,891			—			—
Common stockholders’ equity:
Class A common stock, $0.01 par value (27,000,000 authorized shares, actual; 16,251,346 issued and outstanding shares, actual; 100,000,000 authorized shares, pro forma and pro forma as adjusted;              shares issued and outstanding, pro forma;              shares issued and outstanding, pro forma as adjusted)		163			166
Class B common stock, $0.01 par value (850,000 authorized shares; 311,692 issued and outstanding shares, actual; no shares issued and outstanding, pro forma and pro forma as adjusted)		3			—
Additional paid-in capital		183,656			223,894
Common stock subscribed		(3,163	)		(3,163	)
Accumulated other comprehensive loss		(506	)		(506	)
Accumulated deficit		(136,817	)		(136,817	)
Total common shareholders’ equity		43,336			83,574
Total capitalization	$	83,574		$	83,574		$

The above table excludes:

• 1,469,008 shares of common stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $12.43 per share with exercise prices ranging from $10.43 to $16.15 per share;

21

of these shares, 539,599 shares are subject to currently vested stock options at a weighted average exercise price of $11.90 per share with exercise prices ranging from $10.43 to $16.15 per share;

• up to              shares of common stock reserved for future grant under our new stock incentive plan, our annual incentive plan and our special bonus plan;

•              shares of common stock issuable to a strategic investor, based on the initial public offering price, assumed to be $            , the midpoint of the range set forth on the cover page of this prospectus, in consideration for an aggregate purchase price of $1.0 million in conjunction with a joint project;

•              shares of common stock, under a formula based, in part, on the initial public offering price, assumed to be $            , the midpoint of the range set forth on the cover page of this prospectus, pursuant to the terms of our possible acquisition of either, respectively, all outstanding shares of CDT Oxford that we do not already own or Opsys Limited, described under Note 3 to our consolidated financial statements and “Business—Acquired Businesses”; and

• 5,500 shares of common stock issuable upon the exercise of an outstanding warrant at an exercise price of $10.43 per share.

22

DILUTION

If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the net tangible book value per share of our common stock after this offering.

Net tangible book value per share represents the amount of total tangible assets less total liabilities, divided by the number of shares of common stock then outstanding. Our net tangible book deficit as of March 31, 2004 was $35.2 million, or $(2.12) per share of common stock based on the 16,563,038 shares outstanding as of such date. After giving effect to (i) the conversion of our outstanding series A convertible preferred stock, series B convertible preferred stock and class B common stock into shares of class A common stock, (ii) a              for              reverse stock split and (iii) the sale of              shares of common stock in this offering at an assumed initial public offering price of $             per share, the midpoint of the range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and estimated offering expenses, our net tangible book value as of              would have been $             million, or $             per share of common stock. This represents an immediate increase in the net tangible book value of $             per share to existing stockholders and an immediate and substantial dilution of $             per share to new investors purchasing common stock in this offering. The following table illustrates this per share dilution:

Assumed initial public offering price per share		$
Pro forma net tangible book deficit per share as of March 31, 2004	$
Increase per share attributable to this offering
Pro forma net tangible book value per share after this offering
Dilution in net tangible book value per share to new investors		$

The following table summarizes as of March 31, 2004, the total number of shares of common stock purchased from us, the total consideration paid to us, and the weighted average price per share paid by existing stockholders and by new investors purchasing shares of common stock from us in this offering at our assumed initial public offering price of $             per share, the midpoint of the range set forth on the cover page of this prospectus and before deducting underwriting discounts and estimated offering expenses payable by us.

	Shares Purchased			Total Consideration				Weighted Average Price Per Share
	Number	Percent		Amount		Percent
Existing stockholders	25,286,181	%		$	225,811,000	%		$	8.93
New investors
Total		100.0	%	$		100.0	%	$

The foregoing discussion and tables assume no exercise of outstanding stock options or warrants and gives effect to the conversion of our outstanding series A convertible preferred stock, series B convertible preferred stock and class B common stock into shares of class A common stock and a              for              reverse stock split in connection with this offering as described under “Capitalization.”

To the extent that any outstanding stock options or warrants are exercised or any additional shares of our common stock are issued, in each case as further described under “Capitalization,” there may be further dilution to new investors.

23

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following table presents our selected consolidated financial and other data as of and for the periods indicated. You should read the following financial information in conjunction with “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes to those financial statements included elsewhere in this prospectus.

We derived our selected consolidated statement of operations data for each of the years in the three year period ended December 31, 2003 and our selected consolidated balance sheet data as of December 31, 2002 and 2003 from our audited consolidated financial statements which are included elsewhere in this prospectus. Our selected statement of operations data and consolidated balance sheet as of and for the three months ended March 31, 2004 and our summary consolidated statement of operations data for the three months ended and as of March 31, 2004 and 2003 are derived from our unaudited interim financial statements included elsewhere in this prospectus. The consolidated statement of operations data for the years ended December 31, 1999 and 2000 and the consolidated balance sheet data as of December 31, 1999, 2000 and 2001 have been derived from audited financial statements which do not appear in this prospectus. The unaudited interim financial statements reflect all adjustments, including normal recurring adjustments, that, in the opinion of management, are necessary for the fair presentation of that information as of and for the periods presented. Our results for the interim periods are not necessarily indicative of the results that you should expect for the full year or in the future. The selected consolidated statement of operations data for 1999 includes data from the consolidated statement of operations of a predecessor company (CDT Holdings plc) for the period January 1, 1999 to July 22, 1999, which is a presentation not in accordance with generally accepted accounting principles.

	Years Ended December 31,															Three Months Ended March 31, (Unaudited)
	1999			2000			2001			2002			2003			2003			2004
(In thousands, except per share data)
Consolidated Statement of Operations Data:
Operating revenues
License fees and royalties	$	120		$	98		$	20,869		$	2,474		$	4,314		$	98		$	640
Technology services and development		393			531			1,522			727			3,758			33			676
Litrex revenue		—			—			—			3,852			2,608			385			—
Total operating revenues		513			629			22,391			7,053			10,680			516			1,316
Cost of sales		—			—			—			1,792			1,527			245			239
Gross profit		513			629			22,391			5,261			9,153			271			1,077
Operating expenses
Research and development expenses		4,241			8,681			8,405			19,676			16,841			5,401			3,694
Selling, general and administrative expenses		3,555			7,217			11,292			16,859			11,166			3,515			2,567
Amortization of intangibles acquired		3,461			8,305			8,555			3,660			1,625			415			395
Acquired in-process research and development		28,300			—			—			—			—			—			—
Total operating expenses		39,557			24,203			28,252			40,195			29,632			9,331			6,656
Loss from operations		(39,044	)		(23,574	)		(5,861	)		(34,934	)		(20,479	)		(9,060	)		(5,579	)
Other income (expense)
Equity in loss of CDT Oxford		—			—			—			(651	)		(2,355	)		(591	)		—
Equity in loss of Litrex		—			—			—			—			(1,284	)		—			(401	)
Interest income		469			541			668			282			415			97			107
Interest expense		(91	)		(364	)		(7	)		(10	)		(6	)		(2	)		—
Total other income (expense)		378			177			661			(379	)		(3,230	)		(496	)		(294	)
Loss before (benefit) provision for income taxes and cumulative effect of accounting change		(38,666	)		(23,397	)		(5,200	)		(35,313	)		(23,709	)		(9,556	)		(5,873	)
(Benefit) provision for income taxes		28			55			50			(3,595	)		(932	)		(517	)		(363	)
Cumulative effect of accounting change		—			—			—			—			—			—			(12,200	)
Net loss	$	(38,694	)	$	(23,452	)	$	(5,250	)	$	(31,718	)	$	(22,777	)	$	(9,039	)	$	(17,710	)
Net loss per share—basic and diluted	$	(3.81	)	$	(1.89	)	$	(0.36	)	$	(1.96	)	$	(1.78	)	$	(0.63	)	$	(1.17	)
Weighted average common shares outstanding:
Basic and diluted		10,161			12,414			14,473			16,346			16,584			16,650			16,563

24

	As of December 31,															As of March 31, 2004
	1999			2000			2001			2002			2003
																(Unaudited)
(In thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	12,823		$	13,467		$	4,138		$	11,972		$	10,400		$	7,763
Working capital		7,888			8,810			(971	)		12,977			14,132			7,722
Total assets		95,967			89,644			111,684			129,122			113,870			116,253
Redeemable convertible preferred stock		—			—			—			25,301			38,487			40,238
Accumulated deficit		(35,909	)		(59,362	)		(64,612	)		(96,330	)		(119,107	)		(136,817	)
Total common shareholders’ equity		90,537			83,374			99,860			94,320			62,768			43,336

25

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the other financial information and consolidated financial statements and related notes appearing elsewhere in this prospectus and the documents incorporated by reference herein. This discussion may contain forward looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward looking statements as a result of a variety of factors, including those discussed in “Risk Factors,” “Forward Looking Statements” and elsewhere in this prospectus.

Overview

We are a pioneer in the development of Polymer Organic Light Emitting Diodes, or P-OLEDs, and their use in next-generation flat panel displays and other applications. The fundamental discoveries relating to our P-OLED materials were made by a team of researchers at the Cavendish laboratories at the University of Cambridge in 1989, that included Dr. Jeremy Burroughes, our Chief Technical Officer, and Professor Sir Richard Friend, a member of our Technical Advisory Board and our Chief Scientist. Since our inception in 1992, we have focused on continuing research and development related to the production, manufacturing and commercialization of P-OLED technology in the flat panel display and other industries. Our revenues are primarily generated from the licensing of rights to use our intellectual property, or IP, portfolio, from ongoing product royalties and from fees generated from transfer of technology and joint technology development agreements.

We sold our first P-OLED license in 1996 to Royal Philips Electronics and currently have eight device licensees, four materials licensees and two component licensees and are working with a number of additional display manufacturers through joint technology development programs and informal relationships. We recognized our first royalty revenues in 2002 when commercial consumer electronics products began incorporating our P-OLED technology. Currently, our P-OLED technology is being used in mobile phones, electric shavers, MP3 players, medical equipment and other applications.

While we have made significant progress over the past few years in advancing our P-OLED technology into a number of display licenses, we have incurred significant losses and will continue to do so unless our P-OLED technology becomes more widely adopted and commercialized by flat panel display manufacturers. As of March 31, 2004, we had an accumulated deficit of $136.8 million primarily due to the research and development expenditures we have incurred. Our total research and development expenditures since 1999 exceed $60.0 million.

Our business objective is to license our technology to leading display manufacturers and to generate royalties based on the sales of their products. We market our P-OLED IP and technology by building relationships with established and new entrant flat panel display manufacturers. This may involve developing relationships at a senior level over a period of years. Some manufacturers purchase a license from us at an early stage in their P-OLED development program. Other manufacturers begin their efforts to develop products using our P-OLED technology by working with us through a series of informal meetings, then by entering, either publicly or confidentially, into a formal technology development or technology transfer program which may culminate in the purchase of a license from us.

In order to accommodate our many current and potential Asian licensees and partners, we maintain a representative office in Taiwan. Our senior executives also travel frequently from our corporate offices to Asia and other destinations in order to develop our relationships with both existing and potential new licensees.

We were founded in 1992 as a company organized under the laws of England and Wales by two of the inventors of our fundamental P-OLED technology, with the support of the University of Cambridge. In July 1999, we were acquired by Cambridge Display Technology, Inc., a Delaware corporation, which was owned by entities under the direction of two private investment firms, Kelso & Company, or Kelso, and Hillman Capital Corporation, or Hillman Capital.

26

Description of Our Revenues, Costs and Expenses

Operating Revenues and Cost of Sales

License Fees and Royalties

The most important sources of our revenues are licensing fees and subsequent royalties. Typical license terms include the payment of an upfront fee, which is higher for licenses covering larger or more complex displays. The sale of a license is often the culmination of a lengthy period of relationship building, technical development and negotiation. Our results can show much higher revenues in those quarters during which licenses were sold as the upfront fee is generally recognized in full in the quarter in which the license fee is due.

Licenses vary with regard to which sections of our patent portfolio are covered and for what purposes. They include display device licenses (which may include restrictions with regard to the type of display and the maximum number of pixels), lighting device licenses, material licenses (which may restrict the class of materials which can be manufactured) and component licenses which cover components required to manufacture P-OLED and other OLED devices.

We receive non-refundable fees upon execution of most patent licenses followed, in some cases, by additional fees payable either at a fixed future time or on achievement of defined milestones, such as commencement of commercial production. Additionally, we receive license royalties, which comprise defined percentages of the value of the products sold under the terms of the relevant licenses. Depending on the nature of the licenses, products which attract a royalty are P-OLED display or other devices, P-OLED materials or OLED semiconductor driver circuits. Most of our royalties are payable quarterly and some licenses include provision for a minimum royalty to be paid each year.

Technology Services and Development

We receive fees under the terms of technology development agreements in exchange for us carrying out agreed joint programs of work with customers in order to meet defined technical objectives. In addition, we receive fees from customers for the transfer of technology, which may include manufacturing know-how transfer, resale of ink jet printing equipment, supply of display prototype devices and other samples and provision of access to our personnel and technical facilities. We also sell display device test equipment.

Litrex Revenue

Revenues recorded by Litrex for the sale of ink jet printing equipment and related services are consolidated into our results through August 2003, but not thereafter as a result of our sale of 50% of our interest in Litrex to Ulvac, Inc., a manufacturer and marketer of semiconductor capital equipment.

Cost of Sales

The only cost of sales for our license fees and royalties that we report is for payments to third parties from whom we have in-licensed IP rights. We expect this cost to be approximately 1% of revenue, but it may increase in future years if the relative contribution of in-licensed IP rights to our overall IP portfolio changes or if we decide to license certain IP to which we have sub-licensing rights. For technology services and development, the incremental costs of providing services under those agreements plus the cost of any resold materials or equipment is charged to cost of sales.

27

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of salaries, bonuses and related benefits for personnel engaged in research and development activities (including costs reimbursed to universities under sponsored research agreements), together with the costs of purchasing and maintaining laboratory and clean room equipment and facilities and the costs of materials used in the development and analysis of P-OLED materials and in the fabrication of display and other devices.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses include salaries, bonuses and related benefits of commercialization, human resources, facilities, finance, legal, IP protection and corporate management staff as well as travel costs, consulting, information systems expenses, external legal counsel costs and patent filing and prosecution costs.

Amortization of Intangibles Acquired

Our amortization of intangibles acquired includes the amortization of acquired patent rights from third parties as well as the amortization of intangibles acquired as a result of our acquisition of CDT Holdings plc in 1999. The amortization period for these assets is between five and ten years.

Acquired In-Process Research and Development

Our acquired in-process research and development includes a one-time charge as a result of our acquisition of CDT Holdings plc in 1999.

Factors and Trends That Affect Our Results of Operations

In reading our financial statements, you should be aware of the following factors and trends that our management believes are important in understanding our financial performance:

• Because our license fees often consist of large one-time payments and our royalties for the foreseeable future are expected to be smaller, recurring payments, we expect fluctuations in these revenues depending on the periods in which we enter into new licenses.

• We have and will continue to invest significant resources in research and development in order to develop and effectively demonstrate our technology so that it can be commercialized in a growing number of applications. Our total research and development expenditures in 2003 were $16.8 million.

• We continue to enter into new technology development agreements and existing technology development partners may enter into commercial licenses for use of our P-OLED technology, which we expect will increase our future royalties.

• Our existing licensees continue to expand the use of our P-OLED technology in commercial applications in their consumer electronic products, which we expect will increase our future royalties.

Critical Accounting Policies and Significant Developments and Estimates

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements. The preparation of these statements requires us to make certain estimates and judgments that effect the statement of operations, balance sheet, cash flow or disclosures relating to contingent assets or liabilities. Our actual results might, under different assumptions and conditions, differ from our estimates. Significant estimates include the valuation of our IP, lives of our long-lived assets and estimates

28

related to the delivery of know-how and services under technology services contracts. Our accounting policies are set forth in Note 2 to our consolidated financial statements included elsewhere in this prospectus. Our critical accounting policies are discussed below.

Revenue Recognition

Our revenues derive from license fees and royalties due under license agreements, payments due under various technology development agreements and sales of equipment and services by Litrex through August 2003. Non-refundable license fees are recognized as revenue at the inception of the license term, providing we have no ongoing obligation under the relevant license. Royalties are recorded as revenue when they become receivable and collection is reasonably assured. Where an extended obligation does exist, upfront fees are amortized over the period of that obligation. We also enter into a number of technology development and transfer contracts. Technology transfer contracts involve the transfer of know-how to third parties, together with the provisions of services related to that transfer. When we can determine the fair value of each, we recognize revenue related to the transfer of know-how when that know-how is delivered, and recognize revenue for services as those services are delivered. Technology development contracts require our participation in research projects over a period of time; revenue under these contracts is amortized over the life of the contract. Revenue for the sale of equipment was recognized upon final acceptance of the equipment by the customer.

Basis of Presentation

We have a 50% equity interest in Litrex, a developer and supplier of ink jet printing equipment which can be used in the manufacture of P-OLED displays. Litrex was a subsidiary of our company from November 2001 until August 2003, and was consolidated into our financial statements between those dates. In August 2003, we sold 50% of our interest in Litrex to Ulvac. Since August 2003, 50% of the net losses of Litrex have been reported by us using the equity method.

We acquired a 16% equity interest in CDT Oxford Limited in October 2002. CDT Oxford carries out research in high efficiency P-OLED materials and is 84% owned by Opsys Limited. However, we have full management control over this company and are responsible for funding its operations. Until December 2003, we accounted for 100% of the results of this company in a manner similar to the equity method. Commencing January 1, 2004, we consolidated CDT Oxford as a subsidiary pursuant to the terms of FIN No. 46(R), “Consolidation of Variable Interest Entities.” Under the terms of the transaction agreement, call and put options are in place, which determine how we will acquire the remaining 84% of CDT Oxford, or, alternatively, if certain conditions are met, 100% of the stock of Opsys Limited for a consideration of 1,159,634 shares of our class A common stock. In order to consolidate CDT Oxford effective January 1, 2004, we have included those shares on our balance sheet as shares of common stock to be issued, valued at the fair value of that stock. We have performed a valuation of CDT Oxford as of October 2002 in order to fairly allocate the assets and liabilities as if CDT Oxford had been acquired in a business combination and the fair value of CDT Oxford was the full price payable, including the actual price paid in October 2002 for 16% of the equity and the value of the 1,159,634 shares which will be issued when the put or call option is exercised. Under the terms of the transaction agreement, we would only acquire Opsys Limited, rather than the remaining 84% of CDT Oxford, in the event that Opsys Limited had no significant assets or liabilities other than its shareholding in CDT Oxford.

We are currently negotiating a Settlement and Amendment Agreement with Opsys and certain Opsys shareholders to resolve certain disputes that had arisen between us regarding the alleged entitlement of Opsys to certain anti-dilution adjustments in respect of the investment in our convertible preferred stock made by certain of our affiliates. Under the settlement, which would become effective upon consummation of this offering and our certification as to the satisfaction of the conditions to the exercise by the Opsys shareholders of their right to put the shares of Opsys Limited to us, the number of shares to be received by Opsys would be changed to a number to be derived by application of a specified formula. If we do not enter into a settlement, or if the settlement does not become effective or is terminated, we intend to contest vigorously any claims Opsys may assert against us.

29

Valuation of Goodwill

Goodwill is included in the balance sheet as a result of our acquisition of the U.K. members of the CDT group in 1999 and the consolidation of CDT Oxford in January 2004. We perform an annual impairment test on the value of goodwill and, to date, have concluded that no impairment is required. This impairment test includes an element of subjective judgment with regard to the future commercial prospects for P-OLED technology.

Valuation of Intangible Assets

We have not impaired the value of certain IP, which was valued (net of accumulated amortization) at $2.8 million as of December 31, 2003, because management does not believe that its value is impaired. As more fully described in Note 14 to our consolidated financial statements, this IP is currently the subject of a dispute which we believe will be settled without any impairment of the asset. If that belief proves to be incorrect, then a write-down of up to the full carrying value could be necessary.

Stock-Based Compensation

As explained in Note 2 to our consolidated financial statements, we have elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations in accounting for stock options. Accordingly, other than certain grants at less than fair value, we have recognized no compensation expense with respect to options granted to employees. We account for options and warrants issued to non-employees based on the fair value of the options and warrants granted, as is required under SFAS 123 and EITF 96-18.

Income Taxes

We are liable for franchise taxes to Delaware, our state of incorporation. Such taxes have been included in the provision for income taxes for the years ended December 31, 2003, 2002 and 2001 as well as the quarter ended March 31, 2004. For the years ended December 31, 2003 and 2002, we recorded a tax benefit primarily due to a research and development tax credit from 2003 and prior years. We have filed amended tax returns from the prior years to recoup the tax credit. Our U.K. subsidiaries are eligible to participate in the U.K.’s research and development tax credit program. Under this program, small and medium sized enterprises, such as us, are permitted a deduction in taxable profits of 150% of the amount of certain research and development expenditures (primarily salaries, salary related costs and consumables used in research and development activities). This deduction may be surrendered for a cash payment of 16% of the total deduction for those years during which we sustain a loss. Cambridge Display Technology Limited, our principal operating subsidiary, and CDT Oxford have both claimed such cash payments for the years ended December 31, 2001, 2002 and 2003. If our revenues increase such that we no longer satisfy the criteria to be considered a small to medium sized enterprise (including, for example, annual revenues not exceeding 40.0 million Euro), we will no longer be eligible to claim any cash payments for future periods and our permitted deduction will be reduced to 125% of qualifying research and development expenditures.

Recent Accounting Pronouncements

In December 2003, the Financial Accounting Standards Board, or FASB, issued FIN No. 46(R), “Consolidation of Variable Interest Entities,” which supersedes FIN No. 46 issued in January 2003. FIN No. 46(R) clarifies the application of Accounting Research Bulletin No. 51. This Interpretation requires variable interest entities to be consolidated if the equity investment at risk is not sufficient to permit an entity to finance its activities without support from other parties or the equity investors lack specified characteristics. We adopted this interpretation effective January 1, 2004, and have consolidated CDT Oxford. This will have no impact on the net income (loss) within the consolidated statement of operations, since we are responsible for 100% of the operating loss, but will require our consolidated balance sheet to include the assets and liabilities of CDT Oxford. However, we recorded a one-time cumulative effect adjustment of $12.2 million on January 1, 2004.

30

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify certain financial instruments as a liability (or as an asset in some circumstances). SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after December 15, 2003. Pursuant to the Securities and Exchange Commission’s Accounting Series Release No. 268, we had already classified the preferred stock as other than common equity.

Results of Operations

Comparison of Three Months Ended March 31, 2004 and Three Months Ended March 31, 2003

Our total operating revenues were $1.3 million for the quarter ended March 31, 2004 compared to $0.5 million for the quarter ended March 31, 2003.

Our revenues from license fees and royalties increased by $0.5 million from $0.1 million for the quarter ended March 31, 2003 to $0.6 million for the quarter ended March 31, 2004. The increase was due to the recognition of a scheduled license fee installment of $0.5 million from one of our display manufacturer licensees.

Our revenues from technology services and development increased by $0.6 million from less than $0.1 million for the quarter ended March 31, 2003 to $0.7 million for the quarter ended March 31, 2004. The increase was primarily a result of the commencement of a technology development program with one of our materials licensees as well as an increase in revenues from test equipment sales and training services.

Our revenues from Litrex were $0.4 million, for the quarter ended March 31, 2003. Effective with the sale of 50% of Litrex in August 2003, we no longer consolidate Litrex. Accordingly, revenues from Litrex for the quarter ended March 31, 2004 were zero.

Our cost of sales remained essentially constant at $0.2 million for the quarter ended March 31, 2003 and the quarter ended March 31, 2004. Our cost of sales for the quarter ended March 31, 2004 consisted primarily of the costs of test equipment and incremental costs relating to the support of technology development agreements. Our cost of sales for the quarter ended March 31, 2003 related to the sale of Litrex equipment. Because a significant portion of our revenue is derived from license fees and royalties for which we do not incur significant cost of sales, our cost of sales for the quarter ended March 31, 2003 remained fairly constant despite the fact that our revenues were significantly higher in the quarter ended March 31, 2004.

Our research and development expenses decreased by $1.7 million, or 32%, from $5.4 million for the quarter ended March 31, 2003 to $3.7 million for the quarter ended March 31, 2004. Of this decrease, $0.9 million was due to Litrex research and development expenses that are no longer included in our financial statements, which was partially offset by an increase of $0.5 million due to the inclusion of CDT Oxford’s expenses in the quarter ended March 31, 2004. In addition, our re-organization, which took place in July 2003, resulted in a general reduction in total research and development expenditures. Research staffing in March 2004 was 75 versus 108 in March 2003 and the consolidation of clean room research activities to our Technology Development Center and of chemistry activities to our Cambridge facility resulted in a significant reduction in operating costs. Research and development expenses will continue to vary from quarter to quarter due to the specific requirements of the projects being carried out in any quarter.

Our selling, general and administrative expenses decreased by $0.9 million, or 27%, from $3.5 million for the quarter ended March 31, 2003 to $2.6 million for the quarter ended March 31, 2004. The decrease was primarily due to selling general and administrative costs relating to the operations of Litrex that are no longer included in our financial statements.

Our amortization of intangibles acquired remained constant at $0.4 million for each of the quarters ended March 31, 2004 and 2003.

31

Our total other expense decreased by $0.2 million from $0.5 million for the quarter ended March 31, 2003 to $0.3 million for the quarter ended March 31, 2004. In the quarter ended March 31, 2003, we recognized a loss of $0.6 million in CDT Oxford which compared to an equity loss of $0.4 million in Litrex in the quarter ended March 31, 2004.

Our net loss increased by $8.7 million, or 96%, from $9.0 million (or $0.54 per share) for the quarter ended March 31, 2003 to $17.7 million (or $1.17 per share) for the quarter ended March 31, 2004. The increase in net loss was primarily due to the write-off of in-process research and development in connection with the consolidation of CDT Oxford, which has been accounted for as a cumulative effect of accounting change.

Comparison of Fiscal Years Ended December 31, 2003 and December 31, 2002

Our total operating revenues were $10.7 million for the year ended December 31, 2003 compared to $7.1 million for the year ended December 31, 2002.

Our revenues from license fees and royalties increased by $1.8 million, or 74%, from $2.5 million in 2002 to $4.3 million in 2003. The increase was due to our sale of three licenses with upfront fees in the aggregate of $3.8 million in 2003, as compared to the sale of one license with an upfront fee of $2.0 million in 2002.

Our revenues from technology services and development increased by $3.1 million from $0.7 million in 2002 to $3.8 million in 2003. The increase was primarily due to a contract for technology transfer to one of our display manufacturer licensees under which we recognized revenue of $3.1 million in 2003.

Our revenues from Litrex decreased by $1.3 million, or 32%, from $3.9 million in 2002 to $2.6 million in 2003. The decrease was due to the fact that Litrex revenues and costs were no longer included in our financial statements after August 2003.

Our cost of sales decreased by $0.3 million, or 15%, from $1.8 million in 2002 to $1.5 million in 2003. Our cost of sales were slightly lower in 2003 as 2003 did not include cost of sales relating to Litrex after August 2003. This decrease was partially offset by a charge of $0.2 million in 2003 that related to IP rights in-licensed from a third party.

Our research and development expenses decreased by $2.9 million, or 14%, from $19.7 million in 2002 to $16.8 million in 2003. This was due to the receipt of $1.1 million in U.K. government and European Union grants in 2003 as compared to $0.6 million in 2002, an increase of $0.5 million, and a decrease of $1.7 million in Litrex research and development expense reported in 2003 since no expense was reported for the period after August 2003. The remainder of the decrease was due to a major reorganization of research facilities and staff in the second half of 2003, including the relocation of the former CDT Oxford offices in Oxford, England to Cambridge, England and the consolidation of all of our clean room facilities within our Technology Development Center. The reorganization caused a reduction in research activity and expense as staff were being relocated and facilities moved.

Our selling, general and administrative expenses decreased by $5.7 million, or 34%, from $16.9 million in 2002 to $11.2 million in 2003. The decrease was primarily due to the fact that 2002 included a $2.0 million write-off of an equity investment and a write-off of purchased IP of $1.0 million that were not repeated in 2003. In addition, our selling, general and administrative expenses for the year ended December 31, 2003 did not include costs relating to Litrex after August 2003.

Our amortization of intangibles decreased by $2.1 million, or 57%, from $3.7 million in 2002 to $1.6 million in 2003. The decrease was related to a $2.0 million charge in 2002 associated with the acquisition of a license from Opsys Limited with no corresponding charge in 2003.

Our total other expense increased by $2.8 million from $0.4 million in 2002 to $3.2 million in 2003. The increase in expenses related to increases in equity in loss of both CDT Oxford and Litrex. There was no

32

corresponding equity in loss in Litrex in 2002 and as CDT Oxford was acquired in October 2002, there was a smaller corresponding loss.

Our net loss decreased by $8.9 million, or 28%, from $31.7 million (or $1.96 per share) in 2002 to $22.8 (or $1.78 per share) in 2003. The decrease in net loss was due to decreases in selling, general and administrative expenses, research and development expense and amortization expense, the increase in revenues, partially offset by increases in our equity interest in the loss of Litrex and CDT Oxford and a decrease in tax benefit.

Comparison of Fiscal Years Ended December 31, 2002 and December 31, 2001

Our total operating revenues were $7.1 million for the year ended December 31, 2002 compared to $22.4 million for the year ended December 31, 2001.

Our revenues from license fees and royalties decreased by $18.4 million, or 88%, from $20.9 million in 2001 to $2.5 million in 2002. The decrease was principally due to the sale of three licenses with upfront fees in 2001. In contrast, only one license was sold in 2002, for which we received equity in the licensee as consideration in addition to future payments which were not recognized in 2002.

Our revenues from technology services and development decreased by $0.8 million, or 52%, from $1.5 million in 2001 to $0.7 million in 2002. The decrease was primarily a result of our decision to exit the P-OLED materials production business and license the rights to sell P-OLED materials commercially to Covion, Dow Chemical, H.C. Starck (a subsidiary of Bayer) and Sumitomo Chemical.

Our revenues from Litrex were $3.9 million in 2002. Litrex was acquired in November 2001 and did not generate any revenues until 2002.

Our cost of sales were $1.8 million in 2002, consisting primarily of costs associated with the sale of Litrex equipment. We had no cost of sales in 2001 associated with our technology services and development.

Our research and development expenses increased by $11.3 million from $8.4 million in 2001 to $19.7 million in 2002. The increase was due to a substantial increase in the research and development activities in the U.K., primarily related to our newly-opened Technology Development Center in Godmanchester, but also from an expansion of our research teams at our existing facilities in Cambridge. The remainder of the increase was due to an increase of $3.7 million in expenditure for the Litrex ink jet printing systems development program in 2002.

Our selling, general and administrative expenses increased by $5.6 million, or 49%, from $11.3 million in 2001 to $16.9 million in 2002. The 2002 figure includes a $2.0 million charge for 100% of the value of our equity investment in one of our licensees. This provision was made because we determined that it was likely that the terms of future funding of that company would result in our interest being diluted to a significant extent. In 2001, we purchased IP from Luxell Technologies for $1.0 million, under the terms of a license agreement, which also included provisions for future payments to be made to Luxell by us. In 2002, there was a dispute between Luxell and us with regard to this license which resulted in us writing-off this $1.0 million asset. This dispute was subsequently resolved and both parties agreed to the cancellation of the license.

Our total other income decreased by $1.1 million from $0.7 million in 2001 to $(0.4) million in 2002. The decrease was related to our equity interest in the loss of CDT Oxford for which there was no corresponding loss in 2001, as well as a decrease in interest income due to the lower average cash balances that we held in 2002.

Our net loss increased by $26.4 million from $5.3 million (or $0.36 per share) in 2001 to $31.7 million (or $1.96 per share) in 2002. The increase in net loss attributable to holders of our common stock was primarily due to a decrease in total revenue, as well as an increase in both research and development expenses and selling, general and administrative expenses.

33

Quarterly Results of Operations

The following table sets forth unaudited financial and operating data in each fiscal quarter during 2002 and 2003 and the first quarter of 2004. The unaudited quarterly information reflects all adjustments, which include only normal and recurring adjustments, necessary to present fairly the information shown.

	2002												2003												2004
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			First Quarter			Second Quarter			Third Quarter			Fourth Quarter			First Quarter
	(In thousands, unaudited)
Operating revenues	$	2,528		$	862		$	1,501		$	2,162		$	516		$	3,415		$	4,688		$	2,061		$	1,316
Gross profit		2,472			551			866			1,372			271			2,776			4,301			1,805			1,077
Loss from operations		(3,880	)		(9,011	)		(9,158	)		(12,885	)		(9,060	)		(5,526	)		(3,078	)		(2,815	)		(5,579	)
Net loss	$	(3,629	)	$	(8,494	)	$	(8,630	)	$	(10,965	)	$	(9,039	)	$	(5,994	)	$	(3,833	)	$	(3,911	)	$	(17,710	)

Our quarterly operating results may fluctuate significantly because of several factors, including those described above under “Factors and Trends That Affect Our Results of Operations.”

Liquidity and Capital Resources

As of March 31, 2004, we had cash and cash equivalents of $7.8 million compared to $10.4 million as of December 31, 2003. During 2003, cash used in operating activities was $14.1 million, as compared to $28.8 million in 2002. The decrease was mainly due to a lower net loss for the period.

Since our inception, the primary source of our funding has been the sale of our equity securities. Since 1999, $216.4 million has been raised through private placements of our common and preferred equity securities. Approximately 50% of these proceeds was used to fund the acquisition of CDT Holdings plc in 1999 and the remaining 50% was used to fund our operations. Through October 2002, all equity raised was through subscriptions for shares of our class A common stock and class B common stock. In December 2002, a preferred stock funding round raised $15.0 million from the sale of shares of our series A convertible preferred stock and series B convertible preferred stock. In connection with this $15 million investment, a further $10.0 million which had been invested in July 2002 was exchanged for shares of our series B convertible preferred stock in December 2002. In addition, $6.4 million, net of expenses, of which $4.2 million in consideration was in the form of cash and $2.2 million was in the form of shares of our common stock, was invested in shares of our series B convertible preferred stock in the first quarter of 2003.

Approximately 74% of the subscriptions to our common and preferred stock described above have come from our principal stockholders (affiliates of Kelso and Hillman Capital), 9% from subscriptions by strategic investors (DuPont, Sumitomo Chemical and Toppan), 16% from non-cash consideration (shares in CDT Holding plc, Opsys Limited and Litrex) and 1% from other stockholders.

Net cash provided by operating activities was $9.1 million for the year ended December 31, 2001. Net cash used in operating activities was $28.8 million for the year ended December 31, 2002, $14.1 million for the year ended December 31, 2003 and $3.8 million for the quarter ended March 31, 2004. The reason for a net use of cash in operating activities in 2002 versus a net generation of cash by operating activities in 2001 was that revenues in 2002 were significantly lower than in 2001 and operating expenses were significantly higher. In addition, the working capital of Litrex increased in 2002 due to an increase in inventories. Net cash used in operating activities in 2003 was less than was used in 2002 due to decrease in the net loss, the increase in our equity in loss of Litrex and CDT Oxford, an increased deferred revenue balance and a reduced level of inventories due to the sale of Litrex in August 2003.

Net cash used in investing activities for the year ended December 31, 2001 was $37.2 million, of which $20.0 million was used to acquire property, equipment and leasehold improvements, primarily due to the

34

building of our Technology Development Center. In addition, we used $9.2 million to acquire Litrex and $8.0 million to acquire IP rights. Net cash used in investing activities for the year ended December 31, 2002 was $12.4 million, of which $8.0 million was used to acquire control of CDT Oxford and $4.4 million to acquire property, equipment and leasehold improvements related to further work on our Technology Development Center and for upgrades to our laboratory and clean room facilities in Cambridge. For the year ended December 31, 2003, investing activities generated $8.3 million, primarily comprised of $12.1 million in proceeds from the sale of Litrex less $3.6 million for the acquisition of property, equipment and leasehold improvements for our technical facilities, including costs related to the relocation of certain research activities to our Technology Development Center. We used $0.4 million for the acquisition of property, equipment and leasehold improvements during the quarter ended March 31, 2004.

Sales of shares of our common stock, net of related expenses, were $21.8 million in 2001 and $34.7 million, of which $4.6 million was for non-cash consideration, in 2002. Sales of shares of our series A and series B convertible preferred stock, net of related expenses, were $25.0 million in 2002, of which $10 million was sold in exchange for shares of our common stock and $4.2 million in 2003, of which $2.2 million was sold in exchange for shares of our common stock.

We anticipate, based on our internal forecast and assumptions relating to our operations (including, among others, assumptions regarding our working capital requirements, the progress of our research and development efforts and revenues) that we have sufficient cash to meet our obligations through 2005. Included in this forecast is the availability of a line of credit to a maximum amount of $15.0 million, of which $0.5 million may not be borrowed, that we entered into in July 2004. This line of credit is available for a minimum of one year, renewable for two further years, and is secured by a letter of credit issued by Wells Fargo Bank, which is secured by our patents, trademarks and copyrights and associated license revenues. We also anticipate that, in November 2005, we will sell our remaining 50% stake in Litrex pursuant to the terms of our contract with Ulvac for a minimum of $10.0 million. See Note 3 to our consolidated financial statements. Under certain circumstances, we and Ulvac may each be required to provide financial support for Litrex of up to $1.25 million if necessary to ensure Litrex’s continued operations over the next twelve months.

Contractual Obligations

As of December 31, 2003, we had the following contractual commitments which are not recorded as liabilities on our financial statements:

	Payments Due by Period*
	Total		Less than 1 year		1-3 years		3-5 years		> 5 years
	(In thousands)
Operating leases	$	1,905	$	393	$	432	$	432	$	648
Contracted capital expenditures		1,326		1,326		—		—		—
Sponsored research		339		195		144		—		—
Pension liability		500		—		—		—		500
Total	$	4,070	$	1,914	$	576	$	432	$	1,148

* Assumes conversion of all outstanding shares of our series A convertible preferred stock and series B convertible preferred stock into shares of our common stock, which if not converted, would result in a contractual obligation of $101.6 million in 2012.

We have a number of contractual commitments to provide services, perform research or transfer know-how. In most cases, we receive revenue which, at least, covers our costs of fulfilling our obligations under those contracts and, except as detailed below, as of December 31, 2003, none had a term which extended beyond the end of 2004.

35

Under the terms of a contract between Sumitomo Chemical and us, we are obligated to provide the equivalent of 12 full service scientists and engineers to work on a development project for a three-year period which will end in December 2006 and to contract with two U.K. universities to carry out additional research activities. Sumitomo Chemical is obligated to provide the equivalent of two full service equivalent scientists for this project also. The contract includes a provision requiring both parties to fund 50% of the total costs of these activities, calculated on a fully allocated basis.

Under the terms of a contract between Covion and us, we are obliged to provide the equivalent of 10 full service scientists and engineers to work on research and development projects related to P-OLED materials until December 2006. We receive royalties from Covion based on revenues from all of Covion’s sales of P-OLED materials, whether or not those materials were developed by our project team. Through the end of 2003, the royalties received from Covion were less than our costs of funding the project team. Since royalties will continue to be payable after the obligation to provide research services has concluded, we anticipate that the contract will be profitable. Accordingly, we have not provided for a loss on this contract.

We have guaranteed the liabilities of CDT Oxford. As of December 31, 2003, CDT Oxford’s liabilities were $4.5 million, including $2.6 million due to us. Effective January 1, 2004, CDT Oxford has been consolidated into our financial statements.

Quantitative and Qualitative Disclosure Regarding Market Risk

A substantial majority of our licensing revenues are denominated in U.S. dollars. These licensing revenues include royalties based on revenues or production costs of our licensees that may be denominated in U.S. dollars or other currencies. Where such revenues or production costs of our licensees are denominated in other currencies, they are converted to U.S. dollars for the purpose of calculating any licensing royalties due to us. Our licensing royalty revenues may decrease as a result of any appreciation of the U.S. dollar against these other currencies.

The majority of our current expenditures are incurred in British pounds in order to fund our operations in the United Kingdom. If the U.S. dollar depreciates versus the British pound, additional U.S. dollars will be required to fund our operations in the United Kingdom. For example, a change in the U.S. dollar to British pound exchange rate from 1.8 to 1.9 would, at the current rate of expenditure, cost us approximately an additional $1 million per year.

36

BUSINESS

Our Company

We are a pioneer in the development of Polymer Organic Light Emitting Diodes, or P-OLEDs, and their use in next-generation flat panel displays and other applications. We believe we hold the most extensive and significant IP portfolio for P-OLED materials and devices, including the fundamental patents for the use of polymers in electroluminescent devices, essential for use in P-OLED displays and other applications. P-OLEDs are part of the family of Organic Light Emitting Diodes, or OLEDs, which are matrixes of organic diodes that emit light when an electric voltage is applied. OLEDs are thin, lightweight and power efficient devices used in flat panel displays, or FPDs, and other applications. Our P-OLEDs offer an enhanced visual experience and superior performance characteristics as compared to alternative FPD technologies, such as liquid crystal display, or LCD.

Our P-OLED technology has the potential to drive OLED adoption by significantly lowering the cost of producing OLED displays. P-OLED materials are solution processable, which enables them to be deposited on panels using processes such as high precision ink jet printing. We believe solution processing is inherently more efficient than the complex vacuum deposition processes used by competing OLED technologies and requires fewer processing steps than required in the production of LCDs. We believe that our technology leadership and IP position will enable us to share in the revenues from P-OLED displays as they continue to enter the mainstream consumer electronics market.

Our business strategy is to capitalize on our IP position to generate upfront license fees and recurring royalty payments from sales by third parties of devices using our IP. In addition, we will also receive royalties from suppliers of red, green, blue and other P-OLED materials. We are targeting leading display manufacturers as potential licensees of our P-OLED IP and, in support of this primary objective, we provide these display manufacturers and others with a range of paid-for services relating to technology development and transfer. We have already licensed our technology to leading international companies such as Dai Nippon Printing, Delta Optoelectronics, DuPont Displays, OSRAM Opto Semiconductors, Royal Philips Electronics, or Philips, and Seiko Epson for display manufacture. Several products using our P-OLED technology in their displays have been introduced into the commercial marketplace, including a mobile phone and an electric shaver with Philips displays, an MP3 player with a Delta Optoelectronics display and medical devices and a range of point-of-purchase and other promotional items with OSRAM Opto Semiconductor displays.

Industry Overview

The Flat Panel Display Market

The overall FPD industry has experienced strong growth in recent years. According to DisplaySearch, an independent market research firm tracking the FPD industry, the worldwide FPD market grew from $24.1 billion in 2000 to $43.5 billion in 2003. DisplaySearch expects this market to grow to an estimated $97.0 billion in 2008, representing a compounded annual growth rate since 2000 of approximately 19%.

Revenue growth in the flat panel industry continues to be driven by a number of factors:

Proliferation of Mobile Consumer Electronics Devices.    Consumers throughout the world are rapidly adopting mobile consumer electronics devices such as mobile phones, personal digital assistants, or PDAs, MP3 players, portable DVD players, mobile gaming devices and digital cameras and camcorders. Advances in component technology are driving down the cost of these products and expanding their functionality. Early mobile devices were equipped with simple, small monochrome displays with limited functionality. As the cost of color displays decreased and quality improved, consumers began rapidly adopting mobile devices with color displays. This trend towards greater display functionality in mobile devices continues with the introduction of new phones with dual displays, embedded cameras and television tuner video functionality.

37

Replacement of Older Technology by FPDs.    Although FPDs were initially adopted in the mobile consumer electronics market and in notebook computers, they are displacing cathode ray tube, or CRT, displays in larger product applications such as desktop computer monitors and televisions. This transition is being driven by consumer preferences for appliances that are thinner and more lightweight, particularly in larger display sizes. For example, according to DisplaySearch, in 2002, revenues from the sale of FPD computer monitors exceeded the revenues from the sale of CRT computer monitors for the first time and, in 2004, unit shipments of FPD computer monitors are expected to exceed unit shipments of CRT computer monitors for the first time.

In addition to consumer electronics devices, FPDs are increasingly being used in other applications such as car navigation systems, entertainment and advertising displays, instrumentation panels, household appliances and personal accessory products.

LCDs: Today’s Dominant FPD Technology

LCDs, in total, accounted for approximately 83% of total FPD sales in 2003 according to DisplaySearch. Notebook computer applications and mobile phone displays have been enabled by LCDs and, together with desktop monitors, have been the primary growth drivers to date, with demand for LCD televisions accelerating rapidly in 2003.

Driven by this strong demand for LCDs, particularly for LCD televisions, LCD panel manufacturers are investing in fabrication facilities, or fabs, that enable significantly larger sheets of glass to be processed, thereby reducing unit costs and allowing greater availability of large-sized television panels. This industry trend favors large, established panel manufacturers who can afford the approximately $1 billion required to construct, equip, test and run a Gen-5 fab, which produces panel displays, or substrates, of approximately 39 inches by 43 inches, or the at least $2 billion capital investment required for a more advanced Gen-6 or Gen-7 fab, which produces substrates of approximately 59 inches by 71 inches and above. AU Optronics, Chunghwa Picture Tubes, LG.Philips LCD, Samsung Electronics, Sharp and Sony have each announced plans for Gen-6 or Gen-7 LCD fabs. However, the huge capital commitments required are prohibitive to most industry participants. We believe that this dynamic will result in continued consolidation within the LCD industry and present challenges for other companies attempting to enter or sustain LCD display businesses.

While LCD is currently the dominant technology in the FPD market, other display technologies are also gaining traction and experiencing significant growth. For example, while plasma displays are often criticized for relatively short lifetimes and high power consumption, the superior picture quality and attractive form factor have driven demand for this technology within the high-end, large-sized display market. Rear projection microdisplay-based technologies such as digital light processing and liquid crystal on silicon are also receiving increased attention, especially for larger-size screens.

OLEDs: The Next-Generation FPD Technology

OLED technology is emerging as one of the more promising entrants among the next generation of FPD technologies. According to DisplaySearch, sales from OLED displays are expected to grow significantly as they continue to penetrate the growing FPD market and are expected to increase from an estimated $216.8 million in 2003 to an estimated $3.1 billion by 2008. This represents a compounded annual growth rate of 70%, and approximately 3% of the total $97.0 billion FPD market in 2008. DisplaySearch forecasts this growth will be driven by the adoption of OLED displays in small product applications, such as mobile phones, car audio and video systems, digital cameras and camcorders, PDAs, portable DVD players, handheld televisions, games, notebook computers and other commercial and industrial applications.

While DisplaySearch’s current forecast anticipates OLED displays initially being adopted for small- to medium-sized product applications, larger display applications may represent a significant potential market for

38

OLED displays. OLED displays may have advantages over LCDs in larger applications such as laptop computers, desktop computer monitors and, in particular, televisions because of their sharper picture image and graphics, superior video response time, higher contrast ratios, wider viewing angle and potentially lower manufacturing cost. All of these attributes are particularly important in larger display applications. To illustrate the interest of display manufacturers in next-generation techniques to manufacture large display panels, recent demonstrations of full-color prototype displays using our P-OLED technology include a 12.5-inch display by Seiko Epson, a 13-inch display by Philips, a 17-inch display by Toshiba and, in May 2004, Seiko Epson, unveiled a prototype 40-inch full-color P-OLED display. Seiko Epson has announced that it plans to offer displays for televisions in 2007, and Casio Computer has announced plans for the production of large television screens based on P-OLED technology, also by 2007.

The OLED industry has evolved into two distinct IP groups, each with its own materials, device structures and processing methodologies:

• Small molecule OLED materials, or SMOLED materials, are based on chemical compounds which, given their size, can be evaporated without chemical modification or breakdown. The production of SMOLED devices is typically characterized by a complex process also used by semiconductor manufacturers known as vacuum deposition. In this process, layers of SMOLED materials, each contributing to the generation of a different color, are repeatedly evaporated through a perforated mask to form a specific pattern.

• P-OLED materials, or large molecule polymer OLED materials, are based on longer or many-branched chemical compounds that can be dissolved in organic solvents to form a solution without losing their core properties. As such, P-OLED materials can be processed in a less complex, more cost-effective manner through printing processes, including high precision ink jet printing, and without the need for vacuum deposition.

We believe OLED displays are an attractive alternative to LCDs as they offer a number of potential advantages.

Superior Viewability.    The emissive nature of OLEDs enables higher brightness and contrast ratios, which lead to a sharper picture image and clearer character displays. OLED displays also have a better color spectrum and wider viewing angle than LCDs. We believe the superior viewability and image quality of OLED displays is a key differentiator for consumers in applications ranging from mobile phone to large screen televisions. Evidence from early OLED product launches suggests that consumers value the improved viewability of OLED displays and are willing to pay a premium over the cost of current solutions.

Faster Video Response for Displaying Moving Images.    OLED displays, which have very fast response times, are ideally suited for displaying distortion-free moving images. OLED displays have response times that are approximately a thousand times faster than those of LCDs. While the response times for LCDs have improved over the last 10 years, it is still possible to discern a ghosting effect, a phenomenon where retained images do not keep up with the content, particularly noticeable when watching fast-paced action in movies or sporting events. We believe the faster video response of OLED displays will enable them to further penetrate the mobile phone market as mobile phones add video features and television tuner capabilities.

Cost Advantages.    We believe the cost of producing OLED displays will eventually fall below that of LCD production as OLEDs have a simpler structure, require relatively fewer production processes, eliminate the two most costly components of an LCD, namely the backlight and color filter, and in the case of our P-OLED displays, can be manufactured through rapid, material-use efficient, solution processes such as high precision ink jet printing. It is possible that substantial portions, including the most capital intensive portions, of LCD manufacturing facilities could also be used to manufacture OLED displays, thus improving the attractiveness of a

39

conversion from LCD manufacturing to OLED manufacturing. We believe that if increasing applications and technological improvements drive adoption of OLED displays, we may see a virtuous cycle of cost reduction and increased volumes, ultimately resulting in the cost of OLED displays dropping below that of LCDs.

Slimmer Form Factor.    Electronics consumers have shown a strong preference for thinner, lighter form factors, as evidenced by the displacement of CRT displays by LCDs. OLED displays are, in turn, significantly thinner and lighter than LCDs of the same size. We believe that the thinner and lighter displays enabled by OLEDs will increasingly displace LCDs for both mobile and non-mobile applications. Mobile phone sub-displays, the smaller display on the cover of most flip-phone models, are an example of an application where the slimmer form factor of OLED displays has already resulted in a rapid displacement of LCDs. Further, we believe that OLED technology will be increasingly used in the main display for mobile phones.

Our Solution

We design, develop and market P-OLED technology that enables the manufacture of P-OLED displays which have enhanced features and capabilities for use in numerous consumer and industrial applications, including flat panel televisions, mobile phones, PDAs, digital cameras and camcorders (including electronic viewfinders), portable DVD players, electric shavers, MP3 players and other applications. The key elements of our solution include:

Technology Leadership.    We are a recognized leader in OLED technology and believe we have the most comprehensive portfolio of OLED IP in the areas of P-OLED devices incorporating fluorescent materials, high efficiency phosphorescent dendrimer and other materials, and solution processing know-how. The fundamental inventions relating to P-OLED technology were made by a team of researchers at the Cavendish laboratories at the University of Cambridge in 1989, that included Dr. Jeremy Burroughes, our Chief Technical Officer, and Sir Richard Friend, a professor at the University of Cambridge and a member of our Technical Advisory Board. Through our IP portfolio, both owned by us and licensed from third-party patent owners, we believe that we can enable our licensees to manufacture P-OLED displays independent of fundamental IP governing other types of OLEDs.

We believe that our IP strength will require third-party manufacturers making or selling P-OLED displays or materials in countries where we maintain patent protection to acquire a license from us. The strength of our IP position is illustrated by the fact that we have attracted licensees such as Dow Chemical, DuPont Displays, OSRAM Opto Semiconductors, Philips, Seiko Epson, and Sumitomo Chemical.

In addition to our patent portfolio, we have developed considerable proprietary know-how by virtue of the pioneering achievements of our world class team. Of particular relevance is the implementation knowledge, or the know-how, of the manufacturing process for P-OLED devices, which has been enhanced by our Technology Development Center. Through this facility, we provide services and production process know-how to our licensees, potential licensees and development partners. This allows us to generate service revenues, accelerate overall adoption of our technology and assist our licensees in bringing products to market as quickly as possible.

Commercially Viable Lifetimes and Color Spectrum.    Product lifetime has been a key focus for many emerging display technologies and a challenge to mass adoption. Through intensive research and development efforts, we have achieved the minimum lifetimes and color coordinates of the red, green and blue colors required by manufacturers for full-color mobile devices. Although lifetimes are already sufficient for P-OLED displays in many mobile applications given rapid consumer replacement trends, longer lifetimes across a full-color spectrum need to be achieved to validate P-OLED as a technology that is suitable for existing display types requiring longer service lifetimes and brighter screens, such as televisions. The lifetimes of our red and green have increased from 40,000 hours and 25,000 hours in 2002, respectively, to over 210,000 hours and 190,000 hours today. The lifetime of our blue, which is the most challenging OLED color, has increased from 11,000 hours in 2002 to over 70,000 hours today. The lifetime of a color is measured as the time it takes for the brightness of the color to diminish to half of its original brightness of 100 candelas per square meter, or cd/m². In addition, the

40

lifetimes of our yellow and orange, which are used in monochrome displays, are currently over 250,000 hours and 300,000 hours, respectively, also measured at 100 cd/m². Given this rate of progress, particularly on lifetime of the color blue, we expect to satisfy the lifetime requirements of more demanding applications such as televisions.

Manufacturing Cost Advantages.    LCDs have a complex structure requiring components such as backlights, color filters, spacers, diffusers and alignment layers. Devices based on our P-OLED technology eliminate the need for these additional components. We believe that this simpler structure in comparison to LCDs will lead to significantly lower capital and material costs, shorter manufacturing cycles and higher manufacturing yields. We believe a key advantage of our technology when compared to competing OLED technologies, is the potential for low cost manufacturing. P-OLED materials are solution processable, enabling them to be deposited on panels using conventional printing processes such as high precision ink jet printing, that are materials efficient and may be operated under less rigorous conditions not involving vacuum deposition. In contrast, SMOLED production requires a number of complex vacuum deposition processes in which SMOLED materials are evaporated during a series of repeated steps through a precisely aligned mask, to form a specific pattern, which may result in lower yields. P-OLED advantages over SMOLED become more compelling when scaling to large substrate sizes, as larger masks are more difficult to handle. While some SMOLED technology developers have efforts underway to enable solution processing of small molecules, we believe that these efforts, if commercially successful, would likely require the use of technology covered under our IP and therefore would require a license from us.

Scalable to Large Substrate Sizes.    To meet strong consumer demand for larger panel sizes for products such as flat panel televisions, for more efficient manufacture of smaller screens and to reduce unit costs, LCD manufacturers have rapidly transitioned to larger substrate sizes. As they have made this transition, these manufacturers have encountered significant technical hurdles in scaling some of the component technologies used in LCDs, such as backlights and color filters. For example, backlights that are used to illuminate LCD screens have had technical difficulties in evenly illuminating larger LCD screens. In addition, yield issues have been reported with color filter manufacture for larger scale substrates. The simpler structure of devices based on our self-emissive P-OLEDs does not require the use of either backlights or color filters. We believe the advantages of P-OLED device manufacture will become more compelling as the FPD industry continues its transition towards larger substrate sizes.

Demonstrated Track Record of Commercial Adoption.    The displays on several products using our P-OLED technology have been introduced into the commercial marketplace by leading international companies, including the displays on mobile phones and electric shavers produced by Philips, MP3 player displays produced by Delta Optoelectronics and medical device displays and a range of point-of-purchase and other promotional displays made by OSRAM Opto Semiconductors. Philips, Dai Nippon Printing and others are in development of P-OLED area and full-color displays. Recent demonstrations of full-color prototype displays using our P-OLED technology include 40-inch and 12.5-inch displays by Seiko Epson, a 17-inch display by Toshiba, a 13-inch display by Philips and small screen displays by Casio Computer. Dai Nippon Printing has exhibited a 25-inch poster display which incorporates a number of P-OLED segments as part of the display.

Reduced Barriers to New Entrants to the FPD Industry.    We believe our solution offers a compelling opportunity to new entrants to the FPD industry that are not incumbent display manufacturers. The FPD industry, and the LCD business in particular, has become increasingly concentrated as manufacturers have had to make progressively larger capital outlays to build fabrication facilities that can process larger panel sizes. We believe that FPD manufacturing plants that use P-OLED solution processable materials and manufacturing technology can be built at a significantly lower cost than equivalent LCD manufacturing plants and, therefore, lower cost FPD plants could alter the competitive dynamics of the FPD industry by enabling new entrants. Our partner, OTB Technologies, a manufacturing systems integrator, currently offers a turn-key P-OLED-based FPD manufacturing line, incorporating ink jet printing, for smaller substrate sizes. Examples of recent entrants to the FPD industry using our P-OLED technology include DuPont Displays and OSRAM Opto Semiconductors.

41

Our Strategy

Our objective is to establish P-OLEDs as a leading technology for the FPD industry through the use of our extensive IP portfolio, manufacturing process and engineering expertise and commercialization partnerships. We also intend to encourage expanded use of P-OLED technology in other addressable markets. The principal elements of our strategy are to:

Expand Focus on Technology Licensing.    Our business model is focused on licensing our P-OLED and related technologies to FPD manufacturers on a non-exclusive basis. We believe this approach best enables us to capitalize on our IP position, generating license fees and royalty payments from sales by third parties of materials or displays using our IP. Our business model allows us to concentrate on our core strengths of technology development and innovation, while at the same time providing significant operating leverage. We believe that this approach reduces the potential for competitive conflicts between us and our licensees.

Drive Adoption of our P-OLED Technology.    Our strategy is to collaborate with a group of companies, including material suppliers, equipment manufacturers, display makers and component providers, with expertise in a range of technologies that are necessary for the success of our P-OLED technology. For example, to further materials development, we have licensed our materials IP to four suppliers, Covion, Dow Chemical, H.C. Starck (a subsidiary of Bayer) and Sumitomo Chemical, in exchange for a royalty on their sales of P-OLED materials to our display manufacturer licensees and we continue to work with our materials licensees to test and improve their products. In order to provide specialized ink jet printers for printing P-OLED, we invested in Litrex, a developer and supplier of ink jet printing equipment which can be used in the manufacture of P-OLED displays. This investment has allowed us to accelerate the development of commercial scale printers specifically designed for P-OLED printing. We also seek to obtain licenses, with sub-licensing rights, for other relevant IP in order to simplify the acquisition of IP rights required by our prospective licensees. In January 2002, we opened our Technology Development Center in Godmanchester, near Cambridge, England, at a cost of approximately $25 million, to enable us to develop P-OLED display manufacturing processes in a commercial scale facility and to subsequently sell process and engineering packages to our licensees. In return for technology transfer and service fees, we provide a range of customized service packages which assist companies in achieving their plans to adopt and commercialize products using our P-OLED technology. Finally, we also promote the adoption of our P-OLED technology by participating in and cooperating with industry groups.

Expand and Deepen Relationships with Leading Display Manufacturers.    We have established relationships with many of the major display manufacturers in the industry, including formal relationships with Philips, Samsung Electronics, Seiko Epson and Thomson and informal relationships with Casio Computer, LG.Philips and Toshiba Matsushita Displays. We currently have eight licensees for display devices, four licensees for P-OLED materials, and two licensees for semiconductor driver technologies. In addition, we have active technology development and evaluation agreements with six companies. We seek to expand these relationships and develop additional relationships to increase our revenues and promote the adoption of our technology.

Enhance and Protect our IP Portfolio.    We believe that a strong and comprehensive portfolio of P-OLED patented technology is critical to our success in the display industry. Consequently, we are expanding this portfolio through our internal development efforts, our collaborative relationships and other opportunities. This will not only enhance the strength of our IP position, but will enable us to continue to extend our patent coverage into other forms of display and other devices to provide us with an increasingly strong position in our commercial dealings within the overall patent landscape. We will continue to protect our innovations in all major markets, including the United States, Europe and Japan. Inventions that we consider to have the greatest potential are further protected by the filing of patent applications in a greater number of countries. We will seek, and where necessary, take appropriate action to enforce our patent protection for these innovations.

Increase the Value Proposition of our Technology.    Currently our primary focus is to develop additional P-OLED materials and device structures which extend lifetimes, increase power efficiencies and enhance color

42

spectrums to allow P-OLED technology to be used in a broader array of FPD applications. While, traditionally, phosphorescent light emission was thought to be the only route to high efficiency OLED materials, recent findings at the University of Cambridge, Ad-Vision, TDK Corporation, UCLA, Yamagata University and Philips have shown that higher efficiencies than were thought possible can be obtained from fluorescent P-OLED materials. We believe that these findings may allow fluorescent P-OLEDs to achieve significantly higher power efficiencies than previously expected and may provide the only route to very high efficiency blue OLEDs. In addition to our P-OLED technology, we are developing our proprietary high efficiency, solution processable, phosphorescent dendrimer materials. Dendrimers, which are large, spherical molecules with branched chains emanating from their cores, enable materials and device structures that allow OLEDs to emit phosphorescent light while also being capable of solution processing.

Expand Addressable Markets by Leveraging Core Technologies.    We intend to focus our development efforts on the FPD market, which we believe represents the largest near to mid-term market opportunity for our core P-OLED and solution processing technologies. We also intend to explore the applicability of our core technologies to additional applications such as signage and poster-type displays that incorporate multimedia capabilities, sensors, solid state lighting and photovoltaic cells. For example, we have licensed our core P-OLED technology to OSRAM Opto Semiconductors and Philips, two of the largest lighting companies in the world, for lighting applications. In addition, General Electric, with whom we have been collaborating, has announced encouraging results from using P-OLED technology to create white lighting.

Our Intellectual Property

Since our founding, IP has been our highest priority and the quality and range of our IP portfolio reflects this. From the initial filings with respect to our fundamental patents (i) for the use of conjugated polymers in electroluminescent devices and (ii) for the use of co-polymers to achieve the desired performance characteristics of such devices, we have now amassed a substantial base of IP assets including granted and pending patents, trade secrets and know-how. At this time, we have 146 published or unpublished patent families, including eight joint filings with our development partners, with over 50 issued United States patents and extensive patent protection in Europe, Japan and China.

Our patent portfolio now extends into the following areas:

• electroluminescent devices

• electroluminescent and charge transport materials

• manufacturing processes

• electrodes/cathodes

• device architecture

• electronics/drivers

• optics

• solution processing and ink jet printing

• flexible display devices

• photovoltaics, such as solar cells

In addition to patents owned directly by us, we have exclusive control of certain patents emanating from the Universities of Cambridge and Oxford. We have been granted sub-licensing rights with respect to the extensive portfolio of patents belonging to Seiko Epson to the extent they relate to the manufacture of P-OLED devices by ink jet printing. We also possess substantial know-how, including the implementation knowledge relating to the manufacture of OLED devices.

43

In 2002, as part of our IP expansion strategy, we acquired control of CDT Oxford, which owns or controls a number of patents protecting the use of dendrimers to make solution processable phosphorescent materials. This allows us to develop proprietary materials which we believe have the potential to form the basis of a future generation of high efficiency green and red materials for solution-processed OLED displays.

We have a comprehensive IP policy which has as its objectives, (i) the development of new IP both to ensure our continued control of P-OLED technology and to further our IP position in relation to OLEDs in general and (ii) the maintenance of our valuable trade secrets and know-how. We seek to achieve these objectives through the education and training of our scientific staff and the adoption of appropriate systems and procedures for the creation, identification and protection of IP.

Our staff is encouraged to create inventions that arise not only from the technical problems which they are solving on a daily basis, but which are also likely to become an effective block (unless licensed) to the technology road maps of both P-OLED and SMOLED devices and material manufacturers. All inventions are submitted to a Patent Review Committee which meets regularly to review such inventions and to review technical and market trends. In this way, we strive to increase the range and breadth of our IP portfolio.

Our general practice is to file patent applications for our technology in the United States, Europe and Japan, while inventions which are considered to have the greatest potential are further protected by filing of patent applications in additional countries, including Canada, China, India, Korea and Taiwan. We file and prosecute our patent applications in pursuit of the most extensive protection including, where appropriate, the applications of the relevant technology to the broader display industry, small molecule OLEDs and other developing OLED technology.

Patents issued in the United States prior to June 8, 1995 generally expire 17 years after the date of issuance. Patents resulting from applications that were pending on that date generally expire 17 years after the date of issuance or 20 years from the date of filing, whichever is later, while patents resulting from applications filed after that date generally expire 20 years from the date of filing. Although our fundamental patents expire in 2010 and 2011, we hold a wide array of additional important patents whose expiration dates range from 2017 to 2023. Our comprehensive approach has led to an existing patent portfolio covering a broad spectrum of OLED technology, and we believe that this extensive portfolio, together with our ability to continue to generate important patentable inventions, will extend our ability to generate licensing revenues for the foreseeable future.

Our strong internal research and development program is supplemented through the joint development of new IP with research partners, including the University of Cambridge, the University of Oxford, the University of St. Andrews, Covion, Sumitomo Chemical and Toppan. In many cases, we either solely own, or jointly own with the right to sublicense, some or all of the IP created under these programs. Our IP strategy also attempts to consolidate IP in the OLED field through cross-licensing with our licensees as a condition of our grant of a license to that party.

Our Technology

We believe our P-OLED technology has the potential to drive OLED adoption by significantly lowering the cost of producing OLED displays, being able to scale to larger substrate sizes and offering potentially higher system power efficiencies.

Simple Device Structure

We believe that displays using our P-OLED technology have the potential for significant cost advantages over LCDs, as P-OLED displays have a simpler device structure and require fewer production processes and components.

There are also significant differences in device structure between P-OLED displays and SMOLED displays. These differences can lead to differences in costs, light-emission characteristics and service lives. For example,

44

in a P-OLED device, a single material has all the characteristics required to perform a number of functions required by the device. In contrast, in a SMOLED device, each small molecule material performs one function so that more layers are required to construct the device. In addition, P-OLED materials use a lower drive voltage of three volts compared to five volts commonly required in SMOLED materials. We believe the lower drive voltage of our technology results in significant benefits to display manufacturers, including increased ease of integration and improved system power efficiencies.

The following table summarizes the key differences in device structure among P-OLEDs, SMOLEDs and LCDs:

Solution Processing Technology

P-OLED materials can form a stable solution in organic solvents, making them suitable for production by solution processing methods that deposit materials onto a substrate using low-cost techniques such as spin-coating, in the case of monochrome or area color displays, as well as ink jet printing. We believe solution processing offers significant advantages over vacuum deposition and has the potential to drive adoption of P-OLED materials by enabling the production of devices that have the same visual attractiveness as other types of OLED displays at significantly lower costs. In addition, we believe that solution processing technologies such as ink jet printing are inherently more scalable, making them more suitable for manufacturing larger area displays and making it potentially feasible to convert a Gen-5, 6 or 7 LCD plant to a P-OLED plant.

We believe the advantages of our solution processing technology will become more compelling as the OLED industry transitions to larger substrate sizes because the current vacuum deposition technologies used in SMOLED displays will have difficulty in scaling to these larger sizes and alternative SMOLED deposition processes are unproven in terms of cost and reliability. As the substrate size increases, the increased size of the perforated mask used in current vacuum deposition techniques results in a greater likelihood of mask alignment problems during deposition of successive layers thereby reducing the manufacturing yield.

45

Although high precision ink jet printing is the current state-of-the-art patterning method for P-OLED materials, there are other printing technologies which have potential for low-cost manufacture such as screen printing, offset lithography, gravure and other flexographic methods common to the graphics industry in which they, and ink jet printing, are well established.

Service Lifetimes

A key challenge facing the OLED industry is the development of OLED devices with service lifetimes adequate for commercial applications. Service lifetimes are extrapolated from laboratory testing of materials to simulate what lifetimes are likely to be achieved at given levels of brightness. Different manufacturers of display devices produce this simulation at different levels of initial brightness depending on their intended applications. The industry norm is to effect the simulation from an initial brightness of 100 cd/m². Our P-OLED technology has demonstrated lifetimes greater than 210,000 hours for red devices, over 190,000 hours for green devices and over 70,000 hours for blue devices in each case measured as the time to half-brightness from an initial brightness of 100 cd/m². We believe the current lifetimes we and our materials licensees have achieved satisfy requirements for small- to medium-sized consumer product applications such as mobile phones, PDAs, digital cameras and camcorders (including electronic viewfinders), portable DVD players, electric shavers, MP3 players, and in-car entertainment and navigation displays, but are not yet sufficient for televisions, notebook computers or desktop computer monitors, which operate at higher brightness levels and have longer service lives. As shown in the table below, we, along with our partners, have made significant progress in extending the lifetimes of materials, including the lifetime for blue, a color that has been particularly challenging for the OLED industry. As we continue to make advances in lifetimes, the breadth of the market capable of being served by products using our P-OLED technology will expand to cover additional segments of the display market. The following table shows the advances made in P-OLED materials lifetimes:

P-OLED Materials Lifetimes^*

	End 2000	End 2002	June 2004
Red	>40,000 hours	>40,000 hours	>210,000 hours
Green	>10,000 hours	>25,000 hours	>190,000 hours
Blue	>1,900 hours	>11,000 hours	>70,000 hours
Yellow	>5,000 hours	>30,000 hours	>250,000 hours
Orange	>10,000 hours	>10,000 hours	>300,000 hours

^* Lifetime measured as the time to half-brightness from an initial brightness of 100 cd/m²

We are also currently working on a transparent cathode to enable a top-emission type device. In such a device, the light is emitted through the cathode side of the device rather than having to pass between the gaps in the thin film transistors, or TFTs, driving the display. This is expected to increase system lifetimes by two to three times due to lowering of the required brightness of the P-OLED material itself for a given device brightness.

Our Power Efficient Technologies

We are striving to improve power efficiency through three routes. First, in addition to our P-OLED fluorescent technology, we own or hold exclusive licenses covering a number of patents and patent applications directed to high efficiency, solution processable, phosphorescent dendrimer materials. Dendrimers, which are large, spherical molecules with branched chains emanating from their cores, enable materials and device structures that allow OLEDs to emit light through a process known as phosphorescence. Theoretically, phosphorescent devices are capable of device efficiencies up to four times higher than those exhibited by fluorescent OLEDs. This would substantially reduce the power requirements of an OLED and is potentially useful for hand-held devices, such as mobile phones, where battery power is often a limiting factor.

46

Second, while, traditionally, phosphorescent light emission was thought to be the only route to high efficiency OLED materials, recent findings at the University of Cambridge, Ad-Vision, TDK Corporation, UCLA, Yamagata University and Philips have shown that higher efficiencies than were thought possible can be obtained from fluorescent P-OLED materials. These findings indicate that a greater proportion of singlet excitons are being generated than previously thought to be theoretically possible. We believe that these findings may allow fluorescent P-OLEDs to achieve significantly higher power efficiencies than previously expected and may provide the only route to very high efficiency blue OLEDs, as phosphorescent blue emission is difficult to obtain and sustain.

Finally, we are continuing to reduce the voltage required by devices using our P-OLED technology leading to more power efficient devices.

Favorable Trends in Driver Technologies

LCD and OLED display devices are classified as either passive matrix or active matrix devices. In passive matrix devices, pixels are connected via a simple X-Y grid and rows or columns are addressed consecutively. In active matrix devices, pixels are connected to an array of thin film transistors, or TFTs, and can be addressed simultaneously. Our licensees are shipping P-OLED passive matrix displays for use in mobile phones, electric shavers, MP3 players and other consumer and industrial applications. The passive matrix segment offers many niche opportunities where performance demands are well within the current state of the technology and the market size is sufficiently large so that licensees can ship large volumes to sustain and grow their businesses using P-OLED displays.

While we believe that the passive matrix segment is very important for the overall success of our P-OLED technology, we are directing development of our P-OLED technology to leverage the growth in the active matrix segment, which in the longer term has much larger revenue potential. We believe that our P-OLED technology is particularly suited to the active matrix market since extended display lifetime is easier to achieve in an active matrix device, in which each pixel is driven at its most efficient operating point.

Active matrix technology was developed by the LCD industry to overcome the limitations of passive matrix screens and enable screens with higher resolutions to be made for laptop computers, desktop computer monitors and more recently televisions. There are two primary types of TFT substrates in use today: amorphous silicon substrates, which are the most commonly used, and low-temperature poly-silicon, or LTPS, substrates, which have benefits due to their better performance.

Amorphous silicon TFTs are simpler to fabricate and are a more mature technology. They are sufficient to control each pixel in the display, but are not fast enough to translate the input signal into row and column signals to enable the display to operate correctly. As a result, the row and column drivers are always made from silicon chips which are attached to the display at a later stage in the manufacturing process. This limits the displays to larger sizes. Although the poly silicon TFT fabrication process is more complex, the superior performance allows them to be used not only as pixel drivers but also as integrated row and column drivers, allowing much smaller high resolution LCD displays to be made, that may be used, for example, as displays in digital cameras.

As amorphous silicon TFTs were believed to suffer from unacceptable instability when driving OLEDs, it had been assumed until recently that active matrix OLEDs would have to be driven using LTPS TFTs. Recently though, means to compensate for the amorphous silicon TFT instability have been developed. In particular, Casio Computer has developed P-OLED displays using amorphous silicon TFT technology with compensation schemes that allow this TFT technology to drive P-OLEDs successfully. Although there is still more development to be done, we believe this work significantly increases the number of possible manufacturing facilities that could be converted from LCD to P-OLED and, since LTPS production has, so far, been limited to Gen-4 size and smaller, the ability to scale P-OLED manufacturing to Gen-5 and larger.

47

Although amorphous silicon is the dominant backplane technology, there has been increased investment in LTPS capacity because of the market demand for small, very high resolution displays. According to Display Search, at least 18 companies operate or plan to operate LTPS production. The key benefit of LTPS for P-OLED technology is the ability to drive a higher current for a given voltage and, therefore, allow smaller TFTs to be used so that a greater proportion of the area of the display is available for the emergence of light generated by the P-OLED or to allow higher resolution displays to be made. Recent demonstrations of full-color prototype displays using our P-OLED technology on a LTPS backplane include displays made by Seiko Epson, Toshiba and Philips.

We believe that the growing availability of LTPS and the growing acceptance that amorphous silicon TFTs can drive P-OLED devices, along with additional P-OLED advantages over LCDs, such as sharper picture image and graphics, higher contrast ratios, superior video response time, wider viewing angle, slimmer form factor and potentially lower manufacturing cost, will allow P-OLEDs to penetrate all LCD product markets.

P-OLED Materials Technology

Our materials licensees, Covion, Dow Chemical, H.C. Starck (a subsidiary of Bayer) and Sumitomo Chemical, currently manufacture and sell P-OLED materials to display manufacturers. Through a research and development program with Covion, collaborative relationships with Dow Chemical and Sumitomo Chemical, and our own work, we continue to improve red, green and blue materials and encourage their adoption in the industry to form the basis of the next generation of high efficiency materials for OLED displays. We also share our research to improve lifetimes, color spectrum and power efficiencies of P-OLED materials made by our materials licensees with selected display manufacturers.

Our Licensees

We have granted and will continue to grant a number of non-exclusive licenses for the manufacture of displays, lighting and photovoltaic devices. In this respect, we will enter into licensing discussions with any company that is likely to provide satisfactory market penetration for P-OLEDs. We offer such licenses on a non-exclusive basis and generally require licensees to pay an initial non-refundable lump sum license fee together with recurring royalties, which are in addition to and not creditable against the upfront license fee. From time to time, we have offered to provide a license in exchange for consideration that has included equity in the licensee. We currently have equity ownership stakes in two of our licensees, Plastic Logic and MicroEmissive Displays. The amount of the license fee and royalty will be negotiated, but will be dependent on one or more of the following factors:

• whether the licensee requires a license for both active and passive matrix displays;

• the maximum pixel resolution for the display devices to be manufactured by the licensee;

• the maximum diagonal dimension of the displays to be made;

• whether the license is required for displays, lighting or photovoltaics; and

• if the license is required for displays, the type of display application, such as graphics or consumer devices.

In addition, we have exclusively licensed certain patents for use in the manufacture of emissive materials to Covion, Dow Chemical and Sumitomo Chemical and have issued a license for P-OLED hole transport materials to H.C. Starck.

Prior to entering into a license, we will often enter into an informal collaborative relationship with prospective licensees. During this stage we will ensure that partners are kept updated with the overall state of technology development. Sometimes we will provide direct technical support. We have such relationships with many of the world’s largest display manufacturers. Following this initial informal collaboration, we expect to

48

enter into a more formal paid technology development phase. We currently have technology development agreements with Covion, DuPont Displays, Kolon, Samsung Electronics, Sumitomo Chemical, Thomson and Toppan. The goal of these joint development agreements is to promote adoption of our P-OLED technology and to enhance our license fees and royalties.

Generally, our licenses are “living.” This means that the licensee is licensed under all patents that we have filed or will file in the future. Accordingly, unless terminated, the licenses continue until the last to expire of our patents. In addition to the usual rights to terminate on breach or insolvency, the licensee has the right to terminate on notice. The notice period is either six or 12 months. This means that if the licensee is no longer using our technology, it can terminate the license agreement. We do not offer warranties as to the validity of our patents or non-infringement of third party patents in relation to such licenses.

There are two exceptions to the above: (i) the Philips license is only in relation to patents filed by us up to January 1, 2001, and is of fixed term expiring on December 31, 2020 and (ii) the Seiko Epson license is in respect of all patents, but is of fixed term expiring on December 31, 2010. We expect that the Seiko Epson license will be extended by mutual consent and the parties are obliged, under the terms of the license, to discuss an extension in advance of the expiry of the fixed term.

As of June 2004, our licensees included:

Licensee	Company Description	Status	Date of License
Display Devices
Royal Philips Electronics	One of the world’s largest consumer electronics companies	Spin-coating monochrome line has been in production since 2002. Philips’ first P-OLED commercial product was an electric shaver display that was launched in 2002. Philips launched a mobile phone that included a monochrome P-OLED sub-display in 2004. Additionally, a full-color ink jet printing pilot line is producing prototype displays.	1996
Delta Optoelectronics	Leading consumer electronics company	Spin-coating monochrome line has been producing displays for MP3 players and other displays since 2002.	1996
Seiko Epson	Leading imaging, robotics, precision machinery and electronics company with a significant presence in consumer products	Seiko Epson has produced P-OLED prototypes of a 40-inch and a 12.5-inch full-color ink jet printed display and has announced its intentions to commercialize televisions in 2007.	1999
OSRAM Opto Semiconductors	Provider of solutions based on semiconductor technology for lighting, sensor and visualization applications	Spin-coating monochrome line started commercial production in 2004 of a medical device display and a range of point-of-purchase and other promotional displays.	2001
DuPont Displays	Developer of advanced display devices and components	Currently developing ink jet printing capabilities for full-color active matrix displays. Has monochrome P-OLED display capability through RitDisplay, a Taiwanese consumer electronics display manufacturer.	2001

49

Licensee	Company Description	Status	Date of License
MicroEmissive Displays	Developer of light-emitting polymer-based microdisplays	Has developed full-color microdisplays for use in viewfinder applications in digital cameras. Shipping samples to its first customer with an anticipated product availability in the first quarter of 2005.	2002
Dai Nippon Printing	Leading provider of printing technologies and supplier of color filters to the LCD industry	Developing flexible P-OLED displays for point-of-purchase applications. Expected to commercialize in 2005.	2003
Innoled	Subsidiary of Eastgate, a leading manufacturer and distributor of digital storage products in the Asia Pacific region	Has ordered a complete ink jet printing based production line to be delivered in 2004 through OTB Technologies, our manufacturing systems integrator partner.	2003
Materials
H.C. Starck	Subsidiary of Bayer that produces an assortment of refractory metal powders	P-OLED hole transport materials currently being shipped for commercial production and development.	2000
Dow Chemical	Leader in science and technology, providing chemical, plastic and agricultural products and services	P-OLED materials currently being shipped for commercial production and development.	2001
Covion Organic Semiconductors	Designs, manufactures and markets high performance advanced materials for displays and other electronics applications	P-OLED materials currently being shipped for commercial production and development. Jointly developing new materials with us.	2001
Sumitomo Chemical	Leading chemical company with wide experience in electronic materials	P-OLED materials, including next-generation high efficiency materials, currently under development jointly with us.	2001
Semiconductor Driver Circuits
STMicroelectronics	Global independent semiconductor company that makes a range of discrete devices and integrated circuits	Developing OLED semiconductor driver circuits.	2001
Plastic Logic	Leading developer of plastic electronics technology	Developing next-generation organic semiconductor driver circuits.	2002

Research and Development

We conduct research to further develop and enhance our proprietary core P-OLED and solution processable phosphorescent technologies. Our research and development team of 88 professionals has competencies in materials science, device physics, process development, and ink jet printing. In addition, we have established a Technical Advisory Board composed of leading scientists and seasoned industry experts. This board, which has extensive and relevant scientific and commercial expertise, advises us on P-OLED technology and our other

50

areas of research to help ensure that our research and development and product roadmaps are aligned to customer and market trends.

The current composition of our Technical Advisory Board is as follows:

Name	Experience
Dr. Scott Brown	Our Director of Research and Development
Dr. Jeremy Burroughes	Our Chief Technical Officer
Dr. Paul Burn	Lecturer in Organic Chemistry at the University of Oxford who has been central to the development of dendrimers
William Freer	Over 30 years of experience in the semiconductor and FPD industry in research, manufacturing and commercial environments, most recently with Philips Components
Professor Sir Richard Friend	Our Chief Scientist and Cavendish Professor of Physics at the University of Cambridge
Professor Andrew Holmes	Professor of Organic and Polymer Chemistry and the Director of the Melville Laboratory at the University of Cambridge
Chris Williams	Over 25 years of experience in the displays industry, and formerly worked for Regisbrook Group, the largest manufacturer of LCD and vacuum fluorescent display modules in the United Kingdom

As part of our development efforts, in January 2002, we opened our Technology Development Center in Godmanchester, near Cambridge, England at a cost of approximately $25 million, to enable us to develop P-OLED display manufacturing processes in a commercial scale facility and to subsequently sell process and engineering packages to our licensees. In return for technology transfer and service fees, we provide a range of customized service packages which assist companies in achieving their plans to adopt and commercialize products using our P-OLED technology. At this facility we have the capability to fabricate fully functional display modules on substrate sizes from 1”x1” to 14”x14” for evaluation, testing and demonstration. This enables us to rapidly roll-out and deploy advances made on a research scale into a commercial scale facility.

Acquired Businesses

Litrex

In order to provide development scale and production machines for printing P-OLED, we acquired Litrex Corporation, an ink jet printing systems integrator, from Gretag Imaging Holding AG in November 2001. Following our acquisition of Litrex, we funded the development of commercial scale printers specifically designed for P-OLED printing. Once Litrex had fulfilled our objective of bringing to market P-OLED ink jet printing systems and the expertise and credibility of a large equipment maker was required, in August 2003 we sold a 50% equity interest in Litrex to Ulvac, a large Japanese equipment supplier. In addition, as part of that transaction, we granted Ulvac a call, and obtained a put, on our remaining 50% equity interest in Litrex, exercisable in August 2005. We also pledged our remaining 50% interest to Ulvac as security for the performance of various obligations. In certain circumstances, Ulvac may block our right to exercise our put and require us to repurchase their 50% interest. We anticipate that the sale of our remaining 50% in Litrex to Ulvac will occur in November 2005 and that we will receive a minimum of $10.0 million from Ulvac. Nevertheless, under certain circumstances such as infringement, impairment or unavailability of IP required for Litrex to operate or the departure of a group of key employees from Litrex, this sale may not proceed. We also entered into agreements with Ulvac that govern the operation of Litrex, require minimum levels of funding of Litrex by Ulvac and provide for a fallback license in the event Litrex were to default on its obligations to support the development of ink jet printing equipment for use by P-OLED display manufacturers. Under certain

51

circumstances, we and Ulvac may each be required to provide financial support for Litrex of up to $1.25 million if necessary to ensure Litrex’s continued operations over the next twelve months. Currently, we are focusing our efforts on developing the ink jet printing process know-how to accompany the Litrex printers while Litrex focuses on scale-up of its technologies for printers for Gen-4 and larger fabs.

CDT Oxford

In 2002, we acquired a 16% equity interest in CDT Oxford Limited (formerly known as Opsys UK Limited) in exchange for an immediate cash payment. As part of that transaction, (i) we acquired full management control over CDT Oxford and responsibility for the funding of its operations, (ii) we granted Opsys Limited, the holder of the remaining stock of CDT Oxford, a put, and obtained a call, on all of the stock of CDT Oxford not already owned by us and (iii) we granted the shareholders of Opsys Limited a put, the exercise of which would require us to acquire all of the outstanding stock of Opsys Limited in exchange for a predetermined number of shares of our common stock upon the satisfaction of certain specified conditions. In addition, we are entitled to an annual management fee equal to 98% of all pre-tax profits earned, if any, by CDT Oxford. CDT Oxford owns or controls a number of patents protecting the use of dendrimers to make small molecules processable in solution. CDT Oxford also has a large body of know-how concerning the development of solution processable phosphorescent materials. This allows us to develop and to patent materials that we believe have the potential to form the basis of a future generation of high-efficiency materials thus enhancing our IP portfolio with respect to the future market for OLED displays.

We are currently negotiating a Settlement and Amendment Agreement with Opsys and certain Opsys shareholders to resolve certain disputes that had arisen between us regarding the alleged entitlement of Opsys to certain anti-dilution adjustments in respect of the investment in our convertible preferred stock made by certain of our affiliates. Under the settlement, which would become effective upon consummation of this offering and our certification as to the satisfaction of the conditions to the exercise by the Opsys shareholders of their right to put the shares of Opsys Limited to us, the number of shares to be received by Opsys would be changed to a number to be derived by application of a specified formula. If we do not enter into a settlement, or if the settlement does not become effective or is terminated, we intend to contest vigorously any claims Opsys may assert against us.

Competition

The display industry in which we operate is highly competitive. We compete against existing FPD technologies, dominated by LCDs, as well as emerging FPD technologies, including OLEDs. Due to the complex and rapidly evolving nature of the display industry, many of our competitors are, at times, working with us as licensees, development partners or services customers.

Numerous companies have developed or are developing LCD and other technologies such as plasma, rear-projection microdisplay, inorganic electroluminescence and field emissive displays that compete or will compete with our P-OLED display technologies. In addition, many large LCD manufacturers who have made significant investments in LCD technology and infrastructure may not focus on P-OLED technologies for their next-generation FPD initiatives regardless of the advantages inherent in the production and sales of such displays. Many of the current and potential LCD panel manufacturers, who use a competing technology but are also current or potential licensees of our P-OLED technology, have significantly greater name recognition and more extensive financial, marketing and research resources than we do.

We also compete with a number of companies developing alternative OLED technologies. These include Eastman Kodak, which has licensed its fluorescent SMOLED technology and other patents for passive matrix OLED display applications, and Universal Display Corporation, whose phosphorescent SMOLED technology is used for certain passive matrix OLED applications. In addition, there are a number of smaller and larger companies focused on applications in the OLED sector which could choose to focus their efforts on our current and future licensees, which could affect our growth and business prospects.

52

We believe that the principal competitive factors in the FPD market, which encompasses the market for OLED display technology, include image quality, power efficiency, manufacturing cost, product lifetime, weight and dimension. While we believe that products incorporating our P-OLED technology compare favorably on these factors, there can be no assurance that our technology will capture a substantial portion of the OLED display market or that our licensees’ products using our P-OLED technology will capture a substantial portion of the FPD market.

Facilities

We lease the following facilities:

Location	Approximate Square Feet	Use
Bldg 2020 Cambourne Business Park, Cambridge, England	7,425	Offices for executive and support functions to be occupied in August 2004
Greenwich House Annex, Madingley Rise, Madingley Road, Cambridge, England	9,056	Laboratories and office space for the chemistry and material science teams
Units 8, 11 and 12, Cardinal Business Park, Godmanchester, England	35,302	Technology Development Center (including offices, cleanrooms, laboratories, manufacturing facilities and other technical space)
No. 1, Industry East 2nd Road, SBIP, Hsin-Chu, Taiwan	300	Office space

We believe that our facilities are adequate for our current needs and that suitable additional or substitute space will be available as needed to accommodate foreseeable expansion of our operations.

Employees

As of July 1, 2004, we had 113 full-time employees and three part-time employees, none of whom are unionized. We believe that relations with our employees are good.

Legal Proceedings

We are not currently party to any legal proceedings of a material nature.

53

MANAGEMENT

Directors and Executive Officers

The following chart sets forth certain information regarding our directors and executive officers, with ages as of June 30, 2004:

Name	Age	Position(s)
Dr. David Fyfe	61	Chairman of the Board and Chief Executive Officer
Dr. Scott Brown	41	Director of Research & Technology
Dr. Jeremy Burroughes	43	Chief Technical Officer
Dr. SB Cha	39	Director of Commercial
Stephen Chandler	48	Director of Legal & Intellectual Property
Philip E. Berney	40	Director
Frank K. Bynum, Jr.	41	Director
Dr. Hermann Hauser	55	Director
Gerald Paul Hillman	61	Director

Dr. David Fyfe has served as the Chairman of our Board of Directors and our Chief Executive Officer since September 2000. From 1996 to 1999, Dr. Fyfe was Chief Executive Officer of Harris Specialty Chemicals. Between 1999 and August 2000, Dr. Fyfe worked as an independent business consultant.

Dr. Scott Brown has served as our Director of Research & Technology since May 2002. Prior to joining us, Dr. Brown held a variety of management positions within the Research & Development division at Dow Corning between 1987 and 2002, ultimately serving as Global R&D Director of the electronics business.

Dr. Jeremy Burroughes has served as our Chief Technical Officer since November 2001 and was one of the three original inventors of P-OLED technology. Dr. Burroughes joined us in 1997 to manage the new research group and held the positions of Technical Director from June 1998 to November 2000 and Product Business Unit Director from November 2000 to November 2001.

Dr. SB Cha has been our Director of Commercial since July 2002. Between 1998 and 2002, Dr. Cha was employed in the components division of Royal Philips Electronics, where he was Vice President of Strategic Marketing and Business Development from 1999 to 2002 and Vice President of Customer Development, North America Region from 1998 to 1999.

Stephen Chandler has served as our Director for Legal & Intellectual Property since joining us in 2003, responsible for all legal and intellectual property matters, and for developing our intellectual property strategy. Prior to joining us, Mr. Chandler was a partner at the law firm Pinsent Curtis Biddle between 1986 and 2003.

Philip E. Berney has served as a member of our board of directors since 1999. Mr. Berney is a Managing Director at Kelso & Company, having joined Kelso in 1999. Additionally, Mr. Berney is a director of Key Components and Nortek.

Frank K. Bynum, Jr. has served as a member of our board of directors since 1999. Mr. Bynum is a Managing Director at Kelso & Company, having joined Kelso in 1987. Additionally, Mr. Bynum is a director of Citation Corporation, Endurance Business Media, FairPoint Communications and 21^st Century Newspapers.

Dr. Hermann Hauser has served as a member of our board of directors since December 2003. In 1997, Dr. Hauser co-founded and has since served as a director at Amadeus Capital Partners Limited, a venture capital company specializing in high-technology investments in Europe, where he continues to oversee a broad range of early and later stage developing technology companies. Companies founded or co-founded by Dr. Hauser include Acorn Computers, Active Book Company, Virata, Net Products, NetChannel and Cambridge Network Limited.

54

Gerald Paul Hillman has served as a member of our board of directors since 1999. Mr. Hillman is a Managing Director of Hillman Capital Corporation and a principal in Trireme Partners LP, a venture capital firm that invests in high tech companies. Mr. Hillman is also a director of AKCode LLC, Aralia Systems, Fibrogenex, MP2 Solutions LLC, Peak Wireless Systems and Trireme Systems.

At present, all directors will hold office until their successors are elected and qualified, or until their earlier removal or resignation. Hermann Hauser has indicated his intention to resign from our board of directors upon the consummation of this offering because of a policy of his employer, Amadeus Capital Partners, which forbids service by its directors on public company boards. None of our officers has any family relationship with any director or other officer.

Our Board and Board Committees

The following sets forth certain information regarding our board of directors and certain committees of our board of directors. It is our intention to be in full and timely compliance with all applicable rules of the Nasdaq National Market and applicable law, including with respect to the independence of directors and the composition of certain committees of our board of directors and, accordingly, the composition of our board and certain committees of our board any change prior to and following the consummation of this offering.

Composition of the Board After This Offering

Our business and affairs are managed under the direction of our board of directors. Upon consummation of this offering, our board will be composed of              directors, one of whom is our Chief Executive Officer, and              of whom are independent directors under the applicable rules of the Nasdaq National Market.

Certain Committees of the Board of Directors

Audit Committee.    Upon consummation of this offering, we will have an audit committee consisting of             ,              and             . The audit committee will have responsibility for, among other things:

• selecting our independent auditors;

• reviewing and approving the scope of the independent auditors’ audit activity and extent of non-audit services;

• reviewing with management and the independent accountants the adequacy of our basic accounting systems and the effectiveness of our internal audit plan and activities;

• reviewing with management and the independent accountants our financial statements and exercising general oversight of our financial reporting process; and

• reviewing litigation and other legal matters that may affect our financial condition and monitoring compliance with our business ethics and other policies.

Compensation Committee.    Our board of directors established a compensation committee to review all compensation arrangements for executive officers. The individuals serving on the compensation committee are Philip E. Berney, Gerald Paul Hillman and             .

Compensation Committee Interlocks and Insider Participation

No member of our board of directors serves as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our board of directors or compensation committee, nor has any such interlocking relationship existed in the past.

55

Compensation of Directors

Currently, we reimburse directors for any expenses incurred in attending meetings of our board of directors and committees of our board. After this offering, we expect our independent directors to also receive an annual fee of $15,000 for serving as directors and an annual fee of $10,000 for each committee of our board of directors on which such director serves.

Executive Compensation

The following table sets forth the compensation earned by our Chief Executive Officer and the five additional most highly compensated of our executive officers (each, a named executive officer) for the last fiscal year.

Summary Compensation Table (1)

		Annual Compensation			Long-Term Compensation
Name and Principal Position	Year	Salary ($)(2)	Bonus ($)(3)	Other Annual Compensation ($)(4)	Securities Underlying Options/SARs (#)(5)	All Other Compensation ($)(6)
David Fyfe Chief Executive Officer	2003	424,455	179,550	384,307	—	10,000
Ian Butcher (7) Chief Financial Officer	2003	284,851	85,009	—	—	11,906
Scott Brown Director of Research & Technology	2003	232,323	83,134	34,793	4,000	11,616
Jeremy Burroughes Chief Technical Officer	2003	219,835	75,565	—	—	10,992
Stephen Chandler (8) Director of Legal & Intellectual Property	2003	191,556	82,041	741	75,000	9,578
SB Cha Director of Commercial	2003	209,486	62,323	—	—	15,609

(1) Payments made in pounds sterling are converted into dollars at the exchange rate on December 31, 2003 of 1.7859 dollars to 1 pound sterling, as published in the Wall Street Journal.

(2) Amounts shown in this column include amounts contributed by the named executive to the executive’s 401(k) account, in the case of Dr. Fyfe, and to the executive’s defined contribution pension accounts, in the case of all other named executives.

(3) Amounts in this column represent cash payments made pursuant to our CDT Bonus Plan. These bonus amounts were earned in 2003, but paid in January 2004.

(4) Amounts in this column include (i) a $90,000 overseas allowance payment to Dr. Fyfe and a $35,114 overseas allowance payment to Dr. Fyfe paid in January 2003 for the 2002 year; (ii) $259,193 in tax equalization payments to U.K. Inland Revenue on Dr. Fyfe’s behalf pursuant to his Overseas Benefit Agreement; and (iii) $34,793 paid to Dr. Brown for reimbursement of taxes incurred by him in connection with our payment of his relocation expenses in 2002 and $741 paid to Mr. Chandler for local property taxes incurred by him in 2003.

(5) All of the options were granted under the CDT Acquisition Corp. Amended and Restated Stock Incentive Plan administered by the compensation committee of our board of directors.

(6) Amounts in this column include (i) a $10,000 matching contribution to Dr. Fyfe’s 401(k); and (ii) matching contributions to the defined contribution pension accounts of Drs. Brown, Burroughes and Cha and Messrs. Chandler and Butcher in amounts of $11,616, $10,992, $15,609, $9,578 and $11,906, respectively.

(7) Mr. Butcher’s employment with us terminated on January 31, 2004.

(8) Mr. Chandler joined us in May 2003.

56

Option Grants in the Fiscal Year Ended December 31, 2003

The following table sets forth information concerning individual grants of stock options made during the fiscal year ended December 31, 2003 to the executives named below.

Option Grants in Last Fiscal Year

	Individual Grants
Name	Number of Securities Underlying Options Granted (#)(1)	Percent of Total Options Granted to Employees in 2003(2)		Exercise Price ($/sh)(3)		Expiration Date	Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term(4)
							5% ($)	10%($)
David Fyfe	—
Ian Butcher	—
Scott Brown (5)	4,000	1.95	%	$	16.15	1/1/2013	40,627	102,956
Jeremy Burroughes	—
Stephen Chandler (6)	75,000	36.51	%	$	16.15	5/5/2013	761,749	1,930,421
SB Cha	—

(1) All of the options were granted under the CDT Acquisition Corp. Amended and Restated Stock Incentive Plan administered by the compensation committee of our board of directors.

(2) The total options granted to employees in the fiscal year includes grants to our current and former employees and consultants.

(3) The exercise price is based on the fair market value of a share of our common stock on the date the option is granted.

(4) Potential realizable value is based on the assumed annual growth for each of the grants, shown over their 10-year option term. These amounts represent assumed rates of appreciation in the value of our common stock from the fair market value on the grant date. Actual gains, if any, on stock option exercises depend on the future performance of our common stock and overall stock market conditions. The amounts reflected in the table above may not necessarily be achieved.

(5) Of the 4,000 options granted to Dr. Brown, 1,333 of these shares vest based upon continued service with us and 2,667 of these shares vest if and when Kelso Investment Associates VI, L.P., KEP VI, LLC, Hillman CDT LLC and Hillman CDT 2000 LLC receive an internal rate of return, compounded annually, on their investment in the aggregate number of shares of common stock beneficially owned by them on the date of a change of control (as defined in the CDT Acquisition Corp. Amended and Restated Stock Incentive Plan), in an amount of at least 30%, calculated from the time of their initial investments in us. Of those options that vest based on continued service, 25% vested upon the grant date, and an additional 25% will vest on each of the first, second and third anniversaries of the grant date.

(6) Of the 75,000 options granted to Mr. Chandler, 25,000 of these shares vest based upon continued service with us and 50,000 of these shares vest if and when Kelso Investment Associates VI, L.P., KEP VI, LLC, Hillman CDT LLC and Hillman CDT 2000 LLC receive an internal rate of return, compounded annually, on their investment in the aggregate number of shares of common stock beneficially owned by them on the date of a change of control (as defined in the CDT Acquisition Corp. Amended and Restated Stock Incentive Plan), in an amount of at least 30%, calculated from the time of their initial investments in us. Of those options that vest based on continued service, 25% vested after the six-month anniversary of Mr. Chandler’s start date with us, and an additional 25% will vest on each of the first, second and third anniversaries of the start date.

57

Stock Option Grants and Values as of December 31, 2003

The following table sets forth information for each named executive officer regarding grants of options to purchase shares of our common stock and the value of such options as of December 31, 2003. Such options were granted to the named executive officers pursuant to the CDT Acquisition Corp. Amended and Restated Stock Incentive Plan.

	Number of Securities Underlying Unexercised Options at December 31, 2003		Value of Unexercised In- the-Money Options at December 31, 2003($)(1)
Name	Exercisable	Unexercisable	Exercisable	Unexercisable
David Fyfe	91,667	208,333
Stephen Chandler	12,500	62,500
Ian Butcher (2)	12,500	62,500
Scott Brown	10,667	33,333
Jeremy Burroughes	41,667	83,333
SB Cha	5,000	25,000

(1) Calculated based on a per share price of our common stock of $        , equal to the midpoint of the range set forth on the cover page of this prospectus, less the per share exercise price.

(2) Upon Mr. Butcher’s termination of employment on January 31, 2004, he retained all exercisable options and forfeited all unexercisable options. At the time of his termination, Mr. Butcher had 13,125 exercisable options. He may exercise his retained options for a period of two years from the date of his termination.

Employment Agreements

We have entered into the following employment agreements with our executive officers, each of which is governed by the law of England and Wales, except for the agreement with Dr. David Fyfe, which is governed by U.S. law:

Dr. David Fyfe.    In August 2002, we entered into an employment agreement with Dr. Fyfe as our Chief Executive Officer and a member of our board of directors for a term of three years, subject to extension. Pursuant to this employment agreement, Dr. Fyfe currently receives an annual base salary of $441,000, as well as an annual overseas allowance in the amount of $90,000 for periods during which he serves overseas. Dr. Fyfe is also eligible to receive an annual bonus, which in his first year of employment was limited to 45% of his base salary.

Dr. Fyfe is also entitled to a benefit under the terms of our Special Bonus Plan. Should Dr. Fyfe’s term not be extended upon expiration of his employment agreement or if his employment is terminated for any reason other than for cause (as defined in the employment agreement), his entitlement under the plan shall remain in place until an exit event (as defined in the plan). If Dr. Fyfe terminates his employment before an exit event, then payment of any unvested benefits under this plan will be at the sole discretion of our board of directors. In addition, Dr. Fyfe will be entitled to retain any options to purchase shares of our common stock for a period of seven years, after which, if a vesting event (as defined under our Stock Incentive Plan) has not occurred, we will be required to liquidate the options at a value set by an independent third party.

Upon (i) expiration of his employment, (ii) his death or disability or (iii) termination of his employment either by us without cause or by him for good reason (including a change in control, each of which is defined in the employment agreement), Dr. Fyfe is entitled to a pension of $100,000 per year for a period of five years, contingent upon his recruitment of a successor to be approved by our board of directors, and positive EBITDA in each year that a given payment is to be made. In the event that EBITDA is not positive and thus a pension payment is withheld during a given year, the term of this provision shall be extended by a year, such that a cumulative sum of $500,000 is ultimately paid pursuant to this commitment. An acquiror of the company must assume the pension obligation, in which case the contingencies for payment will not apply.

58

Termination of Dr. Fyfe’s employment by either party, other than termination by us for cause, must be preceded by six months’ notice. Upon termination of Dr. Fyfe’s employment due to death or disability, by us without cause or by Dr. Fyfe for good reason, he will be entitled to (i) all accrued salary and vested benefits payable under the terms of the plan or policy under which they have accrued, (ii) a pro-rata annual bonus payable in a lump sum within 30 days of termination and (iii) his pension payments as described above. Upon termination of Dr. Fyfe’s employment by us without cause or by Dr. Fyfe for good reason, he will also receive severance in the amount of his base salary through the end of his term, payable monthly, and benefit coverage through the end of his term. During his employment and any severance period and for a two-year period following termination by us with cause or by Dr. Fyfe without good reason, Dr. Fyfe will be subject to a customary non-compete provision. Upon termination for any reason, Dr. Fyfe will be subject to a customary one-year non-solicitation provision.

During periods in which he serves overseas, in addition to an annual allowance, we will reimburse Dr. Fyfe for certain reasonable transportation expenses incurred by himself and his family, and will make certain income and employment tax equalization payments pursuant to an overseas benefit agreement. We will also reimburse Dr. Fyfe for up to $10,000 in relocation expenses at the conclusion of his overseas service.

We are currently renegotiating Dr. Fyfe’s agreement to provide for an extension of his term.

Dr. Jeremy Burroughes.    In July 2004, we entered into a new employment agreement with Dr. Burroughes as Chief Technical Officer. Pursuant to this employment agreement, Dr. Burroughes currently receives an annual salary of £126,788 or $226,431 at an exchange rate of 1.7859 dollars to 1 pound sterling as published in the Wall Street Journal for December 31, 2003. Dr. Burroughes is also eligible to receive an annual bonus of up to 35% of his base salary and to participate in our Stock Incentive Plan. Pursuant to this agreement, Dr. Burroughes also participates in our benefits program, including pension contributions, private health insurance and life insurance.

Dr. Burroughes’ employment agreement is for an indeterminate period of time, but may be terminated by either party with twelve months’ notice, or by us without notice for gross misconduct or upon his reaching mandatory retirement age. During any notice period, Dr. Burroughes may not work for any other employer without our permission and upon termination will be subject to customary six-month non-compete and non-solicitation provisions.

Stephen Chandler.    In April 2003, we entered into an employment agreement with Mr. Chandler as Director, Legal & Intellectual Property. Pursuant to this employment agreement, Mr. Chandler currently receives an annual base salary of £180,250 or $321,908 at an exchange rate of 1.7859 dollars to 1 pound sterling as published in the Wall Street Journal for December 31, 2003. Mr. Chandler is also eligible to receive an annual bonus of up to 35% of his base salary and to participate in our Stock Incentive Plan, pursuant to which he was awarded options to purchase up to 75,000 shares of our common stock under his employment agreement. Pursuant to this agreement, Mr. Chandler also participates in our benefits program, including pension contributions, private health insurance, life insurance and reasonable relocation expenses.

Mr. Chandler’s employment agreement is for an indeterminate period of time, but may be terminated by either party with twelve months’ notice, or by us without notice for gross misconduct or upon his reaching mandatory retirement age. During any notice period, Mr. Chandler may not work for any other employer without our permission and upon termination will be subject to customary six-month non-compete and non-solicitation provisions.

Dr. Scott Brown.    In March 2002, we entered into an employment agreement with Dr. Brown as our Director of Research & Technology. Pursuant to this employment agreement, Dr. Brown currently receives an annual base salary of £145,250 or $259,402 at an exchange rate of 1.7859 dollars to 1 pound sterling as published in the Wall Street Journal for December 31, 2003. Dr. Brown is also eligible to receive an annual bonus of up to 35% of his base salary and to participate in our Stock Incentive Plan, pursuant to which he was awarded options

59

to purchase up to 40,000 shares of our common stock under his employment agreement. Pursuant to this agreement, Dr. Brown also participates in our benefits program, including pension contributions, private health insurance, life insurance and reasonable relocation expenses.

Dr. Brown’s employment agreement is for an indeterminate period of time, but may be terminated by either party with twelve months’ notice, or by us without notice for gross misconduct or upon his reaching mandatory retirement age. During any notice period, Dr. Brown may not work for any other employer without our permission and upon termination will be subject to customary six-month non-compete and non-solicitation provisions.

Dr. SB Cha.    In June 2002, we entered into an employment agreement with Dr. Cha as our Director of Commercial. Pursuant to this employment agreement, Dr. Cha currently receives an annual base salary of £122,579 or $218,914 at an exchange rate of 1.7859 dollars to 1 pound sterling as published in the Wall Street Journal for December 31, 2003. Dr. Cha is also eligible to receive an annual bonus of up to 35% of his base salary, and to participate in our Stock Incentive Plan, pursuant to which he was awarded 30,000 stock options under his employment agreement. Pursuant to this agreement, Dr. Cha also participates in our benefits program, including pension contributions, private health insurance, life insurance and reasonable relocation expenses.

Dr. Cha’s employment agreement has an indeterminate term, but may be terminated by either party with six months’ notice, or by us without notice for gross misconduct or upon his reaching mandatory retirement age. During any notice period, Dr. Cha may not work for any other employer without our permission and upon termination will be subject to customary six-month non-compete and non-solicitation provisions.

Ian Butcher.    In November 2002, we entered into an employment agreement with Mr. Butcher as our Chief Financial Officer. Mr. Butcher resigned effective January 31, 2004. Upon termination, Mr. Butcher was entitled to retain vested options to purchase up to 13,125 shares of our common stock, which may only be exercised within two years of his termination. In addition, upon termination Mr. Butcher became subject to customary six-month non-compete and non-solicitation provisions.

Incentive Plans

CDT Acquisition Corp. Amended and Restated Stock Incentive Plan

The compensation committee of our board of directors administers the CDT Acquisition Corp. Amended and Restated Stock Incentive Plan, which is effective as of 2000. The purpose of the plan is to foster and promote our long-term financial success and materially increase stockholder value by motivating superior performance, encouraging and providing for an ownership interest in us by our employees, and enabling us to attract and retain an outstanding management team. Under the plan, certain of our key employees, ex-employees or consultants as selected by the compensation committee are eligible to receive grants of options to purchase shares of our common stock. The number of shares of common stock subject to options under the plan may not exceed 2,000,000. Any shares of common stock subject to an option that for any reason expires or is canceled, terminated or otherwise settled without the issuance of shares, will again be available for grant under the plan. As of June 30, 2004, 1,434,224 options are outstanding under the plan, of which 542,340 options are exercisable.

Under the plan, two types of options may be granted: incentive stock options within the meaning of section 422 of the Internal Revenue Code of 1986, as amended, and non-qualified stock options. The compensation committee has the discretion to determine the number of options, if any, granted to a plan participant, and to designate options as incentive stock options or non-qualified stock options. Each option grant is evidenced by an option agreement that specifies the type of option granted, the exercise price, the duration of the option, the number of shares of common stock to which the option pertains and the conditions upon which the options become vested or exercisable. The exercise price will be determined by the compensation committee, but may not be less than the fair market value of a share of common stock on the date the option is granted. All options expire ten years from the date of grant.

60

The option agreements distinguish between two types of non-qualified stock option: service options and exit options. Service options generally become vested and exercisable in equal installments on each of the date of grant (or six months from the date of grant, in the case of new hires) and the first three anniversaries of the date of grant. Exit options become vested and exercisable on the first occurrence of a Change of Control (as defined in the plan) in which Kelso Investment Associates VI, L.P., KEP VI, LLC, Hillman CDT LLC and Hillman CDT 2000 LLC receive an internal rate of return, compounded annually, on their investment in the aggregate number of shares of common stock beneficially owned by them on the date of the Change of Control, in an amount of at least 30%, calculated from the time of their initial investments in us. If the exit options do not become vested and exercisable as a result of the first occurrence of a Change in Control, they will not become vested and exercisable as a result of any subsequent Change in Control. In addition, our board of directors may accelerate the exercisability of any options in its discretion.

Unless otherwise determined by the compensation committee at the time of grant, the following rules will apply to options in the event a participant’s employment with us terminates. In the event a participant’s employment with us terminates by reason of death or Disability (as defined in the Plan), any options granted to the participant which have become exercisable prior to the participant’s termination may be exercised by the participant or his or her beneficiary at any time prior to the first anniversary of the participant’s termination or the expiration of the term of the options, whichever is shorter. In the event a participant’s employment with us is terminated for Cause (as defined in the plan), all options granted to the participant, whether or not exercisable, shall be immediately forfeited and canceled. If the participant’s employment with us terminates for any reason other than death, Disability or Cause, any options which are exercisable at the date of termination will be exercisable for 60 days or until expiration of the term of the options, whichever period is shorter. Any options which are not exercisable on the date of termination shall terminate and be canceled on the date of termination. The compensation committee has the discretion to permit the exercise of all or any portion of any options to be exercised following a participant’s termination, for a period that does not extend beyond the expiration of the term of the options.

Unless otherwise determined by the compensation committee at the time of grant, upon a Change in Control, we shall have the right to compel participants to exercise their options. However, any options with an exercise price in excess of the price per share of our common stock paid in conjunction with the transaction resulting in the Change in Control will be canceled. Notwithstanding the foregoing, if provided in the option agreement, no compelled exercise, cancellation, acceleration of exercisability, vesting, cash settlement or other payment shall occur upon a Change in Control with respect to any option if the compensation committee reasonably determines in good faith prior to the Change in Control that the option shall be honored or assumed, or new rights substituted therefore by a participant’s employer (or the parent or a subsidiary of such employer) immediately following the Change in Control. To be approved by our compensation committee, any honored, assumed or new rights must:

• provide the participant with equivalent or better rights and entitlements than the rights available under the current options;

• have substantially equivalent economic value to the current options; and

• have terms and conditions which provide that in the event the participant’s employment is involuntarily terminated following a Change in Control, any conditions on a participant’s rights or restrictions on transfer, vesting or exercisability shall be waived or lapse.

Unless the compensation committee permits an option to be transferred to a Permitted Transferee (as defined in the plan), no option my be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by the laws of descent and distribution.

In connection with the offering, we expect that our board will amend the CDT Acquisition Corp. Amended and Restated Stock Incentive Plan to preclude further grants or purchases under that plan. All future awards will be made pursuant to the Cambridge Display Technology, Inc. 2004 Stock Incentive Plan described below.

61

Cambridge Display Technology, Inc. 2004 Stock Incentive Plan

Prior to the completion of this offering, we expect that our board will adopt and our stockholders will approve the Cambridge Display Technology, Inc. 2004 Stock Incentive Plan, or the 2004 Stock Incentive Plan. The 2004 Stock Incentive Plan will provide for the award to eligible participants of (i) stock options, including incentive stock options (within the meaning of Section 422 of the Code); (ii) restricted stock and restricted units; (iii) stock appreciation rights; (iv) incentive stock and incentive units; and (v) deferred shares and supplemental units.

Awards may be made to any directors, officers, employees or consultants of our company or any of our subsidiaries. The number of employees participating in the 2004 Stock Incentive Plan will vary from year to year. A total of              shares of our common stock will be available for award under the 2004 Stock Incentive Plan. The per share exercise price of the options is set by the compensation committee at the time of grant and may not be less than fair market value. Shares subject to awards that are forfeited, canceled or otherwise terminated without the issuance of common stock under the 2004 Stock Incentive Plan or the CDT Acquisition Corp. Amended and Restated Stock Incentive Plan will again be available for future awards under the 2004 Stock Incentive Plan.

Unless otherwise determined by the compensation committee, if the employment of a participant is terminated for any reason, all unvested options will be canceled immediately and vested options must be exercised within a particular number of days, which number may vary depending on the reason for the termination. In the event of a participant’s termination of employment for cause, all vested and unvested options held by a participant shall be forfeited and terminated immediately upon such termination of employment.

Awards under the 2004 Stock Incentive Plan will generally not be assignable or transferable other than by will or by the laws of descent and distribution, except for certain transfers to the participant’s family members or to entities of which the participant or his or her family members are the sole beneficiaries or owners.

The 2004 Stock Incentive Plan will expire on the day prior to the first meeting of our stockholders in 2008 at which directors will be elected. However, the board of directors or our compensation committee may at any time, and from time to time amend, modify or terminate the 2004 Stock Incentive Plan. The expiration of the term of the plan, or any amendment, suspension or termination will not adversely affect any outstanding award held by a participant without the consent of the participant.

In the event of a change in control (as defined in the 2004 Stock Incentive Plan), all outstanding stock options shall, at the discretion of the compensation committee, become fully exercisable or be canceled in exchange for a payment in cash equal to the product of (i) the excess of the change in control price over the option exercise price, and (ii) the number of shares of common stock covered by such stock options. All other awards granted under the 2004 Stock Incentive Plan will become vested and shall be immediately transferable or payable. Notwithstanding the foregoing, if the compensation committee determines before the change in control either that all outstanding awards will be honored or assumed by the acquirer, or alternative awards with equal or better terms will be made available, such outstanding awards will not be canceled, their vesting and exercisability will not be accelerated, and there will be no payment in exchange for such awards. Any alternative awards offered must generally satisfy the requirements for alternative awards described under the heading “CDT Acquisition Corp. Amended and Restated Stock Incentive Plan.”

Cambridge Display Technology, Inc. Annual Incentive Plan

Prior to the completion of this offering, we expect that our board of directors will adopt an annual performance incentive plan that will provide for the award of incentive bonuses to our officers and certain of our employees. Each year the compensation committee will establish target incentive bonuses for participants in the annual incentive plan and will select the eligible participants and performance criteria for that year for a participant or group of participants.

62

The actual bonus payable to a participant—which may equal, exceed or be less than the target bonus—will be determined based on whether the applicable performance targets are met, exceeded or not met, and may be decreased or increased based on individual performance and contributions, or such other factors as the compensation committee may deem appropriate. The compensation committee will have the right, in its discretion, to pay to any participant an annual bonus based on individual performance or any other criteria that the committee deems appropriate and the compensation committee may pay to a participant a bonus amount in any calendar year, regardless of whether performance objectives are attained.

Bonuses will generally be payable as soon as practicable after the compensation committee certifies that the applicable performance criteria have been obtained, or, in the case of bonuses that are not tied to such performance criteria, at such time as the compensation committee determines, and will generally be payable only if the participant remains employed with us or one of our subsidiaries through such payment date, subject to the discretion of the compensation committee to allow payment after a participant’s termination of employment.

If a participant in the plan dies or becomes disabled prior to the payment of the bonus with respect to the year in which he or she dies or becomes disabled, the compensation committee may award to the participant (or his or her estate or legal representative) all or such pro rata portion of the bonus that would otherwise have been payable as it determines appropriate. In addition, the compensation committee may require that a portion of a participant’s annual incentive bonus will be payable in shares or options awarded under our 2004 Stock Incentive Plan (as described above).

The annual incentive plan will be administered by our compensation committee, which may delegate its authority except to the extent that it relates to the compensation of our Chief Executive Officer, our four other most highly compensated executive officers or any other individual whose compensation the board of directors or the compensation committee believes may become subject to Section 162(m) of the Code. The annual incentive plan will expire one day prior to the date of the first meeting of our stockholders in 2008 at which directors will be elected. However, our board of directors or the compensation committee may at any time amend, suspend, discontinue or terminate the annual incentive plan. The determination of the compensation committee on all matters relating to the annual performance incentive plan will be final and binding.

Cambridge Display Technology, Inc. Special Bonus Plan

Prior to the completion of this offering, we expect that our board of directors will approve and establish the Cambridge Display Technology, Inc. Special Bonus Plan. Under the plan, the compensation committee of our board of directors may award special bonuses to certain of our directors or senior executives. Participants in the plan are awarded an amount equal to the excess of a specified percentage of the bonus pool over the aggregate realizable gain on any of our options held by a participant on or prior to a liquidity event. The bonus pool is equal to a percentage of the “notional purchase price” (as defined in the plan) paid upon a liquidity event. A liquidity event is (i) any transaction or series of transactions involving the sale, transfer or other disposition by Hillman CDT LLC, Hillman CDT 2000 LLC, Kelso Investment Associates VI, L.P. and KEP VI, LLC of all shares of our common and preferred stock owned by these parties as of the date of such transaction(s); (ii) the sale, transfer or other disposition of all or substantially all of our assets to parties not affiliated with us or any of the Hillman or Kelso entities mentioned in (i); or (iii) a “public offering” (as defined in the plan, and including this offering). The bonus pool is equal to 6% of the notional purchase price up to and including $100 million, plus 8% of the notional purchase price for amounts from $100 million up to and including $200 million, plus 10% of the notional purchase price for amounts from $200 million up to and including $300 million, plus 15% of the notional purchase price for amounts above $300 million.

Special bonuses vest immediately upon a liquidity event other than a public offering. In the case of a public offering, special bonuses vest in three equal installments on each of the first three anniversaries of the public offering. However, if Kelso Investment Associates VI, L.P., KEP VI, LLC, Hillman CDT LLC and Hillman CDT 2000 LLC sell, in the aggregate, 25% or more of the number of the shares in us that they hold combined on the

63

date the plan was established, the special bonuses will vest in full upon such sale. Additionally, if these entities sell less than 25% of their combined shares, the special bonuses will vest in a percentage equal to the percentage of these entities’ shares sold by these entities.

Payments of special bonuses may be made in cash, property (including shares of our stock or stock of an “associated company” (as defined in the plan)), or a combination thereof, at the discretion of the compensation committee. If payments are made in shares of our stock or shares of an associated company, such shares of stock may not be sold without the prior approval of the compensation committee. Any payments of special bonuses made in whole or in part in our stock will be governed by the terms and conditions of the Cambridge Display Technology, Inc. 2004 Stock Incentive Plan or any future equity compensation plans approved by our stockholders. Payments of vested special bonuses are made on the “plan payment date.” In the case of a public offering, the plan payment dates are the vesting dates described above, except that if any of the special bonus is to be paid in shares of our stock or shares of an associated company, the payment date shall be the date that such shares are no longer subject to a restriction on sale. In the case of a liquidity event other than a public offering, payment shall be made within 10 days of the liquidity event. A pro-rata amount of any part of the purchase price that is retained in escrow will be withheld from any payments of special bonuses until it is released from escrow.

If an special bonus becomes payable in relation to a liquidity event that does not enable us to compel the exercise of any options held by a participant, then at the time of the liquidity event the participant shall elect either: (i) to be paid an special bonus and irrevocable waive any options held by the participant; or (ii) waive his entitlement to an special bonus and preserve his rights under any options in full.

In connection with a public offering, and either at its reasonable discretion or at the request of the underwriters, the compensation committee may adjust the plan to allow for alternate methods and timing of payments of awards, provided that such awards are economically equivalent to those currently provided under the plan.

If, prior to the plan payment date, a participant’s employment with us is terminated without Cause (as defined in the plan) or due to the participant’s resignation (other than in circumstances that would justify termination for Cause), the participant’s special bonus will remain payable on the payment date, but only to the extent it has vested prior to termination. The unvested portion of the special bonus will lapse. If a participant dies prior to the plan payment date, the participant’s special bonus will be payable to his beneficiary on the plan payment date in an amount determined by the compensation committee in light of all the relevant circumstances. If a participant’s employment terminates due to disability or retirement, the participant will receive an amount, if any, determined by the compensation committee in its discretion at such time(s) determined by the compensation committee in its discretion. Except as otherwise stated above, a participant’s special bonus will lapse when his employment terminates.

Special bonuses also lapse upon (i) the termination of the plan, which will occur on March 1, 2009; (ii) if the special bonus is transferred, assigned (other than to the participant’s beneficiary), mortgaged, charged or otherwise disposed of by the participant without the consent of the compensation committee; (iii) if the participant is adjudged bankrupt; or (iv) if the participant makes or proposes a voluntary arrangement under the U.K. Insolvency Act of 1986. In connection with a change of Control (as defined in the plan) that is not a liquidity event, the compensation committee may terminate the plan in its discretion by paying special bonuses to participants.

U.S. Federal Income Tax Consequences

The following is a brief description of the material U.S. federal income tax consequences generally arising with respect to awards issued pursuant to the CDT Acquisition Corp. Amended and Restated Stock Incentive Plan, the Cambridge Display Technology, Inc. 2004 Stock Incentive Plan, the Cambridge Display Technology, Inc. Annual Incentive Plan and the Cambridge Display Technology, Inc. Special Bonus Plan.

The grant of an option under the Amended and Restated Stock Incentive Plan or 2004 Stock Incentive Plan, or the payment in options of a bonus under the Annual Incentive Plan, will generally not give rise to tax

64

consequences for U.S. option holders or entitle us to a deduction. Upon exercising an option, other than an incentive stock option, the U.S. option holder will generally recognize ordinary income equal to the excess, if any, of the closing price of the shares acquired on the date of exercise over the exercise price, and we generally will be entitled to a tax deduction in the same amount in the year the income is so recognized. Generally, upon exercise of an incentive stock option, the participant would not recognize income upon exercise if the participant (i) does not dispose of the shares within two years after the date of grant or one year after the transfer of shares upon exercise, and (ii) is an employee of the company or a subsidiary thereof from the date of grant and through and until three months before the exercise date. Any gain would be taxed to the participant as long-term capital gain and we would not be entitled to a deduction. The excess of the market value on the exercise date over the exercise price is an item of tax preference potentially subject to the alternative minimum tax.

With respect to the other awards under the 2004 Stock Incentive Plan or awards of cash or payment in shares of bonuses under the Annual Incentive Plan or Special Bonus Plan, upon the payment of cash or the issuance of shares or other property that is either not restricted as to transferability or not subject to a substantial risk of forfeiture, the U.S. participant will generally recognize ordinary income equal to the cash or the fair market value of shares or other property delivered in the year it is paid or made available. The fair market value of the shares delivered will be the product of the number of shares delivered and the closing price of a share of common stock on the date of delivery of the shares. We will be entitled to a deduction in an amount equal to the ordinary income recognized by the participant in the year the income is so recognized.

Section 162(m) of the Internal Revenue Code generally limits the ability of a public corporation to deduct compensation greater than $1,000,000 paid with respect to a particular year to an individual who is, on the last day of that year, the corporation’s chief executive officer or one of its four other most highly compensated executive officers, other than compensation that is “performance based” within the meaning of section 162(m). Under a special rule that applies to corporations that become public through an initial public offering, this limitation generally will not apply to compensation that is paid pursuant to the plans described above before the first meeting of our stockholders in 2008 at which directors will be elected.

65

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to the beneficial ownership of our common stock as of March 31, 2004, and as adjusted to reflect the sale of              shares of our common stock offered under this prospectus, for:

• each person or group of affiliated persons who is known by us to beneficially own more than 5% of the outstanding shares of our common stock;

• each of our directors;

• each of the named executive officers listed in the Summary Compensation Table; and

• all of our directors and named executive officers as a group.

Except as indicated in the footnotes to the table and subject to community property laws where applicable, we believe based on the information furnished to us that the persons named in the table have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them. Beneficial ownership and percentage beneficial ownership are determined in accordance with the rules of the SEC. The table includes the number of shares underlying options which are exercisable within 60 days from March 31, 2004. Unless otherwise noted below, the address of each beneficial owner listed in the table is care of Cambridge Display Technology, Inc., c/o Cambridge Display Technology Limited, Greenwich House, Madingley Rise, Madingley Road, Cambridge, CB3 OTX, United Kingdom.

Applicable beneficial ownership percentages before the offering are based on 25,286,181 shares of common stock outstanding on March 31, 2004, assuming the conversion of all outstanding shares of class B common stock, series A convertible preferred stock and series B convertible preferred stock into common stock as of such date based on an assumed initial offering price of $            , equal to the midpoint of the range set forth on the cover page of this prospectus. For purposes of the table below, we have assumed that              shares of common stock will be outstanding upon completion of this offering based on an offering price equal to the midpoint of the range set forth on the cover page of this prospectus.

	Number of Shares of Common Stock Beneficially Owned	Percentage of Common Stock Beneficially Owned
Name and Address of Beneficial Owner		Before Offering		After Offering
Kelso Investment Associates VI, L.P. (1)(2)	12,918,188	51.1	%
KEP VI, LLC (1)(2)	12,918,188	51.1	%
Frank T. Nickell (1)	(3)	(3)		(3)
Thomas R. Wall, IV (1)	(3)	(3)		(3)
George E. Matelich (1)	(3)	(3)		(3)
Michael B. Goldberg (1)	(3)	(3)		(3)
David I. Wahrhaftig (1)	(3)	(3)		(3)
Frank K. Bynum, Jr. (1)(4)	(3)	(3)		(3)
Philip E. Berney (1)(4)	(3)	(3)		(3)
Frank J. Loverro (1)	(3)	(3)		(3)
Michael B. Lazar (1)	(3)	(3)		(3)
Hillman CDT LLC(5)(6)	6,867,867	27.2	%
Hillman CDT 2000 LLC(5)(6)	6,867,867	27.2	%
Gerald Paul Hillman (4)(5)	(7)(8)	(7)(8)		(7)(8)
Hermann Hauser(9)	—	—		—
David Fyfe (10)	91,667		*	*
Ian Butcher (11)	13,125		*	*
Scott Brown (12)	11,000		*	*
Jeremy Burroughes (13)	41,667		*	*
SB Cha (14)	5,250		*	*
Stephen Chandler (15)	13,125		*	*
All directors and executive officers as a group (8 persons) (16)	175,834		*	*

* Less than 1%

66

(1) The business address for these persons is c/o Kelso & Company, 320 Park Avenue, 24th Floor, New York, New York 10022.

(2) The shares owned by Kelso Investment Associates VI, L.P. and KEP VI, LLC represent the combined share ownership of Kelso Investment Associates VI, L.P. and KEP VI, LLC. Kelso Investment Associates VI, L.P. and KEP VI, LLC, due to their common control, could be deemed to beneficially own each of the other’s shares, but disclaim such beneficial ownership. The amount of shares received by Kelso Investment Associates VI, L.P. and KEP VI, LLC in connection with the conversion of all outstanding shares of series A convertible preferred stock and series B convertible preferred stock immediately prior to the offering may vary depending on the per share public offering price of our common stock.

(3) Messrs. Nickell, Wall, Matelich, Goldberg, Wahrhaftig, Bynum, Berney, Loverro and Lazar may be deemed to share beneficial ownership of shares owned of record by Kelso Investment Associates VI, L.P. and KEP VI, LLC, by virtue of their status as managing members of KEP VI, LLC and the general partner of Kelso Investment Associates VI, L.P. Messrs. Nickell, Wall, Matelich, Goldberg, Wahrhaftig, Bynum, Berney, Loverro and Lazar share investment and voting power with respect to the shares owned by Kelso Investment Associates VI, L.P. and KEP VI, LLC but disclaim beneficial ownership of such shares.

(4) Messrs. Berney, Bynum and Hillman are directors.

(5) The business address for these persons is c/o Hillman Capital Corporation, 900 Third Avenue, 5th Floor, New York, New York 10022.

(6) The shares owned by Hillman CDT LLC and Hillman CDT 2000 LLC represent the combined share ownership of Hillman CDT LLC and Hillman CDT 2000 LLC. Hillman CDT LLC and Hillman CDT 2000 LLC, due to their common control, could be deemed to beneficially own each of the other’s shares, but disclaim such beneficial ownership. The amount of shares received by Hillman CDT LLC and Hillman CDT 2000 LLC in connection with the conversion of all outstanding shares of series A convertible preferred stock and series B convertible preferred stock immediately prior to the offering may vary depending on the per share public offering price of our common stock.

(7) Hillman Capital Management LLC (“Hillman Capital LLC”) is the sole managing member of Hillman CDT LLC (“Hillman CDT”) and has the power to direct Hillman CDT as to the voting and disposition of shares held by Hillman CDT. Hillman Capital Corporation is the sole managing member of Hillman Capital LLC, and has the sole voting and dispositive power of Hillman Capital LLC with respect to the shares owned by Hillman CDT. Mr. Hillman is the sole stockholder of Hillman Capital Corporation and has the sole voting and dispositive power of Hillman Capital Corporation with respect to the shares owned by Hillman CDT. Mr. Hillman expressly disclaims beneficial ownership of the shares owned by Hillman CDT.

(8) Hillman Capital Management 2000 LLC (“Hillman Capital 2000 LLC”) is the sole managing member of Hillman CDT 2000 LLC (“Hillman CDT 2000”) and has the power to direct Hillman CDT 2000 as to the voting and disposition of shares held by Hillman CDT 2000. Hillman Capital Corporation is the sole managing member of Hillman Capital 2000 LLC, and has the sole voting and dispositive power of Hillman Capital 2000 LLC with respect to the shares owned by Hillman CDT 2000. Mr. Hillman is the sole stockholder of Hillman Capital Corporation and has the sole voting and dispositive power of Hillman Capital Corporation with respect to the shares owned by Hillman CDT 2000. Mr. Hillman expressly disclaims beneficial ownership of the shares owned by Hillman CDT 2000.

(9) Excludes 342,103 shares held in a trust in which Dr. Hauser has an interest and as to which he does have sole or shared voting or dispositive power.

(10) Consists of 91,667 shares issuable to Dr. Fyfe upon exercise of options exercisable within 60 days.

(11) Consists of 13,125 shares issuable to Mr. Butcher upon exercise of options exercisable within 60 days.

(12) Consists of 11,000 shares issuable to Dr. Brown upon exercise of options exercisable within 60 days.

(13) Consists of 41,667 shares issuable to Dr. Burroughes upon exercise of options exercisable within 60 days.

(14) Consists of 5,250 shares issuable to Dr. Cha upon exercise of options exercisable within 60 days.

(15) Consists of 13,125 shares issuable to Mr. Chandler upon exercise of options exercisable within 60 days.

(16) Excludes shares held by Kelso Investment Associates VI, L.P. and KEP VI, LLC that may be deemed to be beneficially owned by Mr. Bynum and Mr. Berney and shares held by Hillman CDT LLC and Hillman CDT 2000 LLC that may be deemed to be beneficially owned by Mr. Hillman.

67

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Consulting Agreements

Certain affiliates of Kelso and certain affiliates of Hillman Capital will own, respectively, over 40% and 20% of our outstanding common stock immediately following this offering. Each of Kelso and Hillman Capital is party to a separate consulting agreement with us pursuant to which they agree to provide such specific consulting services as we may request and we agree to indemnify them from and against any claims, losses and expenses they may incur in connection with their investment in us or their provision of services to us under these agreements or their being a controlling person of us, except as may be finally judicially determined to result from gross negligence or intentional misconduct on their part. In connection with these agreements, Kelso and Hillman Capital may receive consulting fees from us and are entitled to receive reimbursement of certain out-of-pocket fees and expenses incurred in connection with their investments in us. No such consulting fees have been paid to Kelso or Hillman Capital. We paid Kelso reimbursements in the aggregate of $28,981, $48,266 and $47,441, respectively, for 2001, 2002 and 2003. For the period from January 1, 2004 through July 1, 2004, we paid Kelso reimbursements in the aggregate of $17,982. We paid Hillman Capital reimbursements in the aggregate of $58,894, $29,821 and $34,322, respectively, for 2001, 2002 and 2003. For the period from January 1, 2004 through July 1, 2004, we paid Hillman Capital reimbursements of $594.

Registration Rights

Affiliates of Kelso and Hillman Capital are parties to a registration rights agreement with us that provides them certain demand and incidental registration rights. Various members of management who hold options exercisable for our common stock, including each of our executive officers, will be joined as parties to the registration rights agreement upon exercise of such holder’s options pursuant to which they will have certain incidental registration rights. See “Description of Capital Stock—Registration Rights.” Our registration rights agreement will be amended and restated in connection with this offering.

Issuance of Preferred Stock

In December 2002, affiliates of Kelso purchased 6,000 shares of our series A convertible preferred stock and 9,000 shares of our series B convertible preferred stock from us for a total purchase price of $15.0 million and exchanged 619,195 shares of our common stock purchased by them in July 2002 (for an aggregate purchase price of $10.0 million) for 10,000 shares of our series B convertible preferred stock. The terms of the purchase and exchange were approved by our board of directors based on the recommendation of a special committee of directors unaffiliated with the holders of preferred stock who were advised by separate financial and legal advisors retained by them. We also offered shares of our series B convertible preferred stock to each of our existing investors, some of whom purchased such shares. In connection with this offer, in February 2003, an affiliate of Hillman Capital subscribed for 5,467 shares of our series B convertible preferred stock for total consideration of approximately $5.5 million, consisting of approximately $3.3 million in cash and 135,420 shares of our common stock.

Conversion of Preferred Stock

In connection with this offering, each outstanding share of our series A convertible preferred stock and series B convertible preferred stock will be converted into shares of our common stock. The terms of the conversion, which conversion could not be required by us under the existing terms of the convertible preferred stock, were approved by our board of directors based on the recommendation of a special committee of directors unaffiliated with the holders of preferred stock who were advised by separate financial and legal advisors retained by them.

Conversion Terms

Immediately prior to the consummation of this offering, each share of our series A convertible preferred stock and series B convertible preferred stock will be exchanged for the number of shares of our common stock equal to (i) 2.25 times the initial purchase price of such share of preferred stock divided by (ii) the per share public offering price, before underwriting discounts and commissions.

68

In addition, upon conversion of all of our outstanding series A convertible preferred stock, affiliates of Kelso, as holders of all outstanding shares of our series A convertible preferred stock, will receive an additional number of shares of our common stock equal to the initial purchase price of such shares of series A convertible preferred stock divided by the per share public offering price, before underwriting discounts and commissions.

Registration Rights

The shares of common stock issuable upon the conversion of our outstanding series A convertible preferred stock and series B convertible preferred stock are entitled to the benefits of our amended and restated registration rights agreement. Our registration rights agreement will be amended and restated in connection with the conversion of our series A convertible preferred stock and series B convertible preferred stock and this offering. Our amended and restated registration rights agreement will allow any of our existing stockholders to become a party. All stockholders that are or become parties to our amended and restated registration rights agreement will be required to adhere to all terms thereof, including an initial 270-day lock-up on share sales following the consummation of this offering, and a further 90-day lock-up (unless, in the case of any party to our amended and restated registration right agreement other than minority investors, the managing underwriters advise that a longer period, not to exceed 180 days is required) on share sales following secondary offerings following the consummation of this offering. All of our existing stockholders (other than management stockholders who will remain subject to certain other provisions of amended and restated registration rights agreement) will be entitled to participate in the first secondary offering following the consummation of this offering on a pari passu basis (based on the total number of shares of our common stock owned by all signatories to our amended and restated registration rights agreement). Following such first secondary offering, the minority investors will cease to be parties to or have any rights or obligations under the registration rights agreement. In addition, the affiliates of Kelso and Hillman Capital have agreed not to distribute shares of our common stock held by them to their investors for a period of 18 months following the consummation of this offering. See “Description of Capital Stock—Registration Rights.”

Transactions with CDT Oxford

During 2003, we forwarded cash amounts of $2.8 million to CDT Oxford, incurred net expenses on their behalf of $0.2 million which were recharged and purchased fixed assets from them for $0.5 million. As of December 31, 2003, the amount due to us from CDT Oxford was $2.6 million.

Transactions with Litrex

During the period from August 14, 2003 to December 31, 2003, we purchased ink jet printing systems for $1.1 million and placed deposits of $0.8 million with Litrex. We also charged Litrex $0.1 million for services provided. As of December 31, 2003, the amount due to us from Litrex to us was $37,000.

69

DESCRIPTION OF CAPITAL STOCK

Overview

Upon completion of this offering, our authorized capital stock will consist of 100 million shares of common stock, par value $0.01 per share, and 46,667 shares of preferred stock, par value $0.01 per share. The following descriptions of our capital stock and provisions of our certificate of incorporation and bylaws are summaries of their material terms and provisions and are qualified by reference to our certificate of incorporation and bylaws, copies of which will be filed with the SEC as exhibits to our registration statement of which this prospectus is a part. The descriptions reflect changes to our capital structure, certificate of incorporation and bylaws that will occur upon the closing of this offering.

Common Stock

As of June 30, 2004, there were 16,251,346 shares outstanding of our class A common stock held of record by 70 stockholders and 311,692 shares outstanding of our class B common stock held of record by nine stockholders. All outstanding shares of class B common stock will be converted into shares of our class A common stock upon the closing of this offering and these shares of class B stock common stock will no longer be authorized, issued or outstanding. As of June 30, 2004, options to purchase 1,434,224 shares of common stock were also outstanding. There will be              shares of common stock outstanding upon the closing of this offering (assuming no exercise of the underwriters’ over allotment options or the exercise of outstanding options) after giving effect to the issuance of          shares of common stock offered by us under this prospectus and a      for      reverse stock split.

Each share of common stock has identical rights and privileges. The holders of our common stock are entitled to vote upon all matters submitted to a vote of our stockholders and are entitled to one vote for each share of common stock held.

Subject to the prior rights and preferences, if any, applicable to shares of preferred stock or any series of preferred stock, the holders of common stock are entitled to receive such dividends, payable in cash, stock or otherwise, as may be declared by our board out of any funds legally available for the payment of dividends. See “Dividend Policy.”

If we voluntarily or involuntarily liquidate, dissolve or wind-up, the holders of common stock will be entitled to receive, after distribution in full of preferential amounts, if any, to be distributed to the holders of preferred stock, all of the remaining assets available for distribution ratably in proportion to the number of shares of common stock held by them. Holders of common stock have no preferences or any preemptive conversion or exchange rights.

Preferred Stock

As of June 30, 2004, there were 6,000 shares of series A convertible preferred stock and 25,871 shares of series B convertible preferred stock outstanding. All outstanding shares of preferred stock together with accrued and unpaid dividends thereon will be converted into shares of our common stock upon the closing of this offering and these shares of preferred stock will no longer be issued or outstanding. See “Certain Relationships and Related Transactions—Conversion of Preferred Stock.”

Our board of directors is authorized to provide for the issuance of shares of preferred stock in one or more series, and to fix for each series voting rights, if any, designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions as provided in a resolution or resolutions adopted by our board. Our board of directors may authorize the issuance of shares of preferred stock with terms and conditions which could discourage a takeover or other transaction that holders of some or a majority of shares of common stock might believe to be in their best interests or in which holders of common stock might receive a premium for their shares over the then market price.

70

Registration Rights

Upon completion of this offering, the holders of              shares of our common stock have the right to cause us to register these shares under the Securities Act, as follows:

Demand Registration Rights

At any time after 180 days following the effective date of this offering, Kelso and Hillman Capital each may make up to five separate requests that we register all or part of their registrable shares under the Securities Act (which may include a “shelf” registration to the extent that we are eligible to effect such a registration pursuant to Rule 415 under the Securities Act).

Piggyback Registration Rights

At any time that we file a registration statement to register any of our securities under the Securities Act for our own account (other than registrations of employee benefit plans or business combinations subject to Rule 145 under the Securities Act) and (i) Kelso or Hillman Capital has requested that we include registrable securities owned by any Kelso investor or Hillman Capital investor, as the case may be, in such registration or (ii) the Kelso investors and the Hillman Capital investors no longer own any registrable securities, the holders of              shares of our common stock can request to have their shares registered.

Registration of any of the shares of our common stock held by security holders with registration rights would result in such shares becoming freely tradable without restriction under the Securities Act immediately upon effectiveness of such registration. We will pay all registration expenses, other than underwriting discounts and commissions and transfer taxes, if any, to the extent not otherwise required to be paid by the seller under applicable law.

Anti-Takeover Effects of Provisions of Delaware Law and Our Certificate of Incorporation and Bylaws

Delaware Anti-Takeover Statute

The provisions of Section 203 of the Delaware General Corporation Law, an anti-takeover law, generally prohibits, subject to exceptions, a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless:

• prior to such date, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

• upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding, those shares owned (i) by persons who are directors and also officers and (ii) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

• on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 ²/3% of the outstanding voting stock which is not owned by the interested stockholder.

For purposes of Section 203, a “business combination” includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, with an “interested stockholder” being defined as a person who, together with affiliates and associates, owns, or within three years prior to the date of determination whether the person is an “interested stockholder,” did own, 15% or more of the corporation’s voting stock, subject to specified exceptions.

71

As a Delaware corporation, we have elected to be subject to Section 203 of the Delaware General Corporation Law. Accordingly, Section 203 restricts any person who acquires 15% or more of our outstanding voting stock from engaging in business combinations with us within the three year period.

Certificate of Incorporation and Bylaws

Some provisions of our certificate of incorporation and bylaws may have an anti-takeover effect. These provisions may delay, defer or prevent a tender offer or takeover attempt of our company that a stockholder might consider in his or her best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders. The following summarizes these provisions:

Authorized But Unissued Shares.     Our authorized but unissued shares of common stock and preferred stock are available for our board to issue without stockholder approval. We may use these additional shares for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of our authorized but unissued shares of common stock and preferred stock could render more difficult or discourage an attempt to obtain control of our company by means of a proxy context, tender offer, merger or other transaction.

Amendment of Bylaws.    Our bylaws are subject to amendment, alteration or repeal, either by resolution adopted by a majority of our board of directors or by the affirmative vote of a majority of the voting power of all issued and outstanding shares of our common stock.

Indemnification.    Our bylaws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law. We currently maintain and intend to continue to maintain directors and officers liability insurance. In addition, our certificate of incorporation limits the personal liability of our board members for breaches by the directors of their fiduciary duties to the fullest extent permitted under Delaware law.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is The Bank of New York.

Nasdaq National Market Listing

We have applied to list our common stock for quotation on the Nasdaq National Market under the symbol “OLED”.

72

SHARES ELIGIBLE FOR FUTURE SALE

Before this offering, there has been no public market for our common stock. If our stockholders sell substantial amounts of our common stock in the public market following this offering, the prevailing market price of our common stock could decline. While substantially all currently outstanding shares are subject to contractual and legal restrictions on resale for 270 days after the date of this prospectus, except as described below, sales of substantial amounts of our common stock in the public market after these restrictions lapse could adversely affect the prevailing market price and our ability to raise equity capital in the future.

Upon the closing of this offering, we will have outstanding an aggregate of              shares of our common stock, based upon the number of shares outstanding at             , 2004 and assuming conversion of all of our outstanding shares of class B common stock, series A convertible preferred stock and series B convertible stock, no exercise of the underwriters’ over allotment options, no exercise of outstanding options and no grant of additional options. All shares sold in this offering will be freely tradable without restriction or the requirement of further registration under the Securities Act of 1933, or the Securities Act, unless they are purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act. The remaining shares are “restricted shares,” as that term is defined in Rule 144 under the Securities Act, and will be eligible for sale in the public market as follows:

Lock-up Agreements.    All of our directors and officers and holders of all but              shares of our common stock outstanding or issuable upon exercise of outstanding options are subject to lock-up agreements with the underwriters under which they have agreed not to transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock for 270 days after the date of this prospectus. In addition, if we issue an earnings release or material news or a material event relating to us occurs during the last 17 of the 270 days or if, prior to the expiration of the 270 days, we announce that we will release earnings results during the 16-day period beginning on the 270th day, these restrictions will be extended until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. SG Cowen & Co., LLC may, in its sole discretion, at any time and without prior notice or announcement, release all or any portion of shares subject to the lock-up agreements.

Rule 144.    In general, under Rule 144, beginning 90 days after the date of this prospectus, a person who has beneficially owned shares of our common stock for at least one year, including the holding period of prior owners other than affiliates, is entitled to sell within any three-month period a number of shares that does not exceed (a) 1% of the number of shares of our common stock then outstanding, which will equal approximately              shares immediately after the offering, or (b) the average weekly trading volume of our common stock on the Nasdaq National Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale, whichever is greater. Sales under Rule 144 are also subject to manner-of-sale provisions, notice requirements and the availability of current public information about us. Based upon the number of shares outstanding at                     , 2004, an aggregate of approximately              million shares of our common stock will be eligible to be sold pursuant to Rule 144, subject to the volume restrictions described in the previous sentence, beginning 90 days after the date of this prospectus. However, all but              million of such shares are subject to the lock-up agreements described above and will only become eligible for sale upon the expiration or termination of such agreements.

Rule 144(k).    Under Rule 144(k), a person who is not deemed to have been one of our affiliates at any time during the three months preceding a sale and who has beneficially owned shares for at least two years, including the holding period of certain prior owners other than affiliates, is entitled to sell those shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. Based upon the number of shares outstanding at             , 2004, an aggregate of approximately              shares of our common stock will be eligible to be sold pursuant to Rule 144(k) after the date of the prospectus. However, all but              million of such shares are subject to the lock-up agreements described above and will only become eligible for sale upon the expiration or termination of such agreements.

73

Rule 701.    In general, under Rule 701 of the Securities Act, each of our directors, officers, employees, consultants or advisors who purchased shares from us before the date of this prospectus in connection with our stock incentive plan or other written compensatory agreement is eligible to resell such shares 90 days after the date of the prospectus in reliance on Rule 144, but without compliance with some or all restrictions, including the holding period, contained in Rule 144. However, all but              of such shares are subject to the lock-up agreements described above and will only become eligible for sale upon the expiration or termination of such agreements.

Registration Rights.    After this offering, holders of approximately              million shares of our common stock or their transferees are entitled to have their shares registered by us under the Securities Act. See “Description of Capital Stock—Registration Rights.” After the effectiveness of any registration statement relating to these shares, such shares will be freely tradable, without restriction under the Securities Act other than restrictions that are imposed on sales by our affiliates.

Stock Plans.    As of June 30, 2004, options to purchase 1,434,224 shares of our common stock were outstanding under our CDT Acquisition Corp. Amended and Restated Stock Incentive Plan. After this offering, we intend to file a registration statement on Form S-8 under the Securities Act of 1933 covering shares of common stock reserved for issuance under the CDT Acquisition Corp. Amended and Restated Stock Incentive Plan and the Cambridge Display Technology, Inc. Stock Incentive Plan. At that point, subject to the satisfaction of applicable exercisability periods, Rule 144 volume and other limitations applicable to affiliates and the lock-up agreements with the underwriters referred to above, shares of common stock to be issued upon exercise of outstanding options granted pursuant to our stock incentive plans will be available for immediate resale in the public market.

74

CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS

The following is a discussion of the material U.S. federal income and estate tax considerations relating to the acquisition, ownership and disposition of our common stock. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect, or different interpretations. This discussion only addresses tax considerations for beneficial owners of our common stock that hold our common stock as a “capital asset,” within the meaning of the Code. Moreover, this discussion is for general information only and does not address all of the tax consequences that may be relevant to specific beneficial owners of our common stock in light of their particular circumstances or to beneficial owners of our common stock subject to special treatment under U.S. federal income tax laws (such as banks, insurance companies, tax-exempt entities, retirement plans, dealers in securities, brokers, expatriates, partnerships, other pass-through entities, persons who hold our common stock as part of a straddle, hedge, conversion transaction or other integrated investment, persons whose functional currency is not the U.S. dollar, persons subject to the alternative minimum tax or persons deemed to sell our common stock under the constructive sale provisions of the Code). This discussion does not address any U.S. state and local or non-U.S. tax considerations relating to the acquisition, ownership and disposition of our common stock.

As used in this discussion, the term “U.S. Holder” means a beneficial owner of our common stock that is a U.S. person and is not a partnership for U.S. federal income tax purposes. A U.S. person means a person that is, for U.S. federal income tax purposes:

• an individual who is a citizen or resident of the United States;

• a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or of any State or political subdivision thereof or therein, including the District of Columbia;

• an estate the income of which is subject to U.S. federal income taxation regardless of the source thereof; or

• a trust with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions, or certain electing trusts that were treated as domestic trusts.

The term “Non-U.S. Holder” means a beneficial owner of our common stock that is neither a U.S. person nor a partnership for U.S. federal income tax purposes. If a partnership, or other entity treated as a partnership for U.S. federal income tax purposes, owns our common stock, the tax treatment of a partner in the partnership will depend on the status of the partner and the activities of the partnership.

Beneficial owners of our common stock are urged to consult their own tax advisors as to the particular tax considerations for them relating to the acquisition, ownership and disposition of our common stock, including the applicability of U.S. federal, state or local tax laws or non-U.S. tax laws, any changes in applicable tax laws and any pending or proposed legislation or regulations.

U.S. Holders

The following is a general discussion of certain U.S. federal income tax considerations relating to the acquisition, ownership and disposition of our common stock by a U.S. Holder.

Distributions on Common Stock

Distributions, if any, made on our common stock generally will be included in the income of a U.S. Holder as ordinary dividend income to the extent of our current or accumulated earnings and profits. Distributions in excess of our current and accumulated earnings and profits will be treated as a return of capital to the extent of

75

the U.S. Holder’s basis in the common stock and thereafter as gain from a sale or exchange of the common stock. Such gain generally will be long-term capital gain if the U.S. Holder’s holding period in the common stock is more than one year at the time of the distribution. A dividend distribution to a corporate U.S. Holder may qualify for a dividends received deduction, and such a distribution to a non-corporate U.S. Holder on or before December 31, 2008 will generally be taxed at a reduced maximum marginal tax rate.

Sale or Exchange of Common Stock

Upon the sale or exchange of our common stock, a U.S. Holder generally will recognize gain or loss equal to the difference between (i) the amount of cash and the fair market value of any property received upon the sale or exchange and (ii) such U.S. Holder’s adjusted tax basis in the common stock. Such gain or loss generally will be long-term capital gain or loss if the U.S. Holder’s holding period in the common stock is more than one year at the time of the sale or exchange. Long-term capital gains of non-corporate taxpayers are generally taxed at a reduced maximum marginal tax rate. The deductibility of capital losses is subject to limitations.

Backup Withholding and Information Reporting

In general, payments made on our common stock and proceeds from the sale or other disposition of our common stock may be subject to backup withholding. In general, backup withholding will apply to a non-corporate U.S. Holder if such U.S. Holder:

• fails to furnish, under penalties of perjury, its taxpayer identification number, or TIN (which for an individual is the holder’s social security number);

• furnishes an incorrect TIN;

• is notified by the IRS that it has failed to properly report payments of interest and dividends; or

• under certain circumstances, fails to certify, under penalties of perjury, that it has furnished a correct TIN and is a U.S. person and has not been notified by the IRS that it is subject to backup withholding due to underreporting of interest or dividends, or otherwise fails to comply with applicable requirements of the backup withholding rules.

Any amounts withheld under the backup withholding rules from a payment to a U.S. Holder generally will be allowed as a refund or a credit against such U.S. Holder’s U.S. federal income tax liability, provided that the required procedures are followed.

A U.S. Holder will also be subject to information reporting with respect to payments on our common stock and proceeds from the sale or other disposition of our common stock, unless such U.S. Holder is a corporation or other exempt recipient and appropriately establishes that exemption.

Non-U.S. Holders

The following is a general discussion of certain U.S. federal income and estate tax considerations relating to the acquisition, ownership and disposition of our common stock by a Non-U.S. Holder.

Distributions on Common Stock

Distributions, if any, on our common stock will constitute dividends for U.S. federal income tax purposes to the extent of our current or accumulated earnings and profits as determined under U.S. federal income tax principles. Dividends paid on our common stock held by a Non-U.S. Holder will be subject to U.S. federal withholding tax at a rate of 30% (or reduced rate under an applicable tax treaty) unless such dividends are effectively connected with the conduct of a trade or business in the United States by the Non-U.S. Holder, in which case the Non-U.S. Holder generally will be subject to U.S. federal income tax with respect to such

76

dividends in the same manner as a U.S. Holder unless otherwise provided in an applicable tax treaty. Additionally, a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes could be subject to a branch profits tax on dividends effectively connected with the conduct of a trade or business in the United States by the Non-U.S. Holder at a rate of 30% (or reduced rate under an applicable tax treaty).

Sale or Exchange of Common Stock

A Non-U.S. Holder of our common stock will generally not be subject to U.S. federal income tax on gains realized on the sale or exchange of our common stock unless (i) such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of such sale or exchange, and certain other conditions are met, (ii) such gain is effectively connected with the conduct by such Non-U.S. Holder of a trade or business in the United States, or (iii) we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period preceding such sale or exchange or the period that such Non-U.S. Holder held our common stock (which we do not believe that we have been or are currently) and certain other conditions are met. If the first exception applies, the Non-U.S. Holder generally will be subject to U.S. federal income tax at a rate of 30% (or reduced rate under an applicable tax treaty) on the amount by which capital gains allocated to U.S. sources (including gains from the sale or exchange of our common stock) exceed capital losses allocated to U.S. sources. If the second or third exception applies, the Non-U.S. Holder generally will be subject to U.S. federal income tax with respect to such gain in the same manner as a U.S. Holder unless otherwise provided in an applicable tax treaty. In the case of the second exception, a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes could also be subject to a branch profits tax on such gain at a rate of 30% (or reduced rate under an applicable tax treaty).

U.S. Federal Estate Tax

Our common stock held by an individual Non-U.S. Holder who at the time of death is not a citizen or resident of the United States (as specially defined for U.S. federal estate tax purposes) generally will be included in such holder’s estate for U.S. federal estate tax purposes unless an applicable tax treaty provides otherwise.

Backup Withholding and Information Reporting

Generally, we must report annually to the IRS and to each Non-U.S. Holder any dividend that is subject to withholding tax, or that is exempt from U.S. withholding tax pursuant to a tax treaty. Copies of these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides.

In general, information reporting and backup withholding of U.S. federal income tax at the applicable rate may apply to payments made by us or our paying agent to a Non-U.S. Holder if such Non-U.S. Holder fails to make the appropriate certification that it is not a U.S. person or otherwise fails to establish an exemption.

Payments of the proceeds of a sale or exchange of our common stock to or through a foreign office of a U.S. broker or of a foreign broker with certain specified U.S. connections generally will be subject to information reporting requirements, but not backup withholding, unless the payee is an exempt recipient or otherwise establishes an exemption. Payments of the proceeds of a sale or exchange of our common stock to or through the U.S. office of a broker generally will be subject to information reporting and backup withholding unless the payee certifies under penalties of perjury as to his or her status as a non-U.S. person or otherwise establishes an exemption.

Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder of our common stock will be allowed as a credit against such Non-U.S. Holder’s U.S. federal income tax, if any, or will be otherwise refundable, provided that the required information is furnished to the IRS in a timely manner.

77

UNDERWRITING

We and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to the terms and conditions of the underwriting agreement, the underwriters named below have severally agreed to purchase from us the number of shares of our common stock set forth opposite their names on the table below at the public offering price, less the underwriting discounts and commissions set forth on the cover page of this prospectus as follows:

Name	Number of Shares
SG Cowen & Co., LLC
CIBC World Markets Corp.
Adams, Harkness & Hill, Inc.
Total

The underwriting agreement provides that the obligations of the underwriters to purchase the shares of common stock offered hereby on a firm commitment basis may be terminated in the event of a material adverse change in economic, political or financial conditions. The obligations of the underwriters may also be terminated upon the occurrence of other events specified in the underwriting agreement. The underwriters are severally committed to purchase all of the shares of common stock being offered by us if any shares are purchased.

The underwriters propose to offer the shares of common stock to the public at the public offering price set forth on the cover of this prospectus. The underwriters may offer the common stock to securities dealers at the price to the public less a concession not in excess of $              per share. Securities dealers may reallow a concession not in excess of $              per share to other dealers. After the shares of common stock are released for sale to the public, the underwriters may vary the offering price and other selling terms from time to time.

We have granted to the underwriters an option, exercisable not later than 30 days after the date of this prospectus, to purchase up to an aggregate of additional shares of common stock at the public offering price set forth on the cover page of this prospectus less the underwriting discounts and commissions. The underwriters may exercise this option only to cover over allotments, if any, made in connection with the sale of common stock offered hereby. If the over allotment option is exercised in full, the underwriters will purchase additional common shares from us in approximately the same proportion as shown in the table above.

The following table summarizes the compensation to be paid to the underwriters by us and the proceeds, before expenses, payable to us.

		Total
	Per Share	Without Over Allotment	With Over Allotment
Public offering price	$	$	$
Underwriting discounts and commissions
Proceeds, before expenses, to us	$	$	$

We estimate that the total expenses of this offering, excluding underwriting discounts and commissions, will be approximately $             .

78

We have agreed to indemnify the underwriters against certain civil liabilities, including liabilities under the Securities Act of 1933 and liabilities arising from breaches of representations and warranties contained in the underwriting agreement, and to contribute to payments the underwriters may be required to make in respect of any such liabilities.

Our directors, executive officers and holders of approximately     % of our outstanding common stock immediately prior to this offering and approximately     % of shares of our common stock issuable under our outstanding options and warrants have agreed with the underwriters that for a period of 270 days following the date of this prospectus, they will not, with certain limited exceptions, offer, sell, assign, transfer, pledge, contract to sell or otherwise dispose of or hedge any shares of our common stock or any securities convertible into or exchangeable for shares of common stock. In addition, if we issue an earnings release or material news or a material event relating to us occurs during the last 17 of the 270 days or if, prior to the expiration of the 270 days, we announce that we will release earnings results during the 16-day period beginning on the 270th day, these restrictions will be extended until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. The underwriters may, in their sole discretion, at any time without prior notice, release all or any portion of the shares from the restrictions in any such agreement. We have entered into a similar agreement with the underwriters. There are no agreements between the underwriters and any of our stockholders, optionholders or affiliates releasing them from these lock-up agreements prior to the expiration of the 270-day period.

The underwriters may engage in over allotment, stabilizing transactions, syndicate covering transactions, penalty bids and passive market making in accordance with Regulation M under the Securities Exchange Act of 1934. Over allotment involves syndicate sales in excess of the offering size, which creates a syndicate short position. Covered short sales are sales made in an amount not greater than the number of shares available for purchase by the underwriters under the over allotment option. The underwriters may close out a covered short sale by exercising its over allotment option or purchasing shares in the open market. Naked short sales are sales made in an amount in excess of the number of shares available under the over allotment option. The underwriters must close out any naked short sale by purchasing shares in the open market. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. Syndicate covering transactions involve purchases of the shares of common stock in the open market after the distribution has been completed in order to cover syndicate short positions. Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the shares of common stock originally sold by such syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions. Penalty bids may have the effect of deterring syndicate members from selling to people who have a history of quickly selling their shares. In passive market making, market makers in the shares of common stock who are underwriters may, subject to certain limitations, make bids for or purchases of the shares of common stock until the time, if any, at which a stabilizing bid is made. These stabilizing transactions, syndicate covering transactions and penalty bids may cause the price of the shares of common stock to be higher than it would otherwise be in the absence of these transactions. These transactions may be commenced and discontinued at any time.

Prior to this offering, there has been no public market for shares of our common stock. Consequently, the initial public offering price has been determined by negotiations between us and the underwriters. The various factors considered in these negotiations included prevailing market conditions, the market capitalizations and the states of development of other companies that we and the underwriters believed to be comparable to us, estimates of our business potential, our results of operations in recent periods, the present state of our development and other factors deemed relevant.

79

LEGAL MATTERS

The validity of the issuance of the shares of common stock offered by this prospectus will be passed upon for us by Debevoise & Plimpton LLP, New York, New York. Debevoise & Plimpton LLP also represents Kelso and its affiliates from time to time. The underwriters have been represented by Pillsbury Winthrop LLP, New York, New York.

EXPERTS

The financial statements as of December 31, 2003 and 2002 and for each of the three years in the period ended December 31, 2003 included in this prospectus have been audited by Ernst & Young LLP, independent registered public accountants, as set forth in their report (which is based in part on the report of PricewaterhouseCoopers LLP) appearing elsewhere herein, and are included in reliance on such report given on the authority of such firm as experts in auditing and accounting.

The audited financial statements as of December 31, 2003 and for the year ended December 31, 2003 of Litrex Corporation, not separately presented in this prospectus, have been audited by PricewaterhouseCoopers LLP, independent registered public accounting firm, whose report thereon appears herein. Such financial statements, to the extent they have been included in the financial statements of Cambridge Display Technology, Inc., have been so included in reliance on the report of such independent registered public accounting firm given on the authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

Upon consummation of this offering, we will be required to file annual and quarterly reports with the SEC. You may read and copy any documents filed by us at the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549. Our filings with the SEC will also be available to the public through the SEC’s website at http://www.sec.gov.

We have filed with the SEC a registration statement on Form S-1 under the Securities Act for the registration of the common stock offered by this prospectus. This prospectus, which is a part of the registration statement, does not contain all of the information included in the registration statement. Any statement made in this prospectus concerning the contents of any contract, agreement or other document is not necessarily complete. For further information regarding our company and the common stock offered by this prospectus, please refer to the registration statement, including its exhibits. If we have filed any contract, agreement or other document as an exhibit to the registration statement, you should read the exhibit for a more complete understanding of the documents or matter involved.

80

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Cambridge Display Technology, Inc.—Consolidated Financial Statements Audited Financial Statements
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets As of December 31, 2002 and 2003	F-3
Consolidated Statements of Operations—For the years ended December 31, 2001, 2002 and 2003	F-4
Consolidated Statements of Changes in Common Shareholders’ Equity—For the years ended December 31, 2001, 2002 and 2003	F-5
Consolidated Statements of Cash Flows—For the years ended December 31, 2001, 2002 and 2003	F-6
Notes to Consolidated Financial Statements	F-7
Cambridge Display Technology, Inc.—Consolidated Financial Statements Unaudited Financial Statements
Consolidated Balance Sheets—As of March 31, 2004 and December 31, 2003	F-24
Consolidated Statements of Operations—For the three months ended March 31, 2003 and 2004	F-25
Consolidated Statements of Cash Flows—For the three months ended March 31, 2003 and 2004	F-26
Notes to Consolidated Financial Statements	F-27
Litrex Corporation
Report of Independent Registered Public Accounting Firm	F-30

F-1

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Cambridge Display Technology, Inc.

We have audited the accompanying consolidated balance sheets of Cambridge Display Technology, Inc. as of December 31, 2003, 2002 and 2001 and the related consolidated statements of operations, changes in common shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the 2003 financial statements of Litrex Corporation, a 50% joint venture, which statements reflect total assets constituting 4.4% as of December 31, 2003, and total revenues constituting 24% for the year then ended, of the related consolidated totals. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, in so far as it relates to the amounts included for Litrex Corporation is based solely on the report of the other auditors.

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

In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cambridge Display Technology, Inc. as of December 31, 2003, 2002 and 2001 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with United States generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, in 2002, the Company changed its method of accounting for goodwill.

/s/    ERNST & YOUNG LLP        

New York, NY

July 23, 2004

F-2

Cambridge Display Technology, Inc.

Consolidated Balance Sheets

	December 31,
	2003			2002
	(in thousands, except for share information)
Assets
Current assets:
Cash and cash equivalents	$	10,400		$	11,972
Restricted cash		—			127
Accounts receivable		1,433			907
Due from affiliates		2,603			292
Inventories, net		—			3,176
Demo machines		—			732
Taxes receivable		2,313			1,451
Prepaid expenses and other current assets		2,553			2,598
Total current assets		19,302			21,255
Property, equipment and leasehold improvements, net		19,666			23,041
Investment in affiliates		10,180			7,387
Goodwill		58,735			69,586
Other intangible assets, net of accumulated amortization of $6,643 and $5,247 in 2003 and 2002, respectively		5,987			7,853
Total assets	$	113,870		$	129,122
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	4,222		$	6,484
Loan payable		—			127
Deferred revenue		948			1,426
Other current liabilities		—			241
Total current liabilities		5,170			8,278
Deferred revenue		1,431			1,089
Deferred proceeds on sale of subsidiary stock		5,785			—
Other liabilities		229			134
Commitments and contingencies
Series A redeemable convertible preferred stock, voting, $0.01 par value, 6,000 shares authorized, 6,000 issued and outstanding in 2003 and 2002, respectively		7,897			6,097
Series B redeemable convertible preferred stock, voting, $0.01 par value, 38,667 shares authorized, 25,871 and 19,000 issued and outstanding in 2003 and 2002, respectively		30,590			19,204
Common shareholders’ equity:
Class A common stock, voting, $0.01 par value, 27,000,000 shares authorized, 16,251,346 and 16,386,146 shares issued and outstanding in 2003 and 2002, respectively		163			164
Class B common stock, nonvoting, $0.01 par value 850,000 shares authorized 311,692 shares issued and outstanding in 2003 and 2002		3			3
Additional paid-in capital		185,379			194,172
Deferred compensation		(1	)		(20	)
Common stock subscribed		(3,163	)		(3,163	)
Accumulated other comprehensive loss		(506	)		(506	)
Accumulated deficit		(119,107	)		(96,330	)
Total common shareholders’ equity		62,768			94,320
Total liabilities and shareholders’ equity	$	113,870		$	129,122

See accompanying notes.

F-3

Cambridge Display Technology, Inc.

Consolidated Statements of Operations

	Year ended December 31
	2003			2002			2001
	(in thousands)
Operating revenues:
License fees and royalties	$	4,314		$	2,474		$	20,869
Technology services and development		3,758			727			1,522
Litrex revenue		2,608			3,852			—
Total operating revenues		10,680			7,053			22,391
Cost of sales		1,527			1,792			—
Gross profit		9,153			5,261			22,391
Operating expenses:
Research and development expenses		16,841			19,676			8,405
Selling, general and administrative expenses		11,166			16,859			11,292
Amortization of intangibles acquired		1,625			3,660			8,555
Total operating expenses		(29,632	)		(40,195	)		(28,252	)
Loss from operations		(20,479	)		(34,934	)		(5,861	)
Other income (expense):
Equity in loss of CDT Oxford		(2,355	)		(651	)		—
Equity in loss of Litrex		(1,284	)		—			—
Interest income		415			282			668
Interest expense		(6	)		(10	)		(7	)
Total other income (expense)		(3,230	)		(379	)		661
Loss before (benefit) provision for income taxes		(23,709	)		(35,313	)		(5,200	)
(Benefit) provision for income taxes		(932	)		(3,595	)		50
Net loss	$	(22,777	)	$	(31,718	)	$	(5,250	)
Net loss per common share (basic and diluted)	$	(1.78	)	$	(1.96	)	$	(0.36	)
Weighted average number of common shares outstanding (basic and diluted)		16,584			16,346			14,473

See accompanying notes.

F-4

Cambridge Display Technology, Inc.

Consolidated Statements of Changes in Common Shareholders’ Equity

Years ended December 31, 2003, 2002 and 2001

	Common Stock Class A & B Outstanding					Additional Paid-in Capital			Deferred Compensation			Common Stock Subscribed			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Shareholders’ Equity
	Shares		Amount
	(in thousands)
Balances at January 1, 2001	13,589		$	136		$	146,177		$	(13	)	$	(3,163	)	$	(402	)	$	(59,362	)	$	83,373
Issuance of common stock	1,458			14			21,794			—			—			—			—			21,808
Stock options granted	—			—			58			(58	)		—			—			—			—
Amortization of deferred compensation	—			—			—			32			—			—			—			32
Net loss	—			—			—			—			—			—			(5,250	)		(5,250	)
Foreign currency translation adjustment	—			—			—			—			—			(104	)		—			(104	)
Comprehensive loss	—			—			—			—			—			—			—			(5,354	)
Balances at December 31, 2001	15,047			150			168,029			(39	)		(3,163	)		(506	)		(64,612	)		99,859
Issuance of common stock	2,270			23			36,322			—			—			—			—			36,345
Conversion of common into preferred stock	(619	)		(6	)		(9,994	)		—			—			—			—			(10,000	)
Stock options granted	—			—			116			—			—			—			—			116
Amortization of deferred compensation	—			—			—			19			—			—			—			19
Accretion of liquidation preference	—			—			(301	)		—			—			—			—			(301	)
Net loss and comprehensive loss	—			—			—			—			—			—			(31,718	)		(31,718	)
Balances at December 31, 2002	16,698			167			194,172			(20	)		(3,163	)		(506	)		(96,330	)		94,320
Issuance of common stock	—			—			6			—			—			—			—			6
Conversion of common into preferred stock	(135	)		(1	)		(2,186	)		—			—			—			—			(2,187	)
Stock options granted	—			—			158			—			—			—			—			158
Amortization of deferred compensation	—			—			—			19			—			—			—			19
Accretion of liquidation preference	—			—			(6,771	)		—			—			—			—			(6,771	)
Net loss and comprehensive loss	—			—			—			—			—			—			(22,777	)		(22,777	)
Balances at December 31, 2003	16,563		$	166		$	185,379		$	(1	)	$	(3,163	)	$	(506	)	$	(119,107	)	$	62,768

See accompanying notes.

F-5

Cambridge Display Technology, Inc.

Consolidated Statements of Cash Flows

	Year ended December 31,
	2003			2002			2001
	(in thousands)
Operating activities
Net loss	$	(22,777	)	$	(31,718	)	$	(5,250	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization of property, equipment, leasehold improvements and demo machines		6,334			3,998			1,672
Loss on sale of property, equipment and leasehold improvements		74			—			—
Amortization of goodwill		—			—			7,526
Amortization of other intangible assets		1,625			3,660			1,030
Amortization of deferred compensation		19			19			32
Equity in loss of CDT Oxford		2,355			651			—
Equity in loss of Litrex		1,284			—			—
Stock options granted		158			116			—
Write-off of other intangible assets		—			916			—
Changes in operating assets and liabilities:
Accounts and tax receivable		(2,229	)		(1,548	)		(803	)
Due from affiliates		(2,302	)		(292	)		—
Inventories and demo machines		(511	)		(2,710	)		(141	)
Prepaid expenses and other current assets		110			(108	)		(2,350	)
Accounts payable and accrued expenses		(1,238	)		(271	)		4,112
Deferred revenue		2,579			68			1,229
Other current and non-current liabilities		383			(1,625	)		2,000
Net cash (used in) provided by operating activities		(14,136	)		(28,844	)		9,057
Investing activities
Acquisition of property, equipment and leasehold improvements		(3,601	)		(4,388	)		(19,983	)
Disposal of property, equipment and leasehold improvements		68			—			—
Acquisition of other intangible assets		(100	)		—			(8,000	)
Investment in affiliates		(128	)		(8,038	)		—
Disposal of business		12,091			—			—
Acquisition of business, net of cash acquired		—			—			(9,197	)
Net cash provided by (used in) investing activities		8,330			(12,426	)		(37,180	)
Financing activities
Change in restricted cash		127			136			(2,824	)
(Repayment) increase of loan payable, net		(127	)		(495	)		2,824
Repayments of capital lease obligations		—			—			(16	)
Issuance of common stock		6			34,726			21,808
Issuance of redeemable convertible preferred stock		4,228			15,000			—
Net cash provided by financing activities		4,234			49,367			21,792
Effect of exchange rate changes on cash		—			—			(174	)
Net (decrease) increase in cash		(1,572	)		8,097			(6,505	)
Cash and cash equivalents—beginning of year		11,972			3,875			10,380
Cash and cash equivalents—end of year	$	10,400		$	11,972		$	3,875
Supplemental disclosures of cash flow information
Interest paid	$	6		$	10		$	7

See accompanying notes.

F-6

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements

1.    Organization and Description of Business

CDT Acquisition Corp (the “Company”), a U.S. based corporation, organized in the state of Delaware, was formed in 1999 to acquire all of the common stock of CDT Holdings Plc (“Holdings”, a company organized under the laws of the United Kingdom) (the “acquisition”). Holdings in turn, is the parent of Cambridge Display Technology Limited (“Limited”) and CDT Licensing Limited (“Licensing”), both United Kingdom companies. This acquisition was accounted for as a purchase. Holdings, Limited and Licensing are hereinafter collectively referred to as the “U.K. Subsidiaries”. In 2001, the Company formed CDT International Limited (“CDT International”, a Bermuda based company) to hold certain intellectual property and investments. During 2003, the assets of CDT International were sold to other companies in the group and CDT International was put into solvent liquidation. CDT International was finally liquidated in January 2004. In 2001, CDT International acquired a controlling (86%) interest in Litrex Corporation (“Litrex”, a California based company). In 2002, the Company acquired the remaining 14% ownership in Litrex. In August 2003, a 50% interest in Litrex was sold, as described in Note 3. In October 2002, the Company acquired a 16% equity interest and full management control of Opsys (UK) Limited, which was subsequently renamed CDT Oxford Limited (“CDT Oxford”). In July 2004, the Company formally changed its name to Cambridge Display Technology, Inc.

The Company was initially capitalized by the issuance of 9,461,150 shares of its common stock to affiliates of Kelso & Co. (“Kelso”), and Hillman Capital (“Hillman”), both U.S. based private equity investors. At December 31, 2003, Kelso, and parties related to Kelso, and Hillman controlled 44% and 31% of the vote of the Company, respectively on a fully diluted basis.

The Company is principally involved in the development and commercialization of Polymer Organic Light Emitting Diode (“P-OLED”) intellectual property and technology, an advanced display technology for which it holds worldwide fundamental patents. Litrex is a designer and integrator of ink jet printing solutions for P-OLED printing. CDT Oxford is principally involved in research and development of light emitting dendrimer materials and hybrid P-OLED materials.

2.    Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries after elimination of all significant intercompany balances and transactions. The results of Litrex are fully consolidated into the Company’s financial statements through August 14, 2003. Subsequent to that date, the Company’s 50% share of the profit or loss of Litrex is accounted for using the equity method. The Company also holds a 16% interest in CDT Oxford, but, because it is responsible for funding 100% of the losses of CDT Oxford and has an entitlement to 98% of any profits as a management fee, the Company accounts for 100% of that company’s profit or loss in a manner similar to the equity method.

The Company’s operations are subject to certain risks and uncertainties. These risks include, but are not limited to, the Company’s ability to meet obligations, continuing losses and negative cash flows and funding expansion of the Company’s operations.

Foreign Currencies

Effective for fiscal 2002, the functional currency for the Company and all subsidiaries is the US Dollar, primarily due to the fact that the majority of the revenue is generated in US Dollars and the funding of the Company originates in US Dollars. Prior to 2002 the British Pound was the functional currency and the Company followed the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 52, Foreign Currency Translation. Accordingly, assets and liabilities of foreign subsidiaries were translated at prevailing year-end rates

F-7

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

of exchange and income and expense accounts were translated at weighted average rates for each year. Foreign currency translation gains and losses were recorded in the shareholders’ equity section of the consolidated balance sheets, net of income taxes. Foreign currency transaction gains and losses are included in the determination of net income (loss).

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity at acquisition of three months or less to be cash equivalents. Cash equivalents primarily consist of investment grade commercial paper, which are short term in nature and therefore bear minimal risk.

Restricted Cash

In 2002, the Company had restricted cash set aside in a separate bank account that was payable to former shareholders of Holdings, in exchange for their untendered shares. During 2003 all restricted cash was paid out to the former shareholders.

Inventory

Inventory was stated at the lower of cost or market. Cost was determined using the first-in, first-out method. Following the sale of Litrex, the Company no longer holds any inventory.

Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements, are stated at cost. Depreciation is computed using the straight-line method, based upon the shorter of the estimated useful lives, generally ranging from three to five years, or the lease term of the respective assets.

Goodwill

In July 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 142, Goodwill and Other Intangible Assets. The Company adopted SFAS No. 142 effective January 1, 2002. An initial impairment test of goodwill was performed as of January 1, 2002 and determined that the Company’s reported goodwill was not impaired.

SFAS No. 142 requires that goodwill acquired in a business combination be capitalized at acquisition cost and requires that goodwill no longer be amortized to earnings. On an annual basis, the Company is required to evaluate the carrying value of goodwill at the reporting unit level for impairment using a two step impairment test.

During the fourth quarters of 2003 and 2002, the Company completed the annual impairment tests of goodwill and determined that its reported goodwill was not impaired.

If the Company had adopted SFAS 142 in 2001, net income in 2001 would have been as follows:

Net loss as of December 31, 2001	$	(5,250,000	)
Add: amortization of goodwill for fiscal 2001		7,526,000
Net income as of December 31, 2001, as adjusted	$	2,276,000
Income per share—basic and diluted	$	1.57

F-8

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

Other Intangible Assets

Other intangible assets, which primarily related to intellectual property rights and know-how, will continue to be amortized on a straight-line basis over their estimated useful life of five to ten years. The Company has no indefinite lived intangible assets other than goodwill. As of December 31, 2003 and 2002, the Company’s management believes the net intangible asset balance is recoverable. Amortization expense for the next five years is expected to be as follows:

Year ending December 31:
2004	$	1,566,000
2005		1,566,000
2006		1,399,000
2007		566,000
2008		563,000

Revenue Recognition

The Company’s revenue derives from license fees and royalties due under its license agreements, payments due under various development agreements, research licenses and, in the case of equipment sales, final customer acceptance of systems produced. Up-front, non-refundable license fees are recognized as revenue at the inception of the license term, providing the Company has no ongoing obligation under the relevant license. Where an extended obligation does exist, up-front fees are amortized over the period of that obligation. The Company also enters into a number of Technology Services and Development contracts. These contracts may involve the transfer of know-how to third parties, together with the provision of services related to that transfer. When the specific value of each of the know-how and services can be objectively determined, the Company recognizes revenue related to the provision of know-how when that know-how is delivered, and recognizes revenue for services as those services are delivered. When the split between know-how and services cannot be determined, revenue is recognized over the life of the contract. When contracts involve the Company devoting research effort to projects over a period of time, revenue under these contracts is amortized over the life of the contract. Royalties are recorded as revenue when they become receivable and collection is reasonably assured.

Research and Development

Research and development costs are expensed as incurred.

Income Taxes

Taxes are provided using the liability method on all differences between book and tax bases of assets and liabilities calculated at the rate at which it is anticipated the timing differences will reverse. Given the history of losses of the Company, 100% valuation allowances are provided with respect to loss and other carry forwards and no net deferred tax asset is recognized.

Comprehensive Loss

To date, foreign currency translation adjustments are the principal items of comprehensive loss exclusive of net losses.

Net Loss Per Common Share

The Company reports both basic net loss per common share, which is based on the weighted average number of common shares outstanding, excluding contingently issuable shares, and diluted net income per share,

F-9

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

which is based on the weighted average number of common shares outstanding and dilutive potential common shares outstanding. However, since the Company reported losses in each year presented, the effect of including options and other contingently issuable shares would be anti-dilutive. Accordingly, basic and diluted loss per share are the same.

Business Concentrations

The Company’s customers are located principally in Europe, the United States and Asia. For the year ended December 31, 2003, 13%, 38% and 49% (2002: 54%, 32% and 15%, 2001: 15%, 81% and 4%) of the Company’s revenues were generated from these three areas. For the year ended December 31, 2003, two customers accounted for 48% (2002: four customers accounted for 53%, 2001: two customers accounted for 92%) of the total revenues.

Stock-Based Compensation

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure, which amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. The Company has not elected to expense stock options, but rather continues to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related interpretations in accounting for stock options. Accordingly, other than certain grants at less than fair value, the Company has recognized no compensation expense with respect to options granted to employees. Had compensation cost been determined based upon the fair value at grant date for awards consistent with the methodology prescribed by SFAS No. 123, the Company’s net loss for the year ended December 31 would have been the pro forma amounts indicated below:

	2003			2002			2001
Net loss—as reported	$	(22,777,000	)	$	(31,718,000	)	$	(5,250,000	)
Less: accretion of preferred stock		(6,771,000	)		(301,000	)		—
Add back: APB 25 cost		19,000			19,000			32,000
Less: total stock-based employee compensation expense under the fair value method		(806,000	)		(1,181,000	)		(1,278,000	)
Net loss to common shareholders—pro forma	$	(30,335,000	)	$	(33,181,000	)	$	(6,496,000	)
Net loss per share:
Basic and diluted—as reported	$	(1.78	)	$	(1.96	)	$	(0.36	)
Basic and diluted—pro forma	$	(1.83	)	$	(2.03	)	$	(0.45	)

The fair value of these options was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions for December 31, 2003: risk-free interest rate of 3.0% (3.0% in 2002, 4.0% in 2001); volatility factor of the expected market price of the Company’s common stock of 75% (75% in both 2002 and 2001); expected life of four years (four years in both 2002 and 2001); and a dividend yield of zero (zero in 2002 and 2001).

As any options granted in the future will also be subject to the fair value pro forma calculations, the pro forma adjustments for fiscal years 2003, 2002 and 2001 may not be indicative of future years.

The weighted average fair value of options, calculated using the Black-Scholes option pricing model, granted during 2003 with the market price equal to the exercise price, is $3.37 ($3.17 in 2002, $3.38 in 2001).

F-10

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

The weighted-average remaining contractual life of all outstanding options is 7.3 years (8.1 years in 2002, 8.7 years in 2001).

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In November 2002, the FASB’s Emerging Issues Task Force (“EITF”) reached a consensus on Issue 00-21, Accounting for Multiple Element Revenue Arrangements, addressing how to account for arrangements that involve the delivery or performance of multiple products, services, and/or rights to use assets. Revenue arrangements with multiple deliverables are divided into separate units of accounting if the deliverables in the arrangement meet the following criteria: (1) the delivered item has value to the customer on a standalone basis; (2) there is objective and reliable evidence of the fair value of undelivered items; and (3) delivery of any undelivered item is probable. Arrangement consideration should be allocated among the separate units of accounting based on their relative fair values, with the amount allocated to the delivered item being limited to the amount that is not contingent on the delivery of additional items or meeting other specified performance conditions. The guidance in Issue 00-21 is effective for revenue arrangements entered into in fiscal periods after June 15, 2003. The adoption of Issue 00-21 did not have an impact on the Company’s financial statements.

During November 2002, the FASB issued FASB Interpretation (“FIN”) No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others. FIN No. 45 elaborates on the existing disclosure requirements for a guarantor in its interim and annual financial statements regarding its obligations under guarantees issued. It also clarifies that at the time a guarantee is issued, the guarantor must recognize an initial liability for the fair value of the obligations it assumes under the guarantee and must disclose that information in its financial statements. The initial recognition and measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002, and the disclosure requirements apply to guarantees outstanding at December 31, 2002. The Company adopted the provisions of FIN No. 45 at January 1, 2003. The adoption of this Interpretation did not have an impact on the Company’s financial position or operating results.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how a company classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify certain financial instruments as a liability (or as an asset in some circumstances). SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. Pursuant to the Securities and Exchange Commission’s Accounting Series Release No. 268, the Company had already classified the preferred stock as other than common equity.

In December 2003, the FASB issued FIN No. 46(R), Consolidation of Variable Interest Entities, which supersedes FIN No. 46 issued in January 2003. FIN No. 46(R) clarifies certain aspects of consolidation accounting. This Interpretation requires variable interest entities to be consolidated if the equity investment at risk is not sufficient to permit an entity to finance its activities without support from other parties or the equity investors lack specified characteristics. The Company will adopt this interpretation effective January 1, 2004,

F-11

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

which will require the Company to consolidate CDT Oxford (Note 3). This will have no impact on the net income (loss) shown on the consolidated statement of operations, since the Company is responsible for 100% of the operating loss, but will require the Company’s consolidated balance sheet to include the assets and liabilities of CDT Oxford. However, the Company recorded a one-time cumulative effect adjustment of $12.2 million on January 1, 2004.

3.    Acquisitions and disposals

CDT Oxford

On October 23, 2002, the Company purchased a 16% interest in Opsys UK Limited (“Opsys UK”) for $2,500,000. At the same time, Limited purchased a $2,000,000 license from Opsys Limited (“Opsys”), the parent of Opsys UK. As part of the Transaction Agreement, effective from the date of the Agreement, the Company shall on an exclusive and irrevocable basis, manage the assets and business of Opsys UK. Due to this, all of the books and records of Opsys UK are maintained by the Company. The Company is entitled to an annual management fee equal to 98% of all pre-tax profits earned, if any, by Opsys UK. The Company and Limited are responsible for all liabilities arising from the management of Opsys UK, including funding of any losses incurred. Later in 2002, Opsys UK was renamed CDT Oxford Limited (“CDT Oxford”). The Company accounts for CDT Oxford in a manner similar to the equity method; however, since the Company and Limited are responsible for 100% of the operating loss of CDT Oxford, the Company will be required to consolidate CDT Oxford in future financial statements commencing the year ended 2004 as a result of the issuance of FIN No. 46 (R).

In connection with the Transaction Agreement, Opsys granted a call option for the Company and the Company granted a put option to Opsys, upon the exercise of which, the Company would purchase and Opsys would sell all of the remaining 840 shares of CDT Oxford outstanding not already owned by the Company. In further consideration for the grant of the call option, the Company paid an option price of $500,000 in cash to Opsys. The put option may be exercised by Opsys by 60 days prior written notice to the Company at any time following the completion of the Transaction Agreement. The call option shall be automatically exercised by the Company immediately prior to an Insolvency Event, as defined, of Opsys, or by giving 90 days written notice to Opsys for any of the following circumstances: (a) an initial public offering of the Company, (b) at any time on or after the sixth anniversary of the Transaction Agreement, (c) if there is a Sale, as defined, of the Company, where the consideration on sale payable to Opsys thereunder will be liquid or a sufficient proportion will be liquid to allow Opsys to pay the Section 179 Charge payable, or (d) if the Section 179 Charge becomes payable by CDT Oxford, where the Section 179 Charge is defined as a tax liability arising under Section 179 of the Taxation of Chargeable Gains Act of 1992, a tax provision in the United Kingdom. All options that are exercised will be settled with a maximum of 1,159,654 Class A Common Stock at a deemed value of $16.15 per share.

As part of the Opsys transaction, Toppan Printing Company (“Toppan”) of Japan, a key partner of Opsys, invested $5,000,000 in the Company by purchasing 309,598 of Class A Common Stock. Toppan was also issued an additional 185,758 shares of Class A Common Stock in exchange for shares held by them in Opsys.

Litrex

On November 20, 2001, the Company acquired an 86% interest in Litrex by purchasing certain notes held by Litrex’s parent, Gretag Imaging Trading AG for $10,000,000 plus costs associated with the transaction. These notes were immediately converted into common stock of Litrex. This acquisition has been accounted for as a purchase. The consolidated results of operations for Litrex subsequent to the acquisition have been included in the Company’s consolidated statements of operations. Other intangible assets are being amortized on a straight-line basis over five years. Pursuant to SFAS 142, as the acquisition occurred subsequent to June 30, 2001,

F-12

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

goodwill is not being amortized, but was subject to annual impairment tests. The initial purchase price has been allocated to the acquired assets and liabilities of Litrex as follows:

Net tangible assets	$	616,000
Other intangible assets		500,000
Goodwill		9,166,000
Purchase price	$	10,282,000

For fiscal 2001, the Company expensed the 14% of the Litrex operating losses related to minority interest, as it determined that the minority shareholders were not required to, and would not, fund their share of the operating losses. During September 2002, the Company acquired the remaining 14% ownership in Litrex by issuing the shareholders 100,898 shares of Class A common stock in exchange for their common stock of Litrex, which resulted in an increase in goodwill of $1,630,000 to $10,795,000.

In August 2003, the Company sold 50% of the equity in Litrex to Ulvac Inc, a Japanese company, for $15,084,000, of which $1,388,000 has been held in an escrow account. Under the terms of the Sale and Purchase Agreement, the Company has made a number of warranties (which are secured by the amount held in escrow) and has other ongoing commitments, notably a Joint Venture Agreement with Ulvac under which the Company appoints three of the six Board members of Litrex. The Joint Venture Agreement contains provisions that the Company and Ulvac would have to work together to restructure Litrex if the level of funding that Ulvac has committed to under the Joint Venture Agreement were to be exceeded—in this context, the Company is committed to working with Ulvac to ensure that Litrex is funded for so as long as it retains an equity stake. In addition, the Company and Ulvac have each signed a commitment letter to Litrex under the terms of which, if Litrex requests additional funding in order to maintain its operations, both the Company and Ulvac would provide such funding up to a maximum of $1.25 million from each party. In light of the continuing commitments described above, the $5,785,000 representing the excess of the cash proceeds over the carrying value of the shares sold has been deferred and is shown as “Deferred proceeds on sale of subsidiary stock” on the consolidated balance sheet.

The Sale and Purchase Agreement includes provision for Ulvac to purchase the remaining 50% of Litrex in November 2005. Such a purchase could be triggered in August 2005 by either Ulvac exercising a call option or the Company exercising a put option. The purchase price is, to some extent, contingent on the financial performance of Litrex but will be a minimum of $10.0 million. Under certain circumstances, Ulvac would be able to reject a put option which the Company attempts to exercise, and in other circumstances, Ulvac could require the Company to repurchase the shares owned by Ulvac. The amounts held in escrow after the first closing will be released on second closing, at which time an additional escrow amount will be withheld from the second purchase consideration.

4.    Inventories

Inventories included the following at December 31, 2002:

Raw materials and work in progress	$	2,879,000
Finished goods		297,000
	$	3,176,000

F-13

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

5.    Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements include the following at December 31:

	2003			2002
Machinery and equipment	$	22,047,000		$	20,114,000
Leasehold improvements		8,409,000			8,277,000
Furniture and office equipment		3,107,000			3,164,000
		33,563,000			31,555,000
Less: accumulated depreciation		(13,897,000	)		(8,514,000	)
	$	19,666,000		$	23,041,000

6.    Investment in Affiliates

Summary financial information for affiliated companies accounted for by the equity method is as follows:

	Litrex post Aug. 14, 2003			CDT Oxford
				2003			2002
Current assets	$	4,656,000		$	2,049,000		$	196,000
Non-current assets		12,555,000			1,968,000			2,945,000
Current liabilities		(5,377,000	)		(4,523,000	)		(1,186,000	)
Non-current liabilities		(83,000	)		—			(106,000	)
Net sales		2,151,000			353,000			—
Gross profit		33,000			25,000			—
Net loss		(2,569,000	)		(2,355,000	)		(651,000	)

7.    Other Intangible Assets

In October 2001, CDT International (guaranteed by the Company) entered into an exclusive license agreement with a third party to enable the Company to use certain technology, intellectual property and know-how (“IP”), and made an initial payment of $1,000,000. The agreement required CDT International to pay up to $15,000,000 over six years. However, the agreement was to become void after three years if certain targets, as defined in the agreement, were not met. The parties have now agreed to terminate the license. The initial payment of $1,000,000 was written off in 2002 and no further payments were made or are required to be made.

In October 2001, CDT International for payment of $5,000,000 entered into a nonexclusive license agreement with another third party to enable the Company to use certain technology, intellectual property rights and know-how. The license term continues until the last of the patents ceases to be in force, unless it is terminated early under certain circumstances, as defined in the agreement. The agreement allows for sublicenses to be granted by CDT International. This license has now been transferred to the Company and Limited, recorded in other intangible assets, and is being amortized over five years.

8.    Common Stock Subscribed

For consideration of Class A Common Stock purchased by two shareholders in July 1999, two shareholders issued a secured, full recourse promissory note of $3,163,000 to the Company. The term of note ends upon the earlier of August 8, 2008 or a Termination Event, as defined in the note. In the event that the shareholders are unable to pay, the note is secured by the shares of Class A Common Stock issued to the two shareholders.

F-14

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

9.    Redeemable Convertible Preferred Stock

During 2002, the Company authorized issuance of up to 44,667 shares of $0.01 par, redeemable convertible preferred stock in two series. Series A Preferred Stock consists of 6,000 shares and Series B Preferred Stock consists of 38,667 shares (collectively “Preferred Stock”). In December 2002, 6,000 shares of Series A preferred stock and 9,000 shares of Series B preferred stock were issued for cash consideration of $6,000,000 and $9,000,000, respectively. At the same time, 10,000 shares of Series B preferred stock were issued in exchange for 619,195 shares of Class A common stock. In March 2003, a further 4,684 shares of Series B preferred stock were issued for cash consideration of $4,684,000, and 2,187 shares of Series B preferred stock were issued in exchange for 135,420 shares of Class A common stock.

Each share of Preferred Stock is convertible into 61.92 shares of Class A Common Stock at a price equal to $16.15 per common share (the “Conversion Price”). The Conversion Price is subject to change in certain circumstances, including stock splits and dividends. There are no separate dividends on the preferred shares, other than sharing in any dividends declared and paid on the Common Stock (including both Class A voting and Class B nonvoting) on an as-converted basis. The Preferred Stock is redeemable by the holders 10 years after issuance.

Upon redemption, liquidation, dissolution or winding up of the Company, each holder of Series A Preferred Stock will be entitled to be paid in cash, before any distribution or payment is made on the Series B Preferred Stock or the Common Stock or equivalents, an amount equal to $6,000,000 (the “Initial Investor Preference”). Thereafter, each holder of Preferred Stock will be entitled to be paid, in cash, before any distribution or payment is made on the Common Stock or equivalents, an amount equal to (a) in the case of Series B Preferred Stock, the greater of (i) three times the Purchase Price, as defined, of the Series B Preferred Stock or (ii) the amount that would be received if the Series B Preferred Stock had been converted into Common Stock immediately prior to such liquidation event, and (b) in the case of the Series A Preferred Stock, three times the Purchase Price of the Series A Preferred Stock and thereafter, the Series A Preferred Stock will participate with the Common Stock on an as-converted basis in all remaining assets.

Upon the sale of all or substantially all assets or a change of control transaction, all of the then outstanding shares of Preferred Stock shall be subject to redemption at the option of the holders of a majority of the outstanding Preferred Stock and, except in the case of a “Qualifying Sale” (as defined below), at the option of the Company. Except as provided in Mandatory Conversion below with respect to a “Qualifying Sale”, in any redemption, holders will receive the amounts equal to their liquidation preference as set forth above.

In the event of a “Qualifying IPO”, each share of Preferred Stock will convert into the number of shares of Common Stock determined by dividing the Purchase Price by the Conversion Price. A “Qualifying IPO” will be defined as an IPO of no less than $50,000,000 of proceeds with a post-IPO valuation of at least $500,000,000 and an IPO offering price of at least $22.00 per share.

In the event of a “Qualifying Sale”, each share of Preferred Stock will convert into the number of shares of Common Stock determined by dividing the Purchase Price by the Conversion Price. A “Qualifying Sale” will be defined as a sale of all or substantially all assets or a change of control transaction that values the aggregate equity of the Company in excess of $750,000,000, with a per common share value of at least $34.00 and where the consideration received is either cash or marketable securities.

In the case of a Mandatory Conversion of Series A Preferred Stock as a result of a Qualifying IPO or a Qualifying Sale, the holders of Series A Preferred Stock will be entitled to receive a special payment from the Company of an amount equal to the Initial Investor Preference, payable in cash, or at the option of the Company

F-15

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

or the holders of a majority of the Series A Preferred Stock, in 371,517 shares of Common Stock or equity securities of an acquirer or surviving entity that would have been received by a holder of 371,517 shares of Common Stock.

In the event the holders of a majority of the shares of Preferred Stock, Series A Preferred Stock or Series B Preferred Stock then outstanding elect to convert such shares into Common Stock, then each share of Preferred Stock, Series A Preferred Stock or Series B Preferred Stock, as the case may be, shall be automatically converted into shares of Common Stock, on the same basis as set forth above.

The Preferred Stock will vote on an as-converted basis with the Common Stock. The Preferred Stock will have class voting rights (by a majority vote) in respect of (a) changes to the terms of, or issuances of additional shares of, the Preferred Stock, (b) issuances of shares of preferred stock by their terms senior or pari passu to the Preferred Stock (subject to “most favored nations” treatment for all the Preferred Stock), and (c) incurrences of debt in excess of $5,000,000.

Pursuant to the Securities and Exchange Commission Accounting Series Release No. 268, the difference between the issue price of the Preferred Stock and the redemption value is being accreted to the carrying value of the Preferred Stock over the 10 years to mandatory redemption. Such amount is charged to Paid-in-Capital and credited to Preferred Stock.

10.    Employee Stock Option Plan

In April 2000, the Company adopted the “CDT Acquisition Corp. Stock Incentive Plan” (the “Plan”). Under the Plan, options may be granted to employees and directors. Options available for grant under the Plan total 2,000,000. Under the Plan, employees generally are granted two types of options in one grant: Service Options (one-third of total grant) and Exit Options (two-thirds of total grant). Certain employees of Litrex were only granted Service Options. Service Options granted in 2002 were granted at fair market value at date of grant, vest 25% on the six-month anniversary of grant, and 25% on the anniversary date of each grant for each of the next three years. Fair value was determined by reference to equity sold during the relevant period. Service options to Litrex employees were granted at fair market value at date of grant, vest 20% on the six-month anniversary of grant, and 20% on the anniversary date of each grant for each of the next four years. Prior Service Options were generally granted at fair market value at date of grant, vest 25% on the date of grant and 25% per annum thereafter and have lives of no more than 10 years. Exit Options become exercisable, if at all, on the date of the first occurrence of a change in control (a “Vesting Event”, as defined in the Plan), in which the majority shareholders receive an internal rate of return of at least 30%. If upon the first Vesting Event, the required internal rate of return is not achieved, they shall not become exercisable as a result of a Subsequent Vesting Event, as defined by the Plan. Upon the sale of the 50% interest, all Litrex options were cancelled in August 2003.

During fiscal 2001, the Company bought back 100,000 options from various former employees of the Company for $1 per option. The Company expensed $100,000 related to these option buybacks.

The Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related interpretations in accounting for its employee stock options. Under APB 25, because the exercise price of most of the Company’s Service Options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. For Exit Options, if an appropriate Vesting Event becomes probable, compensation expense will have to be recorded for the intrinsic value, which would be the difference between the market value on the date of the Vesting Event and the exercise price. No compensation expense will be recorded prior to the Vesting Event. In the event that the exercise price is below the market price of the Service Options, compensation expense will be recorded on a straight-line basis over the

F-16

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

vesting period. For the years ended December 31, 2003, 2002 and 2001, the Company expensed $19,000, $19,000 and $32,000, respectively, related to Service Options granted with an exercise price below the market price.

The following table summarizes information concerning the outstanding and exercisable options:

	Number of Shares	Exercise Price Range	Weighted Average Exercise Price
Outstanding, January 1, 2001	1,342,000	$10.43	$	10.43
Granted	406,000	$10.43 - $16.15	$	13.16
Cancelled / buyback	230,000	$10.43 - $14.15	$	10.92
Outstanding, December 31, 2001	1,518,000	$10.43 - $16.15	$	11.25
Granted	384,000	$16.15	$	16.15
Exercised	2,000	$10.43 - $14.15	$	11.68
Cancelled / buyback	312,000	$10.43 - $14.15	$	11.57
Outstanding, December 31, 2002	1,588,000	$10.43 - $16.15	$	12.51
Granted	229,000	$16.15	$	16.15
Cancelled	314,000	$10.43 - $16.15	$	14.68
Outstanding, December 31, 2003	1,503,000	$10.43 - $16.15	$	12.47
Exercisable, December 31, 2003	376,000	$10.43 - $16.15	$	11.52

At December 31, 2003, there remain 495,366 options available for future grants.

11.    Income Taxes

The Company is liable for franchise taxes to Delaware, its state of incorporation. Such taxes have been included in the provision for income taxes for the years ended December 31, 2003, 2002 and 2001. For the years ended December 31, 2003 and 2002, the Company recorded a tax benefit primarily due to a research and development tax credit from 2003 and prior years. The Company has filed amended tax returns from the prior years to recoup the tax credit. The U.K. subsidiaries of the Company are eligible to participate in the U.K.’s research and development tax credit program. Under this program, small and medium sized enterprises, such as the Company, are permitted a deduction in taxable profits of 150% the amount of certain research and development expenditures (primarily salaries, salary related costs and consumables used in research and development activities). This deduction may be surrendered for a cash payment of 16% of the total deduction for those years during which the Company sustains a loss. Limited and CDT Oxford have both claimed such cash payments for the years ended December 31, 2001, 2002 and 2003.

The following is a reconciliation of the statutory financial income tax rate and the effective income tax rate application to earnings before income taxes for the year ended December 31:

	2003		2002		2001
Statutory tax rate	35.0	%	35.0	%	35.0	%
State and local income tax rate	—		—		1.0	%
Change in valuation allowance	(35.0	)%	(35.0	)%	(35.0	)%
Research and development tax credit	(3.9	)%	(10.2	)%	—
Effective tax rate	(3.9	)%	(10.2	)%	1.0	%

F-17

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

Deferred income taxes reflect the net tax effects of operating loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting and the amount used for income tax purposes. Given the Company’s activities and the uncertainty of the future utilization of these carryforwards, the Company has provided valuation allowances for the full amount of the net deferred tax asset.

Significant components of the Company’s net deferred tax amounts for federal, state and foreign income taxes are as follows at December 31:

	2003			2002
Deferred tax assets
Net operating loss carry forwards	$	18,004,000		$	16,524,000
Other		220,000			516,000
		18,224,000			17,040,000
Deferred tax liabilities
Deferred revenue		—			(328,000	)
Tax over book depreciation		(4,800,000	)		(6,465,000	)
Net deferred tax assets		13,424,000			10,247,000
Valuation allowance for deferred tax assets		(13,424,000	)		(10,247,000	)
Net deferred tax asset		—			—

The majority of the net operating loss carryforwards is available only to the results of the U.K. Subsidiaries and their respective consolidated entities ($60,000,000 in 2003 and $48,000,000 in 2002). They are not available to offset income, if any, earned by the Company or any non-U.K. operations. Under U.K. tax laws, such loss carryforwards do not expire, and under certain circumstances, can be used by other U.K. controlled group entities.

12.    Net Loss per Common Share

	2003			2002
Net loss	$	(22,777,000	)	$	(31,718,000	)
Accretion of preferred stock		(6,771,000	)		(301,000	)
Net loss to common shareholders		(29,548,000	)		(32,019,000	)
Weighted average number of common shares outstanding		16,584,000			16,346,000
Net loss per common share	$	(1.78	)	$	(1.96	)

13.    Employee Pension Plans

Limited contributes to individual defined contribution pension plans for its employees. For the years ended December 31, 2003, 2002 and 2001, expenses were $343,000, $267,000 and $177,000, respectively. The Company and Litrex administer a contributory savings plan under Section 401(k) of the Internal Revenue Code for eligible employees. Contributions by employees are not taxable until retirement or early withdrawal. The Company’s contributions under the Plan, which amounted to 100% of employee contributions to a maximum of 5% of the total eligible compensation, approximated $127,000, $166,000 and $26,000 for the years ended December 31, 2003, 2002 and 2001, respectively.

F-18

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

14.    Commitments and Contingencies

Included within “Other Intangible Assets” is a license for intellectual property which is valued, net of accumulated amortization, at $2,833,000. The licensor has advised the company that this license is terminated, on grounds which the Company believes are not well founded. The licensor has been in negotiation with the Company with a view to resolving this dispute such that the Company would retain its rights to this intellectual property and the Company believes that this dispute will be resolved satisfactorily without recourse to legal action. In the event that these discussions are not successful, the Company could incur material expenditures on legal proceedings against the licensor.

After the issuance of Series A and Series B Preferred Stock in 2002, the Company received a communication from counsel to a third party which has an option to acquire Common Stock in the Company. This party claimed that the option should be redesignated as an option for such Preferred Stock rather than Common Stock, under the terms of the anti-dilution provisions in the option agreement. The Company is currently negotiating a Settlement and Amendment Agreement with this third party. Under the settlement, which would become effective upon consummation of the Company’s underwritten initial public offering of common stock and the certification to the Company’s satisfaction of certain other conditions, the number of shares to be received by this third party would be changed to a number to be derived by application of a specified formula. If the Company does not enter into a settlement, or if the settlement does not become effective or is terminated, and in the event that the third party does commence legal proceedings, the Company could incur material expenditures to defend against any claim.

Under the terms of a contract between Covion Organic Semiconductors and the Company, the Company is obliged to provide the equivalent of 10 full service equivalent scientists and engineers to work on research and development projects related to P-OLED materials until December 2006. The Company receives royalties from Covion based on the revenues for all Covion’s sales of P-OLED materials, whether or not those materials were developed by the project team. Until the end of 2003, the royalties received from Covion were less than the costs of funding the project team and such excess costs have been expensed. Since royalties will continue to be payable after the obligation to provide research services has concluded, the Company anticipates that the contract will be profitable and accordingly has not included a loss provision.

Under the purchase agreement between Ulvac and us, we are required to fund 50% of the special bonus plan in which all employees of Litrex participate and an estimate of this amount will be held in escrow in addition to 10% of the consideration paid by Ulvac in the second closing which will be held in escrow for one year.

On the basis of facts presently known, the Company is not involved in any other legal proceedings which could have a material adverse effect on the Company’s financial condition or results of operations.

F-19

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

The Company leases land and buildings under operating leases in which they currently conduct their business. The leases expire between February 2004 and March 2011, one of which can be renewed and two which cannot be renewed. Future rental commitments under these leases are as follows:

Year ended December 31:

2004	$	393,000
2005		216,000
2006		216,000
2007		216,000
2008		216,000
Thereafter		648,000
	$	1,905,000

Rent expense for the years ended December 31, 2003, 2002 and 2001 were $896,000, $962,000 and $486,000, respectively.

At December 31, 2003, 2002 and 2001, the Company had contracted for capital expenditures of approximately $1,326,000, $1,892,000 and $2,424,000, respectively, which are not reflected in the accompanying consolidated financial statements.

The Company has guaranteed the liabilities of CDT Oxford. As of December 31, 2003, CDT Oxford’s liabilities were $4,523,000, including $2,576,000 due to the U.K. subsidiaries. As of December 31, 2002, CDT Oxford’s liabilities were $1,292,000, including $292,000 due to the U.K. subsidiaries.

15.    Segments

The Company has adopted the provisions of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 requires companies to report financial and descriptive information about their reportable operating segments. The Company identifies its operating segments based on how management internally evaluates separate financial information, business activities and management responsibility.

According to these criteria, the Company operated in two segments during 2001—2003: “CDT Research and Licensing” (CDT) and “Litrex Ink Jet Equipment” (Litrex). CDT Research and Licensing comprises the parent company and U.K. subsidiary operations of the group, whose business is to develop and commercialize intellectual property concerning P-OLED technology. This segment performs research into P-OLED’s and similar devices. It seeks to license the intellectual property which results from this research. The Litrex Ink Jet Equipment segment comprises Litrex Corporation, based in California. Litrex develops and markets ink jet printing systems which can be used to manufacture P-OLED devices as well as for other applications.

F-20

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

The Company sold 50% of its equity stake in Litrex on August 14, 2003, and, therefore, the segmental data for 2003 only includes results for the Litrex Ink Jet Equipment segment through this date. After this date, the financial results of Litrex are reported by the Company using the equity method, and, because of this, Litrex Ink Jet Equipment is no longer considered to be a segment. Since August 14, 2003, the Company believes it operates in a single business segment.

	2003
	CDT			Litrex			Eliminations			Total
Revenues from external customers	$	8,072,000		$	2,608,000		$	—		$	10,680,000
Inter-segment revenues		—			500,000			(500,000	)		—
Interest income		563,000			—			(148,000	)		415,000
Interest payable		(6,000	)		(148,000	)		148,000			(6,000	)
Depreciation and amortization expenses		7,704,000			331,000			(76,000	)		7,959,000
Equity in net loss of investees		(3,639,000	)		—			—			(3,639,000	)
Income tax (benefit)		(929,000	)		(3,000	)		—			(932,000	)
Segment (loss)		(19,564,000	)		(3,146,000	)		(67,000	)		(22,777,000	)
Segment assets		113,870,000			—			—			113,870,000
Expenditure for long-lived assets		3,746,000			98,000			(143,000	)		3,701,000
	2002
	CDT			Litrex			Eliminations			Total
Revenues from external customers	$	3,201,000		$	3,852,000		$	—		$	7,053,000
Inter-segment revenues		—			320,000			(320,000	)		—
Interest income		386,000			—			(104,000	)		282,000
Interest payable		10,000			104,000			(104,000	)		10,000
Depreciation and amortization expenses		7,489,000			231,000			(62,000	)		7,658,000
Equity in net loss of investees		(651,000	)		—			—			(651,000	)
Income tax (benefit)		(3,595,000	)		—			—			(3,595,000	)
Segment (loss)		(26,221,000	)		(5,374,000	)		(123,000	)		(31,718,000	)
Segment assets		125,395,000			16,206,000			(12,479,000	)		129,122,000
Expenditure for long-lived assets		3,906,000			667,000			(185,000	)		4,388,000

	2001
	CDT			Litrex			Eliminations			Total
Revenues from external customers	$	22,391,000		$	—		$	—		$	22,391,000
Interest income		668,000			—			—			668,000
Interest payable		7,000			—			—			7,000
Depreciation and amortization expenses		10,214,000			14,000			—			10,228,000
Income tax expense		50,000			—			—			50,000
Segment (loss)		(4,120,000	)		(1,130,000	)		—			(5,250,000	)
Segment assets		113,958,000			11,990,000			(11,101,000	)		114,847,000
Expenditure for long-lived assets		27,910,000			73,000			—			27,983,000

F-21

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

16.    Related Party Transactions

During the year, Limited forwarded cash amounts of $2,754,000 to CDT Oxford, incurred net expenses on their behalf of $165,000 which were recharged and purchased fixed assets from them for $517,000. As of December 31, 2003, there is an amount due to Limited of $2,576,000 (2002: $292,000) from CDT Oxford.

During the period from August 14, 2003 to December 31, 2003, Limited purchased ink jet printing systems for $1,050,000 and placed deposits of $813,000 with Litrex. Limited also charged Litrex Corporation $112,000 for services provided. As of December 31, 2003, the amount due from Litrex to Limited amounted to $37,000.

Dr. David Fyfe, CEO, is employed by the Company but is required to work in the U.K. Under the terms of his employment contract, the Company makes advances to him in order that he can settle his U.K. tax liabilities. A U.S. to U.K. tax equalization payment is made to Dr. Fyfe each year to compensate him for any taxes payable during the previous year which are in excess of what he would have paid had he been working solely in the U.S. Any advances for payment of U.K. taxes made in the prior year are netted off the tax equalization payment. During 2003, amounts of $237,000 (2002: $36,000) were advanced to Dr. Fyfe for the payment of U.K. taxes and the liability as of December 31, 2003 due from him was $94,000.

Under the terms of Dr. Fyfe’s employment contract, he will become entitled to a pension of $500,000, payable in five equal installments after his retirement from the company. No payment will be made if he leaves the company prior to the end of his contract without good reason, if his contract is terminated for cause or if he fails to recruit a replacement chief executive acceptable to the board at the end of his contract term. Payment of each annual installment will be deferred if in any year the company’s EBITDA is negative and there has been no change of control event. The full outstanding sum will become immediately payable to Dr. Fyfe’s estate in the event of his death. This liability is being accrued over the period of his employment contract—the liability at December 31, 2003 was $229,000.

17.    Subsequent Events (Unaudited)

CDT International Limited, a subsidiary of the Company located in Bermuda, was liquidated on January 13, 2004.

On July 2, the Company entered into a revolving credit facility for $15.0 million with Lloyds TSB bank, of which $0.5 million may not be borrowed. This facility has a one year term, renewable for two additional years, and is secured by a letter of credit issued by Wells Fargo Bank, which is secured by the Company’s patents, trademarks and copyrights and associated license revenues.

On July 26, the Company’s board of directors approved the filing of a Registration Statement on Form S-1 with the Securities and Exchange Commission to offer shares of common stock for sale to the public.

On July 27, the Company’s board of directors approved and submitted for shareholder approval an amendment of the Company’s Certificate of Designations defining the terms of the Company’s Series A and Series B redeemable convertible preferred stock to amend the provisions governing the mandatory conversion of such shares of preferred stock upon consummation of an underwritten initial public offering of the Company’s common stock.

F-22

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

18.    Quarterly Data (Unaudited)

	Quarter ended March 31, 2003			Quarter ended June 30, 2003			Quarter ended September 30, 2003			Quarter ended December 31, 2003
Operating revenues	$	516,000		$	3,415,000		$	4,688,000		$	2,061,000
Gross profit		271,000			2,776,000			4,301,000			1,805,000
Loss from operations		(9,060,000	)		(5,526,000	)		(3,078,000	)		(2,815,000	)
Net loss		(9,039,000	)		(5,994,000	)		(3,833,000	)		(3,911,000	)
Net loss per common share	$	(0.63	)	$	(0.47	)	$	(0.34	)	$	(0.33	)
Weighted average number of common shares outstanding		16,650,000			16,593,000			16,593,000			16,593,000
	Quarter ended March 31, 2002			Quarter ended June 30, 2002			Quarter ended September 30, 2002			Quarter ended December 31, 2002
Operating revenues	$	2,528,000		$	862,000		$	1,501,000		$	2,162,000
Gross profit		2,472,000			551,000			866,000			1,372,000
Loss from operations		(3,880,000	)		(9,011,000	)		(9,158,000	)		(12,885,000	)
Net loss		(3,629,000	)		(8,494,000	)		(8,630,000	)		(10,965,000	)
Net loss per common share	$	(0.23	)	$	(0.53	)	$	(0.52	)	$	(0.66	)
Weighted average number of common shares outstanding		15,541,000			16,100,000			16,670,000			17,052,000

F-23

Cambridge Display Technology, Inc.

Consolidated Balance Sheets

(unaudited)

	March 31, 2004			December 31, 2003
	(in thousands except for share information)
Assets
Current assets:
Cash and cash equivalents	$	7,763		$	10,400
Accounts receivable		1,254			1,433
Due from affiliates		26			2,603
Taxes receivable		2,046			2,313
Prepaid expenses and other current assets		3,482			2,553
Total current assets		14,571			19,302
Property, equipment and leasehold improvements, net		18,559			19,666
Investment in affiliates		4,633			10,180
Goodwill		72,828			58,735
Other intangible assets, net of accumulated amortization of $7,038 in 2004 and $6,643 in 2003		5,662			5,987
Total assets	$	116,253		$	113,870
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	3,217		$	4,222
Deferred revenue		3,632			948
Total current liabilities		6,849			5,170
Deferred revenue		1,046			1,431
Deferred proceeds on sale of subsidiary		5,785			5,785
Other liabilities		271			229
Opsys shareholders’ equity		18,728			—
Series A redeemable convertible preferred stock, voting, $0.01 par value, 6,000 shares authorized, 6,000 issued and outstanding		8,347			7,897
Series B redeemable convertible preferred stock, voting, $0.01 par value, 38,667 shares authorized, 25,871 issued and outstanding		31,891			30,590
Commitments and contingencies
Common shareholders’ equity:
Class A common stock, voting, $0.01 par value, 27,000,000 shares authorized, 16,251,346 shares issued and outstanding in 2003		163			163
Class B common stock, nonvoting, $0.01 par value 850,000 shares authorized, 311,692 shares issued and outstanding		3			3
Additional paid-in capital		183,656			185,379
Deferred compensation		—			(1	)
Common stock subscribed		(3,163	)		(3,163	)
Accumulated other comprehensive loss		(506	)		(506	)
Accumulated deficit		(136,817	)		(119,107	)
Total common shareholders’ equity		43,336			62,768
Total liabilities and shareholders’ equity	$	116,253		$	113,870

The accompanying notes are an integral part of these financial statements.

F-24

Cambridge Display Technology, Inc.

Consolidated Statements of Operations

(unaudited)

	Quarter ended March 31, 2004			Quarter ended March 31, 2003
	(in thousands)
Operating revenues:
License fees and royalties	$	640		$	98
Technology services and development		676			33
Litrex revenue		—			385
Total operating revenues		1,316			516
Cost of sales		239			245
Gross profit		1,077			271
Operating expenses:
Research and development expenses		3,694			5,401
Selling, general and administrative expenses		2,567			3,515
Amortization of intangibles acquired		395			415
Total operating expenses		(6,656	)		(9,331	)
Loss from operations		(5,579	)		(9,060	)
Other income (expense):
Equity in loss of Litrex		(401	)		—
Equity in loss of CDT Oxford		—			(591	)
Interest income		107			97
Interest expense		—			(2	)
Total other income (expense)		(294	)		(496	)
Loss before income taxes		(5,873	)		(9,556	)
Income taxes benefit		(363	)		(517	)
Loss before cumulative effect of accounting change		(5,510	)		(9,039	)
Cumulative effect of accounting change		(12,200	)		—
Net loss	$	(17,710	)	$	(9,039	)
Loss per share (basic and diluted)
Loss before cumulative effect of accounting change	$	(0.44	)	$	(0.63	)
Cumulative effect of accounting change		(0.73	)		—
Net loss per common share (basic and diluted)	$	(1.17	)	$	(0.63	)
Weighted average number of common shares outstanding (basic and diluted)		16,563			16,650

The accompanying notes are an integral part of these financial statements.

F-25

Cambridge Display Technology, Inc.

Consolidated Statements of Cash Flows

(unaudited)

	Quarter ended March 31, 2004			Quarter ended March 31, 2003
	(in thousands)
Operating activities
Net loss	$	(17,710	)	$	(9,039	)
Adjustments to reconcile net loss to net cash used in provided by operating activities:
Depreciation and amortization of property, equipment and leasehold improvements		1,609			1,595
Amortization of other intangible assets		395			415
Cumulative effect of accounting change		12,200			—
Amortization of deferred compensation		1			5
Equity in loss of Litrex		401			—
Equity in loss of CDT Oxford		—			591
Stock options granted		27			—
Changes in operating assets and liabilities:
Accounts and tax receivable		(1,420	)		1,344
Due from affiliates		(6	)		(616	)
Inventories and demo machines		—			(746	)
Prepaid expenses and other current assets		1,353			(931	)
Accounts payable and accrued expenses		(1,618	)		(1,935	)
Deferred revenue		956			2,948
Other current and non-current liabilities		42			20
Net cash used in operating activities		(3,770	)		(6,349	)
Investing activities
Acquisition of property, equipment and leasehold improvements		(431	)		(630	)
Investment in affiliates		—			(119	)
Net cash used in investing activities		(431	)		(749	)
Financing activities
Issuance of common stock		—			5
Issuance of redeemable convertible preferred stock		—			4,471
Net cash provided by financing activities		—			4,476
Net decrease in cash		(4,201	)		(2,622	)
Cash and cash equivalents—beginning of period		11,964			11,972
Cash and cash equivalents—end of period	$	7,763		$	9,350
Supplemental disclosures of cash flow information
Interest paid	$	—		$	1

The accompanying notes are an integral part of these financial statements.

F-26

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements

1.    Basis of Presentation

The balance sheet at March 31, 2004 and the statements of operations and cash flows for the quarters ended March 31, 2004 and March 31, 2003 include, in the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation. The balance sheet data as of December 31, 2003 has been derived from the financial statements shown elsewhere in this prospectus.

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Certain information and footnote disclosure normally included in financial statements required by generally accepted accounting principles have been omitted. Operating results for the quarter ended March 31, 2004 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2004. It is suggested that these unaudited financial statements be read in conjunction with the financial statements and notes for the fiscal year ended December 31, 2003 included elsewhere in this prospectus.

2.    Recent Accounting Pronouncements

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how a company classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify certain financial instruments as a liability (or as an asset in some circumstances). SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company has classified the Series A and B convertible preferred stock as other than common equity pursuant to Securities and Exchange Commission’s Accounting Series Release No. 268.

In December 2003, the FASB issued FIN No. 46(R), Consolidation of Variable Interest Entities, which supersedes FIN No. 46 issued in January 2003. FIN No. 46(R) clarifies the certain aspects of consolidation accounting. This Interpretation requires variable interest entities to be consolidated if the equity investment at risk is not sufficient to permit an entity to finance its activities without support from other parties or the equity investors lack specified characteristics. The Company has adopted this interpretation effective January 1, 2004, which has resulted in the Company consolidating CDT Oxford. This has had no impact on the net loss within the consolidated statement of operations, since the Company has previously included 100% of the operating loss in its results of operations, but has resulted in the Company’s consolidated balance sheet including the assets and liabilities of CDT Oxford. The following represents the amounts consolidated as of January 1, 2004:

Cash and cash equivalents	$	1,565,000
Accounts receivable		485,000
Equipment and leasehold improvements, net		69,000
Goodwill		14,092,000
Accounts payable and accrued expenses		(4,523,000	)
Net assets	$	11,688,000

In-process research and development (valued at $12,200,000 at October 2002, the date of the original investment) has been accounted for as the cumulative effect of an accounting change upon adoption of FIN 46 (R).

F-27

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the purpose of consolidation the original acquisition of CDT Oxford has been accounted for as a purchase, and the purchase price (including the value of the shares to be issued to the former owners) has been allocated to the acquired assets and liabilities as follows:

Net assets at date of acquisition (October 22, 2002)	$	602,000
In-process research and development		12,200,000
Goodwill		14,092,000
Purchase price	$	26,894,000

3.    Income Taxes

Income taxes are a benefit for the quarters ended March 31, 2004 and 2003 reflecting tax credits to be received for research and development costs.

4.    Stock-Based Compensation

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure, which amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. The Company has not elected to expense stock options, but rather continues to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related interpretations in accounting for stock options. Accordingly, other than certain grants at less than fair value, the Company has recognized no compensation expense with respect to options granted to employees. Had compensation cost been determined based upon the fair value at grant date for awards consistent with the methodology prescribed by SFAS No. 123, the Company’s net loss would have been the pro forma amounts indicated below:

	Quarter ended March 31, 2004			Quarter ended March 31, 2003
Net loss—as reported	$	(17,710,000	)	$	(9,039,000	)
Less: accretion of preferred stock		(1,751,000	)		(1,517,000	)
Add back: APB 25 cost		1,000			5,000
Less: total stock-based employee compensation expense under the fair value method		(91,000	)		(434,000	)
Net loss—pro forma	$	(19,551,000	)	$	(10,985,000	)
Net loss per share:
Basic and diluted—as reported	$	(1.17	)	$	(0.63	)
Basic and diluted—pro forma	$	(1.18	)	$	(0.66	)

The fair value of these options was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions for both the quarter ended March 31, 2004 and 2003: risk-free interest rate of 3.00%; volatility factor of the expected market price of the Company’s common stock 75%; expected life of four years; and a dividend yield of zero.

F-28

Cambridge Display Technology, Inc.

Notes to Consolidated Financial Statements—(Continued)

5.    Net Loss Per Common Share

	Quarter ended March 31, 2004			Quarter ended March 31, 2003
Net loss	$	(17,710,000	)	$	(9,039,000	)
Accretion of preferred stock		(1,751,000	)		(1,517,000	)
Net loss to common shareholders	$	(19,461,000	)	$	(10,556,000	)
Weighted average number of common shares outstanding		16,563,000			16,650,000
Net loss per common share	$	(1.17	)	$	(0.63	)

6.    Subsequent Events

On July 2, the Company entered into a revolving credit facility for $15.0 million with Lloyds TSB bank, of which $0.5 million may not be borrowed. This facility has a one year term, renewable for two additional years, and is secured by a letter of credit issued by Wells Fargo Bank, which is secured by the Company’s patents, trademarks and copyrights and associated license revenues.

On July 26, the Company’s board of directors approved the filing of a Registration Statement on Form S-1 with the Securities and Exchange Commission to offer shares of common stock for sale to the public.

On July 27, the Company’s board of directors approved and submitted for shareholder approval an amendment of the Company’s Certificate of Designations defining the terms of the Company’s Series A and Series B redeemable convertible preferred stock to amend the provisions governing the mandatory conversion of such shares of preferred stock upon consummation of an underwritten initial public offering of the Company’s common stock.

F-29

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Litrex Corporation

In our opinion, the balance sheet as of December 31, 2003 and the related statements of operations, of stockholders’ equity and of cash flows for the year ended December 31, 2003 (not presented separately herein) present fairly, in all material respects, the financial position of Litrex Corporation at December 31, 2003, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/    PricewaterhouseCoopers LLP

San Jose, California

July 19, 2004

F-30

                       Shares

Common Stock

PROSPECTUS

SG Cowen & Co.

CIBC World Markets

Adams Harkness

                    , 2004

Until                     , 2004, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This requirement is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.    OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table itemizes the expenses incurred by the Registrant in connection with the issuance and distribution of the securities being registered, other than underwriting discounts and commissions. All the amounts shown are estimates except the Securities and Exchange Commission registration, and the NASD filing fee and the Nasdaq National Market listing fee.

Registration fee—Securities and Exchange Commission	$	5,100
Filing fee—National Association of Securities Dealers, Inc.	$	4,525
Listing fee—Nasdaq National Market	$	*
Accounting fees and expenses	$	*
Legal fees and expenses (other than blue sky)	$	*
Blue sky fees and expenses	$	*
Printing; stock certificates	$	*
Transfer agent and registrar fees	$	*
Miscellaneous	$	*
Total	$	*

* To be completed by amendment.

ITEM 14.    INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law, or DGCL, provides that a corporation may indemnify any person (and purchase insurance with respect to such potential liability) who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise), against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding provided that the corporation may not may not eliminate or limit the liability of directors for:

• any breach of the director’s duty of loyalty to the corporation or its stockholders;

• any acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

• any payment of a dividend or approval of a stock purchase that is illegal under Section 174 of the Delaware General Corporation Law; or

• any transaction from which the director derived an improper personal benefit.

Section 145 further provides that a corporation similarly may indemnify any such person serving in any such capacity who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorney’s fees) actually and reasonably incurred in connection with the defense or settlement of such action or suit subject to the same limitations as described above and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or such other court in which such action or suit was brought shall determine upon application that, despite the

II-1

adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper.

Our certificate of incorporation and our bylaws authorize the indemnification of officers and directors of the corporation consistent with Section 145 of the Delaware Corporation Law, as amended, and to the fullest extent permitted under Delaware law.

At present there is no pending litigation or proceeding involving any director, officer, employee or agent as to which indemnification will be required or permitted under our certificate of incorporation. We are not aware of any threatened litigation or proceeding that may result in a claim for such indemnification.

ITEM 15.    RECENT SALES OF UNREGISTERED SECURITIES

The following sets forth information regarding all sales of our unregistered securities during the past three years. All such shares were issued in reliance upon an exemption or exemptions from registration under the Securities Act by reason of Section 4(2) of the Securities Act or Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions by an issuer not involving a public offering or transactions pursuant to compensatory benefit plans relating to compensation as provided under Rule 701. In connection with the transactions for which an exemption is claimed pursuant to Section 4(2) of the Securities Act, the securities were sold to a limited number of persons and accredited investors, such persons were provided access to all relevant information regarding us and represented to us that they were either “sophisticated” investors or were represented by persons with knowledge and experience in financial and business matters who were capable of evaluating the merits and risks of the prospective investment, and such persons represented to us that the shares were purchased for investment purposes only and with no view toward distribution. In connection with the issuances of securities for which an exemption is claimed pursuant to Rule 701, the securities have been offered and issued by us to executive officers and employees and consultants for compensating purposes pursuant to written plans or arrangements.

Since July 1, 2001 through June 30, 2004, we issued options to purchase a total of 529,300 shares of our common stock to our employees and options to purchase 172,000 shares of our common stock to our directors, advisors and consultants.

The following table sets forth the date of each sale, the purchaser(s), the number of shares of our common stock, series A convertible preferred stock and series B convertible preferred stock sold on such date and the aggregate consideration received by us in connection with such sale:

Date of Issuance	Share Acquirer	Number of Shares of Our Common Stock Sold	Aggregate Consideration Received by Us
10/16/01	DuPont Chemical and Energy Operations, Inc.	619,195	$	10,000,000
1/17/02	Hillman CDT 2000 LLC	154,799	$	2,500,000
2/01/02	Hillman CDT 2000 LLC	154,799	$	2,500,000
2/25/02	Sumitomo Chemical Co., Ltd.	309,598	$	5,000,000
3/08/02	Hillman CDT 2000 LLC	247,678	$	4,000,000
4/22/02	Hillman CDT 2000 LLC	185,759	$	3,000,000
7/12/02	1 former employee	1,000	$	10,430
7/16/02	Kelso Investment Associates VI, L.P.	526,316	$	8,500,000
7/16/02	KEP VI, LLC	92,879	$	1,500,000
9/09/02	4 accredited investors	100,898		(1	)
10/25/02	Toppan Printing Co., Ltd	309,598	$	5,000,000
10/25/02	Toppan Printing Co., Ltd.	185,758		(2	)
2/03/03	2 former employees	1,260	$	15,969
12/09/03	1 former employee	120	$	1,252

II-2

(1) The shares of our common stock issued on September 9, 2002 were issued in consideration for all of the outstanding shares of common stock, par value $.001 per share, of Litrex Corporation, pursuant to exchange agreements, each dated September 9, 2002.

(2) We issued 185,758 shares of our common stock to Toppan Printing Co., Ltd. in exchange for 2,821,622 shares of Opsys Limited, pursuant to a subscription agreement, dated October 25, 2002.

Date of Issuance	Share Acquirer	Number of Shares of Our Series A Convertible Preferred Stock Sold	Aggregate Consideration Received by Us
12/12/02	Kelso Investment Associates VI, L.P.	5,100	$	5,100,000
12/12/02	KEP VI, LLC	900	$	900,000
Date of Issuance	Share Acquirer	Number of Shares of Our Series B Convertible Preferred Stock Sold	Aggregate Consideration Received by Us
12/12/02	Kelso Investment Associates VI, L.P.	7,650	$	7,650,000
12/12/02	Kelso Investment Associates VI, L.P.	8,500		(3	)
12/12/02	KEP VI, LLC	1,350	$	1,350,000
12/12/02	KEP VI, LLC	1,500		(4	)
2/28/03	9 existing stockholders	1,404	$	1,404,000	(5)
2/28/03	Hillman CDT 2000 LLC	5,467	$	5,467,000	(6)

(3) We issued 8,500 shares of our series B convertible preferred stock to Kelso Investment Associates VI, L.P. in exchange for 526,316 shares of our class A common stock, pursuant to a subscription agreement dated December 11, 2002.

(4) We issued 1,500 shares of our series B convertible preferred stock to KEP VI, LLC in exchange for 92,879 shares of our class A common stock, pursuant to a subscription agreement dated December 11, 2002.

(5) Each U.S. stockholder who received shares in this issuance represented to us that such stockholder was an accredited investor.

(6) The consideration received by us with respect to this issuance consisted of $3,280,000 and 135,420 shares of our class A common stock.

II-3

ITEM 16.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) List of Exhibits.

Exhibit Number	Description of Document
*1.1	Form of Underwriting Agreement
*3.1	Form of Second Amended and Restated Certificate of Incorporation of Cambridge Display Technology, Inc.
*3.2	Form of Amended Certificate of Designations
*3.3	Form of Second Amended and Restated Bylaws
*4.1	Specimen certificate for common stock of Cambridge Display Technology, Inc.
4.2	Warrant, dated as of August 12, 2000, between CDT Acquisition Corp. and Heidrick & Struggles, Inc.
*5.1	Opinion of Debevoise & Plimpton LLP
10.1	Letter Agreement, dated July 27, 1999, between Cambridge Display Technology Limited and Kelso & Company, L.P.
10.2	Letter Agreement, dated July 27, 1999, between Cambridge Display Technology Limited and Hillman Capital Corporation
10.3	Transaction Agreement, dated October 23, 2002, between CDT Acquisition Corp., Cambridge Display Technology Limited, Opsys Limited, Opsys UK Limited, the Warrantors, Opsys US Corporation and Opsys 2 Corporation
10.4	Agreement for the Sale and Purchase of Part of the Business of Opsys Limited, dated October 24, 2002, between Opsys UK Limited and Opsys Limited
10.5	Subscription and Exchange Agreement, dated October 25, 2002 between CDT Acquisition Corp. and Toppan Printing Co., Ltd.
10.6	Share Purchase Agreement, dated August 15, 2003, among CDT Acquisition Corp., Ulvac, Inc., Litrex Corporation and Cambridge Display Technology Limited
10.7	Joint Venture Agreement, dated August 15, 2003, among CDT Acquisition Corp., Ulvac, Inc., Litrex Corporation and Cambridge Display Technology Ltd.
10.8	Loan Facility Letter, dated July 1, 2004, between Cambridge Display Technology Limited and Lloyds Bank PLC
10.9	Reimbursement Agreement, dated July 1, 2004, between Cambridge Display Technology Limited and IPIFS Guarantee Corp.
10.10	Security Agreement, dated July 1, 2004, between Cambridge Display Technology Limited, CDT Oxford Limited and IPIFS Guarantee Corp.
*10.11	Form of Amended and Restated Registration Rights Agreement, among Cambridge Display Technology, Inc., Kelso Investment Associates VI, L.P., KEP VI, LLC, Hillman Capital Corporation, Hillman CDT LLC, Hillman CDT 2000 LLC and certain employees minority stockholders of Cambridge Display Technology, Inc. and its subsidiaries
10.12	License Agreement, dated August 1, 1996, between Cambridge Display Technology, Ltd. and Phillips Electronics N.V. (+)

II-4

Exhibit Number	Description of Document
10.13	Cross License Agreement, dated November 25, 1999, between Cambridge Display Technology Limited and Seiko Epson Corporation (+)
10.14	Side Letter, dated January 24, 2000, between Cambridge Display Technology Ltd. and Seiko Epson Corporation regarding the Cross License Agreement dated November 25, 1999 (+)
10.15	The New LEP Technology Agreement, dated January 1, 2001, between Cambridge Display Technology Limited and the University of Cambridge (+)
10.16	Patent License, dated April 27, 2001, between Cambridge Display Technology Limited and OSRAM Opto Semiconductors GmbH & Co. OHG (+)
10.17	License Agreement, dated August 13, 2001, between Cambridge Display Technology Limited and Sumitomo Chemical Co., Ltd. (+)
10.18	Patent License of Displays and Display Illumination, dated October 16, 2001, between Cambridge Display Technology Limited, E.I. DuPont de Nemours and Company and Uniax Corporation (+)
10.19	Patent and Know-How License, dated December 14, 2001, between Cambridge Display Technology Limited and Covion Organic Semiconductors GmbH (+)
10.20	Contract Research Agreement, dated December 14, 2001, between CDT International Limited and Covion Organic Semiconductors GmbH (+)
10.21	License of Technology, dated January 21, 2002, between Opsys Limited (novated to CDT Oxford Limited by a Novation and Variation Agreement, dated October 22, 2002), University of Oxford, Isis Innovation Limited and University of St. Andrews (+)
10.22	Option Agreement, dated December 1, 2003, between Cambridge Display Technology Limited, CDT Oxford Ltd. and Sumitomo Chemical Co., Ltd.
10.23	Patent and Co-Ownership Agreement, dated July 5, 2004, between CDT Oxford Limited and Isis Innovation Limited, The Chancellor, Masters and Scholars of the University of Oxford and the University Court of St. Andrews
10.24	Lease, dated March 29, 2001, between Scottish Widows PLC and Cambridge Display Technology Limited, of commercial premises at Unit 8 Cardinal Distribution Park, Godmanchester, Cambridge, England
10.25	Lease, dated March 29, 2001, between Scottish Widows PLC and Cambridge Display Technology Limited, of commercial premises at Unit 11 Cardinal Distribution Park, Godmanchester, Cambridge, England
10.26	Lease, dated March 29, 2001, between Scottish Widows PLC and Cambridge Display Technology Limited, of commercial premises at Unit 12 Cardinal Distribution Park, Godmanchester, Cambridge, England
10.27	Lease, dated June 11, 2004, between CGNU Life Assurance Limited and Cambridge Display Technology Limited, of commercial premises at 2020 Cambourne Business Park, Cambridge, England
10.28	Lease, dated June 27, 2000, between the University of Cambridge and Cambridge Display Technology Limited, of commercial premises at Greenwich House, Madingley Rise, Madingley Road, Cambridge, England
10.29	Employment agreement with Dr. Fyfe, dated as of August 12, 2002
10.30	Overseas benefit agreement with Dr. Fyfe, dated as of August 12, 2002

II-5

Exhibit Number	Description of Document
10.31	Employment agreement with Mr. Chandler, dated February 18, 2003
10.32	Employment agreement with Mr. Butcher, dated November 14, 2002
10.33	Employment agreement with Dr. Brown, dated March 28, 2002
10.34	Employment agreement with Dr. Burroughes, dated July 1, 2004
10.35	Employment agreement with Dr. Cha, dated June 18, 2002
10.36	CDT Acquisition Corp. Amended and Restated Stock Incentive Plan
10.37	Amendment to the CDT Acquisition Corp. Stock Incentive Plan, dated as of March 15, 2002
10.38	Amendment to the CDT Acquisition Corp. Stock Incentive Plan, dated as of October 17, 2002
*10.39	Cambridge Display Technology, Inc. 2004 Stock Incentive Plan
*10.40	Cambridge Display Technology, Inc. Annual Incentive Plan
*10.41	Cambridge Display Technology, Inc. Special Bonus Plan
10.42	Form of CDT Acquisition Corp. Nonqualified Stock Option Agreement between CDT Acquisition Corp. and the Employee
*10.43	Form of Agreement, among Cambridge Display Technology, Inc., Kelso Investment Associates VI, L.P., KEP VI, LLC, Hillman Capital Corporation, Hillman CDT LLC and Hillman CDT 2000 LLC, relating to certain distributions
21.1	List of Subsidiaries of Cambridge Display Technology, Inc.
*23.1	Consent of Debevoise & Plimpton LLP (included in Exhibit 5.1)
23.2	Consent of Ernst & Young LLP
23.3	Consent of PricewaterhouseCoopers LLP
24.1	Powers of Attorney (included on page II-8)

* To be filed by amendment

(+) Portion of document has been redacted pursuant to a request for confidential treatment.

II-6

ITEM 17.    UNDERTAKINGS

The undersigned registrant hereby undertakes as follows:

(1) The undersigned will provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

(2) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance on Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective.

(3) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 14 or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

II-7

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto, duly authorized in the City of New York, State of New York, on July 30, 2004.

CAMBRIDGE DISPLAY TECHNOLOGY, INC.
By:	/S/    DAVID FYFE
Name:	David Fyfe
Title:	Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David Fyfe, jointly and severally, as his true and lawful attorney-in-fact and agent, acting alone, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this registration statement and any new registration statement with respect to the offering contemplated hereby filed pursuant to Rule 462(b) of the Securities Act, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact full power and authority to do and reform each and every act and thing requisite or necessary to be done in and about the premises, as person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

/S/    DAVID FYFE David Fyfe	Director, Chairman and Chief Executive Officer (principal executive officer)	July 30, 2004
/S/    PHILIP F. BERNEY Philip F. Berney	Director	July 30, 2004
/S/    FRANK K. BYNUM, JR. Frank K. Bynum, Jr.	Director	July 30, 2004
/S/    HERMANN HAUSER Hermann Hauser	Director	July 30, 2004
/S/    GERALD PAUL HILLMAN Gerald Paul Hillman	Director	July 30, 2004
/S/    MICHAEL BLACK Michael Black	Director of Finance (principal financial and accounting officer)	July 30, 2004

II-8

EXHIBITS

Exhibit Number	Description of Document
*1.1	Form of Underwriting Agreement
*3.1	Form of Second Amended and Restated Certificate of Incorporation of Cambridge Display Technology, Inc.
*3.2	Form of Amended Certificate of Designations
*3.3	Form of Second Amended and Restated Bylaws
*4.1	Specimen certificate for common stock of Cambridge Display Technology, Inc.
4.2	Warrant, dated as of August 12, 2000, between CDT Acquisition Corp. and Heidrick & Struggles, Inc.
*5.1	Opinion of Debevoise & Plimpton LLP
10.1	Letter Agreement, dated July 27, 1999, between Cambridge Display Technology Limited and Kelso & Company, L.P.
10.2	Letter Agreement, dated July 27, 1999, between Cambridge Display Technology Limited and Hillman Capital Corporation
10.3	Transaction Agreement, dated October 23, 2002, between CDT Acquisition Corp., Cambridge Display Technology Limited, Opsys Limited, Opsys UK Limited, the Warrantors, Opsys US Corporation and Opsys 2 Corporation
10.4	Agreement for the Sale and Purchase of Part of the Business of Opsys Limited, dated October 24, 2002, between Opsys UK Limited and Opsys Limited
10.5	Subscription and Exchange Agreement, dated October 25, 2002 between CDT Acquisition Corp. and Toppan Printing Co., Ltd.
10.6	Share Purchase Agreement, dated August 15, 2003, among CDT Acquisition Corp., Ulvac, Inc., Litrex Corporation and Cambridge Display Technology Limited
10.7	Joint Venture Agreement, dated August 15, 2003, among CDT Acquisition Corp., Ulvac, Inc., Litrex Corporation and Cambridge Display Technology Ltd.
10.8	Loan Facility Letter, dated July 1, 2004, between Cambridge Display Technology Limited and Lloyds Bank PLC
10.9	Reimbursement Agreement, dated July 1, 2004, between Cambridge Display Technology Limited and IPIFS Guarantee Corp.
10.10	Security Agreement, dated July 1, 2004, between Cambridge Display Technology Limited, CDT Oxford Limited and IPIFS Guarantee Corp.
*10.11	Form of Amended and Restated Registration Rights Agreement, among Cambridge Display Technology, Inc., Kelso Investment Associates VI, L.P., KEP VI, LLC, Hillman Capital Corporation, Hillman CDT LLC, Hillman CDT 2000 LLC and certain employees of Cambridge Display Technology, Inc. and its subsidiaries
10.12	License Agreement, dated August 1, 1996, between Cambridge Display Technology, Ltd. and Phillips Electronics N.V. (+)
10.13	Cross License Agreement, dated November 25, 1999, between Cambridge Display Technology Limited and Seiko Epson Corporation (+)
10.14	Side Letter, dated January 24, 2000, between Cambridge Display Technology Ltd. and Seiko Epson Corporation regarding the Cross License Agreement dated November 25, 1999 (+)

Exhibit Number	Description of Document
10.15	The New LEP Technology Agreement, dated January 1, 2001, between Cambridge Display Technology Limited and the University of Cambridge (+)
10.16	Patent License, dated April 27, 2001, between Cambridge Display Technology Limited and OSRAM Opto Semiconductors GmbH & Co. OHG (+)
10.17	License Agreement, dated August 13, 2001, between Cambridge Display Technology Limited and Sumitomo Chemical Co., Ltd. (+)
10.18	Patent License of Displays and Display Illumination, dated October 16, 2001, between Cambridge Display Technology Limited, E.I. DuPont de Nemours and Company and Uniax Corporation (+)
10.19	Patent and Know-How License, dated December 14, 2001, between Cambridge Display Technology Limited and Covion Organic Semiconductors GmbH (+)
10.20	Contract Research Agreement, dated December 14, 2001, between CDT International Limited and Covion Organic Semiconductors GmbH (+)
10.21	License of Technology, dated January 21, 2002, between Opsys Limited (novated to CDT Oxford Limited by a Novation and Variation Agreement, dated October 22, 2002), University of Oxford, Isis Innovation Limited and University of St. Andrews (+)
10.22	Option Agreement, dated December 1, 2003, between Cambridge Display Technology Limited, CDT Oxford Ltd. and Sumitomo Chemical Co., Ltd.
10.23	Patent and Co-Ownership Agreement, dated July 5, 2004, between CDT Oxford Limited and Isis Innovation Limited, The Chancellor, Masters and Scholars of the University of Oxford and the University Court of St. Andrews
10.24	Lease, dated March 29, 2001, between Scottish Widows PLC and Cambridge Display Technology Limited, of commercial premises at Unit 8 Cardinal Distribution Park, Godmanchester, Cambridge, England
10.25	Lease, dated March 29, 2001, between Scottish Widows PLC and Cambridge Display Technology Limited, of commercial premises at Unit 11 Cardinal Distribution Park, Godmanchester, Cambridge, England
10.26	Lease, dated March 29, 2001, between Scottish Widows PLC and Cambridge Display Technology Limited, of commercial premises at Unit 12 Cardinal Distribution Park, Godmanchester, Cambridge, England
10.27	Lease, dated June 11, 2004, between CGNU Life Assurance Limited and Cambridge Display Technology Limited, of commercial premises at 2020 Cambourne Business Park, Cambridge, England
10.28	Lease, dated June 27, 2000, between the University of Cambridge and Cambridge Display Technology Limited, of commercial premises at Greenwich House, Madingley Rise, Madingley Road, Cambridge, England
10.29	Employment agreement with Dr. Fyfe, dated as of August 12, 2002
10.30	Overseas benefit agreement with Dr. Fyfe, dated as of August 12, 2002
10.31	Employment agreement with Mr. Chandler, dated February 18, 2003
10.32	Employment agreement with Mr. Butcher, dated November 14, 2002
10.33	Employment agreement with Dr. Brown, dated March 28, 2002
10.34	Employment agreement with Dr. Burroughes, dated July 1, 2004
10.35	Employment agreement with Dr. Cha, dated June 18, 2002

Exhibit Number	Description of Document
10.36	CDT Acquisition Corp. Amended and Restated Stock Incentive Plan
10.37	Amendment to the CDT Acquisition Corp. Stock Incentive Plan, dated as of March 15, 2002
10.38	Amendment to the CDT Acquisition Corp. Stock Incentive Plan, dated as of October 17, 2002
*10.39	Cambridge Display Technology, Inc. 2004 Stock Incentive Plan
*10.40	Cambridge Display Technology, Inc. Annual Incentive Plan
*10.41	Cambridge Display Technology, Inc. Special Bonus Plan
10.42	Form of CDT Acquisition Corp. Nonqualified Stock Option Agreement between CDT Acquisition Corp. and the Employee
*10.43	Form of Agreement, among Cambridge Display Technology, Inc., Kelso Investment Associates VI, L.P., KEP VI, LLC, Hillman Capital Corporation, Hillman CDT LLC and Hillman CDT 2000 LLC, relating to certain distributions
21.1	List of Subsidiaries of Cambridge Display Technology, Inc.
*23.1	Consent of Debevoise & Plimpton LLP (included in Exhibit 5.1)
23.2	Consent of Ernst & Young LLP
23.3	Consent of PricewaterhouseCoopers LLP
24.1	Powers of Attorney (included on page II-8)

* To be filed by amendment

(+) Portion of document has been redacted pursuant to a request for confidential treatment.