Contents. 22. Chief Financial Officer s statement 26. Five-year consolidated data

July 13, 2017 | Author: Patricia Doyle | Category: N/A
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1 Annual Report 20052 Contents 1. Tecan at a glance 2. Message to shareholders 6. Market overview 12. Liquid handling an...

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Tecan Group

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Text

Seestrasse 103

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KDM Communications, UK

CH-8708 Männedorf

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Tel +41 44 922 88 88

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www.so-print.ch

www.tecan.com

Corporate Communications

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and Investor Relations

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and Branding

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Cornelia Kegele

Annual Report 2005

| Annual Report 2005 | 77

Contents 1. Tecan at a glance 2. Message to shareholders 6. Market overview 12. Liquid handling and robotics 14. Detection 16. Sample management 18. Components 20. Customer service

Tecan locations

22. Chief Financial Officer’s statement 26. Five-year consolidated data Consolidated financial statements 27. Consolidated balance sheet at December 31 28. Consolidated income statement 29. Consolidated statement of changes in shareholders’ equity 30. Consolidated cash flow statement 31. Summary of significant accounting policies 37. Notes to the consolidated financial statements 58. Report of the group auditors to the general meeting of shareholders Tecan Group Ltd. 59. Balance sheet at December 31 60. Income statement 61. Notes to the financial statements 64. Appropriation of available earnings 65. Report of the statutory auditors to the general meeting of shareholders Corporate governance 66. Group structure and shareholders 67. Capital structure 68. Board of Directors 72. Management 74. Compensations, shareholdings and loans 75. Shareholders’ participation rights 76. Changes of control and defense measures 76. Auditors 76. Information policy 77. Tecan locations

Tecan Business Units Liquid Handling and Robotics • Tecan Switzerland Ltd. Seestrase 103 CH-8708 Männedorf Switzerland T +41 44 922 89 22 F +41 44 922 89 23

Detection • Tecan Austria GmbH Untersbergstrasse 1a A-5082 Grödig/Salzburg Austria T +43 62 46 89 33 F +43 62 46 72 770

Components

• Tecan Systems, Inc. 2450 Zanker Road San Jose CA 95131 USA T +1 408 953 3100 F +1 408 953 3101

Sample Management • REMP AG Weststrasse 12 CH-3672 Oberdiessbach Switzerland T +41 31 770 70 70 F +41 31 770 72 66

Tecan Market Units Sales and Service Organizations • Tecan Deutschland GmbH • Theodor-Storm-Strasse 17 D-74564 Crailsheim Germany T +49 79 51 94 170 F +49 79 51 50 38

• Tecan US, Inc. P.O. Box 13953 Research Triangle Park NC 27709 USA T +1 919 361 5200 F +1 919 361 5201

Tecan Group Ltd., Beijing Representative Office Room 2502, Building A Jianwai SOHO #39 Dongsanhuan Zhong Road 100022 Beijing China T +86 10 5869 5936 F +86 10 5869 5935

• Tecan Japan Co. Ltd. Kawasaki Tech Center 580-16, Horikawa-cho Saiwai-ku, Kawasaki Kanagawa 212-0013 Japan T +81 44 556 7311 F +81 44 556 7312

• Tecan Asia Pte. Ltd. 80 Marine Parade #10-09 Parkway Parade Singapore 449269 Singapore T +65 6444 1886 F +65 6444 1836

• REMP (USA), Inc. 150 Hopping Brook Road Holliston MA 01746 USA T +1 508 429 2200 F +1 508 429 1754

• REMP Nippon AG Japan Branch Kawasaki-Tech Center Bldg.17F 580-16, Horikawa-cho Saiwai-ku, Kawasaki-shi Japan 212-0013 T +81 44 542 7021 F +81 44 542 7022

• REMP Deutschland GmbH Auf der Lind 10 D-65529 Waldems T +49 6126 58 31 0 F +49 6126 58 31 29

| Annual Report 2005 | 1

Tecan at a glance Tecan, a leading global supplier for the Biopharma, Diagnostics and Forensics industries, achieved a distinctive increase in revenue and significantly improved operating results for the fiscal year 2005. Through the successful acquisition and integration of REMP, Tecan was able to realize an important strategic step and strengthen its market position. Without even including this acquisition, Tecan’s growth was still substantially greater than that of the overall market.

12 Month 2005 key figures (excluding unusual items) CHF m

2003

2004

2005

∆04/05

Sales

311.6

286.0

344.9

+20.6%

Gross profit*

159.1

140.4

161.4

+15.0%

in % of sales

51.1%

49.1%

46.8%

42.1

36.7

37.8

in % of sales

13.5%

12.8%

11.0%

OPEX*

124.6

120.7

131.6

in % of sales

40.0%

42.2%

38.2%

34.5

19.7

29.8

11.1%

6.9%

8.6%

R&D**

Operating profit*/EBIT* in % of sales

Net profit*

22.6

14.8

17.4

in % of sales

7.3%

5.2%

5.0%

EPS*

1.94

1.35

1.57

+3.0% +9.0% +51.3% +17.5% +16.3%

*Excluding unusual items **Excluding unusual items and regulatory cost

2005 Financial summary Profitability1/Productivity 2003-2005

400 344.9

350

-2%

311.6 300

+13%

200

35

1.4 34.5

1.34

29.8

25

19.7

50 0 2003

2004

2005

In CHF million

+31%

1.2

1.2 17.4

14.8

15

100

1.3 1.25

22.6

20

150 In CHF million

40

30

286.0

250

Rest of world Asia Europe North America

1.1

10 5

1

0 2003

2004

2005

1 Excluding unusual items Net Added Value Index (NAVI) = (EBIT + personnel expenses)/personnel expenses

NAVI

Revenues 2003-2005

Operating profit (EBIT) Net profit Net Added Value Index

2 | Annual Report 2005 |

Message to shareholders Dear shareholders, Your company can look back on what we believe is a milestone year. Tecan not only returned to the growth path and achieved a marked increase in profitability, but also created the platform to maintain leadership in the life sciences instruments market also well into the future. We started into 2005 after three consecutive years with lots of difficulties for Tecan, which were marked by repeated management changes and an unsatisfactory development of our sales and profitability indicators. Going into the year, we defined a set of objectives and initiatives that would help us reverse this trend. We are very happy to report that with the support of our customers and our employees we have reached the ambitious targets that we set. During 2005, Tecan grew revenues by 21%, increased EBIT by 51%, completed a successful and well received acquisition and reduced our order lead times for some of our key products by more than 35%. In addition we reaffirmed the focus on our core competencies of robotics, detection, software and systems integration by discontinuing the LabCD operations in Boston. Finally, the operational and cost containment measures we implemented allowed us to significantly enhance the productivity of our operations.

Success in the market Tecan’s products impact the lives of millions of people each and every day. By providing critical components in the workflows of our life sciences customers, we are able to help them develop new treatments faster and more efficiently, safely and accurately diagnose an illness or support the prosecution of a crime. In 2005, Tecan was able to show double-digit growth both organically and overall. What we are particularly pleased with was that this growth was driven by real performance in the market and not by any exchange rate effects. In fact, the currencies of our main markets, the US Dollar and the Euro were essentially unchanged against our home currency, the Swiss Franc. Based on our performance, we believe that Tecan extended it’s leadership position and market shares in all of the markets where it participates. Of particular note here were our businesses in the area of Diagnostics, Corporate Accounts, Detection and of course our newest addition the company, REMP. Tecan has an unequaled reputation as a solution provider for large Corporate Accounts. Typically we provide the instrumentation to our customers under their own name and brand, enabling them to benefit from Tecan’s expertise in engineering and quality manufacturing. We have held a leadership position for many years and our continued emphasis on quality and regulatory compliance continue to strengthen these very crucial relationships. During the past year, Tecan was able to both launch several new products in this area but also add some exciting new projects to our Research and Development (R&D) pipeline which will be launched over the next several years. In Detection, the decision to strengthen the sales force and create an organization exclusively dedicated to the sale of these instruments enabled this business to show significant double-digit growth. This was also supported by the continued innovation strength, particularly with the launch of two products that were very well received in the market, namely the high-end Safire2 and the mid-range Infinite readers.

Mike Baronian, Chairman Thomas Bachmann, CEO

Acquisition of REMP One of the highlights of the past year was the acquisition of REMP, the global leader in sample management, based in the Swiss town of Oberdiessbach. Having worked closely with the company for a number of years at various of our customer sites around the world, we were well aware of both the professionalism of the people and the quality of the products. The combination of Tecan and Remp adds a number of products to our range of offerings which match extremely well with our existing product range and will in the future allow us to offer our customers unique solutions to their sample management needs. Having finalized the acquisition in June, we are on track with all integration activities and have already realized certain synergies this past year, such as the consolidation of our market operations. The combination of the two premier brands in their industries, Tecan and REMP, was well received by all involved parties, with many customers commenting on the benefits of such a union. Financially, REMP contributed 22.2 million Swiss francs to Tecan’s revenues for the second half of the year. In keeping with our expectations for this business, this figure represents a significant growth compared to the same period in the previous year.

4 | Annual Report 2005 |

Improving operational performance and innovation At the beginning of last year, we communicated a set of key objectives to the financial markets that we felt were crucial to our objectives of returning Tecan to the path to growth and profitability. Central amongst these was the notion of enhancing accountability and efficiency and regaining the trust of the investment community. We feel that while we will continue to focus on the operational issues also during 2006, we have made good progress against our original objectives. The availability of SAP, which came online in January of 2005, has allowed a hitherto unparalleled transparency of our business performance. The availability of detailed and timely data means that we are now able to much more closely manage our business based on financial metrics and financially driven management approaches. In parallel we have focused on creating a culture of accountability throughout all areas of the business. Finally, we were able to put in place a disciplined cost management and -awareness. We believe that the results bear us out, with operating expenses rising only 9% compared to a 21% increase in revenue. In particular during the second half of the year we were glad to show an EBIT margin of 10.2%. In the area of achieving our target of strengthened regulatory compliance we were also able to make significant progress. In 2005 we implemented all of the changes recommended by the FDA in their 2004 warning letter. Our investment in this area has been validated by the successful completion of over thirty customer audits. We feel, that given the sensitivity and importance of this issue, the fact that our customers continue to trust Tecan is an important affirmation that we have taken, and are continuing to take, the correct regulatory actions. Innovation, how we do it and how fast we do it, continues to be one of the central areas of focus. First successes were evident in this area such as the previously mentioned Infinite reader or the Multi-channel pipetting head which were both developed in significantly less time than historically required. Another example for new and innovative applications are the collaborations we have put in place with many of the leading reagent providers to jointly develop and market assays and kits for the different markets. In deciding to discontinue the activities at our Boston LabCD facilities, we reaffirmed our commitment to closely focus on the areas of our core competencies. While the overall spending in R&D is reduced this year to close to our long-term target levels, investment in the core areas of our product portfolio were slightly increased.

| Annual Report 2005 | 5

Looking ahead As we head into 2006 we are positive about the markets we serve. Our customers are entering a growth phase worldwide. Scientists and researchers across the globe are conducting exhaustive investigations into pathogens and exploring new methods of treatment. Tecan’s portfolio of high-tech instruments, devices and services represents a key contribution to the successful execution against the high demands placed on today’s life science providers. In addition to our existing markets such as Biopharma and Diagnostics, technology is opening up new applications where we can leverage our expertise. One such field is Forensics. The increasing importance and acceptance of DNA fingerprinting across the world makes this an area where Tecan has multiple opportunities and, in fact, has just completed the installation of the first large-scale, fully integrated DNA fingerprinting system for the South African Police. While this market is still small, the opportunities for increasing the safety and security of people around the world are truly exciting. We will continue to focus our resources and energies on high-potential areas where our customers’ needs for innovative automation solutions is highest, be this in the areas of cellular biology, molecular diagnostics or array processing. Tecan is the market leader in the majority of the fields it operates in. Our complementary product portfolio, spanning sample storage, liquid handling and detection which is supported by a world class service organization, put us in a good position to serve our customers’ needs also in the future. Our objective is clear: Maintain and expand our market leadership position. We are very grateful to all our employees, our customers, business partners and shareholders for the continued loyalty, trust, and commitment all of you have put in Tecan during this past year. We are looking forward to another interesting, challenging and rewarding 2006, for which we are encouraged and committed to give our best.

Männedorf, 23.3.2006

Mike Baronian Chairman of the Board of Directors

Thomas Bachmann Chief Executive Officer

6 | Annual Report 2005 |

Market overview Bringing Tecan to life At Tecan, we thrive on the knowledge that what we do matters. Through our life science customers, our products have a real impact on real people every day. Whether that’s finding a treatment for rheumatoid arthritis, solving violent crimes, ensuring that blood donated for transfusion is safe to use, or detecting the avian flu in animals, our instruments are there, at the very core of these processes. Tecan’s instruments and solutions provide the reliability, efficiency and performance relied on by today’s leading laboratories.

| Annual Report 2005 | 7

Tecan serves three main markets, the Biopharma industry consisting of the world’s leading pharmaceutical-, biotechnology- and academic research laboratories, the Forensics industry-, consisting of law-enforcement and government laboratories and the Diagnostics industry, which is comprised of blood banks, hospital laboratories and other leading reference laboratories. These markets are served through our five product areas. As an example, a leading Biotech company would purchase sample management, liquid handling and detection solutions from Tecan and protect their investment with a service contract. Markets

Biopharma

Liquid handling and robotics

Products

Forensics

Detection

Sample management

Diagnostics

Components

Customer service

8 | Annual Report 2005 |

Biopharma applications and markets The biopharma market is dedicated to fighting disease, with the ultimate goal of finding the next lifesaving drug and making it safe and available to the world at large as fast as possible. Tecan’s products have applications throughout the drug discovery process helping to generate new medicines efficiently and safely. As one of the world’s largest suppliers of laboratory automation and sample management, Tecan and REMP cover a unique range of steps in the drug discovery process; from storing and identifying target molecules as potential drugs and confirming their therapeutic effects, to pre-clinical testing for possible side effects. Biopharma is a well-established area for Tecan and, now that there is a stronger need for standardized and verified systems, we provide off-the-shelf methods that meet all the important regulatory requirements and give reproducible results, even across multi-site laboratories around the world. Tecan is in a perfect position to take full advantage of this change in requirements, thanks to our past experience and flexible approach of creating individually tailored instruments to automate an application. As well as benefiting the customer, this strategy also helps Tecan to optimize both development time and internal resources.

Tecan in Biopharma – 2005 Tecan is the global leader in offering liquid handling and sample management solutions for the biopharmaceutical industry. The addition of REMP in 2005 has added an additional set of complementary products to Tecan’s product portfolio that now allow us to offer our customers a set of exciting integrated products for all of the most critical aspects of the Drug Discovery process. With the installation of the world’s first large scale REMP storage system for biological materials such as DNA, cellular material or tissues in the fourth quarter of 2005 at Pfizer, or the recently launched Cellerity® systems for various customers, Tecan has established the know-how and capabilities to help customers meet the challenges and opportunities offered by automation also in the field of cellular biology.

Market size and growth • USD 26 bn* • CAGR 6%-8%

Key drivers of automation • Advances in genomics, proteomics and chemistry lead to significant amount of new potential targets • Requires increased screening throughput

Breakout segment: Cellular analysis • USD 900 m • CAGR ~25%

*Sources: Various market reports and Tecan estimates; market size estimates for 2005

• Increasing regulatory demands • Pharmacogenomics and personalized medicine resulting in highly targeted medication and tests

| Annual Report 2005 | 9

Forensics applications and markets Tecan is developing a strong reputation in forensic science, based on a combination of the technology perfected for the biopharma market and the regulatory expertise gained from the strictly controlled clinical diagnostic environment. Our technologies can be applied to criminal investigations as well as to the larger scale human identification projects, such as those following the attack on the World Trade Center. The increasing use and acceptance of DNA evidence as the new ‘fingerprint’ in legal systems around the world means that forensic science has been searching for fully automated, high throughput laboratory solutions like those that Tecan provides. At the same time, forensic scientists need to have absolute confidence in results that potentially link a criminal to the scene of a crime or identify someone’s loved one. Accuracy and reliability are everything. And, for a forensic laboratory, that means a validated technology producing results that can stand up in a court of law. Again, in the same way as the biopharma market, Tecan is there at the forefront, directly addressing this need by creating innovative solutions for the world’s leading forensic, law enforcement and government agencies.

Tecan in Forensics – 2005 Tecan is already today one of the largest suppliers of automation for forensics applications to police and other governmental institutions around the world. In 2005, Tecan expanded this leadership position by installing the world’s first large-scale DNA-profiling system for the South African Police Service. This system, which was commissioned in February of 2006, allows the fully automated processing of forensic evidence. Combining both leading edge science and Tecan’s expertise in regulatory and process integrity, this system will be a valuable tool in fighting violent crime in South Africa while fully adhering to the requirements set down by the country’s legal system.

Key drivers of automation • Increasing acceptance of forensic/ DNA evidence in legal- and lawenforcement systems globally drives significant growth in testing volumes • High requirements toward process safety to adhere to legal standards • Terrorism or environmental disasters creating additional need for DNA testing

Market size and growth • USD 900m* • CAGR 15%-20%

10 | Annual Report 2005 |

Diagnostics applications and markets Diagnostics is, quite simply, the first step of medicine and life science. Before you can treat a disease, you must first know what it is; what caused it; try to understand everything about it – and only then can you treat it early and as effectively as possible. Tecan’s considerable expertise gained in automating applications in blood banking and screening for infectious diseases is equally applicable in the important field of molecular diagnostics, where the mapping of the human genome has opened the floodgates to a whole new area of analysis. The diagnostic market is now effectively driven by the overriding importance of 100% reliable, reproducible results, monitored by laboratories through stringent guidelines and regulations. Tecan’s strength lies precisely in this area of expertise, combined with its constant attention to the development of new safety features, which are also essential for scientists working with potentially infectious samples. Both of these factors are strong advantages recognized by our customers in the entire diagnostic arena.

Tecan in Diagnostics – 2005 Diagnostics is the field Tecan originally started out in and it also today represents a significant part of our business. Our customers rely on Tecan to provide them with systems for the most critical of applications such as HIV/HCV testing of donated blood. In this market, Tecan participates under both its own brand and under that of some of the largest and most renowned diagnostic companies around the world. One of the critical areas in this field is Molecular Diagnostics which is experiencing rapid growth due to the increased sensitivity of this technology. Together with our customers, we were able to launch multiple products in this area as well as adding some truly exciting new projects to our R&D pipeline. Through the China office, which became fully operational in 2005, we are now also well positioned to support the ongoing healthcare efforts in this region.

Market size and growth • USD 29 bn* • CAGR 7% -9%

Breakout segment: Molecular DX • USD 1.5 bn • CAGR ~15%

*Sources: Various market reports and Tecan estimates; market size estimates for 2005

Key drivers of automation • Utility: Diagnostics represent 3% of healthcare spending but affect 80% of decisions • Availability of new diagnostic tests, allows earlier recognition and better treatment of diseases • Aging population and increasing regulatory/insurance demands • Molecular diagnostics create new opportunities mainly in US/EU

12 | Annual Report 2005 |

Liquid handling and robotics A combination of robotics and liquid handling technologies forms the backbone of Tecan’s product portfolio and is an advantage many of our competitors do not have. The flexibility, robustness and innovation of our products mean they can improve the efficiency and safety of almost any laboratory workflow, in all the disciplines of our main biopharma, forensic and diagnostic markets. A good example of this is Cellerity, which, on its launch in 2006, will be the most flexible and reliable tool available for reproducibly supplying ready-to-use cells to biotechnology and pharmaceutical laboratories. These cells are important for understanding drugs and their effects, as well as being a source of biologically based treatments, such as antibodies and hormones. Cellerity will free scientists from the laborious and repetitive task of manually growing cells, enabling them instead to focus on the discovery of new treatments and products. In keeping with our traditional strengths, we will use the development knowledge of this system to market a whole series of similar instruments in a range of sizes.

| Annual Report 2005 | 13

The liquid handling market remains very competitive and continuing innovation is essential to keep us ahead of the game. Early in 2006, the next wave of new development will be launched with an option that identifies different sample or pipetting faults and a number of bridging modules. This relentless attention to the small detail, together with the ability to provide our customers with an outstanding service, is what gives Tecan the edge over its competitors.

Achievements 2005 In 2005, our all-important flexibility in liquid handling has helped us to gain market share from our main competitors, especially in the US. Tecan has continued to collaborate with strategic partners to develop application-focused solutions, including alliances with strong life science companies such as Promega, Invitrogen and BD Biosciences. In October, the dual liquid handling arm was released, a feature that is unique and very useful in the market, offering customers extra flexibility for pipetting small and large volumes of liquids independently and in parallel. New upgraded software was also released and, together, these new developments will keep Tecan at the forefront of technical expertise in this sector.

Key trends Laboratories are increasingly looking for real application solutions rather than the supply of liquid handling instrumentation that they then have to adapt to their methods. For this reason, there is more demand for what might be termed ‘pre-packaged solutions’ – solutions that are co-developed and often co-marketed as a result of strong strategic alliances between reagent and instrumentation vendors. The biggest growth areas for liquid handling are in the areas of forensics, genomics and cell biology. Geographically for this segment, growth is strongest in the Middle East and China.

14 | Annual Report 2005 |

Detection Many of Tecan’s customers from the biopharma, forensic and diagnostic segments benefit from our detection instruments, both as standalone units and fully integrated with our liquid handling systems to create powerful workstations. They comprise a highly successful range of microplate readers and washers, which precisely analyse reactions in a microtiter plate, and a selection of microarray instruments used in the field of molecular biology to identify genetic disorders. Our number one seller is the Safire2, the fastest, most flexible and most sensitive microplate reader of its kind on the market. 2006 will see the launch of completely new instruments, extending our current range of competitive readers and washers. In response to new US Food and Drug Administration and EU guidelines for clinical diagnostics, these will include a number of new safety features which will be unique to the market.

Achievements 2005 Despite a very competitive market, our cutting edge portfolio has had a very strong few years and has gained significant market share. This growth has been strengthened in Europe by the introduction of additional sales personnel in 2005, a strategy also planned for the US in 2006. Following the success of the Safire2 and, because no two customers are alike, we developed and, in 2005, launched the first of the Infinite series of modular microplate readers. This unique modular design allows our customers to modify their instrument according to their current needs and crucially leaves it open for upgrades to grow with our customers’ needs.

| Annual Report 2005 | 15

Key trends The trend continues to focus on more flexible systems that are robust, sensitive, are suitable for high throughput and can meet the changing needs of any laboratory. For what used to be considered simple plate washing, there is a shift towards semi-automation and more of a need for fail-safe features that ensure effective processing. The microarray market, too, is a target for strong growth, reflecting the rising importance of molecular diagnostics in disease screening.

16 | Annual Report 2005 |

Sample Management REMP’s seamless integration into the Tecan Group has been a great success. The product portfolios of both companies complement each other well and this has undoubtedly helped the transition to be more of a natural progression. Where the name of Tecan is synonymous with sample preparation and analysis, REMP is all about storing and accessing hundreds, thousands or even millions of samples. In the biopharma market, this means chemical or biological compounds that need to be analyzed as potential drugs; in forensics, it may mean DNA samples from years of unsolved crimes; and in diagnostic research, we’re talking about tissue samples from e.g. breast cancer patients which might share a common link. REMP’s strength stems from its expertise in developing and supplying large, high quality compound storage banks with excellent lab information system and after-sales service to the world’s major pharmaceutical companies. This same expertise is now being applied to the development of smaller and modular solutions for new markets. Whatever its size, every REMP system relies on the unique, patented Tube Technology, a range of consumables that revolutionized sample management when it was first launched in 1997, and is today the industry standard in the compound storage market.

Achievements 2005 In 2005, REMP launched the Small Sample Store™ (SSS). The SSS has been met with great excitement, not only from the big pharmaceutical companies who can place the SSS in their satellite laboratories, but also from smaller laboratories in biotech and academia that can now take advantage of these cutting-edge storage and retrieval solutions to improve their research performance. The market is also watching intently REMP’s development of the first -80° C storage systems for biological samples following a pilot installation late in 2005.

Key trends As technology races ahead and more laboratories turn to automation, there is a real need in the smaller biotech companies and academic institutions for the same specimen storage and retrieval mechanisms available routinely in the major pharmaceutical arena. Although traditionally developed for the management of chemical compounds, the technology is now eagerly awaited by researchers working with biological samples needing totally different storage conditions and handling criteria.

18 | Annual Report 2005 |

Components Tecan’s OEM Components unit provides pumps and robotic products to manufacturers of lab equipment who, in turn, sell to the life science, analytical chemistry and clinical diagnostic markets. The dynamics of this business sector are different from other Tecan businesses because components remain a part of our customers’ products throughout the life cycle; from a product’s design, through to its manufacture and commercialization – potentially 10 years or more.

| Annual Report 2005 | 19

Tecan is the market leader in this business and holds a market share of around the high 60 percentile for this type of pumps worldwide. From this strong position comes innovation as we introduce a number of new products, replacing lines that are at the end of their technical life. These new products offer new fluidic design options and, importantly, will require less maintenance. A new integration kit of infrastructure tools – software, cabling, power supplies etc. – will also become available, making it simpler for customers to get started and easier for them to integrate our products into their own designs. We are the first company in the sector to effectively address new regulations with new products and discuss all the implications openly with our customers. By choosing our new products they will be fully prepared for compliance with new compulsory directives.

Achievements 2005 In keeping with our commitment to our and our customers’ stringent quality and regulatory requirements, we achieved our ISO 13485/2003 certificate in 2005. Also, in response to the approaching July 2006 deadline of Europe’s RoHS Directive (Restriction of the use of certain Hazardous Substances in electrical and electronic equipment) 2002/95/EG we initiated an extensive project to provide our customers with a fully compliant portfolio of products for their instrument manufacturing needs.

Key trends In 2006, the components market will be dominated by a new European regulation for the Reduction of Hazardous Substances which comes into effect in July. This regulation will restrict the use of environmentally unfriendly chemicals for the manufacture of electronic equipment. 99% of Components customers eventually export to Europe and will need to comply with this regulation.

20 | Annual Report 2005 |

Customer service Customer service is at the heart of Tecan’s offering; the added value that gives our customers the assurance that their investment will be well taken care of. Our customers don’t only buy an instrument, but also the maintenance, training and support they need to ensure that their system performs at its peak for its entire lifetime. A friendly face servicing their instrument or a welcoming voice at the end of a phone can make all the difference to customers’ perception of Tecan as a company.

| Annual Report 2005 | 21

As reliable as our systems are, to keep them at their best we recommend the regular attention a maintenance contract gives to keep their system in perfect working order. Changing regulatory requirements and quality assurance in the laboratory environment are making maintenance a very important issue, especially in the clinical diagnostic field, where regulations often require strict service records, and in forensic science where systems must be highly regulated and documented for scientific evidence to be upheld in court.

Achievements 2005 Throughout 2005, we have concentrated on optimizing our operational systems and recruiting the best service and support candidates, investing time and money to successfully increase our service standards, cut customer response times and ultimately support and strengthen our market presence.

Key trends Customer service continues to be an important criteria in every walk of life and Tecan’s world is no different. The consumables business, which has been boosted with the acquisition of REMP, has potential for growth simply because the larger the installed base of instruments then the larger the demand for consumables will become.

22 | Annual Report 2005 | Page title

Chief Financial Officer’s statement Turnaround in operating profit and major acquisition achieved In 2005, Tecan’s course of business was distinguished by two elements. Firstly, the turnaround to a positive trend in sales and operating profitability, which was started in the second quarter, and secondly the acquisition of REMP, effective July 1, 2005 and worth CHF 99.0 million. For 2005, Tecan achieved sales growth of 20.2% (2004: -5.5%) in local currency to CHF 344.9 million (2004: CHF 286.0 million). Despite strong growth, Tecan was able to generate good cash flow from operating activities. This resulted in a healthy balance sheet which shows shareholders’ equity of 42.4% (2004: 49.3%) of total assets of CHF 338.0 million (2004: CHF 191.3 million). Taking into account the size of the acquisition made, net debt was low, at CHF 33.1 million (2004: net liquidity of CHF 30.7 million).

Higher sales and net profit Sales. In 2005, sales grew in all markets. Genomics/Proteomics resumed historic growth rates, driven by a strong US market, and achieved growth of 24.3% (2004: -0.3%) in local currency, totaling CHF 101.8 million (2004: CHF 81.5 million). Drug Discovery sales totaled CHF 107.4 million (2004: CHF 91.5 million). This represents an increase of 17.2% (2004: -8.0%) in local currency, facilitated by REMP. Driven by new product launches, Diagnostic sales grew to CHF 135.7 million (2004: CHF 113.0 million), which represents growth of 19.7% (2004: -6.9%) in local currency. Gross profit. Gross profit grew by 14.4% (2004: -11.9%) to CHF 159.9 million (2004: 139.8 million) in 2005. The gross profit margin fell by 2.5% (2004: -2.0%) to 46.4% (2004: 48.9%) due to a significant shift in the product mix, the consolidation of REMP, which has a different margin structure, and higher one-off charges. Operating expenses less cost of sales. In July 2005, Tecan announced the closure of its Boston facility, which resulted in a one-off charge of CHF 4.9 million (2004: CHF 2.9 million). The initiatives launched in 2004 to improve operations showed considerable success in 2005. The compliance initiative led to improved customer satisfaction and enabled sales growth in Diagnostics. Investment in sales and marketing led to strong growth in the US and China, as well as in detection sales. The focus on production, application and installation eliminated bottlenecks, shortened the delivery cycle and resulted in higher recognized revenue. As a consequence of this set of measures and the takeover of REMP, operating expenses excluding the cost of sales rose by 9.8% (2004: -10.5%). Driven mainly by the REMP acquisition, the number of employees increased from 865 at the beginning of 2005 to 1047 at the end of 2005. Operating profit. As a result, Tecan’s operating profit rose by 48.2% (2004: -24.5%) to CHF 24.8 million (2004: CHF 16.7 million). Excluding unusual items, operating profit reached CHF 29.8 million (2004: CHF 19.7 million).

Dr. Rudolf Eugster, Chief Financial Officer

Financial result and taxes. Tecan hedges its US-dollar transaction exposure for 12 months rolling forward. Due to the US dollar’s appreciation against the Swiss franc, this resulted in a hedging loss of CHF 3.0 million (2004: CHF -1.1 million). Combined with the interests and expenses for share-based payments, this resulted in a negative financial result of CHF 4.8 million (2004: CHF +0.8 million). The tax rate in 2005 increased to 30.4% (2004: 27.4%). This increase can mainly be attributed to the effect of under and overprovisioning in previous years, tempered by the effect arising from the capitalization of tax losses. Net profit. Tecan posted a net profit of CHF 14.0 million (2004: CHF 12.7 million) which represents an increase of 9.7% (2004: -9.6%).

Good cash flow from operating activities Tecan’s return to the path of growth required an investment into the net working capital of CHF 16.5 million (2004: CHF -3.8 million). Nevertheless, notably in the second semester, Tecan achieved cash flow from operating activities of CHF 15.1 million (2004: CHF 29.7 million).

24 | Annual Report 2005 |

Sales by region

Operating and net profit

2004 Total 286.5

7.1% 5.8% 4.5%

In CHF million

6.1

27.0

153.0

158.8

27.6

2.1

135.4

120.9

30.5

3.7

141.9

135.5

In CHF million

2003 Total 311.6

22.2

4.1%

4.4%

14.1

2003

2005 Total 344.9

Sales by market

Operating profit Net profit

7.2%

North America Europe Asia Other

16.7

% of sales

12.7

2004

24.8

14.0

2005

Research and development (gross) 16.6%

Drug Discovery 31.1%

13.0%

11.8% % of sales

101.8 135.7

Diagnostics 39.3%

107.4

Total 344.9

In CHF million

In CHF million

Genomics/ Proteomics 29.6%

51.7

37.1

40.8

2003

2004

2005

Long-term level of investment in R&D maintained The company’s ongoing objective is to spend approximately 10% of annual sales on R&D. In 2005, Tecan spent CHF 40.8 million (2004: CHF 37.1 million), or 11.8% of sales (2004: 13.0%) on R&D. Excluding unusual items, spending in 2005 amounted to CHF 37.8 million (2004: CHF 36.7 million), or 11.0% of sales (2004: 12.8%). The reduction in R&D spending as a percentage of sales and excluding unusual items, can be put down to the partial omission of R&D costs for the LabCD program at Tecan Boston, the lower level of R&D at REMP, and the focus on core competencies.

| Annual Report 2005 | 25

Cash flow from operating activities

Net liquidity

CHF 1,000 + cash and cash equivalents

In CHF million

29.7

15.1

2003

2004

2005

Basic earnings per share

2004

2005

67,622

40,165

42,645

(39,831)

(8,507)

(14,744)

./. bank loans

(1,735)

(986)

(60,988)

= net liquidity

26,056

30,672

(33,087)

./. current bank liabilities

44.7

2003

Manpower by activity (eop)

General and administration 12.2%

128

In CHF/share

316

Research and development 16.0%

1.21

1.16

1.26

2003

2004

2005

Customer service 15.1%

168

158

277

Total 1047

Unchanged dividend At the annual shareholders’ meeting on April 26, 2006 the Board of Directors will recommend the payment of dividends of CHF 0.45 per share (2004: CHF 0.45).

Dr. Rudolf Eugster Chief Financial Officer

Manufacturing and logistics 30.2% Selling and marketing 26.5%

26 | Annual Report 2005 | Five-year consolidated data

Five-year consolidated data In CHF 1,000

2005

2004

2003

2002

2001

Income statement Sales Operating profit Financial result Income taxes Net profit

344,900 24,826 -4,764 6,108 13,954

285,975 16,749 770 4,795 12,724

311,606 22,171 -1,834 6,254 14,083

332,180 44,701 -1,466 10,427 32,972

362,675 62,378 1,500 18,789 45,093

Research and development, gross Personnel expenses Depreciation of property, plant and equipment Amortization of intangible assets Impairment losses

40,762 118,389 6,603 4,562 1,437

37,101 102,874 7,093 4,376 -

51,689 102,525 8,246 5,950 7,639

44,572 102,819 9,170 6,237 -

48,029 101,396 7,512 4,575 -

Balance sheet Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Shareholders’ equity

206,408 131,600 338,008 111,758 82,917 194,675 143,333

149,000 42,309 191,309 84,606 12,446 97,052 104,802

178,436 45,810 224,246 102,570 11,055 113,625 110,621

183,859 57,057 240,916 61,548 7,338 68,886 172,030

206,071 56,363 262,434 74,565 7,645 82,210 180,224

15,117

29,712

44,695

43,999

32,345

6,008 60,493 4,815

10,589 4,993

6,580 5,344

15,927 4,191 5,807

22,878 2.692 4,534

Other data Number of employees (end of period) Number of employees (average)

1,047 1,026

865 834

812 838

872 904

915 855

Research and development in % of sales Sales per employee

11.8% 336

13.0% 343

16.6% 372

13.4% 367

13.2% 424

Data per share (CHF)* Net profit Shareholders’ equity

1.26 12.97

1.16 9.55

1.28 10.08

3.00 15.68

4.11 16.42

Dividends paid (CHF/share)**

0.45

0.45

0.45

0.45

0.45

Cash flow statement Cash inflows from operating activities Capital expenditure in property, plant and equipment and intangible assets Acquisitions, net of cash acquired Dividends paid

* data per share are based on 11,055,136 registered shares with a nominal value of CHF 1.-/each, outstanding for all periods presented ** proposal to the annual general meeting

Consolidated financial statements | Annual Report 2005 | 27

Consolidated balance sheet at December 31 Notes

2005

2004 Restated (see accounting policies)

In CHF 1,000

Assets 42,645 93,193 10,422 55,881 554 3,713

40,165 58,657 8,322 37,773 849 3,234

206,408

149,000

1,164 23,091 92,375 14,970

1,069 17,037 9,973 14,230

Non-current assets

131,600

42,309

Assets

338,008

191,309

14,744 14,121 10,335 30,880 3,044 27,982 10,652

8,507 9,969 12,845 7,602 19,127 2,242 16,956 7,358

111,758

84,606

60,988 11,833 9,301 795

986 6,674 4,136 650

Non-current liabilities

82,917

12,446

Share capital Capital reserve Treasury shares Retained earnings Translation differences

11,892 2,253 (16,619) 154,955 (9,148)

12,341 1,886 (63,916) 159,710 (15,764)

143,333

94,257

338,008

191,309

Cash and cash equivalents Trade accounts receivable Other accounts receivable Inventories Income tax receivable Prepaid expenses

3 4 5

Current assets Financial assets Property, plant and equipment Intangible assets Deferred tax assets

6 7 8 24

Liabilities and equity Current bank liabilities Liability to repurchase own shares Trade accounts payable Other accounts payable Deferred revenue Income tax payable Accrued expenses Current provisions

9 10

11

12

Current liabilities Bank loans Non-current provisions Deferred tax liabilities Other non-current liabilities

Shareholders’ equity Liabilities and equity

9 12 24

14

28 | Annual Report 2005 | Consolidated financial statements

Consolidated income statement Notes

2005

In CHF 1,000 Sales

2004 Restated (see accounting policies)

344,900

285,975

Cost of sales

(184,968)

(146,202)

Gross profit

159,932

139,773

(60,438) (40,762) (35,226) 1,320

(50,282) (37,101) (36,156) 515

Operating profit

24,826

16,749

Financial income Finance cost Foreign exchange losses

1,513 (3,241) (3,036)

2,483 (624) (1,089)

(4,764)

770

20,062

17,519

(6,108)

(4,795)

13,954

12,724

Sales and marketing Research and development General and administration Other operating income

Financial result

18

21 22

23

Profit before taxes Income taxes

24

Net profit Basic earnings per share (CHF/share)

26

1.26

1.16

Diluted earnings per share (CHF/share)

26

1.26

1.16

Consolidated financial statements | Annual Report 2005 | 29

Consolidated statement of changes in shareholders’ equity

Notes

Total Translation shareholders’ differences equity

Share capital

Capital reserve

Treasury shares

Retained earnings

13,107

15,561

(104,973)

198,605

(11,679)

110,621

-

-

-

(2,011)

-

(2,011)

-

-

-

(9,383)

-

(9,383)

13,107

15,561

(104,973)

187,211

(11,679)

99,227

Net profit Translation differences Total recognized income and expense for the year

-

-

-

12,724 -

(4,085)

12,724 (4,085)

Dividends paid Share capital increase from employee participation plan Share-based payments to employees Cancellation of treasury shares Purchase and sale of treasury shares (net)

-

-

-

(4,993)

-

(4,993)

14

81

3,854

-

-

-

3,935

13 14

(847)

-

36,857

720 (36,010)

-

720 0

14

-

(17,529)

4,200

58

-

(13,271)

12,341

1,886

(63,916)

159,710

(15,764)

94,257

12,341

1,886

(63,916)

159,710

(15,764)

94,257

Net profit Translation differences Total recognized income and expense for the year

-

-

-

13,954 -

6,616

13,954 6,616

Dividends paid Share capital increase from employee participation plan Share-based payments to employees Treasury shares issued due to the acquisition of REMP Group Cancellation of treasury shares Sale of treasury shares Exercise of written put option on treasury shares

-

-

-

(4,815)

-

(4,815)

14

4

199

-

-

-

203

13

-

-

-

660

-

660

1 14 14

(453) -

168

31,820 16,965 2,512

(2,042) (16,512) -

-

29,778 0 2,680

10

-

-

(4,000)

4,000

-

0

11,892

2,253

(16,619)

154,955

(9,148)

143,333

In CHF 1,000 Shareholders’ equity at December 31, 2003 Effect of new/revised accounting standards: IFRS 2 ‘Share-based Payment’ IAS 32 ‘Financial Instruments: Disclosure and Presentation’ Shareholders’ equity at January 1, 2004 (restated)

8,639

Shareholders’ equity at December 31, 2004 (restated) Shareholders’ equity at January 1, 2005

Shareholders’ equity at December 31, 2005

20,570

There were no other items of income and expense recognized directly in equity other than translation differences.

30 | Annual Report 2005 | Consolidated financial statements

Consolidated cash flow statement Notes

2005

In CHF 1,000

2004 Restated

13,954

12,724

7, 8 12 23 24

12,602 3,214 4,764 6,108 (3,469)

11,469 1,702 (770) 4,795 1,158

4 5

(22,916) (7,595) (1,136) 15,152

4,002 (7,081) (1,600) 8,519

Income taxes paid

(5,561)

(5,206)

Cash inflows from operating activities

15,117

29,712

(34) 1,316 (4,960) 365 (60,493) (1,048)

(66) 574 (6,782) 255 (3,807)

(64,854)

(9,826)

(4,815) 203 (10,000) 1,249 (1,664) 68,000 (296) (34)

(4,993) 3,935 (22,760) 9,618 (418) (1,695) (726)

52,643

(17,039)

Translation differences

1,087

(881)

Increase in cash and cash equivalents

3,993

1,966

Cash and cash equivalents at beginning of year

35,946

33,980

39,939

35,946

42,645 (2,706)

40,165 (4,219)

39,939

35,946

Net profit Adjustments for: Depreciation and amortization (including impairment losses) Change in provisions Financial result Income taxes Other non-cash items Change in working capital: Trade accounts receivable Inventories Trade accounts payable Other changes in working capital (net)

Increase in financial assets Interest received Purchase of property, plant and equipment Proceeds from sales of property, plant and equipment Acquisition of REMP Group, net of cash acquired Purchase of intangible assets

6 7 7 1 8

Cash outflows from investing activities Dividends paid Share capital increase from employee participation plan Purchase of treasury shares Proceeds from sales of treasury shares Interests paid Increase in bank liabilities due to the acquisition of REMP Group Decrease in other current bank liabilities Decrease in other bank loans

9

Cash in(out)flows from financing activities

Cash and cash equivalents at year-end

Cash and cash equivalents as per cash flow statement comprise: Cash and cash equivalents as per balance sheet ./. Bank overdrafts under bank pooling arrangements = Cash and cash equivalents as per cash flow statement

3 9

Consolidated financial statements | Annual Report 2005 | 31

Summary of significant accounting policies These financial statements are the consolidated financial statements of Tecan Group Ltd., a company registered in Switzerland, and its subsidiaries (together referred to as the ‘Group’) for the year ended December 31, 2005. The Group is operating in the life sciences supply industry and is specialized in the development, production and distribution of advanced automation solutions enabling drug discovery, genomics, proteomics and diagnostics. The consolidated financial statements were authorized for issue by the board of directors on March 1, 2006. Final approval is subject to acceptance by the annual general meeting of shareholders on April 26, 2006. Basis of preparation of the consolidated financial statements The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations adopted by the International Accounting Standards Board (IASB). The financial statements are presented in Swiss francs, rounded to the nearest thousand. They are prepared on the historical cost basis except for derivative financial instruments, which are stated at their fair value. The preparation of these consolidated financial statements requires management to make assumptions and estimates that affect the reported amounts of revenues, expenses, assets, liabilities and disclosure of contingent liabilities at the date of these financial statements. If in the future such assumptions and estimates deviate from the actual circumstances, the original assumptions and estimates will be modified as appropriate in the year in which the circumstances change. Critical accounting estimates and judgments Goodwill REMP and brand name ‘REMP’ The Group performed the annual obligatory impairment tests for the goodwill REMP and the brand name ‘REMP’ at the end of December 2005. The key assumptions as well as a sensitivity analysis concerning the goodwill REMP are disclosed in note 8. Other intangible assets recognized due to the acquisition of REMP Group As at December 2005 the Group was not aware of any indication, that the carrying amounts of the intangible assets recognized based on the purchase price allocation according to IFRS 3 (see note 8), might have been impaired. Therefore, no specific impairment tests have been performed. Income taxes At December 31, 2005, the net liability for current income taxes is CHF 2.5 million and the net asset for deferred taxes is CHF 5.7 million. Significant estimates are required in determining the current and deferred assets and liabilities for income taxes. Various internal and external factors may have favourable or unfavourable effects on the income tax assets and liabilities. These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations and changes in overall levels of pre-tax earnings. Such changes that arise could impact the assets and liabilities recognized in the balance sheet in the future periods. Changes in accounting policies The accounting policies are consistent with those used in the previous year, except for the introduction of new International Financial Reporting Standards (IFRS) and the amendments of existing International Accounting Standards (IAS), effective as of January 1, 2005. The Group adopted the new standards IFRS 2 ‘Share-based Payment’, IFRS 3 ‘Business combinations’ (including the amendments of IAS 36 ‘Impairment of Assets’ and IAS 38 ‘Intangible Assets’), IFRS 4 ‘Insurance Contracts’ and IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’ as well as the following amended International Accounting Standards (‘Improvements Project’): IAS 1 ‘Presentation of Financial Statements’, IAS 2 ‘Inventories’, IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’, IAS 10 ‘Events after the Balance Sheet Date’, IAS 16 ‘Property, Plant and Equipment’, IAS 17 ‘Leases’, IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’, IAS 24 ‘Related Party Disclosures’, IAS 27 ‘Consolidated and Separate Financial Statements’, IAS 28 ‘Investments in Associates’, IAS 31 ’Interests in Joint Ventures’, IAS 32 ‘Financial Instruments: Disclosure and Presentation’, IAS 33 ‘Earnings per Share’, IAS 39 ‘Financial Instruments: Recognition and Measurement’ and IAS 40 ‘Investment Property’.

32 | Annual Report 2005 | Consolidated financial statements

The principal impacts on the consolidated financial statements are disclosed below: IFRS 2 ‘Share-based Payment’ Up to the year 2002, the Group had introduced several employee stock option plans. In addition to their salaries, all employees of the Group outside of the US received options (= equity-settled plans). Employees in the US received stock appreciation rights (= cash-settled plans) with the same treatment and the same conditions as the employee stock options. Except for social security charges, no personnel expense was recognized. With the adoption of IFRS 2 the Group has changed its accounting policy as follows: Equity-settled plans The fair value of options granted is recognized as a personnel expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options (vesting period). The fair value of the options granted is measured using a binominal model, taking into account the terms and conditions upon which the options were granted. The amount recognized as an expense is adjusted by an expected labour turnover rate to reflect the expected number of options that will vest. The Group has applied IFRS 2 to equity-settled plans, that had been granted after November 7, 2002 and that had not vested at the effective date of IFRS 2 (January 1, 2005). Cash-settled plans The fair value of the amount payable to the employee is recognized as a personnel expense with a corresponding increase in provisions. The fair value is initially measured at grant date and spread over the period during which the employees become unconditionally entitled to payment (vesting period). The fair value of the SAR is measured based on a binominal model, taking into account the terms and conditions upon which the instruments were granted. The provision is remeasured at each balance sheet date and at settlement date. Any changes in the fair value of the provision are recognized in the financial result. The Group has applied IFRS 2 to cash-settled plans that were not settled at the effective date of IFRS 2 (January 1, 2005). IFRS 3 ‘Business Combinations’ and amendments of IAS 36 ‘Impairment of Assets’ and IAS 38 ‘Intangible Assets’ Starting January 1, 2005 the Group stopped amortizing existing goodwill, but instead performs an annual impairment test. In accordance with the provisions of IFRS 3 the Group did not restate previous periods. The amortization of goodwill in 2004 was CHF 1.7 million. IAS 32 ‘Financial Instruments: Disclosure and Presentation’ In previous years the put option on own shares, disclosed in note 10, was classified as an equity instrument. Therefore no liability was recognized. With the amendments of IAS 32 revised, this put option qualifies as financial liability. Accordingly, the Group retrospectively recognizes a liability at the present value of the exercise price (CHF 10 million). Other changes The adoption of IFRS 4, 5, IAS 1, 2, 8, 10, 16, 17, 21, 24, 27, 28, 31, 33, 39, 40, IFRIC 1, 2, 3 and SIC-12 did not result in substantial changes to the Group’s accounting policies. Total impact on restated income statement 2004 The previous year has been restated accordingly. The impact on the restated income statement was:

In CHF 1,000 Cost of sales Sales and marketing Research and development General and administration Operating profit Financial result Income taxes Total amount restated

IFRS 2

Put option (IAS 32)

Total impact on restated 2004 results

721 404 297 187 1,609

-

721 404 297 187 1,609

(1,939) 124

135 -

(1,804) 124

(206)

135

(71)

At the end of 2004 the provision relating to cash-settled plans was CHF 1.1 million (prior year: CHF 2.0 million).

Consolidated financial statements | Annual Report 2005 | 33

New standards and interpretations not yet applied There are no new or revised standards or interpretations that are effective for financial periods beginning after January 1, 2006 that are expected to have a significant impact on the consolidated financial statements. Reclassifications Some minor reclassifications have been introduced to the balance sheet and the cash flow statement during 2005. Prior-year figures have been adjusted accordingly. Basis of consolidation Subsidiaries are those companies controlled, directly or indirectly, by Tecan Group Ltd., where control is defined as the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. This control is normally evidenced when the Group owns, either directly or indirectly, more than 50% of the voting power of a company. Newly acquired companies are consolidated from the date on which operating control is transferred to the Group, using the purchase method. The equity and net profit attributable to minority shareholders’ interests are shown separately in the consolidated balance sheet and consolidated income statement, respectively. The companies, which are included in the consolidated financial statements, are listed in the notes to the statutory financial statements of Tecan Group Ltd. Currently all investments are fully consolidated. Intra-group balances and transactions, and any unrealized profits arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Foreign currency translation All Group companies have identified their local currency as their functional currency. Transactions in other currencies are initially reported using the exchange rate at the date of the transaction. Gains and losses from the settlement of such transactions, as well as gains and losses on monetary assets and liabilities denominated in other currencies are included in net profit. Translation differences arising on intra-group loans that, in substance, are part of Tecan Group Ltd.’s net investment in a foreign entity are recognized directly into equity until the disposal of the net investment. Upon consolidation, assets and liabilities of Group companies using functional currencies other than Swiss francs (foreign entities) are translated into Swiss francs (presentation currency) using year-end exchange rates. Revenues, expenses and cash flows are translated at the average exchange rates for the year. Translation differences due to the changes in exchange rates between the beginning and the end of the year and the difference between net profits translated at the average and year-end exchange rates are taken directly to equity. On the disposal of a foreign entity, the identified cumulative currency translation differences relating to that foreign entity are recognized in profit as part of the gain or loss on disposal. Positions of the balance sheet and income statement Cash and cash equivalents – Cash and cash equivalents comprise cash balances and time deposits with a term of 3 months or less from the date of acquisitions. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the cash flow statement. Trade and other accounts receivable – Trade and other accounts receivable are stated at their amortized cost less impairment losses. For short-term receivables nominal value equals amortized cost. Construction contracts – The product categories Large Storage Systems (LSS) and Midsize Storage Systems (MSS) of REMP are accounted for using the ‘percentage of completion’ method of IAS 11. The respective stage of completion is determined as the proportion of contract costs incurred for work performed to date bear to the estimated total contract costs. According to the stage of completion pro rata sales are recognized in the income statement. In the balance sheet the projects in progress – netted against customers’ advances – are recognized as net assets (included in the position ‘trade accounts receivable’) or net liabilities (included in the position ‘deferred revenue’) from construction contracts. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately. Inventories – Inventories are stated at the lower of purchase or production cost and net realizable value. Production costs include raw materials, components and semi-finished products, direct production costs (internal labour and external services) and production overheads. The Group applies the weighted average cost method. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Provisions are made for slow-moving items. Obsolete items are written off.

34 | Annual Report 2005 | Consolidated financial statements

Property, plant and equipment – Property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses (see separate accounting policy). The cost of self-constructed assets includes the cost of materials, direct labor and an appropriate proportion of production overheads. Borrowing costs are not capitalized. Assets acquired under lease contracts, which provide the Group with substantially all benefits and risks of ownership are classified as finance leases and capitalized at amounts equivalent to the estimated present value of the underlying lease payments. The corresponding rental obligations, net of finance charges, are included in liabilities. Leased assets are depreciated over their estimated useful lives. There were no items of property, plant and equipment under finance lease as per balance sheet date. Payments made under operating leases are charged against income on a straight-line basis over the period of the lease. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of items of property, plant and equipment from the date they are available for use. The estimated useful lives are as follows: Land Buildings Leasehold improvements Furniture and fixtures Machines and motor vehicles EDP equipment

not depreciated maximum 40 years shorter of useful life or lease term 4 - 8 years 2 - 8 years 3 - 5 years

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment (component approach). Costs for repair and maintenance are recognized as an expense as incurred. Goodwill – Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not capable of being individually identified and separately recognized. The cost of a business combination is determined in accordance with IFRS 3 and is equal to the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group, in exchange for control of the acquiree plus any costs directly attributable to the business combination. At the acquisition date (date on which the Group effectively obtains control of the acquire), the Group allocates the cost of a business combination by recognizing the acquiree’s identifiable assets, liabilities and contingent liabilities at their fair value at that date. Any difference between the cost of the business combination and the acquirer’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities so recognized is treated as goodwill. If the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized as described above exceeds the cost of the business combination, the Group reassess the identification and measurement of the acquiree’s identifiable assets, liabilities and contingent liabilities and the measurement of the cost of the combination and recognizes immediately in profit or loss any excess remaining after the reassessment. After initial recognition, the Group measures goodwill at cost less any accumulated impairment losses. In accordance with IFRS 3, IAS 36 and IAS 38, the Group no longer amortizes goodwill. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that there might be an impairment. Other intangible assets Development costs – Expenditure on internal development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalized if the product or process is technically and commercially feasible and the Group has sufficient resources to complete development. The expenditure capitalized includes the cost of materials and external project costs. Other development expenditure (including research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding) is recognized in the income statement as an expense as incurred. Software – Expenditure on the implementation of software, including licenses and external consulting fees, are capitalized. Intangible assets acquired in a business combination – All intangible assets (client relationships, technology, order backlog, brand name ‘REMP’) that are recognized applying the purchase price procedure in accordance with IFRS 3 are stated initially at fair value. The following valuation methods are used in order to determine the fair values at the acquisition date: multi-period excess earnings method, relief from royalty method and replacement cost approach.

Consolidated financial statements | Annual Report 2005 | 35

Intangible assets are stated at cost less accumulated amortization (see below) and impairment losses (see separate accounting policy), except for the brand name ‘REMP’, which is stated at cost less accumulated impairment losses. Amortization is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets. Intangible assets are amortized from the date they are available for use. The estimated useful lives are as follows: Development costs Software Acquired client relationships Acquired technology Acquired order backlog

3 - 5 years 3 - 5 years 15 years 5 - 10 years 2 years

The brand name ‘REMP’ was initially assessed and recognized as an intangible asset with an indefinite useful life. Therefore the asset is not subject to amortization, but is tested for impairment at least annually. Impairment – The carrying amount of the Group’s assets other than goodwill, intangible assets with indefinite useful lives, inventories, assets arising from construction contracts and deferred tax assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists, the asset’s recoverable amount, being the higher of its fair value less cost to sell and its value in use, is estimated. An impairment loss is recognized in the income statement whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Interest-bearing loans and borrowings – Interest-bearing loans and borrowings are recognized initially at fair value, less attributable transaction costs. Subsequent to initial recognition, interest bearing loans and borrowings are stated at amortized cost with any difference between cost and redemption value being recognized in the income statement over the period of the borrowings on an effective interest basis. Liability to repurchase own shares – see changes in accounting policies. Trade and other accounts payable – Trade and other accounts payable are stated at their amortized cost, which equals the nominal amount for short-term payables. Provisions – Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Employee benefits Share-based payment – see changes in accounting policies. Post employment benefits: defined benefit plans – Within the Group, various post-employment benefit plans exist, which differ in their purpose and financing according to local needs. The provision for post-employment benefits relates to defined benefit pension plans and long-service leave benefits. The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount for future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine the present value, and the fair value for any plan assets is deducted. The calculation is performed by a qualified actuary using the projected unit credit method. Current service costs are charged to the income statement in the periods in which the services are rendered by the employees. Actuarial gains and losses comprise: - Experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred); and - The effects of changes in actuarial assumptions. To the extent that the net unrecognized actuarial gains and losses exceed at the end of the previous reporting period the greater of 10% of the present value of the defined benefit obligation or 10% of the fair value of plan assets, they are amortized over the average remaining working lives of the participating employees.

36 | Annual Report 2005 | Consolidated financial statements

Past service cost attributable to plan amendments is recognized as an expense on a straight-line basis over the average period until the benefits become vested. To the extent the benefits immediately vest, the costs associated with the amendment are recognized immediately. A net pension asset is recorded only to the extent that it does not exceed the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan, or any unrecognized actuarial losses and past service costs. Long-service leave benefits: The method of accounting for liabilities concerning long-service leave benefits is similar to the one used for defined benefit pension plans. Equity instruments Treasury shares – When own shares are purchased, the amount of the consideration paid, including directly attributable costs and taxes, is recognized as a change in equity. Repurchased shares are classified as treasury shares and presented as a deduction from total equity. The consideration received when treasury shares are sold is recognized as a change in equity. Financial instruments – The Group uses derivative financial instruments to economically hedge certain exposures to foreign exchange rate risks. Hedge accounting is not applied. Derivative financial instruments are recognized initially at fair value. Subsequent to initial recognition, derivative financial instruments are also stated at fair value. Any resultant gain or loss is recognized directly in the income statement. Sales Goods sold and services rendered – Sales are recorded net of sales taxes and discounts, at the time the risks and benefits of ownership are substantially transferred to customers. The recognition of income from products with material application and installation work requires a written acceptance by the customer. Revenue from service contracts is recognized in the income statement at the proportion of time passed at the balance date bear to the full contract period. Construction contracts – As soon the outcome of a construction contract can be estimated reliably, contract revenue and expenses are recognized in the income statement in proportion to the stage of completion of the contract (see ‘construction contracts’). Government research subsidies – The Group receives government grants for research activities, which are unconditional. They are recognized as income when received. Income tax – Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognized in the income statement except to the extent that it relates to items recognized in equity, in which case it is recognized in equity. Deferred taxes are provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. Deferred tax assets resulting from temporary differences and tax loss carry-forwards are recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized. In addition, deferred taxes are provided on expected dividend distributions from subsidiary companies (non recoverable withholding taxes).

Consolidated financial statements | Annual Report 2005 | 37

Notes to the consolidated financial statements 1. Changes in Group companies (acquisitions) Tecan acquired 100% of REMP Group as of July 1, 2005 consisting of the following companies: Company

Domicile

Currency

REMP AG • REMP Deutschland GmbH • REMP (USA), Inc. • REMP Nippon AG (incl. branch office Tokyo)

Oberdiessbach (CH) Waldems (D) Holliston, MA (US) Oberdiessbach (CH)

CHF EUR USD CHF

Share capital LC 1,000

Activities

4,000 25 0 100

S/R/P/D D D D

S = services, holding functions R = research and development P = production D = distribution

The REMP Group produces and sells large-scale automated storage and retrieval systems for the pharmaceutical and biotech industries. As of July 1, 2005 REMP had 142 employees worldwide. Its headquarter is located near Berne, Switzerland. The acquisition has been accounted for using the purchase method. The following amounts of assets and liabilities acquired have been included in the consolidated financial statements: Amounts of assets and liabilities included in the consolidated financial statements at the acquisition date 1.7.2005

Purchase price allocation according to IFRS 3

Amounts of assets and liabilities acquired in accordance with IFRS, immediately before the combination 30.6.2005

8,724 7,573 1,936 5,867 113 647 9,269 33,510

1,150 30,990

8,724 7,573 1,936 4,717 113 647 9,269 2,520

67,639

32,140

35,499

1,989 666 4,562 111 3,204 521 23 3,099 6,852

1,730 7,603

1,989 666 4,562 111 3,204 521 23 1,369 (751)

Liabilities

21,027

9,333

11,694

Identifiable assets and liabilities

46,612

22,807

23,805

Goodwill

52,383

In CHF 1,000

Cash and cash equivalents Trade accounts receivable Other accounts receivable Inventories Income tax receivable Prepaid expenses Property, plant and equipment Intangible assets Assets Trade accounts payable Other accounts payable Deferred income Income tax payable Accrued expenses Current provisions Bank loans Non-current provisions Deferred tax liabilities

Cost of the business combination

98,995

Cash acquired Treasury shares issued

(8,724) (29,778)

Net cash outflow

60,493

38 | Annual Report 2005 | Consolidated financial statements

The cost of the business combination is calculated as follows: In CHF 1,000

1.7.2005 67,653

Purchase price paid in cash Purchase price paid in treasury shares (726,300 shares* share price of CHF 41.- / share as at July 1, 2005 – date of exchange) Transaction costs

29,778 1,564

Total cost of the business combination

98,995

The remaining goodwill includes expected synergies from the acquisition, the work force and potentially other intangible assets that could not be valued separately. In the six months to December 31, 2005 the acquired business contributed net profit of CHF 0.7 million to the consolidated net profit for the year. If the acquisition had occurred on January 1, 2005, Group sales would have been CHF 364.3 million and net profit would have been CHF 13.4 million. 2. Foreign exchange rates The following foreign exchange rates were used for the preparation of the consolidated financial statements: In CHF EUR GBP SEK USD JPY SGD

1 1 100 1 100 1

Balance sheet 2005 2004

Income statement 2005 2004

1.56 2.27 16.54 1.31 1.11 0.79

1.55 2.26 16.67 1.25 1.13 0.75

1.54 2.28 16.93 1.24 1.15 0.74

2005

2004

10,329 23,007 2,712 4,249 1,102 1,246

2,625 25,117 2,518 7,431 1,131 1,343

42,645

40,165

8,051

5,782

1.54 2.18 17.10 1.13 1.10 0.69

3. Cash and cash equivalents In CHF 1,000 Analysis by currency: Denominated in CHF Denominated in EUR Denominated in GBP Denominated in USD Denominated in JPY Denominated in other currencies Total Thereof time deposits

Consolidated financial statements | Annual Report 2005 | 39

4. Trade accounts receivable In CHF 1,000

2005

2004

93,867 (1,224)

60,111 (1,454)

Construction contracts in progress Aggregate amount of cost incurred and recognized profits (less recognized losses) Amounts of advances received Subtotal construction contracts in progress

12,140 (11,590) 550

-

Total

93,193

58,657

Changes in Group companies Increase / (decrease) Translation differences Total change compared with previous year

7,573 22,916 4,047 34,536

(4,002) (2,565) (6,567)

Amount of contract revenue recognized as sales in the income statement relating to construction contracts

14,437

-

2005

2004

Raw material and work in progress Semi-finished and finished goods Allowance for slow-moving inventories

24,960 40,550 (9,629)

17,785 27,045 (7,057)

Total

55,881

37,773

5,867 7,595 4,646 18,108

7,081 (2,844) 4,237

2,758

1,865

2005

2004

863 301

720 349

1,164

1,069

34 61 95

(77) 66 (51) (62)

Receivables Allowance for doubtful accounts

5. Inventories In CHF 1,000

Changes in Group companies Increase Translation differences Total change compared with previous year Amount of write-offs due to obsolete inventories charged to the income statement At the end of 2005 the amount of inventories stated at fair value less costs to sell was CHF 17.5 million.

6. Financial assets In CHF 1,000 Deposits Assets reserved for pension schemes Total Impairment on loans to third parties Increase Translation differences Total change compared with previous year

40 | Annual Report 2005 | Consolidated financial statements

7. Property, plant and equipment

Land & buildings

Leasehold improvements

Furniture & fittings

Machines & motor vehicles

EDP equipment

Total 2005

7,963

6,927 51

9,465 169

17,172 441

18,557 645

52,121 9,269

-

642 (102) 375

528 (456) 399

1,843 (3,400) 8 545

1,947 (1,964) (8) 828

4,960 (5,922) 0 2,147

7,963

7,893

10,105

16,609

20,005

62,575

208

2,727 765

6,488 1,222

10,855 2,218

15,014 2,190

35,084 6,603

-

(35) 177

(436) 309

1,437 (2,779) 354

(1,900) 670

1,437 (5,150) 0 1,510

208

3,634

7,583

12,085

15,974

39,484

7,755

4,259

2,522

4,524

4,031

23,091

Leasehold improvements

Furniture & fittings

Machines & motor vehicles

EDP equipment

Total 2004

At cost Balance at January 1, 2004 Additions Disposals Transfer Translation differences

7,224 161 (234) 3 (227)

9,554 528 (312) (37) (268)

16,285 3,963 (2,708) 3 (371)

19,936 2,130 (2,968) 31 (572)

52,999 6,782 (6,222) 0 (1,438)

Balance at December 31, 2004

6,927

9,465

17,172

18,557

52,121

Accumulated depreciation and impairment losses Balance at January 1, 2004 Annual depreciation Disposals Transfer Translation differences

2,179 765 (117) 2 (102)

5,753 1,261 (291) (33) (202)

10,799 2,505 (2,197) (252)

15,806 2,562 (2,924) 31 (461)

34,537 7,093 (5,529) 0 (1,017)

Balance at December 31, 2004

2,727

6,488

10,855

15,014

35,084

Net book value

4,200

2,977

6,317

3,543

17,037

In CHF 1,000 At cost Balance at January 1, 2005 Acquisition through business combinations Additions Disposals Transfer Translation differences Balance at December 31, 2005 Accumulated depreciation and impairment losses Balance at January 1, 2005 Annual depreciation Impairment losses (see note 19): Closure of Tecan Boston Disposals Transfer Translation differences Balance at December 31, 2005 Net book value

In CHF 1,000

Property, plant and equipment are insured in the event of fire for the total value of CHF 73.6 million (2004: CHF 59.4 million). As of year-end, purchase commitments for property, plant and equipment amounted to CHF 0.1 million (2004: CHF 0 million).

Consolidated financial statements | Annual Report 2005 | 41

8. Intangible assets

In CHF 1,000

Goodwill

Software

Acquired client relationships

Acquired technology

Acquired order backlog

Brand name ‘REMP’

Total 2005

6,855

13,322

-

-

-

-

20,177

At cost Balance at January 1, 2005 Elimination of goodwill amortization Acquisitions through business combinations Additions Disposals Translation differences

(5,075)

-

-

-

-

-

(5,075)

52,383 23

218 1,048 -

16,634 -

9,586 -

482 -

6,590 -

85,893 1,048 0 23

Balance at December 31, 2005

54,186

14,588

16,634

9,586

482

6,590

102,066

5,075

5,129

-

-

-

-

10,204

(5,075) -

3,092 -

554 -

594 -

322 -

-

(5,075) 4,562 0 0 0

0

8,221

554

594

322

0

9,691

54,186

6,367

16,080

8,992

160

6,590

92,375

Goodwill

Software

Total 2004

23,604 (16,671) (78)

9,515 3,807 -

33,119 3,807 (16,671) (78)

6,855

13,322

20,177

20,058 1,729 (16,671) (41)

2,482 2,647 -

22,540 4,376 (16,671) (41)

Balance at December 31, 2004

5,075

5,129

10,204

Net book value

1,780

8,193

9,973

Accumulated amortization and impairment losses Balance at January 1, 2005 Elimination of goodwill amortization Annual amortization Impairment losses Disposals Translation differences Balance at December 31, 2005 Net book value

In CHF 1,000 At cost Balance at January 1, 2004 Additions Disposals Translation differences Balance at December 31, 2004 Accumulated amortization and impairment losses Balance at January 1, 2004 Annual amortization Disposals Translation differences

42 | Annual Report 2005 | Consolidated financial statements

The amortization charge is recognized in the following line items in the income statement: In CHF 1,000

2005

2004

Cost of sales Sales and marketing Research and development General and administration

322 554 594 3,092

885 844 2,647

Total charges

4,562

4,376

Impairment tests for cash-generating units containing goodwill The Group has performed an impairment test on goodwill end of June for Tecan production Switzerland and end of December for REMP Group. For the purpose of impairment testing, goodwill is allocated to a cash-generating unit or to a group of cash-generating units that are expected to benefit from the synergies of the corresponding business combination. For the impairment test, the recoverable amount of a cash-generating unit (higher of the cash-generating unit’s fair value less costs to sell and its value in use) is compared to the carrying amount of the corresponding cashgenerating unit. Future cash flows are discounted using a pre-tax rate that reflects current market assessments based on the Weighted Average Cost of Capital (WACC) and the Capital Asset Pricing Model (CAPM). Value in use is normally assumed to be higher than the fair value less costs to sell, therefore, fair value less costs to sell is only investigated when value in use is lower than the carrying amount of the cash generating unit. The cash flow projections are based on five-year period budgets. Cash flows beyond the five-year period are extrapolated using the long-term estimated growth rates stated below. The discount rates applied are pre-tax. Key assumptions used for value-in-use calculations of goodwill amounts: Cash generating unit

Carrying amount of goodwill CHF 1,000

REMP Group Tecan production Switzerland

Currency

Basis for recoverable amount

Discount rate

Projection period

Long-term growth rate

52,383 CHF/EUR/USD 1,803 CHF/EUR

Value in use Value in use

12.7% 12.7%

5 years 5 years

1.0% 0.0%

Based on the impairment tests, there was no need for the recognition of any impairment in financial year 2005. Sensitivity analysis of goodwill REMP Group Amount of excess (+)/necessary impairment (-) in CHF million depending on

Growth rate

0.0% 0.5% 1.0% 1.5% 2.0%

11.7%

12.2%

9.4 12.8 16.5 20.5 25.0

4.3 7.4 10.6 14.2 18.2

Discount rate 12.7% (0.4) 2.4 5.3 8.5 12.1

13.2%

13.7%

(4.7) (2.2) 0.4 3.3 6.5

(8.7) (6.5) (4.0) (1.4) 1.4

Impairment test for brand name ‘REMP’ The brand name ‘REMP’ was initially assessed and recognized as an intangible asset with an indefinite useful life. Therefore the asset is not subject to periodic amortizations, but is tested for impairment at least annually. For this purpose the recoverable amount of the asset was assessed end of December based on the ‘relief from royalty method’ by applying a royalty rate of 1.0% on the sales of the cash generating unit ‘REMP Group’ and using a pre-tax discount rate of 13.0%, a projection period of five years and a long-term growth rate of 1.0%. There was no need for the recognition of any impairment in financial year 2005. Circumstances still support an indefinite useful life assessment.

Consolidated financial statements | Annual Report 2005 | 43

9. Interest-bearing loans and borrowings

2005

within 1 year

Bank overdrafts under bank pooling arrangements Current maturities of non-current bank loans Other current bank liabilities Current bank liabilities

2,706 8,680 3,358 14,744

2,706 8,680 3,358 14,744

Non-current bank loans

60,988 75,732

In CHF 1,000

Total

Due within 2-3 years

over 3 years

2004

-

-

4,219 4,258 30 8,507

-

16,988

44,000

986

14,780

16,988

44,000

9,493

Changes in Group companies Increase in bank liabilities due to the acquisition of REMP Group Decrease in other bank liabilities Translation differences Total change compared with previous year

23

-

68,000 (1,989) 205 66,239

(31,703) (370) (32,073)

Analysis by currency: Denominated in CHF Denominated in EUR Denominated in USD Denominated in JPY

70,570 1,648 184 3,330

2,898 1,952 1,343 3,300

75,732

9,493

2,706 68,000

4,219 -

3,358 1,648 20

3,330 1,944 -

75,732

9,493

Total Analysis by interest rates: Variable interest rates depending on LIBOR: - bank overdrafts under bank pooling arrangements - bank liabilities due to the acquisition of REMP Group Fixed interest rates on other current and non-current bank liabilities are as follows: 0% - 2% 2% - 4% 4% - 6% 6% - 8% Total

In 2005 the average interest rate paid on the bank liabilities due to the acquisition of REMP Group was 2.1%. On bank loans there are covenants relating to equity ratio and debt-EBITDA-ratio, which have been fully satisfied throughout the year. Unused lines of credit amounting to CHF 34.7 million are available to the Group at December 31, 2005 (2004: CHF 44.0 million).

44 | Annual Report 2005 | Consolidated financial statements

10. Liability to repurchase own shares At the end of 2004 a put option on own shares, which gave a third party the right to deliver 100,000 Tecan shares until April 11, 2005 at a strike price of CHF 100.0 payable by the Group in cash, was outstanding. The option was exercised on its expiry date.

11. Deferred revenue In CHF 1,000

2005

2004

14,954 11,577

10,840 8,287

Construction contracts in progress Aggregate amount of cost incurred and recognized profits (less recognized losses) Amount of advances received Subtotal construction contracts in progress

(19,377) 23,726 4,349

-

Total deferred revenue

30,880

19,127

4,562 6,101 1,090 11,753

9,833 (518) 9,315

Other

Total 2005

Advance payments related to product sales recognized upon delivery or customer’s acceptance Deferred income related to service contracts

Changes in Group companies Increase Translation differences Total change compared with previous year

12. Provisions

In CHF 1,000

Restructuring

Warranties & returns

Cash-settled Post- share-based employment payment benefit plans transactions Legal cases (see note 13) (see note 13)

Balance at January 1, 2005 Changes in Group companies Provisions made Provisions used Provisions reversed Translation differences

2,116

5,489

530

3,308

1,085

1,504

14,032

3,554 (2,641) (530) 57

521 6,384 (3,730) (591) 344

(16) (87) 6

2,748 548 (152) (131) 18

1,603 -

351 1,592 (280) (1,125) 10

3,620 13,681 (6,819) (2,464) 435

Balance at December 31, 2005

2,556

8,417

433

6,339

2,688

2,052

22,485

Thereof current Thereof non-current

1,024 1,532

8,417 -

433

6,339

2,688

1,211 841

10,652 11,833

Consolidated financial statements | Annual Report 2005 | 45

Cash-settled Post- share-based employment payment benefit plans transactions Legal cases (see note 13) (see note 13)

Restructuring

Warranties & returns

Balance at January 1, 2004 Provisions made Provisions used Provisions reversed Translation differences

3,841 71 (1,328) (420) (48)

4,008 6,896 (4,441) (764) (210)

520 99 (52) (30) (7)

1,589 2,044 (278) (15) (32)

Balance at December 31, 2004

2,116

5,489

530

Thereof current Thereof non-current

365 1,751

5,489 -

530

In CHF 1,000

Other

Total 2004

2,135 889 (1,939) -

2,472 760 (508) (1,221) 1

14,565 10,759 (6,607) (4,389) (296)

3,308

1,085

1,504

14,032

3,308

1,085

1,504 -

7,358 6,674

The provisions for restructuring relate to the closing of the research and development sites in Munich (2005: CHF 1.9 million and 2004: CHF 2.1 million) and Boston (2005: CHF 0.7 million and 2004: CHF 0 million; see also note 19). The provision for Tecan Munich includes an amount of CHF 1.6 million (2004: CHF 1.8 million), which covers the non-cancelable lease commitments concerning the factory building. The contract will expire in May 2011. The provision for legal cases (2005: CHF 0.4 million and 2004: CHF 0.5 million) relates to several minor legal cases with former customers and employees in different subsidiaries, for which the timing of settlement was uncertain at year-end. At the end of 2005 the position ‘Other’ contains a provision to cover purchase commitments on parts and material for discontinued products in the amount of CHF 1.0 million (2004: CHF 1.1 million).

13. Employee benefits Number of employees An average of 1,026 FTEs* (2004: 834 FTEs) have been working for the Group during 2005. At year-end, the Group employed 1,047 FTEs (2004: 865 FTEs). *(FTE = Full Time Equivalent)

Personnel expenses Personnel expenses include the following: 2005 In CHF 1,000 Salaries and wages Social security Retirement benefits Share-based payments (equity- and cash-settled transactions) Other personnel expenses Total personnel expenses

2004 Restated

95,736 12,487 4,626 1,080 4,460

81,916 10,904 4,918 1,609 3,527

118,389

102,874

46 | Annual Report 2005 | Consolidated financial statements

Share-based payment The Group introduced the first employee stock option plan for Tecan shares in December 1999. In addition to their salaries, all employees of the Group outside of the USA receive options. Employees in the USA receive stock appreciation rights (SARs) with the same treatment and the same conditions as the employee stock options. The options / SARs issued grant employees the right to purchase one Tecan share per option. The terms and conditions of the grants are as follows, whereby all options are settled by physical delivery of shares and all SAR’s by cash payments:

Arrangement

Employees entitled/ grant date

Number of instruments/ exercise price

Vesting conditions

Contractual life Expiry date

Plan 1999 Equity-settled

Options granted to all employees outside of USA at December 15, 1999

233,300 options CHF 50.00

Two/four years of service for 50%/ 100% of options

5 years

December 15, 2004

Plan 1999 Cash-settled

SARs granted to employees in the USA at December 15, 1999

108,000 SARs CHF 50.00

Two/four years of service for 50%/ 100% of SARs

5 years

December 15, 2004

Plan 2000

Options granted to all employees at April 10, 2000

212,840 options CHF 100.00

One/two/three/four years of service for 25%/50%/ 75%/100% of options

5 years

April 10, 2005

Plan 2001

Options granted to all employees at November 30, 2000

139,720 options CHF 162.50

One/two/three/four years of service for 25%/50%/ 75%/100% of options

5 years

November 30, 2005

Plan 2002 Equity-settled

Options granted to all employees outside of USA at November 30, 2001

121,344 options CHF 99.00

One/two/three/four years of service for 25%/50%/ 75%/100% of options

11 years

November 30, 2012

Plan 2002 Cash-settled

SARs granted to employees in the USA at November 30, 2001

53,512 SARs CHF 99.00

One/two/three/four years of service for 25%/50%/ 75%/100% of SARs

11 years

November 30, 2012

Plan 2003 Equity-settled

Options granted to all employees outside of USA at November 30, 2002

350,188 options CHF 48.40

One/two/three/four years of service for 25%/50%/ 75%/100% of options

11 years

November 30, 2013

Plan 2003 Cash-settled

SARs granted to employees in the USA at November 30, 2002

159,275 SARs CHF 48.40

One/two/three/four years of service for 25%/50%/ 75%/100% of SARs

11 years

November 30, 2013

All outstanding options and SARs granted are covered by the conditional share capital. No plans have been introduced during 2005 and 2004.

Consolidated financial statements | Annual Report 2005 | 47

The number and weighted average exercise prices of share options and SARs are as follows: Weighted average exercise price (CHF) 2005

Number 2005

Weighted average exercise price (CHF) 2004

Number 2004

Options

SARs

Options

SARs

Options

SARs

Options

SARs

Balance at January 1 Granted Exercised Forfeited Expired

88.83 0 48.40 51.92 121.33

61.00 0 48.40 53.43 68.88

540,973 0 (1,869) (18,835) (247,913)

144,339 0 (2,348) (10,681) (11,122)

81.96 0 49.28 60.59 65.14

57.96 0 49.24 58.82 52.00

704,726 0 (52,838) (26,750) (84,165)

212,508 0 (27,823) (6,645) (33,701)

Balance at December 31

62.07

61.38

272,356

120,188

88.83

61.00

540,973

144,339

The weighted average share price at the date of exercise was CHF 52.2 in 2005 and CHF 56.6 in 2004. Outstanding share options and SARs at the end of the period in detail:

Exercise price

Plan 2000 Plan 2001 Plan 2002 Plan 2003 Balance at December 31 Exercisable at the end of the period

100.00 162.50 99.00 48.40

Remaining contractual life (years) 2005

Remaining contractual life (years) 2004

Number 2005

Number 2004

Options

SARs

Options

SARs

Options

SARs

Options

SARs

6.9 7.9

6.9 7.9

0 0 73,597 198,759

0 0 30,825 89,363

0.3 0.9 7.9 8.9

7.9 8.9

129,761 96,825 81,541 232,846

0 0 35,948 108,391

7.6

7.6

272,356

120,188

5.3

8.7

540,973

144,339

225,566

96,665

406,335

76,027

The total expenses relating to share-based payment transactions, recognized in the consolidated income statement, are calculated as follows: Equity-settled share-based payment Due to the transitional provisions of IFRS 2 only the share options of plan 2003/equity-settled, which had not vested at the effective date of the standard (January 1, 2005), have been recognized in the income statement (see changes in accounting policies). The fair value of services received in return for share options granted is measured by reference to the share options vested times their fair value at grant date (measurement date). The estimate of the fair value is based on a binominal model. Changes of the fair value of the option after the grant date do not change the fair value of the services received.

48 | Annual Report 2005 | Consolidated financial statements

Fair value of share options and key assumptions: Measurement date (= grant date) Plan 2003

Equity-settled

CHF 48.40 CHF 48.40 38.00% 11.0 years 0.84% 2.83% CHF 23.37

Share price Exercise price Expected volatility (historic) Option life Expected dividends Risk-free interest rate Fair value

Cash-settled share-based payment Due to the transitional provisions of IFRS 2 only the SARs of plan 2002 / cash-settled fund plan 2003 / cash-settled, which were not settled at the effective date of the standard (January 1, 2005), have been recognized in the income statement (see changes in accounting policies). The fair value of services received in return for the SARs granted are measured by reference to the SARs vested times their fair value at grant date (measurement date). The estimate of the fair value is based on a binominal model. Changes of the fair value of the SARs after the grant date have an impact on the provision for cash-settled share-based payment and are posted to the financial result. Fair value of SARs and key assumptions:

Cash-settled Share price Exercise price Expected volatility (historic) Option life Expected dividends Risk-free interest rate Fair value

2005 Plan 2003 Plan 2002

2004 Plan 2003 Plan 2002

CHF 57.50

CHF 57.50

CHF 35.00

CHF 35.00

38.00% 7.9 years 0.70% 2.34% CHF 27.20

38.00% 6.9 years 0.70% 2.29% CHF 14.07

38.00% 8.9 years 1.30% 2.50% CHF 11.70

38.00% 7.9 years 1.30% 2.40% CHF 5.12

Measurement date (= grant date) Plan 2003 Plan 2002 CHF 48.40 CHF 48.40 38.00% 11.0 years 0.84% 2.83% CHF 23.37

CHF 99.00 CHF 99.00 38.00% 11.0 years 1.00% 3.55% CHF 48.52

Total expenses/income recognized 2005 In CHF 1,000 Share options granted in 2002 (Plan 2003/equity-settled) Expenses arising from SARs granted in 2001 (Plan 2002/cash-settled) Expenses arising from SARs granted in 2002 (Plan 2003/cash-settled)

2004 Restated

660 92 328

720 234 655

Total personnel expenses recognized with impact on the operating profit

1,080

1,609

Effect of changes in the fair value of SARs with impact on the financial result

1,184

(1,939)

Total expenses/income recognized

2,264

(330)

The liability from cash-settled share-based payment transactions amounts to CHF 2.7 million (2004: CHF 1.1 million, see note 12) as at December 31.

Consolidated financial statements | Annual Report 2005 | 49

Post-employment benefits: Defined benefit plans The Swiss pension plan contracted with an insurance company was terminated as at December 31, 2003. As at January 1, 2004 a new contract with another insurance company had been set up. The new pension plan qualifies as defined benefit plan under IAS 19. Actuarial calculations for the Swiss pension plan identified an excess of projected benefit obligations over plan assets amounting to CHF 1.6 million as at January 1, 2004. This amount of past service costs was charged to personnel expenses on January 1, 2004. The provisions for post-employment benefits are related to the following plans: In CHF 1,000

2005

2004

4 5

1 5

554 0

420 0

46,944 (39,206) 7,738 2,287 (3,691) 5

26,932 (25,337) 1,595 1,904 (216) 25

Liability in balance sheet (see note 12)

6,339

3,308

The amounts recognized in the income statement are as follows (included in personnel expenses): Current service cost Employees’ contributions Interest expense on obligations Expected return on plan assets Amortization of actuarial losses Past service cost

3,315 (1,473) 1,210 (1,107) 22 (25)

2,179 (1,105) 958 (747) 2 1,570

Total

1,942

2,857

Movements in the liability recognized in the balance sheet are as follows: Liability at January 1 Changes in Group companies Net expense recognized in the income statement Employers’ contribution Translation differences

3,308 2,748 1,942 (1,682) 23

1,589 2,857 (1,107) (31)

Liability at December 31

6,339

3,308

2.8% 3.5% 1.6% 0.5% 11.7

3.2% 3.5% 1.8% 0.7% 12.2

Number of plans: Funded plans Unfunded plans Number of persons covered: Active participants Retirees The amounts recognized in the balance sheet are as follows: Present value of funded obligations Fair value of plan assets Subtotal Present value of unfunded obligations Unrecognized actuarial losses Unrecognized past service cost

The actual return on plan assets amounted to CHF 2.5 million (2004: CHF 0.9 million).

Principal actuarial assumptions at the balance sheet date (expressed as weighted averages): Discount rate at December 31 Expected return on plan assets at December 31 Future salary increases Future pension increases Expected average remaining working lives of the participating employees (years)

50 | Annual Report 2005 | Consolidated financial statements

14. Shareholders’ equity The changes in shareholders’ equity are disclosed in the ‘consolidated statement of changes in shareholders’ equity’. Dividends paid: Number of shares with right to dividend Paid dividend per share, CHF

2006 (proposed)

2005

2004

0.45

10,699,576 0.45

11,095,055 0.45

Movements in shares outstanding : Number (each share has a nominal value of CHF 1.-) Balance at January 1, 2004 Issue of new shares from conditional share capital (employee profit sharing program, see below) Cancellation of treasury shares Purchase of treasury shares Sale of treasury shares Balance at December 31, 2004 Issue of new shares from conditional share capital (employee profit sharing program, see below) Acquisition of REMP Group (see note 1) Cancellation of treasury shares Purchase of treasury shares Sale of treasury shares Balance at December 31, 2005

Shares issued

Treasury Shares shares outstanding

13,106,945 (2,047,030)

80,661 (847,000) -

11,059,915

847,000 (563,000) 187,000

80,661 0 (563,000) 187,000

12,340,606 (1,576,030)

10,764,576

4,217 (453,000) -

726,300 453,000 (100,000) 35,000

4,217 726,300 0 (100,000) 35,000

11,891,823

(461,730)

11,430,093

2005

2004

1,112,394 (4,217)

1,193,055 (80,661)

1,108,177

1,112,394

392,544

685,312

Conditional share capital reserved for the employee profit sharing program: Number (each share has a nominal value of CHF 1.-) Balance at January 1 Employee share options exercised (see note 13) Balance at December 31 Employee share options outstanding (see note 13)

15. Financial instruments Credit risks The individual companies and the Group as a whole have no significant concentration of credit risks, as financial instrument contracts are concluded exclusively with first-rate financial institutions. The credit risk associated with trade accounts receivable is limited, as the Group has numerous clients located in various geographical regions. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet. Interest rate risks Bank borrowings primarily bear variable interest rates. There are no significant differences between fair values and carrying amounts of interest-bearing liabilities.

Consolidated financial statements | Annual Report 2005 | 51

Foreign currency risks The Group incurs foreign currency risks on sales, purchases, borrowings and investments denominated in a currency other than the functional currency of the respective subsidiaries. On a consolidated basis, the Group is also exposed to currency fluctuations between the Swiss Franc and the functional currencies of its subsidiaries. The two major currencies giving rise to currency risks are Euros and US Dollars. The Group centralizes its foreign currency exposure in a few locations only. The hedging policy of the Group is to cover the foreign currency exposure to a certain percentage of the operating activities. The Group uses forward exchange contracts, currency options and swaps to hedge its foreign currency risk on specific future foreign currency cash flows. These contracts have maturities of up to 12 months. The Group does not hedge its net investment in foreign entities and the related foreign currency translation of local earnings. Similarly, the Group does not hedge interest exposures. The derivative financial instruments used as economic hedges of foreign currencies are summarized in the table below. They are recognized at fair value as prepaid and accrued expenses respectively. Fair value Positive Negative

Total

In CHF 1,000

Contract value Due within 3 months 3-12 months

Foreign currency forwards Denominated in USD: Purchase Sale

260 -

(2,358)

(2,620) 43,230

(2,620) 10,480

32,750

Total 2005 Total 2004

260 289

(2,358) 0

40,610 37,290

7,860 9,040

32,750 28,250

In CHF 1,000

2005

2004

Due date: Due in 1st year Due in 2nd year Due in 3rd year Due in 4th year Due in 5th year Due in or beyond 6th year

7,214 6,070 5,434 4,949 4,906 3,647

6,611 5,986 5,376 4,784 4,641 5,701

32,220

33,099

16. Rental and lease commitments The commitments arising from operating leases are largely rental payments for buildings. Commitments under non-cancelable operating leases:

Total The Group did not enter into any finance lease contracts.

17. Contingent liabilities and encumbrance of assets As of December 31, 2005 and 2004, the Group had no significant contingent liabilities to third parties, and none of the Group’s assets were pledged, assigned or subject to retention of title, except for the following position: Pledged assets: In CHF 1,000 Cash and cash equivalent (bank pooling arrangement) Shares of REMP AG, pledged to secure bank loans (amount of consolidated net assets)

2005

2004

11,830 46,885

5,954 -

52 | Annual Report 2005 | Consolidated financial statements

18. Segment information The primary segmentation is indicated by geographical region. Intersegment transactions are conducted based on prevailing market prices. Segment information (by location of assets) From July 1, 2005 the segment Europe includes the newly acquired business of REMP Group (see note 1). America In CHF 1,000

Europe

Asia

2005

2004

2005

2004

2005

131,826 37,191 169,017

118,684 9,379 128,063

202,384 110,714 313,098

152,925 64,404 217,329

10,690 10,690

Operating profit

(2,783)

6,538

39,064

6,381

(1,846)

472

Segment assets Unallocated assets Total assets

82,546

55,917

269,208

115,998

5,805

Segment liabilities Unallocated liabilities Total liabilities

43,782

24,152

98,462

58,395

(1,148) -

(1,389) -

(9,817) (1,437)

1,271

1,202

-

-

Sales to third parties Intersegment sales Total sales

Depreciation and amortization Impairment losses Purchase of property, plant and equipment Purchase of intangible assets

2004

Corporate/ Consolidation 2005 2004

Group 2005

2004

(73,783) (73,783)

344,900 344,900

285,975 285,975

(9,609)

3,358

24,826

16,749

7,439

(78,884)

(44,358)

278,675 59,333 338,008

134,996 56,313 191,309

2,282

3,242

(40,616)

(15,662)

103,910 90,765 194,675

70,127 26,925 97,052

(9,989) -

(200) -

(91) -

-

-

(11,165) (1,437)

(11,469) -

3,424

4,814

265

766

-

-

4,960

6,782

1,048

3,807

-

-

-

-

1,048

3,807

14,366 - (147,905) 14,366 (147,905)

No significant non-cash expenses other than depreciation of property, plant and equipment and amortization of intangible assets were incurred. Sales by regions (by location of customers)

In CHF 1,000

North America 2005 2004

Sales to third parties 158,840 Change in local currency versus the prior year in % 30.4

Europe 2005 2004

Asia 2005 2004

Others 2005 2004

Total 2005 2004

120,937

153,041

135,399

26,978

27,552

6,041

2,087

344,900

285,975

(3.6)

12.8

(5.2)

(1.5)

(9.9)

188.6

(44.4)

20.2

(5.5)

Sales by markets

In CHF 1,000 Sales to third parties Change in local currency versus the prior year in %

Genomics/Proteomics Drug Discovery 2005 2004 2005 2004

Diagnostics 2005 2004

Total 2005 2004

101,780

81,522

107,447

91,497

135,673

112,956

344,900

285,975

24.3

(0.3)

17.2

(8.0)

19.7

(6.9)

20.2

(5.5)

Assets and capital expenditure in property, plant and equipment cannot be allocated meaningfully to the individual markets. A mathematical allocation would not result in reliable or meaningful information.

Consolidated financial statements | Annual Report 2005 | 53

19. Unusual items included in income statement In CHF 1,000

2005

Costs related to closure of Tecan Boston are presented in the income statement as follows: Cost of sales Sales and marketing Research and development General and administration

1,437 130 2,929 445

Total charges

4,941

Thereof impairment losses on property, plant and equipment (included in cost of sales) Thereof provisions for restructuring

1,437 3,504

Due to difficulties in developing the LabCDTM technology and delays in its commercialization, the Group decided in July to discontinue the related development programs and to close its research and development facility in Boston (US). All production equipment has been fully written-off.

In CHF 1,000

Change in Settlement pension scheme payment (see note 13) former CEO

Total 2004

607 204 440 319

1,356

607 204 440 1,675

1,570

1,356

2,926

Position of income statement: Cost of sales Sales and marketing Research and development General and administration Total charges

20. Operating expenses by nature 2005 In CHF 1,000 Material costs Personnel expenses Depreciation of property, plant and equipment Amortization of intangible assets Impairment losses Other operating income and expenses (net) Total operating expenses

2004 Restated

120,658 118,389 6,603 4,562 1,437 68,425

92,275 102,874 7,093 4,376 62,608

320,074

269,226

54 | Annual Report 2005 | Consolidated financial statements

21. Research and development 2005 In CHF 1,000

2004 Restated

14,286 25,882 594

12,072 24,185 844 -

Total research and development (gross)

40,762

37,101

Government research subsidies

(1,059)

(154)

Total research and development (net)

39,703

36,947

External project costs Internal costs Amortization of Goodwill arising from R&D driven acquisitions Amortization of acquired technology

Costs for research and the development of new products (gross) amounted to 11.8% of sales (2004: 13.0%).

22. Other operating income In CHF 1,000

2005

2004

Government research subsidies Other operating income (miscellaneous) Other operating expense (miscellaneous)

1,059 279 (18)

154 361 -

Total other operating income

1,320

515

23. Financial result 2005 In CHF 1,000

2004 Restated

Interest income Other Financial income

1,513 1,513

544 1,939 2,483

Interest expenses Impairment Other Finance cost

(2,026) (1,215) (3,241)

(412) (77) (135) (624)

Net foreign exchange losses

(3,036)

(1,089)

(4,764)

770

Total financial result

The positions ‘Other’ include fair value adjustments on cash-settled share-based payment plans. The impairment charge in the amount of CHF 0.1 million, reported in the previous year, relates to the complete write-off of a loan to third parties.

Consolidated financial statements | Annual Report 2005 | 55

24. Income taxes 2005 In CHF 1,000

2004 Restated

Current income taxes Deferred taxes

6,621 (513)

4,889 (94)

Total income taxes

6,108

4,795

20,062

17,519

6,462

5,116

2,078 (1,880) (466) 319 (405)

1,037 (1,365) 419 (853) 441

6,108

4,795

The income tax expense can be analyzed as follows: Profit before taxes Tax expense based on the Group’s average rate of 32.2% (2004: 29.2%) Non-deductible expenses and additional taxable income Tax-free income and tax reductions Tax loss carry-forwards not capitalized Under (over) provided in prior years Effect of tax rate change on opening deferred taxes Tax expense reported Deferred tax assets and liabilities are attributable to the following: Change 2005

2005

In CHF 1,000

2004 Restated

Receivables Inventories Property, plant and equipment Intangible assets Liabilities and accrued expenses Provisions Other

(1,403) 3,754 552 (7,535) (643) 1,546 1,253

200 7,958 (134) (7,518) 1,301 1,919 (1,258)

1,603 4,204 (686) 17 1,944 373 (2,511)

Total net deferred tax assets arising from temporary differences

(2,476)

2,468

4,944

Deferred taxes provided on: - expected dividends from subsidiaries - potential tax benefits from tax loss carry-forwards

(337) (1,612)

(413) 3,614

(76) 5,226

(4,425)

5,669

10,094

(6,852) 513 1,431 483 (4,425)

94 (129) (315) (350)

Total net deferred tax assets Changes in Group companies Deferred taxes recognized in the income statement Deferred taxes recognized directly in equity Translation differences Total change compared with previous year

At year-end, temporary differences on inventory primarily relate to income on intra-group sales eliminated for consolidation purposes. Deferred taxes recognized directly in equity relate to transactions in treasury shares.

56 | Annual Report 2005 | Consolidated financial statements

Tax loss carry-forwards:

In CHF 1,000

Gross value of tax loss carry-forwards not capitalized 2005 2004

Potential tax benefits 2005 2004

Expiring in: 1st year 2nd year 3rd year 4th year 5th year 6th year or beyond Unlimited

105 3,509

639 197 1,121 3,269

Total tax loss carry-forward capitalized

3,614

5,226

Expiring in: 1st year 2nd year 3rd year 4th year 5th year 6th year or beyond Unlimited

11 36 1 65 2,212

2,700

3 9 0 16 738

1,427

Total tax loss carry-forward not capitalized

2,325

2,700

766

1,427

4,380

6,653

Total tax loss carry-forward Deferred taxes are included in the balance sheet as follows:

2005 In CHF 1,000

2004 Restated

Deferred tax assets Deferred tax liabilities

14,970 (9,301)

14,230 (4,136)

Total, net

5,669

10,094

25. Related parties The Group has a related party relationship with its subsidiaries and with key management personnel (members of the board of directors and the executive committee). The total compensation paid to the key management personnel was: In CHF 1,000

2005

2004

Short-term employee benefits Post-employment benefits Termination benefits Share-based payment

2,998 214 47

2,392 179 1,356 111

Total compensation

3,259

4,038

Different to the information provided in the Group’s corporate governance disclosures, the total compensation above includes social security and pension contributions, paid by the employer as well as the fair value of share-based payments.

Consolidated financial statements | Annual Report 2005 | 57

26. Earnings per share The earnings per share are determined based on the consolidated profit of the Group and the average number of shares outstanding, excluding treasury shares. 2005

2004 Restated

11,891,823

12,340,606

461,730

1,576,030

11,055,136

10,973,936

1.26

1.16

0

0

Average number of shares after dilution

11,055,136

10,973,936

Diluted earnings per share (CHF/share)

1.26

1.16

Number of shares issued Number of treasury shares Average number of shares outstanding (see note 14) Basic earnings per share (CHF/share) Average number of shares under option total

425,636

Average number of shares under option dilutive Average exercise price

n.a.

Number of shares which could be issued from the above proceeds if the Group had issued shares at the average trading price for the year of CHF 41.54

n.a.

Adjustment of the dilutive impact of the employee stock option plans

27. Subsequent events No events have occurred subsequent to the balance sheet date, which would require adjustments to or disclosures in these consolidated financial statements.

58 | Annual Report 2005 | Consolidated financial statements

Report of the group auditors to the general meeting of shareholders Tecan Group Ltd., Männedorf As group auditors, we have audited the consolidated financial statements of Tecan Group Ltd., Männedorf, presented on pages 27 to 57 for the year ended December 31, 2005. These consolidated financial statements are the responsibility of the board of directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence. Our audit was conducted in accordance with Swiss Auditing Standards and with the International Standards on Auditing (ISA), which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the consolidated financial statements. We have also assessed the accounting principles used, significant estimates made and the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements give a true and fair view of the financial position, the results of operations and the cash flows in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law. We recommend that the consolidated financial statements submitted to you be approved.

KPMG Fides Peat

Lukas Marty Swiss Certified Accountant Auditor in Charge

Zurich, March 1, 2006

Stefan Dürmüller Swiss Certified Accountant

Tecan Group Ltd. | Annual Report 2005 | 59

Balance sheet at December 31 In CHF

Notes

2005

2004

1,211,418 694,732 19,175,085 355,239 18,000,000 261,393

1,419,735 724,995 15,241,740 1,690,327 18,000,000 356,956

39,697,867

37,433,753

175,189,100 16,160,550 432,138 6,366,825

84,778,717 55,161,050 611,536 8,192,600

Assets Cash and cash equivalents Other accounts receivable from third parties Other accounts receivable from Group companies Current loans to Group companies Current loans to Group companies subordinated Prepaid expenses Current assets Financial assets Treasury shares Property, plant and equipment Intangible assets

2 3

Non-current assets

198,148,613 148,743,903

Assets

237,846,480 186,177,656

Liabilities and equity 8,937,012 1,459,472 579,373 409,254 5,996,754

2,851,083 3,195,389 1,045,886 6,500,000 761,520 3,617,912

17,381,865

17,971,790

Bank loans Non-current provisions

60,000,000 24,950

-

Non-current liabilities

60,024,950

-

Share capital Legal reserves Retained earnings

11,891,823 36,562,977 111,984,865

12,340,606 87,860,455 68,004,805

Current bank liabilities Other liabilities to third parties Other liabilities to Group companies Current provisions Current tax liabilities Accrued expenses Current liabilities

Shareholders’ equity Liabilities and equity

4

160,439,665 168,205,866 237,846,480 186,177,656

60 | Annual Report 2005 | Tecan Group Ltd.

Income statement In CHF Dividend income from Group companies Interest income from third parties Interest income from Group companies Financial income Management fees from Group companies Gain on disposal of non-current assets Other income Income Personnel expenses Depreciation of property, plant and equipment Amortization of intangible assets Other expenses Financial expense Expenses Profit before taxes Income taxes Net profit

2005

2004

9,276,000 817,354 3,032,483 7,424,280 23,583,210 -

8,448,000 104,987 3,322,283 2,188,899 23,011,366 437 2,701,528

44,133,327

39,777,500

(9,642,610) (9,518,044) (287,028) (344,874) (2,874,087) (675,778) (9,740,049) (10,687,734) (8,738,652) (12,087,366) (31,282,426) (33,313,796) 12,850,901

6,463,704

(391,297)

50,485

12,459,604

6,514,189

Tecan Group Ltd. | Annual Report 2005 | 61

Notes to the financial statements 1. General Reporting basis – The Tecan Group Ltd. financial statements are prepared in compliance with Swiss Code of obligations. They are a supplement to the consolidated financial statements (pages 27 through 57) prepared according to International Financial Reporting Standards (IFRS). While the consolidated financial statements reflect the economic situation of the Group as a whole, the information contained in the Tecan Group Ltd. financial statements (pages 59 through 64) relates to the ultimate parent company alone. The retained earnings reported in these financial statements provide the basis for the decision regarding the distribution of earnings to be made during the annual general meeting of shareholders.

2. Financial assets In CHF

2005

2004

151,047,678 22,621,422 1,520,000

50,550,876 32,687,841 1,540,000

175,189,100

84,778,717

Currency

Share capital

Activities

CHF CHF CHF CHF EUR USD CHF EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR GBP SEK USD USD USD USD JPY SGD

5,000,000 300,000 250,000 4,000,000 25,000 0 100,000 1,460,000 35,000 35,000 25,000 51,129 103,000 137,000 2,760,000 30,000 77,469 500,000 100,000 1,500,000 400,000 26,000 0 125,000,000 800,000

R/P S/D D S/R/P/D D D D R/P D D S D R D D D D D D S D R/P R D D

Investments in subsidiaries Non-current loans to Group companies Non-current loans to Group companies subordinated Total

Overview of investments in subsidiaries (direct and indirect) Company

Domicile

Tecan Schweiz AG Tecan Trading AG Tecan Sales Switzerland AG REMP AG - REMP Deutschland GmbH - REMP (USA), Inc. - REMP Nippon AG (incl. branch office Tokyo) Tecan Austria GmbH Tecan Sales Austria GmbH Tecan Sales International GmbH Tecan Landesholding GmbH - Tecan Deutschland GmbH - Tecan Software Competence Center GmbH Tecan Benelux B.V.B.A. Tecan France S.A.S. Tecan Iberica Instrumentacion S.L. Tecan Italia S.r.l. Tecan UK Ltd. Tecan Nordic AB Tecan US Group, Inc. - Tecan US, Inc. - Tecan Systems, Inc. - Tecan Boston, Inc. Tecan Japan Co., Ltd. Tecan Asia (Pte.) Ltd.

Männedorf (CH) Männedorf (CH) Männedorf (CH) Oberdiessbach (CH) Waldems (D) Holliston, MA (US) Oberdiessbach/Bern (CH) Grödig/Salzburg (A) Grödig/Salzburg (A) Grödig/Salzburg (A) Crailsheim (D) Crailsheim (D) Mainz-Kastel (D) Mechelen (B) Lyon (F) Barcelona (E) Milano (I) Reading (GB) Mölndal/Gothenburg (S) Raleigh-Durham, NC (US) Raleigh-Durham, NC (US) San Jose, CA (US) Medford/Boston, MA (US) Tokyo (Jap) Singapore (Sin)

S = services, holding functions R = research and development

P = production

D = distribution

All subsidiaries were 100% owned as of December 31, 2005 and 2004. Changes in investments in subsidiaries As of July 1, 2005 the company acquired a 100% of Remp AG (including its subsidiaries in Germany, US and Switzerland).

62 | Annual Report 2005 | Tecan Group Ltd.

3. Treasury shares Number (each share has a nominal value of CHF 1.-) Balance at January 1 Purchase of treasury shares Sale of treasury shares Cancellation of shares for the purpose of capital reduction Acquisition of REMP Group Balance at December 31 Thereof allocated to the share buy-back program for capital reduction Average price of shares purchased, CHF Average price of shares sold, CHF

2005

2004

1,576,030 100,000 (35,000) (453,000) (726,300)

2,047,030 563,000 (187,000) (847,000) -

461,730

1,576,030

-

453,000

100.00 35.70

40.43 51.43

On the annual general meeting 2005 the shareholders agreed to the proposed cancellation of 453,000 repurchased shares, which led to a capital reduction of CHF 15,855,000 (2004: cancellation of 847,000 repurchased shares, which led to a capital reduction of CHF 36,856,640).

4. Changes in shareholders’ equity

In CHF Shareholders’ equity at January 1, 2004 Net profit Dividends paid Share capital increase from employee participation plan Share capital decrease (see note 3) Change in reserve for treasury shares Shareholders’ equity at December 31, 2004 Net profit Dividends paid Share capital increase from employee participation plan Share capital decrease (see note 3) Change in reserve for treasury shares Shareholders’ equity at December 31, 2005

Share capital

Legal reserves Reserve for treasury General shares reserve (see note 3)

13,106,945

19,944,124 108,972,720

80,661 (847,000) -

-

-

- (36,856,640) - (4,199,749)

12,340,606

19,944,124

67,916,331

-

-

-

4,217 (453,000) 11,891,823

- (16,964,566) - (34,332,912) 19,944,124

Retained earnings

Total shareholders’ equity

55,436,267 197,460,056 6,514,189 (4,992,775)

6,514,189 (4,992,775)

6,000,375 6,081,036 847,000 (36,856,640) 4,199,749 0 68,004,805 168,205,866 12,459,604 (4,814,809)

12,459,604 (4,814,809)

439,787 444,004 1,562,566 (15,855,000) 34,332,912 0

16,618,853 111,984,865 160,439,665

The Company’s share capital is CHF 11,891,823, consisting of 11,891,823 registered shares with a nominal value of CHF 1 each (2004: 12,340,606 registered shares with a nominal value of CHF 1 each). Each share has one voting right at the annual general meeting. Shareholders are entered in the share register only up to 5% of the share capital, and nominees only up to 2%. In 1997 shareholders approved a conditional share capital of CHF 1,300,000, reserved for an employee profit sharing program. The conditional share capital consists of 1,300,000 registered shares with a nominal value of CHF 1 each. Since 1999, based on this conditional capital, employee stock option plans have been introduced. As of December 31, 2005, the conditional share capital amounted to CHF 1,108,177 (2004: CHF 1,112,394) and 392,544 options not yet exercised were outstanding in connection with the employee stock option plans (2004: 685,312 options).

Tecan Group Ltd. | Annual Report 2005 | 63

At the end of 2004 a put option on own shares, which gave a third party the right to deliver 100,000 Tecan shares until April 11, 2005 at a strike price of CHF 100.0 payable by the Company in cash, was outstanding. The fair value of the put option had been provided for. The option was exercised on its expiry date. The Company has knowledge of the following significant shareholders as of December 31, 2005:

BB Medtech AG, Schaffhausen (CH) Fidelity Management & Research Company, Boston (US) UBS Fund Management (Switzerland) AG, Basel (CH) Schweizerische Unfallversicherungsanstalt (SUVA), Lucerne (CH), Tecan Group Ltd The Capital Group Companies Inc., Los Angeles (US)

2005

2004

10.2% 5.8% 5.4% 7.7% < 5% < 5%

< 5% 5.6% < 5% 7.5% 12.8% 6.3%

5. Contingent liabilities The total amount of guarantees in favor of subsidiaries was CHF 49.2 million at December 31, 2005 (2004: CHF 56.7 million). In addition an unlimited guarantee in favour of the German subsidiary (Tecan Deutschland GmbH) was issued.

6. Encumbrance of assets As of December 31, 2005 and 2004, none of the Company’s assets were pledged, assigned, or subject to retention of title, except for the following position: Pledged assets: In CHF Cash and cash equivalent (bank pooling arrangement) Participation REMP AG

2005

2004

645,694 98,994,754

334,370 -

7. Unrecorded liabilities under lease commitments The total amount of unrecorded liabilities under lease commitments was CHF 0.1 million at December 31, 2005 (2004: CHF 0 million).

8. Fire insurance value of property, plant and equipment The insured value of property, plant and equipment in the event of fire was CHF 1.8 million (2004: CHF 1.9 million).

9. Liabilities to pension funds At December 31, 2005, as in the prior year, no liabilities to pension funds existed.

10. Dissolution of reserves in accordance with Art. 663b of the Swiss Code of Obligations No reserves have been dissolved in 2005. In prior years the Company fully depreciated costs related to IT software. In 2004 the Company completed a significant IT project and capitalized the related costs amounting to CHF 8.2 million of which CHF 4.7 million was initially expensed in prior years. In 2004 this was considered a dissolution of reserves in accordance with Art. 663b of the Swiss Code of Obligations. No further items existed which would require disclosure under the provisions of Art. 663b of the Swiss Code of Obligations.

64 | Annual Report 2005 | Tecan Group Ltd.

Appropriation of available earnings As proposed by the board of directors to the annual general meeting of shareholders on April 26, 2006: In CHF Carried forward from previous year Net profit Share capital increase from employee participation plan Share capital decrease Change in reserve for treasury shares Available earnings

2005

2004

Proposed

Approved

63,189,996

50,443,492

12,459,604 439,787 1,562,566 34,332,912

6,514,189 6,000,375 847,000 4,199,749

111,984,865

68,004,805

Dividends paid as approved by the annual general meeting of April 21, 2005 (45% on 10,699,576 shares with a nominal value of CHF 1.- each) 45% dividend on the Company’s share capital of CHF 11,891,823 at December 31, 2005* 45% dividend on employee stock options which may be exercised before the date of dividend payment, totaling 322,231* Balance to be carried forward

(4,814,809) (5,351,320) (145,004) 106,488,541

63,189,996

* Dividends on treasury shares and employee stock options which have not been exercised on the date of the dividend payment will be added to retained earnings.

Tecan Group Ltd | Annual Report 2005 | 65

Report of the statutory auditors to the general meeting of shareholders Tecan Group Ltd., Männedorf As statutory auditors, we have audited the accounting records and the financial statements of Tecan Group Ltd., Männedorf, presented on pages 59 to 64 for the year ended December 31, 2005. These financial statements are the responsibility of the board of directors. Our responsibility is to express an opinion on these financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence. Our audit was conducted in accordance with Swiss Auditing Standards, which require that an audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the financial statements. We have also assessed the accounting principles used, significant estimates made and the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the accounting records, the financial statements and the proposed appropriation of available earnings comply with Swiss law and the company’s articles of incorporation. We recommend that the financial statements submitted to you be approved.

KPMG Fides Peat

Lukas Marty Swiss Certified Accountant Auditor in Charge

Zurich, March 1, 2006

Stefan Dürmüller Swiss Certified Accountant

66 | Annual Report 2005 | Corporate governance

Information according to the Directive on Information Relating to Corporate Governance of the SWX Swiss Exchange. 1. Group structure and shareholders Group structure Tecan Group Ltd. (the “Company”), Seestrasse 103, CH-8708 Männedorf, Zurich, Switzerland, is the parent company of the Tecan group. The Company is listed on the SWX Swiss Exchange. Security symbol: TECN Security number: 1 210 019 ISIN: CH0012100191 Telekurs Financial: TECN Bloomberg: TECN SW Reuters: TECN.S At December 31, 2005, the market capitalization of the company was CHF 657 million. The list of consolidated subsidiaries, none of which is publicly listed, is presented in the financial section on page 61 of this Annual Report. The operational group structure is organized according to the geographical regions Europe, America and Asia, as well as to the business areas Genomics/Proteomics, Drug Discovery and Diagnostics. The segment reporting according to this structure is presented in the financial section on page 52 of this Annual Report. Significant shareholders As per December 31, 2005, the following shareholders held more than 5% of Tecan’s shares:

Shares BB Medtech AG, Schaffhausen (CH) Schweizerische Unfallversicherungsanstalt (SUVA), Lucerne (CH)1 Fidelity Management & Research Company, Boston (US)1 UBS Fund Management (Switzerland) AG, Basle (CH) Tecan Group Ltd. The Capital Group Companies Inc., Los Angeles (US)

1,212,780 920,000 687,115 645,570

2005 % 10.2% 7.7% 5.8% 5.4% < 5% < 5%

Shares

920,000 687,115 1,576,030 777,041

Numbers of shares as most recently notified to SWX; the percentages were adjusted to the actual share capital as per the end of the period under review. 1

no disclosure notification in year under review

The Company does not have any cross-shareholdings exceeding 5% of the capital or voting rights on both sides.

2004 % < 5% 7.5% 5.6% < 5% 12.8% 6.3%

Corporate governance | Annual Report 2005 | 67

2. Capital structure Capital structure of Tecan Group Ltd. as per December 31 2005

2004

2003

Registered shares with a nominal value of CHF 1 Number Nominal value CHF

11,891,823 11,891,823

12,340,606 12,340,606

13,106,945 13,106,945

Share capital CHF

11,891,823

12,340,606

13,106,945

Legal reserves CHF

36,562,977

87,860,456

128,916,844

Retained earnings CHF

111,984,865

68,004,805

55,436,267

160,439,665

168,205,866

197,460,056

1,108,177

1,112,394

1,193,055

Shareholders’ equity CHF Conditional share capital CHF

As of December 31, 2005, the Company’s share capital was CHF 11,891,823, divided into 11,891,823 registered shares with a nominal value of CHF 1 each. Each share is entitled to any dividends approved by the shareholders. The Company has neither bearer shares, nor participation certificates nor bonus certificates outstanding. The Company does not have authorized share capital. Conditional share capital – changes in capital In 1997, the Company’s shareholders approved a conditional share capital of CHF 1,300,000 (consisting of 1,300,000 registered shares each with a nominal value of CHF 1) reserved for the purpose of employee participation. Between 1999 and 2002, employee stock option plans were adopted based on this conditional share capital. Details on options granted under these plans are given in the consolidated financial statements, note 13 “Employee benefits”. Due to the exercise of 4,217 options during the financial year 2005 (2004: 80,661 options; 2003: 30,870 options), the Company’s share capital was increased and the conditional capital decreased by 4,217 shares (2004: 80,661 shares; 2003: 30,870 shares) and the Company received CHF 0.4 million in cash (2004: 4.0 million; 2003: 1.5 million). As per December 31, 2005, 392,544 shares of the conditional share capital were reserved for outstanding employee stock options. These shares correspond to a share capital of CHF 392,544. At the Annual General Meeting 2005, the shareholders approved the proposed cancellation of 453,000 treasury shares, which led to a capital reduction of CHF 15,855,000 (thereof: share capital CHF 453,000 and reserves CHF 15,402,000). The Company does not have convertible bonds or any options other than the aforementioned employee stock options outstanding. Limitations on transferability and nominee registration Registration with voting rights in the Company’s share register is conditional on shareholders declaring that they have acquired the shares in their own name and for their own account. No shareholder is registered with voting rights for more than 5% of the share capital. The Board of Directors of the Company may register nominees for up to 2% of the share capital as shareholders with voting rights in the share register. Nominees are persons who do not explicitly declare in the application for registration that they will hold the shares for their own account, and with whom the Company has entered into a corresponding agreement. Further, for shares in excess of 2% of the share capital, the Board of Directors may register nominees with voting rights in the share register, if such nominees disclose the names, addresses, nationalities and shareholdings of the persons in whose interest they hold 2 or more per cent of the share capital. Entities which are bound in terms of capital and voting powers, common management or otherwise, or which act in a coordinated manner to circumvent the 5% rule are regarded as a single shareholder. The Board of Directors is entitled to grant exceptions from the registration restriction in special cases. No such exceptions were granted in the year under review. The procedures and conditions for canceling these limitations on transferability are described in section 6.

68 | Annual Report 2005 | Corporate governance

3. Board of Directors

Mike Baronian (Chairman) 1947, Canadian-Swiss citizen, Degree in Finance (Concordia University, Montreal) Since 2000, elected until 2007 Professional background: Different management positions within Johnson & Johnson, his last positions being Managing Director of Cilag, Schaffhausen, 1989 to 1997 and Vice-President of Global Operations in 1998. In 1999, he was CEO of ZLB, and between 2000 and 2002, CEO of the Asklia Group. Since 2003, he has been CEO and Chairman of the Board at AZAD Pharma AG, Toffen/BE. Other activities: Life Therapeutics, AUS, Board member; Solvias AG, Basle, Board member.

Prof. Dr. Armin Seiler (Vice-Chairman) 1939, Swiss citizen, MS in Mechanical Engineering (Swiss Federal Institute of Technology), MS and PhD in Business Administration (University of Zurich) Since 1998, elected until 2007 Professional background: Between 1967 and 1975, he worked as a management consultant at McKinsey & Company in Zurich and Chicago. He was CEO at Dr. Ing. Koenig AG, 1975-1977 and CEO at Cham Paper Group, 1978 to 1983. Since 1984 he has been professor at the Swiss Federal Institute of Technology in Zurich for Marketing and Strategic Management. Other activities: Industrieholding Cham AG, Board member; ING Bank (Suisse) SA, Board member.

Timothy B. Anderson 1946, US citizen, Degree in Business Studies (Northwestern University) and MBA (Stanford University) Since 2000, elected until 2007 Professional background: Various senior management positions within Baxter International (USA) including President of the Biotech Group, 1992 to 1997, Chairman of Baxter Europe, 1997 to 1999 and Senior Vice-President of Strategy and Business Development, 1999 to 2002. He was member of the Executive Committee from 1993 until he retired from Baxter at the end of 2002. Other activities: Lake Forest Hospital, USA, Board member; Cerus Corporation, USA, Board member; Member of the Scientific Advisory Board of Baxter International, USA.

Corporate governance | Annual Report 2005 | 69

Gérard Vaillant 1942, US citizen, Degree in Marketing (École Supérieure de Commerce, Paris) and MS (University of Sciences, Paris) Since 2004, elected until 2007 Professional background: Various senior management positions within Johnson & Johnson (US) including Vice-President, J&J International, 1987 to 1992, Worldwide President LifeScan (a J&J company) 1992 to 1995 and Company Group Chairman Diagnostics Worldwide 1995 to 2004. He was member of the Medical Devices & Diagnostics Group Operating Committee of J&J until he retired in 2004. Other activities: Sensors for Medicine and Science, Inc, USA, Board member; Luminex Corporation, USA, Board member.

Prof. Dr. Peter Ryser 1951, Swiss citizen, MS Physics (University Neuchâtel), PhD Physics (University of Geneva) and Masters Degree in Corporate Management (Lucerne) Since 2004, elected until 2007 Professional background: He was a Scientific Assistant at the Institute of Physics, University of Geneva, 1979-1984, Scientific Collaborator, Cerberus AG, 1985 to 1989 and Head of Research, Siemens Building Technologies, Stäfa, von 1990 to 1998 (formerly Cerberus AG). Other activities: Professor of Microengineering, Swiss Federal Institute of Technology, Lausanne (EPFL) since 1998; Sensile Holding AG, Board member; Advanced Micro Technology AG, Board member.

Cleto De Pedrini 1945, Swiss citizen, Degree in Public Law, Business Administration and Economics (University of St. Gallen) Since 2004, elected until 2007 Professional background: He was Head of the Export Department, Dätwyler AG, 1974 to 1980, Chief Executive Officer Truns Tuch- und Kleiderfabrik, 1980 to 1985, Chief Financial Officer, Hürlimann Breweries, 1985 to 1991, and held various senior management positions at Moevenpick AG, the last of which was Chief Financial Officer as well as Member of the Board. Other activities: Partner, topwork ag; Autogrill Switzerland AG, Board member; NovoGel Holding AG, Board member.

70 | Annual Report 2005 | Corporate governance

Independence All the members of the Board of Directors are non-executive members. None of the Board members has important business connections with Tecan Group Ltd. or any other group company, unless explicitly disclosed under item 5, below. None of the Board members was formerly a member of the management of Tecan Group Ltd. or any group company prior to the period under review except for Mike Baronian who served as interim CEO from June to October 2003. There are no cross-involvements. Election, term of office, organization and responsibilities According to the Company’s Articles of Incorporation, the Board of Directors shall be composed of at least one and not more than seven members. The Board of Directors is responsible for the ultimate supervision and management of the Company, including the establishment of general strategies and guidelines, as well as for other matters which by law are under its nontransferable responsibility. To the extent permitted by law and insofar as no contrary provision is made in the Company’s Articles of Incorporation and Organizational Regulations adopted by the Board of Directors, the management of the Company’s affairs is delegated to the Management pursuant to Organizational Regulations. The Board of Directors meets as often as business matters require. The Board meets at least five times a year upon invitation of the Chairman, or, in his absence, upon invitation of another Board member. All Board members are entitled to request a meeting by indicating the reason. The meetings usually last one whole day. As a general rule, the CEO and CFO, together with other members of the Management invited by the Chairman, attend or partially attend the Board meetings. The meetings may also be held by video conference or by telephone. The Board of Directors passes its resolutions with an absolute majority of votes of the Board members present. In the event of a tie, the Chairman of the Board has the casting vote. Resolutions may be passed by means of circulars, unless a member requests discussion in a formal meeting. The committees of the Board of Directors hold separate meetings as often as business requires, usually at least three times a year. The committee meetings usually last between two and three hours. Committees The Board of Directors may appoint from amongst its members committees for the preparation and implementation of its resolutions and for exercising its supervision function. The committees meet upon invitation of the respective chairman and as often as business requires. They make resolutions and proposals to be presented to the entire Board of Directors with a majority of votes cast, provided that at least two committee members are present. Resolutions may also be passed by means of circulars. The Board of Directors has established three committees which are composed as follows:

Audit Committee Mike Baronian

Nomination & Compensation Committee

Innovation Committee

Member

Member

Member

Member

Member

Prof. Dr. Armin Seiler Timothy B. Anderson

Chairman

Gérard Vaillant

Member

Prof. Dr. Peter Ryser Cleto De Pedrini

Chairman Chairman

Corporate governance | Annual Report 2005 | 71

Audit Committee The Audit Committee comprises at least two members. The principal tasks and responsibilities of the Audit Committee are, in short, to form an impression of the internal and external audit and to monitor cooperation between the auditors and the Company, to assess the quality of internal control and compliance, to review the financial statements (consolidated and separate) and interim financial statements destined for publication, and to report and make recommendations on its activities, especially with regard to the approval of annual and interim statements, to the full Board of Directors. Moreover, it is responsible for monitoring the independence of the auditors, their service levels and fees, and to propose them for (re-)election at the Annual General Meeting. Upon invitation of the Chairman, representatives of the external auditors may attend the meetings. Nomination & Compensation Committee The majority of members of the Nomination & Compensation Committee must be non-executive and independent Board members. The principal tasks and responsibilities of the Nomination & Compensation Committee are to prepare and submit to the full Board of Directors proposals on the amount and form of remuneration of the members of the Board of Directors, the CEO, and the other members of the Management. The Nomination & Compensation Committee gathers reports on salary structure and development and monitors disclosure obligations with regard to the remuneration of the Management and Board of Directors. Moreover, the Nomination & Compensation Committee approves the employment of any staff who reports directly to the CEO and proposes the appointment of the CEO to the Board of Directors. Innovation Committee The Innovation Committee comprises at least three members, and the majority must be independent Board members. The committee meets as often as necessary, and at least twice a year. The principal tasks and responsibilities of the Innovation Committee are, in short, to provide the Board of Directors with a general understanding of the technological development and technical innovations, to make recommendations as to priorities and resource allocation in connection with technical developments and to advise the Board of Directors on principle issues in conjunction with technology and products, for instance in case of M&A transactions, joint ventures, cooperations, etc. The Innovation Committee regularly invites internal and external specialists. Information and controlling instruments: To monitor the group’s financial situation and its evolution, the Board of Directors continually receives reports via the group’s Management Information System. To limit and control treasury risks, regulations for treasury affairs are in place.

72 | Annual Report 2005 | Corporate governance

4. Management 4.1 Executive Committee Thomas Bachmann 1959, Swiss citizen, Degree in Mechanical Engineering (Berne University of Applied Sciences), MBA (IMD Lausanne) Function: CEO of Tecan Group since February 2005 Professional background: 1985 to 2002: Various senior management positions at Rieter Holding AG; 1985 to 1988: Manager – Sales North America, Rieter Corporation, Spartanburg, USA; 1989 to 1993: Director Global Sales, Rieter Synthetic Fiber Machinery (Global responsibility for sales and marketing to establish and develop markets in North America, India and Asia). 1994 to 1999: Managing Director, Rieter Synthetic Fiber Machinery, Winterthur, and Rieter Automatik, Grossostheim, Germany; 2000 to 2002: Senior Vice-President – Corporate Development, Rieter Holding AG, Winterthur. 2002 to 2004: CEO Steel Systems Division at AFG Arbonia-Forster-Holding AG, Arbon. Other activities: ALSSA (Analytical & Life Science Systems Association), USA, Board member Dr. Rudolf Eugster 1965, Swiss citizen, Degree in Chemistry (Swiss Federal Institute of Technology), PhD in Technical Science (Swiss Federal Institute of Technology), Postgraduate degree in Economics (Swiss Federal Institute of Technology) Function: CFO and Executive Vice-President Tecan Group since December 2002 Professional background: 1993 to 1994: Strategic Planning/Controlling at Novartis; 1994 to 2002: several positions at Von Roll, the last of which was CFO of Isola Composites, a joint venture between Von Roll and Isola AG. Other activities: none Günter Weisshaar 1960, Swiss citizen, training in Airplane Engineering, Quality Assurance and Management (IGW St. Gallen) Function: Executive Vice-President, General Manager Quality Assurance and Regulatory Affairs Tecan Group since March 2003 Professional background: until 1988: Several positions in the field of quality assurance at various companies. 1988 to 1997: Manager, Quality Assurance and Logistics at Schöttli AG. 1998 to 1999: Manager, Quality Engineering, Schneider (Europe) AG. 1999 to 2003: Manager, Quality Assurance Europe at Jomed AG. Other activities: none

Corporate governance | Annual Report 2005 | 73

Dr. Johann Camenisch 1946, Swiss citizen, Degree in Electronics (Swiss Federal Institute of Technology) and PhD in Engineering (Swiss Federal Institute of Technology) Function: Executive Vice-President, General Manager Research and Development Tecan Group since February 2002 Professional background: 1970 to 1974: Research Engineering at Turlabor SCM, Zumikon. 1975 to 1977: Assistant to CEO at Gestle AG, Chur. 1978 to 1981: CEO of Gestle AG, Chur. 1982 to 2001: Head of Research and Development at Hamilton Bonaduz AG, Bonaduz. Other activities: none Jan Timmers 1962, Dutch citizen, Degree in Biochemistry and Clinical Chemistry Function: Executive Vice-President, General Manager Product Development and Marketing Tecan Group Marketing manager at Tecan Schweiz and Tecan Austria since November 1992, Head of Business Development and manager of the Biopharma and Clinical Diagnostics business area (2002 to 2003). Professional background: Sales specialist for biotechnical applications and product manager at Proton Wilten / Spectra and Ortho-Clinical Diagnostics/ Johnson & Johnson. Other activities: none Bernhard Iseli 1960, Swiss citizen, Degree in Mechanical Engineering (Berne University of Applied Sciences), MBA (SIB/ISZ) Function: Managing Director of Remp AG since August 2002 Professional background: 1981 to 1991: Various senior management positions at Ascom AG. 1981 to 1985: Project manager for Telephony, Gfeller AG, Berne. 1987 to 1990: Head of Construction Group, Ascom Gfeller AG, Berne. 1990 to 1991: Head of business area for wired devices, Ascom AG, Berne. 1992 to 1997: General Manager, Studer AG, Thun. 1997 to 1999: Head of Osteosynthesis Production with sites in Switzerland, Austria and India, Mathys AG, Bettlach; 1999 to 2002: Managing Director, Mikron Comp-Tec AG, Nidau. Other activities: none Bruno Portmann 1966, Swiss citizen, Degree in Electrical Engineering (Abendtechnikum der Innerschweiz, ATIS), Executive MBA (University of St. Gallen) Function: Executive Vice-President, General Manager Logistics and Production Tecan Group since August 2005 Professional background: 1988 to 1997: Various posts as technical assistant. 1990 to 2002: Various posts and managerial positions at SF Emmen (formerly Eidg. Flugzeugwerk), most recently as General Manager of the Aerospace Center. 2002 to 2004: Member of Management Board at ESEC SA, Cham, with responsibility for Operations. Other activities: none

74 | Annual Report 2005 | Corporate governance

4.2 Main group company managers and corporate managers

Function and professional eduction

Nationality

Year of birth

Joined Tecan in

Steve Levers

Head of Tecan Systems Degree in Finance (San José State University) and MBA (University of Santa Clara)

US

1954

1997

Michael Illek

Head of Tecan Austria Degree in Mechanical Engineering (College of Applied Sciences, Giessen)

German

1965

1998

Carl Severinghaus

Head of Tecan US Degree in Communications (Drake University, Des Moines, Iowa)

US

1952

1991

Martin von Lueder

Head of Tecan Europe Qualified industrial manager (Böblingen)

German

1957

1985

Shigeyuki Kaji

Head of Tecan Japan Qualified electrical engineer (Osaka Technical College)

Japanese

1951

2005

Christopher Hanan

Head of Business Development, Corporate Communications and Investor Relations Degree in Business Administration (Georgetown University), MBA (Harvard Business School)

Swiss/US

1969

2004

Andreas Wilhelm

Corporate Legal Counsel, Secretary of the Board of Directors Attorney-at-Law (University of Berne), LL.M. (Boston University)

Swiss

1969

2004

4.3 Management contracts No agreements between the Company and third parties not belonging to the Tecan Group were entered into or existing in the year under review.

5. Compensation, shareholdings and loans Decisions regarding the compensation structure for the members of the Board of Directors and Management, as well as decisions regarding employee stock option plans are taken by the Board of Directors following proposal by the Nomination & Compensation Committee. The procedure on changes in compensation is defined in the Company’s Organizational Regulations. The amount and form of compensation of the Board of Directors is proposed by the Nomination & Compensation Committee and must be approved by the Board of Directors. Since April 2004, Board members have been compensated in the form of a fixed annual fee for their Board and Committee memberships. Actual expenses are paid separately. Members of the Executive Committee are remunerated by means of a fixed salary and variable salary component. The variable salary component, in turn, comprises one part that is dependent on the success of the Company, and another part that is linked to personal achievement. The Company’s “Variable Pay Regulation” was passed by the Board of Directors, and forms the basis for this remuneration scheme. The company targets are set out in advance on an annual basis by the Board of Directors. Personal targets are agreed with the respective supervisor in advance on an annual basis and in accordance with internal guidelines. At the end of each year, the Nomination & Compensation Committee assesses the proposed effective variable salary component to be paid to each member of the Executive Committee for the previous year, together with the fixed salary and the level and composition of the variable salary component for the next financial year. The Nomination & Compensation Committee may revise the proposal before submitting it to the Board of Directors, which then takes the final decision. Compensation paid 2005 Members CHF 1,000 Non-executive members of the Board of Directors in total* Executive members of the Board of Directors and members of the Executive Committee* Severance payment to former CEO * There were no executive members of the Board of Directors in the years under review

2004 Members CHF 1,000

6

565

6

473

8

2,297 -

7 1

1,769 1,356

Corporate governance | Annual Report 2005 | 75

No severance payments or compensation to former members of the Board of Directors or the Executive Committee were paid. The member of the Board of Directors with the highest total compensation received CHF 120,000 in 2005 (2004: CHF 109,000). No shares or options were allocated to any member of the Board of Directors, any member of the Executive Committee or any related parties in the year under review. Ownership of shares Number

December 31, 2005 December 31, 2004

Non-executive members of the Board of Directors including related parties in total

3,950

3,950

Executive members of the Board of Directors and members of the Executive Committee and related parties in total*

8,410

100

Ownership of employee stock options Number

Plan

December 31, 2005 December 31, 2004

Non-executive members of the Board of Directors including related parties in total

2000 2001 2002 2003

0 0 3,390 7,629

5,180 3,390 3,390 10,170

Executive members of the Board of Directors and members of the Executive Committee and related parties in total*

2000 2001 2002 2003

0 0 0 2,513

0 1,760 2,350 10,400

* There were no executive members of the Board of Directors in the years under review

No new employee stock option plans have been launched since 2002. Details of employee stock option plans launched between 1999 and 2002, including the year of grant, expiration date, subscription ratio and exercise price, can be found in the consolidated financial statements, note 13, “Employee Benefits”. In the period under review, topwork ag, Zurich, invoiced the Company, together with group companies, a total of CHF 174,904 (incl. VAT) for recruitment services. Cleto De Pedrini is a partner at topwork ag. No other material additional fees and/or compensation were paid to any other member of the Board of Directors, any member of the Executive Committee or any related parties. There were no loans outstanding as per December 31, 2005 to or by any of these persons.

6. Shareholders’ participation rights Each share entitles the holder to one vote. No shareholder, or group of shareholders acting in concert, may represent at an Annual General Meeting more than 5% of the aggregate voting rights in the Company. This voting restriction does not apply to the independent voting representative nor to a proxy holder appointed by the Company (“Organvertreter”). The Board of Directors may, in negotiation with banks, agree exceptions to the voting restrictions to enable voting rights for deposited shares to be exercised by proxy. No such agreements were entered into or exist in the year under review. Shareholders may only be represented at the Annual General Meeting by their legal representative, another shareholder with voting rights, the independent voting representative, the proxy appointed by the Company or a proxy appointed by a depository institution. A written power of attorney is required which is valid and issued for the meeting in question only. Art. 13 paragraph 2 of the Company’s Articles of Incorporation lists matters for which, in addition to the qualified majority requirements prescribed by law, a shareholders’ resolution taken by a qualified majority of at least two thirds of the votes represented is required. These matters are the following: - the conversion of registered shares into bearer shares; - the cancellation or modification of transfer restrictions (Art. 5 of the Articles of Incorporation); - the cancellation or modification of voting-right restrictions (Art. 12 paragraph 4 of the Articles of Incorporation);

76 | Annual Report 2005 | Corporate governance

- the dissolution and liquidation of the Company; and - the cancellation of Art. 13 paragraph 2 of the Articles of Incorporation itself and the cancellation or modification of the majority requirements in this provision. Shareholders representing shares of an aggregated nominal value of at least 1% of the share capital may demand in writing no later than 56 days prior to an Annual General Meeting that an item be included on the agenda. Shareholders representing 10% of the share capital may demand that an Annual General Meeting be convened. Shareholders with registered voting rights are informed by mail of the fact that an Annual General Meeting is to be convened at least 20 days prior to the Meeting. Moreover, the invitation is published in the Swiss Official Gazette of Commerce. From the day on which the invitations for the Annual General Meeting are dispatched, no further entries are made in the share register until the first day after the Annual General Meeting.

7. Changes to control and defense measures The Company’s Articles of Incorporation do not contain any opt-out or opt-up clause removing or limiting the obligation to submit an offer based on the Stock Exchange Law. No clauses on changes of control are contained in agreements or compensation plans relating to members of the Board of Directors or the Management of the Company or the Tecan Group.

8. Auditors Date of assumption of the existing auditing mandate by KPMG Fides Peat Date on which the head auditor took up office

May 28, 1997 (date of acceptance) 2004

Fees paid In CHF 1,000 Total audit fees (Sub group REMP was audited by PWC. These audit fees are included in the amount stated.) Total tax consulting fees KPMG Total other consulting fees KPMG

2005

2004

702

540

202 23

127 40

The auditors are elected by the Annual General Meeting for a one-year term. Since 2003, the external audit has been reviewed by the Audit Committee.

9. Information policy It is Tecan’s policy to keep shareholders and the financial community updated regarding significant developments in business operations. This policy is primarily implemented through regular press releases, quarterly and annual financial reports and information provided on the Company’s website: www.tecan.com. Hardcopies of Company publications are available on request. They can also be downloaded from Tecan’s website. Useful websites are: http://www.tecan.com/index/com-ir/com-ir-fina_repo.htm http://www.tecan.com/index/com-ir/com-ir-inve_cale.htm http://www.tecan.com/index/com-ir/com-ir-corp_present-entry.htm For mail/phone requests, please contact: Tecan Group AG Annabelle Brameshuber Manager Corporate Communications and Investor Relations

Seestrasse 103 CH-8708 Männedorf

Tel: +41 44 922 84 30 Fax: +41 44 922 88 89 E-Mail: [email protected]

| Annual Report 2005 | 77

Contents 1. Tecan at a glance 2. Message to shareholders 6. Market overview 12. Liquid handling and robotics 14. Detection 16. Sample management 18. Components 20. Customer service

Tecan locations

22. Chief Financial Officer’s statement 26. Five-year consolidated data Consolidated financial statements 27. Consolidated balance sheet at December 31 28. Consolidated income statement 29. Consolidated statement of changes in shareholders’ equity 30. Consolidated cash flow statement 31. Summary of significant accounting policies 37. Notes to the consolidated financial statements 58. Report of the group auditors to the general meeting of shareholders Tecan Group Ltd. 59. Balance sheet at December 31 60. Income statement 61. Notes to the financial statements 64. Appropriation of available earnings 65. Report of the statutory auditors to the general meeting of shareholders Corporate governance 66. Group structure and shareholders 67. Capital structure 68. Board of Directors 72. Management 74. Compensations, shareholdings and loans 75. Shareholders’ participation rights 76. Changes of control and defense measures 76. Auditors 76. Information policy 77. Tecan locations

Tecan Business Units Liquid Handling and Robotics • Tecan Switzerland Ltd. Seestrase 103 CH-8708 Männedorf Switzerland T +41 44 922 89 22 F +41 44 922 89 23

Detection • Tecan Austria GmbH Untersbergstrasse 1a A-5082 Grödig/Salzburg Austria T +43 62 46 89 33 F +43 62 46 72 770

Components

• Tecan Systems, Inc. 2450 Zanker Road San Jose CA 95131 USA T +1 408 953 3100 F +1 408 953 3101

Sample Management • REMP AG Weststrasse 12 CH-3672 Oberdiessbach Switzerland T +41 31 770 70 70 F +41 31 770 72 66

Tecan Market Units Sales and Service Organizations • Tecan Deutschland GmbH • Theodor-Storm-Strasse 17 D-74564 Crailsheim Germany T +49 79 51 94 170 F +49 79 51 50 38

• Tecan US, Inc. P.O. Box 13953 Research Triangle Park NC 27709 USA T +1 919 361 5200 F +1 919 361 5201

Tecan Group Ltd., Beijing Representative Office Room 2502, Building A Jianwai SOHO #39 Dongsanhuan Zhong Road 100022 Beijing China T +86 10 5869 5936 F +86 10 5869 5935

• Tecan Japan Co. Ltd. Kawasaki Tech Center 580-16, Horikawa-cho Saiwai-ku, Kawasaki Kanagawa 212-0013 Japan T +81 44 556 7311 F +81 44 556 7312

• Tecan Asia Pte. Ltd. 80 Marine Parade #10-09 Parkway Parade Singapore 449269 Singapore T +65 6444 1886 F +65 6444 1836

• REMP (USA), Inc. 150 Hopping Brook Road Holliston MA 01746 USA T +1 508 429 2200 F +1 508 429 1754

• REMP Nippon AG Japan Branch Kawasaki-Tech Center Bldg.17F 580-16, Horikawa-cho Saiwai-ku, Kawasaki-shi Japan 212-0013 T +81 44 542 7021 F +81 44 542 7022

• REMP Deutschland GmbH Auf der Lind 10 D-65529 Waldems T +49 6126 58 31 0 F +49 6126 58 31 29

Tecan Group

Design

Text

Seestrasse 103

OTM, London

KDM Communications, UK

CH-8708 Männedorf

www.otmcreate.com

www.kdm-communications.com

Tel +41 44 922 88 88

Photography

Print

Fax +41 44 922 88 89

Susanne Völlm, Zürich

Südostschweiz Druck, Chur

www.susannevoellm.ch

www.so-print.ch

www.tecan.com

Corporate Communications

Marc Wetli, Zürich

and Investor Relations

www.wetli.com

Annabelle Brameshuber Selected product photography Marketing Communications

Günter Bolzern, Zürich

and Branding

www.bolzern.net

Cornelia Kegele

Annual Report 2005

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