| Annual Report · Annual Report2005 Tecan Group Seestrasse 103 CH-8708 Männedorf Tel +41 44 922 88 88 Fax +41 44 922 88 89 Corporate Communications and Investor Relations Annabelle

Annual Report 2005

Tecan Group

Seestrasse 103

CH-8708 Männedorf

www.tecan.com

Tel +41 44 922 88 88

Fax +41 44 922 88 89

Corporate Communications

and Investor Relations

Annabelle Brameshuber

Marketing Communications

and Branding

Cornelia Kegele

Design

OTM, London

www.otmcreate.com

Photography

Susanne Völlm, Zürich

www.susannevoellm.ch

Marc Wetli, Zürich

www.wetli.com

Selected product photography

Günter Bolzern, Zürich

www.bolzern.net

Text

KDM Communications, UK

www.kdm-communications.com

Print

Südostschweiz Druck, Chur

www.so-print.ch

Contents

1. Tecan at a glance 2. Message to shareholders 6. Market overview12. Liquid handling and robotics 14. Detection 16. Sample management18. Components20. Customer service

22. Chief Financial Officer’s statement26. Five-year consolidated data

Consolidated financial statements27. Consolidated balance sheet at December 3128. Consolidated income statement29. Consolidated statement of changes in shareholders’ equity30. Consolidated cash flow statement31. Summary of significant accounting policies37. Notes to the consolidated financial statements58. Report of the group auditors to the general meeting of shareholders

Tecan Group Ltd.59. Balance sheet at December 3160. Income statement61. Notes to the financial statements64. Appropriation of available earnings65. Report of the statutory auditors to the general meeting of shareholders

Corporate governance66. Group structure and shareholders67. Capital structure68. Board of Directors 72. Management74. Compensations, shareholdings and loans75. Shareholders’ participation rights76. Changes of control and defense measures76. Auditors76. Information policy

77. Tecan locations

| Annual Report 2005 | 77

Tecan locations

Liquid Handling and Robotics• Tecan Switzerland Ltd.

Seestrase 103CH-8708 MännedorfSwitzerlandT +41 44 922 89 22F +41 44 922 89 23

Detection• Tecan Austria GmbH

Untersbergstrasse 1aA-5082 Grödig/SalzburgAustriaT +43 62 46 89 33F +43 62 46 72 770

Components• Tecan Systems, Inc.

2450 Zanker RoadSan JoseCA 95131USAT +1 408 953 3100F +1 408 953 3101

Sample Management• REMP AG

Weststrasse 12CH-3672 OberdiessbachSwitzerlandT +41 31 770 70 70F +41 31 770 72 66

• Tecan Deutschland GmbHTheodor-Storm-Strasse 17D-74564 CrailsheimGermanyT +49 79 51 94 170F +49 79 51 50 38

• Tecan US, Inc.P.O. Box 13953Research Triangle ParkNC 27709USAT +1 919 361 5200F +1 919 361 5201

• Tecan Group Ltd., BeijingRepresentative OfficeRoom 2502, Building AJianwai SOHO#39 DongsanhuanZhong Road100022 BeijingChinaT +86 10 5869 5936F +86 10 5869 5935

• Tecan Japan Co. Ltd.Kawasaki Tech Center580-16, Horikawa-choSaiwai-ku, KawasakiKanagawa 212-0013JapanT +81 44 556 7311F +81 44 556 7312

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

• REMP (USA), Inc.150 Hopping Brook RoadHollistonMA 01746USAT +1 508 429 2200F +1 508 429 1754

• REMP Nippon AGJapan BranchKawasaki-Tech CenterBldg.17F580-16, Horikawa-choSaiwai-ku, Kawasaki-shiJapan 212-0013T +81 44 542 7021F +81 44 542 7022

• REMP Deutschland GmbHAuf der Lind 10D-65529 WaldemsT +49 6126 58 31 0F +49 6126 58 31 29

Tecan Business Units

Tecan Market Units

Sales and Service Organizations


Tecan at a glance

2005 Financial summary

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%

R&D** 42.1 36.7 37.8 +3.0%in % of sales 13.5% 12.8% 11.0%

OPEX* 124.6 120.7 131.6 +9.0%in % of sales 40.0% 42.2% 38.2%

Operating profit*/EBIT* 34.5 19.7 29.8 +51.3%in % of sales 11.1% 6.9% 8.6%

Net profit* 22.6 14.8 17.4 +17.5%in % of sales 7.3% 5.2% 5.0%

EPS* 1.94 1.35 1.57 +16.3%

*Excluding unusual items

**Excluding unusual items and regulatory cost

12 Month 2005 key figures (excluding unusual items)

Revenues 2003-2005 Profitability1/Productivity 2003-2005

2003 2004 2005

311.6286.0

344.9

Rest of worldAsiaEurope

North America

0

350

400

300

250

200

150

100

50

In C

HF

mill

ion

+13%

+31%

-2%

2003 2004 20051 Excluding unusual itemsNet Added Value Index (NAVI) = (EBIT + personnel expenses)/personnel expenses

0

40

35

30

25

20

15

10

1.34

1.2

1.25

5

1

1.4

1.3

1.2

1.1

In C

HF

mill

ion

NAV

I

34.5

22.6

14.8

29.8

17.419.7

Operating profit (EBIT)Net profitNet Added ValueIndex

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

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 growthpath and achieved a marked increase in profitability, but also created the platform to maintain leadershipin 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 profitabilityindicators. Going into the year, we defined a set of objectives and initiatives that would help us reversethis trend.

We are very happy to report that with the support of our customers and our employees we have reachedthe 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 keyproducts by more than 35%.

In addition we reaffirmed the focus on our core competencies of robotics, detection, software and systemsintegration by discontinuing the LabCD operations in Boston. Finally, the operational and cost containmentmeasures 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 componentsin the workflows of our life sciences customers, we are able to help them develop new treatments fasterand 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 particularlypleased with was that this growth was driven by real performance in the market and not by any exchangerate effects. In fact, the currencies of our main markets, the US Dollar and the Euro were essentiallyunchanged against our home currency, the Swiss Franc. Based on our performance, we believe that Tecanextended it’s leadership position and market shares in all of the markets where it participates. Ofparticular 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 weprovide the instrumentation to our customers under their own name and brand, enabling them to benefitfrom Tecan’s expertise in engineering and quality manufacturing. We have held a leadership position formany years and our continued emphasis on quality and regulatory compliance continue to strengthenthese very crucial relationships. During the past year, Tecan was able to both launch several new productsin this area but also add some exciting new projects to our Research and Development (R&D) pipelinewhich will be launched over the next several years.

In Detection, the decision to strengthen the sales force and create an organization exclusively dedicated tothe sale of these instruments enabled this business to show significant double-digit growth. This was alsosupported by the continued innovation strength, particularly with the launch of two products that werevery 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 samplemanagement, 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 theprofessionalism 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 matchextremely well with our existing product range and will in the future allow us to offer our customersunique solutions to their sample management needs.

Having finalized the acquisition in June, we are on track with all integration activities and have alreadyrealized 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 allinvolved 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.


Improving operational performance and innovation

At the beginning of last year, we communicated a set of key objectives to the financial markets thatwe felt were crucial to our objectives of returning Tecan to the path to growth and profitability. Centralamongst these was the notion of enhancing accountability and efficiency and regaining the trust of theinvestment community.

We feel that while we will continue to focus on the operational issues also during 2006, we have madegood progress against our original objectives.

The availability of SAP, which came online in January of 2005, has allowed a hitherto unparalleledtransparency of our business performance. The availability of detailed and timely data means that we arenow able to much more closely manage our business based on financial metrics and financially drivenmanagement approaches. In parallel we have focused on creating a culture of accountability throughoutall 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 makesignificant progress. In 2005 we implemented all of the changes recommended by the FDA in their 2004warning 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 ourcustomers 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. Firstsuccesses were evident in this area such as the previously mentioned Infinite reader or the Multi-channelpipetting head which were both developed in significantly less time than historically required. Anotherexample 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 commitmentto closely focus on the areas of our core competencies. While the overall spending in R&D is reduced thisyear to close to our long-term target levels, investment in the core areas of our product portfolio wereslightly increased.

Looking ahead

As we head into 2006 we are positive about the markets we serve. Our customers are entering a growthphase worldwide. Scientists and researchers across the globe are conducting exhaustive investigationsinto 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 demandsplaced on today’s life science providers.

In addition to our existing markets such as Biopharma and Diagnostics, technology is opening up newapplications where we can leverage our expertise. One such field is Forensics. The increasing importanceand acceptance of DNA fingerprinting across the world makes this an area where Tecan has multipleopportunities and, in fact, has just completed the installation of the first large-scale, fully integrated DNAfingerprinting system for the South African Police. While this market is still small, the opportunities forincreasing 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’ needsfor innovative automation solutions is highest, be this in the areas of cellular biology, moleculardiagnostics or array processing.

Tecan is the market leader in the majority of the fields it operates in. Our complementary productportfolio, spanning sample storage, liquid handling and detection which is supported by a world classservice organization, put us in a good position to serve our customers’ needs also in the future. Ourobjective is clear: Maintain and expand our market leadership position.

We are very grateful to all our employees, our customers, business partners and shareholders for thecontinued loyalty, trust, and commitment all of you have put in Tecan during this past year. We are lookingforward to another interesting, challenging and rewarding 2006, for which we are encouraged andcommitted to give our best.

Männedorf, 23.3.2006

Mike Baronian Thomas BachmannChairman of the Board of Directors Chief Executive Officer


Bringing Tecan to life

At Tecan, we thrive on the knowledge that what we domatters. Through our life science customers, our productshave a real impact on real people every day. Whetherthat’s finding a treatment for rheumatoid arthritis,solving violent crimes, ensuring that blood donated for transfusion is safe to use, or detecting the avian fluin animals, our instruments are there, at the very core of these processes. Tecan’s instruments and solutionsprovide the reliability, efficiency and performance reliedon by today’s leading laboratories.

Market overview


Tecan serves three main markets, the Biopharmaindustry consisting of the world’s leading pharmaceutical-,biotechnology- and academic research laboratories, theForensics industry-, consisting of law-enforcement andgovernment laboratories and the Diagnostics industry,which is comprised of blood banks, hospital laboratoriesand other leading reference laboratories.

These markets are served through our five productareas. As an example, a leading Biotech company would purchase sample management, liquid handlingand detection solutions from Tecan and protect theirinvestment with a service contract.


Sample management

Liquidhandlingand robotics

Detection Components Customerservice

Biopharma Forensics DiagnosticsMarkets

Products

Key drivers of automation

• Advances in genomics, proteomics andchemistry lead to significant amountof new potential targets

• Requires increased screening throughput

• Increasing regulatory demands

• Pharmacogenomics and personalizedmedicine resulting in highly targetedmedication and tests

Market size and growth

• USD 26 bn*

• CAGR 6%-8%

Breakout segment:Cellular analysis

• USD 900 m

• CAGR ~25%


Biopharma applications and marketsThe biopharma market is dedicated to fighting disease, with the ultimate goal of finding the next life-saving drug and making it safe and available to the world at large as fast as possible. Tecan’s productshave applications throughout the drug discovery process helping to generate new medicines efficientlyand 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 identifyingtarget molecules as potential drugs and confirming their therapeutic effects, to pre-clinical testing forpossible side effects.

Biopharma is a well-established area for Tecan and, now that there is a stronger need for standardized andverified systems, we provide off-the-shelf methods that meet all the important regulatory requirementsand 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 pastexperience 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 andinternal 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.

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


• USD 900m*

• CAGR 15%-20%


• Increasing acceptance of forensic/DNA evidence in legal- and law-enforcement systems globally drivessignificant growth in testing volumes

• High requirements toward process safety to adhere to legal standards

• Terrorism or environmental disasters creating additional need for DNA testing

Forensics applications and marketsTecan is developing a strong reputation in forensic science, based on a combination of the technologyperfected for the biopharma market and the regulatory expertise gained from the strictly controlledclinical diagnostic environment. Our technologies can be applied to criminal investigations as well as tothe 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 theworld means that forensic science has been searching for fully automated, high throughput laboratorysolutions like those that Tecan provides. At the same time, forensic scientists need to have absoluteconfidence in results that potentially link a criminal to the scene of a crime or identify someone’s lovedone. Accuracy and reliability are everything. And, for a forensic laboratory, that means a validatedtechnology 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 needby 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.


• Utility: Diagnostics represent 3% ofhealthcare spending but affect 80%of decisions

• Availability of new diagnostic tests,allows earlier recognition and bettertreatment of diseases

• Aging population and increasingregulatory/insurance demands

• Molecular diagnostics create newopportunities mainly in US/EU


• USD 29 bn*

• CAGR 7%-9%

Breakout segment:Molecular DX

• USD 1.5 bn

• CAGR ~15%

Diagnostics applications and marketsDiagnostics 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 automatingapplications in blood banking and screening for infectious diseases is equally applicable in the importantfield 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, reproducibleresults, monitored by laboratories through stringent guidelines and regulations. Tecan’s strength liesprecisely in this area of expertise, combined with its constant attention to the development of new safetyfeatures, which are also essential for scientists working with potentially infectious samples. Both of thesefactors 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.

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


Liquid handling and robotics

A combination of robotics and liquid handlingtechnologies forms the backbone of Tecan’s productportfolio and is an advantage many of our competitorsdo not have. The flexibility, robustness and innovation of our products mean they can improve the efficiencyand safety of almost any laboratory workflow, in all the disciplines of our main biopharma, forensic anddiagnostic markets.

A good example of this is Cellerity, which, on its launch in 2006, will be the most flexible and reliable toolavailable 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 ofbiologically based treatments, such as antibodies and hormones. Cellerity will free scientists from thelaborious 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 developmentknowledge of this system to market a whole series of similar instruments in a range of sizes.

The liquid handling market remains very competitive and continuing innovation is essential to keep usahead of the game. Early in 2006, the next wave of new development will be launched with an option thatidentifies different sample or pipetting faults and a number of bridging modules. This relentless attentionto the small detail, together with the ability to provide our customers with an outstanding service, is whatgives 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 realapplication solutions rather than the supply of liquid handling instrumentation thatthey then have to adapt to their methods.For this reason, there is more demand forwhat might be termed ‘pre-packagedsolutions’ – solutions that are co-developedand often co-marketed as a result of strongstrategic alliances between reagent andinstrumentation vendors. The biggestgrowth areas for liquid handling are in theareas of forensics, genomics and cell biology.Geographically for this segment, growth isstrongest in the Middle East and China.

Many of Tecan’s customers from the biopharma,forensic and diagnostic segments benefit from ourdetection instruments, both as standalone units andfully integrated with our liquid handling systems tocreate powerful workstations. They comprise a highlysuccessful range of microplate readers and washers,which precisely analyse reactions in a microtiter plate,and a selection of microarray instruments used in thefield of molecular biology to identify genetic disorders.Our number one seller is the Safire2, the fastest, mostflexible 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 competitivereaders and washers. In response to new US Food and Drug Administration and EU guidelines for clinicaldiagnostics, 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.


Detection


Key trends

The trend continues to focus on more flexiblesystems that are robust, sensitive, are suitablefor high throughput and can meet thechanging needs of any laboratory. For whatused to be considered simple plate washing,there is a shift towards semi-automation andmore of a need for fail-safe features thatensure effective processing. The microarraymarket, too, is a target for strong growth,reflecting the rising importance of moleculardiagnostics in disease screening.

REMP’s seamless integration into the Tecan Group hasbeen a great success. The product portfolios of bothcompanies complement each other well and this hasundoubtedly helped the transition to be more of a natural progression. Where the name of Tecan issynonymous 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 aspotential drugs; in forensics, it may mean DNA samples from years of unsolved crimes; and in diagnosticresearch, we’re talking about tissue samples from e.g. breast cancer patients which might share a commonlink.

REMP’s strength stems from its expertise in developing and supplying large, high quality compoundstorage banks with excellent lab information system and after-sales service to the world’s majorpharmaceutical companies. This same expertise is now being applied to the development of smaller andmodular solutions for new markets. Whatever its size, every REMP system relies on the unique, patentedTube Technology, a range of consumables that revolutionized sample management when it was firstlaunched 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.


Sample Management

Key trends

As technology races ahead and more laboratories turn to automation, there is a real need in the smallerbiotech companies and academic institutions for thesame specimen storage and retrieval mechanismsavailable routinely in the major pharmaceutical arena.Although traditionally developed for the managementof chemical compounds, the technology is noweagerly awaited by researchers working withbiological samples needing totally different storageconditions and handling criteria.

Tecan’s OEM Components unit provides pumps androbotic products to manufacturers of lab equipmentwho, in turn, sell to the life science, analytical chemistryand clinical diagnostic markets. The dynamics of thisbusiness sector are different from other Tecanbusinesses because components remain a part of ourcustomers’ products throughout the life cycle; from a product’s design, through to its manufacture andcommercialization – potentially 10 years or more.


Components


Tecan is the market leader in this business and holds a market share of around the high 60 percentile forthis 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 newfluidic design options and, importantly, will require less maintenance. A new integration kit ofinfrastructure tools – software, cabling, power supplies etc. – will also become available, making it simplerfor customers to get started and easier for them to integrate our products into their own designs. We arethe first company in the sector to effectively address new regulations with new products and discuss allthe implications openly with our customers. By choosing our new products they will be fully prepared forcompliance 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 bedominated by a new European regulation for the Reduction of Hazardous Substanceswhich comes into effect in July. This regulationwill restrict the use of environmentallyunfriendly chemicals for the manufacture ofelectronic equipment. 99% of Componentscustomers eventually export to Europe andwill need to comply with this regulation.

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


Customer service

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 regulatoryrequirements and quality assurance in the laboratory environment are making maintenance a veryimportant issue, especially in the clinical diagnostic field, where regulations often require strictservice records, and in forensic science where systems must be highly regulated and documented forscientific 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 animportant criteria in every walk of life andTecan’s world is no different. The consumablesbusiness, which has been boosted with theacquisition of REMP, has potential for growthsimply because the larger the installed base of instruments then the larger the demand for consumables will become.

22 | Annual Report 2005 | Page title

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 positivetrend in sales and operating profitability, which was started in the second quarter, and secondly theacquisition of REMP, effective July 1, 2005 and worth CHF 99.0 million. For 2005, Tecan achieved sales growthof 20.2% (2004: -5.5%) in local currency to CHF 344.9 million (2004: CHF 286.0 million). Despite stronggrowth, Tecan was able to generate good cash flow from operating activities. This resulted in a healthybalance 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, atCHF 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 101.8million (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 newproduct launches, Diagnostic sales grew to CHF 135.7 million (2004: CHF 113.0 million), which representsgrowth 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 theproduct 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 andmarketing 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 higherrecognized revenue. As a consequence of this set of measures and the takeover of REMP, operatingexpenses 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).

Chief Financial Officer’s statement

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, thisresulted in a negative financial result of CHF 4.8 million (2004: CHF +0.8 million). The tax rate in 2005increased to 30.4% (2004: 27.4%). This increase can mainly be attributed to the effect of under and over-provisioning 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 16.5million (2004: CHF -3.8 million). Nevertheless, notably in the second semester, Tecan achieved cash flowfrom operating activities of CHF 15.1 million (2004: CHF 29.7 million).

Dr. Rudolf Eugster,Chief Financial Officer


Operating and net profit

Sales by market

Sales by region

Research and development (gross)

2003 2004 2005

In C

HF

mill

ion

22.2 14.1 16.7 12.7 24.8 14.0

2003

In C

HF

mill

ion

2004 2005

51.7 37.1 40.8

16.6%

13.0%11.8%

% of sales

Operating profitNet profit

North AmericaEuropeAsia

Other

2003 2004 2005Total 311.6 Total 286.5 Total 344.9

135.

5

141.

9

30.5

3.7

120.

9

135.

4

27.6

2.1

158.

8

153.

0

27.0

6.1

In C

HF

mill

ion

Total 344.9

Genomics/Proteomics 29.6%

DrugDiscovery 31.1%

Diagnostics39.3%

101.8

107.4

135.7

In C

HF

mill

ion

7.1%

4.5%5.8%

7.2%

4.1%4.4% % of sales

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, Tecanspent CHF 40.8 million (2004: CHF 37.1 million), or 11.8% of sales (2004: 13.0%) on R&D. Excluding unusualitems, 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 putdown to the partial omission of R&D costs for the LabCD program at Tecan Boston, the lower level of R&Dat REMP, and the focus on core competencies.


Net liquidity

Manpower by activity (eop)

316

277158

168

128

Total 1047

General andadministration 12.2%

Research anddevelopment 16.0%

Customer service 15.1%

Manufacturingand logistics

30.2%

Selling andmarketing

26.5%

CHF 1,000 2003 2004 2005

+ cash and cash equivalents 67,622 40,165 42,645

./. current bank liabilities (39,831) (8,507) (14,744)

./. bank loans (1,735) (986) (60,988)

= net liquidity 26,056 30,672 (33,087)

Basic earnings per share

Cash flow from operating activities

2003

In C

HF/

shar

e

2004 2005

1.21 1.16 1.26

2003

In C

HF

mill

ion

2004 2005

44.7 29.7 15.1

Unchanged dividend

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

Dr. Rudolf EugsterChief Financial Officer

Five-year consolidated data

In CHF 1,000 2005 2004 2003 2002 2001

Income statementSales 344,900 285,975 311,606 332,180 362,675Operating profit 24,826 16,749 22,171 44,701 62,378Financial result -4,764 770 -1,834 -1,466 1,500Income taxes 6,108 4,795 6,254 10,427 18,789Net profit 13,954 12,724 14,083 32,972 45,093

Research and development, gross 40,762 37,101 51,689 44,572 48,029Personnel expenses 118,389 102,874 102,525 102,819 101,396Depreciation of property, plant and equipment 6,603 7,093 8,246 9,170 7,512Amortization of intangible assets 4,562 4,376 5,950 6,237 4,575Impairment losses 1,437 - 7,639 - -

Balance sheetCurrent assets 206,408 149,000 178,436 183,859 206,071Non-current assets 131,600 42,309 45,810 57,057 56,363Total assets 338,008 191,309 224,246 240,916 262,434Current liabilities 111,758 84,606 102,570 61,548 74,565Non-current liabilities 82,917 12,446 11,055 7,338 7,645Total liabilities 194,675 97,052 113,625 68,886 82,210Shareholders’ equity 143,333 104,802 110,621 172,030 180,224

Cash flow statementCash inflows from operating activities 15,117 29,712 44,695 43,999 32,345Capital expenditure in property, plant and

equipment and intangible assets 6,008 10,589 6,580 15,927 22,878Acquisitions, net of cash acquired 60,493 - - 4,191 2.692Dividends paid 4,815 4,993 5,344 5,807 4,534

Other dataNumber of employees (end of period) 1,047 865 812 872 915Number of employees (average) 1,026 834 838 904 855

Research and development in % of sales 11.8% 13.0% 16.6% 13.4% 13.2%Sales per employee 336 343 372 367 424

Data per share (CHF)*Net profit 1.26 1.16 1.28 3.00 4.11Shareholders’ equity 12.97 9.55 10.08 15.68 16.42

Dividends paid (CHF/share)** 0.45 0.45 0.45 0.45 0.45

* 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

26 | Annual Report 2005 | Five-year consolidated data

Consolidated balance sheet at December 31

Notes 2005 2004Restated

(see accounting In CHF 1,000 policies)

Assets

Cash and cash equivalents 3 42,645 40,165Trade accounts receivable 4 93,193 58,657Other accounts receivable 10,422 8,322Inventories 5 55,881 37,773Income tax receivable 554 849Prepaid expenses 3,713 3,234

Current assets 206,408 149,000

Financial assets 6 1,164 1,069Property, plant and equipment 7 23,091 17,037Intangible assets 8 92,375 9,973Deferred tax assets 24 14,970 14,230

Non-current assets 131,600 42,309

Assets 338,008 191,309

Liabilities and equity

Current bank liabilities 9 14,744 8,507Liability to repurchase own shares 10 - 9,969Trade accounts payable 14,121 12,845Other accounts payable 10,335 7,602Deferred revenue 11 30,880 19,127Income tax payable 3,044 2,242Accrued expenses 27,982 16,956Current provisions 12 10,652 7,358

Current liabilities 111,758 84,606

Bank loans 9 60,988 986Non-current provisions 12 11,833 6,674Deferred tax liabilities 24 9,301 4,136Other non-current liabilities 795 650

Non-current liabilities 82,917 12,446

Share capital 11,892 12,341Capital reserve 2,253 1,886Treasury shares (16,619) (63,916)Retained earnings 154,955 159,710Translation differences (9,148) (15,764)

Shareholders’ equity 14 143,333 94,257

Liabilities and equity 338,008 191,309

Consolidated financial statements | Annual Report 2005 | 27

Consolidated income statement

Notes 2005 2004Restated

(see accountingIn CHF 1,000 policies)

Sales 18 344,900 285,975

Cost of sales (184,968) (146,202)

Gross profit 159,932 139,773

Sales and marketing (60,438) (50,282)Research and development 21 (40,762) (37,101)General and administration (35,226) (36,156)Other operating income 22 1,320 515

Operating profit 24,826 16,749

Financial income 1,513 2,483Finance cost (3,241) (624)Foreign exchange losses (3,036) (1,089)

Financial result 23 (4,764) 770

Profit before taxes 20,062 17,519

Income taxes 24 (6,108) (4,795)

Net profit 13,954 12,724

Basic earnings per share (CHF/share) 26 1.26 1.16

Diluted earnings per share (CHF/share) 26 1.26 1.16

28 | Annual Report 2005 | Consolidated financial statements

Consolidated statement of changes in shareholders’ equity

TotalNotes Share Capital Treasury Retained Translation shareholders’

In CHF 1,000 capital reserve shares earnings differences equity

Shareholders’ equity at 13,107 15,561 (104,973) 198,605 (11,679) 110,621December 31, 2003

Effect of new/revisedaccounting standards:

IFRS 2 ‘Share-based Payment’ - - - (2,011) - (2,011)IAS 32 ‘Financial Instruments:

Disclosure and Presentation’ - - - (9,383) - (9,383)

Shareholders’ equity at January 1, 2004 (restated) 13,107 15,561 (104,973) 187,211 (11,679) 99,227

Net profit - - - 12,724 - 12,724Translation differences - - - - (4,085) (4,085)Total recognized income and

expense for the year 8,639

Dividends paid - - - (4,993) - (4,993)Share capital increase from

employee participation plan 14 81 3,854 - - - 3,935Share-based payments to

employees 13 - - - 720 - 720Cancellation of treasury shares 14 (847) - 36,857 (36,010) - 0Purchase and sale of treasury

shares (net) 14 - (17,529) 4,200 58 - (13,271)

Shareholders’ equity atDecember 31, 2004 (restated) 12,341 1,886 (63,916) 159,710 (15,764) 94,257

Shareholders’ equity atJanuary 1, 2005 12,341 1,886 (63,916) 159,710 (15,764) 94,257

Net profit - - - 13,954 - 13,954Translation differences - - - - 6,616 6,616Total recognized income and

expense for the year 20,570

Dividends paid - - - (4,815) - (4,815)Share capital increase from

employee participation plan 14 4 199 - - - 203Share-based payments to

employees 13 - - - 660 - 660Treasury shares issued due to

the acquisition of REMP Group 1 - - 31,820 (2,042) - 29,778Cancellation of treasury shares 14 (453) - 16,965 (16,512) - 0Sale of treasury shares 14 - 168 2,512 - - 2,680Exercise of written put option on

treasury shares 10 - - (4,000) 4,000 - 0

Shareholders’ equity atDecember 31, 2005 11,892 2,253 (16,619) 154,955 (9,148) 143,333

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


Consolidated cash flow statement

Notes 2005 2004In CHF 1,000 Restated

Net profit 13,954 12,724

Adjustments for:Depreciation and amortization (including impairment losses) 7, 8 12,602 11,469Change in provisions 12 3,214 1,702Financial result 23 4,764 (770)Income taxes 24 6,108 4,795Other non-cash items (3,469) 1,158

Change in working capital:Trade accounts receivable 4 (22,916) 4,002Inventories 5 (7,595) (7,081)Trade accounts payable (1,136) (1,600)Other changes in working capital (net) 15,152 8,519

Income taxes paid (5,561) (5,206)

Cash inflows from operating activities 15,117 29,712

Increase in financial assets 6 (34) (66)Interest received 1,316 574Purchase of property, plant and equipment 7 (4,960) (6,782)Proceeds from sales of property, plant and equipment 7 365 255Acquisition of REMP Group, net of cash acquired 1 (60,493) -Purchase of intangible assets 8 (1,048) (3,807)

Cash outflows from investing activities (64,854) (9,826)

Dividends paid (4,815) (4,993)Share capital increase from employee participation plan 203 3,935Purchase of treasury shares (10,000) (22,760)Proceeds from sales of treasury shares 1,249 9,618Interests paid (1,664) (418)Increase in bank liabilities due to the acquisition of REMP Group 9 68,000 -Decrease in other current bank liabilities (296) (1,695)Decrease in other bank loans (34) (726)

Cash in(out)flows from financing activities 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

Cash and cash equivalents at year-end 39,939 35,946

Cash and cash equivalents as per cash flow statement comprise:

Cash and cash equivalents as per balance sheet 3 42,645 40,165./. Bank overdrafts under bank pooling arrangements 9 (2,706) (4,219)

= Cash and cash equivalents as per cash flow statement 39,939 35,946


Summary of significant accounting policies

These financial statements are the consolidated financial statements of Tecan Group Ltd., a company registered inSwitzerland, 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 ofadvanced 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 statementsThe 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 thehistorical 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 dateof 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 assetsrecognized 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 taxesAt 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 incometaxes. Various internal and external factors may have favourable or unfavourable effects on the income tax assets andliabilities. These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changinginterpretations of existing tax laws or regulations and changes in overall levels of pre-tax earnings. Such changes thatarise could impact the assets and liabilities recognized in the balance sheet in the future periods.

Changes in accounting policiesThe accounting policies are consistent with those used in the previous year, except for the introduction of new InternationalFinancial 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 theamendments 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 AccountingStandards (‘Improvements Project’): IAS 1 ‘Presentation of Financial Statements’, IAS 2 ‘Inventories’, IAS 8 ‘AccountingPolicies, Changes in Accounting Estimates and Errors’, IAS 10 ‘Events after the Balance Sheet Date’, IAS 16 ‘Property, Plantand 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 JointVentures’, IAS 32 ‘Financial Instruments: Disclosure and Presentation’, IAS 33 ‘Earnings per Share’, IAS 39 ‘FinancialInstruments: Recognition and Measurement’ and IAS 40 ‘Investment Property’.


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, allemployees of the Group outside of the US received options (= equity-settled plans). Employees in the US received stockappreciation 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 changedits accounting policy as follows:

Equity-settled plansThe fair value of options granted is recognized as a personnel expense with a corresponding increase in equity. The fairvalue is measured at grant date and spread over the period during which the employees become unconditionally entitled tothe options (vesting period). The fair value of the options granted is measured using a binominal model, taking into accountthe terms and conditions upon which the options were granted. The amount recognized as an expense is adjusted by anexpected 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 vestedat the effective date of IFRS 2 (January 1, 2005).

Cash-settled plansThe fair value of the amount payable to the employee is recognized as a personnel expense with a corresponding increase inprovisions. The fair value is initially measured at grant date and spread over the period during which the employees becomeunconditionally entitled to payment (vesting period). The fair value of the SAR is measured based on a binominal model, takinginto account the terms and conditions upon which the instruments were granted. The provision is remeasured at each balancesheet 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 2004was 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 noliability 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 changesThe 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 insubstantial changes to the Group’s accounting policies.

Total impact on restated income statement 2004The previous year has been restated accordingly. The impact on the restated income statement was:

Total impactPut option on restated

In CHF 1,000 IFRS 2 (IAS 32) 2004 results

Cost of sales 721 - 721Sales and marketing 404 - 404Research and development 297 - 297General and administration 187 - 187Operating profit 1,609 - 1,609

Financial result (1,939) 135 (1,804)Income taxes 124 - 124

Total amount restated (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).


New standards and interpretations not yet appliedThere 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.

ReclassificationsSome 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 consolidationSubsidiaries are those companies controlled, directly or indirectly, by Tecan Group Ltd., where control is defined as the powerto govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. This control isnormally 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 theconsolidated balance sheet and consolidated income statement, respectively.

The companies, which are included in the consolidated financial statements, are listed in the notes to the statutoryfinancial 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 inpreparing the consolidated financial statements.

Foreign currency translationAll Group companies have identified their local currency as their functional currency. Transactions in other currencies are initiallyreported 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 (foreignentities) are translated into Swiss francs (presentation currency) using year-end exchange rates. Revenues, expenses andcash flows are translated at the average exchange rates for the year. Translation differences due to the changes in exchangerates between the beginning and the end of the year and the difference between net profits translated at the average andyear-end exchange rates are taken directly to equity. On the disposal of a foreign entity, the identified cumulative currencytranslation 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 statementCash and cash equivalents – Cash and cash equivalents comprise cash balances and time deposits with a term of 3 monthsor less from the date of acquisitions. Bank overdrafts that are repayable on demand and form an integral part of the Group’scash 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 lessimpairment 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 REMPare accounted for using the ‘percentage of completion’ method of IAS 11. The respective stage of completion is determinedas 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 projectsin progress – netted against customers’ advances – are recognized as net assets (included in the position ‘trade accountsreceivable’) or net liabilities (included in the position ‘deferred revenue’) from construction contracts. When it is probable thattotal 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 costsinclude raw materials, components and semi-finished products, direct production costs (internal labour and externalservices) and production overheads. The Group applies the weighted average cost method. Net realizable value is theestimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costsnecessary to make the sale. Provisions are made for slow-moving items. Obsolete items are written off.


Property, plant and equipment – Property, plant and equipment are stated at cost less accumulated depreciation (seebelow) and impairment losses (see separate accounting policy). The cost of self-constructed assets includes the cost ofmaterials, 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 areclassified as finance leases and capitalized at amounts equivalent to the estimated present value of the underlying leasepayments. The corresponding rental obligations, net of finance charges, are included in liabilities. Leased assets aredepreciated over their estimated useful lives. There were no items of property, plant and equipment under finance lease asper balance sheet date. Payments made under operating leases are charged against income on a straight-line basis over theperiod of the lease.

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of items ofproperty, plant and equipment from the date they are available for use. The estimated useful lives are as follows:

Land not depreciatedBuildings maximum 40 yearsLeasehold improvements shorter of useful life or lease termFurniture and fixtures 4 - 8 yearsMachines and motor vehicles 2 - 8 yearsEDP equipment 3 - 5 years

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separateitems 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 thatare 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 ofexchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group, in exchange forcontrol of the acquiree plus any costs directly attributable to the business combination. At the acquisition date (date onwhich the Group effectively obtains control of the acquire), the Group allocates the cost of a business combination byrecognizing the acquiree’s identifiable assets, liabilities and contingent liabilities at their fair value at that date. Anydifference between the cost of the business combination and the acquirer’s interest in the fair value of the identifiableassets, 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 businesscombination, the Group reassess the identification and measurement of the acquiree’s identifiable assets, liabilities andcontingent 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 withIFRS 3, IAS 36 and IAS 38, the Group no longer amortizes goodwill. Instead, goodwill is tested for impairment annually, ormore frequently if events or changes in circumstances indicate that there might be an impairment.

Other intangible assetsDevelopment costs – Expenditure on internal development activities, whereby research findings are applied to a plan ordesign 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 expenditurecapitalized includes the cost of materials and external project costs. Other development expenditure (including researchactivities, 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 initiallyat 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.


Intangible assets are stated at cost less accumulated amortization (see below) and impairment losses (see separateaccounting 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 intangibleassets. Intangible assets are amortized from the date they are available for use. The estimated useful lives are as follows:

Development costs 3 - 5 yearsSoftware 3 - 5 yearsAcquired client relationships 15 yearsAcquired technology 5 - 10 yearsAcquired order backlog 2 years

The brand name ‘REMP’ was initially assessed and recognized as an intangible asset with an indefinite useful life. Thereforethe 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 todetermine whether there is any indication of impairment. If such indication exists, the asset’s recoverable amount, beingthe higher of its fair value less cost to sell and its value in use, is estimated. An impairment loss is recognized in the incomestatement 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, lessattributable transaction costs. Subsequent to initial recognition, interest bearing loans and borrowings are stated atamortized 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 thenominal 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 amountcan 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, whichdiffer in their purpose and financing according to local needs. The provision for post-employment benefits relates to definedbenefit 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 estimatingthe 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 calculationis 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 thegreater of 10% of the present value of the defined benefit obligation or 10% of the fair value of plan assets, they areamortized over the average remaining working lives of the participating employees.


Past service cost attributable to plan amendments is recognized as an expense on a straight-line basis over the averageperiod until the benefits become vested. To the extent the benefits immediately vest, the costs associated with theamendment are recognized immediately.

A net pension asset is recorded only to the extent that it does not exceed the present value of any economic benefitsavailable in the form of refunds from the plan or reductions in the future contributions to the plan, or any unrecognizedactuarial losses and past service costs.

Long-service leave benefits: The method of accounting for liabilities concerning long-service leave benefits is similar to theone used for defined benefit pension plans.

Equity instruments Treasury shares – When own shares are purchased, the amount of the consideration paid, including directly attributablecosts 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 foreignexchange 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 isrecognized 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 applicationand installation work requires a written acceptance by the customer. Revenue from service contracts is recognized in theincome 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 theincome 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 thecarrying 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 insubsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax providedis based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using taxrates 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 thatit is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets arereduced 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 recoverablewithholding taxes).


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 Share capital ActivitiesLC 1,000

REMP AG Oberdiessbach (CH) CHF 4,000 S/R/P/D• REMP Deutschland GmbH Waldems (D) EUR 25 D• REMP (USA), Inc. Holliston, MA (US) USD 0 D• REMP Nippon AG Oberdiessbach (CH) CHF 100 D

(incl. branch office Tokyo)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 biotechindustries. 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 liabilitiesacquired have been included in the consolidated financial statements:

In CHF 1,000 1.7.2005 30.6.2005

Cash and cash equivalents 8,724 - 8,724Trade accounts receivable 7,573 - 7,573Other accounts receivable 1,936 - 1,936Inventories 5,867 1,150 4,717Income tax receivable 113 - 113Prepaid expenses 647 - 647Property, plant and equipment 9,269 - 9,269Intangible assets 33,510 30,990 2,520

Assets 67,639 32,140 35,499

Trade accounts payable 1,989 - 1,989Other accounts payable 666 - 666Deferred income 4,562 - 4,562Income tax payable 111 - 111Accrued expenses 3,204 - 3,204Current provisions 521 - 521Bank loans 23 - 23Non-current provisions 3,099 1,730 1,369Deferred tax liabilities 6,852 7,603 (751)

Liabilities 21,027 9,333 11,694

Identifiable assets and liabilities 46,612 22,807 23,805

Goodwill 52,383

Cost of the business combination 98,995

Cash acquired (8,724)Treasury shares issued (29,778)

Net cash outflow 60,493


Amounts of assets and liabilitiesincluded in the consolidated financial

statements at the acquisition date

Purchase price allocation according

to IFRS 3

Amounts of assets and liabilitiesacquired in accordance with IFRS,

immediately before the combination

The cost of the business combination is calculated as follows:

In CHF 1,000 1.7.2005

Purchase price paid in cash 67,653Purchase price paid in treasury shares

(726,300 shares* share price of CHF 41.- / share as at July 1, 2005 – date of exchange) 29,778Transaction costs 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 intangibleassets 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 consolidatednet profit for the year. If the acquisition had occurred on January 1, 2005, Group sales would have been CHF 364.3 millionand 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:

Balance sheet Income statementIn CHF 2005 2004 2005 2004

EUR 1 1.56 1.54 1.55 1.54GBP 1 2.27 2.18 2.26 2.28SEK 100 16.54 17.10 16.67 16.93USD 1 1.31 1.13 1.25 1.24JPY 100 1.11 1.10 1.13 1.15SGD 1 0.79 0.69 0.75 0.74

3. Cash and cash equivalents

In CHF 1,000 2005 2004

Analysis by currency:Denominated in CHF 10,329 2,625Denominated in EUR 23,007 25,117Denominated in GBP 2,712 2,518Denominated in USD 4,249 7,431Denominated in JPY 1,102 1,131Denominated in other currencies 1,246 1,343

Total 42,645 40,165

Thereof time deposits 8,051 5,782


4. Trade accounts receivable

In CHF 1,000 2005 2004

Receivables 93,867 60,111Allowance for doubtful accounts (1,224) (1,454)

Construction contracts in progressAggregate amount of cost incurred and recognized profits

(less recognized losses) 12,140 -Amounts of advances received (11,590) -Subtotal construction contracts in progress 550 -

Total 93,193 58,657

Changes in Group companies 7,573 -Increase / (decrease) 22,916 (4,002)Translation differences 4,047 (2,565)Total change compared with previous year 34,536 (6,567)

Amount of contract revenue recognized as sales in the income statement relating to construction contracts 14,437 -

5. Inventories

In CHF 1,000 2005 2004

Raw material and work in progress 24,960 17,785Semi-finished and finished goods 40,550 27,045Allowance for slow-moving inventories (9,629) (7,057)

Total 55,881 37,773

Changes in Group companies 5,867 -Increase 7,595 7,081Translation differences 4,646 (2,844)Total change compared with previous year 18,108 4,237

Amount of write-offs due to obsolete inventories charged to the income statement 2,758 1,865

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 2005 2004

Deposits 863 720Assets reserved for pension schemes 301 349

Total 1,164 1,069

Impairment on loans to third parties - (77)Increase 34 66Translation differences 61 (51)Total change compared with previous year 95 (62)


7. Property, plant and equipment

Leasehold MachinesLand & improve- Furniture & motor EDP Total

In CHF 1,000 buildings ments & fittings vehicles equipment 2005

At costBalance at January 1, 2005 - 6,927 9,465 17,172 18,557 52,121Acquisition through 7,963 51 169 441 645 9,269

business combinationsAdditions - 642 528 1,843 1,947 4,960Disposals - (102) (456) (3,400) (1,964) (5,922)Transfer - - - 8 (8) 0Translation differences - 375 399 545 828 2,147

Balance at December 31, 2005 7,963 7,893 10,105 16,609 20,005 62,575

Accumulated depreciationand impairment losses

Balance at January 1, 2005 - 2,727 6,488 10,855 15,014 35,084Annual depreciation 208 765 1,222 2,218 2,190 6,603Impairment losses (see note 19):

Closure of Tecan Boston - - - 1,437 - 1,437Disposals - (35) (436) (2,779) (1,900) (5,150)Transfer - - - - - 0Translation differences - 177 309 354 670 1,510

Balance at December 31, 2005 208 3,634 7,583 12,085 15,974 39,484

Net book value 7,755 4,259 2,522 4,524 4,031 23,091

Leasehold Machinesimprove- Furniture & motor EDP Total

In CHF 1,000 ments & fittings vehicles equipment 2004

At costBalance at January 1, 2004 7,224 9,554 16,285 19,936 52,999Additions 161 528 3,963 2,130 6,782Disposals (234) (312) (2,708) (2,968) (6,222)Transfer 3 (37) 3 31 0Translation differences (227) (268) (371) (572) (1,438)

Balance at December 31, 2004 6,927 9,465 17,172 18,557 52,121

Accumulated depreciationand impairment losses

Balance at January 1, 2004 2,179 5,753 10,799 15,806 34,537Annual depreciation 765 1,261 2,505 2,562 7,093Disposals (117) (291) (2,197) (2,924) (5,529)Transfer 2 (33) - 31 0Translation differences (102) (202) (252) (461) (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

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).


8. Intangible assets

Acquired Acquired Brandclient rela- Acquired order name Total

In CHF 1,000 Goodwill Software tionships technology backlog ‘REMP’ 2005

At costBalance at January 1, 2005 6,855 13,322 - - - - 20,177Elimination of goodwill

amortization (5,075) - - - - - (5,075)Acquisitions through business

combinations 52,383 218 16,634 9,586 482 6,590 85,893Additions - 1,048 - - - - 1,048Disposals - - - - - - 0Translation differences 23 - - - - - 23

Balance at December 31, 2005 54,186 14,588 16,634 9,586 482 6,590 102,066

Accumulated amortizationand impairment losses

Balance at January 1, 2005 5,075 5,129 - - - - 10,204Elimination of goodwill

amortization (5,075) - - - - - (5,075)Annual amortization - 3,092 554 594 322 - 4,562Impairment losses - - - - - - 0Disposals - - - - - - 0Translation differences - - - - - - 0

Balance at December 31, 2005 0 8,221 554 594 322 0 9,691

Net book value 54,186 6,367 16,080 8,992 160 6,590 92,375

TotalIn CHF 1,000 Goodwill Software 2004

At costBalance at January 1, 2004 23,604 9,515 33,119Additions - 3,807 3,807Disposals (16,671) - (16,671)Translation differences (78) - (78)

Balance at December 31, 2004 6,855 13,322 20,177

Accumulated amortization and impairment losses

Balance at January 1, 2004 20,058 2,482 22,540Annual amortization 1,729 2,647 4,376Disposals (16,671) - (16,671)Translation differences (41) - (41)

Balance at December 31, 2004 5,075 5,129 10,204

Net book value 1,780 8,193 9,973


The amortization charge is recognized in the following line items in the income statement:

In CHF 1,000 2005 2004

Cost of sales 322 -Sales and marketing 554 885Research and development 594 844General and administration 3,092 2,647

Total charges 4,562 4,376

Impairment tests for cash-generating units containing goodwillThe Group has performed an impairment test on goodwill end of June for Tecan production Switzerland and end ofDecember 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 businesscombination. For the impairment test, the recoverable amount of a cash-generating unit (higher of the cash-generatingunit’s fair value less costs to sell and its value in use) is compared to the carrying amount of the corresponding cash-generating unit. Future cash flows are discounted using a pre-tax rate that reflects current market assessments based onthe Weighted Average Cost of Capital (WACC) and the Capital Asset Pricing Model (CAPM). Value in use is normally assumedto be higher than the fair value less costs to sell, therefore, fair value less costs to sell is only investigated when value in useis 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 extrapolatedusing 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 Carrying amount Basis for Long-termgenerating of goodwill recoverable Discount Projection growthunit CHF 1,000 Currency amount rate period rate

REMP Group 52,383 CHF/EUR/USD Value in use 12.7% 5 years 1.0%Tecan production Switzerland 1,803 CHF/EUR Value in use 12.7% 5 years 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 GroupAmount of excess (+)/necessary impairment (-) in CHF million depending on

Discount rate11.7% 12.2% 12.7% 13.2% 13.7%

Growth rate 0.0% 9.4 4.3 (0.4) (4.7) (8.7)0.5% 12.8 7.4 2.4 (2.2) (6.5)1.0% 16.5 10.6 5.3 0.4 (4.0)1.5% 20.5 14.2 8.5 3.3 (1.4)2.0% 25.0 18.2 12.1 6.5 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 theasset is not subject to periodic amortizations, but is tested for impairment at least annually. For this purpose the recoverableamount 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 fiveyears 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.


9. Interest-bearing loans and borrowings

Due within within over

In CHF 1,000 2005 1 year 2-3 years 3 years 2004

Bank overdrafts under bank pooling arrangements 2,706 2,706 4,219Current maturities of non-current bank loans 8,680 8,680 4,258Other current bank liabilities 3,358 3,358 30Current bank liabilities 14,744 14,744 - - 8,507

Non-current bank loans 60,988 - 16,988 44,000 986

Total 75,732 14,780 16,988 44,000 9,493

Changes in Group companies 23 -Increase in bank liabilities due to the acquisition

of REMP Group 68,000 -Decrease in other bank liabilities (1,989) (31,703)Translation differences 205 (370)Total change compared with previous year 66,239 (32,073)

Analysis by currency:Denominated in CHF 70,570 2,898Denominated in EUR 1,648 1,952Denominated in USD 184 1,343Denominated in JPY 3,330 3,300

Total 75,732 9,493

Analysis by interest rates:Variable interest rates depending on LIBOR:- bank overdrafts under bank pooling arrangements 2,706 4,219- bank liabilities due to the acquisition of REMP Group 68,000 -

Fixed interest rates on other current and non-current bank liabilities are as follows:

0% - 2% 3,358 3,3302% - 4% 1,648 1,9444% - 6% - -6% - 8% 20 -

Total 75,732 9,493

In 2005 the average interest rate paid on the bank liabilities due to the acquisition of REMP Group was 2.1%. On bank loansthere 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).


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

Advance payments related to product sales recognized upon delivery or customer’s acceptance 14,954 10,840Deferred income related to service contracts 11,577 8,287

Construction contracts in progressAggregate amount of cost incurred and recognized profits (less recognized losses) (19,377) -Amount of advances received 23,726 -Subtotal construction contracts in progress 4,349 -

Total deferred revenue 30,880 19,127

Changes in Group companies 4,562 -Increase 6,101 9,833Translation differences 1,090 (518)Total change compared with previous year 11,753 9,315

12. Provisions

Cash-settledPost- share-based

employment paymentWarranties benefit plans transactions Total

In CHF 1,000 Restructuring & returns Legal cases (see note 13) (see note 13) Other 2005

Balance atJanuary 1, 2005 2,116 5,489 530 3,308 1,085 1,504 14,032

Changes in Group companies - 521 - 2,748 - 351 3,620

Provisions made 3,554 6,384 - 548 1,603 1,592 13,681Provisions used (2,641) (3,730) (16) (152) - (280) (6,819)Provisions reversed (530) (591) (87) (131) - (1,125) (2,464)Translation differences 57 344 6 18 - 10 435

Balance atDecember 31, 2005 2,556 8,417 433 6,339 2,688 2,052 22,485

Thereof current 1,024 8,417 - - - 1,211 10,652Thereof non-current 1,532 - 433 6,339 2,688 841 11,833


Cash-settledPost- share-based

employment paymentWarranties benefit plans transactions Total

In CHF 1,000 Restructuring & returns Legal cases (see note 13) (see note 13) Other 2004

Balance atJanuary 1, 2004 3,841 4,008 520 1,589 2,135 2,472 14,565

Provisions made 71 6,896 99 2,044 889 760 10,759Provisions used (1,328) (4,441) (52) (278) - (508) (6,607)Provisions reversed (420) (764) (30) (15) (1,939) (1,221) (4,389)Translation differences (48) (210) (7) (32) - 1 (296)

Balance atDecember 31, 2004 2,116 5,489 530 3,308 1,085 1,504 14,032

Thereof current 365 5,489 - - - 1,504 7,358Thereof non-current 1,751 - 530 3,308 1,085 - 6,674

The provisions for restructuring relate to the closing of the research and development sites in Munich (2005: CHF 1.9 millionand 2004: CHF 2.1 million) and Boston (2005: CHF 0.7 million and 2004: CHF 0 million; see also note 19). The provision forTecan Munich includes an amount of CHF 1.6 million (2004: CHF 1.8 million), which covers the non-cancelable leasecommitments 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 withformer 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 fordiscontinued 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 employed1,047 FTEs (2004: 865 FTEs).*(FTE = Full Time Equivalent)

Personnel expenses

Personnel expenses include the following:2005 2004

In CHF 1,000 Restated

Salaries and wages 95,736 81,916Social security 12,487 10,904Retirement benefits 4,626 4,918Share-based payments (equity- and cash-settled transactions) 1,080 1,609Other personnel expenses 4,460 3,527

Total personnel expenses 118,389 102,874


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 grantemployees 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 allSAR’s by cash payments:

Number ofEmployees entitled/ instruments/ Contractual

Arrangement grant date exercise price Vesting conditions life Expiry date

Plan 1999 Options granted to all 233,300 options Two/four years 5 years December 15, Equity-settled employees outside of USA CHF 50.00 of service for 50%/ 2004

at December 15, 1999 100% of options

Plan 1999 SARs granted to 108,000 SARs Two/four years 5 years December 15,Cash-settled employees in the USA CHF 50.00 of service for 50%/ 2004

at December 15, 1999 100% of SARs

Plan 2000 Options granted 212,840 options One/two/three/four years 5 years April 10, to all employees CHF 100.00 of service for 25%/50%/ 2005at April 10, 2000 75%/100% of options

Plan 2001 Options granted 139,720 options One/two/three/four years 5 years November 30,to all employees CHF 162.50 of service for 25%/50%/ 2005at November 30, 2000 75%/100% of options

Plan 2002 Options granted to all 121,344 options One/two/three/four years 11 years November 30,Equity-settled employees outside of USA CHF 99.00 of service for 25%/50%/ 2012

at November 30, 2001 75%/100% of options

Plan 2002 SARs granted to 53,512 SARs One/two/three/four years 11 years November 30,Cash-settled employees in the USA CHF 99.00 of service for 25%/50%/ 2012

at November 30, 2001 75%/100% of SARs

Plan 2003 Options granted to all 350,188 options One/two/three/four years 11 years November 30,Equity-settled employees outside of USA CHF 48.40 of service for 25%/50%/ 2013

at November 30, 2002 75%/100% of options

Plan 2003 SARs granted to 159,275 SARs One/two/three/four years 11 years November 30,Cash-settled employees in the USA CHF 48.40 of service for 25%/50%/ 2013

at November 30, 2002 75%/100% of SARs

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


The number and weighted average exercise prices of share options and SARs are as follows:

Weighted average Weighted averageexercise price (CHF) Number exercise price (CHF) Number

2005 2005 2004 2004

Options SARs Options SARs Options SARs Options SARs

Balance at January 1 88.83 61.00 540,973 144,339 81.96 57.96 704,726 212,508Granted 0 0 0 0 0 0 0 0Exercised 48.40 48.40 (1,869) (2,348) 49.28 49.24 (52,838) (27,823)Forfeited 51.92 53.43 (18,835) (10,681) 60.59 58.82 (26,750) (6,645)Expired 121.33 68.88 (247,913) (11,122) 65.14 52.00 (84,165) (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:

Remaining Remainingcontractual contractual

Exercise life (years) Number life (years) Numberprice 2005 2005 2004 2004

Options SARs Options SARs Options SARs Options SARs

Plan 2000 100.00 - - 0 0 0.3 - 129,761 0Plan 2001 162.50 - - 0 0 0.9 - 96,825 0Plan 2002 99.00 6.9 6.9 73,597 30,825 7.9 7.9 81,541 35,948Plan 2003 48.40 7.9 7.9 198,759 89,363 8.9 8.9 232,846 108,391

Balance at December 31 7.6 7.6 272,356 120,188 5.3 8.7 540,973 144,339

Exercisable at the end of the period 225,566 96,665 406,335 76,027

The total expenses relating to share-based payment transactions, recognized in the consolidated income statement, arecalculated as follows:

Equity-settled share-based paymentDue to the transitional provisions of IFRS 2 only the share options of plan 2003/equity-settled, which had not vested at the effectivedate 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 vestedtimes 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.


Fair value of share options and key assumptions:

Measurement date (= grant date)

Equity-settled Plan 2003

Share price CHF 48.40Exercise price CHF 48.40Expected volatility (historic) 38.00%Option life 11.0 yearsExpected dividends 0.84%Risk-free interest rate 2.83%Fair value CHF 23.37

Cash-settled share-based paymentDue to the transitional provisions of IFRS 2 only the SARs of plan 2002 / cash-settled fund plan 2003 / cash-settled, whichwere 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 theirfair value at grant date (measurement date). The estimate of the fair value is based on a binominal model. Changes of thefair value of the SARs after the grant date have an impact on the provision for cash-settled share-based payment and areposted to the financial result.

Fair value of SARs and key assumptions:

Measurement date 2005 2004 (= grant date)

Cash-settled Plan 2003 Plan 2002 Plan 2003 Plan 2002 Plan 2003 Plan 2002

Share price CHF 57.50 CHF 57.50 CHF 35.00 CHF 35.00 CHF 48.40 CHF 99.00Exercise price CHF 48.40 CHF 99.00Expected volatility (historic) 38.00% 38.00% 38.00% 38.00% 38.00% 38.00%Option life 7.9 years 6.9 years 8.9 years 7.9 years 11.0 years 11.0 yearsExpected dividends 0.70% 0.70% 1.30% 1.30% 0.84% 1.00%Risk-free interest rate 2.34% 2.29% 2.50% 2.40% 2.83% 3.55%Fair value CHF 27.20 CHF 14.07 CHF 11.70 CHF 5.12 CHF 23.37 CHF 48.52

Total expenses/income recognized2005 2004


Share options granted in 2002 (Plan 2003/equity-settled) 660 720Expenses arising from SARs granted in 2001 (Plan 2002/cash-settled) 92 234Expenses arising from SARs granted in 2002 (Plan 2003/cash-settled) 328 655

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.


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 benefitplan under IAS 19. Actuarial calculations for the Swiss pension plan identified an excess of projected benefit obligationsover plan assets amounting to CHF 1.6 million as at January 1, 2004. This amount of past service costs was charged topersonnel expenses on January 1, 2004.

The provisions for post-employment benefits are related to the following plans:

In CHF 1,000 2005 2004

Number of plans:Funded plans 4 1Unfunded plans 5 5

Number of persons covered:Active participants 554 420Retirees 0 0

The amounts recognized in the balance sheet are as follows:Present value of funded obligations 46,944 26,932Fair value of plan assets (39,206) (25,337)Subtotal 7,738 1,595Present value of unfunded obligations 2,287 1,904Unrecognized actuarial losses (3,691) (216)Unrecognized past service cost 5 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 3,315 2,179Employees’ contributions (1,473) (1,105)Interest expense on obligations 1,210 958Expected return on plan assets (1,107) (747)Amortization of actuarial losses 22 2Past service cost (25) 1,570

Total 1,942 2,857

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

Movements in the liability recognized in the balance sheet are as follows:Liability at January 1 3,308 1,589Changes in Group companies 2,748 -Net expense recognized in the income statement 1,942 2,857Employers’ contribution (1,682) (1,107)Translation differences 23 (31)

Liability at December 31 6,339 3,308

Principal actuarial assumptions at the balance sheet date (expressed as weighted averages):Discount rate at December 31 2.8% 3.2%Expected return on plan assets at December 31 3.5% 3.5%Future salary increases 1.6% 1.8%Future pension increases 0.5% 0.7%Expected average remaining working lives of the participating employees (years) 11.7 12.2


14. Shareholders’ equity

The changes in shareholders’ equity are disclosed in the ‘consolidated statement of changes in shareholders’ equity’.

Dividends paid:2006 (proposed) 2005 2004

Number of shares with right to dividend 10,699,576 11,095,055Paid dividend per share, CHF 0.45 0.45 0.45

Movements in shares outstanding :Shares Treasury Shares

Number (each share has a nominal value of CHF 1.-) issued shares outstanding

Balance at January 1, 2004 13,106,945 (2,047,030) 11,059,915

Issue of new shares from conditional share capital (employee profit sharing program, see below) 80,661 - 80,661

Cancellation of treasury shares (847,000) 847,000 0Purchase of treasury shares - (563,000) (563,000)Sale of treasury shares - 187,000 187,000

Balance at December 31, 2004 12,340,606 (1,576,030) 10,764,576

Issue of new shares from conditional share capital(employee profit sharing program, see below) 4,217 - 4,217

Acquisition of REMP Group (see note 1) - 726,300 726,300Cancellation of treasury shares (453,000) 453,000 0Purchase of treasury shares - (100,000) (100,000)Sale of treasury shares - 35,000 35,000

Balance at December 31, 2005 11,891,823 (461,730) 11,430,093

Conditional share capital reserved for the employee profit sharing program:

Number (each share has a nominal value of CHF 1.-) 2005 2004

Balance at January 1 1,112,394 1,193,055Employee share options exercised (see note 13) (4,217) (80,661)

Balance at December 31 1,108,177 1,112,394

Employee share options outstanding (see note 13) 392,544 685,312

15. Financial instruments

Credit risksThe individual companies and the Group as a whole have no significant concentration of credit risks, as financial instrumentcontracts are concluded exclusively with first-rate financial institutions. The credit risk associated with trade accounts receivableis limited, as the Group has numerous clients located in various geographical regions. The maximum exposure to credit risk isrepresented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet.

Interest rate risksBank borrowings primarily bear variable interest rates. There are no significant differences between fair values and carryingamounts of interest-bearing liabilities.


Foreign currency risksThe Group incurs foreign currency risks on sales, purchases, borrowings and investments denominated in a currency otherthan the functional currency of the respective subsidiaries. On a consolidated basis, the Group is also exposed to currencyfluctuations between the Swiss Franc and the functional currencies of its subsidiaries. The two major currencies giving riseto 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 theforeign 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 contractshave maturities of up to 12 months. The Group does not hedge its net investment in foreign entities and the related foreigncurrency translation of local earnings. Similarly, the Group does not hedge interest exposures. The derivative financialinstruments used as economic hedges of foreign currencies are summarized in the table below. They are recognized atfair value as prepaid and accrued expenses respectively.

Fair value Contract valuePositive Negative Total Due within

In CHF 1,000 3 months 3-12 months

Foreign currency forwardsDenominated in USD:Purchase 260 - (2,620) (2,620) -Sale - (2,358) 43,230 10,480 32,750

Total 2005 260 (2,358) 40,610 7,860 32,750Total 2004 289 0 37,290 9,040 28,250

16. Rental and lease commitments

The commitments arising from operating leases are largely rental payments for buildings.

Commitments under non-cancelable operating leases:

In CHF 1,000 2005 2004

Due date:Due in 1st year 7,214 6,611Due in 2nd year 6,070 5,986Due in 3rd year 5,434 5,376Due in 4th year 4,949 4,784Due in 5th year 4,906 4,641Due in or beyond 6th year 3,647 5,701

Total 32,220 33,099

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 theGroup’s assets were pledged, assigned or subject to retention of title, except for the following position:

Pledged assets:

In CHF 1,000 2005 2004

Cash and cash equivalent (bank pooling arrangement) 11,830 5,954Shares of REMP AG, pledged to secure bank loans (amount of consolidated net assets) 46,885 -


18. Segment information

The primary segmentation is indicated by geographical region. Intersegment transactions are conducted based onprevailing 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 Europe Asia Corporate/ GroupConsolidation

In CHF 1,000 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004

Sales to third parties 131,826 118,684 202,384 152,925 10,690 14,366 - - 344,900 285,975Intersegment sales 37,191 9,379 110,714 64,404 - - (147,905) (73,783) - -Total sales 169,017 128,063 313,098 217,329 10,690 14,366 (147,905) (73,783) 344,900 285,975

Operating profit (2,783) 6,538 39,064 6,381 (1,846) 472 (9,609) 3,358 24,826 16,749

Segment assets 82,546 55,917 269,208 115,998 5,805 7,439 (78,884) (44,358) 278,675 134,996Unallocated assets 59,333 56,313Total assets 338,008 191,309

Segment liabilities 43,782 24,152 98,462 58,395 2,282 3,242 (40,616) (15,662) 103,910 70,127Unallocated liabilities 90,765 26,925Total liabilities 194,675 97,052

Depreciation and amortization (1,148) (1,389) (9,817) (9,989) (200) (91) - - (11,165) (11,469)

Impairment losses - - (1,437) - - - - - (1,437) -

Purchase of property,plant and equipment 1,271 1,202 3,424 4,814 265 766 - - 4,960 6,782

Purchase of intangible assets - - 1,048 3,807 - - - - 1,048 3,807

No significant non-cash expenses other than depreciation of property, plant and equipment and amortization of intangibleassets were incurred.

Sales by regions (by location of customers)

North America Europe Asia Others TotalIn CHF 1,000 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004

Sales to third parties 158,840 120,937 153,041 135,399 26,978 27,552 6,041 2,087 344,900 285,975Change in local currency

versus the prior year in % 30.4 (3.6) 12.8 (5.2) (1.5) (9.9) 188.6 (44.4) 20.2 (5.5)

Sales by markets

Genomics/Proteomics Drug Discovery Diagnostics TotalIn CHF 1,000 2005 2004 2005 2004 2005 2004 2005 2004

Sales to third parties 101,780 81,522 107,447 91,497 135,673 112,956 344,900 285,975Change in local currency

versus the prior year in % 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 individualmarkets. A mathematical allocation would not result in reliable or meaningful information.


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 1,437Sales and marketing 130Research and development 2,929General and administration 445

Total charges 4,941

Thereof impairment losses on property, plant and equipment (included in cost of sales) 1,437Thereof provisions for restructuring 3,504

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

Change in Settlementpension scheme payment Total

In CHF 1,000 (see note 13) former CEO 2004

Position of income statement:

Cost of sales 607 - 607Sales and marketing 204 - 204Research and development 440 - 440General and administration 319 1,356 1,675

Total charges 1,570 1,356 2,926

20. Operating expenses by nature

2005 2004In CHF 1,000 Restated

Material costs 120,658 92,275Personnel expenses 118,389 102,874Depreciation of property, plant and equipment 6,603 7,093Amortization of intangible assets 4,562 4,376Impairment losses 1,437 -Other operating income and expenses (net) 68,425 62,608

Total operating expenses 320,074 269,226


21. Research and development


External project costs 14,286 12,072Internal costs 25,882 24,185Amortization of Goodwill arising from R&D driven acquisitions - 844Amortization of acquired technology 594 -

Total research and development (gross) 40,762 37,101

Government research subsidies (1,059) (154)

Total research and development (net) 39,703 36,947

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 1,059 154Other operating income (miscellaneous) 279 361Other operating expense (miscellaneous) (18) -

Total other operating income 1,320 515

23. Financial result


Interest income 1,513 544Other - 1,939Financial income 1,513 2,483

Interest expenses (2,026) (412)Impairment - (77)Other (1,215) (135)Finance cost (3,241) (624)

Net foreign exchange losses (3,036) (1,089)

Total financial result (4,764) 770

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.


24. Income taxes


Current income taxes 6,621 4,889Deferred taxes (513) (94)

Total income taxes 6,108 4,795

The income tax expense can be analyzed as follows:

Profit before taxes 20,062 17,519

Tax expense based on the Group’s average rate of 32.2% (2004: 29.2%) 6,462 5,116

Non-deductible expenses and additional taxable income 2,078 1,037Tax-free income and tax reductions (1,880) (1,365)Tax loss carry-forwards not capitalized (466) 419Under (over) provided in prior years 319 (853)Effect of tax rate change on opening deferred taxes (405) 441

Tax expense reported 6,108 4,795

Deferred tax assets and liabilities are attributable to the following:Change 2005 2005 2004


Receivables (1,403) 200 1,603Inventories 3,754 7,958 4,204Property, plant and equipment 552 (134) (686)Intangible assets (7,535) (7,518) 17Liabilities and accrued expenses (643) 1,301 1,944Provisions 1,546 1,919 373Other 1,253 (1,258) (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 (337) (413) (76)- potential tax benefits from tax loss carry-forwards (1,612) 3,614 5,226

Total net deferred tax assets (4,425) 5,669 10,094

Changes in Group companies (6,852) -Deferred taxes recognized in the income statement 513 94Deferred taxes recognized directly in equity 1,431 (129)Translation differences 483 (315)Total change compared with previous year (4,425) (350)

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


Tax loss carry-forwards:

Gross value oftax loss carry-forwards Potential

not capitalized tax benefitsIn CHF 1,000 2005 2004 2005 2004

Expiring in:1st year - -2nd year - -3rd year 105 6394th year - 1975th year - -6th year or beyond - 1,121Unlimited 3,509 3,269

Total tax loss carry-forward capitalized 3,614 5,226

Expiring in:1st year - - - -2nd year - - - -3rd year 11 - 3 -4th year 36 - 9 -5th year 1 - 0 -6th year or beyond 65 - 16 -Unlimited 2,212 2,700 738 1,427

Total tax loss carry-forward not capitalized 2,325 2,700 766 1,427

Total tax loss carry-forward 4,380 6,653

Deferred taxes are included in the balance sheet as follows:


Deferred tax assets 14,970 14,230Deferred tax liabilities (9,301) (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 theboard 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 2,998 2,392Post-employment benefits 214 179Termination benefits - 1,356Share-based payment 47 111

Total compensation 3,259 4,038

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


26. Earnings per share

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

2005 2004Restated

Number of shares issued 11,891,823 12,340,606

Number of treasury shares 461,730 1,576,030

Average number of shares outstanding (see note 14) 11,055,136 10,973,936

Basic earnings per share (CHF/share) 1.26 1.16

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 0 0

Average number of shares after dilution 11,055,136 10,973,936

Diluted earnings per share (CHF/share) 1.26 1.16

27. Subsequent events

No events have occurred subsequent to the balance sheet date, which would require adjustments to or disclosures in theseconsolidated 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 onpages 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 anopinion on these consolidated financial statements based on our audit. We confirm that we meet the legal requirementsconcerning 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 theconsolidated financial statements are free from material misstatement. We have examined on a test basis evidencesupporting the amounts and disclosures in the consolidated financial statements. We have also assessed the accountingprinciples 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 ofoperations 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 Stefan DürmüllerSwiss Certified Accountant Swiss Certified AccountantAuditor in Charge

Zurich, March 1, 2006


Balance sheet at December 31

In CHF Notes 2005 2004

Assets

Cash and cash equivalents 1,211,418 1,419,735Other accounts receivable from third parties 694,732 724,995Other accounts receivable from Group companies 19,175,085 15,241,740Current loans to Group companies 355,239 1,690,327Current loans to Group companies subordinated 18,000,000 18,000,000Prepaid expenses 261,393 356,956

Current assets 39,697,867 37,433,753

Financial assets 2 175,189,100 84,778,717Treasury shares 3 16,160,550 55,161,050Property, plant and equipment 432,138 611,536Intangible assets 6,366,825 8,192,600

Non-current assets 198,148,613 148,743,903

Assets 237,846,480 186,177,656

Liabilities and equity

Current bank liabilities 8,937,012 2,851,083Other liabilities to third parties 1,459,472 3,195,389Other liabilities to Group companies 579,373 1,045,886Current provisions - 6,500,000Current tax liabilities 409,254 761,520Accrued expenses 5,996,754 3,617,912

Current liabilities 17,381,865 17,971,790

Bank loans 60,000,000 -Non-current provisions 24,950 -

Non-current liabilities 60,024,950 -

Share capital 11,891,823 12,340,606Legal reserves 36,562,977 87,860,455Retained earnings 111,984,865 68,004,805

Shareholders’ equity 4 160,439,665 168,205,866

Liabilities and equity 237,846,480 186,177,656

Tecan Group Ltd. | Annual Report 2005 | 59

Income statement

In CHF 2005 2004

Dividend income from Group companies 9,276,000 8,448,000Interest income from third parties 817,354 104,987Interest income from Group companies 3,032,483 3,322,283Financial income 7,424,280 2,188,899Management fees from Group companies 23,583,210 23,011,366Gain on disposal of non-current assets - 437Other income - 2,701,528

Income 44,133,327 39,777,500

Personnel expenses (9,642,610) (9,518,044)Depreciation of property, plant and equipment (287,028) (344,874)Amortization of intangible assets (2,874,087) (675,778)Other expenses (9,740,049) (10,687,734)Financial expense (8,738,652) (12,087,366)

Expenses (31,282,426) (33,313,796)

Profit before taxes 12,850,901 6,463,704

Income taxes (391,297) 50,485

Net profit 12,459,604 6,514,189

60 | Annual Report 2005 | Tecan Group Ltd.

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 InternationalFinancial Reporting Standards (IFRS). While the consolidated financial statements reflect the economic situation of theGroup 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 forthe decision regarding the distribution of earnings to be made during the annual general meeting of shareholders.

2. Financial assets

In CHF 2005 2004

Investments in subsidiaries 151,047,678 50,550,876Non-current loans to Group companies 22,621,422 32,687,841Non-current loans to Group companies subordinated 1,520,000 1,540,000

Total 175,189,100 84,778,717

Overview of investments in subsidiaries (direct and indirect)

Company Domicile Currency Share capital Activities

Tecan Schweiz AG Männedorf (CH) CHF 5,000,000 R/PTecan Trading AG Männedorf (CH) CHF 300,000 S/DTecan Sales Switzerland AG Männedorf (CH) CHF 250,000 DREMP AG Oberdiessbach (CH) CHF 4,000,000 S/R/P/D- REMP Deutschland GmbH Waldems (D) EUR 25,000 D- REMP (USA), Inc. Holliston, MA (US) USD 0 D- REMP Nippon AG (incl. branch office Tokyo) Oberdiessbach/Bern (CH) CHF 100,000 DTecan Austria GmbH Grödig/Salzburg (A) EUR 1,460,000 R/PTecan Sales Austria GmbH Grödig/Salzburg (A) EUR 35,000 DTecan Sales International GmbH Grödig/Salzburg (A) EUR 35,000 DTecan Landesholding GmbH Crailsheim (D) EUR 25,000 S- Tecan Deutschland GmbH Crailsheim (D) EUR 51,129 D- Tecan Software Competence Center GmbH Mainz-Kastel (D) EUR 103,000 RTecan Benelux B.V.B.A. Mechelen (B) EUR 137,000 DTecan France S.A.S. Lyon (F) EUR 2,760,000 DTecan Iberica Instrumentacion S.L. Barcelona (E) EUR 30,000 DTecan Italia S.r.l. Milano (I) EUR 77,469 DTecan UK Ltd. Reading (GB) GBP 500,000 DTecan Nordic AB Mölndal/Gothenburg (S) SEK 100,000 DTecan US Group, Inc. Raleigh-Durham, NC (US) USD 1,500,000 S- Tecan US, Inc. Raleigh-Durham, NC (US) USD 400,000 D- Tecan Systems, Inc. San Jose, CA (US) USD 26,000 R/P- Tecan Boston, Inc. Medford/Boston, MA (US) USD 0 RTecan Japan Co., Ltd. Tokyo (Jap) JPY 125,000,000 DTecan Asia (Pte.) Ltd. Singapore (Sin) SGD 800,000 D

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).


3. Treasury shares

Number (each share has a nominal value of CHF 1.-) 2005 2004

Balance at January 1 1,576,030 2,047,030Purchase of treasury shares 100,000 563,000Sale of treasury shares (35,000) (187,000)Cancellation of shares for the purpose of capital reduction (453,000) (847,000)Acquisition of REMP Group (726,300) -

Balance at December 31 461,730 1,576,030

Thereof allocated to the share buy-back program for capital reduction - 453,000

Average price of shares purchased, CHF 100.00 40.43Average price of shares sold, CHF 35.70 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 capitalreduction of CHF 36,856,640).

4. Changes in shareholders’ equityLegal reserves

Reserve for Totaltreasury share-

Share General shares Retained holders’In CHF capital reserve (see note 3) earnings equity

Shareholders’ equity at January 1, 2004 13,106,945 19,944,124 108,972,720 55,436,267 197,460,056

Net profit - - - 6,514,189 6,514,189Dividends paid - - - (4,992,775) (4,992,775)Share capital increase from

employee participation plan 80,661 - - 6,000,375 6,081,036Share capital decrease (see note 3) (847,000) - (36,856,640) 847,000 (36,856,640)Change in reserve for treasury shares - - (4,199,749) 4,199,749 0

Shareholders’ equity at December 31, 2004 12,340,606 19,944,124 67,916,331 68,004,805 168,205,866

Net profit - - - 12,459,604 12,459,604Dividends paid - - - (4,814,809) (4,814,809)Share capital increase from

employee participation plan 4,217 - - 439,787 444,004Share capital decrease (see note 3) (453,000) - (16,964,566) 1,562,566 (15,855,000)Change in reserve for treasury shares - - (34,332,912) 34,332,912 0

Shareholders’ equity at December 31, 2005 11,891,823 19,944,124 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 generalmeeting. 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 sharingprogram. The conditional share capital consists of 1,300,000 registered shares with a nominal value of CHF 1 each. Since1999, based on this conditional capital, employee stock option plans have been introduced. As of December 31, 2005, theconditional share capital amounted to CHF 1,108,177 (2004: CHF 1,112,394) and 392,544 options not yet exercised wereoutstanding in connection with the employee stock option plans (2004: 685,312 options).


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 putoption 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, 2005:2005 2004

BB Medtech AG, Schaffhausen (CH) 10.2% < 5%Fidelity Management & Research Company, Boston (US) 5.8% 5.6%UBS Fund Management (Switzerland) AG, Basel (CH) 5.4% < 5%Schweizerische Unfallversicherungsanstalt (SUVA), Lucerne (CH), 7.7% 7.5%Tecan Group Ltd < 5% 12.8%The Capital Group Companies Inc., Los Angeles (US) < 5% 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 2005 2004

Cash and cash equivalent (bank pooling arrangement) 645,694 334,370Participation REMP AG 98,994,754 -

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 significantIT 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.


Appropriation of available earnings

As proposed by the board of directors to the annual general meeting of shareholders on April 26, 2006:

2005 2004In CHF Proposed Approved

Carried forward from previous year 63,189,996 50,443,492

Net profit 12,459,604 6,514,189Share capital increase from employee participation plan 439,787 6,000,375Share capital decrease 1,562,566 847,000Change in reserve for treasury shares 34,332,912 4,199,749

Available earnings 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) (4,814,809)

45% dividend on the Company’s share capital of CHF 11,891,823 at December 31, 2005* (5,351,320)45% dividend on employee stock options which may be exercised before the date

of dividend payment, totaling 322,231* (145,004)

Balance to be carried forward 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.


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 onthese financial statements based on our audit. We confirm that we meet the legal requirements concerning professionalqualification and independence.

Our audit was conducted in accordance with Swiss Auditing Standards, which require that an audit be planned andperformed 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 havealso 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 earningscomply 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 Stefan DürmüllerSwiss Certified Accountant Swiss Certified AccountantAuditor in Charge

Zurich, March 1, 2006

Tecan Group Ltd | Annual Report 2005 | 65

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 theTecan group.

The Company is listed on the SWX Swiss Exchange.Security symbol: TECNSecurity number: 1 210 019ISIN: CH0012100191Telekurs Financial: TECNBloomberg: TECN SWReuters: TECN.SAt 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 thisAnnual Report. The operational group structure is organized according to the geographical regions Europe, America andAsia, as well as to the business areas Genomics/Proteomics, Drug Discovery and Diagnostics. The segment reportingaccording 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:

2005 2004Shares % Shares %

BB Medtech AG, Schaffhausen (CH) 1,212,780 10.2% < 5%Schweizerische Unfallversicherungsanstalt (SUVA), Lucerne (CH)1 920,000 7.7% 920,000 7.5%Fidelity Management & Research Company, Boston (US)1 687,115 5.8% 687,115 5.6%UBS Fund Management (Switzerland) AG, Basle (CH) 645,570 5.4% < 5%Tecan Group Ltd. < 5% 1,576,030 12.8%The Capital Group Companies Inc., Los Angeles (US) < 5% 777,041 6.3%

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.1no 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.

66 | Annual Report 2005 | Corporate governance

2. Capital structure

Capital structure of Tecan Group Ltd. as per December 31

2005 2004 2003

Registered shares with a nominal value of CHF 1Number 11,891,823 12,340,606 13,106,945Nominal value CHF 11,891,823 12,340,606 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

Shareholders’ equity CHF 160,439,665 168,205,866 197,460,056

Conditional share capital CHF 1,108,177 1,112,394 1,193,055

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 hasneither bearer shares, nor participation certificates nor bonus certificates outstanding. The Company does not haveauthorized share capital.

Conditional share capital – changes in capitalIn 1997, the Company’s shareholders approved a conditional share capital of CHF 1,300,000 (consisting of 1,300,000 registeredshares 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 theseplans are given in the consolidated financial statements, note 13 “Employee benefits”. Due to the exercise of 4,217 optionsduring the financial year 2005 (2004: 80,661 options; 2003: 30,870 options), the Company’s share capital was increased andthe 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 sharecapital 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, whichled 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 registrationRegistration with voting rights in the Company’s share register is conditional on shareholders declaring that they haveacquired the shares in their own name and for their own account. No shareholder is registered with voting rights for morethan 5% of the share capital. The Board of Directors of the Company may register nominees for up to 2% of the sharecapital as shareholders with voting rights in the share register. Nominees are persons who do not explicitly declare in theapplication for registration that they will hold the shares for their own account, and with whom the Company has enteredinto a corresponding agreement. Further, for shares in excess of 2% of the share capital, the Board of Directors may registernominees with voting rights in the share register, if such nominees disclose the names, addresses, nationalities andshareholdings 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 underreview. The procedures and conditions for canceling these limitations on transferability are described in section 6.

Corporate governance | Annual Report 2005 | 67


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, 1989to 1997 and Vice-President of Global Operations in 1998. In 1999, he was CEO ofZLB, and between 2000 and 2002, CEO of the Asklia Group. Since 2003, he hasbeen 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 ofTechnology), MS and PhD in Business Administration (University of Zurich)


Professional background: Between 1967 and 1975, he worked as a managementconsultant at McKinsey & Company in Zurich and Chicago. He was CEO atDr. 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)


Professional background: Various senior management positions within BaxterInternational (USA) including President of the Biotech Group, 1992 to 1997,Chairman of Baxter Europe, 1997 to 1999 and Senior Vice-President of Strategyand Business Development, 1999 to 2002. He was member of the ExecutiveCommittee 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 BaxterInternational, USA.


Gérard Vaillant

1942, US citizen, Degree in Marketing (École Supérieure de Commerce, Paris) and MS (University of Sciences, Paris)


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 CompanyGroup Chairman Diagnostics Worldwide 1995 to 2004. He was member of theMedical Devices & Diagnostics Group Operating Committee of J&J until heretired 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)


Professional background: He was a Scientific Assistant at the Institute ofPhysics, 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 ofTechnology, 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 andEconomics (University of St. Gallen)


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 varioussenior management positions at Moevenpick AG, the last of which was ChiefFinancial Officer as well as Member of the Board.

Other activities: Partner, topwork ag; Autogrill Switzerland AG, Board member;NovoGel Holding AG, Board member.

IndependenceAll the members of the Board of Directors are non-executive members. None of the Board members has important businessconnections with Tecan Group Ltd. or any other group company, unless explicitly disclosed under item 5, below. None of theBoard members was formerly a member of the management of Tecan Group Ltd. or any group company prior to the periodunder 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 responsibilitiesAccording to the Company’s Articles of Incorporation, the Board of Directors shall be composed of at least one and not morethan 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 itsnontransferable responsibility. To the extent permitted by law and insofar as no contrary provision is made in the Company’sArticles of Incorporation and Organizational Regulations adopted by the Board of Directors, the management of theCompany’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 uponinvitation of the Chairman, or, in his absence, upon invitation of another Board member. All Board members are entitled torequest 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 anabsolute majority of votes of the Board members present. In the event of a tie, the Chairman of the Board has the castingvote. Resolutions may be passed by means of circulars, unless a member requests discussion in a formal meeting. Thecommittees 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.

CommitteesThe Board of Directors may appoint from amongst its members committees for the preparation and implementation of itsresolutions and for exercising its supervision function. The committees meet upon invitation of the respective chairmanand as often as business requires. They make resolutions and proposals to be presented to the entire Board of Directorswith a majority of votes cast, provided that at least two committee members are present. Resolutions may also be passedby means of circulars. The Board of Directors has established three committees which are composed as follows:

Nomination & Audit Committee Compensation Committee Innovation Committee

Mike Baronian Member

Prof. Dr. Armin Seiler Member Member

Timothy B. Anderson Chairman

Gérard Vaillant Member Member Member

Prof. Dr. Peter Ryser Chairman

Cleto De Pedrini Chairman


Audit CommitteeThe 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 itsactivities, 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 CommitteeThe majority of members of the Nomination & Compensation Committee must be non-executive and independent Boardmembers. The principal tasks and responsibilities of the Nomination & Compensation Committee are to prepare andsubmit to the full Board of Directors proposals on the amount and form of remuneration of the members of the Board ofDirectors, the CEO, and the other members of the Management. The Nomination & Compensation Committee gathersreports on salary structure and development and monitors disclosure obligations with regard to the remuneration of theManagement and Board of Directors. Moreover, the Nomination & Compensation Committee approves the employmentof any staff who reports directly to the CEO and proposes the appointment of the CEO to the Board of Directors.

Innovation CommitteeThe Innovation Committee comprises at least three members, and the majority must be independent Board members. Thecommittee meets as often as necessary, and at least twice a year. The principal tasks and responsibilities of the InnovationCommittee are, in short, to provide the Board of Directors with a general understanding of the technological developmentand technical innovations, to make recommendations as to priorities and resource allocation in connection with technicaldevelopments and to advise the Board of Directors on principle issues in conjunction with technology and products, forinstance in case of M&A transactions, joint ventures, cooperations, etc. The Innovation Committee regularly invites internaland external specialists.

Information and controlling instruments:To monitor the group’s financial situation and its evolution, the Board of Directors continually receives reports via thegroup’s Management Information System. To limit and control treasury risks, regulations for treasury affairs are in place.



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, RieterCorporation, Spartanburg, USA; 1989 to 1993: Director Global Sales, Rieter SyntheticFiber Machinery (Global responsibility for sales and marketing to establish anddevelop markets in North America, India and Asia). 1994 to 1999: ManagingDirector, Rieter Synthetic Fiber Machinery, Winterthur, and Rieter Automatik,Grossostheim, Germany; 2000 to 2002: Senior Vice-President – CorporateDevelopment, 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), Postgraduatedegree 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 IsolaComposites, a joint venture between Von Roll and Isola AG.

Other activities: none

Günter Weisshaar

1960, Swiss citizen, training in Airplane Engineering, Quality Assurance andManagement (IGW St. Gallen)

Function: Executive Vice-President, General Manager Quality Assurance andRegulatory Affairs Tecan Group since March 2003

Professional background: until 1988: Several positions in the field of qualityassurance at various companies. 1988 to 1997: Manager, Quality Assurance andLogistics at Schöttli AG. 1998 to 1999: Manager, Quality Engineering, Schneider(Europe) AG. 1999 to 2003: Manager, Quality Assurance Europe at Jomed AG.



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 DevelopmentTecan 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 ofGestle AG, Chur. 1982 to 2001: Head of Research and Development at HamiltonBonaduz AG, Bonaduz.


Jan Timmers

1962, Dutch citizen, Degree in Biochemistry and Clinical Chemistry

Function: Executive Vice-President, General Manager Product Development andMarketing Tecan Group

Marketing manager at Tecan Schweiz and Tecan Austria since November 1992,Head of Business Development and manager of the Biopharma and ClinicalDiagnostics 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.


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 atAscom 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: GeneralManager, Studer AG, Thun. 1997 to 1999: Head of Osteosynthesis Production withsites in Switzerland, Austria and India, Mathys AG, Bettlach; 1999 to 2002:Managing Director, Mikron Comp-Tec AG, Nidau.


Bruno Portmann

1966, Swiss citizen, Degree in Electrical Engineering (Abendtechnikum derInnerschweiz, ATIS), Executive MBA (University of St. Gallen)

Function: Executive Vice-President, General Manager Logistics and ProductionTecan 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: Memberof Management Board at ESEC SA, Cham, with responsibility for Operations.


4.2 Main group company managers and corporate managers

Year Joined Function and professional eduction Nationality of birth Tecan in

Steve Levers Head of Tecan Systems Degree in Finance (San José US 1954 1997State University) and MBA (University of Santa Clara)

Michael Illek Head of Tecan Austria Degree in Mechanical Engineering German 1965 1998(College of Applied Sciences, Giessen)

Carl Severinghaus Head of Tecan US Degree in Communications US 1952 1991(Drake University, Des Moines, Iowa)

Martin von Lueder Head of Tecan Europe Qualified industrial manager German 1957 1985(Böblingen)

Shigeyuki Kaji Head of Tecan Japan Qualified electrical engineer Japanese 1951 2005(Osaka Technical College)

Christopher Hanan Head of Business Development, Swiss/US 1969 2004Corporate Communications and Investor RelationsDegree in Business Administration (Georgetown University), MBA (Harvard Business School)

Andreas Wilhelm Corporate Legal Counsel, Secretary of the Board of Directors Swiss 1969 2004Attorney-at-Law (University of Berne), LL.M. (Boston University)

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 asdecisions 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 Committeeand 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 variablesalary component, in turn, comprises one part that is dependent on the success of the Company, and another part that is linkedto personal achievement.

The Company’s “Variable Pay Regulation” was passed by the Board of Directors, and forms the basis for this remunerationscheme. The company targets are set out in advance on an annual basis by the Board of Directors. Personal targets are agreedwith 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 salarycomponent to be paid to each member of the Executive Committee for the previous year, together with the fixed salary andthe level and composition of the variable salary component for the next financial year. The Nomination & CompensationCommittee may revise the proposal before submitting it to the Board of Directors, which then takes the final decision.

Compensation paid2005 2004

Members CHF 1,000 Members CHF 1,000

Non-executive members of the Board of Directors in total* 6 565 6 473Executive members of the Board of Directors and members

of the Executive Committee* 8 2,297 7 1,769Severance payment to former CEO - 1 1,356* There were no executive members of the Board of Directors in the years under review


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 anyrelated 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 2000 0 5,180related parties in total 2001 0 3,390

2002 3,390 3,3902003 7,629 10,170

Executive members of the Board of Directors and members 2000 0 0of the Executive Committee and related parties in total* 2001 0 1,760

2002 0 2,3502003 2,513 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 launchedbetween 1999 and 2002, including the year of grant, expiration date, subscription ratio and exercise price, can be found inthe 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 CHF174,904 (incl. VAT) for recruitment services. Cleto De Pedrini is a partner at topwork ag. No other material additional feesand/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 atan Annual General Meeting more than 5% of the aggregate voting rights in the Company. This voting restriction does notapply to the independent voting representative nor to a proxy holder appointed by the Company (“Organvertreter”). TheBoard of Directors may, in negotiation with banks, agree exceptions to the voting restrictions to enable voting rights fordeposited 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 shareholderwith 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 majorityrequirements prescribed by law, a shareholders’ resolution taken by a qualified majority of at least two thirds of the votesrepresented 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);


- 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 writingno later than 56 days prior to an Annual General Meeting that an item be included on the agenda. Shareholders representing10% 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 beconvened at least 20 days prior to the Meeting. Moreover, the invitation is published in the Swiss Official Gazette ofCommerce. From the day on which the invitations for the Annual General Meeting are dispatched, no further entries aremade 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 May 28, 1997 (date of acceptance) Date on which the head auditor took up office 2004

Fees paid

In CHF 1,000 2005 2004

Total audit fees 702 540(Sub group REMP was audited by PWC. These audit fees are included in the amount stated.)

Total tax consulting fees KPMG 202 127Total other consulting fees KPMG 23 40

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

9. Information policy

It is Tecan’s policy to keep shareholders and the financial community updated regarding significant developments inbusiness operations. This policy is primarily implemented through regular press releases, quarterly and annual financialreports and information provided on the Company’s website: www.tecan.com. Hardcopies of Company publications areavailable 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.htmhttp://www.tecan.com/index/com-ir/com-ir-inve_cale.htmhttp://www.tecan.com/index/com-ir/com-ir-corp_present-entry.htm

For mail/phone requests, please contact:Tecan Group AGAnnabelle BrameshuberManager Corporate Communications and Investor Relations


Seestrasse 103CH-8708 Männedorf

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

Contents

1. Tecan at a glance 2. Message to shareholders 6. Market overview12. Liquid handling and robotics 14. Detection 16. Sample management18. Components20. Customer service

22. Chief Financial Officer’s statement26. Five-year consolidated data

Consolidated financial statements27. Consolidated balance sheet at December 3128. Consolidated income statement29. Consolidated statement of changes in shareholders’ equity30. Consolidated cash flow statement31. Summary of significant accounting policies37. Notes to the consolidated financial statements58. Report of the group auditors to the general meeting of shareholders

Tecan Group Ltd.59. Balance sheet at December 3160. Income statement61. Notes to the financial statements64. Appropriation of available earnings65. Report of the statutory auditors to the general meeting of shareholders

Corporate governance66. Group structure and shareholders67. Capital structure68. Board of Directors 72. Management74. Compensations, shareholdings and loans75. Shareholders’ participation rights76. Changes of control and defense measures76. Auditors76. Information policy

77. Tecan locations


Tecan locations

Liquid Handling and Robotics• Tecan Switzerland Ltd.

Seestrase 103CH-8708 MännedorfSwitzerlandT +41 44 922 89 22F +41 44 922 89 23

Detection• Tecan Austria GmbH

Untersbergstrasse 1aA-5082 Grödig/SalzburgAustriaT +43 62 46 89 33F +43 62 46 72 770

Components• Tecan Systems, Inc.

2450 Zanker RoadSan JoseCA 95131USAT +1 408 953 3100F +1 408 953 3101

Sample Management• REMP AG

Weststrasse 12CH-3672 OberdiessbachSwitzerlandT +41 31 770 70 70F +41 31 770 72 66

• Tecan Deutschland GmbHTheodor-Storm-Strasse 17D-74564 CrailsheimGermanyT +49 79 51 94 170F +49 79 51 50 38

• Tecan US, Inc.P.O. Box 13953Research Triangle ParkNC 27709USAT +1 919 361 5200F +1 919 361 5201

• Tecan Group Ltd., BeijingRepresentative OfficeRoom 2502, Building AJianwai SOHO#39 DongsanhuanZhong Road100022 BeijingChinaT +86 10 5869 5936F +86 10 5869 5935

• Tecan Japan Co. Ltd.Kawasaki Tech Center580-16, Horikawa-choSaiwai-ku, KawasakiKanagawa 212-0013JapanT +81 44 556 7311F +81 44 556 7312

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

• REMP (USA), Inc.150 Hopping Brook RoadHollistonMA 01746USAT +1 508 429 2200F +1 508 429 1754

• REMP Nippon AGJapan BranchKawasaki-Tech CenterBldg.17F580-16, Horikawa-choSaiwai-ku, Kawasaki-shiJapan 212-0013T +81 44 542 7021F +81 44 542 7022

• REMP Deutschland GmbHAuf der Lind 10D-65529 WaldemsT +49 6126 58 31 0F +49 6126 58 31 29

Tecan Business Units

Tecan Market Units

Sales and Service Organizations

Annual Report 2005

Tecan Group

Seestrasse 103

CH-8708 Männedorf

www.tecan.com

Tel +41 44 922 88 88

Fax +41 44 922 88 89

Corporate Communications

and Investor Relations

Annabelle Brameshuber

Marketing Communications

and Branding

Cornelia Kegele

Design

OTM, London

www.otmcreate.com

Photography

Susanne Völlm, Zürich

www.susannevoellm.ch

Marc Wetli, Zürich

www.wetli.com

Selected product photography

Günter Bolzern, Zürich

www.bolzern.net

Text

KDM Communications, UK

www.kdm-communications.com

Print

Südostschweiz Druck, Chur

www.so-print.ch

Documents

| Annual Report · Annual Report2005 Tecan Group Seestrasse 103 CH-8708 Männedorf Tel +41 44 922 88 88 Fax +41 44 922 88 89 Corporate Communications and Investor Relations Annabelle