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    WE DEVELOP OUR FUTURE… ANNUAL REPORT 2007


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    Contents 2 Message to the shareholders 6 Strategy 10 Innovation 12 Markets Life science research Forensics In vitro diagnostics 16 Business Review Components & Detection Liquid Handling & Robotics Sample Management 20 Sustainability 22 Employees 24 Corporate Governance 36 Chief Financial Officer’s Report 40 Five-year consolidated data 41 Consolidated financial statements 78 Financial statements of Tecan Group Ltd. 88 Locations and contacts About Tecan Tecan is a leading global supplier of laboratory instruments and solutions for the biopharma, forensic and diagnostic industries. The company specializes in the development, production and distribution of automation solutions for life science laboratories. Through its REMP subsidiary, Tecan is the premier supplier of automated laboratory storage and logistics systems. Its customers include pharmaceutical and biotechnology companies, university research departments and diagnostic laboratories. Founded in Switzerland in 1980, the company owns production, research and development sites in both North America and Europe and maintains a sales and service network in 52 countries. Vision Tecan will be the preferred supplier for leading life science companies and laboratories on all continents, whenever they source their current and future needs for state-of-the-art workflow solutions. Tecan will be in every Laboratory. Mission To delight our customers by exceeding their expectations, aiming for the highest customer satisfaction and retention in our industry. To contribute to the quality of life of humankind by enabling our customers to make the world and our community a healthier and safer place. To create continuous, sustainable shareholder value and to be the employer of choice in our industry.


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    2007 Key figures CHF million 2005 2006 2007 s06/07 Sales 344.9 405.9 414.4 + 2.1% Gross profit 159.9 193.3 212.4 +9.9% in % of sales 46.4 % 47.6 % 51.3 % R&D 40.7 39.0 41.1 +5.2% in % of sales 11.8 % 9.6 % 9.9 % OPEX 135.1 142.5 152.1 + 6.7% in % of sales 39.2 % 35.1 % 36.7 % Operating profit/EBIT 24.8 50.9 60.3 + 18.6% in % of sales 7.2 % 12.5 % 14.6 % Net profit 14.0 40.6 52.4 + 28.9% in % of sales 4.0 % 10.0 % 12.6 % EPS (CHF) 1.26 3.54 4.54 + 28.2% 2007 Financial summary Sales 2005 – 2007 Profitability / productivity 2005 – 2007 (CHF million) (CHF million) 60.3 1.43 (NAVI) 52.4 1.4 405.9 414.4 50.9 1.38 400 -11.8% 50 344.9 +50.5% 40.6 1.3 40 300 +1.8% 30 24.8 1.21 1.2 200 20 -7.1% 14.0 1.1 100 10 0 0 1.0 2005 2006 2007 2005 2006 2007 North America Europe Asia Rest of world Operating profit (EBIT) Net profit Net Added Value Index (NAVI) Net Added Value Index (NAVI) = (EBIT + personnel expenses)/personnel expenses Operating profit (EBIT) and net profit margin (% of sales) 14.6% 15 Sales by business segments 12.5% 12.6% (CHF million) 10.0% 10 114.4 Components & Detection 7.2% 27.6% 5 4.0% 37.4 Sample Management 9.0% 262.6 Liquid Handling & Robotics 0 63.4% 2005 2006 2007 EBIT Net profit


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    Annual Report 2007 Products Our product highlights 2007 Our innovative and reliable products and technology serve scientists in the life science, forensic and diagnostic industries. The following selection represents just a few of our most successful products to make an impact in 2007. Freedom EVO® Infinite® M1000 The Freedom EVO series of modular liquid handling plat- The newest addition to our acclaimed Infinite series of readers, forms and robotic workstations deals with routine laboratory the M1000 offers highest sensitivity performance for a broad tasks and can be adapted to satisfy the exacting demands of all spectrum of applications. It can be upgraded with new detec- our markets. The Freedom EVO series also gives our customers tion modes at any time, making it ideal for drug discovery in the option to expand their systems in the future should the the biopharmaceutical industry, as well as for research labora- need arise. tories with multiple users and ever-changing applications. REMP Small-Size Store™ (SSS) HydroFlex™ The REMP SSS is a fully automated, high performance sample The HydroFlex™ platform is the first microplate washer capable storage and retrieval system that stores and manipulates com- of automating separation techniques as well as plate washing pounds in life science and biotechnology settings. It copes easily protocols.This compact instrument gives scientists more options with increases in numbers and throughputs of compounds and to automate key steps in many laboratory processes, increasing is an ideal entry-level storage solution. their productivity and providing them with reliable results.


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    Tecan Annual Report 2007 Abbott OEM m2000sp Components The m2000sp System is a fully automated OEM Instrument for The innovative new robotic component gives our customers the RNA- and DNA- sample preparation. It provides automatic work- security of knowing exactly what the product is doing at all flow, contamination control, use of barcoded primary sample times. This critical subassembly is designed to be easy to confi- tubes and a process newly developed by Abbott. gure and integrate into our customers’ many different systems, making it the ideal next generation OEM robotics component. HS 4800™ Pro Disposable tips This hybridization system represents the very latest technology Tecan’s high quality disposable tips for precise, reliable and safe for automated reproducible microarray slide processing in the pipetting are designed and manufactured to meet the most field of genomics. These systems are designed to integrate the stringent quality requirements, using computer-controlled manu- entire experimental process, while meeting different through- facturing systems and state-of-the-art production processes. put needs.


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance Message to the shareholders Tecan once again looks back on a successful year. We continued to increase our sales and for the third consecutive year achieved a marked rise in profitability, achieving historical record levels of net profit and EPS. This strong result is largely attributable to our successful product portfolio, increased market presence and ongoing efforts to further strengthen our operating efficiency. 2007 also saw the continued implementation of our strategic priorities, setting a path for the future development of Tecan. Sales increased over the previous year CHF 13.0 million. Excluding this project, nesses are continuing to adjust their in- organically to CHF 414.4 million. The ex- Tecan would have posted organic sales ternal processes to more rapidly respond pansion of Tecan’s business was espe- growth of 5.5% in 2007. This was slightly to market demands and we successfully cially strong in Asia and sales in Europe ahead of the overall market growth. launched multiple new products such also saw a positive development while as the Infinite M500 and M1000 readers our US based business declined slightly Continued progress in strategy and our 96 MCA (Multi Channel Pipet- due to a more challenging environment implementation ting Arm) that were very well received by as a result of the currently prevailing 2007 also saw us making significant the markets. In addition, we continue our macroeconomic factors. We continue to strides in implementing our strategy. push into new applications and workflow put a major emphasis on this region and Our decision to focus more heavily on solutions. A good example here is our are actively addressing the challenges. our OEM business in addition to our end- project for the production of monoclonal This includes strengthening the sales user business was unanimously viewed antibodies with Monash University in organization and increasing our mar- as a positive development by all current Australia, one of the most advanced sys- keting efforts. However, we view the and potential new customers. In addition, tems of its kind. challenges in the US both structurally and we have made significant internal invest- on an exchange rate basis as continuing ments in further strengthening our capa- during the current year. bilities in this area. As previously communicated, sales in On the innovation front, we have created the year 2006 were impacted by an a group dedicated to developing advanced extraordinary project in the amount of strategic technologies. Also our busi- 2


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    Tecan Annual Report 2007 «Tecan achieved record figures in key performance indicators in the 2007 financial year» Mike Baronian Thomas Bachmann Chairman of the Board Chief Executive Officer 3


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance We have further strengthened our ma- We completed multiple strategic alli- cial result. Net profit increased by 28.9% nagement development activities with ances, such as our cooperations with to CHF 52.4 million or 12.6% of sales. Both the introduction of dedicated training companies like Applied Biosystems, GE performance indicators are records in sessions throughout the organization. Healthcare or pIon in the fields of foren- Tecan’s history. The same is true of ear- Furthermore, 2007 saw the development sics, protein crystallization and drug per- nings per share, which rose by 28.2% to and rollout of our corporate vision, mis- meability. Finally, we executed multiple CHF 4.54. sion and values. We believe that these strategic licensing transactions for high guidelines take us a long way in achieving impact intellectual property. Segment reporting adds further a new clarity of purpose throughout our transparency global organization. Marked increase in profitability and The 2007 financial year is the first time we record net profit and EPS are publishing sales and earnings figures 2007 also was a busy year for our M&A Earnings before interest and taxes (EBIT) based on individual business segments. activities. We were actively involved in increased by 18.6% to CHF 60.3 million. The segments are described in detail in numerous opportunities, with some of This corresponds to an EBIT margin of the «Business Review» section of this an- them moving to advanced stages. How- 14.6% compared to 12.5% for the previous nual report. ever, we did not finalize a transaction. year. Tecan was thus able to increase its Our internal processes in this area require operating earnings at a significantly high- Components & Detection posted sales in strict adherence to both, financial and er rate than sales for the third consecutive 2007 of CHF 124.0 million. Thanks to new strategic guidelines and we extend the year. This achievement is primarily due to products and a successful turnaround in discipline from our operational sphere the steps taken since 2005 to improve Japan, this business segment recorded also to our acquisition activities. Thus, operating efficiency. Innovative products encouraging growth. EBIT amounted to some of the targets did not meet our with higher margins, price and cost disci- CHF 11.6 million or 9.3% of sales. internal benchmarks while others deci- pline, and a more advantageous product ded to exit the processes themselves. No mix also helped Tecan to outperform the Liquid Handling & Robotics saw a further acquisitions were lost to competitors and market and achieve an outstanding EBIT rise in profitability although the sales we continue to believe that Tecan’s ex- level. trend was impaired by a cancellation. This ceptionally strong financial, strategic and business segment posted EBIT of CHF operational capabilities position us well Another highlight was the net profit de- 56.9 million on sales of CHF 264.6 million, to create value through strategic invest- velopment. Tecan posted strong growth resulting in a strong EBIT margin of 21.5%. ments. External growth continues to be a in this indicator driven by the higher EBIT, strategic priority of the company. a lower tax rate and an improved finan- « Thanks to a consistently solid operating performance and a healthy balance sheet, our company is well positioned for further internal and external growth» 4


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    Tecan Annual Report 2007 « Based on the positive results, the Board of Directors will recommend an additional payout to shareholders» Sample Management secured two ma- Additional payout to shareholders; Outlook for 2008 jor contracts of strategic importance in Board to propose additional share In 2008, Tecan will continue to focus on Japan in 2007 and slightly increased buyback program securing its long-term growth and imple- sales to CHF 39.9 million. EBIT declined to Based on the positive results and the menting its strategy. Towards this end, CHF 0.1 million, or 0.4% of sales in the year strong balance sheet, the Board of Direc- we are actively working on expanding under review largely driven by the costs tors will recommend to the shareholders our market coverage not only in the high- for global marketing as well as substan- at the annual Shareholders’ Meeting of growth Asian and Near- & Middle East tial investments in research and develop- April 23rd 2008 that once again an addi- markets but also in the New EU countries. ment for a new modular system to store tional payout to shareholders be made. Our customer application teams will con- biological samples. It is our belief that the This payout will consist of a dividend tinue to be strengthened, especially in biological sample market is an exciting of CHF 0.45 per share and a repayment the areas of cellular biology and geno- emerging opportunity to further leverage based on a reduction in nominal value of mics. Finally we will continue to further Sample Management’s unique techno- an additional CHF 0.45 per share. As such, strengthen our OEM development and logy. In addition, our focus is clearly on and similar to 2006, the total payout to supply capabilities and convert a healthy improving operational efficiency to ad- shareholders will amount to CHF 0.90 pipeline into actual projects and actively dress the currently still unsatisfactory le- per share. work on the development of new con- vels of profitability. sumables. In addition, the Board of Directors intends Strong balance sheet as a solid to recommend the initiation of an addi- If challenges in the overall US economy foundation for further growth tional share buyback program once the do not worsen or spread to other eco- Despite the ongoing share buyback pro- current program is terminated. Our strong nomic regions, Tecan expects increased gram, our equity ratio rose from 50.2% to financial position allows us to pursue our sales for 2008 and an operating return at 54.7%. Tecan once again recorded excel- acquisition strategy while a second share the same level as the previous year. lent cash flows from operating activities buyback program will result in the elimi- and high levels of net liquidity. Thanks nation of the repurchased shares and will Our gratitude to a consistently solid operating perfor- allow us to immediately create additional Our success in the 2007 financial year mance and a healthy balance sheet, our value for our shareholders without com- would not have been possible without company is well positioned for further promising our mid- to long-term strate- the commitment of our employees and internal and external growth. gic priorities. This program is contingent the trust of our customers, shareholders on the extension of the authorized share and business partners. On behalf of the capital. Board of Directors and the Executive Committee, we would like to extend our sincere thanks to all of you. Männedorf, March 14, 2008 Mike Baronian Thomas Bachmann Chairman of the Board of Directors Chief Executive Officer 5


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance We develop our future… …by implementing a strategy geared to the rapid pace of scientific progress. The life science sector is growing dynamically. Research and new industrial and clinical applications demand ever more efficient and sophisticated solutions for laboratories. CEO Thomas Bachmann explains the growth opportunities the current market offers and how Tecan plans to utilize them. 6


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    Tecan Annual Report 2007 Mr. Bachmann, Tecan saw another to use in pharmaceutical and medical ap- Does the company plan to achieve these sharp rise in profitability in 2007, but plications. Research is also more broadly objectives on its own? growth was rather modest. Is Tecan in based than before. New market players Thomas Bachmann: We intend to collabo- a period of stagnation? are constantly emerging, especially bio- rate even more closely with customers Thomas Bachmann: Not at all. Over the tech firms and universities. At the same and outside development partners such next several years, Tecan will strive to time, legal regulations on research and as universities and research institutions maintain a growth rate higher than the medicine are becoming increasingly rigor- and expect fresh impetus for innovation market as a whole and to protect and ous and the calls for standardization and from those efforts. On the industrial side, strengthen its profitability. Our objective regulatory discipline ever more insistent. we enter into carefully selected coopera- in recent years was to put Tecan on a so- Our customers must prepare themselves tion and licensing agreements. Our goal is lid financial footing and define a strategy to meet all these challenges and we can to maintain a focused range of products for long-term profitable growth. We have help them do so with innovative compre- and services and to distinguish ourselves been working hard to put that strategy hensive solutions. in our core areas of expertise. In order to in place since 2007. The progress we offer our customers total solutions, we have made so far indicates we are on How exactly do you intend to leverage are looking for reagent and other instru- the right track. these trends? ment manufacturers with whom we can Thomas Bachmann: One of our key stra- enter into cooperative development and What makes you so confident that Tecan tegic goals is to maintain a high rate of marketing agreements. has the right strategy? innovation. We will substantially shorten Thomas Bachmann: Our strategy is based our innovation cycles for individual prod- Which customer segments does Tecan on a thorough analysis of market trends. ucts. We must be able to provide intelli- intend to target in particular? We have identified macro trends that gent integrated solutions by intimately Thomas Bachmann: One strength we can open up avenues for achieving above- understanding our customers’ work flow. build on is our well-established direct average growth. Some of these trends These solutions can take the form of in- business segment. We see potential in the are demographic, others economic. With struments, software packages or applica- need for further automation of sample the spread of globalization, our custom- tion knowledge as well as Services and preparation procedures in a wide variety ers have shifted their activities to new re- Consumables. Tecan draws great strength of applications. We are also developing gions. That, in turn, has allowed us to gain from the breadth and depth of its tech- new geographic markets and adding to a foothold in additional markets. Other nology portfolio. We have also changed our consumables business. Our goal is to drivers are the dynamic changes in the our organizational structures to utilize strengthen customer loyalty by offering life sciences. Our growing understanding our own areas of expertise even more ef- innovative products and excellent service of the human genome has unleashed fectively. and advice. In the direct business, our ef- a flood of new knowledge and insights, forts are aimed at consolidating our posi- which are only just beginning to be put tion as the market leader. « A core objective of the strategy is to achieve a continuously high rate of innovation» 7


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance Tecan is already the market leader in however, this business is very stable due What makes Tecan attractive most product segments. Doesn’t this to the effort and expense involved in any for investors? status limit the company’s possibilities change. Thomas Bachmann: Tecan has steadily in- for growth? creased its revenue and income in recent Thomas Bachmann: We do in fact have Public health care is in trouble in many years. We have a clear strategy for long- large shares of the direct business market. countries. Politicians are calling for term profitable growth. Tecan is a leading But there is great potential in OEM busi- dramatic cost cuts. Doesn’t that pose a market player in all product areas. The ness. To date, diagnostic companies largely threat for Tecan? company generates a significant cash flow covered their needs for laboratory equip- Thomas Bachmann: Many of our custo- and obtains a strong return on capital em- ment themselves. Increasingly, however, mers are undoubtedly being told to cut ployed. It has a solid financial base. Our fi- they are refocusing on their core compe- costs and increase efficiency. We can help nancial reporting is very transparent and tencies and outsourcing process steps them do so in many respects: laboratory we engage in an intensive dialog with the requiring IT and engineering expertise automation has a great leverage effect financial community. Our products, which to specialized suppliers. This large mar- in reducing costs. Fast, reliable testing really do improve people’s lives, as well as ket is still underdeveloped. Internally, we processes can help clinical operations the strong fundamentals of our markets, are taking the necessary steps to develop avoid many unnecessary interventions. should be a decisive criterion for long- attractive solutions for OEM customers. Research and development in the phar- term investors. We expect to see this new segment boost maceutical industry also become less growth at Tecan from 2011 onward. expensive when throughput times are shortened and results can be generated Why will it take so long for OEM business more reliably and efficiently. to bring about this desired growth? Thomas Bachmann: Outsourcing requires major changes on the part of custom- ers. Tecan will also be required to make special efforts initially. First, we have to attract new customers and develop in- struments for them. Then we have to get these instruments approved in regula- tory testing procedures and launch them on the market. It takes four years from customer acquisition to product launch. Once the new products are established, « Our products, which really do improve people’s lives should be a decisive criterion for long-term investors» Thomas Bachmann Chief Executive Officer 8


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    Tecan Annual Report 2007 Tecan’s 7 strategic Key Imperatives Strengthening Shaping Stretching our current business our market space our boundaries Core business Future growth drivers Strategic aspirations • Setting the foundation • Developing our future growth drivers • Creating new markets for future growth • Creating new applications –1– –5– –7– Regain and sustain Build the leading OEM business Ensure participation and leadership innovation leadership based on dedicated products within in emerging fields of genomic –2– our targeted segments & cell-based research and testing Create an organization geared –6– towards performance, possessing Build a strong consumables business the sense of urgency, clarity of and drive enabling content purpose and skills to succeed –3– Become an effective executor of alliances, partnerships and acquisitions –4– Strengthen and maintain leadership in the core platform/direct business 9


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance We develop our future… …by applying our knowledge, creativity and initiative to achieve innovation. We are working in a field that is highly advanced and develops at a rapid pace. Innovation is a central part of Tecan’s strategy and we are taking the necessary steps to maintain our position at the forefront of technology and ideally serve our customers. 10


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    Tecan Annual Report 2007 Tecan is and always will be an innovation­ opment, coupled with our core competen­ Tecan’s new MultiChannel Arm™ 384 for driven company and, in 007, we have cies in advanced robotics, detection and the Freedom EVO® workstations is an taken several new measures throughout software, delivers the strongest results. excellent example of our improved in­ the organization to further strengthen For example, the Components segment novation processes in action. This latest our innovation capabilities. has developed two new product lines this liquid handling module was developed year with direct input from customers. to directly address new requirements As a completely new approach, we have These products, which represent a new from the market, giving customers established an Innovation and Incuba­ generation in liquid handling and robotic accuracy and efficiency for state­of­the­ tion Group that is tasked with looking modules, were designed with quality and art high throughput applications, as well at advanced, strategic technologies and reliability – the key drivers in this busi­ as the flexibility to switch rapidly and at how collaborations with universities, ness – in mind from the very start. The easily between different pipetting confi­ research institutes and other centers of response from early access customers has gurations. Our new solution was develo­ excellence can benefit our development been extremely positive as a result. ped in association with an external part­ pipelines. Early achievements of this team ner, resulting in a faster, more efficient include projects focusing on research that Similarly, the Detection business segment and cost­effective development cycle. either spans multiple business segments visited a number of key customers at the or may bring us into new markets, for beginning of new development projects, example, licensing brand new technolo­ garnering detailed information about gies and testing their feasibility for suc­ workflows and technical challenges, but cessful commercialization. also getting a strong idea of how the cus­ tomer thinks and works into the heads of We continually scan the market for new the people developing the products. ideas, and especially for more opportuni­ ties to establish beneficial collaborative For the Sample Management team, the agreements with third parties. Working emphasis for innovation in 007 was on Simultaneous pipetting of 384 wells with external partners in many capacities the Sample Safe, the compact –80 °C is helping to accelerate our development store for biological samples. As well as After talking to customers at length, the cycles, reduce costs and make the whole developing the technical innovation to development team added extra functio­ process far more efficient. work with such low temperatures, the nality to existing technology, and crea­ team had to immerse themselves in the ted an outstanding product that takes Within each business segment, we are science of biological samples, compared liquid handling to the next level and channelling our efforts into identifying to the chemical compounds administered offers more benefits to the customer precisely how innovation can support our by the other stores. Here, the synergies of than similar competitive technologies. customers’ needs. It is clear that technical Tecan’s different business segments were As well as being compatible with cur­ innovation alone is not enough. We need a great advantage and the teams were rent systems, the MultiChannel Arm 384 to present our customers with the right able to share their knowledge and skills. represents a bridge to Tecan’s new gene­ solutions, and a thorough understanding ration of liquid handling technology of their challenges in the very early devel­ which is currently under development. «We have established an Innovation and Incubation Group that is tasked with looking at advanced, strategic technologies» 11


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance We develop our future… …by tracking developments in our markets with the utmost attention. Laboratories from many disciplines depend on Tecan for reliable and accurate instrumentation. Our in-depth knowledge of our principal markets in the life science research, forensic and diagnostic fields helps us to provide the solutions these laboratories need to address their automation requirements. 12


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    Tecan Annual Report 2007 Market Overview hospital laboratories and other leading Alleviating bottlenecks for researchers Our instruments are essential to many reference laboratories. Our instruments around the world cutting edge developments taking place also offer ideal solutions for other mar­ A new antibody production system de­ in laboratories throughout the life sci­ kets, such as quality control testing for veloped by Tecan in association with ence industry, worldwide. We provide the food and beverage markets or crop the Monash Antibody Technologies the tools that enable scientists to ask – research. Finally, Tecan is a leader in the Facility (MATF) at Monash University, and answer – critical questions, whether development and manufacturing of OEM Australia, will help to ease the bottle­ they are investigating areas of the brain, instrumentation, serving some of the neck of antibody supply experienced by screening DNA samples to link a perpe­ largest companies in our industry. Our many researchers working on impor­ trator to the scene of a crime, or develo­ business segments address each of these tant projects worldwide. ping new diagnostic tests for medical markets with the full range of automa­ and veterinary communities, for exam­ tion solutions they require. Monoclonal antibodies are essential for ple, for biomarkers in cancer or the blue­ a growing number of applications in life tongue virus in livestock. Our automated Life Science Research sciences; in the research world, they are instruments provide the capabilities, Life scientists endeavor to understand crucial to the understanding of a myriad robustness and efficiency required to life from its smallest molecules upwards, of physiological processes, and have led transform today’s ideas into knowledge using the knowledge gained to develop to new approaches in the treatment of for future generations. From large­scale treatments for diseases affecting the life several diseases; in the medical world, projects, requiring the handling of mil­ of millions of people. they are used as diagnostic agents for lions of individual test tubes, to intricate cancers or infectious diseases, as vaccines procedures, such as measuring DNA in Key drivers of automation: to boost the body’s immune response, minute quantities, our high quality, re­ • Continuous advances in genomics, and as drugs, directly targeting cancerous liable instruments consistently perform proteomics and chemistry create cells or decreasing the body’s own immu­ the required tasks. significant numbers of new potential ne response in diseases such as rheuma­ targets, requiring increased screening toid arthritis and multiple sclerosis. Tecan serves three main markets: the life throughput. science research industry consisting of • Strong demand for process integrity the world’s leading pharmaceutical, bio­ requires more reliable system perform­ technology and academic research labo­ ance to achieve higher quality data. ratories; the forensics industry relied on • Increasing need for industry­standard, by law enforcement and government application­focused solutions arises laboratories; and the diagnostics indus­ as smaller laboratories move away try, which is comprised of blood banks, from their own protocols towards simpler, standardized automation. Liquid handling workstations can automate all stages of monoclonal antibody production The system is based around multiple, « Tecan instruments play a decisive integrated liquid handling worksta­ role in pioneering life science tions and sample storage systems and will be operational in 008, fully auto­ projects worldwide » mating all the stages of the production process and providing one of the high­ est throughputs and highest quality antibody production facilities in the world today. Tecan’s Integration Group has already designed and implemen­ ted a series of new innovations for the Monash system that are being reviewed as potential solutions for the wider life sciences market. 13


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance Forging partnerships with the industry Forensics Providing reliable, flexible solutions to leader of the forensic DNA testing market In forensics, our customers support law today’s veterinary scientists As countries around the world increas­ enforcement and judicial organizations Veterinary scientists throughout Eu­ ingly rely on DNA evidence, the number in criminal investigations and court pro­ rope, including those at the Chemical of samples submitted for DNA analysis ceedings. and Veterinary Investigative Institute continues to grow in many forensic labo­ in Krefeld, Germany, rely on Tecan’s ratories. However, the sample processing Key drivers of automation: technology to monitor a number of in­ required prior to DNA analysis is labor­ • Increasing global recognition of fectious diseases in livestock. In recent intensive and may introduce errors. In forensic/DNA evidence in legal and years, an insect­borne viral disease recognition of these challenges, Tecan law enforcement systems globally called Bluetongue, which was previ­ has embarked on a collaboration with Ap­ drives significant growth in testing ously only found in warmer Mediterra­ plied Biosystems, the leading global pro­ volumes. nean climates, has broken out in Wes­ vider of forensic DNA testing systems to • High requirement to maintain an tern European countries. Bluetongue co­develop an automated DNA worksta­ impeccable chain of custody and occurs primarily in sheep and cattle, tion that will streamline many of today’s contamination­free processing and is potentially devastating to far­ manual processes, the HID (Human Iden­ demands automated approaches. mers and a country’s economy. There tification) EVOlution™ System. • New technologies increasingly is currently no effective treatment, so make use of DNA evidence feasible it is critical that the disease is strictly also for smaller police and forensic monitored using rapid and sensitive laboratories. detection methods. Diagnostics The Institute at Krefeld has installed an Diagnostic testing is essential to the automated liquid handling workstation basic management of patient care, allow­ from Tecan precisely for this reason. ing physicians to detect disease earlier, The performance of the Tecan system make a diagnosis, prescribe therapies and means that the scientists will be able to HID EVOlution System streamlines DNA monitor results. respond rapidly to sudden outbreaks of processing in forensics laboratories disease and will continue to deliver fast This new system integrates the Liquid Key drivers of automation: and reliable test results on time. Handling capabilities of Tecan’s Fredom • Growing awareness that new diag­ EVO 150 workstation and software with nostic tests at early stages can save Applied Biosystems DNA genetic analyz­ considerable time and costs during ers, analysis software and DNA testing patient treatment. kits, and was designed to significantly • Regulatory compliance is increasingly reduce the amount of time and effort demanding standardized systems needed to process DNA samples. Just as with reproducible results. importantly, the system also tracks each • Increased outsourcing of automation sample and maintains a record of the solutions as market players focus on chain of custody, preserving the integrity their core competencies and need to Livestock diseases are monitored using rapid and sensitive detection methods of evidence which is ultimately presented replace existing automation solutions. in a court of law. The HID EVOlution™ System provides fo­ rensic laboratories a new validated solu­ tion that effectively processes DNA sam­ ples more quickly and securely, helping to support the legal and law enforcement community in the prosecution of crime. 14


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    Tecan Annual Report 2007 Life Science Research In vitro Diagnostics Forensics Life Science researchers seek to under- Diagnostic testing is essential to the Forensic scientists use highly stand life from its smallest molecules basic management of patient care, regulated processes to isolate upwards, using the knowledge gained allowing physicians to detect disease and identify biological evidence for to continually advance all aspects of earlier, make a diagnosis, prescribe supporting criminal investigations the treatment of disease. therapies and monitor results. and court proceedings. Our Markets Our Direct sales Distribution Channels OEM Our Business Segments Components & Detection Liquid Handling & Robotics Sample Management We supply developers of new We provide the solutions and Our fully automated, scalable laboratory instruments with the criti- outstanding reliability for the automa- sample storage and retrieval systems cal liquid handling components they tion of even the most complex work store and provide access to hundreds, need. Our detection technologies and flows, improving the efficiency and thousands or even millions of encompassing readers, washers and safety of almost any laboratory biological or chemical samples at microarray solutions are used process. a range of temperatures, boosting by research laboratories of every size quality, efficiency and workflow in to measure and analyze the results the management of sample libraries. of their experiments. 15


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance We develop our future… …by working together with our customers at the cutting edge of events. The new structure of our business segments mirrors our day-to-day operations. Across all of our businesses, we are listening closely to our customers and developing relationships with third-party suppliers to stay on top of developments in all our areas of expertise. 16


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    Tecan Annual Report 2007 A New Approach to Our Business Components & Detection future holds in these markets. For the This year we have introduced a new repor- Tecan’s pumps, valves, robotic arms and liquid handling modules, this means long ting structure for our business segments software serve as liquid handling com- life, reliability and smaller sample sizes; that reflects our ongoing dedication to ponents for many instruments which, in for the robotics components, it’s position creating the highest possible transpa- turn, are used in almost any application accuracy and flexibility; and for washers, rency for our investors. The new struc- within life science, clinical diagnostic or the trend for customers using more tedi- ture groups our high volume products, analytical chemistry laboratories. We ous and error-prone combined assays has such as pumps, robotic arms, microplate pride ourselves on our quality product opened up the need for more flexibility. readers and washers, and microarray sys- lines that offer the repeatability and re- tems, within the business segment Com- producibility our customers need, and The response to the new components ponents & Detection; Liquid Handling & are fully compliant with new compulsory products from early access customers has Robotics covers our full range of robotic directives. been very positive, not least because, as platforms and workstations; and Sample instrument developers themselves, our Management includes storage systems Our innovative range of flexible, auto- customers understand the benefits of and their associated instruments and mated microplate and microarray instru- quality and reliability, as well as the im- consumables. ments include multifunctional, modular portance of building these factors in at and upgradeable systems that offer labo- the very start of development. Similarly, This approach closely follows the way we ratories the flexibility to grow with the the success of the new detection techno- manage our business on a daily basis. demands and complexities of research, logies has helped to secure and stabilize Services and consumables are integra- whatever their technology and through- our number three position in this market. ted parts of each of these reporting seg- put requirements. Our microplate readers ments and are, of course, an important and washers can operate as stand-alone In 2007, we continued to guide many of part of Tecan’s overall market presence. instruments or integrate fully with our our customers through the changes that On a global level, a new business system liquid handling workstations, creating the Reduction of Hazardous Substances will standardize our service offerings so powerful integrated systems. Our array (RoHS) directive recently brought to the that contracts are more transparent and scanners and hybridization solutions on industry. The task of implementing these more clearly defined, and customers can the other hand offer powerful perfor- changes in every part of our business was easily attach a value to the contract they mance for today’s leading genomics labo- enormous and, by taking a controlled, choose. This will be especially useful for ratories. proactive approach very early in the pro- our global customers as contracts will be cess, we have been able to address our consistent all over the world. Highlights of 2007 customers’ new requirements in a know- Innovation has been a clear driver this ledgable and timely manner, strengthe- Since this is our first year of reporting in year, with the development from concept ning our position even further in this this new structure, it is not possible to to pre-launch of new generations of two market. provide figures for 2006. The statements major component product lines, the early regarding the growth of the segments are success of our quad4 monochromator™ based on estimates. technology in microplate readers, and the launch of the HydroFlex™ washer. In 2007 we also concentrated on mak- ing our consumables business more Our development teams have listened visible to the market. A new section of closely, not only to what customers want Tecan’s website provides far more infor- now, but also to what they think the mation than ever before, and our instru- ment sales teams are fully updated on the complete portfolio of consumables products and prepared for cross-selling opportunities. «Our development teams have listened closely, not only to what customers want now, but also to what they think the future holds» 17


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance Customers are prepared to pay a pre- Liquid Handling & Robotics tific development. At the same time, we mium for innovative technology and Liquid handling is at the core of our busi- have built significant relationships with a sales of microplate readers and washers ness. It is both our largest business seg- number of major life science companies, increased significantly in the US, as did ment and the technology that founded including GE Healthcare and Applied Bio- those of microarray solutions. This year Tecan over 25 years ago. Today, we supply systems, combining our respective tech- saw Tecan ahead of the competition innovative automated systems to the life nologies where they complement each again in the this area, with the introduc- science research, forensic and diagnos- other and together providing the custo- tion of the QuadChamber™ for higher tics markets, with relentless attention mers with the solutions they need. density microarray applications using the to detail and strong global customer ser- HS Pro™ series, giving customers the ex- vice. Our systems offer flexible solutions In the OEM business, we are leveraging tra automation and standardized proce- and outstanding reliability for pipetting our strengths and refocusing our efforts dures that they need. Overall, the biggest small and large volumes of liquids inde- with the creation of a dedicated sales growth in the detection business was pendently and in parallel, improving the organization and the investment in addi- seen in the Asian region, led by Japan, efficiency and safety of almost any labo- tional ressources to meet the demand India, Australia and Singapore, followed ratory workflow. from our OEM customers. by the new European countries, Russia and the Middle East, where governments Highlights of 2007 Performance are investing heavily in healthcare. This year, we have continued to align Within the business segment Liquid Hand- activities to our underlying strategy, im- ling & Robotics we were able to further Performance proving operational efficiency by redu- strengthen our already strong levels of In our Components & Detection busi- cing the number of projects in the R&D profitability despite the fact that reve- ness segment, we achieved revenues of pipeline and directing resources to more nues, as previously communicated, were CHF 124.0 million in 2007. Driven by the fundamental developments. The focus impacted by the cancellation of an OEM launch of new products and a successful continues to shift away from developing development project. Liquid Handling & turnaround in the Japanese market, the features that are just technically impres- Robotics achieved revenues of CHF 246.6 segment was able to realize solid growth. sive, to concentrating on exactly what million and EBIT of 56.9 million amount- EBIT for the reporting period reached CHF our customers need from our systems. ing to an EBIT margin of 21.5%. During the 11.6 million or 9.3% of revenues. Spending more time early in the develop- year under review, the customer services ment process will help us to reach a bet- business within this segment developed ter understanding of the market and will particularly positively. enable us to define exactly what we need to achieve with the systems and features we offer. To help in this process, we are turning our attention even more to the applications themselves. We actively encourage colla- boration with the scientific communities and, through initiatives such as published papers and scientific symposia, are estab- lishing Tecan as a leading force in scien- 18


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    Tecan Annual Report 2007 Sample Management Highlights of 2007 Performance Sample Management is all about storing This year saw significant developments in The business segment Sample Manage- and accessing hundreds, thousands or Tecan’s Sample Management business in ment secured a number of important even millions of biological or chemical Japan, one of the fastest growing markets projects in 2007, most notably in Japan. It samples at temperatures as low as -80 ˚C. in the field. Many pharmaceutical compa- achieved a slight increase in revenues to Within our Sample Management busi- nies there have yet to invest in state-of- CHF 39.9 million. Driven by the costs asso- ness segment, we develop and supply ad- the-art sample management solutions ciated with an increased global presence vanced compound storage systems. Our and, since REMP Nippon was established and the above mentioned development fully automated, scalable sample storage at the start of this decade, we have stead- project, EBIT for the reporting period de- and retrieval systems and their associa- ily prepared the market and are now be- creased, amounting to CHF 0.1 million or ted devices boost efficiency and workflow ginning to reap the benefits of this early 0.4% of revenues. Sample Management is in the management of sample libraries, activity. Two Mid-Size Stores have been working on targeted product innovations and improve quality and safety for all ap- installed this year, and two large systems to address new market segments and on plications. To achieve the levels of reliabi- have been built for a major Japanese achieving increased levels of profitability. lity and uptime for which we are known, pharmaceutical company. our storage systems rely on our unique patented Tube Technology™, a range of In addition, the customer base of the consumables that revolutionized sample Small-Size Store™ (SSS) has broadened management when it was first launched and the first three factory systems, com- in 1997, and is today considered by many bining the Freedom EVO® and SSS, have to be the industry standard in the com- been sold to customers in the US, India pound storage market. We are continuing and Germany. For these new customers, to transfer our skill and expertise in chem- we offer a significant advantage over our ical storage systems and consumables to competitors with a standardized, off-the- meet the requirements of the emerging shelf solution that can be delivered com- market for biological storage. paratively quickly. Finally, this year saw a major effort in fina- lizing the development of a storage sys- tem for biological substances. This effort is based on the conviction that, just as in chemical sample management, advanced, efficient and secure storage solutions will be required to address the growing repositories of biological samples being amassed by researchers as they increa- singly also work with cells, tissues or other biological material in their research. « Services and Consumables are an important part of Tecan’s overall market presence» 19


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance We develop our future… …by practicing sustainability to ensure the future of the environment. For Tecan, acting responsibly towards people and the environment is integral to corporate management. Tecan makes substantial investments every year to achieve high standards of product and work safety and to minimize the environmental impact of its processes. 20


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    Tecan Annual Report 2007 Tecan has established processes group- Internal and external specialists regularly Tecan Anticipates Global Trends in wide and at its individual business loca- inspect Tecan’s manufacturing plants to the Environmental Sector tions to ensure compliance with national ensure compliance with legal regulations The RoHS Directive has applied since laws and regulations and with internal and internal standards for occupational July 1, 2006, for most applications in the guidelines for safety and environmen- safety and environmental protection. European Union and partially in Asia. It tal protection. In keeping with the goal Each year, all Tecan business locations prohibits the launch of equipment con- of sustainability in its corporate actions, are subjected to a number of audits by taining more than minimal quantities Tecan pursues internal standards in many governmental authorities, by inspection, of lead, cadmium, mercury and certain areas that are even higher than those monitoring and certification agencies other substances that are poisonous required in national law and in stringent and by customers. Tecan operates in ac- and difficult to degrade. industry regulations. cordance with the requirements of the ISO 14971 standard (Risk Management for Tecan cooperates closely with public Medical Devices), which covers a product’s authorities and standard-setting bodies entire life cycle. All of Tecan’s manufactu- around the world to recognize new regu- ring plants are also certified according to latory trends as early as possible, as well the ISO 13485/2003 standard. By 2009, as trends in occupational safety and en- Tecan intends to have all sales locations vironmental protection and to integrate also certified under ISO 13485. In 2007, them in its corporate processes. Tecan three sales locations already received this actively shapes these developments by certification. Tecan developed the relevant Tecan’s implementation of the RoHS Directive is an example of our commitment to the environment participating in pertinent industry asso- processes in collaboration with the inter- ciations in all relevant economic regions. national certification agency, TÜV Product Implementation poses major technical Service, which also performs the certifica- difficulties, so medical and other im- Tecan has defined and installed a global tion and the annual monitoring audits. portant devices are initially excluded risk management process to recognize from the directive. However, Tecan is risks early on in all areas of the compa- In 2007, Tecan launched a program for convinced that the high RoHS standard ny. It monitors occupational safety risks employees entitled «Health & Safety in will become the norm for medical de- as well as environmental and product the Work Environment», which will be vices beyond Europe and becoming ap- risks. The company identifies these risks, implemented worldwide this year. In pro- plicable worldwide. Tecan supports this assesses their probability and takes sui- duction, Tecan relies on materials with ecological objective. Tecan has thus be- table action to mitigate them. the smallest possible environmental im- gun to incorporate RoHS specifications pact and properly disposes of this mate- in product development. With compo- rial in accordance with the EU Directive nents from Tecan, customers can rest on Waste Electrical and Electronic Equip- assured of acting in the interest of the ment (WEEE Directive). environment and of having equipment that will also meet legal requirements over the long term. « Each year all of Tecan’s production locations are subjected to a multitude of audits» 21


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance We develop our future… …by creating an environment for our employees that allows us to succeed together. Our over 1,100 highly qualified and motivated employees are crucial to sustainable success at Tecan. In 2007, Tecan launched a comprehensive program for the further development of all employees and managers. Its objective is to create a corporate culture where a strong spirit of innovation and a constant willingness to excel flourish. 22


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    Tecan Annual Report 2007 Tecan is a responsible employer with per- employees and a variable salary system Broad Base of Support sonnel policies that are binding on all its with an options program for managers. for Corporate Values companies around the globe. Modern The corporate values are also integrated Performance and goal-oriented action, national hiring rules ensure compliance in the job descriptions Tecan has drawn enthusiasm and pride, trust and respect with gender equality, non-discrimination up for recruiting new employees. – these are Tecan’s core values that form and other legal requirements. Tecan ma- the basis of the new corporate culture. nagers and employees are held to a strict Substantial Investments in Basic and These values are intended to guide the code of ethics. Continuing Training daily actions of each employee. Tecan The basic and continuing training of ma- launched a company-wide campaign in Common Values for a nagement and employees is given high 2007 to familiarize all employees with New Corporate Culture priority at Tecan. Human resources deve- these values. Workshops were held to In the autumn of 2006, Tecan implemen- lopment has been intensified and syste- inform employees about Tecan’s vision ted its long-term corporate development matized with the initiative launched in and values and its strategic objectives. strategy. The objectives defined in this 2007. All managers attend leadership In round table discussions with mana- strategy can only be achieved in a corpo- seminars to equip them to perform gement, they talked about what vision rate culture that promotes a strong spirit management tasks and can also take and values actually meant at their job of innovation and an unwavering orienta- advantage of personal coaching on vari- and what each employee can do to help tion towards market and customer needs. ous aspects of management. Every year, implement the long-term growth stra- Another decisive factor is the willingness employees sit down with their supervi- tegy. Posters and work manuals ensure to cooperate across organizational and sors to determine new tasks they might that these insights are not forgotten in national lines to deliver consistently high undertake, the qualifications required to the hectic of day-to-day business. performance. In the spring of 2007, the achieve them, and their individual needs Group Executive Committee drew up a for continuing training. International and set of values and binding guidelines for local training programs cover a broad all managers and employees at Tecan as a range of offerings. Tecan is in the process basis for this new corporate culture. Over of establishing a standard global plat- the course of the year, these fundamental form to monitor continuous specialized principles were presented to all company training in those areas of expertise that employees around the world. are crucial to business. This platform is also especially important for satisfying Our Vision, Mission and Values unite the global Tecan Tecan has established a number of new regulatory requirements. family human resources processes based on these values. A performance management In countries with a dual educational sys- process covers annual goal agreements, tem, i.e. separate tracks for academic and measurement of goal attainment for all vocational training, Tecan trains appren- tices in a variety of occupations. « The Tecan corporate culture promotes a spirit of innovation as well as market and customer orientation» 23


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance Corporate Governance Information pursuant 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, 8708 Männedorf, Zurich, Switzerland, is the parent company of the Tecan Group. The Company is listed on the SWX Swiss Exchange. Security symbol: TECN Security number: 1 210 019 ISIN: CH0012100191 Telekurs Financial: TECN Bloomberg: TECN SW Reuters: TECN.S As of December 31, 2007, the Company’s market capitalization was CHF 769 million. The list of consolidated subsidiaries, none of which is publicly listed, is presented in the financial section on page 80 of this An- nual Report. The operational group structure is organized into the Business Segments Components & Detection, Liquid Handling & Robotics, and Sample Management segments. The segment reporting based on this structure is presented in the financial section on page 72 of this Annual Report. Major shareholders As of December 31, 2007, the following shareholders held more than 3% (2006: more than 5%) of Tecan’s shares: 2006 2007 Shares % Shares % Chase Nominees Ltd., London 1) 1,407,594 11.7% 1,407,594 11.7% Fidelity Management & Research Company, Boston (US) 687,115 5.7% 1,349,560 11.2% BB Medtech AG, Schaffhausen (CH) 1) 1,212,780 10.1% 1,212,780 10.0% Tecan Group Ltd., Männedorf (CH) - <5.0% 772,900 6.4% UBS Fund Management (Switzerland) AG, Basel (CH) - <5.0% 639,220 5.3% TIAA-CREF Investment Management LLCC, New York (US) - <5.0% 593,767 4.9% Oppenheimer Funds Inc., New York (US) - <5.0% 549,615 4.6% FIL Fidelity International Ltd., Hamilton (BM) - <5.0% 457,824 3.8% Schweizerische Unfallversicherungsanstalt (SUVA), Lucerne (CH) 920,000 7.7% - <3.0% Numbers of shares according to the most recent shareholder notifications to the SWX; the percentages are adjusted to the actual share capital as of the end of the reporting period. 1) No disclosure notification in the year under review The Company does not have any cross-shareholdings exceeding 5% of the capital or voting rights on both sides. 24


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    Tecan Annual Report 2007 2. Capital structure Capital structure of Tecan Group Ltd. as of December 31 2005 2006 2007 Number of shares 11,891,823 12,005,607 12,078,381 Nominal value per share CHF 1.00 1.00 0.55 Share capital CHF 11,891,823 12,005,607 6,643,110 Legal reserves CHF 36,562,977 36,562,977 61,640,889 Net retained earnings CHF 111,984,865 130,675,771 120,261,396 Shareholders’ equity CHF 160,439,665 179,244,355 188,545,395 Capital reduction Nominal repayment Number of issued shares on repayment date - - 12,075,250 Reduction in share capital CHF - - (5,433,863) Increase in reserves CHF - - 244,378 Cancellation of treasury shares Number of treasury shares cancelled 453,000 - - Reduction in share capital CHF (453,000) - - Reduction in reserves CHF (15,402,000) - - Conditional share capital Reserved for employee stock option plans Number of shares 1,108,177 994,393 921,619 CHF 1,108,177 994,393 506,890 Reserved for future business development Number of shares - 1,800,000 1,800,000 CHF - 1,800,000 990,000 Authorized share capital Expiring on April 26, 2008 Number of shares - 1,200,000 1,200,000 CHF - 1,200,000 660,000 As of December 31, 2007, the Company’s share capital was CHF 6,643,110, divided into 12,078,381 registered shares with a nominal value of CHF 0.55 each. Each share is entitled to any dividends approved by the shareholders. The Company does not have any bearer shares, participation certificates, or bonus certificates outstanding. Conditional share capital – changes in capital In 1997, the Company’s shareholders approved conditional share capital of CHF 1,300,000 (consisting of 1,300,000 registered shares with a nominal value of CHF 1.00 each) for purposes of employee stock options. Several employee stock option plans were adopted based on this conditional share capital. Details of options granted under these plans are given in the consolidated annual financial statements, note 14 «Employee benefits». Due to the exercise of 72,774 options during the 2007 fiscal year (2006: 113,784 options; 2005: 4,217 options), the Company’s share capital was increased by CHF 71,365 (2006: CHF 113,784; 2005: CHF 4,217) and the conditional capital was decreased by 72,774 shares (2006: 113,784 shares; 2005: 4,217 shares). As of December 31, 2007, 289,815 shares of the conditional share capital were reserved for outstanding employee stock options. These shares cor- respond to a share capital of CHF 159,398. On April 26, 2006, the shareholders approved the creation of additional conditional capital under which the Company’s share capital may be increased through the exercise of conversion rights or options granted in connection with bonds or similar instruments issued by the Company or group companies or through the exercise of options granted to shareholders. Such capital increase shall not exceed CHF 990,000 through the issue of a maximum of 1,800,000 registered shares to be paid in full with a nominal value of CHF 0.55 each. 25


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance The shareholders’ pre-emption rights are excluded. The acquisition of registered shares through the exercise of conversion or option rights and any further transfer of registered shares is subject to the restrictions specified in Article 5 of the Articles of Incorporation. In case of convertible bonds or bonds with option rights, the preferred subscription rights of the shareholders may be restricted or excluded by resolution of the Board of Directors 1) in order to finance or refinance the acquisition of companies, parts of companies or equity investments or 2) in order to issue convertible bonds and bonds with warrants on international capital markets. If preferred subscription rights are excluded, then 1) the bonds must be placed at market conditions, 2) the exercise period must be set at not more than five years from the issue date for warrants and not more than ten years for conversion rights and 3) the conversion or exercise price for the new shares must be set at least in line with the market conditions prevailing at the date of the bond issue. Authorized share capital On April 26, 2006, the shareholders approved the creation of authorized share capital, which authorizes the Board of Directors to increase the share capital at any time up to April 26, 2008, by a maximum of CHF 660,000 through the issue of not more than 1,200,000 registered shares to be paid in full with a nominal value of CHF 0.55. Increases by way of firm commitment underwriting as well as partial increases are permitted. The respective issue amount, the dividend entitlement date, the type of contributions and any possible acquisition of assets will be determined by the Board of Directors. After acquisition, the new registered shares are subject to the restrictions specified in Article 5 of the Articles of Incorporation. The pre-emption rights of the shareholders may be restricted, excluded and allocated to third parties by resolution of the Board of Directors, if the new shares are intended to be used 1) to pay for the acquisition of companies, parts of companies or equity investments, 2) to finance or re-finance the acquisition of companies, parts of companies or equity investments, or 3) for an international place- ment of shares. Shares for which subscription rights were granted but not exercised must be used by the Board of Directors in the interest of the company. The Company does not have convertible bonds or any options other than the aforementioned outstanding employee stock options. Limitations on transferability and nominee registration Registration of voting rights in the Company’s share register is conditional on shareholders declaring that they have acquired the shares in their own name and for their own account. No person will be registered as a shareholder with voting rights for more than five percent of the share capital, regardless of his or her total holdings. The Company’s Board of Directors may register nominees for not more than two percent of the share capital as shareholders with voting rights in the share register. Nominees are shareholders who do not explicitly declare in the application for registration that they hold the shares for their own account and with whom the Company has entered into a corresponding agreement. Further, for shares in excess of two percent of the share capital, the Board of Directors may register nominees with voting rights in the share register if such nominees disclose the names, addresses, nationalities and shareholdings of those persons for whose account they hold two or more per cent of the share capital. Legal entities and companies which are related to one another in terms of capital and voting power, management or otherwise, as well as individuals, legal entities or companies coordinating their actions in order to circumvent the registration restrictions are considered to be one person. The Board of Directors is entitled to grant exceptions from the registration limit in special cases. No such exceptions were granted in the year under review. The procedures and conditions for canceling these limitations on transferability are described in section 6. 3. Board of Directors Board of Directors Brief profiles of the members of the Board of Directors can be found on pages 28 and 29. Independence All the members of the Board of Directors are non-executive members. None of the Board members was formerly a member of the management of Tecan Group Ltd. or any group company during the period under review or the three preceding periods. 26


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    Tecan Annual Report 2007 Election, term of office, organization and responsibilities Pursuant to the Company’s Articles of Incorporation, the Board of Directors is composed of a minimum of one and a maximum of seven members, who are elected for a term of one year. Re-election after the end of the term is permitted. 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 all other matters which are not transferable by law. To the extent permitted by law and insofar as no contrary provision is made in the Company’s Articles of Incorporation and Organizational Regulations adopted by the Board of Directors, the management of the Company’s affairs is delegated to the Management pursuant to Organizational Regulations. The Board of Directors meets as often as business matters require. The Board meets at least five times a year upon invitation of the Chairman, or, in his absence, upon invitation of another Board member. All Board members are entitled to request a meeting indicating the reason. The meetings usually last one whole day. As a general rule, the CEO and CFO, together with other members of the Executive Committee or the management invited by the Chairman, attend (at least partially) the Board mee- tings. The meetings may also be held by video conference or by telephone. The Board of Directors passes its resolutions with an absolute majority of votes of the Board members present. In the event of a tie, the Chairman of the Board has the deciding vote. Resolutions may be passed by means of circulars, unless a member requests discussion in a formal meeting. Committees The Board of Directors may appoint from amongst its members committees for the preparation and implementation of its resolutions and for exercising its supervisory function. The committees meet upon invitation of the respective chairman and as often as business requires, but at least twice a year. The committee meetings usually last between two and three hours. The committees pass resolutions and proposals to be presented to the entire Board of Directors with a majority of votes cast, provided that at least two committee members are present. Resolutions may also be passed by means of circulars. The Board of Directors has established three committees which are composed as follows: Nomination and Strategy and Audit Committee Compensation Committee Technology Committee Mike Baronian Member Heinrich Fischer Chairman Armin Seiler Member Gérard Vaillant Member Chairman Peter Ryser Member Cleto De Pedrini Chairman Jürg Meier Member Member Audit Committee The Audit Committee is comprised of at least two members. The principal tasks and authority of the Audit Committee are to form an impression of the internal and external auditing and to monitor cooperation between the external auditors and the Company, to assess the quality of internal control and compliance, to review the annual financial statements (consolidated and single-entity) and interim financial statements destined for publication, to report to the full Board of Directors, to make recom- mendations, especially with regard to the approval of annual and interim financial statements to be presented to the full Board of Directors. Moreover, the Audit Committee is responsible for monitoring the independence of the external auditors, their per- formance 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 and Compensation Committee The majority of members of the Nomination and Compensation Committee must be non-executive and independent Board members. The principal tasks and responsibilities of the Nomination and Compensation Committee are to prepare and submit to the full Board of Directors proposals on the amount and form of remuneration of the members of the Board of Directors, the CEO, and the other members of the Management. The Nomination and Compensation Committee reviews reports on salary structure and development and monitors disclosure obligations with regard to the remuneration of the Management and of the Board of Directors. Moreover, the Nomination and Compensation Committee approves the employment of any staff who report directly to the CEO and proposes the appointment of the CEO to the Board of Directors. 27


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance Board of Directors Mike Baronian Heinrich Fischer Prof. Dr. Armin Seiler Chairman Vice Chairman Since 1998, elected until 2008 Since 2000, elected until 2008 Since 2007, elected until 2008 1939, Swiss citizen, MS in Mechanical Engineering 1947, Canadian-Swiss citizen, Degree in Finance 1950, Swiss citizen, Master of Applied Physics & (Swiss Federal Institute of Technology), MS and (Concordia University, Montreal) Electrical Engineering (ETH Zurich), PhD in Business Administration (University of Zurich) MBA (University of Zurich) Professional background: Different management po- Professional background: Between 1967 and 1975, he sitions within Johnson & Johnson, his last positions Professional background: Four years R&D in electro- worked as a management consultant at McKinsey & being Managing Director of Cilag, Schaffhausen, 1989 nics (ETH Zurich, IBM); 1980 to 1990 Director of Staff Company in Zurich and Chicago. He was CEO at Dr. to 1997, and Vice-President of Global Operations in Technology and Executive Vice President at Balzers Ing. Koenig AG, 1975 to 1977, and CEO at Cham Paper 1998. In 1999, he was CEO of ZLB, and between 2000 Division of Oerlikon-Bührle Group; 1991 to 1996 Group, 1978 to 1983. Between 1984 and 2006 he was and 2002, CEO of the Asklia Group. Since 2003, he Executive Vice President, Corporate Development at professor at the Swiss Federal Institute of Technology has been CEO and Chairman of the Board at AZAD Oerlikon-Bührle Group; 1994 to 2005 Co-founder and in Zurich for Marketing and Strategic Management. Pharma AG, Toffen/BE. Chairman of ISE (Integrated System Engineering); 1996 to 2007 Delegate of the Board and Chief Execu- Other activities: Industrieholding Cham AG, Board Other activities: Solvias AG, Basle, Board member. tive Officer Saurer Group. member; ING Bank (Suisse) SA, Board member. Other activities: SIG AG (until April 2007), Member of the Board; Schweiter AG, Member of the Board; Gurit AG, Member of the Board; Hilti AG, Schaan/FL, Mem- ber of the Board. from left to right – Dr. Jürg Meier – Gérard Vaillant – Mike Baronian – Heinrich Fischer – Prof. Dr. Peter Ryser – Prof. Dr. Armin Seiler – Cleto De Pedrini 28


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    Tecan Annual Report 2007 Gérard Vaillant Prof. Dr. Peter Ryser Cleto De Pedrini Since 2004, elected until 2008 Since 2004, elected until 2008 Since 2004, elected until 2008 1942, US citizen, Degree in Marketing 1951, Swiss citizen, MS Physics (University of 1945, Swiss citizen, Degree in Public Law, (École Supérieure de Commerce, Paris) Neuchâtel), PhD Physics (University of Geneva) and Business Administration and Economics and MS (University of Sciences, Paris) Masters Degree in Corporate Management (Lucerne) (University of St. Gallen) Professional background: Various senior management Professional background: Scientific Assistant, Institu- Professional background: He was Head of the Export positions within Johnson & Johnson (US), including te of Physics, University of Geneva, 1979 to 1984, Scien- Department, Dätwyler AG, 1974 to 1980, Chief Executive Vice-President, J&J International, 1987 to 1992, World- tific Collaborator, Cerberus AG, 1985 to 1989, Head of Officer Truns Tuch- und Kleiderfabrik, 1980 to 1985, Chief wide President LifeScan (a J&J company), 1992 to 1995, Research, Siemens Building Technologies, Männedorf, Financial Officer, Hürlimann Breweries, 1985 to 1991, and and Company Group Chairman Diagnostics World- 1990 to 1998 (formerly Cerberus Ltd.), since 1998 Pro- held various senior management positions at Moeven- wide, 1995 to 2004. He was a member of the Medical fessor of Microengineering, Swiss Federal Institute of pick AG, the last of which was Chief Financial Officer and Devices & Diagnostics Group Operating Committee Technology, Lausanne (EPFL). Vice-Chairman of the Autogrill Group, from 1999 to 2007 of J&J until he retired in 2004. partner of topwork ag. Other activities: Sensile Technologies Ltd., Board Other activities: Sensors for Medicine and Science, member, Festo Microtechnology Ltd., Board mem- Other activities: Autogrill Switzerland AG, Vice-Chair- Inc, USA, Board member; Luminex Corporation, USA, ber, Cranes Software International Ltd., Board mem- man of the Board; NovoGel Holding AG, Board member, Board member; IntegraGen, France, Board member; ber; member of the commission for education and Aquametro AG, Therwil, Board member. Vivacta Ltd, U.K., Board member; National Air Char- research of Economiesuisse (umbrella organization ters, USA, Board member. representing the Swiss economy), member of the commission on armament of the Federal Department of Defence, Civil Protection and Sport. Dr. Jürg Meier Since 2007, elected until 2008 1941, Swiss citizen, Diploma as Chemist (dipl.chem.ETH, ETH Zurich), Master of Science M.S. (Rensselaer Polytechnic Institute, Troy, NY, USA), Doctor of Technical Sciences in Physical Chemistry (Dr. sc. techn., ETH Zurich), Advanced Management Program (INSEAD France) Professional background: 1971 to 1980 various po- sitions within Sandoz Pharma Ltd., Basel; 1981 to 1982 Visiting Scientist at Massachusetts Institute of Technology MIT (USA), 1983 to 1990 Executive Vice- President, Head of R+D and Member of the Board at Biochemie Ges.m.b.H. Kundl (Austria); 1991 to 1996 various senior management positions within Sandoz Pharma Ltd. in Switzerland, Japan and the USA; 1996 to 1997 Head of worldwide Management Develop- ment and Executive Training at Novartis, Basel; 1996 to 2006 Executive Director Novartis Venture Fund of Novartis. Since 2006 consulting and teaching entre- preneurs and start-up companies. Other activities: Polyphor AG, Allschwil, Chairman; Member of the Swiss National Science Foundation. 29


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance Executive Committee Thomas W. Bachmann Dr. Jürg Dübendorfer Bernhard Iseli Chief Executive Officer since 2005 Senior Vice President, Head of Business Unit Senior Vice President, Head of Business Unit 1959, Swiss citizen. Bachelor of Science degree in Services and Consumables since 2006 Sample Management since 2005 Mechanical Engineering from the University of 1968, Swiss citizen, MSc in Physics (Swiss Federal 1960, Swiss citizen, Degree in Mechanical Applied Sciences in Berne, Switzerland, and an Institute of Technology, Zurich), PhD (University Engineering (Berne University of Applied Executive MBA from IMD in Lausanne, Switzerland. of Freiburg, Switzerland), Executive MBA Sciences), MBA (SIB/ISZ). Rochester-Bern (University of Rochester, NY, USA). Between 2002 and 2004, Thomas Bachmann served Professional background: 1981 to 1991: Various senior as CEO of the Steel Systems Division at AFG Arbonia- Professional background: 1995 to 1998 Research and management positions at Ascom AG; 1981 to 1985: Forster-Holding Ltd., a broadly diversified business of teaching assistant at the Swiss Centre of Microtech- Project Manager for Telephony, Gfeller AG, Berne; 1987 industrial and construction supplies. nology, Zurich, Switzerland; 1998 to 2001: Engineering to 1990: Head of Construction Group, Ascom Gfeller From 1985 to 2002, he was active for Rieter Holding Manager at Perkin Elmer Life and Analytical Sciences, AG, Berne; 1990 to 1991: Head of business area for Ltd., a leading global capital goods supplier to the Downers Grove, IL, USA; 2001 to 2004: Head of R&D wired devices, Ascom AG, Berne; 1992 to 1997: COO, automotive, textile and chemical industries. He held Biopharma at Tecan Schweiz AG, 2004 to 2006: Pro- Studer AG, Thun; 1997 to 1999: Head of Osteosynthe- various operating, executive and corporate positions duct Group Manager Applications at Tecan Schweiz AG. sis Production with sites in Switzerland, Austria and in Europe and the USA and was leading key projects for India, Mathys AG, Bettlach; 1999 to 2002: Managing the company in India and Asia. His career experiences Other activities: none. Director, Mikron Comp-Tec AG, Nidau; 2002 to 2005: include sales and marketing, engineering and devel- COO REMP AG, Oberdiessbach. opment, global supply chain management, interna- tional general management and corporate develop- Christopher C. Hanan Other activities: none. ment. Thomas Bachmann began his career in 1984 as Senior Vice President, Head of Business Develop- an engineering scientist at the Medical Centre of ment and Corporate Communications since 2006 ‘ Queen’s University in Canada. 1969, Swiss and US citizen, BSc from Georgetown Stephen M. Levers University (Washington, DC, USA), MBA from the Senior Vice President, Head of Business Unit Other activities: ALSSA (Analytical & Life Science Harvard Business School (Cambridge, MA, USA). Components since 2006 Systems Association), USA, Member of the Board. 1954, US Citizen, BS in Finance (San Jose Professional background: 1993 to 1995: Consultant at State University), MBA (University of Santa Clara) the Boston Consulting Group (BCG) (Zurich, Switzer- Dr. Rudolf Eugster land); 1997 to 1999: Co-Founder and Head Product Professional background: 1977 to 1980: Financial Ana- Chief Financial Officer of Tecan Group since 2002 & Business Development at NewView Technologies lyst at General Electric; 1980 to 1984: Finance Manag- 1965, Swiss citizen, Degree in Chemistry Inc. (New York, NY, USA); 1999 to 2004: Co-founder er at Atari; 1984 to 1988: Financial Analysis Manager (Swiss Federal Institute of Technology), PhD in Miradiant Global Network (sold to BankOne Corp), at Zilog; 1988 to 1990: Controller at Macamerica; 1990 Technical Science (Swiss Federal Institute of FVP BankOne Corp, (New York, NY, & Chicago, IL, USA); to 1993: several management positions at Dynatech; Technology), Postgraduate degree in Econom- since 2004 Tecan Group, Switzerland. 1993 to 1997: Controller at Commax Technologies; ics (Swiss Federal Institute of Technology). 1997 to 2005: several management positions at Tecan, Other activities: none. such as Controller of Tecan Systems (San Jose, C.A.), Professional background: 1993 to 1994: strategic plan- President of Tecan Systems. ning/controlling at Novartis; 1994 to 2002: Several positions at Von Roll, the last of which was CFO of Michael Illek Other activities: none. Isola Composites, a joint venture between Von Roll Senior Vice President, Head of Business Unit and Isola AG. Detection (Groedig, Austria) since 2006 1965, German citizen, Degree in Mechanical Other activities: none. Engineering (College of Applied Sciences Giessen, Germany). Professional background: 1988 to 1989: Tutor at Fach- hochschule Giessen; 1990 to 1998 Fairchild Technolo- gies GmbH, several positions and responsibilities such as Mechanical Designer, Team Leader, Product Engi- neer/Project Manager, Manager Planning/Control; since 1998 several positions at Tecan Austria GmbH, such as Project Leader R&D, Head of L&P, Project Lead- er SAP, General Manager of Tecan Austria. Other activities: none. 30


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    Tecan Annual Report 2007 Carl Severinghaus Günter Weisshaar Matthew Robin Senior Vice President, Senior Vice President, Head of Quality Assurance Senior Vice President, Head of Business Unit Liquid Head of Direct Sales since 2007 and Regulatory Affairs Tecan Group since 2003 Handling & Robotics since February 2007 1952, US citizen, B.A. in Public Speaking and Commu- 1960, Swiss citizen, Degree in Aircraft Engineering, 1965, British citizen, MEng. in Chemical nications (Drake University, Des Moines, Iowa, USA). background and education in Quality Assurance, Engineering (Imperial College, London). Management (IGW St. Gallen), Risk Management Professional background: 1980 to 1991: National for Medical Devices, Project Management. Professional background: 1987 to 1998: several ma- Sales Manager and other sales management posi- nagement positions at Lonza AG in Switzerland and tions at American Monitor Corporation (Indianapolis, Professional background: until 1988: several posi- the US; 1998 to 2000: Head of Production and Logis- IN, USA); 1991 to 1998: Vice President of Sales and tions in quality assurance at various companies; 1988 tics at Disetronic, Burgdorf; 2000 to 2003: Divisional National Sales Manager at Tecan US; 1999 to 2006: to 1997: Manager, Quality Assurance and Logistics at Head Disetronic Injection Systems at Disetronic, President and General Manager at Tecan US. Schöttli AG; 1998 to 1999: Manager, Quality Enginee- Burgdorf; 2003 to September 2006: CEO of Ypsomed, ring, Schneider (Europe) AG; 1999 to 2003: Manager, Burgdorf. Other activities: none. Quality Assurance Europe at Jomed AG. Other activities: Medisize Holding, Board member. Other activities: none. standing – Stephen M. Levers – Thomas Bachmann – Dr. Jürg Dübendorfer – Günter Weisshaar – Dr. Rudolf Eugster sitting – Carl Severinghaus – Bernhard Iseli – Christopher C. Hanan – Michael Illek – Matthew Robin 31


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance (Continued from page 27) Strategy and Technology Committee The Strategy and Technology Committee is comprised of at least three members of the Board of Directors. The majority must be independent Board members. The Strategy and Technology Committee maintains a cooperative, interactive strategic decision-making process with the Management and assures fully-informed decisions of the Board of Directors in strategic matters. Resolutions for proposals of the Strategy and Technology Committee to the full Board must be passed by majority vote. In the event of a tie, the Chairman has the deciding vote. The principal tasks and responsibilities of the Strategy and Technology Committee are to assist in reviewing and further develo- ping the Company’s strategy to be discussed and approved by the Board of Directors, to periodically review the Management’s implementation of the strategy approved by the Board of Directors, and to provide the members of the Board of Directors with knowledge and information relevant for discussion and decisions as to strategic directions. Furthermore, the Strategy and Technology Committee, together with the Management, draws up a technology strategy in accord with the overall strategy. It shall assure that the priorities in product development and resource allocation comply with the technology strategy and shall make recommendations to the Board of Directors in this regard. The committee assists the Management in identifying techno- logy and market trends as regards licensing, acquisitions and collaborations. Information and controlling instruments The members of the Executive Committee are actively involved in the various committees of the Board of Directors. For instance, the CEO, the CFO and the internal and partially external auditors attend the meetings of the Audit Committee. Moreover, mem- bers of the Executive Committee meet on an ad hoc basis with individual Board members to discuss and delve more deeply into specific subjects. Description of the periodic reporting to the Board of Directors: to monitor the Group’s financial development, the Board of Directors receives monthly reports from the Group’s management information system. All relevant guidelines are presented to the Board of Directors or the appropriate committees for approval to ensure backing on all major decisions. One example of this practice this past year was the Audit Committee’s revision and the Board’s approval of the treasury regulations and the internal controlling manual. Internal Audit: The steady growth and complexity of its business prompted the Company to decide in 2006 to set up its own Internal Audit department. The internal auditors answer to the Audit Committee, so their independence is assured. All com- panies are audited on a three-year cycle based on a risk analysis. The annual audit plan consists of audits of all companies of material significance and is approved by the Audit Committee. The material findings and recommendations are summarized and submitted directly to the Audit Committee and to the CEO and CFO. The reports are also made available to the external auditors. During the year under review, Internal Audit focused its efforts on strengthening the system of internal controls in financial reporting. Audits are also conducted to monitor compliance with laws and standards and the efficiency and effectiveness of business processes. Risk management: Risk management was further intensified in the year under review and expanded at Group level. Each business unit or production location of material significance undergoes systematic risk analysis. The results are then collected at Group level and summarized with Risk Management at Group level for reporting to the Executive Committee and to the Audit Committee. 4. Management Executive Committee Brief profiles of the members of the Executive Committee can be found on pages 30 and 31. Management contracts No agreements for delegating management responsibilities were entered into or continued in the year under review between the Company and third parties not belonging to Tecan Group. 32


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    Tecan Annual Report 2007 5. Content of and Method for Determining Compensation and Stock Option Plans The compensation structure for members of the Board of Directors and the Management and employee stock option plans are determined by the Board of Directors based on a proposal by the Nomination and Compensation Committee. The CEO and CFO participate in the corresponding committee and Board meetings, they can make recommendations but have no voting rights. The authority regarding the determination of compensation and employee stock option plans is defined in the Company’s Organiza- tional Regulations. Details on compensation and information in accordance with Art. 663bis of the Swiss Code of Obligations are contained in note 11 to the balance sheet of Tecan Group Ltd. With regard to the compensation of the management, the Board of Directors has consulted a salary study prepared by PricewaterhouseCoopers, Zurich, which benchmarked the salaries with those of other companies in the global Life Science business and of companies with similar size and market capitalisation in Switzerland. In the year under review, no external advisors were involved for the structuring of the compensation and stock options plans. Cash compensation The total compensation structure for the Management is based on the «Variable Pay Regulation», which is approved by the Board of Directors. This regulation is reviewed annually or as required. The Variable Pay Regulation stipulates that the members of the Executive Committee are remunerated by means of a fixed salary in cash and a variable bonus in cash. For members of the Executive Committee, the variable target bonus is 30 percent of the fixed salary; for the CEO, 40 percent. The bonus amount is pegged to the attainment of the Company’s sales and EBIT targets and of quantitative and qualitative personal targets. The financial targets (sales and EBIT) are set annually in December by the Board of Directors for the following year. The personal targets are agreed to with the pertinent superior annually in advance as measurable operational and quality targets. The financial targets account for 60 to 80% of the variable bonus; the personal targets, for 20 to 40%. If less than 80% of the target is achieved, the variable bonus is not paid. If the targets are surpassed, in no case may the va- riable bonus exceed 200% of the target bonus. In the year under review, the financial targets at Group level were slightly exceeded. The Board of Directors reviews and approves target attainment by the CEO and the actual bonus to be paid, whereas the Nomina- tion and Compensation Committee does so for members of the Executive Committee. The Nomination and Compensation Com- mittee establishes the amount of the fixed salary for the members of the Executive Committee and the entire Board of Directors does so for the CEO. The members of the Executive Committee in question do not participate in these meetings of the Board of Directors or the committee. The amount and form of compensation of the Board of Directors is proposed by the Nomination and Compensation Committee and must be approved by the Board of Directors. Since April 2004, Board members have been compensated in the form of a fixed annual fee for their Board and Committee memberships. Expenses are paid separately. Stock Option Plans In addition to the fixed and variable salary components, and as a long-term incentive and retention tool, the Company has gran- ted options on Tecan stock to the members of the Board of Directors and the Executive Committee, among others. The details of these options can be found in section 14.4 to the Consolidated Annual Financial Statements (Plan 2008 B and Plan 2008 P). The terms and conditions of the options are set forth in the Plan Rules. The proposal on the Plan Rules, as well as the scope of the stock option plan and the benefit entitlement amount per employee category, were discussed in advance by the Nomination and Compensation Committee and approved by the Board of Directors. The CEO and CFO participated in the corresponding commit- tee and Board meetings but had no voting rights. Moreover, the members of the Executive Committee were entitled to an additional Company loyalty bonus to be paid in 2010 to those members who continue to be employed by the company until 2010. The eligible individuals could request pre-payment of this bonus for the sole purpose of purchasing options on Tecan stock issued by a bank at market conditions. Further details on this matter are contained in note 11.4 to the balance sheet of Tecan Group Ltd. 33


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    Annual Report 2007 Message to the Shareholders Strategy Innovation Markets Business Review Sustainability Employees Corporate Governance 6. Shareholders’ participation rights Each share has one vote. No shareholder, or group of shareholders acting in concert to circumvent the voting limitation, may combine more than five percent of the aggregate voting rights at an annual shareholder meeting. The Board of Directors may, in special circumstances, grant exemptions to the voting restriction. This voting restriction does not apply to the independent voting representative or to a proxy holder appointed by the Company («Organvertreter»). The Board of Directors may enter into agreements with banks which deviate from the voting restriction to enable voting rights for deposited shares to be exercised by proxy. No such exceptions were approved or continued in the year under review. Shareholders may only be represented at the annual general meeting by their legal representative, another shareholder with voting rights, an 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 only for the meeting in question. Article 13 paragraph 2 of the Company’s Articles of Incorporation stipulates for which matters beyond those prescribed by law a qualified majority of at least two thirds of the votes represented and the absolute majority of the nominal stock value repre- sented are required for the validity of a shareholders’ resolution. These transactions are as follows: – the conversion of registered shares into bearer shares; – the cancellation or modification of transfer restrictions (Article 5 of the Articles of Incorporation); – the cancellation or modification of voting-right restrictions (Article 12 paragraph 4 of the Articles of Incorporation); – the dissolution and liquidation of the Company; and – the cancellation of Article 13 paragraph 2 of the Articles of Incorporation itself and the cancellation or modification of the quorum specified therein. Shareholders, who together hold shares of at least one percent of the share capital, may demand in writing that an item be in- cluded on the agenda, no later than 56 days prior to an annual shareholders‘ meeting. Shareholders, who together represent at least ten percent of the share capital, may demand that an annual shareholder meeting be convened. Shareholders with registered voting rights are informed by mail of the convening of an annual general meeting at least 20 days prior to the meeting. Moreover, the invitation is published in the Swiss Official Gazette of Commerce. From the day on which the invitations for the annual shareholders’ meeting are dispatched, no further entries are made in the share register until the first day after the annual general meeting. The registration in the share register is further governed by the Company’s Registration Regulations. 7. Change of control and defense measures The Company’s Articles of Incorporation do not contain any opt-out or opt-up clause for removing or limiting the obligation to submit an offer pursuant to the Stock Exchange Act. One-third of the options that were issued in 2007 under the 2008 ESOP (for details please see the consolidated annual financial statements, note 14.4, «Share-Based Payment») vest per year («vesting period») and the options are in general not exercisable during this vesting period. Upon occurrence of a change of control, these options vest immediately and may be exercised immediately (accelerated vesting period). Besides this provision, no clauses on changes of control are contained in agreements or compensation plans on behalf of members of the Board of Directors, the Company’s Executive Committee, or the Tecan group companies. 34


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    Tecan Annual Report 2007 8. External Auditors Date of assumption of the existing auditing mandate by KPMG AG 28 May, 1997 Date on which the head auditor took office 2004 Fees paid CHF 1,000 2006 2007 Total audit fees 739 726 Total tax consulting fees KPMG 312 199 Total other consulting fees KPMG 77 69 The auditors are elected by the annual shareholders’ meeting for a one-year term. Since 2003, the external audit has been re- viewed by the Audit Committee. The auditors attend those meetings of the Audit Committee in which the annual and semi-annual financial statements are discussed and prepared for approval by the Board of Directors. The auditors report on the audit focus and summarize the audit findings. The auditors submit recommendations for the scope of the audit and its focus for the upcoming audit period. At year’s end, the Audit Committee reviews the performance of the auditors as well as the audit costs and submits a recommen- dation to the Board of Directors regarding the re-election of the auditors. Every four years, the Company issues an new invitation to tender for the audit mandate. The head auditor must be changed every seven years. 9. Information policy Tecan has a policy of keeping shareholders and the financial community updated with regard to significant developments in business operations. This policy is primarily implemented through regular press releases, interim and annual financial reports and information provided on the Company’s website: www.tecan.com. Hard copies of Company publications are available on request. They can also be downloaded from Tecan’s website. Tecan has not published quarterly financial reports since the 2007 fiscal year. Investor’s Agenda Date Place Event March 6, 2008 Zurich Press Conference 2007 Full Year Results – Figures April 23, 2008 Zurich Annual Shareholders’ Meeting August 13, 2008 Webcast/Conference Call Semi-Annual Results 2008 For mail/phone requests, please contact: Tecan Group Ltd. Seestrasse 103 Christopher Hanan CH - 8708 Männedorf Senior Vice President Tel: +41 44 922 84 30 Head Business Development Fax: +41 44 922 88 89 and Corporate Communications E-Mail: investor@tecan.com 35


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    Annual Report 2007 Chief Financial Officer’s Report Five-year consolidated data Consolidated financial statements Tecan Group Ltd. Chief Financial Officer’s Report Tecan improved its profitability markedly again in the 2007 fiscal year. Sales increased by 2.1% to CHF 414.4 million while EBIT grew at a proportionally higher rate of 18.6% to CHF 60.3 million. Tecan set all-time records for earnings and earnings per share. High profitability and healthy Sales Gross profit balance sheet Tecan achieved solid internal growth in Gross profit at Tecan increased in the year Business developed positively at Tecan 2007. As indicated in the 2006 Annual Re- under review by 9.9% (2006: 20.9%) to again in 2007. Sales increased by 2.1% port, sales in the previous year were boosted CHF 212.4 million (2006: CHF 193.3 mil- (2006: 17.7%) to CHF 414.4 million (2006: by a major CHF 13.1 million contract. Exclud- lion). The gross profit margin rose to 51.3%, CHF 405.9 million). This increase was at- ing this one-time item, Tecan would have an increase of 3.7%, compared to 1.2% in tributable solely to internal growth. Al- recorded year-on-year sales growth of 5.5% the previous year. General price discipline though costs rose at a faster rate (6.8%) in 2007. Exchange rate effects positively im- and selective price increases were largely than sales, the higher gross profit mar- pacted sales by 0.2 percent. In terms of over- to thank for this significant improvement in gin led to a sharp upturn in profitability. all growth, Tecan slightly outperformed the gross profit, along with increased efficiency Cash inflows from operating activities re- market average. Sales increased the most in in purchasing and lower production costs mained steady. Tecan has a healthy bal- Asia. Developments in the emerging markets for newly developed products. Tecan also ance sheet. Despite the ongoing share were encouraging on the whole. Whereas had a more advantageous overall product buyback program, the equity ratio rose sales in Sample Management were concen- mix in 2007 than in the previous year. from 50.2% to 54.7%. Profit hit CHF 52.4 trated in the United States and Europe in million to top the previous record of CHF 2006, a considerable portion of sales in the 45.1 million in 2001 (2006: CHF 40.6 mil- year under review was in Japan. Tecan re- lion). Tecan also set a record for earnings corded moderate growth in classic end-user per share, posting an increase of 28.2% to business in Europe and a slight decrease in CHF 4.54 (2006: CHF 3.54). the United States in local currencies. 36


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    Tecan Annual Report 2007 « With its healthy balance sheet, Tecan is well positioned for further growth» Operating expenses less cost of sales tax rates in the ratio of the local earnings Dividends Tecan continued to implement the mea- before taxes to consolidated earnings At the annual shareholders’ meeting sures launched in 2005 to increase opera- before taxes. on April 23, 2008, the Board of Directors tional effectiveness. Operating expenses will recommend a total payout of CHF less cost of sales nonetheless increased Net profit 0.90 per share (2006: CHF 0.90) which by 6.8% and thus at a faster pace than Tecan posted a net profit of CHF 52.4 mil- comprises a regular dividend of CHF 0.45 sales. This rise is attributable primarily lion (2006: CHF 40.6 million), which repre- and a payout of CHF 0.45 in the form of to the higher level of activities in emer- sents an increase of 28.9% (2006: 19.2%). a reduction of the nominal value of each ging markets. Investments in sales and The profit margin reached 12.6% of sales share from CHF 0.55 to CHF 0.10. marketing in 2007 focused on develop- (2006: 10.0%). Both performance figures ing the Chinese market, strengthening are records in Tecan’s history. central sales support and expanding sales for OEM business. Through these efforts, Cash flow from operating activities Tecan also laid the groundwork for its Net working capital declined by CHF 1.3 long-term growth strategy. million despite the increase in sales. To- gether with the sharply higher profit, The total number of employees increased these factors ensured another steady in- Dr. Rudolf Eugster by 1.4%, from 1,087 at the end of 2006 to flow of cash from operating activities of Chief Financial Officer 1,102 at the end of the year under review. CHF 59.8 million (2006: CHF 67.2 million). The annual average of 1,108 was some- what higher than the year-end figure, Changed segment information pushing personnel expenses up by 4% The 2007 fiscal year is the first time Tecan over the previous year. is reporting sales and profit figures for its individual business segments. In doing so, Operating profit Tecan is adjusting its financial reporting Tecan saw a sharp increase in earnings to the management structure in force before interest and taxes (EBIT) and in since January 1, 2007. The new structure the operating return in the 2007 fiscal prevents comparison figures from being year. The operating result rose at a much presented for the previous year. Commen- faster rate than sales, increasing by 18.6% tary on the course of business for the seg- (2006: 104.8%) to CHF 60.3 million (2006: ments in 2007 can be found in the Mes- CHF 50.9 million), which corresponds to sage to Shareholders, p. 2. 14.6% of sales (2006: 12.5%). R&D investments held at long-term level Financial result and taxes The Company’s objective is for annual re- Tecan hedges the USD transaction risk on search and development (R&D) expendi- a 12-month rolling basis. Mainly the US tures to be about 10% of sales. In the dollar’s decline against the Swiss franc 2007 fiscal year, Tecan invested CHF 41.1 resulted in exchange rate gains of CHF 0.2 million (2005: CHF 39.0 million) in this million (2006: CHF 1.8 million). Lower ex- area. This corresponds to 9.9% of sales penses for share-based payments and the compared with 9.6% for the previous year. good interest result accounted for CHF 2.4 The increase is mainly due to higher in- million of the substantial improvement in vestments in the Sample Management net financial income of CHF 2.6 million. In and Components & Detection segments. the previous year, Tecan’s financial income Moreover, Tecan launched a longer-term and expenses were nearly the same. The project in 2007 in connection with stra- tax rate fell again in 2007, reaching an all- tegy implementation. time low of 16.7% (2006: 20.1%). It is the weighted average of the locally applicable 37


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    Annual Report 2007 Chief Financial Officer’s Report Five-year consolidated data Consolidated financial statements Tecan Group Ltd. Sales by region Operating and net profit (CHF million) (CHF million) Total 344.9 Total 405.9 Total 414.4 80 200 185.9 189.2 60.3 60 158.8 153.0 166.8 50.9 52.4 154.9 150 40.6 40 100 24.8 56.4 20 50 37.5 14.0 27.0 15.7 13.9 6.1 7.2% 4.0% 12.5% 10.0% 14.6% 12.6% % of sales 0 0 2005 2006 2007 2005 2006 2007 North America Europe Asia Other Operating profit (EBIT) Net profit Sales by business segments Research and development (gross) (CHF million) (CHF million) 114.4 Components & Detection 50 27.6% 40.7 39.0 41.1 40 30 37.4 Sample Management 9.0% 20 10 11.8% 9.6% 9.9% % of sales 262.6 Liquid Handling & Robotics 0 63.4% 2005 2006 2007 38


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    Tecan Annual Report 2007 Cash flow from operating activities Net liquidity (CHF million) 80 67.5 59.8 CHF 1,000 2005 2006 2007 60 40 + cash and cash equivalents 42,645 85,144 102,850 20 - current bank liabilities (14,744) (6,737) (37,540) 15.1 - bank loans (60,988) (48,799) (15,246) 4.4% 16.6% 14.3% % of sales 0 2005 2006 2007 = net liquidity (33,087) 29,608 50,064 Basic earnings per share Employees by activity (eop) (CHF per share) Total 1,102 FTE *) 5 4.54 12.7% General and administration 4 3.54 140 14.9% Research and development 3 294 164 17.8% Customer service 2 1.26 196 1 308 27.9% Manufacturing and logistics 0 2005 2006 2007 26.7% Selling and marketing *) FTE = Full-time equivalent 39


  • Page 44

    Annual Report 2007 Chief Financial Officer’s statement Five-year consolidated data Consolidated financial statements Tecan Group Ltd. 5-year consolidated data CHF 1,000 2003 2004 2005 2006 2007 Income statement Sales 311,606 285,975 344,900 405,929 414,400 Operating profit 22,171 16,749 24,826 50,854 60,299 Financial result (1,834) 770 (4,764) 16 2,586 Income taxes (6,254) (4,795) (6,108) (10,231) (10,506) Net profit 14,083 12,724 13,954 40,639 52,379 Research and development, gross (51,689) (37,101) (40,762) (39,029) (41,069) Personnel expenses (102,525) (102,874) (118,389) (132,826) (138,619) Depreciation of property, plant and equipment (8,246) (7,093) (6,603) (6,372) (6,574) Amortization of intangible assets (5,950) (4,376) (4,562) (5,332) (4,593) Impairment losses (7,639) - (1,437) (690) - Balance sheet Current assets 178,436 149,000 206,408 240,714 251,693 Non-current assets 45,810 42,309 131,600 124,889 122,289 Total assets 224,246 191,309 338,008 365,603 373,982 Current liabilities 102,570 84,606 111,758 111,990 135,557 Non-current liabilities 11,055 12,446 82,917 69,772 33,781 Total liabilities 113,625 97,052 194,675 181,762 169,338 Shareholders’ equity 110,621 94,257 143,333 183,841 204,644 Cash flow statement Cash inflows from operating activities 44,695 29,712 15,117 67,164 59,765 Capital expenditure in property, plant and equipment and intangible assets (6,580) (10,589) (6,008) (6,506) (9,107) Acquisitions, net of cash acquired - - (60,493) - - Dividends paid (5,344 ) (4,993 ) (4,815) (5,172) (5,176) Other information Number of employees (end of period) 812 865 1,047 1,087 1,102 Number of employees (average) 838 834 1,026 1,059 1,108 Research and development in % of sales 16.6% 13.0% 11.8% 9.6% 9.9% Sales per employee 372 343 336 383 374 Information per share Basic earnings per share (CHF) 1.21 1.16 1.26 3.54 4.54 Dividends paid (CHF) *) 0.45 0.45 0.45 0.45 0.45 Payout in form of a nominal value reduction (CHF) *) - - - 0.45 0.45 *) 2007: Proposal to the annual general meeting of shareholders 40


  • Page 45

    Tecan Annual Report 2007 Consolidated balance sheet at December 31 CHF 1,000 Notes 2006 2007 Assets Cash and cash equivalents 5 85,144 102,850 Derivatives 6 506 3,281 Trade accounts receivable 7 91,733 87,285 Other accounts receivable 13,288 12,187 Inventories 8 44,594 37,488 Income tax receivable 2,474 5,788 Prepaid expenses 2,975 2,814 Current assets 240,714 251,693 Non-current financial assets 9 760 1,674 Property, plant and equipment 10 21,779 22,106 Intangible assets 11 87,102 84,450 Deferred tax assets 25 15,248 14,059 Non-current assets 124,889 122,289 Assets 365,603 373,982 Liabilities and equity Current bank liabilities and derivatives 12 6,998 37,682 Trade accounts payable 11,069 9,542 Other accounts payable 10,898 11,400 Deferred revenue 13 28,707 20,535 Income tax payable 8,442 10,274 Accrued expenses 33,846 33,393 Current provisions 15 12,030 12,731 Current liabilities 111,990 135,557 Bank loans 12 48,799 15,246 Liability for post-employment benefits 14 6,255 6,465 Non-current provisions 15 4,679 3,089 Other non-current liabilities 735 609 Deferred tax liabilities 25 9,304 8,372 Non-current liabilities 69,772 33,781 Share capital 12,006 6,643 Capital reserve 8,718 14,191 Treasury shares (16,619) (41,697) Retained earnings 190,608 238,455 Translation differences (10,872) (12,948) Shareholders’ equity 19 183,841 204,644 Liabilities and equity 365,603 373,982 41


  • Page 46

    Annual Report 2007 Chief Financial Officer’s statement Five-year consolidated data Consolidated financial statements Tecan Group Ltd. Consolidated income statement CHF 1,000 Notes 2006 2007 Sales 20 405,929 414,400 Cost of sales (212,612) (201,983) Gross profit 193,317 212,417 Sales and marketing (64,887) (71,683) Research and development 22 (39,029) (41,069) General and administration (39,987) (40,525) Other operating income 23 1,440 1,159 Operating profit 50,854 60,299 Financial income 1,312 3,800 Finance cost (2,128) (1,383) Foreign exchange gains 832 169 Financial result 24 16 2,586 Profit before taxes 50,870 62,885 Income taxes 25 (10,231) (10,506) Net profit 40,639 52,379 Basic earnings per share (CHF/share) 27 3.54 4.54 Diluted earnings per share (CHF/share) 27 3.52 4.52 42


  • Page 47

    Tecan Annual Report 2007 Consolidated statement of changes in shareholders’ equity Total share- Share Capital Treasury Retained Translation holders‘ CHF 1,000 Notes capital reserve shares earnings differences equity Shareholders’ equity at January 1, 2006 11,892 2,253 (16,619) 154,991 (9,184) 143,333 Net profit - - - 40,639 - 40,639 Translation differences - - - - (1,688) (1,688) Total recognized income and expense for the year 38,951 Dividends paid - - - (5,172) - (5,172) New shares issued upon exercise of employee stock options 19 114 6,465 - - - 6,579 Share-based payments to employees 14 - - - 150 - 150 Shareholders’ equity at December 31, 2006 12,006 8,718 (16,619) 190,608 (10,872) 183,841 Net profit - - - 52,379 - 52,379 Translation differences - - - - (2,076) (2,076) Total recognized income and expense for the year 50,303 Dividends paid - - - (5,176) - (5,176) Capital decrease in form of reduction of nominal value 19 (5,434) 244 - - - (5,190) New shares issued upon exercise of employee stock options 19 71 3,741 - - - 3,812 Change in treasury shares (net) 19 - 1,488 (25,078) - - (23,590) Share-based payments to employees 14 - - - 644 - 644 Shareholders’ equity at December 31, 2007 6,643 14,191 (41,697) 238,455 (12,948) 204,644 There were no other items of income and expense recognized directly in equity other than translation differences. 43


  • Page 48

    Annual Report 2007 Chief Financial Officer’s statement Five-year consolidated data Consolidated financial statements Tecan Group Ltd. Consolidated cash flow statement CHF 1,000 Notes 2006 2007 Net profit 40,639 52,379 Adjustments for: Depreciation and amortization (including impairment losses) 10, 11 12,394 11,167 Change in provisions and liability for post-employment benefits 14, 15 3 441 Financial result 24 (16) (2,586) Income taxes 25 10,231 10,506 Other non-cash items 1,136 (1,250) Change in working capital: Trade accounts receivable 7 614 3,030 Inventories 8 10,564 6,345 Trade accounts payable (2,923) (1,799) Other changes in working capital (net) 2,234 (6,272) Income taxes paid (7,351) (12,196) Cash inflows from operating activities 67,525 59,765 Loans to employees 9 - (867) Interest received 1,043 2,572 Purchase of property, plant and equipment 10 (5,815) (7,212) Proceeds from sales of property, plant and equipment 10 210 56 Purchase of intangible assets 11 (691) (1,895) Cash outflows from investing activities (5,253) (7,346) New shares issued upon exercise of employee stock options 6,579 3,812 Capital decrease in form of reduction of nominal value - (5,190) Dividends paid (5,172) (5,176) Purchase of treasury shares - (26,642) Proceeds from sales of treasury shares - 3,016 Change in current bank liabilities 12 597 (343) Increase in bank loans 12 458 663 Repayment of bank loans 12 (18,709) (2,684) Interests paid (1,438) (1,142) Cash outflows from financing activities (17,685) (33,686) Translation differences 221 (630) Increase in cash and cash equivalents 44,808 18,103 Cash and cash equivalents at beginning of year 39,939 84,747 Cash and cash equivalents at year-end 84,747 102,850 Cash and cash equivalents as per cash flow statement comprise: Cash and cash equivalents as per balance sheet 5 85,144 102,850 ./. Bank overdrafts under bank pooling arrangements 12 (397) - = Cash and cash equivalents as per cash flow statement 84,747 102,850 44


  • Page 49

    Tecan Annual Report 2007 Notes to the consolidated financial statements 1 Introduction These financial statements are the consolidated financial statements of Tecan Group Ltd., a company registered in Switzerland, and its subsidiaries (together referred to as the ‘Group’) for the year ended December 31, 007. The Group is operating in the life sciences supply industry and is specialized in the development, production and distribution of advanced automation solutions enabling drug discovery, genomics, proteomics and diagnostics. The consolidated financial statements were authorized for issue by the Board of Directors on February 9, 008. Final approval is subject to acceptance by the annual general meeting of shareholders on April 3, 008. 2 Summary of significant accounting policies 2.1 Basis of preparation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations adopted by the International Accounting Standards Board (IASB). The financial statements are presented in Swiss francs (CHF), rounded to the nearest thousand. They are prepared on the histori­ cal cost basis except for derivative financial instruments, which are stated at their fair value. 2.2 Critical accounting estimates and judgments The preparation of these consolidated financial statements requires management to make assumptions and estimates that af­ fect the reported amounts of revenues, expenses, assets, liabilities and disclosure of contingent liabilities at the date of these financial statements. If in the future such assumptions and estimates deviate from the actual circumstances, the original as­ sumptions and estimates will be modified as appropriate in the year in which the circumstances change. The valuation of the following material positions is based on critical accounting estimates and judgments: 2.2.1 Goodwill and brand name ‘REMP’ The Group performed the annual impairment tests for goodwill and the brand name ‘REMP’ in July 007. The calculation of the recoverable amount of intangible assets requires the use of estimates and assumptions. The key assumptions are disclosed in note 11. 2.2.2 Other intangible assets recognized due to the acquisition of REMP Group At December 007 the Group was not aware of any indication that the carrying amounts of the intangible assets with a finite useful life recognized based on the purchase price allocation of REMP Group (see note 11) might have been impaired. Therefore no specific impairment tests have been performed. 2.2.3 Income taxes At December 31, 007, the net liability for current income taxes is CHF 4.5 million and the net asset for deferred taxes is CHF 5.7 million. Significant estimates are required in determining the current and deferred assets and liabilities for income taxes. Various internal and external factors may have favorable or unfavorable effects on the income tax assets and liabilities. These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations and changes in overall levels of pre­tax earnings. Such changes could impact the assets and liabilities rec­ ognized in the balance sheet in future periods. 2.3 Introduction of new and amended accounting standards and interpretations The accounting policies are consistent with those applied in the previous year, except for the introduction of the following new or amended standards and interpretations*), effective as of January 1, 007: • IFRS 7 ‘Financial Instruments: Disclosures’ • IAS 1 ‘Presentation of Financial Statements: Capital Disclosures’ • IFRIC 7 ‘Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies’ • IFRIC 8 ‘Scope of IFRS ’ • IFRIC 9 ‘Reassessment of Embedded Derivatives’ • IFRIC 10 ‘Interim Financial Reporting and Impairment’ *) IAS = International Accounting Standard, IFRS = International Financial Reporting Standard, IFRIC = International Financial Reporting Interpretations Committee 45


  • Page 50

    Annual Report 2007 Chief Financial Officer’s statement Five-year consolidated data Consolidated financial statements Tecan Group Ltd. The principal impacts on the consolidated financial statements are discussed below: 2.3.1 IFRS 7 ‘Financial instruments: Disclosures’ IFRS 7 ‘Financial Instruments: Disclosures’ requires detailed disclosures concerning the financial risk management of the Group. Note 16 presents information about the Group’s exposure to each of the financial risks, Group’s objectives, policies and processes for measuring and managing risk. Further quantitative disclosures are included throughout these consolidated financial statements. 2.3.2 Other changes The adoption of all other changes did not result in substantial changes to the Group’s accounting policies. 2.4 Change in identification of segments The Board of Directors decided end of 006 to change the Group’s management structure as from January 1, 007 and to adjust the primary segment reporting format accordingly. The following reportable segments were identified: • Components & Detection • Liquid Handling & Robotics • Sample Management Prior period segment information has not been restated on the new basis because it was impracticable to do so. For comparison purposes the segment data for both the previous and the new primary segment reporting format are disclosed in note 0. According to the previous primary segment reporting the goodwill ‘Remp Group’ in the amount of CHF 5.4 million was allocated to a cash generating unit included in the former segment ‘Europe’. Due to the change in identification of segments this goodwill was split and reallocated to the cash generating units Liquid Handling & Robotics (CHF 5.4 million) and Sample Man­ agement (CHF 7.0 million). 2.5 New standards and interpretations not yet applied The following new and revised standards and interpretations have been issued, but are not yet effective and are not applied ear­ ly in these consolidated financial statements: Standard/interpretation*) Effective date for the Group IFRIC 11, 1 and 14 January 1, 008 IFRS 8 ‘Operating Segments’ January 1, 009 IAS 1 revised ‘Presentation of Financial Statements’ January 1, 009 IAS 3 revised ‘Borrowing Costs’ January 1, 009 IFRIC 13 January 1, 009 IFRS 3 revised ‘Business Combination’ January 1, 010 IAS 7 amended ‘Consolidated and Separate Financial Statements January 1, 010 *) IAS = International Accounting Standard, IFRS = International Financial Reporting Standard, IFRIC = International Financial Reporting Interpretations Committee IFRS 8 ‘Operating Segments’ might change segment disclosures. All other changes are not expected to have a significant impact on the consolidated financial statements. 2.6 Reclassifications Some minor reclassifications have been introduced to the balance sheet and the cash flow statement during 007. Prior­year figures have been adjusted accordingly. 2.7 Consolidation principles Subsidiaries are those companies controlled, directly or indirectly, by Tecan Group Ltd., where control is defined as the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. This control is normally evidenced when the Group owns, either directly or indirectly, more than 50% of the voting power of a company. Newly acquired companies are consolidated from the date on which operating control is transferred to the Group, using the purchase method. The equity and net profit attributable to minority shareholders’ interests are shown separately in the consolidated balance sheet and consolidated income statement, respectively. The companies which are included in the consolidated financial statements are listed in the notes to the statutory financial statements of Tecan Group Ltd. Currently there are no minority interests. Intra­group balances and transactions, and any unrealized profits arising from intra­group transactions, are eliminated in pre­ paring the consolidated financial statements. 46

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