Corporate Governance

Introduction

This Corporate Governance Report explains the Furthermore, INFICON’s internal guidelines regard- principles of management and control of INFICON ing corporate governance are provided in its Ar- Holding AG at the highest corporate level in accor- ticles of Incorporation, Organizational Regulations, dance with the Directive on Information relating to Board Committee Charters, CEO and CFO Code of Corporate Governance (the Corporate Governance Ethics, as well as internal policies. Directive) issued by the SWX Swiss Exchange. The following Corporate Governance Report fol- Corporate governance of INFICON Holding AG lows the SWX directive. complies with the principles and recommendations of the “Corporate Governance – Swiss Code of Best Practice” dated March 25, 2002. The principles and rules of INFICON Holding AG on corporate governance are laid down in the Articles of Incorporation, Organizational Regulations and the Regulations of the board committees of INFICON Holding AG.

| 1 Group structure and shareholders

1.1 Group structure

Operational group structure

Board of Directors Committees: Audit Committee Strategy Committee Human Resources & Nominating Committee

CEO Corporate Functions

Executive Management Team

INFICON Holding AG is the parent company of the INFICON group which operates from 12 countries and consists of a parent company, five manufacturing companies, eight sales and service subsidiaries, and a management company located in Bad Ragaz, Switzerland which performs administrative, inter-company financing, and intellectual property management functions. The legal entity structure of the INFICON group is as follows:

INFICON Holding AG Bad Ragaz Switzerland Parent Company

INFICON AG INFICON Inc.* INFICON Aaland Ab. INFICON GmbH Balzers Syracuse Mariehamn Bad Ragaz Liechtenstein USA Finland Switzerland Manufacturing Manufacturing Manufacturing Management Co.

INFICON EDC Inc.** INFICON GmbH Overland Park Cologne USA Germany Manufacturing Manufacturing

INFICON S.A.R.L. INFICON Ltd. INFICON Ptd. Ltd. INFICON Ltd. INFICON Ltd. INFICON Ltd. INFICON Co. Courtaboeuf Bolton Singapore Chubei City Hong Kong Bungdang Yokohama-Shi France United Kingdom Taiwan China Korea Japan Sales Sales Sales Sales Sales Sales Sales

INFICON Guangzhou Service Centre Ltd. Guangzhou China Service

* INFICON LT, Inc. a non-operating legal entity of INFICION, Inc. at December 31, 2005 has been omitted from the above. ** Added in February 2006

| A N N U A L R epor T jahresbericht 2 0 0 5 Listed corporation: INFICON Holding AG On February 8, 2006, INFICON disclosed that Bank INFICON Holding AG is based in Bad Ragaz, Swit- Julius Baer & Co. Ltd. held 131,880 shares. zerland. It has share capital of TCHF 23,340 made up of 2,334,074 shares with a nominal value of CHF 1.3 Cross-shareholdings 10 each. Registered shares are listed on the Swiss Exchange under security number 1102994, ISIN INFICON Holding AG has no cross-shareholdings. CH0011029946 and symbol IFCN.

Market capitalization at December 31, 2005 was 2 Capital Structure TCHF 406,130 based on shares outstanding. 2.1 Capital (Issued, Authorized & Conditional) Share Capital – See statutory financial statements. Registered shares of CHF 10 each at December 31, 1.2 Significant Shareholders 2005: No. of shares Capital Stockholder structure (based on number of regis- Issued share capital 2,334,074 TCHF 23,340 tered stockholders as of December 31, 2005) Conditional share capital 95,926 TCHF 959

Number of shares Number of stockholders The issued share capital comprises 2,334,074 > 50,000 2 registered shares of CHF 10 each. Each share 10,000–50,000 22 entitles the registered owner to one vote at the 1–9,999 1,350 general meeting of shareholders, as well a share of dividends, if any, declared by the Company and Stockholders by Country (based upon number of proceeds from a liquidation, corresponding to its registered stockholders as of December 31, 2005) nominal value as a percentage of the total nominal value of issued share capital. Country Number of stockholders Switzerland 1,155 2.2 Authorized and Conditional Share Capital United States of America 57 Germany 52 The Board of Directors is currently not authorized to Liechtenstein 34 issue new registered shares. Rest of Europe 52 Rest of World 24 The articles of incorporation provide for a con- Total 1,374 ditional capital (according to Art. 653 of the Swiss Code of Obligations) of a maximum of CHF Major stockholders 1,150,000 through the issuance of 115,000 regis- No stockholder entered in the share register held tered shares of CHF 10 each by the exercise of more than 5 percent of the voting rights at Decem- option rights granted to employees and members ber 31, 2005. of the Board of Directors of the Company. As of 2005 2004 December 31, 2005 a total of 19,074 options have Unaxis Holding AG — 9.50% been exercised reducing the available conditional Chase Nominees Ltd. capital from TCHF 1,150 to TCHF 959.26. Wollgate House — 2.64% FMR Corp. — 9.96% 2.3 Changes in Stockholders’ Equity

Changes subject to disclosure requirements Changes in stockholders’ equity for the three years during Fiscal 2005 ended December 31, 2005 are presented in the According to the announcement of October 14, consolidated statements of stockholders’ equity 2005, Unaxis Holding AG held 11,650,500 call op- section of the consolidated financial statements for tions granting 388,350 voting rights if exercised. On INFICON Holding AG for the years end 2005 and February 15, 2006, Unaxis Holding AG gave notice 2004. For the year ended 2003, please refer to the that as a result of a transaction entered into on 2004 Annual Report. February 9, 2006, they held a total of 6,150,500 call options granting 205,016 voting rights if exercised. 2.4 Shares

As of November 17, 2005, Zürcher Kantonalbank See 2.1. No participation certificates are issued. reported holding 423,013 shares. On January 11, 2006, the Zürcher Kantonalbank increased its holding to 489,908 shares.

| 2.5 Profit Sharing Certificates All members of the Board of Directors are non-executive Board members. The Company currently has no profit sharing certificates. According to the law, the Board of Directors is responsible for the ultimate direction and supervision 2.6 Limitations on Transferability and Nominee of INFICON Holding AG. The Board of Directors Registrations has delegated the conduct of the day-to-day business operations to the Company’s executive of- The Articles of Incorporation contain no special ficers, which is headed by the Chief Executive Of- regulations regarding limitations on transferability ficer. The Chief Executive Officer is responsible for and nominee registrations. the management of INFICON Holding AG and for all other matters except for those reserved by law 2.7 Convertible Bonds and Warrants/Options and the Articles of Incorporation. The Board of Di- rectors is required to resolve all matters which are In conjunction with the employee and director not defined by the law, Articles of Incorporation, or stock option programs, current and former employ- management bylaws as being the responsibility of ees as well as current and former members of the any other governing body. According to the Swiss Board of Directors held as of December 31, 2005 Code of Obligations the following non-transferable a total of 121,848 options. 15,696 of these options and inalienable responsibilities are incumbent on carry a subscription ratio of 5 shares per 1 option. the Board of Directors: The remaining 106,152 options carry a subscrip- • ultimate management of the Corporation and the tion ratio of 1 share per 1 option. These options issuance of the necessary directives; entitle holders to acquire a total of 184,632 regis- • determination of the organization; tered shares of INFICON Holding AG. Up to 95,926 • structuring of the accounting system and of the shares resulting from the exercise of stock options financial controls, as well as the financial planning are covered by shares that can be created from insofar as this is necessary to manage the Corpo- conditional capital resulting in an increase in share ration; capital. The remaining amount of 88,706 shares • appointment and the removal of the persons can be covered by shares which we can purchase entrusted with the management and representa- on the stock exchange at market prices and will tion of the Corporation and the granting of the not lead to an increase in share capital. The ag- signatory power; gregate par value of shares purchasable by means • ultimate supervision of the persons entrusted with of outstanding options amounts to TCHF 1,846. For the management, particularly with regard to com- a more detailed discussion of stock option plans, pliance with the law, these Articles of Incorpora- please refer to the footnotes to our Financial State- tion and regulations and directives; ments. • the preparation of the business report as well as the General Meeting of Shareholders, and the The Company currently has no convertible bonds or implementation of the latter’s resolutions; bonds with warrants. • notification of the judge in the case of over-in- debtedness; • passing of resolutions regarding the subsequent 3 Board of Directors payment of capital with respect to non-fully paid- in shares; 3.1 Members of the Board of Directors, other • passing of resolutions confirming increases in the Activities and Vested Interests, and Internal share capital and regarding the amendments to Organizational Structure the Articles of Incorporation entailed thereby; • examination of the professional qualifications of Board of Directors and Management Board the specially qualified auditors in those cases in Our articles of incorporation provide that the Board which the law foresees the use of such auditors. of Directors may consist of one or more members at any time. Directors are elected and removed The Board of Directors, as of the date of this filing, by shareholder resolution. Members of our board has established an Audit Committee, a Strategy of directors serve three-year terms and may be Committee, and a Human Resources and Nominat- re-elected upon completion of their term of office. ing Committee. Each of these committees has reg- The shareholders may remove the directors without ulations which outline its duties and responsibilities. cause. Our five directors currently in office were The Chairman for each committee is elected by the elected by shareholder resolution. Board of Directors. The committees meet regularly and are required to provide the Board of Directors with updates and recommendations at its regular

| A N N U A L R epor T jahresbericht 2 0 0 5 meetings. The agendas for the committee meetings Mario Fontana Chairman are set by their respective chairperson. Dr. Richard Fischer Paul Otth The Audit Committee The Audit Committee consists of three non-execu- Frequency of meetings of the Board of tive members of the Board of Directors. Currently, Directors and its Committees the Audit Committee is comprised of the following The Board of Directors holds four or more meetings members: per year and additional ad hoc meetings and conference calls as necessary. The Audit Committee Dr. Thomas Staehelin Chairman holds four meetings per year in addition to three Paul Otth quarterly conference calls. The Strategy Commit- Gustav Wirz tee and the Human Resources and Nominating Committee hold two or more meetings per year. The responsibilities of the Audit Committee include: • recommending to the board of directors the The Company’s Board of Directors includes: independent public accountants to be selected to conduct the annual audit of our books and Gustav Wirz, Citizen of Switzerland, *1945 records; Chairman of the Board of Directors, Member Audit • reviewing the proposed scope of such audit and Committee approving the audit fees to be paid; • reviewing the adequacy and effectiveness of our Mr. Wirz started his professional career in 1970 accounting and internal financial controls with the as head of R&D department with Kulicke & Soffa independent public accountants and our financial one of the pioneers of the Semiconductor Equip- and accounting staff; ment Manufacturers. In 1974, he joined Seier AG in • reviewing and approving transactions between Switzerland as Managing Director. In 1979, Mr. Wirz the Company, its directors, officers and affiliates; started his own company, initially Gustav Wirz AG, and later the name was changed to Alphasem AG; the • reviewing and reassessing, on an annual basis, company does development, manufacturing and the adequacy of our audit committee charter. sales worldwide of Automatic Die Attach Systems for the semiconductor assembly process. The The Human Resources and Nominating company established subsidiaries for sales and Committee service in Hong Kong, China, Singapore, Taipei, The Human Resources and Nominating Committee Penang, Bangkok, Korea and USA and is today one are to provide a general review of our compensa- of the leading companies for automatic Die Attach tion and benefit plans to ensure they meet corpo- Systems worldwide. In 1987, Mr Wirz was elected to rate financial and strategic objectives, as well as the SEMI board, the world wide Industry Associa- to make recommendations to the board regarding tion of the Semiconductor Equipment and Materials appointment, dismissal and career development of Industry, he was the first non US director. In1 999, senior management positions. The responsibilities he sold the shares of Alphasem AG to the Dover of the Human Resources and Nominating Com- Corporation. He is a member of the council of tech- mittee also include the administration of employee nical college of eastern Switzerland. Mr. Wirz stud- incentive plans. The Human Resources and Nomi- ied mechanical engineering at the technical college nating Committee consists of three non-executive in Biel, Switzerland. Mr. Wirz currently holds direc- members of the Board of Directors. Currently, the torships in other corporations, which include: Human Resources and Nominating Committee is comprised of the following members: Company Position Alphasem Holding GmbH Member Dr. Richard Fischer Chairman NetInvest Holding AG Member Mario Fontana QCSolutions Inc. (USA) Member Dr. Thomas Staehelin Best-Immo-Invest AG Chairman Exalos AG Chairman The Strategy Committee This Committee is responsible for advising the Paul Otth, Citizen of Switzerland, *1943 board on the long term strategy and how to portray Vice Chairman of the Board of Directors, Member INFICON’s strategy to shareholders and the invest- Audit Committee, Member Strategy Committee ment community. The Strategy Committee consists of three non-executive members of the Board of In June 2000, Mr. Otth became the Chief Financial Directors. Currently, the Strategy Committee is Officer and a Member of the Executive Board of comprised of the following members: Unaxis Corporation. From 1989 until November

| 1996, Mr. Otth was with Landis & Gyr AG, where he Ph.D. in Engineering from the University of Vienna. became the Chief Financial Officer and a Member Dr. Fischer currently holds directorships in other of the Executive Board in November 1994. From corporations, which include: November 1996 until October 1998, he served as the Chief Financial Officer and a Member of the Ex- Company Position ecutive Board of Elektrowatt AG (a successor com- ARS GmbH Member pany of Landis & Gyr AG). From October 1998 until Sysmec AG Member May 2000, he served as Chief Financial Officer and VAT Holding AG Chairman a member of the Group Board of Siemens Building Technologies (a successor company of Elektrowatt Mario Fontana, Citizen of Switzerland, *1946 AG). From June 2000 until December 2002, Mr. Director, Chairman Strategy Committee, Member Otth served as Chief Financial Officer and a Mem- Human Resources and Nominating Committee ber of the Executive Board of Unaxis Corporation. Mr. Otth is a Certified Public Accountant. Mr. Otth Mario Fontana started his career in 1970 with IBM also currently holds directorships in other corpora- Switzerland as Marketing Representative and Inter- tions, which include: national Account Manager serving Swiss industrial groups. In 1977 he became CIO at Brown Boveri Company Position in Sao Paulo, Brazil. In 1981 he started the Swiss Swiss Rail (SBB AG) Member Subsidiary of Storage Technology as its first man- Ascom Holding AG Vice Chairman aging director. In 1984 Mario Fontana started a 15- Swissquote Group Holding AG Member year career with Hewlett-Packard, first for 10 years EAO Holding AG Chairman as General Manager of its Swiss subsidiary, then as General Manager for the Computer Systems Thomas Staehelin, Citizen of Switzerland, *1947 Business in Germany, later for Europe, Middle East Director, Chairman Audit Committee, Member Hu- and Africa and in his last position as responsible man Resources and Nominating Committee for the Business Unit Financial Service on a worldwide basis. Mario Fontana studied Mechanical Dr. Staehelin is a Swiss corporate and tax attorney and Aerospace Engineering at the Swiss Institute and partner in the Basel based law firm Fromer, of Technology (ETH) and at the Georgia Institute of Schultheiss and Staehelin. Dr. Staehelin is a private Technology, where he received a Master of Science investor and serves on the boards of various Swiss Degree. Since 1999, Mario Fontana serves on vari- listed or unlisted companies in various capacities ous boards as non-executive director. Mr. Fontana ranging from a member, Vice-Chairman, or Chair- currently holds directorships in other corporations, man. Dr. Staehelin holds a Ph.D. in Law from the which include: University of Basel. He currently serves as Chair- man of the Chamber of Commerce of Basle and Company Position was a member of parliament. Dr. Staehelin cur- Swiss Rail (SBB AG) Member rently holds directorships in other corporations, Swissquote Group Holding AG Chairman which include: Sulzer Ltd. Member Amazys Holding AG Chairman Company Position Dufry AG Member Kühne & Nagel International AG Member Siegfried Holding AG Vice-Chairman 3.2 Other Activities and Vested Interests Swissport International AG Chairman Lantal Textiles Member See 3.1 Lenzerheide Bergbahnen AG Vice-Chairman Scobag AG Chairman 3.3 Cross-involvement

Richard Fischer, Citizen of Austria, *1955 There are no cross-memberships between the Director, Chairman Human Resources and Nomi- Board of Directors of INFICON Holding AG and nating Committee, Member Strategy Committee any other listed company except as listed in the preceding section. Dr. Fischer is a co-owner of VAT Holding AG. VAT is the global leading supplier of vacuum valves. Since 3.4 Elections and Terms of Office 1984, he has served as VAT’s Chief Executive Of- ficer, and since 1997 as the company’s President According to the Articles of Incorporation, the and Chairman of the Board. Prior to joining VAT, Dr. members of the Board of Directors are elected for Fischer was Technical Director of Gama, Access a term of three years. Systems, an Austrian company. Dr. Fischer holds a

| A N N U A L R epor T jahresbericht 2 0 0 5 The members of the Board of Directors were our Balzers AG subsidiary as General Manager elected as follows: Production. Mr. Winkler has a Masters Degree in engineering from the Swiss Federal Institute of Board of Directors Date Term Technology (ETH Zurich) and an Executive-MBA First Elected Expires from Syracuse University. Richard Fischer May 2003 May 2006 Mario Fontana May 2003 May 2006 Peter Maier, Citizen of Germany, *1962 Paul Otth November 2000 May 2006 Vice President and Chief Financial Officer (since Thomas Staehelin May 2001 May 2007 November 2000) Gustav Wirz May 2004 May 2007 Mr. Maier joined INFICON in 1996 as Director of 3.5 Internal Organizational Structure Information Systems and became Vice President of Finance for Leybold Inficon, and Controller for the See 1.1 Instrumentation Division in 1998. Prior to joining us, Mr. Maier served Deloitte Consulting as project 3.6 Definition of Areas of Responsibility manager and consultant for enterprise application integration from 1994 to 1996. From 1992 to 1994, The Board of Directors has delegated authority to Mr. Maier served as Controller for Heidelberger the Company’s executive officers to execute the Druckmaschinen AG in Germany. Mr. Maier holds Company’s approved annual budget. INFICON a masters degree in business administration and Holding AG has a comprehensive financial and computer science from the University of Karlsruhe, enterprise reporting system to gather and report Germany. its financial results. The quarterly financial results are reviewed and approved by the Audit Commit- Stephan DeLuca, Citizen of the USA, *1955 tee prior to issuance to the public. Additionally, the Vice President, Worldwide Sales and Business Board of Directors provides oversight and approval Development (since January 2003) for potential acquisitions or strategic partnerships. Dr. DeLuca joined INFICON in January 1991 as 3.7 Information and Control Instruments vis-à- Product Manager for Gas Analysis products. In vis the Senior Management 1994, he assumed responsibility for the start up of INFICON’s EHS business unit, and from May Information regarding the current state of the busi- of 2000 through December 2002 he managed ness is provided continuously at the meetings of INFICON’s Asia Sales operations, based in Taiwan. the Board of Directors in an appropriate format and Dr. DeLuca holds a Ph.D. in Applied Chemistry is presented by the persons bearing responsibility from the Colorado School of Mines, and an Execu- for oversight of the financial and operational as- tive-MBA from Syracuse University. pects of the business. Ulrich Doebler, Citizen of Germany, *1955 Vice President – Leak Detection (since January 4 Senior Management 2000)

4.1 Members of the Board of the Senior Dr. Doebler joined INFICON in 1986. From 1996 to Management, other Activities and Vested December 1999, Dr. Doebler was the Marketing Interests, Management Contracts and Engineering Manager of the Leak Detection product line. Dr. Doebler holds a Ph.D. in physics Our executive officers are responsible for our from the University of Cologne. day-to-day management. The executive officers have individual responsibilities established by our Daniel Hoffman, Citizen of the USA, *1958 Organizational Regulations and by the Board of Vice President and General Manager, Intelligent Directors. Sensor Solutions

Lukas Winkler, Citizen of Switzerland, *1962 Mr. Hoffman joined INFICON on April 25, 2005, as President and Chief Executive Officer (since Janu- Vice President and General Manager of the Pro- ary 2004) cess Knowledge and Control Business Unit. He became Vice President and General Manager of Mr. Winkler joined the company in January 1993 the Intelligent Sensor Solutions Business Unit when and served as our Vice President, Vacuum Con- it was formed from the merging of the Process trol from January 1997 to December 2003. From Knowledge and Control and Environmental Health January 1995 to January 1997, Mr. Winkler served and Safety Business Units in September 2005. Mr.

| Hoffman comes to INFICON from Lockheed Martin, 5 Compensation, Electronic Systems Division. Previously, he served Shareholdings and Loans as Vice President of Operations for Fab Solutions at Asyst Technologies and General Manager of 5.1 Content and Method of Determining the Semifab, Inc. He also served as Vice President Compensation and Share-ownership of Operations, Universal Instruments and as Vice Programs President, AlliedSignal. Mr. Hoffman has a Bachelor of Science degree in chemistry from Eastern Wash- The Content and method of determining the Com- ington University. pensation and share-ownership programs for the members of the Board of Directors and for the Gary Lewis, Citizen of the USA, *1945 Senior Management are proposed by the Human Vice President, Operations, Intelligent Sensor Solu- Resources and Nominating Committee and ap- tions proved by the Board of Directors.

Mr. Lewis joined INFICON in November 1984 as 5.2 Compensations for Acting Members of Manufacturing Manager and was named Vice Pres- Governing Bodies ident of Quality Assurance in 1991. He has managed various leak detection products for the HVAC The aggregate cash compensation accrued for markets since 1995 and assumed responsibility for members of the Board of Directors and of the man- the Environmental Health and Safety Business Unit agement board for the year ended December 31, in 2000. In September 2005, Mr. Lewis was named 2005 is as follows: Vice President, Operations, Intelligent Sensor Solu- tions, with the formation of this Business Unit from Board members and Executive Management in the merging of the Process Knowledge and Control place at December 31 2005 and the Environmental Health and Safety Business Units. Mr. Lewis holds a Bachelor of Science de- Total Compensation gree in electrical engineering from Clarkson Univer- Non-Executive sity and an MBA from Chapman University. Board Members TUSD 368 Executive Board Members Urs Wälchli, Citizen of Switzerland, *1961 and Management TUSD 1,994 Vice President – Vacuum Control (since March Total TUSD 2,362 2004) 5.3 Compensations for Former Members of Mr. Wälchli joined the company in 1993. In 2000, he Governing Bodies was appointed R&D Manager of our Vacuum Con- trol product line and became Technical Director of None this unit in 2003. Mr. Wälchli holds a Ph.D. in physics from Berne University and a Master of Industrial 5.4/5.5 Share Ownership and Share Allotment Management from the Swiss Federal Institute of in the Year Under Review Technology (ETH Zurich). The number of shares held by the Board of Direc- 4.2 Other Activities and Vested Interests tors and Executive Management as of December 31, 2005: See 4.1 for any activities and vested interests. Non-Executive 4.3 Management Contracts Board Members 10,460 Executive Board Members INFICON Holding AG has not entered into any man- and Management 4,093 agement contracts with third parties outside the Total 14,553 Group. No shares were allotted in the year under review.

5.6 Options

All options are granted at prices equal to 100% of the market value of the common stock at the date of grant. The number of options allocated to members of the Company’s Board of Directors and Executive Officers were:

| A N N U A L R epor T jahresbericht 2 0 0 5 Non-Executive Board Members 6 Shareholder Participation Exercise Option Grant Option Life Price per Shares per Options Month Year (years) Share (CHF) Option Outstanding 6.1 Restrictions on Voting Rights May 2001 7 74.00 94 Nov 2001 7 24.00 254 Each of our shares carries one vote at our share- May 2002 7 70.00 216 holders’ meetings. Voting rights may be exercised Nov 2002 7 69.00 488 only after a shareholder has been recorded in our May 2003 7 75.00 449 share register (Aktienbuch) as a shareholder with Nov 2003 7 97.50 949 voting rights. We may enter into agreements with May 2004 7 07.00 897 banks or financial companies which hold shares for Nov 2004 7 70.75 2,118 the account of other persons (nominees) regard- May 2005 7 0.00 ,927 ing the exercise of the voting rights related to the Nov 2005 7 81.90 ,165 shares. Registration with voting rights is subject to restrictions. Executive Board Members and Management Exercise Our shares are cleared and settled through SIS Option Grant Option Life Price per Shares per Options Month Year (years) Share (CHF) Option Outstanding Sega Inter Settle AG. The shares will not be physi- Nov 2000 7 225.00 5 40,440 cally represented by certificates but will be man- Jan 2002 7 65.00 ,978 aged collectively in book-entry form by SIS Sega Feb 2003 7 50.00 5,000 Inter Settle AG. Shareholders are therefore not Jan 2004 7 05.00 4,000 entitled to have their shares physically represented Mar 2004 7 6.75 9,000 and delivered in certificate form (aufgehobener Feb 2005 7 93.00 4,000 Titeldruck). They can, however, request a statement Apr 2005 7 05.40 2,000 confirming their ownership of the shares.

6.2 Statutory Quorums 5.7 Additional Fees and Remunerations The Articles of Incorporation contain no quorums No reportable fees or remunerations were paid to greater than that set out by the applicable legal members of the board of directors or members of provisions. executive management. 6.3 General Meetings of Shareholders 5.8 Loans to Members of Governing Bodies The Articles of Incorporation contain no rules on In November 2000, certain officers and key em- the convocation of the General meeting of share- ployees purchased 16,480 shares of common stock holders that differ from applicable legal provisions. and paid the exercise price by issuing cash and full recourse and interest bearing promissory notes, 6.4 Agenda denominated in U.S. Dollars, Swiss Francs, and Euros, to the Company totalling TUSD 1,371. The Shareholders holding shares with a par value of at loans have an interest rate equal to 120% of the least TCHF 1,000 have the right to request in writ- mid-term applicable federal rate (as defined in the ing, at least 50 days prior to the day of the respec- Internal Revenue Code) determined on the date the tive shareholders’ meeting, that a specific proposal loans are made. On December 31, 2005, the out- be discussed and voted upon at such shareholders’ standing balance on the notes due from one of the meeting. executive officers was TUSD 152 (TCHF 200). 6.5 Entries into the Share Register 5.9 Highest Total Compensation Only those shareholders with voting rights whose The highest total compensation in 2005 for a member names were recorded in the company’s register of of the Board of Directors was the Chairman of the shareholders on the respective closing date may Board at TUSD 100 (TCHF 132). attend the General Meeting of Shareholders and exercise their voting rights. The Board of Directors endeavors to set the closing date for registration as close as possible to the date of the General Meet- ing, i.e. not more than 3 to 4 weeks before the Gen- eral Meeting. There are no exceptions to this rule regarding the closing date for registration.

| 7 Changes of Control and 8.4 Supervisory and Control Instruments Defense Measures Pertaining to the Audit

7.1 Duty to Make an Offer The Audit Committee of the Board proposed the appointment of PricewaterhouseCoopers AG fol- The Company’s Articles of Incorporation do not lowing a review of offers received from 3 compet- include “opting-out” or “opting-up” clauses and ing firms of independent accountants for the 2002 accordingly under Article 32 of the Swiss Secu- reporting year. The Audit Committee evaluates the rities Exchanges and Securities Trading Act a performance, fees, and independence of the statu- 1 shareholder who acquires 33 /3% or more of the tory auditors and group auditors each year. Company’s shares is obliged to submit a public offer for the remaining shares. Typically the Audit Committee receives a summary of the scope of work planned by the auditors on an 7.2 Clauses on Changes of Control annual basis and meets with the auditors to review these audit plans. Following the audit work, the Our Chief Executive Officer, Lukas Winkler, has an auditors submit a report on the results of their work agreement under which he would become entitled including all communications required to be made to a special payment of two times annual base to the Audit Committee in accordance with auditing upon a change of control of the Company. standards generally accepted in the USA. The Au- dit Committee meets with the auditors to discuss Additionally, the Key Employee Stock Option plan and review their feedback. Based on this informa- contains a provision whereby all unvested out- tion, it determines changes and improvements as standing options vest upon a change in control and necessary. the one year restriction on exercise of options for the Directors Stock Option plan is released upon a change in control. 9 Information policy

INFICON Holding AG pursues an information policy 8 Auditors which is based on truthfulness, timeliness, and continuity. Matters affecting the share price are 8.1 Duration of the Mandate and Term of Office published immediately as ad hoc announcements, of the Lead Auditor in accordance with the obligation to publish on the SWX Swiss Exchange. Annual financial reports are Statutory auditors and group auditors pursuant issued for the benefit of shareholders and potential to Art. 727 ff. and 731a, respectively, of the Swiss investors in March following the year end closing. Code of Obligations is PricewaterhouseCoopers Income statements, balance sheets and cash flow AG, Zurich, elected for one year. Pricewater- statements are prepared on a quarterly basis. A houseCoopers AG commenced its mandate as 2005 half-year report was published in September statutory and group auditors of INFICON Holding 2005. Information available for investors can be AG in June 2002. The lead engagement partner, found at www.inficon.com. Mr. Stephen Williams, has been responsible for the audit of INFICON Holding AG since June 2002. The subsidiaries of INFICON Holding AG are audited by member firms of PricewaterhouseCoopers.

8.2 Auditing Fees

Audit fees for the 2005 audit were approximately TUSD 435 (TCHF 540).

8.3 Additional Fees

Fees paid to PricewaterhouseCoopers for non-audit services rendered during 2005 were approximately TUSD 70 (TCHF 85).

| 1 0 A N N U A L R epor T jahresbericht 2 0 0 5 Financial Report Group Finanzbericht Gruppe

Contents Inhaltsverzeichnis

12 Financial Review Finanzrückblick 14 Consolidated Balance Sheets Konsolidierte Bilanz 15 Consolidated Statements of Income Konsolidierte Erfolgsrechnung 16 Consolidated Statements of Stockholders’ Equity Veränderung des konsolidierten Eigenkapitals 17 Consolidated Statements of Cash Flows Konsolidierte Mittelflussrechnung 18 Notes to Consolidated Financial Statements Anhang zum konsolidierten Jahresabschluss 30 Report of the Group Auditors Bericht der Konzernrechnungsprüfer

| Financial Review

(U.S. Dollars in Thousands)

Income Statement one-time charges related to our NASDAQ delist- ing which were fully compensated by the reversal Net Sales of certain tax reserves, following the successful Net sales increased by 1.7% to USD 191,300 for completion of an audit. 2005 from USD 188,100 for 2004, while there was no impact from changes in currency exchange Operating Income from Continuing Operations rates. Sales to the General Vacuum Process market Operating income improved to USD 20,416 or increased by USD 4,300, due to increased demand 10.7% of net sales for 2005 from USD 14,623 or from customers in Asia. The Emergency Response 7.8% of net sales for 2004. and Security market increased USD 3,000, primarily from increased sales in Europe and Asia as well Other Expense (Income) as increased demand from local government agen- Other expense was USD 297 for 2005 as compared cies throughout the U.S. Finally, new leak detection to other (income) of USD (1,415) for 2004. During products increased sales to the refrigeration and 2005 we incurred foreign currency exchange losses air conditioning market. Offsetting these positive versus foreign currency gains in 2004. Addition- effects was a USD 3,600 year-over-year decrease ally, 2004 included a gain from receipt and sale of in sales to optical data storage customers. shares of Prudential Financial, Inc. of USD 1,100. (see footnote 4). Gross Profit Gross profit increased by USD 1,670 to USD Interest Income 89,214, while gross margin percentage remained Interest income, net was USD 448 for 2005 as nearly flat with 2004 at 46.6%. Although there con- compared to USD 83 for 2004 due to higher inter- tinues to be customer price pressure and increases est rates, favorable currency mix and higher cash in employee overhead costs we have been able balances. to maintain gross profit percentage flat through improved products designed for lower complexity Provision (Benefit) for Income Taxes and material cost. Provision for income taxes increased to USD 5,053, or 24.6% of income from continuing operations be- Research and Development fore income taxes for 2005 from a provision of USD Research and development costs decreased by 4,661, or 28.9% of income from continuing opera- 7.3% to USD 18,700, or 9.8% of net sales for 2005 tions before income taxes, for 2004. This lower from USD 20,181, or 10.7% of net sales for 2004. effective tax rate results from a favorable change in There were slightly lower costs across all product the earnings mix amongst tax jurisdictions and the lines resulting from the completion of some sig- use of net operating loss carryforwards in certain nificant new product development projects, re- jurisdictions where full valuation allowances had prioritization of certain research efforts, reduced been recorded on deferred tax assets. outsourcing costs, as well as customer funded development. Discontinued Operations, Net of Tax The Company recorded income from discontinued Selling, General and Administrative operations of USD 14 for 2005 compared to a loss Selling, general and administrative expenses de- of USD 2,039 2004. During 2004, the Company creased by 5.0% to USD 50,098, or 26.2% of net wrote down a portion of its deferred tax asset sales for 2005 from USD 52,740, or 28.0% of net relative to specific loss carryforwards that were sales, for 2004. Several cost savings initiatives recorded as part of the acquisition of the pattern- were implemented during the year which resulted in ing solutions software business of USD 1,400 mil- decreased advertising and communications costs, lion. Additionally, the patterning solutions business professional services, insurance, as well as reduc- incurred losses from operations of USD 1,300, tions in headcount. In addition, there were certain which were offset by ultra clean business income

| 1 2 A N N U A L R epor T jahresbericht 2 0 0 5 from operations which result from gains on sale of inventory and collection of fully reserved accounts receivable and loan balances.

Net Income Net income increased to USD 15,528, or 8.1% of net sales, for 2005 from USD 9,421, or 5.0% of net sales, for 2004.

Balance Sheet and Cash Flow

Trade accounts receivable increased by USD 6,248 to USD 26,981 at December 31, 2005 as compared to USD 20,733 at December 31, 2004. After adjusting for changes in foreign currency exchange rates trade accounts receivable increased USD 7,570. Days sales outstanding increaesd by 6.5 days from 47.0 in 2004 to 53.5 in 2005, using a 4-point average of quarter-end trade receivables. This primarily resulted from increased sales to the US and Asia, where normal customer payment terms are longer than those of our customers in Europe.

Inventory decreased by USD 2,219 to USD 18,810 at December 31, 2005 as compared to USD 21,029 at December 31, 2004. After adjusting for changes in foreign currency exchange rates, inventory was essentially flat year-over-year. Inventory turns improved to 5.1 for 2005 from 4.8 in 2004, using a 4-point average of quarter-end inventory balances. This improvement is the result of our ongoing efforts to manage inventory levels.

Cash and short term investments at December 31, 2005 totaled USD 72,268, an increase of USD 11,104 when compared to December 31, 2004. Cash generated by operating activities was USD 17,853 for 2005 primarily resulting from net income, depreciation, increased accrued liabilities and utilization of our deferred tax assets and was partially offset by higher trade accounts receivable.

| Consolidated Balance Sheets

(U.S. Dollars in Thousands, except share and per share amounts)

December 31, December 31, ASSETS 2005 2004

Cash and cash equivalents 68,715 56,116 Short-term investments 3,553 5,048 Trade accounts receivable, net 26,981 20,733 Inventories, net 18,810 21,029 Deferred tax assets 2,866 2,650 Other current assets 2,812 ,177 Total current assets 123,737 08,753

Property plant and equipment, net 20,308 22,779 Intangible assets, net 791 ,334 Deferred tax assets 34,332 7,134 Other assets 2,163 2,165 Total non-current assets 57,594 63,412

Total assets 181,331 72,165

LIABILITIES AND STOCKHOLDERS’ EQUITY

Trade accounts payable 6,353 6,360 Short-term borrowings 2,761 — Accrued liabilities 15,468 5,081 Income taxes payable 856 ,617 Deferred tax liabilities 877 ,005 Total current liabilities 26,315 24,063

Deferred tax liabilities 454 550 Other liabilities 7,439 5,248 Total non-current liabilities 7,893 5,798

Total liabilities 34,208 29,861

Common stock (2,334,074 in 2005 and 2,315,900 in 2004 shares issued; par value CHF 10 (USD 5.63) 13,142 ,040 Additional paid-in capital 95,299 94,051 Notes receivable from officers (152) (421) Retained earnings 30,890 5,362 Accumulated other comprehensive income 7,944 20,272 Total stockholders’ equity 147,123 42,304

Total liabilities and stockholders’ equity 181,331 72,165

See notes to consolidated financial statements.

| 1 4 A N N U A L R epor T jahresbericht 2 0 0 5 Consolidated Statements of Income

(U.S. Dollars in Thousands, except per share amounts)

December 31, December 31, ASSETS 2005 2004 Year ended December 31, 2005 2004

Cash and cash equivalents 68,715 56,116 Net sales 191,300 88,147 Short-term investments 3,553 5,048 Cost of sales 102,086 00,603 Trade accounts receivable, net 26,981 20,733 Gross profit 89,214 87,544 Inventories, net 18,810 21,029 Deferred tax assets 2,866 2,650 Research and development 18,700 20,181 Other current assets 2,812 ,177 Selling, general, and administrative 50,098 52,740 Total current assets 123,737 08,753 Operating income from continuing operations 20,416 14,623

Property plant and equipment, net 20,308 22,779 Interest (income), net (448) (83) Intangible assets, net 791 ,334 Other expense (income), net 297 (1,415) Deferred tax assets 34,332 7,134 Income from continuing operations before income taxes 20,567 16,121 Other assets 2,163 2,165 Total non-current assets 57,594 63,412 Provision for income taxes 5,053 4,661 Income from continuing operations 15,514 11,460 Total assets 181,331 72,165 Discontinued operations (Note 3): (Loss) from operations of discontinued operations (net of income LIABILITIES AND STOCKHOLDERS’ EQUITY tax (benefit) of USD (197) in 2005 and USD (1,231) in 2004) (319) (1,328) Income (loss) on disposal of discontinued operations (net of income Trade accounts payable 6,353 6,360 tax provision of USD 45 in 2005 and USD 1,398 in 2004) 333 (711) Short-term borrowings 2,761 — Income (loss) from discontinued operations 14 (2,039) Accrued liabilities 15,468 5,081 Income taxes payable 856 ,617 Net income 15,528 9,421 Deferred tax liabilities 877 ,005 Total current liabilities 26,315 24,063 Earnings (loss) per share: Diluted: Deferred tax liabilities 454 550 Continuing operations 6.63 4.91 Other liabilities 7,439 5,248 Discontinued operations 0.01 (0.87) Total non-current liabilities 7,893 5,798 Total 6.64 4.04

Total liabilities 34,208 29,861 Earnings (loss) per share: Basic: Common stock (2,334,074 in 2005 and 2,315,900 in 2004 Continuing operations 6.68 4.95 shares issued; par value CHF 10 (USD 5.63) 13,142 ,040 Discontinued operations 0.01 (0.88) Additional paid-in capital 95,299 94,051 Total 6.68 4.07 Notes receivable from officers (152) (421) Retained earnings 30,890 5,362 See notes to consolidated financial statements. Accumulated other comprehensive income 7,944 20,272 Total stockholders’ equity 147,123 42,304

Total liabilities and stockholders’ equity 181,331 72,165

See notes to consolidated financial statements.

| 1 5 Consolidated Statements of Stockholders’ Equity

(U.S. Dollars in Thousands, except per share amounts)

Accumulated Additional Note other Total Common paid-in receivable Retained comprehensive stockholders’ stock capital from officers earnings income (loss) equity

Balance at December 31, 2003 13,033 94,024 (383) 5,94 ,144 25,759 Net income 9,421 9,421 Other comprehensive income (loss), net of tax: Unrealized gain on stock available for sale 58 58 Realized gain on stock available for sale (158) (158) Unrealized loss on foreign currency hedges, net of related income tax of USD 47 (78) (78) Foreign currency translation adjustments (38) 7,206 7,206 Total comprehensive income 6,549 Issuance of common stock from exercise of stock options 7 27 34 Balance at December 31, 2004 13,040 94,051 (421) 5,362 20,272 42,304

Net income 5,528 5,528 Other comprehensive income (loss), net of tax: Unrealized gain (loss) on foreign currency hedges, net of related income tax of USD 22 (55) (55) Minimum pension liability adjustment, net of related income tax of USD 620 (926) (926) Foreign currency translation adjustments 49 (11,347) (11,298) Total comprehensive income ,249 Repayment of officer notes 220 220 Issuance of common stock from exercise of stock options 102 ,248 ,350 Balance at December 31, 2005 13,142 95,299 (152) 0,890 7,944 47,123

See notes to consolidated financial statements.

| 1 6 A N N U A L R epor T jahresbericht 2 0 0 5 Consolidated Statements of Cash Flows

(U.S. Dollars in Thousands)

Year ended December 31, 2005 2004

Cash flows from operating activities: Net income 15,528 9,421 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,499 4,863 Gain on receipt and sale of marketable securities — (1,038) Impairment of long lived assets — 363 Deferred taxes 1,553 3,713 Changes in operating assets and liabilities: Trade accounts receivable (7,570) 2,451 Inventories 295 (341) Other assets (451) 895 Trade accounts payable 553 (43) Accrued liabilities 1,656 1,590 Income taxes payable (581) 591 Other liabilities 2,371 657 Net cash provided by operating activities 17,853 23,122

Cash flows from investing activities: Purchases of property, plant and equipment (3,998) (3,745) Proceeds from sale of marketable securities — 1,038 Purchase of short-term investments 829 (5,048) Net cash used in investing activities (3,169) (7,755)

Cash flows from financing activities: Payments on notes receivable from officers 220 — Net proceeds from short-term borrowings 2,761 — Proceeds from exercise of stock options 1,350 34 Net cash provided by financing activities 4,331 34

Effect of exchange rate changes on cash and cash equivalents (6,416) 3,641

Increase in cash and cash equivalents 12,599 19,042

Cash and cash equivalents at beginning of period 56,116 37,074 Cash and cash equivalents at end of period 68,715 56,116

See notes to consolidated financial statements.

| 1 7 Notes to Consolidated Financial Statements

(U.S. Dollars in Thousands, except share and per share amounts)

1. Description of Business 2. Summary of Significant Accounting Policies During 2000, INFICON Holding AG (INFICON or the “Company”) completed its initial public offering, Consolidation whereby the parent, Unaxis Holding AG (Unaxis), The consolidated financial statements include the sold 80.5% of its ownership in INFICON. INFICON accounts of the Company and its wholly-owned Holding AG is domiciled in Bad Ragaz, Switzerland, subsidiaries. All significant inter-company accounts as a corporation (Aktiengesellschaft) organized and transactions have been eliminated in consoli- under the laws of Switzerland. From 2000 through dation. September 7, 2005, INFICON’s stock was traded on the SWX in Switzerland and NASDAQ in the Significant Accounting Policies and Estimates United States. Effective September 8, 2005, the The preparation of financial statements in confor- Company filed Form 15 with the U.S. Securities and mity with generally accepted accounting principles Exchange Commission which suspended our duty requires management to make estimates and to file future reports with the U.S. Securities and assumptions that affect the reported amounts of Exchange Commission. assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial INFICON is a leading developer, manufacturer and statements and the reported amounts of revenues supplier of instrumentation, critical sensor technol- and expenses during the reporting periods. Man- ogies and process control software for the semi- agement bases its estimates and judgments on conductor and vacuum coating industries. These historical experience and on various other factors analyses, measurement and control products are believed to be reasonable under the circumstances vital to original equipment manufacturers (OEMs) that form the basis for making judgments about the and end-users in the complex manufacturing of carrying values of assets and liabilities that are not semiconductors, flat panel displays, data storage readily apparent from other sources. Actual results media, and precision optics. In addition, INFICON may differ from these estimates under different as- provides essential instrumentation for gas leak sumptions or conditions. detection to the air-conditioning/refrigeration and automotive markets and toxic chemical analysis Cash and Cash Equivalents and Short-Term for emergency response, military, and security Investments markets. The Company considers all highly-liquid investments with an original maturity of three months or Headquartered in Syracuse, New York, United less on their acquisition date to be cash equiva- States, INFICON has manufacturing facilities in the lents. The Company classifies investments with an United States and Europe and operations in the original maturity of more than three months on their United States, Liechtenstein, Switzerland, Ger- acquisition date as short-term investments. Short- many, Finland, Japan, United Kingdom, France, term investments consist of certificates of deposit Korea, Singapore, Taiwan, China, and Hong Kong. or time deposits with maturities between three INFICON is subject to risks common to companies months and twelve months. in our industries including, but not limited to, the highly cyclical nature of the semiconductor industry Trade Accounts Receivable leading to recurring periods of oversupply, devel- Trade accounts receivable are shown net of allow- opment by INFICON or its competitors of techno- ances for doubtful accounts of USD 576 and USD logical innovations, dependence on key personnel 675 at December 31, 2005 and 2004, respectively. and the protection of proprietary technology. The Company markets its products to a diverse customer base globally. Trade credit is extended based upon evaluation of each customer’s ability to perform its obligations, these evaluations are

| 1 8 A N N U A L R epor T jahresbericht 2 0 0 5 updated periodically and the Company may re- depreciation are eliminated from the accounts and quire deposits on large orders but does not require any resulting gain or loss is recognized in earn- collateral to support customer receivables. If the ings. Depreciation is provided on the straight-line financial condition of our customers were to de- method over the estimated useful lives of 20 years teriorate, resulting in an impairment of their ability for buildings and 3 to 10 years for machinery and to make payments, additional allowances may be equipment. required. Goodwill and Intangible Assets Concentration Risk The Company reviews goodwill and intangible as- The following table represents specific customer sets for impairment whenever events or changes sales as a percentage of total Company sales: in circumstances indicate that the carrying amount of these assets may not be recoverable, and also 2005 2004 reviews goodwill annually. Goodwill and intangible Pfeiffer Vacuum 16% 7% assets deemed to have indefinite lives are not Unaxis and its divisions 14% 5% subject to amortization, while all other identifiable intangibles are amortized over their estimated Inventories useful life. Intangible assets, such as purchased Inventories are stated at the lower of cost or mar- technology, are generally recorded in connection ket. Cost is determined on the first-in, first-out with the acquisition of a business. The value as- method. The reserve for estimated obsolescence signed to intangible assets is determined by or with or unmarketable inventory is equal to the difference assistance of an independent valuation firm based between the cost of inventory and the estimated on estimates and judgments regarding expecta- fair value based upon assumptions about future tions for the success and life cycle of products and demand and market conditions. If actual future de- technology acquired. If actual results differ signifi- mand or market conditions are less favorable than cantly from the estimates, or other indications are those projected by management, additional inven- present, the Company may be required to record tory write-downs may be required. The reserve for an impairment charge to write down the asset to its excess and obsolete inventories was USD 4,718 realizable value. In addition, goodwill is tested an- and USD 5,260 as of December 31, 2005 and 2004, nually using a two-step process. The first step is to respectively. identify any potential impairment by comparing the carrying value of the reporting unit to its fair value. Income Taxes If a potential impairment is identified, the second Income taxes are accounted for under the asset step is to compare the implied fair value of goodwill and liability method. Under this method, deferred with its carrying amount to measure the impairment tax assets and liabilities are recognized for the loss. A severe decline in fair value could result in an estimated future tax consequences attributable to impairment charge to goodwill, which could have a differences between the financial statement car- material adverse effect on the Company’s business, rying amounts of existing assets and liabilities and financial condition and results of operations. The their respective tax bases, and operating loss and Company performs its annual impairment analysis tax credit carryforwards. Deferred tax assets and during the third quarter. liabilities are measured using enacted tax rates in effect for the year in which those temporary dif- Deferred Tax Assets ferences are expected to be recovered or settled. As of December 31, 2005, the Company had net The effect on deferred tax assets and liabilities of deferred tax assets of USD 35,247 reflecting tax a change in tax rates is recognized in the Con- credit and loss carryforwards, basis differences solidated Statements of Income in the period that primarily from intangible assets, and other deduc- includes the enactment date. A valuation allowance tions available to reduce taxable income in future is recorded to reduce the carrying amounts of de- years. A majority of the net deferred tax assets bal- ferred tax assets if it is more likely than not such ance resides in the United States. In assessing the assets will not be realized. realization of the Company’s deferred tax assets, we consider whether it is more likely than not the Property, Plant, and Equipment deferred tax assets will be realized. The Company Property, plant, and equipment are stated at cost. evaluates the recoverability of its deferred tax as- Expenditures for major renewals and betterments sets based upon historical results and forecasted that extend the useful lives of property, plant results over future years, considering tax planning and equipment are capitalized. Expenditures for strategies, and matches this forecast against the maintenance and repairs are charged to expense basis differences, deductions available in future as incurred. When assets are sold or otherwise years and the limitations allowed for net operating disposed of, the cost and related accumulated loss carryforwards to ensure there is adequate

| 1 9 support for the realization of the deferred tax as- Warranties sets. While we have considered future operating The accrual for the estimated cost of product results, in conjunction with ongoing prudent and warranties is provided for at the time revenue is feasible tax planning strategies in assessing the recognized. While we engage in extensive product need for the valuation allowance, in the event we quality programs and processes, including ac- were to determine that we would not be able to tively monitoring and evaluating the quality of our realize all or part of our net deferred tax assets in component suppliers, our warranty obligation is the future, an adjustment to the deferred tax assets affected by product failure rates, material usage, would be charged as a reduction to income in the and service delivery costs incurred in correcting a period such determination was made. Likewise, product failure. Should actual product failure rates, should we determine that we would be able to real- material usage or service delivery costs differ from ize future deferred tax assets in excess of its net our estimates, revisions to the estimated warranty recorded amount, an adjustment to the deferred liability may be required. tax assets would increase income in the period such determination was made. Although realization Advertising Costs is not assured, the Company believes it is more Advertising costs of USD 734 in 2005 and USD 971 likely than not the net deferred tax asset balance as in 2004 are expensed as incurred. of December 31, 2005 will be realized. Foreign Currency Translation Pension Benefits The functional currency of the Company’s foreign The pension benefit costs and credits are devel- subsidiaries is the applicable local currency. For oped from actuarial valuations. Inherent in these those subsidiaries, assets and liabilities are trans- valuations are key assumptions including discount lated to U.S. Dollars at year-end exchange rates. rates and expected return on plan assets. The Income and expense accounts are translated at the Company considers current market conditions, average monthly exchange rates in effect during including changes in interest rates, in selecting the year. The effects of foreign currency transla- these assumptions. Changes in the related pension tion adjustments are included in accumulated other benefit costs or credits may occur in the future in comprehensive income (loss) as a component of addition to changes resulting from fluctuations in stockholders’ equity. Gains and losses from foreign our related headcount due to changes in the as- currency transactions are reported in the statement sumptions. of income under other expense (income), net.

Revenue Recognition The following foreign exchange rates versus the Revenue is recognized upon the transfer of title U.S. Dollar have been applied when translating the and risk of loss which is generally upon shipment. financial statements of the Companies major sub- In some instances, the Company provides training sidiaries: and maintenance to customers after the product Period-end Rates Average Rates has been shipped. The Company allocates the Currency 2005 2004 2005 2004 revenue between the multiple elements based Swiss Franc 0.7602 0.8839 0.8044 0.8060 upon fair value and defers the revenue related to Euro 1.1844 .3644 1.2454 .2439 the undelivered elements until the training and Japanese Yen 0.0085 0.0097 0.0091 0.0093 maintenance is complete. Fair value is the price Hong Kong Dollar 0.1290 0.1286 0.1286 0.1284 charged when the element is sold separately. When Korean Won 0.0010 0.0010 0.0010 0.0009 a customer’s acceptance is required, revenue is not recognized until the customer’s acceptance Impairment of Long-lived Assets is received. The Company accrues for anticipated In accordance with SFAS No. 144, “Accounting for returns and warranty costs upon shipment. the Impairment or Disposal of Long-Lived Assets”, long-lived assets to be held and used by an entity Research and Development are to be reviewed for impairment whenever events Research and development costs are expensed as or changes in circumstances indicate the carrying incurred. amount of an asset may not be recoverable. If the sum of the expected future undiscounted cash Shipping and Handling Costs flows is less than the carrying amount of the asset, Revenue and costs associated with shipping prod- an impairment loss is recognized by reducing the ucts to customers are included in sales and cost of recorded value to fair value. During 2004 an impair- sales, respectively. ment charge was recognized and is included in loss from discontinued operations. Additionally, the definition of what constitutes a discontinued opera- tion is broader, discontinued operations are no lon-

| 2 0 A N N U A L R epor T jahresbericht 2 0 0 5 ger measured on a net realizable value basis, and this business, within the Consolidated Statements future operating losses are no longer recognized of Income, as discontinued operations for the years before they occur (see Note 3). ended December 31, 2005 and 2004.

Software Cost At December 31, 2005 and 2004, the Company had The Company capitalizes internal-use software de- reserves of USD 224 and USD 544, primarily for a velopment costs in accordance with the provisions receivable resulting from the sale of the business. of SOP 98-1, “Accounting for Costs of Computer During 2005 and 2004, the Company reduced Software Developed or Obtained for Internal Use.” certain accruals by USD 378 and USD 675, respec- The capitalized cost is amortized beginning when it tively, based on adjustments of original estimates is placed into service on a straight-line basis over to actual costs. The reduction of these accruals its estimated life. was recorded as income from discontinued operations. Reclassification Certain reclassifications have been made to prior Patterning Solutions Software Business years’ financial statements to conform to the cur- In March 2004, the Company retained the ser- rent year presentation. vices of an investment bank in connection with the disposal of its patterning solutions software Recent Accounting Pronouncements business. The Company’s decision to exit this busi- In December 2004, the Financial Accounting ness is based upon its decision to further focus Standards Board issued SFAS No. 123(R), “Share- its resources. During 2004 the Company recorded Based Payment”, which is a revision of SFAS No. impairment losses of USD 300 to write-off the bal- 123 and supersedes APB Opinion No. 25. SFAS ance of its intangible assets; USD 1,400 to write- No. 123(R) requires all share-based payments to down a portion of its deferred tax asset relative to employees, including grants of employee stock op- specific loss carryforwards that were recorded as tions, to be valued at fair value on the date of grant, part of the acquisition of the patterning solutions and to be expensed over the applicable vesting software business due to reduced expectations on period. Pro forma disclosure of the income state- the proceeds from sale; and USD 45 for impaired ment effects of share-based payments is no longer fixed assets. On December 31, 2005, the Company an alternative. Companies must also recognize signed a definitive agreement to sell certain assets compensation expense related to any awards that of this business. The patterning solutions software are not fully vested as of the effective date. Com- business had assets of USD 4,609 and liabilities of pensation expense for the unvested awards will be USD 389 as of December 31, 2005 (excluding inter- measured based on the fair value of the awards in company transactions). accordance with the provisions of SFAS No. 123. The Company has applied the rules of a registrant Components of discontinued operations are as fol- as provided by the FASB and extended by the U.S. lows: Securities and Exchange Commission, and we are therefore only applying SFAS No. 123 (R) from 2005 Total Ultra Patterning January 1, 2006 and not from July 1, 2005. The Clean Solutions Company expects annual expense to approximate Loss from operations, net of taxes (319) (319) USD 1,100. Gain (loss) on disposal, net of taxes Income (loss) from discontinued 3. Discontinued Operations operations, net of taxes 4 (319)

Ultra Clean Processing Business 2004 Total Ultra Patterning During 2003, the Company decided to divest of the Clean Solutions ultra clean processing business, based upon its Loss from operations, net of taxes (1,328) — (1,328) long-term strategy of focusing on the Company’s Gain (loss) on disposal, core competencies in the front-end of the semi- net of taxes (711) 598 (1,309) conductor manufacturing process. The divest- Income (loss) from discontinued ment was completed as of December 31, 2003. operations, net of taxes (2,039) 598 (2,637) The divestment was structured as a management buyout where selected assets were purchased for approximately USD 614, with the payment terms al- lowing the Company the potential to recoup a portion of the divestment costs over the next several years. The Company has reported the results of

| 2 1 4. Other Income 7. Intangible Assets

In April 2004 the Company became aware it owned The costs of identified intangible (primarily com- 22,793 shares of Prudential Financial, Inc. (Pruden- pleted software technology) assets are amortized tial) stock resulting from Prudential’s conversion on a straight-line basis over five to ten years. Ac- from a mutual company to a public stock company cumulated amortization at December 31, 2005 and in the fourth quarter of 2001. Prudential had been 2004 was USD 3,533 and USD 3,413, respectively. the Company’s insurance carrier for a number of Amortization expense for the next five years will years and as a result the Company earned these approximate USD 120 per year. shares in the conversion. In considering the appropriate accounting for this event, the Company The activity of identifiable intangible assets was as considered a number of quantitative and qualita- follows: tive factors and recorded the value of the stock as 2005 2004 other income in the quarter it became known. We Balance at Beginning of Year 1,334 ,526 recorded current income for the value of the stock Amortization (120) (132) at the time the Company first became aware of the Impairments (363) shares. The effect of this transaction was USD 880 Foreign currency translation (423) 03 and was recorded as an increase in other income Balance at December 791 ,334 in the first quarter of 2004. The unrealized change in value, which was not material, of the shares subsequent to the demutualization was recorded ret- 8. Accrued Liabilities roactively through equity as the stock is classified as available-for-sale. In the second quarter of 2004, The components of accrued liabilities are as follows the balance of the stock was sold. The effect on net at December 31: income from the sale on the balance of the stock 2005 2004 was USD 158 and was recorded as an increase in Salaries, wages and related costs 8,668 6,632 other income in the second quarter of 2004. Warranty 2,395 2,244 Deferred revenue 1,158 880 Other 3,247 5,325 5. Inventories Balance at December 15,468 5,081

Inventories consist of the following at December 31: 9. Warranty 2005 2004 Raw material 13,970 6,352 The activity of the warranty reserve was as follows: Work-in-process 860 ,009 Finished goods 3,980 ,668 2005 2004 Balance at December 18,810 21,029 Balance at beginning of year 2,244 2,514 Add: warranty provision 1,881 ,473 Deduct: claims against reserve 1,730 ,743 6. Property, Plant, and Balance at December 2,395 2,244 Equipment

The components of property, plant, and equipment 10. Borrowing Facilities consist of the following at December 31: The Company has a USD 10,000 line of credit with 2005 2004 Credit Suisse, which can be in the form of overdraft Land 700 700 facility, fixed advances, margin coverage for foreign Buildings and improvements 17,657 8,923 exchange forward transactions and/or issuance Machinery and equipment 28,009 27,589 of bank guarantees. The agreement can be ter- 46,366 47,212 minated with a 30 day notice by either party. The Less: accumulated depreciation (26,058) (24,433) Company had no outstanding amounts under the Balance at December 20,308 22,779 arrangement as of December 31, 2005.

Additionally, the Company has various facilities at its operating companies which can be in the form of overdraft facilities, fixed advances and/or margin coverage arrangement for foreign exchange forward transactions.

| 2 2 A N N U A L R epor T jahresbericht 2 0 0 5 The following is a summary of these facilities at De- The following table represents outstanding receiv- cember 31, 2005: ables and payables with Unaxis subsidiaries that are included in trade accounts receivable, net and Bank trade accounts payable in the Consolidated Bal- Currency Total Interest rate Expiration Outstanding ance Sheets: available at Dec 31, (USD) 2005 (USD) 2005 2004

Accounts receivable 1,476 735 Nordea Bank Finland Plc Accounts payable 268 EUR 50 Euribor +.60% Upon notice -0- 53

Dresdner Bank EUR ,300 7.50% Upon notice -0- 12. Financial Instruments and Dresdner Bank SGD 500 Variable Upon notice -0- Risk Management

The Hong Kong and Shanghai Banking Corporation The carrying amount of all reported balances in the JPY 2,900 ,83% Upon notice 2,761 balance sheet approximates fair value. Bayerische HypoVereinsbank USD 700 Variable June 2006 0 The Company maintains a foreign currency ex- Bayerische HypoVereinsbank change risk management strategy that uses deriva- USD/EUR ,200 Libor +1.5% December 2006 0 tive instruments, in the form of forward exchange contracts, to hedge against future movements in foreign exchange rates that affect certain foreign 11. Related Party Transactions currency denominated sales and related purchase transactions, caused by currency exchange rate On November 9, 2000, the Company completed volatility. These contracts are designated as cash its initial public offering (IPO), whereby the parent, flow hedges and generally have durations of less Unaxis Holding AG sold 80.5% of its ownership than one year. The Company attempts to match the in INFICON. INFICON and Unaxis have entered forward contracts with the underlying items being into agreements following the separation of the hedged in terms of currency, amount and maturity. companies that governs various relationships for The primary currencies in which the Company has separating employee benefits and tax obligations, exposure are the Japanese Yen, Swiss Franc, Euro, indemnification and transition services. and U.S. Dollar. This exposure arises in certain locations from intercompany purchases and sales The following table summarizes transactions with of inventory in foreign currency for resale in local Unaxis for the years end December 31: currency, in addition to intercompany billings relating to research and development and management 2005 2004 services. The Company’s accounting policy, for Selling, general & administrative derivative financial instruments, is based on its expenses 3,218 ,541 designation of such instruments as hedging trans- Rent expense (included in SG&A actions. An instrument is designated as a hedge expenses) 1,917 2,088 based in part on its effectiveness in risk reduction Net sales 24,870 27,990 and one-to-one matching of derivative instruments to underlying transactions. The Company records From the IPO until October 2005, Unaxis main- all derivatives on the balance sheet at fair value. tained a 19.5% ownership in INFICON shares; how- For derivative instruments that are designated and ever in October 2005 they sold nearly all of these qualify as cash flow hedges, the effective portion shares to unaffiliated parties whereby they owned of the gain or loss on the derivative instrument is less than 1% of the INFICON stock at December reported as a component of accumulated other 31, 2005. SG&A charges represent allocations for comprehensive income and reclassified into earn- expenses incurred by Unaxis on the Company’s ings in the same period or periods during which the behalf including costs for occupancy, finance, legal, hedged transaction affects earnings. The gain or tax, information technology, and human resources loss (ineffectiveness) on the derivative instrument functions. The amounts are primarily allocated in excess of the hedged item, if any, is recognized based on net sales, which management believes in current earnings during the period in which it oc- to be a reasonable approximation of actual incre- curs. The Company’s unrealized net losses under mental expenses. Rent expense is incurred by the foreign currency contracts at December 31, 2005 Company, which leases certain buildings from and 2004, are included in accumulated other com- Unaxis that are due to expire between December prehensive income, net of taxes. These unrealized 2005 and 2010. net losses are expected to be recognized into earnings over the next twelve months.

| 2 3 15. Income Taxes The Company had (gains) losses from all foreign currency transactions and foreign exchange con- For financial reporting purposes, income (loss) be- tracts of USD 493 and USD (122) for years 2005 fore income taxes included the following: and 2004, respectively, which are recorded in other income/expense, net. 2005 2004 Income from continuing operations before income taxes: 13. Commitments and United States of America 5,876 8,795 Contingencies Non-U.S. 14,691 7,326 20,567 6,121 Income (loss) from discontinued operations A summary of contractual commitments and con- before income taxes: tingencies as of December 31, 2005 is as follows: United States of America (516) (2,495) Non-U.S. 378 623 Operating Purchase (138) (1,872) Leases Obligations Total 2006 4,625 4,152 8,777 Total income (loss) before income taxes 20,429 (14,249) 2007 4,416 44 4,760 2008 4,447 4,447 Provision (benefit) for income taxes included the 2009 4,476 4,476 following: 2010 4,447 4,447 2005 2004 Thereafter 7, 7,133 Current: Total 29,544 4,496 34,040 U.S. Federal — — U.S. State — (466) The Company leases some of its facilities and Non-U.S. 2,126 1,068 machinery and equipment under operating leases, 2,126 602 from Unaxis and third parties, expiring in years Deferred: 2006 through 2014. Generally, the facility leases U.S. Federal 2,040 2,443 require the Company to pay maintenance, insur- Non-U.S. 735 1,793 ance and real estate taxes. Rental expense under 2,775 4,226 operating leases totaled USD 5,327 and USD 6,216 for the years ended December 31, 2005 and 2004, Provision (benefit) for income taxes 4,901 4,828 respectively. The differences between the United States federal Purchase obligations include amounts committed statutory income tax rate and the Company’s ef- under legally enforceable contracts or purchase or- fective tax rate were as follows: ders for goods or services with defined terms as to 2005 2004 price, quantity, delivery and termination liability U.S. federal statutory rate 34.0% 4.0% Effect of subsidiaries with different tax rates –9.1% –7.8% 14. Supplemental Cash Flow Change in valuation allowance –1.9% 0.8% Information State taxes, net of federal benefit 1.2% .1% Effect of permanent differences –0.1% –3.1% Cash receipts(payments) for the years ended De- Write-off of deferred tax assets 9.2% cember 31: Other –0.1% –0.3% 2005 2004 Effective tax rate 24.0% .9% Income taxes, net (3,156) (998) Interest, net 448 83

Non-cash investing activities for the years ended December 31: 2005 2004 Minimum pension liability adjustment, net of tax (926) —

| 2 4 A N N U A L R epor T jahresbericht 2 0 0 5 Deferred tax assets and liabilities were comprised USD 1,500, which represents the tax benefit for net of the following: operating losses incurred for which the Company 2005 2004 is uncertain as to the amount, if any, of future tax Deferred tax assets: benefits to be received for the future utilization of Accrued liabilities 2,066 847 such loss carryforwards. Loss carryforwards and tax credits 11,088 5,330 Basis differences/intangible assets 23,570 26,950 Undistributed earnings of INFICON’s subsidiar- Inventory 920 919 ies are permanently reinvested. Distribution of Deferred revenue and other 1,069 868 earnings to INFICON would generally be exempt Total gross deferred tax assets 38,173 44,914 from taxation in Switzerland in accordance with Less: valuation allowances (1,515) (5,130) their participation exemption. The participation 37,198 9,784 exemption, in most cases, exempts income such as dividends, interest, and capital gains from taxa- Deferred tax liabilities: tion in Switzerland if such income is derived from Accrued liabilities 586 757 qualifying investments in subsidiaries. Upon distri- Property, plant, and equipment 663 517 bution of those earnings in the form of dividends, Other 82 281 withholding taxes ranging from 5% to 20% would 1,331 ,555 be payable upon the remittance of all previous un- remitted earnings as of December 31, 2005. Net deferred tax asset 35,867 8,229

Presented as: 16. Employee Benefit Plans Current deferred tax asset 2,866 2,650 Long-term deferred tax asset 34,332 7,134 Certain INFICON employees (primarily United Current deferred tax liability (877) (1,005) States, Liechtenstein, and Germany) participate in Long-term deferred tax liability (454) (550) contributory and noncontributory defined benefit 35,867 8,229 plans. Benefits under the defined benefit plans are generally based on years of service and aver- During the year ended December 31, 2000, Unaxis age pay. The Company funds the pension plans Holding AG transferred the assets and liabilities in accordance with the requirements of the Em- of various INFICON subsidiaries to newly created ployee Retirement Income Security Act of 1974, as legal entities that are wholly-owned by INFICON amended, and the Internal Revenue Code in the Holding AG. For income tax purposes, the as- United States and in accordance with local regula- set transfer was considered a taxable transaction tions in foreign countries. creating a new income tax basis of the assets and liabilities transferred. The transaction resulted in a basis difference of approximately USD 84,000 which will be deductible for tax purposes over various periods, no longer than 15 years. As a result, a deferred tax asset of USD 37,385 related to the basis difference was recorded with a corresponding credit in stockholders’ equity. In conjunction with the business transfers and taxable transaction de- scribed above, it was agreed that Unaxis would be responsible for the payment of taxes for the period up to the date of transfer. The tax liability for the period through the transfer date was estimated and recorded as part of the equity reclassification upon reorganization of the Company.

At December 31, 2005, the Company has U.S. federal and net operating loss carryforwards of approximately USD 31,000, which are available to offset future taxable income, if any, which expire at various dates through 2025. Realization of the deferred tax benefit is dependent on generating sufficient taxable income to offset the deferred tax asset prior to its expiration. The Company has recorded a valuation allowance of approximately

| 2 5 The following tables show reconciliations of defined Allocation of Assets benefit pension plans as of December 31: The asset allocation for the Company’s US and Liechtenstein pension plans for the years ended 2005 2004 December 31, 2005, and the target allocation for Change in benefit obligation 2006, by asset category, follows: Benefit obligation, January 1 57,677 50,411 Service cost 2,173 2,232 Equity – US 0–30% Interest cost 2,315 2,311 Equity – International 0–30% Actuarial losses (gains) 943 1,066 Bonds 0–60% Benefits paid (1,549) (3,184) Fixed Income 0–20% Participant contributions 840 822 Cash/Money Market 0–40% Plan amendments — — Foreign currency translation The Company’s U.S. and Liechtenstein pension adjustments (4,657) 4,019 plan assets are managed by outside investment Benefit obligation, December 57,742 57,677 managers. The Company’s investment strategy with respect to pension assets is to maximize Change in plan assets return while protecting principal. The investment Fair value of plan assets, January 1 44,785 39,619 manager will have the flexibility to adjust the asset Actual return on plan assets 4,131 1,393 allocation and move funds to the asset class that Company contributions 1,986 2,939 offers the most opportunity for investment returns. Participant contributions 840 822 Benefits and expenses paid (1,617) (3,184) Accumulated Benefit Obligation Foreign currency translation The accumulated benefit obligation for the Plans is adjustments (3,284) 3,196 approximately USD 51,900. Fair value of plan assets, December 31 46,841 44,785 Estimated Contributions Reconciliation of funded status It is anticipated the Company will make contribu- Funded status (10,901) (12,892) tions of USD 665 to the pension plans for the fiscal Unrecognized prior year ending December 31, 2006. service (benefit) cost 242 174 Minimum pension liability adjustment (1,546) The Company also participates in U.S. and foreign Unrecognized actuarial (gains) losses 6,320 8,862 defined contribution plans for certain locations. (Accrued) prepaid benefit costs (5,885) (3,856) Expense related to these plans was USD 307 and USD 313 for the years ended December 31, 2005 Range of assumptions (in %) and 2004, respectively. Discount rate 2.8–5.7 .3–6.0 Expected return on plan assets 0.0–8.0 0.0–8.0 Rate of compensation increase .9–5.0 .7–5.5 17. Stockholder’s Equity

The following table summarizes the components Under the Swiss Code of Obligations, the share- of the net periodic benefit costs for defined benefit holders may decide on an increase of the share pension plans for the periods ended December 31: capital in a specified aggregate par value up to 50% of the existing share capital, in the form of 2005 2004 authorized capital to be used at the discretion of Service cost 2,173 2,232 the Board of Directors. The Board of Directors is Interest cost 2,315 2,311 currently not authorized to issue new registered Expected return on plan assets (2,050) (2,107) shares. The General Meeting of Stockholders ap- Amortization of prior service cost 62 72 proved conditional capital in the amount of 115,000 Net amortization and deferral of shares, which shall be issued upon the exercise of actuarial gains(losses) 1,112 1,103 option rights, which some employees and mem- Net periodic benefit cost 3,612 3,611 bers of the Board of Directors will be granted pursuant to the Employee Incentive Plan. The Board of Directors will regulate the details of the issuances. As of December 31, 2005 and 2004, 95,926 and 114,100 shares, respectively, were available for issuance.

In connection with the Company’s initial public offering in 2000, employees had the opportunity to

| 2 6 A N N U A L R epor T jahresbericht 2 0 0 5 participate in one of the two following equity pur- stock options under the Leveraged Share Plan was chase programs. 155,555 shares. All options are granted at prices equal to 100% of the market value of the common Leveraged Share Plan – The leveraged share plan stock at the date of grant. The options are non- was available to three tiers of employees: the Chief transferable and expire on the seventh anniversary Executive Officer, other executive officers, and key of the date of grant. Fifty percent of the options employees. Depending on an eligible employee’s vest and become exercisable on the second anni- tier, an eligible employee may have purchased versary of the date of the grant. The remaining 50% shares in the offering for a total purchase price of the options will vest and become exercisable on between USD 23 and USD 563. Approximately 56 the third anniversary of the date of grant. The plan employees participated in the leveraged share plan includes specific requirements for employees who purchasing either ADRs or shares totaling 38,109 are terminated prior to exercising their options or and 19,872, respectively. Each ADR represents one- prior to the options becoming vested. tenth of one share (or a right to receive one-tenth of one share). The shares purchased under the Directors Stock Option Plan – In fiscal year 2001 leveraged share plan could not be transferred or the Board of Directors approved the Directors sold before November 9, 2004. The plan includes Stock Option Plan. The Directors Stock Option specific requirements for employees who are termi- Plan is solely for members of the Board, who are nated prior to this date. not employees of INFICON. The Company grants options to the eligible Directors, on May 15 and Discounted Share Purchase Plan – The discounted November 15 of each year. The number of options share purchase plan was offered to employees granted to the eligible Directors represents 30% who were not eligible to participate in the leveraged of their annual compensation. Options are non- share plan. Under this plan, eligible persons were transferable and will vest immediately upon date of offered the opportunity to purchase shares on the grant and become exercisable one year after the closing of the offering at a 30% discount to the of- grant date and are exercisable within a period of fer price. Each employee was entitled to purchase seven years after the allocation date. All options up to USD 8 worth of shares in the offering at a are granted at prices equal to 100% of the market 30% discount. Employees who participated in the value of the common stock at the date of grant. The discounted share purchase plan purchased either plan includes specific requirements for the Direc- ADRs or shares totaling 26,011 and 7,166, respec- tors who are removed or resign from the Board. tively. The 30% discount was treated as compensation. Management and Key Employee Stock Option Plan – In fiscal year 2001 the Board of Directors approved The ADRs and shares issued under the leverage the Key Employee Stock Option Plan. The purpose share plan and discounted share purchase plan of the plan is to provide key employees of the Com- were included in the 315,000 shares offered by the pany with an opportunity to become shareholders, Company as part of the initial public offering. and in addition, to obtain options on shares and allow them to participate in the future success of the Notes Receivable from Officers – In November Company. It is intended that the plan will provide 2000, certain officers and key employees pur- an additional incentive for key employees to main- chased 16,480 shares of common stock and paid tain continued employment, contribute to the future the exercise price by issuing cash plus full recourse success and prosperity, and enhance the value of promissory notes, denominated in U.S. Dollars, the Company. Accordingly, the Company will, from Swiss Francs, or Euro, to the Company totaling time to time during the term of this plan, grant to USD 1,371. At December 31, 2005 and 2004, the such key employees options to purchase shares outstanding balance on the notes was USD 152 in such amounts as the Company shall determine, and USD 421, respectively. The remaining notes, subject to the conditions provided in the plan. The which have been offset against stockholders’ eq- plan shall remain in effect through May 15, 2011. uity for financial statement presentation, are due in November 2007 and bear an interest rate equal to In December 2002, the FASB issued Statement 120% of the mid-term applicable federal rate. The of Financial Accounting Standards No. 148 (SFAS interest is payable on a quarterly basis. 148), “Accounting for Stock-Based Compensation – Transition and Disclosure – an Amendment of FASB Statement No. 123 (SFAS 123).” The Company 18. Stock Option Plans has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Leveraged Share Plan - The aggregate amount of Employees” (APB 25) and related interpretations in shares that may be issued in the form incentive accounting for its employee stock options. Under

| 2 7 APB 25, because the exercise price of the Com- The following table summarizes information about pany’s employee stock options equals the market stock options outstanding and exercisable at De- price of the underlying stock on the date of grant, cember 31, 2005. no compensation expense is recognized. Options Outstanding Exercisable For purposes of pro forma disclosures, the es- Average Remaining Average timated fair value of the options is amortized to Exercise Price Shares Price Term Shares Price expense over the options’ vesting period. The (CHF) (CHF) (CHF) Company’s pro forma information follows: 50.00–67.50 17,650 50 4 6,450 50 67.51–90.00 6,729 71.7 .5 6,729 71.7 90.01–112.50 40,786 96.3 5.6 4,059 02.7 2005 2004 112.51–135.00 23,515 7.1 5.1 5,290 8.1 Net income, as reported 15,528 9,421 157.50–180.00 17,472 65.7 6.9 12,844 65.9 202.50–225.00 78,480 225 .8 78,480 225 Income from continuing operations 15,514 ,460 Totals 184,632 113,852 Less: stock based compensation expense, net of tax (1,211) (1,044) Proforma income from The options are granted in Swiss Francs. The aver- continuing operations 14,303 0,416 age rate for 2005 was USD 1.00=CHF 1.246. Income (loss) from discontinued operations 14 (2,093) Pro forma information regarding net income is Net income (loss) – pro forma 14,317 8,377 required by Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Earnings (loss) per share Compensation” (“FASB 123”) (see Note 2). The fair Diluted: value for these options was estimated at the date of Continuing operations – as reported 6.63 4.91 grant using a Black-Scholes option pricing model Discontinued operations – as reported 0.01 (0.87) with the following weighted-average assumptions Total – as reported 6.64 4.04 for the years ended December 31: 2005 2004 Continuing operations – pro forma 6.12 4.47 Risk free interest rate 1.55% .13% Discontinued operations – pro forma 0.01 (0.87) Expected volatility factor of stock price 46.80% 62.81% Total – pro forma 6.12* .59* Dividend Yield 3.30% 0.00% Expected life of stock options (years) 4.7 5.0 Basic: Continuing operations – as reported 6.68 4.95 The Black-Scholes option valuation model was Discontinued operations – as reported 0.01 (0.88) developed for use in estimating the fair value of Total – as reported 6.68* 4.07 traded options which have no vesting restrictions and are fully transferable. In addition, option valu- Continuing operations – pro forma 6.16 4.50 ation models require the input of highly subjective Discontinued operations – pro forma 0.01 (0.88) assumptions including the expected stock price Total – pro forma 6.16* .62 volatility. Because the Company’s employee stock * Figures may not total due to rounding. options have characteristics significantly different from those of traded options, and because The following is a summary of option transactions changes in the subjective input assumptions can under the three Plans: materially affect the fair value estimate, in manage- Weighted ment’s opinion, the existing models do not neces- Average sarily provide a reliable single measure of the fair Price Shares (CHF) value of its employee stock options. Outstanding December 31, 200 188,953 77.29 Granted 36,429 .16 Forfeited (11,140) 27.56 19. Business Segments Exercised (900) 50.00 Outstanding December 31, 2004 213,342 168.61 The Company is a global supplier of instrumenta- Granted 34,892 97.62 tion for analysis, monitoring, and control in the Forfeited (45,428) 99.60 general vacuum processes, semiconductor and Exercised (18,174) 93.30 vacuum coating, refrigeration and air conditioning, Outstanding December 31, 2005 184,632 154.98 and emergency response and security markets. Effective January 1, 2005, the Company changed Exercisable at December 31, 2005 113,852 to one operating segment from its prior operating segments of Semiconductor Vacuum Instrumenta-

| 2 8 A N N U A L R epor T jahresbericht 2 0 0 5 tion and General Vacuum Instrumentation. At the For the year ended December 31, 2005, the fully direction of the Company’s chief operating deci- diluted earnings per share calculation excluded sion maker, the President and Chief Executive 95,952 options to purchase shares since these Officer, and a realignment of goals and objectives, shares would have been anti-dilutive for 2005. the allocation of resources and assessment of performance is now made for the Company as a whole. Since the Company operates in one segment, all 21. Subsequent Event information required by SFAS No. 131, “Disclosures about Segments of an Enterprise and Related In- On February 28, 2006, INFICON acquired the as- formation,” can be found in the consolidated finan- sets of Electro Dynamics Crystal Corporation, a cial statements. premier manufacturer of quartz-based products. The acquisition provides INFICON a competitive Information on the Company’s sales by geographic advantage through vertical supply chain integra- location (determined by country of destination) was tion and improves our position in the optical coat- as follows: ing and display markets. Due to the timing of the 2005 2004 acquisition, the purchase price allocation has not Europe 81,267 83,147 been completed, however, it is believed that the al- North America 54,559 51,434 location will be among inventory, equipment, intan- Asia-Pacific 53,681 51,783 gible assets and possibly goodwill. Other 1,793 1,783 191,300 88,147 22. Additional information required by Swiss Law 20. Earnings Per Share As required by article 663 paragraph 3 of the Swiss The Company computes basic earnings per share, Code of Obligations, the following supplementary which is based on the weighted average number of information is disclosed: common shares outstanding, and diluted earnings 2005 2004 per share, which is based on the weighted average Total personnel costs 57,603 53,985 number of common shares outstanding and all dilutive common equivalent shares outstanding. The Depreciation of property, dilutive effect of options is determined under the plant, and equipment 4,379 4,701 treasury stock method using the average market Amortization and impairment price for the period. on intangible assets 120 525 Total amortization, impairment The following table sets forth the computation of and depreciation 4,499 5,226 basic and diluted earnings per share for the years ended December 31: The fire insurance values of property, plant, and 2005 2004 equipment at December 31: Numerator for basic and diluted 2005 2004 earnings per share: Buildings and improvements 17,621 18,086 Income from continuing operations 15,514 ,460 Machinery and equipment 23,450 19,902 Income (loss) from 41,071 37,988 discontinued operations 14 (2,093) Net income 15,528 9,421

Denominator for basic and diluted earnings per share: Weighted average shares outstanding Basic 2,323,501 2,315,900 Diluted 2,338,889 2,332,703

Earnings per share: Diluted – Continuing operations 6.63 4.91 Diluted – Discontinued operations 0.01 (0.87) Diluted – Total 6.64 4.04

Basic – Continuing operations 6.68 4.95 Basic – Discontinued operations 0.01 (0.88) Basic – Total 6.68* 4.07 * Figures may not total due to rounding. | 2 9 Report of the Group Auditors

To the general meeting of INFICON Holding AG, Bad Ragaz

As auditors of the group, we have audited the accompanying consolidated balance sheets of INFICON Holding AG and its subsidiaries as of December 31, 2005 and 2004 and the related consolidated statements of income, of stockholders’ equity and of cash flows for the years then ended, included on pages 38 through 53. These consolidated financial statements are the responsibility of the Company’s board of directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We confirm that we meet the legal requirements concerning professional qualification and independence.

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

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of INFICON Holding AG and its subsidiaries at December 31, 2005 and 2004 and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America and comply with Swiss law.

We recommend that the consolidated financial statements submitted to you be approved.

PricewaterhouseCoopers AG Stephen W Williams Peter Strassmann

Zurich, March 8, 2006

| 3 0 A N N U A L R epor T jahresbericht 2 0 0 5 Financial Report INFICON Holding AG Finanzbericht INFICON Holding AG

Contents Inhaltsverzeichnis

32 Balance sheet Bilanz 33 Statement of Income Erfolgsrechnung 34 Notes Anhang zur Jahresrechnung 36 Appropriation of available earnings Antrag für die Gewinnverteilung 37 Report of the statutory auditors Bericht der Revisionsstelle

| INFICON Holding AG, Bad Ragaz

Balance Sheet

(CHF 1,000)

December 31, December 31, ASSETS 2005 2004

Cash and cash equivalents 7,035 2,416 Receivables – third parties 38 3 Receivables – subsidiaries 201 369 Other current assets 0 41 Total current assets 7,274 2,560

Notes receivable – subsidiaries 6,704 6,364 Notes receivable – officers 200 459 Investments in subsidiaries 285,776 285,776 Total long-term assets 292,680 292,599

Total assets 299,954 295,159

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable – third parties 49 8 Accounts payable – subsidiaries 3,367 2,476 Accrued liabilities 516 711 Total current liabilities 3,932 ,194

Total liabilities 3,932 ,194

Share capital; CHF 10 par value, 2,334,074 shares issued (2004: 2,315,900) 23,341 23,159 General legal reserve 250,254 248,740 Retained earnings 22,427 20,066 Total stockholders’ equity 296,022 291,965

Total liabilities and stockholders’ equity 299,954 295,159

| 3 2 A N N U A L R epor T jahresbericht 2 0 0 5 INFICON Holding AG, Bad Ragaz

Statement of Income

(CHF 1,000)

December 31, December 31, ASSETS 2005 2004 Year ended December 31, 2005 2004

Cash and cash equivalents 7,035 2,416 Income from investments in subsidiaries 4,000 22,697 Receivables – third parties 38 3 Administrative expenses (2,253) (2,446) Receivables – subsidiaries 201 369 Income from operations 1,747 20,251 Other current assets 0 41 Total current assets 7,274 2,560 Interest income (196) (278) Interest expense — 220 Notes receivable – subsidiaries 6,704 6,364 Foreign currency exchange (gain)/loss (466) 197 Notes receivable – officers 200 459 (662) 139 Investments in subsidiaries 285,776 285,776 Total long-term assets 292,680 292,599 Income before income taxes 2,409 20,112

Total assets 299,954 295,159 Income tax expense (48) (46) Net income 2,361 20,066

LIABILITIES AND STOCKHOLDERS’ EQUITY Retained earnings at beginning of year 20,066 (14,463) Transfer from general legal reserve — 14,463 Accounts payable – third parties 49 8 Retained earnings at end of year 22,427 20,066 Accounts payable – subsidiaries 3,367 2,476 Accrued liabilities 516 711 Total current liabilities 3,932 ,194

Total liabilities 3,932 ,194

Total liabilities and stockholders’ equity 299,954 295,159

| INFICON Holding AG, Bad Ragaz

Notes to INFICON Holding AG

Note 1 – Description of Company December 31, Company Currency 2005 2004 The information contained in the INFICON Holding INFICON Aaland Ab (in 1,000) (in 1,000) AG, Bad Ragaz financial statements relates to the Mariehamn, Finland ultimate parent company alone, while the consoli- Share Capital EUR 60 60 dated financial statements reflect the economic Ownership 100% 00% situation of INFICON Group as a whole. INFICON Purpose Manufacturing Holding AG, Bad Ragaz (the “Company”) financial INFICON Ltd. statements are prepared in compliance with Swiss London, United Kingdom Corporate Law. Share Capital GBP 400 400 Ownership 100% 00% Purpose Sales Note 2 – Investments in INFICON S.A.R.L. Subsidiaries Courtaboeuf, France Share Capital EUR 108 08 The investments in subsidiaries are carried in ag- Ownership 100% 00% gregate at lower of cost or their intrinsic value. The Purpose Sales following subsidiaries were included in INFICON INFICON Co., Ltd. Holding AG’s investment portfolio. Yokohama-Shi, Japan Share Capital JPY 400,000 400,000 December 31, Ownership 100% 00% Company Currency 2005 2004 Purpose Sales INFICON Inc. (in 1,000) (in 1,000) INFICON Ltd. Syracuse, USA Chubei City, Taiwan Share Capital USD * * Share Capital TWD 52,853 52,853 Ownership 100% 00% Ownership 100% 00% Purpose Manufacturing, Sales and Service Purpose Sales INFICON LT Inc. INFICON Ltd. Cambridge, USA Bungdang-Ku, Korea Share Capital USD ** ** Share Capital KRW 600,000 600,000 Ownership 100% 00% Ownership 100% 00% Purpose Sales and Service Purpose Sales INFICON AG INFICON Pte. Ltd. Balzers, Liechtenstein Singapore Share Capital CHF 6,000 6,000 Share Capital SGD 1,000 ,000 Ownership 100% 00% Ownership 100% 00% Purpose Manufacturing, Sales and Service Purpose Sales INFICON GmbH INFICON Ltd. Bad Ragaz, Switzerland Hong Kong Share Capital CHF 2,000 2,000 Share Capital HKD 8,780 8,780 Ownership 100% 00% Ownership 100% 00% Purpose Management Company Purpose Sales INFICON GmbH INFICON Guangzhou Service Centre Ltd. Cologne, Germany Guangzhou Share Capital EUR 1,026 ,026 Share Capital RMB 9,837 9,837 Ownership 100% 00% Ownership 100% 00% Purpose Manufacturing, Sales and Service Purpose Service * The Company was issued 100 shares of INFICON, Inc. which have a nominal value of USD 0.01 per share. ** The Company was issued 1 share which has no nominal value. | 3 4 A N N U A L R epor T jahresbericht 2 0 0 5 Authorized Share Capital Note 3 – Equity The authorization of the Board of Directors to issue at any time up to 1,157,500 registered shares of See footnotes to the consolidated financial state- CHF 10 each expired on May 7, 2005. ments for a description of the company capital and the related stock plans. Conditional Share Capital The articles of incorporation provide for a con- No stockholder entered in the share register held ditional capital of a maximum of CHF 1,150,000 more than 5 percent of the voting rights at Decem- through the issuance of 115,000 registered shares ber 31, 2005. of CHF 10 each by the exercise of option rights 2005 2004 granted to employees and members of the Board Unaxis Holding AG — 9.50% of Directors of the Company. In 2005, employee Chase Nominees Ltd. Wollgate House — 2.64% stock options were exercised resulting in an in- FMR Corp. — 9.96% crease in share capital of 18,174 shares. The balance of conditional share capital at December 31, According to the announcement of October 14, 2005 is CHF 959,260 (2004: CHF 1,141,000). 2005, Unaxis Holding AG held 11,650,500 call options granting 388,350 voting rights if exercised. On February 15, 2006, Unaxis Holding AG gave notice Note 5 – Contingent Liabilities that as a result of a transaction entered into on February 9, 2006, they held a total of 6,150,500 call In CHF 1,000 2005 2004 options granting 205,016 voting rights if exercised. Guarantees in favor of affiliated companies 8,380 2,193 As of November 17, 2005, Zürcher Kantonalbank reported a holding of 423,013 shares. On January 11, 2006, the Zürcher Kantonalbank increased its holding to 489,908 shares.

On February 8, 2006, INFICON disclosed that Bank Julius Baer & Co. Ltd. held 131,880 shares.

Note 4 – Issued, authorized and conditional share capital

Issued Share Capital / Share Capital Increase During 2005, employees of INFICON exercised stock options which resulted in 18,174 new shares being issued and increased nominal share capital by CHF 181,740. The share premium thereon of CHF 1,513,959 has been credited to the general legal reserve. At December 31, 2005, the number of issued INFICON Holding AG registered shares amounted to 2,334,074 (2004: 2,315,900) with a nominal value of CHF 10 each.

| 3 5 Appropriation of Available Earnings

(Proposal of the Board of Directors)

In CHF 1,000 2005 2004 Retained earnings at beginning of year 20,066 — Net income 2,361 20,066 Retained earnings 22,427 20,066

Gross dividend (CHF 5 each share) (11,670) — Balance to be carried forward 10,757 20,066

| 3 6 A N N U A L R epor T jahresbericht 2 0 0 5 INFICON Holding AG, Bad Ragaz

Report of the Statutory Auditors

To the general meeting of INFICON Holding AG, Bad Ragaz

As statutory auditors, we have audited the accounting records and the financial statements (balance sheet, income statement and notes) included on pages 56 to 59 of INFICON Holding AG for the year ended December 31, 2005.

These financial statements are the responsibility of the board of directors. Our responsibility is to express an opinion on these financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.

Our audit was conducted in accordance with Swiss Auditing Standards, which require that an audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the financial statements. We have also assessed the accounting principles used, significant estimates made and the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the accounting records, the financial statements and the proposed appropriation of available earnings comply with Swiss law and the company’s articles of incorporation.

We recommend that the financial statements submitted to you be approved.

PricewaterhouseCoopers AG Stephen W Williams Peter Strassmann

Zurich, March 8, 2006

| 3 7 Certain statements contained in this Annual Report As a consequence, our current and anticipated are forward-looking statements that do not relate plans and our future prospects, results of opera- solely to historical or current facts. Forward-look- tions and financial condition may differ from those ing statements can be identified by the use of expressed in any forward-looking statements made words such as “may”, “believe”, “will”, “expect”, by or on behalf of our company. We undertake no “project”, “assume”, “estimate”, “anticipate”, “plan” obligation to publicly update or revise any forward- or “continue.” These forward-looking statements looking statements, whether as a result of new address, among other things, our strategic ob- information, future events or otherwise. jectives, trends in vacuum technology and in the industries that employ vacuum instrumentation, such as the semiconductor and related industries and the anticipated effects of these trends on our business. These forward-looking statements are based on the current plans and expectations of our management and are subject to a number of uncertainties and risks that could significantly affect our current plans and expectations, as well as future results of operations and financial condition. Some of these risks and uncertainties are discussed in the Company’s Annual Report on Form 20-F for fiscal 2004.

2005 Annual Report /Jahresbericht

INFICON Holding AG Hintergasse 15B CH-7310 Bad Ragaz Switzerland

Headquarters /Hauptsitz INFICON Inc. Two Technology Place East Syracuse, NY 13057 United States of America

| 3 8 A N N U A L R epor T jahresbericht 2 0 0 5