Exhibit 13






















                             THERMOQUEST CORPORATION

                        Consolidated Financial Statements

                                      1996
PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                        Consolidated Statement of Income

    (In thousands except per share amounts)         1996      1995      1994
    ------------------------------------------------------------------------
    Revenues (Notes 8 and 11)                   $313,793  $241,909  $223,396
                                                --------  --------  --------
    Costs and Operating Expenses:
      Cost of revenues                           167,438   120,724   112,597
      Selling, general, and administrative
        expenses (Note 8)                         77,371    66,557    62,605
      Research and development expenses           21,821    17,453    14,712
                                                --------  --------  --------
                                                 266,630   204,734   189,914
                                                --------  --------  --------

    Operating Income                              47,163    37,175    33,482

    Interest Income                                8,905     2,715       343
    Interest Expense                              (7,328)   (3,725)   (1,715)
                                                --------  --------  --------
    Income Before Provision for Income Taxes      48,740    36,165    32,110
    Provision for Income Taxes (Note 5)           20,717    15,163    13,584
                                                --------  --------  --------
    Net Income                                  $ 28,023  $ 21,002  $ 18,526
                                                ========  ========  ========

    Earnings per Share                          $    .59  $    .46  $    .41
                                                ========  ========  ========

    Weighted Average Shares                       47,677    45,187    45,187
                                                ========  ========  ========


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





                                         2PAGE
<PAGE>

    ThermoQuest Corporation                         1996 Financial Statements

                           Consolidated Balance Sheet

    (In thousands)                                            1996      1995
    ------------------------------------------------------------------------
    Assets
    Current Assets:
      Cash and cash equivalents                           $174,978  $120,354
      Available-for-sale investments, at quoted market
        value (amortized cost of $7,430; Note 2)             7,452         -
      Accounts receivable, less allowances of
        $4,459 and $2,341                                   73,669    65,729
      Inventories                                           54,012    47,020
      Prepaid expenses                                       1,003     1,258
      Prepaid income taxes (Note 5)                         11,469     8,695
                                                          --------  --------
                                                           322,583   243,056
                                                          --------  --------
    Property, Plant, and Equipment, at Cost, Net            50,928    43,531
                                                          --------  --------
    Patents and Other Assets                                 4,368     5,627
                                                          --------  --------
    Cost in Excess of Net Assets of Acquired
      Companies (Notes 3 and 5)                            157,191   135,828
                                                          --------  --------
                                                          $535,070  $428,042
                                                          ========  ========


















                                         3PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                     Consolidated Balance Sheet (continued)

    (In thousands except share amounts)                       1996      1995
    ------------------------------------------------------------------------
    Liabilities and Shareholders' Investment
    Current Liabilities:
      Notes payable and current maturities of
        long-term obligations (Note 6)                    $ 16,732  $ 11,755
      Accounts payable                                      18,249    13,144
      Accrued payroll and employee benefits                 15,339    10,533
      Accrued installation and warranty expenses             9,899     7,079
      Accrued income taxes (includes $6,892 and $2,565 
        due to parent company)                              14,290     4,118
      Deferred revenue                                       9,353     8,417
      Customer deposits                                      6,542     6,403
      Other accrued expenses                                14,475    12,077
      Due to parent company                                    839     2,628
                                                          --------  --------
                                                           105,718    76,154
                                                          --------  --------
    Deferred Income Taxes (Note 5)                           5,405     5,767
                                                          --------  --------
    Accrued Pension and Other Deferred Items (Note 4)       16,340    11,925
                                                          --------  --------
    Long-term Obligations (Note 6)                         104,593   106,456
                                                          --------  --------

    Commitments (Note 7)

    Shareholders' Investment (Notes 4 and 9):
      Common stock, $.01 par value, 100,000,000 shares
        authorized; 48,450,000 and 45,000,000 shares
        issued and outstanding                                 485       450
      Capital in excess of par value                       261,921   213,378
      Retained earnings                                     39,787    11,764
      Cumulative translation adjustment                        807     2,148
      Net unrealized gain on available-for-sale
        investments (Note 2)                                    14         -
                                                          --------  --------
                                                           303,014   227,740
                                                          --------  --------
                                                          $535,070  $428,042
                                                          ========  ========


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



                                         4PAGE
<PAGE>

    ThermoQuest Corporation                         1996 Financial Statements

                      Consolidated Statement of Cash Flows

    (In thousands)                                  1996      1995      1994
    ------------------------------------------------------------------------
    Operating Activities:
      Net income                               $ 28,023  $ 21,002  $ 18,526
      Adjustments to reconcile net income
        to net cash provided by operating
        activities:
          Depreciation and amortization           9,603     8,397     8,390
          Provision for losses on accounts
            receivable                              220       213      (265)
          Other noncash expenses                  1,417     1,192     1,085
          Decrease in deferred
            income taxes                           (362)      (45)     (181)
          Changes in current accounts,
            excluding the effects of
            acquisitions:
              Accounts receivable                 8,179   (13,135)    4,220
              Inventories                         4,748    (7,523)    1,596
              Other current assets               (3,013)    1,027     3,512
              Accounts payable                   (5,763)    2,649       696
              Other current liabilities          13,515       782    (8,250)
          Other                                   1,451     1,532     1,252
                                               --------  --------  --------
    Net cash provided by operating activities    58,018    16,091    30,581
                                               --------  --------  --------

    Investing Activities:
      Acquisitions, net of cash acquired
        (Note 3)                                (32,408)        -         -
      Purchases of available-for-sale
        investments                              (7,250)        -         -
      Purchases of property, plant, and
        equipment                                (3,761)   (2,761)   (2,260)
      Other                                         207       (73)      287
                                               --------  --------  --------
    Net cash used in investing activities      $(43,212) $ (2,834) $ (1,973)
                                               --------  --------  --------





                                         5PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                Consolidated Statement of Cash Flows (continued)

    (In thousands)                                  1996      1995      1994
    ------------------------------------------------------------------------
    Financing Activities:
      Net proceeds from initial public offering
        of Company common stock (Note 9)       $ 47,778  $      -  $      -
      Net proceeds from issuance of
        subordinated convertible
        debentures (Note 6)                           -    93,912         -
      Increase (decrease) in short-term
        obligations                              (5,389)    5,927    (2,724)
      Repayment of long-term obligations         (1,906)   (1,135)     (681)
      Net transfer to parent company                  -    (5,590)  (25,486)
      Other                                        (153)      281         -
                                               --------  --------  --------
    Net cash provided by (used in)
      financing activities                       40,330    93,395   (28,891)
                                               --------  --------  --------
    Exchange Rate Effect on Cash                   (512)      652     1,131
                                               --------  --------  --------
    Increase in Cash and Cash Equivalents        54,624   107,304       848
    Cash and Cash Equivalents at Beginning
      of Year                                   120,354    13,050    12,202
                                               --------  --------  --------
    Cash and Cash Equivalents at End of Year   $174,978  $120,354  $ 13,050
                                               ========  ========  ========

    Cash Paid For:
      Interest                                 $  7,010  $  1,701  $  1,715
                                               ========  ========  ========
      Income taxes                             $ 11,337  $  6,826  $  5,003
                                               ========  ========  ========

    Noncash Activities:
      Fair value of assets of acquired
        companies                              $ 69,741  $      -  $      -
      Cash paid for acquired companies          (33,148)        -         -
                                               --------  --------  --------

        Liabilities assumed of acquired
          companies                            $ 36,593  $      -  $      -
                                               ========  ========  ========

      Transfer of acquired business from
        parent company                         $      -  $      -  $ 13,492
                                               ========  ========  ========

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


                                         6PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

               Consolidated Statement of Shareholders' Investment

    (In thousands)                              1996        1995        1994
    ------------------------------------------------------------------------
    Common Stock, $.01 Par Value
       Balance at beginning of year        $     450  $       -   $       -
       Net proceeds from initial public
         offering of Company common stock
         (Note 9)                                 35          -           -
       Capitalization of Company                   -        300           -
       Effect of three-for-two stock split         -        150           -
                                           ---------  ---------   ---------
       Balance at end of year                    485        450           -
                                           ---------  ---------   ---------

    Capital in Excess of Par Value
       Balance at beginning of year          213,378          -           -
       Net proceeds from initial public
         offering of Company common stock
         (Note 9)                             47,743          -           -
       Tax benefit related to employees' and
         directors' stock plans                  800          -           -
       Capitalization of Company                   -    213,528           -
       Effect of three-for-two stock split         -       (150)          -
                                           ---------  ---------   ---------
       Balance at end of year                261,921    213,378           -
                                           ---------  ---------   ---------

    Retained Earnings
       Balance at beginning of year           11,764          -           -
       Net income                             28,023          -           -
       Net income after capitalization
         of Company                                -     11,764           -
                                           ---------  ---------   ---------
       Balance at end of year                 39,787     11,764           -
                                           ---------  ---------   ---------

    Cumulative Translation Adjustment
       Balance at beginning of year            2,148      1,453      (2,060)
       Translation adjustment                 (1,341)       695       3,513
                                           ---------  ---------   ---------
          Balance at end of year                 807      2,148       1,453
                                           ---------  ---------   ---------

    Net Unrealized Gain on Available-
      for-sale Investments
       Balance at beginning of year                -          -           -
       Change in net unrealized gain on
         available-for-sale investments           14          -           -
                                           ---------  ---------   ---------
        Balance at end of year             $      14  $       -   $       -
                                           ---------  ---------   ---------
                                                                  


                                         7PAGE
<PAGE>
   ThermoQuest Corporation                           1996 Financial Statements

         Consolidated Statement of Shareholders' Investment (continued)

    (In thousands)                              1996         1995       1994
    ------------------------------------------------------------------------
    Net Parent Company Investment
       Balance at beginning of year        $       -   $ 210,180  $ 203,648
       Net income prior to capitalization
         of Company                                -       9,238     18,526
       Transfer of acquired business from
         parent company                            -           -     13,492
       Net transfer to parent company              -      (5,590)   (25,486)
       Capitalization of Company                   -    (213,828)         -
                                           ---------   ---------  ---------
         Balance at end of year                    -           -    210,180
                                           ---------   ---------  ---------
     Total Shareholders' Investment        $ 303,014   $ 227,740  $ 211,633
                                           =========   =========  =========


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













                                        8PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                   Notes to Consolidated Financial Statements

    1.  Nature of Operations and Summary of Significant Accounting Policies

    Nature of Operations
        ThermoQuest Corporation (the Company) develops, manufactures, and
    sells mass spectrometers, liquid chromatographs, and gas chromatographs.
    The Company's products are used primarily by pharmaceutical, chemical,
    and food and beverage companies; environmental laboratories; and in
    industrial and forensic applications.

    Relationship with Thermo Instrument Systems Inc. and Thermo Electron
    Corporation
        The Company was incorporated in June 1995 as a wholly owned
    subsidiary of Thermo Instrument Systems Inc. (Thermo Instrument). As part
    of the formation of the Company, Thermo Instrument transferred to the
    Company the assets, liabilities, and businesses of Finnigan Corporation
    (Finnigan) and Thermo Separation Products Inc. (TSP) in exchange for
    45,000,000 shares of the Company's common stock. As of December 28, 1996,
    Thermo Instrument owned 45,000,000 shares of the Company's common stock,
    representing 93% of such stock outstanding. Thermo Instrument is an
    82%-owned subsidiary of Thermo Electron Corporation (Thermo Electron). As
    of December 28, 1996, Thermo Electron owned 60,000 shares of the
    Company's common stock, representing .12% of such stock outstanding.

    Principles of Consolidation
        The accompanying financial statements include the accounts of the
    Company and its wholly owned subsidiaries. All material intercompany
    accounts and transactions have been eliminated.

    Fiscal Year
        The Company has adopted a fiscal year ending the Saturday nearest
    December 31. References to 1996, 1995, and 1994 are for the fiscal years
    ended December 28, 1996, December 30, 1995, and December 31, 1994,
    respectively.

    Revenue Recognition
        The Company recognizes product revenues upon shipment of its products
    and recognizes service contract revenues ratably over the term of the
    contract. The Company provides a reserve for its estimate of warranty and
    installation costs at the time of shipment. Deferred revenue in the
    accompanying balance sheet consists primarily of unearned revenue on
    service contracts. Substantially all of the deferred revenue included in
    the accompanying 1996 balance sheet will be recognized within one year.

    Stock-based Compensation Plans
        The Company applies Accounting Principles Board Opinion (APB) No. 25,
    "Accounting for Stock Issued to Employees" and related interpretations in
    accounting for its stock-based compensation plans (Note 4). Accordingly,
    no accounting recognition is given to stock options granted at fair
    market value until they are exercised. Upon exercise, net proceeds,
    including tax benefits realized, are credited to equity.

                                         9PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                   Notes to Consolidated Financial Statements

    1.  Nature of Operations and Summary of Significant Accounting Policies 
        (continued)

    Income Taxes
        The Company and Thermo Instrument have a tax allocation agreement
    under which both the Company and Thermo Instrument are included in Thermo
    Electron's consolidated federal and certain state income tax returns. The
    agreement provides that in years in which the Company has taxable income,
    it will pay to Thermo Electron amounts comparable to the taxes the
    Company would have paid if it had filed separate tax returns. If Thermo
    Instrument's equity ownership of the Company were to drop below 80%, the
    Company would be required to file its own income tax returns.
        In accordance with Statement of Financial Accounting Standards (SFAS)
    No. 109, "Accounting for Income Taxes," the Company recognizes deferred
    income taxes based on the expected future tax consequences of differences
    between the financial statement basis and the tax basis of assets and
    liabilities, calculated using enacted tax rates in effect for the year in
    which the differences are expected to be reflected in the tax return.

    Earnings per Share
        Earnings per share have been computed based on the weighted average
    number of shares outstanding during the year. Pursuant to Securities and
    Exchange Commission requirements, earnings per share have been presented
    for all periods. Weighted average shares for all periods include the
    45,000,000 shares issued to Thermo Instrument in connection with the
    initial capitalization of the Company and, for periods prior to the
    Company's initial public offering, the effect of the assumed exercise of
    stock options issued within one year prior to the Company's initial
    public offering. Because the effect of the assumed exercise of stock
    options would be immaterial, they have been excluded from weighted
    average shares subsequent to the Company's initial public offering. Fully
    diluted earnings per share have been computed, where dilutive, assuming
    the conversion of the Company's subordinated convertible debentures and
    elimination of the related interest expense, as well as the exercise of
    stock options and their related income tax effects (Note 12).

    Stock Split
        All share and per share information has been restated to reflect a
    three-for-two stock split, effected in the form of a 50% stock dividend,
    distributed in January 1996.

    Cash and Cash Equivalents
        As of December 28, 1996, $152,063,000 of the Company's cash
    equivalents were invested in a repurchase agreement with Thermo Electron.
    Under this agreement, the Company in effect lends excess cash to Thermo
    Electron, which Thermo Electron collateralizes with investments
    principally consisting of U.S. government agency securities, corporate
    notes, commercial paper, money market funds, and other marketable
    securities, in the amount of at least 103% of such obligation. The
    Company's funds subject to the repurchase agreement are readily
    convertible into cash by the Company. The repurchase agreement earns a
    rate based on the 90-day Commercial Paper Composite Rate plus 25 basis 

                                        10PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                   Notes to Consolidated Financial Statements

    1.  Nature of Operations and Summary of Significant Accounting Policies 
        (continued)

    points, set at the beginning of each quarter. As of December 28, 1996,
    the Company's cash equivalents also include investments in commercial
    paper and short-term certificates of deposit of the Company's foreign
    operations, which have an original maturity of three months or less. Cash
    equivalents are carried at cost, which approximates market value.

    Inventories
        Inventories are stated at the lower of cost (on a first-in, first-out
    or weighted average basis) or market value and include materials, labor,
    and manufacturing overhead. The components of inventories are as follows:

    (In thousands)                                           1996      1995
    -----------------------------------------------------------------------
    Raw materials and supplies                            $23,500  $17,970
    Work-in-process and finished goods                     30,512   29,050
                                                          -------  -------
                                                          $54,012  $47,020
                                                          =======  =======

    Property, Plant, and Equipment
        The costs of additions and improvements are capitalized, while
    maintenance and repairs are charged to expense as incurred. The Company
    provides for depreciation and amortization using the straight-line method
    over the estimated useful lives of the property as follows: buildings and
    improvements, 5 to 40 years; machinery and equipment, 3 to 10 years; and
    leasehold improvements, the shorter of the term of the lease or the life
    of the asset. Property, plant, and equipment consists of the following:

    (In thousands)                                           1996      1995
    -----------------------------------------------------------------------
    Land                                                 $15,782   $13,463
    Buildings                                             31,447    27,414
    Machinery, equipment and leasehold improvements       19,996    19,788
                                                         -------   -------
                                                          67,225    60,665
    Less: Accumulated depreciation and amortization       16,297    17,134
                                                         -------   -------
                                                         $50,928   $43,531
                                                         =======   =======

    Patents and Other Assets
        Patents and other assets in the accompanying balance sheet includes
    the costs of acquired patents that are amortized using the straight-line
    method over an estimated useful life of 12 years. These assets were
    $1,751,000 and $2,547,000, net of accumulated amortization of $6,470,000
    and $5,669,000, at year-end 1996 and 1995, respectively. Patents and
    other assets in the accompanying balance sheet also includes deferred
    debt costs of $2,008,000 and $2,348,000, net of accumulated amortization
    of $863,000 and $370,000, at year-end 1996 and 1995, respectively. These 

                                        11PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                   Notes to Consolidated Financial Statements

    1.  Nature of Operations and Summary of Significant Accounting Policies 
        (continued)

    costs are being amortized through the maturities of the related debt. The
    debt matures in 2000 and 2004.

    Cost in Excess of Net Assets of Acquired Companies
        The excess of cost over the fair value of net assets of acquired
    companies is amortized using the straight-line method over 40 years.
    Accumulated amortization was $20,386,000 and $16,524,000 at year-end 1996
    and 1995, respectively. The Company assesses the future useful life of
    this asset whenever events or changes in circumstances indicate that the
    current useful life has diminished. The Company considers the future
    undiscounted cash flows of the acquired companies in assessing the
    recoverability of this asset. If impairment has occurred, any excess of
    carrying value over fair value is recorded as a loss.

    Foreign Currency
        All assets and liabilities of the Company's foreign subsidiaries are
    translated at year-end exchange rates, and revenues and expenses are
    translated at average exchange rates for the year in accordance with SFAS
    No. 52, "Foreign Currency Translation." Resulting translation adjustments
    are reflected as a separate component of shareholders' investment titled
    "Cumulative translation adjustment." Foreign currency transaction gains
    and losses are included in the accompanying statement of income and are
    not material for the three years presented.

    Use of Estimates
        The preparation of financial statements in conformity with generally
    accepted accounting principles requires management to make estimates and
    assumptions that affect the reported amounts of assets and liabilities,
    disclosure of contingent assets and liabilities at the date of the
    financial statements, and the reported amounts of revenues and expenses
    during the reporting period. Actual results could differ from those
    estimates.


    2.  Available-for-sale Investments

        In accordance with SFAS No. 115, "Accounting for Certain Investments
    in Debt and Equity Securities," the Company's debt and marketable equity
    securities are considered available-for-sale investments in the
    accompanying balance sheet and are carried at market value, with the
    difference between cost and market value, net of related tax effects,
    recorded currently as a component of shareholders' investment titled "Net
    unrealized gain on available-for-sale investments."
        Available-for-sale investments in the accompanying 1996 balance sheet
    represents investments in corporate bonds with contractual maturities of
    one year or less. The difference between the market value and the cost
    basis of available-for-sale investments at December 28, 1996, was
    $22,000, which represents gross unrealized gains on those investments.

                                        12PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                   Notes to Consolidated Financial Statements

    3.  Acquisitions

        On December 1, 1995, Thermo Instrument acquired the assets of the
    analytical instruments division of Analytical Technology, Inc. (ATI). In
    June 1996, the Company acquired the Automass division of ATI from Thermo
    Instrument for $4.1 million in cash. The Automass division of ATI is a
    manufacturer of benchtop mass spectrometers. Because the Company and the
    Automass division of ATI were deemed for accounting purposes to be under
    control of their common majority owner, Thermo Instrument, the
    transaction has been accounted for in a manner similar to a pooling of
    interests. The results of the Automass division of ATI for December 1995
    were not material to the Company's results, therefore the Company's 1995
    historical financial information has not been restated. The Company's
    1996 historical financial information includes the results of the
    Automass division of ATI from January 1, 1996.
        On January 19, 1996, the Company acquired Extrel FTMS, Inc. (Extrel)
    from Waters Technologies Corporation for $1.7 million in cash. Extrel is
    a manufacturer of Fourier transform mass spectrometers. The acquisition
    of Extrel has been accounted for using the purchase method of accounting
    and its results have been included in the accompanying financial
    statements from the date of acquisition.
        On March 29, 1996, Thermo Instrument acquired a substantial portion
    of the businesses comprising the Scientific Instruments Division of
    Fisons plc (Fisons), a wholly owned subsidiary of Rhone-Poulenc Rorer,
    Inc. In September 1996, the Company acquired two businesses formerly part
    of Fisons, CE Instruments and MassLab Instruments (MassLab), from Thermo
    Instrument for an aggregate $27.3 million in cash and the assumption of
    approximately $8.9 million in debt, subject to a post-closing adjustment
    to be negotiated with Fisons by Thermo Instrument. CE Instruments is a
    manufacturer of gas chromatographs and MassLab is a manufacturer of mass
    spectrometers. The purchase price was determined based on the net book
    value of CE Instruments and MassLab at March 29, 1996, and a pro rata
    allocation of Thermo Instrument's total cost in excess of net assets of
    acquired companies recorded in connection with the acquisition of the
    Fisons businesses. Because the Company, CE Instruments, and MassLab were
    deemed for accounting purposes to be under control of their common
    majority owner, Thermo Instrument, the transaction has been accounted for
    in a manner similar to a pooling of interests. Accordingly, the Company's
    1996 historical financial information includes the results of CE
    Instruments and MassLab from March 29, 1996, the date these businesses
    were acquired by Thermo Instrument.
        The aggregate cost of these acquisitions exceeded the estimated fair
    value of the acquired net assets by $26.6 million, which is being
    amortized over 40 years. Allocation of the purchase price for these
    acquisitions was based on estimates of the fair value of the net assets
    acquired and, for CE Instruments and MassLab, is subject to adjustment
    upon finalization of the purchase price allocation.
        Pro forma data is not presented since these acquisitions were not
    material to the Company's results of operations.


                                        13PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                   Notes to Consolidated Financial Statements

    4.  Employee Benefit Plans

    Stock-based Compensation Plans

    Stock Option Plans
    ------------------
        In November 1995, the Company adopted a stock-based compensation plan
    for its key employees, directors, and others, which permits the grant of
    a variety of stock and stock-based awards as determined by the human
    resources committee of the Company's Board of Directors (the Board
    Committee), including restricted stock, stock options, stock bonus
    shares, or performance-based shares. To date, only nonqualified stock
    options have been awarded under this plan. The option recipients and the
    terms of options granted under this plan are determined by the Board
    Committee. Generally, options granted to date are exercisable
    immediately, but are subject to certain transfer restrictions and the
    right of the Company to repurchase shares issued upon exercise of the
    options at the exercise price, upon certain events. The restrictions and
    repurchase rights generally lapse ratably over a five to ten year period,
    depending on the term of the option, which generally ranges from ten to
    twelve years. Nonqualified stock options may be granted at any price
    determined by the Board Committee, although incentive stock options must
    be granted at not less than the fair market value of the Company's stock
    on the date of grant. To date, all options have been granted at fair
    market value. The Company also has a directors' stock option plan,
    adopted in November 1995, that provides for the grant of stock options to
    outside directors pursuant to a formula approved by the Company's
    shareholders. Options granted under this plan have the same general terms
    as options granted under the stock-based compensation plan described
    above, except that the restrictions and repurchase rights generally lapse
    ratably over a four-year period and the option term is five years. In
    addition to the Company's stock-based compensation plans, certain
    officers and key employees may also participate in the stock-based
    compensation plans of Thermo Electron and Thermo Instrument.

    Employee Stock Purchase Program
    -------------------------------
        Substantially all of the Company's full-time U.S. employees are
    eligible to participate in an employee stock purchase program sponsored
    by Thermo Instrument and Thermo Electron. Under this program, shares of
    Thermo Instrument's and Thermo Electron's common stock can be purchased
    at the end of a 12-month period at 95% of the fair market value at the
    beginning of the period, and the shares purchased are subject to a
    six-month resale restriction. Prior to November 1, 1995, the applicable
    shares of common stock could be purchased at 85% of the fair market value
    at the beginning of the period, and the shares purchased were subject to
    a one-year resale restriction. Shares are purchased through payroll
    deductions of up to 10% of each participating employee's gross wages.


                                        14PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                   Notes to Consolidated Financial Statements

    4.  Employee Benefit Plans (continued)

    Pro Forma Stock-based Compensation Expense
        In October 1995, the Financial Accounting Standards Board issued SFAS
    No. 123, "Accounting for Stock-based Compensation," which sets forth a
    fair-value based method of recognizing stock-based compensation expense.
    As permitted by SFAS No. 123, the Company has elected to continue to
    apply APB No. 25 to account for its stock-based compensation plans. Had
    compensation cost for awards granted in 1996 under the Company's
    stock-based compensation plans been determined based on the fair value at
    the grant dates consistent with the method set forth under SFAS No. 123,
    the effect on the Company's net income and earnings per share would have
    been as follows:

    (In thousands except per share amounts)                            1996
    -----------------------------------------------------------------------
    Net income:
      As reported                                                   $28,023
      Pro forma                                                      26,902
    Earnings per share:
      As reported                                                       .59
      Pro forma                                                         .56

        Pro forma compensation expense for options granted is reflected over
    the vesting period; therefore, future pro forma compensation expense may
    be greater as additional options are granted.
        The fair value of each option grant was estimated on the grant date
    using the Black-Scholes option-pricing model with the following
    weighted-average assumptions:

                                                                       1996
    -----------------------------------------------------------------------
    Volatility                                                       26.0%
    Risk-free interest rate                                           5.9%
    Expected life of options                                     7.8 years

        The Black-Scholes option-pricing model was developed for use in
    estimating the fair value of traded options which have no vesting
    restrictions and are fully transferable. In addition, option-pricing
    models require the input of highly subjective assumptions including
    expected stock price volatility. Because the Company's employee stock
    options have characteristics significantly different from those of traded
    options, and because changes in the subjective input assumptions can
    materially affect the fair value estimate, in management's opinion, the
    existing models do not necessarily provide a reliable single measure of
    the fair value of its employee stock options.



                                        15PAGE
<PAGE>
   ThermoQuest Corporation                           1996 Financial Statements

                   Notes to Consolidated Financial Statements

   4.  Employee Benefit Plans (continued)

   Stock Option Activity
      A summary of the Company's stock option activity is as follows:

                                                                   1996
                                                             ----------------
                                                                     Weighted
                                                             Number   Average
                                                                 of  Exercise
   (Shares in thousands)                                     Shares     Price
   --------------------------------------------------------------------------
   Options outstanding, beginning of year                        -     $    -
     Granted                                                 2,425      13.12
     Forfeited                                                 (95)     13.00
                                                             -----
   Options outstanding, end of year                          2,330     $13.12
                                                             =====     ======

   Options exercisable                                       2,330     $13.12
                                                             =====     ======
   Options available for grant                                 595
                                                             =====
   Weighted average fair value per share of
     options granted during year                                       $ 5.93
                                                                       ======

        As of December 28, 1996, the options outstanding were exercisable at
   prices ranging from $13.00 to $16.60 and had a weighted-average remaining
   contractual life of 10.1 years.

   401(k) Savings Plans
       Substantially all of the Company's full-time U.S. employees are
   eligible to participate in Thermo Electron's or Finnigan's 401(k) savings
   plans. Contributions to the 401(k) savings plans are made by both the
   employee and the Company. Company contributions are based upon the level of
   employee contributions. For these plans, the Company contributed and
   charged to expense $1,118,000, $1,007,000, and $1,191,000 in 1996, 1995,
   and 1994, respectively.

   Deferred Compensation Plan
       CE Instruments has an unfunded state mandated deferred compensation
   plan, the cost of which the Company accrues based on a fixed percentage of
   each employee's salary, adjusted for inflation. Benefits are paid at the
   time an employee leaves the employ of the Company. During 1996, the
   Company's expense related to this plan was $448,000. The Company's
   liability for this plan is included in "Accrued pension and other deferred
   items" in the accompanying 1996 balance sheet.


                                       16PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                   Notes to Consolidated Financial Statements

    4.  Employee Benefit Plans (continued)

    Defined Benefit Pension Plan
        The Company's Bremen, Germany, subsidiary has a defined benefit
    pension plan covering substantially all of its full-time employees.
    Benefits are based on a percentage of eligible earnings for each year of
    service in excess of ten years. The Company's funding policy is to make
    contributions within a range required by applicable regulations. Net
    periodic pension costs included the following components:

    (In thousands)                                 1996      1995      1994
    -----------------------------------------------------------------------
    Service cost                                $   305   $   386   $   303
    Interest cost on projected benefit
      obligation                                  1,059     1,087       981
    Return on plan assets                          (220)     (234)     (286)
    Amortization of unrecognized prior
      service and obligation, net                   (43)        -        47
                                                -------   -------   -------
                                                $ 1,101   $ 1,239   $ 1,045
                                                =======   =======   =======

        The funded status of the Company's defined benefit pension plan is as
    follows:

    (In thousands)                                 1996      1995
    -------------------------------------------------------------
    Actuarial present value of
      benefit obligations:
        Vested benefits                         $13,494   $14,040
        Nonvested benefits                           96       196
                                                -------   -------
    Accumulated benefit obligation               13,590    14,236
    Effect of projected future salary
      increases                                   1,294     1,618
                                                -------   -------
    Projected benefit obligation                 14,884    15,854
    Plan assets at fair value                     5,842     6,048
                                                -------   -------
    Plan assets less than projected
      benefit obligation                          9,042     9,806
    Unrecognized net gain                         2,550     2,151
    Initial unrecognized net obligation            (340)     (421)
                                                -------   -------
      Accrued pension costs                     $11,252   $11,536
                                                =======   =======


                                        17PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                   Notes to Consolidated Financial Statements

    4.  Employee Benefit Plans (continued)

        Actuarial assumptions used to determine the net periodic pension
    costs were:

                                                   1996       1995     1994
    -----------------------------------------------------------------------
    Discount rate                                  7.5%      7.5%      7.0%
    Rate of increase in salary levels              3.5%      3.5%      4.5%
    Expected long-term rate of return on assets    6.0%      6.0%      6.0%


    5.  Income Taxes

        The components of income before provision for income taxes are as
    follows:

    (In thousands)                                 1996      1995      1994
    -----------------------------------------------------------------------
    Domestic                                    $28,795   $24,583   $30,372
    Foreign                                      19,945    11,582     1,738
                                                -------   -------   -------
                                                $48,740   $36,165   $32,110
                                                =======   =======   =======

        The components of the provision for income taxes are as follows:

    (In thousands)                                 1996      1995      1994
    -----------------------------------------------------------------------
    Currently payable:
      Federal                                   $11,224   $ 7,852   $ 8,141
      State                                       2,340     1,523     1,201
      Foreign                                    10,281     4,600     1,652
                                                -------   -------   -------
                                                 23,845    13,975    10,994
                                                -------   -------   -------
    Net deferred (prepaid):
      Federal                                    (1,529)      683     2,072
      State                                        (324)      145       518
      Foreign                                    (1,275)      360         -
                                                -------   -------   -------
                                                 (3,128)    1,188     2,590
                                                -------   -------   -------
                                                $20,717   $15,163   $13,584
                                                =======   =======   =======

        The provision for income taxes that is currently payable does not
    reflect $1,840,000 and $2,000,000 of tax benefits used to reduce cost in
    excess of net assets of acquired companies in 1996 and 1995,
    respectively. In addition, the Company receives a tax deduction upon
    exercise of nonqualified stock options by employees for the difference
    between the exercise price and the market price of the Company's common
    stock on the date of exercise. The provision for income taxes that is
                                        18PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                   Notes to Consolidated Financial Statements

    5.  Income Taxes (continued)

    currently payable does not reflect $800,000 of such benefits that have
    been allocated to capital in excess of par value in 1996.
        The provision for income taxes in the accompanying statement of
    income differs from the provision calculated by applying the statutory
    federal income tax rate of 35% to income before provision for income
    taxes due to the following:

    (In thousands)                                 1996      1995      1994
    -----------------------------------------------------------------------
    Provision for income taxes at statutory
      rate                                      $17,059   $12,658   $11,239
    Increases (decreases) resulting from:
      State income taxes, net of federal
        tax                                       1,310     1,084     1,117
      Foreign tax rate and tax law
        differential                              2,024       906     1,044
      Tax benefit of foreign sales
        corporation                                (755)     (659)     (770)
      Amortization of cost in excess of net
        assets of acquired companies                905     1,012       848
      Other, net                                    174       162       106
                                                -------   -------   -------
                                                $20,717   $15,163   $13,584
                                                =======   =======   =======

        Prepaid income taxes and deferred income taxes in the accompanying
    balance sheet consist of the following:

    (In thousands)                                 1996      1995
    -------------------------------------------------------------
    Prepaid income taxes:
      Foreign tax loss carryforwards            $20,451   $ 7,404
      Reserves and accruals                       7,067     2,408
      Inventory basis difference                  2,820     2,528
      Accrued compensation                        1,574     1,788
      Other, net                                      8     1,971
                                                -------   -------
                                                 31,920    16,099
      Less: Valuation allowance                  20,451     7,404
                                                -------   -------
                                                $11,469   $ 8,695
                                                =======   =======
    Deferred income taxes:
      Depreciation                              $ 5,405   $ 5,767
                                                =======   =======

        The valuation allowance relates to uncertainty surrounding the
    realization of foreign net operating losses, which is dependent on the
    future income of certain foreign subsidiaries of the Company. As of
    December 28, 1996, the Company had $40,923,000 of foreign tax loss

                                        19PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                   Notes to Consolidated Financial Statements

    5.  Income Taxes (continued)

    carryforwards, $29,083,000 of which expires from 1997 through 2001. The
    remainder of the Company's foreign tax loss carryforwards do not expire.
    The increase in the valuation allowance in 1996 results from an increase
    in acquired foreign tax loss carryforwards. Any tax benefit resulting
    from use of the loss carryforwards is recorded as a reduction of cost in
    excess of net assets of acquired companies.
        A provision has not been made for U.S. or additional foreign taxes on
    $34,257,000 of undistributed earnings of foreign subsidiaries that could
    be subject to taxation if remitted to the U.S. because the Company plans
    to keep these amounts permanently reinvested overseas. The Company
    believes that any additional U.S. tax liability due upon remittance of
    such earnings would be immaterial due to available U.S. foreign tax
    credits.


    6.  Short- and Long-term Obligations

    Short-term Obligations
        Notes payable and current maturities of long-term obligations in the
    accompanying balance sheet includes $15,241,000 and $10,545,000 in 1996
    and 1995, respectively, of short-term bank borrowings and amounts
    borrowed under lines of credit at the Company's foreign subsidiaries. The
    weighted average interest rate for these borrowings was 6.45% and 2.44%
    at year-end 1996 and 1995, respectively. Unused lines of credit were
    $13,041,000 at year-end 1996.

    Long-term Obligations
        Long-term obligations of the Company are as follows:

    (In thousands)                                           1996       1995
    ------------------------------------------------------------------------
    5% Subordinated convertible debentures, due 2000,
      convertible at $16.50 per share                    $ 96,250  $ 96,250
    10.23% Mortgage loan secured by property with a
      net book value of $16,042, payable in monthly
      installments with final payments in 2004              9,267    10,101
    6% Note payable, payable in annual installments
      with final payment in 1997                              567         -
    6.25% Notes payable, paid in 1996                           -     1,215
    5.75% Note payable, paid in 1996                            -       100
                                                         --------  --------
                                                          106,084   107,666
    Less: Current maturities of long-term obligations       1,491     1,210
                                                         --------  --------
                                                         $104,593  $106,456
                                                         ========  ========

        The $96,250,000 principal amount 5% subordinated convertible
    debentures are guaranteed on a subordinated basis by Thermo Electron.
    Thermo Instrument and the Company have agreed to reimburse Thermo
    Electron in the event Thermo Electron is required to make a payment under

                                        20PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                   Notes to Consolidated Financial Statements

    6.  Short- and Long-term Obligations (continued)

    the guarantee. In addition, the Company has agreed to reimburse Thermo
    Instrument in the event Thermo Instrument is required to make a payment
    under the guarantee.
        The annual requirements of long-term obligations as of December 28,
    1996, are $1,491,000 in 1997; $1,023,000 in 1998; $1,133,000 in 1999;
    $97,504,000 in 2000; $1,389,000 in 2001; and $3,544,000 in 2002 and
    thereafter. Total future requirements of long-term obligations are
    $106,084,000.
        See Note  10  for  the  fair  value  information  pertaining  to  the
    Company's long-term obligations.


    7.  Commitments

        The Company leases portions of its office and operating facilities
    under various operating lease arrangements. The accompanying statement of
    income includes expenses from operating leases of $3,041,000, $3,046,000,
    and $2,596,000 in 1996, 1995, and 1994, respectively. Future minimum
    payments due under noncancellable operating leases at December 28, 1996,
    are $1,734,000 in 1997; $1,149,000 in 1998; $801,000 in 1999; $615,000 in
    2000; and $206,000 in 2001. Total future minimum lease payments are
    $4,505,000.


    8.  Related Party Transactions

    Corporate Services Agreement
        The Company and Thermo Electron have a corporate services agreement
    under which Thermo Electron's corporate staff provides certain
    administrative services, including certain legal advice and services,
    risk management, certain employee benefit administration, tax advice and
    preparation of tax returns, centralized cash management, and certain
    financial and other services, for which the Company pays Thermo Electron
    annually an amount equal to 1.0% of the Company's revenues. The Company
    paid an annual fee equal to 1.20% and 1.25% of the Company's revenues in
    1995 and 1994, respectively. The annual fee is reviewed and adjusted
    annually by mutual agreement of the parties. For these services, the
    Company was charged $3,138,000, $2,903,000, and $2,792,000 in 1996, 1995,
    and 1994, respectively. The corporate services agreement is renewed
    annually but can be terminated upon 30 days' prior notice by the Company
    or upon the Company's withdrawal from the Thermo Electron Corporate
    Charter (the Thermo Electron Corporate Charter defines the relationship
    among Thermo Electron and its majority-owned subsidiaries). Management
    believes that the service fee charged by Thermo Electron is reasonable
    and that such fees are representative of the expenses the Company would
    have incurred on a stand-alone basis. For additional items such as
    employee benefit plans, insurance coverage, and other identifiable costs,
    Thermo Electron charges the Company based upon costs attributable to the
    Company.

                                        21PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                   Notes to Consolidated Financial Statements

    8.  Related Party Transactions (continued)

    Other Related Party Transactions
        The Company purchases and sells products in the ordinary course of
    business with other companies affiliated with Thermo Instrument.
    Purchases of products from such affiliated companies totaled $10,527,000,
    $4,974,000, and $2,828,000 in 1996, 1995, and 1994, respectively. Sales
    of products to such affiliated companies totaled $11,987,000, $940,000,
    and $931,000 in 1996, 1995, and 1994, respectively. 

    Repurchase Agreement
        The Company invests excess cash in a repurchase agreement with
    Thermo Electron as discussed in Note 1.


    9.  Common Stock

        In March and April 1996, the Company sold 3,450,000 shares of its
    common stock in an initial public offering at $15.00 per share for net
    proceeds of $47,778,000.
        At December 28, 1996, the Company had reserved 8,833,333 unissued
    shares of its common stock for possible issuance under stock-based
    compensation plans and for issuance upon possible conversion of the
    Company's subordinated convertible debentures.


    10. Fair Value of Financial Instruments

        The Company's financial instruments consist primarily of cash and
    cash equivalents, available-for-sale investments, accounts receivable,
    notes payable and current maturities of long-term obligations, accounts
    payable, due to parent company, long-term obligations, and forward
    exchange contracts. The carrying amount of these financial instruments,
    with the exception of available-for-sale investments, long-term
    obligations, and forward exchange contracts, approximate fair value due
    to their short-term nature.
        Available-for-sale investments are carried at fair value in the
    accompanying 1996 balance sheet. The fair values were determined based on
    quoted market prices (Note 2).
        The Company enters into forward exchange contracts to hedge certain
    firm purchase and sale commitments denominated in currencies other than
    its subsidiaries' local currencies, principally U.S. dollars, British
    pounds sterling, French francs, and Japanese yen. The purpose of the
    Company's foreign currency hedging activities is to protect the Company's
    local currency cash flows related to these commitments from fluctuations
    in foreign exchange rates. The amounts of such forward exchange contracts
    at year-end 1996 and 1995 were $550,000 and $6,237,000, respectively.



                                        22PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                   Notes to Consolidated Financial Statements

    10. Fair Value of Financial Instruments (continued)

        The carrying amount and fair value of the Company's long-term
    obligations and off-balance-sheet financial instruments are as follows:

                                          1996                   1995
                                   --------------------   ------------------
                                   Carrying        Fair   Carrying      Fair
    (In thousands)                   Amount       Value     Amount     Value
    ------------------------------------------------------------------------
    Long-term obligations:
        Subordinated convertible
          debentures               $ 96,250    $ 96,250   $ 96,250  $100,100
        Other                         8,343       9,177     10,206    10,669
                                   --------    --------   --------  --------
                                   $104,593    $105,427   $106,456  $110,769
                                   ========    ========   ========  ========
    Off-balance-sheet financial
      instruments:
        Forward exchange contracts
          receivable                           $     12             $    397

        The fair value of long-term obligations was determined based on
    quoted market prices and on borrowing rates available to the Company at
    the respective year-ends.
        The fair value of forward exchange contracts is the estimated amount
    that the Company would receive upon termination of the contract, taking
    into account the change in foreign exchange rates.


    11. Geographical Information

        The Company is engaged in one business segment: developing,
    manufacturing, and selling mass spectrometers, liquid chromatographs, and
    gas chromatographs. The following table shows data for the Company by
    geographical area.

    (In thousands)                             1996         1995       1994
    -----------------------------------------------------------------------
    Revenues:
        United States                      $171,100    $145,430    $145,281
        Germany                              66,228      64,368      51,333
        Italy                                41,546       5,517       4,425
        Other Europe                         75,242      56,639      52,199
        Japan                                41,993      36,966      28,919
        Other                                 3,503       3,776       1,157
        Transfers among geographical
          areas (a)                         (85,819)    (70,787)    (59,918)
                                           --------    --------    --------

                                           $313,793    $241,909    $223,396
                                           ========    ========    ========

                                        23PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                   Notes to Consolidated Financial Statements

    11. Geographical Information (continued)

    (In thousands)                             1996         1995       1994
    -----------------------------------------------------------------------
    Income before provision for
      income taxes:
        United States (b)                  $ 25,425    $ 20,867    $ 24,431
        Germany                               3,971       3,421      (1,398)
        Italy                                   742         (50)       (208)
        Other Europe                          9,835       6,767       4,201
        Japan                                 6,912       5,820       6,433
        Other                                   278         350          23
                                           --------    --------    --------
        Total operating income               47,163      37,175      33,482
        Interest income (expense), net        1,577      (1,010)     (1,372)
                                           --------    --------    --------
                                           $ 48,740    $ 36,165    $ 32,110
                                           ========    ========    ========

    Identifiable assets:
        United States (c)                  $348,271    $288,095    $186,153
        Germany                              55,470      61,468      63,726
        Italy                                49,760       4,834       4,240
        Other Europe                         60,812      37,775      32,915
        Japan                                19,363      33,760      18,369
        Other                                 1,394       2,110         881
                                           --------    --------    --------
                                           $535,070    $428,042    $306,284
                                           ========    ========    ========

    Export revenues included in United
      States revenues above (d):
        Europe                             $ 44,051    $ 36,943    $ 34,341
        Other                                33,905      26,578      19,305
                                           --------    --------    --------
                                           $ 77,956    $ 63,521    $ 53,646
                                           ========    ========    ========
    ____________________

    (a) Transfers among geographical areas are accounted for at prices that
        are representative of transactions with unaffiliated parties.
    (b) Includes corporate general and administrative expenses.
    (c) Includes $47.8 million in net proceeds from the 1996 initial public
        offering of Company common stock and $93.9 million in net proceeds
        from the 1995 issuance of 5% subordinated convertible debentures.
    (d) In general, export sales are denominated in U.S. dollars.


                                        24PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                   Notes to Consolidated Financial Statements

    12. Unaudited Quarterly Information

    (In thousands except per share amounts)


    1996                           First(a)   Second(b)    Third      Fourth
    Revenues                     $67,299     $81,692     $78,155     $86,647
    Gross profit                  31,889      36,968      37,760      39,738
    Net income                     5,842       6,687       6,728       8,766
    Earnings per share:
      Primary                        .13         .14         .14         .18
      Fully diluted                  .13         .14         .14         .17


    1995                           First      Second       Third      Fourth
    Revenues                     $56,505     $57,729     $58,492     $69,183
    Gross profit                  28,033      29,300      28,437      35,415
    Net income                     4,384       4,854       4,632       7,132
    Earnings per share:
      Primary                        .10         .11         .10         .16
      Fully diluted                  .10         .11         .10         .16

    (a) Includes the results of the Automass division of ATI, effective
        January 1, 1996 (Note 3).
    (b) Includes the results of CE Instruments and MassLab since their
        acquisition by Thermo Instrument on March 29, 1996 (Note 3).








                                        25PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                    Report of Independent Public Accountants

    To the Shareholders and Board of Directors of ThermoQuest Corporation:

        We have audited the accompanying consolidated balance sheet of
    ThermoQuest Corporation (a Delaware corporation and 93%-owned subsidiary
    of Thermo Instrument Systems Inc.) and subsidiaries as of December 28,
    1996, and December 30, 1995, and the related consolidated statements of
    income, shareholders' investment, and cash flows for each of the three
    years in the period ended December 28, 1996. These consolidated financial
    statements are the responsibility of the Company's management. Our
    responsibility is to express an opinion on these consolidated financial
    statements based on our audits.
        We conducted our audits in accordance with generally accepted
    auditing standards. Those standards require that we plan and perform the
    audit to obtain reasonable assurance about whether the consolidated
    financial statements are free of material misstatement. An audit includes
    examining, on a test basis, evidence supporting the amounts and
    disclosures in the financial statements. An audit also includes assessing
    the accounting principles used and significant estimates made by
    management, as well as evaluating the overall financial statement
    presentation. We believe that our audits provide a reasonable basis for
    our opinion.
        In our opinion, the consolidated financial statements referred to
    above present fairly, in all material respects, the financial position of
    ThermoQuest Corporation and subsidiaries as of December 28, 1996, and
    December 30, 1995, and the results of their operations and their cash
    flows for each of the three years in the period ended December 28, 1996,
    in conformity with generally accepted accounting principles.



                                                Arthur Andersen LLP



    Boston, Massachusetts
    February 11, 1997








                                        26PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                     Management's Discussion and Analysis of
                   Financial Condition and Results Operations

        Forward-looking statements, within the meaning of Section 21E of the
    Securities Exchange Act of 1934, are made throughout this Management's
    Discussion and Analysis of Financial Condition and Results of Operations.
    For this purpose, any statements contained herein that are not statements
    of historical fact may be deemed to be forward-looking statements.
    Without limiting the foregoing, the words "believes," "anticipates,"
    "plans," "expects," "seeks," "estimates," and similar expressions are
    intended to identify forward-looking statements. There are a number of
    important factors that could cause the results of the Company to differ
    materially from those indicated by such forward-looking statements,
    including those detailed immediately after this Management's Discussion
    and Analysis of Financial Condition and Results of Operations under the
    caption "Forward-looking Statements."

    Overview

        The Company develops, manufactures, and sells mass spectrometers,
    liquid chromatographs, and gas chromatographs. These analytical
    instruments are used in the quantitative and qualitative chemical
    analysis of organic and inorganic compounds at ultra-trace levels of
    detection. The Company's products are used primarily by pharmaceutical
    companies for drug research, testing, and quality control; by
    environmental laboratories for testing water, air, and soil samples for
    compliance with environmental regulations; by chemical companies for
    research and quality control; by manufacturers for testing in certain
    industrial applications, such as the manufacture of silicon chips, and
    for quality control; by food and beverage companies for quality control
    and to test for product contamination; and in forensic applications.
        An element of the Company's strategy is to combine its internal
    growth with the acquisition of complementary products and technologies.
    On January 19, 1996, the Company acquired Extrel FTMS, Inc. (Extrel), a
    manufacturer of Fourier transform mass spectrometers, from Waters
    Technologies Corporation and effective January 1, 1996, the Company
    acquired the Automass division of Analytical Technology, Inc. (ATI), a
    manufacturer of benchtop mass spectrometers, from Thermo Instrument
    Systems Inc. (Thermo Instrument) (Note 3). In addition, effective March
    29, 1996, the Company acquired CE Instruments, a manufacturer of gas
    chromatographs, and MassLab Instruments (MassLab), a manufacturer of mass
    spectrometers, from Thermo Instrument (Note 3).
        The Company sells its products on a worldwide basis. Although the
    Company seeks to charge its customers in the same currency as its
    operating costs, the Company's financial performance and competitive
    position can be affected by currency exchange rate fluctuations. Where
    appropriate, the Company uses forward contracts to reduce its exposure to
    currency fluctuations.


                                        27PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                     Management's Discussion and Analysis of
                   Financial Condition and Results Operations

    Results of Operations

    1996 Compared With 1995
        Revenues increased 30% to $313.8 million in 1996 from $241.9 million
    in 1995, primarily as a result of the inclusion of $47.3 million of
    revenues from acquisitions (Note 3) and an increase of $33.2 million of
    revenues from the Company's existing mass spectrometry business. The
    increase in revenues from the Company's existing mass spectrometry
    business was primarily due to the introduction of two new products, one
    in the third quarter of 1995 and another in the first quarter of 1996.
    These increases were offset by a decrease of $10.9 million in revenues
    due to the strengthening of the U.S. dollar in relation to the Japanese
    yen and the German mark.
        The gross profit margin decreased to 46.6% in 1996 from 50.1% in
    1995. This decline is primarily due to the inclusion of lower-margin
    revenues from CE Instruments and MassLab. The combined gross profit
    margin at CE Instruments and MassLab was 31% from March 29, 1996, through
    December 28, 1996.
        Selling, general, and administrative expenses as a percentage of
    revenues decreased to 24.7% in 1996 from 27.5% in 1995, primarily due to
    an increase in total revenues. Research and development expenses as a
    percentage of revenues decreased to 7.0% in 1996 from 7.2% in 1995,
    primarily due to an increase in total revenues.
        Interest income increased to $8.9 million in 1996 from $2.7 million
    in 1995, primarily as a result of interest income earned on invested
    proceeds from the Company's issuance of $96.3 million principal amount of
    5% subordinated convertible debentures in August 1995 and, to a lesser
    extent, the Company's initial public offering of common stock in March
    and April 1996 (Note 9). Interest expense increased to $7.3 million in
    1996 from $3.7 million in 1995, primarily due to interest on the
    Company's 5% subordinated convertible debentures.
        The effective tax rate was 42.5% in 1996, compared with 41.9% in
    1995. The effective tax rates exceeded the statutory federal income tax
    rate primarily due to the impact of foreign and state income taxes and
    the nondeductible amortization of cost in excess of net assets of
    acquired companies.

    1995 Compared With 1994
        Revenues increased 8% to $241.9 million in 1995 from $223.4 million
    in 1994, primarily due to an increase of $11.2 million in revenues as a
    result of the weakness of the U.S. dollar in relation to foreign
    currencies, particularly the Japanese yen and the German mark. The
    remaining increase in revenues was primarily due to the introduction of a
    new product in the third quarter of 1995.
        The gross profit margin was relatively unchanged at 50.1% in 1995,
    compared with 49.6% in 1994.
        Selling, general, and administrative expenses as a percentage of
    revenues remained relatively unchanged at 27.5% in 1995, compared with
    28.0% in 1994. Research and development expenses as a percentage of
    revenues increased to 7.2% in 1995 from 6.6% in 1994, primarily due to
    increased expenditures in connection with a line of mass spectrometry
    products that was introduced in 1995.

                                        28PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                     Management's Discussion and Analysis of
                   Financial Condition and Results Operations

    1995 Compared With 1994 (continued)
        Interest income increased to $2.7 million in 1995 from $0.3 million
    in 1994 as a result of interest income earned on invested proceeds from
    the Company's issuance of $96.3 million principal amount of 5%
    subordinated convertible debentures in August 1995. Interest expense
    increased to $3.7 million in 1995 from $1.7 million in 1994, primarily
    due to interest on the Company's 5% subordinated convertible debentures.
        The effective tax rate was 41.9% in 1995 and 42.3% in 1994. The
    effective tax rates exceeded the statutory federal income tax rate
    primarily due to the impact of state income taxes, the inability to
    provide a tax benefit for losses incurred at certain of the Company's
    foreign operations, and the nondeductible amortization of cost in excess
    of net assets of acquired companies.

    Liquidity and Capital Resources

        Consolidated working capital was $216.9 million at December 28, 1996,
    compared with $166.9 million at December 30, 1995, an increase of $50.0
    million. Included in working capital are cash, cash equivalents, and
    available-for-sale investments of $182.4 million at December 28, 1996,
    compared with $120.4 million at December 30, 1995. Cash provided by
    operating activities was $58.0 million in 1996. Accounts receivable
    decreased $8.2 million in 1996, primarily due to improved collections at
    one of the Company's foreign subsidiaries. Other current liabilities
    increased $13.5 million in 1996, primarily due to higher income taxes
    payable.
        At December 28, 1996, $19.9 million of the Company's cash and cash
    equivalents were held by its foreign subsidiaries. Repatriation of this
    cash into the United States would be subject to foreign withholding taxes
    and could also be subject to a United States tax.
        The Company's investing activities used $43.2 million of cash in
    1996. The Company expended $32.4 million, net of cash acquired, for
    acquisitions (Note 3) and $3.8 million for purchases of property, plant,
    and equipment.
        The Company's financing activities provided $40.3 million of cash in
    1996. In March and April 1996, the Company sold 3,450,000 shares of its
    common stock in an initial public offering at $15.00 per share for net
    proceeds of $47.8 million. The Company used $7.3 million of cash in 1996
    to reduce short- and long-term obligations.
        During 1997, the Company plans to expend approximately $5 million for
    property, plant, and equipment. The Company has an underfunded defined
    benefit pension plan covering employees of its manufacturing subsidiary
    in Bremen, Germany. The Company's policy is to fund the plan at a level
    within the range required by applicable regulations. As of December 28,
    1996, the unfunded liabilities for this plan were $11.3 million. In
    addition, as of December 28, 1996, the Company has a deferred
    compensation plan with an unfunded liability of $4.6 million. As of
    December 28, 1996, the Company's foreign subsidiaries had available
    short-term credit facilities of $13.0 million.
        Although the Company expects to have positive cash flow from its
    existing operations, the Company anticipates it will require significant
    amounts of cash to pursue the acquisition of complementary businesses.

                                        29PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                     Management's Discussion and Analysis of
                   Financial Condition and Results Operations

    Liquidity and Capital Resources (continued)

    The Company expects that it will finance acquisitions through a
    combination of internal funds, additional debt or equity financing from
    the capital markets, or short-term borrowings from Thermo Instrument or
    Thermo Electron Corporation, although there is no agreement with these
    companies to ensure that funds will be available on acceptable terms or
    at all. The Company believes that its existing resources are sufficient
    to meet the capital requirements of its existing businesses for the
    foreseeable future.












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<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                           Forward-looking Statements

        In connection with the "safe harbor" provisions of the Private
    Securities Litigation Reform Act of 1995, the Company wishes to caution
    readers that the following important factors, among others, in some cases
    have affected, and in the future could affect, the Company's actual
    results and could cause its actual results in 1997 and beyond to differ
    materially from those expressed in any forward-looking statements made
    by, or on behalf of, the Company.
        Competition, Technological Change, and Industry Acceptance. The
    Company encounters, and expects to continue to encounter, intense
    competition in the sale of its current and future products. Some of the
    Company's competitors and potential competitors have greater resources,
    manufacturing and marketing capabilities, research and development staff,
    and production facilities than those of the Company. No assurance can be
    given that the Company's competitors will not develop products that will
    be superior to the Company's products. In addition, industry acceptance
    of new technologies developed by the Company may be slow to develop due
    to, among other things, existing regulations written specifically for
    older technologies and general unfamiliarity of users with new
    technologies.
        Risks Associated with Intellectual Property. The Company holds many
    patents relating to various aspects of its products, including a
    significant patent relating to ion trap mass spectrometers. In addition,
    the Company believes that proprietary technical know-how is critical to
    many of its products. Proprietary rights relating to the Company's
    products are protected from unauthorized use by third parties only to the
    extent that they are covered by valid and enforceable patents or are
    maintained in confidence as trade secrets. There can be no assurance that
    any patents now or hereafter owned by the Company will afford protection
    against competitors and, in the absence of patent protection, the Company
    may be vulnerable to competitors who attempt to copy the Company's
    products or gain access to its trade secrets and know-how. Proceedings
    initiated by the Company to protect its proprietary rights could result
    in substantial costs to the Company. There can be no assurance that
    competitors of the Company will not initiate litigation to challenge the
    validity of the Company's patents, or that they will not use their
    resources to design comparable products that do not infringe the
    Company's patents. There may also be pending or issued patents of which
    the Company is not aware held by parties not affiliated with the Company
    that relate to the Company's products or technologies. The Company may
    need to acquire licenses to, or contest the validity of, any such
    patents. It is likely that significant funds would be required to contest
    the validity of any such patents. There can be no assurance that any
    license required under any such patent would be made available on
    acceptable terms or that the Company would prevail in any such contest.
        Risks Associated with Acquisition Strategy. The Company's growth
    strategy is to supplement its internal growth with the acquisition of
    businesses and technologies that complement or augment the Company's
    existing product lines. The Company has acquired certain portions of
    several businesses that have been acquired by Thermo Instrument Systems
    Inc., the Company's parent (Thermo Instrument), and may acquire
    additional businesses from Thermo Instrument in the future. Certain of
    the businesses acquired from Thermo Instrument have low levels of
    profitability and businesses that the Company may seek to acquire in the

                                        31PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                           Forward-looking Statements

    future may also be marginally profitable or unprofitable. In order for
    any acquired businesses to achieve the level of profitability desired by
    the Company, the Company must successfully reduce expenses and improve
    operations. No assurance can be given that the Company will be successful
    in this regard. In addition, promising acquisitions are difficult to
    identify and complete for a number of reasons, including competition
    among prospective buyers and the need for regulatory approvals, including
    antitrust approvals. There can be no assurance that the Company or Thermo
    Instrument will be able to complete pending or future acquisitions. In
    order to finance any such acquisitions, it may be necessary for the
    Company to raise additional funds either through public or private
    financings. Any equity or debt financing, if available at all, may be on
    terms which are not favorable to the Company.
        Dependence on the Pharmaceutical Industry. The largest single market
    for the Company's mass spectrometers and liquid chromatographs is the
    pharmaceutical industry. Although the Company's existing products are not
    subject to regulation by the U.S. Food and Drug Administration (the FDA),
    FDA regulations apply to the processes and production facilities used to
    manufacture pharmaceutical products. Any material change by a
    pharmaceutical company in its manufacturing process or equipment could
    necessitate additional FDA review and approval. Such requirements may
    make it more difficult for the Company to sell its products to
    pharmaceutical customers that have already applied for or obtained
    approval for production processes using different equipment and supplies.
    Any changes in the regulations that apply to the processes and production
    facilities used to manufacture pharmaceutical products may adversely
    affect the market for the Company's products. In addition, from time to
    time as a result of industry consolidation and other factors, the
    pharmaceutical industry has reduced its capital expenditures for
    equipment such as that manufactured by the Company, and there can be no
    assurance that further changes in the pharmaceutical industry will not
    adversely affect demand for the Company's products.
        Possible Adverse Effect from Changes in Environmental Regulations.
    One of the largest markets for the Company's products is environmental
    analysis. Most air, water, and soil analysis is conducted to comply with
    federal, state, local, and foreign environmental regulations. These
    regulations are frequently specific as to the type of technology required
    for a particular analysis and the level of detection required for that
    analysis. The Company develops, configures, and markets its products to
    meet customer needs created by existing and anticipated environmental
    regulations. These regulations may be amended or eliminated in response
    to new scientific evidence or political or economic considerations. Any
    significant change in environmental regulations could result in a
    reduction in demand for the Company's products.
        Possible Adverse Impact of Significant International Operations.
    International sales accounted for approximately 70% of the Company's
    revenues in 1996, and the Company expects that international sales will
    continue to account for a significant portion of the Company's revenues
    in the future. Sales to customers in foreign countries are subject to a
    number of risks, including the following: agreements may be difficult to
    enforce, and receivables difficult to collect through a foreign country's
    legal system; foreign customers may have longer payment cycles; and
    foreign countries could impose withholding taxes or otherwise tax the
    Company's foreign income, impose tariffs, embargoes or exchange controls,
                                        32PAGE
<PAGE>
    ThermoQuest Corporation                         1996 Financial Statements

                           Forward-looking Statements

    or adopt other restrictions on foreign trade. Additionally, the U.S.
    dollar value of the Company's net sales varies with currency exchange
    rate fluctuations. Significant increases in the value of the U.S. dollar
    relative to certain foreign currencies could have a material adverse
    effect on the Company's competitive position and results of operations.



























                                        33PAGE
<PAGE>
   ThermoQuest Corporation                        1996 Financial Statements

                         Selected Financial Information

   (In thousands except
   per share amounts)       1996(a)     1995(b)     1994(c)     1993(d)   1992
   ---------------------------------------------------------------------------
   Statement of Income Data:
   Revenues             $313,793    $241,909    $223,396   $204,757   $150,423
   Net income             28,023      21,002      18,526     14,280     11,527
   Earnings per share        .59         .46         .41        .32        .26

   Balance Sheet Data:
   Working capital      $216,865    $166,902    $ 47,955   $ 44,866   $ 25,624
   Total assets          535,070     428,042     306,284    297,969    206,111
   Long-term obligations 104,593     106,456      11,322     12,263     17,971
   Shareholders' 
    investment           303,014     227,740     211,633    201,588    123,185

   (a) Includes the results of the Automass division of Analytical Technology,
       Inc. effective January 1, 1996, the results of CE Instruments and
       MassLab Instruments since their acquisition by Thermo Instrument on
       March 29, 1996, and the net proceeds of the Company's initial public
       offering in March and April 1996.
   (b) Reflects the issuance in August 1995 of $96.3 million principal amount
       of 5% subordinated convertible debentures due 2000.
   (c) Includes the results of Tremetrics Inc. since its acquisition by Thermo
       Instrument in March 1994.
   (d) Includes the results of Spectra-Physics Analytical, Inc. since its
       acquisition by Thermo Instrument in February 1993.







                                       34PAGE
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    ThermoQuest Corporation                         1996 Financial Statements


    Common Stock Market Information
        The following table shows the market range for the Company's common
    stock based on reported sale prices on the American Stock Exchange
    (symbol TMQ) since March 19, 1996, the date the Company's common stock
    began trading on the exchange.

                                    1996
                             ------------------
                Quarter         High      Low
                -------------------------------

                First        $ 20      $ 16 1/4
                Second         17 7/8    13 3/4
                Third          15 3/4    13 1/4
                Fourth         15 3/8    12 1/2

        As of January 24, 1997, the Company had 260 holders of record of its
    common stock. This does not include holdings in street or nominee names.
    The closing market price on the American Stock Exchange for the Company's
    common stock on January 24, 1997, was $15 7/8 per share.

    Shareholder Services
        Shareholders of ThermoQuest Corporation who desire information about
    the Company are invited to contact John N. Hatsopoulos, Chief Financial
    Officer, ThermoQuest Corporation, 81 Wyman Street, P.O. Box 9046,
    Waltham, Massachusetts 02254-9046, (617) 622-1111. A mailing list is
    maintained to enable shareholders whose stock is held in street name, and
    other interested individuals, to receive quarterly reports, annual
    reports, and press releases as quickly as possible. Beginning in 1997,
    quarterly distribution will be limited to the second quarter only. All
    quarterly reports and press releases are available through the Internet
    from Thermo Electron's home page on the World Wide Web
    (http://www.thermo.com/subsid/tmq.html).

    Stock Transfer Agent
        American Stock Transfer & Trust Company is the stock transfer agent
    and maintains shareholder activity records. The agent will respond to
    questions on issuance of stock certificates, change of ownership, lost
    stock certificates, and change of address. For these and similar matters,
    please direct inquiries to:

        American Stock Transfer & Trust Company
        Shareholder Services Department
        40 Wall Street, 46th Floor
        New York, New York 10005
        (718) 921-8200

    Dividend Policy
       The Company has never paid cash dividends and does not expect to pay
    cash dividends in the foreseeable future because its policy has been to
    use earnings to finance expansion and growth. Payment of dividends will
    rest within the discretion of the Board of Directors and will depend
    upon, among other factors, earnings, capital requirements, and financial
    condition.
                                        35PAGE
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    ThermoQuest Corporation                         1996 Financial Statements



    Form 10-K Report
        A copy of the Annual Report on Form 10-K for the fiscal year ended
    December 28, 1996, as filed with the Securities and Exchange Commission,
    may be obtained at no charge by writing to John N. Hatsopoulos, Chief
    Financial Officer, ThermoQuest Corporation, 81 Wyman Street, P.O. Box
    9046, Waltham, Massachusetts 02254-9046.

    Annual Meeting
        The annual meeting of shareholders will be held on Monday, June 2,
    1997, at 10:00 a.m. at the Hyatt Regency Hotel, Hilton Head, South
    Carolina.
 





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