Exhibit 13








                             THERMOQUEST CORPORATION

                        Consolidated Financial Statements

                                      1997
PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                        Consolidated Statement of Income

    (In thousands except per share amounts)         1997      1996      1995
    ------------------------------------------------------------------------
    Revenues (Notes 8 and 11)                   $438,863  $313,793  $241,909
                                                --------  --------  --------
    Costs and Operating Expenses:
      Cost of revenues                           229,960   167,438   120,724
      Selling, general, and administrative
        expenses (Note 8)                        107,770    77,371    66,557
      Research and development expenses           28,152    21,821    17,453
                                                --------  --------  --------
                                                 365,882   266,630   204,734
                                                --------  --------  --------
    Operating Income                              72,981    47,163    37,175

    Interest Income (includes $679 from
      related parties in 1997)                    10,121     8,905     2,715
    Interest Expense (includes $3,126 to
      related parties in 1997; Note 3)           (10,081)   (7,328)   (3,725)
                                                --------  --------  --------
    Income Before Provision for Income Taxes      73,021    48,740    36,165
    Provision for Income Taxes (Note 5)           31,216    20,717    15,163
                                                --------  --------  --------
    Net Income                                  $ 41,805  $ 28,023  $ 21,002
                                                ========  ========  ========

    Earnings per Share (Note 12):
      Basic                                     $    .83  $    .59  $    .47
                                                ========  ========  ========
     
      Diluted                                   $    .80  $    .57  $    .47
                                                ========  ========  ========

    Weighted Average Shares (Note 12):
      Basic                                       50,120    47,677    45,000
                                                ========  ========  ========

      Diluted                                     55,891    53,697    45,000
                                                ========  ========  ========


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

                                         2PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                           Consolidated Balance Sheet

    (In thousands)                                            1997      1996
    ------------------------------------------------------------------------
    Assets
    Current Assets:
      Cash and cash equivalents                           $ 91,898  $174,978
      Available-for-sale investments, at quoted market
        value (amortized cost of $7,430 in 1996; Note 2)         -     7,452
      Accounts receivable, less allowances of $4,361
        and $4,459                                          96,541    73,669
      Inventories                                           66,389    54,012
      Prepaid expenses                                       2,490     1,003
      Prepaid income taxes (Note 5)                         12,542    11,469
      Due from parent company and affiliated
        companies (Note 3)                                     750         -
                                                          --------  --------
                                                           270,610   322,583
                                                          --------  --------
    Property, Plant, and Equipment, at Cost, Net            66,736    50,928
                                                          --------  --------
    Patents and Other Assets                                 2,845     4,368
                                                          --------  --------
    Cost in Excess of Net Assets of Acquired
      Companies (Notes 3 and 5)                            255,435   157,191
                                                          --------  --------
                                                          $595,626  $535,070
                                                          ========  ========

                                         3PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                     Consolidated Balance Sheet (continued)

    (In thousands except share amounts)                       1997      1996
    ------------------------------------------------------------------------
    Liabilities and Shareholders' Investment
    Current Liabilities:
      Notes payable and current maturities of
        long-term obligations (Note 6)                    $  7,147  $ 16,732
      Accounts payable                                      24,151    18,249
      Accrued payroll and employee benefits                 19,541    15,339
      Accrued installation and warranty expenses             9,991     9,899
      Accrued income taxes (includes $10,600 and
        $6,892 due to parent company)                       21,331    14,290
      Deferred revenue                                       9,939     9,353
      Customer deposits                                      5,193     6,542
      Other accrued expenses                                16,907    14,475
      Due to parent company and affiliated companies             -       839
                                                          --------  --------
                                                           114,200   105,718
                                                          --------  --------
    Deferred Income Taxes (Note 5)                           7,503     5,405
                                                          --------  --------
    Accrued Pension and Other Deferred Items (Note 4)       15,064    16,340
                                                          --------  --------
    Long-term Obligations (Note 6)                          88,080   104,593
                                                          --------  --------
    Commitments and Contingencies (Note 7)

    Shareholders' Investment (Notes 4 and 9):
      Common stock, $.01 par value, 100,000,000 shares
        authorized; 51,185,127 and 48,450,000 shares
        issued                                                 512       485
      Capital in excess of par value                       302,881   261,921
      Retained earnings                                     78,229    39,787
      Treasury stock at cost, 340 shares in 1997                (6)        -
      Cumulative translation adjustment                    (10,837)      807
      Net unrealized gain on available-for-sale
        investments (Note 2)                                     -        14
                                                          --------  --------
                                                           370,779   303,014
                                                          --------  --------
                                                          $595,626  $535,070
                                                          ========  ========


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

                                         4PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                      Consolidated Statement of Cash Flows

   (In thousands)                               1997       1996         1995
   -------------------------------------------------------------------------
   Operating Activities:
     Net income                            $  41,805  $  28,023    $  21,002
     Adjustments to reconcile net
       income to net cash provided
       by operating activities:
         Depreciation and amortization        14,285      9,603        8,397
         Provision for losses on
           accounts receivable                   549        220          213
         Other noncash expenses                1,136      1,417        1,192
         Increase (decrease) in
           deferred income taxes               2,098       (362)         (45)
         Changes in current accounts,
           excluding the effects of
           acquisitions:
             Accounts receivable             (11,805)     8,179      (13,135)
             Inventories                       1,111      4,748       (7,523)
             Other current assets             (1,425)    (3,013)       1,027
             Accounts payable                    306     (5,763)       2,649
             Other current liabilities         3,758     13,515          782
         Other                                 1,223      1,451        1,216
                                           ---------  ---------    ---------
   Net cash provided by operating
     activities                               53,041     58,018       15,775
                                           ---------  ---------    ---------
   Investing Activities:
     Acquisitions, net of cash
       acquired (Note 3)                    (154,304)   (32,408)           -
     Purchases of available-for-sale
       investments                                 -     (7,250)           -
     Proceeds from sale and maturities
       of available-for-sale investments       7,250          -            -
     Purchases of property, plant,
       and equipment                          (6,261)    (3,761)      (2,761)
     Proceeds from sale of property,
       plant, and equipment                    2,624        432          316
     Other                                       175       (225)         (73)
                                           ---------  ---------    ---------
   Net cash used in investing
     activities                            $(150,516) $ (43,212)    $  (2,518)
                                           ---------  ---------    ---------

                                         5PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                Consolidated Statement of Cash Flows (continued)

    (In thousands)                             1997         1996        1995
    ------------------------------------------------------------------------
    Financing Activities:
      Net proceeds from issuance of
        Company common stock (Note 9)     $  25,050   $  47,778   $       -
      Net proceeds from issuance of
        subordinated convertible
        debentures (Note 6)                       -           -      93,912
      Increase (decrease) in short-term
        obligations                          (7,926)     (5,389)      5,927
      Repayment of long-term obligations     (2,791)     (1,906)     (1,135)
      Net transfer to parent company              -           -      (5,590)
      Other                                     194        (153)        281
                                          ---------   ---------   ---------
    Net cash provided by financing
      activities                             14,527      40,330      93,395
                                          ---------   ---------   ---------
    Exchange Rate Effect on Cash               (132)       (512)        652
                                          ---------   ---------   ---------
    Increase (Decrease) in Cash and
      Cash Equivalents                      (83,080)     54,624     107,304
    Cash and Cash Equivalents at
      Beginning of Year                     174,978     120,354      13,050
                                          ---------   ---------   ---------
    Cash and Cash Equivalents at End
      of Year                             $  91,898   $ 174,978   $ 120,354
                                          =========   =========   =========

    Cash Paid For:
      Interest                            $   9,851   $   7,010   $   1,701
      Income taxes                        $  25,207   $  11,337   $   6,826

    Noncash Activities (Note 3):
      Fair value of assets of acquired
        companies                         $ 183,050   $  69,741   $       -
      Cash paid for acquired companies     (160,411)    (33,148)          -
      Stock issued to parent company
        for acquired companies                  (16)          -           -
      Adjustment of purchase price due
        from parent company for acquired
        companies                             3,498           -           -
                                          ---------   ---------   ---------
          Liabilities assumed of
            acquired companies            $  26,121   $  36,593   $       -
                                          =========   =========   =========
      Adjustment of purchase price due
        from parent company for companies
        acquired in 1996 (Note 3)         $   2,455   $       -   $       -
                                          =========   =========   =========
      Conversions of convertible
        debentures                        $  15,659   $       -   $       -
                                          =========   =========   =========
    The accompanying notes are an integral part of these consolidated
    financial statements.

                                         6PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

               Consolidated Statement of Shareholders' Investment

    (In thousands)                              1997        1996        1995
    ------------------------------------------------------------------------
    Common Stock, $.01 Par Value
       Balance at beginning of year        $     485  $     450   $       -
       Net proceeds from issuance of
         Company common stock (Note 9)            18         35           -
       Conversions of convertible 
         debentures                                9          -           -
       Capitalization of Company                   -          -         300
       Effect of three-for-two stock split         -          -         150
                                           ---------  ---------   ---------
       Balance at end of year                    512        485         450
                                           ---------  ---------   ---------
    Capital in Excess of Par Value
       Balance at beginning of year          261,921    213,378           -
       Net proceeds from issuance of
         Company common stock (Note 9)        24,818     47,743           -
       Conversions of convertible 
         debentures                           15,414          -           -
       Stock issued to parent company for
         acquired companies (Note 3)              16          -           -
       Issuance of stock under employees'
         and directors' stock plans              220          -           -
       Tax benefit related to employees'
         and directors' stock plans              492        800           -
       Capitalization of Company                   -          -     213,528
       Effect of three-for-two stock split         -          -        (150)
                                           ---------  ---------   ---------
       Balance at end of year                302,881    261,921     213,378
                                           ---------  ---------   ---------
    Retained Earnings
       Balance at beginning of year           39,787     11,764           -
       Net income                             41,805     28,023           -
       Deemed distribution to parent
         company for acquired companies
         (Note 3)                             (3,363)         -           -
       Net income after capitalization
         of Company                                -          -      11,764
                                           ---------  ---------   ---------
       Balance at end of year                 78,229     39,787      11,764
                                           ---------  ---------   ---------
    Treasury Stock
       Balance at beginning of year                -          -           -
       Activity under employees'
         and directors' stock plans               (6)         -           -
                                           ---------  ---------   ---------
       Balance at end of year              $      (6) $       -   $       -
                                           ---------  ---------   ---------

                                         7PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

         Consolidated Statement of Shareholders' Investment  (continued)

    (In thousands)                              1997       1996        1995
    -----------------------------------------------------------------------
    Cumulative Translation Adjustment
       Balance at beginning of year        $     807  $   2,148   $   1,453
       Translation adjustment                (11,644)    (1,341)        695
                                           ---------  ---------   ---------
       Balance at end of year                (10,837)       807       2,148
                                           ---------  ---------   ---------
    Net Unrealized Gain on Available-
      for-sale Investments
       Balance at beginning of year               14          -           -
       Change in net unrealized gain on
         available-for-sale investments          (14)        14           -
                                           ---------  ---------   ---------
       Balance at end of year                      -         14           -
                                           ---------  ---------   ---------
    Net Parent Company Investment
       Balance at beginning of year                -          -     210,180
       Net income prior to capitalization
         of Company                                -          -       9,238
       Net transfer to parent company              -          -      (5,590)
       Capitalization of Company                   -          -    (213,828)
                                           ---------  ---------   ---------
       Balance at end of year                      -          -           -
                                           ---------  ---------   ---------
    Total Shareholders' Investment         $ 370,779  $ 303,014   $ 227,740
                                           =========  =========   =========


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

                                         8PAGE
<PAGE>
    ThermoQuest Corporation                         1997 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, sells,
    and services analytical instruments, including mass spectrometers, liquid
    chromatographs, and gas chromatographs; and scientific equipment for the
    preparation and preservation of chemical samples, as well as consumables
    for the chromatography industry. The Company's products are used
    primarily by the pharmaceutical, environmental, and industrial
    marketplaces. 

    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. As part of the formation of
    the Company, Thermo Instrument transferred to the Company the assets,
    liabilities, and businesses of Finnigan Corporation and Thermo Separation
    Products Inc. in exchange for 45,000,000 shares of the Company's common
    stock. As of January 3, 1998, Thermo Instrument owned 44,999,100 shares
    of the Company's common stock, representing 88% of such stock
    outstanding. Thermo Instrument is an 82%-owned subsidiary of Thermo
    Electron Corporation. As of January 3, 1998, Thermo Electron owned 59,300
    shares of the Company's common stock, representing 0.12% 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 1997, 1996, and 1995 are for the fiscal years
    ended January 3, 1998, December 28, 1996, and December 30, 1995,
    respectively. Fiscal year 1997 included 53 weeks; 1996 and 1995 each
    included 52 weeks.

    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 1997 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 

                                         9PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

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

    market value until they are exercised. Upon exercise, net proceeds,
    including tax benefits realized, are credited to equity.

    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 and Thermo Electron's combined 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
        During the fourth quarter of 1997, the Company adopted SFAS No. 128,
    "Earnings per Share" (Note 12). As a result, all previously reported
    earnings per share have been restated. Basic earnings per share have been
    computed by dividing net income by the weighted average number of shares
    outstanding during the year. For periods prior to the Company's June 1995
    capitalization, shares issued in connection with such capitalization have
    been shown as outstanding for purposes of computing earnings per share.
    Diluted earnings per share have been computed assuming the conversion of
    the Company's convertible obligations and the elimination of the related
    interest expense, and the exercise of stock options, as well as their
    related income tax effects. 
    Stock Split
        All share and per share information was restated in 1996 to reflect a
    three-for-two stock split, effected in the form of a 50% stock dividend,
    which was distributed in January 1996.

    Cash and Cash Equivalents
        At year-end 1997 and 1996, $60,376,000 and $152,063,000,
    respectively, 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
    corporate notes, commercial paper, U.S. government-agency securities,
    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 points, set at the beginning of each 

                                        10PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

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

    quarter. At year-end 1997 and 1996, the Company's cash equivalents also
    include investments in commercial paper and short-term certificates of
    deposit held by 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)                                           1997      1996
    -----------------------------------------------------------------------
    Raw materials and supplies                            $17,174   $10,923
    Work in process                                        17,736    14,987
    Finished goods                                         31,479    28,102
                                                          -------   -------
                                                          $66,389   $54,012
                                                          =======   =======

    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, 1 to 12 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)                                           1997      1996
    -----------------------------------------------------------------------
    Land                                                  $17,428   $15,782
    Buildings                                              39,875    31,447
    Machinery, equipment, and leasehold improvements       32,013    19,996
                                                          -------   -------
                                                           89,316    67,225
    Less: Accumulated depreciation and amortization        22,580    16,297
                                                          -------   -------
                                                          $66,736   $50,928
                                                          =======   =======

    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
    $1,112,000 and $1,751,000, net of accumulated amortization of $6,986,000
    and $6,470,000, at year-end 1997 and 1996, respectively. Patents and
    other assets in the accompanying balance sheet also includes deferred
    debt costs of $1,250,000 and $2,008,000, net of accumulated amortization 

                                        11PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

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

    of $1,385,000 and $863,000, at year-end 1997 and 1996, respectively.
    These 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 $28,166,000 and $20,386,000 at year-end 1997
    and 1996, 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.

    Forward Contracts
        The Company uses short-term forward foreign exchange contracts to
    manage certain exposures to foreign currencies. The Company enters into
    forward foreign exchange contracts to hedge firm purchase and sale
    commitments denominated in currencies other than its subsidiaries' local
    currencies. These contracts principally hedge transactions denominated in
    U.S. dollars and British pounds sterling. 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. Gains and losses arising from forward foreign
    exchange contracts are recognized as offsets to gains and losses
    resulting from the transactions being hedged. The Company does not enter
    into speculative foreign currency agreements.

    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.

                                        12PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

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

    Presentation
        Certain amounts in 1996 and 1995 have been reclassified to conform to
    the presentation in the 1997 financial statements.

    2.  Available-for-sale Investments

        In accordance with SFAS No. 115, "Accounting for Certain Investments
    in Debt and Equity Securities," the Company's debt 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. 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.

    3.  Acquisitions

        In March 1997, Thermo Instrument acquired approximately 95% of the
    outstanding shares of Life Sciences International PLC, a London Stock
    Exchange-listed company. Subsequently, Thermo Instrument acquired the
    remaining shares of Life Sciences' capital stock. In July 1997, the
    Company agreed to acquire three business units within Life Sciences'
    Laboratory Products Group, as well as Life Sciences' Hypersil operations,
    from Thermo Instrument. The Laboratory Products businesses manufacture
    scientific equipment for the preparation and preservation of chemical
    samples, and Hypersil manufactures columns used in high-performance
    liquid chromatography. The aggregate purchase price for the Laboratory
    Products businesses was approximately $160.4 million and consisted of:
    (i) $107.3 million in cash, (ii) 1,000 shares of the Company's common
    stock valued at $15,750, and (iii) the assumption of $53.1 million of
    debt payable to Thermo Instrument. The purchase price represents the sum
    of the net tangible book value of the Laboratory Products businesses and
    Hypersil as of June 28, 1997, plus a percentage of Thermo Instrument's
    total cost in excess of net assets acquired associated with its
    acquisition of Life Sciences, based on the aggregate 1996 revenues of the
    Laboratory Products businesses and Hypersil relative to Life Sciences'
    1996 consolidated revenues. In December 1997, the Company was notified by
    Thermo Instrument that it would receive an adjustment to the purchase
    price of $3.5 million in the first quarter of 1998 in connection with its
    acquisition of the Laboratory Products businesses and Hypersil based on
    Thermo Instrument's final determination of the net tangible book value of
    the acquired businesses and a final calculation of Thermo Instrument's
    total cost in excess of net assets acquired associated with its
    acquisition of Life Sciences. The receivable from Thermo Instrument is
    included in due from parent company and affiliated companies in the 

                                        13PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

    3.  Acquisitions (continued)

    accompanying balance sheet. The cash portion of the purchase price was
    paid in September 1997 together with interest calculated at the 90-day
    Commercial Paper Composite Rate plus 25 basis points, set at the
    beginning of each quarter, from June 28, 1997. The 1,000 shares of common
    stock to be issued to Thermo Instrument will be issued as soon as they
    are listed for trading on the American Stock Exchange.
        Because the Company, the Laboratory Products businesses, and Hypersil
    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
    1997 historical financial information has been restated to include the
    results of the Laboratory Products businesses and Hypersil from March 12,
    1997, the date these businesses were acquired by Thermo Instrument, and
    the shares issuable to Thermo Instrument have been deemed outstanding
    from that date. The purchase price included $3.4 million for the increase
    in the net book value from the date the businesses were acquired by
    Thermo Instrument to June 28, 1997. This amount was recorded as a deemed
    distribution from retained earnings, reflecting payment by the Company to
    Thermo Instrument for the earnings of the transferred businesses from the
    date of the acquisition by Thermo Instrument until the date of transfer
    to the Company.
        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. 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 constituting the Scientific Instruments Division of
    Fisons plc (the Fisons businesses), a wholly owned subsidiary of
    Rhone-Poulenc Rorer Inc (RPR). In September 1996, the Company acquired
    two businesses formerly part of Fisons, CE Instruments and MassLab
    Instruments, from Thermo Instrument for an aggregate $27.3 million in
    cash and the assumption of approximately $8.9 million in debt. 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, 

                                        14PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

    3.   Acquisitions (continued)

    1996, plus a pro rata allocation of Thermo Instrument's total cost in
    excess of net assets acquired associated with its 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.
        In December 1997, Thermo Instrument and RPR negotiated a post-closing
    adjustment under the terms of the purchase agreement for the Fisons
    acquisition pertaining to determination of the net assets of the Fisons
    businesses at the date of acquisition. This negotiation resulted in a
    refund to Thermo Instrument that included interest from the date of
    acquisition. The Company has recorded a receivable from Thermo Instrument
    totaling $2.7 million at January 3, 1998, which represents the Company's
    share of the refund received by Thermo Instrument. The Company has
    recorded $2.2 million of the refund as a reduction of cost in excess of
    net assets of acquired companies. Of the remainder, $272,000 represents
    payment for uncollected accounts receivable acquired by the Company that
    were guaranteed by RPR, and $259,000 represents interest income on the
    refund from the date of acquisition. The receivable from Thermo
    Instrument is included in due from parent company and affiliated
    companies in the accompanying balance sheet.
        The aggregate cost of these acquisitions exceeded the estimated fair
    value of the acquired net assets by $134.0 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 the Laboratory Products businesses and Hypersil, is
    subject to adjustment upon finalization of the purchase price allocation.
    The Company has gathered no information that indicates the final purchase
    price allocation will differ materially from the preliminary estimate.
        Based on unaudited data, the following table presents selected
    financial information of the Company, the Laboratory Products businesses,
    and Hypersil on a pro forma basis, assuming the companies had been
    combined since the beginning of 1996. The effect of the acquisitions not
    included in the pro forma data was not material to the Company's results
    of operations.

    (In thousands except per share amounts)                1997        1996
    -----------------------------------------------------------------------
    Revenues                                          $462,166    $462,421
    Net income                                          36,427      34,471
    Earnings per share:
      Basic                                                .73         .72
      Diluted                                              .70         .69

        The pro forma results are not necessarily indicative of future
    operations or the actual results that would have occurred had the 

                                        15PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

    3.  Acquisitions (continued)

    acquisition of the Laboratory Products businesses and Hypersil been made
    at the beginning of 1996.

    4.  Employee Benefit Plans

    Stock-based Compensation Plans

    Stock Option Plans
    ------------------
        The Company has two stock-based compensation plans for its key
    employees, directors, and others. These plans, adopted in 1995 and 1997,
    permit 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 these plans. The
    option recipients and the terms of options granted under the plans are
    determined by the Board Committee. Generally, options granted 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
    seven 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 plans 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.

                                        16PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

    4.  Employee Benefit Plans (continued)

        A summary of the Company's stock option activity is as follows:
                                               1997               1996
                                         ----------------   ----------------
                                                 Weighted           Weighted
                                         Number   Average   Number   Average
                                             of  Exercise       of  Exercise
    (Shares in thousands)                Shares     Price   Shares     Price
    ------------------------------------------------------------------------
    Options outstanding, beginning
      of year                             2,330    $13.12       -    $    -
        Granted                             873     16.90   2,425     13.12
        Exercised                           (16)    13.30       -         -
        Forfeited                          (140)    13.02     (95)    13.00
                                         ------            ------

    Options outstanding, end of year      3,047    $14.21   2,330    $13.12
                                         ======    ======  ======    ======

    Options exercisable                   3,047    $14.21   2,330    $13.12
                                         ======    ======  ======    ======

    Options available for grant             862               595
                                         ======            ======

        As of January 3, 1998, the options outstanding were exercisable at
    prices ranging from $13.00 to $17.01 and had a weighted average remaining
    contractual life of 8.5 years.

    Employee Stock Purchase Program
    -------------------------------
        Effective November 1, 1997, substantially all of the Company's
    full-time U.S. employees are eligible to participate in an employee stock
    purchase program sponsored by the Company and Thermo Electron, under
    which employees can purchase shares of the Company's and Thermo
    Electron's common stock. Prior to November 1, 1997, the program was
    sponsored by Thermo Instrument and Thermo Electron. Under this program,
    the applicable shares of 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.

    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 1997 and 1996 under the Company's
    stock-based compensation plans been determined based on the fair value at

                                        17PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

    4. Employee Benefit Plans (continued)

    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)                1997        1996
    -----------------------------------------------------------------------
    Net income:
      As reported                                       $41,805     $28,023
      Pro forma                                          40,703      26,902
    Basic earnings per share:
      As reported                                           .83         .59
      Pro forma                                             .81         .56
    Diluted earnings per share:
      As reported                                           .80         .57
      Pro forma                                             .78         .55

        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 weighted average fair value per share of options granted was
    $5.75 and $5.93 in 1997 and 1996, respectively. 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:

                                                           1997        1996
    -----------------------------------------------------------------------
    Volatility                                              28%         26%
    Risk-free interest rate                                5.7%        5.9%
    Expected life of options                          4.7 years   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.

    401(k) Savings Plans
        Substantially all of the Company's full-time U.S. employees are
    eligible to participate in Thermo Electron's or the Company's Finnigan
    subsidiary'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 $1,301,000,
    $1,118,000, and $1,007,000 in 1997, 1996, and 1995, respectively.
                                        18PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

    4. Employee Benefit Plans (continued)

    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. The Company's
    expense related to this plan was $306,000 and $448,000 in 1997 and 1996,
    respectively. The Company's liability for this plan is included in
    accrued pension and other deferred items in the accompanying balance
    sheet.

    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 include the following components:

    (In thousands)                                 1997      1996      1995
    -----------------------------------------------------------------------
    Service cost                                $   235   $   305   $   386
    Interest cost on projected benefit
      obligation                                    954     1,059     1,087
    Return on plan assets                          (167)     (220)     (234)
    Amortization of unrecognized prior
      service and obligation, net                   (23)      (43)        -
                                                -------   -------   -------
                                                $   999   $ 1,101   $ 1,239
                                                =======   =======   =======

                                        19PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

    4. Employee Benefit Plans (continued)

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

    (In thousands)                                 1997      1996
    -------------------------------------------------------------
    Actuarial present value of benefit
      obligations:
        Vested benefits                         $12,289   $13,494
        Nonvested benefits                           91        96
                                                -------   -------
    Accumulated benefit obligation               12,380    13,590
    Effect of projected future salary
      increases                                     989     1,294
                                                -------   -------
    Projected benefit obligation                 13,369    14,884
    Plan assets at fair value                     4,969     5,842
                                                -------   -------
    Plan assets less than projected
      benefit obligation                          8,400     9,042
    Unrecognized net gain                         2,077     2,550
    Initial unrecognized net obligation            (253)     (340)
                                                -------   -------
      Accrued pension costs                     $10,224   $11,252
                                                =======   =======

        Actuarial assumptions used to determine the net periodic pension
    costs in 1997, 1996, and 1995 were as follows: discount rate - 7.5%; rate
    of increase in salary levels - 3.5%; and expected long-term rate of
    return on assets - 6.0%.

    5.  Income Taxes

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

    (In thousands)                                 1997      1996      1995
    -----------------------------------------------------------------------
    Domestic                                    $52,240   $28,795   $24,583
    Foreign                                      20,781    19,945    11,582
                                                -------   -------   -------
                                                $73,021   $48,740   $36,165
                                                =======   =======   =======

                                        20PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

    5.  Income Taxes (continued)

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

    (In thousands)                                 1997      1996      1995
    -----------------------------------------------------------------------
    Currently payable:
      Federal                                   $17,653   $11,224   $ 7,852
      State                                       3,640     2,340     1,523
      Foreign                                     9,434    10,281     4,600
                                                -------   -------   -------
                                                 30,727    23,845    13,975
                                                -------   -------   -------
    Net deferred (prepaid):
      Federal                                       574    (1,529)      683
      State                                         122      (324)      145
      Foreign                                      (207)   (1,275)      360
                                                -------   -------   -------
                                                    489    (3,128)    1,188
                                                -------   -------   -------
                                                $31,216   $20,717   $15,163
                                                =======   =======   =======

        The provision for income taxes that is currently payable does not
    reflect $1,099,000, $1,840,000, and $2,000,000 of tax benefits used to
    reduce cost in excess of net assets of acquired companies in 1997, 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
    underlying common stock on the date of exercise. The provision for income
    taxes that is currently payable does not reflect $492,000 and $800,000 of
    such benefits that have been allocated to capital in excess of par value
    in 1997 and 1996, respectively.

                                        21PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

    5.  Income Taxes (continued)

         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)                                 1997      1996      1995
    -----------------------------------------------------------------------
    Provision for income taxes at
      statutory rate                            $25,557   $17,059   $12,658
    Increases (decreases) resulting from:
      State income taxes, net of federal
        tax                                       2,445     1,310     1,084
      Foreign tax rate and tax law
        differential                              1,954     2,024       906
      Tax benefit of foreign sales
        corporation                                (984)     (755)     (659)
      Amortization of cost in excess of net
        assets of acquired companies              1,715       905     1,012
      Other, net                                    529       174       162
                                                -------   -------   -------
                                                $31,216   $20,717   $15,163
                                                =======   =======   =======

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

    (In thousands)                                 1997      1996
    -------------------------------------------------------------
    Prepaid income taxes:
      Foreign tax loss carryforwards            $10,041   $20,451
      Reserves and accruals                       8,961     7,067
      Inventory basis difference                  1,876     2,820
      Accrued compensation                        1,705     1,574
      Other, net                                      -         8
                                                -------   -------
                                                 22,583    31,920
      Less: Valuation allowance                  10,041    20,451
                                                -------   -------
                                                $12,542   $11,469
                                                =======   =======
    Deferred income taxes:
      Depreciation                              $ 7,503   $ 5,405
                                                =======   =======

        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
    January 3, 1998, the Company had $25,642,000 of foreign tax loss
    carryforwards, $17,293,000 of which expires from 1998 through 2005. The
    remainder of the Company's foreign tax loss carryforwards do not expire.
                                        22PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

    5.  Income Taxes (continued)

    The decrease in the valuation allowance in 1997 results from the decrease
    in foreign tax loss carryforwards, primarily due to a change in foreign
    tax rates, expiration, currency fluctuations, and utilization. Any tax
    benefit resulting from use of the loss carryforwards has been 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
    $47,600,000 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.

    6.  Short- and Long-term Obligations

    Short-term Obligations
        Notes payable and current maturities of long-term obligations in the
    accompanying balance sheet includes $6,076,000 and $15,241,000 at
    year-end 1997 and 1996, 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
    1.63% and 6.45% at year-end 1997 and 1996, respectively. Unused lines of
    credit were $18,553,000 at year-end 1997.

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

    (In thousands except per share amounts)                  1997       1996
    ------------------------------------------------------------------------
    5% Subordinated convertible debentures, due 2000,
      convertible at $16.50 per share                    $ 80,591   $ 96,250
    10.23% Mortgage loan secured by property with a
      net book value of $15,780, payable in monthly
      installments with final payments in 2004              8,343      9,267
    6% Note payable, paid in 1997                               -        567
    Other                                                     217          -
                                                         --------   --------
                                                           89,151    106,084
    Less: Current maturities of long-term obligations       1,071      1,491
                                                         --------   --------
                                                         $ 88,080   $104,593
                                                         ========   ========

        The 5% subordinated convertible debentures are guaranteed on a
    subordinated basis by Thermo Electron. Thermo Instrument has agreed to
    reimburse Thermo Electron in the event Thermo Electron is required to
    make a payment under the guarantee.
        During 1997, $15,659,000 principal amount of the 5% subordinated
    convertible debentures were converted into 949,027 shares of the
    Company's common stock.

                                        23PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

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

        The annual requirements of long-term obligations as of January 3,
    1998, are $1,071,000 in 1998; $1,200,000 in 1999; $81,898,000 in 2000;
    $1,438,000 in 2001; $1,538,000 in 2002; and $2,006,000 in 2003 and
    thereafter. Total future requirements of long-term obligations are
    $89,151,000.
        See Note 10 for the fair value information pertaining to the
    Company's long-term obligations.

    7.  Commitments and Contingencies

    Operating Leases
        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 $5,239,000, $3,041,000,
    and $3,046,000 in 1997, 1996, and 1995, respectively. Future minimum
    payments due under noncancellable operating leases at January 3, 1998,
    are $3,045,000 in 1998; $1,947,000 in 1999; $1,257,000 in 2000; $786,000
    in 2001; $505,000 in 2002; and $1,039,000 in 2003 and thereafter. Total
    future minimum lease payments are $8,579,000.

    Contingencies
        The Company's Finnigan subsidiary has filed complaints against
    Bruker-Franzen Analytik GmbH and its U.S. affiliate, and Hewlett-Packard
    Company, for alleged violation of two U.S. patents owned by Finnigan. The
    patents pertain to methods used in ion-trap mass spectrometers.
        One of Finnigan's complaints was filed in the United States District
    Court for the District of Massachusetts and the other was filed with the
    United States International Trade Commission (ITC) in Washington, DC.
    Finnigan has asked for damages to compensate for the infringements, for
    injunctions against further infringement, and for an order excluding
    further imports into the U.S. of ion-trap mass spectrometers that use the
    patented methods.
        The District Court action has, at the request of Hewlett-Packard and
    Bruker, been stayed pending completion of an investigation by the ITC. In
    February 1998, an administrative law judge at the ITC issued an initial
    determination to the effect that, although one of Finnigan's patents was
    infringed, the patents were invalid for purposes of this case. The ITC's
    jurisdiction in this matter is limited to the issue of whether or not the
    defendant's products can be imported into the U.S. The judge's initial
    determination will be considered by the full commission during the second
    quarter of 1998.
        Bruker presented counterclaims in the ITC investigation. The
    counterclaims, which have been removed to the District Court in
    Massachusetts, allege that the Finnigan patents are invalid and
    unenforceable and are not infringed by the mass spectrometers co-marketed
    by Bruker. They also allege that Finnigan has violated U.S. and
    Massachusetts antitrust laws and engaged in unfair competition by
    attempting to maintain a monopoly position and restrain trade through
    enforcement of allegedly fraudulently obtained patents. Bruker has asked
    for judgment consistent with its counterclaims, and for three times the 

                                        24PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

    7.  Commitments and Contingencies (continued)

    antitrust damages (including attorneys' fees) it has sustained.
        There can be no assurance as to the outcome of these matters or  that
    an unfavorable resolution would not have a material adverse effect on the
    Company's future results of operations and financial position.

    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 has paid Thermo
    Electron annually an amount equal to 1.0% of the Company's revenues in
    1997 and 1996 and 1.2% of the Company's revenues in 1995. For these
    services, the Company was charged $4,389,000, $3,138,000, and $2,903,000
    in 1997, 1996, and 1995, respectively. Beginning in 1998, the Company
    will pay an annual fee equal to 0.8% of the Company's revenues. The
    annual fee is reviewed and adjusted annually by mutual agreement of the
    parties. 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.

    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 $23,791,000,
    $10,527,000, and $4,974,000 in 1997, 1996, and 1995, respectively. Sales
    of products to such affiliated companies totaled $7,090,000, $11,987,000,
    and $940,000 in 1997, 1996, and 1995, 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 1997, the Company sold 1,768,500 shares of its common stock
    at $15.00 per share for net proceeds of $24,836,000.
        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.

                                        25PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

    9.  Common Stock (continued)

        At January 3, 1998, the Company had reserved 8,967,706 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,
    due from parent company and affiliated companies, notes payable and
    current maturities of long-term obligations, accounts payable, due to
    parent company and affiliated companies, 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 carrying amount and fair value of the Company's long-term
    obligations and off-balance-sheet financial instruments are as follows:

                                           1997                 1996
                                    ------------------  ------------------
                                    Carrying      Fair  Carrying      Fair
    (In thousands)                    Amount     Value    Amount     Value
    ----------------------------------------------------------------------
    Long-term obligations:
        Subordinated convertible
          debentures                $ 80,591  $ 88,650  $ 96,250  $ 96,250
        Other                          7,489     9,319     8,343     9,177
                                    --------  --------  --------  --------
                                    $ 88,080  $ 97,969  $104,593  $105,427
                                    ========  ========  ========  ========
    Off-balance-sheet financial
      instruments:
        Forward exchange contracts
          receivable                          $     19            $     12

        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 Company had forward foreign exchange contracts of $1,200,000 and
    $550,000 at year-end 1997 and 1996, respectively. The fair value of such
    contracts is the estimated amount that the Company would receive upon
    termination of the contract, taking into account the change in foreign
    exchange rates.
                                        26PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

    11. Geographical Information

        The Company is engaged in one business segment: developing,
    manufacturing, selling, and servicing analytical instruments, including
    mass spectrometers, liquid chromatographs, and gas chromatographs; and
    scientific equipment for the preparation and preservation of chemical
    samples, as well as chromatography consumables. The following table shows
    data for the Company by geographical area.

    (In thousands)                              1997       1996        1995
    -----------------------------------------------------------------------
    Revenues:
        United States                      $ 289,836  $ 171,100   $ 145,430
        Germany                               64,116     66,228      64,368
        United Kingdom                        60,609     29,597      21,627
        Italy                                 35,142     41,546       5,517
        Other Europe                          49,039     45,839      35,340
        Asia                                  39,432     41,993      36,966
        Other                                  2,032      3,503       3,776
        Transfers among geographical
          areas (a)                         (101,343)   (86,013)    (71,115)
                                           ---------  ---------   ---------
                                           $ 438,863  $ 313,793   $ 241,909
                                           =========  =========   =========

    Income before provision for
      income taxes:
        United States (b)                  $  50,904  $  25,425   $  20,867
        Germany                                2,193      3,971       3,421
        United Kingdom                         9,690      4,443       2,025
        Italy                                  1,858        742         (50)
        Other Europe                           3,140      5,392       4,742
        Asia                                   5,250      6,912       5,820
        Other                                    (54)       278         350
                                           ---------  ---------   ---------
        Total operating income                72,981     47,163      37,175
        Interest income (expense), net            40      1,577      (1,010)
                                           ---------  ---------   ---------
                                           $  73,021  $  48,740   $  36,165
                                           =========  =========   =========

                                        27PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

    11. Geographical Information (continued)

    (In thousands)                              1997       1996        1995
    -----------------------------------------------------------------------
    Identifiable assets:
        United States (c)                  $ 426,812  $ 348,271   $ 288,095
        Germany                               47,537     55,470      61,468
        United Kingdom                        48,136     31,198      15,753
        Italy                                 30,770     49,760       4,834
        Other Europe                          24,270     29,614      22,022
        Asia                                  17,227     19,363      33,760
        Other                                    874      1,394       2,110
                                           ---------  ---------   ---------
                                           $ 595,626  $ 535,070   $ 428,042
                                           =========  =========   =========

    Export revenues included in United
      States revenues above (d):
        Europe                             $  57,755  $  44,051   $  36,943
        Other                                 51,009     33,905      26,578
                                           ---------  ---------   ---------
                                           $ 108,764  $  77,956   $  63,521
                                           =========  =========   =========
    ____________
    (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 corporate cash, cash equivalents, and available-for-sale
        investments.
    (d) In general, export sales are denominated in U.S. dollars.

                                        28PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

    12. Earnings per Share

        Basic and diluted earnings per share were calculated as follows:

    (In thousands except per share amounts)     1997        1996        1995
    ------------------------------------------------------------------------
    Basic
    Net income                              $ 41,805    $ 28,023    $ 21,002
                                            --------    --------    --------
    Weighted average shares                   50,120      47,677      45,000
                                            --------    --------    --------
    Basic earnings per share                $    .83    $    .59    $    .47
                                            ========    ========    ========

    Diluted
    Net income                              $ 41,805    $ 28,023    $ 21,002
    Effect of:
      Convertible obligations                  2,691       2,839           -
                                            --------    --------    --------
    Income available to common
      shareholders, as adjusted             $ 44,496    $ 30,862    $ 21,002
                                            --------    --------    --------
    Weighted average shares                   50,120      47,677      45,000
    Effect of:
      Convertible obligations                  5,529       5,833           -
      Stock options                              242         187           -
                                            --------    --------    --------
    Weighted average shares, as adjusted      55,891      53,697      45,000
                                            --------    --------    --------
    Diluted earnings per share              $    .80    $    .57    $    .47
                                            ========    ========    ========

        The computation of diluted earnings per share for 1996 excludes the
    effect of assuming the exercise of certain outstanding stock options
    because the effect would be antidilutive. As of January 3, 1998, no such
    options were outstanding.
        In addition, the computation of diluted earnings per share for 1995
    excludes the effect of assuming the conversion of the Company's 5%
    subordinated convertible debentures because the effect would be
    antidilutive.

                                        29PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                   Notes to Consolidated Financial Statements

    13. Unaudited Quarterly Information

    (In thousands except per share amounts)

    1997                          First(a)    Second       Third      Fourth
    ------------------------------------------------------------------------
    Revenues                   $ 89,353     $116,542    $109,303    $123,665
    Gross profit                 42,390       55,605      52,587      58,321
    Net income                    8,883       10,633       9,911      12,378
    Earnings per share:
      Basic                         .18          .21         .20         .24
      Diluted                       .18          .20         .19         .23


    1996                          First(b)    Second(c)    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:
      Basic                         .13          .14         .14         .18
      Diluted                       .13          .14         .14         .17

    ------------
    (a) Reflects the acquisition of the Laboratory Products businesses and
        Hypersil, effective March 12, 1997.
    (b) Reflects the acquisition of the Automass division of ATI, effective
        January 1, 1996.
    (c) Reflects the acquisition of CE Instruments and MassLab, effective
        March 29, 1996.

                                       30PAGE
<PAGE>
    ThermoQuest Corporation                         1997 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 88%-owned subsidiary
    of Thermo Instrument Systems Inc.) and subsidiaries as of January 3,
    1998, and December 28, 1996, and the related consolidated statements of
    income, shareholders' investment, and cash flows for each of the three
    years in the period ended January 3, 1998. 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 January 3, 1998, and
    December 28, 1996, and the results of their operations and their cash
    flows for each of the three years in the period ended January 3, 1998, in
    conformity with generally accepted accounting principles.



                                                Arthur Andersen LLP



    Boston, Massachusetts
    February 17, 1998

                                        31PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                     Management's Discussion and Analysis of
                  Financial Condition and Results of 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
    heading "Forward-looking Statements."

    Overview

        The Company develops, manufactures, sells, and services analytical
    products, including mass spectrometers, liquid chromatographs, and gas
    chromatographs. These analytical instruments are used in the quantitative
    and qualitative chemical analysis of chemical compounds at ultratrace
    levels of detection. In addition, the Company develops, manufactures,
    sells, and services scientific equipment for the preparation and
    preservation of chemical samples; and consumables for the chromatography
    industry. 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.
    Effective March 12, 1997, the Company acquired three business units
    within the Laboratory Products Group of Thermo Instrument's Life Sciences
    International PLC subsidiary, as well as Life Sciences' Hypersil
    operations (Note 3). The Laboratory Products businesses develop,
    manufacture, sell, and service scientific equipment including
    centrifuges, ultra low-temperature freezers, incubators, orbital shakers,
    vacuum concentrators, and electrophoresis equipment. These products are
    used in a variety of laboratories, including pharmaceutical, medical,
    industrial, and environmental laboratories worldwide. Hypersil develops,
    manufactures, and sells liquid chromatography media and columns used in
    high-performance liquid chromatography. On January 19, 1996, the Company
    acquired Extrel FTMS, Inc., 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 (Note 3). In addition, effective March 29, 1996,
    the Company acquired CE Instruments, a manufacturer of gas
    chromatographs, and MassLab Instruments, a manufacturer of mass 

                                        32PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

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

    Overview (continued)

    spectrometers, from Thermo Instrument (Note 3).
        The Company sells its products on a worldwide basis. During 1997, the
    Company's U.S. and foreign operations had revenues to customers in Asia
    of approximately 16% of total revenues. Certain countries in Asia are
    experiencing a severe economic crisis, which has been characterized by
    sharply reduced economic activity and liquidity, highly volatile
    foreign-currency-exchange and interest rates, and unstable stock markets.
    Revenues to customers in South Korea, Taiwan, Singapore, Malaysia, and
    Indonesia represented approximately 3% of the Company's total revenues.
    The Company's sales to Asia could be adversely affected by the unstable
    economic conditions there. 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.

    Results of Operations

    1997 Compared With 1996
        Revenues increased 40% to $438.9 million in 1997 from $313.8 million
    in 1996. Revenues increased $137.6 million due to the acquisition of
    three business units within Life Sciences' Laboratory Products Group, as
    well as Life Sciences' Hypersil operations, from Thermo Instrument,
    effective March 12, 1997, and the inclusion for the full twelve months of
    1997 of CE Instruments and MassLab, which were acquired from Thermo
    Instrument, effective March 29, 1996 (Note 3). In addition, revenues
    increased $11.6 million at the Company's existing mass spectrometry
    business, due in part to the continued success of a liquid
    chromatograph/ion-trap mass spectrometer instrument introduced in the
    first quarter of 1996. These increases were offset in part by a decrease
    of $21.3 million in revenues due to the strengthening of the U.S. dollar
    relative to foreign currencies in countries in which the Company operates
    and, to a lesser extent, a decrease in revenues at certain of the
    Company's existing operations due to increased competition. In addition,
    revenues in the first quarter of 1996 included $2.6 million from the sale
    of products manufactured by third parties. The Company's backlog
    decreased by $10.7 million during 1997. The Company believes that its
    backlog in 1996 was higher than in 1997, due to high demand at the end of
    1996 for new products, the release of which had been anticipated by the
    market. The Company does not believe that the amount of backlog at any
    date is necessarily indicative of future demand for its products.
        The gross profit margin increased to 47.6% in 1997 from 46.6% in
    1996. The increase in the gross profit margin was primarily due to the
    increase in sales of higher-margin mass spectrometry products, offset in
    part by the inclusion of lower-margin revenues from the Laboratory
    Products businesses, which recorded an adjustment to expense of $1.0
    million in the first quarter of 1997 relating to the sale of inventories
    revalued at the date of acquisition. The gross profit margin for the
    Laboratory Products businesses was 40.3% in 1997.

                                        33PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

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

    1997 Compared With 1996 (continued)
        Selling, general, and administrative expenses as a percentage of
    revenues remained relatively unchanged at 24.6% in 1997, compared with
    24.7% in 1996. Research and development expenses as a percentage of
    revenues decreased to 6.4% in 1997 from 7.0% in 1996, primarily due to
    lower research and development expenditures as a percentage of revenues
    at the Laboratory Products businesses.
        Interest income increased to $10.1 million in 1997 from $8.9 million
    in 1996, primarily as a result of interest income earned on invested
    proceeds from the Company's initial public offering of common stock in
    March and April 1996 and sale of common stock in March 1997 (Note 9) and,
    to a lesser extent, the inclusion of interest income from the Laboratory
    Products businesses. The increase in interest income was offset in part
    by a reduction in cash as a result of the cash payment of $160.4 million
    to Thermo Instrument in September 1997 for the acquisition of the
    Laboratory Products businesses and Hypersil (Note 3) and, to a lesser
    extent, the acquisition of CE Instruments and MassLab in 1996. In
    December 1997, the Company was notified that it would receive an
    aggregate refund of $6.0 million in the first quarter of 1998 from Thermo
    Instrument in connection with the acquisition of the Laboratory Products
    businesses, Hypersil, CE Instruments, and MassLab (Note 3). Interest
    expense increased to $10.1 million in 1997 from $7.3 million in 1996,
    primarily due to the inclusion of interest expense on debt assumed in
    connection with the acquisition of the Laboratory Products businesses and
    Hypersil, which was repaid to Thermo Instrument in September 1997
    (Note 3).
        The effective tax rate was 43% in 1997 and 1996. The effective tax
    rates exceeded the statutory federal income tax rate primarily due to the
    impact of state income taxes, foreign tax rate and tax law differentials,
    and nondeductible amortization of cost in excess of net assets of
    acquired companies.
        The Company is involved in a patent infringement proceeding relating
    to its ion-trap mass spectrometers (Note 7).
        The Company is currently assessing the potential impact of the year
    2000 on the processing of date-sensitive information by the Company's
    computerized information systems and on products sold as well as products
    purchased by the Company. The Company believes that its internal
    information systems and current products are either year 2000 compliant
    or will be so prior to the year 2000 without incurring material costs.
    There can be no assurance, however, that the Company will not experience
    unexpected costs and delays in achieving year 2000 compliance for its
    internal information systems and current products, which could result in
    a material adverse effect on the Company's future results of operations.
        The Company is presently assessing the effect that the year 2000
    problem may have on its previously sold products. The Company is also
    assessing whether its key suppliers are adequately addressing this issue
    and the effect this might have on the Company. The Company has not
    completed its analysis and is unable to conclude at this time that the
    year 2000 problem as it relates to its previously sold products and
    products purchased from key suppliers is not reasonably likely to have a
    material adverse effect on the Company's future results of operations.

                                        34PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                     Management's Discussion and Analysis of
                  Financial Condition and 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 relative to foreign
    currencies in countries in which the Company operates, primarily the
    Japanese yen and the German deutsche 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 43% in 1996, compared with 42% in 1995.
    The effective tax rates exceeded the statutory federal income tax rate
    primarily due to the impact of state income taxes, foreign tax rate and
    tax law differentials, and nondeductible amortization of cost in excess
    of net assets of acquired companies.

    Liquidity and Capital Resources

        Consolidated working capital was $156.4 million at January 3, 1998,
    compared with $216.9 million at December 28, 1996. Included in working
    capital are cash, cash equivalents, and available-for-sale investments of
    $91.9 million at January 3, 1998, compared with $182.4 million at
    December 28, 1996. Cash provided by operating activities was $53.0
    million in 1997. Accounts receivable increased $11.8 million primarily
    due to increased shipments in the fourth quarter of 1997 and a
    competitive trend to commercial terms of 30 days from the Company's past
    practice of generally obtaining deposits on certain systems.
        At January 3, 1998, $26.7 million of the Company's cash and cash
    equivalents were held by its foreign subsidiaries. While this cash can be
    used outside of the United States, including for acquisitions,
    repatriation of this cash into the United States would be subject to 

                                        35PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

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

    Liquidity and Capital Resources (continued)

    foreign withholding taxes and could also be subject to a United States
    tax.
        The Company's investing activities used $150.5 million of cash in
    1997. The Company expended $154.3 million, net of cash acquired, for
    acquisitions (Note 3) and $6.3 million for purchases of property, plant,
    and equipment. In December 1997, the Company was notified that it would
    receive an aggregate refund of $6.0 million in the first quarter of 1998
    from Thermo Instrument in connection with the acquisition of the
    Laboratory Products businesses, Hypersil, CE Instruments, and MassLab
    (Note 3). The Company recorded $2.6 million in proceeds from the sale of
    property, plant, and equipment, primarily from the sale of a building
    acquired in connection with the acquisition of the Laboratory Products
    businesses. During 1998, the Company plans to expend approximately $8.0
    million for property, plant, and equipment.
        The Company's financing activities provided $14.5 million of cash in
    1997. In March 1997, the Company sold 1,768,500 shares of its common
    stock for net proceeds of $24.8 million (Note 9). The Company used $10.7
    million of cash in 1997 to reduce short- and long-term borrowings.
        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 January 3, 1998, the accrued pension
    costs for this plan were $10.2 million (Note 4). In addition, as of
    January 3, 1998, the Company has a deferred compensation plan with an
    unfunded liability of $3.5 million (Note 4). As of January 3, 1998, the
    Company's foreign subsidiaries had available short-term credit facilities
    of $18.6 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.
    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, 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.

                                        36PAGE
<PAGE>
    ThermoQuest Corporation                         1997 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 1998 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
    significant patents relating to ion trap mass spectrometers, discussed
    below. 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.
        The Company's Finnigan subsidiary has filed complaints against
    Bruker-Franzen Analytik GmbH and its U.S. affiliate, and Hewlett-Packard
    Company, for alleged violation of two U.S. patents owned by Finnigan. The
    patents pertain to methods used in ion-trap mass spectrometers.
        One of Finnigan's complaints was filed in the United States District
    Court for the District of Massachusetts and the other was filed with the

                                        37PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                           Forward-looking Statements

    United States International Trade Commission (ITC) in Washington, DC.
    Finnigan has asked for damages to compensate for the infringements, for
    injunctions against further infringement, and for an order excluding
    further imports into the U.S. of ion-trap mass spectrometers that use the
    patented methods.
        The District Court action has, at the request of Hewlett-Packard and
    Bruker, been stayed pending completion of an investigation by the ITC. In
    February 1998, an administrative law judge at the ITC issued an initial
    determination to the effect that, although one of Finnigan's patents was
    infringed, the patents were invalid for purposes of this case. The ITC's
    jurisdiction in this matter is limited to the issue of whether or not the
    defendant's products can be imported into the U.S. The judge's initial
    determination will be considered by the full commission during the second
    quarter of 1998.
        Bruker presented counterclaims in the ITC investigation. The
    counterclaims, which have been removed to the District Court in
    Massachusetts, allege that the Finnigan patents are invalid and
    unenforceable and are not infringed by the mass spectrometers co-marketed
    by Bruker. They also allege that Finnigan has violated U.S. and
    Massachusetts antitrust laws and engaged in unfair competition by
    attempting to maintain a monopoly position and restrain trade through
    enforcement of allegedly fraudulently obtained patents. Bruker has asked
    for judgment consistent with its counterclaims, and for three times the
    antitrust damages (including attorneys' fees) it has sustained.
         There can be no assurance as to the outcome of these matters or that
    an unfavorable resolution would not have a material adverse effect on the
    Company's future results of operations and financial position.

        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, the
    Company's parent, 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 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.

                                        38PAGE
<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements

                           Forward-looking Statements

        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 59% of the Company's
    revenues in 1997, 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,
    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.
        During 1997, the Company's U.S. and foreign operations had revenues
    to customers in Asia of approximately 16% of total revenues. Certain
    countries in Asia are experiencing a severe economic crisis, which has
    been characterized by sharply reduced economic activity and liquidity, 

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    ThermoQuest Corporation                         1997 Financial Statements

                           Forward-looking Statements

    highly volatile foreign-currency-exchange and interest rates, and
    unstable stock markets. Revenues to customers in South Korea, Taiwan,
    Singapore, Malaysia, and Indonesia represented approximately 3% of the
    Company's total revenues. The Company's sales to Asia could be adversely
    affected by the unstable economic conditions there.

        Potential Impact of Year 2000 on Processing Date-sensitive
    Information. The Company is currently assessing the potential impact of
    the year 2000 on the processing of date-sensitive information by the
    Company's computerized information systems and on products sold as well
    as products purchased by the Company. The Company believes that its
    internal information systems and current products are either year 2000
    compliant or will be so prior to the year 2000 without incurring material
    costs. There can be no assurance, however, that the Company will not
    experience unexpected costs and delays in achieving year 2000 compliance
    for its internal information systems and current products, which could
    result in a material adverse effect on the Company's future results of
    operations.
        The Company is presently assessing the effect that the year 2000
    problem may have on its previously sold products. The Company is also
    assessing whether its key suppliers are adequately addressing this issue
    and the effect this might have on the Company. The Company has not
    completed its analysis and is unable to conclude at this time that the
    year 2000 problem as it relates to its previously sold products and
    products purchased from key suppliers is not reasonably likely to have a
    material adverse effect on the Company's future results of operations.

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   ThermoQuest Corporation                           1997 Financial Statements

                         Selected Financial Information

   (In thousands except
   per share amounts)       1997(a)     1996(b)     1995(c)    1994(d)   1993
   --------------------------------------------------------------------------
   Statement of Income Data:
   Revenues             $438,863    $313,793    $241,909   $223,396  $204,757
   Net income             41,805      28,023      21,002     18,526    14,280
   Earnings per share:
     Basic                   .83         .59         .47        .41       .32
     Diluted                 .80         .57         .47        .41       .32

   Balance Sheet Data:
   Working capital      $156,410    $216,865    $166,902   $ 47,955  $ 44,866
   Total assets          595,626     535,070     428,042    306,284   297,969
   Long-term obligations  88,080     104,593     106,456     11,322    12,263
   Shareholders' 
    investment           370,779     303,014     227,740    211,633   201,588

   ------------
   (a) Reflects the acquisition of three business units within the Laboratory
       Products Group of Life Sciences International PLC and Life Sciences'
       Hypersil operations, effective March 12, 1997, the net proceeds of the
       Company's issuance of common stock in March 1997, and conversion of
       $15.7 million principal amount of 5% subordinated convertible
       debentures.
   (b) Reflects the acquisition of the Automass division of Analytical
       Technology, Inc., effective January 1, 1996, CE Instruments and MassLab
       Instruments, effective March 29, 1996, and the net proceeds of the
       Company's initial public offering in March and April 1996.
   (c) Reflects the issuance in August 1995 of $96.3 million principal amount
       of 5% subordinated convertible debentures due 2000.
   (d) Reflects the acquisition of Tremetrics Inc., effective March 16, 1994.

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    ThermoQuest Corporation                         1997 Financial Statements


    Common Stock Market Information
        The Company's common stock is traded on the American Stock Exchange
    under the symbol TMQ. The following table sets forth the high and low
    sale prices since March 19, 1996, the date the Company's common stock
    began trading on the exchange, as reported in the consolidated
    transaction reporting system.

                                         1997                     1996
                                   ----------------        -----------------
    Quarter                          High       Low           High       Low
    ------------------------------------------------------------------------
    First                         $16 3/8   $12 1/2        $20       $16 1/4
    Second                         16 5/8    11 1/2         17 7/8    13 3/4
    Third                          19 1/8    15 1/8         15 3/4    13 1/4
    Fourth                         20 1/2    16 1/8         15 3/8    12 1/2

        As of January 30, 1998, the Company had 241 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 30, 1998, was $14 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, (781) 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. Distribution of
    printed quarterly reports is limited to the second quarter only. All
    material will be available from Thermo Electron's Internet site
    (http://www.thermo.com/subsid/tmq1.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, the Company's earnings, capital requirements,
    and financial condition.

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<PAGE>
    ThermoQuest Corporation                         1997 Financial Statements


    Form 10-K Report
        A copy of the Annual Report on Form 10-K for the fiscal year ended
    January 3, 1998, 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 1,
    1998, at 10:45 a.m., at the Hyatt Regency Hotel, Scottsdale, Arizona.

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