Financial Highlights

Varian Medical Systems (VMS) is the world's leading manufacturer of integrated radiotherapy systems for treating cancer and a leading supplier of X-ray tubes for imaging in medical, scientific, and industrial applications. The company employs approximately 2,300 people at manufacturing sites in North America and Europe and in 40 sales and support offices worldwide.

Fiscal Years (Dollars in millions except per share amounts) 2000 1999 1998 Sales $ 689.7 $ 590.4 $ 541.5 Net Earnings from Continuing Operations-as Reported $ 53.0 $ 8.2 $ 26.1 Net Earnings from Continuing Operations-Pro Forma n/a $ 39.1 $ 36.0 Net Earnings per Share from Continuing Operations- Diluted, as Reported $ 1.64 $ 0.27 $ 0.86 Net Earnings per Share from Continuing Operations- Diluted, Pro Forma* n/a $ 1.28 $ 1.18 Shares Outstanding at Year End (in thousands) 31,769 30,563 29,743 Net Orders $ 762.1 $ 638.3 $ 546.5 Backlog $ 472.6 $ 400.2 $ 352.4 *Pro forma net earnings assume a 35 percent tax rate and exclude incremental expenses and gains on sales of assets related to the spin-offs of the Company's instruments and semiconductor equipment businesses on April 2, 1999.

Risk Factors Relating to Forward-Looking Information
Except for historical information, this summary annual report contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 which provides a "safe harbor" for these types of statements. For this purpose, statements concerning industry outlook, including market acceptance of or transition to new products or technology such as IMRT, brachytherapy, software, treatment techniques, and advanced X-ray products; growth drivers; Varian Medical Systems, Inc.'s (the "Company" or "VMS") orders, sales, backlog or earnings growth; future financial results and any statements using the terms "anticipates," "believes," "expects," "appears," "should," "will," "point to" or similar statements are forward-looking statements that involve risks and uncertainties that could cause the Company's actual results to differ materially from those projected or management's current expectations. Such risks and uncertainties include, without limitation, market acceptance, demand for and possible obsolescence of VMS's products; the Company's ability to successfully develop and commercialize new products; the impact on VMS's sales and margins of competitive products and pricing; the effect general economic conditions and foreign currency exchange rates; the Company's ability to increase operating margins on higher sales while controlling costs; the Company's ability to maintain manufacturing capacity to meet demand, including the potential risk of earthquake damage to its existing facilities; the effect of environmental claims and clean-up expenses on VMS's costs; the Company's ability to protect its intellectual property and the related competitive advantages of VMS's products; the Company's reliance on sole source or a limited number of suppliers; the impact of managed care initiatives or other healthcare reforms in the U.S. on capital expenditures and/or limitations on third party reimbursements and the resulting pressure on medical equipment pricing and user demand for VMS's products; the Company's ability to meet U.S. FDA and other domestic or foreign regulatory requirements or product clearances which might limit the products VMS can sell or subject it to fines or other regulatory actions; the use of distributors for a portion of the Company's sales, the loss of which could reduce sales and harm the Company's financial results, as could continued consolidation in the X-ray tube market; the possibility that material product liability claims could harm future sales, or require payment of uninsured claims; the availability and adequacy of VMS's insurance to cover future material liabilities, including any material product liability or product recall of General Electric manufactured products for which the Company provides customer service and has assumed such liabilities; the ability of the Company to attract and retain key employees in a highly competitive employment market; the effect fluctuations in VMS's operating results may have on the price of its common stock; the possibility that certain provisions of VMS's Certificate of Incorporation and its stockholder rights plan might discourage a takeover and therefore limit the price of the Company's common stock; the Company's ability to meet time requirements for and implement conversion to the Euro currency in its business dealings and operations in certain European countries; the effect of price transparency in countries of the European Community following implementation of Euro currency regulations; the effect on profit margins of product recycling and related regulatory requirements in European and other countries; the Company's potential responsibility for additional tax obligations and other liabilities arising out of the spin-off of segments of its former businesses; the effect on VMS's revenue recognition of changes in accounting standards; and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company assumes and undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.