<PAGE>   1
 
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 1999
                                                     REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
 
                             MKS INSTRUMENTS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                    <C>                                    <C>
            MASSACHUSETTS                               3823                                04-2277512
   (STATE OR OTHER JURISDICTION OF          (PRIMARY STANDARD INDUSTRIAL                 (I.R.S. EMPLOYER
    INCORPORATION OR ORGANIZATION)          CLASSIFICATION CODE NUMBER)               IDENTIFICATION NUMBER)
</TABLE>
 
                               SIX SHATTUCK ROAD
                               ANDOVER, MA 01810
                                 (978) 975-2350
              (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
       INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------
 
                                JOHN R. BERTUCCI
                CHAIRMAN, CHIEF EXECUTIVE OFFICER, AND PRESIDENT
                             MKS INSTRUMENTS, INC.
                               SIX SHATTUCK ROAD
                               ANDOVER, MA 01810
                                 (978) 975-2350
               (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
               NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
                            ------------------------
 
                                   COPIES TO:
 
<TABLE>
<S>                                                 <C>
               MARK G. BORDEN, ESQ.                                DAVID C. CHAPIN, ESQ.
                 HALE AND DORR LLP                                     ROPES & GRAY
                  60 STATE STREET                                 ONE INTERNATIONAL PLACE
            BOSTON, MASSACHUSETTS 02109                         BOSTON, MASSACHUSETTS 02110
                  (617) 526-6000                                      (617) 951-7000
</TABLE>
 
                            ------------------------
 
    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date hereof.
 
    If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [ ]
 
    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]
 
    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
 
    If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
 
    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box:  [ ]
 
                        CALCULATION OF REGISTRATION FEE
 
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
            TITLE OF EACH CLASS OF                                                 PROPOSED
               SECURITIES TO BE                        AMOUNT TO BE           MAXIMUM AGGREGATE             AMOUNT OF
                  REGISTERED                          REGISTERED(1)             OFFERING PRICE         REGISTRATION FEE(2)
-----------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                       <C>                       <C>
Common Stock, no par value per share...........           shares                 $100,000,000                $27,800
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
 
(1) Includes          shares which the underwriters have the option to purchase
    from the company to cover over-allotments, if any. See "Underwriting."
 
(2) Estimated solely for purposes of calculating the registration fee in
    accordance with Rule 457(o) under the Securities Act of 1933, as amended.
 
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2
 
The information contained in this prospectus is not complete and may be changed.
The underwriters may not confirm sales of these securities until the
registration statement filed with the Securities and Exchange Commission becomes
effective. This prospectus is not an offer to sell these securities, and is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
 
                 SUBJECT TO COMPLETION, DATED JANUARY 28, 1999
 
                                             SHARES
 
                                   [MKS LOGO]
 
                                  COMMON STOCK
 
     MKS Instruments, Inc. ("MKS") is offering            shares of its common
stock. This is MKS's initial public offering and no public market currently
exists for its shares. We have applied for approval for quotation on the Nasdaq
National Market under the symbol "MKSI" for the shares we are offering. We
estimate that the initial public offering price will be between
$                and $                .
 
     After the close of this initial public offering, John R. Bertucci,
Chairman, Chief Executive Officer and President of MKS, and members of his
family will own approximately            % of the outstanding common stock.
 
                            ------------------------
 
     INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
 
                            ------------------------
 
<TABLE>
<CAPTION>
                                                         Per Share       Total
                                                         ---------       -----
<S>                                                      <C>          <C>
Public Offering Price                                     $           $
Discounts and Commissions to Underwriters                 $           $
Proceeds to MKS                                           $           $
</TABLE>
 
     NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
 
     MKS has granted the underwriters a 30-day option to purchase up to an
additional            shares of common stock to cover over-allotments. If the
underwriters exercise this right in full, the Public Offering Price will total
$           , the Discounts and Commissions to Underwriters will total
$           and the Proceeds to MKS will total $           .
 
                            ------------------------
 
NATIONSBANC MONTGOMERY SECURITIES LLC
                          DONALDSON, LUFKIN & JENRETTE
                                                                 LEHMAN BROTHERS
 
               The date of this prospectus is             , 1999
<PAGE>   3
 
                                   [PICTURES]
 
     MKS, MKS Instruments, Baratron and ORION are trademarks of MKS. This
prospectus contains trademarks, service marks and trade names of companies and
organizations other than MKS.
<PAGE>   4
                              MKS INSTRUMENTS, INC.
                                PROSPECTUS COVER
                                JANUARY 28, 1999


INSIDE FRONT COVER (PG. 2):

This page is produced in four-color process. Amidst a dark background, the MKS
logo appears at the top right of the page, and to the top left is the phrase "A
wide range of products made using MKS Process Control Instruments." Two
paragraphs describing the role MKS plays in complex advanced materials
manufacturing processes, such as semiconductor, also appear on this page, and
are as follows:

(first paragraph) "MKS Surrounds the Process. In semiconductor and other
industries involving advanced materials processing, products such as
semiconductor devices, CD ROMS, flat panel displays, and fiber optic cables are
the result of complex manufacturing processes. These processes build up very
thin layers of materials, step by step, through the interaction of specific
gases and materials inside tightly controlled process chambers. Maintaining
control of these complex steps throughout the entire manufacturing process is
critical to performance and yield. (second paragraph) MKS Process Control
Instruments are integrated into almost every step of gas-related
processes--managing the flow rates of gases entering and exiting the process
chamber, controlling the gas composition and pressure inside the chamber,
analyzing and monitoring the composition of the gases, and isolating the gases
from the outside environment."

In the center of the page is a photo montage, displaying images of semiconductor
devices, flat panel displays, fiber optic cables, solar panels, magnetic and
optical storage media and gas lasers. Each of these images has a text label
adjacent to it.


INSIDE SPREAD (PGS. 3 AND 4):

These pages are produced in four-color process. The main focus of the spread is
the illustration of a typical process chamber, with numerous MKS products
surrounding the chamber. At the top of the illustration, centered across the two
pages, is the title "MKS Instruments...Surrounding the Process." Each product is
described in a brief paragraph, and the paragraphs appear on both sides of the
illustration--left and right columns. The paragraphs are as follows:

DIRECT LIQUID INJECTION SUBSYSTEMS
For use in the delivery of a wide variety of new materials to the process
chamber that cannot be delivered using conventional thermal-based mass flow
controllers.

AUTOMATIC PRESSURE CONTROLLERS WITH INTEGRATED BARATRON(R) PRESSURE TRANSDUCERS
A compact, integrated measurement and control package for use in controlling
upstream or downstream process chamber pressure.

ULTRACLEAN MASS FLOW CONTROLLERS
For the precise measurement and control of mass flow rates of inert or corrosive
gases and vapors into the process chamber.

ULTRACLEAN MINI-BARATRON(R) PRESSURE TRANSDUCERS
For use in gas cabinets to feed ultra-pure gases to critical process systems.

PRESSURE CONTROL VALVES
To precisely control the flow of gases to a process chamber in a wide range of
flow rates.

IN SITU FLOW VERIFIERS
For fast verification of mass flow controller accuracy and repeatability during
a process.

DIGITAL COLD CATHODE IONIZATION AND CONVECTION VACUUM GAUGES 
A variety of indirect pressure gauges for measuring very low chamber pressures
and conveying information digitally to host computers.

ORION(R) PROCESS MONITORS AND RESIDUAL GAS ANALYZERS
For the analysis of the composition of background and process gases inside a
process chamber.

PRESSURE SWITCHES
Provide protection of vacuum equipment and processes by signaling when
atmospheric pressure has been reached.

BARATRON(R) PRESSURE MEASURING INSTRUMENTS
For the accurate measurement and control of a wide range of process pressures.

IN SITU DIAGNOSTICS ACCESS VALVE
Allows for accurate calibration and diagnostics of vacuum gauges and pressure
transducers while directly mounted on the process chamber.

EXHAUST THROTTLE VALVES AND AUTOMATIC PRESSURE CONTROLLERS
For isolation and downstream control of process chamber pressures, and pressure
control within the exhaust systems.

HIGH VACUUM VALVES
To isolate the process chamber from both the pumps and from atmosphere.

HEATED PUMPING LINES
For the reduction of contaminants in the vacuum pump and pump exhaust stream.

VAPOR SUBLIMATION TRAP
To collect by-products and particulates that could otherwise contaminate devices
in the process chambers and damage vacuum pumps.

Prices of products shown above range from $400 to $80,000.

The above graphic depicts a typical process chamber and surrounding equipment
used in semiconductor manufacturing.
<PAGE>   5
 
     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS, "MKS," "WE,"
"US" AND "OUR" REFER TO MKS INSTRUMENTS, INC. (UNLESS THE CONTEXT OTHERWISE
REQUIRES).
 
     UNTIL             , 1999, ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
<S>                                                           <C>
Prospectus Summary..........................................    3
Risk Factors................................................    6
S Corporation and Termination of S Corporation Status.......   13
Use of Proceeds.............................................   14
Dividend Policy.............................................   14
Capitalization..............................................   15
Dilution....................................................   16
Selected Consolidated Financial Data........................   17
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................   19
Business....................................................   27
Management..................................................   45
Certain Transactions........................................   51
Principal Stockholders......................................   52
Description of Capital Stock................................   53
Shares Eligible for Future Sale.............................   55
Underwriting................................................   56
Legal Matters...............................................   57
Experts.....................................................   57
Additional Information......................................   58
Index to Consolidated Financial Statements..................  F-1
</TABLE>
 
                                        2
<PAGE>   6
 
                               PROSPECTUS SUMMARY
 
     This summary highlights information contained elsewhere in this prospectus.
You should read this entire prospectus carefully. Unless otherwise indicated,
all information contained in this prospectus assumes that the underwriters will
not exercise their over-allotment option. This prospectus contains forward-
looking statements, which involve risks and uncertainties. MKS's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth under "Risk
Factors" and elsewhere in this prospectus. All information contained in this
prospectus reflects: (i) a 3-for-2 stock split of the common stock; and (ii)
amendments to MKS's Articles of Organization to be effected prior to the
effective date of this prospectus to: (a) increase the total number of
authorized shares of common stock to 30,000,000; (b) authorize 2,000,000 shares
of preferred stock; and (c) convert the shares of Class A common stock and Class
B common stock into a single class of common stock.
 
                             MKS INSTRUMENTS, INC.
 
     We are a leading worldwide developer, manufacturer and supplier of
instruments and components used to measure, control and analyze gases in
semiconductor manufacturing and similar industrial manufacturing processes. We
offer a comprehensive line of products which are used to manufacture, among
other things:
 
- semiconductors
- flat panel displays
- magnetic and optical storage devices and media, including:
  -- compact disks
  -- hard disk storage devices
  -- magnetic devices for reading disk data
  -- digital video disks
  -- optical storage disks (laser readable disks)
- solar cells which convert light into
  electrical current
- fiber optic cables for telecommunications
- optical coatings (such as eyeglass coatings)
- coatings for architectural glass
- hard coatings to minimize wear on cutting tools
- diamond thin films
 
Our products include:
 
- instruments used to measure, control and analyze:
  -- gas pressure
  -- gas flow
  -- gas composition
- vacuum technology products:
  -- vacuum gauges
  -- vacuum valves and components
 
     The ability of semiconductor device manufacturers to offer integrated
circuits with smaller geometries and greater functionality at higher speeds
requires continuous improvements in semiconductor process equipment and process
controls. Manufacturing a semiconductor, or a similar industrial product,
requires hundreds of process steps, many of which involve the precise
measurement and control of gases. In the fabrication of semiconductors, for
example, these process steps take place within a process chamber. Specific gas
mixtures at precisely controlled pressures are used in the process chamber to
control the required process atmosphere and are used as a source of material to
manufacture a semiconductor.
 
     Given the complexity of the semiconductor manufacturing process, the value
of the products manufactured and the significant cost of semiconductor
manufacturing equipment and facilities, significant importance is placed upon:
 
     - the amount of time that semiconductor manufacturing equipment is
       available for processing (or uptime)
 
     - the ratio of acceptable output to total output (or yield)
 
     - the aggregate output that can be processed per hour (or throughput)
 
                                        3
<PAGE>   7
 
The design and performance of instruments that control the pressure or flow of
gases are becoming more critical to the semiconductor manufacturing process
since they directly affect uptime, yield and throughput. In addition, the
increasing sophistication of semiconductor devices requires an increase in the
number of components and subsystems used in the design of semiconductor
manufacturing process tools. To address manufacturing complexity, improve
quality and reliability and ensure long-term service and support, semiconductor
device manufacturers and semiconductor capital equipment manufacturers are
increasingly seeking to reduce their supplier base and are, therefore, choosing
to work with suppliers that provide a broad range of integrated, technologically
advanced products backed by worldwide service and support.
 
     We believe that we offer the widest range of pressure and vacuum
measurement and control products serving the semiconductor industry. Our
products measure pressures from as low as one trillionth of atmospheric pressure
to as high as two hundred times atmospheric pressure. Our objective is to be the
leading worldwide supplier of instruments and components used to measure,
control and analyze gases in semiconductor and other advanced thin-film
processing applications and to help semiconductor device manufacturers achieve
improvements in their return on investment capital. Our strategy to accomplish
this objective includes:
 
     - extending our technology leadership
 
     - continuing to broaden our comprehensive product offering
 
     - building upon our close working relationships with customers
 
     - expanding the application of our existing technologies to related markets
 
     - leveraging our global infrastructure and world class manufacturing
       capabilities
 
     For over 25 years, we have focused on satisfying the needs of semiconductor
capital equipment manufacturers and semiconductor device manufacturers. As a
result, we have established long-term relationships with many of our customers.
We have over 4,000 active customers worldwide (all of which purchased products
during 1998) including:
 
     - semiconductor capital equipment manufacturers
 
     - semiconductor device manufacturers
 
     - industrial manufacturing companies
 
     - university, government and industrial research laboratories
 
Our customers include Applied Materials, Inc., Lam Research Corporation, Tokyo
Electron, Ltd., Air Products and Chemicals, Inc. and Motorola Inc. We sell our
products primarily through our sales force which consists of 118 employees in 22
offices in France, Germany, Japan, Korea, The Netherlands, Singapore, Taiwan,
the United Kingdom and the United States.
 
     MKS Instruments, Inc. is a Massachusetts corporation organized in June
1961. Our principal executive offices are located at Six Shattuck Road, Andover,
MA 01810, and our telephone number is (978) 975-2350.
 
                                        4
<PAGE>   8
 
                                  THE OFFERING
 
Common stock offered by MKS........         shares
 
Common stock to be outstanding
after this offering................         shares
 
Use of proceeds....................  For distributions to current stockholders
                                     and general corporate purposes. See "Use of
                                     Proceeds" and "S Corporation and
                                     Termination of S Corporation Status."
 
Proposed Nasdaq National Market
symbol.............................  MKSI
 
     The common stock to be outstanding after this offering is based on shares
outstanding as of December 31, 1998 and excludes 2,132,575 shares of common
stock issuable upon the exercise of options outstanding as of such date at a
weighted average exercise price of $5.19 per share. See "Capitalization" and
Note 8 of Notes to Consolidated Financial Statements.
 
                      SUMMARY CONSOLIDATED FINANCIAL DATA
 
     MKS has been treated as an S corporation for federal income tax purposes
since July 1, 1987. As an S corporation, MKS has not been subject to federal,
and certain state, income taxes. The pro forma net income reflects the provision
for income taxes that would have been recorded had MKS been a C corporation,
assuming an effective tax rate of 38.0%. As a result of terminating its S
corporation status upon the closing of this offering, MKS will record a one-time
non-cash credit to historical earnings for additional deferred taxes. If this
credit to earnings had occurred at December 31, 1998, the amount would have been
approximately $3.9 million. This amount is expected to change through the
closing of this offering and is excluded from pro forma net income. See Notes 2
and 9 of Notes to Consolidated Financial Statements.
 
     Pro forma balance sheet data set forth below reflects the liability for the
distribution of an estimated $35.9 million, calculated as of December 31, 1998,
of cumulative undistributed S corporation taxable income for which stockholders
of record prior to the closing of this offering have been or will be taxed. The
pro forma net income per share and weighted average common shares outstanding
which are set forth below reflect the effect of an assumed issuance of
sufficient shares to fund this distribution as of January 1, 1998. The
distribution will be made out of the proceeds of this offering. The actual
amount to be distributed is expected to increase based upon taxable earnings for
the period January 1, 1999 through the closing of this offering, subject to
certain limitations. See "S Corporation and Termination of S Corporation
Status." The pro forma as adjusted balance sheet data reflects the sale of
          shares of common stock at an assumed initial public offering price of
$     per share, after deducting the estimated underwriting discount and
offering expenses payable by MKS.
 
<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                              --------------------------------------------------------
                                                                1994        1995        1996        1997        1998
                                                              --------    --------    --------    --------    --------
                                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                           <C>         <C>         <C>         <C>         <C>
STATEMENT OF INCOME DATA:
Net sales...................................................  $106,829    $157,164    $170,862    $188,080    $139,763
Gross profit................................................    47,016      69,461      68,854      80,474      55,979
Income from operations......................................    12,087      24,106      16,068      23,963       9,135
Net income..................................................  $ 10,003    $ 21,658    $ 12,503    $ 20,290    $  7,186
PRO FORMA STATEMENT OF INCOME DATA(1):
Pro forma net income........................................                                                  $  5,044
Pro forma net income per share:
  Basic.....................................................                                                  $   0.25
  Diluted...................................................                                                  $   0.24
Pro forma weighted average common shares outstanding:
  Basic.....................................................                                                    20,166
  Diluted...................................................                                                    20,651
</TABLE>
 
<TABLE>
<CAPTION>
                                                                       DECEMBER 31, 1998
                                                              ------------------------------------
                                                                                        PRO FORMA
                                                               ACTUAL     PRO FORMA    AS ADJUSTED
                                                              --------    ---------    -----------
                                                                         (IN THOUSANDS)
<S>                                                           <C>         <C>          <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................  $ 11,188    $ 11,188
Working capital (deficit)...................................    31,493      (4,433)
Total assets................................................    96,232      96,232
Short-term obligations......................................    12,819      12,819
Long-term obligations, less current portion.................    13,786      13,786
Stockholders' equity........................................    54,826      18,900
</TABLE>
 
---------------
(1) Data is computed on the same basis as Note 2 of Notes to Consolidated
    Financial Statements.
 
                                        5
<PAGE>   9
 
                                  RISK FACTORS
 
     You should consider carefully the risks described below before you decide
to buy our common stock. The risks and uncertainties described below are not the
only ones facing us. Additional risks and uncertainties that we do not presently
know about or that we currently believe are immaterial may also adversely impact
our business operations. If any of the following risks actually occur, our
business, financial condition or results of operations would likely suffer. In
such case, the trading price of our common stock could fall, and you may lose
all or part of the money you paid to buy our common stock.
 
     This prospectus contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements are usually accompanied by words
such as "believes," "anticipates," "plans," "expects" and similar expressions.
Our actual results may differ materially from the results discussed in the
forward-looking statements because of factors such as the Risk Factors discussed
below.
 
OUR PERFORMANCE IS AFFECTED BY THE CYCLICALITY OF THE SEMICONDUCTOR INDUSTRY AND
CAN BE ADVERSELY AFFECTED BY THE INSTABILITY OF ASIAN ECONOMIES
 
     We estimate that approximately 60% of our sales during 1997 and 1998 were
to semiconductor capital equipment manufacturers and semiconductor device
manufacturers, and we expect that sales to such customers will continue to
account for a substantial majority of our sales. Our business depends
substantially upon the capital expenditures of semiconductor device
manufacturers, which in turn depend upon the demand for semiconductors and other
products utilizing semiconductors. Historically, the semiconductor market has
been highly cyclical and has experienced periods of overcapacity, resulting in
significantly reduced demand for capital equipment. For example, in 1996 and
1998 the semiconductor industry experienced a significant decline, which caused
a number of our customers to reduce their orders. In addition, the financial
markets in Asia, one of our principal international markets, have experienced
significant turbulence. Our sales include both direct sales to the semiconductor
industry in Asia, as well as to semiconductor capital equipment manufacturers
that derive a significant portion of their revenue from sales to the Asian
semiconductor industry. Turbulence in the Asian markets began to adversely
affect the semiconductor device manufacturers and semiconductor capital
equipment manufacturers in the fourth quarter of 1997 and continued to adversely
affect them in 1998. We expect the turbulence in the Asian markets will continue
to adversely affect sales of semiconductor capital equipment manufacturers for
at least the first and second quarters of 1999. As a result, we currently expect
that our net sales and net income for each of the first and second quarters of
1999 will be less than net sales and net income for the first and second
quarters of 1998.
 
     Our future sales also depend on the retrofitting, expansion and upgrade of
existing semiconductor fabrication facilities and the construction of new, large
semiconductor fabrication facilities. We cannot be certain that such retrofit,
expansion, upgrade and construction will occur. We also cannot be certain that
the current semiconductor downturn experienced in 1998 will not continue or that
the level of our customer orders will not decline further. The current reduction
in our orders, as well as any further decline in the level of orders as a result
of the current or any future downturn or slowdown in the semiconductor industry,
together with our inability to fully adjust expenses, would have a material
adverse effect on our business, financial condition and results of operations.
 
OUR QUARTERLY RESULTS ARE LIKELY TO FLUCTUATE
 
     We have experienced and expect to continue to experience significant
fluctuations in our quarterly operating results. A substantial portion of our
shipments occur shortly after an order is received. Due to the short time
between receipt of orders and shipments, we operate with a low level of backlog.
Accordingly, backlog at the beginning of each quarter will not be sufficient to
meet our revenue expectations for that particular quarter. As a consequence of
the just-in-time nature of shipments and the low level of backlog, a decrease in
demand for our products from one or more customers could occur with limited
advance notice and could have a material adverse effect on our results of
operations in any particular period.
 
                                        6
<PAGE>   10
 
     Our business, financial condition and results of operations are also
affected by:
 
- specific economic conditions in industries in which our customers operate
 
- the timing of the receipt of orders from major customers
 
- customer cancellations or shipment delays
 
- price competition
 
- disruption in sources of supply
 
- seasonal variations of capital spending by customers
 
- production capacity constraints
 
- specific features requested by customers
 
- exchange rate fluctuations
 
- our or our competitors' introduction or announcement of new products
 
- other factors, many of which are beyond our control
 
     Our results of operations for a particular period would also be adversely
affected if an anticipated significant order was not received in time to permit
shipment during that period, as a portion of our operating expenses are fixed in
nature and planned expenditures are based in part on anticipated orders. In
addition, the need for continued expenditures for research and development would
make it difficult to reduce expenses in a particular period if our sales goals
for that period were not met. The inability to adjust spending quickly enough to
compensate for any revenue shortfall would magnify the adverse impact of such
revenue shortfall on our results of operations. For example, we were in the
process of increasing production capacity when the semiconductor capital
equipment market began to experience a significant downturn in 1996. This
downturn had a material adverse effect on our operating results in the second
half of 1996 and the first half of 1997. After an increase in business in the
latter half of 1997, the market experienced another downturn in 1998, which had
a material adverse effect on our 1998 operating results. As a result of the
factors discussed above, it is likely that we will in the future experience
quarterly or annual fluctuations and that, in one or more future quarters, our
operating results will fall below the expectations of public market analysts or
investors. In any such event, the price of our common stock could decline
significantly.
 
WE HAVE A HIGH DEGREE OF CUSTOMER CONCENTRATION
 
     While we sold products to more than 4,000 customers in 1998, our five
largest customers in 1996, 1997 and 1998 accounted for approximately 26%, 32%
and 24%, respectively, of our net sales. During 1998, one customer, Applied
Materials, Inc., accounted for approximately 16% of our net sales. While we have
entered into a purchase contract with Applied Materials, Inc. that expires in
2000 (unless extended by mutual agreement), none of our significant customers,
including Applied Materials, Inc., has entered into an agreement requiring it to
purchase any minimum quantity of our products. The demand for our products from
our semiconductor capital equipment customers depends in part on orders received
by them from their semiconductor device manufacturer customers.
 
     We sell products primarily to semiconductor capital equipment manufacturers
and, to a lesser extent, semiconductor device manufacturers. The number of our
potential customers in our primary market is limited. The loss of a major
customer or any reduction in orders by such customers, including reductions due
to market or competitive conditions, would likely have a material adverse effect
on our business, financial condition and results of operations. Attempts to
lessen the adverse effect of any such loss or reduction through the rapid
addition of new customers could be difficult because prospective customers
typically require lengthy qualification periods prior to placing volume orders
with a new supplier. Our future success will continue to depend upon:
 
     - our ability to maintain relationships with existing key customers
 
     - our ability to attract new customers
 
     - the success of our customers in creating demand for their capital
       equipment products which incorporate our products
 
                                        7
<PAGE>   11
 
OUR MARKETS ARE HIGHLY COMPETITIVE
 
     The markets for our products are highly competitive. Although no one
competitor competes with us across all product lines, our competitors could
consolidate and/or form alliances to offer a broader array of products to
compete against us. We currently encounter substantial competition in each of
our product lines from a number of competitors, including:
 
     - competitors with greater financial and other resources
 
     - small competitors with well-established specific product niches
 
     - customers who develop in-house products that serve the functions of and
       replace our products
 
     In some cases, particularly with respect to mass flow controllers,
semiconductor device manufacturers may direct semiconductor capital equipment
manufacturers to use a specified supplier's product in their equipment.
Accordingly, for such products, our success will depend in part on our ability
to have semiconductor device manufacturers specify that our products be used at
their semiconductor fabrication facilities. In addition, we may encounter
difficulties in changing established relationships of competitors with a large
installed base of products at such semiconductor fabrication facilities. We
cannot be sure that our competitors will not develop products that offer price
or performance features superior to those of our products. To the extent that
our products do not achieve performance or other advantages over products
offered by our competitors, we are likely to experience increased price
competition or loss of market share with respect to such products. We believe
that the worldwide competitive pressures in our markets could result in a
decline in the prices of our products in the future. Declines in the selling
prices of our products, if not offset by reductions in the cost of producing
such products and increases in unit volume sales or by sales of products with
higher gross margins, could have a material adverse effect on our business,
financial condition and results of operations.
 
OUR MARKETS ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGES
 
     Our success depends in part upon our ability to develop new products and
product enhancements that keep pace with technological developments, achieve
market acceptance and respond to evolving customer requirements. New product
introductions may contribute to fluctuations in quarterly operating results, as
customers may defer ordering products from our existing product lines or may
purchase products from competitors. Any new product reliability or quality issue
could result in reduced orders, higher manufacturing costs and additional
service and warranty expense. Responding to rapid technological change and the
need to develop and introduce new products to meet customers' needs and evolving
industry standards will require us to make substantial investments in research
and product development. Any failure by us to anticipate or respond adequately
to technological developments and customer requirements or any significant
delays in product development or introduction could result in a loss of
competitiveness and could have a material adverse effect on our business,
financial condition and results of operations. We cannot be certain that we will
successfully develop and manufacture new products or that any product
enhancements or new products developed by us will gain market acceptance.
 
     The semiconductor manufacturing industry is currently undergoing an
evolution from the manufacturing of 200mm wafers to 300mm wafers and from 0.25
micron to 0.18 micron line-widths. Semiconductor manufacturers are beginning to
establish pilot production lines and specifications for the use of 300mm wafers
and the production of less than 0.18 micron devices. We have developed, and are
developing, new products and product enhancements to address the expected
increasing demand for equipment capable of handling these new wafer sizes and
line-widths. We have supplied pre-production equipment to be incorporated into
semiconductor capital equipment manufacturers' 300mm pre-production
semiconductor wafer process equipment, which is expected to be included in pilot
production lines of semiconductor device manufacturers. We have also developed
equipment that is being used by research laboratories for devices using less
than 0.18 micron line-widths. However, we cannot be certain that our new
products and enhancements will be designed into production lines by our
customers. Our failure to develop products and
 
                                        8
<PAGE>   12
 
enhancements for general acceptance by our customers in a timely manner would
have a material adverse effect on our business, financial condition and results
of operations.
 
WE HAVE A NUMBER OF RISKS ASSOCIATED WITH THE YEAR 2000
 
     Many currently installed computer systems include software and hardware
products that are unable to distinguish 21st century dates from those in the
20th century. As a result, computer software and/or hardware used by many
companies and governmental agencies may need to be upgraded to comply with Year
2000 requirements or risk system failure or miscalculations that result in
disruptions to normal business activities. We have implemented a multi-phase
Year 2000 project consisting of assessment and remediation, and testing
following remediation. We have examined our internal computer software and
hardware, our facilities and manufacturing equipment, third-party compliance and
the compliance of our products. We have identified the following risks you
should be aware of:
 
     - we cannot be sure that any of our assessments, remediation programs or
       testing will identify and cure all of our Year 2000 compliance issues
 
     - the entities on whom we rely for certain goods and services integral to
       our business may be unsuccessful in addressing all of their software and
       systems problems in order to operate without disruption in the year 2000
       and beyond
 
     - our customers or potential customers may be affected by Year 2000 issues
       that may, in part:
 
        -- cause a reduction, delay or cancelation of customer orders
 
        -- cause a delay in payments for products shipped
 
        -- cause customers to expend significant resources on Year 2000
           compliance matters, rather than investing in our products
 
     - we have not developed a contingency plan related to the failure of our or
       a third-party's Year 2000 remediation efforts and may not be prepared for
       such an event
 
     Further, while we have made efforts to notify our customers who have
purchased potential non-compliant products, we cannot be sure that customers who
purchased such products will not assert claims against us alleging that such
products should have been Year 2000 compliant at the time of purchase, which
could result in costly litigation and divert management's attention.
 
     The occurrence of any of these risks or uncertainties could result in a
material adverse effect on our business, financial condition and results of
operations.
 
WE MAY HAVE DIFFICULTY EXPANDING INTO NEW MARKETS
 
     We plan to build upon our experience in manufacturing and selling gas
measurement, control and analysis products used by the semiconductor industry by
designing and selling such products for applications in other industries which
use production processes similar to those used in the semiconductor industry.
Our future success will depend in part on our ability to:
 
     - identify new applications for our products
 
     - adapt our products for such applications
 
     - market and sell such products to customers
 
     We have limited experience selling our products in certain markets outside
the semiconductor industry. We cannot be certain that we will be successful in
the expansion of our business outside the semiconductor industry. Any failure by
us to penetrate additional markets would limit our ability to reduce our
vulnerability to downturns in the semiconductor industry and could have a
material adverse effect on our business, financial condition and results of
operations.
 
                                        9
<PAGE>   13
 
WE MAY HAVE DIFFICULTY EXPANDING OUR MANUFACTURING CAPACITY
 
     During 1999, we plan to add manufacturing capacity to our Austin, Texas
operations and further equip our cleanroom facilities in Andover and Methuen,
Massachusetts. Our ability to increase sales of certain products depends in part
upon our ability to expand our manufacturing capacity for such products in a
timely manner. If we are unable to expand our manufacturing capacity on a timely
basis or to manage such expansion effectively, our rate of growth and market
share could be reduced and our business, financial condition and results of
operations could be adversely affected. Because the semiconductor industry is
subject to rapid demand shifts which are difficult to foresee, we may not be
able to increase capacity quickly enough to respond to a rapid increase in
demand in the semiconductor industry. Additionally, any capacity expansion will
increase our fixed operating expenses and if sales levels do not increase to
offset the additional expense levels associated with any such expansion, our
business, financial condition and results of operations would likely be
materially adversely affected.
 
WE FACE RISKS FROM INTERNATIONAL OPERATIONS AND SALES
 
     We have manufacturing, sales and service facilities in Germany, Japan,
Korea and the United Kingdom and sales and service facilities in France, The
Netherlands, Singapore and Taiwan. In addition, we have established, through
agents and representatives, sales and service facilities in Canada, China,
India, Israel, and Italy.
 
     International sales (which include sales by our foreign subsidiaries, but
exclude direct export sales which were less than 10% of our total net sales)
accounted for approximately 30.1%, 27.3% and 32.3% of net sales in 1996, 1997
and 1998, respectively. We anticipate that international sales will continue to
account for a significant portion of our net sales. In addition, certain of our
key domestic customers derive a significant portion of their revenues from sales
in international markets. As a result, our operations are subject to risks
inherent in international business activities, including, in particular:
 
- economic conditions in each country
 
- the overlap of different tax structures
 
- management of a large organization spread over various countries
 
- unexpected changes in regulatory requirements
 
- compliance with a variety of foreign laws and regulations
 
- longer accounts receivables payment cycles in certain countries
 
- international sales subject to certain governmental restrictions and
  regulations including the Export Administration Act
 
- import and export licensing requirements
 
- trade restrictions
 
- changes in tariff and freight rates
 
- currency fluctuations
 
     A number of these risks also apply to sales to semiconductor capital
equipment manufacturers based in the United States that incorporate our products
into systems delivered outside the United States. Additionally, we base the
prices for products sold to and by our foreign subsidiaries on the currency of
the country in which these products are sold. Therefore, our operating results
attributable to these sales are exposed to fluctuations in the value of the
United States dollar versus other currencies. While we enter into forward
exchange contracts and local currency purchased options to reduce currency
exposure arising from these sales and associated intercompany purchases of
inventory, we cannot be certain that exchange rate fluctuations will not have an
adverse effect on our business, financial condition and results of operations,
or that we will not realize losses with respect to our hedging activities.
 
WE NEED TO RETAIN AND ATTRACT KEY PERSONNEL
 
     Our success depends to a large extent upon the efforts and abilities of a
number of key employees and officers. The loss of key employees or officers
could have a material adverse effect on our business, financial condition and
results of operations. We believe that our future success will depend in part on
our
 
                                       10
<PAGE>   14
 
ability to attract and retain highly skilled technical, financial, managerial
and marketing personnel. Competition for such personnel is intense, and we
cannot be certain that we will be successful in attracting and retaining such
personnel. We are the beneficiary of key-man life insurance policies on John R.
Bertucci, Chairman, Chief Executive Officer and President, in the amount of $7.2
million.
 
OUR SUCCESS DEPENDS ON PROTECTING OUR INTELLECTUAL PROPERTY
 
     Although we seek to protect our intellectual property rights through
patents, copyrights, trade secrets and other measures, we cannot be certain
that:
 
     - we will be able to protect our technology adequately
 
     - competitors will not be able to develop similar technology independently
 
     - any of our pending patent applications will be issued
 
     - intellectual property laws will protect our intellectual property rights
 
     Litigation may be necessary in order to enforce our patents, copyrights or
other intellectual property rights, to protect our trade secrets, to determine
the validity and scope of the proprietary rights of others or to defend against
claims of infringement. Such litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on our business,
financial condition and results of operations.
 
     In addition, we cannot be certain that any patent issued to us will not be
challenged, invalidated or circumvented, that the rights granted thereunder will
provide competitive advantages to us or that third parties may not assert that
our products infringe patent, copyright or trade secrets of such parties.
Furthermore, we cannot be sure that others will not independently develop
similar products or duplicate our products.
 
YOU WILL HAVE A NUMBER OF MARKET RISKS TYPICALLY ASSOCIATED WITH INITIAL PUBLIC
OFFERINGS
 
     Prior to this offering, there has been no public market for our common
stock and there can be no assurance that an active public market for the common
stock will develop or continue after this offering. The initial public offering
price will be determined by negotiation between MKS and the underwriters.
Nevertheless, after this offering, you may not be able to resell your shares at
or above the initial public offering price due to a number of factors,
including:
 
     - actual or anticipated fluctuations in our operating results
 
     - changes in securities analysts' financial estimates
 
     - changes in expectations as to our future financial performance
 
     - announcements of new technological innovations and alliances by
       competitors
 
     - the operating and stock price performance of our competitors and other
       comparable companies
 
     In addition, the stock market has experienced extreme price and volume
fluctuations which have particularly affected the market prices for many high
technology companies. These broad market fluctuations may materially and
adversely affect the market price of our common stock. You should read the
"Underwriting" section of this prospectus for a more complete discussion of the
factors that the underwriters and we will consider in determining the initial
public offering price.
 
YOU WILL EXPERIENCE AN IMMEDIATE AND SUBSTANTIAL DILUTION
 
     Purchasers of common stock in this offering will incur immediate and
substantial dilution of $          in the pro forma net tangible book value per
share of common stock from the assumed initial public offering price or
$          per share.
 
                                       11
<PAGE>   15
 
AFTER THIS OFFERING A LIMITED NUMBER OF STOCKHOLDERS WILL HAVE CONTROLLING
INTEREST IN MKS
 
     Upon consummation of this offering, John R. Bertucci, Chairman, Chief
Executive Officer and President of MKS, and members of his family will, in the
aggregate, beneficially own approximately   % of our outstanding common stock.
As a result, these stockholders, acting together, will be able to take any of
the following actions without the approval of our public stockholders:
 
     - amend our Articles of Organization in certain respects or approve a
       merger, sale of assets or other major corporate transaction
 
     - defeat any non-negotiated takeover attempt that may be beneficial to our
       public stockholders
 
     - determine the amount and timing of dividends paid to themselves and to
       our public stockholders
 
     - otherwise control our management and operations and the outcome of all
       matters submitted for a stockholder vote, including the election of
       directors
 
WE ARE SUBJECT TO ANTITAKEOVER PROVISIONS
 
     Certain provisions of our Articles of Organization, our By-Laws and
Massachusetts law could discourage potential acquisition proposals and could
delay or prevent a change in control of MKS. Such provisions could diminish the
opportunities for stockholders to participate in tender offers including tender
offers at a price above the then current market value of the common stock. Such
provisions may also inhibit increases in the market price of the common stock
that could result from takeover attempts. For example, while we have no present
plans to issue any preferred stock, the Board of Directors, without further
stockholder approval, may issue preferred stock that could have the effect of
delaying, deterring or preventing a change in control of MKS. The issuance of
preferred stock could adversely affect the voting power of the holders of common
stock including the loss of voting control to others. In addition, our By-Laws
will provide for a classified Board of Directors consisting of three classes.
This classified board could also have the effect of delaying, deterring or
preventing a change in control of MKS.
 
FUTURE SALES OF SHARES COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK
 
     Sales of our common stock in the public market following this offering
could adversely affect the market price of the common stock. All of the shares
offered under this prospectus will be freely tradable in the open market. The
remaining      shares of common stock are subject to lock-up agreements with the
underwriters. Persons subject to lock-up agreements have agreed not to sell
shares of common stock for a period of 180 days after the date of this
prospectus. Upon expiration of the lock-up agreements,           shares of
common stock will be eligible for sale in the public market, subject to the
provisions of Rule 144 or 701 under the Securities Act of 1933. In addition, we
intend to register approximately 4,535,000 shares of common stock issuable under
our stock option and purchase plans upon the closing of this offering.
 
                                       12
<PAGE>   16
 
             S CORPORATION AND TERMINATION OF S CORPORATION STATUS
 
     MKS has been treated as an S corporation for federal income tax purposes
since July 1, 1987. As a result, MKS currently pays no federal, and certain
state, income tax, and all of the earnings of MKS are subject to federal, and
certain state, income taxation directly at the stockholder level. MKS's S
corporation status will terminate upon the closing of this offering, at which
time MKS will become subject to corporate income taxation under Subchapter C of
the Internal Revenue Code and applicable state income taxation law. Pro forma
statement of income data set forth in this prospectus has been adjusted to
include pro forma income tax provisions as if MKS had been a C corporation
during the relevant periods.
 
     In 1997 and 1998, MKS distributed $12.4 million and $6.2 million,
respectively, of undistributed S corporation earnings to its stockholders. As
soon as practicable following the closing of this offering, MKS intends to make
a distribution to the holders of record on the day prior to the closing of this
offering in an amount equivalent to the "accumulated adjustments account," as
defined in Section 1368(a)(1) of the Internal Revenue Code. As of December 31,
1998, the outstanding balance of the accumulated adjustments account was
estimated to be approximately $35.9 million, and such balance is estimated to
increase in the period from January 1, 1999 through the closing of this offering
to approximately $               million. The accumulated adjustments account is
cumulatively equal to financial reporting income, adjusted for differences
between the methods of accounting used for financial accounting and for federal
income tax purposes from July 1, 1987 through the date of termination of MKS's S
corporation status, that has not been previously distributed. Investors
purchasing shares in this offering will not receive any portion of the
distribution.
 
     MKS expects to enter into a Tax Indemnification and S Corporation
Distribution Agreement with its existing stockholders providing for, among other
things, the indemnification of MKS by such stockholders for any federal and
state income taxes (including interest) incurred by MKS if for any reason MKS is
deemed to be treated as a C corporation during any period which it reported its
taxable income as an S corporation. The tax indemnification obligation of the
existing stockholders is limited to the amount of any reduction in their tax
liability as a result of any such determination. This agreement also provides
for the cross-indemnification by MKS of each existing stockholder for any losses
or liabilities with respect to certain additional taxes (including interest and
penalties) resulting from MKS's operations during the period in which it was an
S corporation. The agreement further provides for the payment, with interest, by
the existing stockholders or MKS, as the case may be, for the difference between
the amount to be distributed and the actual amount of accumulated adjustments
account on the day immediately preceding the closing of this offering. The
actual amount of the accumulated adjustments account on the day prior to the
closing of this offering cannot be determined until MKS calculates the amount of
its taxable income for the year ending December 31, 1999. Purchasers of common
stock in this offering will not be parties to the Tax Indemnification and S
Corporation Distribution Agreement.
 
                                       13
<PAGE>   17
 
                                USE OF PROCEEDS
 
     The net proceeds we will receive from the sale of the           shares of
common stock offered by us are estimated to be $               ($
if the underwriters' over-allotment option is exercised in full), after
deducting the estimated underwriting discount and offering expenses payable by
us and assuming an initial public offering price of $       per share.
 
     The principal purposes of this offering are:
 
     - to increase our working capital and equity base
 
     - to provide a public market for our common stock
 
     - to facilitate future access by us to public equity markets
 
     We will use approximately $               million of the net proceeds to
pay current stockholders our undistributed S corporation earnings through the
closing of this offering. The undistributed S corporation earnings were
estimated to be approximately $35.9 million (including approximately $34.4
million representing the share of Mr. Bertucci and members of his family) at
December 31, 1998, and are expected to increase from January 1, 1999 to the
closing of this offering to approximately $               million. See "S
Corporation and Termination of S Corporation Status." We expect to use the
remainder of the net proceeds for general corporate purposes, including working
capital, product development and capital expenditures.
 
     A portion of the net proceeds after the S corporation distribution may also
be used for the acquisition of businesses, products and technologies that are
complementary to those of MKS. There are currently no active negotiations,
commitments or agreements with respect to any acquisition. Pending such uses, we
intend to invest the net proceeds from this offering in short-term,
investment-grade, interest-bearing securities.
 
                                DIVIDEND POLICY
 
     We currently intend, subject to our contractual obligations under the Tax
Indemnification and S Corporation Distribution Agreement, to retain earnings for
the continued development of our business. Restrictions or limitations on the
payment of dividends may be imposed in the future under the terms of credit
agreements or under other contractual provisions. In the absence of such
restrictions or limitations, the payment of any dividends will be at the
discretion of our Board of Directors.
 
                                       14
<PAGE>   18
 
                                 CAPITALIZATION
 
     The following table sets forth the capitalization of MKS (i) as of December
31, 1998, (ii) on a pro forma basis to reflect distributions and adjustments in
connection with MKS's S corporation status and (iii) as adjusted to reflect the
sale of           shares of common stock by MKS at an assumed initial public
offering price of $     per share and the application of the net proceeds
therefrom. See "Use of Proceeds."
 
     The pro forma data reflects the liability for distribution of an estimated
$35.9 million, calculated as of December 31, 1998, of cumulative undistributed S
corporation taxable income for which stockholders of record prior to the closing
of this offering have been or will be taxed. The actual amount to be distributed
is expected to increase based upon taxable earnings for the period from January
1, 1999 through the closing of this offering, subject to certain limitations.
See "S Corporation and Termination of S Corporation Status" and Notes 2 and 9 of
Notes to Consolidated Financial Statements. The pro forma as adjusted numbers
have been adjusted to reflect the issuance of           shares of common stock
at an assumed initial public offering price of $     per share, after deducting
the estimated underwriting discount and offering expenses payable by MKS. The
remaining balance in retained earnings represents accumulated earnings prior to
MKS's conversion from a C corporation to an S corporation in 1987, accumulated
income in overseas subsidiaries and differences between book and tax accumulated
income.
 
<TABLE>
<CAPTION>
                                                                        DECEMBER 31, 1998
                                                         ------------------------------------------------
                                                                                             PRO FORMA
                                                           ACTUAL         PRO FORMA         AS ADJUSTED
                                                           ------         ---------         -----------
                                                         (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                                      <C>             <C>               <C>
Long-term obligations, less current portion............   $13,786          $13,786            $
Stockholders' equity:..................................
  Preferred stock, $.01 par value; 2,000,000 shares
     authorized, no shares issued or outstanding.......        --               --
  Common stock, no par value; 30,000,000 shares
     authorized, 18,053,167 shares issued and
     outstanding (actual and pro forma);   shares
     issued and outstanding (pro forma as adjusted)....       113              113
  Additional paid-in capital...........................        48               48
  Retained earnings....................................    52,479           16,553
  Accumulated other comprehensive income...............     2,186            2,186
                                                          -------          -------            -------
     Total stockholders' equity........................    54,826           18,900
                                                          -------          -------            -------
          Total capitalization.........................   $68,612          $32,686            $
                                                          =======          =======            =======
</TABLE>
 
     The common stock to be outstanding after this offering is based on shares
outstanding as of December 31, 1998 and excludes 2,132,575 shares of common
stock issuable upon the exercise of options outstanding as of such date at a
weighted average exercise price of $5.19 per share. See Note 8 of Notes to
Consolidated Financial Statements.
 
                                       15
<PAGE>   19
 
                                    DILUTION
 
     As of December 31, 1998, MKS had a net tangible book value of $54,826,000,
or $3.04 per share of common stock. Without taking into account any changes in
such net tangible book value subsequent to December 31, 1998, other than to give
effect to the sale by MKS of           shares of common stock offered hereby at
an assumed initial public offering price of $          per share (after
deducting the estimated underwriting discount and offering expenses) and the
application of the estimated net proceeds therefrom, including the distribution
of an estimated $35.9 million of cumulative undistributed S corporation taxable
income for which stockholders have been or will be taxed, as of December 31,
1998, the pro forma net tangible book value of MKS as of December 31, 1998 would
have been $          , or $          per share. This represents an immediate
increase in net tangible book value to existing stockholders attributable to new
investors of $          per share and the immediate dilution of $          per
share to new investors. The following table illustrates this per share dilution:
 
<TABLE>
<S>                                                           <C>        <C>
Assumed initial public offering price per share.............             $
  Net tangible book value per share at December 31, 1998....  $
  Decrease per share attributable to the S corporation
     distribution...........................................
  Increase per share attributable to new investors..........             $
Pro forma net tangible book value per share after this
  offering..................................................
Dilution per share to new investors.........................             $
                                                                         =======
</TABLE>
 
     The following table sets forth, on a pro forma basis as of December 31,
1998, the number of shares of common stock purchased from MKS, the total
consideration paid to MKS, and the average price paid per share by existing
stockholders and by the new investors purchasing shares of common stock in this
offering (before deducting the estimated underwriting discount and offering
expenses), at an assumed initial public offering price of $          per share:
 
<TABLE>
<CAPTION>
                                         SHARES PURCHASED       TOTAL CONSIDERATION
                                       ---------------------    -------------------    AVERAGE PRICE
                                         NUMBER      PERCENT     AMOUNT     PERCENT      PER SHARE
                                       ----------    -------    --------    -------    -------------
<S>                                    <C>           <C>        <C>         <C>        <C>
Existing stockholders................  18,053,167          %    $161,000          %       $0.009
New investors........................
                                       ----------     -----     --------     -----
          Total......................                 100.0%                 100.0%
                                       ==========     =====     ========     =====
</TABLE>
 
     As of December 31, 1998, there were options outstanding to purchase a total
of 2,132,575 shares of common stock, at a weighted average exercise price of
$5.19 per share and 2,401,793 additional shares reserved for future grants of
issuances under MKS's stock option and stock purchase plans. To the extent that
any of these options are exercised, there will be further dilution to new
investors.
 
                                       16
<PAGE>   20
 
                      SELECTED CONSOLIDATED FINANCIAL DATA
 
     The following selected financial data as of December 31, 1997 and 1998 and
for the years ended December 31, 1996, 1997 and 1998 have been derived from
MKS's financial statements, included elsewhere in this prospectus, which have
been audited by PricewaterhouseCoopers LLP, independent accountants, as
indicated in their report. The selected financial data as of December 31, 1994,
1995 and 1996 and for the years ended December 31, 1994 and 1995 are derived
from financial statements, which were also audited by PricewaterhouseCoopers
LLP, not included herein. The data should be read in conjunction with the
Consolidated Financial Statements, including the Notes thereto, and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.
 
     MKS has been treated as an S corporation under the applicable provisions of
the Internal Revenue Code since July 1, 1987. As an S corporation, MKS has not
been subject to federal, and certain state, income taxes. The pro forma net
income set forth below reflects the provision for income taxes that would have
been recorded had MKS been a C corporation, assuming an effective tax rate of
38.0%. As a result of terminating its S corporation status upon the closing of
this offering, MKS will record a one-time non-cash credit to historical earnings
for additional deferred taxes. If this credit to earnings had occurred at
December 31, 1998, the amount would have been approximately $3.9 million. This
amount is expected to change through the closing of this offering and is
excluded from pro forma net income. See Notes 2 and 9 of Notes to Consolidated
Financial Statements. Pro forma balance sheet data reflects the liability for
the distribution of an estimated $35.9 million, calculated as of December 31,
1998, of cumulative undistributed S corporation taxable income for which
stockholders of record prior to the closing of this offering have been or will
be taxed. The actual amount to be distributed is expected to increase based upon
taxable earnings for the period January 1, 1999 through the closing of this
offering, subject to certain limitations. Pro forma net income per share
reflects the effect of an assumed issuance of sufficient shares to fund the
distribution, as of January 1, 1998. See "S Corporation and Termination of S
Corporation Status" and Note 2 of Notes to Consolidated Financial Statements.
 
<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                      --------------------------------------------------------
                                        1994        1995        1996        1997        1998
                                      --------    --------    --------    --------    --------
                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                   <C>         <C>         <C>         <C>         <C>
STATEMENT OF INCOME DATA:
Net sales...........................  $106,829    $157,164    $170,862    $188,080    $139,763
Cost of sales.......................    59,813      87,703     102,008     107,606      83,784
                                      --------    --------    --------    --------    --------
Gross profit........................    47,016      69,461      68,854      80,474      55,979
Research and development............     8,036      10,935      14,195      14,673      12,137
Selling, general and
  administrative....................    26,893      34,420      37,191      41,838      34,707
Restructuring.......................        --          --       1,400          --          --
                                      --------    --------    --------    --------    --------
Income from operations..............    12,087      24,106      16,068      23,963       9,135
Interest expense, net...............     1,284       1,448       2,286       1,861       1,187
Other income (expense), net.........        --          --        (479)        166         187
                                      --------    --------    --------    --------    --------
Income before income taxes..........    10,803      22,658      13,303      22,268       8,135
Provision for income taxes..........       800       1,000         800       1,978         949
                                      --------    --------    --------    --------    --------
Net income..........................  $ 10,003    $ 21,658    $ 12,503    $ 20,290    $  7,186
                                      ========    ========    ========    ========    ========
</TABLE>
 
                                       17
<PAGE>   21
 
<TABLE>
<CAPTION>
                                                                    YEAR ENDED
                                                                   DECEMBER 31,
                                                              ----------------------
                                                                       1998
                                                              ----------------------
                                                              (IN THOUSANDS, EXCEPT
                                                                 PER SHARE DATA)
<S>                                                           <C>
PRO FORMA STATEMENT OF INCOME DATA (UNAUDITED):
Historical income before income taxes.......................          $8,135
Pro forma provision for income taxes........................           3,091
                                                                      ------
Pro forma net income........................................          $5,044
                                                                      ======
Pro forma net income per common share:
    Basic...................................................          $ 0.25
                                                                      ======
    Diluted.................................................          $ 0.24
                                                                      ======
</TABLE>
 
<TABLE>
<CAPTION>
                                            DECEMBER 31,                     DECEMBER 31, 1998
                             ------------------------------------------    ---------------------
                              1994        1995       1996        1997       ACTUAL     PRO FORMA
                             -------    --------    -------    --------    --------    ---------
                                                       (IN THOUSANDS)
<S>                          <C>        <C>         <C>        <C>         <C>         <C>
BALANCE SHEET DATA:
Cash and cash
  equivalents..............  $ 4,059    $  3,650    $ 3,815    $  2,511    $ 11,188    $ 11,188
Working capital
  (deficit)................   25,078      32,202     22,404      30,321      31,493      (4,433)
Total assets...............   72,320     104,511     95,000     106,536      96,232      96,232
Short-term obligations.....    9,246      15,192     16,124      13,852      12,819      12,819
Long-term obligations, less
  current portion..........   14,948      20,462     18,899      15,624      13,786      13,786
Stockholders' equity.......   37,272      48,392     45,498      52,848      54,826      18,900
</TABLE>
 
                                       18
<PAGE>   22
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     The following discussion contains forward-looking statements that involve
risks and uncertainties. MKS's actual results could differ materially from those
discussed in the forward-looking statements as a result of certain factors
including those set forth under "Risk Factors" and elsewhere in this prospectus.
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Consolidated Financial Statements
and Notes thereto appearing elsewhere in this prospectus.
 
OVERVIEW
 
     MKS was founded in 1961. MKS develops, manufactures and supplies
instruments and components used to measure, control and analyze gases in
semiconductor manufacturing and similar industrial manufacturing processes.
During 1997 and 1998, MKS estimates that approximately 60% of its net sales were
to semiconductor capital equipment manufacturers and semiconductor device
manufacturers. MKS expects that sales to such customers will continue to account
for a substantial majority of its sales. MKS has more than 4,000 active
customers worldwide (all of which purchased products during 1998), including
semiconductor capital equipment manufacturers, semiconductor device
manufacturers, industrial manufacturing companies and university, government and
industrial research laboratories. In 1996, 1997, and 1998, sales to MKS's top
five customers accounted for approximately 26%, 32% and 24%, respectively, of
MKS's net sales. During 1998, Applied Materials, Inc. accounted for
approximately 16% of MKS's net sales. MKS typically enters into contracts with
its semiconductor equipment manufacturer customers that provide for quantity
discounts. MKS recognizes revenues, and accrues for anticipated returns and
warranty costs, upon shipment.
 
     In the third quarter of 1996, as a result of the downturn in the
semiconductor industry, MKS recorded a restructuring charge of $1.4 million. The
charge was primarily related to a reduction of personnel and the closure of
certain facilities and included the cost of severance, lease commitments and the
write-off of leasehold improvements.
 
     A significant portion of MKS's sales are to operations in international
markets. International sales by MKS's foreign subsidiaries were 27.3% and 32.4%
of net sales for 1997 and 1998, respectively. MKS does not classify export sales
made directly by MKS as international sales. Such sales have generally been less
than 10% of net sales. MKS currently uses, and plans to continue to use, forward
exchange contracts and local currency purchased options to reduce currency
exposure arising from foreign denominated sales associated with the intercompany
purchases of inventory. Gains and losses on derivative financial instruments
that qualify for hedge accounting are classified in cost of sales. Gains and
losses on derivative financial instruments that do not qualify for hedge
accounting are marked-to-market and recognized immediately in other income. See
Note 3 to Notes to Consolidated Financial Statements.
 
     MKS has been treated as an S corporation for federal income tax purposes
since July 1, 1987. MKS's S corporation status will terminate upon the closing
of this offering, at which time MKS will become subject to federal, and certain
state, income taxation as a C corporation. The pro forma net income reflects a
pro forma effective tax rate of 38.0% to reflect federal and state income taxes
which would have been payable for 1998 had MKS been taxed as a C corporation.
See "S Corporation and Termination of S Corporation Status."
 
                                       19
<PAGE>   23
 
  Results of Operations
 
     The following table sets forth for the periods indicated the percentage of
total net sales of certain line items included in MKS's consolidated statement
of income data:
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                              -----------------------
                                                              1996     1997     1998
                                                              -----    -----    -----
<S>                                                           <C>      <C>      <C>
Net sales...................................................  100.0%   100.0%   100.0%
Cost of sales...............................................   59.7     57.2     59.9
                                                              -----    -----    -----
Gross profit................................................   40.3     42.8     40.1
Research and development....................................    8.3      7.8      8.7
Selling, general and administrative.........................   21.8     22.3     24.9
Restructuring...............................................    0.8       --       --
                                                              -----    -----    -----
Income from operations......................................    9.4     12.7      6.5
Interest expense, net.......................................    1.3      1.0      0.8
Other income (expense), net.................................   (0.3)     0.1      0.1
                                                              -----    -----    -----
Income before income taxes..................................    7.8     11.8      5.8
Provision for income taxes..................................    0.5      1.0      0.7
                                                              -----    -----    -----
Net income..................................................    7.3%    10.8%     5.1%
                                                              =====    =====    =====
Pro forma data:
  Historical income before income taxes.....................                      5.8%
  Pro forma provision for income taxes......................                      2.2
                                                                                -----
  Pro forma net income......................................                      3.6%
                                                                                =====
</TABLE>
 
YEAR ENDED 1998 COMPARED TO 1997
 
     Net Sales.  Net sales decreased 25.7% to $139.8 million for 1998 from
$188.1 million for 1997. International net sales were approximately $45.3
million in 1998 (32.4% of net sales) and $51.4 million in 1997 (27.3% of net
sales). The decrease in net sales was primarily due to decreased sales volume of
MKS's existing products in the United States and in Asia caused by the 1998
downturn in the semiconductor capital equipment market.
 
     Gross Profit.  Gross profit as a percentage of net sales decreased to 40.1%
for 1998 from 42.8% in 1997. The change was primarily due to manufacturing
overhead costs being a higher percentage of net sales due to lower sales volume
in 1998.
 
     Research and Development.  Research and development expenses decreased
17.3% to $12.1 million (8.7% of net sales) for 1998 from $14.7 million (7.8% of
net sales) for 1997. The decrease was primarily due to reduced spending for
development materials required for certain projects that were completed during
1998.
 
     Selling, General and Administrative.  Selling, general and administrative
expenses decreased 17.0% to $34.7 million (24.9% of net sales) for 1998 from
$41.8 million (22.3% of net sales) for 1997. The decrease was due primarily to a
decrease of approximately $4.2 million in compensation expense along with
decreased selling related expenses.
 
     Interest Expense, Net.  Net interest expense decreased to $1.2 million for
1998 from $1.9 million for 1997 primarily due to lower debt outstanding during
1998.
 
     Other Income (Expense), Net.  Other income of $0.2 million in 1998
primarily represents foreign exchange translation gains on intercompany payables
of $1.0 million offset by $0.7 million for costs associated with MKS's planned
initial public offering in early 1998 which was postponed. Other income of
 
                                       20
<PAGE>   24
 
$0.2 million in 1997 represents gains of $1.2 million from foreign exchange
contracts that did not qualify for hedge accounting, offset by a foreign
exchange translation loss on an intercompany payable.
 
     Pro Forma Provision for Income Taxes.  The pro forma provision for income
taxes for 1998 reflects the estimated tax expense MKS would have incurred had it
been subject to federal and state income taxes as a C corporation under the
Internal Revenue Code. The pro forma provision reflects a pro forma tax rate of
38.0%, which differs from the federal statutory rate due primarily to the
effects of state and foreign taxes and certain tax credits.
 
YEAR ENDED 1997 COMPARED TO 1996
 
     Net Sales.  Net sales increased 10.1% to $188.1 million for 1997 from
$170.9 million for 1996. International net sales were approximately $51.4
million in both 1997 (27.3% of net sales) and 1996 (30.1% of net sales). The
increase in net sales was primarily due to increased sales volume of MKS's
existing products in the United States.
 
     Gross Profit.  Gross profit as a percentage of net sales increased to 42.8%
for 1997 from 40.3% for 1996. The change was due primarily to the reduction in
fixed costs resulting from the restructuring effected in the third quarter of
1996 and the resulting increase in operational efficiencies.
 
     Research and Development.  Research and development expenses increased 3.4%
to $14.7 million (7.8% of net sales) for 1997 from $14.2 million (8.3% of net
sales) for 1996. The increase was primarily due to an increase in staffing
throughout 1997 for certain development projects.
 
     Selling, General and Administrative.  Selling, general and administrative
expenses increased 12.5% to $41.8 million (22.2% of net sales) for 1997 from
$37.2 million (21.8% of net sales) for 1996. The increase was due primarily to
increased compensation expense, including increased staffing levels.
 
     Restructuring.  In the third quarter of 1996, as a result of the downturn
in the semiconductor industry, MKS recorded a restructuring charge of $1.4
million. The charge included $0.4 million of severance pay, $0.7 million of
lease commitments, and $0.3 million for the write-off of leasehold improvements.
 
     Interest Expense, Net.  Net interest expense decreased to $1.9 million for
1997 from $2.3 million for 1996 primarily due to lower debt outstanding during
1997.
 
     Other Income (Expense), Net.  Other expense for 1996 and other income for
1997 reflect losses and gains of $0.5 million and $1.2 million, respectively,
from foreign exchange contracts that did not qualify for hedge accounting, and a
foreign exchange translation loss on an intercompany payable from MKS's Korean
subsidiary of $1.0 million related to the devaluation of the Korean won in the
fourth quarter of 1997.
 
                                       21
<PAGE>   25
 
  Selected Quarterly Operating Results
 
     The following tables present unaudited consolidated financial information
for the eight quarters ended December 31, 1998. In the opinion of management,
this information has been presented on the same basis as the audited
Consolidated Financial Statements appearing elsewhere in this Prospectus and all
adjustments (consisting only of normal recurring adjustments) which management
considers necessary for a fair presentation of the results of such periods have
been included in the amounts stated below to present fairly the unaudited
quarterly results when read in conjunction with MKS's Consolidated Financial
Statements and Notes thereto. The results for any quarter are not necessarily
indicative of future quarterly results of operations.
 
<TABLE>
<CAPTION>
                                                                         QUARTER ENDED
                                   -----------------------------------------------------------------------------------------
                                   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,
                                     1997        1997       1997        1997       1998        1998       1998        1998
                                   ---------   --------   ---------   --------   ---------   --------   ---------   --------
                                                                        (IN THOUSANDS)
<S>                                <C>         <C>        <C>         <C>        <C>         <C>        <C>         <C>
STATEMENT OF INCOME DATA:
Net sales........................   $40,520    $45,749     $48,360    $53,451     $46,163    $34,026     $28,834    $30,740
Cost of sales....................    24,277     26,413      27,766     29,150      26,757     20,265      18,140     18,622
                                    -------    -------     -------    -------     -------    -------     -------    -------
Gross profit.....................    16,243     19,336      20,594     24,301      19,406     13,761      10,694     12,118
Research and development.........     2,994      3,563       3,779      4,337       3,794      3,107       2,568      2,668
Selling, general and
  administrative.................     9,612     10,321      10,816     11,089      10,112      9,045       7,808      7,742
                                    -------    -------     -------    -------     -------    -------     -------    -------
Income from operations...........     3,637      5,452       5,999      8,875       5,500      1,609         318      1,708
Interest expense, net............       494        527         445        395         375        337         234        241
Other income (expense), net......       275       (447)        632       (294)       (281)       123          77        268
                                    -------    -------     -------    -------     -------    -------     -------    -------
Income before income taxes.......     3,418      4,478       6,186      8,186       4,844      1,395         161      1,735
Provision for income taxes.......       289        378         523        788         565        163          19        202
                                    -------    -------     -------    -------     -------    -------     -------    -------
Net income.......................   $ 3,129    $ 4,100     $ 5,663    $ 7,398     $ 4,279    $ 1,232     $   142    $ 1,533
                                    =======    =======     =======    =======     =======    =======     =======    =======
</TABLE>
 
<TABLE>
<CAPTION>
                                                                         QUARTER ENDED
                                   -----------------------------------------------------------------------------------------
                                   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,
                                     1997        1997       1997        1997       1998        1998       1998        1998
                                   ---------   --------   ---------   --------   ---------   --------   ---------   --------
<S>                                <C>         <C>        <C>         <C>        <C>         <C>        <C>         <C>
PERCENTAGE OF NET SALES:
Net sales........................     100.0%     100.0%      100.0%     100.0%      100.0%     100.0%      100.0%     100.0%
Cost of sales....................      59.9       57.7        57.4       54.5        58.0       59.6        62.9       60.6
                                    -------    -------     -------    -------     -------    -------     -------    -------
Gross profit.....................      40.1       42.3        42.6       45.5        42.0       40.4        37.1       39.4
Research and development.........       7.4        7.8         7.8        8.1         8.2        9.1         8.9        8.6
Selling, general and
  administrative.................      23.7       22.6        22.4       20.8        21.9       26.6        27.1       25.2
                                    -------    -------     -------    -------     -------    -------     -------    -------
Income from operations...........       9.0       11.9        12.4       16.6        11.9        4.7         1.1        5.6
Interest expense, net............       1.2        1.1         0.9        0.7         0.8        1.0         0.8        0.8
Other income (expense), net......       0.6       (1.0)        1.3       (0.6)       (0.6)       0.4         0.3        0.8
                                    -------    -------     -------    -------     -------    -------     -------    -------
Income before income taxes.......       8.4        9.8        12.8       15.3        10.5        4.1         0.6        5.6
Provision for income taxes.......       0.7        0.8         1.1        1.5         1.2        0.5         0.1        0.6
                                    -------    -------     -------    -------     -------    -------     -------    -------
Net income.......................       7.7%       9.0%       11.7%      13.8%        9.3%       3.6%        0.5%       5.0%
                                    =======    =======     =======    =======     =======    =======     =======    =======
</TABLE>
 
     MKS's quarterly operating results have varied significantly and are likely
to continue to vary significantly due to a number of factors including specific
economic conditions in the industries in which MKS's customers operate,
particularly the semiconductor industry; the timing of the receipt of orders
from major customers; customer cancellations or shipment delays; price
competition; disruption in sources of supply; seasonal variations of capital
spending by customers; production capacity constraints; specific features
requested by customers; exchange rate fluctuations; the introduction or
announcement of new products by MKS or its competitors; and other factors, many
of which are beyond MKS's control.
 
     MKS's net sales have fluctuated over the past eight quarters primarily due
to the decline in the semiconductor capital equipment market and the
semiconductor device market in 1998 that adversely affected sales of MKS's
products in each of the quarters of 1998. See "Risk Factors -- Our quarterly
results are likely to fluctuate." MKS expects that the decline in worldwide
semiconductor capital equipment orders in the second half of 1998 and the
instability of the Asian markets will continue to adversely affect sales of
semiconductor capital equipment manufacturers for at least the first and second
quarters of 1999. As a result, MKS currently expects that its net sales and net
income for each of the first
 
                                       22
<PAGE>   26
 
and second quarters of 1999 will be less than net sales and net income for the
first and second quarters of 1998.
 
     Gross profit as a percentage of net sales increased in each quarter of 1997
primarily as a result of fuller utilization of existing manufacturing capacity
as a result of increased net sales. Gross profit as a percentage of net sales
decreased in each of the first three quarters of 1998 as a result of
manufacturing overhead costs becoming a higher percentage of net sales due to
lower sales volume.
 
     The increase in research and development expenses for the second, third and
fourth quarters of 1997 was primarily due to increased staffing levels. The
decrease in research and development expenses for the first, second, and third
quarters of 1998 was primarily due to reduced spending for development materials
required for certain projects that were completed during 1998.
 
     Selling, general and administrative expenses increased in the second, third
and fourth quarters of 1997 primarily due to increased compensation expense and
the write-off of certain abandoned assets. The decrease in selling, general and
administrative expenses in the first, second, and third quarters of 1998 was
primarily due to a decrease in compensation expense along with other selling
related expenses.
 
     Other income primarily represents gains and losses on foreign exchange
contracts and a foreign exchange translation loss on an intercompany payable
from MKS's Korean subsidiary of $1.0 million in the fourth quarter of 1997
related to the devaluation of the Korean won. Other expenses in the first
quarter of 1998 include $0.7 million for costs associated with MKS's planned
initial public offering in early 1998 which was postponed.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     MKS has financed its operations and capital requirements through a
combination of cash provided by operations, long-term real estate financing,
capital lease financing and short-term lines of credit.
 
     Operations provided cash of $26.3 million, $16.8 million and $23.0 million
for 1996, 1997 and 1998, respectively, primarily impacted in each period by net
income, depreciation and changes in the levels of inventory and accounts
receivable. Investing activities utilized cash of $10.2 million, $3.3 million
and $2.1 million in 1996, 1997 and 1998, respectively, primarily for the
purchase of property and equipment in each period. Financing activities utilized
cash of $15.6 million, $16.2 million and $11.8 million in 1996, 1997 and 1998,
respectively, primarily for stockholder distributions in each period. Cash flows
from financing activities for each period were primarily from short-term and
long-term borrowings.
 
     Working capital was $31.5 million as of December 31, 1998. MKS has a
combined $30.0 million line of credit with two banks, expiring December 31,
1999, all of which is available. MKS also has lines of credit through its
foreign subsidiaries with several financial institutions totaling $15.0 million
at December 31, 1998. The total unused balance under these lines of credit was
$5.3 million at December 31, 1998. These lines generally expire and are renewed
at six month intervals. In addition, MKS has outstanding term loans and mortgage
loans from banks totaling $12.0 million (net of the current portion) at December
31, 1998. See Notes 6 and 13 of Notes to Consolidated Financial Statements.
 
     In 1997 and 1998, MKS distributed $12.4 million and $6.2 million,
respectively, of undistributed S corporation earnings to its stockholders. As
soon as practicable following the closing of this offering, MKS intends to make
a distribution to the holders of record on the day prior to the closing of this
offering in an amount equivalent to the accumulated adjustments account. The
accumulated adjustments account is cumulatively equal to financial reporting
income, adjusted for differences between the methods of accounting used for
financial accounting and for federal income tax purposes from July 1, 1987
through the date of termination of MKS's S corporation status, that has not been
previously distributed. Investors purchasing shares in this offering will not
receive any portion of the distribution. As of December 31, 1998, the
outstanding balance of the accumulated adjustments account was estimated to be
approximately $35.9 million, and such balance is estimated to increase in the
period from January 1, 1999 through the closing of this offering to
approximately $               million.
 
                                       23
<PAGE>   27
 
     MKS believes that the net proceeds from this offering, together with the
cash anticipated to be generated from operations and funds available from
existing credit facilities, will be sufficient to satisfy its estimated working
capital and planned capital expenditure requirements through at least the next
12 months.
 
  Effect of Currency Exchange Rates and Exchange Rate Risk Management.
 
     A significant portion of MKS's business is conducted outside of the United
States through its foreign subsidiaries. The foreign subsidiaries maintain their
accounting records in their local currencies. Consequently, period to period
comparability of results of operations is affected by fluctuations in exchange
rates. MKS derives a significant portion of its cash flows from foreign
denominated revenue. To the extent the dollar value of foreign denominated
revenue is diminished as a result of a strengthening dollar, MKS's results of
operations and cash flows could be adversely affected. To reduce the risks
associated with foreign currency rate fluctuations, MKS has entered into forward
exchange contracts and local currency purchased options on a continuing basis in
amounts and timing consistent with the underlying currency exposures. Gains on
forward exchange contracts and local currency purchased options, qualifying for
hedge accounting, amounted to $2.5 million, $1.2 million and $0.3 million for
the years ended December 31, 1996, 1997 and 1998, respectively, and are
classified in cost of sales. Losses of $0.5 million, gains of $1.2 million and
losses of $0.2 million on forward exchange contracts that did not qualify for
hedge accounting were recognized in earnings for 1996, 1997 and 1998,
respectively, and are classified in other income (expense), net. These amounts
are net of a foreign exchange translation loss of $1.0 million and a gain of
$1.0 million on intercompany payables from its subsidiaries in 1997 and 1998
respectively. Foreign exchange translation gains and losses from unhedged
intercompany balances were not material in 1996. While MKS does not issue or
hold derivative financial instruments for trading purposes, there can be no
assurance that any losses realized on such instruments will be fully offset by
gains on the underlying exposure. Prospectively, MKS plans to continue to use
forward exchange contracts and local currency purchased options to seek to
mitigate the impact of exchange rate fluctuations. See Notes 2 and 3 of Notes to
Consolidated Financial Statements.
 
  Market Risk and Sensitivity Analysis on Exchange Rate Risk Management
 
     The potential fair value loss for a hypothetical 10% adverse change in
forward currency exchange rates on MKS's forward exchange contracts at December
31, 1998 would be $949,000. The potential loss was estimated by calculating the
fair value of the forward exchange contracts at December 31, 1998 and comparing
that with those calculated using the hypothetical forward currency exchange
rates.
 
     The value of the local currency purchased options at December 31, 1998 was
immaterial. Any loss related to the local currency purchased options is limited
to the unamortized premium of $155,000 at December 31, 1998.
 
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 
     See Note 2 of Notes to Consolidated Financial Statements for a discussion
of the impact of recently issued accounting pronouncements.
 
YEAR 2000 COMPLIANCE
 
     The Year 2000 problem stems from the fact that many currently installed
computer systems include software and hardware products that are unable to
distinguish 21st century dates from those in the 20th century. As a result,
computer software and/or hardware used by many companies and governmental
agencies may need to be upgraded to comply with Year 2000 requirements or risk
system failure or miscalculations causing disruptions to normal business
activities.
 
                                       24
<PAGE>   28
 
  State of Readiness
 
     MKS designed and began implementation of a multi-phase Year 2000 project
which consists of: (i) assessment of the corporate systems and operations that
could be affected by the Year 2000 problem, (ii) remediation of non-compliant
systems and components, and (iii) testing of systems and components following
remediation. MKS, under the guidance of its Information Technology Steering
Committee, has focused its Year 2000 review on four areas: (a) internal computer
software and hardware, (b) product compliance, (c) facilities and manufacturing
equipment and (d) third-party compliance.
 
     Internal Computer Software and Hardware.  MKS uses information technology
for its internal infrastructure, which consists of its main enterprise systems
(the systems used, in part, for purchase orders, invoicing, shipping and
accounting), individual workstations, including personal computers, and its
network systems.
 
     Because MKS's business and manufacturing systems, such as its main
enterprise systems, are essential to its business, financial condition and
results of operations, MKS began its assessment of these systems prior to its
other non-critical information technology systems. MKS began its assessment in
the fall of 1997, and in November 1997, MKS developed a remediation plan for all
identified noncompliant business and manufacturing systems. This remediation
plan was implemented in January 1998. By July 1998, MKS had installed new
systems or upgraded existing systems. Based upon post-implementation testing and
review, management believes that all business and manufacturing systems within
its manufacturing operations are Year 2000 compliant.
 
     One of MKS's international subsidiaries is currently undergoing conversion
of its business systems in order to become Year 2000 compliant. Management
believes that these systems will be operational by June 1999. This phase of the
Year 2000 project is currently on schedule.
 
     MKS's personal computer based systems were assessed in early 1998. MKS
believes that all non-compliant hardware and software was identified by March
1998, at which time it made a list prioritizing databases to be remedied.
Critical databases were identified and were scheduled for remediation prior to
other databases. Remediation plans to convert the databases were initiated in
November 1998. MKS anticipates that it will complete its critical and
non-critical conversions by June 1999. This phase of the Year 2000 project is
currently on schedule.
 
     Product Compliance.  Throughout 1998, MKS assessed and addressed the Year
2000 compliance of its products. This assessment resulted in the identification
of MKS's products that were compliant and non-compliant. The substantial
majority of MKS's products were deemed to be compliant.
 
     The date related functions of all non-compliant products, other than
certain residual gas analysis products, are believed by MKS to be non-critical
in that such noncompliance would not affect the independent performance of the
product; would not cause the MKS product to cease operating on any particular
date; and independently would not pose a safety risk. MKS believes that Year
2000 problems associated with non-compliant residual gas analysis products will
also be non-critical. However, these products contain components of other
manufacturers and cannot be tested and therefore it is possible that such
products could cause unanticipated performance problems. The non-compliant
features of our other products primarily relate to non-essential functions such
as date displays. MKS made available to its customers a list which describes
Year 2000 readiness of its products. This phase of the Year 2000 project is
currently on schedule.
 
     Facilities and Manufacturing Equipment.  Some aspects of MKS's facilities
and manufacturing equipment may include embedded technology, such as
microcontrollers. The Year 2000 problem could cause a system failure or
miscalculation in such facilities or manufacturing equipment which could disrupt
MKS's operations. Affected areas include security systems, elevator controls,
voice mail and phone systems, clean room environmental controls, numerically
controlled production machinery and computer based production equipment. MKS
organized a team of experienced managers in November 1998 to assess the
potential problems in these areas. An assessment of all facilities and
manufacturing equipment was conducted through December 1998, and a remediation
plan was developed in January 1999. MKS
 
                                       25
<PAGE>   29
 
anticipates completion of all corrective actions by June 1999 with testing and
review of corrected items to occur in the summer of 1999. This phase of the Year
2000 project is currently on schedule.
 
     Third-Party Compliance.  MKS has relationships with third-parties including
customers and vendors and suppliers of goods, services and computer interfaces.
The failure of such persons to implement and execute Year 2000 compliance
measures in a timely manner, if at all, could, among other things: (i) adversely
affect MKS's ability to obtain components in a timely manner; (ii) cause a
reduction in the quality of components obtained by MKS; (iii) cause a reduction,
delay or cancellation of customer orders received by MKS or a delay in payments
by its customers for products shipped; and/or (iv) result in the loss of
services that would be necessary for MKS to operate in the normal course of
business. MKS assessed which of these third-party goods, services and interfaces
were critical to its operations and developed and mailed a standard survey to
each third-party deemed critical in January 1998. By March 1998, MKS had
reviewed most responses received. To date, the responses received indicate that
the third-parties are either in the process of developing remediation plans, or
are compliant. MKS anticipates further assessment to continue through March 1999
and plans to conduct reviews at that time. A remediation plan is expected to be
in place by June 1999 with all critical third-parties achieving satisfactory
compliance by August 1999. This phase of the Year 2000 project is currently on
schedule.
 
  Costs
 
     MKS's costs to date associated with assessment, remediation and testing
activities concerning the Year 2000 problem have been approximately $1,500,000.
MKS estimates that an additional $1,000,000, the major portion of which will be
capitalized and expensed over the life of the assets, will be required to
complete the replacement or modification of its facilities, manufacturing
equipment, computer software and products and to address the noncompliance of
key third-parties. MKS has funded and will continue to fund these activities
principally through cash provided by operations and existing leasing lines of
credit. It is not possible for MKS to completely estimate the costs incurred in
its remediation effort as many of its employees have focused and will continue
to focus significant efforts in evaluating MKS's Year 2000 state of readiness
and in remediating problems that have arisen, and will continue to arise, from
such evaluation.
 
  Contingency Plan
 
     To date, MKS has not formulated contingency plans related to the failure of
its or a third-party's Year 2000 remediation efforts. Contingency plans for the
failure to implement compliance procedures have not been completed because it is
the intent of MKS to complete all required modifications and to test
modifications thoroughly prior to December 31, 1999. However, as discussed
above, MKS is engaged in ongoing assessment, remediation and testing activities
and the internal results as well as the responses received from third-parties
will be taken into account in determining the nature and extent of any
contingency plans if necessary.
 
                                       26
<PAGE>   30
 
                                    BUSINESS
 
     MKS is a leading worldwide developer, manufacturer and supplier of
instruments and components used to measure, control and analyze gases in
semiconductor manufacturing and similar industrial manufacturing processes. MKS
offers a comprehensive line of products which are used to manufacture, among
other things:
 
- semiconductors
- flat panel displays
- magnetic and optical storage devices and media, including:
  -- compact disks
  -- hard disk storage devices
  -- magnetic devices for reading disk data
  -- digital video disks
  -- optical storage disks (laser readable disks)
 
- solar cells which convert light into electrical current
- fiber optic cables for telecommunications
- optical coatings (such as eyeglass coatings)
- coatings for architectural glass
- hard coatings to minimize wear on cutting tools
- diamond thin films
 
Our products include:
 
- instruments used to measure, control and analyze:
 
  -- gas pressure
 
  -- gas flow
 
  -- gas composition
 
- vacuum technology products:
 
  -- vacuum gauges
 
  -- vacuum valves and components
 
     For over 25 years, MKS has focused on satisfying the needs of semiconductor
capital equipment manufacturers and semiconductor device manufacturers and has
established long-term relationships with many of its customers. MKS has over
4,000 active customers worldwide (all of which purchased products during 1998)
including:
 
     - semiconductor capital equipment manufacturers
 
     - semiconductor device manufacturers
 
     - industrial manufacturing companies
 
     - university, government and industrial research laboratories
 
     MKS's customers include Applied Materials, Inc., Lam Research Corporation,
Tokyo Electron, Ltd., Air Products and Chemicals, Inc. and Motorola Inc. MKS
sells its products primarily through its sales force which consists of 118
employees in 22 offices in France, Germany, Japan, Korea, The Netherlands,
Singapore, Taiwan, the United Kingdom and the United States.
 
INDUSTRY BACKGROUND
 
     In the past 40 years, significant advances in materials science and
processing technologies have made possible the manufacture of products ranging
from highly complex microprocessor chips to simple but effective airtight
coatings for food packaging. In many materials processing applications, specific
gas mixtures at precisely controlled pressures are used:
 
     - to create and maintain the required process atmosphere
 
     - as a source of materials to be deposited on a substrate (for example, a
       silicon wafer)
 
     - to remove (or etch) materials from a substrate to form a circuit pattern
 
     The largest commercial application employing materials science and
processing technologies is the manufacture of semiconductors. Worldwide
semiconductor sales have increased as the use of semiconduc-
 
                                       27
<PAGE>   31
 
tors has expanded beyond personal computers and computer systems to a wide array
of additional applications such as telecommunications and data communications
systems, automotive products, consumer goods, medical products and household
appliances. In large part, this growth has been facilitated by the ability of
semiconductor device manufacturers to produce increasingly fast, more complex,
higher performance semiconductors while steadily reducing cost per function,
power consumption requirements and size of these products to meet end-user and
system designer requirements. These improvements in the ratio of price to
performance have been enabled by advancements in semiconductor processing
technologies, which have facilitated the ability to reduce circuit pattern sizes
and subsequently increase the number of individual semiconductor circuits on a
silicon wafer. These trends have driven the need for increasingly complex and
sophisticated semiconductor device manufacturing processes, process equipment
and process controls.
 
  Semiconductor Manufacturing Process
 
     The beginning of the semiconductor manufacturing process, or front-end
wafer processing, requires hundreds of process steps involving the controlled
application of materials on silicon wafers to form circuit patterns. These
process steps take place within a process chamber, which provides a controlled
environment for the fabrication of semiconductor devices. Most of the key
front-end processes used in the production of semiconductors require precise
automatic control of gas pressure, flow and composition in the process chamber.
 
     To ensure the integrity and performance of the manufacturing process,
semiconductor device manufacturers require sophisticated instruments that can
provide precise automated control of all major process variables within the
process chamber. The process steps required to produce circuit patterns involve
the control of multiple gases flowing into the process chamber at specified
intervals, and at controlled pressure and vacuum levels. In a typical process
step, the process chamber is evacuated to a base pressure established by a
vacuum pumping system and measured with vacuum gauges. Automatic shut-off valves
are sequenced to protect pumps and process instruments from exposure to
atmospheric pressure. Chamber leak integrity may be checked by gas analyzers
scanning for the presence of undesirable atmospheric gases or water vapor. Mass
flow controllers automatically control the flow rates of multiple gases into the
process chamber. Simultaneously, the automatic pressure control system for the
process chamber measures the pressure in the chamber and controls it at the
desired level by electronically adjusting the position of a control valve
located between the process chamber and the vacuum pump. Downstream of the
process chamber, heated lines, particle traps, and vacuum valves and switches
are used to prevent contamination of the process chamber as a result of the
backstream of particles and exhaust gases back into the process chamber. This
improves circuit quality, reduces maintenance and prolongs vacuum pump life.
 
     The front-end process steps which involve gases include deposition, etch,
strip, clean, ion implantation, rapid thermal processing and diffusion.
 
     Deposition involves the formation of several layers of conducting,
semiconducting and insulating thin films on the surface of a wafer or substrate.
The two principal methods of film deposition are physical vapor deposition,
which is used primarily to deposit conductive metal layers, and chemical vapor
deposition, which is used primarily to deposit semiconducting and insulating
thin films. In the physical vapor deposition process, wafers are typically
placed in a process chamber where solid sources of film materials mounted in the
chamber are vaporized onto the wafer surface at precisely controlled pressures
and temperatures. In the chemical vapor deposition process, a specially designed
gas or vaporized liquid material is introduced into a pressure and temperature
controlled process chamber containing the wafers. The gases interact with the
wafer surface to form a semiconducting or insulating layer. The pressure in the
process chamber during the deposition process and the mixture of deposition
gases must be precisely controlled to achieve uniform film thickness and
composition.
 
     The etching process creates the line-widths and other feature sizes which
form the circuit patterns of integrated circuits. To produce specified
line-widths, manufacturers typically employ plasma etching
 
                                       28
<PAGE>   32
 
techniques, which use gases that chemically react with unprotected portions of
the wafer to create the thinly etched features that form the circuit patterns.
The pressure in the etch chamber and the mixture of etchant gases must be
precisely controlled to achieve the specified side wall angle and ratio of
line-widths to depths. Stripping and cleaning are etching processes used to
prepare the wafer surface for further processing steps.
 
     In the ion implantation process, positively charged atoms (or ions) of
certain materials are formed in minuscule quantities from gases introduced into
a chamber on the implantation tool. The ions are generated in the chamber and
are accelerated into the silicon wafer. The energy of acceleration implants the
ion beneath the surface of the silicon, altering electrical characteristics of
the silicon. The flow rates of the gases into the ion chamber and the pressure
in the ion chamber must be precisely controlled to create and maintain the ion
density required to achieve desired electrical characteristics.
 
     Rapid thermal processing and diffusion typically involve raising the
semiconductor wafer to elevated temperatures in order to modify the properties
of a material or electronic circuit. These processes are often performed in a
precisely controlled process gas or vacuum environment.
 
     The pressures used in semiconductor manufacturing processes range from as
low as one trillionth of atmospheric pressure to as high as two hundred times
atmospheric pressure. The following table shows the wide range of pressures
required for typical semiconductor manufacturing processes:
 
    [PRESSURE RANGES OF TYPICAL SEMICONDUCTOR MANUFACTURING PROCESSES CHART]
[This table graphically depicts, using graybars, the gas pressure ranges, from
one trillionth of atmospheric pressure (10(-9) Torr) to two hundred times
atmospheric pressure (152,000 Torr), used in various typical semiconductor
manufacturing process steps, (Gas Distribution, Atmospheric Chemical Vapor
Deposition, Sub-atmospheric Chemical Vapor Deposition, Low Pressure Chemical
Vapor Deposition, Plasma Etching and Cleaning, Physical Vapor Deposition and Ion
Implantation).]
 
     Etching and deposition steps are repeated many times in the fabrication of
a semiconductor circuit and require varying flow rates, pressures and gases. A
typical process step uses from three to five different gases. The amount of time
that the semiconductor processing tool is available for processing (or uptime),
the ratio of acceptable circuits to total circuits processed (or yield), and the
number of wafers that can be processed per hour (or throughput), depend in major
part upon:
 
     - precise repeatable measurement and control of the specific gas pressure,
       flow rates and composition
 
     - the maintenance of the vacuum integrity of the process chamber
 
     - the prevention of wafer contamination from particles entering the chamber
 
                                       29
<PAGE>   33
 
     Pressure variations of as little as one one-hundred-thousandth of
atmospheric pressure can change process yields significantly and errors in gas
flow rates and composition may impair circuit performance. Atmospheric
contamination and particle contamination can produce defects that significantly
reduce wafer yields and the time required to remove contaminates reduces uptime
and throughput. The speed of response and precision of the automatic control
systems directly affects uptime, throughput of wafers and process yields.
 
  Other Similar Industrial Manufacturing Processes
 
     Many of the same processes of deposition, etch, strip, clean, ion
implantation, rapid thermal processing and diffusion used to manufacture
semiconductors are also used to manufacture: flat panel displays; magnetic and
optical storage devices and media; solar cells; fiber optic cables for
telecommunications; optical coatings; coatings for architectural glass; hard
coatings to minimize wear on cutting tools; and diamond thin films.
 
  Trends in Semiconductor Manufacturing
 
     The ability of semiconductor device manufacturers to offer integrated
circuits with smaller geometries and greater functionality at higher speeds
requires continuous improvements in semiconductor process equipment and process
controls. The transition to smaller circuit patterns, such as 0.18 micron and
smaller line-widths, requires more process steps. It is also leading to the
introduction of new materials such as copper for conductors and a whole new
class of organic and inorganic materials for insulators (dielectrics). These in
turn require new technologies for delivery of gases and vapors to the process
chamber. In addition, the introduction of advanced processes such as high
density plasma is leading to a need for lower pressures, which are more
difficult to measure and control than higher pressures. These trends, along with
increased wafer sizes, which result in higher circuit value per wafer, are
leading to the need for increased sophistication of semiconductor processing
equipment, a heightened emphasis on uptime, yield and throughput and the need
for more precise process controls. As a result, the design and performance of
instruments that control pressure or the flow of gases, or analyze the
composition of gases, are becoming even more critical to the semiconductor
manufacturing process.
 
     To address the increasing complexity of semiconductor devices,
semiconductor device manufacturers typically develop processes to create
particular device features using specific manufacturing equipment. The process
for each feature is then documented and may be subsequently replicated for use
in multiple fabrication facilities around the world. The precision,
repeatability and reliability of the measurement and control instrumentation
used for each process is critical to providing uptime, high yield and throughput
on manufacturing equipment at all facilities employing such processes.
Semiconductor device manufacturers are placing increasing importance on uptime,
yield, throughput and process consistency throughout their facilities to
minimize:
 
     - capital equipment expenditures
     - facility construction costs
     - overall ongoing operating costs
 
     The increasing sophistication of semiconductor devices requires an increase
in the number of components and subsystems used in the design of semiconductor
manufacturing process tools. To reduce manufacturing complexity, improve quality
and reliability and ensure long-term service and support, semiconductor capital
equipment manufacturers and semiconductor device manufacturers are increasingly
seeking to establish relationships with a smaller group of broad-based suppliers
that meet their needs on a worldwide basis and provide:
 
     - advanced technological capabilities to address the increasing
       complexities of the semiconductor manufacturing process
 
     - instrument and component designs that ensure repeatable processes around
       the world
 
     - value-added, integrated instruments and components
                                       30
<PAGE>   34
 
     - a worldwide sales, service and support infrastructure
 
MKS SOLUTION AND STRATEGY
 
     MKS's objective is to be the leading worldwide supplier of instruments and
components used to measure, control and analyze gases in semiconductor and other
advanced thin-film materials processing applications and to help semiconductor
device manufacturers achieve improvements in their return on invested capital.
The principal elements of MKS's solution and strategy to achieve this objective
are set forth below:
 
     Technology Leadership.  MKS's products incorporate leading-edge
technologies to control and monitor increasingly complex gas-related
semiconductor manufacturing processes, thereby enhancing uptime, yield and
throughput which can improve the investment return on capital equipment and
facilities. The instruments and components in MKS's product offering provides
the required capabilities through:
 
     - high precision operation over the extreme and variable pressure ranges
       required for semiconductor processes
 
     - precise, consistent and repeatable measurement and control performance
       that allows processes to be replicated in manufacturing facilities around
       the world
 
     - advanced control technologies which enhance uptime, yield and throughput
 
     - multiple, diverse and alternative technologies for controlling the flow
       rate and composition of gases and vapors needed for new classes of
       advanced materials for next generation semiconductor devices
 
     - innovative vacuum technology subsystems that reduce atmospheric and
       particle contamination, thereby enhancing uptime, yield and throughput
 
     MKS has 47 U.S. patents and 10 pending U.S. patent applications. MKS's
products have continuously advanced as its customers' needs have evolved. MKS
seeks to extend its technological leadership by applying its expertise in
vacuum, pressure, flow and gas composition measurement control and analysis
technologies to develop advanced products that meet the critical gas-related
process requirements of semiconductor and advanced thin-film materials
manufacturers. MKS has introduced technological innovations including
corrosion-resistant pressure and vacuum sensors, automatic pressure and vacuum
control systems, and compact single unit gas composition analyzers to replace
bulky multi-component systems. MKS has developed, and continues to develop, new
products to address emerging industry trends such as the transition from the use
of 200mm wafers to 300mm wafers and the shrinking of integrated circuit
line-widths from 0.25 micron to 0.18 micron and smaller. MKS has supplied pre-
production equipment to be incorporated into semiconductor capital equipment
manufacturers' 300mm pre-production semiconductor wafer process equipment, which
is expected to be included in pilot production lines of device manufacturers.
MKS has also developed equipment that is being used by research laboratories for
semiconductor devices using less than 0.18 micron line-widths. In addition, MKS
has developed, and continues to develop, materials delivery systems for new
classes of materials, such as copper for conductors, titanium nitride for
barriers and a class of organic and inorganic dielectric materials that are
beginning to be used in small geometry manufacturing. MKS also has been a leader
in making its products compatible with emerging digital network standards, such
as DeviceNet, for enabling components used in semiconductor manufacturing
processes to transmit self-diagnostic and other information on a digital host
network while reducing system complexity and space requirements. MKS aligns its
research and development program to the Semiconductor Industry Association
Technology Roadmap (which identifies technological developments, as well as
obstacles, required to produce future generations of semiconductor devices), to
ensure that MKS maintains its leading-edge position and, through its association
with leading universities to anticipate future semiconductor production needs
three to seven years in advance.
 
     Comprehensive Product Offering.  MKS currently offers, and intends to
continue to offer, the widest range of pressure and vacuum measurement and
control products serving the semiconductor manufacturing
 
                                       31
<PAGE>   35
 
and similar industrial manufacturing industries. MKS offers a full line of
products including a wide range of gas pressure, flow and composition analysis
measurement and control instruments and vacuum gauges, valves and components.
Since the development of its original Baratron laboratory-based instrument in
1961, MKS has continuously enhanced and expanded its product offerings in
response to the evolving needs of its customers. For example, MKS recently
introduced the Micro Baratron instrument, a significantly smaller version of its
pressure measurement product, and a new low vapor pressure material delivery
system. MKS plans to introduce new products throughout 1999, including a line of
mass flow calibrators and process monitoring hardware and software for residual
gas analysis. MKS plans to continue to expand its product lines through both
internal development and acquisitions of complementary businesses, products and
technologies. MKS's comprehensive product offering enables MKS to meet a broad
range of customer needs and provide a single source of solutions for
semiconductor device and semiconductor capital equipment manufacturers as they
seek to consolidate their supplier relationships to a smaller select group.
 
     MKS's products are designed to meet the increasingly complex needs of its
customers. With the increasing sophistication of semiconductor capital equipment
leading to an increasing number of components and subsystems in semiconductor
manufacturing process tools, MKS delivers products that reduce equipment size
and improve process performance. MKS's subsystem products combine several
components into single integrated solutions. MKS's integrated solutions deliver
higher performance at a lower cost than similar subsystems built from discrete
components. Additionally, MKS's integrated solutions are easier to install and
configure, further reducing the overall cost to the customer.
 
     Close Working Relationships with Customers.  MKS has focused on satisfying
the needs of semiconductor device manufacturers and semiconductor capital
equipment manufacturers for over 25 years and has established long-term
relationships with many of its customers. MKS works with its customers at the
pre-design and design stage to identify and respond to their requests for
current and future generations of products. These close working relationships
allow MKS to understand and address the cost and performance expectations of its
customers. MKS plans to enhance its relationships with its major customers and
identify opportunities to develop similar relationships with additional
semiconductor capital equipment manufacturers and semiconductor device
manufacturers.
 
     Applications in Related Markets.  MKS is leveraging its accumulated
expertise in the semiconductor industry by developing products for applications
that employ production processes similar to semiconductor fabrication processes
in their reliance upon gases and vacuum-based production technologies.
Applications served by MKS outside the semiconductor industry include vacuum
freeze-drying of pharmaceuticals and foods, sterilization of medical appliances,
and applications that involve advanced thin-film manufacturing such as flat
panel displays, magnetic and optical storage media, solar cells, fiber optic
cables and optical coatings. MKS plans to continue to identify and develop
products that address advanced materials processing applications where gas
management plays a critical role.
 
     Global Infrastructure and World Class Manufacturing Capabilities.  As
semiconductor device manufacturers have become increasingly global, they have
required that suppliers offer comprehensive local repair service and close
customer support. Manufacturers require close support to enable them to
calibrate, repair, modify, upgrade and retrofit their equipment to improve
process consistency, uptime, yield and throughput. To meet these market
requirements, MKS maintains a global sales and support organization with 22
offices worldwide. MKS currently manufactures its products at nine facilities in
the United States and abroad. MKS continues to devote significant resources to
expand and maintain its worldwide production and service capabilities to meet
the global demand for gas measurement, control and analysis instruments and
vacuum technology components. MKS opened a sales and support facility in
Singapore in 1998 and during the year ending December 31, 1999 plans to add
manufacturing capabilities to its Austin, Texas facility and further equip its
cleanroom facilities in Andover and Methuen, Massachusetts.
 
     MKS believes that the ability to manufacture reliable instruments and
components in a cost-effective manner is critical to meet the demanding
just-in-time delivery requirements of semiconductor capital equipment
manufacturers and semiconductor device manufacturers. MKS's worldwide production
and
 
                                       32
<PAGE>   36
 
manufacturing facilities provide MKS with the ability to manufacture reliable
gas measurement, control and analysis instruments and components in a timely and
cost-effective manner. With a total of approximately 250,000 square feet of
manufacturing capacity in five locations in the United States and four others in
Germany, Japan, the United Kingdom and Korea, MKS has implemented world class
practices in quality and delivery techniques. MKS's manufacturing facilities in
the United States, the United Kingdom and Germany are ISO 9001 certified.
 
PRODUCTS
 
     MKS offers a full line of instruments and components that are used to
measure, control and analyze gases in semiconductor manufacturing and other
advanced thin-film manufacturing processes. MKS supplies products in two
principal areas:
 
     - measurement and control instrumentation products for gas pressure, flow
       and composition analysis
 
     - vacuum gauges, valves and components
 
     These products are covered by 47 U.S. patents and 10 pending U.S. patent
applications.
 
     The following schematic shows where MKS products are used in a typical
semiconductor manufacturing process.
 
[CHART]
 
 1. Ultraclean Mini-Baratron Pressure Transducer and Local Display Module
 
 2. Automatic Pressure Controller/ Regulator
 
 3. Thermal Mass Flow Controller or Pressure-Based Mass Flow Controller
 
 4. Gas Box Rate-of-Rise In-Situ Calibrator
 
 5. Control and Shut-Off Valves
 
 6. Direct Liquid Injection -- Controller
 
 7. Direct Liquid Injection -- Micropump
 
 8. Direct Liquid Injection -- Vaporizer
 
 9. RGA Mass Spectrometer with Software
 
10. Baratron Pressure Switch
 
11. In-Situ Diagnostics Access Valve
 
12. Baratron Pressure Transducer
 
13. Automatic Downstream Valve Controller
 
14. Vacuum Foreline Virtual Wall
 
15. In-Line Valve
 
16. Convection Pirani Gauge
 
17. Throttle Valve
 
18. Cold Cathode High Vacuum Gauge or Hot Cathode High Vacuum Gauge
 
19. In-Line Trap
 
20. Foreline/Exhaust Line Heaters
 
  Measurement and Control Instrumentation Products
 
     MKS designs and manufactures a wide range of gas pressure, flow and
composition analysis measurement and control instrumentation. Each product line
consists of products which are designed for a variety of pressure, flow and
composition ranges and accuracies.
 
     Baratron Pressure Measurement Products.  MKS's Baratron pressure
measurement products are high precision, pressure measurement instruments. MKS
has five Baratron product families that range from
 
                                       33
<PAGE>   37
 
high accuracy digital output instruments to simple electronic switches. These
products are typically used to measure the pressure of the gases being
distributed upstream of the process chambers, to measure process chamber
pressures and to measure pressures between process chambers, vacuum pumps and
exhaust lines. Baratron instruments measure pressures at ranges from two hundred
times atmospheric pressure to one billionth of atmospheric pressure. MKS
believes it offers the widest range of gas pressure measurement instruments in
the semiconductor and advanced thin-film materials processing industries.
 
     A key feature of Baratron instruments is the ability to measure pressure
independent of gas composition, which is critical for precise pressure control
of semiconductor processes that involve gas mixtures. In these processes, there
is a need to control both pressure and gas mixture, but the pressure measurement
instrument must measure only the pressure of the sum of the gases in the
chamber, independent of gas composition. The Baratron instruments enable users
to achieve a highly precise, accurate and repeatable measurement of gas
pressure. Pressure measurement, independent of gas composition, is also useful
in evacuation (removal of atmospheric gases) and backfilling (introduction of
specific amounts of several gases) applications, such as fluorescent bulb
manufacturing and gas laser fabrication.
 
                                       34
<PAGE>   38
 
     The following table shows MKS's principal Baratron pressure measurement
product lines:
 
                     BARATRON PRESSURE MEASUREMENT PRODUCTS
 
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
    PRODUCT LINES        TYPICAL APPLICATIONS        DESCRIPTION        RANGES OF LIST PRICES
    -------------        --------------------        -----------        ---------------------
<S>                     <C>                     <C>                     <C>
High precision, high    Chemical Vapor          Instruments with        $2,900-$6,400
accuracy pressure and   Deposition              built-in temperature
vacuum measurement                              stabilization
instruments             Physical Vapor          features, for high
                        Deposition              precision, high
                                                accuracy and high
                        Etch, Strip, Clean      temperature operation
                        Pressure Calibration
----------------------------------------------------------------------------------------------
General purpose         Chemical Vapor          Rugged instruments      $450-$4,200
pressure and vacuum     Deposition              with and without
measurement                                     built-in temperature
instruments             Physical Vapor          stabilization
                        Deposition              features, for
                                                reliable, precise and
                        Etch, Strip, Clean      accurate process
                                                measurement
----------------------------------------------------------------------------------------------
Ultra-clean high        Gas Distribution        Instruments with        $550-$1,050
pressure and vacuum                             ultra- clean surfaces
measurement             Chemical Vapor          exposed to gas, for
instruments             Deposition              precise, high purity
                                                applications
                        Etch
----------------------------------------------------------------------------------------------
General purpose "MINI"  Chemical Vapor          Small footprint         $650-$1,400
pressure and vacuum     Deposition              instruments for
measurement                                     precise, accurate,
instruments             Etch, Strip, Clean      general purpose
                                                process measurement
----------------------------------------------------------------------------------------------
Electronic pressure     Physical Vapor          Economical, stable      $350-$750
and vacuum switches     Deposition              instrument providing
                                                "go/no-go" output for
                        Chemical Vapor          precise pressure trip-
                        Deposition              points and alarms
                        Etch
----------------------------------------------------------------------------------------------
</TABLE>
 
     MKS's list prices for its Baratron measurement products vary depending upon
precision, accuracy, pressure range, operating temperature range, stability and
gas purity specifications.
 
     Automatic Pressure Control Products.  MKS's automatic pressure control
products consist of analog and digital automatic pressure and vacuum control
electronic instruments and valves. These products enable precise control of
process pressure by electronically actuating valves which control the flow of
gases in and out of the process chamber to minimize the difference between
desired and actual pressure in the chamber. The electronic controllers vary from
simple analog units with precise manual tuning capability to state-of-the-art
self-tuning, digital signal processing controllers. The valve products vary from
small gas inlet valves to large exhaust valves.
 
                                       35
<PAGE>   39
 
     In most cases, MKS's Baratron pressure measurement instruments provide the
pressure input to the automatic pressure control device. Together, these
components create an integrated automatic pressure control system. MKS's
pressure control products can also accept inputs from other measurement
instruments, enabling the automatic control of gas input or exhaust based on
parameters other than pressure.
 
                      PRESSURE AND VACUUM CONTROL PRODUCTS
 
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
    PRODUCT LINES        TYPICAL APPLICATIONS        DESCRIPTION        RANGES OF LIST PRICES
    -------------        --------------------        -----------        ---------------------
<S>                     <C>                     <C>                     <C>
Automatic throttle      Chemical Vapor          Analog controllers,     $800-$2,650
control valve           Deposition              self- tuning digital
controllers                                     controllers and
                        Etch, Strip, Clean      displayless self-
                                                tuning controllers
----------------------------------------------------------------------------------------------
Throttle control        Chemical Vapor          Non-sealing and         $1,400-$8,800
valves                  Deposition              sealing valves; high
                                                speed sealing throttle
                        Etch                    control valves;
                                                automatic,
                                                microprocessor-based
                                                smart throttle control
                                                valves
----------------------------------------------------------------------------------------------
Automatic solenoid      Chemical Vapor          Stand-alone control     $1,850-$2,900
control valve           Deposition              electronics packages
controllers                                     or integrated sensor,
                        Etch                    valve and control
                                                electronics packages
                        Ion Implantation
                        Backside Wafer Cooling
----------------------------------------------------------------------------------------------
Solenoid control        Etch                    Elastomer and           $450-$1,500
valves                                          all-metal-sealed
                        Ion Implantation        solenoid control
                                                valves
                        Backside Wafer Cooling
----------------------------------------------------------------------------------------------
</TABLE>
 
     MKS has recently introduced a line of integrated pressure controllers that
combine the functions of its Baratron pressure measurement instrument, flow
measurement instrument, control electronics and valve into a four-inch long
instrument which can be placed directly on a gas line to control pressure
downstream of the instrument while indicating the gas flow rate. This addresses
the need for smaller components, saving valuable clean room space.
 
     Flow Measurement and Control Products.  MKS's flow measurement products
include gas, vapor and liquid flow measurement products based upon thermal
conductivity, pressure and direct liquid injection technologies. The flow
control products combine the flow measuring device with valve control elements
based upon solenoid, piezo-electric and piston pump technologies. The products
measure and automatically control the mass flow rate of gases and vapors into
the process chamber. MKS's broad product lines include products that allow the
precise, automatic flow control of inert or corrosive gases, the automatic
control of low vapor pressure gases and heated liquid source materials, and the
automatic control of delicate, advanced technology liquid sources and vaporized
solid sources for next generation devices.
 
                                       36
<PAGE>   40
 
     MKS's line of thermal-based mass flow controllers, which control gas flow
based on the molecular weight of gases, includes all-metal-sealed designs and
ultra-clean designs for semiconductor applications, and general purpose
controllers for applications where all-metal-sealed construction is not
required. MKS has also developed pressure-based mass flow controllers, based on
Baratron pressure instrument measurement and control technology, which use flow
restrictors in the gas line to transform pressure control into mass flow
control.
 
                     FLOW MEASUREMENT AND CONTROL PRODUCTS
 
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
    PRODUCT LINES        TYPICAL APPLICATIONS        DESCRIPTION        RANGES OF LIST PRICES
    -------------        --------------------        -----------        ---------------------
<S>                     <C>                     <C>                     <C>
Direct liquid           Chemical Vapor          Pumps and vaporizes     $8,500-$24,900
injection system        Deposition              liquid precursors for
                                                metals and dielectrics
                                                into process chamber
----------------------------------------------------------------------------------------------
Gas box rate of rise    In-situ Calibration of  Measures pressure       $8,100-$11,800
calibrator              Mass Flow Controllers   increase with time in
                                                a known volume
----------------------------------------------------------------------------------------------
Pressure-based vapor    Chemical Vapor          Measures and controls   $4,900-$12,400
delivery systems        Deposition              flow of low pressure
                                                vapors into chamber
----------------------------------------------------------------------------------------------
Pressure-based mass     Chemical Vapor          Gas flow controller     $2,700
flow controllers        Deposition              consisting of Baratron
                                                sensor, control valve,
                        Ion Implantation        orifice and
                                                electronics
----------------------------------------------------------------------------------------------
Ultra-clean,            Chemical Vapor          Gas flow controller     $1,400-$9,500
all-metal-sealed        Deposition              consisting of sensor,
thermal mass flow                               control valve and
controllers             Physical Vapor          electronics
                        Deposition
                        Etch
----------------------------------------------------------------------------------------------
General purpose         Chemical Vapor          Gas flow controller     $1,050-$2,450
elastomer-sealed mass   Deposition              consisting of sensor,
flow controllers                                control valve and
                        Etch, Strip, Clean      electronics
----------------------------------------------------------------------------------------------
</TABLE>
 
     Certain new materials required for the next generation of semiconductor
devices are difficult to control using traditional thermal mass flow technology.
To control these new materials, MKS has designed a direct liquid injection
subsystem which pumps a precise volume of liquid into a vaporizer, which in turn
supplies a controlled flow of vapor into the process chamber. The direct liquid
injection subsystem pump and vaporizer are presently used principally for
research and development applications for next generation semiconductor device
conductors, diffusion barriers and insulators, such as copper, titanium nitride
and dielectric materials.
 
     MKS's flow measurement products also include an in-situ calibration system
which independently measures mass flow and compares this measurement to that of
the process chamber mass flow controller. The demand for the MKS calibration
system is driven by the increasingly stringent process control needs of the
semiconductor industry and the need to reduce costly downtime resulting from
stopping operations to address mass flow controller problems.
 
     Gas Composition Analysis Instruments.  MKS's gas analysis instruments are
sold primarily to the semiconductor industry. The residual gas analysis product
lines include a quadrapole (four rods) mass spectrometer (a device which
separates gases based on molecular weight) sensor with built-in electronics
 
                                       37
<PAGE>   41
 
to analyze the composition of background and process gases in the process
chamber. MKS's ORION process monitoring system is a sophisticated quadrapole
mass spectrometer process analyzer for statistical process monitoring of
manufacturing processes operating from very low pressures to atmospheric
pressure. These instruments are provided both as portable laboratory systems and
as process gas monitoring systems used in the diagnosis of semiconductor
manufacturing process systems. The gas monitoring systems can indicate
out-of-bounds conditions, such as the presence of undesirable atmospheric gases,
water vapor or out-of-tolerance amounts of specific gases in the process
chamber, enabling operators to diagnose and repair faulty equipment. MKS's gas
sampling systems provide a turn-key solution for withdrawing gases from chambers
at relatively high pressures for introduction into the low pressure gas
analyzers. Next generation semiconductor manufacturing processes, with smaller
circuit patterns and larger wafer sizes, are expected to require sophisticated
gas analysis instruments and/or monitoring equipment to ensure tighter process
control and earlier diagnosis of equipment malfunction.
 
  Vacuum Technology Products
 
     MKS designs and manufactures a wide variety of vacuum technology products,
including vacuum gauges, vacuum valves and components.
 
     Vacuum Gauging Products
 
     MKS offers a wide range of vacuum instruments consisting of vacuum
measurement sensors and associated power supply and readout units. These vacuum
gauges measure phenomena that are related to the level of pressure in the
process chamber and downstream of the process chamber between the chamber and
the pump. Unlike Baratron pressure measurement instruments, vacuum gauges do not
measure pressure directly. These gauges are used to measure vacuum at pressures
lower than those measurable with a Baratron pressure measurement instrument or
to measure vacuum in the Baratron pressure measurement instrument range where
less accuracy is required. MKS's indirect pressure gauges use thermal
conductivity and ionization gauge technologies to measure pressure from
atmospheric pressure to one trillionth of atmospheric pressure. MKS's Baratron
pressure measurement instruments, together with its vacuum gauges, are capable
of measuring the full range of pressures used in semiconductor and other
thin-film manufacturing processes from two hundred times atmospheric pressure to
one trillionth of atmospheric pressure.
 
     MKS also manufactures a wide range of vacuum gauge instruments in which the
associated electronics are packaged with the vacuum sensor, reducing panel space
and installation cost. MKS offers both analog and digital versions of these
vacuum gauge transducers.
 
     Vacuum Valves and Components
 
     MKS's vacuum valves are used on the gas lines between the process chamber
and the pump downstream of the process chamber for chemical vapor deposition,
physical vapor deposition, ion implantation and etch processes. MKS's vacuum
components consist of fittings, flanges, traps and heated lines that are used
downstream from the process chamber to provide leak free connections and to
prevent condensable materials from depositing particles near or back into the
chamber. The manufacture of small circuit patterns cannot tolerate contamination
from atmospheric leaks or particles. MKS's vacuum components are designed to
minimize such contamination and thus increase yields and uptimes.
 
                                       38
<PAGE>   42
 
                  VACUUM GAUGES, VALVES AND COMPONENT PRODUCTS
 
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
    PRODUCT LINES        TYPICAL APPLICATIONS        DESCRIPTION        RANGES OF LIST PRICES
    -------------        --------------------        -----------        ---------------------
<S>                     <C>                     <C>                     <C>
Cold cathode and hot    Physical Vapor          Electronic gauges to    $600-$6,200
filament vacuum gauges  Deposition              measure pressure down
                                                to one trillionth of
                        Ion Implantation        atmospheric pressure
                        Etch
----------------------------------------------------------------------------------------------
Convection gauges       Physical Vapor          Electronic gauges to    $200-$700
                        Deposition              measure from one
                                                atmosphere down to one
                        Chemical Vapor          millionth of
                        Deposition              atmospheric pressure
                        Etch, Strip, Clean
----------------------------------------------------------------------------------------------
Right-angle and         Physical Vapor          High vacuum rapid       $250-$4,500
in-line shut-off        Deposition              action poppet valves
valves
                        Chemical Vapor
                        Deposition
                        Etch, Strip, Clean
                        Ion Implantation
----------------------------------------------------------------------------------------------
Vacuum traps            Chemical Vapor          Contaminant particle    $1,800-$4,600
                        Deposition              trap
                        Etch
----------------------------------------------------------------------------------------------
Other vacuum            Physical Vapor          Flanges, fittings and   $50-$3,050
components              Deposition              heated lines
                        Chemical Vapor
                        Deposition
                        Etch
                        Ion Implantation
----------------------------------------------------------------------------------------------
</TABLE>
 
MARKETS AND APPLICATIONS
 
     MKS estimates that approximately 60% of its sales in 1998 were made to the
semiconductor industry. MKS's products are also used in other markets and
applications including the manufacture of, among other things:
     - flat panel displays
     - magnetic and optical storage devices and media, including:
      -- compact disks
      -- hard disk storage devices
      -- magnetic devices for reading disk data
      -- digital video disks
      -- optical storage disks (laser readable disks)
     - solar cells which convert light into electrical current
     - fiber optic cables for telecommunications
     - optical coatings (such as eyeglass coatings)
     - coatings for architectural glass
                                       39
<PAGE>   43
 
     - hard coatings to minimize wear on cutting tools
     - diamond thin films
 
     MKS sells its products primarily through its direct sales force which
consists of 118 employees in 22 offices in France, Germany, Japan, Korea, The
Netherlands, Singapore, Taiwan, the United Kingdom and the United States. This
direct sales force is supplemented by sales representatives and agents in
Canada, China, India, Israel, and Italy and in selected U.S. cities. The major
markets for MKS's products include:
 
  Semiconductor Manufacturing
 
     MKS's products are sold to semiconductor capital equipment manufacturers
and semiconductor device manufacturers. MKS's products are used in the major
front-end process technologies such as physical vapor deposition, chemical vapor
deposition, etch and ion implantation and for process facility applications such
as gas distribution, clean room (room in which semiconductor manufacturing takes
place) pressure control and vacuum distribution. MKS anticipates that the
semiconductor manufacturing market will continue to account for a substantial
portion of its sales. While the semiconductor device manufacturing market is
global, the major semiconductor capital equipment manufacturers are concentrated
in the United States, Japan and Europe.
 
  Flat Panel Display Manufacturing
 
     MKS's products are used in the manufacture of flat panel displays, which
require the same or similar fabrication processes as semiconductor
manufacturing. The dominant fabrication process is chemical vapor deposition,
which uses the same or similar MKS products as chemical vapor deposition for
semiconductor manufacturing. MKS sells its products both to flat panel original
equipment manufacturers and to end-users in the flat panel display market. The
transition to larger panel size and higher definition is driving the need for
defect reduction which requires tighter process controls. The major
manufacturers for flat panel displays and flat panel display equipment are
concentrated in Japan.
 
  Magnetic and Optical Storage Devices and Media
 
     MKS's products are used in the manufacture of magnetic (data is stored and
read magnetically) and optical (data is read using laser technology) storage
media, compact disks, hard disks, data storage devices, and digital video or
versatile disks, typically in physical vapor deposition applications. The
transition to higher density storage capacity requires manufacturing processes
incorporating tighter process controls. While storage media manufacturing is
global, the major manufacturers are concentrated in Japan and the Asia-Pacific
region and storage media capital equipment manufacturers are concentrated in the
United States, Japan and Europe.
 
  Optical Fiber and Optical Coating
 
     MKS's products are used in optical fiber and optical thin-film coating
processes. MKS's products are sold both to coating equipment manufacturers and
to manufacturers of products made using optical thin-film coating processes.
Optical fibers used for data transmission are manufactured using chemical vapor
deposition processes similar to those used in semiconductor manufacturing. The
requirement for greater data transmission is driving the need for tighter
control of optical fiber coating processes. Optical thin films for eyeglasses,
solar panels and architectural glass are deposited using chemical vapor
deposition or physical vapor deposition in processes similar to those used in
semiconductor manufacturing. Optical fiber manufacturing and optical thin-film
processing are concentrated in the United States, Japan and Europe.
 
  Other Coating Markets
 
     MKS's pressure and flow measurement and control instruments are also used
in chemical vapor deposition and physical vapor deposition processes for the
application of thin films to harden tool bit surfaces, in the production of
diamond thin films, coatings for food container packaging and coatings for
jewelry and ornaments. The major equipment and process providers are
concentrated in the United States, Japan and Europe.
 
                                       40
<PAGE>   44
 
     MKS estimates that the flat panel display, magnetic and optical storage
media, optical fiber, optical coating markets and other coating markets
combined, accounted for approximately 12% and 14% of net sales for 1997 and
1998, respectively.
 
  Other Markets
 
     MKS's pressure measurement and control instruments and vacuum components
are used in plasma processes used to sterilize medical instruments, in vacuum
freeze drying of pharmaceuticals, foods and beverages, and in vacuum processes
involved in light bulb and gas laser manufacturing. MKS's products are also sold
to government, university and industrial laboratories for vacuum applications
involving research and development in materials science, physical chemistry and
electronics materials. The major equipment and process providers and research
laboratories are concentrated in the United States, Japan and Europe.
 
CUSTOMERS
 
     MKS has more than 4,000 active customers worldwide (all of which purchased
products during 1998), including semiconductor capital equipment manufacturers,
semiconductor device manufacturers, industrial manufacturing companies and
university, government and industrial research laboratories. MKS's largest
customers consist primarily of leading semiconductor capital equipment
manufacturers and semiconductor device manufacturers, including Applied
Materials, Inc., Lam Research Corporation, Tokyo Electron, Ltd., Air Products
and Chemicals, Inc. and Motorola Inc. In 1996, 1997, and 1998, sales to MKS's
top five customers accounted for approximately 26%, 32% and 24%, respectively,
of MKS's net sales. During the same periods, international sales represented
approximately 30.1%, 27.3% and 32.3% of total net sales, respectively. During
1998, Applied Materials, Inc. accounted for approximately 16% of MKS's net
sales. Applied Materials, Inc. purchases products from MKS under the terms of an
agreement, with no minimum purchase requirements, that expires in 2000.
 
SALES, MARKETING AND SUPPORT
 
     MKS's worldwide sales, marketing and support organization is critical to
its strategy of maintaining close relationships with semiconductor capital
equipment manufacturers and semiconductor device manufacturers. MKS sells its
products primarily through its direct sales force which consists of 118
employees in 22 offices in France, Germany, Japan, Korea, The Netherlands,
Singapore, Taiwan, the United Kingdom and the United States. This direct sales
force is supplemented by sales representatives and agents in Canada, China,
India, Israel, and Italy and in selected U.S. cities. MKS maintains a marketing
staff of 14 employees to identify customer requirements, assist in product
planning and specifications and to focus on future trends in the semiconductor
and other markets.
 
     As semiconductor device manufacturers have become increasingly sensitive to
the significant costs of system downtime, they have required that suppliers
offer comprehensive local repair service and close customer support.
Manufacturers require close support to enable them to repair, modify, upgrade
and retrofit their equipment to improve yields and adapt new materials or
processes. To meet these market requirements, MKS maintains a worldwide sales
and support organization with offices in 22 locations. Technical support is
provided by applications engineers located at offices in Arizona, California,
Colorado, Massachusetts, Oregon and Texas, as well as Canada, France, Germany,
India, Israel, Italy, Japan, Korea, The Netherlands, Singapore, Taiwan and the
United Kingdom. Repair and calibration services are provided at 14 service
depots located worldwide. MKS provides warranties from one to three years,
depending upon the type of product. In addition, MKS offers training programs
for its customers in a wide range of vacuum and gas processing technologies.
 
MANUFACTURING
 
     MKS believes that the ability to manufacture reliable gas management
instruments and components in a cost-effective manner is critical to meeting the
demanding requirements of semiconductor capital
 
                                       41
<PAGE>   45
 
equipment manufacturers and semiconductor device manufacturers. MKS monitors and
analyzes product lead times, warranty data, process yields, supplier
performance, field data on mean time between failures, inventory turns, repair
response time and other indicators so that it may continuously improve its
manufacturing processes. MKS has adopted a total quality management process.
MKS's manufacturing facilities in the United States, the United Kingdom and
Germany are ISO 9001 certified.
 
     MKS is devoting significant financial and management resources to maintain
and expand its worldwide production and service capabilities to meet the global
demand for gas management instruments and components. MKS believes that the
ability to manufacture reliable instruments and components in a cost-effective
manner is critical to meet the demanding just-in-time delivery requirements of
semiconductor capital equipment manufacturers and semiconductor device
manufacturers. Due to the short time between the receipt of orders and
shipments, MKS normally operates with a level of backlog that is not
significant. MKS currently manufactures its products at nine facilities in the
United States and abroad. MKS plans to add manufacturing capabilities in 1999 to
its Austin, Texas facilities and further equip its cleanroom facilities in
Andover and Methuen, Massachusetts.
 
     MKS's principal manufacturing activities consist of precision assembly,
test, calibration, welding and machining activities. MKS subcontracts a portion
of its assembly, machining and printed circuit board assembly and testing. All
other assembly, test and calibration functions are performed by MKS. Critical
assembly activities are performed in cleanroom environments at MKS's facilities.
 
RESEARCH AND DEVELOPMENT
 
     MKS's research and development efforts are directed toward developing and
improving MKS's gas management instruments and components for semiconductor and
advanced thin-film processing applications and identifying and developing
products for new applications for which gas management plays a critical role.
MKS has undertaken an initiative to involve its marketing, engineering,
manufacturing and sales personnel in the concurrent development of new products
in order to reduce the time to market for new products. MKS's employees also
work closely with its customers' development personnel. These relationships help
MKS identify and define future technical needs on which to focus its research
and development efforts. In addition, MKS participates in SEMI/SEMATECH, a
consortium of semiconductor equipment suppliers, to assist in product
development and standardization of product technology, and it supports research
at academic institutions targeted at advances in materials science and
semiconductor process development.
 
     As of December 31, 1998, MKS employed a research and development staff of
89 employees. In 1996, 1997 and 1998, MKS's research and development
expenditures were approximately $14.2 million, $14.7 million and $12.1 million,
respectively, representing approximately 8.3%, 7.8% and 8.7% of net sales,
respectively.
 
COMPETITION
 
     The market for MKS's products is highly competitive. Principal competitive
factors include historical customer relationships; product quality, performance
and price; breadth of product line; manufacturing capabilities; and customer
service and support. While MKS believes that it competes favorably with respect
to these factors, there can be no assurance that it will continue to do so.
 
     MKS encounters substantial competition in each of its product lines from a
number of competitors, although no one competitor competes with MKS across all
product lines. Certain of MKS's competitors have greater financial and other
resources than MKS. In some cases, the competitors are smaller than MKS, but
well-established in specific product niches. Millipore Corporation offers
products that compete with MKS's pressure and flow products. Aera Corporation,
STEC (Horiba Ltd.), and Unit Instruments, Inc., each offer products that compete
with MKS's mass flow control products. NOR-CAL Products, Inc. and MDC Vacuum
Products, Inc., each offer products that compete with MKS's vacuum components.
Leybold-Inficon, Inc., offers products that compete with MKS's vacuum measuring
and gas analysis products. Helix Technology Corporation offers products that
compete with MKS's vacuum gauging
                                       42
<PAGE>   46
 
products. Spectra International LLC offers products that compete with MKS's gas
analysis products. In some cases, particularly with respect to mass flow
controllers, semiconductor device manufacturers may direct semiconductor capital
equipment manufacturers to use a specified supplier's product in their
equipment. Accordingly, MKS's success depends in part on its ability to have
semiconductor device manufacturers specify that its products be used at their
fabrication facilities and MKS may encounter difficulties in changing
established relationships of competitors with a large installed base of products
at such customers' fabrication facilities. In addition, MKS's competitors can be
expected to continue to improve the design and performance of their products.
There can be no assurance that competitors will not develop products that offer
price or performance features superior to those of MKS's products.
 
PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS
 
     MKS relies on a combination of patent, copyright, trademark and trade
secret laws and license agreements to establish and protect its proprietary
rights. MKS has 47 U.S. patents and 10 pending U.S. patent applications. Foreign
counterparts of certain of these applications have been filed or may be filed at
the appropriate time. While MKS believes that certain patents may be important
for certain aspects of its business, MKS believes that its success depends more
upon close customer contact, innovation, technological expertise, responsiveness
and worldwide distribution.
 
     MKS requires each of its employees, including its executive officers, to
enter into standard agreements pursuant to which the employee agrees to keep
confidential all proprietary information of MKS and to assign to MKS all
inventions made while in the employ of MKS.
 
EMPLOYEES
 
     As of December 31, 1998, MKS employed 821 persons, including 486 in
manufacturing, 89 in research and development, 246 in marketing, sales, support
and general and administrative activities. Management believes that MKS's
ongoing success depends upon its continued ability to attract and retain highly
skilled employees. None of MKS's employees is represented by a labor union or
party to a collective bargaining agreement. MKS believes that its employee
relations are good.
 
FACILITIES
 
     MKS sells its products primarily through its direct sales force in 22
offices in France, Germany, Japan, Korea, The Netherlands, Singapore, Taiwan,
the United Kingdom and the United States. The direct sales force is supplemented
by sales representatives and agents in Canada, China, India, Israel, and Italy
and in selected U.S. cities. MKS's corporate headquarters are located in
Andover, Massachusetts. Manufacturing and other operations are conducted in a
number of locations worldwide. MKS's minimum payments for leased real estate for
the year ending December 31, 1999 are expected to be $1,484,000. MKS believes
that the current facilities along with the planned addition for 1999 will be
adequate and suitable to meet its needs for the foreseeable future. The
following table provides information concerning MKS's principal and certain
other owned and leased facilities:
 
<TABLE>
<CAPTION>
                                                                                       LEASE
       LOCATION          SQ. FT.          ACTIVITY           PRODUCTS MANUFACTURED    EXPIRES
       --------          -------          --------           ---------------------   ---------
<S>                      <C>       <C>                      <C>                      <C>
Andover, Massachusetts   82,000    Headquarters,            Baratron pressure        (1)
                                   Manufacturing, Customer  measurement products
                                   Support and Research &
                                   Development
Boulder, Colorado        86,000    Manufacturing, Customer  Vacuum gauges, valves    (2)
                                   Support, Service and     and components
                                   Research & Development
Methuen, Massachusetts   85,000    Manufacturing, Customer  Pressure control and     (1)
                                   Support, Service and     flow measurement and
                                   Research & Development   control products
</TABLE>
 
                                       43
<PAGE>   47
 
<TABLE>
<CAPTION>
                                                                                       LEASE
       LOCATION          SQ. FT.          ACTIVITY           PRODUCTS MANUFACTURED    EXPIRES
       --------          -------          --------           ---------------------   ---------
<S>                      <C>       <C>                      <C>                      <C>
Lawrence, Massachusetts  40,000    Manufacturing            Baratron pressure        (1)
                                                            measurement products
Tokyo, Japan             20,700    Manufacturing, Sales,    Mass flow measurement    (3)
                                   Customer Support,        and control products
                                   Service and Research &
                                   Development
Santa Clara, California  15,600    Sales, Customer Support  Not applicable           (4)*
                                   and Service
Richardson, Texas        14,600    Manufacturing, Sales,    Subassemblies            8/31/01
                                   Customer Support and
                                   Service
Munich, Germany          14,100    Manufacturing, Sales,    Mass flow measurement    (1)
                                   Customer Support,        and control products
                                   Service and Research &
                                   Development
Le Bourget, France       13,700    Sales, Customer Support  Not applicable           (1)
                                   and Service
Austin, Texas             8,200    Sales, Customer Support  Not applicable           1/30/03
                                   and Service
Seoul, Korea              4,760    Manufacturing, Sales,    Mass flow measurement    5/30/00**
                                   Customer Support and     and control products
                                   Service
Manchester, U.K.          2,200    Manufacturing, Sales,    Mass flow measurement    10/5/09
                                   Customer Support and     and control products
                                   Service
Singapore                 2,050    Sales, Customer Support  Not applicable           3/25/01
                                   and Service
Taiwan                    2,050    Sales, Customer Support  Not applicable           12/31/01
                                   and Service
</TABLE>
 
---------------
(1) This facility is owned by MKS.
 
(2) MKS leases one facility which has 39,000 square feet of space and a lease
    term which expires 10/31/01 and owns a second and third facility with 28,000
    and 19,000 square feet of space, respectively.
 
(3) MKS leases a facility which has 14,000 square feet of space and a lease term
    which expires 4/30/99 and owns another facility with 6,700 square feet of
    space.
 
(4) MKS leases one facility with 4,000 square feet of space on a month-to-month
    basis, a second facility of 4,000 square feet with a lease term which
    expires on 1/30/00 and a third facility of 2,600 square feet with a lease
    term which expires 6/30/99. MKS owns a fourth facility of 5,000 square feet.
 
 *  MKS has an option to extend its leases at this location for a period of 18
    months.
 
**  MKS has an option to extend this lease for a period of two years.
 
     In addition to manufacturing and other operations conducted at the
foregoing leased or owned facilities, MKS provides worldwide sales, customer
support and services from various other leased facilities throughout the world
not listed in the table above. See "Business -- Sales, Marketing and Support."
 
LEGAL PROCEEDINGS
 
     MKS is not a party to any material legal proceedings.
 
                                       44
<PAGE>   48
 
                                   MANAGEMENT
 
EXECUTIVE OFFICERS AND DIRECTORS
 
     The executive officers and directors of MKS as of December 31, 1998 are as
follows:
 
<TABLE>
<CAPTION>
                   NAME                     AGE                         POSITION
                   ----                     ---                         --------
<S>                                         <C>   <C>
John R. Bertucci..........................  57    Chairman, Chief Executive Officer and President
Ronald C. Weigner.........................  53    Vice President and Chief Financial Officer
John J. Sullivan..........................  63    Executive Vice President of Technology
William D. Stewart........................  54    Corporate Vice President and General Manager, Vacuum
                                                  Products
Joseph A. Maher, Jr.......................  51    Corporate Vice President and General Manager,
                                                  Measurement and Control Products
Leo Berlinghieri..........................  45    Corporate Vice President, Customer Support
                                                  Operations
Richard S. Chute(1).......................  60    Director
Owen W. Robbins(2)........................  69    Director
Robert J. Therrien........................  64    Director
Louis P. Valente(1)(2)....................  68    Director
</TABLE>
 
---------------
(1) Member of Compensation Committee.
 
(2) Member of Audit Committee.
 
     Mr. Bertucci has served as President and a Director of MKS since 1974 and
has been Chairman of the Board of Directors and Chief Executive Officer since
November 1995. From 1970 to 1974, he was Vice President and General Manager. Mr.
Bertucci has an M.S. in Industrial Administration and a B.S. in Metallurgical
Engineering from Carnegie-Mellon University. Mr. Bertucci is also a director of
Applied Science and Technology Corporation and Intellisense Corporation.
 
     Mr. Weigner has served as Vice President and Chief Financial Officer of MKS
since November 1995. From September 1993 until November 1995, he was Vice
President and Corporate Controller and from 1980 to 1993 he was Corporate
Controller. Mr. Weigner is a certified public accountant and has a B.S. in
Business Administration from Boston University.
 
     Mr. Sullivan has served as Executive Vice President of Technology of MKS
since March 1995. From 1982 to March 1995, he was Vice President of Marketing,
and from 1975 to 1982, he was Vice President of Sales and Marketing. Mr.
Sullivan has an M.S. and a B.S. in Physics from Northeastern University.
 
     Mr. Stewart has served as Corporate Vice President of MKS and General
Manager of Vacuum Products since November 1997. From October 1986 to November
1997, he was President of HPS Vacuum Products group, which MKS acquired in
October 1986. Mr. Stewart co-founded HPS in 1976. Mr. Stewart has an M.B.A. from
Northwestern University and a B.S. in Business Administration from the
University of Colorado. Mr. Stewart also serves on the board of directors of the
Janus Fund.
 
     Mr. Maher has served as Corporate Vice President of MKS and General Manager
of Measurement and Control Products since November 1997. From March 1997 through
November 1997, he served as Vice President of the Process Control
Instrumentation Group. Mr. Maher was a Vice President of Lam Research
Corporation from 1993 through 1996, and from 1980 through 1993, he was Executive
Vice President of Drytek Corporation, which was purchased by Lam Research
Corporation in 1993. Mr. Maher has a B.S. in Electrical Engineering from
Northeastern University.
 
     Mr. Berlinghieri has served as Corporate Vice President, Customer Support
Operations of MKS since November 1995. From 1980 to November 1995, he served in
various management positions at MKS, including Manufacturing Manager, Production
& Inventory Control Manager, and Director of Customer
 
                                       45
<PAGE>   49
 
Support Operations. Mr. Berlinghieri is also Treasurer of the TQM-BASE Council,
Inc., a non-profit quality management consortium comprised of Boston-area
semiconductor capital equipment manufacturers.
 
     Mr. Chute has served as a director of MKS since 1974. Mr. Chute has been a
member of the law firm of Hill & Barlow, a professional corporation, since
November 1971.
 
     Mr. Robbins has served as a director of MKS since February 1996. Mr.
Robbins was Executive Vice President of Teradyne, Inc., a manufacturer of
electronic test systems and backplane connection systems used in the electronics
and telecommunications industries from March 1992 to May 1997, and its Chief
Financial Officer from February 1980 to May 1997. Mr. Robbins has served on the
board of directors of Teradyne, Inc. since March 1992 and was its Vice Chairman
from January 1996 to May 1997.
 
     Mr. Therrien has served as a director of MKS since February 1996. Mr.
Therrien has been President and Chief Executive Officer of Brooks Automation,
Inc., a manufacturer of semiconductor processing equipment, since 1989.
 
     Mr. Valente has served as a director of MKS since February 1996. Mr.
Valente has been Chairman and Chief Executive Officer of Palomar Medical
Technologies, Inc., a company which designs, manufactures and markets cosmetic
lasers, since September 1997. He has been a director of Palomar Medical
Technologies, Inc. since February 1997 and was its President and Chief Executive
Officer from May 1997 to September 1997. Mr. Valente was a Senior Vice President
of Acquisitions, Mergers and Investments of EG&G, Inc. from 1991 until July
1995. Mr. Valente is also a director of Micrion Corporation.
 
     Executive officers of MKS are elected by the Board of Directors on an
annual basis and serve until their successors are duly elected and qualified.
There are no family relationships among any of the executive officers of MKS.
 
COMMITTEES OF THE BOARD OF DIRECTORS
 
     The Compensation Committee consists of Messrs. Chute and Valente. The
Compensation Committee reviews and evaluates the salaries, supplemental
compensation and benefits of all officers of MKS, reviews general policy matters
relating to compensation and benefits of employees of MKS and makes
recommendations concerning these matters to the Board of Directors. The
Compensation Committee also administers MKS's stock option and stock purchase
plans. See "-- Stock Plans."
 
     The Audit Committee consists of Messrs. Robbins and Valente. The Audit
Committee reviews with MKS's independent auditor the scope and timing of its
audit services, the auditor's report on MKS's financial statements following
completion of its audit and MKS's policies and procedures with respect to
internal accounting and financial controls. In addition, the Audit Committee
will make annual recommendations to the Board of Directors for the appointment
of independent auditors for the ensuing year.
 
DIRECTOR COMPENSATION
 
     Directors of MKS are reimbursed for expenses incurred in connection with
their attendance at Board of Directors and committee meetings. Directors who are
not employees of MKS are paid an annual fee of $10,000 and $1,000 for each Board
of Directors meeting they attend and $500 for each committee meeting they attend
which is not held on the same day as a Board of Directors meeting. Messrs.
Chute, Robbins, Therrien and Valente, MKS's four non-employee directors, have
each been granted options, under MKS's 1996 Director Stock Option Plan (under
which no further grants will be made), to purchase 8,592 shares of common stock
at a weighted average exercise price of $4.81 per share.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     The Compensation Committee is currently comprised of Messrs. Chute and
Valente. No member of the Compensation Committee was at any time an employee of
MKS. No executive officer of MKS serves
 
                                       46
<PAGE>   50
 
as a member of the Board of Directors or Compensation Committee of any other
entity which has one or more executive officers serving as a member of MKS's
Board of Directors or Compensation Committee.
 
EXECUTIVE COMPENSATION
 
     The following table sets forth information with respect to the compensation
of MKS's Chief Executive Officer and each of the four other most highly
compensated executive officers for the year ended December 31, 1998 (the "Named
Executive Officers").
 
                      SUMMARY COMPENSATION TABLE FOR 1998
 
<TABLE>
<CAPTION>
                                                                      LONG-TERM
                                                                     COMPENSATION
                                                                        AWARDS
                                     ANNUAL COMPENSATION             ------------
                             ------------------------------------     SECURITIES
                                                     OTHER ANNUAL     UNDERLYING        ALL OTHER
NAME AND PRINCIPAL POSITION   SALARY      BONUS      COMPENSATION     OPTIONS(#)     COMPENSATION(1)
---------------------------  --------    --------    ------------    ------------    ---------------
<S>                          <C>         <C>         <C>             <C>             <C>
John R. Bertucci...........  $337,440          --            --              --          $19,500
  Chief Executive Officer
  and President
Ronald C. Weigner..........   164,257          --            --          60,000            9,740
  Vice President and Chief
  Financial Officer
Joseph A. Maher, Jr........   161,307          --            --          60,000            9,577
  Corporate Vice President
  and General Manager,
  Measurement and Control
  Products
William D. Stewart.........   173,893          --            --          60,000           10,059
  Corporate Vice President
  and General Manager,
  Vacuum Products
Leo Berlinghieri...........   152,559          --            --          60,000            3,121
  Corporate Vice President,
  Customer Support
  Operations
</TABLE>
 
---------------
(1) Includes a premium of $4,264 paid on a life insurance policy and estimated
    payments of $15,236 paid into a 401(k) plan for Mr. Bertucci, and estimated
    payments paid into a 401(k) plan for Messrs. Weigner, Maher, Stewart and
    Berlinghieri.
 
                                       47
<PAGE>   51
 
STOCK OPTION GRANTS
 
     The following table contains information concerning the grants of options
to purchase MKS's common stock made to each of the Named Executive Officers for
the year ended December 31, 1998.
 
                             OPTION GRANTS IN 1998
 
<TABLE>
<CAPTION>
                                              INDIVIDUAL GRANTS                         POTENTIAL REALIZABLE
                          ---------------------------------------------------------       VALUE AT ASSUMED
                           NUMBER OF                                                   ANNUAL RATES OF STOCK
                          SECURITIES    PERCENT OF TOTAL                                 PRICE APPRECIATION
                          UNDERLYING    OPTIONS GRANTED    EXERCISE OR                   FOR OPTION TERM(2)
                            OPTIONS       TO EMPLOYEES     BASE PRICE    EXPIRATION   ------------------------
          NAME            GRANTED(1)     IN FISCAL YEAR     PER SHARE       DATE         5%             10%
          ----            -----------   ----------------   -----------   ----------   --------        --------
<S>                       <C>           <C>                <C>           <C>          <C>             <C>
John R. Bertucci........        --              --               --            --           --              --
Ronald C. Weigner.......    60,000            9.47%           $6.67        7/9/08     $251,684        $637,816
Joseph A. Maher, Jr. ...    60,000            9.47             6.67        7/9/08      251,684         637,816
William D. Stewart......    60,000            9.47             6.67        7/9/08      251,684         637,816
Leo Berlinghieri........    60,000            9.47             6.67        7/9/08      251,684         637,816
</TABLE>
 
---------------
(1) These options become exercisable 20% on the first anniversary of the date of
    grant and the remainder become exercisable on a quarterly basis over a four
    year period.
 
(2) Amounts represent hypothetical gains that could be achieved for the
    respective options if exercised at the end of the option term. These gains
    are based on assumed rates of stock price appreciation of 5% and 10%
    compounded annually from the date the respective options were granted to
    their expiration date. These numbers are calculated based on rules
    promulgated by the Securities and Exchange Commission and do not reflect
    MKS's estimate of future stock price growth. Actual gains, if any, on stock
    option exercises and common stock are dependent on the timing of such
    exercise and the future performance of the common stock.
 
OPTION EXERCISES AND HOLDINGS
 
     The following table sets forth information concerning option exercises and
option holdings for the fiscal year ended December 31, 1998 with respect to each
of the Named Executive Officers.
 
                      AGGREGATED OPTION EXERCISES IN 1998
                           AND YEAR-END OPTION VALUES
 
<TABLE>
<CAPTION>
                                                   NUMBER OF SHARES
                                                      UNDERLYING                 VALUE OF UNEXERCISED
                                                 UNEXERCISED OPTIONS             IN-THE-MONEY OPTIONS
                                                     AT YEAR-END                    AT YEAR-END(1)
                                             ----------------------------    ----------------------------
                   NAME                      EXERCISABLE    UNEXERCISABLE    EXERCISABLE    UNEXERCISABLE
                   ----                      -----------    -------------    -----------    -------------
<S>                                          <C>            <C>              <C>            <C>
John R. Bertucci...........................        --               --
Ronald C. Weigner..........................    75,961          110,639
Joseph A. Maher, Jr. ......................    44,310          142,290
William D. Stewart.........................    75,961          110,639
Leo Berlinghieri...........................    75,961          110,639
</TABLE>
 
---------------
(1) Values are based on the difference between the fair market value of the
    underlying shares at December 31, 1998 ($     per share) and the exercise
    price of each option listed (between $4.43 and $6.67 per share).
 
STOCK PLANS
 
  1995 Stock Incentive Plan
 
     MKS's Amended and Restated 1995 Stock Incentive Plan (the "1995 Stock
Plan") provides for the grant of incentive stock options, nonstatutory stock
options, stock appreciation rights, performance shares
 
                                       48
<PAGE>   52
 
and awards of restricted stock and unrestricted stock. An aggregate of 3,750,000
shares of common stock may be issued pursuant to the 1995 Stock Plan (subject to
adjustment for certain changes in MKS's capitalization). No award may be made
under the 1995 Stock Plan after November 30, 2005.
 
     The 1995 Stock Plan is administered by the Board of Directors and the
Compensation Committee. The Board of Directors has the authority to grant awards
under the 1995 Stock Plan and to accelerate, waive or amend certain provisions
of outstanding awards. The Board of Directors has authorized the Compensation
Committee to administer certain aspects of the 1995 Stock Plan and has
authorized the Chief Executive Officer of MKS to grant awards to non-executive
officer employees. The maximum number of shares represented by such awards may
not exceed 450,000 shares in the aggregate or 30,000 shares to any one employee.
 
     Incentive Stock Options and Nonstatutory Options.  Optionees receive the
right to purchase a specified number of shares of common stock at some time in
the future at an option price and subject to such terms and conditions as are
specified at the time of the grant. Incentive stock options and options that the
Board of Directors or Compensation Committee intends to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code
may not be granted at an exercise price less than the fair market value of the
common stock on the date of grant (or less than 110% of the fair market value in
the case of incentive stock options granted to optionees holding 10% or more of
the voting stock of MKS). All other options may be granted at an exercise price
that may be less than, equal to or greater than the fair market value of the
common stock on the date of grant.
 
     Stock Appreciation Rights and Performance Shares.  A stock appreciation
right is based on the value of common stock and entitles the holder to receive
consideration to the extent that the fair market value on the date of exercise
of the shares of common stock underlying the right exceeds the fair market value
of the underlying shares on the date the right was granted. A performance share
award entitles the recipient to acquire shares of common stock upon the
attainment of specified performance goals.
 
     Restricted and Unrestricted Stock.  Restricted stock awards entitle
recipients to acquire shares of common stock, subject to the right of MKS to
repurchase all or part of such shares at their purchase price from the recipient
in the event that the conditions specified in the applicable stock award are not
satisfied prior to the end of the applicable restriction period established for
such award. MKS may also grant (or sell at a purchase price not less than 85% of
the fair market value on the date of such sale) to participants shares of common
stock free of any restrictions under the 1995 Stock Plan.
 
     All of the employees, officers, directors, consultants and advisors of MKS
and its subsidiaries who are expected to contribute to MKS's future growth and
success are eligible to participate in the 1995 Stock Plan.
 
     Section 162(m) of the Internal Revenue Code disallows a tax deduction to
public companies for certain compensation in excess of $1.0 million paid to a
company's chief executive officer or to any of the four other most highly
compensated executive officers. Certain compensation, including "performance-
based compensation," is not included in compensation subject to the $1.0 million
limitation. The 1995 Stock Plan limits to 1,350,000 the maximum number of shares
of common stock with respect to which awards may be granted to any employee in
any calendar year. This limitation is intended to preserve the tax deductions to
MKS that might otherwise be unavailable under Section 162(m) with respect to
certain awards.
 
     Prior to the date of this prospectus, MKS plans to grant options (to vest
20% after one year and 5% per quarter thereafter) to purchase approximately
350,000 shares of common stock to certain employees of MKS, at an exercise price
equal to the initial public offering price.
 
  1999 Employee Stock Purchase Plan
 
     MKS's 1999 Employee Stock Purchase Plan (the "Purchase Plan") authorizes
the issuance of up to an aggregate of 450,000 shares of common stock to
participating employees. MKS will make one or more offerings to employees to
purchase common stock under the Purchase Plan. Offerings under the Purchase
                                       49
<PAGE>   53
 
Plan commence on June 1 and December 1 and terminate, respectively on November
30 and May 31. During each offering, the maximum number of shares which may be
purchased by a participating employee is determined on the first day of this
offering period under a formula whereby 85% of the market value of a share of
common stock on the first day of this offering period is divided into an amount
equal to 10% of the employee's annualized compensation (or such lower percentage
as may be established by the Compensation Committee) for the immediately
preceding six-month period. An employee may elect to have up to 10% deducted
from his or her regular salary (or such lower percentage as may be established
by the Compensation Committee) for this purpose. The price at which an
employee's option is exercised is the lower of (i) 85% of the closing price of
the common stock on the Nasdaq National Market on the day that this offering
commences or (ii) 85% of the closing price on the day that this offering
terminates.
 
     The Purchase Plan is administered by the Board of Directors and the
Compensation Committee. With certain exceptions, all eligible employees,
including directors and officers, regularly employed by MKS for at least six
months on the applicable offering commencement date are eligible to participate
in the Purchase Plan. The Purchase Plan is intended to qualify as an "employee
stock purchase plan" as defined in Section 423 of the Internal Revenue Code.
 
  1997 Director Stock Option Plan
 
     MKS's 1997 Director Stock Option Plan (the "1997 Director Plan") authorizes
the issuance of up to an aggregate of 300,000 shares of common stock. The 1997
Director Plan is administered by MKS's Board of Directors. Options are granted
under the 1997 Director Plan only to directors of MKS who are not employees of
MKS. Under the 1997 Director Plan, prior to the date of this prospectus each
existing eligible director will receive an option to purchase 10,500 shares of
common stock at an exercise price equal to the initial public offering price and
future non-employee directors will receive an option to purchase 11,250 shares
of common stock upon their initial election to the Board of Directors. Each
initial option will vest over a three-year period in 12 equal quarterly
installments following the date of grant. On the date of each annual meeting of
the stockholders, options will be automatically granted to each eligible
director who has been in office for at least six months prior to the date of the
annual meeting of the stockholders. Each annual option will entitle the holder
to purchase 6,000 shares of common stock. Each annual option will become
exercisable on the day prior to the first annual meeting of stockholders
following the date of grant (or if no such meeting is held within 13 months
after the date of grant, on the 13-month anniversary of the date of grant). The
exercise price of all options granted under the 1997 Director Plan is equal to
the fair market value of the common stock on the date of grant. Options granted
under the 1997 Director Plan terminate upon the earlier of three months after
the optionee ceases to be a director of MKS or ten years after the grant date.
In the event of a change in control of MKS, the vesting of all options then
outstanding would be accelerated in full and any restrictions on exercising
outstanding options would terminate.
 
     The Company's 1996 Director Stock Option Plan, under which options have
been granted to, and may still be exercised by, four non-employee directors of
MKS, has been terminated. See "-- Director Compensation."
 
                                       50
<PAGE>   54
 
                              CERTAIN TRANSACTIONS
 
     Mr. Chute, a director of MKS, MKS's clerk, and a co-trustee of certain of
the Bertucci Family Trusts (see "Principal Stockholders") and Mr. Thomas H.
Belknap, a co-trustee of certain of the Bertucci Family trusts, are attorneys at
the law firm of Hill & Barlow, a professional corporation. Hill & Barlow has
provided legal services to MKS during the calendar year ended December 31, 1998
for which it was compensated by MKS in the aggregate amount of $183,000.
 
     Mr. Stewart, Corporate Vice President and General Manager of Vacuum
Products, is the general partner of Aspen Industrial Park Partnership ("Aspen").
On October 12, 1989, MKS entered into a lease with Aspen, which has been
periodically extended, for certain facilities occupied by MKS's Vacuum Products
group in Boulder, Colorado. MKS currently pays Aspen approximately $350,000
annually to lease such facilities.
 
     MKS has been treated as an S corporation for federal income tax purposes
since July 1, 1987. As a result, MKS currently pays no federal, and certain
state, income tax and all of the earnings of MKS are subject to federal, and
certain state, income taxation directly at the stockholder level. MKS's S
corporation status will terminate upon the closing of this offering, at which
time MKS will become subject to corporate income taxation under Subchapter C of
the Internal Revenue Code. In 1997 and 1998, MKS distributed $12.4 million and
$6.2 million, respectively, of undistributed S corporation earnings to its
stockholders. As soon as practicable following the closing of this offering, MKS
intends to make a distribution to the holders of record on the day prior to the
closing of this offering in an amount equivalent to the accumulated adjustments
account. As of December 31, 1998, the outstanding balance of the accumulated
adjustments account was approximately $35.9 million and such balance is expected
to increase in the period from January 1, 1999 through the closing of this
offering. See "S Corporation And Termination of S Corporation Status."
 
                                       51
<PAGE>   55
 
                             PRINCIPAL STOCKHOLDERS
 
     The following table sets forth certain information regarding beneficial
ownership of MKS's common stock as of December 31, 1998, and as adjusted to
reflect the sale of shares offered hereby, by (i) each of the directors of MKS,
(ii) each of the Named Executive Officers, (iii) each person or entity known to
MKS to own beneficially more than 5% of MKS's common stock and (iv) all
directors and executive officers as a group. Except as indicated below, none of
these entities has a relationship with MKS or, to the knowledge of MKS, any
underwriters of this offering or their respective affiliates. Unless otherwise
indicated, each person or entity named in the table has sole voting power and
investment power (or shares such power with his or her spouse) with respect to
all shares of capital stock listed as owned by such person or entity.
 
<TABLE>
<CAPTION>
                                                                                 PERCENTAGE OF
                                                                                 COMMON STOCK
                                                      NUMBER SHARES            OUTSTANDING(1)(2)
                                                      BENEFICIALLY     ---------------------------------
              NAME OF BENEFICIAL OWNER                  OWNED(1)       BEFORE OFFERING    AFTER OFFERING
              ------------------------                -------------    ---------------    --------------
<S>                                                   <C>              <C>                <C>
John R. Bertucci(3).................................   17,261,915           95.6%                  %
Ronald C. Weigner(4)................................       82,291              *
John J. Sullivan(5).................................      614,010            3.4
Joseph A. Maher, Jr.(4).............................       44,310              *
William D. Stewart(4)...............................       82,291              *
Leo Berlinghieri(4).................................       82,291              *
Richard S. Chute(6).................................    2,766,852           15.3
Owen W. Robbins(4)..................................        8,027              *
Robert J. Therrien(4)...............................        8,027              *
Louis P. Valente(4).................................        8,027              *
Thomas H. Belknap(7)................................    2,331,902           12.9
All executive officers and directors as a group.....   18,199,216           99.0%                  %
</TABLE>
 
---------------
 *  Less than 1% of outstanding common stock.
 
(1) The number of shares beneficially owned by each stockholder is determined
    under rules promulgated by the Securities and Exchange Commission and the
    information is not necessarily indicative of beneficial ownership for any
    other purpose. Under such rules, beneficial ownership includes any shares as
    to which the individual has sole or shared voting power or investment power
    and also any shares which the individual has the right to acquire within 60
    days of December 31, 1998 through the exercise of any stock option or other
    right. The inclusion herein of such shares, however, does not constitute an
    admission that the named stockholder is a direct or indirect beneficial
    owner of such shares.
 
(2) Assumes no exercise of the underwriters' over-allotment option.
 
(3) Includes 6,046,208 shares held directly by Mr. Bertucci, 6,124,980 shares
    held directly by Mr. Bertucci's wife, and 5,090,727 shares held by trusts
    (collectively, the "Bertucci Family Trusts") for which either Mr. or Mrs.
    Bertucci serves as a co-trustee.
 
(4) Comprised solely of options exercisable within 60 days of December 31, 1998.
 
(5) Includes 316,500 shares held in a grantor retained annuity trust.
 
(6) Includes 2,758,825 shares held by certain of the Bertucci Family Trusts for
    which Mr. Chute serves as a co-trustee and 8,027 shares subject to options
    held by Mr. Chute exercisable within 60 days of December 31, 1998.
 
(7) Represents shares held by certain of the Bertucci Family Trusts for which
    Mr. Belknap serves as a co-trustee.
 
                                       52
<PAGE>   56
 
                          DESCRIPTION OF CAPITAL STOCK
 
     The authorized capital stock of MKS consists of 30,000,000 shares of common
stock, no par value per share, and 2,000,000 shares of preferred stock, $.01 par
value per share, after giving effect to the amendment and restatement of MKS's
Restated Articles of Organization which will be filed with the Secretary of
State of The Commonwealth of Massachusetts prior to the closing of this
offering.
 
COMMON STOCK
 
     As of December 31, 1998, there were 18,053,167 shares of common stock
outstanding and held of record by twenty-three stockholders, after giving effect
to a 3-for-2 stock split to be effected prior to the effective date of this
prospectus, of shares of Class A common stock and Class B common stock and the
conversion of such shares into shares of common stock upon the closing of this
offering.
 
     Upon the closing of this offering, all holders of common stock shall be
entitled to one vote for each share held on all matters submitted to a vote of
stockholders and will not have cumulative voting rights. Accordingly, holders of
a majority of the shares of common stock entitled to vote in any election of
directors may elect all of the directors standing for election. Holders of
common stock are entitled to receive ratably such dividends, if any, as may be
declared by the Board of Directors out of funds legally available therefor,
subject to any preferential dividend rights of any outstanding preferred stock.
Upon the liquidation, dissolution or winding up of MKS, the holders of common
stock are entitled to receive ratably the net assets of MKS available after the
payment of all debts and other liabilities, subject to the prior rights of any
outstanding preferred stock. Holders of the common stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of common
stock are, and the shares offered by MKS in this offering made by this
prospectus will be, when issued and paid for, fully paid and nonassessable. The
rights, preferences and privileges of holders of common stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of preferred stock that MKS may designate and issue in the future. There
are no shares of preferred stock outstanding.
 
PREFERRED STOCK
 
     The Articles of Organization authorize the Board of Directors, subject to
certain limitations prescribed by law, without further stockholder approval,
from time to time to issue up to an aggregate of 2,000,000 shares of preferred
stock in one or more series and to fix or alter the designations, preferences
and rights, and any qualifications, limitations or restrictions thereof, of the
shares of each such series, including the number of shares constituting any such
series and the dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption (including sinking fund provisions), redemption
price or prices and liquidation preferences thereof. The issuance of preferred
stock may have the effect of delaying, deferring or preventing a change in
control of MKS. MKS has no present plans to issue any shares of preferred stock.
 
MASSACHUSETTS LAW AND CERTAIN PROVISIONS OF MKS'S RESTATED ARTICLES OF
ORGANIZATION AND BY-LAWS
 
     MKS intends to amend and restate its By-Laws prior to the closing of this
offering. The By-Laws will include a provision excluding MKS from the
applicability of Massachusetts General Laws Chapter 110D, entitled "Regulation
of Control Share Acquisitions." In general, this statute provides that any
stockholder of a corporation subject to this statute who acquires 20% or more of
the outstanding voting stock of a corporation may not vote such stock unless the
stockholders of the corporation so authorize. The Board of Directors will be
able to amend the By-Laws at any time to subject MKS to this statute
prospectively.
 
     Massachusetts General Laws Chapter 156B, Section 50A generally requires
that publicly-held Massachusetts corporations have a classified board of
directors consisting of three classes as nearly equal in size as possible,
unless the corporation elects to opt out of the statute's coverage. The By-Laws
will contain provisions which give effect to Section 50A.
 
                                       53
<PAGE>   57
 
     The By-Laws will require that nominations for the Board of Directors made
by a stockholder of a planned nomination must be given not less than 30 and not
more than 90 days prior to a scheduled meeting, provided that if less than 40
days' notice is given of the date of the meeting, a stockholder will have ten
days within which to give such notice. The stockholder's notice of nomination
must include particular information about the stockholder, the nominee and any
beneficial owner on whose behalf the nomination is made. MKS may require any
proposed nominee to provide such additional information as is reasonably
required to determine the eligibility of the proposed nominee.
 
     The By-Laws will also require that a stockholder seeking to have any
business conducted at a meeting of stockholders give notice to MKS not less than
60 and not more than 90 days prior to the scheduled meeting, provided in certain
circumstances that a ten-day notice rule applies. The notice from the
stockholder will be required to describe the proposed business to be brought
before the meeting and include information about the stockholder making the
proposal, any beneficial owner on whose behalf the proposal is made, and any
other stockholder known to be supporting the proposal. The By-Laws will require
MKS to call a special stockholders meeting at the request of stockholders
holding at least 40% of the voting power of MKS.
 
     The Articles of Organization will provide that the directors and officers
of MKS shall be indemnified by MKS to the fullest extent authorized by
Massachusetts law, as it now exists or may in the future be amended, against all
expenses and liabilities reasonably incurred in connection with service for or
on behalf of MKS. In addition, the Articles of Organization will provide that
the directors of MKS will not be personally liable for monetary damages to MKS
for breaches of their fiduciary duty as directors, unless they violated their
duty of loyalty to MKS or its stockholders, acted in bad faith, knowingly or
intentionally violated the law (which could include securities laws), authorized
illegal dividends or redemptions or derived an improper personal benefit from
their action as directors.
 
     The Articles of Organization will provide that any amendment to the
Articles of Organization, the sale, lease or exchange of all or substantially
all of MKS's property and assets, or the merger or consolidation of MKS into or
with any corporation may be authorized by the approval of the holders of a
majority of the shares of each class of stock entitled to vote thereon, rather
than by two-thirds as otherwise provided by statute, provided that the
transactions have been authorized by a majority of the members of the Board of
Directors and the requirements of any other applicable provisions of the
Articles of Organization have been met.
 
     The Articles of Organization will contain a provision excluding MKS from
the applicability of Massachusetts General Laws Chapter 110F, entitled "Business
Combinations with Interested Shareholders." In general, Chapter 110F places
limitations on a Massachusetts corporation's ability to engage in business
combinations with certain stockholders for a period of three years, unless the
corporation elects to opt out of the statute's coverage by including such a
provision in its Articles of Organization.
 
TRANSFER AGENT AND REGISTRAR
 
     The Transfer Agent and Registrar for the common stock is BankBoston, N.A.
 
                                       54
<PAGE>   58
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
     Prior to this offering, there has been no public market for the securities
of MKS. Upon completion of this offering, based upon the number of shares
outstanding at December 31, 1998, there will be        shares of common stock of
MKS outstanding (assuming no exercise of the underwriters' over-allotment option
or options outstanding under MKS's stock option plans). Of these shares, the
          shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, except that any
shares purchased by "affiliates" of MKS, as that term is defined in Rule 144
under the Securities Act, may generally only be sold in compliance with the
limitations of Rule 144 described below.
 
SALES OF RESTRICTED SHARES
 
     The remaining      shares of common stock are deemed "restricted
securities" under Rule 144 under the Securities Act. All of these shares are
subject to 180-day lock-up agreements with the Representatives. Upon expiration
of the lock-up agreements 180 days after the date of this prospectus, all such
shares will be available for sale in the public market, subject to the
provisions of Rule 144.
 
     Stockholders who are parties to the lock-up agreement have agreed that for
a period of 180 days after the date of this prospectus, they will not sell,
offer, contract or grant any option to sell, pledge, transfer, establish an open
put equivalent position or otherwise dispose of any shares of common stock, any
options to purchase shares of common stock or any shares convertible into or
exchangeable for shares of common stock, owned directly by such persons or with
respect to which they have the power of disposition, without the prior written
consent of NationsBanc Montgomery Securities LLC.
 
     In general, Rule 144 as currently in effect, beginning 90 days after the
effective date of the registration statement of which this prospectus is a part,
a stockholder, including an affiliate, who has beneficially owned his or her
restricted securities for at least one year from the later of the date such
securities were acquired from MKS or (if applicable) the date they were acquired
from an affiliate is entitled to sell, within any three-month period, a number
of such shares that does not exceed the greater of 1% of the then outstanding
shares of common stock (     shares immediately after this offering) or the
average weekly trading volume in the common stock during the four calendar weeks
preceding the date on which notice of such sale was filed under Rule 144,
provided certain requirements concerning availability of public information,
manner of sale and notice of sale are satisfied. In addition, under Rule 144(k),
if a period of at least two years has elapsed between the later of the date
restricted securities were acquired from MKS or (if applicable) the date they
were acquired from an affiliate of MKS, a stockholder who is not an affiliate of
MKS at the time of sale and has not been an affiliate of MKS for at least three
months prior to the sale is entitled to sell the shares immediately without
compliance with the foregoing requirements under Rule 144.
 
     Securities issued in reliance on Rule 701 (such as shares of common stock
acquired pursuant to the exercise of certain options granted under MKS's stock
plans) are also restricted and, beginning 90 days after the effective date of
the registration statement of which this prospectus is a part, may be sold by
stockholders other than affiliates of MKS subject only to the manner of sale
provisions of Rule 144 and by affiliates under Rule 144 without compliance with
its one-year holding period requirement.
 
OPTIONS
 
     As of December 31, 1998 there were options outstanding to purchase an
aggregate of 2,132,575 shares of MKS's common stock, of which options to
purchase an aggregate of 804,701 shares were exercisable. Of these,      shares
were subject to the lock-up agreements. MKS intends to file registration
statements on Form S-8 under the Securities Act to register all shares of common
stock issuable under each of the 1995 Stock Plan, Purchase Plan, the 1997
Director Plan and the 1996 Director Stock Option Plan promptly following the
consummation of this offering. Shares issued pursuant to such plans shall be,
after the effective date of the Form S-8 registration statements, eligible for
resale in the public market without restriction, subject to Rule 144 limitations
applicable to affiliates and the lock-up agreements noted above, if applicable.
 
                                       55
<PAGE>   59
 
                                  UNDERWRITING
 
     The underwriters named below, represented by NationsBanc Montgomery
Securities LLC, Donaldson, Lufkin & Jenrette Securities Corporation and Lehman
Brothers Inc. (the "Representatives"), have severally agreed, subject to the
terms and conditions set forth in the underwriting agreement, to purchase from
MKS the number of shares of common stock indicated below opposite their
respective names at the initial public offering price less the underwriting
discount set forth on the cover page of this prospectus. The underwriting
agreement provides that the obligations of the underwriters are subject to
certain terms and conditions precedent and that the underwriters are committed
to purchase all of such shares, if any are purchased.
 
<TABLE>
<CAPTION>
                                                              NUMBER OF
                        UNDERWRITER                            SHARES
                        -----------                           ---------
<S>                                                           <C>
NationsBanc Montgomery Securities LLC.......................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Lehman Brothers Inc. .......................................
                                                              ---------
          Total.............................................
                                                              =========
</TABLE>
 
     The Representatives have advised MKS that the underwriters initially
propose to offer the common stock to the public on the terms set forth on the
cover page of this prospectus. The underwriters may allow to selected dealers a
concession of not more than $     per share, and the underwriters may allow, and
any other dealers may reallow, a concession of not more than $     per share to
certain other dealers. After the initial public offering, this offering price
and other selling terms may be changed by the Representatives. The common stock
is offered subject to receipt and acceptance by the underwriters and to certain
other conditions, including the right to reject orders in whole or in part.
 
     MKS has granted an option to the underwriters, exercisable during the
30-day period after the date of this prospectus, to purchase up to a maximum of
          additional shares of common stock to cover over-allotments, if any, at
the same price per share as the initial shares to be purchased by the
underwriters. To the extent the underwriters exercise this option, each of the
underwriters will be committed, subject to certain conditions, to purchase such
additional shares in approximately the same proportion as set forth in the above
table. The underwriters may purchase such shares only to cover over-allotments
made in connection with this offering.
 
     All stockholders prior to this offering, as well as certain holders of
options to purchase common stock, have entered into lock-up agreements whereby
they have agreed not to directly or indirectly sell, offer, contract or grant
any option to sell, pledge, transfer, establish an open put equivalent position
or otherwise dispose of any rights with respect to any shares of common stock,
any options or warrants to purchase common stock, or any securities convertible
or exchangeable for common stock, owned directly by such holders or with respect
to which they have the power of disposition for a period of 180 days after the
period of this prospectus without the prior written consent of NationsBanc
Montgomery Securities LLC which may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to these
lock-up agreements. In addition, MKS has agreed not to sell, offer to sell,
contract to sell or otherwise sell or dispose of any shares of common stock or
any rights to acquire common stock, other than pursuant to its stock plans or
upon the exercise of outstanding options, for a period of 180 days after the
date of this prospectus without the prior consent of NationsBanc Montgomery
Securities LLC.
 
     The underwriting agreement provides that MKS will indemnify the
underwriters against certain liabilities, including civil liabilities, under the
Securities Act, or will contribute to payments the underwriters may be required
to make in respect thereof.
 
     In connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock, including over-allotment, stabilization, syndicate covering
transactions and imposition of penalty bids. In an over-allotment, the
underwriters would allot more shares of common stock to their customers in the
aggregate than are available for purchase by the
 
                                       56
<PAGE>   60
 
underwriters under the underwriting agreement. Stabilizing means the placing of
any bid, or the effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of a security. In a syndicate covering transaction, the
underwriters would place a bid or effect a purchase to reduce a short position
created in connection with this offering. Pursuant to a penalty bid, NationsBanc
Montgomery Securities LLC on behalf of the underwriters, would be able to
reclaim a selling concession from an underwriter if shares of common stock
originally sold by such underwriter are purchased in syndicate covering
transactions. These transactions may result in the price of the common stock
being higher than the price that might otherwise prevail in the open market.
These transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise, and, if commenced, may be discontinued at
any time.
 
     The Representatives have informed MKS that they do not expect to make sales
to accounts over which they exercise discretionary authority in excess of 5% of
the number of shares of common stock offered hereby.
 
     Prior to this offering, there has been no public market for the common
stock of MKS. Consequently, the initial public offering price will be determined
through negotiations among MKS and the Representatives. Among the factors to be
considered in such negotiations are the history of, and prospects for, MKS and
the industry in which it competes, an assessment of MKS's management, the
present state of MKS's development, the prospects for future earnings of MKS,
the prevailing market conditions at the time of this offering, market valuations
of publicly traded companies that MKS and the Representatives believe to be
comparable to MKS, and other factors deemed relevant.
 
                                 LEGAL MATTERS
 
     The validity of the common stock offered hereby will be passed upon for MKS
by Hale and Dorr LLP, Boston, Massachusetts. Certain legal matters in connection
with this offering will be passed upon for the underwriters by Ropes & Gray,
Boston, Massachusetts.
 
                                    EXPERTS
 
     The consolidated balance sheets of MKS Instruments, Inc. at December 31,
1997 and 1998 and the consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31, 1998
included in this prospectus have been included herein in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given upon the authority
of that firm as experts in accounting and auditing.
 
                                       57
<PAGE>   61
 
                             ADDITIONAL INFORMATION
 
     MKS has filed with the Securities and Exchange Commission, a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered hereby. This prospectus, which constitutes part of the registration
statement, does not contain all of the information set forth in the registration
statement, certain parts of which are omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. For further information
with respect to MKS and the common stock offered hereby, reference is made to
the registration statement. Statements contained in this prospectus as to the
contents of any contract or other document filed as an exhibit to the
registration statement are not necessarily complete, and in each instance
reference is made to the copy of such document filed as an exhibit to the
registration statement, each such statement being qualified in all respects by
such reference. The registration statement (and all amendments, exhibits and
schedules thereto) may be inspected without charge at the principal office of
the Securities and Exchange Commission in Washington, D.C. and copies of all or
any part of which may be inspected and copied at the public reference facilities
maintained by the Securities and Exchange Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Room 1024, Washington, D.C. 20549, and at the Securities and
Exchange Commission's regional offices located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can also
be obtained at prescribed rates by mail from the Public Reference Section of the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, the Securities and Exchange Commission maintains a website
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Securities and Exchange Commission.
 
     MKS intends to distribute to its stockholders annual reports containing
audited consolidated financial statements.
 
                                       58
<PAGE>   62
 
                             MKS INSTRUMENTS, INC.
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Accountants...........................  F-2
Consolidated Balance Sheets at December 31, 1997 and
  1998......................................................  F-3
Consolidated Statements of Income for the Years Ended
  December 31, 1996, 1997, and 1998.........................  F-4
Consolidated Statements of Stockholders' Equity for the
  Years Ended December 31, 1996, 1997, and 1998.............  F-5
Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1996, 1997, and 1998.........................  F-6
Notes to Consolidated Financial Statements..................  F-7
</TABLE>
 
                                       F-1
<PAGE>   63
 
     This is the form of the report that we expect to issue upon the filing of
an amendment to the Company's Articles of Organization effecting the 3-for-2
stock split of the Company's outstanding common stock, increase in the number of
authorized shares of common stock and the authorization of preferred stock, as
discussed in Note 8 of Notes to Consolidated Financial Statements.
 
                                            PRICEWATERHOUSECOOPERS LLP
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholders of
  MKS Instruments, Inc.:
 
     In our opinion, the accompanying consolidated balance sheets and related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of MKS Instruments,
Inc. and its subsidiaries at December 31, 1997 and 1998 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
 
Boston, Massachusetts
January 22, 1999, except for
Note 13 as to which the date
is January 28, 1999
 
                                       F-2
<PAGE>   64
 
                             MKS INSTRUMENTS, INC.
 
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                              DECEMBER 31, 1998
                                                            DECEMBER 31,    ----------------------
                                                                1997        ACTUAL      PRO FORMA
                                                            ------------    -------    -----------
                                                                                        (NOTE 2)
                                                                                       (UNAUDITED)
<S>                                                         <C>             <C>        <C>
                                              ASSETS
Current assets:
     Cash and cash equivalents............................    $  2,511      $11,188      $11,188
     Marketable equity securities.........................         614          538          538
     Trade accounts receivable, net of allowance for
       doubtful accounts of $610 and $656 at December 31,
       1997 and 1998, respectively........................      32,439       20,674       20,674
     Inventories..........................................      29,963       24,464       24,464
     Deferred tax asset...................................         682          698          698
     Other current assets.................................       1,670          971          971
                                                              --------      -------      -------
          Total current assets............................      67,879       58,533       58,533
     Property, plant and equipment, net...................      33,976       32,725       32,725
     Other assets.........................................       4,681        4,974        4,974
                                                              --------      -------      -------
          Total assets....................................    $106,536      $96,232      $96,232
                                                              ========      =======      =======
 
                               LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Short-term borrowings................................    $ 10,721      $ 9,687      $ 9,687
     Current portion of long-term debt....................       2,070        2,058        2,058
     Current portion of capital lease obligations.........       1,061        1,074        1,074
     Accounts payable.....................................       7,433        3,677        3,677
     Accrued compensation.................................       7,501        3,985        3,985
     Other accrued expenses...............................       6,883        5,280        5,280
     Income taxes payable.................................       1,889        1,279        1,279
     Distribution payable.................................          --           --       35,926
                                                              --------      -------      -------
          Total current liabilities.......................      37,558       27,040       62,966
Long-term debt............................................      13,748       12,042       12,042
Long-term portion of capital lease obligations............       1,876        1,744        1,744
Deferred tax liability....................................         133          117          117
Other liabilities.........................................         373          463          463
Commitments and contingencies (Note 7)
Stockholders' equity:
     Preferred Stock, $0.01 par value; 2,000,000 shares
       authorized, no shares issued or outstanding........          --           --           --
     Common Stock, Class A, no par value; 11,250,000
       shares authorized, 7,766,910 issued and
       outstanding........................................          40           40           40
     Common Stock, Class B (non voting) no par value;
       18,750,000 shares authorized; 10,286,255 and
       10,286,257 shares issued and outstanding at
       December 31, 1997 and 1998, respectively...........          73           73           73
     Additional paid-in capital...........................          48           48           48
     Retained earnings....................................      51,443       52,479       16,553
     Accumulated other comprehensive income...............       1,244        2,186        2,186
                                                              --------      -------      -------
          Total stockholders' equity......................      52,848       54,826       18,900
                                                              --------      -------      -------
          Total liabilities and stockholders' equity......    $106,536      $96,232      $96,232
                                                              ========      =======      =======
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                       F-3
<PAGE>   65
 
                             MKS INSTRUMENTS, INC.
 
                       CONSOLIDATED STATEMENTS OF INCOME
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                              --------------------------------
                                                                1996        1997        1998
                                                              --------    --------    --------
<S>                                                           <C>         <C>         <C>
Net sales...................................................  $170,862    $188,080    $139,763
Cost of sales...............................................   102,008     107,606      83,784
                                                              --------    --------    --------
Gross profit................................................    68,854      80,474      55,979
Research and development....................................    14,195      14,673      12,137
Selling, general and administrative.........................    37,191      41,838      34,707
Restructuring...............................................     1,400          --          --
                                                              --------    --------    --------
Income from operations......................................    16,068      23,963       9,135
Interest expense............................................     2,378       2,132       1,483
Interest income.............................................        92         271         296
Other income (expense), net.................................      (479)        166         187
                                                              --------    --------    --------
Income before income taxes..................................    13,303      22,268       8,135
Provision for income taxes..................................       800       1,978         949
                                                              --------    --------    --------
Net income..................................................  $ 12,503    $ 20,290    $  7,186
                                                              ========    ========    ========
Pro forma data (unaudited):
     Historical income before income taxes..................                          $  8,135
     Pro forma provision for income taxes...................                             3,091
                                                                                      --------
     Pro forma net income...................................                             5,044
                                                                                      ========
Pro forma net income per share:
     Basic..................................................                          $   0.25
                                                                                      ========
     Diluted................................................                          $   0.24
                                                                                      ========
Pro forma weighted average common shares outstanding:
     Basic..................................................                            20,166
                                                                                      ========
     Diluted................................................                            20,651
                                                                                      ========
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                       F-4
<PAGE>   66
 
                             MKS INSTRUMENTS, INC.
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
                       (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
                                                                        COMMON STOCK
                                                          ----------------------------------------
                                      PREFERRED STOCK          CLASS A               CLASS B         ADDITIONAL
                                     ------------------   ------------------   -------------------    PAID-IN     RETAINED
                                      SHARES     AMOUNT    SHARES     AMOUNT     SHARES     AMOUNT    CAPITAL     EARNINGS
                                     ---------   ------   ---------   ------   ----------   ------   ----------   --------
<S>                                  <C>         <C>      <C>         <C>      <C>          <C>      <C>          <C>
Balance at December 31, 1995.......                       7,766,910    $40     10,286,255    $73        $48       $45,550
Distributions to stockholders......                                                                               (14,500)
Comprehensive income:
    Net income.....................                                                                                12,503
    Other comprehensive income:
    Foreign currency translation
      adjustment...................
    Unrealized loss on
      investments..................
    Comprehensive income...........
                                     ---------    ---     ---------    ---     ----------    ---        ---       -------
Balance at December 31, 1996.......                       7,766,910     40     10,286,255     73         48        43,553
Distributions to stockholders......                                                                               (12,400)
Comprehensive income:
    Net income.....................                                                                                20,290
    Other comprehensive income:
    Foreign currency translation
      adjustment...................
    Unrealized gain on
      investments..................
    Comprehensive income...........
                                     ---------    ---     ---------    ---     ----------    ---        ---       -------
Balance at December 31, 1997.......                       7,766,910     40     10,286,255     73         48        51,443
Distributions to stockholders......                                                                                (6,150)
Issuance of common stock...........                                                     2
Comprehensive income:
    Net income.....................                                                                                 7,186
    Other comprehensive income:
    Foreign currency translation
      adjustment...................
    Unrealized loss on
      investments..................
    Comprehensive income...........
                                     ---------    ---     ---------    ---     ----------    ---        ---       -------
Balance at December 31, 1998.......                       7,766,910    $40     10,286,257    $73        $48       $52,479
                                     =========    ===     =========    ===     ==========    ===        ===       =======
 
<CAPTION>
 
                                      ACCUMULATED
                                         OTHER                           TOTAL
                                     COMPREHENSIVE   COMPREHENSIVE   STOCKHOLDERS'
                                        INCOME          INCOME          EQUITY
                                     -------------   -------------   -------------
<S>                                  <C>             <C>             <C>
Balance at December 31, 1995.......     $2,681                         $ 48,392
Distributions to stockholders......                                     (14,500)
Comprehensive income:
    Net income.....................                     $12,503          12,503
    Other comprehensive income:
    Foreign currency translation
      adjustment...................       (766)            (766)           (766)
    Unrealized loss on
      investments..................       (131)            (131)           (131)
                                                        -------
    Comprehensive income...........                     $11,606
                                        ------          =======        --------
Balance at December 31, 1996.......      1,784                           45,498
Distributions to stockholders......                                     (12,400)
Comprehensive income:
    Net income.....................                      20,290          20,290
    Other comprehensive income:
    Foreign currency translation
      adjustment...................       (786)            (786)           (786)
    Unrealized gain on
      investments..................        246              246             246
                                                        -------
    Comprehensive income...........                     $19,750
                                        ------          =======        --------
Balance at December 31, 1997.......      1,244                           52,848
Distributions to stockholders......                                      (6,150)
Issuance of common stock...........
Comprehensive income:
    Net income.....................                       7,186           7,186
    Other comprehensive income:
    Foreign currency translation
      adjustment...................        992              992             992
    Unrealized loss on
      investments..................        (50)             (50)            (50)
                                                        -------
    Comprehensive income...........                     $ 8,128
                                        ------          =======        --------
Balance at December 31, 1998.......     $2,186                         $ 54,826
                                        ======                         ========
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
 
                                       F-5
<PAGE>   67
 
                             MKS INSTRUMENTS, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1996       1997       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Cash flows from operating activities:
     Net income.............................................  $ 12,503   $ 20,290   $  7,186
     Adjustments to reconcile net income to net cash
       provided by operating activities:
       Depreciation and amortization of property, plant, and
          equipment.........................................     5,920      5,712      6,242
       Loss on disposal of property, plant and equipment....        --        552         48
       Deferred taxes.......................................      (277)      (145)       (32)
       Provision for doubtful accounts......................       (20)       258        253
       Forward exchange contract loss (gain) realized.......       302        132     (1,211)
       Stock option compensation............................        --         95         --
       Changes in operating assets and liabilities:
          (Increase) decrease in trade accounts
            receivable......................................     6,119    (12,509)    12,908
          (Increase) decrease in inventories................     4,145     (5,930)     6,479
          (Increase) decrease in other current assets.......     3,239     (1,261)       554
          Increase (decrease) in accrued compensation.......      (220)     2,386     (3,516)
          Increase (decrease) in other accrued expenses.....    (1,520)     3,312     (1,602)
          Increase (decrease) in accounts payable...........    (4,221)     2,638     (3,682)
          Increase (decrease) in income taxes payable.......       331      1,283       (647)
                                                              --------   --------   --------
     Net cash provided by operating activities..............    26,301     16,813     22,980
                                                              --------   --------   --------
     Cash flows from investing activities:
       Purchases of property, plant and equipment...........    (9,417)    (3,269)    (3,137)
       Proceeds from sale of property, plant and
          equipment.........................................        --        203         60
       Increase in other assets.............................      (443)      (123)      (270)
       Cash received (used) to settle forward exchange
          contracts.........................................      (302)      (132)     1,211
                                                              --------   --------   --------
     Net cash used in investing activities..................   (10,162)    (3,321)    (2,136)
                                                              --------   --------   --------
     Cash flows from financing activities:
       Net (payments) borrowings on demand notes payable....       224     (1,875)        --
       Proceeds from short-term borrowings..................    11,025     24,110     15,242
       Payments on short-term borrowings....................    (9,628)   (22,938)   (17,569)
       Proceeds from long-term debt.........................       400         --         --
       Principal payments on long-term debt.................    (2,093)    (2,217)    (2,057)
       Cash distributions to stockholders...................   (14,500)   (12,400)    (6,150)
       Principal payments under capital lease obligations...      (982)      (870)    (1,257)
                                                              --------   --------   --------
     Net cash used in financing activities..................   (15,554)   (16,190)   (11,791)
                                                              --------   --------   --------
     Effect of exchange rate changes on cash and cash
       equivalents..........................................      (420)     1,394       (376)
                                                              --------   --------   --------
     Increase (decrease) in cash and cash equivalents.......       165     (1,304)     8,677
     Cash and cash equivalents at beginning of period.......     3,650      3,815      2,511
                                                              --------   --------   --------
     Cash and cash equivalents at end of period.............  $  3,815   $  2,511   $ 11,188
                                                              ========   ========   ========
     Supplemental disclosure of cash flow information:
       Cash paid during the period for:
          Interest..........................................  $  2,363   $  2,030   $  1,526
                                                              ========   ========   ========
          Income taxes......................................  $    770   $  1,078   $  1,608
                                                              ========   ========   ========
       Noncash transactions during the period:
          Equipment acquired under capital leases...........  $  2,074   $    145   $  1,138
                                                              ========   ========   ========
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                       F-6
<PAGE>   68
 
                             MKS INSTRUMENTS, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
1.  DESCRIPTION OF BUSINESS:
 
     MKS Instruments, Inc. (the "Company") is a worldwide developer,
manufacturer, and supplier of instruments and components that are used to
measure, control and analyze gases in semiconductor manufacturing and similar
industrial manufacturing processes. The Company's products include pressure and
flow measurement and control instruments; vacuum gauges, valves and components;
and gas analysis instruments. The Company is subject to risks common to
companies in the semiconductor industry including, but not limited to, the
highly cyclical nature of the semiconductor industry leading to recurring
periods of over supply, development by the Company or its competitors of new
technological innovations, dependence on key personnel and the protection of
proprietary technology.
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
BASIS OF PRESENTATION
 
     The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation. The Company has reflected the
approximately 77.5% owned foreign subsidiaries as wholly-owned subsidiaries
pursuant to common control accounting. Upon the closing of this offering for
which these financial statements are being prepared, the shares of the foreign
subsidiaries owned directly by the ultimate stockholders will be contributed to
the Company.
 
PRO FORMA BALANCE SHEET PRESENTATION (UNAUDITED)
 
     The Company intends to distribute the balance of its accumulated and
undistributed S corporation earnings from the proceeds of this offering for
which this registration statement is being prepared. The unaudited pro forma
balance sheet has been prepared assuming an estimated $35,926,000 distribution
was payable as of December 31, 1998. The remaining balance in retained earnings
represents accumulated earnings prior to the Company converting from a C
corporation to an S corporation in 1987, accumulated income in overseas
subsidiaries and differences between book and tax accumulated income.
 
PRO FORMA NET INCOME PER SHARE (UNAUDITED)
 
     Pro forma net income per share is based upon the weighted average number of
common and common equivalent shares (using the treasury stock method)
outstanding. Common equivalent shares are included in the per share calculations
where the effect of their inclusion would be dilutive.
 
     Historical net income has been adjusted for the pro forma provision for
income taxes calculated assuming the Company was subject to income taxation as a
C corporation, at a pro forma tax rate of 38.0%. In accordance with a regulation
of the Securities and Exchange Commission, pro forma net income per share has
been presented for the year ended December 31, 1998 to reflect the effect as of
January 1, 1998 of the assumed issuance of that number of shares of common stock
of the Company necessary to be sold at the mid-point of the estimated initial
public offering price in order to fund the intended distribution in the amount
of the accumulated and undistributed S corporation earnings.
 
                                       F-7
<PAGE>   69
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
     Historical net income per share is not presented as it is not meaningful
based upon the Company's planned conversion from an S corporation to a C
corporation upon the closing of this offering for which these financial
statements are being prepared.
 
     The following is a reconciliation of basic to diluted pro forma net income
per share:
 
<TABLE>
<CAPTION>
                                                              FOR THE YEAR ENDED
                                                              DECEMBER 31, 1998
                                                              ------------------
<S>                                                           <C>
Pro forma net income........................................       $ 5,044
                                                                   =======
Shares used in pro forma net income per common share --
  basic.....................................................        20,166
     Effect of dilutive securities:
          Employee and director stock options...............           485
                                                                   -------
Shares used in pro forma net income per common share --
  diluted...................................................        20,651
                                                                   =======
Pro forma net income per common share -- basic..............       $  0.25
                                                                   =======
Pro forma net income per common share -- diluted............       $  0.24
                                                                   =======
</TABLE>
 
FOREIGN EXCHANGE
 
     The functional currency of the Company's foreign subsidiaries is the
applicable local currency. For those subsidiaries, assets and liabilities are
translated to U.S. dollars at year-end exchange rates. Income and expense
accounts are translated at the average exchange rates prevailing for the year.
The resulting translation adjustments are included in accumulated other
comprehensive income in consolidated stockholders' equity.
 
REVENUE RECOGNITION
 
     The Company recognizes revenue upon shipment. The Company accrues for
anticipated returns and warranty costs upon shipment.
 
CASH AND CASH EQUIVALENTS
 
     All highly liquid investments with an original maturity of three months or
less at the date of purchase are considered to be cash equivalents. Cash
equivalents consist of money market instruments.
 
INVESTMENTS
 
     The appropriate classification of investments in debt and equity securities
is determined at the time of purchase. Debt securities that the Company has both
the intent and ability to hold to maturity are carried at amortized cost. Debt
securities that the Company does not have the intent and ability to hold to
maturity or equity securities are classified either as "available-for-sale" or
as "trading" and are carried at fair value. Marketable equity securities are
carried at fair value and classified either as available-for-sale or trading.
Unrealized gains and losses on securities classified as available-for-sale are
included in accumulated other comprehensive income in consolidated stockholders'
equity. Unrealized gains and losses on securities classified as trading are
reported in earnings.
 
INVENTORIES
 
     Inventories are stated at the lower of cost or market. Cost is determined
on the first-in, first-out method.
 
                                       F-8
<PAGE>   70
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
PROPERTY, PLANT AND EQUIPMENT
 
     Property, plant and equipment are stated at cost. Equipment acquired under
capital leases is recorded at the present value of the minimum lease payments
required during the lease period. Expenditures for major renewals and
betterments that extend the useful lives of property, plant and equipment are
capitalized. Expenditures for maintenance and repairs are charged to expense as
incurred. When assets are sold or otherwise disposed of, the cost and related
accumulated depreciation are eliminated from the accounts and any resulting gain
or loss is recognized in earnings.
 
     Depreciation is provided on the straight-line method over the estimated
useful lives of 20 years for buildings and three to five years for machinery and
equipment. Leasehold improvements are amortized over the shorter of the lease
term or the estimated useful life of the lease.
 
RESEARCH AND DEVELOPMENT
 
     Research and development costs are expensed as incurred.
 
NEW ACCOUNTING PRONOUNCEMENTS
 
     In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Software
Developed or Obtained for Internal Use" which provides guidance on the
accounting for the costs of software developed or obtained for internal use. SOP
98-1 is effective for fiscal years beginning after December 15, 1998. The
Company does not expect the SOP 98-1 to have a material impact on its financial
position or results of operations.
 
     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. The statement
is effective for all fiscal quarters of all fiscal years beginning after June
15, 1999. The Company has not yet determined the impact that the adoption SFAS
No. 133 will have on its financial position or results of operations.
 
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 and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
 
RECLASSIFICATION OF PRIOR YEAR BALANCES
 
     Certain reclassifications have been made to prior years' consolidated
financial statements to conform to the current presentation.
 
                                       F-9
<PAGE>   71
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
3.  FINANCIAL INSTRUMENTS AND RISK MANAGEMENT:
 
FOREIGN EXCHANGE RISK MANAGEMENT
 
     The Company uses forward exchange contracts and local currency purchased
options in an effort to reduce its exposure to currency fluctuations on future
U.S. dollar cash flows derived from foreign currency denominated sales
associated with the intercompany purchases of inventory. The Company has entered
into forward exchange contracts, and to a lesser extent, local currency
purchased options to hedge a portion of its probable anticipated, but not firmly
committed transactions. The Company has also used forward exchange contracts to
hedge firm commitments. Market value gains and losses on forward exchange
contracts are recognized immediately in earnings unless a firm commitment
exists. Market value gains and premiums on local currency purchased options on
probable anticipated transactions and market value gains and losses on forward
exchange contracts hedging firm commitments are recognized when the hedged
transaction occurs. These contracts, which relate primarily to Japanese and
European currencies generally have terms of eighteen months or less. The Company
does not hold or issue derivative financial instruments for trading purposes.
 
     Realized and unrealized gains and losses on forward exchange contracts and
local currency purchased options that qualify for hedge accounting are
recognized in earnings in the same period as the underlying hedged item.
Realized and unrealized gains and losses on forward exchange contracts and local
currency purchased option contracts that do not qualify for hedge accounting are
recognized immediately in earnings. Forward exchange contracts receive hedge
accounting on firmly committed transactions when they are designated as a hedge
of the designated currency exposure and are highly effective in minimizing such
exposure. Options receive hedge accounting on probable anticipated transactions
when they are designated as a hedge of the currency exposure and are highly
effective in minimizing such exposure. The cash flows resulting from forward
exchange contracts and local currency purchased options that qualify for hedge
accounting are classified in the statement of cash flows as part of cash flows
from operating activities. Cash flows resulting from forward exchange contracts
and local currency purchased options that do not qualify for hedge accounting
are classified in the statement of cash flows as investing activities.
 
     Forward exchange contracts with notional amounts totaling none, $9,800,000,
and $8,000,000 to exchange foreign currencies for U.S. dollars, were outstanding
at December 31, 1996, 1997, and 1998, respectively. The forward exchange
contracts with notional amounts outstanding at December 31, 1998 totaling
$8,000,000 do not qualify for hedge accounting and accordingly are marked to
market and recognized immediately in earnings. Local currency purchased options
with notional amounts totaling $3,722,000, $12,738,000, and $10,221,000 to
exchange foreign currencies for U.S. dollars were outstanding at December 31,
1996, 1997, and 1998, respectively.
 
     Foreign exchange losses of $479,000, foreign exchange gains of $1,166,000
and foreign exchange losses of $168,000 on forward exchange contracts that did
not qualify for hedge accounting were recognized in earnings during 1996, 1997
and 1998, respectively, and are classified in Other income (expense), net. Gains
on forward exchange contracts that qualify for hedge accounting of $978,000 were
deferred and classified in other accrued expenses at December 31, 1996. Gains on
local currency purchased options deferred at December 31, 1996 that qualify for
hedge accounting of $200,000 were deferred in other accrued expenses. Gains on
forward exchange contracts and local currency purchased options that qualify for
hedge accounting are classified in cost of goods sold and totaled $2,476,000,
$1,178,000, and $310,000 for the years ended December 31, 1996, 1997, and 1998,
respectively.
 
     The fair value of forward exchange contracts at December 31, 1998,
determined by applying period end currency exchange rates to the notional
contract amounts, amounted to a loss of $349,000. The fair
 
                                      F-10
<PAGE>   72
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
values of local currency purchased options at December 31, 1997 and 1998 which
were obtained through dealer quotes were immaterial.
 
     The Company recorded a foreign exchange translation loss on intercompany
payables of $1,000,000 and a foreign exchange translation gain on intercompany
payables of $1,000,000 in Other income (expense), net in 1997 and 1998,
respectively. Foreign exchange translation gains and losses from unhedged
intercompany balances were not material in 1996.
 
     The market risk exposure from forward exchange contracts is assessed in
light of the underlying currency exposures and is controlled by the initiation
of additional or offsetting foreign currency contracts. The market risk exposure
from options is limited to the cost of such investments. Credit risk exposure
from forward exchange contracts and local currency purchased options are
minimized as these instruments are contracted with a major financial
institution. The Company monitors the credit worthiness of this financial
institution and full performance is anticipated.
 
INTEREST RATE RISK MANAGEMENT
 
     The Company utilizes an interest rate swap to fix the interest rate on
certain variable rate term loans in order to minimize the effect of changes in
interest rates on earnings. In 1998, the Company entered into a four-year
interest rate swap agreement with a major financial institution for the notional
amount of $10,528,000 equal to the term loans described in Note 6. Under the
agreement, the Company pays a fixed rate of 5.85% on the notional amount and
receives the London Interbank Offering Rate ("LIBOR"). The interest differential
paid or received on the swap agreement is recognized as an adjustment to
interest expense. At December 31, 1998, the fair value of this interest rate
swap, which represents the amount the Company would receive or pay to terminate
the agreement, is a net payable of $151,000, based on dealer quotes.
 
     The market risk exposure from the interest rate swap is assessed in light
of the underlying interest rate exposures. Credit risk exposure from the swap is
minimized as the agreement is with a major financial institution. The Company
monitors the credit worthiness of this financial institution and full
performance is anticipated.
 
CONCENTRATIONS OF CREDIT RISK
 
     The Company's significant concentrations of credit risk consist principally
of cash and cash equivalents and trade accounts receivable. The Company
maintains cash and cash equivalents with financial institutions including the
bank it has borrowings with. Concentrations of credit risk with respect to trade
accounts receivable are limited due to the large number of geographically
dispersed customers. Credit is extended for all customers based on financial
condition and collateral is not required.
 
FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     The fair value of the term loans, including the current portion,
approximates its carrying value given its variable rate interest provisions. The
fair value of mortgage notes is based on borrowing rates for similar instruments
and approximates its carrying value. For all other balance sheet financial
instruments, the carrying amount approximates fair value because of the short
period to maturity of these instruments.
 
                                      F-11
<PAGE>   73
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
4.  INVENTORIES:
 
     Inventories consist of the following:
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                             ------------------
                                                              1997       1998
                                                             -------    -------
<S>                                                          <C>        <C>
Raw material...............................................  $ 9,981    $ 7,544
Work in process............................................    7,241      5,718
Finished goods.............................................   12,741     11,202
                                                             -------    -------
                                                             $29,963    $24,464
                                                             =======    =======
</TABLE>
 
5.  PROPERTY, PLANT AND EQUIPMENT:
 
     Property, plant and equipment consist of the following:
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                             ------------------
                                                              1997       1998
                                                             -------    -------
<S>                                                          <C>        <C>
Land.......................................................  $ 8,350    $ 8,834
Buildings..................................................   26,241     26,020
Machinery and equipment....................................   24,861     27,394
Furniture and fixtures.....................................    9,697     10,578
Leasehold improvements.....................................      882      1,814
                                                             -------    -------
                                                              70,031     74,640
Less: accumulated depreciation and amortization............   36,055     41,915
                                                             -------    -------
                                                             $33,976    $32,725
                                                             =======    =======
</TABLE>
 
6.  DEBT:
 
CREDIT AGREEMENTS AND SHORT-TERM BORROWINGS
 
     In February 1996, the Company entered into loan agreements with two banks,
which provide access to a revolving credit facility. These agreements have since
been amended. The revolving credit facility, as amended, provides for
uncollateralized borrowings up to $30,000,000, which expires on December 31,
1999. Interest on borrowings is payable quarterly at either the banks' base rate
or the LIBOR Rate, as defined in the agreement, at the Company's option. At
December 31, 1997 and 1998, the Company had no borrowings under this revolving
credit facility.
 
     Additionally, certain of the Company's foreign subsidiaries have lines of
credit and short-term borrowing arrangements with various financial institutions
which provide for aggregate borrowings as of December 31, 1998 of up to
$15,003,000, which generally expire and are renewed at six month intervals. At
December 31, 1997 and 1998, total borrowings outstanding under these
arrangements were $10,721,000, and $9,687,000, respectively, at interest rates
ranging from 1.3% to 1.6%, and 1.3% to 1.7%, respectively. Foreign short-term
borrowings are generally collateralized by certain trade accounts receivable and
are guaranteed by a domestic bank.
 
                                      F-12
<PAGE>   74
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
LONG-TERM DEBT
 
     Long-term debt consists of the following:
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              -----------------
                                                               1997      1998
                                                              -------   -------
<S>                                                           <C>       <C>
Term loans..................................................  $12,194   $10,528
Mortgage notes..............................................    3,624     3,572
                                                              -------   -------
Total long-term debt........................................   15,818    14,100
Less: current portion.......................................    2,070     2,058
                                                              -------   -------
Long-term debt less current portion.........................  $13,748   $12,042
                                                              =======   =======
</TABLE>
 
     On November 1, 1993, the Company entered into a term loan agreement with a
bank, which provided for borrowings of $10,000,000. Principal payments are
payable in equal monthly installments of $56,000 through October 1, 2000, with
the remaining principal payment due on November 1, 2000. The loan is
collateralized by certain land, buildings, and equipment. Interest is payable
monthly at either the bank's base rate, at a rate based on the long-term funds
rate, or at the LIBOR Rate, as defined in the agreement, at the Company's
option.
 
     On October 31, 1995, the Company also entered into a term loan agreement
with the same bank, which provided additional uncollateralized borrowings of
$7,000,000. Principal payments are payable in equal monthly installments of
$83,000 through June 1, 2002, with the remaining principal payment due on June
30, 2002. Interest is payable monthly at either the bank's base rate or at the
LIBOR Rate, as defined in the agreement, at the Company's option.
 
     At December 31, 1997 and 1998, the interest rates in effect for the term
loan borrowings were 6.975% and 7.131%, respectively.
 
     The terms of the revolving credit facility and term loan agreements, as
amended, contain, among other provisions, requirements for maintaining certain
levels of tangible net worth and other financial ratios. The agreement also
contains restrictions with respect to acquisitions. Under the most restrictive
covenant, the operating cash flow to debt service ratio for a fiscal quarter
shall not be less than 1.25 to 1.0. In the event of default of these covenants
or restrictions, any obligation then outstanding under the loan agreement shall
become payable upon demand by the bank. See Note 13 for subsequent event.
 
     The Company has loans outstanding from various foreign banks in the form of
mortgage notes at interest rates ranging from 2.0% to 6.2%. Principal and
interest are payable in monthly installments through 2010. The loans are
collateralized by mortgages on certain of the Company's foreign properties.
 
     Aggregate maturities of long-term debt over the next five years are as
follows:
 
<TABLE>
<CAPTION>
                                                                AGGREGATE
                  YEAR ENDING DECEMBER 31,                      MATURITIES
                  ------------------------                      ----------
<S>                                                             <C>
     1999...................................................     $ 2,058
     2000...................................................       7,343
     2001...................................................       1,405
     2002...................................................       1,329
     2003...................................................         422
     Thereafter.............................................       1,543
                                                                 -------
                                                                 $14,100
                                                                 =======
</TABLE>
 
                                      F-13
<PAGE>   75
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
7.  LEASE COMMITMENTS:
 
     The Company leases certain of its facilities and machinery and equipment
under capital and operating leases expiring in various years through 2002 and
thereafter. Generally, the facility leases require the Company to pay
maintenance, insurance and real estate taxes. Rental expense under operating
leases totaled $2,487,000, $2,478,000, and $2,388,000 for the years ended
December 31, 1996, 1997, and 1998, respectively.
 
     Minimum lease payments under operating and capital leases are as follows:
 
<TABLE>
<CAPTION>
                                                                                           CAPITAL
                                                                  OPERATING LEASES         LEASES
                                                              ------------------------    ---------
                  YEAR ENDING DECEMBER 31,                    REAL ESTATE    EQUIPMENT    EQUIPMENT
                  ------------------------                    -----------    ---------    ---------
<S>                                                           <C>            <C>          <C>
     1999...................................................    $1,484         $437        $1,202
     2000...................................................       882          251           974
     2001...................................................       660          130           537
     2002...................................................       153           36           333
     2003...................................................        84           13           116
     Thereafter.............................................        51           42            --
                                                                ------         ----        ------
Total minimum lease payments................................    $3,314         $909        $3,162
                                                                ======         ====        ======
Less: amounts representing interest.........................                                  344
                                                                                           ------
Present value of minimum lease payments.....................                                2,818
Less: current portion.......................................                                1,074
                                                                                           ------
Long-term portion...........................................                               $1,744
                                                                                           ======
</TABLE>
 
8.  STOCKHOLDERS' EQUITY:
 
COMMON STOCK
 
     Prior to the effectiveness of a registration statement relating to the
initial public offering of common stock of the Company, the Company will effect
a 3-for-2 stock split, to be effected in the form of a stock dividend of its
common stock, increase the number of authorized shares of common stock to
30,000,000 and authorize 2,000,000 shares of $0.01 par value preferred stock.
Accordingly, all share data has been restated to reflect the common stock split.
 
     The Company has two classes of common stock. Stockholders of Class A common
stock are entitled to voting rights with one vote for each share of common
stock. Stockholders of Class B common stock are not entitled to voting rights.
 
     Upon the closing of this offering for which this Registration Statement is
being prepared each outstanding share of Class A and Class B common stock of the
Company will be converted into an aggregate of 18,053,167 shares of common
stock.
 
STOCK OPTION PLANS
 
     On January 9, 1998, the stockholders of the Company approved the following:
(i) an increase in the number of shares that may be granted under the 1995 Stock
Incentive Plan to 3,750,000 shares of common stock; (ii) the adoption of the
1997 Director Stock Option Plan pursuant to which options may be granted to
purchase up to an aggregate of 300,000 shares of common stock; (iii) the
adoption of the 1997 Employee Stock Purchase Plan pursuant to which the Company
may issue up to an aggregate of 450,000 shares of common stock; and (iv) that
3,750,000 shares, 300,000 shares, and 450,000 shares of
 
                                      F-14
<PAGE>   76
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
common stock be reserved for issuance under the 1995 Stock Incentive Plan, the
1997 Director Stock Option Plan, and the 1997 Employee Stock Purchase Plan,
respectively.
 
     The Company grants options to employees under the 1995 Stock Incentive Plan
(the "Plan") and to directors under the 1996 Director Stock Option Plan (the
"Director Plan").
 
     At December 31, 1998 options to purchase 1,651,793 shares of the Company's
common stock were reserved for issuance under the Plan. At December 31, 1998,
under the Director Plan, options to purchase 28,932 shares of common stock were
reserved for issuance. Stock options are granted at 100% of the fair value of
the Company's common stock as determined by the Board of Directors on the date
of grant. In reaching the determination of fair value at the time of each grant,
the Board of Directors considered a range of factors, including the Company's
current financial position, its recent revenues, results of operations and cash
flows, its assessment of the Company's competitive position in its markets and
prospects for the future, the status of the Company's product development and
marketing efforts, current valuations for comparable companies and the
illiquidity of an investment in the Company's common stock. Generally, stock
options under the Plan vest 20% after one year and 5% per quarter thereafter,
and expire 10 years after the grant date. Under the Director Plan, the options
granted in 1996 vest over three years and options granted in 1997 and later vest
at the earlier of (a) the next annual meeting, (b) 13 months from date of grant
or (c) the effective date of an acquisition as defined in the Director Plan.
 
     The following table presents the activity for options under the Plan.
 
<TABLE>
<CAPTION>
                                           YEAR ENDED             YEAR ENDED             YEAR ENDED
                                        DECEMBER 31, 1996     DECEMBER 31, 1997       DECEMBER 31, 1998
                                       -------------------   --------------------   ---------------------
                                                  WEIGHTED               WEIGHTED                WEIGHTED
                                                  AVERAGE                AVERAGE                 AVERAGE
                                                  EXERCISE               EXERCISE                EXERCISE
                                       OPTIONS     PRICE      OPTIONS     PRICE      OPTIONS      PRICE
                                       --------   --------   ---------   --------   ----------   --------
<S>                                    <C>        <C>        <C>         <C>        <C>          <C>
Outstanding -- beginning of period...   608,270    $11.06      810,442    $4.43      1,564,449    $4.50
Granted..............................   810,442      4.43      785,657     4.57        629,969     6.80
Exercised............................        --        --           --       --             (2)    4.43
Forfeited or Expired.................  (608,270)    11.06      (31,650)    4.43        (96,209)    4.43
                                       --------    ------    ---------    -----     ----------    -----
Outstanding -- end of period.........   810,442    $ 4.43    1,564,449    $4.50      2,098,207    $5.20
Exercisable at end of period.........   114,782    $ 4.43      476,451    $4.43        778,473    $4.46
</TABLE>
 
     At December 31, 1998, Plan options included 1,436,588, 566,669, and 94,950
shares outstanding at exercise prices of $4.43, $6.67, and $8.00 per share. The
weighted average remaining contractual life of these options was 8.2 years.
 
     During 1996, 27,128 options were granted at an exercise price of $4.43 per
share under the Director Plan and were outstanding at December 31, 1996. Of
these options, 4,524 were exercisable at December 31, 1996. During 1997, options
for 3,620 shares were granted under the Director Plan at an exercise price of
$4.43 per share. Of these options, 30,748 were outstanding with 13,564
exercisable at the $4.43 per share price at December 31, 1997. During 1998,
options for 3,620 shares were granted under the Director Plan at an exercise
price of $8.00 per share. Of these options, 34,368 were outstanding with 26,228
exercisable at the $4.43 per share price at December 31, 1998.
 
     The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for
Stock-Based Compensation." The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the
 
                                      F-15
<PAGE>   77
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
fair value of the Company's stock at the date of grant over the amount an
employee must pay to acquire the stock.
 
     The disclosures required under SFAS No. 123 have been omitted as they are
not meaningful based upon the Company's planned conversion from an S corporation
to a C corporation upon the closing of this offering for which these financial
statements are being prepared. Had the fair value based method prescribed in
SFAS No. 123 been used to account for stock-based compensation cost, there would
have been no change in pro forma net income and pro forma earnings per share
from that reported.
 
9.  INCOME TAXES:
 
     The Company has elected to be taxed as an S corporation for federal and
certain states income tax purposes and, as a result, is not subject to Federal
taxation but is subject to state taxation on income in certain states. The
stockholders are liable for individual Federal and certain state income taxes on
their allocated portions of the Company's taxable income.
 
     The components of income before income taxes and the historical related
provision for income taxes consist of the following:
 
<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                         ----------------------------
                                                          1996       1997       1998
                                                         -------    -------    ------
<S>                                                      <C>        <C>        <C>
Income before income taxes:
  United States........................................  $11,953    $21,858    $6,169
  Foreign..............................................    1,350        410     1,966
                                                         -------    -------    ------
                                                          13,303     22,268     8,135
Current taxes:
  State................................................      285      1,331       197
  Foreign..............................................      792        792       784
                                                         -------    -------    ------
                                                           1,077      2,123       981
                                                         -------    -------    ------
Deferred taxes:
  State................................................     (156)       (72)      (39)
  Foreign..............................................     (121)       (73)        7
                                                         -------    -------    ------
                                                            (277)      (145)      (32)
                                                         -------    -------    ------
Provision for income taxes.............................  $   800    $ 1,978    $  949
                                                         =======    =======    ======
</TABLE>
 
     As the Company is not subject to Federal income taxes, a reconciliation of
the effective tax rate to the Federal statutory rate is not meaningful.
 
     At December 31, 1996, 1997, and 1998 the components of the deferred tax
asset and deferred tax liability were as follows:
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                           ------------------------
                                                           1996      1997      1998
                                                           ----      ----      ----
<S>                                                        <C>       <C>       <C>
Deferred tax assets (liabilities):
  Inventories............................................  $234      $344      $265
  Intercompany profits...................................   160       214       152
  Compensation...........................................    72        77       127
  Investment booked under the equity method..............   (28)      (41)      (59)
  Other..................................................   (34)      (45)       96
                                                           ----      ----      ----
          Total..........................................  $404      $549      $581
                                                           ====      ====      ====
</TABLE>
 
                                      F-16
<PAGE>   78
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
10.  EMPLOYEE BENEFIT PLANS:
 
     The Company has a 401(k) profit-sharing plan for U.S. employees meeting
certain requirements in which eligible employees may contribute from 1% up to
12% of their compensation. The Company, at its discretion, may provide a
matching contribution which will generally match up to the first 2% of each
participant's compensation, plus 25% of the next 4% of compensation. At the
discretion of the Board of Directors, the Company may also make additional
contributions for the benefit of all eligible employees. The Company's
contributions are generally paid annually, and were $2,170,000 and $2,500,000
for the years ended December 31, 1996 and 1997. Approximately $1,400,000 has
been accrued as the estimated Company contribution for the year ended December
31, 1998 and is included in accrued compensation.
 
     The Company maintains a bonus plan which provides cash awards to key
employees, at the discretion of the Compensation Committee of the Board of
Directors, based upon operating results and employee performance. Bonus expense
to key employees was none, $1,425,000, and none for the years ended December 31,
1996, 1997, and 1998, respectively.
 
11.  RESTRUCTURING:
 
     In 1996, the Company recorded a restructuring charge of $1,400,000,
primarily related to reduction of personnel and the closure of facilities in
Phoenix, AZ and San Jose, CA. These charges include $425,000 of severance pay,
$710,000 of lease commitments, and $265,000 for the write-off of leasehold
improvements. The facilities closure concluded during 1997. The remaining
balance of approximately $126,000 for lease commitments is included in Other
accrued expenses in the accompanying balance sheet at December 31, 1998.
 
12.  GEOGRAPHIC FINANCIAL INFORMATION AND SIGNIFICANT CUSTOMER:
 
     See Note 1 for a brief description of the Company's business. The Company
is organized around two similar product lines domestically and by geographic
locations internationally and has three reportable segments: North America, Far
East, and Europe. Net sales to unaffiliated customers are based on the location
in which the sale originated. Transfers between geographic areas are at
negotiated transfer prices and have been eliminated from consolidated net sales.
Income from operations consists of total net sales less operating expenses and
does not include either interest income, interest expense or income taxes. The
Company had one customer comprising 15%, 22% and 16% of net sales for the years
ended December 31, 1996, 1997, and 1998, respectively. This data is presented in
accordance with SFAS 131, "Disclosures About Segments of an Enterprise and
Related Information," which the Company has retroactively adopted for all
periods presented.
 
                                      F-17
<PAGE>   79
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31, 1998
                                        ------------------------------------------------
                                        NORTH AMERICA    FAR EAST    EUROPE      TOTAL
                                        -------------    --------    -------    --------
<S>                                     <C>              <C>         <C>        <C>
Net sales to unaffiliated customers...    $ 95,607       $23,902     $20,254    $139,763
Intersegment net sales................      26,657           290       1,015      27,962
Depreciation and amortization.........       5,627           210         405       6,242
Income from operations................       6,319         1,298       1,518       9,135
Identifiable assets...................      65,560        20,768       9,904      96,232
Capital expenditures..................       2,635           179         323       3,137
                                                  YEAR ENDED DECEMBER 31, 1997
                                         -----------------------------------------------
 
Net sales to unaffiliated customers...    $138,186       $31,559     $18,335    $188,080
Intersegment net sales................      35,429           225         749      36,403
Depreciation and amortization.........       5,096           259         357       5,712
Income from operations................      22,847           886         230      23,963
Identifiable assets...................      77,302        19,906       9,328     106,536
Capital expenditures..................       2,899           128         242       3,269
                                                  YEAR ENDED DECEMBER 31, 1996
                                         -----------------------------------------------
 
Net sales to unaffiliated customers...    $121,061       $31,066     $18,735    $170,862
Intersegment net sales................      34,100           199       1,426      35,725
Depreciation and amortization.........       5,145           388         387       5,920
Income from operations................      14,534           653         881      16,068
Identifiable assets...................      66,593        18,524       9,883      95,000
Capital expenditures..................       8,332           208         877       9,417
</TABLE>
 
13.  SUBSEQUENT EVENT:
 
     On January 28, 1999, the Company amended its revolving credit facility and
its term loan agreements described in Note 6. The amendments include revised
quarterly cash flow to debt service ratios. The most restrictive covenant is the
cash flow to debt service ratio of 1.25 to 1.0 in the fourth quarter of 1999 and
thereafter.
 
                                      F-18
<PAGE>   80
INSIDE BACK COVER (PG.5):

The inside back cover graphically depicts MKS Instruments' message of being a
worldwide provider of process control solutions. It is produced in four-color
process. In the center of the page is a photo of the Earth, with the tag line
"Providing Solutions Around the Process, Around the World" wrapping around the
photo. The background of the page is dark, with the MKS logo appearing at the
top right, knocking out to white. Photos of MKS products surround the photo of
the Earth --above, below, left, and right--and include MKS Baratron Capacitance
Manometers, a Throttling Poppet Valve, a Pressure Controller, Mass Flow
Controllers, an In Situ Flow Verifier, a Direct Liquid Injection Subsystem, and
a Residual Gas Analyzer.


<PAGE>   81
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                                             SHARES
 
                                      LOGO
 
                                  COMMON STOCK
 
                            ------------------------
                                   Prospectus
                                          , 1999
                            ------------------------
 
                     NationsBanc Montgomery Securities LLC
 
                          Donaldson, Lufkin & Jenrette
 
                                Lehman Brothers
 
     Until             , 1999 (25 days after the date of this prospectus), all
dealers effecting transactions in the common stock, whether or not participating
in this distribution, may be required to deliver a prospectus. This is in
addition to the obligation of dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   82
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
 
     Estimated expenses payable in connection with the sale of the common stock
offered hereby are as follows:
 
<TABLE>
<S>                                                           <C>
SEC Registration Fee........................................  $27,800
NASD Filing Fee.............................................  $10,500
Printing, Engraving and Mailing Expenses....................  $  *
Nasdaq Listing Fee..........................................  $95,000
Legal Fees and Expenses.....................................  $  *
Accounting Fees and Expenses................................  $  *
Blue Sky Fees and Expenses..................................  $  *
Transfer Agent and Registrar Fees...........................  $  *
Miscellaneous...............................................  $  *
                                                              -------
          Total.............................................  $  *
                                                              =======
</TABLE>
 
---------------
 
     The Company will bear all expenses shown above.
 
ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
     Section 67 of Chapter 156B of the Massachusetts General Laws provides that
a corporation may indemnify its directors and officers to the extent specified
in or authorized by (i) the articles of organization; (ii) a by-law adopted by
the stockholders; or (iii) a vote adopted by the holders of a majority of the
shares of stock entitled to vote on the election of directors. In all instances,
the extent to which a corporation provides indemnification to its directors and
officers under Section 67 is optional. In its Amended and Restated Articles of
Organization (the "Articles of Organization"), the Registrant has elected to
commit to provide indemnification to its directors and officers in specified
circumstances. Generally, Article 6 of the Registrant's Articles of Organization
provides that the Registrant shall indemnify directors and officers of the
Registrant against liabilities and expenses arising out of legal proceedings
brought against them by reason of their status as directors or officers or by
reason of their agreeing to serve, at the request of the Registrant, as a
director or officer with another organization. Under this provision, a director
or officer of the Registrant shall be indemnified by the Registrant for all
costs and expenses (including attorneys' fees), judgments, liabilities and
amounts paid in settlement of such proceedings, even if he is not successful on
the merits, if he acted in good faith in the reasonable belief that his action
was in the best interests of the Registrant. The Board of Directors may
authorize advancing litigation expenses to a director or officer at his request
upon receipt of an undertaking by any such director of officer to repay such
expenses if it is ultimately determined that he is not entitled to
indemnification for such expenses.
 
     Article 6 of the Registrant's Articles of Organization eliminates the
personal liability of the Registrant's directors to the Registrant or its
stockholders for monetary damages for breach of a director's fiduciary duty,
except to the extent Chapter 156B of the Massachusetts General Laws prohibits
the elimination or limitation of such liability.
 
     The Underwriting Agreement, a form of which is filed at Exhibit 1.1 to this
Registration Statement on Form S-1 (the "Underwriting Agreement"), provides that
the underwriters are obligated under certain circumstances to indemnify
directors, officers and controlling persons of the Registrant against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"). Reference is made to the form of Underwriting Agreement.
 
                                      II-1
<PAGE>   83
 
     The Company has obtained directors and officers liability insurance for the
benefit of its directors and certain of its officers.
 
ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES.
 
     In the three years preceding the filing of this Registration Statement, the
Registrant sold 2 shares of its common stock for total proceeds of $6.64. The
registrant awarded options to purchase 837,570 shares of common stock at a
weighted average exercise price of $4.43 per share and 789,277 shares of common
stock at a weighted average exercise price of $4.57 per share, in 1996 and 1997,
respectively.
 
     In 1998, the registrant awarded options to purchase shares of common stock
on the dates in the amounts, and at the exercise price set forth below:
 
<TABLE>
<CAPTION>
                                                             NUMBER OF        EXERCISE PRICE
DATE                                                          OPTIONS           PER SHARE
----                                                     -----------------    --------------
<S>                                                      <C>                  <C>
January 9, 1998........................................         3,620             $8.00
January 26, 1998.......................................        31,650             $8.00
March 31, 1998.........................................        31,650             $8.00
July 9, 1998...........................................       450,000             $6.67
November 10, 1998......................................       116,669             $6.67
</TABLE>
 
     The grant of options were exempt from registration under the Securities Act
by virtue of the provisions of Section 4(2) of the Securities Act or Rule 701
thereunder.
 
ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
 
     (a) Exhibits:
 
<TABLE>
<CAPTION>
  EX. NO.                           DESCRIPTION
  -------                           -----------
  <C>       <S>
     1.1    Form of Underwriting Agreement
     3.1    Restated Articles of Organization, as amended
    *3.2    Form of Amended and Restated Articles of Organization
     3.3    By-Laws, as amended
    *3.4    Form of Amended and Restated By-Laws
     4.1    Specimen certificate representing the common stock
    *5.1    Opinion of Hale and Dorr LLP
    10.1    Amended and Restated 1995 Stock Incentive Plan
    10.2    1996 Amended and Restated 1996 Director Stock Option Plan
    10.3    1997 Director Stock Option Plan
   *10.4    1999 Employee Stock Purchase Plan
    10.5    Amended and Restated Employment Agreement dated as of
            December 15, 1995 between Leo Berlinghieri and the
            Registrant
    10.6    Amended and Restated Employment Agreement dated as of
            December 15, 1995 between John J. Sullivan and the
            Registrant
    10.7    Amended and Restated Employment Agreement dated as of
            December 15, 1995 between Ronald C. Weigner and the
            Registrant
    10.8    Amended and Restated Employment Agreement dated as of
            December 15, 1995 between William D. Stewart and the
            Registrant
   *10.9    Loan Agreement dated as of October 31, 1995, as last amended
            January 28, 1999, by and between the First National Bank of
            Boston and the Registrant
   10.10    Lease Agreement dated as of October 12, 1989, as extended
            November 1, 1998, by and between Aspen Industrial Park
            Partnership and the Registrant
  *10.11    Loan Agreement dated as of November 1, 1993, as last amended
            January 28, 1999 between the First National Bank of Boston
            and the Registrant
</TABLE>
 
                                      II-2
<PAGE>   84
 
<TABLE>
<CAPTION>
  EX. NO.                           DESCRIPTION
  -------                           -----------
  <C>       <S>
   10.12    Lease dated as of September 21, 1995 by and between General
            American Life Insurance Company and the Registrant
  *10.13    Loan Agreement dated as of February 23, 1996, as last
            amended January 28, 1999 between the BankBoston, N.A.,
            Chemical Bank and the Registrant
   10.14    Revolving Credit Note ($8,000,000) dated February 23, 1996
            between Chemical Bank, The First National Bank of Boston and
            the Registrant
   10.15    Revolving Credit Note ($12,000,000) dated February 23, 1996
            between Chemical Bank, The First National Bank of Boston and
            the Registrant
   10.16    Promissory Note dated as of August 1990 between Jefferson
            National Life Insurance Company and the Registrant
  **10.17   Comprehensive Supplier Agreement #982812 dated October 23,
            1998 by and between Applied Materials, Inc. and the
            Registrant
  **10.18   Management Incentive Program
   10.19    Lease dated as of December 21, 1989, as last amended
            December 1996, between Walpole Park South II Trust and the
            Registrant
   10.20    Lease dated as of January 1, 1996 between MiFuji Kanzai Co.
            Ltd. and the Registrant (covering Floor 5)
   10.21    Lease dated as of April 21, 1997 between MiFuji Kanzai Co.
            Ltd. and the Registrant (covering Floors 1 and 2)
   10.22    Split-Dollar Agreement dated as of September 12, 1991
            between the Registrant, John R. Bertucci and Claire R.
            Bertucci and Richard S. Chute, Trustees of the John R.
            Bertucci Insurance Trust of January 10, 1986
   10.23    Split-Dollar Agreement dated as of September 12, 1991
            between the Registrant, John R. Bertucci and John R.
            Bertucci and Thomas H. Belknap, Trustees of the Claire R.
            Bertucci Insurance Trust of January 10, 1986
  *10.24    Tax Indemnification and S Corporation Distribution Agreement
   10.25    Employment Agreement dated March 7, 1997 between Joseph
            Maher and the Registrant
  *10.26    Contribution Agreement
    21.1    Subsidiaries of the Registrant
   *23.1    Consent of Hale and Dorr LLP (contained in Exhibit 5.1)
    23.2    Consent of PricewaterhouseCoopers LLP
      24    Power of Attorney (included on Page II-4)
      27    Financial Data Schedule
</TABLE>
 
---------------
 * To be filed by amendment.
** Confidential materials omitted and filed separately with the Securities and
Exchange Commission.
 
     (b) FINANCIAL STATEMENTS SCHEDULES
 
     Report of Independent Accountants on Schedule II -- Valuation and
Qualifying Accounts
 
     Schedule II -- Valuation and Qualifying Accounts
 
ITEM 17.  UNDERTAKINGS.
 
     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer and controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
 
                                      II-3
<PAGE>   85
 
     The undersigned registrant hereby undertakes that:
 
     (1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
 
     (2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offer
therein, and this offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
 
     The undersigned registrant hereby further undertakes to provide to the
underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
 
                                      II-4
<PAGE>   86
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement (File No. 333-      ) to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Andover, Commonwealth of Massachusetts, on this day of January 28, 1999.
 
                                          MKS INSTRUMENTS, INC.
 
                                          By:     /s/ JOHN R. BERTUCCI
                                            ------------------------------------
                                                      JOHN R. BERTUCCI
                                            CHAIRMAN OF THE BOARD OF DIRECTORS,
                                               PRESIDENT AND CHIEF EXECUTIVE
                                                           OFFICER
                                               (PRINCIPAL EXECUTIVE OFFICER)
 
                               POWER OF ATTORNEY
 
     KNOWN ALL MEN BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints each of John R. Bertucci, Ronald C.
Weigner and Mark G. Borden such person's true and lawful attorney-in-fact and
agent with full power of substitution and resubstitution, for such person and in
such person's name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this Registration
Statement (or to any other registration statement for the same offering that is
to be effective upon filing pursuant to Rule 462(b) under the Securities Act),
and to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as such person might or could do
in person, hereby ratifying and confirming all that any said attorney-in-fact
and agent, or any substitute or substitutes of any of them, may lawfully do or
cause to be done by virtue hereof.
 
     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                    SIGNATURES                                     TITLE                      DATE
                    ----------                                     -----                      ----
<C>                                                   <S>                               <C>
 
               /s/ JOHN R. BERTUCCI                   Chairman of the Board of          January 28, 1999
---------------------------------------------------   Directors, President and Chief
                 JOHN R. BERTUCCI                     Executive Officer (Principal
                                                      Executive Officer)
 
               /s/ RONALD C. WEIGNER                  Vice President and Chief          January 28, 1999
---------------------------------------------------   Financial Officer (Principal
                 RONALD C. WEIGNER                    Financial and Accounting
                                                      Officer)
 
               /s/ RICHARD S. CHUTE                   Director                          January 28, 1999
---------------------------------------------------
                 RICHARD S. CHUTE
 
                                                      Director                          January   , 1999
---------------------------------------------------
                  OWEN W. ROBBINS
 
              /s/ ROBERT J. THERRIEN                  Director                          January 28, 1999
---------------------------------------------------
                ROBERT J. THERRIEN
 
               /s/ LOUIS P. VALENTE                   Director                          January 28, 1999
---------------------------------------------------
                 LOUIS P. VALENTE
</TABLE>
 
                                      II-5
<PAGE>   87
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholders
  of MKS Instruments, Inc.:
 
Our audits of the consolidated financial statements referred to in our report
dated January 22, 1999, except for Note 13 as to which the date is January 28,
1999, of MKS Instruments, Inc. also included an audit of the consolidated
financial statement schedule listed in Item 16(b) herein. In our opinion, this
consolidated financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
 
                                            PRICEWATERHOUSECOOPERS LLP
 
Boston, Massachusetts
January 22, 1999
 
                                       S-1
<PAGE>   88
 
                                                                     SCHEDULE II
 
                             MKS INSTRUMENTS, INC.
 
                       VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                                BALANCE
                                                        BALANCE AT   PROVISION                  AT END
                                                        BEGINNING    CHARGED TO    ACCOUNTS       OF
                                                        OF PERIOD     EXPENSE     WRITTEN OFF   PERIOD
                                                        ----------   ----------   -----------   -------
<S>                                                     <C>          <C>          <C>           <C>
YEAR ENDED DECEMBER 31, 1996
  Allowance for Doubtful Accounts.....................     $542          (20)          40        $482
YEAR ENDED DECEMBER 31, 1997
  Allowance for Doubtful Accounts.....................     $482          258          130        $610
YEAR ENDED DECEMBER 31, 1998
  Allowance for Doubtful Accounts.....................     $610          253          207        $656
</TABLE>
 
                                       S-2
<PAGE>   89
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
                                                                          SEQUENTIALLY
                                                                            NUMBERED
EX. NO.                           DESCRIPTION                                 PAGE
-------                           -----------                             ------------
<C>       <S>                                                             <C>
   1.1    Form of Underwriting Agreement
   3.1    Restated Articles of Organization, as amended
  *3.2    Form of Amended and Restated Articles of Organization
   3.3    By-Laws, as amended
  *3.4    Form of Amended and Restated By-Laws
   4.1    Specimen certificate representing the common stock
  *5.1    Opinion of Hale and Dorr LLP
  10.1    Amended and Restated 1995 Stock Incentive Plan
  10.2    1996 Amended and Restated 1996 Director Stock Option Plan
  10.3    1997 Director Stock Option Plan
 *10.4    1999 Employee Stock Purchase Plan
  10.5    Amended and Restated Employment Agreement dated as of
          December 15, 1995 between Leo Berlinghieri and the
          Registrant
  10.6    Amended and Restated Employment Agreement dated as of
          December 15, 1995 between John J. Sullivan and the
          Registrant
  10.7    Amended and Restated Employment Agreement dated as of
          December 15, 1995 between Ronald C. Weigner and the
          Registrant
  10.8    Amended and Restated Employment Agreement dated as of
          December 15, 1995 between William D. Stewart and the
          Registrant
 *10.9    Loan Agreement dated as of October 31, 1995, as last amended
          January 28, 1999, by and between the First National Bank of
          Boston and the Registrant
 10.10    Lease Agreement dated as of October 12, 1989, as extended
          November 1, 1998, by and between Aspen Industrial Park
          Partnership and the Registrant
*10.11    Loan Agreement dated as of November 1, 1993, as last amended
          January 28, 1999 between the First National Bank of Boston
          and the Registrant
 10.12    Lease dated as of September 21, 1995 by and between General
          American Life Insurance Company and the Registrant
*10.13    Loan Agreement dated as of February 23, 1996, as last
          amended January 28, 1999 between the BankBoston, N.A.,
          Chemical Bank and the Registrant
 10.14    Revolving Credit Note ($8,000,000) dated February 23, 1996
          between Chemical Bank, The First National Bank of Boston and
          the Registrant
 10.15    Revolving Credit Note ($12,000,000) dated February 23, 1996
          between Chemical Bank, The First National Bank of Boston and
          the Registrant
 10.16    Promissory Note dated as of August 1990 between Jefferson
          National Life Insurance Company and the Registrant
**10.17   Comprehensive Supplier Agreement #982812 dated October 23,
          1998 by and between Applied Materials, Inc. and the
          Registrant
**10.18   Management Incentive Program
 10.19    Lease dated as of December 21, 1989, as last amended
          December 1996, between Walpole Park South II Trust and the
          Registrant
</TABLE>
<PAGE>   90
 
<TABLE>
<CAPTION>
                                                                          SEQUENTIALLY
                                                                            NUMBERED
EX. NO.                           DESCRIPTION                                 PAGE
-------                           -----------                             ------------
<C>       <S>                                                             <C>
 10.20    Lease dated as of January 1, 1996 between MiFuji Kanzai Co.
          Ltd. and the Registrant (covering Floor 5)
 10.21    Lease dated as of April 21, 1997 between MiFuji Kanzai Co.
          Ltd. and the Registrant (covering Floors 1 and 2)
 10.22    Split-Dollar Agreement dated as of September 12, 1991
          between the Registrant, John R. Bertucci and Claire R.
          Bertucci and Richard S. Chute, Trustees of the John R.
          Bertucci Insurance Trust of January 10, 1986
 10.23    Split-Dollar Agreement dated as of September 12, 1991
          between the Registrant, John R. Bertucci and John R.
          Bertucci and Thomas H. Belknap, Trustees of the Claire R.
          Bertucci Insurance Trust of January 10, 1986
*10.24    Tax Indemnification and S Corporation Distribution Agreement
 10.25    Employment Agreement dated March 7, 1997 between Joseph
          Maher and the Registrant
*10.26    Contribution Agreement
  21.1    Subsidiaries of the Registrant
 *23.1    Consent of Hale and Dorr LLP (contained in Exhibit 5.1)
  23.2    Consent of PricewaterhouseCoopers LLP
    24    Power of Attorney (included on Page II-4)
    27    Financial Data Schedule
</TABLE>
 
---------------
 * To be filed by amendment.
** Confidential materials omitted and filed separately with the Securities and
Exchange Commission.
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1
 
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 1999
                                                     REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
 
                             MKS INSTRUMENTS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS                               3823                                04-2277512
   (STATE OR OTHER JURISDICTION OF          (PRIMARY STANDARD INDUSTRIAL                 (I.R.S. EMPLOYER
    INCORPORATION OR ORGANIZATION)          CLASSIFICATION CODE NUMBER)               IDENTIFICATION NUMBER)
SIX SHATTUCK ROAD
                               ANDOVER, MA 01810
                                 (978) 975-2350
              (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
       INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------
 
                                JOHN R. BERTUCCI
                CHAIRMAN, CHIEF EXECUTIVE OFFICER, AND PRESIDENT
                             MKS INSTRUMENTS, INC.
                               SIX SHATTUCK ROAD
                               ANDOVER, MA 01810
                                 (978) 975-2350
               (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
               NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
                            ------------------------
 
                                   COPIES TO:
MARK G. BORDEN, ESQ.                                DAVID C. CHAPIN, ESQ.
                 HALE AND DORR LLP                                     ROPES & GRAY
                  60 STATE STREET                                 ONE INTERNATIONAL PLACE
            BOSTON, MASSACHUSETTS 02109                         BOSTON, MASSACHUSETTS 02110
                  (617) 526-6000                                      (617) 951-7000
------------------------
 
    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date hereof.
 
    If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [ ]
 
    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]
 
    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
 
    If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
 
    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box:  [ ]
 
                        CALCULATION OF REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
            TITLE OF EACH CLASS OF                                                 PROPOSED
               SECURITIES TO BE                        AMOUNT TO BE           MAXIMUM AGGREGATE             AMOUNT OF
                  REGISTERED                          REGISTERED(1)             OFFERING PRICE         REGISTRATION FEE(2)
-----------------------------------------------------------------------------------------------------------------------------
Common Stock, no par value per share...........           shares                 $100,000,000                $27,800
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
(1) Includes          shares which the underwriters have the option to purchase
    from the company to cover over-allotments, if any. See "Underwriting."
 
(2) Estimated solely for purposes of calculating the registration fee in
    accordance with Rule 457(o) under the Securities Act of 1933, as amended.
 
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2
 
The information contained in this prospectus is not complete and may be changed.
The underwriters may not confirm sales of these securities until the
registration statement filed with the Securities and Exchange Commission becomes
effective. This prospectus is not an offer to sell these securities, and is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
 
                 SUBJECT TO COMPLETION, DATED JANUARY 28, 1999
 
                                             SHARES
 
                                   [MKS LOGO]
 
                                  COMMON STOCK
 
     MKS Instruments, Inc. ("MKS") is offering            shares of its common
stock. This is MKS's initial public offering and no public market currently
exists for its shares. We have applied for approval for quotation on the Nasdaq
National Market under the symbol "MKSI" for the shares we are offering. We
estimate that the initial public offering price will be between
$                and $                .
 
     After the close of this initial public offering, John R. Bertucci,
Chairman, Chief Executive Officer and President of MKS, and members of his
family will own approximately            % of the outstanding common stock.
 
                            ------------------------
 
     INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
 
                            ------------------------
Per Share       Total
                                                         ---------       -----
Public Offering Price                                     $           $
Discounts and Commissions to Underwriters                 $           $
Proceeds to MKS                                           $           $
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
 
     MKS has granted the underwriters a 30-day option to purchase up to an
additional            shares of common stock to cover over-allotments. If the
underwriters exercise this right in full, the Public Offering Price will total
$           , the Discounts and Commissions to Underwriters will total
$           and the Proceeds to MKS will total $           .
 
                            ------------------------
 
NATIONSBANC MONTGOMERY SECURITIES LLC
                          DONALDSON, LUFKIN & JENRETTE
                                                                 LEHMAN BROTHERS
 
               The date of this prospectus is             , 1999
3
 
                                   [PICTURES]
 
     MKS, MKS Instruments, Baratron and ORION are trademarks of MKS. This
prospectus contains trademarks, service marks and trade names of companies and
organizations other than MKS.
4
                              MKS INSTRUMENTS, INC.
                                PROSPECTUS COVER
                                JANUARY 28, 1999

INSIDE FRONT COVER (PG. 2):

This page is produced in four-color process. Amidst a dark background, the MKS
logo appears at the top right of the page, and to the top left is the phrase "A
wide range of products made using MKS Process Control Instruments." Two
paragraphs describing the role MKS plays in complex advanced materials
manufacturing processes, such as semiconductor, also appear on this page, and
are as follows:

(first paragraph) "MKS Surrounds the Process. In semiconductor and other
industries involving advanced materials processing, products such as
semiconductor devices, CD ROMS, flat panel displays, and fiber optic cables are
the result of complex manufacturing processes. These processes build up very
thin layers of materials, step by step, through the interaction of specific
gases and materials inside tightly controlled process chambers. Maintaining
control of these complex steps throughout the entire manufacturing process is
critical to performance and yield. (second paragraph) MKS Process Control
Instruments are integrated into almost every step of gas-related
processes--managing the flow rates of gases entering and exiting the process
chamber, controlling the gas composition and pressure inside the chamber,
analyzing and monitoring the composition of the gases, and isolating the gases
from the outside environment."

In the center of the page is a photo montage, displaying images of semiconductor
devices, flat panel displays, fiber optic cables, solar panels, magnetic and
optical storage media and gas lasers. Each of these images has a text label
adjacent to it.

INSIDE SPREAD (PGS. 3 AND 4):

These pages are produced in four-color process. The main focus of the spread is
the illustration of a typical process chamber, with numerous MKS products
surrounding the chamber. At the top of the illustration, centered across the two
pages, is the title "MKS Instruments...Surrounding the Process." Each product is
described in a brief paragraph, and the paragraphs appear on both sides of the
illustration--left and right columns. The paragraphs are as follows:

DIRECT LIQUID INJECTION SUBSYSTEMS
For use in the delivery of a wide variety of new materials to the process
chamber that cannot be delivered using conventional thermal-based mass flow
controllers.

AUTOMATIC PRESSURE CONTROLLERS WITH INTEGRATED BARATRON(R) PRESSURE TRANSDUCERS
A compact, integrated measurement and control package for use in controlling
upstream or downstream process chamber pressure.

ULTRACLEAN MASS FLOW CONTROLLERS
For the precise measurement and control of mass flow rates of inert or corrosive
gases and vapors into the process chamber.

ULTRACLEAN MINI-BARATRON(R) PRESSURE TRANSDUCERS
For use in gas cabinets to feed ultra-pure gases to critical process systems.

PRESSURE CONTROL VALVES
To precisely control the flow of gases to a process chamber in a wide range of
flow rates.

IN SITU FLOW VERIFIERS
For fast verification of mass flow controller accuracy and repeatability during
a process.

DIGITAL COLD CATHODE IONIZATION AND CONVECTION VACUUM GAUGES 
A variety of indirect pressure gauges for measuring very low chamber pressures
and conveying information digitally to host computers.

ORION(R) PROCESS MONITORS AND RESIDUAL GAS ANALYZERS
For the analysis of the composition of background and process gases inside a
process chamber.

PRESSURE SWITCHES
Provide protection of vacuum equipment and processes by signaling when
atmospheric pressure has been reached.

BARATRON(R) PRESSURE MEASURING INSTRUMENTS
For the accurate measurement and control of a wide range of process pressures.

IN SITU DIAGNOSTICS ACCESS VALVE
Allows for accurate calibration and diagnostics of vacuum gauges and pressure
transducers while directly mounted on the process chamber.

EXHAUST THROTTLE VALVES AND AUTOMATIC PRESSURE CONTROLLERS
For isolation and downstream control of process chamber pressures, and pressure
control within the exhaust systems.

HIGH VACUUM VALVES
To isolate the process chamber from both the pumps and from atmosphere.

HEATED PUMPING LINES
For the reduction of contaminants in the vacuum pump and pump exhaust stream.

VAPOR SUBLIMATION TRAP
To collect by-products and particulates that could otherwise contaminate devices
in the process chambers and damage vacuum pumps.

Prices of products shown above range from $400 to $80,000.

The above graphic depicts a typical process chamber and surrounding equipment
used in semiconductor manufacturing.
5
 
     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS, "MKS," "WE,"
"US" AND "OUR" REFER TO MKS INSTRUMENTS, INC. (UNLESS THE CONTEXT OTHERWISE
REQUIRES).
 
     UNTIL             , 1999, ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
 
                               TABLE OF CONTENTS
PAGE
Prospectus Summary..........................................    3
Risk Factors................................................    6
S Corporation and Termination of S Corporation Status.......   13
Use of Proceeds.............................................   14
Dividend Policy.............................................   14
Capitalization..............................................   15
Dilution....................................................   16
Selected Consolidated Financial Data........................   17
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................   19
Business....................................................   27
Management..................................................   45
Certain Transactions........................................   51
Principal Stockholders......................................   52
Description of Capital Stock................................   53
Shares Eligible for Future Sale.............................   55
Underwriting................................................   56
Legal Matters...............................................   57
Experts.....................................................   57
Additional Information......................................   58
Index to Consolidated Financial Statements..................  F-1
2
6
 
                               PROSPECTUS SUMMARY
 
     This summary highlights information contained elsewhere in this prospectus.
You should read this entire prospectus carefully. Unless otherwise indicated,
all information contained in this prospectus assumes that the underwriters will
not exercise their over-allotment option. This prospectus contains forward-
looking statements, which involve risks and uncertainties. MKS's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth under "Risk
Factors" and elsewhere in this prospectus. All information contained in this
prospectus reflects: (i) a 3-for-2 stock split of the common stock; and (ii)
amendments to MKS's Articles of Organization to be effected prior to the
effective date of this prospectus to: (a) increase the total number of
authorized shares of common stock to 30,000,000; (b) authorize 2,000,000 shares
of preferred stock; and (c) convert the shares of Class A common stock and Class
B common stock into a single class of common stock.
 
                             MKS INSTRUMENTS, INC.
 
     We are a leading worldwide developer, manufacturer and supplier of
instruments and components used to measure, control and analyze gases in
semiconductor manufacturing and similar industrial manufacturing processes. We
offer a comprehensive line of products which are used to manufacture, among
other things:
 
- semiconductors
- flat panel displays
- magnetic and optical storage devices and media, including:
  -- compact disks
  -- hard disk storage devices
  -- magnetic devices for reading disk data
  -- digital video disks
  -- optical storage disks (laser readable disks)
- solar cells which convert light into
  electrical current
- fiber optic cables for telecommunications
- optical coatings (such as eyeglass coatings)
- coatings for architectural glass
- hard coatings to minimize wear on cutting tools
- diamond thin films
 
Our products include:
 
- instruments used to measure, control and analyze:
  -- gas pressure
  -- gas flow
  -- gas composition
- vacuum technology products:
  -- vacuum gauges
  -- vacuum valves and components
 
     The ability of semiconductor device manufacturers to offer integrated
circuits with smaller geometries and greater functionality at higher speeds
requires continuous improvements in semiconductor process equipment and process
controls. Manufacturing a semiconductor, or a similar industrial product,
requires hundreds of process steps, many of which involve the precise
measurement and control of gases. In the fabrication of semiconductors, for
example, these process steps take place within a process chamber. Specific gas
mixtures at precisely controlled pressures are used in the process chamber to
control the required process atmosphere and are used as a source of material to
manufacture a semiconductor.
 
     Given the complexity of the semiconductor manufacturing process, the value
of the products manufactured and the significant cost of semiconductor
manufacturing equipment and facilities, significant importance is placed upon:
 
     - the amount of time that semiconductor manufacturing equipment is
       available for processing (or uptime)
 
     - the ratio of acceptable output to total output (or yield)
 
     - the aggregate output that can be processed per hour (or throughput)
 
                                        3
7
 
The design and performance of instruments that control the pressure or flow of
gases are becoming more critical to the semiconductor manufacturing process
since they directly affect uptime, yield and throughput. In addition, the
increasing sophistication of semiconductor devices requires an increase in the
number of components and subsystems used in the design of semiconductor
manufacturing process tools. To address manufacturing complexity, improve
quality and reliability and ensure long-term service and support, semiconductor
device manufacturers and semiconductor capital equipment manufacturers are
increasingly seeking to reduce their supplier base and are, therefore, choosing
to work with suppliers that provide a broad range of integrated, technologically
advanced products backed by worldwide service and support.
 
     We believe that we offer the widest range of pressure and vacuum
measurement and control products serving the semiconductor industry. Our
products measure pressures from as low as one trillionth of atmospheric pressure
to as high as two hundred times atmospheric pressure. Our objective is to be the
leading worldwide supplier of instruments and components used to measure,
control and analyze gases in semiconductor and other advanced thin-film
processing applications and to help semiconductor device manufacturers achieve
improvements in their return on investment capital. Our strategy to accomplish
this objective includes:
 
     - extending our technology leadership
 
     - continuing to broaden our comprehensive product offering
 
     - building upon our close working relationships with customers
 
     - expanding the application of our existing technologies to related markets
 
     - leveraging our global infrastructure and world class manufacturing
       capabilities
 
     For over 25 years, we have focused on satisfying the needs of semiconductor
capital equipment manufacturers and semiconductor device manufacturers. As a
result, we have established long-term relationships with many of our customers.
We have over 4,000 active customers worldwide (all of which purchased products
during 1998) including:
 
     - semiconductor capital equipment manufacturers
 
     - semiconductor device manufacturers
 
     - industrial manufacturing companies
 
     - university, government and industrial research laboratories
 
Our customers include Applied Materials, Inc., Lam Research Corporation, Tokyo
Electron, Ltd., Air Products and Chemicals, Inc. and Motorola Inc. We sell our
products primarily through our sales force which consists of 118 employees in 22
offices in France, Germany, Japan, Korea, The Netherlands, Singapore, Taiwan,
the United Kingdom and the United States.
 
     MKS Instruments, Inc. is a Massachusetts corporation organized in June
1961. Our principal executive offices are located at Six Shattuck Road, Andover,
MA 01810, and our telephone number is (978) 975-2350.
 
                                        4
8
 
                                  THE OFFERING
 
Common stock offered by MKS........         shares
 
Common stock to be outstanding
after this offering................         shares
 
Use of proceeds....................  For distributions to current stockholders
                                     and general corporate purposes. See "Use of
                                     Proceeds" and "S Corporation and
                                     Termination of S Corporation Status."
 
Proposed Nasdaq National Market
symbol.............................  MKSI
 
     The common stock to be outstanding after this offering is based on shares
outstanding as of December 31, 1998 and excludes 2,132,575 shares of common
stock issuable upon the exercise of options outstanding as of such date at a
weighted average exercise price of $5.19 per share. See "Capitalization" and
Note 8 of Notes to Consolidated Financial Statements.
 
                      SUMMARY CONSOLIDATED FINANCIAL DATA
 
     MKS has been treated as an S corporation for federal income tax purposes
since July 1, 1987. As an S corporation, MKS has not been subject to federal,
and certain state, income taxes. The pro forma net income reflects the provision
for income taxes that would have been recorded had MKS been a C corporation,
assuming an effective tax rate of 38.0%. As a result of terminating its S
corporation status upon the closing of this offering, MKS will record a one-time
non-cash credit to historical earnings for additional deferred taxes. If this
credit to earnings had occurred at December 31, 1998, the amount would have been
approximately $3.9 million. This amount is expected to change through the
closing of this offering and is excluded from pro forma net income. See Notes 2
and 9 of Notes to Consolidated Financial Statements.
 
     Pro forma balance sheet data set forth below reflects the liability for the
distribution of an estimated $35.9 million, calculated as of December 31, 1998,
of cumulative undistributed S corporation taxable income for which stockholders
of record prior to the closing of this offering have been or will be taxed. The
pro forma net income per share and weighted average common shares outstanding
which are set forth below reflect the effect of an assumed issuance of
sufficient shares to fund this distribution as of January 1, 1998. The
distribution will be made out of the proceeds of this offering. The actual
amount to be distributed is expected to increase based upon taxable earnings for
the period January 1, 1999 through the closing of this offering, subject to
certain limitations. See "S Corporation and Termination of S Corporation
Status." The pro forma as adjusted balance sheet data reflects the sale of
          shares of common stock at an assumed initial public offering price of
$     per share, after deducting the estimated underwriting discount and
offering expenses payable by MKS.
YEAR ENDED DECEMBER 31,
                                                              --------------------------------------------------------
                                                                1994        1995        1996        1997        1998
                                                              --------    --------    --------    --------    --------
                                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
Net sales...................................................  $106,829    $157,164    $170,862    $188,080    $139,763
Gross profit................................................    47,016      69,461      68,854      80,474      55,979
Income from operations......................................    12,087      24,106      16,068      23,963       9,135
Net income..................................................  $ 10,003    $ 21,658    $ 12,503    $ 20,290    $  7,186
PRO FORMA STATEMENT OF INCOME DATA(1):
Pro forma net income........................................                                                  $  5,044
Pro forma net income per share:
  Basic.....................................................                                                  $   0.25
  Diluted...................................................                                                  $   0.24
Pro forma weighted average common shares outstanding:
  Basic.....................................................                                                    20,166
  Diluted...................................................                                                    20,651
DECEMBER 31, 1998
                                                              ------------------------------------
                                                                                        PRO FORMA
                                                               ACTUAL     PRO FORMA    AS ADJUSTED
                                                              --------    ---------    -----------
                                                                         (IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents...................................  $ 11,188    $ 11,188
Working capital (deficit)...................................    31,493      (4,433)
Total assets................................................    96,232      96,232
Short-term obligations......................................    12,819      12,819
Long-term obligations, less current portion.................    13,786      13,786
Stockholders' equity........................................    54,826      18,900
---------------
(1) Data is computed on the same basis as Note 2 of Notes to Consolidated
    Financial Statements.
 
                                        5
9
 
                                  RISK FACTORS
 
     You should consider carefully the risks described below before you decide
to buy our common stock. The risks and uncertainties described below are not the
only ones facing us. Additional risks and uncertainties that we do not presently
know about or that we currently believe are immaterial may also adversely impact
our business operations. If any of the following risks actually occur, our
business, financial condition or results of operations would likely suffer. In
such case, the trading price of our common stock could fall, and you may lose
all or part of the money you paid to buy our common stock.
 
     This prospectus contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements are usually accompanied by words
such as "believes," "anticipates," "plans," "expects" and similar expressions.
Our actual results may differ materially from the results discussed in the
forward-looking statements because of factors such as the Risk Factors discussed
below.
 
OUR PERFORMANCE IS AFFECTED BY THE CYCLICALITY OF THE SEMICONDUCTOR INDUSTRY AND
CAN BE ADVERSELY AFFECTED BY THE INSTABILITY OF ASIAN ECONOMIES
 
     We estimate that approximately 60% of our sales during 1997 and 1998 were
to semiconductor capital equipment manufacturers and semiconductor device
manufacturers, and we expect that sales to such customers will continue to
account for a substantial majority of our sales. Our business depends
substantially upon the capital expenditures of semiconductor device
manufacturers, which in turn depend upon the demand for semiconductors and other
products utilizing semiconductors. Historically, the semiconductor market has
been highly cyclical and has experienced periods of overcapacity, resulting in
significantly reduced demand for capital equipment. For example, in 1996 and
1998 the semiconductor industry experienced a significant decline, which caused
a number of our customers to reduce their orders. In addition, the financial
markets in Asia, one of our principal international markets, have experienced
significant turbulence. Our sales include both direct sales to the semiconductor
industry in Asia, as well as to semiconductor capital equipment manufacturers
that derive a significant portion of their revenue from sales to the Asian
semiconductor industry. Turbulence in the Asian markets began to adversely
affect the semiconductor device manufacturers and semiconductor capital
equipment manufacturers in the fourth quarter of 1997 and continued to adversely
affect them in 1998. We expect the turbulence in the Asian markets will continue
to adversely affect sales of semiconductor capital equipment manufacturers for
at least the first and second quarters of 1999. As a result, we currently expect
that our net sales and net income for each of the first and second quarters of
1999 will be less than net sales and net income for the first and second
quarters of 1998.
 
     Our future sales also depend on the retrofitting, expansion and upgrade of
existing semiconductor fabrication facilities and the construction of new, large
semiconductor fabrication facilities. We cannot be certain that such retrofit,
expansion, upgrade and construction will occur. We also cannot be certain that
the current semiconductor downturn experienced in 1998 will not continue or that
the level of our customer orders will not decline further. The current reduction
in our orders, as well as any further decline in the level of orders as a result
of the current or any future downturn or slowdown in the semiconductor industry,
together with our inability to fully adjust expenses, would have a material
adverse effect on our business, financial condition and results of operations.
 
OUR QUARTERLY RESULTS ARE LIKELY TO FLUCTUATE
 
     We have experienced and expect to continue to experience significant
fluctuations in our quarterly operating results. A substantial portion of our
shipments occur shortly after an order is received. Due to the short time
between receipt of orders and shipments, we operate with a low level of backlog.
Accordingly, backlog at the beginning of each quarter will not be sufficient to
meet our revenue expectations for that particular quarter. As a consequence of
the just-in-time nature of shipments and the low level of backlog, a decrease in
demand for our products from one or more customers could occur with limited
advance notice and could have a material adverse effect on our results of
operations in any particular period.
 
                                        6
10
 
     Our business, financial condition and results of operations are also
affected by:
 
- specific economic conditions in industries in which our customers operate
 
- the timing of the receipt of orders from major customers
 
- customer cancellations or shipment delays
 
- price competition
 
- disruption in sources of supply
 
- seasonal variations of capital spending by customers
 
- production capacity constraints
 
- specific features requested by customers
 
- exchange rate fluctuations
 
- our or our competitors' introduction or announcement of new products
 
- other factors, many of which are beyond our control
 
     Our results of operations for a particular period would also be adversely
affected if an anticipated significant order was not received in time to permit
shipment during that period, as a portion of our operating expenses are fixed in
nature and planned expenditures are based in part on anticipated orders. In
addition, the need for continued expenditures for research and development would
make it difficult to reduce expenses in a particular period if our sales goals
for that period were not met. The inability to adjust spending quickly enough to
compensate for any revenue shortfall would magnify the adverse impact of such
revenue shortfall on our results of operations. For example, we were in the
process of increasing production capacity when the semiconductor capital
equipment market began to experience a significant downturn in 1996. This
downturn had a material adverse effect on our operating results in the second
half of 1996 and the first half of 1997. After an increase in business in the
latter half of 1997, the market experienced another downturn in 1998, which had
a material adverse effect on our 1998 operating results. As a result of the
factors discussed above, it is likely that we will in the future experience
quarterly or annual fluctuations and that, in one or more future quarters, our
operating results will fall below the expectations of public market analysts or
investors. In any such event, the price of our common stock could decline
significantly.
 
WE HAVE A HIGH DEGREE OF CUSTOMER CONCENTRATION
 
     While we sold products to more than 4,000 customers in 1998, our five
largest customers in 1996, 1997 and 1998 accounted for approximately 26%, 32%
and 24%, respectively, of our net sales. During 1998, one customer, Applied
Materials, Inc., accounted for approximately 16% of our net sales. While we have
entered into a purchase contract with Applied Materials, Inc. that expires in
2000 (unless extended by mutual agreement), none of our significant customers,
including Applied Materials, Inc., has entered into an agreement requiring it to
purchase any minimum quantity of our products. The demand for our products from
our semiconductor capital equipment customers depends in part on orders received
by them from their semiconductor device manufacturer customers.
 
     We sell products primarily to semiconductor capital equipment manufacturers
and, to a lesser extent, semiconductor device manufacturers. The number of our
potential customers in our primary market is limited. The loss of a major
customer or any reduction in orders by such customers, including reductions due
to market or competitive conditions, would likely have a material adverse effect
on our business, financial condition and results of operations. Attempts to
lessen the adverse effect of any such loss or reduction through the rapid
addition of new customers could be difficult because prospective customers
typically require lengthy qualification periods prior to placing volume orders
with a new supplier. Our future success will continue to depend upon:
 
     - our ability to maintain relationships with existing key customers
 
     - our ability to attract new customers
 
     - the success of our customers in creating demand for their capital
       equipment products which incorporate our products
 
                                        7
11
 
OUR MARKETS ARE HIGHLY COMPETITIVE
 
     The markets for our products are highly competitive. Although no one
competitor competes with us across all product lines, our competitors could
consolidate and/or form alliances to offer a broader array of products to
compete against us. We currently encounter substantial competition in each of
our product lines from a number of competitors, including:
 
     - competitors with greater financial and other resources
 
     - small competitors with well-established specific product niches
 
     - customers who develop in-house products that serve the functions of and
       replace our products
 
     In some cases, particularly with respect to mass flow controllers,
semiconductor device manufacturers may direct semiconductor capital equipment
manufacturers to use a specified supplier's product in their equipment.
Accordingly, for such products, our success will depend in part on our ability
to have semiconductor device manufacturers specify that our products be used at
their semiconductor fabrication facilities. In addition, we may encounter
difficulties in changing established relationships of competitors with a large
installed base of products at such semiconductor fabrication facilities. We
cannot be sure that our competitors will not develop products that offer price
or performance features superior to those of our products. To the extent that
our products do not achieve performance or other advantages over products
offered by our competitors, we are likely to experience increased price
competition or loss of market share with respect to such products. We believe
that the worldwide competitive pressures in our markets could result in a
decline in the prices of our products in the future. Declines in the selling
prices of our products, if not offset by reductions in the cost of producing
such products and increases in unit volume sales or by sales of products with
higher gross margins, could have a material adverse effect on our business,
financial condition and results of operations.
 
OUR MARKETS ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGES
 
     Our success depends in part upon our ability to develop new products and
product enhancements that keep pace with technological developments, achieve
market acceptance and respond to evolving customer requirements. New product
introductions may contribute to fluctuations in quarterly operating results, as
customers may defer ordering products from our existing product lines or may
purchase products from competitors. Any new product reliability or quality issue
could result in reduced orders, higher manufacturing costs and additional
service and warranty expense. Responding to rapid technological change and the
need to develop and introduce new products to meet customers' needs and evolving
industry standards will require us to make substantial investments in research
and product development. Any failure by us to anticipate or respond adequately
to technological developments and customer requirements or any significant
delays in product development or introduction could result in a loss of
competitiveness and could have a material adverse effect on our business,
financial condition and results of operations. We cannot be certain that we will
successfully develop and manufacture new products or that any product
enhancements or new products developed by us will gain market acceptance.
 
     The semiconductor manufacturing industry is currently undergoing an
evolution from the manufacturing of 200mm wafers to 300mm wafers and from 0.25
micron to 0.18 micron line-widths. Semiconductor manufacturers are beginning to
establish pilot production lines and specifications for the use of 300mm wafers
and the production of less than 0.18 micron devices. We have developed, and are
developing, new products and product enhancements to address the expected
increasing demand for equipment capable of handling these new wafer sizes and
line-widths. We have supplied pre-production equipment to be incorporated into
semiconductor capital equipment manufacturers' 300mm pre-production
semiconductor wafer process equipment, which is expected to be included in pilot
production lines of semiconductor device manufacturers. We have also developed
equipment that is being used by research laboratories for devices using less
than 0.18 micron line-widths. However, we cannot be certain that our new
products and enhancements will be designed into production lines by our
customers. Our failure to develop products and
 
                                        8
12
 
enhancements for general acceptance by our customers in a timely manner would
have a material adverse effect on our business, financial condition and results
of operations.
 
WE HAVE A NUMBER OF RISKS ASSOCIATED WITH THE YEAR 2000
 
     Many currently installed computer systems include software and hardware
products that are unable to distinguish 21st century dates from those in the
20th century. As a result, computer software and/or hardware used by many
companies and governmental agencies may need to be upgraded to comply with Year
2000 requirements or risk system failure or miscalculations that result in
disruptions to normal business activities. We have implemented a multi-phase
Year 2000 project consisting of assessment and remediation, and testing
following remediation. We have examined our internal computer software and
hardware, our facilities and manufacturing equipment, third-party compliance and
the compliance of our products. We have identified the following risks you
should be aware of:
 
     - we cannot be sure that any of our assessments, remediation programs or
       testing will identify and cure all of our Year 2000 compliance issues
 
     - the entities on whom we rely for certain goods and services integral to
       our business may be unsuccessful in addressing all of their software and
       systems problems in order to operate without disruption in the year 2000
       and beyond
 
     - our customers or potential customers may be affected by Year 2000 issues
       that may, in part:
 
        -- cause a reduction, delay or cancelation of customer orders
 
        -- cause a delay in payments for products shipped
 
        -- cause customers to expend significant resources on Year 2000
           compliance matters, rather than investing in our products
 
     - we have not developed a contingency plan related to the failure of our or
       a third-party's Year 2000 remediation efforts and may not be prepared for
       such an event
 
     Further, while we have made efforts to notify our customers who have
purchased potential non-compliant products, we cannot be sure that customers who
purchased such products will not assert claims against us alleging that such
products should have been Year 2000 compliant at the time of purchase, which
could result in costly litigation and divert management's attention.
 
     The occurrence of any of these risks or uncertainties could result in a
material adverse effect on our business, financial condition and results of
operations.
 
WE MAY HAVE DIFFICULTY EXPANDING INTO NEW MARKETS
 
     We plan to build upon our experience in manufacturing and selling gas
measurement, control and analysis products used by the semiconductor industry by
designing and selling such products for applications in other industries which
use production processes similar to those used in the semiconductor industry.
Our future success will depend in part on our ability to:
 
     - identify new applications for our products
 
     - adapt our products for such applications
 
     - market and sell such products to customers
 
     We have limited experience selling our products in certain markets outside
the semiconductor industry. We cannot be certain that we will be successful in
the expansion of our business outside the semiconductor industry. Any failure by
us to penetrate additional markets would limit our ability to reduce our
vulnerability to downturns in the semiconductor industry and could have a
material adverse effect on our business, financial condition and results of
operations.
 
                                        9
13
 
WE MAY HAVE DIFFICULTY EXPANDING OUR MANUFACTURING CAPACITY
 
     During 1999, we plan to add manufacturing capacity to our Austin, Texas
operations and further equip our cleanroom facilities in Andover and Methuen,
Massachusetts. Our ability to increase sales of certain products depends in part
upon our ability to expand our manufacturing capacity for such products in a
timely manner. If we are unable to expand our manufacturing capacity on a timely
basis or to manage such expansion effectively, our rate of growth and market
share could be reduced and our business, financial condition and results of
operations could be adversely affected. Because the semiconductor industry is
subject to rapid demand shifts which are difficult to foresee, we may not be
able to increase capacity quickly enough to respond to a rapid increase in
demand in the semiconductor industry. Additionally, any capacity expansion will
increase our fixed operating expenses and if sales levels do not increase to
offset the additional expense levels associated with any such expansion, our
business, financial condition and results of operations would likely be
materially adversely affected.
 
WE FACE RISKS FROM INTERNATIONAL OPERATIONS AND SALES
 
     We have manufacturing, sales and service facilities in Germany, Japan,
Korea and the United Kingdom and sales and service facilities in France, The
Netherlands, Singapore and Taiwan. In addition, we have established, through
agents and representatives, sales and service facilities in Canada, China,
India, Israel, and Italy.
 
     International sales (which include sales by our foreign subsidiaries, but
exclude direct export sales which were less than 10% of our total net sales)
accounted for approximately 30.1%, 27.3% and 32.3% of net sales in 1996, 1997
and 1998, respectively. We anticipate that international sales will continue to
account for a significant portion of our net sales. In addition, certain of our
key domestic customers derive a significant portion of their revenues from sales
in international markets. As a result, our operations are subject to risks
inherent in international business activities, including, in particular:
 
- economic conditions in each country
 
- the overlap of different tax structures
 
- management of a large organization spread over various countries
 
- unexpected changes in regulatory requirements
 
- compliance with a variety of foreign laws and regulations
 
- longer accounts receivables payment cycles in certain countries
 
- international sales subject to certain governmental restrictions and
  regulations including the Export Administration Act
 
- import and export licensing requirements
 
- trade restrictions
 
- changes in tariff and freight rates
 
- currency fluctuations
 
     A number of these risks also apply to sales to semiconductor capital
equipment manufacturers based in the United States that incorporate our products
into systems delivered outside the United States. Additionally, we base the
prices for products sold to and by our foreign subsidiaries on the currency of
the country in which these products are sold. Therefore, our operating results
attributable to these sales are exposed to fluctuations in the value of the
United States dollar versus other currencies. While we enter into forward
exchange contracts and local currency purchased options to reduce currency
exposure arising from these sales and associated intercompany purchases of
inventory, we cannot be certain that exchange rate fluctuations will not have an
adverse effect on our business, financial condition and results of operations,
or that we will not realize losses with respect to our hedging activities.
 
WE NEED TO RETAIN AND ATTRACT KEY PERSONNEL
 
     Our success depends to a large extent upon the efforts and abilities of a
number of key employees and officers. The loss of key employees or officers
could have a material adverse effect on our business, financial condition and
results of operations. We believe that our future success will depend in part on
our
 
                                       10
14
 
ability to attract and retain highly skilled technical, financial, managerial
and marketing personnel. Competition for such personnel is intense, and we
cannot be certain that we will be successful in attracting and retaining such
personnel. We are the beneficiary of key-man life insurance policies on John R.
Bertucci, Chairman, Chief Executive Officer and President, in the amount of $7.2
million.
 
OUR SUCCESS DEPENDS ON PROTECTING OUR INTELLECTUAL PROPERTY
 
     Although we seek to protect our intellectual property rights through
patents, copyrights, trade secrets and other measures, we cannot be certain
that:
 
     - we will be able to protect our technology adequately
 
     - competitors will not be able to develop similar technology independently
 
     - any of our pending patent applications will be issued
 
     - intellectual property laws will protect our intellectual property rights
 
     Litigation may be necessary in order to enforce our patents, copyrights or
other intellectual property rights, to protect our trade secrets, to determine
the validity and scope of the proprietary rights of others or to defend against
claims of infringement. Such litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on our business,
financial condition and results of operations.
 
     In addition, we cannot be certain that any patent issued to us will not be
challenged, invalidated or circumvented, that the rights granted thereunder will
provide competitive advantages to us or that third parties may not assert that
our products infringe patent, copyright or trade secrets of such parties.
Furthermore, we cannot be sure that others will not independently develop
similar products or duplicate our products.
 
YOU WILL HAVE A NUMBER OF MARKET RISKS TYPICALLY ASSOCIATED WITH INITIAL PUBLIC
OFFERINGS
 
     Prior to this offering, there has been no public market for our common
stock and there can be no assurance that an active public market for the common
stock will develop or continue after this offering. The initial public offering
price will be determined by negotiation between MKS and the underwriters.
Nevertheless, after this offering, you may not be able to resell your shares at
or above the initial public offering price due to a number of factors,
including:
 
     - actual or anticipated fluctuations in our operating results
 
     - changes in securities analysts' financial estimates
 
     - changes in expectations as to our future financial performance
 
     - announcements of new technological innovations and alliances by
       competitors
 
     - the operating and stock price performance of our competitors and other
       comparable companies
 
     In addition, the stock market has experienced extreme price and volume
fluctuations which have particularly affected the market prices for many high
technology companies. These broad market fluctuations may materially and
adversely affect the market price of our common stock. You should read the
"Underwriting" section of this prospectus for a more complete discussion of the
factors that the underwriters and we will consider in determining the initial
public offering price.
 
YOU WILL EXPERIENCE AN IMMEDIATE AND SUBSTANTIAL DILUTION
 
     Purchasers of common stock in this offering will incur immediate and
substantial dilution of $          in the pro forma net tangible book value per
share of common stock from the assumed initial public offering price or
$          per share.
 
                                       11
15
 
AFTER THIS OFFERING A LIMITED NUMBER OF STOCKHOLDERS WILL HAVE CONTROLLING
INTEREST IN MKS
 
     Upon consummation of this offering, John R. Bertucci, Chairman, Chief
Executive Officer and President of MKS, and members of his family will, in the
aggregate, beneficially own approximately   % of our outstanding common stock.
As a result, these stockholders, acting together, will be able to take any of
the following actions without the approval of our public stockholders:
 
     - amend our Articles of Organization in certain respects or approve a
       merger, sale of assets or other major corporate transaction
 
     - defeat any non-negotiated takeover attempt that may be beneficial to our
       public stockholders
 
     - determine the amount and timing of dividends paid to themselves and to
       our public stockholders
 
     - otherwise control our management and operations and the outcome of all
       matters submitted for a stockholder vote, including the election of
       directors
 
WE ARE SUBJECT TO ANTITAKEOVER PROVISIONS
 
     Certain provisions of our Articles of Organization, our By-Laws and
Massachusetts law could discourage potential acquisition proposals and could
delay or prevent a change in control of MKS. Such provisions could diminish the
opportunities for stockholders to participate in tender offers including tender
offers at a price above the then current market value of the common stock. Such
provisions may also inhibit increases in the market price of the common stock
that could result from takeover attempts. For example, while we have no present
plans to issue any preferred stock, the Board of Directors, without further
stockholder approval, may issue preferred stock that could have the effect of
delaying, deterring or preventing a change in control of MKS. The issuance of
preferred stock could adversely affect the voting power of the holders of common
stock including the loss of voting control to others. In addition, our By-Laws
will provide for a classified Board of Directors consisting of three classes.
This classified board could also have the effect of delaying, deterring or
preventing a change in control of MKS.
 
FUTURE SALES OF SHARES COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK
 
     Sales of our common stock in the public market following this offering
could adversely affect the market price of the common stock. All of the shares
offered under this prospectus will be freely tradable in the open market. The
remaining      shares of common stock are subject to lock-up agreements with the
underwriters. Persons subject to lock-up agreements have agreed not to sell
shares of common stock for a period of 180 days after the date of this
prospectus. Upon expiration of the lock-up agreements,           shares of
common stock will be eligible for sale in the public market, subject to the
provisions of Rule 144 or 701 under the Securities Act of 1933. In addition, we
intend to register approximately 4,535,000 shares of common stock issuable under
our stock option and purchase plans upon the closing of this offering.
 
                                       12
16
 
             S CORPORATION AND TERMINATION OF S CORPORATION STATUS
 
     MKS has been treated as an S corporation for federal income tax purposes
since July 1, 1987. As a result, MKS currently pays no federal, and certain
state, income tax, and all of the earnings of MKS are subject to federal, and
certain state, income taxation directly at the stockholder level. MKS's S
corporation status will terminate upon the closing of this offering, at which
time MKS will become subject to corporate income taxation under Subchapter C of
the Internal Revenue Code and applicable state income taxation law. Pro forma
statement of income data set forth in this prospectus has been adjusted to
include pro forma income tax provisions as if MKS had been a C corporation
during the relevant periods.
 
     In 1997 and 1998, MKS distributed $12.4 million and $6.2 million,
respectively, of undistributed S corporation earnings to its stockholders. As
soon as practicable following the closing of this offering, MKS intends to make
a distribution to the holders of record on the day prior to the closing of this
offering in an amount equivalent to the "accumulated adjustments account," as
defined in Section 1368(a)(1) of the Internal Revenue Code. As of December 31,
1998, the outstanding balance of the accumulated adjustments account was
estimated to be approximately $35.9 million, and such balance is estimated to
increase in the period from January 1, 1999 through the closing of this offering
to approximately $               million. The accumulated adjustments account is
cumulatively equal to financial reporting income, adjusted for differences
between the methods of accounting used for financial accounting and for federal
income tax purposes from July 1, 1987 through the date of termination of MKS's S
corporation status, that has not been previously distributed. Investors
purchasing shares in this offering will not receive any portion of the
distribution.
 
     MKS expects to enter into a Tax Indemnification and S Corporation
Distribution Agreement with its existing stockholders providing for, among other
things, the indemnification of MKS by such stockholders for any federal and
state income taxes (including interest) incurred by MKS if for any reason MKS is
deemed to be treated as a C corporation during any period which it reported its
taxable income as an S corporation. The tax indemnification obligation of the
existing stockholders is limited to the amount of any reduction in their tax
liability as a result of any such determination. This agreement also provides
for the cross-indemnification by MKS of each existing stockholder for any losses
or liabilities with respect to certain additional taxes (including interest and
penalties) resulting from MKS's operations during the period in which it was an
S corporation. The agreement further provides for the payment, with interest, by
the existing stockholders or MKS, as the case may be, for the difference between
the amount to be distributed and the actual amount of accumulated adjustments
account on the day immediately preceding the closing of this offering. The
actual amount of the accumulated adjustments account on the day prior to the
closing of this offering cannot be determined until MKS calculates the amount of
its taxable income for the year ending December 31, 1999. Purchasers of common
stock in this offering will not be parties to the Tax Indemnification and S
Corporation Distribution Agreement.
 
                                       13
17
 
                                USE OF PROCEEDS
 
     The net proceeds we will receive from the sale of the           shares of
common stock offered by us are estimated to be $               ($
if the underwriters' over-allotment option is exercised in full), after
deducting the estimated underwriting discount and offering expenses payable by
us and assuming an initial public offering price of $       per share.
 
     The principal purposes of this offering are:
 
     - to increase our working capital and equity base
 
     - to provide a public market for our common stock
 
     - to facilitate future access by us to public equity markets
 
     We will use approximately $               million of the net proceeds to
pay current stockholders our undistributed S corporation earnings through the
closing of this offering. The undistributed S corporation earnings were
estimated to be approximately $35.9 million (including approximately $34.4
million representing the share of Mr. Bertucci and members of his family) at
December 31, 1998, and are expected to increase from January 1, 1999 to the
closing of this offering to approximately $               million. See "S
Corporation and Termination of S Corporation Status." We expect to use the
remainder of the net proceeds for general corporate purposes, including working
capital, product development and capital expenditures.
 
     A portion of the net proceeds after the S corporation distribution may also
be used for the acquisition of businesses, products and technologies that are
complementary to those of MKS. There are currently no active negotiations,
commitments or agreements with respect to any acquisition. Pending such uses, we
intend to invest the net proceeds from this offering in short-term,
investment-grade, interest-bearing securities.
 
                                DIVIDEND POLICY
 
     We currently intend, subject to our contractual obligations under the Tax
Indemnification and S Corporation Distribution Agreement, to retain earnings for
the continued development of our business. Restrictions or limitations on the
payment of dividends may be imposed in the future under the terms of credit
agreements or under other contractual provisions. In the absence of such
restrictions or limitations, the payment of any dividends will be at the
discretion of our Board of Directors.
 
                                       14
18
 
                                 CAPITALIZATION
 
     The following table sets forth the capitalization of MKS (i) as of December
31, 1998, (ii) on a pro forma basis to reflect distributions and adjustments in
connection with MKS's S corporation status and (iii) as adjusted to reflect the
sale of           shares of common stock by MKS at an assumed initial public
offering price of $     per share and the application of the net proceeds
therefrom. See "Use of Proceeds."
 
     The pro forma data reflects the liability for distribution of an estimated
$35.9 million, calculated as of December 31, 1998, of cumulative undistributed S
corporation taxable income for which stockholders of record prior to the closing
of this offering have been or will be taxed. The actual amount to be distributed
is expected to increase based upon taxable earnings for the period from January
1, 1999 through the closing of this offering, subject to certain limitations.
See "S Corporation and Termination of S Corporation Status" and Notes 2 and 9 of
Notes to Consolidated Financial Statements. The pro forma as adjusted numbers
have been adjusted to reflect the issuance of           shares of common stock
at an assumed initial public offering price of $     per share, after deducting
the estimated underwriting discount and offering expenses payable by MKS. The
remaining balance in retained earnings represents accumulated earnings prior to
MKS's conversion from a C corporation to an S corporation in 1987, accumulated
income in overseas subsidiaries and differences between book and tax accumulated
income.
DECEMBER 31, 1998
                                                         ------------------------------------------------
                                                                                             PRO FORMA
                                                           ACTUAL         PRO FORMA         AS ADJUSTED
                                                           ------         ---------         -----------
                                                         (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Long-term obligations, less current portion............   $13,786          $13,786            $
Stockholders' equity:..................................
  Preferred stock, $.01 par value; 2,000,000 shares
     authorized, no shares issued or outstanding.......        --               --
  Common stock, no par value; 30,000,000 shares
     authorized, 18,053,167 shares issued and
     outstanding (actual and pro forma);   shares
     issued and outstanding (pro forma as adjusted)....       113              113
  Additional paid-in capital...........................        48               48
  Retained earnings....................................    52,479           16,553
  Accumulated other comprehensive income...............     2,186            2,186
                                                          -------          -------            -------
     Total stockholders' equity........................    54,826           18,900
                                                          -------          -------            -------
          Total capitalization.........................   $68,612          $32,686            $
                                                          =======          =======            =======
The common stock to be outstanding after this offering is based on shares
outstanding as of December 31, 1998 and excludes 2,132,575 shares of common
stock issuable upon the exercise of options outstanding as of such date at a
weighted average exercise price of $5.19 per share. See Note 8 of Notes to
Consolidated Financial Statements.
 
                                       15
19
 
                                    DILUTION
 
     As of December 31, 1998, MKS had a net tangible book value of $54,826,000,
or $3.04 per share of common stock. Without taking into account any changes in
such net tangible book value subsequent to December 31, 1998, other than to give
effect to the sale by MKS of           shares of common stock offered hereby at
an assumed initial public offering price of $          per share (after
deducting the estimated underwriting discount and offering expenses) and the
application of the estimated net proceeds therefrom, including the distribution
of an estimated $35.9 million of cumulative undistributed S corporation taxable
income for which stockholders have been or will be taxed, as of December 31,
1998, the pro forma net tangible book value of MKS as of December 31, 1998 would
have been $          , or $          per share. This represents an immediate
increase in net tangible book value to existing stockholders attributable to new
investors of $          per share and the immediate dilution of $          per
share to new investors. The following table illustrates this per share dilution:
Assumed initial public offering price per share.............             $
  Net tangible book value per share at December 31, 1998....  $
  Decrease per share attributable to the S corporation
     distribution...........................................
  Increase per share attributable to new investors..........             $
Pro forma net tangible book value per share after this
  offering..................................................
Dilution per share to new investors.........................             $
                                                                         =======
The following table sets forth, on a pro forma basis as of December 31,
1998, the number of shares of common stock purchased from MKS, the total
consideration paid to MKS, and the average price paid per share by existing
stockholders and by the new investors purchasing shares of common stock in this
offering (before deducting the estimated underwriting discount and offering
expenses), at an assumed initial public offering price of $          per share:
SHARES PURCHASED       TOTAL CONSIDERATION
                                       ---------------------    -------------------    AVERAGE PRICE
                                         NUMBER      PERCENT     AMOUNT     PERCENT      PER SHARE
                                       ----------    -------    --------    -------    -------------
Existing stockholders................  18,053,167          %    $161,000          %       $0.009
New investors........................
                                       ----------     -----     --------     -----
          Total......................                 100.0%                 100.0%
                                       ==========     =====     ========     =====
As of December 31, 1998, there were options outstanding to purchase a total
of 2,132,575 shares of common stock, at a weighted average exercise price of
$5.19 per share and 2,401,793 additional shares reserved for future grants of
issuances under MKS's stock option and stock purchase plans. To the extent that
any of these options are exercised, there will be further dilution to new
investors.
 
                                       16
20
 
                      SELECTED CONSOLIDATED FINANCIAL DATA
 
     The following selected financial data as of December 31, 1997 and 1998 and
for the years ended December 31, 1996, 1997 and 1998 have been derived from
MKS's financial statements, included elsewhere in this prospectus, which have
been audited by PricewaterhouseCoopers LLP, independent accountants, as
indicated in their report. The selected financial data as of December 31, 1994,
1995 and 1996 and for the years ended December 31, 1994 and 1995 are derived
from financial statements, which were also audited by PricewaterhouseCoopers
LLP, not included herein. The data should be read in conjunction with the
Consolidated Financial Statements, including the Notes thereto, and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.
 
     MKS has been treated as an S corporation under the applicable provisions of
the Internal Revenue Code since July 1, 1987. As an S corporation, MKS has not
been subject to federal, and certain state, income taxes. The pro forma net
income set forth below reflects the provision for income taxes that would have
been recorded had MKS been a C corporation, assuming an effective tax rate of
38.0%. As a result of terminating its S corporation status upon the closing of
this offering, MKS will record a one-time non-cash credit to historical earnings
for additional deferred taxes. If this credit to earnings had occurred at
December 31, 1998, the amount would have been approximately $3.9 million. This
amount is expected to change through the closing of this offering and is
excluded from pro forma net income. See Notes 2 and 9 of Notes to Consolidated
Financial Statements. Pro forma balance sheet data reflects the liability for
the distribution of an estimated $35.9 million, calculated as of December 31,
1998, of cumulative undistributed S corporation taxable income for which
stockholders of record prior to the closing of this offering have been or will
be taxed. The actual amount to be distributed is expected to increase based upon
taxable earnings for the period January 1, 1999 through the closing of this
offering, subject to certain limitations. Pro forma net income per share
reflects the effect of an assumed issuance of sufficient shares to fund the
distribution, as of January 1, 1998. See "S Corporation and Termination of S
Corporation Status" and Note 2 of Notes to Consolidated Financial Statements.
YEAR ENDED DECEMBER 31,
                                      --------------------------------------------------------
                                        1994        1995        1996        1997        1998
                                      --------    --------    --------    --------    --------
                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
Net sales...........................  $106,829    $157,164    $170,862    $188,080    $139,763
Cost of sales.......................    59,813      87,703     102,008     107,606      83,784
                                      --------    --------    --------    --------    --------
Gross profit........................    47,016      69,461      68,854      80,474      55,979
Research and development............     8,036      10,935      14,195      14,673      12,137
Selling, general and
  administrative....................    26,893      34,420      37,191      41,838      34,707
Restructuring.......................        --          --       1,400          --          --
                                      --------    --------    --------    --------    --------
Income from operations..............    12,087      24,106      16,068      23,963       9,135
Interest expense, net...............     1,284       1,448       2,286       1,861       1,187
Other income (expense), net.........        --          --        (479)        166         187
                                      --------    --------    --------    --------    --------
Income before income taxes..........    10,803      22,658      13,303      22,268       8,135
Provision for income taxes..........       800       1,000         800       1,978         949
                                      --------    --------    --------    --------    --------
Net income..........................  $ 10,003    $ 21,658    $ 12,503    $ 20,290    $  7,186
                                      ========    ========    ========    ========    ========
17
21
YEAR ENDED
                                                                   DECEMBER 31,
                                                              ----------------------
                                                                       1998
                                                              ----------------------
                                                              (IN THOUSANDS, EXCEPT
                                                                 PER SHARE DATA)
PRO FORMA STATEMENT OF INCOME DATA (UNAUDITED):
Historical income before income taxes.......................          $8,135
Pro forma provision for income taxes........................           3,091
                                                                      ------
Pro forma net income........................................          $5,044
                                                                      ======
Pro forma net income per common share:
    Basic...................................................          $ 0.25
                                                                      ======
    Diluted.................................................          $ 0.24
                                                                      ======
DECEMBER 31,                     DECEMBER 31, 1998
                             ------------------------------------------    ---------------------
                              1994        1995       1996        1997       ACTUAL     PRO FORMA
                             -------    --------    -------    --------    --------    ---------
                                                       (IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash
  equivalents..............  $ 4,059    $  3,650    $ 3,815    $  2,511    $ 11,188    $ 11,188
Working capital
  (deficit)................   25,078      32,202     22,404      30,321      31,493      (4,433)
Total assets...............   72,320     104,511     95,000     106,536      96,232      96,232
Short-term obligations.....    9,246      15,192     16,124      13,852      12,819      12,819
Long-term obligations, less
  current portion..........   14,948      20,462     18,899      15,624      13,786      13,786
Stockholders' equity.......   37,272      48,392     45,498      52,848      54,826      18,900
18
22
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     The following discussion contains forward-looking statements that involve
risks and uncertainties. MKS's actual results could differ materially from those
discussed in the forward-looking statements as a result of certain factors
including those set forth under "Risk Factors" and elsewhere in this prospectus.
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Consolidated Financial Statements
and Notes thereto appearing elsewhere in this prospectus.
 
OVERVIEW
 
     MKS was founded in 1961. MKS develops, manufactures and supplies
instruments and components used to measure, control and analyze gases in
semiconductor manufacturing and similar industrial manufacturing processes.
During 1997 and 1998, MKS estimates that approximately 60% of its net sales were
to semiconductor capital equipment manufacturers and semiconductor device
manufacturers. MKS expects that sales to such customers will continue to account
for a substantial majority of its sales. MKS has more than 4,000 active
customers worldwide (all of which purchased products during 1998), including
semiconductor capital equipment manufacturers, semiconductor device
manufacturers, industrial manufacturing companies and university, government and
industrial research laboratories. In 1996, 1997, and 1998, sales to MKS's top
five customers accounted for approximately 26%, 32% and 24%, respectively, of
MKS's net sales. During 1998, Applied Materials, Inc. accounted for
approximately 16% of MKS's net sales. MKS typically enters into contracts with
its semiconductor equipment manufacturer customers that provide for quantity
discounts. MKS recognizes revenues, and accrues for anticipated returns and
warranty costs, upon shipment.
 
     In the third quarter of 1996, as a result of the downturn in the
semiconductor industry, MKS recorded a restructuring charge of $1.4 million. The
charge was primarily related to a reduction of personnel and the closure of
certain facilities and included the cost of severance, lease commitments and the
write-off of leasehold improvements.
 
     A significant portion of MKS's sales are to operations in international
markets. International sales by MKS's foreign subsidiaries were 27.3% and 32.4%
of net sales for 1997 and 1998, respectively. MKS does not classify export sales
made directly by MKS as international sales. Such sales have generally been less
than 10% of net sales. MKS currently uses, and plans to continue to use, forward
exchange contracts and local currency purchased options to reduce currency
exposure arising from foreign denominated sales associated with the intercompany
purchases of inventory. Gains and losses on derivative financial instruments
that qualify for hedge accounting are classified in cost of sales. Gains and
losses on derivative financial instruments that do not qualify for hedge
accounting are marked-to-market and recognized immediately in other income. See
Note 3 to Notes to Consolidated Financial Statements.
 
     MKS has been treated as an S corporation for federal income tax purposes
since July 1, 1987. MKS's S corporation status will terminate upon the closing
of this offering, at which time MKS will become subject to federal, and certain
state, income taxation as a C corporation. The pro forma net income reflects a
pro forma effective tax rate of 38.0% to reflect federal and state income taxes
which would have been payable for 1998 had MKS been taxed as a C corporation.
See "S Corporation and Termination of S Corporation Status."
 
                                       19
23
 
  Results of Operations
 
     The following table sets forth for the periods indicated the percentage of
total net sales of certain line items included in MKS's consolidated statement
of income data:
YEAR ENDED DECEMBER 31,
                                                              -----------------------
                                                              1996     1997     1998
                                                              -----    -----    -----
Net sales...................................................  100.0%   100.0%   100.0%
Cost of sales...............................................   59.7     57.2     59.9
                                                              -----    -----    -----
Gross profit................................................   40.3     42.8     40.1
Research and development....................................    8.3      7.8      8.7
Selling, general and administrative.........................   21.8     22.3     24.9
Restructuring...............................................    0.8       --       --
                                                              -----    -----    -----
Income from operations......................................    9.4     12.7      6.5
Interest expense, net.......................................    1.3      1.0      0.8
Other income (expense), net.................................   (0.3)     0.1      0.1
                                                              -----    -----    -----
Income before income taxes..................................    7.8     11.8      5.8
Provision for income taxes..................................    0.5      1.0      0.7
                                                              -----    -----    -----
Net income..................................................    7.3%    10.8%     5.1%
                                                              =====    =====    =====
Pro forma data:
  Historical income before income taxes.....................                      5.8%
  Pro forma provision for income taxes......................                      2.2
                                                                                -----
  Pro forma net income......................................                      3.6%
                                                                                =====
YEAR ENDED 1998 COMPARED TO 1997
 
     Net Sales.  Net sales decreased 25.7% to $139.8 million for 1998 from
$188.1 million for 1997. International net sales were approximately $45.3
million in 1998 (32.4% of net sales) and $51.4 million in 1997 (27.3% of net
sales). The decrease in net sales was primarily due to decreased sales volume of
MKS's existing products in the United States and in Asia caused by the 1998
downturn in the semiconductor capital equipment market.
 
     Gross Profit.  Gross profit as a percentage of net sales decreased to 40.1%
for 1998 from 42.8% in 1997. The change was primarily due to manufacturing
overhead costs being a higher percentage of net sales due to lower sales volume
in 1998.
 
     Research and Development.  Research and development expenses decreased
17.3% to $12.1 million (8.7% of net sales) for 1998 from $14.7 million (7.8% of
net sales) for 1997. The decrease was primarily due to reduced spending for
development materials required for certain projects that were completed during
1998.
 
     Selling, General and Administrative.  Selling, general and administrative
expenses decreased 17.0% to $34.7 million (24.9% of net sales) for 1998 from
$41.8 million (22.3% of net sales) for 1997. The decrease was due primarily to a
decrease of approximately $4.2 million in compensation expense along with
decreased selling related expenses.
 
     Interest Expense, Net.  Net interest expense decreased to $1.2 million for
1998 from $1.9 million for 1997 primarily due to lower debt outstanding during
1998.
 
     Other Income (Expense), Net.  Other income of $0.2 million in 1998
primarily represents foreign exchange translation gains on intercompany payables
of $1.0 million offset by $0.7 million for costs associated with MKS's planned
initial public offering in early 1998 which was postponed. Other income of
 
                                       20
24
 
$0.2 million in 1997 represents gains of $1.2 million from foreign exchange
contracts that did not qualify for hedge accounting, offset by a foreign
exchange translation loss on an intercompany payable.
 
     Pro Forma Provision for Income Taxes.  The pro forma provision for income
taxes for 1998 reflects the estimated tax expense MKS would have incurred had it
been subject to federal and state income taxes as a C corporation under the
Internal Revenue Code. The pro forma provision reflects a pro forma tax rate of
38.0%, which differs from the federal statutory rate due primarily to the
effects of state and foreign taxes and certain tax credits.
 
YEAR ENDED 1997 COMPARED TO 1996
 
     Net Sales.  Net sales increased 10.1% to $188.1 million for 1997 from
$170.9 million for 1996. International net sales were approximately $51.4
million in both 1997 (27.3% of net sales) and 1996 (30.1% of net sales). The
increase in net sales was primarily due to increased sales volume of MKS's
existing products in the United States.
 
     Gross Profit.  Gross profit as a percentage of net sales increased to 42.8%
for 1997 from 40.3% for 1996. The change was due primarily to the reduction in
fixed costs resulting from the restructuring effected in the third quarter of
1996 and the resulting increase in operational efficiencies.
 
     Research and Development.  Research and development expenses increased 3.4%
to $14.7 million (7.8% of net sales) for 1997 from $14.2 million (8.3% of net
sales) for 1996. The increase was primarily due to an increase in staffing
throughout 1997 for certain development projects.
 
     Selling, General and Administrative.  Selling, general and administrative
expenses increased 12.5% to $41.8 million (22.2% of net sales) for 1997 from
$37.2 million (21.8% of net sales) for 1996. The increase was due primarily to
increased compensation expense, including increased staffing levels.
 
     Restructuring.  In the third quarter of 1996, as a result of the downturn
in the semiconductor industry, MKS recorded a restructuring charge of $1.4
million. The charge included $0.4 million of severance pay, $0.7 million of
lease commitments, and $0.3 million for the write-off of leasehold improvements.
 
     Interest Expense, Net.  Net interest expense decreased to $1.9 million for
1997 from $2.3 million for 1996 primarily due to lower debt outstanding during
1997.
 
     Other Income (Expense), Net.  Other expense for 1996 and other income for
1997 reflect losses and gains of $0.5 million and $1.2 million, respectively,
from foreign exchange contracts that did not qualify for hedge accounting, and a
foreign exchange translation loss on an intercompany payable from MKS's Korean
subsidiary of $1.0 million related to the devaluation of the Korean won in the
fourth quarter of 1997.
 
                                       21
25
 
  Selected Quarterly Operating Results
 
     The following tables present unaudited consolidated financial information
for the eight quarters ended December 31, 1998. In the opinion of management,
this information has been presented on the same basis as the audited
Consolidated Financial Statements appearing elsewhere in this Prospectus and all
adjustments (consisting only of normal recurring adjustments) which management
considers necessary for a fair presentation of the results of such periods have
been included in the amounts stated below to present fairly the unaudited
quarterly results when read in conjunction with MKS's Consolidated Financial
Statements and Notes thereto. The results for any quarter are not necessarily
indicative of future quarterly results of operations.
QUARTER ENDED
                                   -----------------------------------------------------------------------------------------
                                   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,
                                     1997        1997       1997        1997       1998        1998       1998        1998
                                   ---------   --------   ---------   --------   ---------   --------   ---------   --------
                                                                        (IN THOUSANDS)
STATEMENT OF INCOME DATA:
Net sales........................   $40,520    $45,749     $48,360    $53,451     $46,163    $34,026     $28,834    $30,740
Cost of sales....................    24,277     26,413      27,766     29,150      26,757     20,265      18,140     18,622
                                    -------    -------     -------    -------     -------    -------     -------    -------
Gross profit.....................    16,243     19,336      20,594     24,301      19,406     13,761      10,694     12,118
Research and development.........     2,994      3,563       3,779      4,337       3,794      3,107       2,568      2,668
Selling, general and
  administrative.................     9,612     10,321      10,816     11,089      10,112      9,045       7,808      7,742
                                    -------    -------     -------    -------     -------    -------     -------    -------
Income from operations...........     3,637      5,452       5,999      8,875       5,500      1,609         318      1,708
Interest expense, net............       494        527         445        395         375        337         234        241
Other income (expense), net......       275       (447)        632       (294)       (281)       123          77        268
                                    -------    -------     -------    -------     -------    -------     -------    -------
Income before income taxes.......     3,418      4,478       6,186      8,186       4,844      1,395         161      1,735
Provision for income taxes.......       289        378         523        788         565        163          19        202
                                    -------    -------     -------    -------     -------    -------     -------    -------
Net income.......................   $ 3,129    $ 4,100     $ 5,663    $ 7,398     $ 4,279    $ 1,232     $   142    $ 1,533
                                    =======    =======     =======    =======     =======    =======     =======    =======
QUARTER ENDED
                                   -----------------------------------------------------------------------------------------
                                   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,
                                     1997        1997       1997        1997       1998        1998       1998        1998
                                   ---------   --------   ---------   --------   ---------   --------   ---------   --------
PERCENTAGE OF NET SALES:
Net sales........................     100.0%     100.0%      100.0%     100.0%      100.0%     100.0%      100.0%     100.0%
Cost of sales....................      59.9       57.7        57.4       54.5        58.0       59.6        62.9       60.6
                                    -------    -------     -------    -------     -------    -------     -------    -------
Gross profit.....................      40.1       42.3        42.6       45.5        42.0       40.4        37.1       39.4
Research and development.........       7.4        7.8         7.8        8.1         8.2        9.1         8.9        8.6
Selling, general and
  administrative.................      23.7       22.6        22.4       20.8        21.9       26.6        27.1       25.2
                                    -------    -------     -------    -------     -------    -------     -------    -------
Income from operations...........       9.0       11.9        12.4       16.6        11.9        4.7         1.1        5.6
Interest expense, net............       1.2        1.1         0.9        0.7         0.8        1.0         0.8        0.8
Other income (expense), net......       0.6       (1.0)        1.3       (0.6)       (0.6)       0.4         0.3        0.8
                                    -------    -------     -------    -------     -------    -------     -------    -------
Income before income taxes.......       8.4        9.8        12.8       15.3        10.5        4.1         0.6        5.6
Provision for income taxes.......       0.7        0.8         1.1        1.5         1.2        0.5         0.1        0.6
                                    -------    -------     -------    -------     -------    -------     -------    -------
Net income.......................       7.7%       9.0%       11.7%      13.8%        9.3%       3.6%        0.5%       5.0%
                                    =======    =======     =======    =======     =======    =======     =======    =======
MKS's quarterly operating results have varied significantly and are likely
to continue to vary significantly due to a number of factors including specific
economic conditions in the industries in which MKS's customers operate,
particularly the semiconductor industry; the timing of the receipt of orders
from major customers; customer cancellations or shipment delays; price
competition; disruption in sources of supply; seasonal variations of capital
spending by customers; production capacity constraints; specific features
requested by customers; exchange rate fluctuations; the introduction or
announcement of new products by MKS or its competitors; and other factors, many
of which are beyond MKS's control.
 
     MKS's net sales have fluctuated over the past eight quarters primarily due
to the decline in the semiconductor capital equipment market and the
semiconductor device market in 1998 that adversely affected sales of MKS's
products in each of the quarters of 1998. See "Risk Factors -- Our quarterly
results are likely to fluctuate." MKS expects that the decline in worldwide
semiconductor capital equipment orders in the second half of 1998 and the
instability of the Asian markets will continue to adversely affect sales of
semiconductor capital equipment manufacturers for at least the first and second
quarters of 1999. As a result, MKS currently expects that its net sales and net
income for each of the first
 
                                       22
26
 
and second quarters of 1999 will be less than net sales and net income for the
first and second quarters of 1998.
 
     Gross profit as a percentage of net sales increased in each quarter of 1997
primarily as a result of fuller utilization of existing manufacturing capacity
as a result of increased net sales. Gross profit as a percentage of net sales
decreased in each of the first three quarters of 1998 as a result of
manufacturing overhead costs becoming a higher percentage of net sales due to
lower sales volume.
 
     The increase in research and development expenses for the second, third and
fourth quarters of 1997 was primarily due to increased staffing levels. The
decrease in research and development expenses for the first, second, and third
quarters of 1998 was primarily due to reduced spending for development materials
required for certain projects that were completed during 1998.
 
     Selling, general and administrative expenses increased in the second, third
and fourth quarters of 1997 primarily due to increased compensation expense and
the write-off of certain abandoned assets. The decrease in selling, general and
administrative expenses in the first, second, and third quarters of 1998 was
primarily due to a decrease in compensation expense along with other selling
related expenses.
 
     Other income primarily represents gains and losses on foreign exchange
contracts and a foreign exchange translation loss on an intercompany payable
from MKS's Korean subsidiary of $1.0 million in the fourth quarter of 1997
related to the devaluation of the Korean won. Other expenses in the first
quarter of 1998 include $0.7 million for costs associated with MKS's planned
initial public offering in early 1998 which was postponed.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     MKS has financed its operations and capital requirements through a
combination of cash provided by operations, long-term real estate financing,
capital lease financing and short-term lines of credit.
 
     Operations provided cash of $26.3 million, $16.8 million and $23.0 million
for 1996, 1997 and 1998, respectively, primarily impacted in each period by net
income, depreciation and changes in the levels of inventory and accounts
receivable. Investing activities utilized cash of $10.2 million, $3.3 million
and $2.1 million in 1996, 1997 and 1998, respectively, primarily for the
purchase of property and equipment in each period. Financing activities utilized
cash of $15.6 million, $16.2 million and $11.8 million in 1996, 1997 and 1998,
respectively, primarily for stockholder distributions in each period. Cash flows
from financing activities for each period were primarily from short-term and
long-term borrowings.
 
     Working capital was $31.5 million as of December 31, 1998. MKS has a
combined $30.0 million line of credit with two banks, expiring December 31,
1999, all of which is available. MKS also has lines of credit through its
foreign subsidiaries with several financial institutions totaling $15.0 million
at December 31, 1998. The total unused balance under these lines of credit was
$5.3 million at December 31, 1998. These lines generally expire and are renewed
at six month intervals. In addition, MKS has outstanding term loans and mortgage
loans from banks totaling $12.0 million (net of the current portion) at December
31, 1998. See Notes 6 and 13 of Notes to Consolidated Financial Statements.
 
     In 1997 and 1998, MKS distributed $12.4 million and $6.2 million,
respectively, of undistributed S corporation earnings to its stockholders. As
soon as practicable following the closing of this offering, MKS intends to make
a distribution to the holders of record on the day prior to the closing of this
offering in an amount equivalent to the accumulated adjustments account. The
accumulated adjustments account is cumulatively equal to financial reporting
income, adjusted for differences between the methods of accounting used for
financial accounting and for federal income tax purposes from July 1, 1987
through the date of termination of MKS's S corporation status, that has not been
previously distributed. Investors purchasing shares in this offering will not
receive any portion of the distribution. As of December 31, 1998, the
outstanding balance of the accumulated adjustments account was estimated to be
approximately $35.9 million, and such balance is estimated to increase in the
period from January 1, 1999 through the closing of this offering to
approximately $               million.
 
                                       23
27
 
     MKS believes that the net proceeds from this offering, together with the
cash anticipated to be generated from operations and funds available from
existing credit facilities, will be sufficient to satisfy its estimated working
capital and planned capital expenditure requirements through at least the next
12 months.
 
  Effect of Currency Exchange Rates and Exchange Rate Risk Management.
 
     A significant portion of MKS's business is conducted outside of the United
States through its foreign subsidiaries. The foreign subsidiaries maintain their
accounting records in their local currencies. Consequently, period to period
comparability of results of operations is affected by fluctuations in exchange
rates. MKS derives a significant portion of its cash flows from foreign
denominated revenue. To the extent the dollar value of foreign denominated
revenue is diminished as a result of a strengthening dollar, MKS's results of
operations and cash flows could be adversely affected. To reduce the risks
associated with foreign currency rate fluctuations, MKS has entered into forward
exchange contracts and local currency purchased options on a continuing basis in
amounts and timing consistent with the underlying currency exposures. Gains on
forward exchange contracts and local currency purchased options, qualifying for
hedge accounting, amounted to $2.5 million, $1.2 million and $0.3 million for
the years ended December 31, 1996, 1997 and 1998, respectively, and are
classified in cost of sales. Losses of $0.5 million, gains of $1.2 million and
losses of $0.2 million on forward exchange contracts that did not qualify for
hedge accounting were recognized in earnings for 1996, 1997 and 1998,
respectively, and are classified in other income (expense), net. These amounts
are net of a foreign exchange translation loss of $1.0 million and a gain of
$1.0 million on intercompany payables from its subsidiaries in 1997 and 1998
respectively. Foreign exchange translation gains and losses from unhedged
intercompany balances were not material in 1996. While MKS does not issue or
hold derivative financial instruments for trading purposes, there can be no
assurance that any losses realized on such instruments will be fully offset by
gains on the underlying exposure. Prospectively, MKS plans to continue to use
forward exchange contracts and local currency purchased options to seek to
mitigate the impact of exchange rate fluctuations. See Notes 2 and 3 of Notes to
Consolidated Financial Statements.
 
  Market Risk and Sensitivity Analysis on Exchange Rate Risk Management
 
     The potential fair value loss for a hypothetical 10% adverse change in
forward currency exchange rates on MKS's forward exchange contracts at December
31, 1998 would be $949,000. The potential loss was estimated by calculating the
fair value of the forward exchange contracts at December 31, 1998 and comparing
that with those calculated using the hypothetical forward currency exchange
rates.
 
     The value of the local currency purchased options at December 31, 1998 was
immaterial. Any loss related to the local currency purchased options is limited
to the unamortized premium of $155,000 at December 31, 1998.
 
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 
     See Note 2 of Notes to Consolidated Financial Statements for a discussion
of the impact of recently issued accounting pronouncements.
 
YEAR 2000 COMPLIANCE
 
     The Year 2000 problem stems from the fact that many currently installed
computer systems include software and hardware products that are unable to
distinguish 21st century dates from those in the 20th century. As a result,
computer software and/or hardware used by many companies and governmental
agencies may need to be upgraded to comply with Year 2000 requirements or risk
system failure or miscalculations causing disruptions to normal business
activities.
 
                                       24
28
 
  State of Readiness
 
     MKS designed and began implementation of a multi-phase Year 2000 project
which consists of: (i) assessment of the corporate systems and operations that
could be affected by the Year 2000 problem, (ii) remediation of non-compliant
systems and components, and (iii) testing of systems and components following
remediation. MKS, under the guidance of its Information Technology Steering
Committee, has focused its Year 2000 review on four areas: (a) internal computer
software and hardware, (b) product compliance, (c) facilities and manufacturing
equipment and (d) third-party compliance.
 
     Internal Computer Software and Hardware.  MKS uses information technology
for its internal infrastructure, which consists of its main enterprise systems
(the systems used, in part, for purchase orders, invoicing, shipping and
accounting), individual workstations, including personal computers, and its
network systems.
 
     Because MKS's business and manufacturing systems, such as its main
enterprise systems, are essential to its business, financial condition and
results of operations, MKS began its assessment of these systems prior to its
other non-critical information technology systems. MKS began its assessment in
the fall of 1997, and in November 1997, MKS developed a remediation plan for all
identified noncompliant business and manufacturing systems. This remediation
plan was implemented in January 1998. By July 1998, MKS had installed new
systems or upgraded existing systems. Based upon post-implementation testing and
review, management believes that all business and manufacturing systems within
its manufacturing operations are Year 2000 compliant.
 
     One of MKS's international subsidiaries is currently undergoing conversion
of its business systems in order to become Year 2000 compliant. Management
believes that these systems will be operational by June 1999. This phase of the
Year 2000 project is currently on schedule.
 
     MKS's personal computer based systems were assessed in early 1998. MKS
believes that all non-compliant hardware and software was identified by March
1998, at which time it made a list prioritizing databases to be remedied.
Critical databases were identified and were scheduled for remediation prior to
other databases. Remediation plans to convert the databases were initiated in
November 1998. MKS anticipates that it will complete its critical and
non-critical conversions by June 1999. This phase of the Year 2000 project is
currently on schedule.
 
     Product Compliance.  Throughout 1998, MKS assessed and addressed the Year
2000 compliance of its products. This assessment resulted in the identification
of MKS's products that were compliant and non-compliant. The substantial
majority of MKS's products were deemed to be compliant.
 
     The date related functions of all non-compliant products, other than
certain residual gas analysis products, are believed by MKS to be non-critical
in that such noncompliance would not affect the independent performance of the
product; would not cause the MKS product to cease operating on any particular
date; and independently would not pose a safety risk. MKS believes that Year
2000 problems associated with non-compliant residual gas analysis products will
also be non-critical. However, these products contain components of other
manufacturers and cannot be tested and therefore it is possible that such
products could cause unanticipated performance problems. The non-compliant
features of our other products primarily relate to non-essential functions such
as date displays. MKS made available to its customers a list which describes
Year 2000 readiness of its products. This phase of the Year 2000 project is
currently on schedule.
 
     Facilities and Manufacturing Equipment.  Some aspects of MKS's facilities
and manufacturing equipment may include embedded technology, such as
microcontrollers. The Year 2000 problem could cause a system failure or
miscalculation in such facilities or manufacturing equipment which could disrupt
MKS's operations. Affected areas include security systems, elevator controls,
voice mail and phone systems, clean room environmental controls, numerically
controlled production machinery and computer based production equipment. MKS
organized a team of experienced managers in November 1998 to assess the
potential problems in these areas. An assessment of all facilities and
manufacturing equipment was conducted through December 1998, and a remediation
plan was developed in January 1999. MKS
 
                                       25
29
 
anticipates completion of all corrective actions by June 1999 with testing and
review of corrected items to occur in the summer of 1999. This phase of the Year
2000 project is currently on schedule.
 
     Third-Party Compliance.  MKS has relationships with third-parties including
customers and vendors and suppliers of goods, services and computer interfaces.
The failure of such persons to implement and execute Year 2000 compliance
measures in a timely manner, if at all, could, among other things: (i) adversely
affect MKS's ability to obtain components in a timely manner; (ii) cause a
reduction in the quality of components obtained by MKS; (iii) cause a reduction,
delay or cancellation of customer orders received by MKS or a delay in payments
by its customers for products shipped; and/or (iv) result in the loss of
services that would be necessary for MKS to operate in the normal course of
business. MKS assessed which of these third-party goods, services and interfaces
were critical to its operations and developed and mailed a standard survey to
each third-party deemed critical in January 1998. By March 1998, MKS had
reviewed most responses received. To date, the responses received indicate that
the third-parties are either in the process of developing remediation plans, or
are compliant. MKS anticipates further assessment to continue through March 1999
and plans to conduct reviews at that time. A remediation plan is expected to be
in place by June 1999 with all critical third-parties achieving satisfactory
compliance by August 1999. This phase of the Year 2000 project is currently on
schedule.
 
  Costs
 
     MKS's costs to date associated with assessment, remediation and testing
activities concerning the Year 2000 problem have been approximately $1,500,000.
MKS estimates that an additional $1,000,000, the major portion of which will be
capitalized and expensed over the life of the assets, will be required to
complete the replacement or modification of its facilities, manufacturing
equipment, computer software and products and to address the noncompliance of
key third-parties. MKS has funded and will continue to fund these activities
principally through cash provided by operations and existing leasing lines of
credit. It is not possible for MKS to completely estimate the costs incurred in
its remediation effort as many of its employees have focused and will continue
to focus significant efforts in evaluating MKS's Year 2000 state of readiness
and in remediating problems that have arisen, and will continue to arise, from
such evaluation.
 
  Contingency Plan
 
     To date, MKS has not formulated contingency plans related to the failure of
its or a third-party's Year 2000 remediation efforts. Contingency plans for the
failure to implement compliance procedures have not been completed because it is
the intent of MKS to complete all required modifications and to test
modifications thoroughly prior to December 31, 1999. However, as discussed
above, MKS is engaged in ongoing assessment, remediation and testing activities
and the internal results as well as the responses received from third-parties
will be taken into account in determining the nature and extent of any
contingency plans if necessary.
 
                                       26
30
 
                                    BUSINESS
 
     MKS is a leading worldwide developer, manufacturer and supplier of
instruments and components used to measure, control and analyze gases in
semiconductor manufacturing and similar industrial manufacturing processes. MKS
offers a comprehensive line of products which are used to manufacture, among
other things:
 
- semiconductors
- flat panel displays
- magnetic and optical storage devices and media, including:
  -- compact disks
  -- hard disk storage devices
  -- magnetic devices for reading disk data
  -- digital video disks
  -- optical storage disks (laser readable disks)
 
- solar cells which convert light into electrical current
- fiber optic cables for telecommunications
- optical coatings (such as eyeglass coatings)
- coatings for architectural glass
- hard coatings to minimize wear on cutting tools
- diamond thin films
 
Our products include:
 
- instruments used to measure, control and analyze:
 
  -- gas pressure
 
  -- gas flow
 
  -- gas composition
 
- vacuum technology products:
 
  -- vacuum gauges
 
  -- vacuum valves and components
 
     For over 25 years, MKS has focused on satisfying the needs of semiconductor
capital equipment manufacturers and semiconductor device manufacturers and has
established long-term relationships with many of its customers. MKS has over
4,000 active customers worldwide (all of which purchased products during 1998)
including:
 
     - semiconductor capital equipment manufacturers
 
     - semiconductor device manufacturers
 
     - industrial manufacturing companies
 
     - university, government and industrial research laboratories
 
     MKS's customers include Applied Materials, Inc., Lam Research Corporation,
Tokyo Electron, Ltd., Air Products and Chemicals, Inc. and Motorola Inc. MKS
sells its products primarily through its sales force which consists of 118
employees in 22 offices in France, Germany, Japan, Korea, The Netherlands,
Singapore, Taiwan, the United Kingdom and the United States.
 
INDUSTRY BACKGROUND
 
     In the past 40 years, significant advances in materials science and
processing technologies have made possible the manufacture of products ranging
from highly complex microprocessor chips to simple but effective airtight
coatings for food packaging. In many materials processing applications, specific
gas mixtures at precisely controlled pressures are used:
 
     - to create and maintain the required process atmosphere
 
     - as a source of materials to be deposited on a substrate (for example, a
       silicon wafer)
 
     - to remove (or etch) materials from a substrate to form a circuit pattern
 
     The largest commercial application employing materials science and
processing technologies is the manufacture of semiconductors. Worldwide
semiconductor sales have increased as the use of semiconduc-
 
                                       27
31
 
tors has expanded beyond personal computers and computer systems to a wide array
of additional applications such as telecommunications and data communications
systems, automotive products, consumer goods, medical products and household
appliances. In large part, this growth has been facilitated by the ability of
semiconductor device manufacturers to produce increasingly fast, more complex,
higher performance semiconductors while steadily reducing cost per function,
power consumption requirements and size of these products to meet end-user and
system designer requirements. These improvements in the ratio of price to
performance have been enabled by advancements in semiconductor processing
technologies, which have facilitated the ability to reduce circuit pattern sizes
and subsequently increase the number of individual semiconductor circuits on a
silicon wafer. These trends have driven the need for increasingly complex and
sophisticated semiconductor device manufacturing processes, process equipment
and process controls.
 
  Semiconductor Manufacturing Process
 
     The beginning of the semiconductor manufacturing process, or front-end
wafer processing, requires hundreds of process steps involving the controlled
application of materials on silicon wafers to form circuit patterns. These
process steps take place within a process chamber, which provides a controlled
environment for the fabrication of semiconductor devices. Most of the key
front-end processes used in the production of semiconductors require precise
automatic control of gas pressure, flow and composition in the process chamber.
 
     To ensure the integrity and performance of the manufacturing process,
semiconductor device manufacturers require sophisticated instruments that can
provide precise automated control of all major process variables within the
process chamber. The process steps required to produce circuit patterns involve
the control of multiple gases flowing into the process chamber at specified
intervals, and at controlled pressure and vacuum levels. In a typical process
step, the process chamber is evacuated to a base pressure established by a
vacuum pumping system and measured with vacuum gauges. Automatic shut-off valves
are sequenced to protect pumps and process instruments from exposure to
atmospheric pressure. Chamber leak integrity may be checked by gas analyzers
scanning for the presence of undesirable atmospheric gases or water vapor. Mass
flow controllers automatically control the flow rates of multiple gases into the
process chamber. Simultaneously, the automatic pressure control system for the
process chamber measures the pressure in the chamber and controls it at the
desired level by electronically adjusting the position of a control valve
located between the process chamber and the vacuum pump. Downstream of the
process chamber, heated lines, particle traps, and vacuum valves and switches
are used to prevent contamination of the process chamber as a result of the
backstream of particles and exhaust gases back into the process chamber. This
improves circuit quality, reduces maintenance and prolongs vacuum pump life.
 
     The front-end process steps which involve gases include deposition, etch,
strip, clean, ion implantation, rapid thermal processing and diffusion.
 
     Deposition involves the formation of several layers of conducting,
semiconducting and insulating thin films on the surface of a wafer or substrate.
The two principal methods of film deposition are physical vapor deposition,
which is used primarily to deposit conductive metal layers, and chemical vapor
deposition, which is used primarily to deposit semiconducting and insulating
thin films. In the physical vapor deposition process, wafers are typically
placed in a process chamber where solid sources of film materials mounted in the
chamber are vaporized onto the wafer surface at precisely controlled pressures
and temperatures. In the chemical vapor deposition process, a specially designed
gas or vaporized liquid material is introduced into a pressure and temperature
controlled process chamber containing the wafers. The gases interact with the
wafer surface to form a semiconducting or insulating layer. The pressure in the
process chamber during the deposition process and the mixture of deposition
gases must be precisely controlled to achieve uniform film thickness and
composition.
 
     The etching process creates the line-widths and other feature sizes which
form the circuit patterns of integrated circuits. To produce specified
line-widths, manufacturers typically employ plasma etching
 
                                       28
32
 
techniques, which use gases that chemically react with unprotected portions of
the wafer to create the thinly etched features that form the circuit patterns.
The pressure in the etch chamber and the mixture of etchant gases must be
precisely controlled to achieve the specified side wall angle and ratio of
line-widths to depths. Stripping and cleaning are etching processes used to
prepare the wafer surface for further processing steps.
 
     In the ion implantation process, positively charged atoms (or ions) of
certain materials are formed in minuscule quantities from gases introduced into
a chamber on the implantation tool. The ions are generated in the chamber and
are accelerated into the silicon wafer. The energy of acceleration implants the
ion beneath the surface of the silicon, altering electrical characteristics of
the silicon. The flow rates of the gases into the ion chamber and the pressure
in the ion chamber must be precisely controlled to create and maintain the ion
density required to achieve desired electrical characteristics.
 
     Rapid thermal processing and diffusion typically involve raising the
semiconductor wafer to elevated temperatures in order to modify the properties
of a material or electronic circuit. These processes are often performed in a
precisely controlled process gas or vacuum environment.
 
     The pressures used in semiconductor manufacturing processes range from as
low as one trillionth of atmospheric pressure to as high as two hundred times
atmospheric pressure. The following table shows the wide range of pressures
required for typical semiconductor manufacturing processes:
 
    [PRESSURE RANGES OF TYPICAL SEMICONDUCTOR MANUFACTURING PROCESSES CHART]
[This table graphically depicts, using graybars, the gas pressure ranges, from
one trillionth of atmospheric pressure (10(-9) Torr) to two hundred times
atmospheric pressure (152,000 Torr), used in various typical semiconductor
manufacturing process steps, (Gas Distribution, Atmospheric Chemical Vapor
Deposition, Sub-atmospheric Chemical Vapor Deposition, Low Pressure Chemical
Vapor Deposition, Plasma Etching and Cleaning, Physical Vapor Deposition and Ion
Implantation).]
 
     Etching and deposition steps are repeated many times in the fabrication of
a semiconductor circuit and require varying flow rates, pressures and gases. A
typical process step uses from three to five different gases. The amount of time
that the semiconductor processing tool is available for processing (or uptime),
the ratio of acceptable circuits to total circuits processed (or yield), and the
number of wafers that can be processed per hour (or throughput), depend in major
part upon:
 
     - precise repeatable measurement and control of the specific gas pressure,
       flow rates and composition
 
     - the maintenance of the vacuum integrity of the process chamber
 
     - the prevention of wafer contamination from particles entering the chamber
 
                                       29
33
 
     Pressure variations of as little as one one-hundred-thousandth of
atmospheric pressure can change process yields significantly and errors in gas
flow rates and composition may impair circuit performance. Atmospheric
contamination and particle contamination can produce defects that significantly
reduce wafer yields and the time required to remove contaminates reduces uptime
and throughput. The speed of response and precision of the automatic control
systems directly affects uptime, throughput of wafers and process yields.
 
  Other Similar Industrial Manufacturing Processes
 
     Many of the same processes of deposition, etch, strip, clean, ion
implantation, rapid thermal processing and diffusion used to manufacture
semiconductors are also used to manufacture: flat panel displays; magnetic and
optical storage devices and media; solar cells; fiber optic cables for
telecommunications; optical coatings; coatings for architectural glass; hard
coatings to minimize wear on cutting tools; and diamond thin films.
 
  Trends in Semiconductor Manufacturing
 
     The ability of semiconductor device manufacturers to offer integrated
circuits with smaller geometries and greater functionality at higher speeds
requires continuous improvements in semiconductor process equipment and process
controls. The transition to smaller circuit patterns, such as 0.18 micron and
smaller line-widths, requires more process steps. It is also leading to the
introduction of new materials such as copper for conductors and a whole new
class of organic and inorganic materials for insulators (dielectrics). These in
turn require new technologies for delivery of gases and vapors to the process
chamber. In addition, the introduction of advanced processes such as high
density plasma is leading to a need for lower pressures, which are more
difficult to measure and control than higher pressures. These trends, along with
increased wafer sizes, which result in higher circuit value per wafer, are
leading to the need for increased sophistication of semiconductor processing
equipment, a heightened emphasis on uptime, yield and throughput and the need
for more precise process controls. As a result, the design and performance of
instruments that control pressure or the flow of gases, or analyze the
composition of gases, are becoming even more critical to the semiconductor
manufacturing process.
 
     To address the increasing complexity of semiconductor devices,
semiconductor device manufacturers typically develop processes to create
particular device features using specific manufacturing equipment. The process
for each feature is then documented and may be subsequently replicated for use
in multiple fabrication facilities around the world. The precision,
repeatability and reliability of the measurement and control instrumentation
used for each process is critical to providing uptime, high yield and throughput
on manufacturing equipment at all facilities employing such processes.
Semiconductor device manufacturers are placing increasing importance on uptime,
yield, throughput and process consistency throughout their facilities to
minimize:
 
     - capital equipment expenditures
     - facility construction costs
     - overall ongoing operating costs
 
     The increasing sophistication of semiconductor devices requires an increase
in the number of components and subsystems used in the design of semiconductor
manufacturing process tools. To reduce manufacturing complexity, improve quality
and reliability and ensure long-term service and support, semiconductor capital
equipment manufacturers and semiconductor device manufacturers are increasingly
seeking to establish relationships with a smaller group of broad-based suppliers
that meet their needs on a worldwide basis and provide:
 
     - advanced technological capabilities to address the increasing
       complexities of the semiconductor manufacturing process
 
     - instrument and component designs that ensure repeatable processes around
       the world
 
     - value-added, integrated instruments and components
                                       30
34
 
     - a worldwide sales, service and support infrastructure
 
MKS SOLUTION AND STRATEGY
 
     MKS's objective is to be the leading worldwide supplier of instruments and
components used to measure, control and analyze gases in semiconductor and other
advanced thin-film materials processing applications and to help semiconductor
device manufacturers achieve improvements in their return on invested capital.
The principal elements of MKS's solution and strategy to achieve this objective
are set forth below:
 
     Technology Leadership.  MKS's products incorporate leading-edge
technologies to control and monitor increasingly complex gas-related
semiconductor manufacturing processes, thereby enhancing uptime, yield and
throughput which can improve the investment return on capital equipment and
facilities. The instruments and components in MKS's product offering provides
the required capabilities through:
 
     - high precision operation over the extreme and variable pressure ranges
       required for semiconductor processes
 
     - precise, consistent and repeatable measurement and control performance
       that allows processes to be replicated in manufacturing facilities around
       the world
 
     - advanced control technologies which enhance uptime, yield and throughput
 
     - multiple, diverse and alternative technologies for controlling the flow
       rate and composition of gases and vapors needed for new classes of
       advanced materials for next generation semiconductor devices
 
     - innovative vacuum technology subsystems that reduce atmospheric and
       particle contamination, thereby enhancing uptime, yield and throughput
 
     MKS has 47 U.S. patents and 10 pending U.S. patent applications. MKS's
products have continuously advanced as its customers' needs have evolved. MKS
seeks to extend its technological leadership by applying its expertise in
vacuum, pressure, flow and gas composition measurement control and analysis
technologies to develop advanced products that meet the critical gas-related
process requirements of semiconductor and advanced thin-film materials
manufacturers. MKS has introduced technological innovations including
corrosion-resistant pressure and vacuum sensors, automatic pressure and vacuum
control systems, and compact single unit gas composition analyzers to replace
bulky multi-component systems. MKS has developed, and continues to develop, new
products to address emerging industry trends such as the transition from the use
of 200mm wafers to 300mm wafers and the shrinking of integrated circuit
line-widths from 0.25 micron to 0.18 micron and smaller. MKS has supplied pre-
production equipment to be incorporated into semiconductor capital equipment
manufacturers' 300mm pre-production semiconductor wafer process equipment, which
is expected to be included in pilot production lines of device manufacturers.
MKS has also developed equipment that is being used by research laboratories for
semiconductor devices using less than 0.18 micron line-widths. In addition, MKS
has developed, and continues to develop, materials delivery systems for new
classes of materials, such as copper for conductors, titanium nitride for
barriers and a class of organic and inorganic dielectric materials that are
beginning to be used in small geometry manufacturing. MKS also has been a leader
in making its products compatible with emerging digital network standards, such
as DeviceNet, for enabling components used in semiconductor manufacturing
processes to transmit self-diagnostic and other information on a digital host
network while reducing system complexity and space requirements. MKS aligns its
research and development program to the Semiconductor Industry Association
Technology Roadmap (which identifies technological developments, as well as
obstacles, required to produce future generations of semiconductor devices), to
ensure that MKS maintains its leading-edge position and, through its association
with leading universities to anticipate future semiconductor production needs
three to seven years in advance.
 
     Comprehensive Product Offering.  MKS currently offers, and intends to
continue to offer, the widest range of pressure and vacuum measurement and
control products serving the semiconductor manufacturing
 
                                       31
35
 
and similar industrial manufacturing industries. MKS offers a full line of
products including a wide range of gas pressure, flow and composition analysis
measurement and control instruments and vacuum gauges, valves and components.
Since the development of its original Baratron laboratory-based instrument in
1961, MKS has continuously enhanced and expanded its product offerings in
response to the evolving needs of its customers. For example, MKS recently
introduced the Micro Baratron instrument, a significantly smaller version of its
pressure measurement product, and a new low vapor pressure material delivery
system. MKS plans to introduce new products throughout 1999, including a line of
mass flow calibrators and process monitoring hardware and software for residual
gas analysis. MKS plans to continue to expand its product lines through both
internal development and acquisitions of complementary businesses, products and
technologies. MKS's comprehensive product offering enables MKS to meet a broad
range of customer needs and provide a single source of solutions for
semiconductor device and semiconductor capital equipment manufacturers as they
seek to consolidate their supplier relationships to a smaller select group.
 
     MKS's products are designed to meet the increasingly complex needs of its
customers. With the increasing sophistication of semiconductor capital equipment
leading to an increasing number of components and subsystems in semiconductor
manufacturing process tools, MKS delivers products that reduce equipment size
and improve process performance. MKS's subsystem products combine several
components into single integrated solutions. MKS's integrated solutions deliver
higher performance at a lower cost than similar subsystems built from discrete
components. Additionally, MKS's integrated solutions are easier to install and
configure, further reducing the overall cost to the customer.
 
     Close Working Relationships with Customers.  MKS has focused on satisfying
the needs of semiconductor device manufacturers and semiconductor capital
equipment manufacturers for over 25 years and has established long-term
relationships with many of its customers. MKS works with its customers at the
pre-design and design stage to identify and respond to their requests for
current and future generations of products. These close working relationships
allow MKS to understand and address the cost and performance expectations of its
customers. MKS plans to enhance its relationships with its major customers and
identify opportunities to develop similar relationships with additional
semiconductor capital equipment manufacturers and semiconductor device
manufacturers.
 
     Applications in Related Markets.  MKS is leveraging its accumulated
expertise in the semiconductor industry by developing products for applications
that employ production processes similar to semiconductor fabrication processes
in their reliance upon gases and vacuum-based production technologies.
Applications served by MKS outside the semiconductor industry include vacuum
freeze-drying of pharmaceuticals and foods, sterilization of medical appliances,
and applications that involve advanced thin-film manufacturing such as flat
panel displays, magnetic and optical storage media, solar cells, fiber optic
cables and optical coatings. MKS plans to continue to identify and develop
products that address advanced materials processing applications where gas
management plays a critical role.
 
     Global Infrastructure and World Class Manufacturing Capabilities.  As
semiconductor device manufacturers have become increasingly global, they have
required that suppliers offer comprehensive local repair service and close
customer support. Manufacturers require close support to enable them to
calibrate, repair, modify, upgrade and retrofit their equipment to improve
process consistency, uptime, yield and throughput. To meet these market
requirements, MKS maintains a global sales and support organization with 22
offices worldwide. MKS currently manufactures its products at nine facilities in
the United States and abroad. MKS continues to devote significant resources to
expand and maintain its worldwide production and service capabilities to meet
the global demand for gas measurement, control and analysis instruments and
vacuum technology components. MKS opened a sales and support facility in
Singapore in 1998 and during the year ending December 31, 1999 plans to add
manufacturing capabilities to its Austin, Texas facility and further equip its
cleanroom facilities in Andover and Methuen, Massachusetts.
 
     MKS believes that the ability to manufacture reliable instruments and
components in a cost-effective manner is critical to meet the demanding
just-in-time delivery requirements of semiconductor capital equipment
manufacturers and semiconductor device manufacturers. MKS's worldwide production
and
 
                                       32
36
 
manufacturing facilities provide MKS with the ability to manufacture reliable
gas measurement, control and analysis instruments and components in a timely and
cost-effective manner. With a total of approximately 250,000 square feet of
manufacturing capacity in five locations in the United States and four others in
Germany, Japan, the United Kingdom and Korea, MKS has implemented world class
practices in quality and delivery techniques. MKS's manufacturing facilities in
the United States, the United Kingdom and Germany are ISO 9001 certified.
 
PRODUCTS
 
     MKS offers a full line of instruments and components that are used to
measure, control and analyze gases in semiconductor manufacturing and other
advanced thin-film manufacturing processes. MKS supplies products in two
principal areas:
 
     - measurement and control instrumentation products for gas pressure, flow
       and composition analysis
 
     - vacuum gauges, valves and components
 
     These products are covered by 47 U.S. patents and 10 pending U.S. patent
applications.
 
     The following schematic shows where MKS products are used in a typical
semiconductor manufacturing process.
 
[CHART]
 
 1. Ultraclean Mini-Baratron Pressure Transducer and Local Display Module
 
 2. Automatic Pressure Controller/ Regulator
 
 3. Thermal Mass Flow Controller or Pressure-Based Mass Flow Controller
 
 4. Gas Box Rate-of-Rise In-Situ Calibrator
 
 5. Control and Shut-Off Valves
 
 6. Direct Liquid Injection -- Controller
 
 7. Direct Liquid Injection -- Micropump
 
 8. Direct Liquid Injection -- Vaporizer
 
 9. RGA Mass Spectrometer with Software
 
10. Baratron Pressure Switch
 
11. In-Situ Diagnostics Access Valve
 
12. Baratron Pressure Transducer
 
13. Automatic Downstream Valve Controller
 
14. Vacuum Foreline Virtual Wall
 
15. In-Line Valve
 
16. Convection Pirani Gauge
 
17. Throttle Valve
 
18. Cold Cathode High Vacuum Gauge or Hot Cathode High Vacuum Gauge
 
19. In-Line Trap
 
20. Foreline/Exhaust Line Heaters
 
  Measurement and Control Instrumentation Products
 
     MKS designs and manufactures a wide range of gas pressure, flow and
composition analysis measurement and control instrumentation. Each product line
consists of products which are designed for a variety of pressure, flow and
composition ranges and accuracies.
 
     Baratron Pressure Measurement Products.  MKS's Baratron pressure
measurement products are high precision, pressure measurement instruments. MKS
has five Baratron product families that range from
 
                                       33
37
 
high accuracy digital output instruments to simple electronic switches. These
products are typically used to measure the pressure of the gases being
distributed upstream of the process chambers, to measure process chamber
pressures and to measure pressures between process chambers, vacuum pumps and
exhaust lines. Baratron instruments measure pressures at ranges from two hundred
times atmospheric pressure to one billionth of atmospheric pressure. MKS
believes it offers the widest range of gas pressure measurement instruments in
the semiconductor and advanced thin-film materials processing industries.
 
     A key feature of Baratron instruments is the ability to measure pressure
independent of gas composition, which is critical for precise pressure control
of semiconductor processes that involve gas mixtures. In these processes, there
is a need to control both pressure and gas mixture, but the pressure measurement
instrument must measure only the pressure of the sum of the gases in the
chamber, independent of gas composition. The Baratron instruments enable users
to achieve a highly precise, accurate and repeatable measurement of gas
pressure. Pressure measurement, independent of gas composition, is also useful
in evacuation (removal of atmospheric gases) and backfilling (introduction of
specific amounts of several gases) applications, such as fluorescent bulb
manufacturing and gas laser fabrication.
 
                                       34
38
 
     The following table shows MKS's principal Baratron pressure measurement
product lines:
 
                     BARATRON PRESSURE MEASUREMENT PRODUCTS
----------------------------------------------------------------------------------------------
    PRODUCT LINES        TYPICAL APPLICATIONS        DESCRIPTION        RANGES OF LIST PRICES
    -------------        --------------------        -----------        ---------------------
High precision, high    Chemical Vapor          Instruments with        $2,900-$6,400
accuracy pressure and   Deposition              built-in temperature
vacuum measurement                              stabilization
instruments             Physical Vapor          features, for high
                        Deposition              precision, high
                                                accuracy and high
                        Etch, Strip, Clean      temperature operation
                        Pressure Calibration
----------------------------------------------------------------------------------------------
General purpose         Chemical Vapor          Rugged instruments      $450-$4,200
pressure and vacuum     Deposition              with and without
measurement                                     built-in temperature
instruments             Physical Vapor          stabilization
                        Deposition              features, for
                                                reliable, precise and
                        Etch, Strip, Clean      accurate process
                                                measurement
----------------------------------------------------------------------------------------------
Ultra-clean high        Gas Distribution        Instruments with        $550-$1,050
pressure and vacuum                             ultra- clean surfaces
measurement             Chemical Vapor          exposed to gas, for
instruments             Deposition              precise, high purity
                                                applications
                        Etch
----------------------------------------------------------------------------------------------
General purpose "MINI"  Chemical Vapor          Small footprint         $650-$1,400
pressure and vacuum     Deposition              instruments for
measurement                                     precise, accurate,
instruments             Etch, Strip, Clean      general purpose
                                                process measurement
----------------------------------------------------------------------------------------------
Electronic pressure     Physical Vapor          Economical, stable      $350-$750
and vacuum switches     Deposition              instrument providing
                                                "go/no-go" output for
                        Chemical Vapor          precise pressure trip-
                        Deposition              points and alarms
                        Etch
----------------------------------------------------------------------------------------------
MKS's list prices for its Baratron measurement products vary depending upon
precision, accuracy, pressure range, operating temperature range, stability and
gas purity specifications.
 
     Automatic Pressure Control Products.  MKS's automatic pressure control
products consist of analog and digital automatic pressure and vacuum control
electronic instruments and valves. These products enable precise control of
process pressure by electronically actuating valves which control the flow of
gases in and out of the process chamber to minimize the difference between
desired and actual pressure in the chamber. The electronic controllers vary from
simple analog units with precise manual tuning capability to state-of-the-art
self-tuning, digital signal processing controllers. The valve products vary from
small gas inlet valves to large exhaust valves.
 
                                       35
39
 
     In most cases, MKS's Baratron pressure measurement instruments provide the
pressure input to the automatic pressure control device. Together, these
components create an integrated automatic pressure control system. MKS's
pressure control products can also accept inputs from other measurement
instruments, enabling the automatic control of gas input or exhaust based on
parameters other than pressure.
 
                      PRESSURE AND VACUUM CONTROL PRODUCTS
----------------------------------------------------------------------------------------------
    PRODUCT LINES        TYPICAL APPLICATIONS        DESCRIPTION        RANGES OF LIST PRICES
    -------------        --------------------        -----------        ---------------------
Automatic throttle      Chemical Vapor          Analog controllers,     $800-$2,650
control valve           Deposition              self- tuning digital
controllers                                     controllers and
                        Etch, Strip, Clean      displayless self-
                                                tuning controllers
----------------------------------------------------------------------------------------------
Throttle control        Chemical Vapor          Non-sealing and         $1,400-$8,800
valves                  Deposition              sealing valves; high
                                                speed sealing throttle
                        Etch                    control valves;
                                                automatic,
                                                microprocessor-based
                                                smart throttle control
                                                valves
----------------------------------------------------------------------------------------------
Automatic solenoid      Chemical Vapor          Stand-alone control     $1,850-$2,900
control valve           Deposition              electronics packages
controllers                                     or integrated sensor,
                        Etch                    valve and control
                                                electronics packages
                        Ion Implantation
                        Backside Wafer Cooling
----------------------------------------------------------------------------------------------
Solenoid control        Etch                    Elastomer and           $450-$1,500
valves                                          all-metal-sealed
                        Ion Implantation        solenoid control
                                                valves
                        Backside Wafer Cooling
----------------------------------------------------------------------------------------------
MKS has recently introduced a line of integrated pressure controllers that
combine the functions of its Baratron pressure measurement instrument, flow
measurement instrument, control electronics and valve into a four-inch long
instrument which can be placed directly on a gas line to control pressure
downstream of the instrument while indicating the gas flow rate. This addresses
the need for smaller components, saving valuable clean room space.
 
     Flow Measurement and Control Products.  MKS's flow measurement products
include gas, vapor and liquid flow measurement products based upon thermal
conductivity, pressure and direct liquid injection technologies. The flow
control products combine the flow measuring device with valve control elements
based upon solenoid, piezo-electric and piston pump technologies. The products
measure and automatically control the mass flow rate of gases and vapors into
the process chamber. MKS's broad product lines include products that allow the
precise, automatic flow control of inert or corrosive gases, the automatic
control of low vapor pressure gases and heated liquid source materials, and the
automatic control of delicate, advanced technology liquid sources and vaporized
solid sources for next generation devices.
 
                                       36
40
 
     MKS's line of thermal-based mass flow controllers, which control gas flow
based on the molecular weight of gases, includes all-metal-sealed designs and
ultra-clean designs for semiconductor applications, and general purpose
controllers for applications where all-metal-sealed construction is not
required. MKS has also developed pressure-based mass flow controllers, based on
Baratron pressure instrument measurement and control technology, which use flow
restrictors in the gas line to transform pressure control into mass flow
control.
 
                     FLOW MEASUREMENT AND CONTROL PRODUCTS
----------------------------------------------------------------------------------------------
    PRODUCT LINES        TYPICAL APPLICATIONS        DESCRIPTION        RANGES OF LIST PRICES
    -------------        --------------------        -----------        ---------------------
Direct liquid           Chemical Vapor          Pumps and vaporizes     $8,500-$24,900
injection system        Deposition              liquid precursors for
                                                metals and dielectrics
                                                into process chamber
----------------------------------------------------------------------------------------------
Gas box rate of rise    In-situ Calibration of  Measures pressure       $8,100-$11,800
calibrator              Mass Flow Controllers   increase with time in
                                                a known volume
----------------------------------------------------------------------------------------------
Pressure-based vapor    Chemical Vapor          Measures and controls   $4,900-$12,400
delivery systems        Deposition              flow of low pressure
                                                vapors into chamber
----------------------------------------------------------------------------------------------
Pressure-based mass     Chemical Vapor          Gas flow controller     $2,700
flow controllers        Deposition              consisting of Baratron
                                                sensor, control valve,
                        Ion Implantation        orifice and
                                                electronics
----------------------------------------------------------------------------------------------
Ultra-clean,            Chemical Vapor          Gas flow controller     $1,400-$9,500
all-metal-sealed        Deposition              consisting of sensor,
thermal mass flow                               control valve and
controllers             Physical Vapor          electronics
                        Deposition
                        Etch
----------------------------------------------------------------------------------------------
General purpose         Chemical Vapor          Gas flow controller     $1,050-$2,450
elastomer-sealed mass   Deposition              consisting of sensor,
flow controllers                                control valve and
                        Etch, Strip, Clean      electronics
----------------------------------------------------------------------------------------------
Certain new materials required for the next generation of semiconductor
devices are difficult to control using traditional thermal mass flow technology.
To control these new materials, MKS has designed a direct liquid injection
subsystem which pumps a precise volume of liquid into a vaporizer, which in turn
supplies a controlled flow of vapor into the process chamber. The direct liquid
injection subsystem pump and vaporizer are presently used principally for
research and development applications for next generation semiconductor device
conductors, diffusion barriers and insulators, such as copper, titanium nitride
and dielectric materials.
 
     MKS's flow measurement products also include an in-situ calibration system
which independently measures mass flow and compares this measurement to that of
the process chamber mass flow controller. The demand for the MKS calibration
system is driven by the increasingly stringent process control needs of the
semiconductor industry and the need to reduce costly downtime resulting from
stopping operations to address mass flow controller problems.
 
     Gas Composition Analysis Instruments.  MKS's gas analysis instruments are
sold primarily to the semiconductor industry. The residual gas analysis product
lines include a quadrapole (four rods) mass spectrometer (a device which
separates gases based on molecular weight) sensor with built-in electronics
 
                                       37
41
 
to analyze the composition of background and process gases in the process
chamber. MKS's ORION process monitoring system is a sophisticated quadrapole
mass spectrometer process analyzer for statistical process monitoring of
manufacturing processes operating from very low pressures to atmospheric
pressure. These instruments are provided both as portable laboratory systems and
as process gas monitoring systems used in the diagnosis of semiconductor
manufacturing process systems. The gas monitoring systems can indicate
out-of-bounds conditions, such as the presence of undesirable atmospheric gases,
water vapor or out-of-tolerance amounts of specific gases in the process
chamber, enabling operators to diagnose and repair faulty equipment. MKS's gas
sampling systems provide a turn-key solution for withdrawing gases from chambers
at relatively high pressures for introduction into the low pressure gas
analyzers. Next generation semiconductor manufacturing processes, with smaller
circuit patterns and larger wafer sizes, are expected to require sophisticated
gas analysis instruments and/or monitoring equipment to ensure tighter process
control and earlier diagnosis of equipment malfunction.
 
  Vacuum Technology Products
 
     MKS designs and manufactures a wide variety of vacuum technology products,
including vacuum gauges, vacuum valves and components.
 
     Vacuum Gauging Products
 
     MKS offers a wide range of vacuum instruments consisting of vacuum
measurement sensors and associated power supply and readout units. These vacuum
gauges measure phenomena that are related to the level of pressure in the
process chamber and downstream of the process chamber between the chamber and
the pump. Unlike Baratron pressure measurement instruments, vacuum gauges do not
measure pressure directly. These gauges are used to measure vacuum at pressures
lower than those measurable with a Baratron pressure measurement instrument or
to measure vacuum in the Baratron pressure measurement instrument range where
less accuracy is required. MKS's indirect pressure gauges use thermal
conductivity and ionization gauge technologies to measure pressure from
atmospheric pressure to one trillionth of atmospheric pressure. MKS's Baratron
pressure measurement instruments, together with its vacuum gauges, are capable
of measuring the full range of pressures used in semiconductor and other
thin-film manufacturing processes from two hundred times atmospheric pressure to
one trillionth of atmospheric pressure.
 
     MKS also manufactures a wide range of vacuum gauge instruments in which the
associated electronics are packaged with the vacuum sensor, reducing panel space
and installation cost. MKS offers both analog and digital versions of these
vacuum gauge transducers.
 
     Vacuum Valves and Components
 
     MKS's vacuum valves are used on the gas lines between the process chamber
and the pump downstream of the process chamber for chemical vapor deposition,
physical vapor deposition, ion implantation and etch processes. MKS's vacuum
components consist of fittings, flanges, traps and heated lines that are used
downstream from the process chamber to provide leak free connections and to
prevent condensable materials from depositing particles near or back into the
chamber. The manufacture of small circuit patterns cannot tolerate contamination
from atmospheric leaks or particles. MKS's vacuum components are designed to
minimize such contamination and thus increase yields and uptimes.
 
                                       38
42
 
                  VACUUM GAUGES, VALVES AND COMPONENT PRODUCTS
----------------------------------------------------------------------------------------------
    PRODUCT LINES        TYPICAL APPLICATIONS        DESCRIPTION        RANGES OF LIST PRICES
    -------------        --------------------        -----------        ---------------------
Cold cathode and hot    Physical Vapor          Electronic gauges to    $600-$6,200
filament vacuum gauges  Deposition              measure pressure down
                                                to one trillionth of
                        Ion Implantation        atmospheric pressure
                        Etch
----------------------------------------------------------------------------------------------
Convection gauges       Physical Vapor          Electronic gauges to    $200-$700
                        Deposition              measure from one
                                                atmosphere down to one
                        Chemical Vapor          millionth of
                        Deposition              atmospheric pressure
                        Etch, Strip, Clean
----------------------------------------------------------------------------------------------
Right-angle and         Physical Vapor          High vacuum rapid       $250-$4,500
in-line shut-off        Deposition              action poppet valves
valves
                        Chemical Vapor
                        Deposition
                        Etch, Strip, Clean
                        Ion Implantation
----------------------------------------------------------------------------------------------
Vacuum traps            Chemical Vapor          Contaminant particle    $1,800-$4,600
                        Deposition              trap
                        Etch
----------------------------------------------------------------------------------------------
Other vacuum            Physical Vapor          Flanges, fittings and   $50-$3,050
components              Deposition              heated lines
                        Chemical Vapor
                        Deposition
                        Etch
                        Ion Implantation
----------------------------------------------------------------------------------------------
MARKETS AND APPLICATIONS
 
     MKS estimates that approximately 60% of its sales in 1998 were made to the
semiconductor industry. MKS's products are also used in other markets and
applications including the manufacture of, among other things:
     - flat panel displays
     - magnetic and optical storage devices and media, including:
      -- compact disks
      -- hard disk storage devices
      -- magnetic devices for reading disk data
      -- digital video disks
      -- optical storage disks (laser readable disks)
     - solar cells which convert light into electrical current
     - fiber optic cables for telecommunications
     - optical coatings (such as eyeglass coatings)
     - coatings for architectural glass
                                       39
43
 
     - hard coatings to minimize wear on cutting tools
     - diamond thin films
 
     MKS sells its products primarily through its direct sales force which
consists of 118 employees in 22 offices in France, Germany, Japan, Korea, The
Netherlands, Singapore, Taiwan, the United Kingdom and the United States. This
direct sales force is supplemented by sales representatives and agents in
Canada, China, India, Israel, and Italy and in selected U.S. cities. The major
markets for MKS's products include:
 
  Semiconductor Manufacturing
 
     MKS's products are sold to semiconductor capital equipment manufacturers
and semiconductor device manufacturers. MKS's products are used in the major
front-end process technologies such as physical vapor deposition, chemical vapor
deposition, etch and ion implantation and for process facility applications such
as gas distribution, clean room (room in which semiconductor manufacturing takes
place) pressure control and vacuum distribution. MKS anticipates that the
semiconductor manufacturing market will continue to account for a substantial
portion of its sales. While the semiconductor device manufacturing market is
global, the major semiconductor capital equipment manufacturers are concentrated
in the United States, Japan and Europe.
 
  Flat Panel Display Manufacturing
 
     MKS's products are used in the manufacture of flat panel displays, which
require the same or similar fabrication processes as semiconductor
manufacturing. The dominant fabrication process is chemical vapor deposition,
which uses the same or similar MKS products as chemical vapor deposition for
semiconductor manufacturing. MKS sells its products both to flat panel original
equipment manufacturers and to end-users in the flat panel display market. The
transition to larger panel size and higher definition is driving the need for
defect reduction which requires tighter process controls. The major
manufacturers for flat panel displays and flat panel display equipment are
concentrated in Japan.
 
  Magnetic and Optical Storage Devices and Media
 
     MKS's products are used in the manufacture of magnetic (data is stored and
read magnetically) and optical (data is read using laser technology) storage
media, compact disks, hard disks, data storage devices, and digital video or
versatile disks, typically in physical vapor deposition applications. The
transition to higher density storage capacity requires manufacturing processes
incorporating tighter process controls. While storage media manufacturing is
global, the major manufacturers are concentrated in Japan and the Asia-Pacific
region and storage media capital equipment manufacturers are concentrated in the
United States, Japan and Europe.
 
  Optical Fiber and Optical Coating
 
     MKS's products are used in optical fiber and optical thin-film coating
processes. MKS's products are sold both to coating equipment manufacturers and
to manufacturers of products made using optical thin-film coating processes.
Optical fibers used for data transmission are manufactured using chemical vapor
deposition processes similar to those used in semiconductor manufacturing. The
requirement for greater data transmission is driving the need for tighter
control of optical fiber coating processes. Optical thin films for eyeglasses,
solar panels and architectural glass are deposited using chemical vapor
deposition or physical vapor deposition in processes similar to those used in
semiconductor manufacturing. Optical fiber manufacturing and optical thin-film
processing are concentrated in the United States, Japan and Europe.
 
  Other Coating Markets
 
     MKS's pressure and flow measurement and control instruments are also used
in chemical vapor deposition and physical vapor deposition processes for the
application of thin films to harden tool bit surfaces, in the production of
diamond thin films, coatings for food container packaging and coatings for
jewelry and ornaments. The major equipment and process providers are
concentrated in the United States, Japan and Europe.
 
                                       40
44
 
     MKS estimates that the flat panel display, magnetic and optical storage
media, optical fiber, optical coating markets and other coating markets
combined, accounted for approximately 12% and 14% of net sales for 1997 and
1998, respectively.
 
  Other Markets
 
     MKS's pressure measurement and control instruments and vacuum components
are used in plasma processes used to sterilize medical instruments, in vacuum
freeze drying of pharmaceuticals, foods and beverages, and in vacuum processes
involved in light bulb and gas laser manufacturing. MKS's products are also sold
to government, university and industrial laboratories for vacuum applications
involving research and development in materials science, physical chemistry and
electronics materials. The major equipment and process providers and research
laboratories are concentrated in the United States, Japan and Europe.
 
CUSTOMERS
 
     MKS has more than 4,000 active customers worldwide (all of which purchased
products during 1998), including semiconductor capital equipment manufacturers,
semiconductor device manufacturers, industrial manufacturing companies and
university, government and industrial research laboratories. MKS's largest
customers consist primarily of leading semiconductor capital equipment
manufacturers and semiconductor device manufacturers, including Applied
Materials, Inc., Lam Research Corporation, Tokyo Electron, Ltd., Air Products
and Chemicals, Inc. and Motorola Inc. In 1996, 1997, and 1998, sales to MKS's
top five customers accounted for approximately 26%, 32% and 24%, respectively,
of MKS's net sales. During the same periods, international sales represented
approximately 30.1%, 27.3% and 32.3% of total net sales, respectively. During
1998, Applied Materials, Inc. accounted for approximately 16% of MKS's net
sales. Applied Materials, Inc. purchases products from MKS under the terms of an
agreement, with no minimum purchase requirements, that expires in 2000.
 
SALES, MARKETING AND SUPPORT
 
     MKS's worldwide sales, marketing and support organization is critical to
its strategy of maintaining close relationships with semiconductor capital
equipment manufacturers and semiconductor device manufacturers. MKS sells its
products primarily through its direct sales force which consists of 118
employees in 22 offices in France, Germany, Japan, Korea, The Netherlands,
Singapore, Taiwan, the United Kingdom and the United States. This direct sales
force is supplemented by sales representatives and agents in Canada, China,
India, Israel, and Italy and in selected U.S. cities. MKS maintains a marketing
staff of 14 employees to identify customer requirements, assist in product
planning and specifications and to focus on future trends in the semiconductor
and other markets.
 
     As semiconductor device manufacturers have become increasingly sensitive to
the significant costs of system downtime, they have required that suppliers
offer comprehensive local repair service and close customer support.
Manufacturers require close support to enable them to repair, modify, upgrade
and retrofit their equipment to improve yields and adapt new materials or
processes. To meet these market requirements, MKS maintains a worldwide sales
and support organization with offices in 22 locations. Technical support is
provided by applications engineers located at offices in Arizona, California,
Colorado, Massachusetts, Oregon and Texas, as well as Canada, France, Germany,
India, Israel, Italy, Japan, Korea, The Netherlands, Singapore, Taiwan and the
United Kingdom. Repair and calibration services are provided at 14 service
depots located worldwide. MKS provides warranties from one to three years,
depending upon the type of product. In addition, MKS offers training programs
for its customers in a wide range of vacuum and gas processing technologies.
 
MANUFACTURING
 
     MKS believes that the ability to manufacture reliable gas management
instruments and components in a cost-effective manner is critical to meeting the
demanding requirements of semiconductor capital
 
                                       41
45
 
equipment manufacturers and semiconductor device manufacturers. MKS monitors and
analyzes product lead times, warranty data, process yields, supplier
performance, field data on mean time between failures, inventory turns, repair
response time and other indicators so that it may continuously improve its
manufacturing processes. MKS has adopted a total quality management process.
MKS's manufacturing facilities in the United States, the United Kingdom and
Germany are ISO 9001 certified.
 
     MKS is devoting significant financial and management resources to maintain
and expand its worldwide production and service capabilities to meet the global
demand for gas management instruments and components. MKS believes that the
ability to manufacture reliable instruments and components in a cost-effective
manner is critical to meet the demanding just-in-time delivery requirements of
semiconductor capital equipment manufacturers and semiconductor device
manufacturers. Due to the short time between the receipt of orders and
shipments, MKS normally operates with a level of backlog that is not
significant. MKS currently manufactures its products at nine facilities in the
United States and abroad. MKS plans to add manufacturing capabilities in 1999 to
its Austin, Texas facilities and further equip its cleanroom facilities in
Andover and Methuen, Massachusetts.
 
     MKS's principal manufacturing activities consist of precision assembly,
test, calibration, welding and machining activities. MKS subcontracts a portion
of its assembly, machining and printed circuit board assembly and testing. All
other assembly, test and calibration functions are performed by MKS. Critical
assembly activities are performed in cleanroom environments at MKS's facilities.
 
RESEARCH AND DEVELOPMENT
 
     MKS's research and development efforts are directed toward developing and
improving MKS's gas management instruments and components for semiconductor and
advanced thin-film processing applications and identifying and developing
products for new applications for which gas management plays a critical role.
MKS has undertaken an initiative to involve its marketing, engineering,
manufacturing and sales personnel in the concurrent development of new products
in order to reduce the time to market for new products. MKS's employees also
work closely with its customers' development personnel. These relationships help
MKS identify and define future technical needs on which to focus its research
and development efforts. In addition, MKS participates in SEMI/SEMATECH, a
consortium of semiconductor equipment suppliers, to assist in product
development and standardization of product technology, and it supports research
at academic institutions targeted at advances in materials science and
semiconductor process development.
 
     As of December 31, 1998, MKS employed a research and development staff of
89 employees. In 1996, 1997 and 1998, MKS's research and development
expenditures were approximately $14.2 million, $14.7 million and $12.1 million,
respectively, representing approximately 8.3%, 7.8% and 8.7% of net sales,
respectively.
 
COMPETITION
 
     The market for MKS's products is highly competitive. Principal competitive
factors include historical customer relationships; product quality, performance
and price; breadth of product line; manufacturing capabilities; and customer
service and support. While MKS believes that it competes favorably with respect
to these factors, there can be no assurance that it will continue to do so.
 
     MKS encounters substantial competition in each of its product lines from a
number of competitors, although no one competitor competes with MKS across all
product lines. Certain of MKS's competitors have greater financial and other
resources than MKS. In some cases, the competitors are smaller than MKS, but
well-established in specific product niches. Millipore Corporation offers
products that compete with MKS's pressure and flow products. Aera Corporation,
STEC (Horiba Ltd.), and Unit Instruments, Inc., each offer products that compete
with MKS's mass flow control products. NOR-CAL Products, Inc. and MDC Vacuum
Products, Inc., each offer products that compete with MKS's vacuum components.
Leybold-Inficon, Inc., offers products that compete with MKS's vacuum measuring
and gas analysis products. Helix Technology Corporation offers products that
compete with MKS's vacuum gauging
                                       42
46
 
products. Spectra International LLC offers products that compete with MKS's gas
analysis products. In some cases, particularly with respect to mass flow
controllers, semiconductor device manufacturers may direct semiconductor capital
equipment manufacturers to use a specified supplier's product in their
equipment. Accordingly, MKS's success depends in part on its ability to have
semiconductor device manufacturers specify that its products be used at their
fabrication facilities and MKS may encounter difficulties in changing
established relationships of competitors with a large installed base of products
at such customers' fabrication facilities. In addition, MKS's competitors can be
expected to continue to improve the design and performance of their products.
There can be no assurance that competitors will not develop products that offer
price or performance features superior to those of MKS's products.
 
PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS
 
     MKS relies on a combination of patent, copyright, trademark and trade
secret laws and license agreements to establish and protect its proprietary
rights. MKS has 47 U.S. patents and 10 pending U.S. patent applications. Foreign
counterparts of certain of these applications have been filed or may be filed at
the appropriate time. While MKS believes that certain patents may be important
for certain aspects of its business, MKS believes that its success depends more
upon close customer contact, innovation, technological expertise, responsiveness
and worldwide distribution.
 
     MKS requires each of its employees, including its executive officers, to
enter into standard agreements pursuant to which the employee agrees to keep
confidential all proprietary information of MKS and to assign to MKS all
inventions made while in the employ of MKS.
 
EMPLOYEES
 
     As of December 31, 1998, MKS employed 821 persons, including 486 in
manufacturing, 89 in research and development, 246 in marketing, sales, support
and general and administrative activities. Management believes that MKS's
ongoing success depends upon its continued ability to attract and retain highly
skilled employees. None of MKS's employees is represented by a labor union or
party to a collective bargaining agreement. MKS believes that its employee
relations are good.
 
FACILITIES
 
     MKS sells its products primarily through its direct sales force in 22
offices in France, Germany, Japan, Korea, The Netherlands, Singapore, Taiwan,
the United Kingdom and the United States. The direct sales force is supplemented
by sales representatives and agents in Canada, China, India, Israel, and Italy
and in selected U.S. cities. MKS's corporate headquarters are located in
Andover, Massachusetts. Manufacturing and other operations are conducted in a
number of locations worldwide. MKS's minimum payments for leased real estate for
the year ending December 31, 1999 are expected to be $1,484,000. MKS believes
that the current facilities along with the planned addition for 1999 will be
adequate and suitable to meet its needs for the foreseeable future. The
following table provides information concerning MKS's principal and certain
other owned and leased facilities:
LEASE
       LOCATION          SQ. FT.          ACTIVITY           PRODUCTS MANUFACTURED    EXPIRES
       --------          -------          --------           ---------------------   ---------
Andover, Massachusetts   82,000    Headquarters,            Baratron pressure        (1)
                                   Manufacturing, Customer  measurement products
                                   Support and Research &
                                   Development
Boulder, Colorado        86,000    Manufacturing, Customer  Vacuum gauges, valves    (2)
                                   Support, Service and     and components
                                   Research & Development
Methuen, Massachusetts   85,000    Manufacturing, Customer  Pressure control and     (1)
                                   Support, Service and     flow measurement and
                                   Research & Development   control products
43
47
LEASE
       LOCATION          SQ. FT.          ACTIVITY           PRODUCTS MANUFACTURED    EXPIRES
       --------          -------          --------           ---------------------   ---------
Lawrence, Massachusetts  40,000    Manufacturing            Baratron pressure        (1)
                                                            measurement products
Tokyo, Japan             20,700    Manufacturing, Sales,    Mass flow measurement    (3)
                                   Customer Support,        and control products
                                   Service and Research &
                                   Development
Santa Clara, California  15,600    Sales, Customer Support  Not applicable           (4)*
                                   and Service
Richardson, Texas        14,600    Manufacturing, Sales,    Subassemblies            8/31/01
                                   Customer Support and
                                   Service
Munich, Germany          14,100    Manufacturing, Sales,    Mass flow measurement    (1)
                                   Customer Support,        and control products
                                   Service and Research &
                                   Development
Le Bourget, France       13,700    Sales, Customer Support  Not applicable           (1)
                                   and Service
Austin, Texas             8,200    Sales, Customer Support  Not applicable           1/30/03
                                   and Service
Seoul, Korea              4,760    Manufacturing, Sales,    Mass flow measurement    5/30/00**
                                   Customer Support and     and control products
                                   Service
Manchester, U.K.          2,200    Manufacturing, Sales,    Mass flow measurement    10/5/09
                                   Customer Support and     and control products
                                   Service
Singapore                 2,050    Sales, Customer Support  Not applicable           3/25/01
                                   and Service
Taiwan                    2,050    Sales, Customer Support  Not applicable           12/31/01
                                   and Service
---------------
(1) This facility is owned by MKS.
 
(2) MKS leases one facility which has 39,000 square feet of space and a lease
    term which expires 10/31/01 and owns a second and third facility with 28,000
    and 19,000 square feet of space, respectively.
 
(3) MKS leases a facility which has 14,000 square feet of space and a lease term
    which expires 4/30/99 and owns another facility with 6,700 square feet of
    space.
 
(4) MKS leases one facility with 4,000 square feet of space on a month-to-month
    basis, a second facility of 4,000 square feet with a lease term which
    expires on 1/30/00 and a third facility of 2,600 square feet with a lease
    term which expires 6/30/99. MKS owns a fourth facility of 5,000 square feet.
 
 *  MKS has an option to extend its leases at this location for a period of 18
    months.
 
**  MKS has an option to extend this lease for a period of two years.
 
     In addition to manufacturing and other operations conducted at the
foregoing leased or owned facilities, MKS provides worldwide sales, customer
support and services from various other leased facilities throughout the world
not listed in the table above. See "Business -- Sales, Marketing and Support."
 
LEGAL PROCEEDINGS
 
     MKS is not a party to any material legal proceedings.
 
                                       44
48
 
                                   MANAGEMENT
 
EXECUTIVE OFFICERS AND DIRECTORS
 
     The executive officers and directors of MKS as of December 31, 1998 are as
follows:
NAME                     AGE                         POSITION
                   ----                     ---                         --------
John R. Bertucci..........................  57    Chairman, Chief Executive Officer and President
Ronald C. Weigner.........................  53    Vice President and Chief Financial Officer
John J. Sullivan..........................  63    Executive Vice President of Technology
William D. Stewart........................  54    Corporate Vice President and General Manager, Vacuum
                                                  Products
Joseph A. Maher, Jr.......................  51    Corporate Vice President and General Manager,
                                                  Measurement and Control Products
Leo Berlinghieri..........................  45    Corporate Vice President, Customer Support
                                                  Operations
Richard S. Chute(1).......................  60    Director
Owen W. Robbins(2)........................  69    Director
Robert J. Therrien........................  64    Director
Louis P. Valente(1)(2)....................  68    Director
---------------
(1) Member of Compensation Committee.
 
(2) Member of Audit Committee.
 
     Mr. Bertucci has served as President and a Director of MKS since 1974 and
has been Chairman of the Board of Directors and Chief Executive Officer since
November 1995. From 1970 to 1974, he was Vice President and General Manager. Mr.
Bertucci has an M.S. in Industrial Administration and a B.S. in Metallurgical
Engineering from Carnegie-Mellon University. Mr. Bertucci is also a director of
Applied Science and Technology Corporation and Intellisense Corporation.
 
     Mr. Weigner has served as Vice President and Chief Financial Officer of MKS
since November 1995. From September 1993 until November 1995, he was Vice
President and Corporate Controller and from 1980 to 1993 he was Corporate
Controller. Mr. Weigner is a certified public accountant and has a B.S. in
Business Administration from Boston University.
 
     Mr. Sullivan has served as Executive Vice President of Technology of MKS
since March 1995. From 1982 to March 1995, he was Vice President of Marketing,
and from 1975 to 1982, he was Vice President of Sales and Marketing. Mr.
Sullivan has an M.S. and a B.S. in Physics from Northeastern University.
 
     Mr. Stewart has served as Corporate Vice President of MKS and General
Manager of Vacuum Products since November 1997. From October 1986 to November
1997, he was President of HPS Vacuum Products group, which MKS acquired in
October 1986. Mr. Stewart co-founded HPS in 1976. Mr. Stewart has an M.B.A. from
Northwestern University and a B.S. in Business Administration from the
University of Colorado. Mr. Stewart also serves on the board of directors of the
Janus Fund.
 
     Mr. Maher has served as Corporate Vice President of MKS and General Manager
of Measurement and Control Products since November 1997. From March 1997 through
November 1997, he served as Vice President of the Process Control
Instrumentation Group. Mr. Maher was a Vice President of Lam Research
Corporation from 1993 through 1996, and from 1980 through 1993, he was Executive
Vice President of Drytek Corporation, which was purchased by Lam Research
Corporation in 1993. Mr. Maher has a B.S. in Electrical Engineering from
Northeastern University.
 
     Mr. Berlinghieri has served as Corporate Vice President, Customer Support
Operations of MKS since November 1995. From 1980 to November 1995, he served in
various management positions at MKS, including Manufacturing Manager, Production
& Inventory Control Manager, and Director of Customer
 
                                       45
49
 
Support Operations. Mr. Berlinghieri is also Treasurer of the TQM-BASE Council,
Inc., a non-profit quality management consortium comprised of Boston-area
semiconductor capital equipment manufacturers.
 
     Mr. Chute has served as a director of MKS since 1974. Mr. Chute has been a
member of the law firm of Hill & Barlow, a professional corporation, since
November 1971.
 
     Mr. Robbins has served as a director of MKS since February 1996. Mr.
Robbins was Executive Vice President of Teradyne, Inc., a manufacturer of
electronic test systems and backplane connection systems used in the electronics
and telecommunications industries from March 1992 to May 1997, and its Chief
Financial Officer from February 1980 to May 1997. Mr. Robbins has served on the
board of directors of Teradyne, Inc. since March 1992 and was its Vice Chairman
from January 1996 to May 1997.
 
     Mr. Therrien has served as a director of MKS since February 1996. Mr.
Therrien has been President and Chief Executive Officer of Brooks Automation,
Inc., a manufacturer of semiconductor processing equipment, since 1989.
 
     Mr. Valente has served as a director of MKS since February 1996. Mr.
Valente has been Chairman and Chief Executive Officer of Palomar Medical
Technologies, Inc., a company which designs, manufactures and markets cosmetic
lasers, since September 1997. He has been a director of Palomar Medical
Technologies, Inc. since February 1997 and was its President and Chief Executive
Officer from May 1997 to September 1997. Mr. Valente was a Senior Vice President
of Acquisitions, Mergers and Investments of EG&G, Inc. from 1991 until July
1995. Mr. Valente is also a director of Micrion Corporation.
 
     Executive officers of MKS are elected by the Board of Directors on an
annual basis and serve until their successors are duly elected and qualified.
There are no family relationships among any of the executive officers of MKS.
 
COMMITTEES OF THE BOARD OF DIRECTORS
 
     The Compensation Committee consists of Messrs. Chute and Valente. The
Compensation Committee reviews and evaluates the salaries, supplemental
compensation and benefits of all officers of MKS, reviews general policy matters
relating to compensation and benefits of employees of MKS and makes
recommendations concerning these matters to the Board of Directors. The
Compensation Committee also administers MKS's stock option and stock purchase
plans. See "-- Stock Plans."
 
     The Audit Committee consists of Messrs. Robbins and Valente. The Audit
Committee reviews with MKS's independent auditor the scope and timing of its
audit services, the auditor's report on MKS's financial statements following
completion of its audit and MKS's policies and procedures with respect to
internal accounting and financial controls. In addition, the Audit Committee
will make annual recommendations to the Board of Directors for the appointment
of independent auditors for the ensuing year.
 
DIRECTOR COMPENSATION
 
     Directors of MKS are reimbursed for expenses incurred in connection with
their attendance at Board of Directors and committee meetings. Directors who are
not employees of MKS are paid an annual fee of $10,000 and $1,000 for each Board
of Directors meeting they attend and $500 for each committee meeting they attend
which is not held on the same day as a Board of Directors meeting. Messrs.
Chute, Robbins, Therrien and Valente, MKS's four non-employee directors, have
each been granted options, under MKS's 1996 Director Stock Option Plan (under
which no further grants will be made), to purchase 8,592 shares of common stock
at a weighted average exercise price of $4.81 per share.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     The Compensation Committee is currently comprised of Messrs. Chute and
Valente. No member of the Compensation Committee was at any time an employee of
MKS. No executive officer of MKS serves
 
                                       46
50
 
as a member of the Board of Directors or Compensation Committee of any other
entity which has one or more executive officers serving as a member of MKS's
Board of Directors or Compensation Committee.
 
EXECUTIVE COMPENSATION
 
     The following table sets forth information with respect to the compensation
of MKS's Chief Executive Officer and each of the four other most highly
compensated executive officers for the year ended December 31, 1998 (the "Named
Executive Officers").
 
                      SUMMARY COMPENSATION TABLE FOR 1998
LONG-TERM
                                                                     COMPENSATION
                                                                        AWARDS
                                     ANNUAL COMPENSATION             ------------
                             ------------------------------------     SECURITIES
                                                     OTHER ANNUAL     UNDERLYING        ALL OTHER
NAME AND PRINCIPAL POSITION   SALARY      BONUS      COMPENSATION     OPTIONS(#)     COMPENSATION(1)
---------------------------  --------    --------    ------------    ------------    ---------------
John R. Bertucci...........  $337,440          --            --              --          $19,500
  Chief Executive Officer
  and President
Ronald C. Weigner..........   164,257          --            --          60,000            9,740
  Vice President and Chief
  Financial Officer
Joseph A. Maher, Jr........   161,307          --            --          60,000            9,577
  Corporate Vice President
  and General Manager,
  Measurement and Control
  Products
William D. Stewart.........   173,893          --            --          60,000           10,059
  Corporate Vice President
  and General Manager,
  Vacuum Products
Leo Berlinghieri...........   152,559          --            --          60,000            3,121
  Corporate Vice President,
  Customer Support
  Operations
---------------
(1) Includes a premium of $4,264 paid on a life insurance policy and estimated
    payments of $15,236 paid into a 401(k) plan for Mr. Bertucci, and estimated
    payments paid into a 401(k) plan for Messrs. Weigner, Maher, Stewart and
    Berlinghieri.
 
                                       47
51
 
STOCK OPTION GRANTS
 
     The following table contains information concerning the grants of options
to purchase MKS's common stock made to each of the Named Executive Officers for
the year ended December 31, 1998.
 
                             OPTION GRANTS IN 1998
INDIVIDUAL GRANTS                         POTENTIAL REALIZABLE
                          ---------------------------------------------------------       VALUE AT ASSUMED
                           NUMBER OF                                                   ANNUAL RATES OF STOCK
                          SECURITIES    PERCENT OF TOTAL                                 PRICE APPRECIATION
                          UNDERLYING    OPTIONS GRANTED    EXERCISE OR                   FOR OPTION TERM(2)
                            OPTIONS       TO EMPLOYEES     BASE PRICE    EXPIRATION   ------------------------
          NAME            GRANTED(1)     IN FISCAL YEAR     PER SHARE       DATE         5%             10%
          ----            -----------   ----------------   -----------   ----------   --------        --------
John R. Bertucci........        --              --               --            --           --              --
Ronald C. Weigner.......    60,000            9.47%           $6.67        7/9/08     $251,684        $637,816
Joseph A. Maher, Jr. ...    60,000            9.47             6.67        7/9/08      251,684         637,816
William D. Stewart......    60,000            9.47             6.67        7/9/08      251,684         637,816
Leo Berlinghieri........    60,000            9.47             6.67        7/9/08      251,684         637,816
---------------
(1) These options become exercisable 20% on the first anniversary of the date of
    grant and the remainder become exercisable on a quarterly basis over a four
    year period.
 
(2) Amounts represent hypothetical gains that could be achieved for the
    respective options if exercised at the end of the option term. These gains
    are based on assumed rates of stock price appreciation of 5% and 10%
    compounded annually from the date the respective options were granted to
    their expiration date. These numbers are calculated based on rules
    promulgated by the Securities and Exchange Commission and do not reflect
    MKS's estimate of future stock price growth. Actual gains, if any, on stock
    option exercises and common stock are dependent on the timing of such
    exercise and the future performance of the common stock.
 
OPTION EXERCISES AND HOLDINGS
 
     The following table sets forth information concerning option exercises and
option holdings for the fiscal year ended December 31, 1998 with respect to each
of the Named Executive Officers.
 
                      AGGREGATED OPTION EXERCISES IN 1998
                           AND YEAR-END OPTION VALUES
NUMBER OF SHARES
                                                      UNDERLYING                 VALUE OF UNEXERCISED
                                                 UNEXERCISED OPTIONS             IN-THE-MONEY OPTIONS
                                                     AT YEAR-END                    AT YEAR-END(1)
                                             ----------------------------    ----------------------------
                   NAME                      EXERCISABLE    UNEXERCISABLE    EXERCISABLE    UNEXERCISABLE
                   ----                      -----------    -------------    -----------    -------------
John R. Bertucci...........................        --               --
Ronald C. Weigner..........................    75,961          110,639
Joseph A. Maher, Jr. ......................    44,310          142,290
William D. Stewart.........................    75,961          110,639
Leo Berlinghieri...........................    75,961          110,639
---------------
(1) Values are based on the difference between the fair market value of the
    underlying shares at December 31, 1998 ($     per share) and the exercise
    price of each option listed (between $4.43 and $6.67 per share).
 
STOCK PLANS
 
  1995 Stock Incentive Plan
 
     MKS's Amended and Restated 1995 Stock Incentive Plan (the "1995 Stock
Plan") provides for the grant of incentive stock options, nonstatutory stock
options, stock appreciation rights, performance shares
 
                                       48
52
 
and awards of restricted stock and unrestricted stock. An aggregate of 3,750,000
shares of common stock may be issued pursuant to the 1995 Stock Plan (subject to
adjustment for certain changes in MKS's capitalization). No award may be made
under the 1995 Stock Plan after November 30, 2005.
 
     The 1995 Stock Plan is administered by the Board of Directors and the
Compensation Committee. The Board of Directors has the authority to grant awards
under the 1995 Stock Plan and to accelerate, waive or amend certain provisions
of outstanding awards. The Board of Directors has authorized the Compensation
Committee to administer certain aspects of the 1995 Stock Plan and has
authorized the Chief Executive Officer of MKS to grant awards to non-executive
officer employees. The maximum number of shares represented by such awards may
not exceed 450,000 shares in the aggregate or 30,000 shares to any one employee.
 
     Incentive Stock Options and Nonstatutory Options.  Optionees receive the
right to purchase a specified number of shares of common stock at some time in
the future at an option price and subject to such terms and conditions as are
specified at the time of the grant. Incentive stock options and options that the
Board of Directors or Compensation Committee intends to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code
may not be granted at an exercise price less than the fair market value of the
common stock on the date of grant (or less than 110% of the fair market value in
the case of incentive stock options granted to optionees holding 10% or more of
the voting stock of MKS). All other options may be granted at an exercise price
that may be less than, equal to or greater than the fair market value of the
common stock on the date of grant.
 
     Stock Appreciation Rights and Performance Shares.  A stock appreciation
right is based on the value of common stock and entitles the holder to receive
consideration to the extent that the fair market value on the date of exercise
of the shares of common stock underlying the right exceeds the fair market value
of the underlying shares on the date the right was granted. A performance share
award entitles the recipient to acquire shares of common stock upon the
attainment of specified performance goals.
 
     Restricted and Unrestricted Stock.  Restricted stock awards entitle
recipients to acquire shares of common stock, subject to the right of MKS to
repurchase all or part of such shares at their purchase price from the recipient
in the event that the conditions specified in the applicable stock award are not
satisfied prior to the end of the applicable restriction period established for
such award. MKS may also grant (or sell at a purchase price not less than 85% of
the fair market value on the date of such sale) to participants shares of common
stock free of any restrictions under the 1995 Stock Plan.
 
     All of the employees, officers, directors, consultants and advisors of MKS
and its subsidiaries who are expected to contribute to MKS's future growth and
success are eligible to participate in the 1995 Stock Plan.
 
     Section 162(m) of the Internal Revenue Code disallows a tax deduction to
public companies for certain compensation in excess of $1.0 million paid to a
company's chief executive officer or to any of the four other most highly
compensated executive officers. Certain compensation, including "performance-
based compensation," is not included in compensation subject to the $1.0 million
limitation. The 1995 Stock Plan limits to 1,350,000 the maximum number of shares
of common stock with respect to which awards may be granted to any employee in
any calendar year. This limitation is intended to preserve the tax deductions to
MKS that might otherwise be unavailable under Section 162(m) with respect to
certain awards.
 
     Prior to the date of this prospectus, MKS plans to grant options (to vest
20% after one year and 5% per quarter thereafter) to purchase approximately
350,000 shares of common stock to certain employees of MKS, at an exercise price
equal to the initial public offering price.
 
  1999 Employee Stock Purchase Plan
 
     MKS's 1999 Employee Stock Purchase Plan (the "Purchase Plan") authorizes
the issuance of up to an aggregate of 450,000 shares of common stock to
participating employees. MKS will make one or more offerings to employees to
purchase common stock under the Purchase Plan. Offerings under the Purchase
                                       49
53
 
Plan commence on June 1 and December 1 and terminate, respectively on November
30 and May 31. During each offering, the maximum number of shares which may be
purchased by a participating employee is determined on the first day of this
offering period under a formula whereby 85% of the market value of a share of
common stock on the first day of this offering period is divided into an amount
equal to 10% of the employee's annualized compensation (or such lower percentage
as may be established by the Compensation Committee) for the immediately
preceding six-month period. An employee may elect to have up to 10% deducted
from his or her regular salary (or such lower percentage as may be established
by the Compensation Committee) for this purpose. The price at which an
employee's option is exercised is the lower of (i) 85% of the closing price of
the common stock on the Nasdaq National Market on the day that this offering
commences or (ii) 85% of the closing price on the day that this offering
terminates.
 
     The Purchase Plan is administered by the Board of Directors and the
Compensation Committee. With certain exceptions, all eligible employees,
including directors and officers, regularly employed by MKS for at least six
months on the applicable offering commencement date are eligible to participate
in the Purchase Plan. The Purchase Plan is intended to qualify as an "employee
stock purchase plan" as defined in Section 423 of the Internal Revenue Code.
 
  1997 Director Stock Option Plan
 
     MKS's 1997 Director Stock Option Plan (the "1997 Director Plan") authorizes
the issuance of up to an aggregate of 300,000 shares of common stock. The 1997
Director Plan is administered by MKS's Board of Directors. Options are granted
under the 1997 Director Plan only to directors of MKS who are not employees of
MKS. Under the 1997 Director Plan, prior to the date of this prospectus each
existing eligible director will receive an option to purchase 10,500 shares of
common stock at an exercise price equal to the initial public offering price and
future non-employee directors will receive an option to purchase 11,250 shares
of common stock upon their initial election to the Board of Directors. Each
initial option will vest over a three-year period in 12 equal quarterly
installments following the date of grant. On the date of each annual meeting of
the stockholders, options will be automatically granted to each eligible
director who has been in office for at least six months prior to the date of the
annual meeting of the stockholders. Each annual option will entitle the holder
to purchase 6,000 shares of common stock. Each annual option will become
exercisable on the day prior to the first annual meeting of stockholders
following the date of grant (or if no such meeting is held within 13 months
after the date of grant, on the 13-month anniversary of the date of grant). The
exercise price of all options granted under the 1997 Director Plan is equal to
the fair market value of the common stock on the date of grant. Options granted
under the 1997 Director Plan terminate upon the earlier of three months after
the optionee ceases to be a director of MKS or ten years after the grant date.
In the event of a change in control of MKS, the vesting of all options then
outstanding would be accelerated in full and any restrictions on exercising
outstanding options would terminate.
 
     The Company's 1996 Director Stock Option Plan, under which options have
been granted to, and may still be exercised by, four non-employee directors of
MKS, has been terminated. See "-- Director Compensation."
 
                                       50
54
 
                              CERTAIN TRANSACTIONS
 
     Mr. Chute, a director of MKS, MKS's clerk, and a co-trustee of certain of
the Bertucci Family Trusts (see "Principal Stockholders") and Mr. Thomas H.
Belknap, a co-trustee of certain of the Bertucci Family trusts, are attorneys at
the law firm of Hill & Barlow, a professional corporation. Hill & Barlow has
provided legal services to MKS during the calendar year ended December 31, 1998
for which it was compensated by MKS in the aggregate amount of $183,000.
 
     Mr. Stewart, Corporate Vice President and General Manager of Vacuum
Products, is the general partner of Aspen Industrial Park Partnership ("Aspen").
On October 12, 1989, MKS entered into a lease with Aspen, which has been
periodically extended, for certain facilities occupied by MKS's Vacuum Products
group in Boulder, Colorado. MKS currently pays Aspen approximately $350,000
annually to lease such facilities.
 
     MKS has been treated as an S corporation for federal income tax purposes
since July 1, 1987. As a result, MKS currently pays no federal, and certain
state, income tax and all of the earnings of MKS are subject to federal, and
certain state, income taxation directly at the stockholder level. MKS's S
corporation status will terminate upon the closing of this offering, at which
time MKS will become subject to corporate income taxation under Subchapter C of
the Internal Revenue Code. In 1997 and 1998, MKS distributed $12.4 million and
$6.2 million, respectively, of undistributed S corporation earnings to its
stockholders. As soon as practicable following the closing of this offering, MKS
intends to make a distribution to the holders of record on the day prior to the
closing of this offering in an amount equivalent to the accumulated adjustments
account. As of December 31, 1998, the outstanding balance of the accumulated
adjustments account was approximately $35.9 million and such balance is expected
to increase in the period from January 1, 1999 through the closing of this
offering. See "S Corporation And Termination of S Corporation Status."
 
                                       51
55
 
                             PRINCIPAL STOCKHOLDERS
 
     The following table sets forth certain information regarding beneficial
ownership of MKS's common stock as of December 31, 1998, and as adjusted to
reflect the sale of shares offered hereby, by (i) each of the directors of MKS,
(ii) each of the Named Executive Officers, (iii) each person or entity known to
MKS to own beneficially more than 5% of MKS's common stock and (iv) all
directors and executive officers as a group. Except as indicated below, none of
these entities has a relationship with MKS or, to the knowledge of MKS, any
underwriters of this offering or their respective affiliates. Unless otherwise
indicated, each person or entity named in the table has sole voting power and
investment power (or shares such power with his or her spouse) with respect to
all shares of capital stock listed as owned by such person or entity.
PERCENTAGE OF
                                                                                 COMMON STOCK
                                                      NUMBER SHARES            OUTSTANDING(1)(2)
                                                      BENEFICIALLY     ---------------------------------
              NAME OF BENEFICIAL OWNER                  OWNED(1)       BEFORE OFFERING    AFTER OFFERING
              ------------------------                -------------    ---------------    --------------
John R. Bertucci(3).................................   17,261,915           95.6%                  %
Ronald C. Weigner(4)................................       82,291              *
John J. Sullivan(5).................................      614,010            3.4
Joseph A. Maher, Jr.(4).............................       44,310              *
William D. Stewart(4)...............................       82,291              *
Leo Berlinghieri(4).................................       82,291              *
Richard S. Chute(6).................................    2,766,852           15.3
Owen W. Robbins(4)..................................        8,027              *
Robert J. Therrien(4)...............................        8,027              *
Louis P. Valente(4).................................        8,027              *
Thomas H. Belknap(7)................................    2,331,902           12.9
All executive officers and directors as a group.....   18,199,216           99.0%                  %
---------------
 *  Less than 1% of outstanding common stock.
 
(1) The number of shares beneficially owned by each stockholder is determined
    under rules promulgated by the Securities and Exchange Commission and the
    information is not necessarily indicative of beneficial ownership for any
    other purpose. Under such rules, beneficial ownership includes any shares as
    to which the individual has sole or shared voting power or investment power
    and also any shares which the individual has the right to acquire within 60
    days of December 31, 1998 through the exercise of any stock option or other
    right. The inclusion herein of such shares, however, does not constitute an
    admission that the named stockholder is a direct or indirect beneficial
    owner of such shares.
 
(2) Assumes no exercise of the underwriters' over-allotment option.
 
(3) Includes 6,046,208 shares held directly by Mr. Bertucci, 6,124,980 shares
    held directly by Mr. Bertucci's wife, and 5,090,727 shares held by trusts
    (collectively, the "Bertucci Family Trusts") for which either Mr. or Mrs.
    Bertucci serves as a co-trustee.
 
(4) Comprised solely of options exercisable within 60 days of December 31, 1998.
 
(5) Includes 316,500 shares held in a grantor retained annuity trust.
 
(6) Includes 2,758,825 shares held by certain of the Bertucci Family Trusts for
    which Mr. Chute serves as a co-trustee and 8,027 shares subject to options
    held by Mr. Chute exercisable within 60 days of December 31, 1998.
 
(7) Represents shares held by certain of the Bertucci Family Trusts for which
    Mr. Belknap serves as a co-trustee.
 
                                       52
56
 
                          DESCRIPTION OF CAPITAL STOCK
 
     The authorized capital stock of MKS consists of 30,000,000 shares of common
stock, no par value per share, and 2,000,000 shares of preferred stock, $.01 par
value per share, after giving effect to the amendment and restatement of MKS's
Restated Articles of Organization which will be filed with the Secretary of
State of The Commonwealth of Massachusetts prior to the closing of this
offering.
 
COMMON STOCK
 
     As of December 31, 1998, there were 18,053,167 shares of common stock
outstanding and held of record by twenty-three stockholders, after giving effect
to a 3-for-2 stock split to be effected prior to the effective date of this
prospectus, of shares of Class A common stock and Class B common stock and the
conversion of such shares into shares of common stock upon the closing of this
offering.
 
     Upon the closing of this offering, all holders of common stock shall be
entitled to one vote for each share held on all matters submitted to a vote of
stockholders and will not have cumulative voting rights. Accordingly, holders of
a majority of the shares of common stock entitled to vote in any election of
directors may elect all of the directors standing for election. Holders of
common stock are entitled to receive ratably such dividends, if any, as may be
declared by the Board of Directors out of funds legally available therefor,
subject to any preferential dividend rights of any outstanding preferred stock.
Upon the liquidation, dissolution or winding up of MKS, the holders of common
stock are entitled to receive ratably the net assets of MKS available after the
payment of all debts and other liabilities, subject to the prior rights of any
outstanding preferred stock. Holders of the common stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of common
stock are, and the shares offered by MKS in this offering made by this
prospectus will be, when issued and paid for, fully paid and nonassessable. The
rights, preferences and privileges of holders of common stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of preferred stock that MKS may designate and issue in the future. There
are no shares of preferred stock outstanding.
 
PREFERRED STOCK
 
     The Articles of Organization authorize the Board of Directors, subject to
certain limitations prescribed by law, without further stockholder approval,
from time to time to issue up to an aggregate of 2,000,000 shares of preferred
stock in one or more series and to fix or alter the designations, preferences
and rights, and any qualifications, limitations or restrictions thereof, of the
shares of each such series, including the number of shares constituting any such
series and the dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption (including sinking fund provisions), redemption
price or prices and liquidation preferences thereof. The issuance of preferred
stock may have the effect of delaying, deferring or preventing a change in
control of MKS. MKS has no present plans to issue any shares of preferred stock.
 
MASSACHUSETTS LAW AND CERTAIN PROVISIONS OF MKS'S RESTATED ARTICLES OF
ORGANIZATION AND BY-LAWS
 
     MKS intends to amend and restate its By-Laws prior to the closing of this
offering. The By-Laws will include a provision excluding MKS from the
applicability of Massachusetts General Laws Chapter 110D, entitled "Regulation
of Control Share Acquisitions." In general, this statute provides that any
stockholder of a corporation subject to this statute who acquires 20% or more of
the outstanding voting stock of a corporation may not vote such stock unless the
stockholders of the corporation so authorize. The Board of Directors will be
able to amend the By-Laws at any time to subject MKS to this statute
prospectively.
 
     Massachusetts General Laws Chapter 156B, Section 50A generally requires
that publicly-held Massachusetts corporations have a classified board of
directors consisting of three classes as nearly equal in size as possible,
unless the corporation elects to opt out of the statute's coverage. The By-Laws
will contain provisions which give effect to Section 50A.
 
                                       53
57
 
     The By-Laws will require that nominations for the Board of Directors made
by a stockholder of a planned nomination must be given not less than 30 and not
more than 90 days prior to a scheduled meeting, provided that if less than 40
days' notice is given of the date of the meeting, a stockholder will have ten
days within which to give such notice. The stockholder's notice of nomination
must include particular information about the stockholder, the nominee and any
beneficial owner on whose behalf the nomination is made. MKS may require any
proposed nominee to provide such additional information as is reasonably
required to determine the eligibility of the proposed nominee.
 
     The By-Laws will also require that a stockholder seeking to have any
business conducted at a meeting of stockholders give notice to MKS not less than
60 and not more than 90 days prior to the scheduled meeting, provided in certain
circumstances that a ten-day notice rule applies. The notice from the
stockholder will be required to describe the proposed business to be brought
before the meeting and include information about the stockholder making the
proposal, any beneficial owner on whose behalf the proposal is made, and any
other stockholder known to be supporting the proposal. The By-Laws will require
MKS to call a special stockholders meeting at the request of stockholders
holding at least 40% of the voting power of MKS.
 
     The Articles of Organization will provide that the directors and officers
of MKS shall be indemnified by MKS to the fullest extent authorized by
Massachusetts law, as it now exists or may in the future be amended, against all
expenses and liabilities reasonably incurred in connection with service for or
on behalf of MKS. In addition, the Articles of Organization will provide that
the directors of MKS will not be personally liable for monetary damages to MKS
for breaches of their fiduciary duty as directors, unless they violated their
duty of loyalty to MKS or its stockholders, acted in bad faith, knowingly or
intentionally violated the law (which could include securities laws), authorized
illegal dividends or redemptions or derived an improper personal benefit from
their action as directors.
 
     The Articles of Organization will provide that any amendment to the
Articles of Organization, the sale, lease or exchange of all or substantially
all of MKS's property and assets, or the merger or consolidation of MKS into or
with any corporation may be authorized by the approval of the holders of a
majority of the shares of each class of stock entitled to vote thereon, rather
than by two-thirds as otherwise provided by statute, provided that the
transactions have been authorized by a majority of the members of the Board of
Directors and the requirements of any other applicable provisions of the
Articles of Organization have been met.
 
     The Articles of Organization will contain a provision excluding MKS from
the applicability of Massachusetts General Laws Chapter 110F, entitled "Business
Combinations with Interested Shareholders." In general, Chapter 110F places
limitations on a Massachusetts corporation's ability to engage in business
combinations with certain stockholders for a period of three years, unless the
corporation elects to opt out of the statute's coverage by including such a
provision in its Articles of Organization.
 
TRANSFER AGENT AND REGISTRAR
 
     The Transfer Agent and Registrar for the common stock is BankBoston, N.A.
 
                                       54
58
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
     Prior to this offering, there has been no public market for the securities
of MKS. Upon completion of this offering, based upon the number of shares
outstanding at December 31, 1998, there will be        shares of common stock of
MKS outstanding (assuming no exercise of the underwriters' over-allotment option
or options outstanding under MKS's stock option plans). Of these shares, the
          shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, except that any
shares purchased by "affiliates" of MKS, as that term is defined in Rule 144
under the Securities Act, may generally only be sold in compliance with the
limitations of Rule 144 described below.
 
SALES OF RESTRICTED SHARES
 
     The remaining      shares of common stock are deemed "restricted
securities" under Rule 144 under the Securities Act. All of these shares are
subject to 180-day lock-up agreements with the Representatives. Upon expiration
of the lock-up agreements 180 days after the date of this prospectus, all such
shares will be available for sale in the public market, subject to the
provisions of Rule 144.
 
     Stockholders who are parties to the lock-up agreement have agreed that for
a period of 180 days after the date of this prospectus, they will not sell,
offer, contract or grant any option to sell, pledge, transfer, establish an open
put equivalent position or otherwise dispose of any shares of common stock, any
options to purchase shares of common stock or any shares convertible into or
exchangeable for shares of common stock, owned directly by such persons or with
respect to which they have the power of disposition, without the prior written
consent of NationsBanc Montgomery Securities LLC.
 
     In general, Rule 144 as currently in effect, beginning 90 days after the
effective date of the registration statement of which this prospectus is a part,
a stockholder, including an affiliate, who has beneficially owned his or her
restricted securities for at least one year from the later of the date such
securities were acquired from MKS or (if applicable) the date they were acquired
from an affiliate is entitled to sell, within any three-month period, a number
of such shares that does not exceed the greater of 1% of the then outstanding
shares of common stock (     shares immediately after this offering) or the
average weekly trading volume in the common stock during the four calendar weeks
preceding the date on which notice of such sale was filed under Rule 144,
provided certain requirements concerning availability of public information,
manner of sale and notice of sale are satisfied. In addition, under Rule 144(k),
if a period of at least two years has elapsed between the later of the date
restricted securities were acquired from MKS or (if applicable) the date they
were acquired from an affiliate of MKS, a stockholder who is not an affiliate of
MKS at the time of sale and has not been an affiliate of MKS for at least three
months prior to the sale is entitled to sell the shares immediately without
compliance with the foregoing requirements under Rule 144.
 
     Securities issued in reliance on Rule 701 (such as shares of common stock
acquired pursuant to the exercise of certain options granted under MKS's stock
plans) are also restricted and, beginning 90 days after the effective date of
the registration statement of which this prospectus is a part, may be sold by
stockholders other than affiliates of MKS subject only to the manner of sale
provisions of Rule 144 and by affiliates under Rule 144 without compliance with
its one-year holding period requirement.
 
OPTIONS
 
     As of December 31, 1998 there were options outstanding to purchase an
aggregate of 2,132,575 shares of MKS's common stock, of which options to
purchase an aggregate of 804,701 shares were exercisable. Of these,      shares
were subject to the lock-up agreements. MKS intends to file registration
statements on Form S-8 under the Securities Act to register all shares of common
stock issuable under each of the 1995 Stock Plan, Purchase Plan, the 1997
Director Plan and the 1996 Director Stock Option Plan promptly following the
consummation of this offering. Shares issued pursuant to such plans shall be,
after the effective date of the Form S-8 registration statements, eligible for
resale in the public market without restriction, subject to Rule 144 limitations
applicable to affiliates and the lock-up agreements noted above, if applicable.
 
                                       55
59
 
                                  UNDERWRITING
 
     The underwriters named below, represented by NationsBanc Montgomery
Securities LLC, Donaldson, Lufkin & Jenrette Securities Corporation and Lehman
Brothers Inc. (the "Representatives"), have severally agreed, subject to the
terms and conditions set forth in the underwriting agreement, to purchase from
MKS the number of shares of common stock indicated below opposite their
respective names at the initial public offering price less the underwriting
discount set forth on the cover page of this prospectus. The underwriting
agreement provides that the obligations of the underwriters are subject to
certain terms and conditions precedent and that the underwriters are committed
to purchase all of such shares, if any are purchased.
NUMBER OF
                        UNDERWRITER                            SHARES
                        -----------                           ---------
NationsBanc Montgomery Securities LLC.......................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Lehman Brothers Inc. .......................................
                                                              ---------
          Total.............................................
                                                              =========
The Representatives have advised MKS that the underwriters initially
propose to offer the common stock to the public on the terms set forth on the
cover page of this prospectus. The underwriters may allow to selected dealers a
concession of not more than $     per share, and the underwriters may allow, and
any other dealers may reallow, a concession of not more than $     per share to
certain other dealers. After the initial public offering, this offering price
and other selling terms may be changed by the Representatives. The common stock
is offered subject to receipt and acceptance by the underwriters and to certain
other conditions, including the right to reject orders in whole or in part.
 
     MKS has granted an option to the underwriters, exercisable during the
30-day period after the date of this prospectus, to purchase up to a maximum of
          additional shares of common stock to cover over-allotments, if any, at
the same price per share as the initial shares to be purchased by the
underwriters. To the extent the underwriters exercise this option, each of the
underwriters will be committed, subject to certain conditions, to purchase such
additional shares in approximately the same proportion as set forth in the above
table. The underwriters may purchase such shares only to cover over-allotments
made in connection with this offering.
 
     All stockholders prior to this offering, as well as certain holders of
options to purchase common stock, have entered into lock-up agreements whereby
they have agreed not to directly or indirectly sell, offer, contract or grant
any option to sell, pledge, transfer, establish an open put equivalent position
or otherwise dispose of any rights with respect to any shares of common stock,
any options or warrants to purchase common stock, or any securities convertible
or exchangeable for common stock, owned directly by such holders or with respect
to which they have the power of disposition for a period of 180 days after the
period of this prospectus without the prior written consent of NationsBanc
Montgomery Securities LLC which may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to these
lock-up agreements. In addition, MKS has agreed not to sell, offer to sell,
contract to sell or otherwise sell or dispose of any shares of common stock or
any rights to acquire common stock, other than pursuant to its stock plans or
upon the exercise of outstanding options, for a period of 180 days after the
date of this prospectus without the prior consent of NationsBanc Montgomery
Securities LLC.
 
     The underwriting agreement provides that MKS will indemnify the
underwriters against certain liabilities, including civil liabilities, under the
Securities Act, or will contribute to payments the underwriters may be required
to make in respect thereof.
 
     In connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock, including over-allotment, stabilization, syndicate covering
transactions and imposition of penalty bids. In an over-allotment, the
underwriters would allot more shares of common stock to their customers in the
aggregate than are available for purchase by the
 
                                       56
60
 
underwriters under the underwriting agreement. Stabilizing means the placing of
any bid, or the effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of a security. In a syndicate covering transaction, the
underwriters would place a bid or effect a purchase to reduce a short position
created in connection with this offering. Pursuant to a penalty bid, NationsBanc
Montgomery Securities LLC on behalf of the underwriters, would be able to
reclaim a selling concession from an underwriter if shares of common stock
originally sold by such underwriter are purchased in syndicate covering
transactions. These transactions may result in the price of the common stock
being higher than the price that might otherwise prevail in the open market.
These transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise, and, if commenced, may be discontinued at
any time.
 
     The Representatives have informed MKS that they do not expect to make sales
to accounts over which they exercise discretionary authority in excess of 5% of
the number of shares of common stock offered hereby.
 
     Prior to this offering, there has been no public market for the common
stock of MKS. Consequently, the initial public offering price will be determined
through negotiations among MKS and the Representatives. Among the factors to be
considered in such negotiations are the history of, and prospects for, MKS and
the industry in which it competes, an assessment of MKS's management, the
present state of MKS's development, the prospects for future earnings of MKS,
the prevailing market conditions at the time of this offering, market valuations
of publicly traded companies that MKS and the Representatives believe to be
comparable to MKS, and other factors deemed relevant.
 
                                 LEGAL MATTERS
 
     The validity of the common stock offered hereby will be passed upon for MKS
by Hale and Dorr LLP, Boston, Massachusetts. Certain legal matters in connection
with this offering will be passed upon for the underwriters by Ropes & Gray,
Boston, Massachusetts.
 
                                    EXPERTS
 
     The consolidated balance sheets of MKS Instruments, Inc. at December 31,
1997 and 1998 and the consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31, 1998
included in this prospectus have been included herein in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given upon the authority
of that firm as experts in accounting and auditing.
 
                                       57
61
 
                             ADDITIONAL INFORMATION
 
     MKS has filed with the Securities and Exchange Commission, a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered hereby. This prospectus, which constitutes part of the registration
statement, does not contain all of the information set forth in the registration
statement, certain parts of which are omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. For further information
with respect to MKS and the common stock offered hereby, reference is made to
the registration statement. Statements contained in this prospectus as to the
contents of any contract or other document filed as an exhibit to the
registration statement are not necessarily complete, and in each instance
reference is made to the copy of such document filed as an exhibit to the
registration statement, each such statement being qualified in all respects by
such reference. The registration statement (and all amendments, exhibits and
schedules thereto) may be inspected without charge at the principal office of
the Securities and Exchange Commission in Washington, D.C. and copies of all or
any part of which may be inspected and copied at the public reference facilities
maintained by the Securities and Exchange Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Room 1024, Washington, D.C. 20549, and at the Securities and
Exchange Commission's regional offices located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can also
be obtained at prescribed rates by mail from the Public Reference Section of the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, the Securities and Exchange Commission maintains a website
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Securities and Exchange Commission.
 
     MKS intends to distribute to its stockholders annual reports containing
audited consolidated financial statements.
 
                                       58
62
 
                             MKS INSTRUMENTS, INC.
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
                                                              ----
Report of Independent Accountants...........................  F-2
Consolidated Balance Sheets at December 31, 1997 and
  1998......................................................  F-3
Consolidated Statements of Income for the Years Ended
  December 31, 1996, 1997, and 1998.........................  F-4
Consolidated Statements of Stockholders' Equity for the
  Years Ended December 31, 1996, 1997, and 1998.............  F-5
Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1996, 1997, and 1998.........................  F-6
Notes to Consolidated Financial Statements..................  F-7
F-1
63
 
     This is the form of the report that we expect to issue upon the filing of
an amendment to the Company's Articles of Organization effecting the 3-for-2
stock split of the Company's outstanding common stock, increase in the number of
authorized shares of common stock and the authorization of preferred stock, as
discussed in Note 8 of Notes to Consolidated Financial Statements.
 
                                            PRICEWATERHOUSECOOPERS LLP
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholders of
  MKS Instruments, Inc.:
 
     In our opinion, the accompanying consolidated balance sheets and related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of MKS Instruments,
Inc. and its subsidiaries at December 31, 1997 and 1998 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
 
Boston, Massachusetts
January 22, 1999, except for
Note 13 as to which the date
is January 28, 1999
 
                                       F-2
64
 
                             MKS INSTRUMENTS, INC.
 
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, 1998
                                                            DECEMBER 31,    ----------------------
                                                                1997        ACTUAL      PRO FORMA
                                                            ------------    -------    -----------
                                                                                        (NOTE 2)
                                                                                       (UNAUDITED)
ASSETS
Current assets:
     Cash and cash equivalents............................    $  2,511      $11,188      $11,188
     Marketable equity securities.........................         614          538          538
     Trade accounts receivable, net of allowance for
       doubtful accounts of $610 and $656 at December 31,
       1997 and 1998, respectively........................      32,439       20,674       20,674
     Inventories..........................................      29,963       24,464       24,464
     Deferred tax asset...................................         682          698          698
     Other current assets.................................       1,670          971          971
                                                              --------      -------      -------
          Total current assets............................      67,879       58,533       58,533
     Property, plant and equipment, net...................      33,976       32,725       32,725
     Other assets.........................................       4,681        4,974        4,974
                                                              --------      -------      -------
          Total assets....................................    $106,536      $96,232      $96,232
                                                              ========      =======      =======
 
                               LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Short-term borrowings................................    $ 10,721      $ 9,687      $ 9,687
     Current portion of long-term debt....................       2,070        2,058        2,058
     Current portion of capital lease obligations.........       1,061        1,074        1,074
     Accounts payable.....................................       7,433        3,677        3,677
     Accrued compensation.................................       7,501        3,985        3,985
     Other accrued expenses...............................       6,883        5,280        5,280
     Income taxes payable.................................       1,889        1,279        1,279
     Distribution payable.................................          --           --       35,926
                                                              --------      -------      -------
          Total current liabilities.......................      37,558       27,040       62,966
Long-term debt............................................      13,748       12,042       12,042
Long-term portion of capital lease obligations............       1,876        1,744        1,744
Deferred tax liability....................................         133          117          117
Other liabilities.........................................         373          463          463
Commitments and contingencies (Note 7)
Stockholders' equity:
     Preferred Stock, $0.01 par value; 2,000,000 shares
       authorized, no shares issued or outstanding........          --           --           --
     Common Stock, Class A, no par value; 11,250,000
       shares authorized, 7,766,910 issued and
       outstanding........................................          40           40           40
     Common Stock, Class B (non voting) no par value;
       18,750,000 shares authorized; 10,286,255 and
       10,286,257 shares issued and outstanding at
       December 31, 1997 and 1998, respectively...........          73           73           73
     Additional paid-in capital...........................          48           48           48
     Retained earnings....................................      51,443       52,479       16,553
     Accumulated other comprehensive income...............       1,244        2,186        2,186
                                                              --------      -------      -------
          Total stockholders' equity......................      52,848       54,826       18,900
                                                              --------      -------      -------
          Total liabilities and stockholders' equity......    $106,536      $96,232      $96,232
                                                              ========      =======      =======
The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                       F-3
65
 
                             MKS INSTRUMENTS, INC.
 
                       CONSOLIDATED STATEMENTS OF INCOME
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
                                                              --------------------------------
                                                                1996        1997        1998
                                                              --------    --------    --------
Net sales...................................................  $170,862    $188,080    $139,763
Cost of sales...............................................   102,008     107,606      83,784
                                                              --------    --------    --------
Gross profit................................................    68,854      80,474      55,979
Research and development....................................    14,195      14,673      12,137
Selling, general and administrative.........................    37,191      41,838      34,707
Restructuring...............................................     1,400          --          --
                                                              --------    --------    --------
Income from operations......................................    16,068      23,963       9,135
Interest expense............................................     2,378       2,132       1,483
Interest income.............................................        92         271         296
Other income (expense), net.................................      (479)        166         187
                                                              --------    --------    --------
Income before income taxes..................................    13,303      22,268       8,135
Provision for income taxes..................................       800       1,978         949
                                                              --------    --------    --------
Net income..................................................  $ 12,503    $ 20,290    $  7,186
                                                              ========    ========    ========
Pro forma data (unaudited):
     Historical income before income taxes..................                          $  8,135
     Pro forma provision for income taxes...................                             3,091
                                                                                      --------
     Pro forma net income...................................                             5,044
                                                                                      ========
Pro forma net income per share:
     Basic..................................................                          $   0.25
                                                                                      ========
     Diluted................................................                          $   0.24
                                                                                      ========
Pro forma weighted average common shares outstanding:
     Basic..................................................                            20,166
                                                                                      ========
     Diluted................................................                            20,651
                                                                                      ========
The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                       F-4
66
 
                             MKS INSTRUMENTS, INC.
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
                       (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK
                                                          ----------------------------------------
                                      PREFERRED STOCK          CLASS A               CLASS B         ADDITIONAL
                                     ------------------   ------------------   -------------------    PAID-IN     RETAINED
                                      SHARES     AMOUNT    SHARES     AMOUNT     SHARES     AMOUNT    CAPITAL     EARNINGS
                                     ---------   ------   ---------   ------   ----------   ------   ----------   --------
Balance at December 31, 1995.......                       7,766,910    $40     10,286,255    $73        $48       $45,550
Distributions to stockholders......                                                                               (14,500)
Comprehensive income:
    Net income.....................                                                                                12,503
    Other comprehensive income:
    Foreign currency translation
      adjustment...................
    Unrealized loss on
      investments..................
    Comprehensive income...........
                                     ---------    ---     ---------    ---     ----------    ---        ---       -------
Balance at December 31, 1996.......                       7,766,910     40     10,286,255     73         48        43,553
Distributions to stockholders......                                                                               (12,400)
Comprehensive income:
    Net income.....................                                                                                20,290
    Other comprehensive income:
    Foreign currency translation
      adjustment...................
    Unrealized gain on
      investments..................
    Comprehensive income...........
                                     ---------    ---     ---------    ---     ----------    ---        ---       -------
Balance at December 31, 1997.......                       7,766,910     40     10,286,255     73         48        51,443
Distributions to stockholders......                                                                                (6,150)
Issuance of common stock...........                                                     2
Comprehensive income:
    Net income.....................                                                                                 7,186
    Other comprehensive income:
    Foreign currency translation
      adjustment...................
    Unrealized loss on
      investments..................
    Comprehensive income...........
                                     ---------    ---     ---------    ---     ----------    ---        ---       -------
Balance at December 31, 1998.......                       7,766,910    $40     10,286,257    $73        $48       $52,479
                                     =========    ===     =========    ===     ==========    ===        ===       =======
ACCUMULATED
                                         OTHER                           TOTAL
                                     COMPREHENSIVE   COMPREHENSIVE   STOCKHOLDERS'
                                        INCOME          INCOME          EQUITY
                                     -------------   -------------   -------------
Balance at December 31, 1995.......     $2,681                         $ 48,392
Distributions to stockholders......                                     (14,500)
Comprehensive income:
    Net income.....................                     $12,503          12,503
    Other comprehensive income:
    Foreign currency translation
      adjustment...................       (766)            (766)           (766)
    Unrealized loss on
      investments..................       (131)            (131)           (131)
                                                        -------
    Comprehensive income...........                     $11,606
                                        ------          =======        --------
Balance at December 31, 1996.......      1,784                           45,498
Distributions to stockholders......                                     (12,400)
Comprehensive income:
    Net income.....................                      20,290          20,290
    Other comprehensive income:
    Foreign currency translation
      adjustment...................       (786)            (786)           (786)
    Unrealized gain on
      investments..................        246              246             246
                                                        -------
    Comprehensive income...........                     $19,750
                                        ------          =======        --------
Balance at December 31, 1997.......      1,244                           52,848
Distributions to stockholders......                                      (6,150)
Issuance of common stock...........
Comprehensive income:
    Net income.....................                       7,186           7,186
    Other comprehensive income:
    Foreign currency translation
      adjustment...................        992              992             992
    Unrealized loss on
      investments..................        (50)             (50)            (50)
                                                        -------
    Comprehensive income...........                     $ 8,128
                                        ------          =======        --------
Balance at December 31, 1998.......     $2,186                         $ 54,826
                                        ======                         ========
The accompanying notes are an integral part of the consolidated financial
                                  statements.
 
                                       F-5
67
 
                             MKS INSTRUMENTS, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1996       1997       1998
                                                              --------   --------   --------
Cash flows from operating activities:
     Net income.............................................  $ 12,503   $ 20,290   $  7,186
     Adjustments to reconcile net income to net cash
       provided by operating activities:
       Depreciation and amortization of property, plant, and
          equipment.........................................     5,920      5,712      6,242
       Loss on disposal of property, plant and equipment....        --        552         48
       Deferred taxes.......................................      (277)      (145)       (32)
       Provision for doubtful accounts......................       (20)       258        253
       Forward exchange contract loss (gain) realized.......       302        132     (1,211)
       Stock option compensation............................        --         95         --
       Changes in operating assets and liabilities:
          (Increase) decrease in trade accounts
            receivable......................................     6,119    (12,509)    12,908
          (Increase) decrease in inventories................     4,145     (5,930)     6,479
          (Increase) decrease in other current assets.......     3,239     (1,261)       554
          Increase (decrease) in accrued compensation.......      (220)     2,386     (3,516)
          Increase (decrease) in other accrued expenses.....    (1,520)     3,312     (1,602)
          Increase (decrease) in accounts payable...........    (4,221)     2,638     (3,682)
          Increase (decrease) in income taxes payable.......       331      1,283       (647)
                                                              --------   --------   --------
     Net cash provided by operating activities..............    26,301     16,813     22,980
                                                              --------   --------   --------
     Cash flows from investing activities:
       Purchases of property, plant and equipment...........    (9,417)    (3,269)    (3,137)
       Proceeds from sale of property, plant and
          equipment.........................................        --        203         60
       Increase in other assets.............................      (443)      (123)      (270)
       Cash received (used) to settle forward exchange
          contracts.........................................      (302)      (132)     1,211
                                                              --------   --------   --------
     Net cash used in investing activities..................   (10,162)    (3,321)    (2,136)
                                                              --------   --------   --------
     Cash flows from financing activities:
       Net (payments) borrowings on demand notes payable....       224     (1,875)        --
       Proceeds from short-term borrowings..................    11,025     24,110     15,242
       Payments on short-term borrowings....................    (9,628)   (22,938)   (17,569)
       Proceeds from long-term debt.........................       400         --         --
       Principal payments on long-term debt.................    (2,093)    (2,217)    (2,057)
       Cash distributions to stockholders...................   (14,500)   (12,400)    (6,150)
       Principal payments under capital lease obligations...      (982)      (870)    (1,257)
                                                              --------   --------   --------
     Net cash used in financing activities..................   (15,554)   (16,190)   (11,791)
                                                              --------   --------   --------
     Effect of exchange rate changes on cash and cash
       equivalents..........................................      (420)     1,394       (376)
                                                              --------   --------   --------
     Increase (decrease) in cash and cash equivalents.......       165     (1,304)     8,677
     Cash and cash equivalents at beginning of period.......     3,650      3,815      2,511
                                                              --------   --------   --------
     Cash and cash equivalents at end of period.............  $  3,815   $  2,511   $ 11,188
                                                              ========   ========   ========
     Supplemental disclosure of cash flow information:
       Cash paid during the period for:
          Interest..........................................  $  2,363   $  2,030   $  1,526
                                                              ========   ========   ========
          Income taxes......................................  $    770   $  1,078   $  1,608
                                                              ========   ========   ========
       Noncash transactions during the period:
          Equipment acquired under capital leases...........  $  2,074   $    145   $  1,138
                                                              ========   ========   ========
The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                       F-6
68
 
                             MKS INSTRUMENTS, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
1.  DESCRIPTION OF BUSINESS:
 
     MKS Instruments, Inc. (the "Company") is a worldwide developer,
manufacturer, and supplier of instruments and components that are used to
measure, control and analyze gases in semiconductor manufacturing and similar
industrial manufacturing processes. The Company's products include pressure and
flow measurement and control instruments; vacuum gauges, valves and components;
and gas analysis instruments. The Company is subject to risks common to
companies in the semiconductor industry including, but not limited to, the
highly cyclical nature of the semiconductor industry leading to recurring
periods of over supply, development by the Company or its competitors of new
technological innovations, dependence on key personnel and the protection of
proprietary technology.
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
BASIS OF PRESENTATION
 
     The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation. The Company has reflected the
approximately 77.5% owned foreign subsidiaries as wholly-owned subsidiaries
pursuant to common control accounting. Upon the closing of this offering for
which these financial statements are being prepared, the shares of the foreign
subsidiaries owned directly by the ultimate stockholders will be contributed to
the Company.
 
PRO FORMA BALANCE SHEET PRESENTATION (UNAUDITED)
 
     The Company intends to distribute the balance of its accumulated and
undistributed S corporation earnings from the proceeds of this offering for
which this registration statement is being prepared. The unaudited pro forma
balance sheet has been prepared assuming an estimated $35,926,000 distribution
was payable as of December 31, 1998. The remaining balance in retained earnings
represents accumulated earnings prior to the Company converting from a C
corporation to an S corporation in 1987, accumulated income in overseas
subsidiaries and differences between book and tax accumulated income.
 
PRO FORMA NET INCOME PER SHARE (UNAUDITED)
 
     Pro forma net income per share is based upon the weighted average number of
common and common equivalent shares (using the treasury stock method)
outstanding. Common equivalent shares are included in the per share calculations
where the effect of their inclusion would be dilutive.
 
     Historical net income has been adjusted for the pro forma provision for
income taxes calculated assuming the Company was subject to income taxation as a
C corporation, at a pro forma tax rate of 38.0%. In accordance with a regulation
of the Securities and Exchange Commission, pro forma net income per share has
been presented for the year ended December 31, 1998 to reflect the effect as of
January 1, 1998 of the assumed issuance of that number of shares of common stock
of the Company necessary to be sold at the mid-point of the estimated initial
public offering price in order to fund the intended distribution in the amount
of the accumulated and undistributed S corporation earnings.
 
                                       F-7
69
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
     Historical net income per share is not presented as it is not meaningful
based upon the Company's planned conversion from an S corporation to a C
corporation upon the closing of this offering for which these financial
statements are being prepared.
 
     The following is a reconciliation of basic to diluted pro forma net income
per share:
FOR THE YEAR ENDED
                                                              DECEMBER 31, 1998
                                                              ------------------
Pro forma net income........................................       $ 5,044
                                                                   =======
Shares used in pro forma net income per common share --
  basic.....................................................        20,166
     Effect of dilutive securities:
          Employee and director stock options...............           485
                                                                   -------
Shares used in pro forma net income per common share --
  diluted...................................................        20,651
                                                                   =======
Pro forma net income per common share -- basic..............       $  0.25
                                                                   =======
Pro forma net income per common share -- diluted............       $  0.24
                                                                   =======
FOREIGN EXCHANGE
 
     The functional currency of the Company's foreign subsidiaries is the
applicable local currency. For those subsidiaries, assets and liabilities are
translated to U.S. dollars at year-end exchange rates. Income and expense
accounts are translated at the average exchange rates prevailing for the year.
The resulting translation adjustments are included in accumulated other
comprehensive income in consolidated stockholders' equity.
 
REVENUE RECOGNITION
 
     The Company recognizes revenue upon shipment. The Company accrues for
anticipated returns and warranty costs upon shipment.
 
CASH AND CASH EQUIVALENTS
 
     All highly liquid investments with an original maturity of three months or
less at the date of purchase are considered to be cash equivalents. Cash
equivalents consist of money market instruments.
 
INVESTMENTS
 
     The appropriate classification of investments in debt and equity securities
is determined at the time of purchase. Debt securities that the Company has both
the intent and ability to hold to maturity are carried at amortized cost. Debt
securities that the Company does not have the intent and ability to hold to
maturity or equity securities are classified either as "available-for-sale" or
as "trading" and are carried at fair value. Marketable equity securities are
carried at fair value and classified either as available-for-sale or trading.
Unrealized gains and losses on securities classified as available-for-sale are
included in accumulated other comprehensive income in consolidated stockholders'
equity. Unrealized gains and losses on securities classified as trading are
reported in earnings.
 
INVENTORIES
 
     Inventories are stated at the lower of cost or market. Cost is determined
on the first-in, first-out method.
 
                                       F-8
70
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
PROPERTY, PLANT AND EQUIPMENT
 
     Property, plant and equipment are stated at cost. Equipment acquired under
capital leases is recorded at the present value of the minimum lease payments
required during the lease period. Expenditures for major renewals and
betterments that extend the useful lives of property, plant and equipment are
capitalized. Expenditures for maintenance and repairs are charged to expense as
incurred. When assets are sold or otherwise disposed of, the cost and related
accumulated depreciation are eliminated from the accounts and any resulting gain
or loss is recognized in earnings.
 
     Depreciation is provided on the straight-line method over the estimated
useful lives of 20 years for buildings and three to five years for machinery and
equipment. Leasehold improvements are amortized over the shorter of the lease
term or the estimated useful life of the lease.
 
RESEARCH AND DEVELOPMENT
 
     Research and development costs are expensed as incurred.
 
NEW ACCOUNTING PRONOUNCEMENTS
 
     In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Software
Developed or Obtained for Internal Use" which provides guidance on the
accounting for the costs of software developed or obtained for internal use. SOP
98-1 is effective for fiscal years beginning after December 15, 1998. The
Company does not expect the SOP 98-1 to have a material impact on its financial
position or results of operations.
 
     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. The statement
is effective for all fiscal quarters of all fiscal years beginning after June
15, 1999. The Company has not yet determined the impact that the adoption SFAS
No. 133 will have on its financial position or results of operations.
 
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 and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
 
RECLASSIFICATION OF PRIOR YEAR BALANCES
 
     Certain reclassifications have been made to prior years' consolidated
financial statements to conform to the current presentation.
 
                                       F-9
71
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
3.  FINANCIAL INSTRUMENTS AND RISK MANAGEMENT:
 
FOREIGN EXCHANGE RISK MANAGEMENT
 
     The Company uses forward exchange contracts and local currency purchased
options in an effort to reduce its exposure to currency fluctuations on future
U.S. dollar cash flows derived from foreign currency denominated sales
associated with the intercompany purchases of inventory. The Company has entered
into forward exchange contracts, and to a lesser extent, local currency
purchased options to hedge a portion of its probable anticipated, but not firmly
committed transactions. The Company has also used forward exchange contracts to
hedge firm commitments. Market value gains and losses on forward exchange
contracts are recognized immediately in earnings unless a firm commitment
exists. Market value gains and premiums on local currency purchased options on
probable anticipated transactions and market value gains and losses on forward
exchange contracts hedging firm commitments are recognized when the hedged
transaction occurs. These contracts, which relate primarily to Japanese and
European currencies generally have terms of eighteen months or less. The Company
does not hold or issue derivative financial instruments for trading purposes.
 
     Realized and unrealized gains and losses on forward exchange contracts and
local currency purchased options that qualify for hedge accounting are
recognized in earnings in the same period as the underlying hedged item.
Realized and unrealized gains and losses on forward exchange contracts and local
currency purchased option contracts that do not qualify for hedge accounting are
recognized immediately in earnings. Forward exchange contracts receive hedge
accounting on firmly committed transactions when they are designated as a hedge
of the designated currency exposure and are highly effective in minimizing such
exposure. Options receive hedge accounting on probable anticipated transactions
when they are designated as a hedge of the currency exposure and are highly
effective in minimizing such exposure. The cash flows resulting from forward
exchange contracts and local currency purchased options that qualify for hedge
accounting are classified in the statement of cash flows as part of cash flows
from operating activities. Cash flows resulting from forward exchange contracts
and local currency purchased options that do not qualify for hedge accounting
are classified in the statement of cash flows as investing activities.
 
     Forward exchange contracts with notional amounts totaling none, $9,800,000,
and $8,000,000 to exchange foreign currencies for U.S. dollars, were outstanding
at December 31, 1996, 1997, and 1998, respectively. The forward exchange
contracts with notional amounts outstanding at December 31, 1998 totaling
$8,000,000 do not qualify for hedge accounting and accordingly are marked to
market and recognized immediately in earnings. Local currency purchased options
with notional amounts totaling $3,722,000, $12,738,000, and $10,221,000 to
exchange foreign currencies for U.S. dollars were outstanding at December 31,
1996, 1997, and 1998, respectively.
 
     Foreign exchange losses of $479,000, foreign exchange gains of $1,166,000
and foreign exchange losses of $168,000 on forward exchange contracts that did
not qualify for hedge accounting were recognized in earnings during 1996, 1997
and 1998, respectively, and are classified in Other income (expense), net. Gains
on forward exchange contracts that qualify for hedge accounting of $978,000 were
deferred and classified in other accrued expenses at December 31, 1996. Gains on
local currency purchased options deferred at December 31, 1996 that qualify for
hedge accounting of $200,000 were deferred in other accrued expenses. Gains on
forward exchange contracts and local currency purchased options that qualify for
hedge accounting are classified in cost of goods sold and totaled $2,476,000,
$1,178,000, and $310,000 for the years ended December 31, 1996, 1997, and 1998,
respectively.
 
     The fair value of forward exchange contracts at December 31, 1998,
determined by applying period end currency exchange rates to the notional
contract amounts, amounted to a loss of $349,000. The fair
 
                                      F-10
72
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
values of local currency purchased options at December 31, 1997 and 1998 which
were obtained through dealer quotes were immaterial.
 
     The Company recorded a foreign exchange translation loss on intercompany
payables of $1,000,000 and a foreign exchange translation gain on intercompany
payables of $1,000,000 in Other income (expense), net in 1997 and 1998,
respectively. Foreign exchange translation gains and losses from unhedged
intercompany balances were not material in 1996.
 
     The market risk exposure from forward exchange contracts is assessed in
light of the underlying currency exposures and is controlled by the initiation
of additional or offsetting foreign currency contracts. The market risk exposure
from options is limited to the cost of such investments. Credit risk exposure
from forward exchange contracts and local currency purchased options are
minimized as these instruments are contracted with a major financial
institution. The Company monitors the credit worthiness of this financial
institution and full performance is anticipated.
 
INTEREST RATE RISK MANAGEMENT
 
     The Company utilizes an interest rate swap to fix the interest rate on
certain variable rate term loans in order to minimize the effect of changes in
interest rates on earnings. In 1998, the Company entered into a four-year
interest rate swap agreement with a major financial institution for the notional
amount of $10,528,000 equal to the term loans described in Note 6. Under the
agreement, the Company pays a fixed rate of 5.85% on the notional amount and
receives the London Interbank Offering Rate ("LIBOR"). The interest differential
paid or received on the swap agreement is recognized as an adjustment to
interest expense. At December 31, 1998, the fair value of this interest rate
swap, which represents the amount the Company would receive or pay to terminate
the agreement, is a net payable of $151,000, based on dealer quotes.
 
     The market risk exposure from the interest rate swap is assessed in light
of the underlying interest rate exposures. Credit risk exposure from the swap is
minimized as the agreement is with a major financial institution. The Company
monitors the credit worthiness of this financial institution and full
performance is anticipated.
 
CONCENTRATIONS OF CREDIT RISK
 
     The Company's significant concentrations of credit risk consist principally
of cash and cash equivalents and trade accounts receivable. The Company
maintains cash and cash equivalents with financial institutions including the
bank it has borrowings with. Concentrations of credit risk with respect to trade
accounts receivable are limited due to the large number of geographically
dispersed customers. Credit is extended for all customers based on financial
condition and collateral is not required.
 
FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     The fair value of the term loans, including the current portion,
approximates its carrying value given its variable rate interest provisions. The
fair value of mortgage notes is based on borrowing rates for similar instruments
and approximates its carrying value. For all other balance sheet financial
instruments, the carrying amount approximates fair value because of the short
period to maturity of these instruments.
 
                                      F-11
73
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
4.  INVENTORIES:
 
     Inventories consist of the following:
DECEMBER 31,
                                                             ------------------
                                                              1997       1998
                                                             -------    -------
Raw material...............................................  $ 9,981    $ 7,544
Work in process............................................    7,241      5,718
Finished goods.............................................   12,741     11,202
                                                             -------    -------
                                                             $29,963    $24,464
                                                             =======    =======
5.  PROPERTY, PLANT AND EQUIPMENT:
 
     Property, plant and equipment consist of the following:
DECEMBER 31,
                                                             ------------------
                                                              1997       1998
                                                             -------    -------
Land.......................................................  $ 8,350    $ 8,834
Buildings..................................................   26,241     26,020
Machinery and equipment....................................   24,861     27,394
Furniture and fixtures.....................................    9,697     10,578
Leasehold improvements.....................................      882      1,814
                                                             -------    -------
                                                              70,031     74,640
Less: accumulated depreciation and amortization............   36,055     41,915
                                                             -------    -------
                                                             $33,976    $32,725
                                                             =======    =======
6.  DEBT:
 
CREDIT AGREEMENTS AND SHORT-TERM BORROWINGS
 
     In February 1996, the Company entered into loan agreements with two banks,
which provide access to a revolving credit facility. These agreements have since
been amended. The revolving credit facility, as amended, provides for
uncollateralized borrowings up to $30,000,000, which expires on December 31,
1999. Interest on borrowings is payable quarterly at either the banks' base rate
or the LIBOR Rate, as defined in the agreement, at the Company's option. At
December 31, 1997 and 1998, the Company had no borrowings under this revolving
credit facility.
 
     Additionally, certain of the Company's foreign subsidiaries have lines of
credit and short-term borrowing arrangements with various financial institutions
which provide for aggregate borrowings as of December 31, 1998 of up to
$15,003,000, which generally expire and are renewed at six month intervals. At
December 31, 1997 and 1998, total borrowings outstanding under these
arrangements were $10,721,000, and $9,687,000, respectively, at interest rates
ranging from 1.3% to 1.6%, and 1.3% to 1.7%, respectively. Foreign short-term
borrowings are generally collateralized by certain trade accounts receivable and
are guaranteed by a domestic bank.
 
                                      F-12
74
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
LONG-TERM DEBT
 
     Long-term debt consists of the following:
DECEMBER 31,
                                                              -----------------
                                                               1997      1998
                                                              -------   -------
Term loans..................................................  $12,194   $10,528
Mortgage notes..............................................    3,624     3,572
                                                              -------   -------
Total long-term debt........................................   15,818    14,100
Less: current portion.......................................    2,070     2,058
                                                              -------   -------
Long-term debt less current portion.........................  $13,748   $12,042
                                                              =======   =======
On November 1, 1993, the Company entered into a term loan agreement with a
bank, which provided for borrowings of $10,000,000. Principal payments are
payable in equal monthly installments of $56,000 through October 1, 2000, with
the remaining principal payment due on November 1, 2000. The loan is
collateralized by certain land, buildings, and equipment. Interest is payable
monthly at either the bank's base rate, at a rate based on the long-term funds
rate, or at the LIBOR Rate, as defined in the agreement, at the Company's
option.
 
     On October 31, 1995, the Company also entered into a term loan agreement
with the same bank, which provided additional uncollateralized borrowings of
$7,000,000. Principal payments are payable in equal monthly installments of
$83,000 through June 1, 2002, with the remaining principal payment due on June
30, 2002. Interest is payable monthly at either the bank's base rate or at the
LIBOR Rate, as defined in the agreement, at the Company's option.
 
     At December 31, 1997 and 1998, the interest rates in effect for the term
loan borrowings were 6.975% and 7.131%, respectively.
 
     The terms of the revolving credit facility and term loan agreements, as
amended, contain, among other provisions, requirements for maintaining certain
levels of tangible net worth and other financial ratios. The agreement also
contains restrictions with respect to acquisitions. Under the most restrictive
covenant, the operating cash flow to debt service ratio for a fiscal quarter
shall not be less than 1.25 to 1.0. In the event of default of these covenants
or restrictions, any obligation then outstanding under the loan agreement shall
become payable upon demand by the bank. See Note 13 for subsequent event.
 
     The Company has loans outstanding from various foreign banks in the form of
mortgage notes at interest rates ranging from 2.0% to 6.2%. Principal and
interest are payable in monthly installments through 2010. The loans are
collateralized by mortgages on certain of the Company's foreign properties.
 
     Aggregate maturities of long-term debt over the next five years are as
follows:
AGGREGATE
                  YEAR ENDING DECEMBER 31,                      MATURITIES
                  ------------------------                      ----------
1999...................................................     $ 2,058
     2000...................................................       7,343
     2001...................................................       1,405
     2002...................................................       1,329
     2003...................................................         422
     Thereafter.............................................       1,543
                                                                 -------
                                                                 $14,100
                                                                 =======
F-13
75
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
7.  LEASE COMMITMENTS:
 
     The Company leases certain of its facilities and machinery and equipment
under capital and operating leases expiring in various years through 2002 and
thereafter. Generally, the facility leases require the Company to pay
maintenance, insurance and real estate taxes. Rental expense under operating
leases totaled $2,487,000, $2,478,000, and $2,388,000 for the years ended
December 31, 1996, 1997, and 1998, respectively.
 
     Minimum lease payments under operating and capital leases are as follows:
CAPITAL
                                                                  OPERATING LEASES         LEASES
                                                              ------------------------    ---------
                  YEAR ENDING DECEMBER 31,                    REAL ESTATE    EQUIPMENT    EQUIPMENT
                  ------------------------                    -----------    ---------    ---------
1999...................................................    $1,484         $437        $1,202
     2000...................................................       882          251           974
     2001...................................................       660          130           537
     2002...................................................       153           36           333
     2003...................................................        84           13           116
     Thereafter.............................................        51           42            --
                                                                ------         ----        ------
Total minimum lease payments................................    $3,314         $909        $3,162
                                                                ======         ====        ======
Less: amounts representing interest.........................                                  344
                                                                                           ------
Present value of minimum lease payments.....................                                2,818
Less: current portion.......................................                                1,074
                                                                                           ------
Long-term portion...........................................                               $1,744
                                                                                           ======
8.  STOCKHOLDERS' EQUITY:
 
COMMON STOCK
 
     Prior to the effectiveness of a registration statement relating to the
initial public offering of common stock of the Company, the Company will effect
a 3-for-2 stock split, to be effected in the form of a stock dividend of its
common stock, increase the number of authorized shares of common stock to
30,000,000 and authorize 2,000,000 shares of $0.01 par value preferred stock.
Accordingly, all share data has been restated to reflect the common stock split.
 
     The Company has two classes of common stock. Stockholders of Class A common
stock are entitled to voting rights with one vote for each share of common
stock. Stockholders of Class B common stock are not entitled to voting rights.
 
     Upon the closing of this offering for which this Registration Statement is
being prepared each outstanding share of Class A and Class B common stock of the
Company will be converted into an aggregate of 18,053,167 shares of common
stock.
 
STOCK OPTION PLANS
 
     On January 9, 1998, the stockholders of the Company approved the following:
(i) an increase in the number of shares that may be granted under the 1995 Stock
Incentive Plan to 3,750,000 shares of common stock; (ii) the adoption of the
1997 Director Stock Option Plan pursuant to which options may be granted to
purchase up to an aggregate of 300,000 shares of common stock; (iii) the
adoption of the 1997 Employee Stock Purchase Plan pursuant to which the Company
may issue up to an aggregate of 450,000 shares of common stock; and (iv) that
3,750,000 shares, 300,000 shares, and 450,000 shares of
 
                                      F-14
76
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
common stock be reserved for issuance under the 1995 Stock Incentive Plan, the
1997 Director Stock Option Plan, and the 1997 Employee Stock Purchase Plan,
respectively.
 
     The Company grants options to employees under the 1995 Stock Incentive Plan
(the "Plan") and to directors under the 1996 Director Stock Option Plan (the
"Director Plan").
 
     At December 31, 1998 options to purchase 1,651,793 shares of the Company's
common stock were reserved for issuance under the Plan. At December 31, 1998,
under the Director Plan, options to purchase 28,932 shares of common stock were
reserved for issuance. Stock options are granted at 100% of the fair value of
the Company's common stock as determined by the Board of Directors on the date
of grant. In reaching the determination of fair value at the time of each grant,
the Board of Directors considered a range of factors, including the Company's
current financial position, its recent revenues, results of operations and cash
flows, its assessment of the Company's competitive position in its markets and
prospects for the future, the status of the Company's product development and
marketing efforts, current valuations for comparable companies and the
illiquidity of an investment in the Company's common stock. Generally, stock
options under the Plan vest 20% after one year and 5% per quarter thereafter,
and expire 10 years after the grant date. Under the Director Plan, the options
granted in 1996 vest over three years and options granted in 1997 and later vest
at the earlier of (a) the next annual meeting, (b) 13 months from date of grant
or (c) the effective date of an acquisition as defined in the Director Plan.
 
     The following table presents the activity for options under the Plan.
YEAR ENDED             YEAR ENDED             YEAR ENDED
                                        DECEMBER 31, 1996     DECEMBER 31, 1997       DECEMBER 31, 1998
                                       -------------------   --------------------   ---------------------
                                                  WEIGHTED               WEIGHTED                WEIGHTED
                                                  AVERAGE                AVERAGE                 AVERAGE
                                                  EXERCISE               EXERCISE                EXERCISE
                                       OPTIONS     PRICE      OPTIONS     PRICE      OPTIONS      PRICE
                                       --------   --------   ---------   --------   ----------   --------
Outstanding -- beginning of period...   608,270    $11.06      810,442    $4.43      1,564,449    $4.50
Granted..............................   810,442      4.43      785,657     4.57        629,969     6.80
Exercised............................        --        --           --       --             (2)    4.43
Forfeited or Expired.................  (608,270)    11.06      (31,650)    4.43        (96,209)    4.43
                                       --------    ------    ---------    -----     ----------    -----
Outstanding -- end of period.........   810,442    $ 4.43    1,564,449    $4.50      2,098,207    $5.20
Exercisable at end of period.........   114,782    $ 4.43      476,451    $4.43        778,473    $4.46
At December 31, 1998, Plan options included 1,436,588, 566,669, and 94,950
shares outstanding at exercise prices of $4.43, $6.67, and $8.00 per share. The
weighted average remaining contractual life of these options was 8.2 years.
 
     During 1996, 27,128 options were granted at an exercise price of $4.43 per
share under the Director Plan and were outstanding at December 31, 1996. Of
these options, 4,524 were exercisable at December 31, 1996. During 1997, options
for 3,620 shares were granted under the Director Plan at an exercise price of
$4.43 per share. Of these options, 30,748 were outstanding with 13,564
exercisable at the $4.43 per share price at December 31, 1997. During 1998,
options for 3,620 shares were granted under the Director Plan at an exercise
price of $8.00 per share. Of these options, 34,368 were outstanding with 26,228
exercisable at the $4.43 per share price at December 31, 1998.
 
     The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for
Stock-Based Compensation." The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the
 
                                      F-15
77
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
fair value of the Company's stock at the date of grant over the amount an
employee must pay to acquire the stock.
 
     The disclosures required under SFAS No. 123 have been omitted as they are
not meaningful based upon the Company's planned conversion from an S corporation
to a C corporation upon the closing of this offering for which these financial
statements are being prepared. Had the fair value based method prescribed in
SFAS No. 123 been used to account for stock-based compensation cost, there would
have been no change in pro forma net income and pro forma earnings per share
from that reported.
 
9.  INCOME TAXES:
 
     The Company has elected to be taxed as an S corporation for federal and
certain states income tax purposes and, as a result, is not subject to Federal
taxation but is subject to state taxation on income in certain states. The
stockholders are liable for individual Federal and certain state income taxes on
their allocated portions of the Company's taxable income.
 
     The components of income before income taxes and the historical related
provision for income taxes consist of the following:
YEAR ENDED DECEMBER 31,
                                                         ----------------------------
                                                          1996       1997       1998
                                                         -------    -------    ------
Income before income taxes:
  United States........................................  $11,953    $21,858    $6,169
  Foreign..............................................    1,350        410     1,966
                                                         -------    -------    ------
                                                          13,303     22,268     8,135
Current taxes:
  State................................................      285      1,331       197
  Foreign..............................................      792        792       784
                                                         -------    -------    ------
                                                           1,077      2,123       981
                                                         -------    -------    ------
Deferred taxes:
  State................................................     (156)       (72)      (39)
  Foreign..............................................     (121)       (73)        7
                                                         -------    -------    ------
                                                            (277)      (145)      (32)
                                                         -------    -------    ------
Provision for income taxes.............................  $   800    $ 1,978    $  949
                                                         =======    =======    ======
As the Company is not subject to Federal income taxes, a reconciliation of
the effective tax rate to the Federal statutory rate is not meaningful.
 
     At December 31, 1996, 1997, and 1998 the components of the deferred tax
asset and deferred tax liability were as follows:
DECEMBER 31,
                                                           ------------------------
                                                           1996      1997      1998
                                                           ----      ----      ----
Deferred tax assets (liabilities):
  Inventories............................................  $234      $344      $265
  Intercompany profits...................................   160       214       152
  Compensation...........................................    72        77       127
  Investment booked under the equity method..............   (28)      (41)      (59)
  Other..................................................   (34)      (45)       96
                                                           ----      ----      ----
          Total..........................................  $404      $549      $581
                                                           ====      ====      ====
F-16
78
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
 
10.  EMPLOYEE BENEFIT PLANS:
 
     The Company has a 401(k) profit-sharing plan for U.S. employees meeting
certain requirements in which eligible employees may contribute from 1% up to
12% of their compensation. The Company, at its discretion, may provide a
matching contribution which will generally match up to the first 2% of each
participant's compensation, plus 25% of the next 4% of compensation. At the
discretion of the Board of Directors, the Company may also make additional
contributions for the benefit of all eligible employees. The Company's
contributions are generally paid annually, and were $2,170,000 and $2,500,000
for the years ended December 31, 1996 and 1997. Approximately $1,400,000 has
been accrued as the estimated Company contribution for the year ended December
31, 1998 and is included in accrued compensation.
 
     The Company maintains a bonus plan which provides cash awards to key
employees, at the discretion of the Compensation Committee of the Board of
Directors, based upon operating results and employee performance. Bonus expense
to key employees was none, $1,425,000, and none for the years ended December 31,
1996, 1997, and 1998, respectively.
 
11.  RESTRUCTURING:
 
     In 1996, the Company recorded a restructuring charge of $1,400,000,
primarily related to reduction of personnel and the closure of facilities in
Phoenix, AZ and San Jose, CA. These charges include $425,000 of severance pay,
$710,000 of lease commitments, and $265,000 for the write-off of leasehold
improvements. The facilities closure concluded during 1997. The remaining
balance of approximately $126,000 for lease commitments is included in Other
accrued expenses in the accompanying balance sheet at December 31, 1998.
 
12.  GEOGRAPHIC FINANCIAL INFORMATION AND SIGNIFICANT CUSTOMER:
 
     See Note 1 for a brief description of the Company's business. The Company
is organized around two similar product lines domestically and by geographic
locations internationally and has three reportable segments: North America, Far
East, and Europe. Net sales to unaffiliated customers are based on the location
in which the sale originated. Transfers between geographic areas are at
negotiated transfer prices and have been eliminated from consolidated net sales.
Income from operations consists of total net sales less operating expenses and
does not include either interest income, interest expense or income taxes. The
Company had one customer comprising 15%, 22% and 16% of net sales for the years
ended December 31, 1996, 1997, and 1998, respectively. This data is presented in
accordance with SFAS 131, "Disclosures About Segments of an Enterprise and
Related Information," which the Company has retroactively adopted for all
periods presented.
 
                                      F-17
79
                             MKS INSTRUMENTS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1998
                                        ------------------------------------------------
                                        NORTH AMERICA    FAR EAST    EUROPE      TOTAL
                                        -------------    --------    -------    --------
Net sales to unaffiliated customers...    $ 95,607       $23,902     $20,254    $139,763
Intersegment net sales................      26,657           290       1,015      27,962
Depreciation and amortization.........       5,627           210         405       6,242
Income from operations................       6,319         1,298       1,518       9,135
Identifiable assets...................      65,560        20,768       9,904      96,232
Capital expenditures..................       2,635           179         323       3,137
                                                  YEAR ENDED DECEMBER 31, 1997
                                         -----------------------------------------------
 
Net sales to unaffiliated customers...    $138,186       $31,559     $18,335    $188,080
Intersegment net sales................      35,429           225         749      36,403
Depreciation and amortization.........       5,096           259         357       5,712
Income from operations................      22,847           886         230      23,963
Identifiable assets...................      77,302        19,906       9,328     106,536
Capital expenditures..................       2,899           128         242       3,269
                                                  YEAR ENDED DECEMBER 31, 1996
                                         -----------------------------------------------
 
Net sales to unaffiliated customers...    $121,061       $31,066     $18,735    $170,862
Intersegment net sales................      34,100           199       1,426      35,725
Depreciation and amortization.........       5,145           388         387       5,920
Income from operations................      14,534           653         881      16,068
Identifiable assets...................      66,593        18,524       9,883      95,000
Capital expenditures..................       8,332           208         877       9,417
13.  SUBSEQUENT EVENT:
 
     On January 28, 1999, the Company amended its revolving credit facility and
its term loan agreements described in Note 6. The amendments include revised
quarterly cash flow to debt service ratios. The most restrictive covenant is the
cash flow to debt service ratio of 1.25 to 1.0 in the fourth quarter of 1999 and
thereafter.
 
                                      F-18
80
INSIDE BACK COVER (PG.5):

The inside back cover graphically depicts MKS Instruments' message of being a
worldwide provider of process control solutions. It is produced in four-color
process. In the center of the page is a photo of the Earth, with the tag line
"Providing Solutions Around the Process, Around the World" wrapping around the
photo. The background of the page is dark, with the MKS logo appearing at the
top right, knocking out to white. Photos of MKS products surround the photo of
the Earth --above, below, left, and right--and include MKS Baratron Capacitance
Manometers, a Throttling Poppet Valve, a Pressure Controller, Mass Flow
Controllers, an In Situ Flow Verifier, a Direct Liquid Injection Subsystem, and
a Residual Gas Analyzer.
81
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                                             SHARES
 
                                      LOGO
 
                                  COMMON STOCK
 
                            ------------------------
                                   Prospectus
                                          , 1999
                            ------------------------
 
                     NationsBanc Montgomery Securities LLC
 
                          Donaldson, Lufkin & Jenrette
 
                                Lehman Brothers
 
     Until             , 1999 (25 days after the date of this prospectus), all
dealers effecting transactions in the common stock, whether or not participating
in this distribution, may be required to deliver a prospectus. This is in
addition to the obligation of dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
82
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
 
     Estimated expenses payable in connection with the sale of the common stock
offered hereby are as follows:
SEC Registration Fee........................................  $27,800
NASD Filing Fee.............................................  $10,500
Printing, Engraving and Mailing Expenses....................  $  *
Nasdaq Listing Fee..........................................  $95,000
Legal Fees and Expenses.....................................  $  *
Accounting Fees and Expenses................................  $  *
Blue Sky Fees and Expenses..................................  $  *
Transfer Agent and Registrar Fees...........................  $  *
Miscellaneous...............................................  $  *
                                                              -------
          Total.............................................  $  *
                                                              =======
---------------
 
     The Company will bear all expenses shown above.
 
ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
     Section 67 of Chapter 156B of the Massachusetts General Laws provides that
a corporation may indemnify its directors and officers to the extent specified
in or authorized by (i) the articles of organization; (ii) a by-law adopted by
the stockholders; or (iii) a vote adopted by the holders of a majority of the
shares of stock entitled to vote on the election of directors. In all instances,
the extent to which a corporation provides indemnification to its directors and
officers under Section 67 is optional. In its Amended and Restated Articles of
Organization (the "Articles of Organization"), the Registrant has elected to
commit to provide indemnification to its directors and officers in specified
circumstances. Generally, Article 6 of the Registrant's Articles of Organization
provides that the Registrant shall indemnify directors and officers of the
Registrant against liabilities and expenses arising out of legal proceedings
brought against them by reason of their status as directors or officers or by
reason of their agreeing to serve, at the request of the Registrant, as a
director or officer with another organization. Under this provision, a director
or officer of the Registrant shall be indemnified by the Registrant for all
costs and expenses (including attorneys' fees), judgments, liabilities and
amounts paid in settlement of such proceedings, even if he is not successful on
the merits, if he acted in good faith in the reasonable belief that his action
was in the best interests of the Registrant. The Board of Directors may
authorize advancing litigation expenses to a director or officer at his request
upon receipt of an undertaking by any such director of officer to repay such
expenses if it is ultimately determined that he is not entitled to
indemnification for such expenses.
 
     Article 6 of the Registrant's Articles of Organization eliminates the
personal liability of the Registrant's directors to the Registrant or its
stockholders for monetary damages for breach of a director's fiduciary duty,
except to the extent Chapter 156B of the Massachusetts General Laws prohibits
the elimination or limitation of such liability.
 
     The Underwriting Agreement, a form of which is filed at Exhibit 1.1 to this
Registration Statement on Form S-1 (the "Underwriting Agreement"), provides that
the underwriters are obligated under certain circumstances to indemnify
directors, officers and controlling persons of the Registrant against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"). Reference is made to the form of Underwriting Agreement.
 
                                      II-1
83
 
     The Company has obtained directors and officers liability insurance for the
benefit of its directors and certain of its officers.
 
ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES.
 
     In the three years preceding the filing of this Registration Statement, the
Registrant sold 2 shares of its common stock for total proceeds of $6.64. The
registrant awarded options to purchase 837,570 shares of common stock at a
weighted average exercise price of $4.43 per share and 789,277 shares of common
stock at a weighted average exercise price of $4.57 per share, in 1996 and 1997,
respectively.
 
     In 1998, the registrant awarded options to purchase shares of common stock
on the dates in the amounts, and at the exercise price set forth below:
NUMBER OF        EXERCISE PRICE
DATE                                                          OPTIONS           PER SHARE
----                                                     -----------------    --------------
January 9, 1998........................................         3,620             $8.00
January 26, 1998.......................................        31,650             $8.00
March 31, 1998.........................................        31,650             $8.00
July 9, 1998...........................................       450,000             $6.67
November 10, 1998......................................       116,669             $6.67
The grant of options were exempt from registration under the Securities Act
by virtue of the provisions of Section 4(2) of the Securities Act or Rule 701
thereunder.
 
ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
 
     (a) Exhibits:
EX. NO.                           DESCRIPTION
  -------                           -----------
1.1    Form of Underwriting Agreement
     3.1    Restated Articles of Organization, as amended
    *3.2    Form of Amended and Restated Articles of Organization
     3.3    By-Laws, as amended
    *3.4    Form of Amended and Restated By-Laws
     4.1    Specimen certificate representing the common stock
    *5.1    Opinion of Hale and Dorr LLP
    10.1    Amended and Restated 1995 Stock Incentive Plan
    10.2    1996 Amended and Restated 1996 Director Stock Option Plan
    10.3    1997 Director Stock Option Plan
   *10.4    1999 Employee Stock Purchase Plan
    10.5    Amended and Restated Employment Agreement dated as of
            December 15, 1995 between Leo Berlinghieri and the
            Registrant
    10.6    Amended and Restated Employment Agreement dated as of
            December 15, 1995 between John J. Sullivan and the
            Registrant
    10.7    Amended and Restated Employment Agreement dated as of
            December 15, 1995 between Ronald C. Weigner and the
            Registrant
    10.8    Amended and Restated Employment Agreement dated as of
            December 15, 1995 between William D. Stewart and the
            Registrant
   *10.9    Loan Agreement dated as of October 31, 1995, as last amended
            January 28, 1999, by and between the First National Bank of
            Boston and the Registrant
   10.10    Lease Agreement dated as of October 12, 1989, as extended
            November 1, 1998, by and between Aspen Industrial Park
            Partnership and the Registrant
  *10.11    Loan Agreement dated as of November 1, 1993, as last amended
            January 28, 1999 between the First National Bank of Boston
            and the Registrant
II-2
84
EX. NO.                           DESCRIPTION
  -------                           -----------
10.12    Lease dated as of September 21, 1995 by and between General
            American Life Insurance Company and the Registrant
  *10.13    Loan Agreement dated as of February 23, 1996, as last
            amended January 28, 1999 between the BankBoston, N.A.,
            Chemical Bank and the Registrant
   10.14    Revolving Credit Note ($8,000,000) dated February 23, 1996
            between Chemical Bank, The First National Bank of Boston and
            the Registrant
   10.15    Revolving Credit Note ($12,000,000) dated February 23, 1996
            between Chemical Bank, The First National Bank of Boston and
            the Registrant
   10.16    Promissory Note dated as of August 1990 between Jefferson
            National Life Insurance Company and the Registrant
  **10.17   Comprehensive Supplier Agreement #982812 dated October 23,
            1998 by and between Applied Materials, Inc. and the
            Registrant
  **10.18   Management Incentive Program
   10.19    Lease dated as of December 21, 1989, as last amended
            December 1996, between Walpole Park South II Trust and the
            Registrant
   10.20    Lease dated as of January 1, 1996 between MiFuji Kanzai Co.
            Ltd. and the Registrant (covering Floor 5)
   10.21    Lease dated as of April 21, 1997 between MiFuji Kanzai Co.
            Ltd. and the Registrant (covering Floors 1 and 2)
   10.22    Split-Dollar Agreement dated as of September 12, 1991
            between the Registrant, John R. Bertucci and Claire R.
            Bertucci and Richard S. Chute, Trustees of the John R.
            Bertucci Insurance Trust of January 10, 1986
   10.23    Split-Dollar Agreement dated as of September 12, 1991
            between the Registrant, John R. Bertucci and John R.
            Bertucci and Thomas H. Belknap, Trustees of the Claire R.
            Bertucci Insurance Trust of January 10, 1986
  *10.24    Tax Indemnification and S Corporation Distribution Agreement
   10.25    Employment Agreement dated March 7, 1997 between Joseph
            Maher and the Registrant
  *10.26    Contribution Agreement
    21.1    Subsidiaries of the Registrant
   *23.1    Consent of Hale and Dorr LLP (contained in Exhibit 5.1)
    23.2    Consent of PricewaterhouseCoopers LLP
      24    Power of Attorney (included on Page II-4)
      27    Financial Data Schedule
---------------
 * To be filed by amendment.
** Confidential materials omitted and filed separately with the Securities and
Exchange Commission.
 
     (b) FINANCIAL STATEMENTS SCHEDULES
 
     Report of Independent Accountants on Schedule II -- Valuation and
Qualifying Accounts
 
     Schedule II -- Valuation and Qualifying Accounts
 
ITEM 17.  UNDERTAKINGS.
 
     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer and controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
 
                                      II-3
85
 
     The undersigned registrant hereby undertakes that:
 
     (1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
 
     (2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offer
therein, and this offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
 
     The undersigned registrant hereby further undertakes to provide to the
underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
 
                                      II-4
86
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement (File No. 333-      ) to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Andover, Commonwealth of Massachusetts, on this day of January 28, 1999.
 
                                          MKS INSTRUMENTS, INC.
 
                                          By:     /s/ JOHN R. BERTUCCI
                                            ------------------------------------
                                                      JOHN R. BERTUCCI
                                            CHAIRMAN OF THE BOARD OF DIRECTORS,
                                               PRESIDENT AND CHIEF EXECUTIVE
                                                           OFFICER
                                               (PRINCIPAL EXECUTIVE OFFICER)
 
                               POWER OF ATTORNEY
 
     KNOWN ALL MEN BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints each of John R. Bertucci, Ronald C.
Weigner and Mark G. Borden such person's true and lawful attorney-in-fact and
agent with full power of substitution and resubstitution, for such person and in
such person's name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this Registration
Statement (or to any other registration statement for the same offering that is
to be effective upon filing pursuant to Rule 462(b) under the Securities Act),
and to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as such person might or could do
in person, hereby ratifying and confirming all that any said attorney-in-fact
and agent, or any substitute or substitutes of any of them, may lawfully do or
cause to be done by virtue hereof.
 
     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURES                                     TITLE                      DATE
                    ----------                                     -----                      ----
/s/ JOHN R. BERTUCCI                   Chairman of the Board of          January 28, 1999
---------------------------------------------------   Directors, President and Chief
                 JOHN R. BERTUCCI                     Executive Officer (Principal
                                                      Executive Officer)
 
               /s/ RONALD C. WEIGNER                  Vice President and Chief          January 28, 1999
---------------------------------------------------   Financial Officer (Principal
                 RONALD C. WEIGNER                    Financial and Accounting
                                                      Officer)
 
               /s/ RICHARD S. CHUTE                   Director                          January 28, 1999
---------------------------------------------------
                 RICHARD S. CHUTE
 
                                                      Director                          January   , 1999
---------------------------------------------------
                  OWEN W. ROBBINS
 
              /s/ ROBERT J. THERRIEN                  Director                          January 28, 1999
---------------------------------------------------
                ROBERT J. THERRIEN
 
               /s/ LOUIS P. VALENTE                   Director                          January 28, 1999
---------------------------------------------------
                 LOUIS P. VALENTE
II-5
87
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholders
  of MKS Instruments, Inc.:
 
Our audits of the consolidated financial statements referred to in our report
dated January 22, 1999, except for Note 13 as to which the date is January 28,
1999, of MKS Instruments, Inc. also included an audit of the consolidated
financial statement schedule listed in Item 16(b) herein. In our opinion, this
consolidated financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
 
                                            PRICEWATERHOUSECOOPERS LLP
 
Boston, Massachusetts
January 22, 1999
 
                                       S-1
88
 
                                                                     SCHEDULE II
 
                             MKS INSTRUMENTS, INC.
 
                       VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)
BALANCE
                                                        BALANCE AT   PROVISION                  AT END
                                                        BEGINNING    CHARGED TO    ACCOUNTS       OF
                                                        OF PERIOD     EXPENSE     WRITTEN OFF   PERIOD
                                                        ----------   ----------   -----------   -------
YEAR ENDED DECEMBER 31, 1996
  Allowance for Doubtful Accounts.....................     $542          (20)          40        $482
YEAR ENDED DECEMBER 31, 1997
  Allowance for Doubtful Accounts.....................     $482          258          130        $610
YEAR ENDED DECEMBER 31, 1998
  Allowance for Doubtful Accounts.....................     $610          253          207        $656
S-2
89
 
                                 EXHIBIT INDEX
SEQUENTIALLY
                                                                            NUMBERED
EX. NO.                           DESCRIPTION                                 PAGE
-------                           -----------                             ------------
1.1    Form of Underwriting Agreement
   3.1    Restated Articles of Organization, as amended
  *3.2    Form of Amended and Restated Articles of Organization
   3.3    By-Laws, as amended
  *3.4    Form of Amended and Restated By-Laws
   4.1    Specimen certificate representing the common stock
  *5.1    Opinion of Hale and Dorr LLP
  10.1    Amended and Restated 1995 Stock Incentive Plan
  10.2    1996 Amended and Restated 1996 Director Stock Option Plan
  10.3    1997 Director Stock Option Plan
 *10.4    1999 Employee Stock Purchase Plan
  10.5    Amended and Restated Employment Agreement dated as of
          December 15, 1995 between Leo Berlinghieri and the
          Registrant
  10.6    Amended and Restated Employment Agreement dated as of
          December 15, 1995 between John J. Sullivan and the
          Registrant
  10.7    Amended and Restated Employment Agreement dated as of
          December 15, 1995 between Ronald C. Weigner and the
          Registrant
  10.8    Amended and Restated Employment Agreement dated as of
          December 15, 1995 between William D. Stewart and the
          Registrant
 *10.9    Loan Agreement dated as of October 31, 1995, as last amended
          January 28, 1999, by and between the First National Bank of
          Boston and the Registrant
 10.10    Lease Agreement dated as of October 12, 1989, as extended
          November 1, 1998, by and between Aspen Industrial Park
          Partnership and the Registrant
*10.11    Loan Agreement dated as of November 1, 1993, as last amended
          January 28, 1999 between the First National Bank of Boston
          and the Registrant
 10.12    Lease dated as of September 21, 1995 by and between General
          American Life Insurance Company and the Registrant
*10.13    Loan Agreement dated as of February 23, 1996, as last
          amended January 28, 1999 between the BankBoston, N.A.,
          Chemical Bank and the Registrant
 10.14    Revolving Credit Note ($8,000,000) dated February 23, 1996
          between Chemical Bank, The First National Bank of Boston and
          the Registrant
 10.15    Revolving Credit Note ($12,000,000) dated February 23, 1996
          between Chemical Bank, The First National Bank of Boston and
          the Registrant
 10.16    Promissory Note dated as of August 1990 between Jefferson
          National Life Insurance Company and the Registrant
**10.17   Comprehensive Supplier Agreement #982812 dated October 23,
          1998 by and between Applied Materials, Inc. and the
          Registrant
**10.18   Management Incentive Program
 10.19    Lease dated as of December 21, 1989, as last amended
          December 1996, between Walpole Park South II Trust and the
          Registrant
90
SEQUENTIALLY
                                                                            NUMBERED
EX. NO.                           DESCRIPTION                                 PAGE
-------                           -----------                             ------------
10.20    Lease dated as of January 1, 1996 between MiFuji Kanzai Co.
          Ltd. and the Registrant (covering Floor 5)
 10.21    Lease dated as of April 21, 1997 between MiFuji Kanzai Co.
          Ltd. and the Registrant (covering Floors 1 and 2)
 10.22    Split-Dollar Agreement dated as of September 12, 1991
          between the Registrant, John R. Bertucci and Claire R.
          Bertucci and Richard S. Chute, Trustees of the John R.
          Bertucci Insurance Trust of January 10, 1986
 10.23    Split-Dollar Agreement dated as of September 12, 1991
          between the Registrant, John R. Bertucci and John R.
          Bertucci and Thomas H. Belknap, Trustees of the Claire R.
          Bertucci Insurance Trust of January 10, 1986
*10.24    Tax Indemnification and S Corporation Distribution Agreement
 10.25    Employment Agreement dated March 7, 1997 between Joseph
          Maher and the Registrant
*10.26    Contribution Agreement
  21.1    Subsidiaries of the Registrant
 *23.1    Consent of Hale and Dorr LLP (contained in Exhibit 5.1)
  23.2    Consent of PricewaterhouseCoopers LLP
    24    Power of Attorney (included on Page II-4)
    27    Financial Data Schedule
---------------
 * To be filed by amendment.
** Confidential materials omitted and filed separately with the Securities and
Exchange Commission.