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<SEC-DOCUMENT>0000950135-07-001256.txt : 20070228
<SEC-HEADER>0000950135-07-001256.hdr.sgml : 20070228
<ACCEPTANCE-DATETIME>20070228162826
ACCESSION NUMBER:		0000950135-07-001256
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		12
CONFORMED PERIOD OF REPORT:	20061231
FILED AS OF DATE:		20070228
DATE AS OF CHANGE:		20070228

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			COGNEX CORP
		CENTRAL INDEX KEY:			0000851205
		STANDARD INDUSTRIAL CLASSIFICATION:	INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823]
		IRS NUMBER:				042713778
		STATE OF INCORPORATION:			MA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-17869
		FILM NUMBER:		07658239

	BUSINESS ADDRESS:	
		STREET 1:		ONE VISION DR
		CITY:			NATICK
		STATE:			MA
		ZIP:			01760
		BUSINESS PHONE:		5086503000

	MAIL ADDRESS:	
		STREET 1:		ONE VISION DRIVE
		CITY:			NATICK
		STATE:			MA
		ZIP:			01760
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>b63634cce10vk.htm
<DESCRIPTION>COGNEX CORPORATION
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vk</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 10-K</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>(Mark One)</I>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>Annual report pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended <U>December&nbsp;31, 2006</U> or</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>Transition report pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of
1934 for the transition period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Commission File Number </B><U><B>0-17869</B></U></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B><U>COGNEX CORPORATION</U></B>
</DIV>

<DIV align="center" style="font-size: 10pt"><I>(Exact name of registrant as specified in its charter)</I></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Massachusetts</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>04-2713778</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><I>(State or other jurisdiction of <BR>
incorporation or organization)</I>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><I>(I.R.S. Employer Identification No.)</I></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>One Vision Drive<BR>
Natick, Massachusetts 01760-2059<BR>
(508)&nbsp;650-3000</B><BR>
<I>(Address, including zip code, and telephone number, including area code, of<BR>
principal executive offices)</I></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Securities registered pursuant to Section 12(b) of the Act:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Title of Each Class
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Name of Exchange on Which Registered</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Common Stock, par value $.002 per share
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">The NASDAQ Stock Market LLC</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Securities registered pursuant to Section 12(g) of the Act: None
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule&nbsp;405 of
the Securities Act.
</DIV>

<DIV align="center" style="font-size: 10pt">Yes&nbsp;<FONT face="Wingdings">&#254;</FONT>&nbsp;No&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if the registrant is not required to file reports pursuant to Section&nbsp;13 or
Section 15(d) of the Act.
</DIV>

<DIV align="center" style="font-size: 10pt">Yes&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;No&nbsp;<FONT face="Wingdings">&#254;</FONT>&nbsp;</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for
such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days.
</DIV>

<DIV align="center" style="font-size: 10pt">Yes&nbsp;<FONT face="Wingdings">&#254;</FONT>&nbsp;No&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if disclosure of delinquent filers pursuant to Item&nbsp;405 of Regulation&nbsp;S-K is
not contained herein, and will not be contained, to the best of the registrant&#146;s knowledge, in
definitive proxy or information statements incorporated by reference in Part&nbsp;III of this Form 10-K
or any amendment to this Form 10-K. <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of &#147;acclerated filer and large accelerated filer&#148; in
Rule&nbsp;12b-2 of the Exchange Act (Check one):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="31%"></TD>
    <TD width="3%"></TD>
    <TD width="31%"></TD>
    <TD width="3%"></TD>
    <TD width="31%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Large accelerated filer&nbsp;<FONT face="Wingdings">&#254;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Non-accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of the
Exchange Act).
</DIV>

<DIV align="center" style="font-size: 10pt">Yes&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;No&nbsp;<FONT face="Wingdings">&#254;</FONT>&nbsp;</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Aggregate market value of voting stock held by non-affiliates of the registrant<BR>
as of July&nbsp;2, 2006: <U>$1,081,957,000</U><BR>
$.002 par value common stock outstanding as of February&nbsp;25,
2007: <U>44,465,706 shares</U></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Documents incorporated by reference:<BR>
The registrant intends to file a Definitive Proxy Statement pursuant to Regulation&nbsp;14A within 120
days of the end of the fiscal year ended December&nbsp;31, 2006. Portions of such Proxy Statement are
incorporated by reference in Part&nbsp;III of this report. Portions of the registrant&#146;s Annual Report
to Shareholders for the year ended December&nbsp;31, 2006 are incorporated by reference in Part&nbsp;I and
Part&nbsp;II of this report.
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>










<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>COGNEX CORPORATION ANNUAL REPORT ON</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 0pt"><B>FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2006</B>

</DIV>

<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>INDEX</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#101"><B>PART</B>&nbsp;<B>I</B></A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#102">ITEM&nbsp;1.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">BUSINESS</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#103">ITEM&nbsp;1A.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103">RISK FACTORS</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#104">ITEM&nbsp;1B.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104">UNRESOLVED STAFF COMMENTS</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#105">ITEM&nbsp;2.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105">PROPERTIES</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#106">ITEM&nbsp;3.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#106">LEGAL PROCEEDINGS</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#107">ITEM&nbsp;4.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107">SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#108">ITEM&nbsp;4A.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108">EXECUTIVE OFFICERS AND OTHER MEMBERS OF THE MANAGEMENT TEAM OF THE REGISTRANT</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#109"><B>PART</B>&nbsp;<B>II</B></A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#110">ITEM&nbsp;5.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110">MARKET FOR REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#111">ITEM&nbsp;6.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111">SELECTED FINANCIAL DATA</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#112">ITEM&nbsp;7.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#113">ITEM&nbsp;7A.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113">QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#114">ITEM&nbsp;8.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#114">FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#115">ITEM&nbsp;9.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#116">ITEM&nbsp;9A.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#116">CONTROLS AND PROCEDURES</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#117">ITEM&nbsp;9B</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#117">OTHER INFORMATION</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#118"><B>PART</B>&nbsp;<B>III</B></A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#119">ITEM&nbsp;10.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#119">DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#120">ITEM&nbsp;11.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#120">EXECUTIVE COMPENSATION</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#121">ITEM&nbsp;12.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#121">SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#122">ITEM&nbsp;13.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#122">CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#123">ITEM&nbsp;14.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#123">PRINCIPAL ACCOUNTANT FEES AND SERVICES</A></DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#124"><B>PART</B>&nbsp;<B>IV</B></A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#125">ITEM&nbsp;15.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#125">EXHIBITS AND FINANCIAL STATEMENT SCHEDULES</A></DIV></TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="b63634ccexv10ws.txt">EX-10.S Summary of Annual Bonus Program</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="b63634ccexv10wt.htm">EX-10.T Summary of Director Compensation</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="b63634ccexv13.htm">EX-13 Annual Report to Shareholders</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="b63634ccexv21.txt">EX-21 Subsidiaries</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="b63634ccexv23w1.txt">EX-23.1 Consent of Ernst & Young LLP</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="b63634ccexv31w1.htm">EX-31.1 Section 302 Certification of C.E.O.</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="b63634ccexv31w2.htm">EX-31.2 Section 302 Certification of C.F.O.</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="b63634ccexv32w1.htm">EX-32.1 Section 906 Certification of C.E.O.</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="b63634ccexv32w2.htm">EX-32.2 Section 906 Certification of C.F.O.</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART I</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This Annual Report on Form 10-K contains forward-looking statements within the meaning of the
Federal Securities Laws. Readers can identify these forward-looking statements by the Company&#146;s
use of the words &#147;expects,&#148; &#147;anticipates,&#148; &#147;estimates,&#148; &#147;believes,&#148; &#147;projects,&#148; &#147;intends,&#148; &#147;plans,&#148;
&#147;will,&#148; &#147;may,&#148; &#147;shall,&#148; and similar words and other statements of a similar sense. The Company&#146;s
future results may differ materially from current results and from those projected in the
forward-looking statements as a result of known and unknown risks and uncertainties. Readers
should pay particular attention to considerations described in the section captioned &#147;Risk
Factors,&#148; appearing in Part&nbsp;I &#151; Item&nbsp;IA of this Annual Report on Form 10-K. The Company cautions
readers not to place undue reliance upon any such forward-looking statements, which speak only as
of the date made. The Company disclaims any obligation to subsequently revise forward-looking
statements to reflect the occurrence of anticipated or unanticipated events or circumstances after
the date such statements are made.
</DIV>
<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 1. BUSINESS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Corporate Profile</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cognex Corporation (&#147;Cognex&#148; or the &#147;Company,&#148; each of which includes, unless the context indicates
otherwise, Cognex Corporation and its subsidiaries) was incorporated in Massachusetts in 1981. Its
corporate headquarters are located at One Vision Drive, Natick, Massachusetts 01760 and its
telephone number is (508)&nbsp;650-3000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company designs, develops, manufactures, and markets machine vision systems, or computers that
can &#147;see,&#148; which are used to automate a wide range of manufacturing processes where vision is
required. Machine vision is important for applications in which human vision is inadequate to meet
requirements for feature size, accuracy, or speed, or in instances where substantial cost savings
are obtained through the reduction of direct labor or improved product quality. Today, many types
of manufacturing equipment require machine vision because of the increasing demands for speed and
accuracy in manufacturing processes, as well as the decreasing feature size of items being
manufactured.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has two operating divisions: the Modular Vision Systems Division (MVSD), based in
Natick, Massachusetts, and the Surface Inspection Systems Division (SISD), based in Alameda,
California. MVSD designs, develops, manufactures, and markets modular vision systems that are used
to automate the manufacture of discrete items, such as semiconductor chips, cellular phones, and
light bulbs, by locating, identifying, inspecting, and measuring them during the manufacturing
process. SISD designs, develops, manufactures, and markets surface inspection vision systems that
are used to inspect the surfaces of materials processed in a continuous fashion, such as paper,
metals, plastics, and non-wovens, to ensure there are no flaws or defects on the surfaces.
Historically, MVSD has been the source of the majority of the Company&#146;s revenue, representing
approximately 87% of total revenue in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>What is Machine Vision?</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Since the beginning of the Industrial Revolution, human vision has played an indispensable role in
the process of manufacturing products. Human eyes did what no machines could do themselves:
locating and positioning work, tracking the flow of parts, and inspecting output for quality and
consistency. Today, however, the requirements of many manufacturing processes have surpassed the
limits of human eyesight. Manufactured items often are produced too quickly or with tolerances too
small to be analyzed by the human eye. In response to manufacturers&#146; needs, &#147;machine vision&#148;
technology emerged, providing manufacturing equipment with the gift of sight. The Company believes
that virtually every manufacturer that makes products in an automated process can achieve better
quality and manufacturing efficiency by using machine vision.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Machine vision systems combine cameras with intelligent software to collect images and then answer
questions about these images, such as:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Question</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Example</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR><TD>&nbsp;</TD></TR><TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><U><I>GUIDANCE</I></U></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Where is it?
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Determining the exact physical
location and orientation of an
object.
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Determining the position of a printed circuit board
so that a robot can automatically be guided to
insert electronic components.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><U><I>IDENTIFICATION</I></U></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">What is it?
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Identifying an object by analyzing
its shape or by reading a serial
number.
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Identifying the serial number on an automotive
airbag so that it can be tracked and processed
correctly through manufacturing.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><U><I>INSPECTION</I></U></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">How good is it?
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Inspecting an object for flaws or
defects.
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Inspecting the paper that US currency is printed
on.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><U><I>GAUGING</I></U></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">What size is it?
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Determining the dimensions of an
object.
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Determining the diameter of a bearing prior to
final assembly.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Machine Vision Market</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cognex serves a wide array of customers around the world that use the Company&#146;s products to replace
human vision in a variety of industrial applications. While machine vision systems were first
widely embraced by manufacturers of electronic components who needed this technology to produce
computer chips with decreasing geometries, advances in technology and easy-to-use interfaces have
made machine vision available to a broader range of users. Today, the Company&#146;s products are at
work solving vision applications in many industries, including semiconductors, electronics,
automotive, food and beverage, healthcare, pharmaceuticals, and high-speed inspection of materials,
such as paper and metals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s current customers can be classified into three primary markets: the semiconductor and
electronics capital equipment market, the discrete factory automation market, and the surface
inspection market. Semiconductor and electronics capital equipment manufacturers purchase Cognex
machine vision systems and integrate them into the capital equipment that they manufacture and then
sell to their customers in the semiconductor and electronics industries that either make computer
chips or make printed circuit boards containing computer chips. Although the Company sells to
original equipment manufacturers (OEMs) in a number of industries, these semiconductor and
electronics OEMs have historically been large consumers of the Company&#146;s products. Sales to
semiconductor and electronics capital equipment manufacturers represented approximately 32% of the
Company&#146;s total revenue in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Discrete manufacturers in the factory automation area include a wide array of manufacturers who use
machine vision for applications in a variety of industries, including the automotive, consumer
electronics, food and beverage, healthcare, pharmaceutical, and aerospace industries. These
manufacturers purchase Cognex machine vision systems and install them directly on their production
lines. These customers, who typically have limited computer programming or machine vision
experience, purchase Cognex products from the Company&#146;s direct sales force, from a distributor, or
from a system integrator or machine builder that is experienced in machine vision technology.
System integrators are hired by end users to help them develop a vision application for their
production line, whereas machine builders are hired by end users to build a complete, custom
machine that incorporates machine vision. Sales to discrete factory automation customers
represented approximately 55% of the Company&#146;s total revenue in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Surface inspection customers are manufacturers of materials processed in a continuous fashion, such
as paper, metals, plastics, and nonwovens. These customers need sophisticated machine vision to
detect
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and classify defects in the surfaces of those materials as they are being processed at high
speeds. Surface inspection sales represented approximately 13% of the Company&#146;s total revenue in
2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Business Strategy</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s goal is to expand its position as a leading worldwide supplier of machine vision
systems for factory automation by offering a complete family of machine vision products to a broad
base of manufacturers. Semiconductor and electronics equipment manufacturers have historically
been large consumers of the Company&#146;s products. Over the past few years, however, the Company has
diversified its customer base beyond the semiconductor and electronics capital equipment sector.
Demand from these capital equipment manufacturers is highly cyclical, with periods of investment
followed by temporary downturns. At its revenue peak in 2000, sales to semiconductor and
electronics capital equipment manufacturers represented approximately 61% of the Company&#146;s total
revenue, compared to approximately 32% in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company believes that long-term, sustained revenue growth will come from a broad base of
manufacturers outside of the semiconductor and electronics capital equipment manufacturer sector.
Accordingly, the Company has invested in expanding its product offerings to its discrete factory
automation customers, who demand a wide range of easy-to-use products of varying capability and
price, and in developing a strong worldwide sales and support infrastructure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In May&nbsp;2005, the Company completed its largest acquisition to date when it purchased DVT
Corporation. In recent years, the Company has expanded its product line by adding low-cost,
easy-to-use vision sensors. However, reaching the many prospects for these products in factories
around the world requires a large third-party distribution channel to supplement the Company&#146;s own
direct end-user sales force. With the acquisition of DVT Corporation, the Company immediately
gained a worldwide network of distributors, all fully trained in selling and supporting machine
vision products. The Company believes that it can accelerate its growth in the rapidly developing
discrete factory automation market by selling its expanding line of low-cost, easy-to-use products,
including the acquired DVT vision sensors, through this worldwide distribution channel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In May&nbsp;2006, the Company acquired AssistWare Technology, Inc., a developer of Lane Departure
Warning Systems, and entered the emerging market for machine vision systems in vehicles. These
highly-specialized sensors are installed in vehicles, ranging from long-haul trucks to passenger
cars, where they provide driver assistance by constantly analyzing the vehicle&#146;s external
environment and warning the driver of potentially dangerous situations. AssistWare&#146;s Lane
Departure Warning System uses machine vision technology to watch the road ahead and alert drivers
if they unintentionally leave their lane or if their driving pattern becomes erratic. The Company
believes that entering this new commercial market for machine vision systems is an important
strategic move to diversify into areas outside of the factory floor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company intends to continue to defend its strong position in the semiconductor and electronics
capital equipment sector, while selectively expanding into new industrial and commercial machine
vision applications through the internal development of new products, as well as the acquisition of
businesses and technologies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Products</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cognex offers a full range of machine vision products designed to meet customer needs at virtually
any stage of the manufacturing process and virtually any capability/price point.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Vision Sensors</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company believes it is firmly positioned in the fast-growing market for vision sensors with its
In-Sight<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and DVT<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> product lines. Vision sensors are machine vision systems
that combine a digital camera, software, vision processor, and input/output capability in a
low-cost, compact, easy-to-use package. These general-purpose vision sensors are designed to be
easily programmed to perform a
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">wide range of vision tasks including part location, identification,
measurement, assembly verification, and robotic guidance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Company expanded the In-Sight 5000 series to include remote-head vision sensors and
new software tools to address vision robotic applications, while continuing to increase processing
power in a rugged, industrial-grade package that meets high standards for shock, vibration, and
dust and wash-down protection. The DVT product line introduced three new models in 2006 to address
the low-cost, full-function vision sensor market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Vision sensors are sold to end users, distributors, system integrators, and machine builders
located in North America, Japan, Europe, and Southeast Asia in a wide range of general
manufacturing applications, such as automotive parts and assembly, consumer packaged goods,
electronic components, medical devices, and pharmaceuticals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Expert Sensors</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Unlike general-purpose vision sensors that can be programmed to solve a wide variety of vision
tasks, Cognex&#146;s sensor products are designed to deliver very simple, low-cost solutions for
specific sensor problems. Because of their low price and ease of use, the Company expects to solve
many new manufacturing problems with its Checker<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> series of products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2004, the Company introduced Checker 101, designed to detect the presence or absence of product
features. Checker detects or inspects parts by understanding what they look like, providing high
reliability and eliminating many of the drawbacks of traditional photoelectric sensors. In 2005,
the Company introduced Checker 101E, which expands Checker&#146;s capability to include the tracking and
rejecting of parts. This capability provides significant value to the customer since it eliminates
the need for other industrial equipment, providing higher ease of use and a lower cost solution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Checker is predominantly sold through the Company&#146;s distribution network to end users located in
North America, Japan, Europe, and Southeast Asia in a wide range of general manufacturing
industries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>ID Products</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s industrial ID products are designed to quickly and reliably read codes (e.g.
one-dimensional bar codes on labels or two-dimensional marks on parts) that have been applied or
directly marked on discrete items during the manufacturing process. These image-based products
provide industry-leading read rates on parts regardless of the speed of the production line,
marking method (i.e. pin stamped, etched, printed, or otherwise), or part material (i.e. paper,
metal, plastic, glass, etc.). Manufacturers of goods ranging from automotive suppliers to
pharmaceutical items to aircraft components to medical devices are increasingly looking to direct
part mark (DPM)&nbsp;identification to ensure the appropriate manufacturing processes are performed in
the correct sequence on the right parts. In addition, DPM can be used to create a history of the
part from the beginning of its life to the end, and for use in supply chain management and repair.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Company introduced the DataMan<I>&#153; </I>7500 Series&nbsp;DPM hand-held readers for part
traceability. The DataMan 7500 reads everything from the most challenging marks on parts to the
easiest printed bar codes. These rugged, self-contained readers incorporate IDMax&#153; decoding
software and UltraLight<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> illumination system to optimally illuminate and read marks on
any part surfaces.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In early 2007, the Company introduced the DataMan 100 fixed-mount readers. The DataMan 100 is
smaller than a flip phone. Its all-in-one design includes integrated illumination, aiming, and
optics and can provide six-sigma read rates at line speeds up to 45 parts per second. Like the
DataMan 7500, this product also incorporates IDMax to read the most difficult direct marked parts.
The DataMan 100 features a rugged aluminum housing that provides protection against dust and water,
making it ideal for anything from the highest speed document handling machine to the most difficult
marks on an automotive assembly line.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Industrial ID products are sold to end users, distributors, system integrators, and machine
builders located in North America, Japan, Europe, and Southeast Asia in a broad range of
industries, such as automotive, pharmaceuticals, aerospace, and medical devices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s wafer ID products are designed to quickly and reliably read codes (e.g. one- or
two-dimensional bar codes or human-readable characters) that have been laser scribed onto
semiconductor wafers. These products are sold to OEMs and integrated into semiconductor
manufacturing and handling equipment. They read codes on wafers under a variety of challenging
process conditions so that semiconductor manufacturers can track individual wafers through every
step of the process, ensuring full traceability and closed-loop process feedback.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Company launched a new series of high-performance wafer readers based on a new
generation of microprocessors. The In-Sight 1721 and 1722 wafer readers offer fast and powerful
wafer identification. The 1721 uses fab-safe red LED lighting, while the 1722 is a specialized
infrared reader designed to read wafers despite the newest ultra-thin photoresist coatings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Wafer ID products are predominantly sold to OEMs located in North America, Japan, Europe, and
Southeast Asia in the semiconductor industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>PC-Based Vision Systems</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company sells a full range of PC-based vision systems that combine the vision power of Cognex&#146;s
most advanced vision tools with the processing power of high-speed PCs, provide the flexibility to
choose from the widest range of contemporary analog and digital cameras for image acquisition, and
facilitate seamless integration of vision into capital equipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These products offer the most extensive suite of patented and unique vision software tools
featuring PatMax<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, high-accuracy pattern location software that can locate objects that
vary in size and orientation or whose appearance is degraded; PatFlex<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, which enables a
vision system to locate a pattern, or read or verify a code on curved objects, or warped, wrinkled,
or lumpy packages; and PatInspect<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, which can accurately detect extremely small or
subtle manufacturing defects.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PC-based vision is sold both to OEMs located in North America, Japan, Europe, and Southeast Asia
who integrate the machine vision systems into capital equipment for the semiconductor and
electronics industries, as well as to end users, system integrators, and machine builders located
in North America, Japan, Europe, and Southeast Asia in a wide range of industries within the
factory automation market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>VisionPro Product Family</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">VisionPro<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> facilitates rapid application development and installation of integrated PC
vision solutions, speeding time to market for OEMs, system integrators, machine builders, and
advanced manufacturing engineers. VisionPro&#146;s easy-to-use application development software offers
both the power and flexibility of advanced programming and the simplicity of a graphical
programming environment. VisionPro&#146;s extensive suite of patented vision tools enables solving the
most challenging machine vision applications. VisionPro works with both Cognex
MVS-8000<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Series frame grabbers and with direct connect FireWire PC systems.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>MVS-8000 Product Family</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The MVS-8000 family of programmable machine vision systems provides industrial-grade fast and
reliable image capture and vision processing for the most demanding machine vision applications.
Designed for high throughput, the 8000 series frame grabbers support the widest range of high-speed
and high-resolution digital and analog acquisition, including CameraLink, area scan, linescan,
color, and multi-camera acquisition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Application Specific PC-based Vision Systems</I>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company offers a variety of application-specific systems that combine Cognex PC-based hardware
and software to create a solution that is tailored to the particular requirements of certain vision
applications. A partial list of application-specific vision systems is as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>ProofRead&#153; </I>with <I>OCVMax&#153; </I>and <I>IDMax </I>is a complete system for ensuring label accuracy and product
traceability for the pharmaceutical, food and beverage, and personal care industries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>DisplayInspect</I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> inspects the small, high-resolution displays commonly found on cellular
phones, pagers, medical test instruments, and other electronic devices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>SMD 4</I><SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP>guides the placement of surface mount devices onto printed circuit boards and
other assemblies, as well as inspects parts prior to placement. <I>BGA II</I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> inspects ball
grid array devices for missing, misplaced, or improperly formed solder balls. <I>PMI </I>inspects probe
marks after electrical testing of wafers to detect damage to bond pads or indicate damaged probe
cards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Application-specific systems are targeted to OEMs, system integrators, machine builders, and end
users located in North America, Japan, Europe, and Southeast Asia in a wide range of industries,
depending upon the application.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Commercial Products</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s commercial products currently serve two major market areas:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Automotive and Truck market for vehicle-based &#147;driver assist&#148; vision sensors that
enhance vehicle safety and driver convenience, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Building Automation and Security market for vision-based &#147;people&#148; sensing and counting.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the
Automotive and Truck market, the Company sells the
SafeTRAC<I>&#153;</I> Lane Departure Warning System, a vision sensor that watches the
roadway directly ahead of the vehicle and alerts the driver if the vehicle crosses out of its lane
without first activating a turn signal. SafeTRAC also warns the driver if they are exhibiting
symptoms of drowsiness, so that they can stop and get rest. SafeTRAC is currently sold to
commercial truck fleets located in North America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the Building Automation and Security market, the Company sells the CPS-1000 People Sensor<I>&#153;</I>, a
vision sensor designed for door security that detects, counts, and monitors the direction of motion
of people as they pass through an access-controlled doorway. The CPS-1000 utilizes Cognex&#146;s
existing vision software, as well as patented 2D and 3D vision technology that Cognex developed
specifically for &#147;people sensing&#148; applications. The CPS-1000 is currently sold to OEMs located in
North America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Surface Inspection Systems</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The SmartView<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> surface and web inspection system provides reliable detection,
classification, and visualization of defects and monitoring of surface quality on products that are
manufactured in a continuous process. The SmartView system provides grey-scale imaging capability
to visualize the defects, as well as a high-quality snapshot of the surface or web. Most advanced
open data access capabilities embedded into the SmartView system ensure real-time inspection
control and data access between the SmartView system and other control, business, production, and
quality systems in the mill. The SmartView system is a modular and scalable system on a
Microsoft<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Windows<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>-based platform that enables the Company to expand into
more complex vision applications in the paper, metals, plastics, and nonwovens industries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SmartView is sold primarily to end users located in North America, Japan, Europe, and Southeast
Asia in the paper, metals, plastics, and nonwovens industries. In addition, SmartView is sold to
end users located in Europe and Asia in the paper industry through an OEM relationship with
Honeywell International, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Research, Development, and Engineering</B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company engages in research, development, and engineering (R,D&#038;E) to enhance its existing
products and to develop new products and functionality to meet market opportunities. In addition
to internal research and development efforts, the Company intends to continue its strategy of
gaining access
to new technology through strategic relationships and acquisitions where appropriate. The Company
considers its on-going efforts in R,D&#038;E to be a key component of its strategy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the Company employed 175 professionals in R,D&#038;E, most of whom are software
developers. The Company&#146;s R,D&#038;E expenses totaled $32,607,000, $27,640,000, and $27,063,000, or
approximately 13%, 13%, and 14% of revenue, in 2006, 2005, and 2004, respectively. 2006 R,D&#038;E
expenses included $3,627,000 of stock-based compensation expense that was not recorded in 2005 or
2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Manufacturing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s MVSD products, with the exception of its DVT product line, are manufactured utilizing
a turnkey operation whereby the majority of component procurement, assembly, and initial testing
are performed under agreement by third-party contract manufacturers. After the completion of
initial testing, the contract manufacturers deliver the products to the Company&#146;s Cork, Ireland
facility for programming and quality control. For the DVT product line, components are procured by
the Company, delivered to a contract manufacturer for assembly and initial testing, and returned to
the Company&#146;s Duluth, Georgia facility for programming and quality control. The contract
manufacturers use specified components and assembly and test documentation created and controlled
by the Company. From time to time, the Company will procure large quantities of end-of-life
components for strategic purposes that will not be consumed within one year. Certain components
are presently available only from a single source.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s SISD products are manufactured at its Alameda, California facility, with the
exception of the frames on which the cameras and the lights used to illuminate the web are mounted.
The manufacturing process at the Alameda facility consists of system design, configuration
management and control, component procurement, and subassembly. After the completion of
subassembly at the Alameda facility, some of the systems are delivered to the Company&#146;s Kuopio,
Finland facility where the frames and lights are manufactured. The manufacturing process at the
Kuopio facility consists of system integration, final testing, and quality control. Certain
products are manufactured by third-party contract manufacturers using documentation created and
controlled by the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Sales and Service</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company sells its MVSD products through a worldwide direct sales force that focuses on the
development of strategic accounts that generate or are expected to generate significant sales
volume for the Company. Orders from direct customers currently ship from the Company&#146;s Cork,
Ireland facility. The Company&#146;s easy-to-use vision sensors are also sold through a worldwide
distribution network. Orders from distributors currently ship from the Company&#146;s Duluth, Georgia
facility. The Company&#146;s SISD products are primarily sold through a worldwide direct sales force
and ship from either the Company&#146;s Alameda, California or Kuopio, Finland facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the Company&#146;s sales force consisted of 244 professionals, including sales
engineers, application engineers, and distribution management personnel. Sales engineers call
directly on targeted accounts and coordinate the activity of the application engineers. The
majority of the Company&#146;s sales force holds engineering or science degrees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Sales to customers based outside of the United States represented approximately 65% of total
revenue in 2006, compared to approximately 63% in 2005 and approximately 69% in 2004. No customer
accounted for greater than 10% of revenue in 2006, 2005, or 2004. Although international sales may
from time to time be subject to federal technology export regulations, to date the Company has not
suffered significant delays or prohibitions in sales to any of its foreign customers. Financial
information about segments and geographic areas may be found in the Notes to the Consolidated
Financial Statements, appearing on
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">pages 49 and 50 of the Annual Report to Shareholders for the
year ended December&nbsp;31, 2006, which is attached as Exhibit&nbsp;13 hereto, and is incorporated herein by
reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s MVSD service offerings include maintenance and support, training, and consulting
services. Maintenance and support programs include hardware support programs that entitle
customers
to have failed product repaired, as well as software support programs that provide customers with
application support and software updates on the latest software releases. Training services
include a variety of product courses that are available at the Company&#146;s offices worldwide, at
customer facilities, and on computer-based tutorials, video, and the Internet. The Company
provides consulting services that range from a specific area of functionality to a completely
integrated machine vision application.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s SISD service offerings include maintenance and support and training services similar
to those provided by MVSD, as well as installation services. The installation services group
supervises the physical installation of the hardware at the customer location, configures the
software application to detect the customer&#146;s defects, validates that the entire integrated system
with the peripheral components is functioning according to the specifications, and performs
operator training.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Intellectual Property</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Because the Company relies on the technical expertise, creativity, and knowledge of its personnel,
it utilizes patent, trademark, copyright, and trade secret protection to maintain its competitive
position and protect its proprietary rights in its products and technology. While its intellectual
property rights are important to its success, the Company believes that its business as a whole is
not materially dependent on any particular patent, trademark, copyright, or other intellectual
property right.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the Company had been granted, or owned by assignment, approximately 247
patents issued in the field of machine vision technology and had 189 patent applications pending.
The Company has used, registered, or applied to register a number of trademark registrations in the
United States and in other countries. The Company&#146;s trademark and servicemark portfolio includes
various registered marks, including but not limited to, Cognex<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, DVT<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>,
In-Sight<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, Checker<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, PatMax<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, VisionPro<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, and
SmartView<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, as well as many common-law marks, including but not limited to,
DataMan<SUP style="font-size: 85%; vertical-align: text-top">TM</SUP>, IDMax<SUP style="font-size: 85%; vertical-align: text-top">TM</SUP>, and Proofread<SUP style="font-size: 85%; vertical-align: text-top">TM</SUP>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compliance with Environmental Provisions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s capital expenditures, earnings, and competitive position are not materially affected
by compliance with federal, state, and local environmental provisions which have been enacted or
adopted to regulate the distribution of materials into the environment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Competition</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The machine vision market is highly fragmented and the Company&#146;s competitors vary depending upon
market segment, geographic region, and application niche. The Company&#146;s competitors are typically
other vendors of machine vision systems and manufacturers of image processing systems and sensors.
In addition, in the semiconductor and electronics capital equipment market, the Company competes
with the internal engineering efforts of current or prospective customers. Also, in the DPM
identification market, the Company competes with manufacturers of automatic identification systems.
Any of these competitors may have greater financial and other resources than the Company.
Although the Company considers itself to be one of the leading machine vision companies in the
world, reliable estimates of the machine vision market and the number of competitors are not
available.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s ability to compete depends upon its ability to design, manufacture, and sell
high-quality products, as well as its ability to develop new products that meet evolving customer
requirements. The primary competitive factors affecting the choice of a machine vision system
include vendor reputation, product functionality and performance, ease of use, price, and
post-sales support. The importance of each of these factors varies depending upon the specific
customer&#146;s needs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Backlog</B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the Company&#146;s backlog totaled $36,783,000, compared to $33,069,000 at
December&nbsp;31, 2005. Backlog reflects purchase orders for products scheduled for shipment primarily
within three months at MVSD and primarily within six months at SISD. The level of backlog at any
particular date is not necessarily indicative of future revenue of the Company. The Company&#146;s
vision
sensors typically ship within one week of when the order is booked. In addition, delivery
schedules may be extended and orders may be canceled at any time subject to certain cancellation
penalties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Employees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the Company employed 760 persons, including 375 in sales, marketing, and
service activities; 175 in research, development, and engineering; 97 in manufacturing and quality
assurance; and 113 in information technology, finance, and administration. Of the Company&#146;s 760
employees, 300 are based outside of the United States. None of the Company&#146;s employees are
represented by a labor union and the Company has experienced no work stoppages. The Company
believes that its employee relations are good.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Available Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company maintains a website on the World Wide Web at <U>www.cognex.com</U>. The Company makes
available, free of charge, on its website in the section captioned &#147;Investors &#151; SEC FiIings&#148; its
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, as soon as reasonably practicable after such reports are
electronically filed with, or furnished to, the SEC. The Company&#146;s reports filed with, or
furnished to, the SEC are also available at the SEC&#146;s website at
<U>www.sec.gov</U>. Information
contained on the Company&#146;s website is not a part of, or incorporated by reference into, this Annual
Report on Form 10-K.
</DIV>
<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 1A. RISK FACTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The risks and uncertainties described below are not the only ones that we face. Additional risks
and uncertainties that we are unaware of, or that we currently deem immaterial, also may become
important factors that affect our company in the future. If any of these risks were to occur, our
business, financial condition, or results of operations could be materially and adversely affected.
This section includes or refers to certain forward-looking statements; you should read the
explanation of the qualifications and limitations on such forward-looking statements found in the
section captioned &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations,&#148; appearing on page 15 of the Annual Report to Shareholders for the year ended December
31, 2006, which is attached as Exhibit&nbsp;13 hereto, and is incorporated herein by reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Unless the context otherwise requires, the words &#147;Cognex,&#148; &#147;we,&#148; &#147;our,&#148; &#147;us,&#148; and &#147;our company&#148;
refer to Cognex Corporation and its consolidated subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Unfavorable changes in economic conditions and capital spending may negatively impact our operating
results.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our revenue is dependent upon the capital spending trends of manufacturers in a number of
industries, including, but not limited to, the semiconductor, electronics, automotive, and steel
industries. These spending levels are, in turn, impacted by global economic conditions. Our
operating results have been materially adversely affected in the past, and could be materially
adversely affected in the future, as a result of unfavorable economic conditions and reduced
capital spending by manufacturers worldwide.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Downturns in the semiconductor and electronics industries may adversely affect our business.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, approximately 32% of our revenue was derived from semiconductor and electronics capital
equipment manufacturers. This concentration was as high as 61% in 2000 during its revenue peak.
The semiconductor and electronics industries are highly cyclical and have historically experienced
periodic downturns, which have often had a severe effect on demand for production equipment that
incorporates
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">our products. While we have been successful in diversifying our business beyond OEM
customers who serve the semiconductor and electronics industries, our business is still impacted by
capital expenditures in these industries, which, in turn, are dependent upon the market demand for
products containing
computer chips. As a result, our operating results in the foreseeable future could be
significantly and adversely affected by a slowdown in either of these industries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Economic, political, and other risks associated with international sales and operations could
adversely affect our business and operating results.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, approximately 65% of our revenue was derived from customers located outside of the United
States. We anticipate that international sales will continue to account for a significant portion
of our revenue. We intend to continue to expand our operations outside of the United States and
may enter additional international markets, which will require significant management attention and
financial resources. As a result, our operations are subject to the risks inherent in
international sales, including, among other things:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>various regulatory requirements,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>transportation delays,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>difficulties in staffing and managing foreign sales operations, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>potentially adverse tax consequences.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, fluctuations in foreign currency exchange rates may render our products less
competitive relative to local product offerings, or could result in significant foreign currency
losses if not properly hedged. We are also subject to the political risks inherent in
international operations and their impact on the global economy, including economic disruption from
acts of war or terrorism, particularly in the aftermath of the terrorist attacks of September&nbsp;11,
2001. Any of these factors could have a material adverse effect on our operating results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Fluctuations in foreign exchange rates could materially affect our reported results.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We face exposure to adverse movements in foreign currency exchange rates as a significant portion
of our revenue, expenses, assets, and liabilities are denominated in currencies other than the
functional currencies of our company. In certain instances, we utilize derivative instruments to
hedge against foreign currency fluctuations. These contracts are used to reduce our risk
associated with foreign currency exchange rate changes, as the gains or losses on the derivative
are intended to offset the losses or gains on the underlying exposure. We do not engage in foreign
currency speculation. The success of our foreign currency risk management program depends upon
forecasts of transaction activity denominated in various currencies. To the extent that these
forecasts are overstated or understated during periods of currency volatility, we could experience
unanticipated foreign currency gains or losses that could have a material impact on our results of
operations. In addition, our failure to identify new exposures and hedge them in a timely manner
may result in material foreign currency gains or losses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The loss of a large customer could have an adverse effect on our operating results.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, our top five customers accounted for approximately 11% of total revenue. Our expansion
into the factory automation marketplace has reduced our reliance upon the revenue from any one of
our larger OEM customers. Nevertheless, the loss of, or significant curtailment of purchases by,
any one or more of our larger customers could have a material adverse effect on our operating
results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The failure of a key supplier to deliver quality product in a timely manner or our inability to
obtain components for our products could adversely affect our operating results.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A significant portion of our MVSD inventory is manufactured by a third-party contractor. As a
result, we are dependent upon this contractor to provide quality product and meet delivery
schedules. We engage in extensive product quality programs and processes, including actively
monitoring the performance of our third-party manufacturers; however, we may not detect all product
quality issues through these programs and processes. In addition, a variety of components used in
our products are only available
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">from a single source. The announcement by a single-source supplier
of a last-time component buy could result in our purchase of a significant amount of inventory
that, in turn, could lead to an increased risk of inventory
obsolescence. An interruption in, termination of, or material change in the purchase terms of any
single-source components could have a material adverse effect on our operating results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Our business could suffer if we lose the services of, or fail to attract, key personnel.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are highly dependent upon the management and leadership of Robert J. Shillman, our Chief
Executive Officer and Chairman of the Board of Directors, as well as other members of our senior
management team, including James F. Hoffmaster, our President, who has full responsibility for
running our day-to-day operations. Although we have retained many experienced and qualified senior
managers, the loss of key personnel could have a material adverse effect on our company. Our
continued growth and success also depends upon our ability to attract and retain skilled employees
and on the ability of our officers and key employees to effectively manage the growth of our
business through the implementation of appropriate management information systems and internal
controls.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have historically used stock options as a key component of our total employee compensation
program in order to align employee interests with the interests of our shareholders, provide
competitive compensation and benefits packages, and encourage employee retention. Beginning in the
first quarter of 2006, Cognex was required to recognize compensation expense for all stock option
grants. As a result, we incurred increased compensation costs associated with our stock-based
compensation programs. Moreover, difficulties relating to obtaining shareholder approval of stock
option plans could result in a reduction in the total number of options available for grant in
future periods. Due to these factors, we may find it difficult to attract, retain, and motivate
employees, and any such difficulty could materially adversely affect our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Our products may contain design or manufacturing defects, which could result in reduced demand,
significant delays, or substantial costs.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If flaws in either the design or manufacture of our products were to occur, we could experience a
rate of failure in our products that could result in significant delays in shipment and material
repair or replacement costs. While we engage in extensive product quality programs and processes,
including actively monitoring and evaluating the quality of our component suppliers and contract
manufacturers, these actions may not be sufficient to avoid a product failure rate that results in:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>substantial delays in shipment,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>significant repair or replacement costs, or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>potential damage to our reputation,</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">any of which could have a material adverse effect on our operating results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Our failure to develop new products and to respond to technological changes could result in the
loss of our market share and a decrease in our revenues.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The market for our products is characterized by rapidly changing technology. Accordingly, we
believe that our future success will depend upon our ability to develop or acquire new products
with improved price/performance and introduce them to the marketplace in a timely manner. We may
not be able to introduce and market new products successfully and respond effectively to
technological changes or new product introductions by competitors. Our ability to keep pace with
the rapid rate of technological change in the high-technology marketplace could have a material
adverse effect on our operating results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Our failure to effectively manage product transitions or accurately forecast customer demand could
result in excess or obsolete inventory and resulting charges.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Because the market for our products is characterized by rapid technological advances, we frequently
introduce new products with improved hardware performance, additional software features and
functionality, or lower cost that may replace existing products. Among the risks associated with
the
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">introduction of new products are difficulty predicting customer demand and effectively managing
inventory levels to ensure adequate supply of the new product and avoid excess supply of the legacy
product. In
addition, we may strategically enter into non-cancelable commitments with vendors to purchase
materials for our products in advance of demand in order to take advantage of favorable pricing or
address concerns about the availability of future supplies. Our failure to effectively manage
product transitions or accurately forecast customer demand, in terms of both volume and
configuration, has led to, and may again in the future lead to, an increased risk of excess or
obsolete inventory and resulting charges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Our failure to properly manage the distribution of our products and services could result in the
loss of revenue.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We use a variety of different distribution methods to sell our products and services, including
third-party resellers and distributors, as well as direct sales to end users. Successfully
managing the interaction of our direct and indirect sales channels to reach various potential
customers for our products and services is a complex process. In addition, our reliance upon
indirect distribution methods may reduce visibility to demand and pricing issues. Each
distribution method has distinct risks and costs, and therefore, our failure to implement the most
advantageous balance in the delivery model for our products and services could adversely affect our
revenue and profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>If we fail to successfully defend our intellectual property, our competitive position and operating
results could suffer.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We rely heavily on our proprietary software technology and hardware designs, as well as the
technical expertise, creativity, and knowledge of our personnel. Although we use a variety of
methods to protect our intellectual property, we rely most heavily on patent, trademark, copyright,
and trade secret protection, as well as non-disclosure agreements with customers, suppliers,
employees, and consultants. We also attempt to protect our intellectual property by restricting
access to our proprietary information by a combination of technical and internal security measures.
These measures, however, may not be adequate to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>protect our proprietary technology,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>protect our patents from challenge, invalidation, or circumvention, or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ensure that our intellectual property will provide us with competitive advantages.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Any of these adverse circumstances could have a material effect on our operating results. We refer
you to the section captioned &#147;Intellectual Property,&#148; appearing in Part&nbsp;I &#151; Item&nbsp;I of this report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Our company may be subject to costly litigation.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">From time to time, we may be subject to various claims and lawsuits by competitors, customers, or
other parties arising in the ordinary course of business, including lawsuits charging patent
infringement. These matters can be time-consuming, divert our management&#146;s attention and
resources, and cause us to incur significant expenses. Furthermore, the results of any of these
actions may have a material adverse effect on our operating results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Increased competition may result in decreased demand or prices for our products and services.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We compete with other vendors of machine vision systems, the internal engineering efforts of
our current or prospective customers, and the manufacturers of image processing systems, automatic
identification systems, and sensors. Any of these competitors may have greater financial and other
resources than we do. In recent years, ease-of-use and product price have become significant
competitive factors in the factory automation marketplace. We may not be able to compete
successfully in the future and our investments in research and development, sales and marketing,
and service activities may be insufficient to enable us to maintain our competitive advantage. In
addition, competitive pressures could lead to price erosion that could materially and adversely
affect our operating results. We refer you to the section captioned &#147;Competition,&#148; appearing in
Part&nbsp;I &#151; Item&nbsp;1 of this report.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Implementation of our acquisition strategy may not be successful, which could affect our ability to
increase our revenue or profitability.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have in the past acquired, and will in the future consider the acquisition of, businesses and
technologies in the machine vision industry. Our business may be negatively impacted by risks
related to those acquisitions. These risks include, among others:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the diversion of management&#146;s attention from other operational matters,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the inability to realize expected synergies resulting from the acquisition,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the failure to retain key customers or employees, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the impairment of acquired intangible assets resulting from technological obsolescence
or lower-than-expected cash flows from the acquired assets.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Acquisitions are inherently risky and the inability to effectively manage these risks could have a
material adverse effect on our operating results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Attractive acquisition opportunities may not be available to us.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our business strategy includes selective expansion into other machine vision applications through
the acquisition of businesses and technologies. Since 1995, we have completed several business and
technology acquisitions, including the acquisition of DVT Corporation in May&nbsp;2005 and AssistWare
Technology, Inc. in May&nbsp;2006. We plan to continue to seek opportunities to expand our product
line, customer base, distribution network, and technical talent through acquisitions in the machine
vision industry. However, we may not have the opportunity to make suitable acquisitions on
favorable terms in the future, which could negatively impact the growth of our business. We expect
that other companies in the machine vision industry will compete with us to acquire compatible
businesses. This competition could increase prices for businesses and technologies that we would
likely pursue, and our competitors may have greater resources than we do.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The trading price of our common stock may be volatile.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The price of our common stock has historically experienced significant volatility due to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fluctuations in our revenue and earnings,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in the market&#146;s expectations for our growth,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>overall equity market conditions,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>conditions relating to the market for technology stocks,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>general economic conditions, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>other factors unrelated to our operations.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The stock markets have experienced extreme price volatility in recent years. This volatility has
had a substantial effect on the market prices of securities issued by many technology companies,
such as our company, often for reasons unrelated to the operating results of the specific company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We may have additional tax liabilities.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are subject to income taxes in both the United States and numerous foreign jurisdictions.
Significant judgment is required in determining our worldwide provision for income taxes. In the
ordinary course of our business, there are many transactions and calculations where the ultimate
tax determination is uncertain. We are regularly under audit by tax authorities. Although we
believe our tax estimates are reasonable, the final determination of tax audits and any related
litigation could be materially different than that which is reflected in historical income tax
provisions and accruals. Based on the results of an audit or litigation, a material effect on our
income tax provision, net income, or cash flows in the period or periods for which that
determination is made could result.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 1B. UNRESOLVED STAFF COMMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There are no unresolved staff comments as of the date of this report.
</DIV>
<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 2: PROPERTIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 1994, the Company purchased and renovated a 100,000 square-foot building located in Natick,
Massachusetts that serves as its corporate headquarters. In 1997, the Company completed
construction of a 50,000 square-foot addition to this building.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 1995, the Company purchased an 83,000 square-foot office building adjacent to its corporate
headquarters. This building is currently occupied with tenants who have lease agreements that
expire at various dates through 2017. The Company also uses a portion of this space for storage
and product demonstrations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 1997, the Company purchased a three and one-half acre parcel of land situated on Vision Drive,
adjacent to the Company&#146;s corporate headquarters. This land is being held for future expansion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company also is party to an agreement to purchase land and a 19,000 square-foot building
adjacent to its corporate headquarters for $1,700,000, which amount was previously paid by the
Company in the form of a deposit. The closing on the purchase of this property, which remains
subject to customary closing conditions, is anticipated to occur in 2007. The Company expects to
continue to lease this building to its current tenants who have lease agreements that expire at
various dates through 2012.
</DIV>
<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 3: LEGAL PROCEEDINGS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On March&nbsp;13, 2006, the Company filed a Declaratory Judgment action in the United States District
Court for Minnesota seeking that certain patents being asserted by Acacia Research Corporation and
Veritec, Inc., and their respective subsidiaries, be ruled invalid, unenforceable, and/or not
infringed by Cognex Corporation. The patent assertions relate to two-dimensional symbology
reading; in particular, the defendants have alleged that any company reading a data matrix code
infringe the subject patents. Certain defendants in the action have asserted counterclaims against
Cognex Corporation, seeking unspecified damages. The litigation is in its early stages and
discovery will begin shortly. Cognex Corporation cannot predict the outcome of this matter, and
although the Company believes it has a meritorious case, an adverse resolution of this lawsuit
could have a material adverse effect on the Company&#146;s financial position, liquidity, results of
operations, and/or indemnification obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Various other claims and legal proceedings generally incidental to the normal course of business
are pending or threatened on behalf of or against Cognex Corporation. While the Company cannot
predict the outcome of these matters, in the opinion of management, any liability arising from them
will not have a material adverse effect on the Company&#146;s financial position, liquidity, or results
of operations after giving effect to provisions already recorded.
</DIV>
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There were no matters submitted during the fourth quarter of the year ended December&nbsp;31, 2006 to a
vote of security holders through solicitation of proxies or otherwise.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->14<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 4A: EXECUTIVE OFFICERS AND OTHER MEMBERS OF THE MANAGEMENT TEAM OF THE REGISTRANT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table sets forth the names, ages, and titles of the Company&#146;s executive officers at
December&nbsp;31, 2006, all of whom have been employed by the Company in their present or other
capacities for no less than the past five years:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Title</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Robert J. Shillman
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">60</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer and Chairman of the Board of Directors</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">James F. Hoffmaster
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President and Chief Operating Officer</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Eric Ceyrolle
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">53</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President of Worldwide Sales and Marketing, MVSD</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Richard A. Morin
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">57</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President of Finance and Administration, Chief Financial
Officer, and Treasurer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Executive officers are elected annually by the Board of Directors. There are no family
relationships among the directors and executive officers of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other members of the senior management team include the following individuals, all of whom have
been employed by the Company in their present or other capacities for no less than the past five
years:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Title</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Markku Jaaskelainen
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">52</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President and General Manager, SISD</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Marilyn Matz
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">53</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President, Semiconductor and Electronics</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">E. John McGarry
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">50</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President, Research and Development</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Akira Nakamura
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">62</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President, Cognex K.K.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kris Nelson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">59</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President, Factory Automation</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">William Silver
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">53</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President and Senior Fellow</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Justin Testa
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">54</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President, ID Products and Sensor Products</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>

<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 5: MARKET FOR REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information with respect to this item may be found in the sections captioned &#147;Selected Quarterly
Financial Data (Unaudited),&#148; &#147;Stock Performance Graph&#148; and &#147;Company Information,&#148; appearing on
pages 57, 58 and 61, respectively, of the Annual Report to Shareholders for the year ended December
31, 2006, which is attached as Exhibit&nbsp;13 hereto, and is incorporated herein by reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table sets forth information as of and for the quarter ended December&nbsp;31, 2006 with
respect to the Company&#146;s stock repurchase program.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Approximate Dollar</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shares Purchased as</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Value of Shares</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Part of Publicly</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">that May Yet be</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average Price Paid</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Announced Plans or</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Purchased under the</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Period of Repurchase</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares Purchased</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Per Share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Programs (1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Plans or Programs</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">October 2 &#151; November&nbsp;1, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">80,587,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">November 2 &#151; December&nbsp;1, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,464,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December 2 &#151; December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,587,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">202,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24.73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">202,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">75,587,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>On July&nbsp;27, 2006, the Company&#146;s Board of Directors authorized the repurchase of up to
$100,000,000 of the Company&#146;s common stock.</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 6: SELECTED FINANCIAL DATA</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information with respect to this item may be found in the section captioned &#147;Five-Year Summary of
Selected Financial Data,&#148; appearing on page 56 of the Annual Report to Shareholders for the year
ended December&nbsp;31, 2006, which is attached as Exhibit&nbsp;13 hereto, and is incorporated herein by
reference.
</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 7: MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information with respect to this item may be found in the section captioned &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations,&#148; appearing on pages 15
through 27 of the Annual Report to Shareholders for the year ended December&nbsp;31, 2006, which is
attached as Exhibit&nbsp;13 hereto, and is incorporated herein by reference.
</DIV>
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information with respect to this item may be found in the section captioned &#147;Quantitative and
Qualitative Disclosures About Market Risk,&#148; appearing on pages 26 and 27 of the Annual Report to
Shareholders for the year ended December&nbsp;31, 2006, which is attached as Exhibit&nbsp;13 hereto, and is
incorporated herein by reference.
</DIV>
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information with respect to this item, which includes the consolidated financial statements and
notes thereto, reports of independent registered public accounting firms, and supplementary data,
may be found on pages 28 through 58 of the Annual Report to Shareholders for the year ended
December&nbsp;31, 2006, which is attached as Exhibit&nbsp;13 hereto, and is incorporated herein by reference.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There were no disagreements with accountants on accounting or financial disclosure during 2006 or
2005.
</DIV>
<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 9A: CONTROLS AND PROCEDURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Disclosure Controls and Procedures</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As required by Rules&nbsp;13a-15 and 15d-15 of the Securities Exchange Act of 1934, the Company has
evaluated, with the participation of management, including the Chief Executive Officer and the
Chief Financial Officer, the effectiveness of its disclosure controls and procedures (as defined in
such rules) as of the end of the period covered by this report. Based on such evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that such disclosure controls and
procedures were effective as of that date. From time to time, the Company reviews its disclosure
controls and procedures, and may from time to time make changes aimed at enhancing their
effectiveness and to ensure that the Company&#146;s systems evolve with its business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Management&#146;s Report on Internal Control over Financial Reporting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information with respect to this item may be found in the section captioned &#147;Report of Management
on Internal Control Over Financial Reporting,&#148; appearing on page 54 of the Annual Report to
Shareholders for the year ended December&nbsp;31, 2006, which is attached as Exhibit&nbsp;13 hereto, and is
incorporated herein by reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Registered Public Accounting Firm&#146;s Report on Internal Control Over Financial Reporting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information with respect to this item may be found in the section captioned &#147;Report of Independent
Registered Public Accounting Firm on Internal Control Over Financial Reporting,&#148; appearing on page
55 of the Annual Report to Shareholders for the year ended December&nbsp;31, 2006, which is attached as
Exhibit&nbsp;13 hereto, and is incorporated herein by reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Changes in Internal Control Over Financial Reporting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There have been no changes in the Company&#146;s internal control over financial reporting that occurred
during the fourth quarter of the year ended December&nbsp;31, 2006 that have materially affected, or are
reasonably likely to materially affect, the Company&#146;s internal control over financial reporting.
</DIV>
<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 9B: OTHER INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">None
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART III</B>
</DIV>

<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information with respect to Directors and Executive Officers of the Company required by Item&nbsp;10
shall be included in the Company&#146;s definitive Proxy Statement for the Special Meeting in Lieu
of the 2007 Annual Meeting of Shareholders to be held on April&nbsp;18, 2007 and is incorporated
herein by reference. In addition, certain information with respect to Executive Officers of
the Company may be found in the section captioned &#147;Executive Officers and Other Members of the
Management Team of the Registrant,&#148; appearing in Part&nbsp;I &#151; Item&nbsp;4A of this Annual Report on
Form 10-K.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has adopted a Code of Business Conduct and Ethics covering all employees, which is
available, free of charge, on the Company&#146;s website, www.cognex.com. The Company intends to
disclose any amendments to or waivers of the Code of Business Conduct and Ethics on behalf of the
Company&#146;s Chief Executive Officer, Chief Financial Officer, Controller, and persons performing
similar functions on the Company&#146;s website.
</DIV>
<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 11: EXECUTIVE COMPENSATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information with respect to executive compensation required by Item&nbsp;11 shall be included in the
Company&#146;s definitive Proxy Statement for the Special Meeting in Lieu of the 2007 Annual
Meeting of Shareholders to be held on April&nbsp;18, 2007 and is incorporated herein by reference.
</DIV>
<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information with respect to security ownership and the other matters required by Item&nbsp;12 shall be
included in the Company&#146;s definitive Proxy Statement for the Special Meeting in Lieu of the 2007
Annual Meeting of Shareholders to be held on April&nbsp;18, 2007 and is incorporated herein by
reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table provides information as of December&nbsp;31, 2006 regarding shares of common stock
that may be issued under the Company&#146;s existing equity compensation plans.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">securities</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">remaining available</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">for future issuance</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">securities to be</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">under equity</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">issued upon</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted-average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">compensation plans</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">exercise of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">exercise price of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(excluding</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">outstanding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">outstanding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">securities</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">options, warrants,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">options, warrants,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">reflected in column</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Plan Category</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">and rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">and rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(a))</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(c)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation
plans approved by
shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11,069,029</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">26.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3,623,911</TD>
    <TD nowrap>(2)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation
plans not approved
by shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">255,125</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">7,500,000</TD>
    <TD nowrap>(4)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,324,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,123,911</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes shares to be issued upon exercise of outstanding options under the Company&#146;s
1991 Isys Controls, Inc. Long-Term Equity Incentive Plan, 1993 Stock Option Plan, 1993
Stock Option Plan for Non-Employee Directors, 1998 Stock Incentive Plan, and 1998
Non-Employee Director Stock Option Plan. Does not include purchase rights accruing under
the Employee Stock Purchase Plan (ESPP)&nbsp;because the purchase price (and therefore the
number of shares to be purchased) will not be determined until the end of the purchase
period.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes shares remaining available for future issuance under the Company&#146;s 1998 Stock
Incentive Plan and 1998 Non-Employee Director Stock Option Plan. Includes 240,235 shares
available for future issuance under the ESPP.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes shares to be issued upon the exercise of outstanding options under the
Company&#146;s 2001 Interim General Stock Incentive Plan.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes shares remaining available for future issuance under the Company&#146;s 2001
General Stock Option Plan.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The 2001 General Stock Option Plan was adopted by the Board of Directors on December&nbsp;11, 2001
without shareholder approval. This plan provides for the granting of nonqualified stock options to
any employee who is actively employed by the Company and is not an officer or director of the
Company.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The maximum number of shares of common stock available for grant under the plan is 7,500,000 shares.
All option grants must have an exercise price per share that is no less than the fair market value
per share of the Company&#146;s common stock on the grant date and must have a term that is no longer
than fifteen years from the grant date. No stock options have been granted under the 2001 General
Stock Option Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The 2001 Interim General Stock Incentive Plan was adopted by the Board of Directors on July&nbsp;17,
2001 without shareholder approval. This plan provides for the granting of nonqualified stock
options to any employee who is actively employed by the Company and is not an officer or director
of the Company. The maximum number of shares of common stock available for grant under the plan is
400,000 shares. All option grants have an exercise price per share that is no less than the fair
market value per share of the Company&#146;s common stock on the grant date and must have a term that is
no longer than fifteen years from the grant date. All 400,000 stock options have been granted
under the 2001 Interim General Stock Incentive Plan.
</DIV>
<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information with respect to certain relationships and related transactions required by Item&nbsp;13
shall be included in the Company&#146;s definitive Proxy Statement for the Special Meeting in Lieu
of the 2007 Annual Meeting of Shareholders to be held on April&nbsp;18, 2007 and is incorporated
herein by reference.
</DIV>
<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information with respect to principal accountant fees and services required by Item&nbsp;14 shall be
included in the Company&#146;s definitive Proxy Statement for the Special Meeting in Lieu of the
2007 Annual Meeting of Shareholders to be held on April&nbsp;18, 2007 and is incorporated herein by
reference.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="124"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART IV</B>
</DIV>

<DIV align="left">
<A name="125"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Financial Statements</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following consolidated financial statements of Cognex Corporation and the reports of
independent public accounting firms relating thereto are included in the Company&#146;s Annual
Report to Shareholders for the year ended December&nbsp;31, 2006, which is attached as Exhibit&nbsp;13
hereto, and are incorporated herein by reference:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Consolidated Statements of Operations for the years ended December&nbsp;31, 2006, 2005, and
2004</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Consolidated Balance Sheets at December&nbsp;31, 2006 and 2005</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Consolidated Statements of Shareholders&#146; Equity for the years ended December&nbsp;31, 2006,
2005, and 2004</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Consolidated Statements of Cash Flows for the years ended December&nbsp;31, 2006, 2005, and
2004</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notes to Consolidated Financial Statements</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reports of Independent Public Accounting Firms</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Financial Statement Schedule</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Included at the end of this report are the following:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Report of Independent Registered Public Accounting Firm on the Financial Statement
Schedule</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Schedule&nbsp;II &#151; Valuation and Qualifying Accounts</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Other schedules are omitted because of the absence of conditions under which they are
required or because the required information is given in the consolidated financial
statements or notes thereto.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Exhibits</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Exhibits filed as part of this Annual Report on Form 10-K are listed in the Exhibit
Index, immediately preceding such Exhibits.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the requirements of Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">COGNEX CORPORATION<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Robert J. Shillman
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Robert J. Shillman&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer and Chairman of the Board of Directors&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Signature</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Title</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Date</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Robert J. Shillman
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Robert J. Shillman
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer and
Chairman of the Board of Directors
(principal executive officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">February&nbsp;28, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Richard A. Morin
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Richard A. Morin
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President of Finance and
Administration, Chief Financial Officer,
and Treasurer
(principal financial and accounting officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">February&nbsp;28, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Patrick Alias
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Patrick Alias
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">February&nbsp;28, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Jerald Fishman
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Jerald Fishman
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">February&nbsp;28, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Anthony Sun
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Anthony Sun
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">February&nbsp;28, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Reuben Wasserman
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Reuben Wasserman
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">February&nbsp;28, 2007</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>COGNEX CORPORATION &#151; SCHEDULE II &#151; VALUATION AND QUALIFYING ACCOUNTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Additions</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Balance at Beginning of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Charged to Costs</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Charged to Other</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>and Expenses</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Accounts</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Deductions</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Balance at End of Period</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="25">(Dollars in thousands)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="25" align="left">Reserve for Uncollectible Accounts:</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(273</TD>
    <TD nowrap>)(a)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(635</TD>
    <TD nowrap>)(b)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,662</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(81</TD>
    <TD nowrap>)(a)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(145</TD>
    <TD nowrap>)(b)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,370</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,613</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(167</TD>
    <TD nowrap>)(a)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">150 </TD>
    <TD nowrap>(b)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,596</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="25" align="left">Reserve for Inventory Obsolescence:</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2,647</TD>
    <TD nowrap>)(c)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,079</TD>
    <TD nowrap>)(d)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,530</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,577</TD>
    <TD nowrap>)(c)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(759</TD>
    <TD nowrap>)(d)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,770</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,206</TD>
    <TD nowrap>)(c)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(805</TD>
    <TD nowrap>)(d)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,772</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>Specific write-offs</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>Foreign exchange rate changes; 2006 also includes an $800,000 reversal of
previously-established reserves that were not supported by specific uncollectible accounts</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(c)</TD>
    <TD>&nbsp;</TD>
    <TD>Specific write-offs and scrap</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(d)</TD>
    <TD>&nbsp;</TD>
    <TD>Sale of previously reserved inventory</TD>
</TR>

</TABLE>




<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT INDEX</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>EXHIBIT NUMBER</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2A</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Agreement and Plan of Merger, dated May&nbsp;9, 2005, by and among Cognex, Tango
Acquisition Corp. and DVT Corporation (excluding schedules and exhibits which
the registrant agrees to furnish supplementally to the Commission upon request)
(incorporated by reference to Exhibit&nbsp;2.1 of Cognex&#146;s Current Report on Form
8-K filed on May&nbsp;11, 2005 &#091;File No.&nbsp;0-17869&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3A</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Restated Articles of Organization of Cognex Corporation effective June&nbsp;27,
1989, as amended April&nbsp;30, 1991, April&nbsp;21, 1992, April&nbsp;25, 1995, April&nbsp;23,
1996, and May&nbsp;8, 2000 (incorporated by reference to Exhibit&nbsp;3A of Cognex&#146;s
Annual Report on Form&nbsp;10-K for the year ended December&nbsp;31, 2002 &#091;File No.
0-17869&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3B</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By-laws of the Company, as amended March&nbsp;16, 1998 (incorporated by reference to
Exhibit&nbsp;3B of Cognex&#146;s Annual Report on Form&nbsp;10-K for the year ended December
31, 2002 &#091;File No.&nbsp;0-17869&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Specimen Certificate for Shares of Common Stock (incorporated by reference to
Exhibit&nbsp;4 to the Registration Statement on Form&nbsp;S-1 &#091;Registration No.
33-29020&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10A</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Cognex Corporation 1993 Stock Option Plan for Non-Employee Directors
(incorporated by reference to Exhibit&nbsp;4A to the Registration Statement on Form
S-8 &#091;Registration No.&nbsp;33-81150&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10B</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Cognex Corporation 1993 Stock Option Plan, as amended November&nbsp;14, 1995 and
February&nbsp;25, 1996 (incorporated by reference to Exhibit&nbsp;4A to the Registration
Statement on Form&nbsp;S-8 &#091;Registration No.&nbsp;333-04621&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10C</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1991 Isys Controls, Inc. Long-Term Equity Incentive Plan (incorporated by
reference to Exhibit&nbsp;4A to the Registration Statement on Form&nbsp;S-8 &#091;Registration
No.&nbsp;333-02151&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10D</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Amendment to the Cognex Corporation 1993 Stock Option Plan for Non-Employee
Directors (incorporated by reference to Exhibit&nbsp;10E of Cognex&#146;s Annual Report
on Form&nbsp;10-K for the year ended December&nbsp;31, 2002 &#091;File No.&nbsp;0-17869&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10E</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Amendment to the Cognex Corporation 1993 Stock Option Plan (incorporated by
reference to Exhibit&nbsp;10F of Cognex&#146;s Annual Report on Form&nbsp;10-K for the year
ended December&nbsp;31, 2002 &#091;File No.&nbsp;0-17869&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10F</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Cognex Corporation 1998 Non-Employee Director Stock Option Plan (incorporated
by reference to Exhibit&nbsp;4.1 to the Registration Statement on Form&nbsp;S-8
&#091;Registration No.&nbsp;333-60807&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10G</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Cognex Corporation 1998 Stock Incentive Plan (incorporated by reference to
Exhibit&nbsp;4.2 to the Registration Statement on Form&nbsp;S-8 &#091;Registration No.
333-60807&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10H</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">First Amendment to the Cognex Corporation 1998 Stock Incentive Plan
(incorporated by reference to Exhibit&nbsp;4.3 to the Registration Statement on Form
S-8 &#091;Registration No.&nbsp;333-60807&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10I</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Second Amendment to the Cognex Corporation 1998 Stock Incentive Plan
(incorporated by reference to Exhibit&nbsp;10.3 of Cognex&#146;s Quarterly Report on Form
10-Q for the quarter ended July&nbsp;2, 2006 &#091;File No.&nbsp;0-17869&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10J</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Cognex Corporation 2000 Employee Stock Purchase Plan (incorporated by reference
to Exhibit&nbsp;4 to the Registration Statement on Form&nbsp;S-8 &#091;Registration No.
333-44824&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10K</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">First Amendment to 2000 Employee Stock Purchase Plan (incorporated by reference
to Exhibit&nbsp;10.2 of Cognex&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter ended
July&nbsp;3, 2005 &#091;File No.&nbsp;0-17869&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10L</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Cognex Corporation 2001 Interim General Stock Incentive Plan (incorporated by
reference to Exhibit&nbsp;4.1 to the Registration Statement on Form&nbsp;S-8
&#091;Registration No.&nbsp;333-68158&#093;)</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>EXHIBIT NUMBER</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10M</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Cognex Corporation 2001 General Stock Option Plan (incorporated by reference to
Exhibit&nbsp;4.1 to the Registration Statement on Form&nbsp;S-8 &#091;Registration No.
333-100709&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10N</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Transition Loan Agreement between James F. Hoffmaster and Cognex Corporation,
dated May&nbsp;24, 2001 (incorporated by reference to Exhibit&nbsp;10M of Cognex&#146;s Annual
Report on Form&nbsp;10-K for the year ended December&nbsp;31, 2002 &#091;File No.&nbsp;0-17869&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10O</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Termination Agreement between James F. Hoffmaster and Cognex Corporation dated
June&nbsp;4, 2001 (incorporated by reference to Exhibit&nbsp;10N of Cognex&#146;s Annual
Report on Form&nbsp;10-K for the year ended December&nbsp;31, 2002 &#091;File No.&nbsp;0-17869&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10P</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Stock Option Agreement (Non-Qualified) under 1998 Stock Incentive Plan
(incorporated by reference to Exhibit&nbsp;10.1 of Cognex&#146;s Quarterly Report on Form
10-Q for the quarter ended October&nbsp;3, 2004 &#091;File No.&nbsp;0-17869&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10Q</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Stock Option Agreement (Non-Qualified) under 1998 Non-Employee Director
Stock Plan (incorporated by reference to Exhibit&nbsp;10.2 of Cognex&#146;s Quarterly
Report on Form&nbsp;10-Q for the quarter ended October&nbsp;3, 2004 &#091;File No.&nbsp;0-17869&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10R</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Supplemental Retirement and Deferred Compensation Plan effective April&nbsp;1, 1995
(incorporated by reference to Exhibit&nbsp;10P of Cognex&#146;s Annual Report on Form
10-K for the year ended December&nbsp;31, 2004 &#091;File No.&nbsp;0-17869&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10S</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Summary of Annual Bonus Program *</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10T</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Summary of Director Compensation*</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>

<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Annual Report to Shareholders for the year ended December&nbsp;31, 2006 (which is
not deemed to be &#147;filed&#148; except to the extent that portions thereof are
expressly incorporated by reference in this Annual Report on Form&nbsp;10-K) *</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Code of Business Conduct and Ethics as amended March&nbsp;12, 2004 (incorporated by
reference to Exhibit&nbsp;14 of Cognex&#146;s Annual Report on Form&nbsp;10-K for the year
ended December&nbsp;31, 2004 &#091;File No.&nbsp;0-17869&#093;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">21</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Subsidiaries of the registrant *</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">23.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Consent of Ernst &#038; Young LLP *</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certification of Chief Executive Officer*</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certification of Chief Financial Officer*</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">32.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certification pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002 (CEO)**</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">32.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certification pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002 (CFO)**</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Filed herewith</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>Furnished herewith</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.S
<SEQUENCE>2
<FILENAME>b63634ccexv10ws.txt
<DESCRIPTION>EX-10.S SUMMARY OF ANNUAL BONUS PROGRAM
<TEXT>
<PAGE>

                                                                     EXHIBIT 10S

                               COGNEX CORPORATION
                         SUMMARY OF ANNUAL BONUS PROGRAM

Cognex Corporation (the "Company") provides selected employees, including the
Company's named executive officers, with an opportunity to earn cash bonuses
pursuant to an annual bonus program (the "Bonus Program"). Each participant in
the Bonus Program is assigned a target annual cash bonus. Participants may earn
their bonuses based on the achievement of certain financial goals set forth in
the Company's annual budget related to the Company's operating income as a
percentage of revenue, or "operating margin". The Compensation/Stock Option
Committee of the Company's Board of Directors establishes a minimum level of
operating margin, which must be achieved for any cash bonus to be paid to a
participant. Once the minimum threshold has been achieved, each participant's
eligible bonus is calculated as follows:

     -    if the operating margin is above the minimum threshold but below the
          operating margin target in the annual budget, each employee is
          eligible to receive a pro-rata portion of his or her target bonus;

     -    if the operating margin is equal to the operating margin set forth in
          the annual budget, each employee is eligible to receive 100% of his
          or her target bonus; and

     -    if the operating margin is above the operating margin set forth in the
          annual budget, all exempt employees are eligible to receive an
          additional amount depending upon his or her grade level and up to a
          maximum level approved by the Compensation/Stock Option Committee.

The Compensation/Stock Option Committee approves the target bonus for each
employee at director level and above, which includes the Company's named
executive officers, and the amount by which each individual can participate in
any increase due to performance in excess of the budget target. Once the
operating margin criterion is met, the amount each employee at director level
and above, which includes the Company's named executive officers, receives
depends upon the achievement of individual performance goals, which are
established annually.

Under the Bonus Program, Robert J. Shillman, the Company's Chief Executive
Officer, has the opportunity to earn 0-300% of his target bonus amount based on
the achievement of the specified performance goals; James F. Hoffmaster, the
Company's President and Chief Operating Officer, has the opportunity to earn
0-250% of his target bonus amount based on the achievement of the specified
performance goals; Eric A. Ceyrolle, the Company's Executive Vice President of
Worldwide Sales and Marketing, MVSD, has the opportunity to earn 0-200% of his
target bonus amount based on the achievement of the specified performance goals;
and Richard A. Morin, the Company's Senior Vice President, Chief Financial
Officer, and Treasurer, has the opportunity to earn 0-200% of his target bonus
amount based on the achievement of the specified performance goals.

The annual bonuses for the Company's named executive officers are listed in the
Summary Compensation Table set forth in the Company's proxy statement for its
annual meeting of shareholders.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.T
<SEQUENCE>3
<FILENAME>b63634ccexv10wt.htm
<DESCRIPTION>EX-10.T SUMMARY OF DIRECTOR COMPENSATION
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10wt</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 10T</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>COGNEX CORPORATION</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SUMMARY OF DIRECTOR COMPENSATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cognex Corporation (the &#147;Company&#148;)
pays each Director (other than Robert J. Shillman
and Patrick A. Alias) an annual fee for his services on the Company&#146;s Board of
Directors and its committees, plus additional amounts for each meeting attended.
Each Director receives annual cash compensation in the amount of $7,500, plus an
additional $4,000 for each meeting attended. Each Director who serves on the
Compensation/Stock Option Committee of the Company&#146;s Board of Directors receives an
annual fee of $2,000. Each Director who serves on the Audit Committee of the
Company&#146;s Board of Directors receives an annual fee of $3,500. The Chairman of the
Audit Committee receives an additional annual fee of $2,500. Each Audit Committee
member also receives $500 for each quarterly meeting attended to discuss the
Company&#146;s financial results and $1,500 for any additional meetings attended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All of the Directors (other than Dr.&nbsp;Shillman)
also receive an annual option grant
of 7,500 shares for 2007. These options have a
ten-year term and vest in four equal annual installments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Dr.&nbsp;Shillman, who is the Company&#146;s Chief Executive Officer, receives no additional
compensation to serve on the Company&#146;s Board of Directors and Mr.&nbsp;Alias, who is an
employee of the Company, receives no additional cash compensation to serve on the
Company&#146;s Board of Directors.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>4
<FILENAME>b63634ccexv13.htm
<DESCRIPTION>EX-13 ANNUAL REPORT TO SHAREHOLDERS
<TEXT>
<HTML>
<HEAD>
<TITLE>exv13</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;13</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Management&#146;s Discussion and</B><BR>
<B>Analysis of Financial Condition and Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>FORWARD-LOOKING STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain statements made in this report, as well as oral statements made by the Company from time to
time, constitute forward&#150;looking statements within the meaning of Section&nbsp;27A of the Securities Act
of 1933, as amended, and Section&nbsp;21E of the Securities Exchange Act of 1934, as amended. Readers
can identify these forward&#150;looking statements by the Company&#146;s use of the words &#147;expects,&#148;
&#147;anticipates,&#148; &#147;estimates,&#148; &#147;believes,&#148; &#147;projects,&#148; &#147;intends,&#148; &#147;plans,&#148; &#147;will,&#148; &#147;may,&#148; &#147;shall,&#148; and
similar words and other statements of a similar sense. These statements are based upon the
Company&#146;s current estimates and expectations as to prospective events and circumstances, which may
or may not be in the Company&#146;s control and as to which there can be no firm assurances given. These
forward&#150;looking statements involve known and unknown risks and uncertainties that could cause
actual results to differ materially from those projected. Such risks and uncertainties include: (1)
global economic conditions that impact the capital spending trends of manufacturers in a variety of
industries; (2)&nbsp;the cyclicality of the semiconductor and electronics industries; (3)&nbsp;the inability
to achieve significant international revenue; (4)&nbsp;fluctuations in foreign exchange rates; (5)&nbsp;the
loss of, or a significant curtailment of purchases by, any one or more principal customers; (6)&nbsp;the
reliance upon certain
sole&#150;source suppliers to manufacture and deliver critical components for the Company&#146;s products;
(7)&nbsp;the inability to attract and retain skilled employees; (8)&nbsp;the inability to design and
manufacture high&#150;quality products; (9)&nbsp;the technological obsolescence of current products and the
inability to develop new products; (10)&nbsp;the failure to effectively manage product transitions or
accurately forecast customer demand; (11)&nbsp;the failure to properly manage the distribution of
products; (12)&nbsp;the inability to protect the Company&#146;s proprietary technology and intellectual
property; (13)&nbsp;the Company&#146;s involvement in time&#150;consuming and costly litigation; (14)&nbsp;the impact
of competitive pressures; (15)&nbsp;the challenges in integrating acquired businesses; and (16)&nbsp;the
inability to achieve expected results from acquisitions. The foregoing list should not be construed
as exhaustive and the Company encourages readers to refer to the detailed discussion of risk
factors included in Part&nbsp;I &#150; Item&nbsp;1A of the Company&#146;s Annual Report on Form&nbsp;10&#150;K. The Company
cautions readers not to place undue reliance upon any such forward&#150;looking statements, which speak
only as of the date made. The Company disclaims any obligation to subsequently revise
forward&#150;looking statements to reflect the occurrence of anticipated or unanticipated events or
circumstances after the date such statements are made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>EXECUTIVE OVERVIEW</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cognex Corporation (the &#147;Company&#148;) designs, develops, manufactures, and markets machine vision
systems, or computers that can &#147;see,&#148; which are used to automate a wide range of manufacturing
processes where vision is required. The Company&#146;s Modular Vision Systems Division (MVSD)
specializes in machine vision systems that are used to automate the manufacturing of discrete
items, while the Company&#146;s Surface Inspection Systems Division (SISD)&nbsp;specializes in machine vision
systems that are used to inspect the surfaces of materials processed in a continuous fashion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition to product revenue derived from the sale of machine vision systems, the Company also
generates revenue by providing maintenance and support, training, consulting, and installation
services to its customers. The Company&#146;s current customers can be classified into three primary
markets: the semiconductor and electronics capital equipment market, the discrete factory
automation market, and the surface inspection market.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Semiconductor and electronics capital equipment manufacturers purchase Cognex machine
vision systems and integrate them into the capital equipment that they manufacture and
then sell to their customers in the semiconductor and electronics industries that either
make computer chips or make printed circuit boards containing computer chips. Although the
Company sells to original equipment manufacturers (OEMs) in a number of industries, these
semiconductor and electronics OEMs have historically been large consumers of the Company&#146;s
products. Demand from these
capital equipment manufacturers is highly cyclical, with periods of investment followed by
temporary downturns.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Discrete manufacturers in the factory automation area include a wide array of
manufacturers who use machine vision for applications in a variety of industries,
including the automotive, consumer electronics, food and beverage, healthcare
pharmaceutical, and aerospace industries. These customers purchase Cognex machine vision
systems either</TD>
</TR>

</TABLE>
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">15
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Management&#146;s Discussion and</B><br>
<B>Analysis of Financial Condition and Results of Operations</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>directly from the Company or through a reseller and install them on their production lines.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Surface inspection customers are manufacturers of materials processed in a continuous
fashion, such as paper and metals. These customers need sophisticated machine vision to detect
and classify defects in the surfaces of those materials as they are being processed at high
speeds.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In May&nbsp;2006, the Company acquired AssistWare Technology, Inc., a developer of Lane Departure
Warning Systems, and entered the emerging market for machine vision systems in vehicles. These
highly&#150;specialized sensors are installed in vehicles, ranging from long&#150;haul trucks to passenger
cars, where they provide driver assistance by constantly analyzing the vehicle&#146;s external
environment and warning the driver of potentially dangerous situations. AssistWare&#146;s Lane Departure
Warning System uses machine vision technology to watch the
road ahead and alert drivers if they unintentionally leave their lane or if their driving pattern
becomes erratic. Although this acquisition was not significant to the Company&#146;s consolidated
results of operations in 2006, the Company believes that entering this new commercial market for
machine vision systems is an important strategic move to diversify into areas outside of the
factory floor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Revenue for the year ended December&nbsp;31, 2006 totaled $238&nbsp;million, representing a 10% increase over
the prior year due to higher sales to customers in the semiconductor and electronics capital
equipment and discrete factory automation markets. Despite the inclusion of $13.6&nbsp;million of
stock&#150;based compensation expense in 2006, net income per share increased 15% to $0.85 in 2006
compared to $0.74 in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table sets forth certain consolidated financial data as a percentage of revenue:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>100</B>      </TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100      </TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100      </TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>27</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross margin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>73</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research, development, and engineering expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general, and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>41</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>19</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonoperating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>21</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>17</B>      </TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">16      </TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">19      </TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>STOCK-BASED COMPENSATION EXPENSE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2004, the Financial Accounting Standards Board (FASB)&nbsp;issued Statement of Financial
Accounting Standard (SFAS)&nbsp;No.&nbsp;123R, &#147;Share&#150;Based Payment,&#148; which is a revision of SFAS No.&nbsp;123,
&#147;Accounting for Stock&#150;Based Compensation.&#148; SFAS No.&nbsp;123R requires companies to recognize
compensation expense for all share&#150;based payments to employees at fair value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SFAS No.&nbsp;123R was adopted by the Company on January&nbsp;1, 2006 using the modified prospective method
in which compensation expense is recognized beginning on the effective date. Under this transition
method, compensation expense recognized for the year ended December&nbsp;31, 2006 includes: (1)
compensation expense for all share&#150;based payments granted
prior to but not yet vested as of December&nbsp;31, 2005, based on the grant&#150;date fair value estimated
under SFAS No.&nbsp;123, and (2)&nbsp;compensation expense for all share&#150;based payments granted subsequent to
December&nbsp;31, 2005, based on the grant&#150;date fair value estimated under SFAS No.&nbsp;123R. In accordance
with the modified prospective method, the Company&#146;s results of operations and financial position
have not been restated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The fair values of stock options granted after January&nbsp;1, 2006 were estimated on the grant date
using a binomial lattice model. The fair values of options granted prior to January&nbsp;1, 2006 were
estimated using the Black&#150;Scholes option pricing model for footnote disclosure under SFAS No.&nbsp;123.
The Company
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">16
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cognex Corporation: Management&#146;s Discussion and</B><BR>
<B>Analysis of Financial Condition and Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">believes that a binomial lattice model results in a better estimate of fair value because it
identifies patterns of exercises based on triggering events, tying the results to possible future
events instead of a single path of actual historical events. Readers should refer to Note 13:
Stock&#150;Based Compensation Expense to the Consolidated Financial Statements for a detailed
description of the valuation assumptions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The total stock&#150;based compensation expense and the related income tax benefit recognized for the
year ended December&nbsp;31, 2006 was $13,624,000 and $4,741,000, respectively. No compensation expense
was capitalized at December&nbsp;31,
2006. Prior to January&nbsp;1, 2006, the Company recognized compensation expense using the intrinsic
value based method described in APB Opinion No.&nbsp;25, and accordingly, no compensation expense was
recorded since stock options were granted with an exercise price equal to the market value of the
Company&#146;s common stock at the grant date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, total unrecognized compensation expense related to non&#150;vested stock options
was $11,616,000, which is expected to be recognized over a weighted&#150;average period of 1.7&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>RESULTS OF OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Year Ended December&nbsp;31, 2006<BR>
Compared to Year Ended December&nbsp;31, 2005</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Revenue</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Revenue for the year ended December&nbsp;31, 2006 increased 10% to $238,424,000 from $216,875,000 for
the year ended December&nbsp;31, 2005. This increase was primarily due to higher sales to customers in
the semiconductor and electronics capital equipment market, and to a lesser extent, the discrete
factory automation market. Geographically, revenue increased in all of the Company&#146;s major regions,
but most significantly in Japan where many of the Company&#146;s semiconductor and electronics capital
equipment customers are located, and the rest of Asia, a region where many capital equipment
manufacturers are also located and where the general manufacturing economy is experiencing growth.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Semiconductor
and Electronics Capital Equipment Market</I></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Sales to customers who make capital equipment for the semiconductor and electronics industries,
which are included in the Company&#146;s MVSD segment, represented 32% of the Company&#146;s total revenue in
2006 and increased by $16,306,000, or 27%, from the prior year. Although the level of demand from
these customers is higher than that experienced in 2005, revenue from this sector has been
gradually declining since the first quarter of 2006 and the Company expects this trend to continue
into 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Discrete
Factory Automation Market</I></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Sales to manufacturing customers in the discrete factory automation area, which are included in the
Company&#146;s MVSD
segment, represented 55% of the Company&#146;s total revenue in 2006 and increased by $9,179,000, or 7%,
from the prior year. The Company offers a full range of machine vision products to its factory
automation customers at different capability/price points, from its programmable PC&#150;based vision
systems to its low&#150;cost, easy&#150;to&#150;use vision sensors. Although sales of the Company&#146;s PC&#150;based
vision systems decreased from the prior year primarily in the electronics industry, vision sensor
sales increased from 2005 across all product lines including In&#150;Sight vision sensors, Checker
expert sensors, and Dataman ID readers. In May&nbsp;2005, the Company acquired DVT Corporation, and as a
result, expanded its worldwide distribution network to sell its vision sensor products and added
the DVT vision sensor to its product line, which complements the In&#150;Sight vision sensor. Sales of
acquired DVT products also contributed to the increase in factory automation revenue. In recent
years, the Company has invested in new product offerings and distribution channels for the factory
automation market and expects to continue to grow this business in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Commercial
Markets</I></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s commercial products currently serve the building automation and security market for
vision&#150;based &#147;people&#148; sensing and counting, as well as the automotive and truck market for
vehicle&#150;based &#147;driver&#150;assist&#148; vision sensors that enhance vehicle safety and driver convenience,
which the Company entered in May&nbsp;2006 with the acquisition of AssistWare Technology, Inc. Sales to
commercial customers, which are included in the Company&#146;s MVSD segment, were not material in 2006
and the Company does not expect this new market to generate significant revenue in 2007.
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">17
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Management&#146;s Discussion and</B><br>
<B>Analysis of Financial Condition and Results of Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Surface
Inspection Market</I></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Sales to surface inspection customers, which comprise the Company&#146;s SISD segment, represented 13%
of the Company&#146;s total revenue and declined by $4,088,000, or 12%, from the prior year. This
decrease is attributed to customers delaying projects due to a slowing manufacturing economy and to
mergers mainly in the metals industry. Since the average order size for a SmartView surface
inspection system is relatively large, the timing of customer projects, system deliveries, and
installations can have a significant impact on the quarterly, and even annual, distribution of
revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Product
Revenue</I></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Product revenue for the year ended December&nbsp;31, 2006 increased 11% to $214,938,000 from
$192,804,000 for the year ended December&nbsp;31, 2005. This increase was due to a higher volume of
modular vision systems sold to semiconductor and electronics capital equipment manufacturers, as
well as discrete factory automation customers. The average selling price of the Company&#146;s MVSD
products decreased from 2005 due to the continued shift away from PC-based vision systems to vision
sensors, which have a lower average selling price. The average selling price decline, however, was
more than offset by the higher volume of units sold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Service
Revenue</I></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Service revenue, which is derived from the sale of maintenance and support, training, consulting,
and installation services, decreased 2% to $23,486,000 in 2006 from $24,071,000 in 2005 due
principally to lower revenue generated by maintenance and support programs and training services
resulting from improved product quality and ease of use. Service revenue decreased as a percentage
of total revenue to
10% in 2006 from 11% in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gross
Margin</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Gross margin as a percentage of revenue was 73% for 2006 compared to 71% for 2005. The increase in
gross margin was primarily due to the impact of the higher sales volume, as well as a shift in
revenue mix to modular vision systems, which have higher margins than the sale of surface
inspection systems and services. Stock&#150;based compensation expense included in cost of revenue was
$1,596,000 in 2006, which had a relatively small impact on the total gross margin percentage.
Benefits from the sale of previously-reserved inventory amounted to $1,079,000 in 2006, which also
had a relatively small impact on the total gross margin percentage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>MVSD
Margin</I></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">MVSD gross margin as a percentage of revenue was 77% for 2006 compared to 75% for 2005. The
increase in MVSD margin was primarily due to the impact of the higher sales volume, as well as a
shift in mix to product revenue, which has a higher margin than service revenue. The gross margin
percentage is relatively consistent among MVSD product offerings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>SISD
Margin</I></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SISD gross margin as a percentage of revenue was 46% for 2006 compared to 48% for 2005. The
decrease in SISD margin was due principally to the impact of the lower sales volume, as well as the
inclusion of stock&#150;based compensation expense in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Product
Margin</I></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Product gross margin as a percentage of revenue was 77% for 2006 compared to 75% for 2005. The
increase in product margin was due principally to the impact of the higher sales volume, as well as
a shift in mix to higher&#150;margin modular vision systems.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Service
Margin</I></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Service gross margin as a percentage of revenue was 38% for 2006 compared to 36% for 2005. A
reduction in service personnel due to the elimination of redundancies had a favorable impact on the
service margin from the prior year. This was partially offset, however, by the inclusion of
stock&#150;based compensation expense in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Operating
Expenses</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Research, development, and engineering (R,D&#038;E) expenses for the year ended December&nbsp;31, 2006
increased 18% to $32,607,000 from $27,640,000 for the year ended December 31, 2005. MVSD R,D&#038;E
expenses increased $4,646,000, or 19%, from the prior year primarily due to $3,360,000 of
stock&#150;based compensation expense, additional engineering personnel resulting from the acquisitions
of DVT Corporation in May&nbsp;2005 and AssistWare Technology, Inc. in May&nbsp;2006, and increased outside
service and materials costs related to new product initiatives. SISD R,D&#038;E expenses increased
$321,000, or 11%, from the prior year due principally to $267,000 of stock&#150;based compensation
expense.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">R,D&#038;E expenses as a percentage of revenue were 13% in both 2006 and 2005. The Company believes that
a continued commitment to R,D&#038;E activities is essential in order to maintain product leadership
with its existing products and to provide in-
</DIV>

<DIV align="LEFT" style="font-size: 10pt; margin-top: 12pt">18
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Management&#146;s Discussion and </B><br>
<B>Analysis of Financial Condition and Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">novative new product offerings, and therefore, expects to continue to make significant R,D&#038;E
investments
in the future. Although the Company targets its R,D&#038;E spending to be between 10% and 15% of
revenue, this percentage is impacted by revenue cyclicality. At any point in time, the Company has
numerous research and development projects underway, and believes that none of these projects is
material on an individual basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Selling, general, and administrative (S,G&#038;A) expenses for the year ended December&nbsp;31, 2006
increased 17% to $96,678,000 from $82,332,000 for the year ended December&nbsp;31, 2005. MVSD S,G&#038;A
expenses increased $8,148,000, or 12%, from the prior year, while SISD S,G&#038;A expenses increased
$271,000, or 3%, from 2005. Corporate expenses that are not allocated to either division increased
$5,927,000, or 83%, from the prior year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The increase in MVSD S,G&#038;A expenses was primarily due to $5,160,000 of stock&#150;based compensation
expense, as well as investments in sales and marketing in the discrete factory automation market,
including the acquisition of DVT Corporation in May&nbsp;2005. This acquisition resulted in additional
sales and marketing expenses related to managing a worldwide distribution network, as well as
additional amortization expense of $1,259,000 related to acquired intangible assets. The increase
in SISD S,G&#038;A expenses was due principally to $820,000 of stock&#150;based compensation expense,
partially offset by lower sales commissions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The increase in corporate expenses was principally due to $2,421,000 of stock&#150;based compensation
expense, costs associated with the Company&#146;s 25th Anniversary party held in January 2006, the
reversal in 2005 of a $1,000,000 reserve established for possible indemnification of the Company&#146;s
customers from patent infringement claims by the Lemelson Partnership, and higher professional
fees.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Nonoperating
Income</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Investment and other income for the year ended December&nbsp;31, 2006 increased 25% to $6,437,000 from
$5,130,000 for the year ended December&nbsp;31, 2005. Although the average invested balance declined in
2006 due to net cash outlays related primarily to the Company&#146;s stock repurchase program,
investment and other income increased over the prior year because the Company earned higher yields
on its portfolio of debt securities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The foreign currency loss for the year ended December&nbsp;31, 2006 was $333,000 compared to a loss of
$888,000 for the
year ended December&nbsp;31, 2005. The loss in 2006 was primarily due to the revaluation of cash
balances on the Company&#146;s subsidiaries&#146; books that are denominated in a currency other than the
subsidiaries&#146; functional currency, as well as the revaluation and settlement of accounts receivable
balances that are reported in one currency and collected in another. The loss in 2005 was primarily
due to the revaluation and settlement of short&#150;term intercompany balances that are reported in one
currency and collected or paid in another.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Income
Taxes</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s effective tax rate for 2006 was 21% compared to 26% for 2005. The effective tax rate
for 2006 included the impact of the following discrete tax events: a reduction in tax expense of
$1,220,000 due to the expiration of the statute of limitations for an open tax year, a reduction in
tax expense of $869,000 from the settlement of a multi&#150;year state tax audit, a reduction in tax
expense of $405,000 for the final true&#150;up of the 2005 tax accrual upon filing the actual return,
and a reduction in tax expense of $200,000 for the favorable impact in the U.S. of the retroactive
reinstatement of the Research &#038; Development Tax credit. These reductions were partially offset by
an increase in tax expense of $648,000 from the settlement of a long&#150;standing tax audit in Japan.
These one&#150;time tax adjustments lowered the Company&#146;s tax rate by four percentage points in 2006.
The remaining one percentage point decrease in the effective tax rate from the prior year was due
to more of the Company&#146;s profits being earned in lower tax jurisdictions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Year Ended December&nbsp;31, 2005</B><BR>
<B>Compared to Year Ended December&nbsp;31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Revenue</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Revenue for the year ended December&nbsp;31, 2005 increased 7% to $216,875,000 from $201,957,000 for the
year ended Decem-ber 31, 2004. Although sales to customers who make capital equipment for the
semiconductor and electronics industries declined by $29,566,000, or 33%, from the prior year, this
decrease was offset by increased sales to discrete manufacturing customers in the factory
automation area (including approximately $19,000,000 of revenue from acquired DVT products) and
higher sales to surface inspection customers. Demand from these capital equipment manufacturers is
highly cyclical, with periods of investment followed by temporary downturns. During the first half
of 2004, the Company experienced an increase in orders from these customers that has since been
curtailed. However, sales to discrete factory automation customers increased
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">19
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Management&#146;s Discussion and </B><br>
<B>Analysis of Financial Condition and Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">$38,221,000, or 45%, from 2004 and sales to surface inspection customers increased $6,263,000, or
22%, from the prior year. As a result, revenue from customers outside of the semiconductor and
electronics capital equipment sector grew from the prior year and represented the majority of the
company&#146;s total revenue in 2005, increasing as a percentage of total revenue to 73% in 2005 from
58% in 2004. Geographically, revenue increased in all of the Company&#146;s major regions except in
Japan, where many of the Company&#146;s semiconductor and electronics capital equipment customers are
located.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Product revenue for the year ended December&nbsp;31, 2005 increased 9% to $192,804,000 from $176,569,000
for the year ended December&nbsp;31, 2004. The increase in product revenue was due to a higher volume of
machine vision systems sold to discrete manufacturers in the factory automation area, as well as a
higher volume of sales to surface inspection customers. Service revenue, which is derived from the
sale of maintenance and support, education, consulting, and installation services, decreased 5% to
$24,071,000 in 2005 from $25,388,000 in 2004 due principally to lower revenue generated by
maintenance and support programs. In recent years, the Company has expanded its MVSD product
offerings to include a wider range of easy&#150;to&#150;use products that require less maintenance and
support, and this trend has resulted in a decline in service revenue. Service revenue decreased as
a percentage of total revenue to 11% in 2005 from 13% in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">MVSD revenue for the year ended December&nbsp;31, 2005 increased 5% to $182,544,000 from $173,889,000
for the year ended December&nbsp;31, 2004. The increase in MVSD revenue was due to a higher volume of
modular vision systems sold to discrete manufacturing customers in the factory automation area.
SISD revenue increased 22% to $34,331,000 in 2005 from $28,068,000 in 2004. The increase in SISD
revenue was due principally to a higher volume of SmartView system deliveries and installations.
SISD revenue increased as a percentage of total revenue to 16% in 2005 compared to 14% in 2004.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gross
Margin</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Gross margin as a percentage of revenue was 71% for 2005 compared to 72% for 2004. The decrease in
gross margin was primarily due to a higher percentage of total revenue from the sale of surface
inspection systems, which have lower margins than the sale of modular vision systems, as well as a
decline in MVSD service margins.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Product gross margin as a percentage of revenue was 75% for 2005 compared to 76% for 2004. The
decrease in product margin was primarily due to a shift in product mix to lower&#150;margin surface
inspection systems. Service gross margin as a percentage of revenue was 36% for 2005 compared to
43% for 2004. The decrease in service margin was due principally to lower maintenance and support
revenue that is sold bundled with MVSD products, without a corresponding decrease in expenses.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">MVSD gross margin as a percentage of revenue was 75% for 2005 compared to 76% for 2004. The
decrease in MVSD margin was primarily due to lower maintenance and support revenue. SISD gross
margin as a percentage of revenue was 48% for 2005 compared to 45% for 2004. The increase in SISD
margin was due principally to the higher sales volume with relatively flat overhead costs.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Operating
Expenses</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Research, development, and engineering (R,D&#038;E) expenses for the year ended December&nbsp;31, 2005
increased 2% to $27,640,000 from $27,063,000 for the year ended December&nbsp;31, 2004. MVSD R,D&#038;E
expenses increased $498,000, or 2%, from the prior year primarily due to additional engineering
personnel resulting from the acquisition of DVT Corporation on May&nbsp;9, 2005, partially offset by
lower company bonus accruals in 2005. SISD R,D&#038;E expenses increased $79,000, or 3%, from the prior
year due principally to increased compensation costs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">R,D&#038;E expenses as a percentage of revenue were 13% in 2005 and 14% in 2004. The Company believes
that a continued commitment to R,D&#038;E activities is essential in order to maintain product
leadership with our existing products and to provide innovative new product offerings, and
therefore, we expect to continue to make significant R,D&#038;E investments in the future. Although the
Company targets its R,D&#038;E spending to be between 10% and 15% of revenue, this percentage is
impacted by revenue cyclicality. At any point in time, the Company has numerous research and
development projects underway, and we believe that none of these projects is material on an
individual basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Selling, general, and administrative (S,G&#038;A) expenses for the year ended December&nbsp;31, 2005
increased 16% to $82,332,000 from $70,674,000 for the year ended December&nbsp;31, 2004. MVSD S,G&#038;A
expenses increased $12,570,000, or 23%, from the prior year, while SISD S,G&#038;A expenses decreased
$30,000
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">20
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cognex Corporation: Management&#146;s Discussion and </B><br>
<B>Analysis of Financial Condition and Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">from 2004. Corporate expenses that are not allocated to a division decreased $882,000, or 11%, from
the prior year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The increase in MVSD expenses was primarily due to investments in sales and marketing intended to
drive revenue growth in the discrete factory automation market, including the acquisition of DVT
Corporation on May&nbsp;9, 2005. This acquisition resulted in additional sales and marketing expenses
related to managing a worldwide distribution network, as well as additional amortization expense of
$2,517,000 related to the acquired intangible assets. In addition to the personnel added as a
result of the DVT acquisition, the Company also made investments during 2005 in its direct factory
automation sales force and in marketing activities, such as advertising, telemarketing, customer
seminars, and trade shows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The decrease in corporate expenses was principally due to the reversal of a $1,000,000 reserve
established for possible indemnification of the Company&#146;s customers from patent infringement claims
by the Lemelson Partnership, as well as lower company bonus accruals in 2005. These decreases were
partially offset by higher professional fees in 2005.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Nonoperating Income</B><br>
Investment and other income for the year ended December&nbsp;31, 2005 increased 10% to $5,130,000 from
$4,670,000 for the year ended December&nbsp;31, 2004. Although the average invested balance declined in
2005 due to $111,607,000 in net cash outlays related to the acquisition of DVT Corporation on
May&nbsp;9, 2005, investment and other income increased over the prior year because the Company earned
higher yields on its portfolio of debt securities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The foreign currency loss for the year ended December&nbsp;31, 2005 was $888,000 compared to a gain of
$1,641,000 for the year ended December&nbsp;31, 2004. The Company recognizes foreign currency gains and
losses on the revaluation and settlement of accounts receivable and payable balances that are
reported in one currency and collected or paid in another, as well as intercompany transactions
between its subsidiaries. The gain in 2004 was primarily due to the revaluation and settlement of
intercompany balances between the Company and its Irish subsidiary. During 2004, the Euro Dollar
strengthened versus the U.S. Dollar, resulting in foreign currency gains on the Irish subsidiary&#146;s
books when these intercompany balances were revalued and paid. During 2005, the U.S. Dollar gained
strength versus the Euro Dollar in the months that large intercompany transactions occurred,
resulting in foreign currency losses on the Irish subsidiary&#146;s books. These losses were not as
significant as the gains experienced in the prior year because foreign exchange rates did not
fluctuate as significantly in 2005.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Income Taxes</B><br>
The Company&#146;s effective tax rate for 2005 was 26% compared to 29% for 2004. The decrease in the
effective tax rate was primarily due to more of the Company&#146;s profits being earned and taxed in
lower tax jurisdictions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>LIQUIDITY
AND CAPITAL RESOURCES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has historically been able to generate positive cash flow from operations, which has
funded its operating activities and other cash requirements and has resulted in an accumulated
cash, cash equivalent, and investment balance of $266,220,000 at December&nbsp;31, 2006, representing
56% of shareholders&#146; equity. The Company has established guidelines relative to credit ratings,
diversification, and maturities of its investments that maintain liquidity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s cash requirements during the year ended December 31, 2006 were met with its existing
cash, cash equivalent, and investment balance, as well as positive cash flow from operations and
the proceeds from the issuance of common stock under stock option plans. Cash requirements
primarily consisted of operating activities, capital expenditures, the repurchase of
common stock, the payment of dividends, and the purchase of AssistWare Technology, Inc. During
2006, cash flows from operations included $10,178,000 of net cash outflows related to investments
in inventories. The Company increased inventory levels to better support distributors, to obtain an
adequate supply of end-of-life components, and to support new product introductions while shifting
a portion of its manufacturing operations from Massachusetts to Ireland. Capital expenditures in
2006 totaled $4,224,000 and consisted primarily of expenditures for computer hardware and software,
as well as various building improvements to the Company&#146;s corporate headquarters. The Company
believes that its existing cash, cash equivalent, and investment balance, together with continued
positive cash flow from operations, will be sufficient to meet its operating, investing, and
financing activities in 2007 and the foreseeable future.
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">21
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Management&#146;s Discussion and </B><br>
<B>Analysis of Financial Condition and Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the Company&#146;s material contractual obligations, both fixed and
contingent (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Venrock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Limited</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Inventory</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Partnership</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Purchase</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Commitments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Leases</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>19,036</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,812</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,812</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,459</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>886</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>555</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,850</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,525</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>12,731</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>12,342</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>26,598</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2000, the Company became a Limited Partner in Venrock Associates III, L.P. (Venrock), a
venture capital fund. A Director of the Company is a Managing General Partner of Venrock
Associates. The Company has committed to a total investment in the limited partnership of up to
$20,500,000, with the commitment period expiring on December&nbsp;31, 2010. In January&nbsp;2007, Venrock
reduced the Company&#146;s total commitment from $22,500,000 to $20,500,000. The Company does not have
the right to withdraw from the partnership prior to December&nbsp;31, 2010. As of December&nbsp;31, 2006, the
Company had contributed $18,463,000 to the partnership, including $1,013,000 during 2006. In
addition, the Company contributed $512,000 in January&nbsp;2007. The remaining commitment of $1,525,000
can be called by Venrock in any period through 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition to the obligations described above, the following items may also result in future
material uses of cash:
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Stock
Repurchase Program</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On December&nbsp;12, 2000, the Company&#146;s Board of Directors authorized the repurchase of up to
$100,000,000 of the Company&#146;s common stock. During the first half of 2006, the Company repurchased
2,260,941 shares at a cost of $61,883,000, which completed the Company&#146;s repurchases under this
program. On July&nbsp;27, 2006, the Company&#146;s Board of Directors authorized a new program for the
repurchase of
up to $100,000,000 of the Company&#146;s common stock. During the second half of 2006, the Company
repurchased 1,019,579 shares at a cost of $24,413,000 under this program. The Company may
repurchase additional shares under this program in future periods depending upon a variety of
factors, including stock price levels and share availability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Dividends</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Beginning in the third quarter of 2003, the Company&#146;s Board of Directors has declared and paid a
cash dividend in each quarter, including the first quarter of 2007. Dividend payments amounted to
$15,058,000 during 2006 and $3,778,000 in the first quarter of 2007. The payment in the first
quarter of 2007 represented a dividend of $0.085 per share. Future dividends will be declared at
the discretion of the Company&#146;s Board of Directors and will depend upon such factors as the Board
deems relevant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Acquisitions</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;20, 2006, the Company acquired AssistWare Technology, Inc. for $2,998,000 in cash paid at
closing, with the potential for an additional cash payment of up to $1,500,000 in 2007 and up to
$500,000 in 2008 depending upon the achievement of certain performance criteria. The Company&#146;s
business strategy includes selective expansion into new machine vision applications through the
acquisition of businesses and technologies, which may result in significant cash outlays in the
future.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>OFF&#150;BALANCE SHEET ARRANGEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2006, the Company had no off&#150;balance sheet arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">22
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cognex Corporation: Management&#146;s Discussion and </B><br>
<B>Analysis of Financial Condition and Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>CRITICAL ACCOUNTING POLICIES AND ESTIMATES</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s discussion and analysis of its financial condition and results of operations are
based upon its consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation of these financial
statements requires management to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenue, and
expenses, and related disclosure of contingent assets and liabilities. Management bases its
estimates on historical experience and various other assumptions believed to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results
could differ from these estimates under different assumptions or circumstances resulting in charges
that could be material in future reporting periods. The Company believes the following critical
accounting policies require the use of significant estimates and judgments in the preparation of
its consolidated financial statements.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Revenue
Recognition</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company requires that a signed customer contract or purchase order is received, the fee from
the arrangement is fixed or determinable, and collection of the resulting receivable is probable in
order to recognize revenue. Assuming that these criteria have been met, product revenue is
recognized upon delivery, revenue from maintenance and support programs is recognized ratably over
the program period, revenue from training and consulting services is recognized over the period
that the services are provided, and revenue from installation services is recognized when the
customer has signed off that the installation is complete. If the arrangement contains
customer&#150;specified acceptance criteria, then revenue is deferred until the Company can demonstrate
that the customer&#146;s criteria have been met.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain of the Company&#146;s arrangements include multiple elements that provide the customer with a
combination of product or service deliverables. The fee from the arrangement is allocated to each
of the undelivered elements based upon vendor&#150;specific objective evidence (VSOE)&nbsp;of fair value,
which is limited to the price charged when the same element is sold separately, with the residual
value from the arrangement allocated to the delivered element. The portion of the fee that is
allocated to each element is then recognized as revenue when
the criteria for revenue recognition have been met with respect to that element.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">While the Company applies the guidance of Statement of Position (SOP)&nbsp;No.&nbsp;97&#150;2, &#147;Software Revenue
Recognition,&#148; as amended by SOP No.&nbsp;98&#150;9, &#147;Modification of SOP 97&#150;2, Software Revenue Recognition,
With Respect to Certain Transactions,&#148; management exercises judgment in connection with the
determination of the amount of revenue to be recognized each period. Such judgments include, but
are not limited to, assessing the probability of collecting the receivable, assessing whether the
fee is fixed or determinable, assessing whether customer&#150;specified acceptance criteria are
substantive in nature, and assessing whether VSOE of fair value has been established for
undelivered elements.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Investments</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the Company&#146;s investment balance totaled $178,859,000, of which $167,913,000
consisted of municipal bonds and other debt securities. Debt securities are reported at fair value,
with unrealized gains and losses, net of tax, recorded in shareholders&#146; equity as other
comprehensive income (loss). At December&nbsp;31, 2006, the Company&#146;s portfolio of debt securities had
gross unrealized losses totaling $264,000.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The remaining investment balance of $10,946,000 represented a limited partnership interest in
Venrock Associates III, L.P., a venture capital fund. A Director of the Company is a Managing
General Partner of Venrock Associates. The Company&#146;s limited partnership interest is accounted for
using the cost method because the Company&#146;s investment is less than 5% of the partnership and the
Company has no influence over the partnership&#146;s operating and financial policies. At December&nbsp;31,
2006, the carrying value of this investment was $10,946,000 compared to an estimated fair value of
$13,115,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of the Company&#146;s limited partnership interest is based upon valuations of the
partnership&#146;s investments as determined by the General Partner. The Company understands that the
General Partner adjusts the investment valuations at least quarterly to reflect both realized and
unrealized gains and losses on partnership investments. Securities of public companies are valued
at market, subject to appropriate discounts to reflect limitations on liquidity. Securities of
private companies are valued at an estimated fair
value, which initially is at cost,
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">23
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Management&#146;s Discussion and</B><br>
<B>Analysis of Financial Condition and Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">adjusted for subsequent transactions that indicate a higher or lower value is warranted. The value
of private securities may be discounted when, in the General Partner&#146;s judgment, the carrying value
of such securities has been impaired by specific events.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company monitors the carrying value of its investments compared to their fair value to
determine whether an other&#150;than&#150;temporary impairment has occurred. In considering whether a decline
in fair value is other than temporary, the Company considers many factors, both qualitative and
quantitative in nature. Some of these factors include the duration and extent of the fair value
decline, the length of the Company&#146;s commitment to the investment, and general economic, stock
market, and interest rate trends. In the case of the Company&#146;s limited partnership investment,
specific communications from the General Partner are also considered in this evaluation. If a
decline in fair value is determined to be other&#150;than&#150;temporary, an impairment charge would be
recorded in current operations. There were no other&#150;than&#150;temporary impairments of investments in
2006, 2005, or 2004.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Accounts
Receivable</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company maintains reserves against its accounts receivable for potential credit losses. Ongoing
credit evaluations of customers are performed and the Company has historically not experienced
significant losses related to the collection of its accounts receivable. Allowances for specific
accounts determined to be at risk for collection are estimated by management taking into account
the length of time receivables have been outstanding, the risks associated with selling to smaller
customers, and the economic conditions of the primary regions and industries sold to, as well as
general economic conditions. An adverse change in any of these factors may result in the need for
additional bad debt provisions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Inventories</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Inventories are stated at the lower of cost or market. The Company estimates excess and
obsolescence exposures based upon assumptions about future demand, product transitions, and market
conditions, and records reserves to reduce the carrying value of inventories to their net
realizable value. Among the risks associated with the introduction of new products are difficulty
predicting customer demand and effectively managing inventory levels to ensure adequate supply of
the new product and avoid excess supply of the legacy product. In addition, the Company may
strategically enter into non-cancelable commitments with vendors to purchase
materials for products in advance of demand in order
to take advantage of favorable pricing or address concerns about the availability of future
supplies. The failure to effectively manage product transitions or accurately forecast customer
demand, in terms of both volume and configuration, and adjust material requirement plans in a
timely manner may lead to additional excess and obsolete inventory charges in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Long&#150;Lived
Assets</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has long&#150;lived assets including property, plant, and equipment, as well as acquired
goodwill and other intangible assets. These assets are susceptible to shortened estimated useful
lives and changes in fair value due to changes in their use, market or economic changes, or other
events or circumstances. In addition, the fair value of goodwill is susceptible to changes in the
fair value of the reporting units in which the goodwill resides, which are also reportable
segments. The Company evaluates the potential impairment of its long&#150;lived assets annually, as
required, or whenever events or circumstances indicate their carrying value may not be recoverable.
If events or circumstances occur which would require a significant reduction in the estimated
useful lives of these assets or a significant decrease in fair value below their carrying value, an
adjustment to the lives or carrying values would result in a charge to income in the period of
determination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Warranty
Obligations</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company records the estimated cost of fulfilling product warranties at the time of sale based
upon historical costs to fulfill claims. Obligations may also be recorded subsequent to the time
of sale whenever specific events or circumstances impacting product quality become known that would
not have been taken into account using historical data. While the Company engages in extensive
product quality programs and processes, including actively monitoring and evaluating the quality of
its component suppliers and third&#150;party contract manufacturers, the Company&#146;s warranty obligation
is affected by product failure rates, material usage, and service delivery costs incurred in
correcting a product failure. An adverse change in any of these factors may result in the need for
additional warranty provisions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Contingencies</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Estimated losses from contingencies are accrued by management based upon the likelihood of a loss
and the ability to reasonably estimate the amount of the loss. Estimating potential losses, or even
a range of losses, is difficult and involves a great
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">24
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cognex Corporation: Management&#146;s Discussion and</B><br>
<B>Analysis of Financial Condition and Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">deal of judgment. The Company relies primarily on assessments made by its internal and external
legal counsel to make its determination as to whether a loss contingency arising from litigation
should be recorded or disclosed. Should the resolution of a contingency result in a loss that the
Company did not accrue because management did not believe that the loss was probable or capable of
being reasonably estimated, then this loss would result in a charge to income in the period the
contingency was resolved.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Stock-Based
Compensation Expense</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company adopted Statement of Financial Accounting Standard No. 123R, &#147;Share-Based Payment&#148; on
January&nbsp;1, 2006, which requires compensation expense to be recognized for all stock option grants.
Determining the appropriate valuation model and estimating the fair values of these grants requires
the input of subjective assumptions, including expected stock price volatility, dividend yields,
and forfeiture rates. The expected volatility assumption is based partially on the historical
volatility of the Company&#146;s common stock, which may or may not be a good indicator of future
volatility, particularly as the Company continues to seek to diversify its customer base. The
assumptions used in calculating the fair values of stock option grants represent management&#146;s best
estimates, but these estimates involve inherent uncertainties and the application of judgment. As a
result, if factors change and different assumptions are used, stock-based compensation expense
could be significantly different from what the Company recorded in the current period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Income
Taxes</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As part of the process of preparing consolidated financial statements, management is required to
estimate income taxes in each of the jurisdictions in which the Company operates. This process
involves estimating the current tax liability, as well as assessing temporary differences arising
from the different treatment of items for financial statement and tax purposes. These differences
result in deferred tax assets and liabilities, which are recorded on the Consolidated Balance
Sheet.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the Company had net deferred tax assets of $17,638,000, primarily resulting
from temporary differences between the financial statement and tax bases of assets and liabilities.
Management has evaluated the realizability of these deferred tax assets and has determined that it
is more likely than not that these assets will be realized, net of any established reserves. In
reaching this conclusion,
management has evaluated relevant criteria, including the Company&#146;s historical profitability,
current projections of future profitability, and the lives of tax credits, net operating and
capital losses, and other
carryforwards, certain of which have indefinite lives. Should the Company fail to generate
sufficient pre&#150;tax profits in future periods, it may be required to record material adjustments to
these deferred tax assets, resulting in a charge to income in the period of determination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Significant judgment is required in determining worldwide income tax expense based upon tax laws in
the various jurisdictions in which the Company operates. The Company has established reserves to
provide for additional income taxes that may be due in future years as these previously filed tax
returns are audited. These reserves have been established based upon management&#146;s assessment as to
the potential exposure attributable to permanent differences and interest applicable to both
permanent and temporary differences. All tax reserves are analyzed periodically and adjustments are
made as events occur that warrant modification, such as the completion of audits or the expiration
of statutes of limitations, which may result in future charges or credits to tax expense.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Derivative
Instruments</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In certain instances, the Company enters into forward contracts and currency swaps to hedge against
foreign currency fluctuations. These contracts are used to reduce the Company&#146;s risk associated
with foreign currency exchange rate changes, as the gains or losses on these contracts are intended
to offset the losses or gains on the underlying exposures. The Company does not engage in foreign
currency speculation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company recorded net foreign currency losses of $333,000 in 2006, $888,000 in 2005, and net
foreign currency gains of $1,641,000 in 2004. The Company is exposed to foreign currency gains and
losses as a significant portion of its revenues, expenses, assets, and liabilities are denominated
in currencies other than the functional currencies of the Company or its subsidiaries. In addition,
foreign exchange rates have fluctuated significantly in the past.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Administering the Company&#146;s foreign currency risk management program requires the use of estimates
and the application of judgment, including compiling forecasts of transaction activity denominated
in various currencies. The failure to identify foreign currency exposures and construct effective
hedges may result in material foreign currency gains or losses.
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">25
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Management&#146;s Discussion and</B><br>
<B>Analysis of Financial Condition and Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NEW PRONOUNCEMENTS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>FIN No.&nbsp;48, &#147;Accounting for Uncertainty in Income Taxes &#150; an Interpretation of FASB Statement No.
109&#148;</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2006, the Financial Accounting Standards Board (FASB)&nbsp;issued Interpretation No.&nbsp;48
&#147;Accounting for Uncertainty in Income Taxes &#150; an Interpretation of FASB Statement No.&nbsp;109&#148; (FIN
48). FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition
threshold a tax position is required to meet before being recognized in the financial statements.
This Interpretation also provides guidance on derecognition, measurement, classification, interest
and penalties, accounting in interim periods, disclosure, and transition. FIN 48 will require
disclosure at the end of the annual reporting period of the nature of uncertain tax positions and
related events if it is reasonably possible that those positions and events could change the
associated recognized tax benefit within the next twelve months. This Interpretation is effective
for fiscal years beginning after December&nbsp;15, 2006. The Company will
adopt FIN 48 effective January&nbsp;1, 2007. The cumulative effect of applying the provisions of FIN 48
will be recorded as an adjustment to opening retained earnings in the first quarter of 2007. While
our assessment of the impact is not yet complete, the Company expects that the adoption of FIN 48
will result in a reduction in retained earnings of approximately $2,000,000 to $4,000,000.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>FASB
Statement No.&nbsp;159, &#147;The Fair Value Option for Financial
Assets and Financial Liabilities&#148;</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2007, the FASB issued Statement No.&nbsp;159, &#147;The Fair Value Option for Financial Assets
and Financial Liabilities,&#148; which provides companies with an option to report selected financial
assets and liabilities at fair value. This Statement is effective for the Company&#146;s fiscal year
ended December&nbsp;31, 2008, although earlier adoption is permitted. The Company does not expect this
Statement to have a material impact on its financial condition or results of operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Foreign
Currency Risk</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company faces exposure to adverse movements in foreign currency exchange rates as a significant
portion of its revenues, expenses, assets, and liabilities are denominated in currencies other than
the functional currencies of the Company or its subsidiaries. These exposures may change over time
as business practices evolve. The Company evaluates its foreign currency exposures on an ongoing
basis and makes adjustments to its foreign currency risk management program as circumstances
change.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In certain instances, the Company enters into forward contracts and currency swaps to hedge against
foreign currency fluctuations. Currency swaps are used to hedge long&#150;term transactions between the
Company and its subsidiaries. Forward contracts are used to provide a hedge against transactions
denominated in currencies other than the functional currencies of the Company or its subsidiaries.
These forward contracts and currency swaps are used to reduce the Company&#146;s risk associated with
foreign currency exchange rate changes, as the gains or losses on these contracts are intended to
offset the losses or gains on the underlying exposures. The Company does not engage in foreign
currency speculation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The success of the Company&#146;s foreign currency risk management program depends upon forecasts of
transaction activity denominated in various currencies. To the extent that these forecasts are
overstated or understated during periods of currency volatility, the Company could experience
unanticipated foreign currency gains or losses that could have a material impact on the Company&#146;s
results of operations. In addition, the failure to identify new exposures and hedge them in a
timely manner may result in material foreign currency gains or losses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company enters into currency swaps to hedge the foreign currency exposure of its long&#150;term
intercompany loans between the parent and certain of its European subsidiaries. A currency swap to
exchange a total of 30,000,000 Euro Dollars for U.S. Dollars at a settlement price of 1.02
USD/Euro, with an original term of four years, was outstanding at December&nbsp;31, 2006. This
instrument at fair value had a loss of $9,748,000 at December&nbsp;31, 2006, which was materially offset
by gains on the Company&#146;s intercompany loans. In addition, the Company enters into forward
contracts to hedge the foreign currency exposure of its Irish subsidiary&#146;s accounts receivable
denominated in U.S. dollars and Japanese Yen. Forward contracts to exchange 1,199,750,000 Japanese
Yen for Euro Dollars at a
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">26
</DIV>



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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cognex Corporation: Management&#146;s Discussion and<BR>
Analysis of Financial Condition and Results of Operations</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">weighted&#150;average settlement price of 151.13 Yen/Euro and contracts to exchange 4,070,000 U.S.
dollars for Euro Dollars at a weighted&#150;average settlement price of 1.31 USD/Euro, both with terms
between one and six months, were outstanding at December&nbsp;31, 2006. These instruments at fair value
had a gain of $449,000 at December&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><b>Interest
Rate Risk</b>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s investment portfolio includes municipal bonds and other debt securities. Debt
securities with original maturities greater than three months are designated as available&#150;for&#150;sale
and are reported at fair value. At December&nbsp;31, 2006, the fair value of the Company&#146;s portfolio of
debt securities amounted to $167,913,000, with principal amounts totaling $170,541,000, maturities
that do not exceed three years, and a yield to maturity of 3.35%. Differences between the fair
value and principal amounts of the Company&#146;s portfolio of debt
securities are primarily attributable to discounts and premiums arising at the acquisition date, as
well as unrealized gains and losses at the balance sheet date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Given the relatively short maturities and investment&#150;grade quality of the Company&#146;s portfolio of
debt securities at December&nbsp;31, 2006, a sharp rise in interest rates should not have a material
adverse effect on the fair value of these instruments. As a result, the Company does not currently
hedge these interest rate exposures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table presents the hypothetical change in the fair value of the Company&#146;s portfolio
of debt securities arising from selected potential changes in interest rates (in thousands). This
modeling technique measures the change in fair value that would result from a parallel shift in the
yield curve plus or minus 50 and 100 basis points (BP)&nbsp;over a twelve&#150;month time horizon.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Valuation of securities given</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">No change in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Valuation of securities given</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Type of security</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">an interest rate decrease</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">interest rates</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">an interest rate increase</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">(100 BP)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">(50 BP)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">50 BP</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">100 BP</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Municipal Bonds and Other Debt Securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">168,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">168,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">169,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">169,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">170,314</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other
Market Risks</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s investment portfolio also includes a limited partnership interest in Venrock
Associates III, L.P., a venture capital fund with an investment focus on Information Technology and
Health Care and Life Sciences. The majority of the partnership&#146;s portfolio consists of investments
in early stage, private companies characterized by a high degree of risk, volatility, and
illiquidity. A Director of the Company is a Managing General Partner of Venrock Associates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of the Company&#146;s limited partnership interest is based upon valuations of the
partnership&#146;s investments as determined by the General Partner. The Company understands that the
General Partner adjusts the investment valuations at least quarterly to reflect both realized and
unrealized gains and losses on partnership investments. Securities of public companies are valued
at market, subject to appropriate discounts to reflect limitations on liquidity.
Securities of private companies are valued at an estimated fair value, which initially is at cost,
adjusted for subsequent transactions that indicate a higher or lower value is warranted. The value
of private securities may be discounted when, in the General Partner&#146;s judgment, the carrying value
of such private securities has been impaired by specific events.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the carrying value of this investment was $10,946,000 compared to an
estimated fair value, as determined by the General Partner, of $13,115,000. Should the fair value
of this investment decline in future periods below its carrying value, the Company will determine
whether this decline is other&#150;than&#150;temporary and future impairment charges may be required.
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cognex Corporation: Consolidated Statements of Operations</B><BR>
(In thousands, except per share amounts)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" style="font-weight: bold">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Product</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">$</TD>
    <TD align="right" style="font-weight: bold">214,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">192,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">176,569</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Service</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">23,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,388</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" style="font-weight: bold">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">238,424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">216,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201,957</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Product <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">50,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,788</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Service <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">14,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,583</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" style="font-weight: bold">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">64,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,371</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross margin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Product</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">164,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133,781</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Service</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">8,861</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,805</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" style="font-weight: bold">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">173,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,586</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research, development, and engineering expenses <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">32,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,063</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general, and administrative expenses <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">96,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,674</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>



<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" style="font-weight: bold">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">44,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,849</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency gain (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">(333</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(888</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,641</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investment and other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">6,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,670</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" style="font-weight: bold">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">50,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,160</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">10,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,416</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" style="font-weight: bold">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">$</TD>
    <TD align="right" style="font-weight: bold">39,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income
per common and common&#150;equivalent share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">$</TD>
    <TD align="right" style="font-weight: bold">0.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.83</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">$</TD>
    <TD align="right" style="font-weight: bold">0.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>




    <TD align="left">$</TD>
    <TD align="right">0.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" style="font-weight: bold">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px">Weighted&#150;average common and common&#150;equivalent shares outstanding:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">45,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,480</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" style="font-weight: bold">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">46,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,358</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" style="font-weight: bold">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash dividends per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">$</TD>
    <TD align="right" style="font-weight: bold">0.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD colspan="5" align="left"><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP> Amounts include stock&#150;based compensation expense, as follows:</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Product cost of revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">$</TD>
    <TD align="right" style="font-weight: bold">725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Service cost of revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Research, development, and engineering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">3,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling, general, and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">8,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total
stock&#150;based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">$</TD>
    <TD align="right" style="font-weight: bold">13,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.

</DIV>

<P align="left" style="font-size: 10pt"><!-- Folio -->28<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Consolidated Balance Sheets</B><BR>
(In thousands)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" style="font-weight: bold">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">$</TD>
    <TD align="right" style="font-weight: bold">87,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">72,856</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short&#150;term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">128,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169,156</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable, less reserves of $1,662 and
$2,370 in 2006 and 2005, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">40,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,051</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">30,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,819</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">8,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,667</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">18,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,104</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">313,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">326,653</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long&#150;term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">50,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,246</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, plant, and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">26,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,175</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">9,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,227</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">44,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">83,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,807</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">1,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,405</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">$</TD>
    <TD align="right" style="font-weight: bold">528,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">564,562</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">

<TD><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES
AND SHAREHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">$</TD>
    <TD align="right" style="font-weight: bold">6,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,118</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">40,612</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,476</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,142</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">6,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,305</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR><TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">54,801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,041</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commitments (Notes 4, 9, 10, 11, and 18)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock, $.002 par value &#150;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Authorized: 140,000 shares, issued: 44,403 and
47,171 shares in 2006 and 2005, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid&#150;in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">155,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">216,031</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">329,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">304,454</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">(10,626</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,058</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR><TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">473,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">506,521</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR><TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">$</TD>
    <TD align="right" style="font-weight: bold">528,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">564,562</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR><!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.

</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->29<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cognex Corporation: Consolidated Statements of Shareholders&#146; Equity</B><BR>
(In thousands)
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Additional</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Paid&#150;in</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Par Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Capital</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">209,679</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock under stock option, stock purchase,
and other plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,213</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit from exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,722</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payment of dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock received for payment of stock option exercises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retirement of treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,263</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(72,754</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Losses on currency swaps, net of gains on long&#150;term
intercompany loans, net of tax of $1,016</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net unrealized loss on available&#150;for&#150;sale investments,
net of tax of $696</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">192,860</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock under stock option, stock purchase,
and other plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,213</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit from exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,648</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repurchase of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(384</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,690</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payment of dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gains on long&#150;term intercompany loans, net of losses
on currency swaps, net of tax of $82</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net unrealized loss on available&#150;for&#150; sale investments, net
of tax of $31</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">216,031</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock under stock option, stock purchase,
and other plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,357</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock&#150;based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,624</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Excess tax benefit from stock option exercises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,413</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repurchase of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,281</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(86,289</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payment of dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gains on long&#150;term intercompany loans, net of losses on
currency swaps, net of tax of $139</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net unrealized gain on available&#150;for&#150;sale investments,
net of tax of $330</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>44,403</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>89</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>155,136</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.

</DIV>

<P align="left" style="font-size: 10pt"><!-- Folio -->30<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>

</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Total</TD>
    <TD>&nbsp;</TD>

</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="4" style="border-bottom: 1px solid #000000">Treasury Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Retained</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Comprehensive</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Comprehensive</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Shareholders&#146;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right">Shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Earnings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Loss</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Income</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Equity</TD>
    <TD>&nbsp;</TD>

</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">

<TD align="right"><DIV style="margin-left:15px; text-indent:-15px">4,253</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">(72,445</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">258,724</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">(11,060</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">384,994</TD>
    <TD>&nbsp;</TD>

</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,217</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,722</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,756</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,756</TD>
    <TD nowrap>)</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:30px; text-indent:-15px">10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(317</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(317</TD>
    <TD nowrap>)</TD>

</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">(4,263)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,744</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,730</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,730</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,730</TD>
    <TD nowrap>)</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,185</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,185</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,185</TD>
    <TD nowrap>)</TD>

</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118</TD>
    <TD>&nbsp;</TD>

</TR>
<TR style="font-size: 1px">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34,947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom">



    <TD align="right">&#151;</TD>

    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">283,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(13,857</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">462,807</TD>
    <TD>&nbsp;</TD>

</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,215</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,648</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,690</TD>
    <TD nowrap>)</TD>

</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,960</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,960</TD>
    <TD nowrap>)</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,702</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(52</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(52</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(52</TD>
    <TD nowrap>)</TD>

</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(288</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(288</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(288</TD>
    <TD nowrap>)</TD>

</TR>
<TR style="font-size: 1px">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD align="right">&#151;</TD>

    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">304,454</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(14,058</TD>
    <TD nowrap>)</TD>
   <TD>&nbsp;</TD>
   <TD>&nbsp;</TD>
 <TD>&nbsp;</TD>
 <TD>&nbsp;</TD>
 <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">506,521</TD>
    <TD>&nbsp;</TD>

</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,359</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,624</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,413</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(86,296</TD>
    <TD nowrap>)</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,058</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,058</TD>
    <TD nowrap>)</TD>

</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">39,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,855</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">562</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,634</TD>
    <TD>&nbsp;</TD>

</TR>
<TR style="font-size: 1px">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">43,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>


<TR valign="bottom" style="background: #cceeff; font-weight: bold">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">&#151;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">329,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(10,626</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">473,850</TD>
    <TD>&nbsp;</TD>

</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" >&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->31<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cognex Corporation: Consolidated Statements of Cash Flows</B><BR>
(In thousands)
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" style="font-weight: bold">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">$</TD>
    <TD align="right" style="font-weight: bold">39,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments to reconcile net income to net cash provided by operations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock&#151;based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">13,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation of property, plant, and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">4,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,548</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amortization of intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">5,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,526</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amortization of investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">1,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,896</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Excess tax benefit from stock option exercises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">(1,413</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Tax benefit from stock option exercises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,722</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred income tax expense (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">(45</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,996</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,568</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Changes in operating assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">4,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,770</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,417</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">(10,178</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,642</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">(1,340</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(290</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">(6,911</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,089</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,785</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">(996</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(128</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">48,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,761</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,176</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from investing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">(481,086</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,437,264</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(805,621</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Maturity and sale of investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">541,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,531,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">716,714</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of property, plant, and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">(4,224</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,819</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,120</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash paid for business acquisitions, net of cash acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">(3,188</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(111,842</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(123</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash provided by (used in) investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">52,525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,095</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(92,150</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from financing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of common stock under stock option, stock purchase,
and other plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">10,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,900</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repurchase of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">(86,296</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,690</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payment of dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">(15,058</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,960</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,756</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Excess tax benefit from stock option exercises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">1,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash provided by (used in) financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">(89,582</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,144</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of exchange rate changes on cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">3,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,645</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,120</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net increase in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">14,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,290</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD align="right" style="font-weight: bold">72,856</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,980</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD style="font-weight: bold">$</TD>
    <TD align="right" style="font-weight: bold">87,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">72,856</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">54,270</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR><!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.

</DIV>

<P align="left" style="font-size: 10pt"><!-- Folio -->32<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying consolidated financial statements reflect the application of the significant
accounting policies described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Nature
of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cognex Corporation (the &#147;Company&#148;) designs, develops, manufactures, and markets machine vision
systems, or computers that can &#147;see.&#148; The Company&#146;s products are used to automate a wide range of
manufacturing processes where vision is required.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Use of
Estimates in the Preparation of Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and judgments that affect the reported
amounts of assets and liabilities at the balance sheet date and the reported amounts of revenue and
expenses during the year. Actual results could differ from those estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Basis
of Consolidation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The consolidated financial statements include the accounts of Cognex Corporation and its
subsidiaries. In addition, the Company consolidated the results of a real estate limited
partnership in accordance with Financial Accounting Standards Board Interpretation No.&nbsp;46,
&#147;Variable Interest Entities&#148; (See Note 6). All intercompany accounts and transactions have been
eliminated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Foreign
Currency</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The financial statements of the Company&#146;s foreign subsidiaries, where the local currency is the
functional currency, are translated using exchange rates in effect at the end of the year for
assets and liabilities and average exchange rates during the year for results of operations. The
resulting foreign currency translation adjustment is recorded in shareholders&#146; equity as other
comprehensive income (loss).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cash,
Cash Equivalents, and Investments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Debt securities purchased with original maturities of three months or less are classified as cash
equivalents and are stated at amortized cost. Debt securities with original maturities greater than
three months and remaining maturities of one year or less, as well as auction rate and variable
rate demand securities for which interest rates reset in less than 90&nbsp;days but for which the
maturity date is greater than 90&nbsp;days, are classified as short-term investments. Despite the
long-term nature of their
contractual maturities, the Company has the ability to quickly liquidate auction rate and variable
rate demand securities. Debt securities with remaining maturities greater than one year, as well as
a limited partnership interest, are classified as long-term investments. It is the Company&#146;s policy
to invest in debt securities with contractual maturities that do not exceed three years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Debt securities with original maturities greater than three months are designated as
available-for-sale and are reported at fair value, with unrealized gains and losses, net of tax,
recorded in shareholders&#146; equity as other comprehensive income (loss). Realized gains and losses
are included in current operations, along with the amortization of the discount or premium arising
at acquisition and are calculated using the specific identification method. The Company&#146;s limited
partnership interest is accounted for using the cost method because the Company&#146;s investment is
less than 5% of the partnership and the Company has no influence over the partnership&#146;s operating
and financial policies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company monitors the carrying value of its investments compared to their fair value to
determine whether an other-than-temporary impairment has occurred. If a decline in fair value is
determined to be other-than-temporary, an impairment charge related to that specific investment is
recorded in current operations. There were no other-than-temporary impairments of investments in
2006, 2005, or 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Accounts
Receivable</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company establishes reserves against its accounts receivable for potential credit losses when
it determines receivables are at risk for collection based upon the length of time receivables have
been outstanding, as well as various other factors. Receivables are written off against these
reserves in the period they are determined to be uncollectible.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Inventories</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Inventories are stated at the lower of cost or market. Cost is determined using standard costs,
which approximate the first in, first out (FIFO)&nbsp;method. The Company&#146;s inventory is subject to
rapid technological change or obsolescence. The Company periodically reviews inventory quantities
on hand and estimates excess and obsolescence exposures based upon assumptions about future demand,
product transitions, and market conditions, and records reserves to reduce the carrying value of
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->33<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">inventories to their net realizable value. If actual future demand is less than estimated,
additional inventory write-downs would be required.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company generally disposes of obsolete inventory upon determination of obsolescence. The
Company does not dispose of excess inventory immediately, due to the possibility that some of this
inventory could be sold to customers as a result of differences between actual and forecasted
demand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">When inventory has been written down below cost, such reduced amount is considered the new cost
basis for subsequent accounting purposes. As a result, the Company would recognize a higher than
normal gross margin if the reserved inventory were subsequently sold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Property,
Plant, and Equipment</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Property, plant, and equipment are stated at cost and depreciated using the straight-line method
over the assets&#146; estimated useful lives. Buildings&#146; useful lives are 39&nbsp;years, building
improvements&#146; useful lives are 10&nbsp;years, and the useful lives of computer hardware, computer
software, and furniture and fixtures range from two to five years. Leasehold improvements are
depreciated over the shorter of the estimated useful lives or the remaining terms of the leases.
Maintenance and repairs are expensed when incurred; additions and improvements are capitalized.
Upon retirement or disposition, the cost and related accumulated depreciation of the assets
disposed of are removed from the accounts, with any resulting gain or loss included in current
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Intangible
Assets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Intangible assets are stated at cost and amortized using the straight-line method over the assets&#146;
estimated useful lives. The useful lives of distribution networks range from 11-12&nbsp;years, of
customer contracts and relationships from 8-12&nbsp;years, and of completed technologies and other
intangible assets from three to six years. The Company evaluates the possible impairment of
long-lived assets, including intangible assets, whenever events or circumstances indicate the
carrying value of the assets may not be recoverable. At the occurrence of a certain event or change
in circumstances, the Company evaluates the potential impairment of an asset by estimating the
future undiscounted cash flows expected to result from the use and eventual disposition of the
asset. If the sum of the estimated future cash flows is less than the carrying value, the Company
determines the amount of such impairment by comparing the fair value
of the asset to its carrying value. The fair value is based upon the present value of the estimated
future cash flows using a discount rate commensurate with the risks involved.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Goodwill</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Goodwill is stated at cost. The Company evaluates the possible impairment of goodwill annually each
fourth quarter, and whenever events or circumstances indicate the carrying value of the goodwill
may not be recoverable. The Company evaluates the potential impairment of goodwill by comparing the
fair value of the reporting unit to its carrying value, including goodwill. If the fair value is
less than the carrying value,the Company determines the amount of such impairment by comparing the
implied fair value of the goodwill to its carrying value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Warranty
Obligations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company warrants its hardware products to be free from defects in material and workmanship for
periods ranging from six months to two years from the time of sale based upon the product being
purchased and the terms of the customer arrangement. Warranty obligations are evaluated and
recorded at the time of sale since it is probable that customers will make claims under warranties
related to products that have been sold and the amount of these claims can be reasonably estimated
based upon historical costs to fulfill claims. Obligations may also be recorded subsequent to the
time of sale whenever specific events or circumstances impacting product quality become known that
would not have been taken into account using historical data.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Revenue
Recognition</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company recognizes revenue in accordance with Statement of Position (SOP)&nbsp;No.&nbsp;97-2, &#147;Software
Revenue Recognition,&#148; as amended by SOP No.&nbsp;98-9, &#147;Modification of SOP 97-2, Software Revenue
Recognition, With Respect to Certain Transactions,&#148; since the software is more than incidental to
its product and the services in its arrangements do not involve significant production,
modification, or customization of the software.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company requires that a signed customer contract or purchase order is received, the fee from
the arrangement is fixed or determinable,
and collection of the resulting receivable is probable in order to recognize revenue. Assuming that
these criteria have been met, product revenue is recognized upon delivery, revenue from maintenance
and support programs is recognized ratably over the program period, revenue from
</DIV>

<P align="left" style="font-size: 10pt"><!-- Folio -->34<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">training and consulting services is recognized over the period that the services are
provided, and revenue from installation services is recognized when the customer has signed off
that the installation is complete. If the arrangement contains customer-specified acceptance
criteria, then revenue is deferred until the Company can demonstrate that the customer&#146;s criteria
have been met.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain of the Company&#146;s arrangements include multiple elements that provide the customer with a
combination of product or service deliverables. The fee from the arrangement is allocated to each
of the undelivered elements based upon vendor-specific objective evidence (VSOE)&nbsp;of fair value,
which is limited to the price charged when the same element is sold separately, with the residual
value from the arrangement allocated to the delivered element. The portion of the fee that is
allocated to each element is then recognized as revenue when the criteria for revenue recognition
have been met with respect to that element.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s products are sold directly to end users, as well as to resellers including original
equipment manufacturers (OEMs), system integrators, and distributors. Revenue is recognized upon
delivery of the product to the reseller, assuming all other revenue recognition criteria have been
met. The Company establishes reserves against revenue for potential product returns in accordance
with Statement of Financial Accounting Standards No.&nbsp;48, &#147;Revenue Recognition When Right of Return
Exists,&#148; since the amount of future returns can be reasonably estimated based upon experience.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Amounts billed to customers related to shipping and handling, as well as reimbursements received
from customers for out-of-pocket expenses, are classified as revenue, with the associated costs
included in cost of revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Research
and Development</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Research and development costs for internally-developed or acquired products are expensed when
incurred until technological feasibility has been established for the product. Thereafter, all
software costs are capitalized until the product is available for general release to customers. The
Company determines technological feasibility at the time the product reaches beta in its stage of
development. Historically, the time incurred between beta and general release to customers has
been short, and therefore, the costs have been insignificant. As a result, the Company has not
capitalized software costs associated with internally-developed products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Income
Taxes</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company accounts for income taxes under the liability method. Under this method, a deferred tax
asset or liability is determined based upon the differences between the financial statement and tax
bases of assets and liabilities as measured by the enacted tax rates that will be in effect when
these differences reverse. Tax credits are recorded as a reduction in income taxes. Valuation
allowances are provided if, based upon the weight of available evidence, it is more likely than not
that some or all of the deferred tax assets will not be realized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Net Income Per Share</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Basic net income per share is computed by dividing net income available to common shareholders by
the weighted-average number of common shares outstanding for the period. Diluted net income per
share is computed by dividing net income available to common shareholders by the weighted-average
number of common shares outstanding for the period plus potential dilutive common shares. Dilutive
common equivalent shares consist of stock options and are calculated using the treasury stock
method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Comprehensive
Income (Loss)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Comprehensive income (loss)&nbsp;is defined as the change in equity of a company during a period from
transactions and other events and circumstances, excluding transactions resulting from investments
by owners and distributions to owners. Accumulated other comprehensive loss consists of foreign
currency translation adjustments of $8,643,000 and $11,277,000 at December&nbsp;31, 2006 and 2005,
respectively, net unrealized losses on available-for-sale investments, net of tax, of $166,000 and
$728,000 at December&nbsp;31, 2006 and 2005, respectively, and losses on currency swaps net of gains on
long-term inter-company loans, net of tax, of $1,817,000 and $2,053,000 at December&nbsp;31, 2006 and
2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Concentrations
of Risk</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Financial instruments that potentially subject the Company to concentrations of credit risk consist
primarily of cash, cash equivalents, investments, and trade receivables. The Company primarily
invests in municipal obligations of state and local
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->35<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">government entities. The Company has established guidelines relative to credit ratings,
diversification, and maturities of its debt securities that maintain safety and liquidity. The
Company has not experienced any significant realized losses on its debt securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A significant portion of the Company&#146;s sales and receivables are from customers who are either in
or who serve the semiconductor and electronics industries. The Company performs ongoing credit
evaluations of its customers and maintains allowances for potential credit losses. The Company has
not experienced any significant losses related to the collection of its accounts receivable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A significant portion of the Company&#146;s MVSD inventory is manufactured by a third-party contractor.
The Company is dependent upon this contractor to provide quality product and meet delivery
schedules. The Company engages in extensive product quality programs and processes, including
actively monitoring the performance of its third-party manufacturers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Derivative
Instruments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has adopted the accounting and disclosure requirements of Statement of Financial
Accounting Standards (SFAS)&nbsp;No.&nbsp;133, &#147;Accounting for Derivative Instruments and Hedging
Activities.&#148; SFAS No.&nbsp;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
operations or in shareholders&#146; equity as other comprehensive income (loss), depending upon whether
the derivative is designated as part of a hedge transaction and, if it is, the type of hedge
transaction. Hedges of underlying exposures are designated and documented at the inception of the
hedge and are evaluated for effectiveness quarterly.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In certain instances, the Company enters into forward contracts and currency swaps to hedge against
foreign currency fluctuations. Currency swaps are used to hedge long-term transactions between the
Company and its subsidiaries. Forward contracts are used to provide a hedge against transactions
denominated in currencies other than the functional currencies of the Company or its subsidiaries.
These forward contracts
and currency swaps are used to reduce the Company&#146;s risk associated with exchange rate changes, as
the gains or losses on these contracts are intended to offset the losses or gains on the underlying
exposures. The Company does not engage in foreign currency speculation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stock-Based
Compensation Plans</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2004, the Financial Accounting Standards Board (FASB)&nbsp;issued Statement of Financial
Accounting Standard (SFAS)&nbsp;No.&nbsp;123R, &#147;Share-Based Payment,&#148; which is a revision of SFAS No.&nbsp;123,
&#147;Accounting for Stock-Based Compensation.&#148; SFAS No.&nbsp;123R requires companies to recognize
compensation expense for all share-based payments to employees at fair value. Recognizing
compensation expense using the intrinsic value based method described in Accounting Principles
Board (APB)&nbsp;Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to Employees&#148; and disclosing the pro-forma
impact of using the fair value based method described in SFAS No.&nbsp;123 is no longer an alternative.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SFAS No.&nbsp;123R was adopted by the Company on January&nbsp;1, 2006 using the modified prospective method
in which compensation expense is recognized beginning on the effective date. Under this transition
method, compensation expense recognized for the year ended December&nbsp;31, 2006 includes: (1)
compensation expense for all share-based payments granted prior to but not yet vested as of
December&nbsp;31, 2005, based on the grant-date fair value estimated under SFAS No.&nbsp;123, and (2)
compensation expense for all share-based payments granted subsequent to December&nbsp;31, 2005, based on
the grant-date fair value estimated under SFAS No.&nbsp;123R. In accordance with the modified
prospective method, the Company&#146;s results of operations and financial position have not been
restated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table details the effect on net income and net income per share had stock-based
compensation expense been recorded against income for 2005 and 2004 using the fair value based
method described in SFAS No.&nbsp;123. The reported and pro-forma net income and net income per share
for 2006 are the same since stock-based compensation expense was recorded under the provisions of
SFAS No.&nbsp;123R.
</DIV>


<P align="left" style="font-size: 10pt"><!-- Folio -->36<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>35,702</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Total share-based compensation costs determined under fair value
based method, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(9,355</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,183</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income, pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>26,347</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24,561</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic net income per share, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.76</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.83</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic net income per share, pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.56</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted net income per share, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.74</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted net income per share, pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.55</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">0.52</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Amount was originally reported as $0.49 and has been adjusted to $0.52 due to a
refinement in the calculation.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 2: NEW PRONOUNCEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>FIN
No.&nbsp;48, &#147;Accounting for Uncertainty in Income Taxes &#150; an Interpretation of FASB Statement No. 109&#148;</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2006, the Financial Accounting Standards Board
(FASB)&nbsp;issued Interpretation No.&nbsp;48 &#147;Accounting for
Uncertainty in Income Taxes &#150; an Interpretation of FASB
Statement No.&nbsp;109&#148; (FIN 48). FIN 48 clarifies the
accounting for income taxes by prescribing the minimum
recognition threshold a tax position is required to meet
before being recognized in the financial statements. This
Interpretation also provides guidance on derecognition,
measurement, classification, interest and penalties,
accounting in interim periods, disclosure, and transition.
FIN 48 will require disclosure at the end of the annual
reporting period of the nature of uncertain tax positions
and related events if it is reasonably possible that those
positions and events could change the associated recognized
tax benefit within the next twelve months. This
Interpretation is effective for fiscal years beginning
after December&nbsp;15, 2006. The Company will
adopt FIN 48 effective January&nbsp;1, 2007. The cumulative
effect of applying the provisions of FIN 48 will be
recorded as an adjustment to opening retained earnings in
the first quarter of 2007. While our assessment of the
impact is not yet complete, the Company expects that the
adoption of FIN 48 will result in a reduction in retained
earnings of approximately $2,000,000 to $4,000,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>FASB
Statement no. 159, &#147;The Fair Value Option for
Financial Assets and Financial Liabilities&#148;</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2007 , the FASB issued Statement No.&nbsp;159,&#147;The
Fair Value Option for Financial Assets and Financial
Liabilities&#148; which provides companies with an option to
report selected financial assets and liabilities at fair
value. This Statement is effective for the Company&#146;s
fiscal year ended December&nbsp;31, 2008, although earlier
adoption is permitted. The Company does not expect this
Statement to have a material impact on its financial
condition or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 3: FOREIGN CURRENCY RISK MANAGEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company enters into currency swaps to hedge the
foreign currency exposure of its long-term intercompany
loans between the
parent and certain of its European subsidiaries. Contracts
outstanding at December&nbsp;31, 2006 relate to the Euro Dollar
and have an original term of four years. These hedges have
been designated for hedge accounting. They are classified
as net investment hedges, with the gains or losses on the
currency swaps, along with the associated losses or gains
on the intercompany loans, net of tax, recorded in
shareholders&#146; equity as other comprehensive income (loss)
to the extent they are effective as a hedge. The Company
recorded net foreign
currency gains of $236,000 and $139,000 in 2006 and 2005,
respectively, and a net foreign currency loss of
$1,730,000 in 2004 in other comprehensive income (loss)
on the intercompany loans and associated currency swaps.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company enters into forward contracts to hedge the
foreign currency exposure of its Irish subsidiary&#146;s
accounts receivable denominated in U.S. Dollars and
Japanese Yen. Contracts outstanding at December&nbsp;31, 2006
relate to the Euro Dollar and Japanese Yen and have terms
of one to six months. These hedges have not been designated
for hedge accounting. The
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->37<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">gains or losses on the forward contracts, along with
the associated losses or gains on the revaluation and
settlement of the short-term intercompany balances and
accounts receivable, are recorded in current operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition to the transactions described above that are
included in the Company&#146;s hedging program, the Company
enters into other transactions denominated in foreign
currencies for which the exchange rate gains or losses are
included in current operations. The Company recorded net
foreign currency losses of $333,000 and $888,000 in 2006
and 2005, respectively, and a net foreign currency gain of
$1,641,000 in 2004, representing the total net exchange
rate gains or losses that are recognized in current
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 4: CASH, CASH EQUIVALENTS, AND INVESTMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash, cash equivalents, and investments consist of the following (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>84,361</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">72,856</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>87,361</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,856</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Municipal bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>108,332</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,718</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial paper</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,988</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,584</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Agency notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,999</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Treasury bills</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,354</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>128,319</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169,156</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Municipal bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>39,594</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,863</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Limited partnership interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,946</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,383</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>50,540</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,246</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>266,220</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">312,258</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following is a summary of the Company&#146;s
available-for-sale investments at December&nbsp;31, 2006 (in
thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Amortized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Gains</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Fair Value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Municipal bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">108,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(139</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">108,332</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial paper</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,988</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Agency notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,999</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(152</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,319</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term municipal bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(129</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,594</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>168,177</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>17</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(281</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>167,913</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company recorded gross realized gains on the sale of
debt securities totaling $22,000 in 2006, $14,000 in 2005,
and $392,000 in 2004. The Company recorded gross realized
losses on the sale of debt securities totaling $30,000 in
2006, $525,000 in 2005, and $90,000 in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2000, the Company became a Limited Partner in
Venrock Associates III, L.P. (Venrock), a venture capital
fund. A Director of the Company is a Managing General
Partner of Venrock Associates. The Company has committed
to a total investment in the limited partnership of up to
$22,500,000,
</DIV>

<P align="left" style="font-size: 10pt"><!-- Folio -->38<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">with an expiration date of December&nbsp;31, 2010. In
January&nbsp;2007, Venrock reduced the Company&#146;s total
commitment from $22,500,000 to $20,500,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2006, the Company had contributed
$18,463,000 to the partnership, including $1,013,000
during 2006. The Company received distributions of
$450,000 from Venrock during 2006 that were accounted
for as a return of capital. At December&nbsp;31, 2006, the
carrying value of this investment was $10,946,000
compared to an estimated fair value, as determined by
the General Partner, of $13,115,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 5: INVENTORIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Inventories consist of the following (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raw materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>16,746</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,958</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Work-in-process</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,630</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,406</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,207</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,455</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>30,583</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,819</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2001, the Company recorded a $16,300,000 charge in
&#147;Cost of product revenue&#148; on the Consolidated Statement of
Operations for excess inventories and purchase commitments
resulting from an extended slowdown in the semiconductor
and electronics industries, as well as the expected
transition to newer Cognex hardware platforms by the
Company&#146;s OEM customers. A total of $12,500,000 of this
charge represented reserves against existing inventories
and was accordingly included in &#147;Inventories&#148; on the
Consolidated Balance Sheet. The remaining $3,800,000 of
this charge represented commitments to purchase excess
components and systems from various suppliers and
accordingly was included in &#147;Accrued expenses&#148; on the
Consolidated Balance Sheet. A favorable settlement of
these purchase commitments would result in a recovery of a
portion of the remaining $1,400,000 accrued at December
31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the change during 2006,
2005, and 2004 in the inventory-related reserve established
in 2001 (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Statement of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Balance Sheet</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Operations</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Accrued</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Inventories</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Expenses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Benefits</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reserve balance at December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventory sold to customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(805</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">805</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventory sold to brokers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(387</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Write-off and scrap of inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(743</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reserve balance at December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Benefits to cost of product revenue recorded in 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">805</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventory sold to customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(759</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">759</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventory sold to brokers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(158</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Write-off and scrap of inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(647</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reserve balance at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Benefits to cost of product revenue recorded in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">759</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventory sold to customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1,079</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,079</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventory sold to brokers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(617</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Write-off and scrap of inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(180</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reserve balance at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4,008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,400</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Benefits to cost of product revenue recorded in 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,079</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->39<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTE 6: PROPERTY, PLANT, AND EQUIPMENT</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Property, plant, and equipment consist of the
following (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3,951</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,051</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>18,371</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,571</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Building improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,769</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,206</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Computer hardware
and software</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>31,911</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,976</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Furniture and fixtures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,710</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,314</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,240</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,105</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>66,952</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,223</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: accumulated
depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(40,924</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(40,048</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>26,028</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24,175</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Buildings include property held for lease with a cost
basis of $4,950,000 at both December&nbsp;31, 2006 and 2005 and
accumulated depreciation of $1,460,000 and $1,333,000 at
Decem ber 31, 2006
and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In January&nbsp;2003, the Financial Accounting Standards Board
issued Interpretation No.&nbsp;46, &#147;Variable Interest Entities&#148;
(FIN 46), that addresses when a company should include in
its financial statements the assets, liabilities, and
activities of another entity. Previously, a company
generally included other entities in its consolidated
financial statements only if it controlled the entity
through voting interests. FIN 46 changed that guidance by
requiring variable interest entities, as defined, to be
consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest
entity&#146;s activities or is entitled to receive a majority
of that entity&#146;s residual returns (defined as the primary
beneficiary).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2000, the Company entered into an agreement with a real
estate limited partnership to purchase property adjacent to
its corporate headquarters for $1,700,000 with an estimated
closing date in 2007. The purchase price was accounted for
as a deposit included in &#147;Other assets&#148; on the Consolidated
Balance Sheet. Although the Company concluded at the
transaction date that the limited partnership was a
variable interest entity, the Company also concluded that
it was not the primary beneficiary because the deposit was
fully refundable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2006, the Company became the primary beneficiary of
this limited partnership when its right to terminate its
obligations under the agreement lapsed and the deposit was
no longer refundable. At December&nbsp;31, 2006, the Company has
included the assets, liabilities, and activities of the
limited partnership in its consolidated financial
statements. This had no impact on the Company&#146;s results of
operations since the Company has no ownership interest in
the partnership&#146;s results prior to the closing date in
2007. The Company reclassified $1,700,000 from &#147;Other
assets&#148; to &#147;Property, plant, and equipment,&#148; specifically
land and building, on the Consolidated Balance Sheet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 7: INTANGIBLE ASSETS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Intangible assets consist of the following (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Net</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Carrying Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Amortization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Carrying Value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Distribution networks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>38,060</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>5,477</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>32,583</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer contracts and relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13,002</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,110</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,892</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Completed technologies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,834</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,086</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,748</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,422</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>657</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>765</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>59,318</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>14,330</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>44,988</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Distribution networks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">38,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35,869</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer contracts and relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,666</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Completed technologies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,537</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">977</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">60,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">50,049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt"><!-- Folio -->40<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The cost and related accumulated amortization of
certain fully-amortized completed technologies totaling
$2,369,000 were removed from the accounts during 2006.
Aggregate amortization expense was $5,884,000 in 2006,
$4,283,000 in 2005, and $1,526,000 in 2004. Estimated
amortization expense for each of the five succeeding fiscal
years and thereafter is as follows (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,622</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,622</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,434</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,304</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,401</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,605</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>44,988</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 8: GOODWILL</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has two reporting units with goodwill, the
Modular Vision Systems Division (MVSD)&nbsp;and the Surface
Inspection Systems Division (SISD), which are also
reportable segments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The changes in the carrying value of goodwill are as
follows (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">MVSD</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">SISD</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Consolidated</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,033</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">DVT business acquisition (Note 18)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,478</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency exchange rate changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(333</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(371</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(704</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">77,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">79,807</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">AssistWare business acquisition (Note 18)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,962</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
       <TD align="right"><B>2,962</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Siemens contingent payment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>190</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</b></td>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>190</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">DVT purchase price adjustment (Note 18)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(298</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(298</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency exchange rate changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>365</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>292</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>657</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>80,485</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>2,833</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>83,318</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTE 9: ACCRUED EXPENSES</B>
Accrued expenses consist of the following (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forward contracts and
currency swaps</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>9,752</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,026</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,548</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,653</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vacation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,270</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,094</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Company bonuses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,236</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,653</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Salaries, commissions,
and payroll taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,129</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,693</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consumption taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,561</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,624</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventory purchase
commitments (Note 5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,400</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warranty obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,387</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,447</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Professional fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>854</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,050</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,475</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,836</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>40,612</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">43,476</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The changes in the warranty obligation are as
follows (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,758</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provisions for warranties issued
during the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">696</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warranty obligations assumed in
business acquisition (Note 17)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fulfillment of warranty obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,055</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign exchange rate changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(152</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,447</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provisions for warranties issued
during the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>993</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fulfillment of warranty obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1,153</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign exchange rate changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>100</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,387</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->41<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTE 10: COMMITMENTS AND CONTINGENCIES</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Commitments</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the Company had outstanding purchase
orders totaling $12,731,000 to purchase inventory from
various vendors. Certain of these purchase orders may be
cancelled by the Company, subject to cancellation
penalties. These purchase commitments relate to expected
sales in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company conducts certain of its operations in leased
facilities. These lease agreements expire at various dates
through 2016 and are accounted for as operating leases.
Certain of these leases contain renewal options. Annual
rental expense totaled $5,562,000 in 2006, $5,062,000 in
2005, and $4,662,000 in 2004. Future minimum rental
payments under these agreements are as follows (in
thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,780</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,812</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,459</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">886</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">555</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,850</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>12,342</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company owns an 83,000 square-foot office building
adjacent to its corporate headquarters. The building is
currently occupied with tenants who have lease agreements
that expire at various dates through 2017. Annual rental
income totaled $313,000 in 2006, $763,000 in 2005, and
$818,000 in 2004. Rental income and related expenses are
included in &#147;Investment and other income&#148; on the
Consolidated Statement of Operations. Future minimum
rental receipts under non- cancelable lease agreements are
as follows (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">450</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">495</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">259</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">274</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3,454</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Contingencies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On March&nbsp;13, 2006, the Company filed a Declaratory Judgment
action in the United States District Court for Minnesota
seeking that certain patents being asserted by Acacia
Research Corporation and Veritec, Inc., and their
respective subsidiaries, be ruled invalid, unenforceable,
and/or not infringed by Cognex Corporation. The patent
assertions relate to two-dimensional symbology reading; in
particular, the defendants have alleged that any company
reading a data matrix code infringe the subject patents.
Certain defendants in the action have asserted
counterclaims against Cognex Corporation, seeking
unspecified damages. The litigation is in its early stages
and discovery will begin shortly. Cognex Corporation cannot
predict the outcome of this matter, and although the
Company believes it has a meritorious case, an adverse
resolution of this lawsuit could have a material adverse
effect on the Company&#146;s financial position, liquidity,
results of operations, and/or indemnification obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Various other claims and legal proceedings generally
incidental to the normal course of business are pending or
threatened on behalf of or against Cognex Corporation.
While the Company cannot predict the outcome of these
matters, in the opinion of management, any liability
arising from them will not have a material adverse effect
on the Company&#146;s financial position, liquidity, or results
of operations after giving effect to provisions already
recorded.
</DIV>


<P align="left" style="font-size: 10pt"><!-- Folio -->42<!-- /Folio -->
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTE 11: INDEMNIFICATION PROVISIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Except as limited by Massachusetts law, the by-laws of the
Company require it to indemnify certain current or former
directors, officers, and employees of the Company against
expenses incurred by them in connection with each
proceeding in which he or she is involved as a result of
serving or having served in certain capacities.
Indemnification is not available with respect to a
proceeding as to which it has been adjudicated that the
person did not act in good faith in the reasonable belief
that the action was in the best interests of the Company.
The maximum potential amount of future payments the Company
could be required to make under these provisions is
unlimited. The Company has never incurred significant costs
related to these indemnification provisions. As a result,
the Company believes the estimated fair value of these
provisions is minimal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company accepts standard limited indemnification
provisions in the ordinary course of business, whereby it
indemnifies its customers for certain direct damages
incurred in connection with third-party patent or other
intellectual property infringement claims with respect to
the use of the Company&#146;s products. The term of these
indemnification provisions generally coincides with the customer&#146;s use of the Company&#146;s products.
The maximum potential amount of future payments the Company
could be required to make under these provisions is subject
to fixed monetary limits. The Company has never incurred
significant costs to defend lawsuits or settle claims
related to these indemnification provisions. As a result,
the Company believes the estimated fair value of these
provisions is minimal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company also accepts limited indemnification provisions
from time to time, whereby it indemnifies customers for
certain direct damages incurred in connection with bodily
injury and property damage arising from the installation of
the Company&#146;s products. The term of these indemnification
provisions generally coincides with the period of
installation. The maximum potential amount of future
payments the Company could be required to make under these
provisions is limited and is likely recoverable under the
Company&#146;s insurance policies. As a result of this coverage,
and the fact that the Company has never incurred significant
costs to defend lawsuits or settle claims related to these
indemnification provisions, the Company believes the
estimated fair value of these provisions is minimal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 12: SHAREHOLDERS&#146; EQUITY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Preferred Stock</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has 400,000 shares of authorized but unissued
$.01 par value preferred stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stock repurchase Program</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On December&nbsp;12, 2000, the Company&#146;s Board of Directors
authorized the repurchase of up to $100,000,000 of the
Company&#146;s common stock. The Company repurchased 2,260,941
shares at a cost of $61,883,000 in 2006, 383,908 shares at
a cost of $11,690,000 in 2005, and 1,768,452 shares at a
cost of $26,425,000 in 2002 under this program. During the
third quarter of 2006, this repurchase program was
completed. On July&nbsp;27, 2006, the Company&#146;s Board of
Directors authorized a new program for the repurchase of up
to $100,000,000 of the Company&#146;s common stock. The Company
repurchased 1,019,579 shares at a cost of $24,413,000 in
2006 under this program. The Company may repurchase
additional shares under this program in future periods
depending upon a variety of factors, including stock price
levels and share availability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stock option Plans</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the Company had 10,883,676 shares
available for grant under three stock option plans: the
1998 Director Plan, 10,250; the 1998 Stock Incentive Plan,
3,373,426; and the 2001 General Stock Option Plan,
7,500,000. Each of these plans expire ten years from the
date the plan was approved. The Company has not granted
any stock options from the 2001 General Stock Option Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On April&nbsp;21, 1998, the shareholders approved the 1998
Stock Incentive Plan, under which the Company initially
was able to
grant stock options and stock awards to purchase up to
1,700,000 shares of common stock. Effective January&nbsp;1,
1999 and each January 1st thereafter during the term of
the 1998 Stock Incentive Plan, the number of shares of
common stock available for grants of stock options and
stock awards is increased automatically by an amount equal
to 4.5% of the total number of issued shares of common
stock as of the close of business on December&nbsp;31st of the
preceding year.
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->43<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Stock options are generally granted with an exercise
price equal to the market value of the Company&#146;s common
stock at the grant date, generally vest over four years
based on continuous service, and generally expire ten
years from the grant date. Historically, the majority of
the Company&#146;s stock options have been granted during the
first quarter of each year to reward existing employees
for their performance. In addition, the Company grants
stock options throughout the year for new employees and
promotions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following is a summary of the Company&#146;s
stock option activity for the year ended December&nbsp;31,
2006 (shares and dollars in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Weighted-Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Weighted-Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Remaining</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Aggregate</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Exercise Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Contractual Term</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Intrinsic Value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granted at market value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(504</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Forfeited or Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(577</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,324</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>25.90</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>17,212</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercisable at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,913</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>25.35</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>15,725</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Employee Stock Purchase Plan</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under the Company&#146;s Employee Stock Purchase Plan (ESPP),
employees who have completed six months of continuous
employment with the Company may purchase common stock
semi-annually at 95% of the fair market value of the stock
on the last day of the purchase period through
accumulation of payroll deductions. Employees are required
to hold common stock purchased under the ESPP for a
period of three months from the date of purchase.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The maximum number of shares of common stock available for
issuance under the ESPP is 250,000 shares. Effective
January&nbsp;1, 2001 and each January 1st thereafter during the
term of the ESPP, 250,000 shares of common stock will
always be available for issuance. Shares purchased under
the ESPP totaled 9,765 in 2006,
21,721 in 2005, and 21,031 in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 13: STOCK-BASED COMPENSATION EXPENSE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s share-based payments that result in
compensation expense consist solely of stock option grants.
The fair values of stock options granted after January&nbsp;1,
2006 were estimated on the grant date using a binomial
lattice model. The fair values of options granted prior to
January&nbsp;1, 2006 were estimated using the Black-Scholes
option pricing model for footnote disclosure under SFAS No.
123. The Company believes that a binomial lattice model
results in a better estimate of fair value because it
identifies patterns of exercises based on triggering
events, tying the results to possible future events instead
of a single path of actual historical events. Management is
responsible for determining the appropriate valuation model
and estimating these fair values, and in doing so,
considered a number of factors, including information
provided by an outside valuation advisor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The fair values of stock options granted in each period
presented were estimated using the following
weighted-average assumptions:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">2004</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>4.6</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>1.12</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.26</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">.73</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>45</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">35</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">45</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected term (in years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risk-Free Rate</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The risk-free rate was based on a treasury instrument whose
term was consistent with the contractual term of the option
for 2006 grants, and the expected term of the option for
2005 and 2004 grants.
</DIV>

<P align="left" style="font-size: 10pt"><!-- Folio -->44<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Expected Dividend Yield</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The current dividend yield is calculated by annualizing the
cash dividend declared by the Company&#146;s Board of Directors
for the current quarter and dividing that result by the
closing stock price on the grant date. Although dividends
are declared at the discretion of the Company&#146;s Board of
Directors, for this purpose, the Company anticipates
continuing to pay a quarterly dividend that approximates
the current dividend yield.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Expected Volatility</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The expected volatility for 2006 grants was based on a
combination of historical volatility of the Company&#146;s
common stock over the contractual term of the option and
implied volatility for traded options of the Company&#146;s
stock. The expected volatility for 2005 and 2004 grants was
based on the historical volatility of the Company&#146;s common
stock over the expected term of the option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Expected Term</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The expected term for 2006 grants was derived from the
binomial lattice model from the impact of events that
trigger exercises over time. The expected term for 2005 and
2004 grants, which is an input to the Black-Scholes model,
was based on historical option exercise behavior.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The weighted-average grant-date fair value of stock options
granted during 2006, 2005, and 2004 was $10.96, $6.01, and
$9.22, respectively. The Company recognizes compensation
expense using the graded attribution method, in which
expense is recognized on a straight-line basis over the
service period for each separately vesting portion of the
stock option as if the option was, in substance, multiple
awards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The amount of compensation expense recognized at the end of
the vesting period is based on the number of stock options
for
which the requisite service has been completed. No
compensation expense is recognized for options that are
forfeited for which the employee does not render the
requisite service. The term &#147;forfeitures&#148; is distinct from
&#147;expirations&#148; and represents only the unvested portion of
the surrendered option. The Company currently expects that
approximately 62% of its stock options will actually vest,
and therefore, has applied a weighted-average annual
forfeiture rate of 11% to all unvested options. This rate
will be revised, if necessary, in subsequent periods if
actual forfeitures differ from this estimate. Ultimately,
compensation expense will only be recognized over the
vesting period for those options that actually vest. Prior
to January&nbsp;1, 2006, the Company accounted for actual
forfeitures as they occur for footnote disclosure under
SFAS No.&nbsp;123.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The total stock-based compensation expense and the related
income tax benefit recognized for 2006 was $13,624,000 and
$4,741,000, respectively. No compensation expense was
capitalized at December&nbsp;31, 2006. Prior to January&nbsp;1,
2006, the Company recognized compensation expense using
the intrinsic value based method described in APB Opinion
No.&nbsp;25, and accordingly, no compensation expense was
recorded since stock options were granted with an exercise
price equal to the market value of the Company&#146;s common
stock at the grant date. The total intrinsic value of
stock options exercised for 2006, 2005, and 2004 was
$4,003,000, $15,970,000, and $29,306,000, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, total unrecognized compensation
expense related to non-vested stock options was
$11,616,000, which is expected to be recognized over a
weighted-average period of 1.7&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 14: EMPLOYEE SAVINGS PLAN</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under the Company&#146;s Employee Savings Plan, a defined
contribution plan, employees who have attained age 21 may
contribute up to 25% of their salary on a pre-tax basis
subject to the annual dollar limitations established by the
Internal Revenue Service. The Company contributes fifty
cents for each dollar an employee contributes, with a
maximum contribution of 3% of an
employee&#146;s pre-tax salary. Company contributions vest 20%,
40%, 60%, and 100% after two, three, four, and five years
of continuous employment with the Company, respectively.
Company contributions totaled $1,106,000 in 2006,
$1,060,000 in 2005, and $967,000 in 2004. Cognex stock is
not an investment alternative, nor are Company
contributions made in the form of Cognex stock.
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->45<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTE 15: INCOME TAXES</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Domestic income before taxes was $16,772,000, $19,206,000,
and $22,507,000 and foreign income before taxes was
$33,528,000, $29,040,000, and $30,653,000 in 2006, 2005,
and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The provision for income taxes consists of the
following (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>9,718</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,662</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>240</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">758</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,674</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,632</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,403</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(4,847</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(177</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(101</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(239</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,884</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(5,187</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,013</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>10,445</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,416</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A reconciliation of the United States federal statutory
corporate tax rate to the Company&#146;s effective tax rate is
as follows (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax provision at federal statutory rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>35</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">35</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">35</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">State income taxes, net of federal benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax-exempt investment income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign tax rate differential</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(11</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Discrete tax events</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>21</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">26</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">29</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt"><!-- Folio -->46<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Deferred tax assets consist of the following (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current deferred tax assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventory and revenue related</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4,881</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,805</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal capital loss carryforward</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,237</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Bonus, commission, and other compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,144</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">943</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,854</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,919</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross current deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,116</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,667</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(480</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net current deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>8,636</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,667</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Noncurrent deferred tax assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal and state tax credit carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>11,611</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,434</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock-based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,741</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquired completed
technologies and other intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,364</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,664</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,478</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,478</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized investment gains and losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,428</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,390</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquired in-process technology</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>800</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">924</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net operating loss carryforwards
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal and state capital loss carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,708</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>771</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">762</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>24,193</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,960</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Noncurrent deferred tax liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Nondeductible intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(14,990</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,703</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(201</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(15,191</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,733</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net noncurrent deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>9,002</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,227</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the Company had federal research and
experimentation tax credit carryforwards of approximately
$5,390,000, which may be available to offset future federal
income tax liabilities and will begin to expire in 2015.
The Company also had approximately $2,467,000 of
alternative minimum tax credits and approximately $454,000
of foreign tax credits, which may be available to offset
future regular income tax liabilities. The alternative
minimum tax credits have an unlimited life and the foreign
tax credits will begin to expire in 2011. In addition, the
Company had approximately $3,300,000 of state research and
experimentation tax credit carryforwards, which will begin
to expire in 2015.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company recorded certain intangible assets as a result
of the acquisition of DVT Corporation in May&nbsp;2005. The
amortization of these intangible assets is not deductible
for U.S. tax purposes. A deferred tax liability was
established to reflect the federal and state liability
associated with not deducting the acquisition-related
amortization expenses. The balance of this liability at
December&nbsp;31, 2006 was $14,990,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company established a valuation allowance of $480,000
against its deferred tax assets at December&nbsp;31, 2006. This
partial valuation allowance related to a deferred tax
asset for a capital loss carryforward due to expire in
2007. No valuation allowances were recorded in 2005 or
2004.
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->47<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">While the remaining deferred tax assets are not
assured of realization, the Company has evaluated the
realizability of these deferred tax assets and has
determined that it is more likely than not that these
assets will be realized. In reaching this conclusion, the
Company has evaluated certain relevant criteria including
the Company&#146;s historical profitability, current projections
of future profitability, and the lives of tax credits, net
operating and capital losses, and other carryforwards.
Should the Company fail to generate sufficient pre-tax
profits in future periods, the Company
may be required to establish valuation allowances against
these deferred tax assets, resulting in a charge to income
in the period of determination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has established reserves to provide for
additional income taxes that may be due in future years as
previously filed income tax returns are audited. These
reserves have been established based upon management&#146;s
assessment as to the potential exposure attributable to
permanent differences and interest applicable to both
permanent and temporary differences. All tax reserves are
analyzed periodically and adjustments are made as events
occur that warrant modification, such as the completion of
audits or the expiration of statutes of limitations, which
may result in future charges or credits to tax expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company does not provide U.S. income taxes on its
foreign subsidiaries&#146; undistributed earnings, as they are
deemed to be permanently reinvested outside the U.S.
Non-U.S. income taxes are, however, provided on those
foreign subsidiaries&#146; undistributed earnings. Upon
repatriation, the Company would provide the appropriate
U.S. income taxes on these earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On March&nbsp;20, 2006, the Company provided standby letters of
credit totaling 3,359,825,000 Yen (or approximately
$28,231,000 based upon the exchange rate at December&nbsp;31,
2006) to taxing authorities in Japan that were
collateralized by investments on the Consolidated Balance
Sheet. The Tokyo Regional
Taxation Bureau (TRTB)&nbsp;asserted that Cognex Corporation had
a permanent establishment in Japan that would require
certain income, previously reported on U.S. tax returns for
the years ended December&nbsp;31, 1997 through December&nbsp;31,
2001, to be subject instead to taxation in Japan. In
September&nbsp;2003, the Company filed a request with the
Internal Revenue Service Tax Treaty Division for competent
authority assistance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the third quarter of 2006, the Company reached an
agreement with the TRTB through the competent authority
proceedings. The agreement resulted in an adjustment of the
intercompany transfer price between the U.S. parent and its
Japanese subsidiary. The resulting additional tax to be
paid to the TRTB, net of expected refunds due from the U.S.
tax authorities, resulted in an increase in tax expense of
$648,000. The standby letters of credit, as a result of
this agreement with the TRTB, are no longer required as of
December&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2006, the Company settled a
multi-year state tax audit and, as a result of that
settlement, recorded a reduction in tax expense of
$869,000. During the third quarter of 2006, the Company
recorded a $1,220,000 reduction in tax expense resulting
from the expiration of the statute of limitations for an
open tax year, and a $405,000 reduction in tax expense
resulting from the true-up of the tax accrual recorded in
2005 as compared to actual return filed. The Tax Relief and
Health Care Act of 2006 was signed into law on December&nbsp;20,
2006. This Act retroactively reinstated the Research and
Development Tax credit for 2006 and extended this credit to
2007. As a result of this reinstatement, the Company
recorded a reduction in tax expense of $200,000 during the
fourth quarter of 2006.
</DIV>


<P align="left" style="font-size: 10pt"><!-- Folio -->48<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTE 16: NET INCOME PER SHARE</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net income per share is calculated as follows (in thousands, except per share amounts):

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>39,855</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Weighted-average common shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45,559</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,480</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.87</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.83</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Weighted-average common shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45,559</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,480</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Effect of dilutive stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,089</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,878</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Weighted-average common and common-equivalent shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>46,648</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,358</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income per common and common-equivalent share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.85</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Stock options to purchase 5,761,820, 3,903,178, and 1,656,927 shares of common stock were
outstanding in 2006, 2005, and 2004, respectively, but were not included in the calculation of
diluted net income per share because they were anti-dilutive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 17: SEGMENT AND GEOGRAPHIC INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has two reportable segments: the Modular Vision Systems Division (MVSD)&nbsp;and the Surface
Inspections Systems Division (SISD). MVSD designs, develops, manufactures, and markets modular
vision systems that are used to control the manufacturing of discrete items by locating,
identifying, inspecting, and measuring them during the manufacturing process. SISD designs,
develops, manufactures, and markets surface inspection vision systems that are used to inspect
surfaces of materials that are processed in a continuous fashion to ensure there are no flaws or
defects in the surfaces. Segments are determined based upon the way that management organizes its
business for making operating decisions and assessing performance. The Company evaluates segment
performance based upon income or loss from operations, excluding unusual items and stock-based
compensation expense.
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->49<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes information about the Company&#146;s segments (in thousands):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Reconciling</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">MVSD</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">SISD</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Items</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Consolidated</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year Ended December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Product revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>195,203</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>19,735</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>214,938</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Service revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,978</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,508</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23,486</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,684</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>260</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>225</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,169</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Goodwill and intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>125,473</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,833</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>128,306</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>65,123</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,380</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(24,307</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>44,196</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year Ended December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Product revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">168,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">192,804</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Service revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,869</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,071</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,670</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Goodwill and intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129,856</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,177</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year Ended December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Product revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">155,966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">176,569</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Service revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,388</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,074</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Goodwill and intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,539</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,059</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,849</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Reconciling items consist of stock-based compensation expense and unallocated corporate expenses,
which primarily include corporate headquarters costs and professional fees. In 2006, corporate
expenses also included costs associated with the Company&#146;s 25th Anniversary party. Other asset
information by segment is not produced internally for use by the chief operating decision maker,
and therefore, is not presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other asset information is not provided because the cash and investments are commingled and the
divisions share assets and resources in a number of locations around the world.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">No customer accounted for greater than 10% of revenue in 2006, 2005, or 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes information about geographic areas (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">North</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">America</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Japan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Europe</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Consolidated</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year Ended December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Product revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>73,198</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>61,494</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>60,162</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>20,084</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>214,938</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Service revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,348</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,430</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,502</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,206</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23,486</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-lived assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>139,377</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,820</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14,723</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>108</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>156,028</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year Ended December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Product revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">70,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">53,761</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">56,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">192,804</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,071</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-lived assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157,436</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year Ended December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Product revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">52,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">69,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">43,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">176,569</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Service revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,388</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-lived assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,434</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Revenue is presented geographically based upon the customer&#146;s country of domicile.
</DIV>

<P align="left" style="font-size: 10pt"><!-- Folio -->50<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTE 18: ACQUISITIONS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Acquisition
of AssistWare Technology, Inc.</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;20, 2006, the Company acquired all of the outstanding shares of AssistWare Technology, Inc.,
a privately-held developer of Lane Departure Warning Systems for $2,998,000 in cash paid at
closing, with the potential for an additional cash payment of up to $1,500,000 in 2007 and up to
$500,000 in 2008 depending upon the achievement of certain performance criteria. The $2,998,000
initial purchase price consisted of $2,848,000 in cash consideration and $150,000 in transaction
costs. The acquisition was accounted for under the purchase method of accounting. Accordingly,
AssistWare&#146;s results of operations have been included in the Company&#146;s consolidated results of
operations since the date of acquisition. The historical results of operations of the acquired
business were not material compared to the consolidated results of operations of the Company, and
therefore, pro forma results are not presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">With the acquisition of AssistWare, the Company has entered the emerging market for machine vision
systems in vehicles. These highly-specialized sensors are installed in vehicles, ranging from
long-haul trucks to passenger cars, where they provide driver assistance by constantly analyzing
the vehicle&#146;s external environment and warning the driver of potentially dangerous situations.
AssistWare&#146;s Lane Departure Warning System uses machine vision technology to watch the road ahead
and alert drivers if they unintentionally leave their lane or if their driving pattern becomes
erratic.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The purchase price was allocated as follows (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Weighted-Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Estimated Fair</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Amortization Period</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">(in years)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, plant, and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer contract</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Completed technologies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total assets acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total liabilities assumed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">743</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>2,998</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->51<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The contingent payments will be recorded as additional purchase price and allocated to goodwill
when and if paid. The goodwill is assigned to the MVSD segment. None of the acquired intangible
assets, including goodwill, are deductible for tax purposes. The Company obtained third-party
valuations of the acquired intangible assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Acquisition of DVT Corporation Vision Sensor Business</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;9, 2005, the Company acquired all of the outstanding shares of DVT Corporation, a provider
of low-cost, easy-to-use vision sensors, for approximately $111,607,000, net of $4,702,000 cash
acquired. The purchase price consisted of $110,346,000 in cash paid at closing (net of acquired
cash) and $1,261,000 in transaction costs. The acquisition was accounted for under the purchase
method of accounting. Accordingly, DVT Corporation&#146;s results of operations have been included in
the Company&#146;s consolidated results of operations since the date of acquisition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In recent years, the Company has expanded its product line by adding low-cost and easy-to-use
vision sensors. However, reaching the many prospects for these products in factories around the
world requires a large third-party distribution channel to supplement the Company&#146;s own direct
end-user sales force. With the acquisition of DVT Corporation, the Company immediately gained a
worldwide network of distributors, all fully trained in selling and supporting machine vision
products. The Company sells its low-cost, easy-to-use products, including the acquired DVT&#146;s vision
sensors, through these distribution networks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company adjusted the purchase price allocation during the second quarter of 2006, which
resulted in a $281,000 increase in prepaid expenses and other current assets, a $9,000 increase in
other assets, a $298,000 decrease in goodwill, and an $8,000 decrease in accrued expenses. The
final purchase price was allocated as follows (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Weighted-Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Estimated Fair Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Amortization Period (in years)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, plant, and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Distribution networks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Completed technologies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade names, trademarks, and
non-competition agreement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total assets acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total liabilities assumed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>111,607</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt"><!-- Folio -->52<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The goodwill is assigned to the MVSD segment. None of the acquired intangible assets, including
goodwill, are deductible for tax purposes. The Company obtained third-party valuations of the
acquired intangible assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following summarized, pro forma results of operations assume the acquisition took place at the
beginning of the respective periods (in thousands, except per share amounts).
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">227,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">230,196</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36,263</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income per diluted share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.77</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 19: DIVIDENDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Beginning in the third quarter of 2003, the Company&#146;s Board of Directors has declared and paid a
cash dividend in each quarter. During the third quarter of 2004, the Company&#146;s Board of Directors
voted to increase the quarterly cash dividend from $0.06 to $0.08 per share. During the third
quarter of 2006, the Company&#146;s Board of Directors voted to increase the quarterly cash dividend
from $0.080 to $0.085 per share. Dividend payments amounted to $15,058,000 in 2006, $14,960,000 in
2005, and $12,756,000 in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 20: SUBSEQUENT EVENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;23, 2007, the Company&#146;s Board of Directors declared a cash dividend of $0.085 per share.
The dividend was paid on February&nbsp;23, 2007 to all shareholders of record at the close of business
on February&nbsp;9, 2007 and amounted to $3,778,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 21: SUPPLEMENTAL DISCLOSURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash paid for income taxes totaled $18,356,000 in 2006, $2,970,000 in 2005, and $2,327,000 in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Common stock received as payment for stock option exercises totaled $317,000 in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company retired certain fully depreciated property, plant, and equipment totaling $3,742,000 in
2006, $4,234,000 in 2005, and $1,824,000 in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Advertising costs are expensed as incurred and totaled $2,144,000 in 2006, $3,057,000 in 2005, and
$2,000,000 in 2004.
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->53<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Report of Independent Registered Public Accounting Firm
on Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>To the Board of Directors and Shareholders of Cognex Corporation:</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying consolidated balance sheets of Cognex Corporation and subsidiaries
as of December&nbsp;31, 2006 and 2005, and the related consolidated statements of operations,
shareholders&#146; equity, and cash flows for each of the three years in the period ended December&nbsp;31,
2006. These financial statements are the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Cognex Corporation at December&nbsp;31, 2006 and 2005,
and the consolidated results of their operations and their cash flows for each of the three years
in the period ended December&nbsp;31, 2006, in conformity with U.S. generally accepted accounting
principles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As discussed in Note 2 to the consolidated financial statements, on January&nbsp;1, 2006, the Company
adopted the provisions of Statement of Financial Accounting Standards No. l23(R), &#147;Share-Based
Payment&#147; which requires the Company to recognize expense related to the fair value of share-based
compensation awards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of Cognex Corporation&#146;s internal control over financial
reporting as of December&nbsp;31, 2006, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated February&nbsp;27, 2007 expressed an unqualified opinion thereon.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><IMG src="b63634ccb6363401.gif" alt="(ERNST &#038; YOUNG LLP)">
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ernst &#038; Young LLP<BR>
Boston, Massachusetts<BR>
February&nbsp;26, 2007

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Report of Management on Internal Control
Over Financial Reporting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Management is responsible for establishing and maintaining adequate internal control over financial
reporting. Management has evaluated the effectiveness of the Company&#146;s internal control over
financial reporting based upon the framework in Internal Control &#150; Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Based upon our evaluation, management has concluded that the Company&#146;s internal control over
financial reporting was effective as of December&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Management&#146;s assessment of the effectiveness of the Company&#146;s internal control over financial
reporting as of December&nbsp;31, 2006 has been audited by Ernst &#038; Young LLP, an independent registered
public accounting firm, as stated in their report which is included herein.
</DIV>

<P align="left" style="font-size: 10pt"><!-- Folio -->54<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Report of Independent Registered Public Accounting Firm on Internal Control
Over Financial Reporting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>To The Board of Directors and Shareholders of Cognex Corporation:</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited management&#146;s assessment, included in the accompanying Report of Management on
Internal Control Over Financial Reporting, that Cognex Corporation maintained effective internal
control over financial reporting as of December&nbsp;31, 2006, based on criteria established in Internal
Control&#151;Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). Cognex Corporation&#146;s management is responsible for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an opinion on
management&#146;s assessment and an opinion on the effectiveness of the company&#146;s internal control over
financial reporting based on our audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, evaluating management&#146;s
assessment, testing and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A company&#146;s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
company&#146;s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2)&nbsp;provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3)&nbsp;provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company&#146;s assets that could have a material effect on the
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, management&#146;s assessment that Cognex Corporation maintained effective internal
control over financial reporting as of December&nbsp;31, 2006, is fairly stated, in all material
respects, based on the COSO criteria. Also, in our opinion, Cognex Corporation maintained, in all
material respects, effective internal control over financial reporting as of December&nbsp;31, 2006,
based on the COSO criteria.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the 2006 consolidated financial statements of Cognex Corporation and our
report dated February&nbsp;27, 2007 expressed an unqualified opinion thereon.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><IMG src="b63634ccb6363401.gif" alt="(ERNST &#038; YOUNG LLP)">
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ernst &#038; Young LLP<BR>
Boston, Massachusetts<BR>
February&nbsp;26, 2007

</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->55<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cognex Corporation: Five-year Summary of Selected Financial Data</B><BR>
(In thousands, except per share amounts)
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statement of Operations Data:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>238,424</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">216,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">201,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">150,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">114,107</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of revenue<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>64,943</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,859</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross margin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>173,481</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research, development, and
engineering expenses<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>32,607</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general, and
administrative expenses<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>96,678</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,376</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>44,196</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,758</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonoperating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,104</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,554</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;before taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>50,300</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,204</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax provision (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,445</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,177</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>39,855</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6,027</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic net income (loss)&nbsp;per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.87</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.14</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted net income (loss)&nbsp;per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.85</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.14</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic weighted-average common
shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45,559</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,503</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted weighted-average common
shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>46,648</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,503</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash dividends per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.33</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(1) </SUP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Amounts in 2006 include stock-based compensation expense, as follows:</TD>
</TR>

</TABLE>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,596</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research, development, and engineering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,627</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general, and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,401</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total stock-based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,624</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD align="left">(In thousands)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance Sheet Data:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Working capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>258,280</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">268,612</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">242,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">150,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">162,808</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>528,651</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">564,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">533,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">432,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">385,934</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>473,850</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">506,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">462,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">384,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">354,520</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt"><!-- Folio -->56<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Selected Quarterly Financial Data (Unaudited)</B>

<BR>(In thousands, except per share amounts)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Quarter ended 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>April 2,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>July 2,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>October 1,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>59,040</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>63,074</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>58,005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>58,305</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross margin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>42,330</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>46,481</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>42,558</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>42,112</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,634</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,622</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,147</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,793</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,800</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,434</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,116</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,505</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic net income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.19</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.25</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.23</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.21</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted net income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.18</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.24</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.22</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.21</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash dividends per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.080</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.080</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.085</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.085</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock prices:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">High</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>33.24</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>30.01</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26.20</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26.98</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Low</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>27.18</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>24.25</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20.87</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>21.65</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Quarter Ended 2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">April 3,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">July 3,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">October 2,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">43,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">54,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">58,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">60,818</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross margin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,529</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,634</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic net income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted net income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash dividends per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock prices:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">High</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.70</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Low</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.78</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->57<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Stock Performance Graph</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Set forth below is a line graph comparing the annual percentage change in the cumulative total
shareholder return on the Company&#146;s common stock, based on the market price of the Company common
stock, with the total return on companies within the Nasdaq Stock Market-US Companies Index (the
&#147;Nasdaq-US Index&#148;) and the Center for Research in Security Prices (&#147;CRSP&#148;) Nasdaq Lab Apparatus &#038;
Analytical, Optical, Measuring &#038; Controlling Instrument (SIC 3820-3829 US Companies) Index (the
&#147;Nasdaq Lab Apparatus Index&#148;). The performance graph assumes an investment of $100 in each of the
Company and the two indices, and the reinvestment of any dividends. The historical information set
forth below is not necessarily indicative of future performance. Data for the Nasdaq-US Index and
the Nasdaq Lab Apparatus Index was provided to the Company by CRSP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cognex Corporation<BR>
Comparison of Five-year<BR>
Cumulative Total Returns</B><BR>
<br>Produced on January&nbsp;29, 2007

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="b63634ccb6363402.gif" alt="( PERFORMANCE GRAPH)">
</DIV>

 <DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Notes:
</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">A.</TD>
    <TD>&nbsp;</TD>
    <TD>The lines represent monthly index levels derived from compounded daily returns that include all
dividends.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">B.</TD>
    <TD>&nbsp;</TD>
    <TD>The indexes are reweighted daily using the market capitalization on the previous trading day.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">C.</TD>
    <TD>&nbsp;</TD>
    <TD>If the monthly interval, based on the fiscal year-end, is not a trading day the preceding
trading day is used.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">D.</TD>
    <TD>&nbsp;</TD>
    <TD>The index level for all series was set to $100.0 on I2/31/2OO1.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><!-- Folio -->58<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Offices</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>UNITED STATES</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Corporate Headquarters</B><BR>
One Vision Drive<BR>
Natick, MA 01760<BR>
Telephone: (508)&nbsp;650-3000<BR>
Fax: (508)&nbsp;650-3333

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>California</B><BR>
2060 Challenger Drive<BR>
Alameda, CA 94501<BR>
Telephone: (510)&nbsp;749-4000<BR>
Fax: (510)&nbsp;865-9927

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1001 Rengstorff Avenue<BR>
Mountain View, CA 94043<BR>
Telephone: (650)&nbsp;969-4812<BR>
Fax: (650)&nbsp;969-4818

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">11512 El

Camino Real, Suite&nbsp;360<BR>
San Diego, California 92130<BR>
Telephone: (858)&nbsp;481-2469<BR>
Fax: (858)&nbsp;481-2411

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Georgia</B><BR>
1855 Satellite Boulevard, Suite&nbsp;100<BR>
Duluth, Georgia 30097<BR>
Telephone: (770)&nbsp;814-7920<BR>
Fax: (770)&nbsp;814-7925

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Illinois</B><BR>
800 East Diehl Road, Suite&nbsp;125<BR>
Naperville, IL 60563<BR>
Telephone: (630)&nbsp;649-6312<BR>
Fax: (630)&nbsp;955-0661

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Michigan</B><BR>
46850 Magellan Drive, Suite&nbsp;150<BR>
Novi, MI 48377<BR>
Telephone: (248)&nbsp;668-5100<BR>
Fax: (248)&nbsp;624-2964

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Oregon</B><BR>
15865 SW 74th Street, Suite&nbsp;105<BR>
Portland, OR 97224<BR>
Telephone: (503)&nbsp;620-6601<BR>
Fax: (503)&nbsp;620-6093

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Pennsylvania</B><BR>
2873 West Hardies Road<BR>
Gibsonia, PA 15044<BR>
Telephone: (724)&nbsp;449-7233<BR>
Fax: (724)&nbsp;449-7237

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Tennessee</B><BR>
318 Seaboard Lane, Suite&nbsp;314<BR>
Franklin, TN 37067<BR>
Telephone: (615)&nbsp;844-6158<BR>
Fax: (615)&nbsp;844-6159

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Wisconsin</B><BR>
10150 West National Avenue, Suite&nbsp;202<BR>
West Allis, WI 53227<BR>
Telephone: (414)&nbsp;604-7000<BR>
Fax: (414)&nbsp;604-2342

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>CANADA</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cognex Canada Inc.,<BR>
9970 Cote de Liesse, Suite&nbsp;110<BR>
Lachine, Quebec H8T 1A1<BR>
Telephone: (514)&nbsp;420-0828<BR>
Fax: (514)&nbsp;420-0825

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>EUROPE</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Finland</B><BR>
Cognex Finland <BR>Kellonkierto 7<BR>
70460 Kuopio, Finland<BR>
Telephone: &#043;358-17-3893 200<BR>
Fax: &#043;###-##-#### 232

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>France</B><BR>
Cognex International Inc., France<BR>
104 Avenue Albert ler<BR>
F-92563 Rueil Malmaison Cedex,<BR>
France<BR>
Telephone: &#043;33-1-47-77-15-50<BR>
Fax: &#043;33-1-47-77-15-55

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Germany</B><BR>
Cognex Germany, Inc.<BR>
Emmy Noether Strasse 11<BR>
D-76131 Karlsruhe, Germany<BR>
Telephone: &#043; 49-721-6639-0<BR>
Fax: &#043; 49-721-6639-599

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cognex Aachen<BR>
Vaalser Stra&#223;e 259<BR>
52074 Aachen, Germany<BR>
Telephone: &#043;49 241 17 301 4 0<BR>
Fax: &#043;49 241 17 301 4 44

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Ireland</B><BR>
Cognex Ltd.<BR>
c/o PricewaterhouseCoopers,<BR>
1, South Mall,<BR>
Cork, Ireland<BR>
Telephone: &#043;353 (0)21 230 0271<BR>
Fax: &#043;353 (0)21 230 0133

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Italy</B><BR>
Cognex International Inc., Italy<BR>
Via Gasparotto, 1<BR>
I-20124 Milano, Italy<BR>
Telephone: &#043; 39-0267 471 200<BR>
Fax: &#043;39-0267 471 300

</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->59<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Offices</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>EUROPE </B>(continued)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Spain</B><BR>
Cognex Spain<BR>
Edificio Windsor<BR>
Via Augusta 2 Bis 5<BR>
08006 Barcelona, Spain<BR>
Telephone: &#043;34 93 445 67 78<BR>
Fax: &#043;34 93 415 04 62

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Sweden</B><BR>
Cognex International Inc., Sweden<BR>
Skrapan 1830<BR>
Kopparbergsvagen 10<BR>
S-722 10 Vasteras, Sweden<BR>
Telephone: &#043;46-21-14 55 88<BR>
Fax: &#043;46-21-14 408 0

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Switzerland</B><BR>
Kornhausstrasse 3<BR>
CH-9000 St. Gallen<BR>
Switzerland<BR>
Telephone: &#043;41 71 313 06 05<BR>
Fax: &#043;41 71 313 06 06

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>United Kingdom</B><BR>
Cognex UK, Ltd.<BR>
Sunningdale House<BR>
43 Caldecotte Lake Drive<BR>
Caldecotte Lake Business Park<BR>
Milton Keynes MK7 8LF, UK<BR>
Telephone: &#043;44-1908-206 000<BR>
Fax: &#043;44-1908-392 463

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cognex UK, Ltd., Epsom Branch<BR>
Units 7-8, First Quarter<BR>
Blenheim Road, Epsom<BR>
Surrey, KT19 9QN, UK<BR>
Telephone: &#043;44-1372-754 100<BR>
Fax: &#043;44-1372-754 150

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cognex UK, Ltd., Training<BR>
Exchange House &#150; MWB<BR>
494 Midsummer Boulevard<BR>
Milton Keynes MK9 2EA, UK<BR>
Telephone: &#043;44-19 08255878<BR>
Fax: &#043;44-19 08 255 700

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>JAPAN</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cognex KK-Headquarters</B><BR>
23F, Bunkyo Green Court<BR>
2-28-8 Honkomagome, Bunkyo-ku,<BR>
Tokyo<BR>
113-6591, Japan<BR>
Telephone: &#043;81-3-5977-5400<BR>
Fax: &#043;81-3-5977-5401

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cognex KK-Osaka<BR>
3F, Central Shin-Osaka Building<BR>
4-5-36 Miyahara, Yodogawa-ku<BR>
Osaka-shi, Osaka<BR>
532-0003 Japan<BR>
Telephone: &#043;81-6-4807-8201<BR>
Fax: &#043;81-6-4807-8202

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cognex KK-Nagoya<BR>
4F, IT Meieki Building<BR>
3-11-22 Meieki, Nakamura-ku<BR>
Nagoya-shi, Aichi-ken<BR>
450-0002 Japan<BR>
Telephone: &#043; 81-52-569-5900<BR>
Fax: &#043;81-52-581-7760

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cognex KK-Fukuoka<BR>
5F, Dai 5 Hakata Kaisei Building<BR>
1-18-25 Hakataeki-Higashi, Hakata-ku<BR>
Fukuoka-shi, Fukuoka-ken<BR>
812-0013, Japan<BR>
Telephone: &#043;81-92-432-7741<BR>
Fax: &#043;81-92-412-3590

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cognex KK-Sendai<BR>
10F, Sendai-Hashimoto Building<BR>
27-21 Tachimachi, Aoba-ku,<BR>
Sendai-shi, Miyagi-ken<BR>
980-0822, Japan<BR>
Telephone: &#043;81-22-711-1971<BR>
Fax: &#043;81-22-711-1982

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>ASIA</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>China</B><BR>
Room&nbsp;1210, Huaihai China Tower<BR>
885, Renmin Road<BR>
Shanghai 200010, P.R. of China<BR>
Telephone: &#043;86-21-6320 3821<BR>
Fax: &#043;86-21-6328 0632

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Korea</B><BR>
704 City Air Terminal<BR>
159-6 Samsung-dong, Gangnam-gu,<BR>
Seoul 135&#150;728 Korea<BR>
Telephone: &#043;82-2-539-9047<BR>
Fax: &#043;82-2-539-9592

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Singapore</B><BR>
10 Anson Road #30-06A<BR>
International Plaza<BR>
Singapore 079903<BR>
Telephone: &#043;65 6325 5 700<BR>
Fax: &#043;65 5325 5 703

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Taiwan</B><BR>
10F-1, No.&nbsp;25, Puding Road<BR>
Hsin-Chu City<BR>
300 Taiwan, R.O.C.<BR>
Telephone: &#043;886-3-5780060<BR>
Fax: &#043;886-3-5781520

</DIV>

<P align="left" style="font-size: 10pt"><!-- Folio -->60<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cognex Corporation: Company Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Transfer Agent</B><BR>
National City Bank<BR>
Corporate Trust Operations<BR>
3rd Floor, North Annex<BR>
4100 West 150th Street<BR>
Cleveland, OH 44135-1385<BR>
Telephone: (216)&nbsp;257-8663<BR>
Toll free: (800)&nbsp;622-6757<BR>
www.nationalcitystocktransfer.com<BR>
email: shareholder.inquiries@nationalcity.com

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>General Counsel</B><BR>
Goodwin Procter LLP<BR>
Boston, Massachusetts

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Independent Auditors</B><BR>
Ernst &#038; Young LLP<BR>
Boston, Massachusetts

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Form&nbsp;10-k</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A copy of the Annual Report on Form 10-K filed with the Securities and Exchange Commission is
available to shareholders, without charge, upon request to:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Department of Investor Relations<BR>
Cognex Corporation<BR>
One Vision Drive<BR>
Natick, MA 01760

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Additional copies of this annual report are also
available, without charge, upon request to the above address. Or, request information on-line at
http://www.cognex.com
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s common stock is traded on The NASDAQ Stock Market LLC, under
the symbol CGNX. As of February&nbsp;25, 2007, there were approximately 600 shareholders of record of
the Company&#146;s common stock. The Company believes the number of beneficial owners of the Company&#146;s
common stock on that date was substantially greater.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company declared and paid a cash dividend of $0.08 per share in each quarter of 2005 and in the
first and second quarters of 2006, and $0.085 per share in the third and fourth quarters of 2006.
Any future declaration and payment of cash dividends will be subject to the discretion of the
Company&#146;s Board of Directors and will depend upon such factors as the Board deems relevant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>BOARD OF DIRECTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Robert J. Shillman</B><BR>
Chairman and Chief Executive Officer<BR>
Cognex Corporation

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Patrick A. Alias</B><BR>
Senior Vice President<BR>
Cognex Corporation

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Jerald G. Fishman</B><BR>
President and Chief Executive Officer<BR>
Analog Devices, Inc.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Anthony Sun</B><BR>
Managing General Partner<BR>
Venrock Associates

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Reuben Wasserman</B><BR>
Business Consultant

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>SENIOR MANAGEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Robert J. Shillman</B><BR>
Chairman and Chief Executive Officer

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>James F. Hoffmaster</B><BR>
President and Chief Operating Officer

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Patrick A. Alias</B><BR>
Senior Vice President

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Patricia Bautz</B><BR>
Vice President,<BR>
Corporate Employee Services

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Eric Ceyrolle</B><BR>
Executive Vice President Worldwide Sales<BR>
and Marketing

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Ettore Cucchetti</B><BR>
Vice President of Sales and Service, Asia

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Markku Jaaskelainen</B><BR>
Senior Vice President and<BR>
General Manager, SISD

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Todd Keebaugh</B><BR>
Vice President, Legal Services

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Didier Lacroix</B><BR>
Vice President of Sales and Service, Europe

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Herb Lade</B><BR>
Vice President, Operations

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Stanley Luboda</B><BR>
Vice President, SISD Sales and Service

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Marilyn Matz</B><BR>
Senior Vice President, Semi &#038; Electronics

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>John McGarry</B><BR>
Senior Vice President,<BR>
Research and Development

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Richard A. Morin</B><BR>
Senior Vice President of Finance and<BR>
Administration, Chief Financial Officer,<BR>
and Treasurer

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Akira Nakamura</B><BR>
President, Cognex K.K.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Kris Nelson</B><BR>
Senior Vice President, Factory Automation

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Brian Phillips</B><BR>
Vice President of Sales, Americas

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>David Schatz</B><BR>
Vice President, Corporate Development

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Robert Settle</B><BR>
Vice President, Worldwide Distribution

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Hisataka Shitara</B><BR>
Vice President, SISD, Cognex K.K.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>William Silver</B><BR>
Senior Vice President and Senior Fellow

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Justin Testa</B><BR>
Senior Vice President, ID Products and<BR>
Sensor Products

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This



annual report, including the letter to shareholders, contains &#147;forward-looking statements&#148;
within the meaning of the Securities Act of 1933 and the Securities
and Exchange Act of 1934. Please see the section entitled
&#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#151;Forward-Looking Statements&#148; in this report for a discussion regarding risks
associated with these statements.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Copyright
&#169; 2007 by Cognex Corporation. All rights reserved. Any part of this work may be reproduced or transmitted in any form or by any means without written consent of Cognex
Corporation, under the condition that the source of the excerpted material is given.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cognex, Cognex Vision for Industry, In-Sight, Checker, SmartView, and DVT are registered
trademarks, and DataMan and SafeTRAC are trademarks of Cognex.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Design: PointOne Marketing &#038; Design, Danvers, MA www.pointonemarketing.com

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Major
Photography: David Shopper &nbsp;&nbsp; Printed in the United States of America

</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->61<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>5
<FILENAME>b63634ccexv21.txt
<DESCRIPTION>EX-21 SUBSIDIARIES
<TEXT>
<PAGE>

                                                                      EXHIBIT 21

                               COGNEX CORPORATION
                         SUBSIDIARIES OF THE REGISTRANT

At December 31, 2006, the registrant had the following subsidiaries, the
financial statements of which are all included in the consolidated financial
statements of the registrant:

<TABLE>
<CAPTION>
       NAME OF SUBSIDIARY          STATE/COUNTRY OF INCORPORATION   PERCENT OWNERSHIP
       ------------------          ------------------------------   -----------------
<S>                                <C>                              <C>
Cognex Technology and Investment
   Corporation                     California                              100%
Cognex Canada Technology, Inc.     California                              100%
Cognex Foreign Sales Corporation   Barbados                                100%
Cognex Distribution Corporation    Georgia                                 100%
AssistWare Technology, Inc.        Pennsylvania                            100%
Vision Drive, Inc.                 Delaware                                100%
Cognex Canada, Inc.                Delaware                                100%
Cognex K.K.                        Japan                                   100%
Cognex International, Inc.         Delaware                                100%
Cognex Europe, Inc.                Delaware                                100%
Cognex Europe, b.v.                Netherlands                             100%
Cognex, Ltd.                       Ireland                                 100%
Cognex Germany, Inc.               Massachusetts                           100%
Cognex UK Ltd.                     United Kingdom                          100%
Cognex Finland Oy                  Finland                                 100%
Cognex Singapore, Inc.             Delaware                                100%
Cognex Korea, Inc.                 Delaware                                100%
Cognex Taiwan, Inc.                Delaware                                100%
Cognex Asia, Inc.
(formerly Cognex China, Inc.)      Delaware                                100%
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>6
<FILENAME>b63634ccexv23w1.txt
<DESCRIPTION>EX-23.1 CONSENT OF ERNST & YOUNG LLP
<TEXT>
<PAGE>

                                                                    EXHIBIT 23.1

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Cognex Corporation of our report dated February 26, 2007, with respect to the
consolidated financial statements of Cognex Corporation and our report dated
February 26, 2007 with respect to Cognex Corporation management's assessment of
the effectiveness of internal control over financial reporting and the
effectiveness of internal control over financial reporting of Cognex
Corporation, included in the 2006 Annual Report to Shareholders of Cognex
Corporation.

Our audits also included the financial statement schedule of Cognex Corporation
listed in Item 15(a). This schedule is the responsibility of Cognex
Corporation's management. Our responsibility is to express an opinion based on
our audits. In our opinion, as to which the date is February 26, 2007, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

We consent to the incorporation by reference in the Registration Statements on
Form S-8 (File Nos. 33-81150, 333-04621, 333-02151, 333-60807, 33-32815,
333-44824, 333-68158, 333-96961, 333-100709, and 333-126787) of Cognex
Corporation of our report dated February 26, 2007, with respect to the
consolidated financial statements of Cognex Corporation incorporated herein by
reference, our report dated February 26, 2007 with respect to Cognex Corporation
management's assessment of the effectiveness of internal control over financial
reporting and the effectiveness of internal control over financial reporting of
Cognex Corporation incorporated herein by reference, and our report included in
the preceding paragraph with respect to the financial statement schedule of
Cognex Corporation included in this Annual Report (Form 10-K) of Cognex
Corporation.

/s/ Ernst & Young LLP

Boston, Massachusetts
February 26, 2007
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>7
<FILENAME>b63634ccexv31w1.htm
<DESCRIPTION>EX-31.1 SECTION 302 CERTIFICATION OF C.E.O.
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>CERTIFICATION</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top"><B>Exhibit&nbsp;31.1</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Robert J. Shillman, Chief Executive Officer and Chairman of the Board of Directors of
Cognex Corporation, certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this Annual Report on Form 10-K of Cognex Corporation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations, and cash flows of the registrant as of,
and for, the periods presented in this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules&nbsp;13a-15(f) and 15d-15(f)) for the
registrant and have:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the registrant&#146;s disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change in the registrant&#146;s
internal control over financial reporting that occurred during the registrant&#146;s
most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant&#146;s internal control over financial reporting;
and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial reporting,
to the registrant&#146;s auditors and the audit committee of the registrant&#146;s board of
directors (or persons performing the equivalent functions):</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant&#146;s ability to record,
process, summarize, and report financial information; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant&#146;s internal
control over financial reporting.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Date: February&nbsp;28, 2007
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">     /s/ Robert J. Shillman
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Robert J. Shillman&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chief Executive Officer and
Chairman of the Board of Directors&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>8
<FILENAME>b63634ccexv31w2.htm
<DESCRIPTION>EX-31.2 SECTION 302 CERTIFICATION OF C.F.O.
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>CERTIFICATION</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top"><B>Exhibit&nbsp;31.2</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Richard A. Morin, Senior Vice President of Finance and Administration, Chief Financial
Officer, and Treasurer of<BR>
Cognex Corporation, certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this Annual Report on Form 10-K of Cognex Corporation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations, and cash flows of the registrant as of,
and for, the periods presented in this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules&nbsp;13a-15(f) and 15d-15(f)) for the
registrant and have:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the registrant&#146;s disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change in the registrant&#146;s
internal control over financial reporting that occurred during the registrant&#146;s
most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant&#146;s internal control over financial reporting;
and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial reporting,
to the registrant&#146;s auditors and the audit committee of the registrant&#146;s board of
directors (or persons performing the equivalent functions):</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant&#146;s ability to record,
process, summarize, and report financial information; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant&#146;s internal
control over financial reporting.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Date: February&nbsp;28, 2007
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">                                                     /s/ Richard A. Morin
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Richard A. Morin&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Senior Vice President of Finance and Administration,
Chief Financial Officer, and Treasurer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>9
<FILENAME>b63634ccexv32w1.htm
<DESCRIPTION>EX-32.1 SECTION 906 CERTIFICATION OF C.E.O.
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;32.1*</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The undersigned officer of Cognex Corporation (the &#147;Company&#148;) hereby certifies that the Company&#146;s
Annual Report on Form 10-K for the year ended December&nbsp;31, 2006 (the &#147;Report&#148;), as filed with the
Securities and Exchange Commission on the date hereof, fully complies with the requirements of
Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and
that the information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Date: February&nbsp;28, 2007
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">      /s/ Robert J. Shillman
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Robert J. Shillman&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chief Executive Officer and
Chairman of the Board of Directors<BR>
(principal executive officer)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>This certification shall not be deemed &#147;filed&#148; for purposes of Section&nbsp;18 of the Securities
Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be deemed
to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>10
<FILENAME>b63634ccexv32w2.htm
<DESCRIPTION>EX-32.2 SECTION 906 CERTIFICATION OF C.F.O.
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;32.2*</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The undersigned officer of Cognex Corporation (the &#147;Company&#148;) hereby certifies that the Company&#146;s
Annual Report on Form 10-K for the year ended December&nbsp;31, 2006 (the &#147;Report&#148;), as filed with the
Securities and Exchange Commission on the date hereof, fully complies with the requirements of
Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and
that the information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Date: February&nbsp;28, 2007
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Richard A. Morin
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Richard A. Morin&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Senior Vice President of Finance and Administration,<BR>
Chief Financial Officer, and Treasurer<BR>
(principal financial officer)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>This certification shall not be deemed &#147;filed&#148; for purposes of Section&nbsp;18 of the Securities
Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be deemed
to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934.</TD>
</TR>

</TABLE>




<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>


</BODY>
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<SEQUENCE>11
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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
