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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549


FORM 10-K

|x                                             | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934     
|--------------------------------------------- | -----------------------------------------------------------------------------------------
|                                              |                                                                                          
|For
 the fiscal year ended September 30, 2008
|o                                             | TRANSITION
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from
             to

Commission file number: 000-21377

|                                                       |  |                    
|------------------------------------------------------ |  | -------------------
|ROFIN-SINAR TECHNOLOGIES INC.                         
|                                                      
|(Exact name of Registrant as specified in its charter)
|                                                       |  |                    
|                                                       |  |                    
|Delaware                                               |  | 38-3306461         
|                                                       |  |                    
|(State or other jurisdiction of                        |  | (I.R.S. Employer   
|incorporation or organization)                         |  | Identification No.)
|                                                       |  |                    
|40984 Concept Drive, Plymouth, MI                      |  | 48170              
|                                                       |  |                    
|(Address of principal executive
 offices)              |  | (Zip Code)         

Registrants
telephone number, including area code: (734) 455-5400

Securities
registered pursuant to Section 12(b) of the Act:

|                                               |  |                                          
|---------------------------------------------- |  | -----------------------------------------
|Title of each class                            |  | Name of each exchange on which registered
|                                               |  |                                          
|                                               |  |                                          
|Common Stock, par value $0.01 per Share        |  | The NASDAQ Global Select Market          
|Rights Associated with Common Stock, par value |  |                                          
|$0.01 per Share                                |  |                                          

Securities
registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.    Yes   o    No   x

Indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.    Yes   o    No   x

Indicate by
check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.    Yes   x    No   o

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Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(§229.405 of this chapter) is not contained herein, and will not be contained,
to the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K.   o

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer. See definition of accelerated filer and large
accelerated filer in Rule 12b-2 of the Exchange Act.

|                        |   |                   |   |                       |  
|----------------------- | - | ----------------- | - | --------------------- | -
|Large accelerated filer | x | Accelerated filer | o | Non-accelerated filer | o

Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   o    No   x

The aggregate
market value of the voting and non-voting common equity held by non-affiliates
of the registrant based upon the closing price of the common stock on March 30,
2008 (the last business day of the most recently completed second fiscal
quarter) as reported by the NASDAQ Global Select Market was approximately
$1,332,313,210 For the purposes hereof, affiliates include all executive
officers and directors of the registrant.

28,896,619
shares of the Registrants common stock, par value $.01 per share, were
outstanding as of November 28, 2008.

Certain
sections of the Companys Proxy Statement to be filed in connection with the
Companys 2009 Annual Meeting of Stockholders to be held in March 2009 are
incorporated by reference herein at Part III, Items 10-14.

2

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ROFIN-SINAR TECHNOLOGIES INC.

TABLE OF CONTENTS

|         |           |  |                                                                                                                      |   
|-------- | --------- |  | -------------------------------------------------------------------------------------------------------------------- | --
|         |           |  | Page                                                                                                                
|PART
 I  |           |  |                                                                                                                     
|         |           |  |                                                                                                                     
|         | ITEM
 1.  |  | BUSINESS                                                                                                             | 4 
|         |           |  |                                                                                                                      |   
|         | ITEM
 1A. |  | RISK
 FACTORS                                                                                                        | 23
|         |           |  |                                                                                                                      |   
|         | ITEM
 1B. |  | UNRESOLVED
 STAFF COMMENTS                                                                                           | 27
|         |           |  |                                                                                                                      |   
|         | ITEM
 2.  |  | PROPERTIES                                                                                                           | 28
|         |           |  |                                                                                                                      |   
|         | ITEM
 3.  |  | LEGAL
 PROCEEDINGS                                                                                                   | 29
|         |           |  |                                                                                                                      |   
|         | ITEM
 4.  |  | SUBMISSION
 OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                 | 29
|         |           |  |                                                                                                                      |   
|PART
 II |           |  |                                                                                                                     
|         |           |  |                                                                                                                     
|         | ITEM
 5.  |  | MARKET
 PRICE FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
 PURCHASES OF EQUITY SECURITIES | 29
|         |           |  |                                                                                                                      |   
|         | ITEM 6.   |  | SELECTED FINANCIAL DATA                                                                                              | 32
|         |           |  |                                                                                                                      |   
|         | ITEM 7.   |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS                               | 33
|         |           |  |                                                                                                                      |   
|         | ITEM 7A.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                           | 42
|         |           |  |                                                                                                                      |   
|         | ITEM 8.   |  | CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                             | 42
|         |           |  |                                                                                                                      |   
|         | ITEM 9.   |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
 FINANCIAL DISCLOSURE                                | 42
|         |           |  |                                                                                                                      |   
|         | ITEM 9A.  |  | CONTROLS AND PROCEDURES                                                                                              | 43
|         |           |  |                                                                                                                      |   
|         | ITEM 9B.  |  | OTHER INFORMATION                                                                                                    | 44
|         |           |  |                                                                                                                      |   
|PART III |           |  |                                                                                                                     
|         |           |  |                                                                                                                      |   
|         | ITEM 10.  |  | DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                            | 44
|         |           |  |                                                                                                                      |   
|         | ITEM 11.  |  | EXECUTIVE COMPENSATION                                                                                               | 44
|         |           |  |                                                                                                                      |   
|         | ITEM 12.  |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
 RELATED STOCKHOLDER MATTERS                      | 44
|         |           |  |                                                                                                                      |   
|         | ITEM 13.  |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
 INDEPENDENCE                                            | 45
|         |           |  |                                                                                                                      |   
|         | ITEM 14.  |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                               | 45
|         |           |  |                                                                                                                      |   
|PART IV  |           |  |                                                                                                                     
|         |           |  |                                                                                                                     
|         | ITEM 15.  |  | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                                           | 46

3

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PART I

Cautionary Note Regarding Forward-Looking
Statements

Certain
statements in this Annual Report on Form 10-K constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995 (the Reform Act). Forward-looking statements include all statements
that do not relate solely to historical or current facts, and can be identified
by the use of words such as may, believe, will, expect, project,
anticipate, estimate, plan or continue. These forward-looking
statements are based on the current plans and expectations of our management
and are subject to a number of uncertainties and risks that could significantly
affect our current plans and expectations, as well as future results of
operations and financial condition.

These factors
include (among others):

|                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                           
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                             |  | downturns in
 the machine tool, automotive, semiconductor and electronics industries which
 may have, in the future, a material adverse effect on sales and profitability
 of the Company;
|                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                             |  | the ability
 of the Companys OEM-customers to incorporate its laser products into their
 systems;                                                                                        
|                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                             |  | the impact
 of exchange rate fluctuations, which may be significant because a substantial
 portion of the Companys operations is located overseas;                                       
|                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                             |  | the level of
 competition and the ability of the Company to compete in the markets for its
 products;                                                                                     
|                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                             |  | the
 Companys ability to develop new and enhanced products to meet market demand
 or to adequately utilize its existing technology;                                                      
|                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                             |  | third party
 infringement of the Companys proprietary technology or third party claims
 against the Company for the infringement or misappropriation of their
 proprietary rights;       
|                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                             |  | competing
 technologies that are similar to or that serve the same uses as the Companys
 technology;                                                                                     
|                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                             |  | the scope of
 patent protection that the Company is able to obtain or maintain;                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                             |  | the
 Companys ability to efficiently manage the risks associated with its
 international operations; and                                                                                 
|                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                             |  | the other
 risks described under ITEM 1A - Risk Factors.                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                           
|In making
 these forward-looking statements, we claim the protection of the safe-harbor
 for forward-looking statements contained in the Reform Act. We do not assume
 any obligation to update these forward-looking statements to reflect actual
 results, changes in assumptions, or changes in other factors affecting such
 forward-looking statements.

|        |         
|------- | --------
|ITEM 1. | BUSINESS

COMPANY OVERVIEW AND HISTORY

Rofin-Sinar Technologies Inc. was
incorporated in 1996 under the laws of the State of Delaware and
is a NASDAQ listed Company. We are a leader in the design, development,
engineering, manufacturing and marketing of laser-based products, primarily
used for cutting, welding and marking a wide range of materials. In this
report, the terms Company, Rofin, RSTI, we, us, and our mean
Rofin-Sinar Technologies Inc, and all entities included in our consolidated
financial statements

Lasers are a
non-contact technology for material processing, which have several advantages
compared to conventional manufacturing tools that are desirable in industrial
applications. The Companys lasers all deliver a high-quality beam at
guaranteed power outputs and feature compact design, high processing speed,
flexibility, low operating and maintenance costs and easy integration into the
customers production process. As a technological leader in CO2, solid-state
lasers and diode lasers, the Company is able to meet a broad range
of its customers material processing requirements.

4

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Based on the revised 2007 industry
data of the Optoelectronics Report for laser products used for macro (cutting
and welding) applications and marking and micro (fine cutting, fine welding,
and perforating) applications combined, the Company had a worldwide market
share (based on sales volume) in 2007 of approximately 18%. Using the
Optoelectronics Report industry data projected for 2008, the Company believes
it has a worldwide market share of approximately 20% and that it is among the
largest suppliers of laser products used for marking applications worldwide.
The Company has sold more than 47,000 laser sources since 1975 and currently
has over 3,000 active customers (including multinational companies with
multiple facilities purchasing from the Company). During fiscal
2008, 2007, and 2006, approximately 41%, 43%, and 41%, respectively, of the
Companys revenues related to sales of laser products for macro applications,
approximately 10%, 9%, and 8% respectively, related to sales of components, and
approximately 49%, 48%, and 51%, respectively, related to sales of laser
products for marking and micro applications.

Through its global
manufacturing, distribution and service network, the Company provides a
comprehensive range of laser sources and laser-based system solutions to three
principal target markets: the machine tool, automotive, and the semiconductor
and electronics industries. The Company sells directly to end-users and to
original equipment manufacturers (OEMs) (principally in the machine tool
industry) that integrate Rofins laser sources with other system components.
Many of Rofins customers are among the largest global participants in their
respective industries. During fiscal 2008, 2007, and 2006, 25%, 23%, and 30%,
respectively, of the Companys sales were in North America, 51%, 55%, and 48%,
respectively, were in Europe and 24%, 22%, and 22%, respectively, were in Asia.
See Note 13, Geographic Information, to the consolidated financial statements
for further information.

On December 2,
2006, the Company purchased an additional 1% of the share capital of
Rofin-Sinar U.K. Ltd. through Rofin-Sinar Technologies Europe S.L. under an
option agreement between the Company and the former minority shareholders. This
purchase resulted in goodwill of $0.2 million. Effective December 3, 2007, the
Company purchased the remaining 19% of the share capital of Rofin-Sinar U.K. Ltd.
through Rofin-Sinar Technologies Europe S.L. under an option agreement between
the Company and the former minority shareholders. The Company now holds 100% of
the share capital of Rofin-Sinar U.K. Ltd. This purchase resulted in goodwill
of $5.6 million.

Effective
February 28, 2007, the Company acquired 80% of the common stock of m2k-laser
GmbH, Freiburg (Germany), through its wholly-owned subsidiary Rofin-Sinar Laser
GmbH. m2k-laser GmbH develops and manufactures semiconductor lasers based on
the III-V compounds GaAs and GaSb for use predominantly in the scientific
industry. The same components can also be used for pumping solid-state lasers,
which are used for material processing. Additionally the parties have agreed on
a put/call option exercisable beginning in 2012 for the remaining 20% of the
common stock. Accordingly, the Companys financial statements present m2k-laser
GmbH as if it was 100%-owned. This purchase resulted in goodwill of
approximately $0.6 million.

Effective
March 28, 2007, the Company acquired 100% of the common stock of Corelase Oy,
Tampere (Finland). Corelase Oy has considerable experience in semiconductors,
optics, and fiber technology. Its product lines include fiber-coupled diode
laser systems, continuous-wave and ultra short pulse mode-locked fiber laser
systems, and components such as diode lasers for a wide range of material
processing applications. The terms of the purchase include payment of deferred
purchase price based on Corelase Oy achieving certain long-term financial targets.
    This purchase resulted in goodwill of approximately $6.9 million.

Effective
April 05, 2007, the Company acquired 100% of the common stock of ES Technology
Ltd., Oxford (UK), through its wholly-owned subsidiary Rofin-Baasel UK Ltd. ES
Technology Ltd. develops customized laser marking system solutions based on
various laser technologies and distributes a number of optical devices and
components into Northern European territories from several American suppliers
via its subsidiary, Laser Service (Oxford) Ltd. This purchase resulted in
goodwill of approximately $0.7 million.

Effective
January 24, 2008, the Company purchased Nufern, one of the worlds largest
independent manufacturers of specialty fibers and fiber laser modules serving a
wide range of industries, as a wholly-owned subsidiary of Rofin-Sinar
Technologies Inc. This purchase resulted in goodwill of $6.6 million.

5

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The
acquisition of Nufern is accounted for as a purchase business combination.
Assets acquired and liabilities assumed are recorded in the accompanying
consolidated balance sheet at their estimated fair values at January 24, 2008.
The Company is in the process of finalizing its valuation of the identified
intangible assets related to this acquisition. To the extent the final
valuation is different from the Companys preliminary assessment of fair
value, a purchase price adjustment will be made, which could impact the amount
of goodwill recorded. Nufern was purchased for cash. In connection with, and
as part of the consideration for, the acquisition, the Company agreed to make
additional payments to the former Nufern stockholders contingent upon Nufern
achieving specific financial performance metrics through calendar year 2008.
On November 14, 2008, the Company and the former stockholders entered into an
agreement pursuant to which the Company agreed to pay the former Nufern
stockholders an aggregate of $5.0 million in full satisfaction of its
obligation to make the earn-out payment.

During the
quarter ended June 30, 2008, the Company formed Dilas Diodelaser China Company
Ltd. in Nanjing (China) through its 95% owned subsidiary Dilas Diodenlaser
GmbH.

During the
quarter ended June 30, 2008, the Company formed Nanjing Eastern Technologies
Company Ltd. in Nanjing (China) as an 80% owned subsidiary.

Effective July
1, 2008, the Company formed Rofin-Baasel Swiss AG in Biel (Switzerland) as a
wholly owned subsidiary through its wholly-owned subsidiary Rofin-Sinar
Technologies Europe S.L.

The company is
in the process of finalizing the acquisition of 80% of China-based Nanjing
Eastern Laser Company Ltd. (NELC) through two separate cash transactions.
NELCs product lines are largely comprised of high power, fast-axial flow CO2
lasers, with a power range up to 3 kW as well as NC-based laser processing
equipment.

On November 7,
2007, the Board of Directors approved a 2-for-1 stock split. The stock split
was in the form of a dividend of one share of Common Stock on each outstanding
share and the distribution date was December 5, 2007, for shareholders of
record as of November 22, 2007. All share and per share amounts disclosed in
the Consolidated Balance Sheet and Statement of Operations and Notes 11, 16 and
17 to the Consolidated Financial Statements have been adjusted to reflect the
2-for-1 stock split. The Board also approved a stock buyback plan. The stock
buyback program was completed as per June 30, 2008. The Company bought back
approximately 2.8 million shares for an amount of $ 120.0 million.

BUSINESS STRATEGY

The Companys
business strategy is to maximize shareholder value by (i) strengthening its
position as a leading supplier to the global market for macro (cutting and
welding) applications; (ii) capitalizing on its leadership position in marking
applications; (iii) extending its position in micro (fine cutting, fine welding
and perforating) applications; (iv) cross-selling its various laser products to
its existing large customer base; (v) enlarging its market coverage
geographically and by developing new applications, and (vi) strengthening its
product portfolio and customer base through acquisitions.

The Company
believes that the major sources of its future growth will be the following:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Developing
 New Laser Products through Technological Innovation: Product innovation in
 response to evolving customer needs for increased output power, greater
 penetration and higher processing speeds is a key component of the Companys
 strategy. The Company is currently focusing its research and development
 activity on expanding the output power range of its CO2, diffusion
 cooled, wave-guide Slab lasers and enhancing the performance of its line of
 high power, fast-flow CO2 lasers. The Company is also expanding
 its series of end and side pumped, solid-state lasers for marking and micro
 applications. In addition, the Company is actively engaged in the research
 and development of its low- and high-power fiber laser to further expand its
 solid-state laser range for marking, micro and macro applications. In
 addition, R&D is focused on expanding our component product range, especially
 in the field of passive and active fibers, laser diodes, power supplies and
 fiber delivery systems.

6

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Focusing on
 Cross-Selling to Existing Customers in Target Markets: The Company intends to
 continue to focus its sales and marketing activities on its traditional
 target markets (the machine tool, automotive, semiconductor and electronics
 industries) as well as those markets it has entered more recently (the
 medical device and photovoltaic industries). The Company has targeted and
 will continue to target these industries because they use advanced
 manufacturing processes that require continuing investments to improve
 production efficiency and because the Company has significant market presence
 in these sectors. To exploit its opportunities by developing new applications
 for existing laser technologies, the Company is further exploring the
 potential for use of its high-power, Q-Switch, diode pumped, solid state
 laser for edge ablation in the photovoltaic industry. In addition, building
 on the success of its laser marking of small integrated circuits, the Company
 intends to develop new applications, such as fine welding and micro soldering
 for the semiconductor and electronics industry. In the packaging industry,
 the Company is seeking new opportunities for foil perforation based on its
 extensive knowledge of paper perforation with lasers. In the photovoltaic
 industry the Company intends to further exploit structuring applications for
 its macro and micro laser products. Such as scribing of thin film solar cells
 or edge ablation.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Capitalizing
 on Global Presence to Attract New Customers: The Company intends to
 capitalize on its customer base and the presence of its manufacturing, sales
 and service operations in the three principal geographic markets in which its
 customers operate (North America, Europe and the Asia/Pacific region) to
 increase market share in its existing industrial and geographic markets. The
 Company believes its global manufacturing, distribution and service network
 allows it to be more responsive to customers needs and positions it to
 expand into additional promising markets which offer high long-term potential
 for growth.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Offering
 Customized Solutions based on Standard Platforms: While the Company offers a
 wide range of laser applications and develops customized solutions for its
 customers, these applications and solutions are built on a focused number of
 product families comprised of standardized laser sources. For example, for
 its OEM-customers in the machine tool industry, the Company provides
 customized power supply packaging services. For its marking customers, the
 Company combines its standard laser marker with customized parts handling and
 software. For its micro applications customers, the Company delivers its
 standard laser sources in different customized packages. The Company believes
 that this product strategy has contributed to increases in product sales and
 intends to continue offering focused customization services and pursuing its
 initiatives to standardize its core products so as to lower its production
 costs and continue to improve its profitability.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Acquiring
 Complementary Business Operations or Products: Since 1997 the Company has
 successfully completed and integrated twelve acquisitions, including its
 acquisitions of Dilas (1997), assets of Palomar Technologies UK Ltd. (1998),
    Rasant-Alcotec Beschichtungstechnik GmbH (1999), Baasel Lasertech (2000),
    Z-Laser S.A. (2001), Optoskand AB (2004), PRC Laser Corporation and Lee Laser,
    Inc. (2004), H2B Photonics GmbH (2006 and 2007), ES Technologies Ltd. (2007),
    Corelase Oy (2007), m2k-laser GmbH (2007) and Nufern (2008). Management believes
    that, collectively, these acquisitions have advanced the Companys worldwide
 expansion, consolidated the Companys position in the industrial laser
 material processing market and contributed to the Companys financial
 performance during the last several years. The Company will continue to seek
 opportunities to make value-based acquisitions that complement its business
 operations, broaden its product offerings or provide access to new
 geographical markets.                                                                                                                                                                                                                                                                                                                                                                                                                                                  

THE INDUSTRIAL
LASER MARKET FOR MATERIAL PROCESSING

Over the past
30 years, lasers have revolutionized industrial manufacturing and have been
used increasingly to provide reliable, flexible, non-contact, compact and
high-speed alternatives to conventional technologies for processing various
kinds of metal and non-metal materials in a broad range of advanced
manufacturing applications. The industrial laser market is generally considered
to be made up of laser sources sold for industrial applications including
material processing, medical therapeutic, instrumentation, research,
telecommunications, optical storage, entertainment, image recording,
inspection, measurement and control, bar-code scanning and other end-uses.

7

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LASER TECHNOLOGY

The term
laser is an acronym for Light Amplification by Stimulated Emission of
Radiation. Lasers were first developed in the early 1960s in the United
States. A laser consists of an active lasing medium that gives off its own
light (radiation) when excited, an optical resonator with a
partially-reflective output mirror at one end, a fully-reflective rear mirror
at the other that permits the light to bounce back and forth between the
mirrors through the lasing medium, and an external energy source used to excite
the lasing medium. A laser works by causing the energy source to excite (pump)
the lasing medium, which converts the energy from the source into an emission
consisting of particles of light (photons). These photons stimulate the release
of more photons, as they are reflected between the two mirrors, which form the
resonator. The resulting build-up in the number of photons is emitted in the
form of a laser beam through an output port or window. By changing the energy
and the lasing medium, different wavelengths and types of laser light can be
produced. The laser produces light from the lasing medium to achieve the
desired intensity, uniformity and wavelength through a series of reflective
mirrors. The heat generated by the excitation of the lasing medium is
dissipated through a cooling mechanism, which varies according to the type of
laser technology.

Lasers are
used for material processing because of the excellent focusability of laser
beams. When focused through lenses and mirrors, the energy density in the focus
spot is so high that metals and other materials can be melted and vaporized.
The principal factors that distinguish different types of lasers and determine
the particular laser suitable for a specific application are pulse duration,
wavelength, output power, spatial coherence and cost per watt of laser power.

The three
principal types of laser technologies currently used for material processing
are CO2 lasers, solid-state lasers and diode lasers.

CO2
lasers, which use CO2 gas as the lasing medium, are divided into
high-power (above 500 watts) and low-power (below 500 watts) applications.
There are two methods for CO2 excitation, radio frequency (RF or
HF) and direct current (DC) excitation. Most high-power CO2
lasers are based on gas flow, in which a continuous supply of fresh laser gas
flows through the laser cavity to create the energy necessary for excitation.
Due to their ability to generate comparatively high levels of continuous-wave
(CW) power, CO2 lasers are a particularly attractive laser medium
for material processing applications. Material processing applications for CO2
laser sources vary according to the power output and configuration of the laser
system. The primary applications for high-power CO2 lasers are
cutting and welding of metal. Low-power CO2 lasers are used
principally for marking, cutting and engraving of non-metal materials. While
both low- and high-power CO2 lasers are used for cutting, the
materials they are used to process and their physical size can vary
significantly.

Solid-state lasers use flash lamps or laser
diodes as source of excitation and are referred to as flash-lamp- pumped or
diode-pumped lasers. The lasing medium is a solid-state crystal, generally in
the form of a rod or a disc. Widely used crystal rod material is either
Neodymium Yttrium Aluminium Garnet (Nd:YAG) or Neodymium Vanadate (Nd:YVO4).
The rod is positioned in a cavity, which is either a gold or ceramic reflector,
and pumped using flash lamps or laser diodes from the side, or alternatively
the rod is pumped from its ends with laser diodes. Typical output powers vary
from 3 to 1,000 watts from a single rod and output powers up to 8,000 watts can
be achieved by combining several cavities within a resonator. In the disc
design the lasing medium is a thin crystal (typically Ytterbium:YAG) disc,
which is excited by laser diodes in an optical multipass configuration. By
using multiple thin disc laser heads within one resonator, several kilowatts of
power can be generated. Fiber lasers use semiconductor diodes as the light
source to pump specialty optical fibers, which are infused with rare earth
ions. These fibers are called active fibers and are comparable in diameter to a
human hair. The laser emission is created within optical fibers and delivered
through a flexible cable.

Diode lasers
or laser diodes are based on special semiconductor structures on a Gallium
Arsenide (GaAs) die to generate laser light. A typical 10 mm long laser diode
bar contains approximately 25 single laser emitters. When mounted on a
specially designed, highly-efficient heat sink, a laser diode bar is able to
produce up to 100 watts of laser output power. A single high-power laser diode
module consists of: (1) a semiconductor laser diode bar; (2) a high-efficient
    heat sink, on which the laser bar is mounted; and optional (3) a micro-lens
    system, which is mounted in front of the laser bar to collimate or focus
    the light. Optical output power can be increased by combining the beamlets
    of several laser diode modules on top of each other. Through optical combination
    of such modules, output powers in the kilowatt range can be achieved. Diode
    lasers typically have larger spot diameters when focused, and are typically
    used for surface treatment, micro-hardening, soldering and plastic welding.

8

---



THE COMPANYS LASER PRODUCTS

The Company
distinguishes itself from the majority of its competitors who specialize in
only one or two of the three principal laser technologies for material
processing by offering its customers CO2, solid-state and diode
laser sources and solutions in a variety of configurations and options. As a
technological leader in CO2 lasers, solid-state and diode lasers,
the Company is able to meet a broad range of its customers cutting, welding,
and marking requirements. The Companys lasers all deliver a high-quality beam
at guaranteed power outputs and feature compact design, high processing speed,
flexibility, low operating and maintenance costs, and easy integration into the
customers production process. The Companys engineers and other technical
experts work directly with the customer in the Companys applications centers
to develop and customize the optimal solution for the customers manufacturing
requirements.

The Company
currently offers a comprehensive range of laser products and related services
for three principal material processing applications:

|                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                          |  | Cutting,
 welding, and surface treatment (macro applications);                                                                                                                                   
|                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                          |  | marking; and                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                          |  | fine
 cutting, fine welding, and micro structuring (micro applications).                                                                                                                         
|                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                  
|Besides
 offering laser systems for some specialized niche applications, the Company
 works directly with its customers to develop and customize optimal solutions
 for their unique manufacturing requirements. In developing its laser-based
 solutions, the Company offers customers its expertise in:
|                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                          |  | product
 development and manufacturing services based on more than 30 years of laser
 technology experience and applications know-how;                                                           
|                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                          |  | application
 and process development, which means developing new laser-based applications
 for manufacturing customers and assisting them in integrating lasers into
 their production processes;
|                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                          |  | system
 engineering, which means advising customers on machine design, including
 tooling, automation and controls for customers in need of turn-key
 solutions; and                           
|                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                          |  | extensive
 after-sales support of its laser products, including technical support, field
 service, maintenance and training programs, and rapid spare parts delivery.                            

The following
table sets forth the Companys net sales of laser products used for macro
applications, laser products used for marking and micro applications, and
components in fiscal 2008, 2007, and 2006:

|                                  |  |                |         |      |   |         |  |   |         | 
|--------------------------------- |  | -------------- | ------- | ---- | - | ------- |  | - | ------- | 
|                                  |  | September 30,  |        
|                                  |  |                |        
|Product
 Category*                |  | 2008           |         | 2007 |   | 2006    | 
|                                  |  |                |         |      |   |         | 
|                                  |  | (in thousands) |        
|                                  |  |                |        
|Laser macro
 products             |  | $              | 238,518 |      | $ | 205,772 |  | $ | 172,959 | 
|Laser
 marking and micro products |  |                | 279,123 |      |   | 231,920 |  |   | 213,632 | 
|Components                        |  |                | 57,637  |      |   | 41,983  |  |   | 34,299  | 
|                                  |  |                |         |      |   |         |  |   |         | 
|                                  |  | $              | 575,278 |      | $ | 479,675 |  | $ | 420,890 | 
|                                  |  |                |         |      |   |         |  |   |         | 

|  |                                                                                                                                    
|- | -----------------------------------------------------------------------------------------------------------------------------------
| 
|* | For each
 laser product category, net sales include sales of service (including
 training, maintenance and repair) and spare parts.

The laser sources
sold by the Company consist of a laser head (containing the lasing medium,
resonator, source of excitation, resonator mirrors and cooling mechanism),
power supply, and microcontroller (for control and monitoring). Selected laser
systems provided by our Company are equipped with the uniform operating concept
ROFIN Control Unit (RCU). RCU is a real-time laser and handling control
device, which allows control of any laser mode. The user interface allows full
access from a terminal (for instance a touch screen) that is located directly
on the machines, or via a preceding PC with an Ethernet connection. The
standardized ROFIN Control Network (RCN) allows the extended diagnosis of all
laser components via the Intranet, the Internet, or WLAN. With the open PLC
programming system customers can individually adapt the process sequence. For a
more detailed discussion of the
components of a laser source, see Laser Technology. Products are offered in
different configurations and utilize different design principles according to
the desired application.

9

---



The following
table sets forth the Companys product categories by principal markets and
principal applications:

|                        |  |                                                                                   |  |                                                                    
|----------------------- |  | --------------------------------------------------------------------------------- |  | -------------------------------------------------------------------
|PRODUCT
 CATEGORY       |  | PRINCIPAL
 MARKETS                                                                |  | PRINCIPAL
 APPLICATIONS                                            
|                        |  |                                                                                   |  |                                                                    
|                       
|Laser macro
 products   |  | Machine tool                                                                      |  | Cutting and
 welding of metals                                     
|                        |  |                                                                                   |  |                                                                    
|                        |  | Automotive                                                                        |  | Cutting and
 welding of metals                                     
|                        |  |                                                                                   |  |                                                                    
|Laser
 marking products |  | Semiconductor
 and electronics                                                    |  | Marking of
 integrated circuits, electronic components, smart cards
|                        |  |                                                                                   |  |                                                                    
|                        |  | Automotive                                                                        |  | Marking of
 labels and car components                              
|                        |  |                                                                                   |  |                                                                    
|Laser micro
 products   |  | Medical
 devices, semiconductor and electronics, photovoltaic, dental and jewelry |  | Spot
 welding, fine cutting, micro structuring                     
|                        |  |                                                                                   |  |                                                                    
|                        |  | Packaging
 and paper industry                                                     |  | Perforating
 of cigarette tip paper and plastic foils              
|                        |  |                                                                                   |  |                                                                    
|Components              |  | Laser
 industry                                                                   |  |                                                                    

LASER MACRO PRODUCTS

The Companys
business strategy for its macro laser business is to grow its revenues by:

| |   |                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increasing
 its market share in its existing CO2 laser market through
 increased sales of its low- and high- power, diffusion cooled, wave-guide
 Slab lasers and fast-axial flow CO2 lasers;                             
| |   |                                                                                                                                                                                                                           
| |  | developing
 diffusion-cooled Slab lasers with higher output power to achieve higher
 welding depths or faster cutting speeds and thereby widen their potential
 usage;                                                    
| |   |                                                                                                                                                                                                                           
| |  | further
 developing the Remote Welding, Tube Welding, Profile Welding, and Scanner
 Welding System concepts;                                                                                                              
| |   |                                                                                                                                                                                                                           
| |  | continuing
 research and product engineering for its solid-state laser series, including
 the high-power fiber laser, to further penetrate the market and to further
 increase the output power for specific applications.

The Companys family of CO2
laser products for macro applications, and their principal markets and
applications, are discussed below.

10

---



|               |  |                 |  |                     |  |                                     |  |                         
|-------------- |  | --------------- |  | ------------------- |  | ----------------------------------- |  | ------------------------
|LASER SERIES   |  | POWER RANGE     |  | MODE OF
 EXCITATION |  | PRINCIPAL
 MARKETS                  |  | APPLICATIONS            
|               |  |                 |  |                     |  |                                     |  |                         
|DC Slab Series |  | 1.0 kW - 8.0 kW |  | High Frequency      |  | Machine toolAutomotive              |  | Cutting and welding     
|SC Series      |  | 100 W - 600 W   |  | High Frequency      |  | Machine tool
 Automotive
 Packaging |  | Cutting and
 structuring
|XL Series      |  | 1.0 kW - 1.5 kW |  | Direct Current      |  | Machine tool                        |  | Cutting and welding     
|STS Series     |  | 2.0 kW - 5.0 kW |  | Direct Current      |  | Machine tool                        |  | Cutting and welding     
|FH Series      |  | 6.0 kW - 8.0 kW |  | Direct Current      |  | Machine tool                        |  | Cutting and welding     

The Company
believes that it is the only laser manufacturer of diffusion cooled, Slab-based
lasers in the high-power range. In the DC Slab Series laser design, a
radio-frequency excited gas discharge occurs between two water-cooled
electrodes that have a large surface area that permits maximum heat
dissipation. The core diffusion cooled, wave-guide technology is protected by
three patents, two of which expire in 2009 and one of which expires in 2010,
and the Company has exclusive license rights to this technology on a worldwide
basis for power levels above 500 watts for material processing applications.
Principal markets for the Slab Series lasers are the machine tool and
automotive industries.

The Companys
XL, STS, and FH Series fast-axial flow CO2 lasers are used for both
cutting and welding applications and are marketed under the PRC brand. In the
fast-axial flow principle, the gas discharge occurs in a tube in the same
direction as the resonator, through which the laser gas mixture flows at a high
speed. XL, STS, and FH Series products are used primarily by the machine tool
industry.

The Companys
SC Series diffusion cooled, wave-guide CO2 lasers are developed and
produced by Rofin-Sinar UK Ltd. The SC Series are sealed-off lasers, which are
also based on the Slab laser principle used for the DC Slab Series. These
lasers are used mainly for cutting and structuring applications. Principal
markets are the machine tool, automotive and packaging industries.

The Companys family of
solid-state laser products for macro applications, and their principal markets,
are discussed below.

|             |  |                 |  |                     |  |                                                   |  |                    
|------------ |  | --------------- |  | ------------------- |  | ------------------------------------------------- |  | -------------------
|LASER SERIES |  | POWER RANGE     |  | MODE OF
 EXCITATION |  | PRINCIPAL
 MARKETS                                |  | APPLICATIONS       
|             |  |                 |  |                     |  |                                                   |  |                    
|DP Series    |  | 1.0 kW - 4.0 kW |  | Laser diodes        |  | Automotive                                        |  | Cutting and welding
|DS Series    |  | 1.0 kW - 3.0 kW |  | Laser diodes        |  | Automotive                                        |  | Cutting and welding
|LY Products  |  | 1.0 kW          |  | Flash lamp          |  | Automotive                                        |  | Cutting and welding
|DQ Series    |  | 500 W  800 W   |  | Laser diodes        |  | Automotive,
 Consumer
 electronics,
 Photovoltaic |  | Surface treatment  

Rofins
DP/DS/LY Series of continuous wave, solid-state lasers are designed exclusively
for use with flexible fiber-optic beam delivery systems, making them
particularly well-suited for integration into complex production systems for
cutting and welding applications. The key competitive advantages of the DP/DS
Series lasers are the fact that they are diode-pumped and that they are
designed to allow multiple power output configurations. These configurations
include continuous-wave, pulsed and power ramping modes, which allow Rofin to
address a wide range of customer applications. In addition, several features of
the DP/DS Series laser are designed for easy maintenance, such as the simple
modular resonator design, easily accessed power supply and PC-based controller
equipped with a modem, which allows communication with a remote service center.
The diode pumping technology is characterized by high beam quality and high
efficiency. These lasers are used principally in the automotive industry. The
LY product is a flash lamp pumped, solid-state laser mainly targeting low price
markets. The Companys DQ Series of Q switched, solid-state lasers are designed
for applications such as removal, cleaning, and insulation of various materials
in the automotive, consumer electronics and photovoltaic markets. To meet the
different demands of these target markets, DQ Series lasers offer a couple of
set up options which differ in power, pulse energy, and number of laser sources
per unit.

11

---



The Companys
family of diode laser products for welding, soldering and surface treatment
applications, and their principal markets, are discussed below.

|             |  |               |  |                     |  |                                                                     |  |                                                                                              
|------------ |  | ------------- |  | ------------------- |  | ------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------
|LASER SERIES |  | POWER RANGE   |  | MODE OF
 EXCITATION |  | PRINCIPAL
 MARKETS                                                  |  | APPLICATIONS                                                                                 
|             |  |               |  |                     |  |                                                                     |  |                                                                                              
|Diode Lasers |  | 10 W - 3.6 kW |  | Direct current      |  | Electronics
 Machine tool
 Medical device
 Automotive
 Photovoltaic |  | Soldering
 Surface treatment
 Plastic welding
 Plastic welding
 Soldering, Surface
 treatment

The Companys
diode lasers are designed to meet the requirements of a wide range of welding,
soldering, and surface treatment applications. The Companys high-power laser
diodes can be stacked into arrays achieving output powers in the multiple
kilowatt range. In addition to their use in the automotive, machine tool and
electronics markets, these lasers are also sold into the medical device and
research markets.

LASER MARKING PRODUCTS

The Company
entered the laser-marking business in 1989 when it acquired Laser Optronic GmbH
from Coherent General Inc. and designed and introduced the PowerLine laser
marker. Since then the Company has developed a broad line of market leading
laser markers that deliver optimal results in terms of quality and speed on a
wide range of materials. Based on its vast experience, Rofin offers standardized
and customized laser marking systems in different power ranges and wavelengths
for use in various industrial segments. Strength and experience in research and
development, application and software ensure innovative, standardized and
tailored solutions which meet most exigent customer demands. The Companys
laser marking products incorporate high value-added software VisualLaser
Marker and LaserCAD to facilitate use in the customers own environment.

The Company believes that the
following factors have contributed to the growth that it has experienced in the
laser marking business:

| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the
 Companys ability to tailor its laser marking solutions to the customers
 requirements;                                                                                                                                       
| |   |                                                                                                                                                                                                                                     
| |  | the
 Companys expertise in solid-state laser beam power, mode structure and
 high-frequency switching capability which provides optimal quality in terms
 of marking contrast and speed on a wide variety of materials;            
| |   |                                                                                                                                                                                                                                     
| |  | the
 Companys proprietary software  VisualLaserMarker and LaserCAD which
 provides an interface between the laser marking products and the customers
 computers and supports a broad range of network communication software; and
| |   |                                                                                                                                                                                                                                     
| |  | the
 Companys focus on innovation, which is reflected in cutting-edge products
 that satisfy standard as well as complex market requirements.                                                                                      

The Companys business strategy
for its laser marking business is four-fold:

| |   |                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to expand
 its position in worldwide laser marking markets with particular focus on the
 automotive, smart card, semiconductor and electronics industries;
| |   |                                                                                                                                                           
| |  | to offer a
 balanced product portfolio covering different technologies that addresses
 high-end and general application markets;                          
| |   |                                                                                                                                                           
| |  | to pursue
 application development for existing and new products; and                                                                                     
| |   |                                                                                                                                                           
| |  | to
 capitalize on its installed base of lasers by cross-selling the Companys
 products to its existing customers.                                        

12

---



The Companys family of laser
marking products is as follows:

|                                   |  |                                                                           |  |                                                                    |  |                                                             |  |                                                                                                                    
|---------------------------------- |  | ------------------------------------------------------------------------- |  | ------------------------------------------------------------------ |  | ----------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------
|LASER SERIES                       |  | POWER RANGE                                                               |  | MODE OF
 EXCITATION                                                |  | PRINCIPAL
 MARKETS                                          |  | APPLICATIONS                                                                                                       
|                                   |  |                                                                           |  |                                                                    |  |                                                             |  |                                                                                                                    
|PowerLine
 StarMark Series         |  | 2 W  100 W                                                               |  | Laser diodes, Flash
 lamps or CO2                                  |  | Semiconductor,
 electronics,
 general marking
 applications |  | Integrated circuit
 marking, marking of
 metals plastics and
 organic materials,
 Day and Night
 design, Smart card
|MultiScan                          |  | 100 W                                                                     |  | High Frequency                                                     |  | Packaging                                                   |  | Consumer goods
 marking                                                                                            
|LabelMarker E
 LabelMarker Compact |  | Stand-alone laser based system                                            |  | Automotive
 Non-automotive                                         |  | Label marking
 Label marking                               
|                                   |  |                                                                           |  |                                                                    |  |                                                            
|EasyMark II                        |  | Laser workstation                                                         |  | General marking
 applications, medical
 components, tool
 industry |  | Metal and plastics
 marking                                
|                                   |  |                                                                           |  |                                                                    |  |                                                            
|EasyJewel                          |  | Laser workstation                                                         |  | Jewelry marking                                                    |  | Metal marking                                              
|                                   |  |                                                                           |  |                                                                    |  |                                                            
|CombiLine Series                   |  | Laser workstation for integration of a wide
 range of Rofin laser markers |  | General marking
 applications                                      |  | Metal and plastics
 marking                                

PowerLine/StarMark
Series  The Companys standard PowerLine and StarMark laser marking products
consist of a range of lasers with output power from 2 watts to 100 watts with a
galvo-head, a personal computer with state-of-the-art processor and Rofins
proprietary VisualLaserMarker and LaserCAD software. The modular design of the
PowerLine and StarMark markers with 19 components enable the customers to
order the most suitable configuration for their production processes or systems
(e.g. OEM-customers may order the laser head and 19 modules, for easy
integration into the system specified by the end-user). The PowerLine and
StarMark solid-state lasers incorporate either diode modules or a dual or single
lamp ceramic cavity design using long-life lamps both of which result in
higher output power (and therefore higher marking speeds), higher energy
efficiency (and therefore reduced operating costs), high beam quality (and
therefore constant and reliable marking quality), and longer service intervals.
New-generation, completely air-cooled solutions ensure further increase in
efficiency in addition to a compact size. PowerLine marking products are also
available with fiber lasers with an output power of 20 watts (PowerLine F 20).
The Companys proprietary VisualLaserMarker and LaserCAD software provide
customers with a user-friendly software environment that allows them to select
fonts, import graphics, preview marking and control all laser parameters and job
programs. Special options and accessories include a double marking head
allowing speeds of up to 1,200 characters per second in certain applications
(most notably marking of integrated circuits), as well as beam-switching and
-splitting options for marking of products in multiple production lines using a
single laser. Their main application - among a wide variety of possible
applications - is marking in the semiconductor and electronics industries.

MultiScan VS 
This vector scanning marker utilizes a 100 watts sealed-off CO2
laser and features the ability to mark components that are moving at high
speeds. The main application is the marking of consumer goods in the packaging
industry.

LabelMarker
Advanced  This stand-alone, laser based system is Rofins state-of-the
art solution when it comes to high demands concerning speed and reliability in
the process of label marking. The LabelMarker Advanced ensures high efficiency
and a short marking time due to an integrated, powerful laser. As a comprehensive
all-in-one solution, the LabelMarker Advanced is compact and comfortable. This
laser system with a class 1 safety rating can be used in any production area
without additional safety requirements.

13

---



LabelMarker
Compact  This all-in-one desktop label marker combines performance and
flexibility with the ability to mark virtually any conventional label material.
The user interface with an integrated, comfortable touch panel provides for
routine operation and the selection of pre-defined marking layouts. The
LabelMarker Compact operates with efficient and low-maintenance thermoelectric
cooling. It requires no external water supply and can be connected to any power
outlet from 110 V to 240 V. A network interface is available for integration
into production control networks.

EasyMark II 
The EasyMark II is a class 1 transportable desktop device. The 110 V to 230 V
connection and integrated cooling based on thermo-electrical technology
guarantee quick and easy initial operation. The EasyMark offers a program-controlled
z axis and a rotary axis which can optionally be integrated. An aluminum T-slot
plate facilitates mounting of customer-specific work piece carriers. Processing
of work pieces of different size and shape is thus possible.

EasyJewel 
The EasyJewel is transportable desktop device with a class 1 safety rating
specially developed to mark jewelry. The laser system offers the benefits of
non-contact, abrasion-resistant, permanent marking onto almost any type of
precious material with high speed and precision. Special machine features are
quick and exact loading of regular and special shapes, jogging function to
reach optimum marking position and various software features.

CombiLine
Flexible/CombiLine Advanced  These compact laser workstations have been designed
for small and medium-size batches. They integrate a wide range of Rofin laser
markers depending on the customers specific application. Supply units are
incorporated in the housing to provide efficient use of the floor space.
Different versions either with rotary or work table with various axes enable
exact adaptation to the required tasks.

LASER MICRO PRODUCTS

After the acquisition of Baasel
Lasertech in 2000, the Company formed a separate sales and marketing group
focused on micro applications. This group markets and sells a broad range of
laser products, including lamp pumped, pulsed, solid-state lasers for various
spot welding and fine cutting applications, CO2 Slab lasers for
perforating applications, Q switched solid-state lasers for surface structuring
and diode lasers for soldering and plastic welding applications. The Companys
business strategy for its micro applications business is to:

| |   |                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | further
 increase its share of the spot welding market in the jewelry industry and
 develop customers in other industries, such as consumer electronic industry
 that use a similar product and technology for industrial applications;
| |   |                                                                                                                                                                                                                                        
| |  | focus on
 manufacturers of medical instruments and implants within the medical device
 industry using mainly the applications cutting and welding;                                                                                     
| |   |                                                                                                                                                                                                                                        
| |  | increase its
 sales of perforating systems to the packaging industry for applications like
 easy-tear and special perforated foils for food packaging that allow the
 transfer of air and keep moisture in packaged goods; and         
| |   |                                                                                                                                                                                                                                        
| |  | develop new
 markets for glass cutting and solar-cell structuring applications.                                                                                                                                                        

The Companys family of laser
products for micro applications is as follows:

|                  |  |                |  |                     |  |                                         |  |                               
|----------------- |  | -------------- |  | ------------------- |  | --------------------------------------- |  | ------------------------------
|LASER SERIES      |  | POWER RANGE    |  | MODE OF
 EXCITATION |  | PRINCIPAL
 MARKETS                      |  | APPLICATIONS                  
|                  |  |                |  |                     |  |                                         |  |                               
|StarWeld Series   |  | 40 W - 500 W   |  | Flash Lamp          |  | Jewelry,
 Medical device
 Electronics   |  | Spot and seam
 welding        
|StarPulse         |  | 40 W + 90 W    |  | Flash Lamp          |  | Medical device Electronics              |  | Spot and seam
 welding        
|StarFiber         |  | 100 W  200 W  |  | Diode               |  | Electronics
 Medical device             |  | Fine cutting 
 Fine welding   
|X-Lase            |  | 1 W  24 W     |  | Diode               |  | Semiconductor,
 Electronics
 Solar cell |  | Micro structuring             
|DS Disc Series    |  | 60 W  100 W   |  | Diode               |  | Electronics                             |  | CuttingStructuring            
|StarCut Series    |  | 12 W  150 W   |  | Flash Lamp/Diode    |  | Medical                                 |  | Fine cutting                  
|PerfoLas Systems  |  | n.a.           |  | n.a.                |  | Paper                                   |  | Perforating                   
|StarShape Systems |  | n.a.           |  | n.a.                |  | Packaging                               |  | Cutting
 Drilling
 Structuring
|Series 800        |  | 8 W  1000 W   |  | Flash Lamp          |  | OEM                                     |  | Micro/Marking                 
|Series 600        |  | 8 W  100 W    |  | Flash Lamp          |  | OEM                                     |  | Micro/Marking                 
|Series LDP        |  | 10 W - 200 W   |  | Diode               |  | OEM                                     |  | Micro/Marking                 
|Series LEP        |  | 4 W  6 W      |  | Diode               |  | OEM                                     |  | Micro/Marking                 
|Series LDPP       |  | 10 W  50 W    |  | Diode               |  | OEM                                     |  | Fine cutting                  
|Series LLP        |  | 500 W  1000 W |  | Flash Lamp          |  | OEM                                     |  | Welding
 Cutting              

14

---



StarWeld
Series  Rofins standard StarWeld laser products consist of pulsed solid-state
lasers in the range of 40 watts to 500 watts. Although the StarWeld Series has
a wide variety of possible applications, its main application is the fine
welding of jewelry, electronics, and dental parts.

StarPulse
Series  The StarPulse Series consists of pulsed Nd:YAG rod lasers with power
ratings from 40 to 90 watts. StarPulse lasers provide high peak powers and high
pulse-to-pulse stability and are designed for use in fine welding applications
such as laser welding of highly reflective materials in the medical device and
electronics industry.

StarFiber
Series - The robust and compact fiber laser systems of the StarFiber Series
achieve nominal powers of 100 watts up to 200 watts. The lasers can be operated
in either pulsed or continuous wave mode. The StarFiber Series is designed for
a broad range of applications for fine welding and fine cutting, such as
welding of electromechanic components or fine cutting, e.g. in the production
of medical devices.

X-Lase  The X-Lase
Series comprise of picosecond pulse mode-locked fiber laser systems with a
maximal output power of 24 watts. Main markets are in the semiconductor, solar
cell, electronics, and display industries. In these industries the X-Lase
products can be used for thin film patterning, ablation and scribing
applications.

DS Disc Series
 Rofins Disc laser products use laser diodes as the source of excitation
to pump a thin crystal (disc). The output power is in the range of 60 watts to
100 watts and the main application is structuring or cutting of electronics.

StarCut Series
 Rofins StarCut laser products use pulsed solid-state lasers in the range of
12 watts to 150 watts. Their main application is the fine cutting of medical
devices.

PerfoLas
Systems  The PerfoLas Systems consist of a high-power CO2 laser and
a specially designed beam delivery and paper handling system that includes a
laser beam splitter (PerfoLas Multiplexer) which allows customers to drill more
than 500,000 holes per second into paper or foils. The main application for
these lasers is perforation of cigarette tip paper.

StarShape
Systems  The StarShape Systems consist of a CO2 or solid-state
laser in combination with a galvo scanning head and is used for precise
cutting, drilling, and surface structuring.

Series 600 and
800 are flash-lamp pumped, solid-state lasers sold to OEM-customers and system
integrators for various micro and marking applications.

Series LDP and
LEP are diode pumped, solid-state lasers sold to OEM-customers and system integrators
for various micro and marking applications.

Series LDPP
are diode pulse-pumped Nd:YAG lasers that are designed specifically to
precision cut thin metals. Main market is the medical devices industry.

Series LLP are lamp-pumped
solid-state lasers designed for welding and cutting applications.

15

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COMPONENT PRODUCTS

Power Supplies
 The Company offers power supplies for pulsed and continuous wave solid-state
lasers, CO2lasers, diode lasers, as well as RF generators for
acousto-optic Q-switches through its wholly-owned subsidiary PMB Elektronik GmbH.

Fiber and Optics Technology  Special
fiber lasers, fiber coupling products and optical engines for primary use in
fiber lasers are manufactured and marketed by the Companys Finland-based
subsidiary Corelase Oy.

Laser Diodes and Modules  High-power semiconductor
components such as high power, high-brightness laser diodes and modules are
manufactured and marketed by the Companys subsidiaries Dilas Diodenlaser GmbH,
Dilas Diodelaser Inc., and m2k-laser GmbH.

Fibers and
Fiber Optic Beam Deliveries - Fibers, fiber components, beam splitters or
switches and beam combiners designed for use in industrial lasers or as beam
delivery systems are manufactured and marketed by Optoskand AB.

Active and passive fibers, amplifiers and
other fiber laser technology components are developed, manufactured and
marketed by Nufern, East Granby.

The Companys
high-technology components are either integrated by other laser manufacturers
into their products or are used for the Companys own product portfolio.

APPLICATIONS DEVELOPMENT

In addition to
manufacturing and selling laser sources for macro applications and marking and
micro applications, Rofin operates application centers in eight countries where
it develops laser-based solutions for customers seeking alternatives to conventional
manufacturing techniques. Revenues derived from application development are not
a significant component of total revenues. Applications development is
generally a support service to the sales and marketing function and is
performed to customize the laser to the particular needs of the customer. The
Company currently has approximately 40 employees in applications development.

MARKETS AND CUSTOMERS

Rofin sells
its laser products and laser-based system solutions to a wide range of
industries. Our three principal markets are the machine tool, automotive, and
semiconductor and electronics industries. The following table sets forth the
allocation of the Companys total laser sales among our principal markets:

|                               |  |              |    |      |  |      |   |                       |    |   |                                                                                                      | 
|------------------------------ |  | ------------ | -- | ---- |  | ---- | - | --------------------- | -- | - | ---------------------------------------------------------------------------------------------------- | 
|                               |  | Fiscal Years |    |      | 
|                               |  |              |    |      | 
|Principal
 Market              |  | 2008         |    | 2007 |  | 2006 |   | Primary
 Applications |   
|                               |  |              |    |      |  |      |   |                       |   
|Machine Tool                   |  |              | 33 | %    |  | 36   | % |                       | 31 | % | Cutting and
 welding                                                                                 | 
|                               |  |              |    |      |  |      |   |                       |    |   |                                                                                                      | 
|Semiconductor
 and Electronics |  |              | 27 | %    |  | 23   | % |                       | 18 | % | Marking of
 integrated circuits, electronic components, smart cards, and structuring of
 solar cells | 
|                               |  |              |    |      |  |      |   |                       |    |   |                                                                                                      | 
|Automotive
 & Sub-Supplier     |  |              | 11 | %    |  | 8    | % |                       | 7  | % | Cutting,
 welding and component marking                                                              | 
|                               |  |              |    |      |  |      |   |                       |    |   |                                                                                                      | 
|                               |  |              | 71 | %    |  | 67   | % |                       | 56 | % |                                                                                                      | 

The remaining
29%, 33%, and 44%, of total laser sales in fiscal 2008, 2007, and 2006,
respectively, were attributable to customers in a wide variety of other
industries including aerospace, consumer goods, medical device manufacturing,
flexible packaging, job shops, jewelry, universities and institutes. No one
customer accounted for over 10% of total sales in any of these periods.

16

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SALES, MARKETING AND DISTRIBUTION

Rofin sells
its products in approximately 55 countries to OEMs, systems integrators and
industrial end-users who have in-house engineering resources capable of
integrating Rofins products into their own production systems. Lasers for
cutting applications are marketed and sold principally to OEMs in the machine
tool industry who sell laser cutting machines incorporating Rofins products
without any substantial involvement by Rofin. Lasers for welding applications
are marketed and sold both to systems integrators and to end-users. Laser
marking products are marketed and sold directly to end-users and to OEMs for
integration into their handling systems (mainly for integrated circuit, solar
cell, and smart card marking applications). Laser micro products are marketed
and sold directly to end-users and to OEM-customers (mainly for solar cell and
jewelry applications). In the case of both welding lasers and laser marking
products, the end-user is significantly involved in the selection of the laser
component. In these cases, Rofins application engineers work directly with the
end-user to optimize the applications performance and demonstrate the
advantages of the Companys products.

Rofin has
approximately 140 direct sales engineers operating in 24 countries,
approximately 40 of whom are dedicated to marketing lasers for macro
applications and approximately 100 of whom are dedicated to marketing lasers
for marking and micro applications. Rofin sales engineers work either in a
well-defined geographic territory or are dedicated to specific industries or
applications. In addition, Rofin has 22 independent representatives marketing
the Companys laser products in Australia, Argentina, Brazil, China, Denmark,
Eastern Europe, Finland, India, Israel, Italy, Northern Africa, the
Philippines, Russia, Singapore, South Africa, Scandinavia, Slovenia, Thailand,
Turkey, and the United Kingdom. These independent representatives provide Rofin
with sales leads and opportunities, but do not distribute Rofins products. All
sales and delivery of product are conducted by the Company. Seventeen of the
independent representative agreements are on an exclusive basis, with the other
five on a non-exclusive basis. These agreements provide for a standard
percentage of the net sales price to be paid as commissions to the
representatives. The duration of the agreements is usually one year (with an
automatic one-year extension) and a six month cancellation clause.

Rofin directs
its worldwide sales and marketing of lasers for macro applications from its
offices in Hamburg (Germany), and of laser diode components, from Mainz
(Germany), Tucson, Arizona, and Freiburg (Germany). Worldwide sales and marketing
of laser marking products is directed from Rofins offices in Gunding-Munich
(Germany) and, for laser micro products and power supplies, from Starnberg
(Germany). Optical engines for fiber lasers for the worldwide market are sold
and marketed from Tampere (Finland) and East Granby (USA) and fiber optics and
beam delivery systems are sold and marketed from Gothenburg, Sweden. In Europe,
Rofin also maintains sales and service offices in Belgium, France, Italy, the
Netherlands, Spain, Switzerland, and the United Kingdom.

North American
sales of Rofins macro and micro laser products are managed out of the
Companys Plymouth, Michigan facility and of its marking products are managed
out of its Boxborough, Massachusetts facility. The Company also maintains a
sales office in Tempe, Arizona to support the expansion of Rofins laser
marking business in the North American market and a new sales and service
office in Mississauga (Canada) to support the Canadian market.

PRC Laser
directs its worldwide sales and marketing of lasers for macro applications from
its office in Landing, New Jersey, while Lee Laser directs its worldwide sales
and marketing of laser for micro applications from its office in Orlando,
Florida. Both companies sell their products independently under their own brands.

The Company
maintains sales and service offices in Japan, Singapore, South Korea, Taiwan,
and China, to cover the Asia/Pacific region. Over the next five years, the
Company expects demand for industrial lasers to increase in the Asia/Pacific
region. The Company believes that the geographic market with the greatest
long-term potential over the next 10 to 15 years is China, principally due to
the expansion of domestic automobile and semiconductor and electronic
production in that country. The Company has a technology license agreement with
the Nanjing Eastern Laser Corporation, or NELC, under which NELC manufactures
CO2 laser sources for sale in the Chinese market.

17

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CUSTOMER SERVICE, REPLACEMENT PARTS AND
COMPONENTS

During each of
fiscal 2008, 2007, and 2006, approximately 35% of the Companys revenues were
generated from sales of after-sales services, replacement parts and components
for laser products. The Company believes that a high level of customer support
is necessary to successfully develop and maintain long-term relationships with
its OEM and end-user customers. This close relationship is maintained as
customers needs change and evolve.

Recognizing
the importance of its existing and growing installed multinational customer
base, the Company has expanded its local service and support platform into new
geographic regions. Rofin has 347 customer service personnel. The Companys
field service and in-house technical support personnel receive ongoing training
with respect to the Companys laser products, maintenance procedures,
laser-operating techniques, and processing technology. Most of the Companys
OEM-customers also provide customer service and support to end-users.

Many of
Rofins laser products are operated 24 hours a day in high speed, quality-oriented
manufacturing operations. Accordingly, the Company provides 24 hour, year-round
service support to its customers in the United States, Germany, and the
majority of other countries in which it operates. The Company plans to continue
adopting similar service support elsewhere. In addition, eight-hour response
time is provided to certain key customers. This support includes field service
personnel who reside in close proximity to the Companys installed base. The
Company provides customers with process diagnostic and verification techniques,
as well as specialized training in the operation and maintenance of its
systems. The Company also offers regularly scheduled and intensive training
programs and customized maintenance contracts for its customers.

Of Rofins 347
customer service personnel, approximately 210 employees operate in the field
    in about 50 countries. Field service personnel are also involved in the installation
    of the Companys systems.

Rofins
approach to the sale of replacement parts is closely linked to the Companys
strategic focus on rapid customer response. The Company provides
around-the-clock order entry and provides same or next day delivery of parts
worldwide in order to minimize disruption to customers manufacturing
operations. Rofin typically provides a minimum one-year warranty for its
products with warranty extensions negotiated on a case-by-case basis. It agrees
to after-sales service and parts supply up to a period of 10 years, if
requested by a customer. The Companys growing base of installed laser sources
and laser-based systems is expected to continue to generate a stable source of
parts and service sales.

In addition,
the Company offers components such as OEM laser modules, optical engines, laser
diodes, active and passive fibers, fiber optic delivery systems, and power
supplies. These high-technology components are mainly sold to other laser
manufacturer into their product portfolio.

COMPETITION

Laser Macro Products

The market for
laser macro products and systems is fragmented and includes a large number of
competitors, many of which are small or privately owned or which compete with
Rofin on a limited geographic, industry-specific or application-specific basis.
The Company also competes in certain target markets with competitors that are
part of large industrial groups and have access to substantially greater
financial and other resources than Rofin. The overall competitive position of
the Company will depend upon a number of factors, including product performance
and reliability, price, customer support, manufacturing quality, the
compatibility of its products with existing laser systems, and the continued
development of products utilizing the technologies of diode lasers and diode
pumped, solid-state lasers. Competition among laser manufacturers is also based
on attracting and retaining qualified engineering and technical personnel.

18

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Rofin believes
it is among the top three suppliers of laser sources in the worldwide market
for macro applications. Companies such as Trumpf and Fanuc (for high-power CO2lasers), Synrad and Coherent (for low-power CO2 lasers),
Trumpf and IPG (for solid-state lasers) and Laserline and Jenoptik (for diode
lasers and laser diodes) compete in certain of the markets in which Rofin
operates. However, in the Companys opinion, none of these companies compete in
all of the industries, applications and geographic markets currently served by
Rofin. We believe that only Trumpf has a product range and worldwide presence
similar to that of the Company.

Laser Marking and Micro Products

Significant
competitive factors in the laser marking and micro market include system
performance and flexibility, cost, the size of each manufacturers installed
base, capability for customer support and breadth of product line. Because many
of the components required to develop and produce a laser product for marking
and micro applications are commercially available, barriers to entry into this
market are low and the Company expects new competitive products to enter this market.
The Company believes that its product range for marking and micro applications
will compete favorably in this market primarily due to the performance and
price characteristics of such products.

The Companys
laser marking products compete with conventional ink-based and acid-etching
technologies, as well as with laser mask-marking. The Companys micro products
compete with conventional welding, etching and spark erosion technologies. The
Company believes that its principal competitors in the laser marking and micro
market include Trumpf, GSI Group, Unitek Miyachi, Lasag, IPG and Control Laser.

Rofin also
competes with manufacturers of conventional non-laser products in applications
such as welding, drilling, soldering, cutting, and marking. The Company
believes that as manufacturing industries continue to modernize, seek to reduce
production costs and require more precise and flexible production, the features
of laser-based systems will become more desirable than systems incorporating
conventional material processing techniques and processes. The increased
acceptance of these laser applications by industrial users will be enhanced by
laser product line expansion to include lower and higher power CO2
lasers, advancements in fiber-optic beam delivery systems, improvements in
reliability, and the introduction of lower and higher power diode lasers and
diode pumped, solid-state lasers, including fiber lasers, capable of performing
heavy industrial material processing and marking and micro applications.

MANUFACTURING AND ASSEMBLY

Rofin
manufactures and tests its high-power CO2 and solid-state laser
macro products at its Hamburg (Germany), Plymouth, Michigan, Landing, New
Jersey, and Kingston upon Hull (UK) facilities. The Companys laser marking
products are manufactured and tested at its facilities in Gunding-Munich
(Germany), Starnberg (Germany), Oxford (UK), Singapore, and Boxborough,
Massachusetts. Rofins micro application products are manufactured and tested
in Starnberg (Germany), Tampere (Finland) and Orlando, Florida. The Companys
diode laser products are manufactured and tested at its Mainz (Germany),
Freiburg (Germany) and Tucson, Arizona, facilities. The Companys low-power
CO2
laser products are manufactured and tested in Kingston upon Hull (UK). Coating
of Rofins Slab laser electrodes is performed at the Overath (Germany)
facility. The Companys fiber optics and beam delivery systems are manufactured
and tested in Gothenburg (Sweden), and power supplies are manufactured and
tested in Starnberg (Germany). The Companys active and passive fibers are
manufactured and tested in East Granby, Connecticut.

Given the
competitive nature of the laser business, the Company focuses substantial
efforts on maintaining and enhancing the efficiency and quality of its
manufacturing operations. The Company utilizes just-in-time and cell-based
manufacturing techniques to reduce manufacturing cycle times and inventory
levels, thus enabling it to offer on-time delivery and high-quality products to
its customers.

Rofins
in-house manufacturing includes only those manufacturing operations that are
critical to achieve quality standards or protect intellectual property. These
manufacturing activities consist primarily of product development, testing of
components and subassemblies (some of which are supplied from within the
Company and others of which are supplied by third party vendors and then
integrated into the Companys finished products), assembly and final testing of
the completed product, as well as proprietary software design and
hardware/software integration. Although the Company minimizes the number of
suppliers and component types

19

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wherever
practicable it has at least two sources of supply for key items. Rofin has a
qualifying program for its vendors and generally seeks to build long-term relationships
with such vendors. The Company purchases certain major components from single
suppliers. The Company estimates that 22% of its revenues are from the sale of
products that require specialized components currently only available from
single sources. Rofin has written agreements with such suppliers and has not
had material delays in supplies from these sources. The Company believes that
it could, if necessary, purchase such components from alternative sources,
within four to six months, following appropriate qualification of such new
vendors.

Rofin is
committed to meeting internationally recognized manufacturing standards. Its
Hamburg, Gunding-Munich, Starnberg, Mainz (all Germany), East Granby, Connecticut,
    and Tucson, Arizona, facilities are ISO 9001 certified. In addition, the
    following facilities are ISO 9002 certified: Pamplona (Spain), Milan (Italy),
    Paris (France), Willerby (UK), Gothenburg (Sweden) and Singapore.

RESEARCH AND DEVELOPMENT

During fiscal
2008, 2007, and 2006, Rofins net spending on research and development was
$41.1 million, $27.8 million, and $24.0 million, respectively. The Companys
net spending on research and development reflects receipt of funding under
German government and European Union grants totaling $1.3 million, $2.3
million, and $1.2 million in fiscal 2008, 2007, and 2006, respectively. Rofin
has approximately 229 employees engaged in product research and development.

Rofins
research and development activities are directed at meeting customers
manufacturing needs and application processes. Core competencies include CO2
gas lasers, solid-state lasers, diode lasers, precision optics, electronic
power supplies, fibers, fiber optics, beam delivery, control interfaces,
software programming and systems integration. The Company strives for customer-driven
development activities and promotes the use of alliances with key customers and
joint development programs in a wide range of its target markets.

The Companys
research and development activities are carried out in thirteen centers in
Hamburg, Gunding-Munich, Starnberg, Freiburg, and Mainz (all Germany), Kingston
upon Hull (UK), Gothenburg (Sweden), Tampere (Finland), Plymouth, Michigan,
Landing, New Jersey, Orlando, Florida, Tucson, Arizona and East Granby,
Connecticut (all USA), and are centrally coordinated and managed. Rofin
maintains close working relationships with the leading industrial, government
and university research laboratories in Germany, including the Fraunhofer
Institute for Laser Technology in Aachen, the Institute for Technische Physik
of the German Space and Aerospace Research Center in Stuttgart, the Institute
for Strahlwerkzeuge of the University of Stuttgart, the Fraunhofer Institute
for Material Science in Dresden, the Laser Center in Hanover, and elsewhere
around the world, including the University of Edinburgh in the United Kingdom.
These relationships include funding of research, joint development programs,
personnel exchange programs, and licensing of patents developed at these
institutes.

INTELLECTUAL PROPERTY

Rofin owns
intellectual property, which includes patents, proprietary software, technical
know-how and expertise, designs, process techniques and inventions.

While policies
and procedures are in place to protect critical intellectual property rights,
Rofin believes that its success depends to a larger extent on the innovative
skills, know-how, technical competence and abilities of Rofins personnel. The
Company is also a worldwide licensee of two U.S. patents, one Japanese patent
and their corresponding foreign counterparts, which expire in 2009 and 2010,
respectively. These licenses are exclusive for industrial material processing
applications of 500 watts and above for the diffusion cooled, wave-guide
technology used in the Companys Slab Series CO2 lasers and non-exclusive
for applications below 500 watts. In Rofins view, the technology protected by
these three patents represents a significant step forward in industrial laser
technology for material processing and is an important source of Rofins
current revenues and future growth and profitability.

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Rofin protects
its intellectual property in a number of ways including, in certain
circumstances, patents. Rofin has sought patent protection primarily in the
United States, Europe, and Japan. Rofin currently holds 177 separate patents
for inventions relating to lasers, processes and power supplies with expiration
dates ranging from 2009 to 2026. In addition, 67 patent applications have been
filed and are under review by the relevant patent authorities. The Company
holds 62 exclusive and non-exclusive patents licenses with relevance to its
products and laser technology. Rofin requires its employees and certain of its
customers, suppliers, representatives, agents and consultants to enter into
confidentiality agreements to further safeguard Rofins intellectual property.

Rofin, from
time to time, receives notices from third parties alleging infringement of such
parties patent or other intellectual property rights by Rofins products.
While these notices are common in the laser industry and Rofin has in the past
been able to develop non-infringing technology or license necessary patents or
technology on commercially reasonable terms, Rofin cannot assure that it would
in the future prevail in any litigation seeking damages or expenses from Rofin
or to enjoin Rofin from selling its products on the basis of such alleged
infringement. Nor can Rofin assure that it would be able to develop any
non-infringing technology or to license any valid and infringed patents on commercially
reasonable terms. In the event any third party made a valid claim against Rofin
or its customers and a license were not made available to Rofin on commercially
reasonable terms, Rofin would be adversely affected.

From time to
time, Rofin files notices of opposition to certain patents on laser
technologies held by others, including academic institutions and competitors of
Rofin, which the Company believes could inhibit its ability to develop laser
products for industrial material processing applications.

ORDER BACKLOG

The Companys
order backlog was $143.4 million, $116.6 million, and $84.9 million, as of
September 30, 2008, 2007, and 2006, respectively. The Companys order backlog,
which contains relatively little service, training and spare parts, represents
approximately three months of laser shipments. The increase in the Companys
order backlog from September 30, 2007 to September 30, 2008 was attributable to
8% higher orders for macro applications, 22% higher orders for micro and
marking applications and 41% higher orders for components. The fluctuation of
the U.S. dollar in fiscal 2008 had a favorable effect of approximately $11.2
million on year-to-year order backlog. The increase in the Companys order
backlog from September 30, 2006 to September 30, 2007, was attributable to 24%
higher orders for macro applications (including components) and 14% higher
orders for micro and marking applications. The fluctuation of the U.S. dollar
in fiscal 2007 had a favorable effect of approximately $5.1 million on
year-to-year order backlog.

An order is
entered into backlog by Rofin when a purchase order with an assigned delivery
date has been received. Delivery schedules range from one week to six months,
depending on the size, complexity and availability of the product or system
ordered, although typical delivery dates for laser source products range
between 6-12 weeks from the date an order is placed. Although there is a risk
that customers may cancel or delay delivery of their orders, orders for
standard non-customized lasers can typically be allocated to other customers
without significant additional costs. The Company also manages this risk by
establishing the right to charge a cancellation fee that covers any material
and developmental costs incurred prior to the order being cancelled.
Enforcement of this right is dependent on many factors including, but not
limited to, the customers requested length of delay, the number of other
outstanding orders with the same customer, and the ability to quickly convert
the canceled order to another sale.

The Company
anticipates shipping the present backlog during fiscal 2009. However, the
Companys backlog at any given date is not necessarily indicative of actual
sales for any future period.

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EMPLOYEES

At September
30, 2008, Rofin had 1,775 full-time employees, of which 945 were in Germany,
331 in the United States, 7 in Canada, 39 in France, 49 in Italy, 125 in the
United Kingdom, 30 in Spain, 9 in the Netherlands, 48 in Sweden, 22 in Finland,
11 in Belgium, 2 in Switzerland, 34 in Singapore, 14 in Korea, 19 in Taiwan, 57
in China, and 33 in Japan, whereas at September 30, 2007, Rofin had 1,609
full-time employees, of which 900 were in Germany, 255 in the United States, 6
in Canada, 40 in France, 48 in Italy, 126 in the United Kingdom, 30 in Spain, 9
in the Netherlands, 43 in Sweden, 20 in Finland, 11 in Belgium, 30 in
Singapore, 13 in Korea, 17 in Taiwan, 31 in China, and 30 in Japan. The average
number of employees for the fiscal year ended September 30, 2008, was 1,700.

While the
Companys employees are not covered by collective bargaining agreements and the
Company has never experienced a work stoppage, slowdown or strike, the
Companys employees at its Hamburg and Starnberg facilities are each
represented by a nine-person works council and in Gunding-Munich by a
seven-person works council. Additionally, Hamburg and Gunding-Munich are
represented by a four-person central works council. Matters relating to
compensation, benefits and work rules are negotiated and resolved between
management and the works council for the relevant location. The Company
considers its relations with its employees to be good.

GOVERNMENT REGULATION

The majority
of the Companys laser products sold in the United States are classified as Class
IV Laser Products under applicable rules and regulations of the Center for
Devices and Radiological Health (CDRH) of the U.S. Food and Drug
Administration. The same classification system is applied in the European
markets. Safety rules are formulated with Deutsche Industrie Norm (i.e.,
German Industrial Standards) or ISO standards, which are internationally
harmonized.

CDRH
regulations generally require a self-certification procedure pursuant to which
a manufacturer must file with the CDRH with respect to each product
incorporating a laser device, periodic reporting of sales and purchases and
compliance with product labeling standards. The Companys laser products for
macro, micro and laser marking applications can result in injury to human
tissue if directed at an individual or otherwise misused.

The Company
believes that its laser products for macro, micro and marking applications and
components are in substantial compliance with all applicable laws for the
manufacture of laser devices.

AVAILABLE INFORMATION

The Company
makes available, free of charge on its internet website, its Annual Report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any
amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Exchange Act, as soon as reasonably practicable after they are
electronically filed with, or furnished to, the Securities and Exchange
Commission (the SEC). You can find these reports on the Companys website at
www.rofin.com under the heading Investor Relations. The information on the
Companys website is not incorporated by reference in this Annual Report on
Form 10-K.

These reports
may also be obtained at the SECs Public Reference Room at 100 F Street NE,
Washington, D.C. 20549. Information on the operation of the Public Reference
Room is available by calling the SEC at (202) 942-8090. You may also access
this information at the SECs website (http://www.sec.gov). This site contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC.

22

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|         |             
|-------- | ------------
|ITEM 1A. | RISK FACTORS

DOWNTURNS IN
THE INDUSTRIES WE SERVE, PARTICULARLY IN THE MACHINE TOOL, AUTOMOTIVE, AND SEMICONDUCTOR
AND ELECTRONICS INDUSTRIES MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR SALES AND
PROFITABILITY.

Our business
depends substantially upon capital expenditures particularly by manufacturers
in the machine tool, automotive, and semiconductor and electronics industries.
We estimate that approximately 71% of our laser sales during fiscal year 2008
were to these three industry markets. These industries are cyclical and have
historically experienced periods of oversupply, resulting in significantly
reduced demand for capital equipment, including the products manufactured and
marketed by us. For the foreseeable future, our operations will continue to
depend upon capital expenditures in these industries, which, in turn, depend
upon the market demand for their products. Decreased demand from manufacturers
in these industries, for example, during a downturn, may lead to decreased
demand for our products. Although such decreased demand would reduce our sales,
we may not be able to reduce expenses quickly, due in part to the need for
continual investment in research and development and the need to maintain
extensive ongoing customer service and support capability. Although we order
materials for assembly in response to firm orders, the lead time for assembly
and delivery of some of our products creates a risk that we may incur
expenditures or purchase inventories for products which we cannot sell.

Accordingly,
any downturn or slowdown in the machine tool, automotive, and semiconductor and
electronics industries could have a material adverse effect on our financial
condition and results of operations.

A HIGH
PERCENTAGE OF OUR SALES ARE OVERSEAS AND OUR RESULTS ARE THEREFORE SUBJECT TO
THE IMPACT OF EXCHANGE RATE FLUCTUATIONS.

Although we
report our results in U.S. dollars, approximately 69% of our current sales are
denominated in other currencies, including the Euro, Swedish krona, Swiss
francs, British pound, Singapore dollar, Japanese yen, Korean won, Taiwanese NT
dollar, Canadian dollar, and Chinese RMB. The fluctuation of the Euro, and the
other functional currencies, against the U.S. dollar has had the effect of
increasing and decreasing (as applicable) reported net sales as well as cost of
goods sold, gross margin, and selling, general and administrative expenses
denominated in such foreign currencies when translated into U.S. dollars as compared
to prior periods. Our subsidiaries will, from time to time, pay dividends in
their respective functional currencies, thus presenting another area of
potential currency exposure for us in the future.

We also face
transaction risk from fluctuations in exchange rates between the various
currencies in which we do business. We believe that a certain portion of the
transaction risk of our operations in multiple currencies is mitigated by our
hedging activities, utilizing forward exchange contracts and forward exchange
options. We also continue to borrow in each operating subsidiarys functional
currency to reduce exposure to exchange gains and losses. However, there can be
no assurance that changes in currency exchange rates will not have a material
adverse effect on our business, financial condition and results of operations.

OUR INABILITY
TO MANAGE THE RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS COULD
ADVERSELY AFFECT OUR BUSINESS.

Our products
are currently marketed in approximately 55 countries, with Germany, the rest of
Europe, the United States, and the Asia/Pacific region being our principal
markets. Our operations and sales in our principal markets are subject to risks
inherent in international business activities, including:

| |   |                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the general
 political and economic conditions in each such country or region;                                                                                                          
| |   |                                                                                                                                                                                         
| |  | overlap of
 differing tax structures;                                                                                                                                                   
| |   |                                                                                                                                                                                         
| |  | management
 of an organization spread over various jurisdictions; and                                                                                                                   
| |   |                                                                                                                                                                                         
| |  | unexpected
 changes in regulatory requirements and compliance with a variety of foreign
 laws and regulations, such as import and export licensing requirements and
 trade restrictions.

23

---



Any failure to
manage the risks associated with our international business operations could
have a material adverse effect on our financial condition and results of
operations.

Our
profitability may be adversely affected by economic slowdowns in the United
States, Europe, or the Asia/Pacific region. A recession in these economies
could trigger a decline in laser sales to the machine tool, automotive, or
semiconductor/electronics industries, and any related weaknesses in their
respective currencies could adversely affect customer demand for our products,
the U.S. dollar value of our foreign currency denominated sales, and ultimately
our consolidated results of operations.

WE DEPEND ON
THE ABILITY OF OUR OEM CUSTOMERS TO INCORPORATE OUR LASER PRODUCTS INTO THEIR
SYSTEMS.

Our sales
depend in part upon the ability of our OEM customers to develop and sell
systems that incorporate our laser products. Adverse economic conditions, inadequate
    liquidity, large inventory positions, limited marketing resources, and other
    factors affecting these OEM customers could subject us to risks of business
    failure by such customers and potential credit and inventory risks, and thus
    could have a substantial impact upon our financial results. We cannot provide
    assurances that our OEM customers will not experience financial or other
    difficulties that could adversely affect their operations and, in turn, our
    financial condition or results of operations.

WE EXPERIENCED
IN THE PAST, AND EXPECT TO EXPERIENCE IN THE FUTURE, FLUCTUATIONS IN OUR QUARTERLY
RESULTS. THESE FLUCTUATIONS MAY INCREASE THE VOLATILITY OF OUR STOCK PRICE.

We have
experienced and expect to continue to experience some fluctuations in our
quarterly results. We believe that fluctuations in quarterly results may cause
the market prices of our common stock, on the NASDAQ Global Select Market and
the Frankfurt Stock Exchange, to fluctuate, perhaps substantially. Factors
which may have an influence on the Companys operating results in a particular
quarter include:

| |   |                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | general economic uncertainties;                                                                                                                                                                      
| |   |                                                                                                                                                                                                      
| |  | fluctuations in demand for, and sales of, our products or prolonged downturns in the industries that we serve;                                                                                       
| |   |                                                                                                                                                                                                      
| |  | the timing of
 the receipt of orders from major customers;                                                                                                                                           
| |   |                                                                                                                                                                                                      
| |  | product mix;                                                                                                                                                                                         
| |   |                                                                                                                                                                                                      
| |  | competitive
 pricing pressures;                                                                                                                                                                      
| |   |                                                                                                                                                                                                      
| |  | the relative
 proportions of domestic and international sales;                                                                                                                                       
| |   |                                                                                                                                                                                                      
| |  | our ability
 to design, manufacture and introduce new products on a cost-effective and
 timely basis;                                                                                                
| |   |                                                                                                                                                                                                      
| |  | the delayed
 effect of incurrence of expenses to develop and improve marketing and service
 capabilities;                                                                                            
| |   |                                                                                                                                                                                                      
| |  | foreign
 currency fluctuations;                                                                                                                                                                      
| |   |                                                                                                                                                                                                      
| |  | ability of
 our suppliers to produce and deliver components and parts, including sole or
 limited source components, in a timely manner, in the quantity desired and at
 the prices we have budgeted;
| |   |                                                                                                                                                                                                      
| |  | our ability
 to control expenses; and                                                                                                                                                                
| |   |                                                                                                                                                                                                      
| |  | costs
 related to acquisitions of businesses.                                                                                                                                                        

These and
other factors make it difficult for us to release precise predictions regarding
the results and the development of our business. In addition, current conditions
in the domestic and global economies are extremely uncertain. As a result, it is
difficult to estimate the level of growth for the economy as a whole or of capital
expenditures in the industrial markets we serve. Because all of the components
of our budgeting and forecasting are dependent on estimates of spending within
these markets, the prevailing economic uncertainty renders estimates of future
revenue and expenses even more difficult than usual to make. In
addition, our backlog at any given time is not necessarily indicative of actual
sales for any succeeding period. As our delivery schedule typically ranges from
one week to six months, our sales will often reflect orders shipped in the same
quarter that they are received. Moreover, customers may cancel or reschedule
shipments and production difficulties could delay shipments. Accordingly, the
Companys
results of operations are subject to significant fluctuations from quarter to
quarter. See also Business - Order Backlog.

Other factors
that we believe may cause the market price of our common stock to fluctuate,
perhaps substantially, include announcements of new products, technologies or
customers by us or our competitors,

24

---



developments
with respect to intellectual property and shortfalls in our operations relative
to analysts expectations. In addition, in recent years, the stock market
in general, and the shares of technology companies in particular, have experienced
wide price fluctuations. These broad market and industry fluctuations,
particularly in the semiconductor and electronics, machine tool, and automotive
industries, may adversely affect the market prices of our common stock on the
NASDAQ Global Select Market and the Frankfurt Stock Exchange.

THE MARKETS
FOR OUR PRODUCTS ARE HIGHLY COMPETITIVE AND INCREASED COMPETITION COULD
INCREASE OUR COSTS, REDUCE OUR SALES OR CAUSE US TO LOSE MARKET SHARE.

The laser
industry is characterized by significant price and technical competition. Our
current and proposed laser products for macro, marking and micro applications,
and components compete with those of several well-established companies, some
of which are larger and have substantially greater financial, managerial and
technical resources, more extensive distribution and service networks, and
larger installed customer bases than us.

We believe
that competition will be particularly intense in the CO2, diode
laser, and solid-state laser markets, including fiber lasers, as many companies
have committed significant research and development resources to pursue
opportunities in these markets. There can be no assurance that we will
successfully differentiate our current and proposed products from the products
of our competitors or that the marketplace will consider our products to be
superior to competing products. Because many of the components required to
develop and produce a laser-based marking system are commercially available,
barriers to entry into this market are relatively low, and we expect new
competitive product entries in this market. To maintain our competitive
position in these markets, we believe that we will be required to continue a high
level of investment in engineering, research and development, marketing, and
customer service and support. There can be no assurance that we will have
sufficient resources to continue to make these investments, that we will be
able to make the technological advances necessary to maintain our competitive
position, or that our products will receive market acceptance. See also
Business - Competition.

OUR FUTURE
GROWTH AND COMPETITIVENESS DEPEND UPON OUR ABILITY TO DEVELOP NEW AND ENHANCED
PRODUCTS TO MEET MARKET DEMAND AND TO INCREASE OUR MARKET SHARE FOR LASER
MARKING AND MICRO PRODUCTS.

If we are to
increase our laser sales in the near term, these sales will have to come
through increases in market share for our existing products, through the
development of new products, or through the acquisition of competitors or their
products. To date, a substantial portion of our revenues has been derived from
sales of high-powered CO2 laser sources, solid-state laser sources,
and diode lasers. In order to increase market demand for these products, we
will need to devote substantial resources to:

| |   |                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------
| |  | continuing
 to broaden our CO2 laser product range;                                                                                
| |   |                                                                                                                                    
| |  | continuing
 to increase the output power of our CO2 laser sources, diode
 lasers, and diode pumped, solid-state laser products; and
| |   |                                                                                                                                    
| |  | continuing
 to reduce the manufacturing costs of our product range to achieve more
 attractive pricing.                            

A large part
of our growth strategy depends upon being able to increase our worldwide market
share for laser marking and micro products.

Our future
success depends on our ability to anticipate our customers needs and develop
products that address those needs. Our ability to control costs is limited by
our need to invest in research and development. If we are unable to implement
our strategy to develop new and enhanced products, our business, operating
results and financial condition could be adversely affected. We cannot provide
assurance that we will successfully implement our business strategy or that any
of the newly developed or enhanced products will achieve market acceptance or
not be rendered obsolete or uncompetitive by products of other companies. See
also

25

---



Managements
Discussion and Analysis of Financial Condition and Results of Operations and
Business - The Companys Laser Products.

IF WE LOSE OUR
KEY MANAGEMENT PERSONNEL, WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR
BUSINESS OR ACHIEVE OUR OBJECTIVES.

Our future
success depends in large part upon the leadership and performance of our
executive management team and key employees at the operating level. These key
employees include technical, sales and support personnel for our operations on
a worldwide basis. If we lose the services of one or more of our executive
officers or key employees, or if one or more of them decides to join a
competitor or otherwise compete directly or indirectly with us, we may not be
able to successfully manage our business or achieve our business objectives. If
we lose the services of any of our key employees at the operating or regional
level, we may not be able to replace them with similarly qualified personnel,
which could harm our business.

WE MAY NOT BE
ABLE TO SUCCESSFULLY ACQUIRE NEW OPERATIONS OR INTEGRATE FUTURE ACQUISITIONS,
WHICH COULD CAUSE OUR BUSINESS TO SUFFER.

An important
part of our growth strategy is making strategic acquisitions of companies with
complementary operations, technologies or products. We regularly review potential
    acquisitions and periodically engage in discussions regarding such possible
    acquisitions. We may be unable to successfully complete potential strategic
    acquisitions if we cannot reach agreement on acceptable terms or for other
    reasons. Future acquisitions may require us to obtain additional debt or
    equity financing, which may not be available on terms acceptable to us, if
    at all. In connection with future acquisitions, we may assume the liabilities
    of the companies we acquire. Any debt that we incur to pay for future acquisition
    could contain covenants that restrict the manner in which we operate our
    business. Any new equity securities that we issue for this purpose would
    be dilutive to our existing stockholders. If we buy a company or a division
    of a company, we may experience difficulty integrating that company or divisions
    personnel and operations, which could negatively affect our operating results.

In addition:

| |   |                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the key
 personnel of the acquired company may decide not to work for us;                                                                                                                  
| |   |                                                                                                                                                                                            
| |  | we may
 experience additional financial and accounting challenges and complexities in
 areas such as tax planning, treasury management and financial reporting;                            
| |   |                                                                                                                                                                                            
| |  | we may be
 held liable for risks and liabilities (including for environmental-related
 costs) as a result of our acquisitions, some of which we may not discover
 during our due diligence;
| |   |                                                                                                                                                                                            
| |  | our ongoing
 business may be disrupted or receive insufficient management attention; and                                                                                                   
| |   |                                                                                                                                                                                            
| |  | we may not
 be able to realize the synergies, cost savings or other financial benefits we
 anticipated.                                                                                    

WE DEPEND ON
LIMITED SOURCE SUPPLIERS THAT COULD CAUSE SUBSTANTIAL MANUFACTURING DELAYS AND
INCREASE OUR COSTS IF A DISRUPTION IN SUPPLY OCCURS.

We estimate
that 22% of our revenues are derived from sales of products that require
specialized components only available from single sources. We also rely on a
limited number of independent contractors to manufacture subassemblies for some
of our products. There can be no assurance that, in the future, our current or
alternative sources will be able to meet all of our demands on a timely basis.
If one or more of our suppliers or subcontractors experiences difficulties that
result in a reduction or interruption in supply to us, or if they fail to meet
any of our manufacturing requirements, our business could be harmed until we
are able to secure alternative sources, if any. If we are unable to find
necessary parts or components on commercially reasonable terms, we could be
required to reengineer our products to accommodate available substitutions
which would increase our costs and/or have a material adverse effect on
manufacturing schedules, product performance, and market acceptance.

26

---



OUR FAILURE TO
PROTECT OUR PROPRIETARY TECHNOLOGY OR TO AVOID LITIGATION FOR INFRINGEMENT OR
MISAPPROPRIATION OF PROPRIETARY RIGHTS OF THIRD PARTIES COULD RESULT IN A LOSS
OF REVENUES AND PROFITS.

Our future
success depends in part upon our intellectual property rights, including trade
secrets, know-how and continuing technological innovation. There can be no
assurance that the steps taken by us to protect our intellectual property
rights will be adequate to prevent misappropriation or that others will not
develop competitive technologies or products.

We currently
hold 177 United States and foreign patents on our laser sources, with
expiration dates ranging from 2009 to 2026. We have also obtained licenses
under certain patents covering lasers and related technology incorporated into
our products. Of particular importance is the license of three patents related
to the sales of our Slab Series CO2 lasers, which we estimate to
account for approximately 25% of our revenue in fiscal year 2008. Two of these
licenses expire in 2009 and one expires in 2010. In addition, 67 patent
applications have been filed and are under review by the relevant patent
authorities. There can be no assurance that other companies are not
investigating or developing other technologies that are similar to ours, that
any patents will issue from any application filed by us or that, if patents do
issue, the claims allowed will be sufficiently broad to deter or prohibit
others from marketing similar products. In addition, there can be no assurance
that any patents issued to us will not be challenged, invalidated or
circumvented, or that the rights thereunder will provide a competitive
advantage to us. See also Business - Intellectual Property.

From time to
time, we receive notices from third parties alleging infringement of such
parties patent or other proprietary rights by our products. While these
notices are common in the laser industry and we have in the past been able to
develop non-infringing technology or license necessary patents or technology on
commercially reasonable terms, there can be no assurance that we would in the
future prevail in any litigation seeking damages or expenses from us or to
enjoin us from selling products on the basis of such alleged infringement, or
that we would be able to develop any non-infringing technology or license any
valid and infringed patents on commercially reasonable terms. In the event any
third party made a valid claim against us or our customers and a license was
not made available to us on commercially reasonable terms, we would be
adversely affected.

CHANGES IN TAX RATES, TAX LIABILITIES OR TAX ACCOUNTING RULES COULD AFFECT FUTURE RESULTS.

As a global company, we are subject to taxation in the United
States and various other countries and jurisdictions. Significant judgment is
required to determine worldwide tax liabilities. Our future tax rates could be
affected by changes in the composition of earnings in countries with differing tax rates,
changes in the valuation of our deferred tax assets and liabilities, or changes in the tax
laws. In addition, we are subject to regular examination of our income tax returns by the
Internal Revenue Service and other tax authorities. We regularly assess the likelihood of
favorable or unfavorable outcomes resulting from these examinations to determine the
adequacy of our provision for income taxes. Although we believe our tax estimates are
reasonable, there can be no assurance that any final determination will not be
materially different than the treatment reflected in our historical income tax provisions
and accruals, which could materially and adversely affect our operating results and financial
condition.

ANY DEFECTS IN
OUR PRODUCTS OR CUSTOMER PROBLEMS ARISING FROM THE USE OF OUR PRODUCTS MAY
SERIOUSLY HARM OUR BUSINESS AND REPUTATION.

Our laser
products are technologically complex and may contain known and undetected
errors or performance problems. In addition, performance problems can also be
caused by the improper installation of our products by a customer. These errors
or performance problems could result in customer dissatisfaction, which could
harm our sales or customer relationships. In addition, these problems may cause
us to incur significant warranty and repair costs and divert the attention of
our engineering personnel from our product development efforts.

|         |                          
|-------- | -------------------------
|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|        
|None.    |                          

27

---



|        |           
|------- | ----------
|ITEM 2. | PROPERTIES

The Companys
manufacturing facilities include the following:

|                           |  |                  |   |                   |         |                   |                                                  
|-------------------------- |  | ---------------- | - | ----------------- | ------- | ----------------- | -------------------------------------------------
|Location
 of Facility      |  | Owned or
 Leased |   | Size**
 (sq. ft.) |         | Primary
 Activity
|                           |  |                  |   |                   |         |                  
|Hamburg,
 Germany          |  | Owned            | * |                   | 165,015 |                   | CO2
 lasers, solid-state lasers, diode lasers    
|Starnberg,
 Germany        |  | Leased           |   |                   | 111,603 |                   | Laser
 marking and micro products, power supplies
|Gunding-Munich,
 Germany   |  | Leased           |   |                   | 85,951  |                   | Solid-state
 lasers, laser marking products      
|Plymouth,
 Michigan        |  | Leased           |   |                   | 52,128  |                   | CO2
 lasers, laser micro and marking systems     
|Kingston
 upon Hull,       |  |                  |   |                   |         |                   |                                                  
|United
 Kingdom            |  | Leased           |   |                   | 48,485  |                   | Low-power CO2
 lasers                            
|Orlando,
 Florida          |  | Owned            |   |                   | 35,207  |                   | Solid-state
 lasers                              
|Landing, New
 Jersey       |  | Owned            |   |                   | 34,292  |                   | CO2
 lasers                                      
|Mainz,
 Germany            |  | Leased           |   |                   | 38,758  |                   | Diode lasers
 and components                     
|Boxborough,
 Massachusetts |  | Leased           |   |                   | 22,512  |                   | Laser
 marking systems                           
|Gothenburg,
 Sweden        |  | Leased           |   |                   | 21,337  |                   | Fiber optic
 production                          
|Overath,
 Germany          |  | Leased           |   |                   | 12,417  |                   | Coating of
 materials                            
|Oxford,
 United Kingdom    |  | Leased           |   |                   | 11,578  |                   | Laser
 marking systems                           
|Sakai,
 Atsugi-shi, Japan  |  | Leased           |   |                   | 9,763   |                   | CO2 lasers                                       
|Tampere,
 Finland          |  | Leased           |   |                   | 9,964   |                   | Fiber
 lasers, Optical engines                   
|Pamplona,
 Spain           |  | Owned            |   |                   | 7,532   |                   | Laser
 marking systems                           
|Singapore                  |  | Leased           |   |                   | 6,047   |                   | Laser
 marking products                          
|Freiburg,
 Germany         |  | Leased           |   |                   | 4,947   |                   | Laser diodes                                     
|Tucson,
 Arizona           |  | Leased           |   |                   | 5,853   |                   | Components                                       
|East Granby,
 Connecticut  |  | Leased           |   |                   | 57,000  |                   | Fibers                                           

| |    |                                                                                                                                                            
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | *  | The facility is owned by Rofin-Sinar Laser GmbH (RSL);
    the real property on which the facility is located is leased by RSL under
    a 99-year lease.
| |    |                                                                                                                                                            
| | ** | Includes
 sales, administration and research and development facilities where
 applicable.                                                                 

The Kingston
upon Hull (United Kingdom) facility lease expires in 2012. The Gunding-Munich
(Germany) moved to another facility in the beginning of 2008. This new main
facility is leased until 2017. The leases on the Companys Japanese facilities
in Atsugi-shi expire in 2011, with a renewal option for five years. The Mainz
(Germany) main facility leases expire in 2011 and 2017, the Overath (Germany)
facility leases expire in 2013, and the Freiburg (Germany) facility leases
expire in 2012. The Singapore facility lease expires in 2009. The Starnberg
(Germany) main facility is leased until 2017 from a member of the Companys
board of and includes a clause to terminate the lease contract within a
two-year notice period during the contract. The leases on its U.S. facilities
in Boxborough, Massachusetts, Plymouth, Michigan, Tucson, Arizona, and East
Granby, Connecticut expire in 2010, 2012, 2013, and 2010 respectively. The
Gothenburg (Sweden) facility lease expires in 2011, with a renewal option for
three years. The Tampere (Finland) facility is leased with no expiration date
but can be terminated upon three months notice from the landlord and a one
month notice from the lessee.

The Company
maintains sales, administration and research and development facilities at each
of the Hamburg, Starnberg, Gunding-Munich, Mainz, Freiburg, Kingston upon Hull,
Gothenburg, Tampere, East Granby, Plymouth, Landing, and Orlando locations. The
Company also maintains sales and service offices worldwide, all of which are
leased, with the exception of the Pamplona (Spain), and Seoul (South Korea)
properties which are owned.

The Company
believes that its existing facilities are adequate to meet its currently
projected needs for the next 12 months and that suitable additional or
alternative space would be available, if necessary, in the future on
commercially reasonable terms.

28

---



|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS

The Company
has been and is likely to be involved from time to time in litigation involving
its intellectual property and ordinary routine litigation arising in the
ordinary course of business.

A licensor of patents
covering the technology used in certain of the Companys CO2lasers has asserted that the Company has calculated
royalties due
in respect of certain sales of such CO2lasers in a manner that is
not consistent with the applicable license agreement. In addition, the licensor
claims that it has not been provided with copies of invoices and other
documentation relating to such sales, to which it asserts it is entitled under
the license agreement. The Company disputes these and related allegations and
believes that it is in compliance with all of its obligations under the license
agreement. Following discussions with the licensor in order to resolve these
disagreements, the parties have reached an agreement in principle that an
independent auditor should be appointed to review the calculations made by the
Company in connection with the royalties it has paid in the past. To date the
audit has not commenced. In February 2008, the Company contacted the licensor
in writing in order to proceed with the appointment of an independent auditor
and agree on parameters to apply to the conduct of the audit. The Company is
still waiting for a response from the licensor. Management believes that it
will achieve a resolution of this matter that will not have a material adverse
impact on the Companys financial condition or results of operations or cash
flows.

|        |                                                    
|------- | ---------------------------------------------------
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no
matters submitted to a vote of the security holders during the fourth quarter
of our fiscal year ended September 30, 2008.

PART II

|        |                                                                                                                    
|------- | -------------------------------------------------------------------------------------------------------------------
|ITEM 5. | MARKET PRICE FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
 MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Companys
Common Stock is traded on the NASDAQ Global Select Market and also on the Prime
Standard Segment of the Frankfurt Stock Exchange, under the symbol RSTI and
international securities identification number (ISIN) US7750431022,
respectively. The table below sets forth the high and low closing sales prices
of the Companys Common Stock for each quarter ended during the last two fiscal
years as reported by NASDAQ:

|                    |  |                           |       |     |   |       | 
|------------------- |  | ------------------------- | ----- | --- | - | ----- | 
|                    |  | Common Stock Trade Prices |      
|                    |  |                           |      
|Quarter
 ended      |  | High                      |       | Low |  
|                    |  |                           |       |     |  
|December 31,
 2006  |  | $                         | 31.86 |     | $ | 28.67 | 
|March 31,
 2007     |  | $                         | 32.72 |     | $ | 28.17 | 
|June 30,
 2007      |  | $                         | 35.15 |     | $ | 29.95 | 
|September
 30, 2007 |  | $                         | 36.55 |     | $ | 32.54 | 
|December 31,
 2007  |  | $                         | 48.58 |     | $ | 36.55 | 
|March 31,
 2008     |  | $                         | 47.15 |     | $ | 34.72 | 
|June 30,
 2008      |  | $                         | 47.93 |     | $ | 30.20 | 
|September
 30, 2008 |  | $                         | 42.34 |     | $ | 28.54 | 

At November
28, 2008, the Company had 7 holders of record of its Common Stock and
28,896,619 shares outstanding. A significantly greater number of holders of the
Companys Common Stock are street name or beneficial holders, whose shares
are held of record by bankers, brokers and other financial institutions. The
Company has not paid dividends on its Common Stock and does not anticipate
paying dividends in the foreseeable future.

29

---



During the
fiscal year 2008, no equity securities of the Company were sold by the Company
that were not registered under the Securities Act.

There were no
purchase of Common Stock of the Company made by the Company or any affiliated
purchaser of the Company as defined in Rule 10b-18(a)(3) under the Exchange
Act during the fourth fiscal quarter of the fiscal year 2008.

On November 7,
2007, the Board of Directors had approved a stock buyback plan which authorized
    the repurchase of up to $120 million of the Companys common stock,
    or approximately 10% of the shares of Common Stock then outstanding based
    on then current market prices. The share buyback program was authorized to
    begin November 15, 2007. The shares were repurchased from time to time in
    open market transactions or privately negotiated transactions at the Companys
    discretion, including the quantity, timing and price thereof.

|Period                                   |  | Total
Number of
Shares
    (In Thousands) |  | Average
      Price Paid
      Per
    Share |    | Total Number
of Shares
Purchased as
part of Publically
Announced Plans
or Programs
    (In Thousands) |  | Approximate
      Dollar Value
      that may yet
      be Purchased
      Under the Plans
    or Program | 
|---------------------------------------- |  | ----------------------------------------- |  | -------------------------------------------- | -- | ----------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------- | 
|                                         |  |                                           |  |                                              |    |                                                                                                       |  |                                                                                                           | 
|November 15, 2007 thru November 30, 2007 |  | 405                                       |  | $                                            | 44 |                                                                                                       |  | 405                                                                                                       | 
|                                         |  |                                           |  |                                              |    |                                                                                                       |  |                                                                                                           | 
|December 3, 2007 thru December 31, 2007  |  | 1,289                                     |  | $                                            | 46 | 2/3                                                                                                   |  | 1,289                                                                                                     | 
|                                         |  |                                           |  |                                              |    |                                                                                                       |  |                                                                                                           | 
|May 2, 2008 thru May 19, 2008            |  | 1,136                                     |  | $                                            | 37 |                                                                                                       |  | 1,136                                                                                                     | 
|                                         |  |                                           |  |                                              |    |                                                                                                       |  |                                                                                                           | 
|Total                                    |  | 2,830                                     |  | $                                            | 42 | 2/5                                                                                                   |  | 2,830                                                                                                     | 
|                                         |  |                                           |  |                                              |    |                                                                                                       |  |                                                                                                           | 

STOCK PRICE PERFORMANCE GRAPH

The following
Stock Price Performance Graph includes comparisons required by the SEC. The
Graph does not constitute soliciting material and should not be deemed filed or
incorporated by reference into any other Company filings under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except
to the extent that the Company specifically incorporates this information by
reference therein.

The following
graph presents the one-year total return for Rofin-Sinar Technologies Inc.
Common Stock compared with the NASDAQ Stock Market Index and the S&P
Technology Sector Index. Rofin-Sinar selected these comparative groups due to
industry similarities and the fact that they contain several direct
competitors.

The graph
assumes that the value of the investment in Rofin-Sinar Technologies Inc.
Common Stock, the NASDAQ Stock Market Index, and the S&P Technology Sector
Index each was $100 on September 30, 2003, and that all dividends were
reinvested. The S&P Technology Sector Index is weighted by market
capitalization. The stock price performance shown in this graph is not
necessarily indicative of, and not intended to suggest future stock price
performance.

30

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COMPARISON OF 5
YEAR CUMULATIVE TOTAL RETURN*Among
Rofin-Sinar Technologies Inc., The NASDAQ Composite Index
And The S&P Information Technology Index

(LINE GRAPH)

| |                                                                                           | 
| | ----------------------------------------------------------------------------------------- | 
| | *$100
 invested on 9/30/03 in stock & index-including reinvestment of dividends.          | 
| | Fiscal
 year ending September 30.                                                         | 
| |                                                                                           | 
| | Copyright
 © 2008 S&P, a division of The McGraw-Hill Companies Inc. All rights
 reserved.

EDGAR REPRESENTATION OF DATA POINTS USED IN
PRINTED GRAPHIC

|        |  |                                |  |                            |        |                              |  |        |  | 
|------- |  | ------------------------------ |  | -------------------------- | ------ | ---------------------------- |  | ------ |  | 
|        |  | Rofin-Sinar
 Technologies Inc. |  | NASDAQ Stock
 Market Index |        | S&P Technology
 Sector Index | 
|        |  |                                |  |                            |        |                              | 
|9/30/03 |  | 100                            |  |                            | 100    |                              |  | 100    |  | 
|9/30/04 |  | 139.77                         |  |                            | 107.74 |                              |  | 101.96 |  | 
|9/30/05 |  | 180.73                         |  |                            | 123.03 |                              |  | 115.67 |  | 
|9/30/06 |  | 289.11                         |  |                            | 131.60 |                              |  | 119.44 |  | 
|9/30/07 |  | 334.02                         |  |                            | 158.88 |                              |  | 147.30 |  | 
|9/30/08 |  | 291.25                         |  |                            | 119.05 |                              |  | 112.87 |  | 

31

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|        |                        
|------- | -----------------------
|ITEM 6. | SELECTED FINANCIAL DATA

The following
table sets forth selected consolidated financial data for the five fiscal years
ended September 30, 2008. The information set forth below should be read in
conjunction with the consolidated financial statements and notes and
Managements Discussion and Analysis of Financial Condition and Results of
Operations contained elsewhere in this Annual Report on Form 10-K.

|                                                      |  |                                          |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|----------------------------------------------------- |  | ---------------------------------------- | ------- | ---- | - | ------- | - | ---- | ------- | ---- | - | ------- | - | - | ------- | -
|                                                      |  | Year ended September 30,                 |        
|                                                      |  |                                          |        
|                                                      |  | 2008                                     |         | 2007 |   | 2006    |   | 2005 |         | 2004 |  
|                                                      |  |                                          |         |      |   |         |   |      |         |      |  
|                                                      |  | (in thousands, except per share amounts) |        
|STATEMENT OF OPERATIONS DATA:                         |  |                                          |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Net sales                                             |  | $                                        | 575,278 |      | $ | 479,675 |   | $    | 420,890 |      | $ | 375,191 |   | $ | 322,628 |  
|Cost of goods sold                                    |  |                                          | 327,286 |      |   | 276,402 |   |      | 242,619 |      |   | 222,189 |   |   | 190,473 |  
|Gross profit                                          |  |                                          | 247,992 |      |   | 203,273 |   |      | 178,271 |      |   | 153,002 |   |   | 132,155 |  
|Selling, general & administrative
 expenses           |  |                                          | 103,781 |      |   | 86,468  |   |      | 76,900  |      |   | 66,171  |   |   | 58,336  |  
|Research & development expenses                       |  |                                          | 41,113  |      |   | 27,830  |   |      | 23,968  |      |   | 22,565  |   |   | 20,473  |  
|Amortization expense                                  |  |                                          | 6,769   |      |   | 4,251   |   |      | 3,532   |      |   | 5,270   |   |   | 2,389   |  
|Income from operations                                |  |                                          | 96,329  |      |   | 84,724  |   |      | 73,871  |      |   | 58,996  |   |   | 50,957  |  
|Net interest expense (income)                         |  |                                          | (2,960  | )    |   | (5,028  | ) |      | (2,588  | )    |   | 148     |   |   | 1,771   |  
|Income before income taxes                            |  |                                          | 97,225  |      |   | 87,115  |   |      | 76,664  |      |   | 58,570  |   |   | 50,078  |  
|Income tax expense                                    |  |                                          | 33,466  |      |   | 31,838  |   |      | 27,041  |      |   | 20,595  |   |   | 17,648  |  
|Net income                                            |  |                                          | 63,759  |      |   | 55,277  |   |      | 49,623  |      |   | 37,975  |   |   | 32,430  |  
|Earnings per common share  Basic                     |  | $                                        | 2.15    |      | $ | 1.78    |   | $    | 1.62    |      | $ | 1.26    |   | $ | 1.21    |  
|Earnings per common share  Diluted                   |  | $                                        | 2.09    |      | $ | 1.74    |   | $    | 1.58    |      | $ | 1.22    |   | $ | 1.16    |  
|Shares used in computing earnings pershare
  Basic   |  |                                          | 29,640  |      |   | 30,975  |   |      | 30,568  |      |   | 30,143  |   |   | 26,957  |  
|Shares used in computing earnings pershare
  Diluted |  |                                          | 30,446  |      |   | 31,806  |   |      | 31,374  |      |   | 31,122  |   |   | 28,040  |  
|                                                      |  |                                          |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|OPERATING DATA (as percentage of sales):              |  |                                          |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Gross profit                                          |  |                                          | 43.1    | %    |   | 42.4    | % |      | 42.4    | %    |   | 41.0    | % |   | 41.0    | %
|Selling, general & administrative
 expenses           |  |                                          | 18.0    | %    |   | 18.0    | % |      | 18.3    | %    |   | 17.6    | % |   | 18.1    | %
|Research & development expenses                       |  |                                          | 7.1     | %    |   | 5.8     | % |      | 5.7     | %    |   | 6.0     | % |   | 6.4     | %
|Income from operations                                |  |                                          | 16.7    | %    |   | 17.7    | % |      | 17.6    | %    |   | 15.7    | % |   | 15.8    | %
|Income before income taxes                            |  |                                          | 16.9    | %    |   | 18.2    | % |      | 18.4    | %    |   | 15.8    | % |   | 15.5    | %
|                                                      |  |                                          |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|BALANCE SHEET DATA:                                   |  |                                          |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Working capital                                       |  | $                                        | 257,954 |      | $ | 344,907 |   | $    | 282,659 |      | $ | 222,002 |   | $ | 163,540 |  
|Total assets                                          |  |                                          | 583,660 |      |   | 626,224 |   |      | 501,521 |      |   | 428,638 |   |   | 413,806 |  
|Line of credit and loans                              |  |                                          | 66,674  |      |   | 40,592  |   |      | 35,416  |      |   | 41,002  |   |   | 54,802  |  
|Stockholders equity                                  |  |                                          | 402,258 |      |   | 448,923 |   |      | 358,440 |      |   | 294,166 |   |   | 257,384 |  

32

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|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS

OVERVIEW

Rofin-Sinar
Technologies Inc. is a leader in the design, development, engineering,
manufacture, and marketing of laser-based products, primarily used for cutting,
welding, and marking a wide range of materials.

Lasers are a
non-contact technology for material processing, which have several advantages
compared to conventional manufacturing tools that are desirable in industrial
applications. The Companys lasers all deliver a high-quality beam at
guaranteed power outputs and feature compact design, high processing speed,
flexibility, low operating and maintenance costs and easy integration into the
customers production process. As a technological leader in CO2,
solid-state lasers and diode lasers, the Company is able to meet a broad range
of its customers material processing requirements.

Based on the revised 2007 industry data of the Optoelectronics
    Report for laser products used for macro (cutting and welding) applications
    and marking and micro (fine cutting, fine welding, and perforating) applications
    combined, the Company had a worldwide market share (based on sales volume)
    in 2007 of over 18%. Using the Optoelectronics Report industry data projected
    for 2008, the Company believes it has a worldwide market share of approximately
    20% and that it is among the largest suppliers of laser products used for
    marking applications worldwide. The Company has sold more than 47,000 laser
    sources since 1975 and currently has over 3,000 active customers (including
    multinational companies with multiple facilities purchasing from the Company).
    During fiscal 2008, 2007, and 2006, approximately 41%, 43%, and 41%, respectively,
    of the Companys
revenues related to sales of laser products for macro applications,
approximately 10%, 9%, and 8% respectively, related to sales of components, and
approximately 49%, 48%, and 51%, respectively, related to sales of laser
products for marking and micro applications.

Through its
global manufacturing, distribution and service network, the Company provides a
comprehensive range of laser sources and laser-based system solutions to three
principal target markets: the machine tool, automotive, and the semiconductor
and electronics industries. The Company sells directly to end-users and to
original equipment manufacturers (OEMs) (principally in the machine tool
industry) that integrate Rofins laser sources with other system components.
Many of Rofins customers are among the largest global participants in their
respective industries. During fiscal 2008, 2007, and 2006, 25%, 23%, and 30%,
respectively, of the Companys sales were in North America, 51%, 55%, and 48%,
respectively, were in Europe and 24%, 22%, and 22%, respectively, were in Asia.
See note 13, Geographic Information, to the consolidated financial statements
for further information.

Outlook

Management
believes that the general slowdown of the industrial markets and recent
fluctuations in exchange rates will have an impact on the Companys
future business. Mid-term predictions are currently quite difficult, but we are
confident that our focus on emerging industries and regions
is the right strategy for sustained long-term success. Our success in this
challenging macroeconomic environment will also depend on our ability to
further diversify our markets, enhance our global presence and serve a broader
customer base. We should be able to capitalize on our recent investment in
Switzerland, India, and China. In addition, addressing less cyclical industries
such as military and defense industry should help us to compensate a slowdown
in other branches.

Acquisitions and
Formation of New Entities

Effective
October 1, 2005, the Company formed DILAS Diodelaser Inc. in Tucson, Arizona, as
a wholly-owned subsidiary of the Companys wholly-owned subsidiary,
Rofin-Sinar, Inc.

Effective
December 2, 2005, the Company purchased an additional 4% of the share capital
of Rofin-Sinar U.K. Ltd. through Rofin-Sinar Technologies Europe S.L. under an option
agreement between the Company and the former minority shareholders. The Company
currently holds 80% of the share capital of Rofin-Sinar U.K. Ltd. This purchase
resulted in goodwill of $0.5 million.

On March 23,
2006, the Company acquired 40% of the share capital of H2B Photonics GmbH,
Garbsen (Germany) through its wholly-owned subsidiary Carl Baasel Lasertechnik
GmbH & Co. KG. H2B Photonics

33

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GmbH
specializes in the development, manufacturing and sales of laser-based systems
used to cut brittle materials, such as glass, to produce perfectly cut edges.

Effective May
1, 2006, the Company formed Rofin-Baasel Canada Ltd. in, Mississauga, Canada,
as a wholly-owned subsidiary of the Companys wholly-owned subsidiary,
Rofin-Sinar, Inc.

Effective
December 2, 2006, the Company purchased an additional 1% of the share capital
of Rofin-Sinar U.K. Ltd. through Rofin-Sinar Technologies Europe S.L. under an
option agreement between the Company and the former minority shareholders. The
Company currently holds 81% of the share capital of Rofin-Sinar U.K. Ltd. This
purchase resulted in goodwill of approximately $0.2 million.

Effective
February 28, 2007, the Company acquired 80% of the common stock of m2k-laser
GmbH, Freiburg (Germany), through its wholly-owned subsidiary Rofin-Sinar Laser
GmbH. m2k-laser GmbH develops and manufactures semiconductor lasers based on
the III-V compounds GaAs and GaSb for use predominantly in the scientific
industry. Additionally, the parties have agreed on a put/call option exercisable
beginning in 2012 for the remaining 20% of the common stock. Accordingly, the
Companys financial statements present m2k-laser GmbH as if it was 100%-owned.
This purchase resulted in goodwill of approximately $0.6 million.

Effective
March 28, 2007, the Company acquired 100% of the common stock of Corelase Oy,
Tampere (Finland). Corelase Oy has considerable experience in semiconductors,
optics, and fiber technology. Its product lines include fiber-coupled diode
laser systems, continuous-wave and ultra short pulse mode-locked fiber laser
systems, and components such as diode lasers for a wide range of material
processing applications. The terms of the purchase include payment of deferred
purchase price based on Corelase Oy achieving certain financial targets. This
purchase resulted in goodwill of approximately $6.9 million.

Effective
April 05, 2007, the Company acquired 100% of the common stock of ES Technology
Ltd., Oxford, (UK), through its wholly-owned subsidiary Rofin-Baasel UK Ltd. ES
Technology Ltd. develops customized laser marking system solutions based on
various laser technologies and distributes a number of optical devices and
components into Northern European territories from several American suppliers
via its subsidiary, Laser Service (Oxford) Ltd. This purchase resulted in
goodwill of approximately $0.7 million.

Effective May
14, 2007, the Company purchased an additional 45% of the share capital of H2B
Photonics GmbH, Garbsen (Germany) through its wholly-owned subsidiary Carl
Baasel Lasertechnik GmbH. The Company currently holds 85% of the share capital
of H2B Photonics GmbH. This purchase resulted in goodwill of approximately $0.1
million.

Effective
December 3, 2007, the Company purchased the remaining 19% of the share capital
of Rofin-Sinar U.K. Ltd. through Rofin-Sinar Technologies Europe S.L. under an
option agreement between the Company and the former minority shareholders. The
Company now holds 100% of the share capital of Rofin-Sinar U.K. Ltd. This
purchase resulted in goodwill of $5.6 million.

Effective
January 24, 2008, the Company purchased Nufern, one of the worlds largest
independent manufacturers of specialty fibers and fiber laser modules serving a
wide range of industries, as a wholly-owned subsidiary of Rofin-Sinar
Technologies Inc. This purchase resulted in goodwill of $6.6 million. The
acquisition of Nufern is accounted for as a purchase business combination.
Assets acquired and liabilities assumed are recorded in the accompanying
condensed consolidated balance sheet at their estimated fair values at January
24, 2008. The Company is in the process of finalizing its valuation of the
identified intangible assets related to this acquisition. To the extent the
final valuation is different from the Companys preliminary assessment of fair value,
a purchase price adjustment will be made, which could impact the amount of
goodwill recorded. Nufern was purchased with cash and the Company is
contingently obligated to make an additional amount in potential earn out
payments based on Nufern achieving specific financial performance metrics
through calendar year 2008.

During the
quarter ended June 30, 2008, the Company formed Dilas Diodelaser China Company
Ltd. in Nanjing (China) through its 95%-owned subsidiary Dilas Diodenlaser
GmbH.

During the
quarter ended June 30, 2008, the Company formed Nanjing Eastern Technologies
Company Ltd. in Nanjing (China) as an 80%-owned subsidiary.

34

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Effective July
1, 2008 the Company formed Rofin-Baasel Swiss AG in Biel (Switzerland) as a
wholly-owned subsidiary through its wholly-owned subsidiary Rofin-Sinar
Technologies Europe S.L.

The company is
in the process of finalizing the acquisition of 80% of China-based Nanjing
Eastern Laser Company Ltd. (NELC) through two separate cash transactions.
NELCs product lines are largely comprised of high power, fast-axial flow CO2
lasers, with a power range up to 3 kW as well as NC-based laser processing
equipment.

RESULTS OF OPERATIONS

For the
periods indicated, the following table sets forth the percentage of net sales
represented by the respective line items in the Companys consolidated
statements of operations:

|                                              |  |                                 |   |       |   |       |  
|--------------------------------------------- |  | ------------------------------- | - | ----- | - | ----- | -
|                                              |  | Fiscal Year ended September 30, |  
|                                              |  |                                 |  
|                                              |  | 2008                            |   | 2007  |   | 2006  |  
|                                              |  |                                 |   |       |   |       |  
|Net sales                                     |  | 100.0                           | % | 100.0 | % | 100.0 | %
|Cost of
 goods sold                           |  | 56.9                            | % | 57.6  | % | 57.6  | %
|Gross profit                                  |  | 43.1                            | % | 42.4  | % | 42.4  | %
|Selling,
 general and administrative expenses |  | 18.0                            | % | 18.0  | % | 18.3  | %
|Research
 & development expenses              |  | 7.1                             | % | 5.8   | % | 5.7   | %
|Intangibles
 amortization                     |  | 1.2                             | % | 0.9   | % | 0.8   | %
|Income from
 operations                       |  | 16.7                            | % | 17.7  | % | 17.6  | %
|Income
 before income taxes                   |  | 16.9                            | % | 18.2  | % | 18.2  | %
|Net income                                    |  | 11.1                            | % | 11.5  | % | 11.8  | %

Fiscal Year 2008 Compared to Fiscal Year 2007

Net Sales 
Net sales of $575.3 million represents an increase of $95.6 million, or 20%,
over the prior year. Net sales increased $66.2 million, or 18%, in Europe/Asia
and $29.4 million, or 26%, in North America, compared to the prior year. The
U.S. dollar fluctuated against foreign currencies, which had a favorable effect
on net sales of $45.0 million. Net sales of laser products for macro applications
increased by 16% to $238.5 million, primarily due to the higher demand for our
lower and higher power CO2 lasers from OEM customers in the
automotive industry. Net sales of lasers for marking and micro applications
increased by 20% to $279.1 million compared to fiscal year 2007, mainly due to
the higher demand for our lasers for micro and marking applications principally
from the photovoltaic and electronics industries. Revenues for the component
business increased by 37% to $58 million, primarily due to the Companys last
acquisition and higher sales related to laser diodes.

Gross Profit 
The Companys gross profit of $248.0 million increased by $44.7 million,
or 22%, over the prior year. As a percentage of sales, gross profit increased
to 43%. The increased percentage margin in fiscal year 2008 was primarily a result
of a favorable product mix, an increase in the components business and higher
production efficiencies gained primarily in the manufacturing of high-power CO2
lasers. Gross profit was favorably affected by $15.5 million in fiscal year
2008 due to the fluctuation of the U.S. dollar against foreign currencies, primarily
the Euro.

Selling,
General and Administrative Expenses  Selling, general and administrative
expenses increased by $17.3 million, or 20%, to $103.8 million, compared to
fiscal year 2007 primarily as a result of our increased selling and marketing
activities, mainly in Asia, the acquisition of our new companies, and higher
commissions related to our record-high revenues. Selling, general and
administrative expenses were impacted by $0.5 million higher stock-based
compensation expenses compared to fiscal year 2007. As a percentage of net
sales, selling, general and administrative expenses remained at 18%. Selling,
general and administrative expenses were unfavorably affected by $7.2 million
in fiscal year 2008 due to the fluctuation of the U.S. dollar against foreign
currencies, primarily the Euro.

Research and
Development  The Companys net expenses for research and development amounted
to $41.1 million, which represents an increase of $13.3 million, or 48%, over fiscal
year 2007 primarily due to ongoing research and development work mainly in the
area of fiber lasers, R&D expenses from the new acquired subsidiaries and
lower R&D grants. Gross research and development expenses for fiscal years
2008 and 2007 were $42.3 million and $30.1million, respectively, and were
reduced by $1.2 million and $2.3 million of government grants during the
respective periods. The Company will continue to apply for,

35

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and expects to
continue receiving, government grants towards research and development,
especially in Europe. Research and development expenses were unfavorably
affected by $3.8 million in fiscal year 2008 due to the fluctuation of the U.S.
dollar against foreign currencies, primarily the Euro.

Other Income -
Net other income of $1.5 million fiscal year 2008 represents a decrease of $2.0
million compared to the prior year. As a result of our share buyback program,
net interest income decreased to $3.0 million in fiscal year 2008, compared to
net interest income of $5.0 million in fiscal 2007. The interest income is offset
by $1.9 million of foreign currency losses in fiscal 2008 compared to $2.1
million in fiscal 2007.

Income Tax
Expense  Income tax expense of $33.5 million in fiscal year 2008 and $31.8
million in fiscal year 2007, represent effective tax rates of 34.4% and 36.6%
for the respective periods. The lower effective income tax rate in fiscal year
2008 is mainly due to a reduced effective tax rate in Germany as a result of
a change in German income tax law. Income tax
expense, a significant portion of which is incurred in foreign currencies, was
unfavorably affected by $3.3 million in fiscal 2008 due to the weakening of the
U.S. dollar against foreign currencies, primarily the Euro.

Net Income 
As a result of the foregoing factors, the Companys net income of $63.8 million
($2.09 per diluted share, based on 30.4 million weighted average common shares
outstanding) in fiscal year 2008 increased by $8.5 million over the prior
years net income of $55.3 million ($1.74 per diluted share, based on 31.8
million weighted average common shares outstanding). Currency translation
increased net income by $0.9 million in fiscal year 2008.

Fiscal Year 2007 Compared to Fiscal Year 2006

Net Sales 
Net sales of $479.7 million represents an increase of $58.8 million, or 14%,
over the prior year. Net sales increased $72.7 million, or 25%, in Europe/Asia
and decreased $13.9 million, or 11%, in North America, compared to the prior
year. The U.S. dollar fluctuated against foreign currencies, which had a
favorable effect on net sales of $26.8 million. Net sales of laser products for
macro applications increased by 19% to $205.8 million, primarily due to the
higher demand for our lower and higher power CO2 lasers from
OEM-customers in the machine tool industry. Net sales of lasers for marking and
micro applications increased by 9% to $231.9 million compared to fiscal year
2006, mainly due to the higher demand for our lasers for micro and marking
applications principally from the photovoltaic, electronics, and medical device
industries. Revenues for the component business increased by 22% to $42.0
million, primarily due to higher sales related to laser diodes and fiber-optic
products.

Gross Profit 
The Companys gross profit of $203.3 million increased by $25.0 million, or
14%, over the prior year. As a percentage of sales, gross profit remained at
42%. The high percentage margin in fiscal year 2007 was primarily a result of a
favorable product mix across all product lines and the higher production
efficiencies gained primarily in the manufacturing of high-power CO2
lasers. Gross profit was favorably affected by $9.2 million in fiscal year 2007
due to the fluctuation of the U.S. dollar.

Selling,
General and Administrative Expenses  Selling, general and administrative
expenses increased by $9.6 million, or 12%, to $86.5 million, compared to
fiscal year 2006 primarily as a result of our increased selling and marketing
activities, the acquisition of our new companies, and higher commissions
related to our record-high revenues. Selling, general and administrative
expenses were impacted by $2.1 million higher stock-based compensation expenses
compared to fiscal year 2006. As a percentage of net sales, selling, general
and administrative expenses remained at 18%. Selling, general and
administrative expenses were unfavorably affected by $4.2 million in fiscal
year 2007 due to the fluctuation of the U.S. dollar.

Research and
Development  The Companys net expenses for research and development amounted
to $27.8 million, which represents an increase of $3.8 million, or 16%, over
fiscal year 2006 primarily due to ongoing research and development work mainly
in the area of high-power fiber lasers, diode pumped, solid-state lasers, and
CO2 lasers. Gross research and development expenses for fiscal years
2007 and 2006, were $30.1 million and $25.2million, respectively, and were
reduced by $2.3 million and $1.2 million of government grants during the
respective periods. The Company will continue to apply for, and expects to
continue receiving, government grants towards research and development,
especially in Europe. Research and development expenses were unfavorably
affected by $2.0 million in fiscal year 2007 due to the fluctuation of the U.S.
dollar.

36

---



Other Income -
Net other income of $3.5 million fiscal year 2007 represents a decrease of $0.2
million compared to the corresponding period in the prior year. Due to our
continued cash generation, the low interest rates on outstanding debt, and
higher interest rates on short-term investments, we were able to achieve net
interest income of $5.0 million in fiscal year 2007, compared to net interest
income of $2.6 million in fiscal 2006. This increased interest income is offset
by $2.1 million of foreign currency losses in fiscal 2007 compared to $0.3
million of foreign currency gains in fiscal 2006.

Income Tax
Expense  Income tax expense of $31.8 million in fiscal year 2007 and $27.0
million in fiscal year 2006, represent effective tax rates of 36.6 % and 35.3%
for the respective periods. The higher effective income tax rate in fiscal year
2007 is mainly due to high permanent differences related to the stock-based
compensation expenses and taxable profit generation at nearly all subsidiaries
which includes the usage of the existing net operating losses. Income tax
expense, a significant portion of which is incurred in foreign currencies, was
unfavorably affected by $2.2 million in fiscal 2007 due to the weakening of the
U.S. dollar against foreign currencies, primarily the Euro.

Net Income 
As a result of the foregoing factors, the Companys net income of $55.3 million
($3.48 per diluted share, based on 15.9 million weighted average common shares
outstanding) in fiscal year 2007 increased by $5.7 million over the prior
years net income of $49.6 million ($3.16 per diluted share, based on 15.7
million weighted average common shares outstanding). SFAS 123R had an effect of
reducing net income by $5.0 million. Currency translation increased net income
by $0.5 million in fiscal year 2007.

LIQUIDITY AND CAPITAL RESOURCES

The Companys
primary sources of liquidity at September 30, 2008, were cash and cash
equivalents of $114.5 million, short-term investments of $2.0 million, an
annually renewable $25.0 million line of credit with Deutsche Bank AG, a
long-term loan with Deutsche Bank AG of $7.2 million and several other lines of
credit to support foreign subsidiaries in their local currencies in an
aggregate amount of $94.3 million (translated at the applicable exchange rate
at September 30, 2008). Additionally, the Company had outstanding short-term
debt with Deutsche Bank AG and Bayerische Hypo und Vereinsbank AG of $40.0
million, which was used to finance the stock buyback plan. As of September 30,
2008, $3.2 million was outstanding under the $25.0 million Deutsche Bank
facility, $7.2 million was outstanding from the long-term loan with Deutsche
Bank and $16.3 million under other lines of credit. Therefore, $99.8 million is
unused and available under Rofins lines of credit. The Company is subject to
financial covenants under these facilities and lines of credit, which could
restrict the Company from drawing money under them. At September 30, 2008, the
Company was in compliance with these covenants.

Cash and cash
equivalents decreased by $4.0 million during fiscal year 2008. Approximately
$32.6 million in cash and cash equivalents were provided by operating
activities, primarily as the result of increased net income and other non-cash
items, principally depreciation and amortization. Operating cash flow was
negatively affected by a decrease in income tax payable and an increase in
accounts receivables and in inventories.

Net cash
provided by investing activities totaled $52.2 million for the year ended
September 30, 2008, and related primarily to the sale of short-term investments
($224.6 million) offset by the purchase of short-term investments ($128.5),
acquisitions ($30.2), and various additions to
property and equipment in connection with the expansion of the Companys
operations ($14.5 million).

Net cash used
in financing activities totaled $90.5 million and was primarily related to the
stock buyback program ($120.0 million), partly offset by $24.6 million net
borrowings from banks and by $5.2 million generated through issuance of new
shares from the exercise of stock options.

The Company
expects that its capital expenditures will be approximately $14.0 million in
2009.

Management believes
that cash flows from operations, along with existing cash and cash equivalents
and availability under our credit facilities and lines of credit, will provide
adequate resources to meet the Companys capital requirements and operational
needs on both a current and a long-term basis.

37

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The following
table illustrates the Companys contractual obligations as of September 30,
2008:

|                             |  |                                       |         |                   |   |            |  |            |        |                    |   |        |  |   |        | 
|---------------------------- |  | ------------------------------------- | ------- | ----------------- | - | ---------- |  | ---------- | ------ | ------------------ | - | ------ |  | - | ------ | 
|                             |  | Payments due by period (in thousands) |        
|                             |  |                                       |        
|Contractual
 Obligations     |  | Total                                 |         | Less than
 1 Year |   | 1-3
 Years |  | 3-5
 Years |        | More than
 5 Years |  
|                             |  |                                       |         |                   |   |            |  |            |        |                    |  
|                             |  |                                       |         |                   |   |            |  |            |        |                    |   |        |  |   |        | 
|Long and short-term
 debt    |  | $                                     | 66,674  |                   | $ | 54,706     |  | $          | 2,161  |                    | $ | 7,549  |  | $ | 2,258  | 
|Pension
 obligations         |  |                                       | 12,275  |                   |   | 387        |  |            | 2,129  |                    |   | 2,798  |  |   | 6,961  | 
|Operating
 lease obligations |  |                                       | 33,281  |                   |   | 7,872      |  |            | 13,736 |                    |   | 3,454  |  |   | 8,219  | 
|Purchase
 obligations *      |  |                                       | 116,892 |                   |   | 92,458     |  |            | 24,432 |                    |   | 2      |  |   |       | 
|Interest
 obligation         |  |                                       | 3,890   |                   |   | 1,102      |  |            | 2,005  |                    |   | 783    |  |   |       | 
|Other
 long-term liabilities |  |                                       | 1,584   |                   |   | 133        |  |            | 497    |                    |   | 263    |  |   | 691    | 
|                             |  |                                       |         |                   |   |            |  |            |        |                    |   |        |  |   |        | 
|Total                        |  | $                                     | 234,596 |                   | $ | 156,658    |  | $          | 44,960 |                    | $ | 14,849 |  | $ | 18,129 | 
|                             |  |                                       |         |                   |   |            |  |            |        |                    |   |        |  |   |        | 

* Purchase obligations include payments due
under various types of agreements to purchase raw materials or other goods

Off-Balance Sheet Arrangements

The Company has no
off-balance sheet arrangements or financing arrangements involving variable
interest entities.

CURRENCY EXCHANGE RATE FLUCTUATIONS

Although the
Company prepares its consolidated financial statements in U.S. dollars,
approximately 69% of its net sales are denominated in other currencies, primarily
the Euro, Swedish krona, Swiss francs, British pound, Singapore dollar,
Taiwanese dollar, Korean won, Japanese yen, Canadian dollar, and Chinese RMB.
Net sales and costs and related assets and liabilities are generally
denominated in the functional currencies of the operations, thereby serving to
reduce the Companys exposure to exchange gains and losses.

Exchange
differences upon translation from each operations functional currency to U.S.
dollars are accumulated as a separate component of equity. The currency
translation adjustment component of shareholders equity had the effect of
increasing total equity by $37.4 million at September 30, 2008, as compared to
$42.2 million at September 30, 2007.

The
fluctuation of the Euro and the other relevant functional currencies against
the U.S. dollar has had the effect of increasing or decreasing (as applicable)
reported net sales, as well as cost of goods sold, gross margin, selling,
general and administrative expenses, and research and development expenses,
denominated in such foreign currencies when translated into U.S. dollars as
compared to prior periods.

The Company
defines the term constant currency to mean that financial data for a period
are translated into U.S. dollars using the same foreign currency exchange rates
that were used to translate financial data for the previously reported period.
Changes in sales, gross profit and income from operations include the effect of
fluctuations in foreign currency exchange rates. The Companys management reviews
and analyzes business results on a currency basis and believes these results
better represent the Companys underlying business trends without distortion
due to currency fluctuations. The Company believes that this constant
currency financial information is a useful measure for investors because it
reflects actual changes in operations.

38

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The following
chart compares our net sales, gross profit, and income from operations for each
of fiscal 2008, 2007, and 2006 to the equivalent financial results calculated
on a constant currency basis. Because this constant currency financial
information does not conform to generally accepted accounting principles, it is
presented under the caption Non-GAAP Constant Currency:

|                       |  |                  |       |                                 |   |                  |  |                                |       |              |   |                                  |  |   |       |  |   |       | 
|---------------------- |  | ---------------- | ----- | ------------------------------- | - | ---------------- |  | ------------------------------ | ----- | ------------ | - | -------------------------------- |  | - | ----- |  | - | ----- | 
|                       |  |                  |       |                                 |   |                  | 
|                       |  | Fiscal Year 2008 |       | Fiscal Year 2007                |   | Fiscal Year 2006 | 
|                       |  |                  |       |                                 |   |                  | 
|                       |  | GAAP
 Actual     |       | Non-
 GAAP
 Constant 
 Currency |   | GAAP
 Actual     |  | Non-
 GAAP
 Constant
 Currency |       | GAAP
 Actual |   | Non-
 GAAP 
 Constant 
 Currency | 
|                       |  |                  |       |                                 |   |                  |  |                                |       |              |   |                                  | 
|                       |  | (in millions)    |      
|Net sales              |  | $                | 575.3 |                                 | $ | 530.2            |  | $                              | 479.7 |              | $ | 452.9                            |  | $ | 420.9 |  | $ | 429.7 | 
|Gross profit           |  |                  | 248.0 |                                 |   | 232.5            |  |                                | 203.3 |              |   | 193.9                            |  |   | 178.3 |  |   | 181.4 | 
|Income from operations |  |                  | 96.3  |                                 |   | 92.1             |  |                                | 84.7  |              |   | 82.0                             |  |   | 73.9  |  |   | 74.8  | 

Between fiscal
year 2008 and 2007, the average exchange rate for the Euro strengthened against
the U.S. dollar by approximately 11.3%. The impact of this strengthening was to
increase net sales and gross profit by $45.1 million and $15.8 million,
respectively, because approximately 69% of sales are denominated in other currencies,
primarily the Euro. However, because more than 69% of operating expenses are
also denominated in these other currencies, this same strengthening of the Euro
had the effect of increasing operating expenses and thereby reducing the
overall exchange rate effect on income from operations by $4.2 million.

Between fiscal
year 2007 and 2006, the average exchange rate for the Euro strengthened against
the U.S. dollar by approximately 7.6%. The impact of this strengthening was to
increase net sales and gross profit by $26.8 million and $9.2 million,
respectively, because approximately 69% of sales were denominated in other
currencies, primarily the Euro. This strengthening of the Euro had the effect
of increasing operating expense by $6.4 million, thereby increasing income from
operations only by $2.7 million.

Between fiscal
year 2006 and 2005, the average exchange rate for the Euro weakened against the
U.S. dollar by approximately 3.0%. The impact of this weakening was to decrease
net sales and gross profit by $8.8 million and $3.1 million, respectively,
because approximately 61% of sales were denominated in other currencies,
primarily the Euro. This weakening of the Euro had the effect of decreasing
operating expense by $2.2 million, thereby reducing income from operations only
by $0.9 million.

CRITICAL ACCOUNTING POLICIES

The Companys
significant accounting policies are more fully described in Note 1 of the
consolidated financial statements. Certain of the accounting policies require
the application of significant judgment by management in selecting appropriate
assumptions for calculating financial estimates. By their nature, these
judgments are subject to an inherent degree of uncertainty.

Allowance
for Doubtful Accounts

The Company
records allowances for uncollectible customer accounts receivable based on
historical experience. Additionally, an allowance is made based on an
assessment of specific customers financial condition and liquidity. If the
financial condition of the Companys customers were to deteriorate, additional
allowances may be required. No individual customer represents more than 10% of
total accounts receivable. Any increase in allowance will impact operating
income during a given period.

Inventory
Valuation

Inventories
are stated at the lower of cost or market, after provisions for excess and
obsolete inventory salable at prices below cost. Provisions for slow moving and
obsolete inventories are provided based on current assessments about historical
experience and future product demand and production requirements for the next
twelve months. These factors are impacted by market conditions, technology
changes, and changes in strategic direction, and require estimates and
management judgment that may include elements that are uncertain. The Company
evaluates the adequacy of these provisions quarterly. Although the

39

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Company
strives to achieve a balance between market demands and risk of inventory
excess or obsolescence, it is possible that, should conditions change,
additional provisions may be needed. Any changes in provisions will impact
operating income during a given period.

Warranty
Reserves

The Company provides
reserves for the estimated costs of product warranties when revenue is
recognized. The Company
relies upon historical experience, expectation of future conditions, and its
service data to estimate its warranty reserve. The Company
continuously monitors these data to ensure that the reserve is sufficient.
Warranty expense has historically been within our expectations. To the extent
we experience increased warranty claim
activity or increased costs associated with servicing those claims (such costs
may include material, labor, and travel costs), revisions to the estimated
warranty liability would be required. Increases in reserves will impact operating income during the period.

Pension
Obligations

The
determination of the Companys obligation and expense for pension is dependent
on the selection of certain assumptions used by actuaries in calculating those
amounts. Assumptions are made about interest rates, expected investment return
on plan assets, total turnover rates, and rates of future compensation
increases. In addition, the Company provides the actuarial consultants with
subjective factors such as withdrawal rates and mortality rates to develop
their calculations of these amounts. The Company generally reviews these
assumptions at the beginning of each fiscal year. The Company is required to
consider current market conditions, including changes in interest rates, in
making these assumptions. The actuarial assumptions that the Company uses may
differ materially from actual results due to changing market and economic
conditions, higher or lower withdrawal rates or longer or shorter life spans of
participants. These differences may result in a significant impact on the
amount of pension benefits expense the Company has recorded or may record.

The discount
rate enables the Company to state expected future cash flows at a present value
on the measurement date. The Company has little latitude in selecting this rate
and it must represent the market rate of high-quality fixed income investments.
A lower discount rate increases the present value of benefit obligations and
increases pension expense.

To determine
the expected long-term rate of return on plan assets, the Company considers the
current and expected asset allocations, as well as historical and expected
returns on various categories of plan assets.

Share-Based
Payment

Stock-based
compensation cost is measured at grant date, based on the fair value of the
award, and is recognized as expense over the employee requisite vesting period.
We make judgments about the fair value of the awards, including the expected
term of the award, volatility of the underlying stock and estimated forfeitures,
which impact the amount of compensation expense recognized in the financial
statements. Such amounts may change as a result of additional grants,
forfeitures, modifications in assumptions and other factors. SFAS No. 123R
provides that income tax effects of share-based payments are recognized in the
financial statements for those awards which will normally result in tax
deductions under existing tax law. Under current U.S. federal tax laws, we
receive a compensation expense deduction related to stock options only when
those options are exercised and vested shares are received. Accordingly, the
financial statement recognition of compensation cost for stock options creates
a deductible temporary difference which results in a deferred tax asset and a
corresponding deferred tax benefit in the income statement for all U.S. based
employees. Stock compensation expense related to non-U.S. employees is treated
as a permanent difference for income tax purposes.

New Accounting Pronouncements

In September
2006, the FASB issued SFAS No. 157, Fair Value Measurements, (SFAS 157).
SFAS 157 establishes a framework for measuring fair value and expands
disclosures about fair value measurements. The changes to current practice
resulting from the application of this Statement relate to the definition of
fair value, the methods used to measure fair value, and the expanded
disclosures about fair value measurements. SFAS 157 will be effective beginning
in the Companys first quarter of fiscal year 2009. We do not believe that the
adoption of the provisions of SFAS 157 will materially impact our consolidated
financial position and results of operations.

40

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In February
2007, the FASB issued Statement of Financial Accounting Standards No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities Including an
Amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits entities to
choose to measure many financial instruments and certain other opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently. The Statement is effective for fiscal years beginning
after November 15, 2007. The Company is currently evaluating the requirements
of SFAS 159 on its consolidated financial position and results of operations.

In December
2007, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 141 (Revised 2007), Business
Combinations. SFAS 141(R) retains the fundamental requirements of the original
pronouncement requiring that the purchase method be used for all business
combinations. SFAS 141(R) defines the acquirer as the entity that obtains
control of one or more businesses in the business combination, establishes the
acquisition date as the date that the acquirer achieves control and requires
the acquirer to recognize the assets acquired, liabilities assumed and any
noncontrolling interest at their fair values as of the acquisition date. In
addition, SFAS 141(R) requires expensing of acquisition-related and
restructure-related costs, remeasurement of earn out provisions at fair value,
measurement of equity securities issued for purchase at the date of close of
the transaction and non-expensing of in-process research and development
related intangibles. SFAS 141(R) is effective for the Companys business
combinations for which the acquisition date is on or after October 1, 2009. The
Company is currently evaluating the impact of the implementation of SFAS No.
141(R) on its consolidated financial position, and results of operations.

In December
2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements an amendment of ARB No. 51. This Statement amends ARB 51
to establish accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that
a noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. It requires consolidated net income to be reported at
amounts that include the amounts attributable to both the parent and the
noncontrolling interest. This Statement establishes a single method of
accounting for changes in a parents ownership interest in a subsidiary that do
not result in deconsolidation. SFAS No. 160 is effective for the Companys
fiscal year beginning October 1, 2009. The Company is currently evaluating the
impact of the implementation of SFAS 160 on its consolidated financial
position, results of operations and cash flows.

In February
2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-1, Application
of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting
Pronouncements That Address Fair Value Measurements for Purposes of Lease
Classification or Measurement under Statement 13. FSP 157-1 amends SFAS 157 to
exclude from its scope SFAS 13, Accounting for Leases, and other accounting
pronouncements that address fair value measurements for purposes of lease
classification or measurement under SFAS 13.

In February
2008, the FASB issued FSP No. 157-2, Effective Date of FASB Statement No.
157, which defers the effective date of SFAS 157 for nonfinancial assets and
nonfinancial liabilities, except for items that are recognized or disclosed at
fair value in an entitys financial statements on a recurring basis (at least
annually), to the Companys first quarter of fiscal year 2010.

In March 2008,
the FASB released SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities. SFAS 161 requires additional disclosures related to the
use of derivative instruments, the accounting for derivatives and the financial
statement impact of derivatives. SFAS 161 is effective for fiscal years and
interim periods beginning after November 15, 2008. The Company is currently
assessing the impact the adoption of SFAS 161 will have on the Companys
consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position 142-3,
Determination of the Useful Life of Intangible Assets (FSP
No. FAS 142-3), which amends the list of factors an entity should
consider in developing renewal or extension assumptions used in determining
the useful life of recognized intangible assets under SFAS No. 142,
Goodwill and Other Intangible Assets. The new guidance applies to
(1) intangible assets that are acquired individually or with a group of
other assets and (2) intangible assets acquired in both business combinations
and asset acquisitions. Under FSP No. FAS 142-3, entities estimating the useful
life of a recognized intangible asset must consider their historical experience in
renewing or extending similar arrangements or, in the absence of historical experience, must
consider assumptions that market participants would use about renewal or extension.
FSP No. FAS 142-3 will require certain additional disclosures beginning October 1,
2009 and prospective application to useful life estimates prospectively for intangible assets
acquired after September 20, 2009. The Company is in the process of evaluating the impact
that the adoption of FSP No. FAS 142-3 may have on its financial statements and related disclosures.

In May 2008,
the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting
Principles (SFAS 162), which identifies the sources of accounting principles
and the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles (GAAP) in the United
States (the GAAP hierarchy). SFAS 162 is effective 60 days following the SECs
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles. The Company does not expect the adoption of
SFAS 162 to have a material effect on its consolidated financial statements.

41

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In
June 2008, the FASB issued FASB Staff Position (FSP) No. EITF
03-6-1, Determining Whether Instruments Granted in Share-Based Payment
Transaction Are Participating Securities. FSP No. EITF 03-6-1 requires
that unvested share-based payment awards that contain nonforfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating
securities and shall be included in the computation of earnings per share pursuant
to the two-class method. This statement is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods
within those years, and requires that all prior period earnings per share data
presented (including interim financial statements, summaries of earnings and
selected financial data) be adjusted retrospectively to conform with its
provisions. The Company is currently evaluating the impact, if any, that the
adoption of FSP EITF 03-6-1 will have on its consolidated financial statements.

|         |                                                           
|-------- | ----------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following
discussion about the Companys market risk disclosures involves forward-looking
statements. Actual results could differ materially from those projected in the
forward-looking statements. The Company is exposed to market risk related to
changes in interest rates and foreign currency exchange rates. The Company does
not use derivative financial instruments for trading purposes.

Interest Rate Sensitivity

As of
September 30, 2008, the Company maintained cash equivalents and short-term
investments of $116.5 million, consisting mainly of non-taxable interest
bearing securities and demand deposits all with maturities of less than three
months. If short-term interest rates were to increase or decrease by 10%, the
impact on interest income would be approximately $0.2 million.

As of
September 30, 2008, the Company had $1.6 million of variable rate debt on which
the interest rate is reset every three months, $15.8 million of variable rate
debt on which the interest rate is reset every six months and $49.2 million of
fixed rate debt. Maturities of this debt are as follows: $54.7 million is due
in 2009, $0.9 million is due in 2010, $0.7 million is due in 2011, $0.6 million
is due in 2012, $7.4 million is due in 2013, $0.1 million is due in 2014 and
$2.3 million is due in 2015. A 10% change in the variable interest rates of the
Companys debt would result in an increase or decrease in interest expense of
less than $0.1 million.

Additionally,
the Company entered into interest rate swap agreements of total notional amount
of Euro 4.0 million (equivalent to $5.7 million based on the exchange rate at
September 30, 2008) to minimize the interest expenses on short-term debt by
shifting from variable to fixed interest rates.

Foreign Currency Exchange Risk

The Company enters
into foreign currency forward contracts and forward exchange options generally
of less than one year duration to hedge a portion of its foreign currency risk
on sales transactions. At September 30, 2008, the Company held Japanese yen
forward exchange options with notional amounts of Euro 0.7 million, Japanese
yen forward exchange options with notional amount of $0.2 million and Euro
forward exchange options of Euro 0.7 million. The gains or losses resulting
from a 10% change in currency exchange rates would be approximately $0.1 and
$0.3 million respectively.

|        |                                                         
|------- | --------------------------------------------------------
|ITEM 8. | CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 15(a)
for an index to the consolidated financial statements. No supplementary
financial information is required to be presented pursuant to Item 302(a) of
Regulation S-K.

|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
 FINANCIAL DISCLOSURE

None.

42

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|         |                        
|-------- | -----------------------
|ITEM 9A. | CONTROLS AND PROCEDURES

Attached as
exhibits to this Form 10-K are certifications of the Companys chief executive
officer and chief financial officer, which are required in accordance with Rule
13a-14 of the Securities Exchange Act of 1934, as amended (the Exchange Act).
This Controls and Procedures section includes information concerning the
controls and controls evaluation referred to in the certifications. Part IV,
Item 15 of this Form 10-K sets forth the report of Deloitte & Touche LLP,
our independent registered public accounting firm, regarding its audit of the
Companys internal control over financial reporting set forth below in this
section. This section should be read in conjunction with the certifications and
the Deloitte & Touche LLP report for a more complete understanding of the
topics presented.

Evaluation of
Disclosure Controls and Procedures

The Company
under the supervision and with the participation of its management, including
the Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of the design and operation of the Companys disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange
Act) as of September 30, 2008. Based on the evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the Companys disclosure
controls and procedures were effective as of September 30, 2008.

There has been
no change in the Companys internal control over financial reporting during the
fourth quarter of our fiscal year ended September 30, 2008 that has materially
affected, or is reasonably likely to materially affect, the Companys internal
control over financial reporting.

Management Report on
Internal Control Over Financial Reporting

The Companys
management is responsible for establishing and maintaining adequate internal
control over financial reporting to provide reasonable assurance regarding the
reliability of the Companys financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles. Internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of
records, that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the Company; (ii) 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 (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of the
Companys assets that could have a material effect on the financial statements.

Management
assessed the Companys internal control over financial reporting as of
September 30, 2008, the end of its fiscal year. Management based its assessment
on criteria established in Internal Control - Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission.
Managements assessment included evaluation of such elements as the design and
operating effectiveness of key financial reporting controls, process
documentation, accounting policies, and the Companys overall control
environment. This assessment is supported by testing and monitoring performed
by the Companys Internal Audit organization.

Based on its
assessment, management has concluded that the Companys internal control over
financial reporting was effective as of the end of the fiscal year to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external reporting purposes in
accordance with generally accepted accounting principles. Management reviewed
the results of its assessment with the Audit Committee of the Companys Board
of Directors.

The Companys independent
registered public accounting firm, Deloitte & Touche LLP, independently
assessed the effectiveness of the Companys internal control over financial
reporting. Deloitte & Touche LLP has issued an attestation report
concurring with managements assessment, which is included at the beginning of
Part IV, Item 15 of this Annual Report on Form 10-K.

43

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|         |                  
|-------- | -----------------
|ITEM 9B. | OTHER INFORMATION

None.

PART III

|         |                                                          
|-------- | ---------------------------------------------------------
|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The
information required by this item is included in the Election of Directors,
Directors and Executive Officers, Section 16(a) Beneficial Ownership
Reporting Compliance, and Committees of the Board of Directors; Meetings and
Compensation of Directors, sections of the Companys Proxy Statement to be
filed in connection with the Companys 2009 Annual Meeting of Stockholders to
be held in March 2009, and is incorporated by reference herein.

|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION

The
information required by this item is included in the Executive Compensation
and Related Information section of the Companys Proxy Statement to be filed
in connection with the Companys 2009 Annual Meeting of Stockholders to be held
in March 2009, and is incorporated by reference herein.

|         |                                                                                                
|-------- | -----------------------------------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
 RELATED STOCKHOLDER MATTERS

The following
table sets forth the number of securities authorized for issuance under our
equity compensation plans at September 30, 2008:

|                                                              |  |                                                                                                 |   |     |                                                                                 |     |  |                                                                                                                                             |  | 
|------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- | - | --- | ------------------------------------------------------------------------------- | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|                                                              |  | Number of securities
 to be issued upon
 exercise of
 outstanding options,
 warrants and rights |   |     | Weighted-average
 exercise price of
 outstanding
 options, warrants
 and rights |     |  | Number of securitiesremaining available forfuture issuance underequity compensation
 plans (excluding
 securities reflected in
 column (a)) |  | 
|                                                              |  |                                                                                                 |   |     |                                                                                 |     |  |                                                                                                                                             |  | 
|                                                              |  | (a)                                                                                             |   | (b) |                                                                                 | (c) | 
|Equity compensation plans approved by
 security holders:      |  |                                                                                                 |   |     |                                                                                 |     |  |                                                                                                                                             |  | 
|2002 Equity Incentive Plan                                    |  | 1,662,000                                                                                       |   |     | 18 1/16                                                                         |     |  |                                                                                                                                            |  | 
|                                                             
|2007 Incentive Stock Plan                                     |  | 905,300                                                                                         | * |     | 32 2/3                                                                          |     |  | 966,750                                                                                                                                     |  | 
|                                                              |  |                                                                                                 |   |     |                                                                                 |     |  |                                                                                                                                             |  | 
|                                                             
|Total equity compensation plans approved by
 security holders |  | 2,567,300                                                                                       |   |     | 23 2/9                                                                          |     |  | 966,750                                                                                                                                     |  | 
|Equity compensation plans not approved by
 security holders   |  |                                                                                                |   |     |                                                                                |     |  |                                                                                                                                            |  | 
|                                                              |  |                                                                                                 |   |     |                                                                                 |     |  |                                                                                                                                             |  | 
|Total                                                         |  | 2,567,300                                                                                       |   |     | 23 2/9                                                                          |     |  | 966,750                                                                                                                                     |  | 
|                                                              |  |                                                                                                 |   |     |                                                                                 |     |  |                                                                                                                                             |  | 

The remaining
information required by this is included in the Security Ownership of Certain
Beneficial Owners and Management sections of the Companys Proxy Statement
to be filed in connection with the Companys 2009 Annual Meeting of
Stockholders to be held in March 2009, and is incorporated by reference herein.

* Does not
included 12,000 shares that were issued as the annual grants of shares of
common stock to outside Board of Directors

44

---



|         |                                                                          
|-------- | -------------------------------------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
 INDEPENDENCE

The
information required by this item is included in the Compensation Committee,
Compensation Committee Interlocks and Insider Participation and Certain
Relationships and Related Transactions sections of the Companys Proxy
Statement to be filed in connection with the Companys 2009 Annual Meeting of
Stockholders to be held in March 2009, and is incorporated by reference herein.

The main
facility in Starnberg is rented under a 25-year operating lease from the former
minority shareholder of CBL Mr. Baasel, who is also a member of the Board of
Directors of the Company, and includes a clause to terminate the lease contract
within a two-year notice period during the contract. The Company paid, mainly
for rental expenses, $1 million, $0.7 million and $0.6 million, to Mr. Baasel
during fiscal years 2008, 2007, and 2006, respectively.

The Company
believes that all transactions noted above, have been executed on an
arms-length basis. Except for the foregoing, no director, officer, nominee
director, 5% holder of the Companys shares, or immediate family member,
associate or affiliate thereof, had any material interest, direct or indirect,
in any transaction since the beginning of fiscal year 2008 or has any material
interest, direct or indirect, in any proposed transaction, having a value of
$60,000 or more.

Indebtedness of
Officers and Directors

Since the
beginning of fiscal year 2004, there has been no indebtedness to the Company by
any director or officer or associates of any such person, other than
reimbursements for purchases, for ordinary travel and expense advances and for
other transactions in the ordinary course of business.

|         |                                       
|-------- | --------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES

The
information set forth under Independent Public Accountants in the definitive
form of the Companys Proxy Statement to be filed in connection with the Companys
2009 Annual Meeting of Stockholders to be held in March 2009, is incorporated
by reference herein.

45

---



PART IV

|         |                                           
|-------- | ------------------------------------------
|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

|   |    |                                                                                                                                                                                                                   |  |     
|-- | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|a. | 1. | Consolidated
 Financial Statements                                                                                                                                                                                |  |     
|   |    |                                                                                                                                                                                                                   |  |     
|   |    | The
 following financial statements are filed as part of this 10-K:                                                                                                                                               |  |     
|   |    |                                                                                                                                                                                                                   |  |     
|   |    | Reports of Independent Registered Public Accounting Firm                                                                                                                                                          |  | F-1 
|   |    |                                                                                                                                                                                                                   |  |     
|   |    | Consolidated Balance Sheets as of September 30, 2008, and 2007                                                                                                                                                    |  | F-4 
|   |    |                                                                                                                                                                                                                   |  |     
|   |    | Consolidated Statements of Operations for the years ended September
 30, 2008, 2007, and 2006                                                                                                                     |  | F-5 
|   |    |                                                                                                                                                                                                                   |  |     
|   |    | Consolidated Statements of Stockholders Equity and Comprehensive
 Income for the years ended September 30, 2008, 2007, and 2006                                                                                  |  | F-6 
|   |    |                                                                                                                                                                                                                   |  |     
|   |    | Consolidated Statements of Cash flows for the years ended September
 30, 2008, 2007, and 2006                                                                                                                     |  | F-8 
|   |    |                                                                                                                                                                                                                   |  |     
|   |    | Notes to Consolidated Financial Statements                                                                                                                                                                        |  | F-9 
|   |    |                                                                                                                                                                                                                   |  |     
|   | 2. | Financial
 Statement Schedules                                                                                                                                                                                    |  |     
|   |    |                                                                                                                                                                                                                   |  |     
|   |    | Schedule II  Valuation and Qualifying Accounts                                                                                                                                                                   |  | F-32
|   |    |                                                                                                                                                                                                                   |  |     
|   |    | Schedules
 not listed above have been omitted because the matter or conditions are not
 present or the information required to be set forth therein is included in
 the Consolidated Financial Statements hereto. |  |     
|   |    |                                                                                                                                                                                                                   |  |     
|   | 3. | Exhibits                                                                                                                                                                                                          |  |     
|   |    |                                                                                                                                                                                                                   |  |     
|   |    | The exhibits
 listed in the accompanying index to exhibits are filed or incorporated by
 reference as part of this Annual Report.                                                                                

46

---



|                |  |                                                                                                                                                                                             
|--------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT
 NUMBER |  | DESCRIPTION                                                                                                                                                                                 
|                |  |                                                                                                                                                                                             
|                |  |                                                                                                                                                                                             
|3.1             |  | Certificate
 of Incorporation of the Company and Form of Certificate of Amendment thereto
 (*)                                                                                              
|                |  |                                                                                                                                                                                             
|3.2             |  | By-Laws of
 the Company (**)                                                                                                                                                                
|                |  |                                                                                                                                                                                             
|4.1             |  | Form of
 Rights Agreement (*)                                                                                                                                                               
|                |  |                                                                                                                                                                                             
|10.1            |  | Form of Sale
 and Transfer Agreement between Siemens Aktiengesellschaft and Rofin-Sinar
 Technologies Inc. (*)                                                                              
|                |  |                                                                                                                                                                                             
|10.2            |  | Form of Sale
 and Transfer Agreement by and among Siemens Power Corporation and Rofin-Sinar
 Technologies Inc. (*)                                                                          
|                |  |                                                                                                                                                                                             
|10.3            |  | Form of Tax
 Allocation and Indemnification Agreement among Rofin-Sinar Technologies Inc.,
 Rofin-Sinar, Inc., Siemens Corporation, and Siemens Power Corporation (*)                       
|                |  |                                                                                                                                                                                             
|10.4            |  | Joint
 Venture Agreement, dated as of May 27, 1992, by and among Rofin-Sinar Laser
 GmbH, Marubeni Corporation and Nippei Toyama Corporation (*)                                            
|                |  |                                                                                                                                                                                             
|10.5            |  | Cooperation
 Agreement, dated as of May 27, 1992, among Nippei Toyama Corporation,
 Rofin-Sinar Laser GmbH, and Marubeni Corporation (*)                                                    
|                |  |                                                                                                                                                                                             
|10.6            |  | Cooperation
 Agreement, dated as of May 27, 1992, among Rofin-Sinar Laser GmbH, Marubeni
 Corporation, and Nippei Toyama Corporation (*)                                                    
|                |  |                                                                                                                                                                                             
|10.7            |  | Inheritable
 Building Right (Erbbaurecht), dated as of March 1, 1990, between Rofin-Sinar
 Laser GmbH and Lohss GmbH (in German, English summary provided) (*)                              
|                |  |                                                                                                                                                                                             
|10.8            |  | Lease
 Agreement, dated August 10, 1990, between Josef and Maria Kranz and
 Rofin-Sinar Laser GmbH (in German, English summary provided) (*)                                                
|                |  |                                                                                                                                                                                             
|10.9            |  | Lease
 Agreement, dated March 25, 1993, between DR Group and Rofin-Sinar,
 Incorporated (Concept Drive property) (*)                                                                        
|                |  |                                                                                                                                                                                             
|10.10           |  | Rofin-Sinar
 Laser GmbH Pension Plan (in German, English summary provided) (*) (a)                                                                                                          
|                |  |                                                                                                                                                                                             
|10.11           |  | Form of 1996
 Equity Incentive Plan (*) (a)                                                                                                                                                 
|                |  |                                                                                                                                                                                             
|10.12           |  | Form of 1996
 Non-Employee Directors Stock Plan (*) (a)                                                                                                                                    
|                |  |                                                                                                                                                                                             
|10.13           |  | Deutsche
 Bank AG Commitment Letter dated August 22, 1996 (*)                                                                                                                               
|                |  |                                                                                                                                                                                             
|10.14           |  | Form of
 Employment Agreement, dated as of September 2, 1996 among Peter Wirth,
 Rofin-Sinar Laser GmbH, and Rofin-Sinar Technologies Inc. (in German, English
 summary provided) (a)       
|                |  |                                                                                                                                                                                             
|10.15           |  | Form of
 Employment Agreement, dated as of September 2, 1996, among Gunther Braun,
 Rofin-Sinar Laser GmbH, and Rofin-Sinar Technologies Inc. (in German, English
 summary provided) (*) (a)
|                |  |                                                                                                                                                                                             
|10.16           |  | English
 Translation of Acquisition Agreement, dated as of April 29, 2000, by and
 between Mannesmann Demag Krauss-Maffei AG and Rofin-Sinar Laser GmbH (****)                              
|                |  |                                                                                                                                                                                             
|10.17           |  | English
 Translation of Option Agreement between Carl Baasel and Rofin-Sinar Laser
 GmbH (***)                                                                                              

47

---



|                |  |                                                                                  
|--------------- |  | ---------------------------------------------------------------------------------
|EXHIBIT
 NUMBER |  | DESCRIPTION                                                                      
|                |  |                                                                                  
|                |  |                                                                                  
|10.18           |  | Lease
 Agreement between Carl Baasel and Rofin-Sinar Laser GmbH (***)            
|                |  |                                                                                  
|10.19           |  | 2002 Equity
 Incentive Plan (*****) (a)                                          
|                |  |                                                                                  
|10.20           |  | 2007
 Incentive Stock Plan (*******) (a)                                         
|                |  |                                                                                  
|14.1            |  | Code of
 Business Ethics (******)                                                
|                |  |                                                                                  
|21.1            |  | List of
 Subsidiaries of the Registrant                                          
|                |  |                                                                                  
|23.1            |  | Consent of
 KPMG, LLP Independent Registered Public Accounting Firm              
|                |  |                                                                                  
|23.2            |  | Consent of
 Deloitte & Touche, LLP Independent Registered Public Accounting Firm,
|                |  |                                                                                  
|31.1            |  | Rule
 13a-14(a)/15d-14(a) Certification of Chief Executive Officer               
|                |  |                                                                                  
|31.2            |  | Rule 13a-14(a)/15d-14(a)
 Certification of Chief Financial Officer               
|                |  |                                                                                  
|32.1            |  | Section 1350
 Certification of Chief Executive Officer                           
|                |  |                                                                                  
|32.2            |  | Section 1350
 Certification of Chief Financial Officer                           

|          |                                                                                                                                                                                  
|--------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(*)       | Incorporated
 by reference to the exhibits filed with the Companys Registration Statement
 on Form S-1 (File No. 333-09539) which was declared effective on September
 25, 1996.
|          |                                                                                                                                                                                  
|(**)      | Incorporated
 by reference to the exhibit filed with the Companys Quarterly Report for the
 period ended March 31, 1998.                                                        
|          |                                                                                                                                                                                  
|(***)     | Incorporated by reference to the exhibit filed with the Companys
 Current Report on Form 8-K filed with the Securities and Exchange Commission
 on May 24, 2000.                
|          |                                                                                                                                                                                  
|(****)    | Incorporated by reference to the exhibit filed with the Companys
 Annual Report on Form 10-K/A filed with the Securities and Exchange
 Commission on January 18, 2001.          
|          |                                                                                                                                                                                  
|(*****)   | Incorporated by reference to the exhibit filed with the Companys
 Annual Report on Form 10-K filed with the Securities and Exchange Commission
 on December 23, 2003.           
|          |                                                                                                                                                                                  
|(******)  | Incorporated by reference to the exhibit filed with the Companys
 Proxy Statement on Schedule 14A filed with the Securities and Exchange
 Commission on January 30, 2004.       
|          |                                                                                                                                                                                  
|(*******) | Incorporated by reference to the exhibit filed with the Companys
 Proxy Statement on Schedule 14A filed with the Securities and Exchange
 Commission on January 25, 2007.       
|          |                                                                                                                                                                                  
|(a)       | Management contracts and compensatory plans and arrangements required
 to be filed as exhibits pursuant to Item 15(c) of this report.                                            

48

---



SIGNATURES

Pursuant to
the requirements of Section 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.

|                            |                                                   |                   
|--------------------------- | ------------------------------------------------- | ------------------
|Date:     November 28, 2008 | ROFIN-SINAR TECHNOLOGIES INC.                    
|                            |                                                   |                   
|                            | By:                                               | /s/ Günther
 Braun
|                            |                                                   |                   
|                            |                                                   | Günther
 Braun    
|                            | President,
 Chief Executive Officer, and Director

Pursuant to
the requirements of the Securities 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.

|                            |  |                                                  |  |                  
|--------------------------- |  | ------------------------------------------------ |  | -----------------
|SIGNATURE                   |  | TITLE                                            |  | DATE             
|                            |  |                                                  |  |                  
|                            |  |                                                  |  |                  
|/s/     Peter
 Wirth        |  | Chairman of
 the Board                           |  | November 28, 2008
|                            |  |                                                  |  |                  
|Peter Wirth                 |  |                                                  |  |                  
|                            |  |                                                  |  |                  
|/s/     Günther Braun       |  | President, Chief Executive Officer, and Director |  | November 28, 2008
|                            |  |                                                  |  |                  
|Günther Braun               |  |                                                  |  |                  
|                            |  |                                                  |  |                  
|/s/     Ingrid Mittelstaedt |  | Chief
 Financial Officer                         |  | November 28, 2008
|                            |  |                                                  |  |                  
|Ingrid
 Mittelstaedt        |  |                                                  |  |                  
|                            |  |                                                  |  |                  
|/s/     Ralph
 Reins        |  | Director                                         |  | November 28, 2008
|                            |  |                                                  |  |                  
|Ralph
 Reins                |  |                                                  |  |                  
|                            |  |                                                  |  |                  
|/s/     Gary
 Willis        |  | Director                                         |  | November 28, 2008
|                            |  |                                                  |  |                  
|Gary
 Willis                |  |                                                  |  |                  
|                            |  |                                                  |  |                  
|/s/     Carl
 F. Baasel     |  | Director                                         |  | November 28, 2008
|                            |  |                                                  |  |                  
|Carl
 F. Baasel             |  |                                                  |  |                  
|                            |  |                                                  |  |                  
|/s/     Daniel
 Smoke       |  | Director                                         |  | November 28, 2008
|                            |  |                                                  |  |                  
|Daniel
 Smoke               |  |                                                  |  |                  
|                            |  |                                                  |  |                  
|/s/     Stephen
 Fantone    |  | Director                                         |  | November 28, 2008
|                            |  |                                                  |  |                  
|Stephen
 Fantone            |  |                                                  |  |                  

49

---



Report
of Independent Registered Public Accounting Firm

The Board of
Directors and Stockholders
Rofin-Sinar Technologies Inc. and Subsidiaries:

We have
audited the accompanying consolidated statements of operations, stockholders
equity and comprehensive income, and cash flows of Rofin-Sinar Technologies
Inc. and Subsidiaries (the Company) for the fiscal year ended September 30,
2006. Our audit also included the financial statement schedule, Valuation and
Qualifying Accounts, for the fiscal year ended September 30, 2006. These
consolidated financial statements and financial statement schedule are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audit.

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 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 audit provides a
reasonable basis for our opinion.

In our
opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Rofin-Sinar Technologies Inc. and Subsidiaries for the fiscal year ended
September 30, 2006, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, such financial statement schedule for the
fiscal year ended September 30, 2006, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

/s/ KPMG LLP
Detroit, Michigan
December 12, 2006

F-1

---



REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board
of Directors and Stockholders of
Rofin-Sinar Technologies Inc. and Subsidiaries
Plymouth, Michigan

We have
audited the accompanying consolidated balance sheets of Rofin-Sinar
Technologies Inc. and subsidiaries (the Company) as of September 30, 2008 and
2007, and the related consolidated statements of operations, stockholders
equity, and cash flows for the years then ended. Our audits also included the
financial statement schedule listed in the Index at Item 15 (the financial statement
schedule). We also have audited the Companys internal control over financial
reporting as of September 30, 2008, based on criteria established in Internal
Control  Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Companys management
is responsible for these financial statements and financial statement schedule,
for maintaining effective internal control over financial reporting, and for
its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on these
financial statements and financial statement schedule, and an opinion on the
Companys internal control over financial reporting based on our audits.

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 and whether effective internal
control over financial reporting was maintained in all material respects. Our
audits of the financial statements included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. Our
audits of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.

A companys
internal control over financial reporting is a process designed by, or under
the supervision of, the companys principal executive and principal financial
officers, or persons performing similar functions, and effected by the
companys board of directors, management, and other personnel 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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)
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) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the companys assets that could have a material effect on the financial
statements.

Because of the
inherent limitations of internal control over financial reporting, including
the possibility of collusion or improper management override of controls,
material misstatements due to error or fraud may not be prevented or detected
on a timely basis. Also, projections of any evaluation of the effectiveness of
the internal control over financial reporting to future periods are subject to
the risk that the controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures
may deteriorate.

In our
opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
September 30, 2008 and 2007, and the results of their operations and their cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, the
financial statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein. Also, in our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of September 30, 2008, based on the criteria established in Internal
Control  Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

F-2

---



As discussed
in Note 9, the Company adopted the provisions of Financial Accounting Standards
Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes,
on October 1, 2007.

/s/ DELOITTE & TOUCHE LLP
Detroit, MichiganNovember 28, 2008

F-3

---



ROFIN-SINAR
TECHNOLOGIES INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS 
(dollars in thousands, except share data)

|                                                                                                                                                           |  |               |          |      |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | -------- | ---- | - | ------- | -
|                                                                                                                                                           |  | September 30, |         
|                                                                                                                                                           |  |               |         
|                                                                                                                                                           |  | 2008          |          | 2007 |  
|                                                                                                                                                           |  |               |          |      |  
|ASSETS                                                                                                                                                     |  |               |          |      |   |         |  
|Current assets:                                                                                                                                            |  |               |          |      |   |         |  
|Cash and cash equivalents                                                                                                                                  |  | $             | 114,486  |      | $ | 118,458 |  
|Short-term investments                                                                                                                                     |  |               | 1,985    |      |   | 109,751 |  
|Accounts receivable, trade                                                                                                                                 |  |               | 121,557  |      |   | 106,866 |  
|Less allowance for doubtful accounts                                                                                                                       |  |               | (3,647   | )    |   | (3,206  | )
|                                                                                                                                                           |  |               |          |      |   |         |  
|Trade accounts receivable, net                                                                                                                             |  |               | 117,910  |      |   | 103,660 |  
|Accounts receivable from related party
 (note 12)                                                                                                          |  |               | 712      |      |   | 563     |  
|Other accounts receivable                                                                                                                                  |  |               | 3,393    |      |   | 5,720   |  
|Inventories (note 2)                                                                                                                                       |  |               | 153,267  |      |   | 135,806 |  
|Prepaid expenses                                                                                                                                           |  |               | 3,183    |      |   | 2,938   |  
|Deferred income tax assets (note 9)                                                                                                                        |  |               | 11,419   |      |   | 10,340  |  
|                                                                                                                                                           |  |               |          |      |   |         |  
|Total current assets                                                                                                                                       |  |               | 406,355  |      |   | 487,236 |  
|Long-term investments                                                                                                                                      |  |               | 11,550   |      |   |        |  
|Property and equipment, at cost (note 3)                                                                                                                   |  |               | 113,551  |      |   | 95,579  |  
|Less accumulated depreciation                                                                                                                              |  |               | (57,325  | )    |   | (51,736 | )
|                                                                                                                                                           |  |               |          |      |   |         |  
|Property and equipment, net                                                                                                                                |  |               | 56,226   |      |   | 43,843  |  
|Deferred income tax assets (note 9)                                                                                                                        |  |               | 4,796    |      |   | 3,291   |  
|Goodwill (note 4)                                                                                                                                          |  |               | 91,755   |      |   | 79,614  |  
|Intangibles,
 net (note 4)                                                                                                                                 |  |               | 11,443   |      |   | 11,382  |  
|Other assets                                                                                                                                               |  |               | 1,535    |      |   | 858     |  
|                                                                                                                                                           |  |               |          |      |   |         |  
|Total assets                                                                                                                                               |  | $             | 583,660  |      | $ | 626,224 |  
|                                                                                                                                                           |  |               |          |      |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                       |  |               |          |      |   |         |  
|Current liabilities:                                                                                                                                       |  |               |          |      |   |         |  
|Line of credit and short-term borrowings
 (notes 6)                                                                                                        |  | $             | 54,706   |      | $ | 27,952  |  
|Accounts payable, trade                                                                                                                                    |  |               | 21,176   |      |   | 18,197  |  
|Accounts payable to related party (note
12)                                                                                                                |  |               | 1,433    |      |   | 1,222   |  
|Income taxes payable (note 9)                                                                                                                              |  |               | 6,316    |      |   | 33,046  |  
|Deferred income tax liabilities (note 9)                                                                                                                   |  |               | 1,343    |      |   | 38      |  
|Accrued liabilities (note 5)                                                                                                                               |  |               | 63,427   |      |   | 61,873  |  
|                                                                                                                                                           |  |               |          |      |   |         |  
|Total current liabilities                                                                                                                                  |  |               | 148,401  |      |   | 142,328 |  
|Long-term debt (note 7)                                                                                                                                    |  |               | 11,968   |      |   | 12,639  |  
|Pension
 obligations (note 10)                                                                                                                             |  |               | 12,049   |      |   | 13,324  |  
|Deferred income tax liabilities (note 9)                                                                                                                   |  |               | 4,549    |      |   | 4,245   |  
|Minority interests                                                                                                                                         |  |               | 2,287    |      |   | 3,794   |  
|Other long-term liabilities                                                                                                                                |  |               | 2,148    |      |   | 971     |  
|                                                                                                                                                           |  |               |          |      |   |         |  
|Total liabilities                                                                                                                                          |  |               | 181,402  |      |   | 177,301 |  
|Commitments (note 8)                                                                                                                                       |  |               |          |      |   |         |  
|Stockholders equity:                                                                                                                                      |  |               |          |      |   |         |  
|Preferred stock, 5,000,000 shares
 authorized, none issued or outstanding                                                                                  |  |               |         |      |   |        |  
|Common
    stock, $0.01 par value, 50,000,000 shares authorized, 28,896,619 (31,141,600
    at September 30, 2007) shares issued and outstanding (note 16) |  |               | 161      |      |   | 156     |  
|Additional paid-in capital                                                                                                                                 |  |               | 189,091  |      |   | 177,048 |  
|Retained earnings                                                                                                                                          |  |               | 294,644  |      |   | 229,971 |  
|Accumulated other comprehensive income                                                                                                                     |  |               | 38,358   |      |   | 41,748  |  
|Treasury shares, at cost, 2,829,581 shares                                                                                                                 |  |               | (119,996 | )    |   |        |  
|                                                                                                                                                           |  |               |          |      |   |         |  
|Total stockholders equity                                                                                                                                 |  |               | 402,258  |      |   | 448,923 |  
|                                                                                                                                                           |  |               |          |      |   |         |  
|Total liabilities and stockholders
equity                                                                                                                 |  | $             | 583,660  |      | $ | 626,224 |  
|                                                                                                                                                           |  |               |          |      |   |         |  

See
accompanying notes to consolidated financial statements

F-4

---



ROFIN-SINAR
TECHNOLOGIES INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 2008, 2007, AND 2006
(dollars in thousands, except share and per share amounts)

|                                                                         |  |                           |            |      |   |            |   |   |            |  
|------------------------------------------------------------------------ |  | ------------------------- | ---------- | ---- | - | ---------- | - | - | ---------- | -
|                                                                         |  | Years ended September 30, |           
|                                                                         |  |                           |           
|                                                                         |  | 2008                      |            | 2007 |   | 2006       |  
|                                                                         |  |                           |            |      |   |            |  
|                                                                         |  |                           |            |      |   |            |  
|Net sales                                                                |  | $                         | 575,278    |      | $ | 479,675    |   | $ | 420,890    |  
|Cost of goods sold                                                       |  |                           | 327,286    |      |   | 276,402    |   |   | 242,619    |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Gross profit                                                             |  |                           | 247,992    |      |   | 203,273    |   |   | 178,271    |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Selling, general and administrative
 expenses                            |  |                           | 103,781    |      |   | 86,468     |   |   | 76,900     |  
|Research and development expenses                                        |  |                           | 41,113     |      |   | 27,830     |   |   | 23,968     |  
|Amortization expense                                                     |  |                           | 6,769      |      |   | 4,251      |   |   | 3,532      |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Income from operations                                                   |  |                           | 96,329     |      |   | 84,724     |   |   | 73,871     |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Other expense (income):                                                  |  |                           |            |      |   |            |   |   |            |  
|Interest, net                                                            |  |                           | (2,960     | )    |   | (5,028     | ) |   | (2,588     | )
|Minority interest                                                        |  |                           | 574        |      |   | 1,126      |   |   | 890        |  
|Foreign currency losses (gains)                                          |  |                           | 1,882      |      |   | 2,115      |   |   | (344       | )
|Miscellaneous                                                            |  |                           | (392       | )    |   | (604       | ) |   | (751       | )
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Total other expense (income), net                                        |  |                           | (896       | )    |   | (2,391     | ) |   | (2,793     | )
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Income before income taxes                                               |  |                           | 97,225     |      |   | 87,115     |   |   | 76,664     |  
|Income tax expense (note 9)                                              |  |                           | 33,466     |      |   | 31,838     |   |   | 27,041     |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Net income                                                               |  | $                         | 63,759     |      | $ | 55,277     |   | $ | 49,623     |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Earnings per share (note 11):                                            |  |                           |            |      |   |            |   |   |            |  
|Basic                                                                    |  | $                         | 2.15       |      | $ | 1.78       |   | $ | 1.62       |  
|Diluted                                                                  |  | $                         | 2.09       |      | $ | 1.74       |   | $ | 1.58       |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Weighted average shares used in computing
 earnings per share (note 11): |  |                           |            |      |   |            |   |   |            |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Basic                                                                    |  |                           | 29,639,876 |      |   | 30,975,364 |   |   | 30,567,634 |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Diluted                                                                  |  |                           | 30,446,319 |      |   | 31,806,454 |   |   | 31,373,784 |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  

See accompanying notes to
consolidated financial statements

F-5

---



ROFIN-SINAR TECHNOLOGIES INC. AND
SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND
COMPREHENSIVE INCOME 
YEARS ENDED SEPTEMBER 30, 2008, 2007, AND 2006
(dollars in thousands)

|                                                        |  |                                       |            |                          |   |                 |  |                              |   |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  
|------------------------------------------------------- |  | ------------------------------------- | ---------- | ------------------------ | - | --------------- |  | ---------------------------- | - | ------------------ | - | ------------------------------------------------ |  | ---------------------------- | ------- |  | - | ------ | - | - | ------- | -
|                                                        |  | Number of
 Common Shares
 Outstanding |            | Common
 Stock
 Par Value |   | Treasury
 Stock |  | Additional
 Paid-in
 Capital |   | Retained
 Earnings |   | Accumulated
 Other
 Comprehensive
 Income (loss) |  | Total
 Stockholders
 Equity |        
|                                                        |  |                                       |            |                          |   |                 |  |                              |   |                    |   |                                                  |  |                              |        
|BALANCES at September 30, 2005                          |  |                                       | 30,245,300 |                          | $ | 151             |  |                              |  |                    | $ | 162,550                                          |  | $                            | 125,071 |  | $ | 6,394  |   | $ | 294,166 |  
|Comprehensive income:                                   |  |                                       |            |                          |   |                 |  |                              |   |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  
|Fair value of interest swap agreement                   |  |                                       |            |                          |   |                |  |                              |  |                    |   |                                                 |  |                              |        |  |   | 204    |   |   | 204     |  
|Minimum pension liability                               |  |                                       |            |                          |   |                 |  |                              |   |                    |   |                                                  |  |                              |         |  |   | 707    |   |   | 707     |  
|Foreign currency translation adjustment                 |  |                                       |            |                          |   |                |  |                              |  |                    |   |                                                 |  |                              |        |  |   | 8,841  |   |   | 8,841   |  
|Net income                                              |  |                                       |            |                          |   |                |  |                              |  |                    |   |                                                 |  |                              | 49,623  |  |   |       |   |   | 49,623  |  
|                                                        |  |                                       |            |                          |   |                 |  |                              |   |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  
|Total comprehensive income                              |  |                                       |            |                          |   |                 |  |                              |   |                    |   |                                                  |  |                              |         |  |   |        |   |   | 59,375  |  
|Common stock issued in connection with:                 |  |                                       |            |                          |   |                 |  |                              |   |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  
|Stock incentive plans                                   |  |                                       | 499,100    |                          |   | 3               |  |                              |  |                    |   | 4,896                                            |  |                              |        |  |   |       |   |   | 4,899   |  
|                                                        |  |                                       |            |                          |   |                 |  |                              |   |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  
|BALANCES at September 30, 2006                          |  |                                       | 30,744,400 |                          | $ | 154             |  |                              |  |                    | $ | 167,446                                          |  | $                            | 174,694 |  | $ | 16,146 |   | $ | 358,440 |  
|                                                        |  |                                       |            |                          |   |                 |  |                              |   |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  
|Comprehensive income:                                   |  |                                       |            |                          |   |                 |  |                              |   |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  
|Fair value of interest swap agreement                   |  |                                       |            |                          |   |                |  |                              |  |                    |   |                                                 |  |                              |        |  |   | 39     |   |   | 39      |  
|Minimum pension liability                               |  |                                       |            |                          |   |                |  |                              |  |                    |   |                                                 |  |                              |        |  |   | 479    |   |   | 479     |  
|Defined benefit pension plan:                           |  |                                       |            |                          |   |                 |  |                              |   |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  
|Net gain arising during period (net of
 taxes $295)     |  |                                       |            |                          |   |                |  |                              |  |                    |   |                                                 |  |                              |        |  |   | 722    |   |   | 722     |  
|Foreign currency translation adjustment                 |  |                                       |            |                          |   |                |  |                              |  |                    |   |                                                 |  |                              |        |  |   | 25,853 |   |   | 25,853  |  
|Net income                                              |  |                                       |            |                          |   |                |  |                              |  |                    |   |                                                 |  |                              | 55,277  |  |   |       |   |   | 55,277  |  
|                                                        |  |                                       |            |                          |   |                 |  |                              |   |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  
|Total comprehensive income                              |  |                                       |            |                          |   |                 |  |                              |   |                    |   |                                                  |  |                              |         |  |   |        |   |   | 82,370  |  
|Adoption of the recognition provisions of
 SFAS No. 158 |  |                                       |            |                          |   |                |  |                              |  |                    |   |                                                 |  |                              |        |  |   | (1,491 | ) |   | (1,491  | )
|Common stock issued in connection with:                 |  |                                       |            |                          |   |                 |  |                              |   |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  
|Stock incentive plans                                   |  |                                       | 397,200    |                          |   | 2               |  |                              |  |                    |   | 9,602                                            |  |                              |        |  |   |       |   |   | 9,604   |  
|                                                        |  |                                       |            |                          |   |                 |  |                              |   |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  
|BALANCES at September 30, 2007                          |  |                                       | 31,141,600 |                          | $ | 156             |  |                              |  |                    | $ | 177,048                                          |  | $                            | 229,971 |  | $ | 41,748 |   | $ | 448,923 |  
|                                                        |  |                                       |            |                          |   |                 |  |                              |   |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  

F-6

---



ROFIN-SINAR TECHNOLOGIES INC. AND
SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME,
CONTINUED 
YEARS ENDED SEPTEMBER 30, 2008, 2007, AND 2006 
(dollars in thousands)

|                                                       |  |                                       |            |                          |   |                 |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |          |  
|------------------------------------------------------ |  | ------------------------------------- | ---------- | ------------------------ | - | --------------- |  | ---------------------------- | -------- | ------------------ | - | ------------------------------------------------ |  | ---------------------------- | ------- |  | - | ------ | - | - | -------- | -
|                                                       |  | Number of
 Common Shares
 Outstanding |            | Common
 Stock
 Par Value |   | Treasury
 Stock |  | Additional
 Paid-in
 Capital |          | Retained
 Earnings |   | Accumulated
 Other
 Comprehensive
 Income (loss) |  | Total
 Stockholders
 Equity |        
|                                                       |  |                                       |            |                          |   |                 |  |                              |          |                    |   |                                                  |  |                              |        
|BALANCES at September 30, 2007                         |  |                                       | 31,141,600 |                          | $ | 156             |  |                              |         |                    | $ | 177,048                                          |  | $                            | 229,971 |  | $ | 41,748 |   | $ | 448,923  |  
|Adoption of FIN 48                                     |  |                                       |            |                          |   |                |  |                              |         |                    |   |                                                 |  |                              | 914     |  |   |       |   |   | 914      |  
|Comprehensive income:                                  |  |                                       |            |                          |   |                 |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |          |  
|Fair value of interest swap agreement                  |  |                                       |            |                          |   |                |  |                              |         |                    |   |                                                 |  |                              |        |  |   | (147   | ) |   | (147     | )
|Minimum pension liability                              |  |                                       |            |                          |   |                 |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |          |  
|Defined benefit pension plan:                          |  |                                       |            |                          |   |                 |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |          |  
|Net gain arising during period (net of
 taxes of $690) |  |                                       |            |                          |   |                |  |                              |         |                    |   |                                                 |  |                              |        |  |   | 1,588  |   |   | 1,588    |  
|Foreign currency translation adjustment                |  |                                       |            |                          |   |                |  |                              |         |                    |   |                                                 |  |                              |        |  |   | (4,831 | ) |   | (4,831   | )
|Net income                                             |  |                                       |            |                          |   |                |  |                              |         |                    |   |                                                 |  |                              | 63,759  |  |   |       |   |   | 63,759   |  
|                                                       |  |                                       |            |                          |   |                 |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |          |  
|Total comprehensive income                             |  |                                       |            |                          |   |                 |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   | 60,369   |  
|Common stock issued in connection with:                |  |                                       |            |                          |   |                 |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |          |  
|Stock incentive plans                                  |  |                                       | 584,600    |                          |   | 5               |  |                              |         |                    |   | 12,043                                           |  |                              |        |  |   |       |   |   | 12,048   |  
|Less common shares held in treasury, at
 cost          |  |                                       | (2,829,581 | )                        |   |                |  |                              | (119,996 | )                  |   |                                                 |  |                              |        |  |   |       |   |   | (119,996 | )
|                                                       |  |                                       |            |                          |   |                 |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |          |  
|BALANCES at September 30, 2008                         |  |                                       | 28,896,619 |                          | $ | 161             |  | $                            | (119,996 | )                  | $ | 189,091                                          |  | $                            | 294,644 |  | $ | 38,358 |   | $ | 402,258  |  
|                                                       |  |                                       |            |                          |   |                 |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |          |  

See accompanying notes to consolidated financial statements

F-7

---



ROFIN-SINAR
TECHNOLOGIES INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2008, 2007 AND 2006 (dollars in thousands)

|                                                                                                                      |  |                           |          |      |   |          |   |   |          |  
|--------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | ---- | - | -------- | - | - | -------- | -
|                                                                                                                      |  | Years ended September 30, |         
|                                                                                                                      |  |                           |         
|                                                                                                                      |  | 2008                      |          | 2007 |   | 2006     |  
|                                                                                                                      |  |                           |          |      |   |          |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                 |  |                           |          |      |   |          |   |   |          |  
|Net income                                                                                                            |  | $                         | 63,759   |      | $ | 55,277   |   | $ | 49,623   |  
|Adjustments to reconcile net income to net
 cash provided by operating activities:                                    |  |                           |          |      |   |          |   |   |          |  
|Depreciation and amortization                                                                                         |  |                           | 16,362   |      |   | 10,959   |   |   | 9,076    |  
|Issuance of restricted stock                                                                                          |  |                           | 439      |      |   | 335      |   |   | 284      |  
|Provision for doubtful accounts                                                                                       |  |                           | 730      |      |   | 1,582    |   |   | 642      |  
|Exchange rate (gains) losses                                                                                          |  |                           | (1,804   | )    |   | 741      |   |   | (22      | )
|(Gain) loss on disposal of property and
 equipment                                                                    |  |                           | (32      | )    |   | 87       |   |   | 47       |  
|Stock-based compensation expenses                                                                                     |  |                           | 5,863    |      |   | 5,374    |   |   | 3,320    |  
|Deferred income taxes                                                                                                 |  |                           | (177     | )    |   | (2,675   | ) |   | (4,080   | )
|Increase in minority interest                                                                                         |  |                           | 824      |      |   | 1,126    |   |   | 890      |  
|Change in operating assets and liabilities:                                                                           |  |                           |          |      |   |          |   |   |          |  
|Accounts receivable, trade                                                                                            |  |                           | (13,134  | )    |   | (10,799  | ) |   | (5,437   | )
|Other accounts receivable                                                                                             |  |                           | 1,001    |      |   | (2,423   | ) |   | (887     | )
|Inventories                                                                                                           |  |                           | (15,355  | )    |   | (5,691   | ) |   | (5,313   | )
|Prepaid expenses and other                                                                                            |  |                           | (1,346   | )    |   | (2,686   | ) |   | (571     | )
|Accounts payable                                                                                                      |  |                           | 2,040    |      |   | 786      |   |   | 403      |  
|Income taxes payable                                                                                                  |  |                           | (27,522  | )    |   | 15,291   |   |   | 2,403    |  
|Accrued liabilities and pension obligations                                                                           |  |                           | 914      |      |   | 615      |   |   | 7,909    |  
|                                                                                                                      |  |                           |          |      |   |          |   |   |          |  
|Net cash provided by operating activities                                                                             |  |                           | 32,562   |      |   | 67,899   |   |   | 58,287   |  
|                                                                                                                      |  |                           |          |      |   |          |   |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                 |  |                           |          |      |   |          |   |   |          |  
|Additions to property and equipment                                                                                   |  |                           | (14,485  | )    |   | (8,964   | ) |   | (6,396   | )
|Proceeds from the sale of property and
 equipment                                                                     |  |                           | 741      |      |   | 381      |   |   | 262      |  
|Purchases of short-term investments                                                                                   |  |                           | (128,506 | )    |   | (146,794 | ) |   | (190,225 | )
|Sales of short-term investments                                                                                       |  |                           | 224,650  |      |   | 131,252  |   |   | 174,800  |  
|Acquisition of business, net of cash
 acquired                                                                        |  |                           | (30,153  | )    |   | (5,341   | ) |   | (1,249   | )
|                                                                                                                      |  |                           |          |      |   |          |   |   |          |  
|Net cash provided by (used in) investing
 activities                                                                  |  |                           | 52,247   |      |   | (29,466  | ) |   | (22,808  | )
|                                                                                                                      |  |                           |          |      |   |          |   |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                 |  |                           |          |      |   |          |   |   |          |  
|Borrowings from bank                                                                                                  |  |                           | 53,704   |      |   | 3,546    |   |   | 16,095   |  
|Repayments to bank                                                                                                    |  |                           | (29,122  | )    |   | (11,486  | ) |   | (23,140  | )
|Purchase of treasury stock                                                                                            |  |                           | (119,996 | )    |   |         |   |   |         |  
|Issuance of common stock                                                                                              |  |                           | 5,180    |      |   | 3,713    |   |   | 3,712    |  
|Payments to subsidiarys minority
 shareholders                                                                       |  |                           | (223     | )    |   |         |   |   |         |  
|                                                                                                                      |  |                           |          |      |   |          |   |   |          |  
|Net cash used in financing activities                                                                                 |  |                           | (90,457  | )    |   | (4,227   | ) |   | (3,333   | )
|                                                                                                                      |  |                           |          |      |   |          |   |   |          |  
|Effect of foreign currency translation on
 cash                                                                       |  |                           | 1,676    |      |   | 8,857    |   |   | 2,647    |  
|                                                                                                                      |  |                           |          |      |   |          |   |   |          |  
|                                                                                                                      |  |                           |          |      |   |          |   |   |          |  
|Net increase (decrease) in cash and cash
 equivalents                                                                 |  |                           | (3,972   | )    |   | 43,063   |   |   | 34,793   |  
|Cash and cash equivalents at beginning of
 year                                                                       |  |                           | 118,458  |      |   | 75,395   |   |   | 40,602   |  
|                                                                                                                      |  |                           |          |      |   |          |   |   |          |  
|Cash and cash equivalents at end of year                                                                              |  | $                         | 114,486  |      | $ | 118,458  |   | $ | 75,395   |  
|                                                                                                                      |  |                           |          |      |   |          |   |   |          |  
|                                                                                                                      |  |                           |          |      |   |          |   |   |          |  
|Cash paid during the year for interest                                                                                |  | $                         | 2,046    |      | $ | 1,601    |   | $ | 1,770    |  
|                                                                                                                      |  |                           |          |      |   |          |   |   |          |  
|Cash paid during the year for income taxes                                                                            |  | $                         | 63,118   |      | $ | 21,219   |   | $ | 28,087   |  
|                                                                                                                      |  |                           |          |      |   |          |   |   |          |  
|                                                                                                                      |  |                           |          |      |   |          |   |   |          |  
|Non-cash investing and financing
 activities:                                                                         |  |                           |          |      |   |          |   |   |          |  
|Investments
 of $ 11,550 that were previously recorded as short-term were reclassified to
 long term in fiscal 2008. | 

See
accompanying notes to consolidated financial statements

F-8

---



ROFIN-SINAR TECHNOLOGIES INC. AND
SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008, 2007, and 2006
(dollars in thousands, except per share amounts)

|    |                                         
|--- | ----------------------------------------
|1.  | SUMMARY OF
 ACCOUNTING POLICIES         
|    |                                         
|(a) | Description
 of the Company and Business

The primary
business of Rofin-Sinar Technologies Inc. (Rofin or RSTI or the Company)
is to develop, manufacture, and market industrial lasers and supplies used for
material processing applications. The majority of the Companys customers are
in the machine tool, automotive and semiconductor and electronics industries
and are located in the United States, Europe, and Asia. For the years ended
September 30, 2008, 2007, and 2006 Rofin generated approximately 65% of its
revenues from the sale of lasers and laser systems and approximately 35% from
aftermarket support for the Companys existing laser products and from its
components business.

The accompanying
financial statements present the historical financial information of
Rofin-Sinar Technologies Inc., its wholly-owned subsidiaries Rofin-Sinar, Inc.
(RS Inc.), PRC Laser Corp. (PRC), Lee Laser, Inc. (Lee), Rofin-Baasel
Canada Ltd., Dilas Diodelaser Inc., Corelase Oy, Nufern, Rofin-Sinar
Technologies Europe S.L. (RSTE) and its 80%-owned subsidiary Nanjing Eastern
Technologies Company Ltd. RSTE, a European holding company formed in 1999, owns 100% of Rofin-Sinar
Laser GmbH (RSL), 95% of Dilas Diodenlaser GmbH (Dilas), 100% of
Rofin-Baasel Italiana S.r.l., 100% of Rofin-Baasel France S.A., 100% of
Rofin-Sinar UK Ltd., 100% of Rofin-Baasel UK Ltd., 100% of Rofin-Baasel Benelux
B.V., 100% of Rofin-Baasel Singapore Pte. Ltd., 100% of Rofin-Baasel Espana
S.L. (RBE), 100% of Rofin-Baasel Taiwan Ltd., 100% of Rofin-Baasel Korea Co.,
Ltd., and 100% of Rofin-Baasel Swiss AG.

Rofin Baasel UK Ltd. owns 100% of ES
Technology Ltd. (EST). The financial statements of EST include the
consolidated accounts of Laser Service Ltd.

The financial
statements of PRC include the consolidated accounts of PRC Laser Europe N.V.,
Belgium.

RSL includes
the consolidated accounts of its 88%-owned subsidiary, Rofin-Baasel Japan
Corporation, its 100%-owned subsidiary, Rasant-Alcotec Beschichtungstechnik
GmbH (Rasant), its 100%-owned subsidiary, Carl Baasel Lasertechnik GmbH &
Co. KG (CBL), its 90%-owned subsidiary Optoskand AB (Optoskand), its
100%-owned subsidiary, CBL Verwaltungsgesellschaft GmbH, its 80%-owned subsidiary
m2k-laser GmbH (m2k), and its 80%-owned subsidiary Rofin-Baasel China Co., Ltd.

CBL includes
the consolidated accounts of its wholly-owned subsidiaries, Rofin-Baasel, Inc.,
Wegmann-Baasel Laser und elektrooptische Geraete GmbH, and PMB Elektronik GmbH,
and its 85%-owned subsidiary H2B Photonics GmbH.

Dilas includes
the consolidated accounts of its 95%-owned subsidiary Dilas Diodelaser China
Company Ltd.

All
significant intercompany balances and transactions have been eliminated in
consolidation.

F-9

---



|    |                                            
|--- | -------------------------------------------
|(b) | Acquisitions
 and Formation of New Entities

The Company
uses the purchase method of accounting for its acquisitions with the respective
results of operations included in the consolidated results from the date of
acquisition.

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Effective
 October 1, 2005, the Company formed DILAS Diode Laser Inc. in Tucson, Arizona,
 as a wholly-owned subsidiary of the Companys wholly-owned subsidiary,
 Rofin-Sinar Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Effective
 December 2, 2005, the Company purchased an additional 4% of the share capital
 of Rofin-Sinar U.K. Ltd. through Rofin-Sinar Technologies Europe S.L. under
 an option agreement between the Company and the former minority shareholders.
 This purchase resulted in goodwill of $0.5 million.                                                                                                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Effective
 May 1, 2006, the Company formed Rofin-Baasel Canada Ltd. in, Mississauga
 (Canada) as a wholly-owned subsidiary of the Companys wholly-owned subsidiary,
 Rofin-Sinar Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Effective
 December 2, 2006, the Company purchased an additional 1% of the share capital
 of Rofin-Sinar U.K. Ltd. through Rofin-Sinar Technologies Europe S.L. under
 an option agreement between the Company and the former minority shareholders.
 The Company currently holds 81% of the share capital of Rofin-Sinar U.K. Ltd.
 This purchase resulted in goodwill of approximately $0.2 million.                                                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Effective
 February 28, 2007, the Company acquired 80% of the common stock of m2k-laser
 GmbH, Freiburg (Germany), through its wholly-owned subsidiary RSL. m2k-laser
 GmbH develops and manufactures semiconductor lasers based on the III-V
 compounds GaAs and GaSb for use predominantly in the scientific industry.
 Additionally, the parties have agreed on a put/call option exercisable
 beginning in 2012 for the remaining 20% of the common stock. Accordingly, the
 Companys financial statements present m2k-laser GmbH as if it was 100%
 owned. This purchase resulted in goodwill of approximately $0.6 million.                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Effective
 March 28, 2007, the Company acquired 100% of the common stock of Corelase Oy,
 Tampere (Finland). Corelase Oy has considerable experience in semiconductors,
 optics, and fiber technology. Its product lines include fiber-coupled diode
 laser systems, continuous-wave and ultra short pulse mode-locked fiber laser
 systems, and components such as diode lasers for a wide range of material processing
 applications. The terms of the purchase include payment of deferred purchase
 price based on Corelase Oy achieving certain long-term financial targets. This
    certain long-term purchase resulted in goodwill of approximately $6.9 million.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Effective
 April 05, 2007, the Company acquired 100% of the common stock of ES
 Technology Ltd., Oxford (UK) through its wholly-owned subsidiary Rofin-Baasel
 UK Ltd. ES Technology Ltd. develops customized laser marking system solutions
 based on various laser technologies and distributes a number of optical
 devices and components into Northern European territories from several
 American suppliers via its subsidiary, Laser Service (Oxford) Ltd. This
 purchase resulted in goodwill of approximately $0.7 million.                                                                                                                                     
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Effective
 May 14, 2007, the company purchased an additional 45% of the share capital of
 H2B Photonics GmbH, Garbsen (Germany) through its wholly-owned subsidiary CBL.
 The Company currently holds 85% of the share capital of H2B Photonics GmbH.
 This purchase resulted in goodwill of approximately $0.1 million.                                                                                                                                                                                                                                                                                                                                                 
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Effective
 December 3, 2007, the Company purchased the remaining 19% of the share
 capital of Rofin-Sinar U.K. Ltd. through Rofin-Sinar Technologies Europe S.L.
 under an option agreement between the Company and the former minority
 shareholders. The Company now holds 100% of the share capital of Rofin-Sinar
 U.K. Ltd. This purchase resulted in goodwill of $5.6 million.                                                                                                                                                                                                                                                                                     
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Effective
 January 24, 2008, the Company acquired Nufern, one of the worlds largest
 independent manufacturers of specialty fibers and fiber laser modules serving
 a wide range of industries, as a wholly-owned subsidiary of Rofin-Sinar
 Technologies Inc. This purchase resulted in goodwill of $6.6 million. The
 acquisition of Nufern is accounted for as a purchase business combination.
 Assets acquired and liabilities assumed are recorded in the accompanying
 condensed consolidated balance sheet at their estimated fair values at
 January 24, 2008. The                                                                                             

F-10

---



|                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                      | Company is
 in the process of finalizing its valuation of the identified intangible
 assets related to this acquisition. To the extent the final valuation is
 different from the Companys preliminary assessment of fair value, a purchase
 price adjustment will be made, which could impact the amount of goodwill
 recorded. Nufern was purchased for cash. In connection with, and as part of
 the consideration for, the acquisition, the Company agreed to make additional
 payments to the former Nufern stockholders contingent upon Nufern achieving
 specific financial performance metrics through calendar year 2008. On
 November 14, 2008, the Company and the former stockholders entered into an
 agreement pursuant to which the Company agreed to pay the former Nufern
 stockholders an aggregate of $5.0 million in full satisfaction of its obligation
 to make the earn-out payment.
|                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                     | During the
 quarter ended June 30, 2008, the Company formed Dilas Diodelaser China
 Company Ltd. in Nanjing (China) through its 95%-owned subsidiary Dilas
 Diodenlaser GmbH.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                     | During the
 quarter ended June 30, 2008, the Company formed Nanjing Eastern Technologies
 Company Ltd. in Nanjing (China) as an 80%-owned subsidiary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                     | Effective
 July 1, 2008, the Company formed Rofin-Baasel Swiss AG in Biel (Switzerland)
 as a wholly-owned subsidiary through its wholly-owned subsidiary Rofin-Sinar
 Technologies Europe S.L.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                     | The Company
 is in the process of finalizing the acquisition of 80% of China-based Nanjing
 Eastern Laser Company Ltd. (NELC) through two separate cash transactions.
 NELCs product lines are largely comprised of high power, fast-axial flow CO2
 lasers, with a power range up to 3 kW as well as NC-based laser processing
 equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                     
|                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                     | On March 23,
 2006, the Company acquired 40% of the share capital of H2B Photonics GmbH,
 Garbsen (Germany) through its wholly-owned subsidiary Carl Baasel
 Lasertechnik GmbH & Co. KG. H2B Photonics GmbH specializes in the
 development, manufacturing and sales of laser-based systems used to cut
 brittle materials, such as glass, to produce perfectly cut edges. Since the
 purchase of the additional 45% of the share capital of H2B Photonics GmbH in
 May 2007, the Company uses the purchase method of accounting for this
 acquisition.                                                                                                                                                                                                                                                                                                                                                     
|                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|None of these aquisitions were material for the
    purpose of profroma presentation.
|                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(c)                                                                                   | Cash Equivalents
 and Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

Cash equivalents consist of financial
instruments that are readily convertible into cash and have original maturities
of three months or less at the time of acquisition.

Short-term investments, at September 30, 2007,
include auction rate securities. Auction rate securities are variable rate
securities tied to short-term interest rates with maturities on the face of the
securities in excess of 90 days. Auction rate securities have rate resets
through a modified Dutch auction, at predetermined short-term intervals,
usually every 7, 28, 35, or 49 days. The securities trade at par and are
callable at par on any payment date at the option of the issuer. Investment
earnings paid during a given period are based upon the reset rate determined
during the prior auction.

Although these securities are issued and
rated as long-term securities, they are priced and traded as short-term
instruments because of the liquidity provided through the interest rate reset.

Purchases of
short-term investments and Sales of short-term investments included
in the accompanying consolidated statements of cash flows, have been included
to reflect the purchases and sales of auction rate securities during the years
presented.

Through auctions completed at
various times during the first and second quarters of fiscal year 2008, the
Company reduced its holdings of auction rate securities to approximately $11.6
million at September 30, 2008. All such auctions resulted in sales, for cash,
at par value. At September 30, 2008, the Company held five individual auction
rate securities, four of which the Company unsuccessfully attempted to resell
in failed auctions since February 2008. The Company does not believe that the
remaining balance of auction rate securities represent a significant portion of
the Companys total liquidity. The Company used a discounted cash

F-11

---



flow model to determine the fair
market value of these investments at September 30, 2008. This model included
estimates for interest rates, discount rates, the amount of cash flows, and
expected holding periods. As a result, the Company concluded that the par value
of these investments approximates fair market value. Additionally, the Company
has the ability and intent to hold these investments until a resumption of the
auction process or until maturity. However, since the Company believes it will
take longer than a year for these investments to become liquid,
they have been classified as long-term assets on the consolidated balance
sheet and no gain or loss has been recognized.

Interest
income on cash equivalents and term investments was $5,291, $6,892, and
$3,998 for the years ended September 30, 2008, 2007, and 2006, respectively,
and was offset by interest expense of $2,330, $1,864, and $1,410, respectively,
in the accompanying consolidated statements of operations.

|    |            
|--- | -----------
|(d) | Inventories

Inventories
are stated at the lower of cost or market, after provisions for excess and
obsolete inventory salable at prices below cost. Costs are determined using the
first in, first out and weighted average cost methods.

The Company
writes down inventory for estimated obsolescence or unmarketable inventory
equal to the difference between the cost of inventory and the estimated market
value based upon assumptions about future demand and market conditions. If
actual market conditions are less favorable than those projected by management,
additional inventory write-downs may be required.

|    |                        
|--- | -----------------------
|(e) | Property and
 Equipment

Property and
equipment are recorded at cost and depreciated over their estimated useful
lives, except for leasehold improvements, which are amortized over the lesser
of their estimated useful lives or the term of the lease. The methods of
depreciation are straight line for financial reporting purposes and accelerated
for income tax purposes. Depreciable lives for financial reporting purposes are
as follows:

|                                  |  | Useful Lives                       
|--------------------------------- |  | -----------------------------------
|                                  |  |                                    
|Buildings                         |  | 40 Years                           
|Technical machinery and equipment |  | 3-10 Years                         
|Furniture and fixtures            |  | 3-10 Years                         
|Computers and software            |  | 3-4 Years                          
|Leasehold improvements            |  | Lesser of term of lease or 15 Years

The Company
reviews long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future undiscounted net cash
flows expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell.

|    |                                      
|--- | -------------------------------------
|(f) | Goodwill and
 Other Intangible Assets

Goodwill
represents the excess purchase price over the fair value of the assets acquired
in connection with the Companys acquisitions.

Goodwill is
required to be tested on an annual basis for potential impairment at the
reporting unit level. A reporting unit is defined as the lowest level of an
entity that is a business and that can be distinguished, physically and
operationally and for internal reporting purposes, from other activities,
operations, and assets of the entity. A reporting unit can be no higher than a
reportable operating segment and would generally be lower than that level of
reporting. The Company manages its business under geographic regions that are
aggregated together as one segment in the global industrial laser industry.

F-12

---



In testing for
impairment, the fair value, which is determined based on market data, of the
    reporting unit is compared to its carrying amount. If the carrying value
    is below the fair value assessment, there will be no impairment loss. If
    the fair value is below the carrying value, then the Company is required
    to perform an additional test to determine the impaired fair value of the
    goodwill and its carrying amount.

The Company
performed its annual goodwill impairment testing as of September 30th
and determined that the fair value of each reporting unit exceeds its carrying
value and accordingly, the second step of the impairment test was not required
to be performed.

|    |                                                       
|--- | ------------------------------------------------------
|(g) | Revenue
 Recognition and Accounts Receivable Valuation

Revenue is
recognized when persuasive evidence of an arrangement exists, the product has
been delivered, the price is fixed or determinable and collection is probable. Terms
under these arrangements are generally free on board (FOB) shipping point, or
ex works factory (EXW), at which time legal title passes from the Company to
the customer. Therefore, delivery is generally considered to have occurred upon
shipment. In certain circumstances customers may negotiate different terms. In
these situations, delivery is considered to have occurred once legal title has
passed from the Company to the customer. This may be at delivery to the
customers destination or acceptance by the Companys customer.

Sales to
end-user customers and resellers typically do not have customer acceptance provisions
and only certain of the original equipment manufacturer (OEM) customer sales
have customer acceptance provisions. Customer acceptance is generally limited
to performance under published product specifications. For the few product
sales that have customer acceptance provisions because of higher than published
specifications, (1) the products are tested and accepted by the customer at a
Company site or by the customers acceptance of the results of a testing
program prior to shipment to the customer, or (2) the revenue is deferred until
customer acceptance occurs. The Company records adjustments to revenue based
on volume discounts to certain OEM customers.

The vast
majority of our sales are made to OEMs, resellers, and end-users in the
industrial market. Sales made to OEMs and resellers in the industrial market
    do not require installation of the products by the Company, as installation
    is performed by the customer and are not subject to other post-delivery
obligations. For end-users, where the Company has agreed to perform
installation or provide training, the Company defers revenue related to
installation services until installation is completed. The Company defers
revenue on training services until these services are provided.

The Company
records allowances for uncollectible customer accounts receivable based on
historical experience. Additionally, an allowance is made based on an
assessment of specific customers financial condition and liquidity. If the
financial condition of the Companys customers were to deteriorate, additional
allowances may be required.

|    |                        
|--- | -----------------------
|(h) | Income and
 other Taxes

Income taxes
are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss tax
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates that apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred taxes of a change in tax rates is recognized in income in the period
that includes the enactment date. In assessing the realizability of deferred
tax assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized.

In July 2006,
the FASB issued FASB Interpretation No. 48, Accounting
for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the
accounting for income taxes by prescribing a minimum probability threshold that
a tax position must meet before a financial statement benefit is recognized.
The minimum threshold is defined in FIN 48 as a tax position that is more
likely than not to be sustained upon examination by the applicable taxing
authority, including resolution of any related appeals or litigation processes,
based on the technical merits of the position. The tax benefit to be recognized
is measured as the largest amount of benefit that is greater than fifty percent
likely of being realized upon ultimate settlement. The Companys policy is to
recognize interest and penalties accrued on any unrecognized tax benefits as
interest expense and SG&A, respectively. The Company adopted FIN 48 at the
beginning of fiscal year 2008.

F-13

---



In June 2006,
the FASB ratified EITF No.06-3, How Taxes Collected from Customers and
Remitted to Governmental Authorities Should Be Presented in the Income
Statement (That Is, Gross versus Net Presentation). EITF 06-3 applies to any
tax assessed by a governmental authority that is directly imposed on a revenue
producing transaction between a seller and a customer. EITF 06-3 allows companies
to present taxes either gross within revenue and expense or net. If taxes
subject to this issue are significant, a company is required to disclose its
accounting policy for presenting taxes and the amount of such taxes that are
recognized on a gross basis. EITF 06-3 was required to be adopted during the
first quarter of fiscal year 2008. The adoption of EITF 06-3 has had no impact
on the Companys consolidated results of operations and financial condition.

|    |                          
|--- | -------------------------
|(i) | Accounting for Warranties

The Company issues
a standard warranty of one to two years for parts and labor on lasers that are
sold. Additionally, extended warranties are negotiated on a
contract-by-contract basis. The Company provides for estimated warranty costs
as products are shipped.

The Companys
estimate of costs to fulfill its warranty obligations is based on historical
experience and expectation of future conditions. To the extent the Company
experiences increased warranty claim activity or increased costs associated
with servicing those claims, revisions to the estimated warranty liability
would be required.

|    |                              
|--- | -----------------------------
|(j) | Foreign
 Currency Translation

The assets and
liabilities of the Companys operations outside the United States are
translated into U.S. dollars at exchange rates in effect on the balance sheet
date, and revenues and expenses are translated using a weighted average
exchange rate during the period. Gains or losses resulting from the translation
of foreign currency financial statements are recorded as a separate component
of stockholders equity. Gains or losses resulting from foreign currency
transactions are included in net income.

|    |                          
|--- | -------------------------
|(k) | Earnings per
 Share (EPS)

Basic EPS is
computed by dividing net income by the weighted average number of common shares
outstanding during the period. Diluted EPS reflects the potential dilution from
common stock equivalents (stock options).

|    |                      
|--- | ---------------------
|(l) | Comprehensive
 Income

Comprehensive
income consists of net income, foreign currency translation adjustments,
minimum pension liability, and fair value of interest rate swap agreements, and
is presented in the consolidated statements of stockholders equity and
comprehensive income. Accumulated other comprehensive income is comprised of
the following:

|                                                                                            |  |               |        |      |   |        |  
|------------------------------------------------------------------------------------------- |  | ------------- | ------ | ---- | - | ------ | -
|                                                                                            |  | September 30, |       
|                                                                                            |  |               |       
|                                                                                            |  | 2008          |        | 2007 |  
|                                                                                            |  |               |        |      |  
|Foreign
 currency translation adjustment                                                    |  | $             | 37,388 |      | $ | 42,214 |  
|Defined
 benefit pension plan (net of tax effect of $323 in 2008 and $366 in 2007)          |  |               | 814    |      |   | (769   | )
|Fair value of interest swap agreements (net
 of tax effect of $59 in 2008 and $176 in 2007) |  |               | 156    |      |   | 303    |  
|                                                                                            |  |               |        |      |   |        |  
|Total
 accumulated other comprehensive income                                               |  | $             | 38,358 |      | $ | 41,748 |  
|                                                                                            |  |               |        |      |   |        |  

|    |                                   
|--- | ----------------------------------
|(m) | Research and
 Development Expenses

Research and
development costs are expensed when incurred and are net of German government
and European grants of $1,276, $2,339, and $1,193 received for the years ended
September 30, 2008, 2007, and 2006, respectively. The Company has no future
obligations under such grants.

|    |                       
|--- | ----------------------
|(n) | Financial
 Instruments

The fair value
of financial instruments, consisting principally of cash, short-term
investments, accounts receivable, accounts payable, and line of credits,
approximate carrying value due to the short-term nature of such instruments. The
fair value of long-term debt approximates the carrying value due to the
variable based

F-14

---



interest on
such debt. The fair values of interest rate swap agreements were estimated by
discounting expected cash flows using market interest rates over the remaining
term of the instrument.

|    |                                  
|--- | ---------------------------------
|(o) | Derivative
 Financial Instruments

The Company
uses derivative financial instruments to manage funding costs and exposures
arising from fluctuations in interest rates. These derivative financial
instruments consist primarily of interest rate swaps. The Company does not use
derivative financial instruments for trading purposes.

Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Certain Hedging Activities and SFAS No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activity, an Amendment of
SFAS 133 require that all derivative instruments be recorded on the balance
sheet as either an asset or liability measured at their respective fair values
and that changes in the derivative instruments fair value be recognized in
earnings. On the date the derivative contract is entered into, the Company
designates the derivative as a hedge of the variability of cash flows to be
paid related to a recognized liability (cash flow hedge). Changes in the fair
value of a derivative that is highly effective and that is designated and
qualifies as a cash flow hedge are recorded in other comprehensive income,
until earnings are affected by the variability in cash flows of the designated
hedged item.

Interest rate
swap agreements designated as hedges of the Companys financial liabilities are
recorded in the consolidated balance sheet at fair value. Adjustments to the
fair value of the derivative asset or liability are recorded as an adjustment
to other comprehensive income.

From time to
time, the Company enters into foreign currency forward contracts and forward
exchange options generally of less than one year duration to hedge a portion
    of its sales transactions denominated in foreign currencies. At September
    30, 2008, the Company held Japanese yen forward exchange options with notional
amounts of Euro 0.7 million, Japanese yen forward exchange options with
notional amount of $0.2 million, and Euro forward exchange options with
notional amount of Euro 0.7 million.

|    |                  
|--- | -----------------
|(p) | Operating
 Leases

The Company
leases facilities under operating leases. Building lease agreements generally
include rent escalation clauses. Most of the Companys lease agreements include
renewal periods at the Companys option. The Company recognizes scheduled rent
increases on a straight-line basis over the lease term beginning with the date
the Company takes possession of the leased space.

|    |                  
|--- | -----------------
|(q) | Use of
 Estimates

Management of
the Company makes a number of estimates and assumptions relating to the
reporting of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reporting of revenues and expenses, to prepare these
financial statements in conformity with generally accepted U.S. accounting
principles. Significant items subject to such estimates and assumptions include
the valuation allowance for receivables, inventory valuation, warranty
liabilities, and assets and obligations related to employee benefits. Actual
results could differ from these estimates.

|    |                       
|--- | ----------------------
|(r) | Stock
 Incentive Plans

Effective
October 1, 2005, the Company adopted SFAS No. 123(R), Share-Based Payment (SFAS
No. 123(R)), which revised SFAS No. 123, Accounting for Stock-Based
Compensation and supersedes Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees. SFAS No. 123(R) requires all share-based
payments to employees, including grants of employee stock options, to be
measured at fair value and expensed in the consolidated statement of operations
over the service period (generally the vesting period) of the grant. Upon
adoption, the Company transitioned to SFAS No. 123(R) using the modified
prospective application, under which compensation expense is only recognized in
the consolidated statements of operations beginning with the first period that
SFAS No. 123(R) is effective and continuing to be expensed thereafter.

F-15

---



|    |                             
|--- | ----------------------------
|(s) | Shipping and
 Handling Costs

The Company
accounts for shipping and handling fees and costs in accordance with Emerging
Issues Task Force (EITF) Issue No. 00-10, Accounting for Shipping and
Handling Fees and Costs. In accordance with EITF No. 00-10, revenue from
shipping and handling fees is reflected in net sales and shipping and handling
costs are reflected in cost of sales.

|    |            
|--- | -----------
|(t) | Stock Split

On November 7,
2007, the Board of Directors approved a 2-for-1 stock split. The stock split
was in the form of a dividend of one share of Common Stock on each outstanding
share and the distribution date was December 5, 2007, for shareholders of
record as of November 22, 2007. All share and per share amounts disclosed in
the Consolidated Balance Sheet and Statement of Operations and Notes to the
Consolidated Financial Statements have been adjusted to reflect the 2-for-1
stock split.

|    |                               
|--- | ------------------------------
|(u) | New
 Accounting Pronouncements

In September
2006, the FASB issued SFAS No. 157, Fair Value Measurements, (SFAS 157).
SFAS 157 establishes a framework for measuring fair value and expands
disclosures about fair value measurements. The changes to current practice
resulting from the application of this Statement relate to the definition of
fair value, the methods used to measure fair value, and the expanded
disclosures about fair value measurements. SFAS 157 will be effective beginning
in the Companys first quarter of fiscal year 2009. We do not believe that the
adoption of the provisions of SFAS 157 will materially impact our consolidated
financial position and results of operations.

In February
2007, the FASB issued Statement of Financial Accounting Standards No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities Including an
Amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits entities to
choose to measure many financial instruments and certain other opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently. The Statement is effective for fiscal years beginning
after November 15, 2007. The Company is currently evaluating the requirements
of SFAS 159 on its consolidated financial position and results of operations.

In December
2007, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 141 (Revised 2007), Business
Combinations. SFAS 141(R) retains the fundamental requirements of the original
pronouncement requiring that the purchase method be used for all business
combinations. SFAS 141(R) defines the acquirer as the entity that obtains
control of one or more businesses in the business combination, establishes the
acquisition date as the date that the acquirer achieves control and requires
the acquirer to recognize the assets acquired, liabilities assumed and any
noncontrolling interest at their fair values as of the acquisition date. In
addition, SFAS 141(R) requires expensing of acquisition-related and
restructure-related costs, remeasurement of earn out provisions at fair value,
measurement of equity securities issued for purchase at the date of close of
the transaction and non-expensing of in-process research and development
related intangibles. SFAS 141(R) is effective for the Companys business
combinations for which the acquisition date is on or after October 1, 2009. The
Company is currently evaluating the impact of the implementation of SFAS No.
141(R) on its consolidated financial position, and results of operations.

In December
2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements an amendment of ARB No. 51. This Statement amends ARB 51
to establish accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that
a noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. It requires consolidated net income to be reported at
amounts that include the amounts attributable to both the parent and the
noncontrolling interest. This Statement establishes a single method of
accounting for changes in a parents ownership interest in a subsidiary that do
not result in deconsolidation. SFAS No. 160 is effective for the Companys
fiscal year beginning October 1, 2009. The Company is currently evaluating the
impact of the implementation of SFAS 160 on its consolidated financial
position, results of operations and cash flows.

F-16

---



In February
2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-1, Application
of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting
Pronouncements That Address Fair Value Measurements for Purposes of Lease
Classification or Measurement under Statement 13. FSP 157-1 amends SFAS 157 to
exclude from its scope SFAS 13, Accounting for Leases, and other accounting
pronouncements that address fair value measurements for purposes of lease
classification or measurement under SFAS 13.

In February
2008, the FASB issued FSP No. 157-2, Effective Date of FASB Statement No. 157,
which defers the effective date of SFAS 157 for nonfinancial assets and
nonfinancial liabilities, except for items that are recognized or disclosed at
fair value in an entitys financial statements on a recurring basis (at least
annually), to the Companys first quarter of fiscal year 2010.

In March 2008,
the FASB released SFAS No. 161, Disclosures about Derivative Instruments
and Hedging Activities. SFAS 161 requires additional disclosures related
to the use of derivative instruments, the accounting for derivatives and the
financial statement impact of derivatives. SFAS 161 is effective for fiscal years
and interim periods beginning after November 15, 2008. The Company is currently
assessing the impact the adoption of SFAS 161 will have on the Companys
consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position 142-3,
Determination of the Useful Life of Intangible Assets (FSP
 No. FAS 142-3), which amends the list of factors an entity should
  consider in developing renewal or extension assumptions used in determining
  the useful life of recognized intangible assets under SFAS No. 142,
Goodwill and Other Intangible Assets. The new guidance applies to
 (1) intangible assets that are acquired individually or with a group of
  other assets and (2) intangible assets acquired in both business combinations
   and asset acquisitions. Under FSP No. FAS 142-3, entities estimating
   the useful  life of a recognized intangible asset must consider their historical
   experience in  renewing or extending similar arrangements or, in the absence
   of historical experience, must  consider assumptions that market participants
   would use about renewal or extension.  FSP No. FAS 142-3 will require
   certain additional disclosures beginning October 1,
2009 and prospective application to useful life estimates prospectively for intangible
   assets  acquired after September 30, 2009. The Company is in the process
   of evaluating the impact that the adoption of FSP No. FAS 142-3 may have
   on its financial statements and related disclosures.

In May 2008,
the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting
Principles (SFAS 162), which identifies the sources of accounting
principles and the framework for selecting the principles to be used in the preparation
of financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles (GAAP) in the United
States (the GAAP hierarchy). SFAS 162 is effective 60 days following the SECs
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles. The Company does not expect the adoption
of SFAS 162 to have a material effect on its consolidated financial statements.

In June 2008,
the FASB issued FASB Staff Position (FSP) No. EITF 03-6-1, Determining
Whether Instruments Granted in Share-Based Payment Transaction Are
Participating Securities. FSP No. EITF 03-6-1 requires that unvested
share-based payment awards that contain nonforfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) are participating securities and
shall be included in the computation of earnings per share pursuant to the
two-class method. This statement is effective for financial statements issued
for fiscal years beginning after December 15, 2008 and interim periods within
those years, and requires that all prior period earnings per share data
presented (including interim financial statements, summaries of earnings and
selected financial data) be adjusted retrospectively to conform with its
provisions. The Company is currently evaluating the impact, if any, that the
adoption of FSP EITF 03-6-1 will have on its consolidated financial statements.

|   |            
|-- | -----------
|2. | INVENTORIES

Inventories
are summarized as follows:

|                            |  |               |         |      |   |         | 
|--------------------------- |  | ------------- | ------- | ---- | - | ------- | 
|                            |  | September 30, |        
|                            |  |               |        
|                            |  | 2008          |         | 2007 |  
|                            |  |               |         |      |  
|Finished
 goods             |  | $             | 23,844  |      | $ | 19,630  | 
|Work in
 progress           |  |               | 31,224  |      |   | 33,043  | 
|Raw
 materials and supplies |  |               | 53,857  |      |   | 43,103  | 
|Demo
 inventory             |  |               | 16,868  |      |   | 15,170  | 
|Service
 parts              |  |               | 27,474  |      |   | 24,860  | 
|                            |  |               |         |      |   |         | 
|Total
 inventories          |  | $             | 153,267 |      | $ | 135,806 | 
|                            |  |               |         |      |   |         | 

F-17

---



|                                               |                        
|---------------------------------------------- | -----------------------
|3.                                             | PROPERTY AND
 EQUIPMENT
|                                               |                        
|Property and
 equipment include the following:

|                                       |  |                |         |      |   |        | 
|-------------------------------------- |  | -------------- | ------- | ---- | - | ------ | 
|                                       |  | September
 30, |        
|                                       |  |                |        
|                                       |  | 2008           |         | 2007 |  
|                                       |  |                |         |      |  
|Buildings                              |  | $              | 35,283  |      | $ | 33,766 | 
|Technical
 machinery and equipment     |  |                | 33,088  |      |   | 27,385 | 
|Construction
 in progress              |  |                | 3,083   |      |   | 1,487  | 
|Furniture
 and fixtures                |  |                | 19,981  |      |   | 17,405 | 
|Computers
 and software                |  |                | 8,395   |      |   | 8,357  | 
|Leasehold
 improvements                |  |                | 13,721  |      |   | 7,179  | 
|                                       |  |                |         |      |   |        | 
|Total
 property and equipment, at cost |  | $              | 113,551 |      | $ | 95,579 | 
|                                       |  |                |         |      |   |        | 

|   |                                      
|-- | -------------------------------------
|4. | GOODWILL AND
 OTHER INTANGIBLE ASSETS

The changes in
the carrying amount of goodwill for the years ended September 30, 2008, and
2007, are as follows:

|                                      |  |         |        |                |   |        |  |       |        |   |   |        | 
|------------------------------------- |  | ------- | ------ | -------------- | - | ------ |  | ----- | ------ | - | - | ------ | 
|                                      |  | Germany |        | United
 States |   | Other  |  | Total |       
|                                      |  |         |        |                |   |        |  |       |       
|Balance as
 of September 30, 2006     |  | $       | 40,371 |                | $ | 9,880  |  | $     | 14,365 |   | $ | 64,616 | 
|Additional goodwill from acquisitions |  |         | 773    |                |   |       |  |       | 7,829  |   |   | 8,602  | 
|Currency exchange difference          |  |         | 4,426  |                |   | 338    |  |       | 1,632  |   |   | 6,396  | 
|                                      |  |         |        |                |   |        |  |       |        |   |   |        | 
|Balance as
 of September 30, 2007     |  | $       | 45,570 |                | $ | 10,218 |  | $     | 23,826 |   | $ | 79,614 | 
|                                      |  |         |        |                |   |        |  |       |        |   |   |        | 
|Additional goodwill from acquisitions |  |         |       |                |   | 6,611  |  |       | 5,144  |   |   | 11,755 | 
|Currency exchange difference          |  |         | 449    |                |   | 33     |  |       | (96    | ) |   | 386    | 
|                                      |  |         |        |                |   |        |  |       |        |   |   |        | 
|Balance as
 of September 30, 2008     |  | $       | 46,019 |                | $ | 16,862 |  | $     | 28,874 |   | $ | 91,755 | 
|                                      |  |         |        |                |   |        |  |       |        |   |   |        | 

The carrying
values of other intangible assets are as follows:

|                              |  |                        |        |                           |   |                        |  |                           |        |  |   |        | 
|----------------------------- |  | ---------------------- | ------ | ------------------------- | - | ---------------------- |  | ------------------------- | ------ |  | - | ------ | 
|                              |  | September 30, 2008     |        | September 30, 2007        |  
|                              |  |                        |        |                           |  
|                              |  | Gross Carrying
 Amount |        | Accumulated
 Amortization |   | Gross Carrying
 Amount |  | Accumulated
 Amortization |       
|                              |  |                        |        |                           |   |                        |  |                           |       
|Amortized
 intangible assets: |  |                        |        |                           |   |                        |  |                           |        |  |   |        | 
|Patents                       |  | $                      | 9,821  |                           | $ | 4,417                  |  | $                         | 8,468  |  | $ | 3,723  | 
|Customer base                 |  |                        | 14,846 |                           |   | 13,688                 |  |                           | 14,756 |  |   | 12,334 | 
|Other                         |  |                        | 17,229 |                           |   | 12,348                 |  |                           | 11,780 |  |   | 7,565  | 
|                              |  |                        |        |                           |   |                        |  |                           |        |  |   |        | 
|Total                         |  | $                      | 41,896 |                           | $ | 30,453                 |  | $                         | 35,004 |  | $ | 23,622 | 
|                              |  |                        |        |                           |   |                        |  |                           |        |  |   |        | 

Patents are
amortized over the life of the patent which ranges from 1 to 20 years. Customer
base is amortized on a straight-line basis over seven years. Amortization
expense for the years ended September 30, 2008, 2007, and 2006, was $6,769,
$4,251, $3,532, respectively. At September 30, 2008, estimated amortization
expense for the next five fiscal years based on the average exchange rates as
of September 30, 2008, are as follows:

|     |  |   |       | 
|---- |  | - | ----- | 
|2009 |  | $ | 3,800 | 
|2010 |  |   | 1,500 | 
|2011 |  |   | 1,300 | 
|2012 |  |   | 1,200 | 
|2013 |  |   | 1,200 | 

F-18

---



|                                                     |                     
|---------------------------------------------------- | --------------------
|5.                                                   | ACCRUED
 LIABILITIES
|                                                     |                     
|Accrued
 liabilities are comprised of the following:

|                           |  |               |        |      |   |        | 
|-------------------------- |  | ------------- | ------ | ---- | - | ------ | 
|                           |  | September 30, |       
|                           |  |               |       
|                           |  | 2008          |        | 2007 |  
|                           |  |               |        |      |  
|Employee
 compensation     |  | $             | 23,211 |      | $ | 20,611 | 
|Warranty
 reserves         |  |               | 12,337 |      |   | 12,269 | 
|Other taxes
 payable       |  |               | 198    |      |   | 252    | 
|Customer
 deposits         |  |               | 10,649 |      |   | 12,933 | 
|Other                      |  |               | 17,032 |      |   | 15,808 | 
|                           |  |               |        |      |   |        | 
|Total
 accrued liabilities |  | $             | 63,427 |      | $ | 61,873 | 
|                           |  |               |        |      |   |        | 

The Company
provides for the estimated costs of product warranties when revenue is
recognized. The estimate of costs to fulfill warranty obligations is based on
historical experience and expectation of future conditions. The change in
warranty reserves for the years ended September 30, 2008, and 2007, is as
follows:

|                                                      |  |   |        |  
|----------------------------------------------------- |  | - | ------ | -
|Balance at
 September 30, 2006                        |  | $ | 11,754 |  
|Additional accruals for warranties during
 the period |  |   | 5,323  |  
|Usage during the period                               |  |   | (5,983 | )
|Currency translation                                  |  |   | 1,175  |  
|                                                      |  |   |        |  
|Balance at
 September 30, 2007                        |  | $ | 12,269 |  
|Additional accruals for warranties during
 the period |  |   | 2,718  |  
|Usage during the period                               |  |   | (2,725 | )
|Currency translation                                  |  |   | 75     |  
|                                                      |  |   |        |  
|Balance at
 September 30, 2008                        |  | $ | 12,337 |  
|                                                      |  |   |        |  

|   |                 
|-- | ----------------
|6. | LINES OF
 CREDIT

The Company
maintains a $25,000 annually renewable line of credit with Deutsche Bank AG to
support its working capital needs. As of September 30, 2008 and 2007, $3,199
and $8,693, respectively, were outstanding under this loan facility as a result
of borrowings by Rofin-Baasel Japan Corporation, Rofin-Baasel Italiana
S.r.l., and Carl Baasel Lasertechnik GmbH & Co. KG (in 2007 only), at an
average fixed interest rate of 2.8% for fiscal year 2008 and 3.1% for fiscal
year 2007.

Additionally,
the Company has outstanding short-term debt with Deutsche Bank AG and Bayerische
Hypo und Vereinsbank AG of $40,000, which was used to finance the stock buyback
plan. The Company is not subject to financial convenants on this short-term
debt.

In addition,
the Companys non-U.S. subsidiaries have several lines of credit, which allow
them to borrow in the applicable local currency. At September 30, 2008 and
2007, direct borrowings under these agreements totaled $11,507 and $19,259,
respectively. The remaining unused portion of the lines of credit at September
30, 2008, was $77,996, in aggregate. Fixed interest rates vary from 1.3% to
3.8%, depending upon the country and usage of the available credit.

The Company
has entered into interest rate swap agreements for a total notional amount of
Euro 4,000 (equivalent to $5,734 based on the exchange rate at September 30,
2008) to minimize exposure to fluctuation of interest rates on short-term variable
rate debt.

F-19

---



|   |                
|-- | ---------------
|7. | LONG-TERM
 DEBT

Carl Baasel
Lasertechnik GmbH & Co. KG maintains additional long-term credit facilities
of $7,167, which expire in 2013. RofinBaasel Korea, Co, Ltd., maintains
additional long-term credit facilities of $266 which expire in 2013. Corelase
Oy maintains long-term credit facilities of $850 which expire in 2010, $667
which expire in 2011, $645 which expire in 2012, $115 which expire in 2014, and
$2,258 which expire in 2015. As of September 30, 2008, $11,968 was borrowed
under such facilities at an average interest rate of 5.9%. As of September 30,
2007, $12,639 was borrowed under such facilities at an average interest rate of
5.2%.

The Company is
subject to financial covenants under these credit facilities and lines of
credit, which could restrict the Company from drawing money under them. At
September 30, 2008, the Company was in compliance with these covenants.

|   |            
|-- | -----------
|8. | COMMITMENTS

The Company
leases operating facilities and equipment under operating leases, which expire
at various dates through 2017 (see note 12). The lease agreements require
payment of real estate taxes, insurance and maintenance expenses by the
Company.

Minimum lease
payments for future fiscal years under non-cancelable operating leases as of
September 30, 2008, are:

|                                 |  |       |       | 
|-------------------------------- |  | ----- | ----- | 
|Fiscal year ending September 30, |  | Total |      
|                                 |  |       |      
|2009                             |  | $     | 7,872 | 
|2010                             |  |       | 6,463 | 
|2011                             |  |       | 4,330 | 
|2012                             |  |       | 2,943 | 
|2013                             |  |       | 1,890 | 
|2014 and
 thereafter             |  |       | 9,784 | 

Rent expense
charged to operations for the years ended September 30, 2008, 2007, and 2006,
approximated $8,452, $7,432, and $6,652, respectively.

Purchase obligations for payments due under various types of agreements to purchase raw materials or other goods as of September 30, 2008 are:

|Less than 1 year |  | $ | 92,458 | 
|---------------- |  | - | ------ | 
|1-3 years        |  |   | 24,432 | 
|3-5 years        |  |   | 2      | 

|   |             
|-- | ------------
|9. | INCOME TAXES

Significant
components of the income tax provision are as follows:

|                         |  |                           |        |      |   |        |   |   |        |  
|------------------------ |  | ------------------------- | ------ | ---- | - | ------ | - | - | ------ | -
|                         |  | Years ended September 30, |       
|                         |  |                           |       
|                         |  | 2008                      |        | 2007 |   | 2006   |  
|                         |  |                           |        |      |   |        |  
|Current:                 |  |                           |        |      |   |        |   |   |        |  
|United States            |  | $                         | 2,784  |      | $ | 3,063  |   | $ | 5,212  |  
|Foreign                  |  |                           | 30,859 |      |   | 31,450 |   |   | 25,909 |  
|                         |  |                           |        |      |   |        |   |   |        |  
|Total current            |  |                           | 33,643 |      |   | 34,513 |   |   | 31,121 |  
|                         |  |                           |        |      |   |        |   |   |        |  
|Deferred:                |  |                           |        |      |   |        |   |   |        |  
|United States            |  |                           | (350   | )    |   | (807   | ) |   | (2,018 | )
|Foreign                  |  |                           | 173    |      |   | (1,868 | ) |   | (2,062 | )
|                         |  |                           |        |      |   |        |   |   |        |  
|Total deferred           |  |                           | (177   | )    |   | (2,675 | ) |   | (4,080 | )
|                         |  |                           |        |      |   |        |   |   |        |  
|Total income tax expense |  | $                         | 33,466 |      | $ | 31,838 |   | $ | 27,041 |  
|                         |  |                           |        |      |   |        |   |   |        |  

F-20

---



Income (loss) before
income taxes is attributable to the following geographic regions:

|                                  |  |                           |        |      |   |        |  |   |        | 
|--------------------------------- |  | ------------------------- | ------ | ---- | - | ------ |  | - | ------ | 
|                                  |  | Years ended September 30, |       
|                                  |  |                           |       
|                                  |  | 2008                      |        | 2007 |   | 2006   | 
|                                  |  |                           |        |      |   |        | 
|United
 States                    |  | $                         | (3,077 | )    | $ | 5,132  |  | $ | 12,989 | 
|Germany                           |  |                           | 87,377 |      |   | 68,587 |  |   | 51,137 | 
|France                            |  |                           | 1,112  |      |   | 852    |  |   | 402    | 
|Italy                             |  |                           | 2,846  |      |   | 2,119  |  |   | 1,707  | 
|Singapore                         |  |                           | 2,315  |      |   | 2,649  |  |   | 2,536  | 
|United
 Kingdom                   |  |                           | 5,776  |      |   | 3,809  |  |   | 3,373  | 
|Japan                             |  |                           | 203    |      |   | 223    |  |   | 565    | 
|Other                             |  |                           | 673    |      |   | 3,744  |  |   | 3,955  | 
|                                  |  |                           |        |      |   |        |  |   |        | 
|Total income
 before income taxes |  | $                         | 97,225 |      | $ | 87,115 |  | $ | 76,664 | 
|                                  |  |                           |        |      |   |        |  |   |        | 

The difference
between actual income tax expense and the amount computed by applying the U.S.
federal income tax rate is as follows:

|                                                     |  |                           |        |      |   |        |   |   |        |  
|---------------------------------------------------- |  | ------------------------- | ------ | ---- | - | ------ | - | - | ------ | -
|                                                     |  | Years ended September 30, |       
|                                                     |  |                           |       
|                                                     |  | 2008                      |        | 2007 |   | 2006   |  
|                                                     |  |                           |        |      |   |        |  
|U.S. federal statutory tax rate                      |  |                           | 35     | %    |   | 35     | % |   | 35     | %
|                                                     |  |                           |        |      |   |        |   |   |        |  
|Computed expected tax expense                      |  | $                         | 34,029 |      | $ | 30,490 |   | $ | 26,833 |  
|Difference between U.S. and foreign
 statutory rates |  |                           | (5,048 | )    |   | 2,117  |   |   | 1,398  |  
|Minority interest and other permanent
 differences   |  |                           | 1,543  |      |   | 652    |   |   | 89     |  
|Adjustment of valuation allowance                    |  |                           | (10    | )    |   | (7     | ) |   | (2,112 | )
|Change in statutory tax rates                        |  |                           | 276    |      |   | (415   | ) |   |       |  
|Other                                                |  |                           | 2,676  |      |   | (999   | ) |   | 833    |  
|                                                     |  |                           |        |      |   |        |   |   |        |  
|Actual tax expense                                   |  | $                         | 33,466 |      | $ | 31,838 |   | $ | 27,041 |  
|                                                     |  |                           |        |      |   |        |   |   |        |  

Total income
taxes for the years ended September 30, 2008, 2007, and 2006, were allocated as
follows:

|                                                                               |  |                           |        |      |   |        |   |   |        |  
|------------------------------------------------------------------------------ |  | ------------------------- | ------ | ---- | - | ------ | - | - | ------ | -
|                                                                               |  | Years ended September 30, |       
|                                                                               |  |                           |       
|                                                                               |  | 2008                      |        | 2007 |   | 2006   |  
|                                                                               |  |                           |        |      |   |        |  
|Income taxes from operations                                                   |  | $                         | 33,466 |      | $ | 31,838 |   | $ | 27,041 |  
|Stockholders equity:                                                          |  |                           |        |      |   |        |   |   |        |  
|Tax benefit applicable to the exercise of
 stock options                       |  |                           | (567   | )    |   | (174   | ) |   | (323   | )
|Tax (benefit) expense applicable to the
 additional minimum pension obligation |  |                           |       |      |   | 316    |   |   | 470    |  
|Tax benefit applicable to defined benefit
 pension plan                        |  |                           | 690    |      |   | (353   | ) |   |       |  
|Tax expense applicable to the fair value of
 interest swap agreements          |  |                           | (118   | )    |   | 23     |   |   | 116    |  
|                                                                               |  |                           |        |      |   |        |   |   |        |  
|                                                                               |  |                           |        |      |   |        |   |   |        |  
|Total income tax                                                               |  | $                         | 33,471 |      | $ | 31,650 |   | $ | 27,304 |  
|                                                                               |  |                           |        |      |   |        |   |   |        |  

F-21

---



Deferred
income taxes result from temporary differences between the amount of assets and
liabilities recognized for financial reporting and tax purposes. The components
of net deferred income taxes are as follows:

|                                      |  |               |         |      |   |        |  
|------------------------------------- |  | ------------- | ------- | ---- | - | ------ | -
|                                      |  | September 30, |        
|                                      |  |               |        
|                                      |  | 2008          |         | 2007 |  
|                                      |  |               |         |      |  
|Deferred income tax assets:           |  |               |         |      |   |        |  
|Foreign                               |  |               |         |      |   |        |  
|Net operating loss carryforwards      |  | $             | 3,346   |      | $ | 2,150  |  
|Pension obligations                   |  |               | 419     |      |   | 980    |  
|Inventories                           |  |               | 4,311   |      |   | 4,182  |  
|Accounts payable                      |  |               | 147     |      |   | 8      |  
|Other                                 |  |               | 318     |      |   | 322    |  
|                                      |  |               |         |      |   |        |  
|Total Foreign                         |  |               | 8,541   |      |   | 7,642  |  
|                                      |  |               |         |      |   |        |  
|United States:                        |  |               |         |      |   |        |  
|Net operating loss carryforwards      |  |               | 18,760  |      |   | 119    |  
|Tax credits                           |  |               | 1,922   |      |   |       |  
|Warranty reserve                      |  |               | 653     |      |   | 474    |  
|Inventories                           |  |               | 3,988   |      |   | 3,792  |  
|Allowance for doubtful accounts       |  |               | 380     |      |   | 276    |  
|Accrued liabilities                   |  |               | 559     |      |   | 641    |  
|Pension obligations                   |  |               | 287     |      |   | 362    |  
|Stock-based compensation expense      |  |               | 804     |      |   | 639    |  
|Other                                 |  |               | 133     |      |   | 62     |  
|                                      |  |               |         |      |   |        |  
|Total United States                   |  |               | 27,486  |      |   | 6,365  |  
|                                      |  |               |         |      |   |        |  
|Gross deferred income tax assets      |  |               | 36,027  |      |   | 14,007 |  
|Less: Valuation allowance             |  |               | (20,682 | )    |   | (10    | )
|                                      |  |               |         |      |   |        |  
|Net deferred income tax assets        |  | $             | 15,345  |      | $ | 13,997 |  
|                                      |  |               |         |      |   |        |  
|Deferred income tax liabilities:      |  |               |         |      |   |        |  
|Foreign:                              |  |               |         |      |   |        |  
|Property and equipment                |  |               | (1,691  | )    |   | (1,620 | )
|Intangibles                           |  |               | (1,489  | )    |   | (1,490 | )
|Other                                 |  |               | (292    | )    |   | (273   | )
|                                      |  |               |         |      |   |        |  
|                                      |  |               |         |      |   |        |  
|Total Foreign                         |  |               | (3,472  | )    |   | (3,383 | )
|                                      |  |               |         |      |   |        |  
|United States:                        |  |               |         |      |   |        |  
|Property & equipment                  |  |               | (488    | )    |   | (407   | )
|Intangibles                           |  |               | (352    | )    |   | (859   | )
|Non-US earnings                       |  |               | (710    | )    |   |       |  
|                                      |  |               |         |      |   |        |  
|Total United States                   |  |               | (1,550  | )    |   | (1,266 | )
|                                      |  |               |         |      |   |        |  
|Gross deferred income tax liabilities |  |               | (5,022  | )    |   | (4,649 | )
|                                      |  |               |         |      |   |        |  
|Net deferred income tax assets        |  | $             | 10,323  |      | $ | 9,348  |  
|                                      |  |               |         |      |   |        |  

The total
deferred income tax assets (liabilities) are included in the accompanying
consolidated balance sheet as follows:

|                                               |  |               |        |      |   |        |  
|---------------------------------------------- |  | ------------- | ------ | ---- | - | ------ | -
|                                               |  | September 30, |       
|                                               |  |               |       
|                                               |  | 2008          |        | 2007 |  
|                                               |  |               |        |      |  
|Deferred income tax assets  current           |  | $             | 11,419 |      | $ | 10,340 |  
|Deferred income tax assets  non current       |  |               | 4,796  |      |   | 3,291  |  
|Deferred income tax liabilities  current      |  |               | (1,343 | )    |   | (38    | )
|Deferred income tax liabilities  non
 current |  |               | (4,549 | )    |   | (4,245 | )
|                                               |  |               |        |      |   |        |  
|Net deferred income tax assets                 |  | $             | 10,323 |      | $ | 9,348  |  
|                                               |  |               |        |      |   |        |  

F-22

---



In assessing
the realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets will
not be realized. The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the periods in which those
temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods in which the deferred tax assets are deductible, management believes
    it is more likely than not that the Company will realize the benefits of
    these deductible differences. The Company had established a valuation allowance
related to net operating loss carryforwards and tax credits at RB Inc. and
Nufern due to uncertainty regarding their ability to generate future taxable
income required to utilize these carryforwards and tax credits. The valuation
allowance increased in fiscal year 2008 by $20.7 million due to the
acquisition of Nufern.

At September
30, 2008, the Company has net operating tax loss carryforwards and tax
credits available of $20.7 million in the United States (which start to expire
    in 2020), and $0.6 million in Germany and $10.8 million in other European
    countries (which start to expire in 2019).

We have accumulated
undistributed earnings of foreign subsidiaries aggregating approximately $390
million at September 30, 2008. These earnings are expected to be indefinitely
reinvested outside of the United States, except for approximately $35 million
which will be repatriated during fiscal year ending September 30, 2009. If
those earnings were distributed in the form of dividends or otherwise, we would
be subject to federal income taxes (subject to an adjustment for foreign tax
credits), state income taxes and withholding taxes payable to the various
foreign countries. It is not currently practicable to estimate the tax
liability that might be payable on the repatriation of these foreign earnings.

On October 1,
2007, the Company adopted the provisions of the Financial Accounting Standard
Board (FASB) Interpretation (FIN) No. 48, Accounting for Uncertainty in
Income Taxes. FIN No. 48 heightens the threshold for recognizing and measuring
tax benefits and requires enterprises to make explicit disclosures about uncertainties
in their income tax positions, including a detailed roll-forward of tax
benefits taken that do not qualify for financial statement recognition. As a
result of the implementation of Interpretation No. 48, the Company recorded a
decrease of $0.9 million to reserves for income taxes, with a corresponding
increase to retained earnings as of October 1, 2007. As of the date of adoption
and after recognizing the impact of FIN 48, the Companys gross unrecognized
tax benefits totaled $0.2 million.

The Companys
policy is to recognize interest and penalties accrued on any unrecognized tax
benefits as interest expense and SG&A, respectively. As of the date of
adoption of FIN 48, an amount of interest and penalties included in the $0.2
million of unrecognized tax benefits noted above is approximately $0.1 million.

Consistent
with the provisions of FIN 48, the Company classified the unrecognized tax
benefit as non-current because payment is not anticipated within one year of
the balance sheet date.

During fiscal
2008, the Company increased the unrecognized tax benefit by $0.5 million. The
increase was due to tax developments primarily related to US operation, which
impacted the Companys valuation of uncertain tax positions.

As of
September 30, 2008, the Companys gross unrecognized tax benefits totaled
$0.7 million, which includes approximately $0.1 million of interest and penalties.
Approximately $0.6 million of unrecognized tax benefits would impact the
effective tax rate, if recognized. The Company estimates that the unrecognized
tax benefits will not change significantly within the next year.

F-23

---



A
reconciliation of the beginning and ending amount of gross unrecognized tax
benefits, excluding the related accrual for interest, is as follows:

|                                              |  |                     |     | 
|--------------------------------------------- |  | ------------------- | --- | 
|                                              |  | September 30,
 2008 |    
|                                              |  |                     |    
|Unrecognized
 tax benefit Opening Balance    |  | $                   | 242 | 
|Increases in
 tax positions for prior years   |  |                     | 434 | 
|Increases in
 tax positions for current years |  |                     |    | 
|Settlements
 with taxing authorities          |  |                     |    | 
|                                              |  |                     |     | 
|Unrecognized
 Tax Benefit  ending Balance    |  | $                   | 676 | 
|                                              |  |                     |     | 

The Company
files federal and state income tax returns in several domestic and foreign
jurisdictions. In most tax jurisdictions, returns are subject to examination by
the relevant tax authorities for a number of years after the returns have been
filed. With limited exception, the Company is no longer subject to examination
by the United States Internal Revenue Service for years through 2004. With
respect to state and local tax jurisdictions and countries outside the United
States, with limited exceptions the Company is no longer subject to income tax
audits for years before 2002.

|    |                        
|--- | -----------------------
|10. | EMPLOYEE
 BENEFIT PLANS

The Company
has defined benefit pension plans for the RSL and RS Inc. employees. The
Companys U.S. plan began in fiscal year 1995 and is funded. Any new employees
hired after January 1, 2005 are not eligible for the RSI pension plan. As is
the normal practice with German companies, the German pension plan is unfunded.
Any new employees, hired after the acquisition of CBL, are not eligible for the
RSL pension plan. The measurement date of the Companys pension plans is
September 30.

The
determination of the Companys obligation and expense for pension is dependent
on the selection of certain assumptions used by actuaries in calculating those
amounts. Assumptions are made about interest rates, expected investment return
on plan assets, total turnover rates, and rates of future compensation
increases. In addition, the Companys actuarial consultants use subjective
factors such as withdrawal rates and mortality rates to develop their
calculations of these amounts. The Company generally reviews these assumptions
at the beginning of each fiscal year. The Company is required to consider
current market conditions, including changes in interest rates, in making these
assumptions. The actuarial assumptions that the Company uses may differ
materially from actual results due to changing market and economic conditions,
higher or lower withdrawal rates or longer or shorter life spans of participants.
These differences may result in a significant impact on the amount of pension
benefits expense the Company has recorded or may record.

The discount
rate enables the Company to state expected future cash flows at a present value
on the measurement date. The Company has little latitude in selecting this rate
and it must represent the market rate of high-quality fixed income investments.
A lower discount rate increases the present value of benefit obligations and
increases pension expense.

To determine
the expected long-term rate of return on plan assets, the Company considers the
current and expected asset allocations, as well as historical and expected
returns on various categories of plan assets.

F-24

---



The following
table sets forth the funded status of the plans at the balance sheet dates:

|                                                      |  |               |         |      |   |         |  
|----------------------------------------------------- |  | ------------- | ------- | ---- | - | ------- | -
|                                                      |  | September 30, |        
|                                                      |  |               |        
|                                                      |  | 2008          |         | 2007 |  
|                                                      |  |               |         |      |  
|Change in benefit obligation:                         |  |               |         |      |   |         |  
|Projected benefit obligation at beginning
 of year    |  | $             | 18,463  |      | $ | 16,496  |  
|Service cost                                          |  |               | 814     |      |   | 769     |  
|Interest cost                                         |  |               | 1,036   |      |   | 835     |  
|Actuarial (gains) losses                              |  |               | (3,515  | )    |   | (636    | )
|Amortization of unrecognized gains/losses             |  |               |        |      |   | (114    | )
|Foreign exchange rate changes                         |  |               | 133     |      |   | 1,365   |  
|Benefits paid                                         |  |               | (289    | )    |   | (252    | )
|                                                      |  |               |         |      |   |         |  
|Projected benefit obligation at end of year           |  |               | 16,642  |      |   | 18,463  |  
|                                                      |  |               |         |      |   |         |  
|Change in plan assets:                                |  |               |         |      |   |         |  
|Fair value of plan assets at beginning of
 year       |  |               | 4,945   |      |   | 4,021   |  
|Actual return on plan assets                          |  |               | (813    | )    |   | 562     |  
|Employer contributions                                |  |               | 350     |      |   | 450     |  
|Benefits paid                                         |  |               | (115    | )    |   | (88     | )
|                                                      |  |               |         |      |   |         |  
|Fair value of plan assets at end of year              |  |               | 4,367   |      |   | 4,945   |  
|                                                      |  |               |         |      |   |         |  
|Funded status at end of year                          |  | $             | (12,275 | )*   | $ | (13,518 | )
|                                                      |  |               |         |      |   |         |  
|                                                      |  |               |         |      |   |         |  
|Amounts recognized in the consolidated
 balance sheet |  |               |         |      |   |         |  
|Accrued benefit liability                             |  | $             | (12,275 | )    | $ | (13,518 | )
|Accumulated other comprehensive loss                  |  |               | (1,136  | )    |   | 1,136   |  
|                                                      |  |               |         |      |   |         |  
|Net amount recognized                                 |  | $             | (13,411 | )    | $ | (12,382 | )
|                                                      |  |               |         |      |   |         |  

The
accumulated benefit obligation for defined benefit pension plans was $15,148
and $16,537 at September 30, 2008 and 2007, respectively.

|                                                                                                    |  |               |        |      |   |        |  
|--------------------------------------------------------------------------------------------------- |  | ------------- | ------ | ---- | - | ------ | -
|                                                                                                    |  | September 30, |       
|                                                                                                    |  |               |       
|                                                                                                    |  | 2008          |        | 2007 |  
|                                                                                                    |  |               |        |      |  
|Information for pension plans with an
 accumulated benefit obligation in excess of plan assets      |  |               |        |      |   |        |  
|Projected benefit obligation                                                                        |  |               | 16,642 |      |   | 18,463 |  
|Accumulated benefit obligation                                                                      |  |               | 15,148 |      |   | 16,537 |  
|Fair value of plan assets                                                                           |  |               | 4,367  |      |   | 4,945  |  
|                                                                                                    |  |               |        |      |   |        |  
|Components of Net Periodic Benefit Cost and
 Other Amounts Recognized in Other Comprehensive Income |  |               |        |      |   |        |  
|Net Periodic Benefit Cost                                                                           |  |               |        |      |   |        |  
|Service Cost                                                                                        |  | $             | 814    |      | $ | 769    |  
|Interest Cost                                                                                       |  |               | 1,036  |      |   | 835    |  
|Expected return on plan assets                                                                      |  |               | (424   | )    |   | (324   | )
|Amortization of prior service costs                                                                 |  |               |       |      |   |       |  
|                                                                                                    |  |               |        |      |   |        |  
|Net periodic benefit cost                                                                           |  | $             | 1,426  |      | $ | 1,280  |  
|                                                                                                    |  |               |        |      |   |        |  
|                                                                                                    |  |               |        |      |   |        |  
|Other changes in plan assets and benefit
 obligations recognized in other comprehensive income      |  |               |        |      |   |        |  
|Net loss (gain)                                                                                     |  |               | (2,278 | )    |   | 1,136  |  
|Amortization of prior service cost                                                                  |  |               |       |      |   |       |  
|                                                                                                    |  |               |        |      |   |        |  
|Total recognized in other comprehensive
 income                                                     |  | $             | (2,278 | )    | $ | 1,136  |  
|                                                                                                    |  |               |        |      |   |        |  
|Total recognized in net periodic benefit
 cost and other comprehensive income                       |  | $             | (852   | )    | $ | 2,416  |  
|                                                                                                    |  |               |        |      |   |        |  

F-25

---



* $226 relate
to expected payments in the following twelve months and were therefore
reclassified to accrued liabilities in the consolidated balance sheet
as of September 30, 2008.

The
assumptions used in the valuation of the plan are as follows:

|                                                     |  |               |     |      |  |     |  
|---------------------------------------------------- |  | ------------- | --- | ---- |  | --- | -
|                                                     |  | September 30, |    
|                                                     |  |               |    
|                                                     |  | 2008          |     | 2007 | 
|                                                     |  |               |     |      | 
|Discount
 rate:                                      |  |               |     |      |  |     |  
|United States                                        |  |               | 7.5 | %    |  | 6.0 | %
|Foreign                                              |  |               | 6.4 | %    |  | 5.4 | %
|Expected return
 on plan assets  United States only |  |               | 8.0 | %    |  | 8.5 | %
|Rate of
 compensation increase                       |  |               |     |      |  |     |  
|United States                                        |  |               | 3.0 | %    |  | 3.0 | %
|Foreign                                              |  |               | 3.0 | %    |  | 2.0 | %

SFAS 158 was
effective for the Company for the year ended September 30, 2007. This Statement
requires the recognition of an entitys over (under)funded status of defined
benefit plans in the statement of financial position. This Statement also
requires recognition in other comprehensive income of certain gains and losses
that arise during the period but are deferred under current pension accounting
rules. On September 30, 2007, the Company recognized the net underfunded status
of its defined benefit pension plans in the Consolidated Balance Sheet. The
incremental effect of adopting SFAS No. 158 on the Companys financial
statements at September 30, 2007 decreased accumulated other comprehensive
income by approximately $769 net of tax.

RS Inc. had a
minimum required contribution to its defined pension plans of approximately
$0.4 million for the fiscal 2008 plan year, which it made in fiscal year 2009.
The Company has not determined whether it will make additional voluntary
contributions for this plan.

Expected
benefit payments for each of the next five fiscal years and for the five years
aggregated thereafter is as follows: $387 in 2009, $654 in 2010, $689 in 2011,
$785 in 2012, $794 in 2013, and $5,165 thereafter.

The Companys
pension plan allocations at September 30, 2008 and 2007, by asset category are
as follows:

|                       |  |              |       |            |  |              |   |            |       |  |  |     |  
|---------------------- |  | ------------ | ----- | ---------- |  | ------------ | - | ---------- | ----- |  |  | --- | -
|                       |  | 2008         |       | 2007       | 
|                       |  |              |       |            | 
|                       |  | Dollar Value |       | Percentage |  | Dollar Value |   | Percentage |      
|                       |  |              |       |            |  |              |   |            |      
|Money Market
 Funds    |  | $            | 779   |            |  | 18           | % | $          | 662   |  |  | 13  | %
|Stocks                 |  |              | 2,747 |            |  | 63           | % |            | 3,407 |  |  | 69  | %
|Government
 Securities |  |              | 841   |            |  | 19           | % |            | 876   |  |  | 18  | %
|                       |  |              |       |            |  |              |   |            |       |  |  |     |  
|Total plan
 assets     |  | $            | 4,367 |            |  | 100          | % | $          | 4,945 |  |  | 100 | %
|                       |  |              |       |            |  |              |   |            |       |  |  |     |  

The Company
employs a total return investment approach whereby a mix of stocks and
government securities are used to maximize the long-term return of plan assets
for a prudent level of risk. The intent of this strategy is to minimize plan
expenses by maximizing investment returns within that prudent level of risk.
Furthermore, equity investments are diversified across U.S. and non-U.S. stocks
as well as growth, value, and small and large capitalizations. Additionally,
cash balances are maintained at levels adequate to meet near term plan expenses
and benefit payments. Investment risk is measured and monitored on an ongoing
basis through semi-annual investment portfolio reviews.

RS Inc., RB
Inc., PRC, Lee Laser, Rofin-Baasel Canada Ltd., and Dilas Diodelaser Inc. have
401(k) plans for the benefit of all eligible U.S. employees, as defined by the
plan. Participating employees may contribute up to 16% of their qualified
annual compensation. Those subsidiaries match 50% of the first 5 to 6% of the
employees compensation contributed as a salary deferral. Company contributions
for the years ended September 30, 2008, 2007, and 2006, were $559, $527, and
$374, respectively.

F-26

---



|    |                          
|--- | -------------------------
|11. | EARNINGS
PER COMMON SHARE

The calculation
of the weighted average number of common shares outstanding for each period is
as follows:

|                                                                       |  |                           |            |      |  |            |  |  |            | 
|---------------------------------------------------------------------- |  | ------------------------- | ---------- | ---- |  | ---------- |  |  | ---------- | 
|                                                                       |  | Years ended September 30, |           
|                                                                       |  |                           |           
|                                                                       |  | 2008                      |            | 2007 |  | 2006       | 
|                                                                       |  |                           |            |      |  |            | 
|Weighted number of shares for basic
 earnings per common share         |  |                           | 29,639,876 |      |  | 30,975,364 |  |  | 30,567,634 | 
|Potential additional shares due to
 outstanding dilutive stock options |  |                           | 806,444    |      |  | 831,090    |  |  | 806,150    | 
|                                                                       |  |                           |            |      |  |            |  |  |            | 
|Weighted number of shares for diluted
 earnings per common share       |  |                           | 30,446,319 |      |  | 31,806,454 |  |  | 31,373,784 | 
|                                                                       |  |                           |            |      |  |            |  |  |            | 

|    |                           
|--- | --------------------------
|12. | RELATED
PARTY TRANSACTIONS

The Company
had sales to its minority shareholder in Japan amounting to $1,292, $1,303, and
$1,755 in fiscal years 2008, 2007, and 2006, respectively. As of September 30,
2008 and 2007, the accounts receivable with the minority shareholder in Japan
amounted to $684 and $553, respectively.

The remaining
accounts receivable to related party of $28, at September 30, 2008, are with
the minority shareholder in Sweden.

The Company
maintains other accounts payable to related party in China amounting $24.

The Company
has accrued $345 at September 30, 2008 for the option to purchase the remaining
minority interests in m2k and $64 was accrued for accumulated interest on these
obligations as of September 30, 2008. In fiscal 2008 the Company purchased
material amounting to $465 from the minority shareholder of m2k.

The main
facility in Starnberg is rented under a 25-year operating lease from the former
minority shareholder of CBL, Mr. Baasel, who is also a member of the Board of
Directors of the Company, and includes a clause to terminate the lease upon
two-year notice. The Company paid expenses, mainly for rental expense of $957,
$707, and $644, to Mr. Baasel during fiscal years 2008, 2007, and 2006,
respectively.

The Company has
accrued $143 and $142 at September 30, 2008 and 2007, for the option to
purchase the remaining minority interests in Optoskand AB and $151 and $103
were accrued to accumulated interest on this obligation as of September 30,
2008 and 2007. In addition, the Company has accrued $704 and $521 at September
30, 2008 and 2007, respectively, based on an earn-out agreement with the
minority shareholder of Optoskand. These amounts are included in accounts
payable to related party in the accompanying consolidated balance sheet.

|    |                       
|--- | ----------------------
|13. | GEOGRAPHIC
INFORMATION

The Company
manages its business under geographic regions that are aggregated together as
one segment in the global industrial laser industry. Sales from these regions
have similar long-term financial performance and economic characteristics. The
products from these regions utilize similar manufacturing processes and use
similar production equipment, which may be interchanged from group to group.
The Company distributes, sells and services final product to the same type of
customers from all regions.

Assets,
revenues, and income before taxes, by geographic region are summarized below:

|       |                            |  |  |  |               |      |          |      |   |          |  
|------ | -------------------------- |  |  |  | ------------- | ---- | -------- | ---- | - | -------- | -
|ASSETS |                            |  |  |  |               |     
|       |                            |  |  |  | September 30, |     
|       |                            |  |  |  |               |     
|       |                            |  |  |  |               | 2008 |          | 2007 |  
|       |                            |  |  |  |               |      |          |      |  
|       | North
 America             |  |  |  |               | $    | 199,423  |      | $ | 248,912  |  
|       | Germany                    |  |  |  |               |      | 402,813  |      |   | 391,081  |  
|       | Other                      |  |  |  |               |      | 207,885  |      |   | 187,991  |  
|       | Intercompany
 eliminations |  |  |  |               |      | (226,461 | )    |   | (201,760 | )
|       |                            |  |  |  |               |      |          |      |   |          |  
|       | Total assets               |  |  |  |               | $    | 583,660  |      | $ | 626,224  |  
|       |                            |  |  |  |               |      |          |      |   |          |  

F-27

---



|                   |                            |  |  |  |               |      |        |      |   |        |  
|------------------ | -------------------------- |  |  |  | ------------- | ---- | ------ | ---- | - | ------ | -
|LONG-LIVED
 ASSETS |                            |  |  |  |               |      |        |      |   |       
|                   |                            |  |  |  | September 30, |     
|                   |                            |  |  |  |               |     
|                   |                            |  |  |  |               | 2008 |        | 2007 |  
|                   |                            |  |  |  |               |      |        |      |  
|                   | North
 America             |  |  |  |               | $    | 14,603 |      | $ | 7,339  |  
|                   | Germany                    |  |  |  |               |      | 34,263 |      |   | 29,479 |  
|                   | Other                      |  |  |  |               |      | 7,399  |      |   | 7,121  |  
|                   | Intercompany
 eliminations |  |  |  |               |      | (39    | )    |   | (96    | )
|                   |                            |  |  |  |               |      |        |      |   |        |  
|                   | Total
 long-lived assets   |  |  |  |               | $    | 56,226 |      | $ | 43,843 |  
|                   |                            |  |  |  |               |      |        |      |   |        |  

|                           |                            |  |                           |          |      |   |          |   |   |          |  
|-------------------------- | -------------------------- |  | ------------------------- | -------- | ---- | - | -------- | - | - | -------- | -
|REVENUES -
 TOTAL BUSINESS |                            |  |                           |          |      |   |          |   |   |         
|                           |                            |  | Years ended September 30, |         
|                           |                            |  |                           |         
|                           |                            |  | 2008                      |          | 2007 |   | 2006     |  
|                           |                            |  |                           |          |      |   |          |  
|                           | North
 America             |  | $                         | 146,828  |      | $ | 117,405  |   | $ | 130,374  |  
|                           | Germany                    |  |                           | 463,725  |      |   | 382,415  |   |   | 313,576  |  
|                           | Other                      |  |                           | 181,556  |      |   | 161,881  |   |   | 140,561  |  
|                           | Intercompany
 eliminations |  |                           | (216,831 | )    |   | (182,026 | ) |   | (163,621 | )
|                           |                            |  |                           |          |      |   |          |   |   |          |  
|                           |                            |  | $                         | 575,278  |      | $ | 479,675  |   | $ | 420,890  |  
|                           |                            |  |                           |          |      |   |          |   |   |          |  

|                       |                            |  |                           |          |      |   |          |   |   |          |  
|---------------------- | -------------------------- |  | ------------------------- | -------- | ---- | - | -------- | - | - | -------- | -
|INTERCOMPANY
 REVENUES |                            |  |                           |          |      |   |          |   |   |         
|                       |                            |  | Years ended September 30, |         
|                       |                            |  |                           |         
|                       |                            |  | 2008                      |          | 2007 |   | 2006     |  
|                       |                            |  |                           |          |      |   |          |  
|                       | North
 America             |  | $                         | 4,795    |      | $ | 4,800    |   | $ | 3,874    |  
|                       | Germany                    |  |                           | 171,084  |      |   | 143,199  |   |   | 125,944  |  
|                       | Other                      |  |                           | 40,952   |      |   | 34,027   |   |   | 33,803   |  
|                       | Intercompany
 eliminations |  |                           | (216,831 | )    |   | (182,026 | ) |   | (163,621 | )
|                       |                            |  |                           |          |      |   |          |   |   |          |  
|                       |                            |  | $                         |         |      | $ |         |   | $ |         |  
|                       |                            |  |                           |          |      |   |          |   |   |          |  

|                   |                |  |                           |         |      |   |         |  |   |         | 
|------------------ | -------------- |  | ------------------------- | ------- | ---- | - | ------- |  | - | ------- | 
|EXTERNAL
 REVENUES |                |  |                           |         |      |   |         |  |   |        
|                   |                |  | Years ended September 30, |        
|                   |                |  |                           |        
|                   |                |  | 2008                      |         | 2007 |   | 2006    | 
|                   |                |  |                           |         |      |   |         | 
|                   | North
 America |  | $                         | 142,033 |      | $ | 112,605 |  | $ | 126,500 | 
|                   | Germany        |  |                           | 292,640 |      |   | 239,216 |  |   | 187,632 | 
|                   | Other          |  |                           | 140,605 |      |   | 127,854 |  |   | 106,758 | 
|                   |                |  |                           |         |      |   |         |  |   |         | 
|                   |                |  | $                         | 575,278 |      | $ | 479,675 |  | $ | 420,890 | 
|                   |                |  |                           |         |      |   |         |  |   |         | 

|                            |                |  |                           |        |      |   |        |  |   |        | 
|--------------------------- | -------------- |  | ------------------------- | ------ | ---- | - | ------ |  | - | ------ | 
|INCOME
 BEFORE INCOME TAXES |                |  |                           |        |      |   |        |  |   |       
|                            |                |  | Years ended September 30, |       
|                            |                |  |                           |       
|                            |                |  | 2008                      |        | 2007 |   | 2006   | 
|                            |                |  |                           |        |      |   |        | 
|                            | North
 America |  | $                         | (3,077 | )    | $ | 5,132  |  | $ | 12,947 | 
|                            | Germany        |  |                           | 87,376 |      |   | 68,586 |  |   | 51,137 | 
|                            | Other          |  |                           | 12,926 |      |   | 13,397 |  |   | 12,580 | 
|                            |                |  |                           |        |      |   |        |  |   |        | 
|                            |                |  | $                         | 97,225 |      | $ | 87,115 |  | $ | 76,664 | 
|                            |                |  |                           |        |      |   |        |  |   |        | 

F-28

---



|    |                            
|--- | ---------------------------
|14. | ENTERPRISE
WIDE INFORMATION

The Company
derives revenues from the sale and servicing of laser products used for macro
applications, from the sale and servicing of laser products for marking and
micro applications, and from the sale of components products. Product sales are
summarized below:

|                                  |  |                |         |      |   |         |  |   |         | 
|--------------------------------- |  | -------------- | ------- | ---- | - | ------- |  | - | ------- | 
|                                  |  | September 30,  |        
|                                  |  |                |        
|Product
 Category                 |  | 2008           |         | 2007 |   | 2006    | 
|                                  |  |                |         |      |   |         | 
|                                  |  | (in thousands) |        
|                                  |  |                |         |      |   |         |  |   |         | 
|Laser macro
 products             |  | $              | 238,518 |      | $ | 205,772 |  | $ | 172,959 | 
|Laser
 marking and micro products |  |                | 279,123 |      |   | 231,920 |  |   | 213,632 | 
|Components                        |  |                | 57,637  |      |   | 41,983  |  |   | 34,299  | 
|                                  |  |                |         |      |   |         |  |   |         | 
|                                  |  | $              | 575,278 |      | $ | 479,675 |  | $ | 420,890 | 
|                                  |  |                |         |      |   |         |  |   |         | 

|    |                                              
|--- | ---------------------------------------------
|15. | SELECTED
QUARTERLY FINANCIAL DATA (Unaudited)

The following
represents the Companys quarterly results (millions of dollars, except per
share amounts):

|                              |  |                |       |                 |   |                |  |                 |       |  |   |       | 
|----------------------------- |  | -------------- | ----- | --------------- | - | -------------- |  | --------------- | ----- |  | - | ----- | 
|                              |  | Quarters ended |      
|                              |  |                |      
|                              |  | Dec. 31,
 2007 |       | March 31,
 2008 |   | June 30,
 2008 |  | Sept. 30,
 2008 |      
|                              |  |                |       |                 |   |                |  |                 |      
|Net sales                     |  | $              | 134.7 |                 | $ | 136.6          |  | $               | 149.7 |  | $ | 154.3 | 
|Gross profit                  |  |                | 58.7  |                 |   | 60.7           |  |                 | 62.9  |  |   | 65.8  | 
|Net income                    |  |                | 16.9  |                 |   | 10.8           |  |                 | 16.1  |  |   | 20.0  | 
|Earnings per
 share  Basic   |  |                | 0.55  |                 |   | 0.36           |  |                 | 0.55  |  |   | 0.69  | 
|Earnings per
 share  Diluted |  |                | 0.53  |                 |   | 0.35           |  |                 | 0.54  |  |   | 0.68  | 
|                              |  |                |       |                 |   |                |  |                 |       |  |   |       | 
|                              |  | Quarters ended |      
|                              |  |                |      
|                              |  | Dec. 31,
 2006 |       | March 31,
 2007 |   | June 30,
 2007 |  | Sept. 30,
 2007 |      
|                              |  |                |       |                 |   |                |  |                 |      
|Net sales                     |  | $              | 111.7 |                 | $ | 116.1          |  | $               | 121.4 |  | $ | 130.5 | 
|Gross profit                  |  |                | 45.9  |                 |   | 49.2           |  |                 | 51.7  |  |   | 56.4  | 
|Net income                    |  |                | 11.5  |                 |   | 13.1           |  |                 | 14.3  |  |   | 16.4  | 
|Earnings per
 share  Basic   |  |                | 0.37  |                 |   | 0.42           |  |                 | 0.46  |  |   | 0.53  | 
|Earnings per
 share  Diluted |  |                | 0.36  |                 |   | 0.41           |  |                 | 0.45  |  |   | 0.51  | 

|    |               
|--- | --------------
|16. | TREASURY
STOCK

On November 7,
2007, the Board of Directors had approved a 2-for-1 stock split and a stock
buyback plan. The stock split was in the form of a dividend of one share of
common stock on each outstanding share and the distribution date was December
5, 2007, for shareholders of record as of November 22, 2007. The buyback
program authorized the repurchase of up to $120 million of the Companys common
stock, or approximately 10% of the shares of common stock then outstanding
based on then current market prices. The share buyback program was authorized
to begin November 15, 2007. The shares were repurchased from time to time in
open market transactions or privately negotiated transactions at the Companys
discretion, including the quantity, timing and price thereof. As of June 30,
2008, the Company had bought approximately 2.8 million shares of common stock,
at an average price of $42.41, under the stock buyback program for a total
amount of $120.0 million.

All share and
per share amounts disclosed in the Condensed Consolidated Balance Sheet and
Statement of Operations and Notes to the Condensed Consolidated Financial
Statements have been adjusted to reflect the 2-for-1 stock split.

F-29

---



|    |                       
|--- | ----------------------
|17. | STOCK
 INCENTIVE PLANS

Effective
March 15, 2008, the stockholders approved the Rofin-Sinar Technologies Inc.
2007 Incentive Stock Plan (the 2007 Incentive Plan). The 2007 Incentive
Plan supersedes the Rofin-Sinar Technologies Inc. 1996 Non-Employee Directors Stock
Plan and the Rofin-Sinar Technologies Inc 2002 Equity Incentive Plan. Under the
2007 Incentive Plan, the Company has reserved 1,600,000 shares of common stock
to provide for the grant of options to purchase Common Stock (options),
grants of shares of Common Stock (stock grants), stock units, and
stock appreciation rights (SARs) to certain eligible employees and
to outside directors. During fiscal year 2008, outside directors each received
3,000 shares of common stock and 321,250 non-qualified stock options were granted
to officers and other key employees. The terms of these issuances are the same
as those described below.

Directors
Plan

The Company
had reserved 100,000 shares of common stock for the Directors Plan, which
covered non-employee members of the Board of Directors. Under this plan each
member of the Board of Directors who was not an employee of the Company and who
was elected or continued as a member of the Board of Directors was entitled to
receive an initial grant of 1,500 shares of common stock and thereafter an
annual grant of 1,500 shares of common stock. The Directors Plan also provided
that non-employee directors aged 65 or older, upon their appointment or
election to the Board of Directors, will receive, in lieu of such initial and
annual grants of shares of common stock, 7,500 shares of restricted stock which
shall vest in five equal installments on the date of grant and each of the
following four anniversaries thereof. Prior to vesting, no shares of restricted
stock may be sold, transferred, assigned, pledged, encumbered or otherwise
disposed of, subject to certain exceptions. The Company records compensation
expense based on the fair market value of the common stock, as determined by
the closing price at the date of issuance. A total of 40,500 shares are issued
and outstanding under the plan at September 30, 2006. On March 15, 2008, this
Plan was superseded by the 2007 Incentive Plan, as discussed above.

Equity
Incentive Plan

The Company
also maintained an Equity Incentive Plan, whereby incentive and non-qualified
stock options, restricted stock and performance shares were granted to officers
and other key employees to purchase a specified number of shares of common
stock at a price not less than the fair market value on the date of grant. The
term of the Equity Incentive Plan continues through 2011. There were no
incentive stock options, restricted stock or performance shares granted in
fiscal years 2006, 2005, or 2004. Non-qualified stock options were granted to
officers and other key employees in fiscal years 2006, 2005, and 2004. Options
generally vest over five years and expire not later than ten years after the
date on which they are granted. On March 15, 2008, this Plan was superseded by
the 2007 Incentive Plan, as discussed above.

The fair value of our stock
options was estimated based on the date of grant using the Black-Scholes option
pricing model. The following assumptions were used in these calculations:

|                                        |  |               |         |              |   |              |   |   |         |  
|--------------------------------------- |  | ------------- | ------- | ------------ | - | ------------ | - | - | ------- | -
|                                        |  | September 30, |        
|                                        |  |               |        
|                                        |  | 2008
 Grants  |         | 2007
 Grants |   | 2006
 Grants |  
|                                        |  |               |         |              |   |              |  
|Weighted
 average grant date fair value |  | $             | 18.51   |              | $ | 28.50        |   | $ | 13.26   |  
|Expected
 life                          |  |               | 5 Years |              |   | 5 Years      |   |   | 5 Years |  
|Volatility                              |  |               | 48.1    | %            |   | 50.0         | % |   | 50.0    | %
|Risk-free
 interest rate                |  |               | 2.36    | %            |   | 4.47         | % |   | 4.61    | %
|Dividend
 yield                         |  |               | 0       | %            |   | 0            | % |   | 0       | %
|Annual
 forfeiture rate                 |  |               | 2       | %            |   | 4            | % |   | 9       | %
|                                        |  |               |         |              |   |              |   |   |         |  

F-30

---



For purposes
of the Black Scholes model, the Company uses historical data to estimate the
expected life, volatility, and estimated forfeitures of an option. The
risk-free interest rate is based on the U.S. Treasury yield curve in effect at
the time of grant.

The balance of outstanding
stock options and all options activity for the three year period ended
September 30, 2008, are as follows:

|                                   |  |                   |           |                                   |   |                                                        |     |                                        |  |   |      | 
|---------------------------------- |  | ----------------- | --------- | --------------------------------- | - | ------------------------------------------------------ | --- | -------------------------------------- |  | - | ---- | 
|                                   |  | Number of
 Shares |           | Weighted
 Average
 Exercise Price |   | Weighted Average
 Remaining
 Contractual Term
 (Years) |     | Aggregate
 Intrinsic Value
 (Millions) | 
|                                   |  |                   |           |                                   |   |                                                        |     |                                        | 
|Balance at
 September 30, 2005     |  |                   | 2,579,200 |                                   | $ | 21                                                     | 3/5 | 7.54                                   |  | $ | 21.1 | 
|                                   |  |                   |           |                                   |   |                                                        |     |                                        |  |   |      | 
|Granted                            |  |                   | 584,500   |                                   | $ | 52                                                     | 1/5 |                                        |  |   |      | 
|Exercised                          |  |                   | (499,100  | )                                 | $ | 14                                                     | 7/8 |                                        |  |   |      | 
|Forfeited                          |  |                   | (29,200   | )                                 | $ | 13                                                     | 5/8 |                                        |  |   |      | 
|                                   |  |                   |           |                                   |   |                                                        |     |                                        |  |   |      | 
|Balance at
 September 30, 2006     |  |                   | 2,635,400 |                                   | $ | 29                                                     | 3/4 | 7.41                                   |  | $ | 40.9 | 
|                                   |  |                   |           |                                   |   |                                                        |     |                                        |  |   |      | 
|Granted                            |  |                   | 600,000   |                                   | $ | 57                                                     |     |                                        |  |   |      | 
|Exercised                          |  |                   | (370,200  | )                                 | $ | 20                                                     |     |                                        |  |   |      | 
|Forfeited                          |  |                   | (41,200   | )                                 | $ | 28                                                     |     |                                        |  |   |      | 
|                                   |  |                   |           |                                   |   |                                                        |     |                                        |  |   |      | 
|Balance at
 September 30, 2007     |  |                   | 2,824,000 |                                   | $ | 36                                                     | 6/7 | 7.22                                   |  | $ | 47.1 | 
|                                   |  |                   |           |                                   |   |                                                        |     |                                        |  |   |      | 
|Granted                            |  |                   | 321,250   |                                   | $ | 40                                                     | 1/5 |                                        |  |   |      | 
|Exercised                          |  |                   | (572,600  | )                                 | $ | 9                                                      |     |                                        |  |   |      | 
|Forfeited                          |  |                   | (5,350    | )                                 | $ | 26                                                     | 2/5 |                                        |  |   |      | 
|                                   |  |                   |           |                                   |   |                                                        |     |                                        |  |   |      | 
|Balance at
 September 30, 2008     |  |                   | 2,567,300 |                                   | $ | 23                                                     | 2/9 | 7.13                                   |  | $ | 19.0 | 
|                                   |  |                   |           |                                   |   |                                                        |     |                                        |  |   |      | 
|                                   |  |                   |           |                                   |   |                                                        |     |                                        |  |   |      | 
|Exercisable
 at September 30, 2008 |  |                   | 1,026,900 |                                   | $ | 17                                                     |     | 6.05                                   |  | $ | 14.0 | 
|                                   |  |                   |           |                                   |   |                                                        |     |                                        |  |   |      | 

As of September 30, 2008, there
was $16.7 million of total unrecognized compensation costs related to stock
options. These costs are expected to be recognized over a weighted average period
of 3.29 years. The total fair value of shares vested during the
years ended September 30, 2008, 2007, and 2006 was $5.3 million, $3.9 million,
and $2.7 million respectively.

|                                                  |  |                           |      |      |   |      |  |   |     | 
|------------------------------------------------- |  | ------------------------- | ---- | ---- | - | ---- |  | - | --- | 
|                                                  |  | Years ended September 30, |     
|                                                  |  |                           |     
|                                                  |  | 2008                      |      | 2007 |   | 2006 | 
|                                                  |  |                           |      |      |   |      | 
|Total
 intrinsic value of stock options exercised |  | $                         | 19.0 |      | $ | 8.4  |  | $ | 8.6 | 

Cash received
from stock option exercises for the years ended September 30, 2008, 2007 and
2006 was $5.2 million, $3.7 million and $3.7 million, respectively.

F-31

---



SCHEDULE II

ROFIN-SINAR
TECHNOLOGIES INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts - Allowance for Doubtful Accounts
Years ended September 30, 2008, 2007, and 2006
(dollars in thousands)

|                    |  |                                |       |                   |   |                                 |  |                         |       |                           |   |        |   |   |       | 
|------------------- |  | ------------------------------ | ----- | ----------------- | - | ------------------------------- |  | ----------------------- | ----- | ------------------------- | - | ------ | - | - | ----- | 
|                    |  | Balance at
 Beginning ofPeriod |       | Acquired
 Reserve |   | Charged to
 Costs and
 Expenses |  | Additions
 (Deductions) |       | Balance at End of
 Period |  
|                    |  |                                |       |                   |   |                                 |  |                         |       |                           |  
|                   
|September
 30, 2006 |  | $                              | 2,398 |                   | $ |                                |  | $                       | 642   |                           | $ | (384   | ) | $ | 2,656 | 
|                   
|September
 30, 2007 |  | $                              | 2,656 |                   | $ | 6                               |  | $                       | 1,582 |                           | $ | (1,038 | ) | $ | 3,206 | 
|                   
|September
 30, 2008 |  | $                              | 3,206 |                   | $ | 43                              |  | $                       | 730   |                           | $ | (332   | ) | $ | 3,647 | 

F-32

---



INDEX TO EXHIBITS

|             |  |                                                                                  
|------------ |  | ---------------------------------------------------------------------------------
|Exhibit
 No. |  | Exhibit                                                                          
|             |  |                                                                                  
|             |  |                                                                                  
|21.1         |  | List of
 Subsidiaries of the Registrant                                          
|             |  |                                                                                  
|23.1         |  | Consent of
 KPMG, LLP Independent Registered Public Accounting Firm              
|             |  |                                                                                  
|23.2         |  | Consent of
 Deloitte & Touche, LLP Independent Registered Public Accounting Firm,
|             |  |                                                                                  
|31.1         |  | Rule
 13a-14(a)/15d-14(a) Certification of Chief Executive Officer               
|             |  |                                                                                  
|31.2         |  | Rule
 13a-14(a)/15d-14(a) Certification of Chief Financial Officer               
|             |  |                                                                                  
|32.1         |  | Section 1350
 Certification of Chief Executive Officer                           
|             |  |                                                                                  
|32.2         |  | Section 1356
 Certification of Chief Financial Officer                           

F-33

---