|                                   
|-----------------------------------
|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, 2009                                            
|  |                                                                                          
|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
whether the registrant has submitted electronically and posted on its corporate
Website, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post
such files). Yes x  No o

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, a
non-accelerated filer, or a smaller reporting Company. See definition of
accelerated filer, large accelerated filer, and smaller reporting company
in Rule 12b-2 of the Exchange Act.

Large accelerated filer o     Accelerated filer x     Non-accelerated filer o     Smaller reporting company 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,
2009 (the last business day of the most recently completed second fiscal
quarter) as reported by the NASDAQ Global Select Market was approximately
$462,310,622. For the purposes hereof, affiliates include all executive
officers and directors of the registrant.

28,994,296
shares of the registrants common stock, par value $.01 per share, were
outstanding as of November 20, 2009.

Certain
sections of the Companys Proxy Statement to be filed in connection with the
Companys 2010 Annual Meeting of Stockholders to be held in March 2010 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                                                                                                        |  | 24  
|        
|         | ITEM 1B. |  | UNRESOLVED STAFF COMMENTS                                                                                           |  | 30  
|        
|         | ITEM 2.  |  | PROPERTIES                                                                                                          |  | 30  
|        
|         | ITEM 3.  |  | LEGAL PROCEEDINGS                                                                                                   |  | 31  
|        
|         | ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                 |  | 31  
|         |          |  |                                                                                                                     | 
|PART II  |          |  |                                                                                                                     | 
|         |          |  |                                                                                                                     | 
|         | ITEM 5.  |  | MARKET PRICE FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
 MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |  | 32  
|        
|         | ITEM 6.  |  | SELECTED FINANCIAL DATA                                                                                             |  | 34  
|        
|         | ITEM 7.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS                              |  | 35  
|        
|         | ITEM 7A. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                          |  | 45  
|        
|         | ITEM 8.  |  | CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                            |  | 46  
|        
|         | ITEM 9.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
 FINANCIAL DISCLOSURE                               |  | 46  
|        
|         | ITEM 9A. |  | CONTROLS AND PROCEDURES                                                                                             |  | 46  
|        
|         | ITEM 9B. |  | OTHER INFORMATION                                                                                                   |  | 47  
|         |          |  |                                                                                                                     | 
|PART III |          |  |                                                                                                                     | 
|         |          |  |                                                                                                                     | 
|         | ITEM 10. |  | DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                           |  | 47  
|        
|         | ITEM 11. |  | EXECUTIVE COMPENSATION                                                                                              |  | 47  
|        
|         | ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
 RELATED STOCKHOLDER MATTERS                     |  | 48  
|        
|         | ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
 INDEPENDENCE                                           |  | 48  
|        
|         | ITEM 14. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                              |  | 49  
|         |          |  |                                                                                                                     | 
|PART IV  |          |  |                                                                                                                     | 
|         |          |  |                                                                                                                     | 
|         | ITEM 15. |  | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                                          |  | 50  

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 electronics, and photovoltaic
 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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The fiscal year ended September 30, 2009, was
strongly influenced by the severe economic downturn in the global
economy. Fiscal year sales were negatively impacted by postponed shipments and
order cancellations in various industries. With very few exceptions, we
experienced diminished demand across all industries. The Company took action
    to reduce its worldwide cost structure to address the declined global business
without sacrificing its goal of broadening its customer base. These actions
included labor cost reductions (in both hours and headcount), and elimination
of non-critical services provided by third parties. Due to the effect of lower
    fixed cost absorption and additional costs related to headcount reductions,
    we reported a significant reduction in net income, compared to fiscal year
    2008.

Based on the revised 2008 industry data of the
Optoelectronics Report for laser products used for macro (cutting and welding)
applications and marking and micro (fine cutting, fine welding, perforating and
structuring) applications combined, the Company had a worldwide market share
(based on sales volume) in 2008 of approximately 23%. Due to the severe global
economic downturn there are no reliable industry forecasts available for 2009
to calculate market share. The Company has sold more than 49,000 laser sources
since 1975 and currently has over 3,000 active customers (including
multinational companies with multiple facilities purchasing from the Company). During fiscal 2009, 2008, and 2007,
approximately 40%, 41%, and 43%, respectively, of the Companys revenues
related to sales of laser products for macro applications, approximately 12%,
10%, and 9% respectively, related to sales of components, and approximately
48%, 49%, and 48%, 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
    the following principal target markets: the machine tool, automotive, the
    semiconductor, electronics, and photovoltaic 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 2009, 2008, and 2007, 20%, 25%, and 23%, respectively, of the Companys
    sales were in North America, 57%, 51%, and 55%, respectively, were in Europe,
    and 23%, 24%, and 22%, respectively, were in Asia. See Note 15, Geographic
    Information,
to the consolidated financial statements for further information.

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 13, 18,
and 19 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 May 19, 2008. The Company bought
back approximately 2.8 million shares for an amount of $120.0 million.

Effective October 22, 2004, the remaining 17% of the share
    capital of Rofin-Baasel Espana S.L. was purchased by the Company through
    RSTE under an option agreement between the Company and the former minority
    shareholder.

On December 9,
  2004, the Company purchased an additional 5% of the share capital of
  Rofin-Sinar U.K. Ltd. (RS UK) through Rofin-Sinar Technologies
  Europe S.L. (RSTE) under
  an option agreement between the Company and the minority shareholders. The
  Company held 76% of the share capital as a result of this purchase. On December
  2, 2005, the Company purchased an additional 4% of the share capital of
  RS UK through RSTE under this
  option agreement. The
  Company held 80% of the share capital of RS UK as a result of this purchase.
  This purchase resulted in goodwill of $0.5 million. On December
  2, 2006, the Company purchased an additional 1% of the share capital of RS
  UK through RSTE under this option agreement. This purchase resulted in goodwill
  of $0.2 million. Finally, effective December 3, 2007, the Company purchased
  the remaining 19% of the share capital of RS UK through RSTE under this option.
  The Company now holds 100% of the share capital of RS UK. This purchase
  resulted in goodwill of $5.6 million.

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

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 (CBL). 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. Effective May
14, 2007, the Company purchased an additional 45% of the share capital of H2B
Photonics GmbH, Garbsen (Germany) through CBL. The Company currently holds 85%
    of the share capital of H2B Photonics GmbH. This purchase resulted in goodwill
of approximately $0.1 million.

5

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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
  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 5, 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. During fiscal year 2009, the Company settled an earn-out
agreement with the former Nufern owners for an aggregate of $5.0 million and
finalized its valuation of the identified intangible assets related to this acquisition.
As a result, a total adjustment amounting to a net decrease of $3.7 million was
made to the amount of goodwill recorded. This purchase resulted in final
goodwill of $2.9 million.

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.

6

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Effective
March 11, 2009, the Company made the final payment for the outstanding
earn-out, and acquired the remaining 10% of the share capital of Optoskand AB
through its wholly-owned subsidiary Rofin-Sinar Laser GmbH under an option
agreement. This purchase resulted in additional goodwill of $0.7 million.

Effective
April 9, 2009, the Company acquired 80% of the equity 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. This purchase resulted in a preliminary goodwill calculation of
approximately $4.3 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, perforating and structuring 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 family 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | 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, flexible packaging 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 or surface
 applications such as cleaning of materials. 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.
 For flexible solar cell production the Company is developing roll-to-roll
 turnkey system solutions for scribing, drilling and marking applications.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

7

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 thirteeen 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), Nufern (2008) and NELC (2009). 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
35 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.

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.

8

---



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 in the multiple kilowatt
range 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 multi-pass configuration.
By using multiple thin disc laser heads within one resonator, several kilowatts
of power can be generated. Fiber
lasers have their origin in low-power information and communication
applications and since 2003 have undergone a rapid development towards
higher output powers which makes this technology also interesting  for higher-power
material processing applications. The lasing medium, typically Ytterbium, is
contained in a waveguide (the fiber itself) and surrounded by a cladding which
guides the pump light to the lasing medium. With in-fiber components
like fiber bragg gratings (mirrors), tapered fiber bundles (pump light
couplers), taps (beam splitters) and delivery fibers,
from the generation of the light to the delivery of the light to the work piece,
can be realized in an all-in-fiber technology. Today, a kilowatt
of laser power can be generated from a single fiber not bigger in diameter than
a human hair. Higher power can be generated by bundeling multiple fibers.

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.

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.

9

---



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, micro drilling, 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 2009, 2008, and 2007:

|                                  |  |                |         |      |   |         |  |   |        
|--------------------------------- |  | -------------- | ------- | ---- | - | ------- |  | - | -------
|                                  |  | September 30, 
|                                  |  |               
|Product
 Category*                |  | 2009           |         | 2008 |   | 2007   
|                                  |  |                |         |      |   |        
|                                  |  | (in thousands)
|                                  |  |               
|Laser macro
 products             |  | $              | 140,362 |      | $ | 238,518 |  | $ | 205,772
|Laser
 marking and micro products |  |                | 168,131 |      |   | 279,123 |  |   | 231,920
|Components                        |  |                | 41,086  |      |   | 57,637  |  |   | 41,983 
|                                  |  |                |         |      |   |         |  |   |        
|                                  |  | $              | 349,579 |      | $ | 575,278 |  | $ | 479,675
|                                  |  |                |         |      |   |         |  |   |        

|  |                                                                                                                                    
|- | -----------------------------------------------------------------------------------------------------------------------------------
| 
|* | 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.

10

---



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.

|               |  |                 |  |                      |  |                                     |  |                         
|-------------- |  | --------------- |  | -------------------- |  | ----------------------------------- |  | ------------------------
|LASER
 SERIES  |  | POWER
 RANGE    |  | MODE OF 
 EXCITATION |  | PRINCIPAL
 MARKETS                  |  | APPLICATIONS            
|               |  |                 |  |                      |  |                                     |  |                         
|DC Slab Series |  | 1.0 kW - 8.0 kW |  | High frequency       |  | Machine tool
 Automotive            |  | 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     
|SM Series      |  | 1.0 kW - 3.0 kW |  | Direct current       |  | Machine tool                        |  | Cutting and welding     

11

---



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. Principal markets for the Slab Series lasers are the machine tool
and automotive industries.

The Companys
XL, STS, FH, and SM Series fast-axial flow CO2 lasers are used for
both cutting and welding applications and are marketed under the PRC and NELC
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, FH, and SM 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       
|              |  |                 |  |                     |  |                                                   |  |                    
|              |  |                 |  |                     |  |                                                   |  |                    
|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 - 1.0 W   |  | Laser diodes        |  | Automotive,
 Consumer
 electronics,
 Photovoltaic |  | Surface treatment  
|              |  |                 |  |                     |  |                                                   |  |                    
|FL Series     |  | 1.0 kW - 2.0 kW |  | Laser diodes        |  | Automotive
 Machine tool                          |  | Cutting and welding

Rofins 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 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 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. The Companys FL Series of high-brightness single or multi-mode fiber
  lasers use special fiber optics as the active medium. These fiber lasers are
  suitable for classic cutting and welding applications as well as for new applications
  such as remote cutting. In contrast to common laser concepts in which
  the created laser beam switches repeatedly between air and the active medium,
  this laser beam does not leave the fiber optic before entering the working
  process optic (single mode) or the beam switch (multi mode) with subsequent
  launching into the working process. Due to this all-in-fiber technology
  the risk of contamination can be eliminated. Beam switches and energy splitters
  are available options allowing up to four work cells to be operated with only
  one laser.

12

---



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  that provide the customer full control of the
laser marking process.

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
 semiconductor, electronics, automotive, and smart card 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.                                                                                                                  

13

---



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, Flashlamps 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 Series         |  | Stand-alone laser based
 system                                            |  | Automotive
 Non-automotive                                       |  | Label marking
 Label marking                             
|                           |  |                                                                            |  |                                                                  |  |                                                           |  |                                                                                                                 
|EasyMark                   |  | 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
both of which result in higher output power (and therefore higher marking speeds),
and 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 output power of 20
watts or higher (i.e. with PowerLine F 20), ensuring higher energy efficiency
and therefore reduced operating costs. 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.

14

---



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  The EasyMark 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 a 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 include quick and exact loading of regular
and special shapes, jogging function to reach optimum marking position and
various software capabilities.

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, fiber and other 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 the consumer electronics 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;                  
| |   |                                                                                                                                                                                                                                             
| |  | increase its sales in the photovoltaic market with
 different applications; and                                                                                                                                                             
| |   |                                                                                                                                                                                                                                             
| |  | develop new markets for glass cutting and other applications.                                                                                                                                                                               

15

---



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  600 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                            |  | Cutting Structuring          
|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        |  | 4 W  1000 W   |  | Flash lamp          |  | OEM                                    |  | Micro/Marking                
|Series 600        |  | 8 W  100 W    |  | Flash lamp          |  | OEM                                    |  | Micro/Marking                
|Series LDP        |  | 10 W - 800 W   |  | Diode               |  | OEM                                    |  | Micro/Marking                
|Series LEP        |  | 2 W  20 W     |  | Diode               |  | OEM                                    |  | Micro/Marking                
|Series LDPP       |  | 8 W  200 W    |  | Diode               |  | OEM                                    |  | Fine cutting                 
|Series LLP        |  | 500 W  1000 W |  | Flash lamp          |  | OEM                                    |  | Welding Cutting              

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 600
watts. The lasers can be operated in either pulse-modulated 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.

16

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StarShape Systems  Each StarShape System consists 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.

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., Dilas Diodelaser China, 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 and Amplifiers - Fibers and 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 nine 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.

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MARKETS
AND CUSTOMERS

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

|                                             |  |              |  |      |  |      |  |                                                                                                    
|-------------------------------------------- |  | ------------ |  | ---- |  | ---- |  | ---------------------------------------------------------------------------------------------------
|                                             |  | Fiscal Years |  |     
|                                             |  |              |  |     
|Principal
 Market                            |  | 2009         |  | 2008 |  | 2007 |  | Primary
 Applications                                                                              
|                                             |  |              |  |      |  |      |  |                                                                                                    
|Machine Tool                                 |  | 34%          |  | 33%  |  | 36%  |  | Cutting and welding                                                                                
|                                             |  |              |  |      |  |      |  |                                                                                                    
|Semiconductor, Electronics, and Photovoltaic |  | 24%          |  | 27%  |  | 23%  |  | Marking of integrated circuits, electronic
 components, smart cards, and structuring of solar cells
|                                             |  |              |  |      |  |      |  |                                                                                                    
|Automotive & Sub-Supplier                    |  | 8%           |  | 11%  |  | 8%   |  | Cutting, welding and component marking                                                             
|                                             |  |              |  |      |  |      |  |                                                                                                    
|                                             |  | 66%          |  | 71%  |  | 67%  |  |                                                                                                    

The remaining 34%, 29%, and 33%, of total laser sales
in fiscal 2009, 2008, and 2007, 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.

SALES,
MARKETING AND DISTRIBUTION

Rofin sells its products in approximately 70 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 130 direct sales engineers
operating in 24 countries, approximately 40 of whom are dedicated to marketing
lasers for macro applications and approximately 90 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 27 independent
representatives marketing the Companys laser products in Australia, Austria,
Argentina, Brazil, China, Denmark, Eastern Europe, Finland, France, Germany,
India, Israel, Italy, Northern Africa, Norway, the Middle East, the
Philippines, Russia, Singapore, South Africa, Slovenia, Sweden, Switzerland,
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.
Sixteen of the independent representative agreements are on an exclusive basis,
with the other eleven 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.

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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 sales offices in Tempe, Arizona and Santa Clara,
California to support the expansion of Rofins laser business in the North
American market and a 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, as well as a liaison-office
in India 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 markets with the greatest
long-term potential in the future are China and India, principally due to the
expansion of domestic machine tool, automobile, semiconductor, electronic, and
photovoltaic production in these countries.

CUSTOMER
SERVICE, REPLACEMENT PARTS AND COMPONENTS

During fiscal 2009 approximately 42% and during fiscal
2008 and 2007 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 345
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 345 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.

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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 manufacturers for use in their products.

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.

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.

20

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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 Nanjing (China) 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), Nanjing (China), 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 and amplifiers 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 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 18% 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
2009, 2008, and 2007, Rofins net spending on research and development was
$31.5 million, $41.1 million, and $27.8 million, respectively. The Companys
net spending on research and development reflects receipt of funding under
German government and European Union grants totaling $2.0 million, $1.3
million, and $2.3 million in fiscal 2009, 2008, and 2007, respectively. Rofin
has approximately 228 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.

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The Companys
research and development activities are carried out in fourteen 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, East Granby,
Connecticut (all USA), and Nanjing (China) 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 was also a worldwide licensee of two U.S. patents, which expired during
fiscal year 2009. These licenses were 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.
In addition, the Company is a licensee of one Japanese patent and the
corresponding foreign counterparts for the Slab technology, which expire in
2010. Although a portion of the patent coverage for the Slab
Series has expired, the Company believes that the complexity of this laser
technology is a barrier to entry into this market.

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 176 patents for
inventions relating to lasers, processes and power supplies with expiration
dates ranging from 2013 to 2027. In addition, 63 patent applications have been
filed and are under review by the relevant patent authorities. The Company
holds 61 exclusive and non-exclusive licenses of patents and pending patent
applications 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.

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ORDER BACKLOG

The Companys
order backlog was $87.6 million, $143.4 million, and $116.6 million, as of
September 30, 2009, 2008, and 2007, respectively. The Companys order backlog,
which contains relatively little service, training and spare parts, represents
approximately three months of laser shipments. The decrease in the Companys
order backlog from September 30, 2008 to September 30, 2009, was attributable
to 49% lower orders for macro applications, 54% lower orders for micro and
marking applications, and 46% lower orders for components. The fluctuation of
the U.S. dollar in fiscal 2009 had an unfavorable effect of approximately $11.2
million on year-to-year order backlog. 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.

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 2010. However, the
Companys backlog at any given date is not necessarily indicative of actual
sales for any future period.

EMPLOYEES

At September
30, 2009, Rofin had 1,726 full-time employees, of which 903 were in Germany,
267 in the United States, 5 in Canada, 37 in France, 47 in Italy, 130 in the
United Kingdom, 31 in Spain, 9 in the Netherlands, 32 in Sweden, 23 in Finland,
12 in Belgium, 28 in Singapore, 14 in Korea, 15 in Taiwan, 138 in China, 4 in
Switzerland, and 31 in Japan, whereas 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. The average number of employees for the fiscal year ended September 30,
2009, was 1,747.

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.

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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.

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

THE GLOBAL ECONOMIC, CAPITAL MARKETS AND CREDIT DISRUPTIONS
    MAY CONTINUE TO ADVERSELY IMPACT OUR RESULTS OF OPERATIONS.

The current
economic crisis is having a significant negative impact on businesses around
the world. Our results can be impacted by a number of macroeconomic factors,
including but not limited to consumer confidence and spending levels,
unemployment, consumer credit availability, global factory production, and
credit market conditions. The downturn in the economy may continue to affect
sales of our products for the foreseeable future and adversely impact our
results of operations.

DOWNTURNS IN
THE INDUSTRIES WE SERVE, PARTICULARLY IN THE MACHINE TOOL, AUTOMOTIVE,
SEMICONDUCTOR, ELECTRONICS AND PHOTOVOLTAIC 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, semiconductor, electronics, and photovoltaic
industries. We estimate that approximately 66% of our laser sales during fiscal
year 2009 were to these 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.

24

---



Accordingly,
any downturn or slowdown in the machine tool, automotive, semiconductor,
electronics, and photovoltaic 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 72% 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
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 70 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.

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, semiconductor,
electronics or photovoltaic 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.

25

---



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, 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,

26

---



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 and solid-sate laser product range;                                     
| |   |                                                                                                        
| |  | continuing
 to increase the output power of our product portfolio; 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 Managements Discussion and Analysis of Financial Condition and Results
of Operations and Business - The Companys Laser Products.

27

---



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 18% 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.

28

---



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 176 United States and foreign patents on our laser sources, with
expiration dates ranging from 2013 to 2027. We have also obtained licenses
under certain patents covering lasers and related technology incorporated into
our products. Of particular importance was the license of three patents related
to the sales of our Slab Series CO2 lasers, which we estimate to
account for approximately 22% of our revenue in fiscal year 2009. Two of these
licenses expired in 2009 and one expires in 2010. In addition, 63 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.

29

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|         |                           
|-------- | --------------------------
|ITEM 1B. | UNRESOLVED
 STAFF COMMENTS

None.

|        |           
|------- | ----------
|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          |  | 117,047           |  | 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 CO2lasers                              
|Orlando, Florida                   |  | Owned           |  | 35,207            |  | Solid-state lasers                               
|Landing, New Jersey                |  | Owned           |  | 34,292            |  | CO2 lasers                                       
|Mainz, Germany                     |  | Leased          |  | 52,993            |  | 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                            
|Tampere,
 Finland                  |  | Leased          |  | 9,964             |  | Fiber lasers, optical
 engines                   
|Pamplona, Spain                    |  | Owned           |  | 12,654            |  | Laser marking systems                            
|Singapore                          |  | Leased          |  | 5,724             |  | Laser marking products                           
|Freiburg, Germany                  |  | Leased          |  | 4,947             |  | Laser diodes                                     
|Tucson, Arizona                    |  | Leased          |  | 6,218             |  | Components                                       
|East Granby, Connecticut           |  | Leased          |  | 57,000            |  | Fibers                                           
|Nanjing, China                     |  | Leased          |  | 25,932            |  | CO2 lasers, laser
 marking products, components  
|Nanjing, China                     |  | Owned           |  | 5,380             |  | CO2 lasers                                       

| |    |                                                                                                                                                      
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | *  | 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) main facility is leased until 2017. The Mainz (Germany) main facility
had been expanded during fiscal year 2009 and the new lease expires 2024. The
Overath (Germany) facility leases expire in 2013, and the Freiburg (Germany)
facility leases expire in 2012. The Singapore facility lease expires in 2012.
The Starnberg (Germany) main facility is leased until 2017 from a member of the
Companys Board of Directors 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, 2011, 2013, and 2020,
respectively. The Gothenburg (Sweden) main facility leases expire in 2011 and
2012, 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 Oxford (United
Kingdom) facility lease expires in 2019. The Nanjing (China) facility leases
expire in 2009 and 2011. In addition, NELC owns land rights which require
construction of manufacturing facilities in the near future.

30

---



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, Orlando and Nanjing
(China) 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.

|        |                   
|------- | ------------------
|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 CO2
lasers has asserted that the Company has calculated royalties due in respect of
certain sales of such CO2 lasers 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. A response from the licensor
was received in January 2009 and the Company and the licensor are in the
process of selecting a mutually agreeable independent auditor. 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, 2009.

31

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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, 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 | 
|December 31, 2008  |  | $ | 30.47                     |  | $   | 17.17 | 
|March 31, 2009     |  | $ | 21.75                     |  | $   | 12.57 | 
|June 30, 2009      |  | $ | 23.96                     |  | $   | 16.78 | 
|September 30, 2009 |  | $ | 25.68                     |  | $   | 17.76 | 

At November
20, 2009, the Company had 7 holders of record of its common stock and
28,994,296 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.

During the
fiscal year 2009, the Company did not sell any equity securities that were not
registered under the Securities Act.

There were no
purchases 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 2009.

On November 7, 2007, the Board
of Directors 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. The program was completed in May 2008.

32

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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, 2004, 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.

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 9/30/04 in stock or index, including
 reinvestment of dividends.     
| | Fiscal year ending September 30.                                                       
| |                                                                                        
| | Copyright© 2009 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
|        |  |                                |        |                             |  |                              
|9/30/04 |  |                                | 100    |                             |  | 100                           |  |  | 100   
|9/30/05 |  |                                | 129.31 |                             |  | 113.78                        |  |  | 113.45
|9/30/06 |  |                                | 206.84 |                             |  | 121.50                        |  |  | 117.14
|9/30/07 |  |                                | 238.97 |                             |  | 143.37                        |  |  | 144.47
|9/30/08 |  |                                | 208.37 |                             |  | 109.15                        |  |  | 110.70
|9/30/09 |  |                                | 156.30 |                             |  | 112.55                        |  |  | 120.10

33

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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, 2009. 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,                 |        
|                                                       |  |                                          |        
|                                                       |  | 2009                                     |         | 2008 |   | 2007    |   | 2006 |         | 2005 |  
|                                                       |  |                                          |         |      |   |         |   |      |         |      |  
|                                                       |  | (in thousands, except per share amounts) |        
|STATEMENT OF
 OPERATIONS DATA:                         |  |                                          |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Net sales                                              |  | $                                        | 349,579 |      | $ | 575,278 |   | $    | 479,675 |      | $ | 420,890 |   | $ | 375,191 |  
|Cost of goods
 sold                                    |  |                                          | 218,417 |      |   | 327,286 |   |      | 276,402 |      |   | 242,619 |   |   | 222,189 |  
|Gross profit                                           |  |                                          | 131,162 |      |   | 247,992 |   |      | 203,273 |      |   | 178,271 |   |   | 153,002 |  
|Selling, general
 & administrative expenses            |  |                                          | 87,387  |      |   | 103,781 |   |      | 86,468  |      |   | 76,900  |   |   | 66,171  |  
|Research &
 development expenses                       |  |                                          | 31,500  |      |   | 41,113  |   |      | 27,830  |      |   | 23,968  |   |   | 22,565  |  
|Amortization
 expense                                  |  |                                          | 3,559   |      |   | 6,769   |   |      | 4,251   |      |   | 3,532   |   |   | 5,270   |  
|Income from
 operations                                |  |                                          | 8,716   |      |   | 96,329  |   |      | 84,724  |      |   | 73,871  |   |   | 58,996  |  
|Net interest
 expense (income)                         |  |                                          | 309     |      |   | (2,960  | ) |      | (5,028  | )    |   | (2,588  | ) |   | 148     |  
|Income before
 income taxes                            |  |                                          | 14,360  |      |   | 97,225  |   |      | 87,115  |      |   | 76,664  |   |   | 58,570  |  
|Income tax
 expense                                    |  |                                          | 5,197   |      |   | 33,466  |   |      | 31,838  |      |   | 27,041  |   |   | 20,595  |  
|Net income                                             |  |                                          | 9,163   |      |   | 63,759  |   |      | 55,277  |      |   | 49,623  |   |   | 37,975  |  
|Earnings per
 common share  Basic                     |  | $                                        | 0.32    |      | $ | 2.15    |   | $    | 1.78    |      | $ | 1.62    |   | $ | 1.26    |  
|Earnings per
 common share  Diluted                   |  | $                                        | 0.31    |      | $ | 2.09    |   | $    | 1.74    |      | $ | 1.58    |   | $ | 1.22    |  
|Shares used in computing
 earnings per share  Basic   |  |                                          | 28,912  |      |   | 29,640  |   |      | 30,975  |      |   | 30,568  |   |   | 30,143  |  
|Shares used in
 computing earnings per share  Diluted |  |                                          | 29,194  |      |   | 30,446  |   |      | 31,806  |      |   | 31,374  |   |   | 31,122  |  
|                                                       |  |                                          |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|OPERATING DATA
 (as percentage of sales):              |  |                                          |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Gross profit                                           |  |                                          | 37.5    | %    |   | 43.1    | % |      | 42.4    | %    |   | 42.4    | % |   | 41.0    | %
|Selling, general
 & administrative expenses            |  |                                          | 25.0    | %    |   | 18.0    | % |      | 18.0    | %    |   | 18.3    | % |   | 17.6    | %
|Research &
 development expenses                       |  |                                          | 9.0     | %    |   | 7.1     | % |      | 5.8     | %    |   | 5.7     | % |   | 6.0     | %
|Income from
 operations                                |  |                                          | 2.5     | %    |   | 16.7    | % |      | 17.7    | %    |   | 17.6    | % |   | 15.7    | %
|Income before
 income taxes                            |  |                                          | 4.1     | %    |   | 16.9    | % |      | 18.2    | %    |   | 18.4    | % |   | 15.8    | %
|                                                       |  |                                          |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|BALANCE SHEET
 DATA:                                   |  |                                          |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Working capital                                        |  | $                                        | 274,279 |      | $ | 257,954 |   | $    | 344,907 |      | $ | 282,659 |   | $ | 222,002 |  
|Total assets                                           |  |                                          | 539,507 |      |   | 583,660 |   |      | 626,224 |      |   | 501,521 |   |   | 428,638 |  
|Line of credit
 and loans                              |  |                                          | 31,409  |      |   | 66,674  |   |      | 40,592  |      |   | 35,416  |   |   | 41,002  |  
|Stockholders
 equity                                  |  |                                          | 418,334 |      |   | 402,258 |   |      | 448,923 |      |   | 358,440 |   |   | 294,166 |  

34

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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 2008 industry data of the Optoelectronics Report for
laser products used for macro (cutting and welding) applications and marking
and micro (fine cutting, fine welding, perforating and structuring)
applications combined, the Company had a worldwide market share (based on sales
volume) in 2008 of approximately 23%. Due to the severe global economic
downturn, there are no reliable industry forecasts available for 2009 to calculate
market share. The Company has sold more than 49,000 laser sources since 1975
and currently has over 3,000 active customers (including multinational
companies with multiple facilities purchasing from the Company). During
fiscal 2009, 2008, and 2007, approximately 40%, 41%, and 43%, respectively, of
the Companys revenues related to sales of laser products for macro
applications, approximately 12%, 10%, and 9%, respectively, related to sales of
components, and approximately 48%, 49%, and 48%, 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 the following principal target markets: the
    machine tool, automotive, the semiconductor, electronics and photovoltaic
    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
2009, 2008, and 2007, 20%, 25%, and 23%, respectively, of the Companys
sales were in North America, 57%, 51%, and 55%, respectively, were in Europe
and 23%, 24%, and 22%, respectively, were in Asia. See note 15, Geographic
Information, to
the consolidated financial statements for further information.

The fiscal year ended September 30, 2009, was strongly influenced
    by the severe economic downturn in the global economy. Fiscal year
    sales were negatively impacted by postponed shipments and order cancellations
    in various industries. With very few exceptions, we experienced diminished
    demand across all industries. The Company took action to reduce its worldwide
    cost structure to address the declined global business without sacrificing
    its goal of broadening its customer base. These actions included labor cost
    reductions (in both hours and headcount), and elimination of non-critical
    services provided by third parties. Due to the effect of lower fixed cost
    absorption and additional costs related to headcount reductions, we reported
    a significant reduction in net income, compared to fiscal year 2008.

Outlook

Management is cautiously optimistic that the bottom of macroeconomic
    downturn has been reached. Although visibility is still limited, we are seeing
    the first signs of a slight market recovery, demonstrated by increasing service
    business volume and higher order activity. In addition, in some geographic
    regions we are experiencing a more positive customer sentiment due to the
    stimulus packages. This, combined with our focus on broadening our product
    portfolio for dedicated applications in emerging industries, should help
    to continue to build sequential revenue growth in the coming quarters.

35

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Acquisitions and Formation of New Entities

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 this option agreement. 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 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 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. During fiscal year
2009, the Company settled an earn-out agreement with the former Nufern owners
for an aggregate of $5.0 million and finalized its valuation of the identified intangible
assets related to this acquisition. As a result, a total adjustment amounting
to a net decrease of $3.7 million was made to the amount of goodwill recorded.
This purchase resulted in final goodwill of $2.9 million.

36

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During the quarter ended June 30, 2008, the Company
formed Dilas Diodelaser China Company Ltd. as a 95%-owned subsidiary 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.

Effective March 11, 2009, the Company made the final
payment for the outstanding earn-out, and acquired the remaining 10% of share
capital of Optoskand AB through its wholly-owned subsidiary Rofin-Sinar Laser
GmbH under an option agreement. This purchase resulted in additional goodwill
of $0.7 million.

Effective April 9, 2009, the Company acquired 80% of
the equity 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. This purchase resulted in a
preliminary goodwill calculation of approximately $4.3 million.

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, |      
|                                             |  |                                 |      
|                                             |  | 2009                            |       | 2008 |  | 2007  |  
|                                             |  |                                 |       |      |  |       |  
|Net sales                                    |  |                                 | 100.0 | %    |  | 100.0 | % |  | 100.0 | %
|Cost of goods sold                           |  |                                 | 62.5  | %    |  | 56.9  | % |  | 57.6  | %
|Gross profit                                 |  |                                 | 37.5  | %    |  | 43.1  | % |  | 42.4  | %
|Selling, general and administrative expenses |  |                                 | 25.0  | %    |  | 18.0  | % |  | 18.0  | %
|Research & development expenses              |  |                                 | 9.0   | %    |  | 7.1   | % |  | 5.8   | %
|Intangibles amortization                     |  |                                 | 1.0   | %    |  | 1.2   | % |  | 0.9   | %
|Income from operations                       |  |                                 | 2.5   | %    |  | 16.7  | % |  | 17.7  | %
|Income before income taxes                   |  |                                 | 4.1   | %    |  | 16.9  | % |  | 18.2  | %
|Net income                                   |  |                                 | 2.6   | %    |  | 11.1  | % |  | 11.5  | %

Fiscal
Year 2009 Compared to Fiscal Year 2008

Net Sales  Primarily as a result of the financial crisis
    and the severe economic downturn, net sales decreased by $225.7 million,
    or 39%, compared to the prior year and amounted to $349.6 million in fiscal
    year 2009. Compared to fiscal year 2008, net sales decreased $153.7 million,
    or 36%, in Europe/Asia and $72.0 million, or 51%, in North America. The U.S.
    dollar fluctuated against foreign currencies, which had an unfavorable effect
    on net sales of $28.5 million. Net sales of laser products for macro applications
decreased by 41% to $140.4 million, primarily due to the lower demand for our
low and high power CO2 lasers from OEM-customers and diminished
demand from the automotive industry. Net sales of lasers for marking and micro
applications decreased by 40% to $168.1 million compared to fiscal year 2008,
mainly due to the lower demand principally from the photovoltaic,
semiconductor, consumer electronics, and jewelry industries. Due to the
economic downturn, component business revenue decreased by 29%, to $41.1
million.

Gross Profit  The Companys gross profit of $131.2
million decreased by $116.8 million, or 47%, compared to the prior year. As a
percentage of sales, gross profit decreased to 38%. The decrease in our gross
margins was mainly the result of the low level of business with the
corresponding lower absorption of fixed costs, a decrease in our service and
spare parts revenue and in our components business, as well as the one-time
costs associated with the headcount reductions amounting to $1.0 million. Gross
profit was unfavorably affected by $8.7 million in fiscal year 2009 due to the
fluctuation of the U.S. dollar against foreign currencies, primarily the Euro.

37

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Selling, General and Administrative Expenses 
Selling, general and administrative expenses decreased by $16.4 million, or
16%, to $87.4 million, compared to fiscal year 2008 primarily as a result of
cost reductions in labor, travelling and marketing, as well as lower
commissions related to the lower level of revenues, partially offset by
one-time costs related to headcount reductions of $1.8 million. Due to decreased
    sales, selling, general and administrative expenses as a percentage of net
    sales, increased to 25% compared to 18% in fiscal year 2008. Selling, general
    and administrative expenses were favorably affected by $6.1 million in fiscal
    year 2009 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 $31.5 million, which represents a
decrease of $9.6 million, or 23%, compared to fiscal year 2008. Gross research
and development expenses for fiscal years 2009 and 2008 were $33.5 million and
$42.3 million, respectively, and were reduced by $2.0 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. The decrease in research and
development expenses is mainly a result of lower labor and material costs,
partially offset by one-time costs associated with headcount reductions
amounting to $0.4 million. Research and development expenses were favorably
affected by $3.5 million in fiscal year 2009 due to the fluctuation of the U.S.
dollar against foreign currencies, primarily the Euro.

Other Income - Net other income of $5.6 million fiscal
year 2009 represents an increase of $4.7 million compared to the prior year.
The increase in net other income is primarily attributable to net exchange
gains of $3.5 million compared to net exchange losses of $1.9 million in fiscal
year 2008 and to net miscellaneous income of $2.7 million compared to net
miscellaneous income of $0.4 million in fiscal year 2008. Miscellaneous income
includes $2.0 million compensation for the cancellation of orders received in
the prior fiscal year.

Income Tax Expense  Income tax expense of $5.2
million in fiscal year 2009 and $33.5 million in fiscal year 2008, represent
effective tax rates of 36.1% and 34.4% for the respective periods. The higher
effective income tax rate is primarily due to additional income taxes related
to the repatriation of foreign income in combination with low level of taxable
income in countries with lower income tax rates. Income tax expense, a
significant portion of which is incurred in foreign currencies, was favorably
affected by $0.9 million in fiscal year 2009 due to the fluctuation of the U.S.
dollar against foreign currencies, primarily the Euro.

Net Income  Despite the challenging macroeconomic
conditions but as a result of the already implemented cost reductions, the
Company achieved net income of $9.2 million ($0.31 per diluted share, based on
29.2 million weighted average common shares outstanding) in fiscal year 2009.
Net income decreased by $54.6 million compared to the prior years net income
of $63.8 million ($2.09 per diluted share, based on 30.4 million weighted
average common shares outstanding). Net income was favorably affected by $1.4
million in fiscal year 2009 due to the fluctuation of the U.S. dollar against
foreign currencies, primarily the Euro.

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 of Nufern 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.

38

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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, 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). Net income was favorably affected by $0.9 million in fiscal 2008
due to the fluctuation of the U.S. dollar against foreign currencies, primarily
the Euro.

LIQUIDITY
AND CAPITAL RESOURCES

The Companys primary sources of liquidity at
September 30, 2009, were cash and cash equivalents of $116.1 million,
short-term investments of $2.9 million, short-term credit lines of $91.0
million and long-term loans of $12.4 million. As of September 30, 2009, $19.0
million was outstanding under the short-term lines of credit. Additionally, $4.2
million was used for bank guarantees under these lines of credit. $12.4 million
was outstanding from the long-term loan. Additionally the Company maintained
credit lines specific to bank guarantees for $2.9 million, of which $0.3 million
    was used. Therefore, $70.4 million was unused and available under Rofins
    lines of credit. The Company is subject to financial covenants under some
    of these facilities and lines of credit, which could restrict the Company
    from drawing money under them. At September 30, 2009, the Company was in
    compliance with these covenants.

Cash and cash equivalents increased by $1.6 million
during fiscal year 2009. Approximately $55.4 million in cash and cash
equivalents were provided by operating activities, primarily as the result of
the decrease in accounts receivable and inventories. Operating cash flow was
negatively affected by decreased net income and other non-cash items,
principally depreciation and amortization and by a decrease in income tax
payable, accounts payable and accrued liabilities and pension obligations.

39

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Net cash used in investing activities totaled $18.2
million for the year ended September 30, 2009, and related primarily to
acquisitions ($12.3 million), various additions to property and equipment ($7.8
million), purchase of short-term investments ($2.3 million), offset by the sale
of short-term investments ($3.7 million) and proceeds from sales of property
and equipment ($0.5 million).

Net cash used in financing activities totaled $35.6
million and was primarily related to repayments of loans amounting to $48.0
million, partly offset by $11.8 million net borrowings from banks, $0.2 million
generated through issuance of new shares from the exercise of stock options and
$0.4 million was related to excess of tax benefit from stock options.

The Company expects that its capital expenditures will
be approximately $12.0 million in 2010.

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.

The following table illustrates the Companys
contractual obligations as of September 30, 2009:

|                            |  |                                       |         |                   |   |            |  |            |        |                    |   |        |  |   |        | 
|--------------------------- |  | ------------------------------------- | ------- | ----------------- | - | ---------- |  | ---------- | ------ | ------------------ | - | ------ |  | - | ------ | 
|                            |  | 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    |  | $                                     | 31,409  |                   | $ | 18,983     |  | $          | 2,198  |                    | $ | 7,919  |  | $ | 2,309  | 
|Pension obligations         |  |                                       | 17,396  |                   |   | 299        |  |            | 1,072  |                    |   | 1,142  |  |   | 14,883 | 
|Operating lease obligations |  |                                       | 32,413  |                   |   | 8,683      |  |            | 10,618 |                    |   | 4,484  |  |   | 8,628  | 
|Purchase obligations *      |  |                                       | 83,470  |                   |   | 68,207     |  |            | 15,263 |                    |   |       |  |   |       | 
|Interest obligation         |  |                                       | 2,494   |                   |   | 725        |  |            | 1,256  |                    |   | 465    |  |   | 48     | 
|Other long-term liabilities |  |                                       | 3,294   |                   |   | 724        |  |            | 813    |                    |   | 315    |  |   | 1,442  | 
|Total                       |  | $                                     | 170,476 |                   | $ | 97,621     |  | $          | 31,220 |                    | $ | 14,325 |  | $ | 27,310 | 

|  |                                                                                                                       
|- | ----------------------------------------------------------------------------------------------------------------------
|* | 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 72% 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 $40.6 million
at September 30, 2009, as compared to $37.4 million at September 30, 2008.

40

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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 constant 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.

The following chart compares our net sales, gross
profit, and income from operations for each of fiscal years 2009, 2008, and
2007 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 2009 |       | Fiscal Year 2008               |   | Fiscal Year 2007 | 
|                       |  |                  |       |                                |   |                  | 
|                       |  | GAAP
 Actual     |       | Non-
 GAAP
 Constant
 Currency |   | GAAP
 Actual     |  | Non-
 GAAP
 Constant
 Currency |       | GAAP
 Actual |   | Non-
 GAAP
 Constant
 Currency | 
|                       |  |                  |       |                                |   |                  |  |                                |       |              |   |                                | 
|                       |  | (in millions)    |      
|Net sales              |  | $                | 349.6 |                                | $ | 378.1            |  | $                              | 575.3 |              | $ | 530.2                          |  | $ | 479.7 |  | $ | 452.9 | 
|Gross profit           |  |                  | 131.2 |                                |   | 139.9            |  |                                | 248.0 |              |   | 232.5                          |  |   | 203.3 |  |   | 193.9 | 
|Income from operations |  |                  | 8.7   |                                |   | 7.7              |  |                                | 96.3  |              |   | 92.1                           |  |   | 84.7  |  |   | 82.0  | 

Between fiscal year 2009 and 2008, the average
exchange rate for the Euro weakened against the U.S. dollar by approximately
10.5%. The impact of this weakening was to decrease net sales and gross profit
by $28.5 million and $8.7 million, respectively, because approximately 72% of
sales were denominated in other currencies, primarily the Euro. This weakening
of the Euro had the effect of decreasing operating expense by $29.5 million,
thereby increasing income from operations only by $1.0 million.

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 fiscal year 2008 sales were denominated in other currencies,
    primarily the Euro. However, because more than 69% of operating expenses
    were 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 fiscal year 2007 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.

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.

41

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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 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 costs have 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. The 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

42

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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.

Recent Accounting Pronouncements Adopted

The Financial Accounting Standards Board modified the
hierarchy of Generally Accepted Accounting Principles (GAAP), 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 in the United States (the GAAP hierarchy). The
new Accounting Standards Codification (ASC) became the single source of
authoritative nongovernmental U.S. Generally Accepted Accounting Principles.
The ASC became effective for interim and annual periods ending after September
15, 2009, and did not have an impact on the Companys consolidated financial
statements other then changing the references to authoritative accounting
literature.

In May 2009, ASC Topic 855, Subsequent Events, was
amended to require entities to disclose the date through which they have
evaluated subsequent events and whether the date corresponds with the release
of their financial statements. The Company adopted the guidance for the third
quarter of fiscal year 2009. The adoption had no impact on our consolidated
financial statements, besides the additional disclosure.

In April 2009, ASC Topic 320 Investments  Debt and
Equity Securities was amended, to change the recognition and measurement of
other-than-temporary impairments for debt securities by modifying the
pre-existing intent and ability indicator. Under this amendment, an
other-than-temporary impairment is triggered when there is intent to sell the
security, it is more likely than not that the security will be required to be
sold before recovery, or the security is not expected to recover the entire
amortized cost basis of the security. Additionally, ASC Topic 220 Comprehensive
Income, and Topic 225 Income Statement were amended to change the
presentation of an other-than-temporary impairment in the income statement for
those impairments involving credit losses. The credit loss component will be
recognized in earnings and the remainder of the impairment will be recorded in
other comprehensive income. The Company adopted these Topic changes as of June
30, 2009, and did not have a significant impact on the Companys consolidated
financial position or results of operations.

In April 2009, ASC Topic 820 Fair Value Measurements
and Disclosures was amended to provide application guidance addressing the
determination of (a) when a market for an asset or a liability is active or
inactive and (b) when a particular transaction is distressed. This Topic became
effective June 30, 2009, and did not have a material impact on the Companys
consolidated financial statements.

In April 2009, ASC Topic 825, Financial Instruments
was amended to require entities to disclose the methods and significant
assumptions used to estimate the fair value of financial instruments, in both
interim financial statements as well as annual financial statements. This Topic
became effective for interim and annual periods ending after June 15, 2009, and
did not have an impact on the Companys consolidated financial statements.

In March 2008, ASC Topic 815, Derivatives and
Hedging was amended to require additional disclosures related to the use of
derivative instruments, the accounting for derivatives, and the financial
statement impact of derivatives. This Topic was effective for fiscal years and
interim periods beginning after November 15, 2008. This Topic became effective
January 1, 2009, and did not have an impact on the Companys consolidated
financial statements.

In February 2008, ASC Topic 820 Fair Value
Measurements and Disclosures was amended to exclude from its scope lease
accounting and other accounting pronouncements that address fair value
measurements for purposes of lease classification or measurement. This Topic
became effective for the quarter ending December 31, 2008 and did not have a
material impact on the Companys consolidated financial statements.

43

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In February
2007, ASC Topic 825, Financial Instruments, was amended to permit entities to
choose to measure many financial instruments at fair value, and certain other
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently. This Topic was effective for fiscal
years beginning after November 15, 2007. The adoption of this Topic did not
have a material impact on our consolidated financial position and results of
operations.

Recent Accounting Pronouncements
Not Yet Adopted as of September 30, 2009

In June 2009,
the FASB issued SFAS No. 167, Amendments to
FASB Interpretation No. 46(R). The objective of this statement is
to improve financial reporting by enterprises involved with variable interest
entities. This statement addresses (1) the effects on certain provisions of
FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable
Interest Entities, as a result of the elimination of the qualifying
special-purpose entity concept in SFAS No. 166, Accounting for Transfers of Financial Assets, and (2)
concern about the application of certain key provisions of FASB Interpretation
No. 46(R), including those in which the accounting and disclosures under the
Interpretation do not always provide timely and useful information about an
enterprises involvement in a variable interest entity. This statement is
effective as of the beginning of each reporting entitys first annual reporting
period that begins after November 15, 2009, for interim periods within that
first annual reporting period, and for interim and annual reporting periods
thereafter. Earlier application is prohibited. The adoption of this statement
is not expected to have a material effect on the Companys consolidated financial
statements.

In June 2008,
ASC Topic 260 Earnings Per Share, was amended to require that unvested
share-based payment awards that contain nonforfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) be treated as participating securities
and shall be included in the computation of earnings per share pursuant to the
two-class method. This amendment 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 to its
provisions. The Company is currently evaluating the impact, if any, that the
adoption of this amendment will have on its consolidated financial statements.

In April 2008,
ASC Topic 350, Intangibles  Goodwill and Other, was amended to include a
list of factors an entity should consider in developing renewal or extension
assumptions used in determining the useful life of recognized 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 this amendment,
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. This
amendment 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 this amendment may have
on its consolidated financial statements and related disclosures.

In February
2008, ASC Topic 820 Fair Value Measurements and Disclosures was amended to
defer the effective date of fair value measurements 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. The Company is
currently evaluating the impact that the adoption of this amendment will have
on its consolidated financial statements.

In December
2007, ASC Topic 805 Business Combinations was amended to retain the
fundamental requirements of the original topic requiring that the purchase
method be used for all business combinations. Topic 805 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, this amendment 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. This amendment is effective for
the Companys business combinations for which the acquisition date is on or
after October 1, 2009.

44

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In December
2007, ASC Topic 810 Consolidation was amended 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 amendment
establishes a single method of accounting for changes in a parents ownership
interest in a subsidiary that do not result in deconsolidation. This amendment
is effective for the Companys fiscal year beginning October 1, 2009. The
Company is currently evaluating the impact of the implementation of this
amendment on its consolidated financial position, results of operations and
cash flows.

In October
2009, the FASB issued Accounting Standards Update (ASU) No. 2009-13, Multiple-Deliverable
Revenue Arrangements (ASU 2009-13) and ASU No. 2009-14, Certain
Revenue Arrangements That Include Software Elements (ASU 2009-14).
ASU 2009-13 addresses the accounting for multiple-deliverable arrangements to
enable vendors to account for products or services (deliverables) separately
rather than as a combined unit. ASU 2009-14 changes the accounting model for
revenue arrangements that include both tangible products and software elements.
Tangible products containing software components and nonsoftware components
that function together to deliver the tangible products essential
functionality are no longer within the scope of the software revenue guidance
of ASC 985-605. These amendments will be effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on
or after June 15, 2010. Early adoption is permitted. The Company is currently
assessing the impact the adoption of ASU 2009-13 and ASU 2009-14 may 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, 2009, the Company maintained cash equivalents and short-term
investments of $119.0 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 less than $0.1 million.

As of
September 30, 2009, the Company had $2.4 million of variable rate debt on which
the interest rate is reset every three months, $8.9 million of variable rate
debt on which the interest rate is reset every six months and $20.1 million of
fixed rate debt. Maturities of this debt are as follows: $19.0 million is due
in 2010, $1.5 million is due in 2011, $0.7 million is due in 2012, $7.6 million
is due in 2013, $0.3 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 has entered into an interest rate swap agreement of total notional
amount of Euro 4.0 million (equivalent to $5.9 million based on the exchange
rate at September 30, 2009) 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, 2009, the Company held
Japanese yen forward exchange options with notional amounts of Euro 0.3 million
and Japanese yen forward exchange options with notional amount of $0.1 million.
The gains or losses resulting from a 10% change in currency exchange rates
would be approximately less than $0.1 and $0.1 million, respectively.

45

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|        |                                                         
|------- | --------------------------------------------------------
|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.

|         |                        
|-------- | -----------------------
|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, 2009. 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, 2009.

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, 2009, 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.

46

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Management
assessed the Companys internal control over financial reporting as of
September 30, 2009, 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.

The Companys management
does not expect that the internal controls over financial reporting will
prevent or detect all errors and all fraud. A control system, no matter how
well designed and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the
design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Due to the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues, errors and
instances of fraud, if any, within the Company have been or will be detected.

|         |                  
|-------- | -----------------
|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 2010 Annual Meeting of Stockholders to
be held in March 2010, 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 2010 Annual Meeting of Stockholders to be held
in March 2010, and is incorporated by reference herein.

47

---



|         |                                                                                                
|-------- | -----------------------------------------------------------------------------------------------
|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, 2009:

|                                                              |  |                                                                                                 |   |                                                                                  |  |                                                                                                                                                    |         | 
|------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- | - | -------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | 
|                                                              |  | 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 securities
 remaining available for
 future issuance under 
 equity 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 2010 Annual Meeting of
Stockholders to be held in March 2010, 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

|         |                                                                          
|-------- | -------------------------------------------------------------------------
|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 2010 Annual Meeting of
Stockholders to be held in March 2010, 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 upon
two-year notice. The Company paid expenses, mainly for
rental expenses, $0.9 million, $1 million and $0.7 million, to Mr. Baasel
during fiscal years 2009, 2008, and 2007, 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 2009 or has any material
interest, direct or indirect, in any proposed transaction, having a value of
$60,000 or more.

48

---



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 2010 Annual Meeting of
Stockholders to be held in March 2010, is incorporated by reference herein.

49

---



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:                                                                                                                                               |  |     
|   |    |                                                                                                                                                                                                                   |  |     
|   |    | Report of Independent Registered Public Accounting Firm                                                                                                                                                           |  | F-1 
|   |    |                                                                                                                                                                                                                   |  |     
|   |    | Consolidated Balance Sheets as of September 30, 2009, and 2008                                                                                                                                                    |  | F-3 
|   |    |                                                                                                                                                                                                                   |  |     
|   |    | Consolidated Statements of Operations for the years ended September
 30, 2009, 2008, and 2007                                                                                                                     |  | F-4 
|   |    |                                                                                                                                                                                                                   |  |     
|   |    | Consolidated Statements of Stockholders Equity and Comprehensive
 Income for the years ended September 30, 2009, 2008, and 2007                                                                                  |  | F-5 
|   |    |                                                                                                                                                                                                                   |  |     
|   |    | Consolidated Statements of Cash flows for the years ended September
 30, 2009, 2008, and 2007                                                                                                                     |  | F-7 
|   |    |                                                                                                                                                                                                                   |  |     
|   |    | Notes to Consolidated Financial Statements                                                                                                                                                                        |  | F-8 
|   |    |                                                                                                                                                                                                                   |  |     
|   | 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.                                                                                

50

---



|                |  |                                                                                                                                                                                             
|--------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 (***)                                                                                              

51

---



|                |  |                                                                                                                                                                                  
|--------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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
 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.                                           

52

---



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 25,
 2009 | 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 25,
 2009
|          |                      |              |                                      |     
|          | Peter Wirth          |              |                                      |      |                   
|          |                      |              |                                      |      |                   
|/s/       | Günther
 Braun       |              | President,
 Chief Executive Officer, |      | November 25,
 2009
|          |                      | and Director |                                      |     
|          | Günther
 Braun       |              |                                      |      |                   
|          |                      |              |                                      |      |                   
|/s/       | Ingrid
 Mittelstaedt |              | Chief
 Financial Officer             |      | November 25,
 2009
|          |                      |              |                                      |     
|          | Ingrid Mittelstaedt  |              |                                      |      |                   
|          |                      |              |                                      |      |                   
|/s/       | Ralph Reins          |              | Director                             |      | November 25,
 2009
|          |                      |              |                                      |     
|          | Ralph Reins          |              |                                      |      |                   
|          |                      |              |                                      |      |                   
|/s/       | Gary Willis          |              | Director                             |      | November 25,
 2009
|          |                      |              |                                      |     
|          | Gary Willis          |              |                                      |      |                   
|          |                      |              |                                      |      |                   
|/s/       | Carl F.
 Baasel      |              | Director                             |      | November 25,
 2009
|          |                      |              |                                      |     
|          | Carl F.
 Baasel      |              |                                      |      |                   
|          |                      |              |                                      |      |                   
|/s/       | Daniel Smoke         |              | Director                             |      | November 25,
 2009
|          |                      |              |                                      |     
|          | Daniel Smoke         |              |                                      |      |                   
|          |                      |              |                                      |      |                   
|/s/       | Stephen
 Fantone     |              | Director                             |      | November 25,
 2009
|          |                      |              |                                      |     
|          | Stephen
 Fantone     |              |                                      |      |                   

53

---



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, 2009 and
2008, and the related consolidated statements of operations, stockholders
equity and comprehensive income, and cash flows for each of the three years in
the period ended September 30, 2009. 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, 2009, 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.

F-1

---



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, 2009 and 2008, and the results of their operations and their cash
flows for each of the three years in the period ended September 30, 2009, 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, 2009, based on the criteria established in Internal Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway
Commission.

As discussed in Note 11, the
Company adopted the provisions of Financial Accounting Standards Board (FASB)
Accounting Standards Codification 740, Income Taxes (formerly FASB Interpretation
No. 48, Accounting
for Uncertainty in Income Taxes) on October 1, 2007.

/s/ DELOITTE & TOUCHE LLP
Detroit, Michigan
November 25, 2009

F-2

---



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

|                                                                                                                                                               |  |               |          |      |   |          |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | -------- | ---- | - | -------- | -
|                                                                                                                                                               |  | September 30, |         
|                                                                                                                                                               |  |               |         
|                                                                                                                                                               |  | 2009          |          | 2008 |  
|                                                                                                                                                               |  |               |          |      |  
|ASSETS                                                                                                                                                         |  |               |          |      |   |          |  
|Current assets:                                                                                                                                                |  |               |          |      |   |          |  
|Cash and cash equivalents                                                                                                                                      |  | $             | 116,128  |      | $ | 114,486  |  
|Short-term investments                                                                                                                                         |  |               | 2,856    |      |   | 1,985    |  
|Refundable income taxes                                                                                                                                        |  |               | 214      |      |   |         |  
|Accounts receivable, trade                                                                                                                                     |  |               | 82,890   |      |   | 121,557  |  
|Less allowance for doubtful accounts                                                                                                                           |  |               | (3,533   | )    |   | (3,647   | )
|                                                                                                                                                               |  |               |          |      |   |          |  
|Trade accounts receivable, net                                                                                                                                 |  |               | 79,357   |      |   | 117,910  |  
|Accounts receivable from related party
 (note 14)                                                                                                              |  |               | 625      |      |   | 712      |  
|Other accounts receivable                                                                                                                                      |  |               | 2,640    |      |   | 3,393    |  
|Inventories (note 3)                                                                                                                                           |  |               | 136,448  |      |   | 153,267  |  
|Prepaid expenses                                                                                                                                               |  |               | 2,685    |      |   | 3,183    |  
|Deferred income tax assets (note 11)                                                                                                                           |  |               | 13,962   |      |   | 11,419   |  
|                                                                                                                                                               |  |               |          |      |   |          |  
|Total current assets                                                                                                                                           |  |               | 354,915  |      |   | 406,355  |  
|Long-term investments (note 4)                                                                                                                                 |  |               | 9,350    |      |   | 11,550   |  
|Property and equipment, at cost (note 5)                                                                                                                       |  |               | 122,298  |      |   | 113,551  |  
|Less accumulated depreciation                                                                                                                                  |  |               | (66,563  | )    |   | (57,325  | )
|                                                                                                                                                               |  |               |          |      |   |          |  
|Property and equipment, net                                                                                                                                    |  |               | 55,735   |      |   | 56,226   |  
|Deferred income tax assets (note 11)                                                                                                                           |  |               | 14,249   |      |   | 4,796    |  
|Goodwill (note 6)                                                                                                                                              |  |               | 93,790   |      |   | 91,755   |  
|Intangibles,
 net (note 6)                                                                                                                                     |  |               | 11,177   |      |   | 11,443   |  
|Other assets                                                                                                                                                   |  |               | 291      |      |   | 1,535    |  
|                                                                                                                                                               |  |               |          |      |   |          |  
|Total assets                                                                                                                                                   |  | $             | 539,507  |      | $ | 583,660  |  
|                                                                                                                                                               |  |               |          |      |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                           |  |               |          |      |   |          |  
|Current liabilities:                                                                                                                                           |  |               |          |      |   |          |  
|Line of credit and short-term borrowings
 (note 8)                                                                                                             |  | $             | 18,983   |      | $ | 54,706   |  
|Accounts payable, trade                                                                                                                                        |  |               | 13,146   |      |   | 21,176   |  
|Accounts payable to related party (note 14)                                                                                                                    |  |               | 551      |      |   | 1,433    |  
|Income taxes payable (note 11)                                                                                                                                 |  |               |         |      |   | 6,316    |  
|Deferred income tax liabilities (note 11)                                                                                                                      |  |               | 1,567    |      |   | 1,343    |  
|Accrued liabilities (note 7)                                                                                                                                   |  |               | 46,389   |      |   | 63,427   |  
|                                                                                                                                                               |  |               |          |      |   |          |  
|Total current liabilities                                                                                                                                      |  |               | 80,636   |      |   | 148,401  |  
|Long-term debt (note 9)                                                                                                                                        |  |               | 12,426   |      |   | 11,968   |  
|Pension
 obligations (note 12)                                                                                                                                 |  |               | 17,097   |      |   | 12,049   |  
|Deferred income tax liabilities (note 11)                                                                                                                      |  |               | 4,643    |      |   | 4,549    |  
|Minority interests                                                                                                                                             |  |               | 3,360    |      |   | 2,287    |  
|Other long-term liabilities                                                                                                                                    |  |               | 3,011    |      |   | 2,148    |  
|                                                                                                                                                               |  |               |          |      |   |          |  
|Total liabilities                                                                                                                                              |  |               | 121,173  |      |   | 181,402  |  
|Commitments (note 10)                                                                                                                                          |  |               |          |      |   |          |  
|Stockholders equity:                                                                                                                                          |  |               |          |      |   |          |  
|Preferred stock, 5,000,000 shares
 authorized, none issued or outstanding                                                                                      |  |               |         |      |   |         |  
|Common stock, $0.01 par value, 50,000,000
 shares authorized, 31,749,400 shares issued at September 30, 2009 (31,726,200
 shares issued at September 30, 2008) |  |               | 318      |      |   | 317      |  
|Additional paid-in capital                                                                                                                                     |  |               | 196,185  |      |   | 189,091  |  
|Retained earnings                                                                                                                                              |  |               | 303,651  |      |   | 294,488  |  
|Accumulated other comprehensive income                                                                                                                         |  |               | 38,176   |      |   | 38,358   |  
|Treasury shares, at cost, 2,829,581 shares                                                                                                                     |  |               | (119,996 | )    |   | (119,996 | )
|                                                                                                                                                               |  |               |          |      |   |          |  
|Total stockholders equity                                                                                                                                     |  |               | 418,334  |      |   | 402,258  |  
|                                                                                                                                                               |  |               |          |      |   |          |  
|Total liabilities and stockholders equity                                                                                                                     |  | $             | 539,507  |      | $ | 583,660  |  
|                                                                                                                                                               |  |               |          |      |   |          |  

See
accompanying notes to consolidated financial statements

F-3

---



ROFIN-SINAR TECHNOLOGIES INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 2009, 2008, AND 2007
(dollars in thousands, except share and per share amounts)

|                                                                         |  |                           |            |      |   |            |   |   |            |  
|------------------------------------------------------------------------ |  | ------------------------- | ---------- | ---- | - | ---------- | - | - | ---------- | -
|                                                                         |  | Years ended September 30, |           
|                                                                         |  |                           |           
|                                                                         |  | 2009                      |            | 2008 |   | 2007       |  
|                                                                         |  |                           |            |      |   |            |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Net sales                                                                |  | $                         | 349,579    |      | $ | 575,278    |   | $ | 479,675    |  
|Cost of
 goods sold                                                      |  |                           | 218,417    |      |   | 327,286    |   |   | 276,402    |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Gross profit                                                             |  |                           | 131,162    |      |   | 247,992    |   |   | 203,273    |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Selling,
 general and administrative expenses                            |  |                           | 87,387     |      |   | 103,781    |   |   | 86,468     |  
|Research and
 development expenses                                       |  |                           | 31,500     |      |   | 41,113     |   |   | 27,830     |  
|Amortization
 expense                                                    |  |                           | 3,559      |      |   | 6,769      |   |   | 4,251      |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Income from operations                                                   |  |                           | 8,716      |      |   | 96,329     |   |   | 84,724     |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Other
 expense (income):                                                 |  |                           |            |      |   |            |   |   |            |  
|Interest income                                                          |  |                           | (1,442     | )    |   | (5,291     | ) |   | (6,892     | )
|Interest expense                                                         |  |                           | 1,751      |      |   | 2,331      |   |   | 1,864      |  
|Minority interest                                                        |  |                           | 340        |      |   | 574        |   |   | 1,126      |  
|Foreign currency losses (gains)                                          |  |                           | (3,544     | )    |   | 1,882      |   |   | 2,115      |  
|Miscellaneous                                                            |  |                           | (2,749     | )    |   | (392       | ) |   | (604       | )
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Total other expense (income), net                                        |  |                           | (5,644     | )    |   | (896       | ) |   | (2,391     | )
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Income before income taxes                                               |  |                           | 14,360     |      |   | 97,225     |   |   | 87,115     |  
|Income tax
 expense (note 11)                                            |  |                           | 5,197      |      |   | 33,466     |   |   | 31,838     |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Net income                                                               |  | $                         | 9,163      |      | $ | 63,759     |   | $ | 55,277     |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Earnings per
 share (note 13):                                           |  |                           |            |      |   |            |   |   |            |  
|Basic                                                                    |  | $                         | 0.32       |      | $ | 2.15       |   | $ | 1.78       |  
|Diluted                                                                  |  | $                         | 0.31       |      | $ | 2.09       |   | $ | 1.74       |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Weighted
 average shares used in computing earnings per share (note 13): |  |                           |            |      |   |            |   |   |            |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Basic                                                                    |  |                           | 28,911,559 |      |   | 29,639,876 |   |   | 30,975,364 |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  
|Diluted                                                                  |  |                           | 29,193,771 |      |   | 30,446,319 |   |   | 31,806,454 |  
|                                                                         |  |                           |            |      |   |            |   |   |            |  

See
accompanying notes to consolidated financial statements

F-4

---



ROFIN-SINAR
TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND
COMPREHENSIVE INCOME
YEARS ENDED SEPTEMBER 30, 2009, 2008, AND 2007
(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, 2006                       |  |                                        | 30,744,400 |                          | $ | 310              |  |                              |         |                    | $ | 167,446                                          |  | $                            | 174,538 |  | $ | 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   |  
|Compensation  Retirement Benefits                   |  |                                        |            |                          |   |                 |  |                              |         |                    |   |                                                 |  |                              |        |  |   | (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 |                          | $ | 312              |  |                              |         |                    | $ | 177,048                                          |  | $                            | 229,815 |  | $ | 41,748 |   | $ | 448,923  |  
|                                                     |  |                                        |            |                          |   |                  |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |          |  
|Uncertain tax positions                              |  |                                        |            |                          |   |                 |  |                              |         |                    |   |                                                 |  |                              | 914     |  |   |       |   |   | 914      |  
|Comprehensive income:                                |  |                                        |            |                          |   |                  |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |          |  
|Fair value of interest swap agreement                |  |                                        |            |                          |   |                 |  |                              |         |                    |   |                                                 |  |                              |        |  |   | (147   | ) |   | (147     | )
|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 |                          | $ | 317              |  | $                            | (119,996 | )                  | $ | 189,091                                          |  | $                            | 294,488 |  | $ | 38,358 |   | $ | 402,258  |  
|                                                     |  |                                        |            |                          |   |                  |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |          |  

F-5

---



ROFIN-SINAR
TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME,
CONTINUED
YEARS ENDED SEPTEMBER 30, 2009, 2008, AND 2007
(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, 2008                                 |  |                                        | 28,896,619 |                          | $ | 317              |  | $                            | (119,996 | )                  | $ | 189,091                                          |  | $                            | 294,488 |  | $ | 38,358 |   | $ | 402,258 |  
|Comprehensive income:                                          |  |                                        |            |                          |   |                  |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  
|Fair value of interest swap agreement                          |  |                                        |            |                          |   |                 |  |                              |         |                    |   |                                                 |  |                              |        |  |   | (216   | ) |   | (216    | )
|Defined benefit pension plan:                                  |  |                                        |            |                          |   |                  |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  
|Net loss arising during period(net of tax benefit of $(1,585)) |  |                                        |            |                          |   |                 |  |                              |         |                    |   |                                                 |  |                              |        |  |   | (3,176 | ) |   | (3,176  | )
|Foreign currency translation adjustment                        |  |                                        |            |                          |   |                 |  |                              |         |                    |   |                                                 |  |                              |        |  |   | 3,210  |   |   | 3,210   |  
|Net income                                                     |  |                                        |            |                          |   |                 |  |                              |         |                    |   |                                                 |  |                              | 9,163   |  |   |       |   |   | 9,163   |  
|                                                               |  |                                        |            |                          |   |                  |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  
|Total comprehensive income                                     |  |                                        |            |                          |   |                  |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   | 8,981   |  
|Common stock issued in connection with:                        |  |                                        |            |                          |   |                  |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  
|Stock incentive plans                                          |  |                                        | 23,200     |                          |   | 1                |  |                              |         |                    |   | 7,094                                            |  |                              |        |  |   |       |   |   | 7,095   |  
|                                                               |  |                                        |            |                          |   |                  |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  
|BALANCES at September 30, 2009                                 |  |                                        | 28,919,819 |                          | $ | 318              |  | $                            | (119,996 | )                  | $ | 196,185                                          |  | $                            | 303,651 |  | $ | 38,176 |   | $ | 418,334 |  
|                                                               |  |                                        |            |                          |   |                  |  |                              |          |                    |   |                                                  |  |                              |         |  |   |        |   |   |         |  

See accompanying notes to consolidated financial statements

F-6

---



ROFIN-SINAR TECHNOLOGIES INC. AND
SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED SEPTEMBER 30, 2009, 2008, AND 2007 
(dollars in thousands)

|                                                                                                                     |  |                           |         |      |   |          |   |   |          |  
|-------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | ---- | - | -------- | - | - | -------- | -
|                                                                                                                     |  | Years ended September 30, |        
|                                                                                                                     |  |                           |        
|                                                                                                                     |  | 2009                      |         | 2008 |   | 2007     |  
|                                                                                                                     |  |                           |         |      |   |          |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                |  |                           |         |      |   |          |   |   |          |  
|Net income                                                                                                           |  | $                         | 9,163   |      | $ | 63,759   |   | $ | 55,277   |  
|Adjustments to reconcile net income to net
 cash provided by operating activities:                                   |  |                           |         |      |   |          |   |   |          |  
|Depreciation and amortization                                                                                        |  |                           | 12,984  |      |   | 16,362   |   |   | 10,959   |  
|Issuance of restricted stock                                                                                         |  |                           | 366     |      |   | 439      |   |   | 335      |  
|Provision for doubtful accounts                                                                                      |  |                           | 1,004   |      |   | 730      |   |   | 1,582    |  
|Exchange rate (gains) losses                                                                                         |  |                           | (171    | )    |   | (1,804   | ) |   | 741      |  
|(Gain) loss on disposal of property and
 equipment                                                                   |  |                           | (35     | )    |   | (32      | ) |   | 87       |  
|Stock-based compensation expenses                                                                                    |  |                           | 6,089   |      |   | 5,863    |   |   | 5,374    |  
|Deferred income taxes                                                                                                |  |                           | (2,715  | )    |   | (177     | ) |   | (2,675   | )
|Increase in minority interest                                                                                        |  |                           | 340     |      |   | 824      |   |   | 1,126    |  
|Change in operating assets and liabilities:                                                                          |  |                           |         |      |   |          |   |   |          |  
|Accounts receivable, trade                                                                                           |  |                           | 38,041  |      |   | (13,134  | ) |   | (10,799  | )
|Other accounts receivable                                                                                            |  |                           | 756     |      |   | 1,001    |   |   | (2,423   | )
|Inventories                                                                                                          |  |                           | 21,026  |      |   | (15,355  | ) |   | (5,691   | )
|Prepaid expenses and other                                                                                           |  |                           | 667     |      |   | (1,346   | ) |   | (2,686   | )
|Accounts payable                                                                                                     |  |                           | (9,235  | )    |   | 2,040    |   |   | 786      |  
|Income taxes payable                                                                                                 |  |                           | (6,241  | )    |   | (27,522  | ) |   | 15,291   |  
|Accrued liabilities and pension obligations                                                                          |  |                           | (16,634 | )    |   | 914      |   |   | 615      |  
|                                                                                                                     |  |                           |         |      |   |          |   |   |          |  
|Net cash provided by operating activities                                                                            |  |                           | 55,405  |      |   | 32,562   |   |   | 67,899   |  
|                                                                                                                     |  |                           |         |      |   |          |   |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                |  |                           |         |      |   |          |   |   |          |  
|Additions to property and equipment                                                                                  |  |                           | (7,791  | )    |   | (14,485  | ) |   | (8,964   | )
|Proceeds from the sale of property and
 equipment                                                                    |  |                           | 531     |      |   | 741      |   |   | 381      |  
|Purchases of short-term investments                                                                                  |  |                           | (2,335  | )    |   | (128,506 | ) |   | (146,794 | )
|Sales of short-term and long-term
 investments                                                                       |  |                           | 3,675   |      |   | 224,650  |   |   | 131,252  |  
|Acquisition of businesses, net of cash acquired                                                                      |  |                           | (12,293 | )    |   | (30,153  | ) |   | (5,341   | )
|                                                                                                                     |  |                           |         |      |   |          |   |   |          |  
|Net cash provided by (used in) investing
 activities                                                                 |  |                           | (18,213 | )    |   | 52,247   |   |   | (29,466  | )
|                                                                                                                     |  |                           |         |      |   |          |   |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                |  |                           |         |      |   |          |   |   |          |  
|Borrowings from bank                                                                                                 |  |                           | 11,833  |      |   | 53,704   |   |   | 3,546    |  
|Repayments to bank                                                                                                   |  |                           | (48,024 | )    |   | (29,122  | ) |   | (11,486  | )
|Purchase of treasury stock                                                                                           |  |                           |        |      |   | (119,996 | ) |   |         |  
|Issuance of common stock                                                                                             |  |                           | 176     |      |   | 5,180    |   |   | 3,713    |  
|Excess tax benefit from stock options                                                                                |  |                           | 464     |      |   |         |   |   |         |  
|Payments to subsidiarys minority
 shareholders                                                                      |  |                           |        |      |   | (223     | ) |   |         |  
|                                                                                                                     |  |                           |         |      |   |          |   |   |          |  
|Net cash used in financing activities                                                                                |  |                           | (35,551 | )    |   | (90,457  | ) |   | (4,227   | )
|                                                                                                                     |  |                           |         |      |   |          |   |   |          |  
|Effect of foreign currency translation on
 cash                                                                      |  |                           | 1       |      |   | 1,676    |   |   | 8,857    |  
|                                                                                                                     |  |                           |         |      |   |          |   |   |          |  
|                                                                                                                     |  |                           |         |      |   |          |   |   |          |  
|Net increase (decrease) in cash and cash
 equivalents                                                                |  |                           | 1,642   |      |   | (3,972   | ) |   | 43,063   |  
|Cash and cash equivalents at beginning of
 year                                                                      |  |                           | 114,486 |      |   | 118,458  |   |   | 75,395   |  
|                                                                                                                     |  |                           |         |      |   |          |   |   |          |  
|Cash and cash equivalents at end of year                                                                             |  | $                         | 116,128 |      | $ | 114,486  |   | $ | 118,458  |  
|                                                                                                                     |  |                           |         |      |   |          |   |   |          |  
|                                                                                                                     |  |                           |         |      |   |          |   |   |          |  
|Cash paid during the year for interest                                                                               |  | $                         | 1,949   |      | $ | 2,046    |   | $ | 1,601    |  
|                                                                                                                     |  |                           |         |      |   |          |   |   |          |  
|Cash paid during the year for income taxes                                                                           |  | $                         | 13,651  |      | $ | 63,118   |   | $ | 21,219   |  
|                                                                                                                     |  |                           |         |      |   |          |   |   |          |  
|                                                                                                                     |  |                           |         |      |   |          |   |   |          |  
|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-7

---



ROFIN-SINAR TECHNOLOGIES INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
September 30, 2009, 2008, and 2007 
(dollars in thousands, except per share amounts)

|   |                                
|-- | -------------------------------
|1. | SUMMARY OF
 ACCOUNTING POLICIES

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, 2009, 2008, and 2007, Rofin generated approximately 58%, 65%, and
65%, respectively, of its revenues from the sale of lasers and laser systems.
For the years ended September 30, 2009, 2008, and 2007, approximately 42%, 35%,
and 35%, respectively, were generated 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 subsidiaries
Nanjing Eastern Laser Company Ltd. (NELC) and Nanjing Eastern Technologies
Company Ltd. (NET). 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 100%-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.,
WB-PRC Laser Service 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
intercompany balances and transactions have been eliminated in consolidation.

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.

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On December 2, 2006, the Company purchased an additional 1%
     of the share capital of Rofin-Sinar UK Ltd. through RSTE 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
     UK Ltd. through RSTE under this option agreement. The Company now holds
     100% of the share capital of Rofin-Sinar UK 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 RSL. m2k 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 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. EST 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.                                                                                                                                                                                                                                                                                                                                                                                                         

F-8

---



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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. During fiscal year 2009, the Company settled an earn-out
 agreement with the former Nufern owners for an aggregate of $5.0 million and
 finalized its valuation of the identified intangible assets related to this
 acquisition. As a result, a total adjustment amounting to a net decrease of
 $3.7 million was made to the amount of goodwill recorded. This purchase
 resulted in final goodwill of $2.9 million.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Effective
 March 11, 2009, the Company made the final payment for the outstanding
 earn-out, and acquired the remaining 10% of share capital of Optoskand AB
 through its wholly-owned subsidiary Rofin-Sinar Laser GmbH under an option
 agreement. This purchase resulted in additional goodwill of $0.7 million.                                                                                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Effective
 April 9, 2009, the Company acquired 80% of the equity 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. This purchase resulted in
 a preliminary goodwill calculation of approximately $4.3 million.                                                                                                                                                                                                                                                  

None of these
acquisitions were material for the purpose of proforma presentation.

Fair Value

The Companys
cash, investments, accounts receivable, other assets, accounts payable, accrued
liabilities, notes payable, interest rate swaps and other liabilities are
carried at amounts, which reasonably approximate their fair value due to their
short-term nature. The Companys notes payable are at variable interest rates
that approximate market. Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Where
available, fair value is based on observable market prices or parameters or
derived from such prices or parameters. Where observable prices or inputs are
not available, valuation models may be applied.

Assets and
liabilities recorded at fair value in our balance sheet are categorized based
upon the level of judgment associated with the inputs used to measure their
fair values. Hierarchical levels directly related to the amount of subjectivity
associated with the inputs to fair valuation of these assets and liabilities
are as follows:

| |   |                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Level 1 -
 Unadjusted observable quoted prices for identical instruments in active
 markets.                                                                                                                                 
| |   |                                                                                                                                                                                                                              
| |  | Level 2 -
 Observable inputs other than those included in Level 1. For example, quoted
 prices for similar assets or liabilities in active markets or quoted prices
 for identical assets or liabilities in inactive markets.
| |   |                                                                                                                                                                                                                              
| |  | Level 3 -
 Unobservable inputs reflecting managements own assumptions about the inputs
 used in pricing the asset or liability.                                                                                             

F-9

---



Cash Equivalents

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.

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.

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            |  | Term of lease

Total
depreciation expense for the years ended September 30, 2009, 2008, and 2007
amounted to $9.4 million, $9.6 million and $6.7 million, respectively.

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.

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 an
operating segment and would generally be lower than that level of reporting.
The Company manages its business under one operating and reportable segment,
and has one reporting unit.

F-10

---



In testing for
impairment, the fair value of the reporting unit, that is determined based on
market data, 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 implied fair value of the goodwill.

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

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
revenues net of volume discount rebates that certain OEM-customers earn, based
on sales levels, pursuant to contractual agreements.

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.

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.

The Company
recognizes certain tax liabilities for anticipated tax audit findings in the
U.S. and other tax jurisdictions based on its estimate of whether, and to the
extent to which additional taxes would be due. If the audit finding results in
actual taxes owed more or less than what the Company anticipated, its income
tax expense would increase or decrease in the period of determination.

Revenue and
expenses are presented net of sales, use and value added taxes, as the case may
be.

F-11

---



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.

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.

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).

Comprehensive Income

Comprehensive
income consists of net income, foreign currency translation adjustments,
pension liability adjustments, 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, |       
|                                                                                               |  |               |       
|                                                                                               |  | 2009          |        | 2008 |  
|                                                                                               |  |               |        |      |  
|Foreign currency translation adjustment                                                        |  | $             | 40,597 |      | $ | 37,388 | 
|Defined benefit
     pension plans (net of tax effect of $1,263 in 2009 and $323 in 2008)      |  |               | (2,362 | )    |   | 814    | 
|Fair value of
     interest swap agreements (net of tax effect of $22 in 2009 and $59 in 2008) |  |               | (59    | )    |   | 156    | 
|                                                                                               |  |               |        |      |   |        | 
|Total accumulated other comprehensive
 income                                                  |  | $             | 38,176 |      | $ | 38,358 | 
|                                                                                               |  |               |        |      |   |        | 

Research and Development Expenses

Research and
development costs are expensed when incurred and are net of German government
and European grants of $1,991, $1,276, and $2,339 received for the years ended
September 30, 2009, 2008, and 2007, respectively. The Company has no future
obligations under such grants.

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.

F-12

---



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,
2009, the Company held Japanese yen forward exchange options with notional
amounts of Euro 0.3 million and Japanese yen forward exchange options with
notional amount of $0.1 million.

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.

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, the valuation allowance for deferred tax assets, and assets and
obligations related to employee benefits. Actual results could differ from
these estimates.

Stock Incentive Plans

The Company
measures share-based payments to employees, including grants of employee stock options,
at fair value and expenses them in the consolidated statement of operations
over the service period (generally the vesting period) of the grant. The
Company only recognized compensation expense in the consolidated statements of
operations beginning with the first period that the expensing requirement
became effective, as allowed under the modified prospective application.

Shipping and Handling Costs

The Company
accounts for shipping and handling fees and costs by recording revenue from
shipping and handling fees in net sales and shipping and handling costs in cost
of sales.

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 retroactively to reflect
the 2-for-1 stock split.

F-13

---



Recent Accounting Pronouncements Adopted

The Financial
Accounting Standards Board modified the hierarchy of Generally Accepted
Accounting Principles, 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 in the United States
(the GAAP hierarchy). The new Accounting Standards Codification (ASC) became the
single source of authoritative nongovernmental U.S. Generally Accepted
Accounting Principles. The ASC became effective for interim and annual periods
ending after September 15, 2009, and did not have an impact on the Companys
consolidated financial statements other then changing the references to
authoritative accounting literature.

In May 2009,
ASC Topic 855, Subsequent Events, was amended to require entities to disclose
the date through which they have evaluated subsequent events and whether the date
corresponds with the release of their financial statements. The Company adopted
the guidance for the third quarter of 2009. The adoption had no impact on our
consolidated financial statements, besides the additional disclosure.

In April 2009,
ASC Topic 320 Investments  Debt and Equity Securities, was amended, to
change the recognition and measurement of other-than-temporary impairments for
debt securities by modifying the pre-existing intent and ability indicator.
Under this amendment, an other-than-temporary impairment is triggered when
there is intent to sell the security, it is more likely than not that the
security will be required to be sold before recovery, or the security is not
expected to recover the entire amortized cost basis of the security.
Additionally, ASC Topics 220 Comprehensive Income, and Topic 225 Income
Statement were amended to change the presentation of an other-than-temporary
impairment in the income statement for those impairments involving credit
losses. The credit loss component will be recognized in earnings and the
remainder of the impairment will be recorded in other comprehensive income. The
Company adopted these Topic changes as of June 30, 2009, and did not have a
significant impact on the Companys consolidated financial position or results
of operations.

In April 2009,
ASC Topic 820 Fair Value Measurements and Disclosures, was amended to provide
application guidance addressing the determination of (a) when a market for an
asset or a liability is active or inactive and (b) when a particular
transaction is distressed. This Topic became effective June 30, 2009, and did
not have a material impact on the Companys consolidated financial statements.

In April 2009,
ASC Topic 825, Financial Instruments, was amended to require entities to
disclose the methods and significant assumptions used to estimate the fair
value of financial instruments, in both interim financial statements as well as
annual financial statements. This Topic became effective for interim and annual
periods ending after June 15, 2009, and did not have an impact on the Companys
consolidated financial statements.

In March 2008,
ASC Topic 815, Derivatives and Hedging, was amended to require additional
disclosures related to the use of derivative instruments, the accounting for
derivatives and the financial statement impact of derivatives. This Topic was
effective for fiscal years and interim periods beginning after November 15,
2008. This Topic became effective January 1, 2009 and did not have an impact on
the Companys consolidated financial statements.

In February
2008, ASC Topic 820 Fair Value Measurements and Disclosures, was amended to
exclude from its scope lease accounting and other accounting pronouncements
that address fair value measurements for purposes of lease classification or
measurement. This Topic became effective for the quarter ending December 31,
2008, and did not have a material impact on the Companys consolidated
financial statements.

In February
2007, ASC Topic 825, Financial Instruments, was amended to permit entities to
choose to measure many financial instruments at fair value, and certain other
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently. This Topic was effective for fiscal
years beginning after November 15, 2007. The adoption this Topic did not have a
material impact on our consolidated financial position and results of
operations.

F-14

---



Recent Accounting Pronouncements Not Yet
Adopted as of September 30, 2009

In June 2009,
the FASB issued SFAS No. 167, Amendments to
FASB Interpretation No. 46(R). The objective of this statement is
to improve financial reporting by enterprises involved with variable interest
entities. This statement addresses (1) the effects on certain provisions of
FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable
Interest Entities, as a result of the elimination of the qualifying
special-purpose entity concept in SFAS No. 166, Accounting for Transfers of Financial Assets, and (2)
concern about the application of certain key provisions of FASB Interpretation
No. 46(R), including those in which the accounting and disclosures under the
Interpretation do not always provide timely and useful information about an
enterprises involvement in a variable interest entity. This statement is
effective as of the beginning of each reporting entitys first annual reporting
period that begins after November 15, 2009, for interim periods within that
first annual reporting period, and for interim and annual reporting periods
thereafter. Earlier application is prohibited. The adoption of this statement
is not expected to have a material effect on the Companys consolidated
financial statements.

In June 2008,
ASC Topic 260, Earnings Per Share, was amended to require that unvested
share-based payment awards that contain nonforfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) be treated as participating
securities and shall be included in the computation of earnings per share
pursuant to the two-class method. This amendment 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 to
its provisions. The Company is currently evaluating the impact, if any, that
the adoption of this amendment will have on its consolidated financial
statements.

In April 2008,
ASC Topic 350, Intangibles  Goodwill and Other, was amended to include a
list of factors an entity should consider in developing renewal or extension
assumptions used in determining the useful life of recognized 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 this amendment,
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. This amendment
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 this amendment may have on its
consolidated financial statements and related disclosures.

In February
2008, ASC Topic 820, Fair Value Measurements and Disclosures, was amended to
defer the effective date of fair value measurements 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. The Company is
currently evaluating the impact that the adoption of this amendment will have
on its consolidated financial statements.

In December
2007, ASC Topic 805, Business Combinations, was amended to retain the
fundamental requirements of the original topic requiring that the purchase
method be used for all business combinations. Topic 805 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, this amendment 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. This amendment is effective for
the Companys business combinations for which the acquisition date is on or
after October 1, 2009.

F-15

---



In December
2007, ASC Topic 810, Consolidation, was amended 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 amendment
establishes a single method of accounting for changes in a parents ownership
interest in a subsidiary that do not result in deconsolidation. This amendment
is effective for the Companys fiscal year beginning October 1, 2009. The
Company is currently evaluating the impact of the implementation of this
amendment on its consolidated financial position, results of operations and
cash flows.

In October
2009, the FASB issued Accounting Standards Update (ASU) No. 2009-13,
Multiple-Deliverable Revenue Arrangements (ASU 2009-13)
and ASU No. 2009-14, Certain Revenue Arrangements That Include Software
Elements (ASU
2009-14). ASU 2009-13 addresses the accounting for multiple-deliverable
arrangements to enable vendors to account for products or services
(deliverables) separately rather than as a combined unit. ASU 2009-14 changes
the accounting model for revenue arrangements that include both tangible
products and software elements. Tangible products containing software
components and nonsoftware components that function together to deliver the
tangible products essential functionality are no longer within the scope
of the software revenue guidance of ASC 985-605. These amendments will be
effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010. Early adoption
is permitted. The Company is currently assessing the impact the adoption of
ASU 2009-13 and ASU 2009-14 may have on its consolidated financial  statements.

|   |                         
|-- | ------------------------
|2. | FAIR VALUE
 MEASUREMENTS

Financial
assets and liabilities measured at fair value on a recurring basis as of
September 30, 2009, are classified on the valuation hierarchy in the table
below:

|                                       |  |       |         |         |   |         |  |         |     |   |   |       | 
|-------------------------------------- |  | ----- | ------- | ------- | - | ------- |  | ------- | --- | - | - | ----- | 
|                                       |  | Total |         | Level 1 |   | Level 2 |  | Level 3 |    
|                                       |  |       |         |         |   |         |  |         |    
|Cash and
 cash equivalents             |  | $     | 116,128 |         | $ | 116,128 |  | $       |    |   | $ |      | 
|Short-term
 investments                |  |       | 2,856   |         |   | 2,856   |  |         |    |   |   |      | 
|Derivatives                            |  |       | (83     | )       |   |        |  |         | (83 | ) |   |      | 
|Non 
 current auction rate securities |  |       | 9,350   |         |   |        |  |         |    |   |   | 9,350 | 
|                                       |  |       |         |         |   |         |  |         |     |   |   |       | 
|Total assets
 at fair value            |  | $     | 128,251 |         | $ | 118,984 |  | $       | (83 | ) | $ | 9,350 | 
|                                       |  |       |         |         |   |         |  |         |     |   |   |       | 

The changes in
the fair value measurement of investments using significant unobservable inputs
(level 3) for the year ended September 30, 2009, are as follows:

|                    |  |                                                                            |        |  
|------------------- |  | -------------------------------------------------------------------------- | ------ | -
|                    |  | Fair Value
 Measurements Using
 Significant Unobservable
 Inputs (Level 3) |       
|                    |  |                                                                            |       
|September
 30, 2008 |  | $                                                                          | 11,550 |  
|Settlements         |  |                                                                            | (2,200 | )
|                    |  |                                                                            |        |  
|September
 30, 2009 |  | $                                                                          | 9,350  |  
|                    |  |                                                                            |        |  

F-16

---



|   |            
|-- | -----------
|3. | INVENTORIES

Inventories
are summarized as follows:

|                            |  |               |         |      |   |         | 
|--------------------------- |  | ------------- | ------- | ---- | - | ------- | 
|                            |  | September 30, |        
|                            |  |               |        
|                            |  | 2009          |         | 2008 |  
|                            |  |               |         |      |  
|Finished
 goods             |  | $             | 18,078  |      | $ | 23,844  | 
|Work in
 progress           |  |               | 29,266  |      |   | 31,224  | 
|Raw
 materials and supplies |  |               | 46,699  |      |   | 53,857  | 
|Demo
 inventory             |  |               | 16,030  |      |   | 16,868  | 
|Service
 parts              |  |               | 26,375  |      |   | 27,474  | 
|                            |  |               |         |      |   |         | 
|Total
 inventories          |  | $             | 136,448 |      | $ | 153,267 | 
|                            |  |               |         |      |   |         | 

|   |                      
|-- | ---------------------
|4. | LONG-TERM INVESTMENTS

Long-term
investments include auction rate securities which 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.

Through sales,
the Company reduced its holdings of auction rate securities to approximately
$9.4 million at September 30, 2009. All sales were settled, for cash, at par
value. At September 30, 2009, the Company held five individual auction rate
securities. 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 flow model to determine the fair
market value of these investments at September 30, 2009. 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. Although the Company believes these
investments will become liquid within the next twelve months, it is uncertain
what impact the current economic environment will have on this position and
therefore, they have been classified as long-term assets on the consolidated
balance sheet. See footnote 20 Subsequent Events regarding the sale of
additional auction rate securities subsequent to September 30, 2009.

|   |                        
|-- | -----------------------
|5. | PROPERTY AND
 EQUIPMENT

Property and
equipment include the following:

|                                       |  |               |         |      |   |         | 
|-------------------------------------- |  | ------------- | ------- | ---- | - | ------- | 
|                                       |  | September 30, |        
|                                       |  |               |        
|                                       |  | 2009          |         | 2008 |  
|                                       |  |               |         |      |  
|Buildings                              |  | $             | 36,152  |      | $ | 35,283  | 
|Technical
 machinery and equipment     |  |               | 37,410  |      |   | 33,088  | 
|Construction
 in progress              |  |               | 1,759   |      |   | 3,083   | 
|Furniture
 and fixtures                |  |               | 21,916  |      |   | 19,981  | 
|Computers
 and software                |  |               | 8,370   |      |   | 8,395   | 
|Leasehold
 improvements                |  |               | 16,691  |      |   | 13,721  | 
|                                       |  |               |         |      |   |         | 
|Total
 property and equipment, at cost |  | $             | 122,298 |      | $ | 113,551 | 
|                                       |  |               |         |      |   |         | 

F-17

---



|   |                                      
|-- | -------------------------------------
|6. | GOODWILL AND
 OTHER INTANGIBLE ASSETS

The changes in
the carrying amount of goodwill for the years ended September 30, 2009 and
2008, are as follows:

|                                                             |  |         |        |               |   |        |   |       |        |   |   |        |  
|------------------------------------------------------------ |  | ------- | ------ | ------------- | - | ------ | - | ----- | ------ | - | - | ------ | -
|                                                             |  | Germany |        | United States |   | Other  |   | Total |       
|                                                             |  |         |        |               |   |        |   |       |       
|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 |  
|                                                             |  |         |        |               |   |        |   |       |        |   |   |        |  
|Additional goodwill from acquisitions                        |  |         |       |               |   | 5,045  |   |       | 5,087  |   |   | 10,132 |  
|Adjustment to goodwill from final purchase
 price allocation |  |         |       |               |   | (8,740 | ) |       |       |   |   | (8,740 | )
|Currency exchange difference                                 |  |         | 976    |               |   | 73     |   |       | (406   | ) |   | 643    |  
|                                                             |  |         |        |               |   |        |   |       |        |   |   |        |  
|Balance as of September 30, 2009                             |  | $       | 46,995 |               | $ | 13,240 |   | $     | 33,555 |   | $ | 93,790 |  
|                                                             |  |         |        |               |   |        |   |       |        |   |   |        |  

The carrying
values of other intangible assets are as follows:

|                              |  |                        |        |                           |   |                        |  |                           |        |  |   |        | 
|----------------------------- |  | ---------------------- | ------ | ------------------------- | - | ---------------------- |  | ------------------------- | ------ |  | - | ------ | 
|                              |  | September 30, 2009     |        | September 30, 2008        |  
|                              |  |                        |        |                           |  
|                              |  | Gross Carrying
 Amount |        | Accumulated
 Amortization |   | Gross Carrying
 Amount |  | Accumulated
 Amortization |       
|                              |  |                        |        |                           |   |                        |  |                           |       
|Amortized
 intangible assets: |  |                        |        |                           |   |                        |  |                           |        |  |   |        | 
|Patents                       |  | $                      | 10,577 |                           | $ | 5,477                  |  | $                         | 9,821  |  | $ | 4,417  | 
|Customer base                 |  |                        | 17,289 |                           |   | 15,174                 |  |                           | 14,846 |  |   | 13,688 | 
|Other                         |  |                        | 18,132 |                           |   | 14,170                 |  |                           | 17,229 |  |   | 12,348 | 
|                              |  |                        |        |                           |   |                        |  |                           |        |  |   |        | 
|Total                         |  | $                      | 45,998 |                           | $ | 34,821                 |  | $                         | 41,896 |  | $ | 30,453 | 
|                              |  |                        |        |                           |   |                        |  |                           |        |  |   |        | 

Patents are
amortized on a straight-line basis 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, 2009, 2008,
and 2007, was $3,559, $6,769, and $4,251, respectively. At September 30, 2009,
estimated amortization expense for the next five fiscal years based on the
average exchange rates as of September 30, 2009, is as follows:

|     |  |   |       | 
|---- |  | - | ----- | 
|2010 |  | $ | 1,700 | 
|2011 |  |   | 1,500 | 
|2012 |  |   | 1,400 | 
|2013 |  |   | 1,400 | 
|2014 |  |   | 1,400 | 

|   |                     
|-- | --------------------
|7. | ACCRUED
 LIABILITIES

Accrued
liabilities are comprised of the following:

|                           |  |               |        |      |   |        | 
|-------------------------- |  | ------------- | ------ | ---- | - | ------ | 
|                           |  | September 30, |       
|                           |  |               |       
|                           |  | 2009          |        | 2008 |  
|                           |  |               |        |      |  
|Employee
 compensation     |  | $             | 14,375 |      | $ | 23,211 | 
|Warranty
 reserves         |  |               | 8,962  |      |   | 12,337 | 
|Other taxes
 payable       |  |               | 108    |      |   | 198    | 
|Customer
 deposits         |  |               | 8,973  |      |   | 10,649 | 
|Other                      |  |               | 13,971 |      |   | 17,032 | 
|                           |  |               |        |      |   |        | 
|Total
 accrued liabilities |  | $             | 46,389 |      | $ | 63,427 | 
|                           |  |               |        |      |   |        | 

F-18

---



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, 2009 and 2008, is as
follows:

|                                                      |  |   |        |  
|----------------------------------------------------- |  | - | ------ | -
|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 |  
|Additional accruals for warranties during
 the period |  |   | 439    |  
|Usage during the period                               |  |   | (3,774 | )
|Currency translation                                  |  |   | (40    | )
|                                                      |  |   |        |  
|Balance at
 September 30, 2009                        |  | $ | 8,962  |  
|                                                      |  |   |        |  

|   |                 
|-- | ----------------
|8. | LINES OF
 CREDIT

The Company
maintains $25,000 in short-term lines of credit. As of September 30, 2009, $10,000
was used under these lines of credit.

In addition,
the Companys non-U.S. subsidiaries have short-term credit lines amounting
to $65,990, which allow them to borrow in the applicable local currency. At
September 30, 2009 and 2008, direct borrowings under these agreements totaled
$8,983 and $14,706, respectively. Additionally $4,184 and $6,750 were used for
bank guarantees under those lines of credit as of September 30, 2009 and 2008,
respectively. The remaining unused portion of the lines of credit at September
30, 2009, was $52,823, in aggregate. Fixed interest rates vary from 1.1% to
10.8%, depending upon the country and usage of the available credit.

Furthermore,
the Company also maintains credit lines specific to bank guarantees amounting
    to $2,933 and $3,139 as of September 30, 2009 and 2008, respectively, of
    which $331 and $339 was used as at 30, 2009 and 2008, respectively.

The Company
has entered into an interest rate swap agreement for a total notional amount of
Euro 4,000 (equivalent to $5,865 based on the exchange rate at September 30,
2009) to minimize exposure to fluctuation of interest rates on short-term
variable rate debt.

|   |                
|-- | ---------------
|9. | LONG-TERM
 DEBT

Carl Baasel
Lasertechnik GmbH & Co. KG and Rofin-Baasel Korea, Co, Ltd, maintain
additional long-term credit facilities of $7,604, which expire in 2013.
Corelase Oy maintains long-term credit facilities of $1,538 which expire in
2011, $660 which expire in 2012, $314 which expire in 2014, and $2,310 which
expire in 2015. As of September 30, 2009, $12,426 was borrowed under such
facilities at an average interest rate of 5.2%. As of September 30, 2008,
$11,968 was borrowed under such facilities at an average interest rate of 5.9%.

The Company is
subject to financial covenants under some of these credit facilities and lines
of credit, which could restrict the Company from drawing money under them. At
September 30, 2009, the Company was in compliance with these covenants.

|    |            
|--- | -----------
|10. | COMMITMENTS

The Company
leases operating facilities and equipment under operating leases, which expire
at various dates through 2017 (see note 14). The lease agreements require
payment of real estate taxes, insurance and maintenance expenses by the
Company.

F-19

---



Minimum lease
payments for future fiscal years under non-cancelable operating leases as of
September 30, 2009, are:

|                                 |  |       |       | 
|-------------------------------- |  | ----- | ----- | 
|Fiscal year ending September 30, |  | Total |      
|                                 |  |       |      
|2010                             |  | $     | 8,683 | 
|2011                             |  |       | 6,564 | 
|2012                             |  |       | 4,054 | 
|2013                             |  |       | 2,372 | 
|2014                             |  |       | 2,112 | 
|2015 and
 thereafter             |  |       | 8,628 | 

Rent expense
charged to operations for the years ended September 30, 2009, 2008, and 2007,
approximated $8,732, $8,452, and $7,432, respectively.

Purchase
obligations for payments due under various types of agreements to purchase raw
materials and other goods as of September 30, 2009, are:

|                  |  |  |        | 
|----------------- |  |  | ------ | 
|Less than 1
 Year |  |  | 68,207 | 
|1  3 Years       |  |  | 15,263 | 
|3  5 Years       |  |  |       | 

|    |             
|--- | ------------
|11. | INCOME TAXES

Significant
components of the income tax provision are as follows:

|                         |  |                           |        |      |   |        |   |   |        |  
|------------------------ |  | ------------------------- | ------ | ---- | - | ------ | - | - | ------ | -
|                         |  | Years ended September 30, |       
|                         |  |                           |       
|                         |  | 2009                      |        | 2008 |   | 2007   |  
|                         |  |                           |        |      |   |        |  
|Current:                 |  |                           |        |      |   |        |   |   |        |  
|United States            |  | $                         | 306    |      | $ | 2,784  |   | $ | 3,063  |  
|Foreign                  |  |                           | 7,605  |      |   | 30,859 |   |   | 31,450 |  
|                         |  |                           |        |      |   |        |   |   |        |  
|Total current            |  |                           | 7,911  |      |   | 33,643 |   |   | 34,513 |  
|                         |  |                           |        |      |   |        |   |   |        |  
|Deferred:                |  |                           |        |      |   |        |   |   |        |  
|United States            |  |                           | (2,596 | )    |   | (350   | ) |   | (807   | )
|Foreign                  |  |                           | (118   | )    |   | 173    |   |   | (1,868 | )
|                         |  |                           |        |      |   |        |   |   |        |  
|Total deferred           |  |                           | (2,714 | )    |   | (177   | ) |   | (2,675 | )
|                         |  |                           |        |      |   |        |   |   |        |  
|Total income tax expense |  | $                         | 5,197  |      | $ | 33,466 |   | $ | 31,838 |  
|                         |  |                           |        |      |   |        |   |   |        |  

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

|                                  |  |                           |         |      |   |        |   |   |        | 
|--------------------------------- |  | ------------------------- | ------- | ---- | - | ------ | - | - | ------ | 
|                                  |  | Years ended September 30, |        
|                                  |  |                           |        
|                                  |  | 2009                      |         | 2008 |   | 2007   |  
|                                  |  |                           |         |      |   |        |  
|United
 States                    |  | $                         | (11,766 | )    | $ | (3,077 | ) | $ | 5,132  | 
|Germany                           |  |                           | 21,068  |      |   | 87,377 |   |   | 68,587 | 
|France                            |  |                           | 175     |      |   | 1,112  |   |   | 852    | 
|Italy                             |  |                           | 107     |      |   | 2,846  |   |   | 2,119  | 
|Singapore                         |  |                           | 298     |      |   | 2,315  |   |   | 2,649  | 
|United
 Kingdom                   |  |                           | 4,069   |      |   | 5,776  |   |   | 3,809  | 
|Japan                             |  |                           | 71      |      |   | 203    |   |   | 223    | 
|Other                             |  |                           | 338     |      |   | 673    |   |   | 3,744  | 
|                                  |  |                           |         |      |   |        |   |   |        | 
|Total income
 before income taxes |  | $                         | 14,360  |      | $ | 97,225 |   | $ | 87,115 | 
|                                  |  |                           |         |      |   |        |   |   |        | 

F-20

---



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, |       
|                                                     |  |                           |       
|                                                     |  | 2009                      |        | 2008 |   | 2007   |  
|                                                     |  |                           |        |      |   |        |  
|U.S. federal statutory tax rate                      |  |                           | 35     | %    |   | 35     | % |   | 35     | %
|                                                     |  |                           |        |      |   |        |   |   |        |  
|Computed expected tax expense                      |  | $                         | 5,026  |      | $ | 34,029 |   | $ | 30,490 |  
|Difference between U.S. and foreign
 statutory rates |  |                           | (1,594 | )    |   | (5,048 | ) |   | 2,117  |  
|Minority interest and other permanent
 differences   |  |                           | 321    |      |   | 1,543  |   |   | 652    |  
|Adjustment of valuation allowance                    |  |                           | 456    |      |   | (10    | ) |   | (7     | )
|Change in statutory tax rates                        |  |                           | (80    | )    |   | 276    |   |   | (415   | )
|Other                                                |  |                           | 1,068  |      |   | 2,676  |   |   | (999   | )
|                                                     |  |                           |        |      |   |        |   |   |        |  
|Actual tax expense                                   |  | $                         | 5,197  |      | $ | 33,466 |   | $ | 31,838 |  
|                                                     |  |                           |        |      |   |        |   |   |        |  

Total income
taxes for the years ended September 30, 2009, 2008, and 2007, were allocated as
follows:

|                                                                                |  |                           |        |      |   |        |   |   |        |  
|------------------------------------------------------------------------------- |  | ------------------------- | ------ | ---- | - | ------ | - | - | ------ | -
|                                                                                |  | Years ended September 30, |       
|                                                                                |  |                           |       
|                                                                                |  | 2009                      |        | 2008 |   | 2007   |  
|                                                                                |  |                           |        |      |   |        |  
|Income taxes from operations                                                    |  | $                         | 5,197  |      | $ | 33,466 |   | $ | 31,838 |  
|Stockholders equity:                                                           |  |                           |        |      |   |        |   |   |        |  
|Tax benefit applicable to the exercise of
 stock options                        |  |                           | (464   | )    |   | (567   | ) |   | (174   | )
|Tax expense applicable to the additional
 minimum pension obligation            |  |                           |       |      |   |       |   |   | 316    |  
|Tax (benefit) expense applicable to defined
 benefit pension plan               |  |                           | (1,585 | )    |   | 690    |   |   | (353   | )
|Tax (benefit) expense applicable to the
 fair value of interest swap agreements |  |                           | (81    | )    |   | (118   | ) |   | 23     |  
|                                                                                |  |                           |        |      |   |        |   |   |        |  
|                                                                               
|Total income tax                                                                |  | $                         | 3,067  |      | $ | 33,471 |   | $ | 31,650 |  
|                                                                                |  |                           |        |      |   |        |   |   |        |  

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, |       
|                                      |  |               |       
|                                      |  | 2009          |        | 2008 |  
|                                      |  |               |        |      |  
|Deferred income tax assets:           |  |               |        |      |   |         |  
|Foreign                               |  |               |        |      |   |         |  
|Net operating loss carryforwards      |  | $             | 3,966  |      | $ | 3,346   |  
|Pension
 obligations                  |  |               | 1,039  |      |   | 419     |  
|Inventories                           |  |               | 3,418  |      |   | 4,311   |  
|Accounts payable                      |  |               | 213    |      |   | 147     |  
|Other                                 |  |               | 644    |      |   | 318     |  
|                                      |  |               |        |      |   |         |  
|Total Foreign                         |  |               | 9,280  |      |   | 8,541   |  
|                                      |  |               |        |      |   |         |  
|United States:                        |  |               |        |      |   |         |  
|Net operating loss carryforwards      |  |               | 10,423 |      |   | 18,760  |  
|Tax credits                           |  |               | 1,663  |      |   | 1,922   |  
|Warranty reserve                      |  |               | 375    |      |   | 653     |  
|Inventories                           |  |               | 4,567  |      |   | 3,988   |  
|Allowance for doubtful accounts       |  |               | 452    |      |   | 380     |  
|Accrued liabilities                   |  |               | 392    |      |   | 559     |  
|Pension obligations                   |  |               | 981    |      |   | 287     |  
|Property & equipment                  |  |               | 101    |      |   |        |  
|Stock-based compensation expense      |  |               | 1,143  |      |   | 804     |  
|Other                                 |  |               | 315    |      |   | 133     |  
|                                      |  |               |        |      |   |         |  
|Total United States                   |  |               | 20,412 |      |   | 27,486  |  
|                                      |  |               |        |      |   |         |  
|Gross deferred income tax assets      |  |               | 29,692 |      |   | 36,027  |  
|Less: Valuation allowance             |  |               | (3,318 | )    |   | (20,682 | )
|                                      |  |               |        |      |   |         |  
|Net deferred income tax assets        |  | $             | 26,374 |      | $ | 15,345  |  
|                                      |  |               |        |      |   |         |  
|Deferred income tax liabilities:      |  |               |        |      |   |         |  
|Foreign:                              |  |               |        |      |   |         |  
|Property & equipment                  |  |               | (1,761 | )    |   | (1,691  | )
|Intangibles                           |  |               | (2,495 | )    |   | (1,489  | )
|Other                                 |  |               | (25    | )    |   | (292    | )
|                                      |  |               |        |      |   |         |  
|Total Foreign                         |  |               | (4,281 | )    |   | (3,472  | )
|                                      |  |               |        |      |   |         |  
|United States:                        |  |               |        |      |   |         |  
|Accounts receivable                   |  |               | (92    | )    |   |        |  
|Property & equipment                  |  |               |       |      |   | (488    | )
|Intangibles                           |  |               |       |      |   | (352    | )
|Non-US earnings                       |  |               |       |      |   | (710    | )
|                                      |  |               |        |      |   |         |  
|Total United States                   |  |               | (92    | )    |   | (1,550  | )
|                                      |  |               |        |      |   |         |  
|Gross deferred income tax liabilities |  |               | (4,373 | )    |   | (5,022  | )
|                                      |  |               |        |      |   |         |  
|Net deferred income tax assets        |  | $             | 22,001 |      | $ | 10,323  |  
|                                      |  |               |        |      |   |         |  

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

|                                               |  |               |        |      |   |        |  
|---------------------------------------------- |  | ------------- | ------ | ---- | - | ------ | -
|                                               |  | September 30, |       
|                                               |  |               |       
|                                               |  | 2009          |        | 2008 |  
|                                               |  |               |        |      |  
|Deferred income tax assets  current           |  | $             | 13,962 |      | $ | 11,419 |  
|Deferred income tax assets  non current       |  |               | 14,249 |      |   | 4,796  |  
|Deferred income tax liabilities  current      |  |               | (1,567 | )    |   | (1,343 | )
|Deferred income tax liabilities  non
 current |  |               | (4,643 | )    |   | (4,549 | )
|                                               |  |               |        |      |   |        |  
|Net deferred income tax assets                 |  | $             | 22,001 |      | $ | 10,323 |  
|                                               |  |               |        |      |   |        |  

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, as well as limitations imposed by the
relevant taxing jurisdictions on the future benefits of those deductions.
Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income, the relevant statutory and regulatory
limitations, 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.

In its initial
purchase price allocation in fiscal 2008, the Company had established a
valuation allowance related to net operating loss carryforwards and tax credits
at Nufern due to uncertainty regarding their ability to utilize these
carryforwards and tax credits. As a result of further analysis of the statutory
and regulatory limitations in fiscal 2009 at the federal level, the Company
concluded that a portion of these carryforward amounts will be unavailable to
the Company. These amounts have been removed from the amount of deferred income
tax asset, and have likewise been removed from the related valuation allowance.
Furthermore, as a result of analysis of projected future taxable income
eligible to be offset by the remaining carryforwards, the Company concluded
that a valuation allowance against the remaining federal carryforwards was not
required. The adjustment
to deferred taxes resulting from this analysis reduced the goodwill recorded
as part of the Nufern purchase price allocation, and this analysis was performed
as part of the finalization of the Nufern purchase price allocation in fiscal
2009.

At September 30, 2009, the Company had federal net operating
    tax loss carryforwards and tax credits available of $22.3 million and state
    net operating loss carryforwards and tax credits available of $45.1 million
    in the United States (which start to expire in 2028), $0.8 million in Germany,
    and $14.4 million in other European countries (which start to expire in 2013).
    As of September 30, 2009, deferred tax assets, net of valuation allowances
    related to these operating tax losses and tax credits, amounted to $13.1
    million.

We have accumulated undistributed earnings of foreign subsidiaries aggregating
  approximately $375 million at September 30, 2009. These earnings are expected
  to be indefinitely reinvested outside of the United States. If those earnings
  were distributed in the form of dividends or otherwise, they would be subject
  to US 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.

The Company
  adopted the amended provisions of ASC Topic, 740 Income taxes, in fiscal year
  2008. As a result of the implementation of this amendment, 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 these amendments, 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. 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 year 2009, the Company
decreased the unrecognized tax benefit by $0.1 million. The decrease was due
to tax developments primarily related to U.S. operations, which impacted the
Companys valuation of uncertain tax positions.

As of
September 30, 2009, the Companys gross unrecognized tax benefits totaled $ 0.6
million, which includes approximately $0.1 million of interest and penalties.
Approximately $0.5 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,
 2009 |    
|                                              |  |                     |    
|Unrecognized tax benefit  opening Balance    |  | $                   | 676 |  
|Increases in tax positions for prior years    |  |                     |    |  
|Increases in tax positions for current
 years |  |                     |    |  
|Settlements with taxing authorities           |  |                     | (39 | )
|                                              |  |                     |     |  
|Unrecognized Tax Benefit  ending Balance     |  | $                   | 637 |  
|                                              |  |                     |     |  

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 exceptions, the Company is no longer subject to
    examination by the United States Internal Revenue Service for years through
    2005. 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.

|    |                        
|--- | -----------------------
|12. | EMPLOYEE
 BENEFIT PLANS

The Company
has defined benefit pension plans for the RSL, RBE 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 Companys Spanish plan began in fiscal year 2009 and is
funded. 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, |        
|                                                          |  |               |        
|                                                          |  | 2009          |         | 2008 |  
|                                                          |  |               |         |      |  
|Change in benefit obligation:                             |  |               |         |      |  
|Projected benefit obligation at beginning
 of year        |  | $             | 16,642  |      | $ | 18,463  |   
|Service cost                                              |  |               | 730     |      |   | 814     |   
|Interest cost                                             |  |               | 1,130   |      |   | 1,036   |   
|Actuarial (gains) losses                                  |  |               | 4,636   |      |   | (3,515  | ) 
|Foreign exchange rate changes                             |  |               | 263     |      |   | 133     |   
|Benefits paid                                             |  |               | (346    | )    |   | (289    | ) 
|                                                          |  |               |         |      |   |         |   
|Projected benefit obligation at end of year               |  |               | 23,055  |      |   | 16,642  |   
|                                                          |  |               |         |      |   |         |   
|Change in plan assets:                                    |  |               |         |      |   |         |   
|Fair value of plan assets at beginning of
 year           |  |               | 4,367   |      |   | 4,945   |   
|Actual return on plan assets                              |  |               | 264     |      |   | (813    | ) 
|Employer contributions                                    |  |               | 1,150   |      |   | 350     |   
|Benefits paid                                             |  |               | (122    | )    |   | (115    | ) 
|                                                          |  |               |         |      |   |         |   
|Fair value of plan assets at end of year                  |  |               | 5,659   |      |   | 4,367   |   
|                                                          |  |               |         |      |   |         |   
|Funded status at end of year                              |  | $             | (17,396 | )*   | $ | (12,275 | )*
|                                                          |  |               |         |      |   |         |   
|                                                          |  |               |         |      |   |         |   
|Amounts recognized in the consolidated balance sheet      |  |               |         |      |   |         |   
|Accrued benefit liability                                 |  | $             | (17,396 | )    | $ | (12,275 | ) 
|Accumulated
     other comprehensive gain, loss (pre-tax) |  |               | 3,625   |      |   | (1,136  | ) 
|                                                          |  |               |         |      |   |         |   
|Net amount recognized                                     |  | $             | (13,771 | )    | $ | (13,411 | ) 
|                                                          |  |               |         |      |   |         |   

*$299 and $226
relate to expected payments in the following twelve months for the Companys
unfunded non-US plans and are therefore classified in current accrued
liabilities in the consolidated balance sheet as of September 30, 2009 and
2008, respectively.

The
accumulated benefit obligation for defined benefit pension plans was $20,587
and $15,148 at September 30, 2009 and 2008, respectively.

|                                                                                                         |  |               |        |      |   |        |  
|-------------------------------------------------------------------------------------------------------- |  | ------------- | ------ | ---- | - | ------ | -
|                                                                                                         |  | September 30, |       
|                                                                                                         |  |               |       
|                                                                                                         |  | 2009          |        | 2008 |  
|                                                                                                         |  |               |        |      |  
|Information for pension plans with an
 accumulated benefit obligation in excess of plan assets           |  |               |        |      |   |        |  
|Projected benefit obligation                                                                             |  |               | 23,055 |      |   | 16,642 |  
|Accumulated benefit obligation                                                                           |  |               | 20,587 |      |   | 15,148 |  
|Fair value of plan assets                                                                                |  |               | 5,659  |      |   | 4,367  |  
|                                                                                                         |  |               |        |      |   |        |  
|Components of net periodic benefit cost and
 other amounts recognized in other comprehensive income      |  |               |        |      |   |        |  
|Net periodic benefit cost                                                                                |  |               |        |      |   |        |  
|Service Cost                                                                                             |  | $             | 730    |      | $ | 814    |  
|Interest Cost                                                                                            |  |               | 1,130  |      |   | 1,036  |  
|Expected return on plan assets                                                                           |  |               | (389   | )    |   | (424   | )
|                                                                                                         |  |               |        |      |   |        |  
|Net periodic benefit cost                                                                                |  | $             | 1,471  |      | $ | 1,426  |  
|                                                                                                         |  |               |        |      |   |        |  
|                                                                                                         |  |               |        |      |   |        |  
|Other changes in plan assets and benefit
 obligations recognized in other comprehensive income (pre-tax) |  |               |        |      |   |        |  
|Net loss (gain)                                                                                          |  |               | 4,761  |      |   | (2,278 | )
|                                                                                                         |  |               |        |      |   |        |  
|Total recognized in other comprehensive
 income                                                          |  | $             | 4,761  |      | $ | (2,278 | )
|                                                                                                         |  |               |        |      |   |        |  
|Total recognized in net periodic benefit
 cost and other comprehensive income                            |  | $             | 6,232  |      | $ | (852   | )
|                                                                                                         |  |               |        |      |   |        |  

F-25

---



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

|                                |  |               |   |      |  
|------------------------------- |  | ------------- | - | ---- | -
|                                |  | September 30, |  
|                                |  |               |  
|                                |  | 2009          |   | 2008 |  
|                                |  |               |   |      |  
|Discount
 rate:                 |  |               |   |      |  
|United States                   |  | 5.75          | % | 7.5  | %
|Foreign                         |  | 5.4           | % | 6.4  | %
|Expected
 return on plan assets |  | 7.75          | % | 8.0  | %
|Rate of
 compensation increase  |  |               |   |      |  
|United States                   |  | 3.0           | % | 3.0  | %
|Foreign                         |  | 3.0           | % | 3.0  | %

The Company
recognizes the over (under)funded status of the defined benefit plans in the
statement of financial position. The Company also recognizes, in other comprehensive
income, certain gains and losses that arise during the period but are deferred
under current pension accounting rules.

Expected
benefit payments for each of the next five fiscal years and for the five years
aggregated thereafter is as follows: $527 in 2010, $674 in 2011, $730 in 2012,
$731 in 2013, $808 in 2014, and $5,403 thereafter.

The Companys
pension plan asset allocations at September 30, 2009 and 2008, by asset
category are as follows:

|                       |  |              |       |            |  |              |   |            |       |  |  |     |  
|---------------------- |  | ------------ | ----- | ---------- |  | ------------ | - | ---------- | ----- |  |  | --- | -
|                       |  | 2009         |       | 2008       | 
|                       |  |              |       |            | 
|                       |  | Dollar Value |       | Percentage |  | Dollar Value |   | Percentage |      
|                       |  |              |       |            |  |              |   |            |      
|Money Market
 Funds    |  | $            | 327   |            |  | 6            | % | $          | 779   |  |  | 18  | %
|Equity
 Securities     |  |              | 2,858 |            |  | 51           | % |            | 2,747 |  |  | 63  | %
|Debt
 Securities       |  |              | 2,452 |            |  | 43           | % |            |      |  |  |    |  
|Government
 Securities |  |              | 22    |            |  | 0            | % |            | 841   |  |  | 19  | %
|                       |  |              |       |            |  |              |   |            |       |  |  |     |  
|Total plan
 assets     |  | $            | 5,659 |            |  | 100          | % | $          | 4,367 |  |  | 100 | %
|                       |  |              |       |            |  |              |   |            |       |  |  |     |  

The Company
employs a total return investment approach whereby a mix of equity, debt
securities, 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., Dilas Diodelaser Inc., and
Nufern 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, 2009, 2008, and 2007, were
$334, $559, and $527, respectively.

F-26

---



|    |                           
|--- | --------------------------
|13. | 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, |           
|                                                                       |  |                            |           
|                                                                       |  | 2009                       |            | 2008 |  | 2007       | 
|                                                                       |  |                            |            |      |  |            | 
|Weighted
 number of shares for basic earnings per common share         |  |                            | 28,911,559 |      |  | 29,639,876 |  |  | 30,975,364 | 
|Potential
 additional shares due to outstanding dilutive stock options |  |                            | 282,212    |      |  | 806,444    |  |  | 831,090    | 
|                                                                       |  |                            |            |      |  |            |  |  |            | 
|Weighted
 number of shares for diluted earnings per common share       |  |                            | 29,193,771 |      |  | 30,446,319 |  |  | 31,806,454 | 
|                                                                       |  |                            |            |      |  |            |  |  |            | 

The
weighted-average diluted shares outstanding for the years ended September 30,
2009, 2008, and 2007 excludes the dilutive effect of approximately 1.8 million,
0.9 million, and 1.2 million stock options, respectively, since the impact of
including these options in diluted earnings per share for these years was
antidilutive.

|    |                            
|--- | ---------------------------
|14. | RELATED
 PARTY TRANSACTIONS

The Company
had sales to its minority shareholder in Japan amounting to $1,352, $1,292, and
$1,303 in fiscal years 2009, 2008, and 2007, respectively. As of September 30,
2009 and 2008, the accounts receivable with the minority shareholder in Japan
amounted to $625 and $684, respectively.

The Company
maintains other accounts payable to related party in China amounting $107 and
in Japan amounting $30.

The Company
has accrued $342 at September 30, 2009, for the option to purchase the
remaining minority interests in m2k and $72 was accrued for accumulated
interest on these obligations as of September 30, 2009. In fiscal 2009, the
Company had expenses of $580, mainly for purchases of materials and services,
to 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 $902,
$957, and $707, to Mr. Baasel during fiscal years 2009, 2008, and 2007,
respectively.

The Company has accrued $143 at September 30, 2008, for the
    option to purchase the remaining minority interests in Optoskand AB and $151
    was accrued to accumulated interest on this obligation as of September 30,
    2008. In addition, the Company accrued $704 at September 30, 2008, 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 for 2008. Effective March 11, 2009, the option
    to purchase Optoskand has been exercised and the final payment for the earn-out
    has been made, and as such there are no remaining accounts payable to related
    party with the former minority shareholder of Optoskand.

|    |                        
|--- | -----------------------
|15. | GEOGRAPHIC
 INFORMATION

The Company
organizes its business under geographic regions that are aggregated together
and managed as one segment in the global industrial laser industry.

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

ASSETS

|                          |  |                |          |      |   |          |  
|------------------------- |  | -------------- | -------- | ---- | - | -------- | -
|                          |  | September
 30, |         
|                          |  |                |         
|                          |  | 2009           |          | 2008 |  
|                          |  |                |          |      |  
|North America             |  | $              | 181,612  |      | $ | 199,423  |  
|Germany                   |  |                | 377,667  |      |   | 402,813  |  
|Other                     |  |                | 210,186  |      |   | 207,885  |  
|Intercompany eliminations |  |                | (229,958 | )    |   | (226,461 | )
|                          |  |                |          |      |   |          |  
|Total assets              |  | $              | 539,507  |      | $ | 583,660  |  
|                          |  |                |          |      |   |          |  

F-27

---



LONG-LIVED
 ASSETS

|                          |  |  |  |  |                |        |      |   |        |  
|------------------------- |  |  |  |  | -------------- | ------ | ---- | - | ------ | -
|                          |  |  |  |  | September
 30, |       
|                          |  |  |  |  |                |       
|                          |  |  |  |  | 2009           |        | 2008 |  
|                          |  |  |  |  |                |        |      |  
|North America             |  |  |  |  | $              | 12,926 |      | $ | 14,603 |  
|Germany                   |  |  |  |  |                | 35,312 |      |   | 34,263 |  
|Other                     |  |  |  |  |                | 7,548  |      |   | 7,399  |  
|Intercompany eliminations |  |  |  |  |                | (51    | )    |   | (39    | )
|                          |  |  |  |  |                |        |      |   |        |  
|Total long-lived assets   |  |  |  |  | $              | 55,735 |      | $ | 56,226 |  
|                          |  |  |  |  |                |        |      |   |        |  

REVENUES -
 TOTAL BUSINESS

|                          |  |                            |          |      |   |          |   |   |          |  
|------------------------- |  | -------------------------- | -------- | ---- | - | -------- | - | - | -------- | -
|                          |  | Years
 ended September 30, |         
|                          |  |                            |         
|                          |  | 2009                       |          | 2008 |   | 2007     |  
|                          |  |                            |          |      |   |          |  
|North America             |  | $                          | 89,203   |      | $ | 146,828  |   | $ | 117,405  |  
|Germany                   |  |                            | 244,025  |      |   | 463,725  |   |   | 382,415  |  
|Other                     |  |                            | 131,322  |      |   | 181,556  |   |   | 161,881  |  
|Intercompany eliminations |  |                            | (114,971 | )    |   | (216,831 | ) |   | (182,026 | )
|                          |  |                            |          |      |   |          |   |   |          |  
|                          |  | $                          | 349,579  |      | $ | 575,278  |   | $ | 479,675  |  
|                          |  |                            |          |      |   |          |   |   |          |  

INTERCOMPANY
 REVENUES

|                          |  |                            |          |      |   |          |   |   |          |  
|------------------------- |  | -------------------------- | -------- | ---- | - | -------- | - | - | -------- | -
|                          |  | Years
 ended September 30, |         
|                          |  |                            |         
|                          |  | 2009                       |          | 2008 |   | 2007     |  
|                          |  |                            |          |      |   |          |  
|North America             |  | $                          | 4,106    |      | $ | 4,795    |   | $ | 4,800    |  
|Germany                   |  |                            | 86,639   |      |   | 171,084  |   |   | 143,199  |  
|Other                     |  |                            | 24,226   |      |   | 40,952   |   |   | 34,027   |  
|Intercompany eliminations |  |                            | (114,971 | )    |   | (216,831 | ) |   | (182,026 | )
|                          |  |                            |          |      |   |          |   |   |          |  
|                          |  | $                          |         |      | $ |         |   | $ |         |  
|                          |  |                            |          |      |   |          |   |   |          |  

EXTERNAL
 REVENUES

|              |  |                            |         |      |   |         |  |   |         | 
|------------- |  | -------------------------- | ------- | ---- | - | ------- |  | - | ------- | 
|              |  | Years
 ended September 30, |        
|              |  |                            |        
|              |  | 2009                       |         | 2008 |   | 2007    | 
|              |  |                            |         |      |   |         | 
|North America |  | $                          | 85,097  |      | $ | 142,033 |  | $ | 112,605 | 
|Germany       |  |                            | 157,386 |      |   | 292,640 |  |   | 239,216 | 
|Other         |  |                            | 107,096 |      |   | 140,605 |  |   | 127,854 | 
|              |  |                            |         |      |   |         |  |   |         | 
|              |  | $                          | 349,579 |      | $ | 575,278 |  | $ | 479,675 | 
|              |  |                            |         |      |   |         |  |   |         | 

INCOME BEFORE
 INCOME TAXES

|              |  |                            |         |      |   |        |   |   |        | 
|------------- |  | -------------------------- | ------- | ---- | - | ------ | - | - | ------ | 
|              |  | Years
 ended September 30, |        
|              |  |                            |        
|              |  | 2009                       |         | 2008 |   | 2007   |  
|              |  |                            |         |      |   |        |  
|North America |  | $                          | (11,809 | )    | $ | (3,077 | ) | $ | 5,132  | 
|Germany       |  |                            | 21,068  |      |   | 87,376 |   |   | 68,586 | 
|Other         |  |                            | 5,101   |      |   | 12,926 |   |   | 13,397 | 
|              |  |                            |         |      |   |        |   |   |        | 
|              |  | $                          | 14,360  |      | $ | 97,225 |   | $ | 87,115 | 
|              |  |                            |         |      |   |        |   |   |        | 

F-28

---



|    |                             
|--- | ----------------------------
|16. | 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                 |  | 2009           |         | 2008 |   | 2007    | 
|                                  |  |                |         |      |   |         | 
|                                  |  | (in thousands) |        
|                                  |  |                |         |      |   |         |  |   |         | 
|Laser macro
 products             |  | $              | 140,362 |      | $ | 238,518 |  | $ | 205,772 | 
|Laser
 marking and micro products |  |                | 168,131 |      |   | 279,123 |  |   | 231,920 | 
|Components                        |  |                | 41,086  |      |   | 57,637  |  |   | 41,983  | 
|                                  |  |                |         |      |   |         |  |   |         | 
|                                  |  | $              | 349,579 |      | $ | 575,278 |  | $ | 479,675 | 
|                                  |  |                |         |      |   |         |  |   |         | 

|    |                                               
|--- | ----------------------------------------------
|17. | SELECTED
 QUARTERLY FINANCIAL DATA (Unaudited)

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

|                                     |  |                |       |                 |   |                |  |                 |       |   |   |       | 
|------------------------------------ |  | -------------- | ----- | --------------- | - | -------------- |  | --------------- | ----- | - | - | ----- | 
|                                     |  | Quarters ended |      
|                                     |  |                |      
|                                     |  | Dec. 31,
 2008 |       | March 31,
 2009 |   | June 30,
 2009 |  | Sept. 30,
 2009 |      
|                                     |  |                |       |                 |   |                |  |                 |      
|Net sales                            |  | $              | 107.0 |                 | $ | 75.6           |  | $               | 76.6  |   | $ | 90.4  | 
|Gross profit                         |  |                | 42.0  |                 |   | 27.9           |  |                 | 26.7  |   |   | 34.6  | 
|Net income
 (loss)                   |  |                | 7.6   |                 |   | 1.2            |  |                 | (4.9  | ) |   | 5.3   | 
|Earnings
 (loss) per share  Basic   |  |                | 0.26  |                 |   | 0.04           |  |                 | (0.17 | ) |   | 0.18  | 
|Earnings
 (loss) per share  Diluted |  |                | 0.26  |                 |   | 0.04           |  |                 | (0.17 | ) |   | 0.18  | 
|                                     |  |                |       |                 |   |                |  |                 |       |   |   |       | 
|                                     |  | 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  | 

|    |                
|--- | ---------------
|18. | TREASURY
 STOCK

On November 7,
2007, the Board of Directors 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 May 19, 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 Consolidated Balance Sheets and Statements
of Operations and Notes to the Consolidated Financial Statements have
retroactively been adjusted to reflect the 2-for-1 stock split.

F-29

---



|    |                       
|--- | ----------------------
|19. | 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. There were no incentive stock options, restricted stock or
performance shares granted in fiscal years 2009 or 2008, under this Plan.
Non-qualified stock options were granted to officers and other key employees in
fiscal years 2009 and 2008. During fiscal year 2009, outside directors each
received 3,000 shares of common stock and 306,250 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 from 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, 2009. 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 year 2007. Non-qualified stock options were granted to officers and
other key employees in fiscal year 2007. 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, |        
|                                        |  |               |        
|                                        |  | 2009
 Grants  |         | 2008
 Grants |   | 2007
 Grants |  
|                                        |  |               |         |              |   |              |  
|Weighted
 average grant date fair value |  | $             | 6.87    |              | $ | 18.51        |   | $ | 28.50   |  
|Expected
 life                          |  |               | 5 Years |              |   | 5 Years      |   |   | 5 Years |  
|Volatility                              |  |               | 50.3    | %            |   | 48.1         | % |   | 50.0    | %
|Risk-free
 interest rate                |  |               | 1.65    | %            |   | 2.36         | % |   | 4.47    | %
|Dividend
 yield                         |  |               | 0       | %            |   | 0            | % |   | 0       | %
|Annual
 forfeiture rate                 |  |               | 2       | %            |   | 2            | % |   | 4       | %

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, 2009, are as follows:

|                                   |  |                   |   |                                   |    |                                                        |      |                                        |   |     
|---------------------------------- |  | ----------------- | - | --------------------------------- | -- | ------------------------------------------------------ | ---- | -------------------------------------- | - | ----
|                                   |  | Number of
 Shares |   | Weighted
 Average
 Exercise Price |    | Weighted Average
 Remaining
 Contractual Term
 (Years) |      | Aggregate
 Intrinsic Value
 (Millions)
|                                   |  |                   |   |                                   |    |                                                        |      |                                       
|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
|                                   |  |                   |   |                                   |    |                                                        |      |                                        |   |     
|Granted                            |  | 306,250           |   | $                                 | 15 |                                                        |      |                                        |   |     
|Exercised                          |  | (11,200           | ) | $                                 | 15 | 3/4                                                    |      |                                        |   |     
|Forfeited                          |  | (5,800            | ) | $                                 | 17 | 2/3                                                    |      |                                        |   |     
|                                   |  |                   |   |                                   |    |                                                        |      |                                        |   |     
|Balance at
 September 30, 2009     |  | 2,856,550         |   | $                                 | 22 | 2/5                                                    | 6.50 |                                        | $ | 1.6 
|                                   |  |                   |   |                                   |    |                                                        |      |                                        |   |     
|                                   |  |                   |   |                                   |    |                                                        |      |                                        |   |     
|Exercisable
 at September 30, 2009 |  | 1,564,100         |   | $                                 | 19 | 1/2                                                    | 5.48 |                                        | $ | 5.5 
|                                   |  |                   |   |                                   |    |                                                        |      |                                        |   |     

As of
September 30, 2009, there was $12.7 million of total unrecognized compensation
costs related to stock options. These costs are expected to be recognized over
a weighted average period of 2.83 years. The total fair value of shares vested
during the years ended September 30, 2009, 2008, and 2007, was $5.1 million,
$5.3 million, and $3.9 million respectively.

|                                                  |  |                           |     |      |   |      |  |   |    
|------------------------------------------------- |  | ------------------------- | --- | ---- | - | ---- |  | - | ---
|                                                  |  | Years ended September 30,
|                                                  |  |                          
|                                                  |  | 2009                      |     | 2008 |   | 2007
|                                                  |  |                           |     |      |   |     
|Total
 intrinsic value of stock options exercised |  | $                         | 0.1 |      | $ | 19.0 |  | $ | 8.4

Cash received
from stock option exercises for the years ended September 30, 2009, 2008, and
2007, was $0.2 million, $5.2 million, and $3.7 million, respectively.

|    |                   
|--- | ------------------
|20. | SUBSEQUENT
 EVENTS

The Company
evaluated subsequent events through the date the financial statements were
issued and filed with the Securities and Exchange Commission, which was
November 25, 2009. Subsequent to September 30, 2009, the Company sold an
additional $2.5 million of auction rate securities that have been classified as
long-term assets in the consolidated balance sheets at par. There were no other
subsequent events that required recognition or disclosure.

F-31

---



SCHEDULE II

ROFIN-SINAR
TECHNOLOGIES INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts - Allowance for Doubtful Accounts
Years ended September 30, 2009, 2008, and 2007 
(dollars in thousands)

|                   |  |                                  |       |                   |   |                                             |  |              |       |                           |   |        |   |   |       | 
|------------------ |  | -------------------------------- | ----- | ----------------- | - | ------------------------------------------- |  | ------------ | ----- | ------------------------- | - | ------ | - | - | ----- | 
|                   |  | Balance at
 Beginning of
 Period |       | Acquired
 Reserve |   | Additions-
 Charged to
 Costs and
 Expenses |  | (Deductions) |       | Balance at End of
 Period |  
|                   |  |                                  |       |                   |   |                                             |  |              |       |                           |  
|                   |  |                                  |       |                   |   |                                             |  |              |       |                           |   |        |   |   |       | 
|September 30, 2007 |  | $                                | 2,656 |                   | $ | 6                                           |  | $            | 1,582 |                           | $ | (1,038 | ) | $ | 3,206 | 
|                   |  |                                  |       |                   |   |                                             |  |              |       |                           |   |        |   |   |       | 
|September 30, 2008 |  | $                                | 3,206 |                   | $ | 43                                          |  | $            | 730   |                           | $ | (332   | ) | $ | 3,647 | 
|                   |  |                                  |       |                   |   |                                             |  |              |       |                           |   |        |   |   |       | 
|September 30, 2009 |  | $                                | 3,647 |                   | $ | 7                                           |  | $            | 1,004 |                           | $ | (1,125 | ) | $ | 3,533 | 

Allowance
for Inventory Reserve
Years ended September 30, 2009, 2008, and 2007 
(dollars in thousands)

|                   |  |                                  |        |                   |   |           |  |                                 |       |                           |   |        |   |   |        | 
|------------------ |  | -------------------------------- | ------ | ----------------- | - | --------- |  | ------------------------------- | ----- | ------------------------- | - | ------ | - | - | ------ | 
|                   |  | Balance at
 Beginning of
 Period |        | Acquired
 Reserve |   | Additions |  | Usage for
 Disposals
 and Scrap |       | Balance at End of
 Period |  
|                   |  |                                  |        |                   |   |           |  |                                 |       |                           |  
|                   |  |                                  |        |                   |   |           |  |                                 |       |                           |   |        |   |   |        | 
|September 30, 2007 |  | $                                | 14,387 |                   | $ | 84        |  | $                               | 3,975 |                           | $ | (3,729 | ) | $ | 14,717 | 
|                   |  |                                  |        |                   |   |           |  |                                 |       |                           |   |        |   |   |        | 
|September 30, 2008 |  | $                                | 14,717 |                   | $ | 450       |  | $                               | 6,012 |                           | $ | (3,495 | ) | $ | 17,720 | 
|                   |  |                                  |        |                   |   |           |  |                                 |       |                           |   |        |   |   |        | 
|September 30, 2009 |  | $                                | 17,720 |                   |   |          |  | $                               | 4,844 |                           | $ | (3,688 | ) | $ | 18,876 | 

F-32

---



INDEX
TO EXHIBITS

|             |  |                                                                                  
|------------ |  | ---------------------------------------------------------------------------------
|Exhibit
 No. |  | Exhibit                                                                          
|             |  |                                                                                  
|             |  |                                                                                  
|21.1         |  | List of Subsidiaries of the Registrant                                           
|             |  |                                                                                  
|23.1         |  | 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

---