SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES AND EXCHANGE ACT OF 1934

                  For the fiscal year ended September 30, 1996

                        Commission file number: 000-21377

                          Rofin-Sinar Technologies Inc.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


               Delaware                                          38-3306461
    -------------------------------                          -------------------
    (State of other jurisdiction of                           (I.R.S. Employer
    incorporation or organization)                           Identification No.)



     45701 Mast Street, Plymouth, MI                               48170
----------------------------------------                         ----------
(Address of principal executive offices)                         (Zip Code)


Registrant's telephone number, including area code:  (313) 455-5400

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

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

                               Title of each class
                               -------------------

                          Common Stock, $.01 par value

          Rights Associated with Common Stock, par value $.01 per Share

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
    ---      ---

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K 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. [X]

The  aggregate  market value of the common stock held by  non-affiliates  of the
Registrant  (based  upon the closing  price of the stock on the Nasdaq  National
Market on December 20, 1996) was approximately $143,187,500.

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes ____ No ____

11,510,500  shares of the  Registrant's  common stock, par value $.01 per share,
were outstanding as of December 20, 1996.

                       Documents Incorporated by Reference
                       -----------------------------------

Certain sections of the Company's Proxy Statement to be filed in connection with
the Company's 1997 Annual Meeting of  Stockholders  to be held in March 1997 are
incorporated by reference herein at Part III, Items 10 - 13.



<PAGE>



                                TABLE OF CONTENTS


            Item                                                            Page
            ----                                                            ----

PART I.     1.  Business

            2.  Properties

            3.  Legal Proceedings

            4.  Submission of Matters to a Vote of Security Holders

PART II.    5.  Market for Registrant's Common
                Equity and Related Stockholder Matters

            6.  Selected Financial Data

            7.  Management's Discussion and Analysis of
                Financial Condition and Results of Operations

            8.  Consolidated Financial Statements and Supplementary Data

            9.  Changes in and Disagreements with Accountants
                on Accounting and Financial Disclosure

PART III.   10. Directors and Executive Officers of the Registrant

            11. Executive Compensation

            12. Security Ownership of Certain
                Beneficial Owners and Management

            13. Certain Relationships and Related Transactions

PART IV.    14. Exhibits, Consolidated Financial Statement
                Schedules, and Reports on Form 8-K



SIGNATURES


<PAGE>



                                     PART I


Special 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").  Such   forward-looking
statements  involve known and unknown  risks,  uncertainties,  and other factors
which may cause the actual results,  performance, or achievements of the Company
to be materially different from any future results, performance or achievements,
expressed or implied by such forward-looking statements.

Item 1.  Business

Company Overview

         On September 30, 1996, Rofin-Sinar  Technologies Inc. ("Rofin-Sinar" or
the  "Company")  consummated  an initial  public  offering  of its common  stock
("IPO").  Prior to the IPO,  the common  stock of  Rofin-Sinar,  a newly  formed
holding  company,  Rofin Sinar Inc.  ("RSI") and Rofin Sinar Laser GmbH  ("RSL")
were each owned directly or indirectly by Siemens AG  ("Siemens").  RSL includes
the consolidated  accounts of its 99.97% owned  subsidiary,  Rofin-Sinar  France
S.A.; its 90.65% (83.5% in 1994) owned subsidiary  Rofin-Sinar  Italiana S.r.l.;
and its 51%  owned  subsidiary  Rofin-Marubeni  Laser  Corporation  (a  Japanese
corporation).  Concurrent with the IPO, the stock of RSI and RSL (together,  the
"Rofin-Sinar Group"), including all business operations, assets and liabilities,
were sold to the Company in a  reorganization.  Approximately $82 million of the
gross  proceeds  ($77.1  million of the net proceeds)  from the IPO were used to
purchase such stock of  Rofin-Sinar  Group from Siemens AG and its  subsidiaries
and to repay certain indebtedness to Siemens AG.

         Rofin-Sinar  designs,  develops,  engineers,  manufactures  and markets
laser  products  for  cutting,  welding and  marking a wide range of  industrial
materials.  Lasers are a non-contact  technology for material  processing  which
have several  advantages  that are  desirable in  industrial  applications.  The
Company  believes it has a worldwide  market  share  (based on sales  volume) of
approximately  20% for laser products used for cutting and welding  applications
and that it is among the largest  suppliers of laser  products  used for marking
applications in Europe and the Asia/Pacific  region (other than Japan). Over 80%
of the  Company's  sales in fiscal  1996 were made to  existing  customers.  The
Company has sold more than 4,000 laser sources since 1975 and currently has over
1,500  active  customers  (including   multinational   companies  with  multiple
facilities   purchasing  from  the  Company).   During  the  1996  fiscal  year,
approximately  72% of the  Company's  revenues  were from sales and servicing of
laser products for cutting and welding  applications and  approximately 28% were
from sales and servicing of laser products for marking applications.

         Through its global manufacturing, distribution and service network, the
Company  provides a  comprehensive  range of laser  solutions to three principal
target markets for material processing lasers: the Machine Tool,  Automotive and
Semiconductor & Electronics industries. The Company sells directly to industrial
end-users,  to OEMs  (principally  in the Machine Tool  industry)  who integrate
Rofin-Sinar's  laser sources with other system  components and to  distributors.
Many of  Rofin-Sinar's  customers are among the largest global  participants  in
their respective industries. During fiscal 1996, 34% of the Company's sales were
in North  America,  52% were in Germany and the remainder  were in certain other
European  Countries  and  in  the  Asia/Pacific  region.  See  Note  11  to  the
consolidated financial statements.

The Company's Laser Products

         The Company currently offers a comprehensive  range of state-of-the-art
laser  products and related  services for three  principal  material  processing
applications:  (1) cutting; (2) welding;  and (3) marking.  Rather than offering
standardized  laser  systems,  the Company  works  directly with the customer to
develop and  customize  the optimal  solution for the  customer's  manufacturing
requirements. In developing its laser solutions, the Company offers

                                                                           

<PAGE>


                                        2

customers its expertise in: (i) product  development  and  manufacturing  (i.e.,
state-of-the-art product development and manufacturing services based on over 20
years  of  laser  technology   experience  and  applications   know-how);   (ii)
application   and  process   development   (i.e.,   developing  new  laser-based
applications  for  manufacturing  customers and assisting  them in  successfully
integrating  lasers into their production  processes);  (iii) system engineering
(i.e., advising customers on machine design,  including tooling,  automation and
controls,  for  customers in need of "turnkey"  solutions);  and (iv)  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 cutting and welding  applications  and of laser  products used
for marking applications in fiscal 1996:

         Product Category*                      Fiscal 1996
         -----------------                      -----------
                                               (in thousands)
         Lasers for cutting and welding....      $ 83,884
         Laser marking products............        32,019
                                                 --------
                                                 $115,903


         -------------
         *  For each product  category,  net sales  includes  sales of
            services (including training,  maintenance and repair) and
            spare parts.

         The Company from time to time reviews various  opportunities to acquire
businesses,  technologies  or products  complementary  to the Company's  present
business.

Laser Products for Cutting and Welding

         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),  a power supply and microcontroller (for control
and  monitoring).  For a more detailed  discussion of the  components of a laser
source,   see  "--  Laser   Technology."   Products  are  offered  in  different
configurations  and  utilizing  different  design  principles  according  to the
desired  application.  The Company's  engineers and other technical experts work
directly with the customer in the Company's  applications centers to develop and
customize the optimal solution for the customer's manufacturing requirements.

         The Company's  family of CO2 laser products for cutting and welding and
their principal markets and applications are as discussed below.

                                                              Mode of
Laser Series                   Power Range                   Excitation
------------                   -----------                   ----------
RS DC Slab Series              1.5 kW-2.5 kW               High Frequency
RS HF Series                   4 kW-6 kW                   High Frequency
RS SM Series                   700W-2 kW                   Direct current


         Rofin-Sinar  introduced its diffusion-cooled RS DC Slab Series laser in
mid-1995  and has  manufactured  over 80 units  since  that  date.  The  Company
believes that it is the only laser manufacturer of  diffusion-cooled  slab-based
lasers in the  high-power  range.  In this laser design,  a high  frequency (HF)
excited gas discharge  occurs between two  water-cooled  electrodes which have a
large   surface  area  that  permits   maximum   heat   dissipation.   The  core
diffusion-cooled  technology  is  protected  by two  patents and the Company has
exclusive  license rights to this  technology on a worldwide basis for the range
above 500 W for material  processing  applications.  The Company's current focus
with respect to its Slab Series lasers is on  increasing  their power output and
reducing their  manufacturing costs in order to achieve more attractive pricing.
Principal markets for the Slab Series lasers are the machine tool and automotive
industries.

                                                                           

<PAGE>


                                        3


         The  Company's RS HF Series lasers  combine  proven  cross-flow  design
principles  with modern  high-frequency  (HF) discharge  excitation  technology.
Since its  introduction  in fiscal  1995,  the Company has shipped  this product
predominantly to customers in the Automotive industry and their sub-suppliers in
the  United  States  and  Europe,  where the HF Series  laser has been used in a
significant   number  of  welding   applications,   including   the  welding  of
transmissions,  tailored  blanks  and many other car parts and  components.  The
automotive industry is the principal market for the HF Series laser.

         The  Company's  SM-Series  fast  axial  flow CO2 laser is used for both
cutting and welding  applications.  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.  Due to the potential to reduce the
manufacturing  cost of the Slab lasers,  the Company intends over the next three
years to replace  the  SM-Series  product  family  with the  Slab-Series  laser.
SM-Series products are used primarily by the machine tool industry.

         The Company's  family of Nd:YAG laser  products for cutting and welding
and their principal markets are discussed below.

                                                              Mode of
Laser Series                   Power Range                   Excitation
------------                   -----------                   ----------
RS P-Series                    50W--1 kW                     Flash Lamp
RSY CW-Series                  1 kW--2.5 kW                  Flash Lamp



         The Company's RSY P-Series of pulsed Nd:YAG lasers are designed to meet
the requirements of a wide range of welding and cutting applications. Their high
peak power, flexible fiberoptic beam delivery and the small focused spot size of
the laser beam allow these lasers to be successfully applied in many cutting and
welding applications. The RSY lasers' pulse shaping capability (achieved through
programming of the power supply) makes these lasers  particularly well suited to
the processing of metallurgically  difficult  materials such as aluminum and its
different alloys. These lasers can be integrated into a wide range of both fixed
optic and fiberoptic beam delivery  systems.  Principal markets for these lasers
are the automotive and medical device markets.

         Rofin-Sinar's  RSY CW-Series of continuous wave ND:YAG lasers represent
the Company's latest development in high-power  industrial ND:YAG lasers as they
are designed exclusively for use with flexible fiberoptic beam delivery systems,
making them  particularly  well suited for integration  into complex  production
systems. The key competitive  advantages of the CW-Series lasers are their pulse
shaping   capability   and   multiple   power   output   configurations.   These
configurations include continuous wave and pulsed power ramping modes separately
or in  combination  with each other,  which allows the Company to address a wide
range of  customer  applications.  Power  ramping  is  particularly  suited  for
achieving  smooth  welds and  avoiding  cracks  during the welding  process.  In
addition,  several  features of the CW-Series laser such as the simple resonator
design,  easy to access power supply and highly durable ceramic pumping chambers
are designed with a view to long service intervals and therefore low maintenance
costs. These lasers are used principally in the automotive industry.

         The  Company is actively  engaged in the  development  of  diode-pumped
solid-state  Nd:YAG lasers through a joint research  program with the Fraunhofer
Institute for Laser Technology as well as through a second program  sponsored by
the Bavarian  Government.  The  Company's  objective is to develop  diode-pumped
lasers capable of performing heavy industrial material  processing  applications
(e.g.  car body  welding),  as well as marking  applications,  more rapidly than
previously  possible and at reduced operating and maintenance costs. Such lasers
also  have  potential  for use in  marking  applications,  where  they  could be
developed in much more compact systems. See "--Research and Development."


                                                                           

<PAGE>


                                        4

Laser Marking Products

         The Company's family of laser marking products are as follows:

                                                              Mode of
Laser Series                   Power Range                   Excitation
------------                   -----------                   ----------
PowerLine; CombiLine           25-150W                       Flash Lamp



         PowerLine.  The Company's  standard  PowerLine  laser  marking  product
consists of a Nd:YAG laser in the range of 25 to 150W, a galvo-head,  a personal
computer with Pentium  processor on board and  Rofin-Sinar's  proprietary  Laser
Work  Bench  software.  The  modular  design  of the  PowerLine  marker  enables
customers to order the most suitable  configuration for their production process
or system  (e.g.  OEM  customers  may order the laser head and laser  supply and
laser cooling  assembly plates as  subassemblies  without the cabinet for easier
integration  into the handling system  specified by the end user). The PowerLine
marker's  Nd:YAG  laser  incorporates  a dual lamp ceramic  cavity  design using
"long-life"  lamps  (guaranteed  to provide  1,200 hours usage) which results in
higher  output  power (and  therefore  higher  marking  speeds),  higher  energy
efficiency  and  therefore  reduced  operating  costs,  high  beam  quality  and
therefore  constant and reliable marking quality,  and longer service intervals.
The Company's  proprietary Laser Work Bench software  provides  operators with a
user-friendly  desktop  publishing  environment  that allows them to  manipulate
fonts, import graphics, preview marking and control all laser parameters and job
programs.  Special  options  and  accessories  include,  among other  things,  a
double-marking  head allowing  marking speeds of up to 600 characters per second
in  certain  applications   (marking  of  integrated   circuits),   as  well  as
beam-switching  and  -splitting  options for  marking of  products in  different
locations.

         CombiLine.  The CombiLine is a complete  laser marking  system that the
Company introduced in 1994. Built on a modular design, the CombiLine consists of
a PowerLine  laser marker that can be combined with a variety of parts  handling
systems  developed by the Company.  The parts  handling  options  offered by the
Company  include motor driven  positioning  tables,  foil  handling  systems for
marking  labels,  conveyor  belts  and  pick-and-place  systems,   allowing  the
CombiLine to be  customized  as a turn-key  system  according to the  customer's
specifications.

         Development of Stand-Alone Marker. To date, the Company has shipped the
majority  of  its  laser  markers  to  large  customers  in the  Automotive  and
Semiconductor  &  Electronics  industries.  The  Company has also  targeted  the
low-end laser marking market in Europe, which is currently served by a number of
smaller regional competitors.  The Company is currently developing a lower-cost,
more standardized  version of its PowerLine product with the same basic software
but fewer features and options, which it expects to begin shipping in the second
half of fiscal 1997.

Applications Development

         In addition to manufacturing  and selling laser sources for cutting and
welding  and  laser  marking   products,   the  Company  also  develops  in  its
applications  centers in  Hamburg  and  Gunding-Munich,  Germany  and  Plymouth,
Michigan   laser-based   solutions  for  customers   seeking   alternatives   to
conventional  manufacturing  techniques.  More than 20 years'  laser  technology
experience  and  know-how  are embodied in the  Company's  applications  groups,
developed  as a result  of its  participation  in a broad  range  of  industrial
markets.

Markets and Customers

         Rofin-Sinar's  laser  products and systems are sold to three  principal
industrial markets: the Machine Tool, Automotive and Semiconductor & Electronics
industries. The following table sets forth the distribution of the

                                                                           

<PAGE>


                                        5

Company's total sales in fiscal 1996 among the Company's  principal  markets and
each market's primary applications:


                                                  Primary
         Principal Market        Fiscal 1996    Applications
         ----------------        -----------    ------------
Machine Tool.................        31%        Cutting
Automotive...................        27         Welding and component marking
Semiconductor & Electronics..        15         Marking of integrated circuits
                                    ---
                                     73%


         The  remaining  27% of  sales  in  fiscal  1996  were  attributable  to
customers in a wide variety of other  industries  (including  the  aerospace and
consumer goods industries, medical device manufacturers, job shops, universities
and institutes). No one customer accounted for over 10% of total sales in any of
such periods.

Sales, Marketing and Distribution

         Rofin-Sinar  sells its products in approximately  25 countries  through
OEMs and to major end-users who have in-house  engineering  resources capable of
integrating  the Company's  products into their own  production  systems.  Laser
sources for cutting  applications  are marketed and sold  principally to OEMs in
the Machine Tool industry who sell cutting machines  incorporating the Company's
laser products without any substantial involvement by the Company. Laser sources
for welding  applications are marketed and sold both to systems  integrators and
to end-users.  Laser marking  products are marketed and sold principally to OEMs
for  integration  into their handling  systems  (mainly for  integrated  circuit
marking  applications).  In the case of both  welding  lasers and laser  marking
products, since product samples are required to be run through the OEM's system,
the end-user is  significantly  involved in the selection of the laser component
and will typically specify that it desires a Rofin-Sinar  device. In such cases,
the Company's  application engineers work directly with the end-user to optimize
the  application's  performance and demonstrate the superiority of the Company's
products.

         The Company has 27 direct sales engineers operating in 12 countries, of
whom 16 persons are  dedicated  to  marketing  of the  Company's  CO2 and Nd:YAG
lasers for cutting and welding and 11 persons are  dedicated to marketing of the
Company's laser marking  products.  In addition,  Rofin-Sinar has 12 independent
distributors  and agents who market the  Company's  welding  and  cutting  laser
products and laser marking products in Australia,  Brazil, Denmark,  Israel, the
Philippines,  the People's Republic of China, Portugal,  Singapore, South Korea,
Spain, Sweden and Taiwan.

         The Company  directs its  worldwide  sales and marketing of cutting and
welding  lasers  from its  offices  in  Hamburg,  Germany.  Worldwide  sales and
marketing of laser marking  products is directed  from the Company's  offices in
Gunding-Munich,  Germany.  U.S. sales of the Company's cutting and welding laser
products  are managed  out of its  Plymouth,  Michigan  facility.  In 1995,  the
Company  opened  a sales  office  in  Phoenix,  Arizona  in  proximity  to major
semiconductor  manufacturers to support expansion of the Company's laser marking
business in the U.S.  market.  In Europe,  Rofin-Sinar  also maintains sales and
service offices in Italy, France, the United Kingdom and Belgium. A sales office
is maintained in California to cover the Asia/Pacific region (other than Japan);
the Company  intends to open a sales  office in that region in fiscal  1997.  In
Japan,  the Company's  principal  distributor is its joint venture with Marubeni
Corporation and Nippei Toyama Corporation.


                                                                           

<PAGE>


                                        6

Customer Service and Replacement Parts

         During fiscal 1996,  approximately  25% of the Company's  revenues were
generated from sales of after-sale  services and replacement parts for its laser
products.  The  Company  believes  that a high  level  of  customer  support  is
necessary to develop successfully and maintain long-term  relationships with its
OEM and end-user  customers  in its laser  products  and laser  marking  systems
business.  This close  relationship  is maintained as customer  needs change and
evolve.  Recognizing the importance of its existing and growing  installed base,
the Company follows its customers into new geographic regions by providing local
service and support.  Rofin-Sinar has over 90 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
distributors also provide customer service and support.

         Many of  Rofin-Sinar's  laser  products  are operated 24 hours a day in
high speed, quality oriented manufacturing  operations.  Accordingly,  in fiscal
1994 the Company  successfully  launched 24 hour,  year-round service support to
its U.S. and German  customers and 8 hour response time for its major customers.
This support  includes field service  personnel who reside in close proximity to
the Company's installed base. Rofin-Sinar plans to adopt similar service support
elsewhere.   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-Sinar's customer service personnel, approximately 70 employees
operate in the field in 40 countries.  Field service personnel are also involved
in the installation of the Company's systems.

         Rofin-Sinar's  approach  to the sale of  replacement  parts is  closely
linked to the Company's strategic focus on rapid customer response.  The Company
has round-the-clock  order entry and provides same or next day delivery of parts
worldwide  in  order  to  minimize  disruption  to  a  customer's  manufacturing
operations. Rofin-Sinar generally agrees to provide after sale parts and service
for 10 years  if  requested  by the  customer.  The  Company's  growing  base of
installed  laser sources and laser  marking  products is expected to continue to
generate a stable source of parts and service sales.

Competition

Laser Products for Cutting and Welding

         The market for laser 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-Sinar  on  a  limited  geographic,   industry-specific   or
application-specific  basis. The Company also competes in certain target markets
with competitors  which are part of large  industrial  groups and have access to
substantially   greater   financial  and  other   resources  than  the  Company.
Competition  among  laser   manufacturers   includes  attracting  and  retaining
qualified engineering and technical personnel.  The overall competitive position
of the Company will depend upon a number of factors,  including the  performance
and reliability of its products, the level of customer support and manufacturing
quality,  the  compatibility of its products with existing laser systems and the
Company's   ability  to  develop   successfully   for  commercial   distribution
diode-pumped  solid state lasers and participate in the growth of these emerging
technologies, as well as price.

         Rofin-Sinar  believes  it is among  the top  three  suppliers  of laser
sources in the worldwide market for cutting and welding applications.  Companies
such as Trumpf, Fanuc and PRC (for CO2 lasers) and Haas and Lumonics (for Nd:YAG
lasers)  compete  in  certain  of the  markets  in which  Rofin-Sinar  operates.
However, in the Company's

                                                                           

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                                        7

opinion, none of these companies competes in all of the industries, applications
and geographic  markets currently served by Rofin-Sinar.  Only Trumpf/Haas has a
product  range and  worldwide  presence  similar  to those of the  Company.  The
Company believes that it has a competitive  advantage over such companies due to
its   exclusive   access   (for   material   applications)   to   the   patented
diffusion-cooling technology incorporated in its CO2 slab lasers.

Laser Marking Products

         Significant  competitive  factors in the laser marking  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 marker
are commercially available,  barriers to entry into this market are low, and the
Company  expects new competitive  product entries into this market.  The Company
believes that its PowerLine and CombiLine  laser markers will compete  favorably
in this market  primarily due to the  performance and price  characteristics  of
such products.

         The Company's  PowerLine and CombiLine  marking products compete in the
laser marking market with conventional ink-based and acid-etching  technologies,
as well as with laser  mask-marking.  The Company  believes  that its  principal
competitors in the laser marking market include Baasel, General Scanning,  Excel
Technology and Lumonics.

         Rofin-Sinar also competes with manufacturers of conventional  non-laser
products in applications  such as welding,  drilling,  cutting and marking.  The
Company  believes  that as  industries  continue  to  modernize,  seek to reduce
production  costs and require  more  precise  and  flexible  manufacturing,  the
features  of  laser-based  systems  will  become  more  desirable  than  systems
incorporating conventional  manufacturing techniques and processes.  Advances in
fiber-optic beam delivery systems,  improvements in reliability and introduction
of higher-power CO2 lasers and  diode-pumped  lasers capable of performing heavy
industrial material processing  applications,  as well as marking  applications,
more  rapidly  than  previously  possible  are  expected to result in  increased
acceptance of laser applications by industrial users.

Manufacturing and Assembly

         Rofin-Sinar  manufactures  and tests its CO2 and Nd:YAG laser  products
for  cutting  and  welding  at  its  Hamburg,  Germany  and  Plymouth,  Michigan
facilities.  The Company's laser marking products are manufactured and tested at
its facilities in Gunding-Munich, Germany. See "Properties." The Company's joint
venture in Japan performs assembly and testing of SM-Series CO2 lasers.

         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-Sinar's  in-house manufacturing includes only those manufacturing
operations   which  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. The Company minimizes the number of suppliers
and component types but,  wherever  practicable,  it has at least two sources of
supply for key items.  The Company has a qualifying  program for its vendors and
generally seeks to build  long-term  relationships  with such vendors.  Roots(R)
blowers  (used to  accelerate  gas flow in its  SM-Series  fast  axial  flow CO2
lasers) are the only component the Company purchases from a single supplier. The
Company  has no reason to  believe it could not  purchase  such  component  from
alternative sources of supply on

                                                                           

<PAGE>


                                        8

comparable  terms.  Rofin-Sinar  is not  dependent  on any  supplier and has not
experienced any difficulty in obtaining necessary materials and components.

         Rofin-Sinar   is  committed  to  meeting   internationally   recognized
manufacturing  standards.  In 1995, the Company's  Hamburg facility received ISO
9001  certification.  The Company intends to apply for IS0 9001 certification of
all of its manufacturing sites and anticipates  obtaining ISO 9001 certification
of its Gunding-Munich  facility during fiscal 1997. The Company expects that its
U.S.  operation will be qualified by Ford as a "Q-1" supplier under Ford's "Q-1"
quality management standards in fiscal 1997.

         The Company's production is controlled by production planning software.
By reducing  the variety of products and  options,  designing  new products on a
modular  concept,  reducing  the number of vendors  and the depth of  production
through outsourcing, the Company has been able to reduce its manufacturing costs
significantly over the last three years and improved its production efficiency.

Research and Development

         During fiscal 1994, 1995 and 1996, Rofin-Sinar spent $6.8 million, $6.7
million  and  $9.3  million,  respectively,  on  research  and  development.  In
addition,  the Company received  funding under  government  grants totaling $0.6
million  $1.4  million  and  $0.8  million  in  fiscal  1994,   1995  and  1996,
respectively.

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

         The Company's  research and  development  activities are carried out in
three centers in Hamburg and Gunding-Munich,  Germany and Plymouth, Michigan and
are  centrally  coordinated  and managed.  Rofin-Sinar  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 Fraunhofer  Institute for Material
Science in Dresden and the Laser  Center in Hanover,  and  elsewhere  around the
world, including the University of Alberta in Canada. Such relationships include
funding of research, joint development programs, personnel exchange programs and
licensing of patents developed at such institutes.

         In September  1996, the Company  agreed on a research  program with the
Fraunhofer Institute for Laser Technology to develop a modular 5 kW diode-pumped
Nd:YAG laser.  Under this  arrangement,  the total project budget to be spent by
both  parties  is  approximately  DM  6.5  million.   Under  the  terms  of  the
collaboration,  the  Company  will  be  granted  access  to  technology  already
developed  by  the  Fraunhofer  Institute.  The  Company  anticipates  that  the
project's  development  and  manufacturing  scale-up  efforts  will occur over a
five-year  period.  No assurance  can be given that the  collaboration  with the
Fraunhofer Institute will be successful.

Intellectual Property

         Rofin-Sinar   has   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 properties,  Rofin-Sinar believes that its success depends
to a larger extent on the innovative skills, know-how,  technical competence and
abilities of the Company's personnel.  The Company is also an exclusive licensee
on a worldwide  basis of two patents,  one of which  expires in July 2007 (as to
which  the  license  is  exclusive  for five  years  from  commercialization  of
products) and one of which expires in January 2005 (as to which the license is

                                                                           

<PAGE>


                                        9

exclusive  for  the  duration  of the  patent),  covering  the  diffusion-cooled
technology used in its Slab-Series CO2 lasers for industrial material processing
applications.  In the  Company's  view,  the  technology  protected by these two
patents represents a significant step forward in industrial laser technology for
material  processing and an important  source of the Company's future growth and
profitability.

         Rofin-Sinar  protects  its  intellectual  property  in a number of ways
including,  in certain  circumstances,  through patents.  The Company has sought
patent protection  primarily in Germany and the United States. Some patents have
also been registered in other  jurisdictions  including  Great Britain,  France,
Italy and Japan. The Company  currently holds 32 separate patents for inventions
relating to lasers, processes and power supplies which expire from 1997 to 2014.
In addition,  Rofin-Sinar  requires its employees and certain of its  customers,
suppliers,  distributors,  agents and consultants to enter into  confidentiality
agreements to further safeguard the Company's intellectual property.

         The  Company  from time to time  receives  notices  from third  parties
alleging  infringement  of such parties' patent or other  intellectual  property
rights by the Company's products. While such notices are common in the Company's
industry  and the  Company  has 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 the Company would in the future prevail in
any  litigation  seeking  damages or expenses  from the Company or to enjoin the
Company from selling its products on the basis of such alleged infringement,  or
that the  Company  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 the Company or its  customers
and a license were not made available to the Company on commercially  reasonable
terms, the Company would be adversely affected.

         In July 1996, the Company  received notice of an opposition  filed by a
competitor in the European Patent Office ("EPO") which challenges on a number of
grounds one of the two  third-party  patents  licensed  by the Company  covering
certain  aspects  of  its  diffusion-cooled  CO2  Slab  laser.  The  U.S.-issued
counterpart  of this  patent  was  previously  the  subject  of a  reexamination
proceeding in the U.S. Patent and Trademark  Office ("PTO") at the conclusion of
which the patent was upheld. While the decision of the PTO is not binding on the
EPO, based on the outcome of the U.S. reexamination  proceeding and management's
review of the arguments made in the notice of opposition,  the Company  believes
that such notice of opposition is without substantial merit. The Company intends
to defend the EPO opposition proceeding vigorously.

         In July 1996,  the  Company  received a letter from a  manufacturer  of
sealed-off,   RF-excited  CO2  lasers  for  military  and  commercial   avionics
applications  offering a license of its U.S. patents covering such technology in
exchange for a cross-license of the Company's CO2 Slab laser  technology.  Based
on its review of the patents  held by such  manufacturer,  the Company  does not
believe  that its  products  infringe  such  patents,  and it  intends to defend
vigorously  any  infringement  action which such party may commence  against the
Company.

         From time to time,  the Company  files notices of opposition to certain
patents on laser technologies held by others,  including  academic  institutions
and  competitors  of the Company,  which the Company  believes could inhibit its
ability to develop  products  in this area.  In  particular,  the  Company has a
pending  notice of  opposition  against a patent held by a  competitor  which it
believes  conflicts with a third-party  patent licensed by the Company  covering
certain  aspects of its  diffusion-cooled  CO2 Slab laser.  No assurance  can be
given that the  Company  will be able to avoid an action by such  competitor  or
others or not be forced to initiate  its own actions to protect its  proprietary
position.


                                                                           

<PAGE>


                                       10

Order Backlog

         The Company's order backlog was $26.5 million at the end of fiscal 1995
and $35.9  million  at the end of  fiscal  1996.  The  Company's  order  backlog
represents a 35.5% increase over the order backlog at September 30, 1995.

         An order is booked by Rofin-Sinar when an unconditional  purchase order
has been received  where a delivery date has been assigned.  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  8-12 weeks from the date an order is placed.
During  fiscal  1996,  as the rate of order  intake for laser  marking  products
increased  substantially,  average  delivery  dates for such products were for a
time  extended by  approximately  four weeks,  but  returned to normal  delivery
times.  Orders  in  backlog  are  firm,  but  are  subject  to  cancellation  or
rescheduling  by the customer.  The Company's  backlog of any particular date is
not necessarily indicative of actual sales for any future period.

         The Company anticipates filling the present backlog during fiscal 1997.
In the event  that the  Company's  marketing  activities  in the  United  States
related  to its laser  marking  systems  result in  additional  demand  for such
systems,  the Company  will need to add  manufacturing  in the United  States in
fiscal  1997.  In  addition,  in the event that the Company is able to implement
anticipated  improvements  in  the  product  design  and  manufacturing  of  its
diffusion-cooled  CO2 Slab lasers  would  enable it to offer such lasers at more
attractive  prices,  the  Company  anticipates  that it will need to expand  its
manufacturing capacity in Europe and in the United States in fiscal 1997 or 1998
in order to satisfy  the  resulting  increase in demand for such  products.  The
Company  estimates  that the total  capital  expenditures  required  to add such
manufacturing  capacity in the United States and Europe would be in the range of
$500,000 to $750,000.

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.

Employees

         At September  30, 1996,  Rofin-Sinar  had 453 full time  employees,  of
which 308 were in Germany,  97 were in the United  States,  12 in France,  16 in
Italy and 20 in Japan.

         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 Gunding-Munich facilities are
represented by a seven-person and five-person  works council,  respectively,  as
well  as  by  a  four-person   central  works  council.   Matters   relating  to
compensation, benefits and work rules are negotiated

                                                                           

<PAGE>


                                       11

and resolved between management and the works council for the relevant location.
The Company considers its relations with its employees to be excellent.

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.
Such 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
cutting  and welding and laser  marking  products  can result in injury to human
tissue if directed at an individual or otherwise  misused.  The Company believes
that its laser  products for cutting and welding and laser marking  products are
in substantial  compliance with all applicable laws for the manufacture of laser
devices.

                                  Risk Factors

Industry Concentration and Cyclicality; Dependence on Sales by Third Parties

         The   Company's   business  is   significantly   dependent  on  capital
expenditures by manufacturers in the Machine Tool,  Automotive and Semiconductor
& Electronics  industries.  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 the
Company.  For the foreseeable future, the Company's  operations will continue to
be dependent on capital  expenditures  in these  industries  which, in turn, are
largely  dependent on the market  demand for their  products.  The Company's net
sales  and  results  of  operations  may be  materially  adversely  affected  if
downturns or slowdowns  in the Machine  Tool,  Automotive  and  Semiconductor  &
Electronics industries occur in the future.

         The  Company's  net sales are dependent in part upon the ability of its
OEM customers to develop and sell systems that  incorporate  the Company's laser
products.  Adverse  economic  conditions,  large  inventory  positions,  limited
marketing resources and other factors affecting these OEM customers could have a
substantial impact upon the Company's  financial  results.  No assurances can be
given that the Company's OEM customers  will not  experience  financial or other
difficulties  that could  adversely  affect their  operations  and, in turn, the
financial condition or results of operations of the Company.

Variability and Uncertainty of Quarterly Operating Results; Potential Volatility
of Stock Price

         The Company has  experienced and expects to continue to experience some
fluctuations in its quarterly results. The Company believes that fluctuations in
quarterly  results may cause the market price of its Common Stock to  fluctuate,
perhaps  substantially.  Factors  which may have an influence  on the  Company's
operating  results in a particular  quarter include the timing of the receipt of
orders from major customers,  product mix,  competitive  pricing pressures,  the
relative  proportions of domestic and international sales, the Company's ability
to design, manufacture and introduce new products on a cost-effective and timely
basis, the delay between incurrence of expenses to further develop marketing and
service   capabilities   and   realization   of  benefits   from  such  improved
capabilities,  and the  introduction  of new  products  by the  Company  and its
competitors.  In  addition,  the  Company's  backlog  at any  given  time is not
necessarily  indicative of actual sales for any succeeding period. The Company's
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  variability from quarter to quarter.  See
"Business--Order Backlog."

                                                                           

<PAGE>


                                       12


         Other factors which the Company  believes may cause the market price of
its Common Stock to fluctuate,  perhaps substantially,  include announcements of
new products,  technologies  or customers by the Company or its  competitors and
developments  with  respect  to  intellectual  property  and  shortfalls  in the
Company's operations relative to analysts' expectations.  In addition, in recent
years,  the stock market in general,  and the shares of technology  companies in
particular,  have  experienced wide price  fluctuations.  These broad market and
industry fluctuations, particularly in the Semiconductor & Electronics industry,
may adversely affect the market price of the Company's Common Stock.

Currency Risk

         Although the Company reports its results in U.S. dollars, approximately
two-thirds of its sales are denominated in other currencies, including primarily
German marks, as well as French francs,  Italian lire and Japanese yen. Although
a predominant portion of the Company's cost of goods sold, selling,  general and
administrative expenses and research development expenses are incurred in German
marks,  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 changed from a $1.5 million credit
at September  30, 1994 to a $5.4 million  credit at September  30, 1995 and from
the $5.4  million  credit at  September  30,  1995 to a $2.2  million  credit at
September 30, 1996. These changes arose primarily from the  strengthening of the
German mark against the U.S. dollar during the fiscal  1994-1995  period and the
strengthening  of the U.S.  dollar  against such foreign  currencies  during the
fiscal  1995-1996  period,  and reflect the fact that a high  proportion  of the
Company's  capital  is  invested  in its  German  operations,  whose  functional
currency is the German mark.  The  fluctuation  of the German mark 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
and gross margin and selling, general and administrative expenses denominated in
such foreign  currencies when translated into U.S.  dollars as compared to prior
periods.   Although  historically  the  Company's  subsidiaries  have  not  paid
dividends,  a further area of currency exposure may in the future be represented
by the payment of dividends,  if any, by the Company's operating subsidiaries in
their respective functional currencies.

         The  Company  has  implemented  a policy  to hedge up to 50% of its net
foreign currency exposure utilizing forward exchange contracts, forward exchange
options and currency swap contracts.  The Company has also  implemented a policy
to  continue to borrow in each  operating  subsidiary's  functional  currency to
reduce  exposure to exchange  gains and losses.  There can be no assurance  that
changes in currency  exchange  rates will not have a material  adverse effect on
the Company's business, financial condition and results of operations.

Competition

         The laser industry is characterized by significant  price  competition.
The Company's  current and proposed  laser  products and laser marking  products
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 the Company. The Company believes that this competition will
be  particularly  intense in the  Nd:YAG  solid  state  laser  markets,  as many
companies  have  committed  significant  research and  development  resources to
pursue  opportunities  in these  markets.  There  can be no  assurance  that the
Company will  successfully  differentiate its current and proposed products from
the  products of its  competitors  or that the  marketplace  will  consider  the
Company's  products to be superior to  competing  products.  With respect to the
Company's  laser marking  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 the Company  expects
new  competitive  product  entry in this  market.  To maintain  its  competitive
position  in this  market,  the  Company  believes  that it will be  required to
continue a high level of investment in engineering,

                                                                           

<PAGE>


                                       13

research and development, marketing and customer service and support. There can
be no assurance that the Company will have sufficient resources to continue to
make such investments, that the Company will be able to make the technological
advances necessary to maintain its competitive position, or that its products
will receive market acceptance. See "Business--Competition."

Risks Relating to Sales Growth in CO2 and Nd:YAG Lasers

         In recent years,  the Company has experienced a period of rapid growth,
attributable in large part to the demand for its laser marking products.  If the
Company is to maintain or increase  the rate of growth of its laser sales in the
near term,  such sales will have to come  through  increases in market share for
the Company's  existing  products,  through the  development  of new products or
through the Company's acquisition of its competitors or their products. To date,
a substantial  portion of the  Company's  revenue has been derived from sales of
high-powered CO2 laser sources and, more recently, solid state flash lamp-pumped
laser sources. The Company intends to devote substantial resources to increasing
the  output  power  of  its  diffusion-cooled  CO2  Slab  laser  sources  and to
developing  diode-pumped  Nd:YAG solid state laser  products in accordance  with
market demand.  The Company is currently  focused on reducing the  manufacturing
costs of its  diffusion-cooled  CO2  Slab  lasers  to  achieve  more  attractive
pricing. The Company's  diode-pumped  lasers,  however, are in an early stage of
development and are not expected to result in marketable products prior to 1998.
A large  part of the  Company's  growth  strategy  depends  upon  being  able to
increase substantially its market share for laser marking products, particularly
in the United  States.  If the Company is unable to  implement  its  strategy of
increasing  its market share for laser  marking  products  and of expanding  its
product range to include  higher output power  diffusion-cooled  CO2 Slab lasers
and diode-pumped  Nd:YAG solid state lasers at attractive  prices, it may not be
able to  achieve  its  anticipated  rate of  growth,  as a result  of which  its
business, operating results and financial condition could be adversely affected.
No assurance can be given that the Company will successfully  expand its marking
products' market share,  increase the output power of its  diffusion-cooled  CO2
Slab laser sources or develop diode-pumped Nd:YAG solid state laser products, or
that any  such  products  will  achieve  market  acceptance  or not be  rendered
obsolete  or  uncompetitive  by  products  of  other  companies.   See  Item  7,
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and "--The Company's Laser Products."

         While there are  currently  no  commitments  with respect to any future
acquisitions,  the  Company's  business  strategy  includes the expansion of its
products and services,  which may be effected through acquisitions.  The Company
from  time  to  time  reviews  various   opportunities  to  acquire  businesses,
technologies  or  products  complementary  to the  Company's  present  business.
Although  management  expects to analyze any such  opportunity  carefully before
committing the Company's  resources,  there can be no assurance that the Company
will be  able  to  integrate  any  acquired  business  effectively  or that  any
acquisition will result in long-term benefits to the Company.

Conflicting Patents  and Other  Intellectual Property  Rights of  Third Parties;
Limited Protection of Intellectual Property

         The  Company  from time to time  receives  notices  from third  parties
alleging  infringement  of such parties' patent or other  intellectual  property
rights by the Company's products. While such notices are common in the Company's
industry  and the  Company  has 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 the Company would in the future prevail in
any  litigation  seeking  damages or expenses  from the Company or to enjoin the
Company from selling its products on the basis of such alleged infringement,  or
that the  Company  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 the Company or its  customers
and a license were not made available to the Company on commercially  reasonable
terms, the Company would be adversely affected.


                                                                           

<PAGE>


                                       14

         The  Company's  future  success  depends in part upon its  intellectual
property,   including  trade  secrets,  know-how  and  continuing  technological
innovation.  There can be no  assurance  that the steps  taken by the Company to
protect its intellectual  property will be adequate to prevent  misappropriation
or that  others will not  develop  competitive  technologies  or  products.  The
Company  currently  holds 32 United  States  and  foreign  patents  on its laser
sources  which expire from 1997 to 2014.  There can be no  assurance  that other
companies  are not  investigating  or  developing  other  technologies  that are
similar to the Company's, that any patents will issue from any application filed
by the  Company  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 the Company
will  not be  challenged,  invalidated  or  circumvented,  or  that  the  rights
thereunder   will  provide  a   competitive   advantage  to  the  Company.   See
"Business--Intellectual Property."

Risks Associated with International Operations

         The  Company's  products are  currently  marketed in  approximately  25
countries,  with  Germany,  the  rest  of  Europe,  the  United  States  and the
Asia/Pacific  region  being  the  Company's  principal  markets.  Sales  in  the
Company's  principal  markets  are subject to risks  inherent  in  international
business activities,  including,  in particular,  general economic conditions in
each such  country,  overlap  of  differing  tax  structures,  management  of an
organization spread over various jurisdictions, unexpected changes in regulatory
requirements  and  compliance  with a variety of foreign  laws and  regulations.
Other general risks associated with international  operations include import and
export  licensing  requirements,  trade  restrictions  and changes in tariff and
freight  rates.   The  business  and  operations  of  the  Company's   principal
subsidiary,  RSL, are primarily  subject to the changing  economic and political
conditions  prevailing  from time to time in Germany.  Although  productivity in
Germany is generally high,  labor costs,  corporate  taxes and employee  benefit
expenses are high and weekly  working  hours are shorter in Germany  compared to
the rest of the European Union, the United States and Japan.


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*          110,840     CO2 lasers, Nd: YAG
                                                           lasers
Gunding-Munich, Germany..      Leased           36,849     Nd: YAG lasers, laser
                                                           marking products
Plymouth, Michigan.......      Leased           58,075     CO2 lasers
Sakai Atsugi-shi, Japan..      Leased           11,100     CO2 lasers

----------
* The  facility  is owned by RSL;  the real  property  on which the  facility is
  located is leased by RSL under a 99-year lease.


         The  Company's  leases of its  facilities  in  Plymouth,  Michigan  and
Gunding-Munich,  Germany  expire in 1998 (with  renewal  options until 2001) and
2005,  respectively.  The leases on its Japanese facilities in Atsugi-shi expire
in 1997 (renewable for two years) and in 1998 (renewable for three years).

         The  Company   maintains   sales,   administration   and  research  and
development  facilities  at each of the  Hamburg,  Gunding-Munich  and  Plymouth
locations.  The Company also maintains sales and service offices worldwide,  all
of which are leased.


                                                                           

<PAGE>


                                       15

         Except as noted under Item 1 above under "--Order Backlog," the Company
believes  that its  existing  facilities  are adequate to meet its 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. The
Company  expects  to  make  additional  capital   expenditures  to  support  its
diode-pumped solid state laser development  activities and add manufacturing and
testing  capacity in North America for selected  components and products,  which
may also require  certain  leasehold  improvements  in the  Company's  Plymouth,
Michigan facility.


Item 3.  Legal Proceedings

         There are no pending material legal proceedings to which the Company is
a party.


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 fiscal 1996.


                                     PART II


Item 5. Market for the  Registrant's  Common Stock and Related  Security  Holder
Matters

         The Company's  Common Stock commenced  trading under the symbol RSTI on
the Nasdaq National Market on September 26, 1996. The table below sets forth the
high and low closing bid prices of the  Company's  Common  Stock during the last
three days of the fourth  quarter of fiscal  1996 as  reported  by the  National
Association of Securities Dealers, Inc.:

                                                      Common Trade Prices
                                                      -------------------
Quarter ended                                          High          Low
-------------                                         -------        ---
September 30, 1996                                    $11 3/4        $10



         At December 20, 1996,  the Company had  approximately  eight holders of
record of its Common Stock and 11,510,500  shares  outstanding.  The Company has
not paid dividends on its Common Stock and does not anticipate  paying dividends
in the foreseeable future.



                                                                           

<PAGE>


                                       16

Item 6.  Selected Financial Data

         The following table sets forth selected consolidated financial data for
the four fiscal years ended  September 30, 1996. The information set forth below
should be read in conjunction  with the  consolidated  financial  statements and
notes thereto filed as part of this annual report.

<TABLE>
<CAPTION>
                                                                      Year ended September 30,
                                                        ---------------------------------------------------
                                                          1993           1994          1995          1996
                                                        --------       --------      --------      --------
                                                                (in thousands, except share amounts)
<S>                                                     <C>             <C>         <C>           <C>
Statement of Income Data:
     Net sales                                           60,034         69,217         92,466       115,903
     Cost of goods sold                                  47,745         46,993         57,162        72,096
     Gross profit                                        12,289         22,224         35,304        43,807
     Selling, general, and administrative expenses       21,951         17,059         20,673        21,246
     Research and development expenses                   10,276          6,834          6,719         9,335
     Income (loss) from operations                      (19,938)        (1,669)         7,912        13,226
     Net interest expense                                 1,654          1,308          1,272         1,010
     Income (loss) before income taxes                  (21,386)        (3,116)         6,265        12,244
     Net tax expense (benefit)                           (1,565)        (1,422)         3,052         4,956
     Net income (loss)                                  (19,821)        (1,694)         3,213         7,288
     Pro forma net income per common share                                               0.37          0.84
     Shares used in computing pro forma net income                                  8,631,578     8,639,498
         per share


Operating Data:
As percentage of sales:
     Gross profit                                          20.5%          32.1%          38.2%         37.8%
     Selling, general and administrative expenses          36.6%          24.6%          22.4%         18.3%
     Research and development expenses                     17.1%           9.9%           7.3%          8.1%
     Income (loss) from operations                        (33.2%)         (2.4%)          8.6%         11.4%
     Income (loss) before income taxes                    (35.6%)         (4.5%)          6.8%         10.6%


Balance Sheet Data:
     Working capital                                      7,672          4,927         14,530        56,138
     Total assets                                        84,580          7,667         90,995       133,147
     Line of credit and loans                            22,196         22,380         21,805        24,780
     Stockholders' equity                                35,837         30,583         39,673        78,000


Other Data:
     Depreciation and amortization                        2,803          2,527          2,364         2,449
     Backlog                                             12,500         17,000         26,500        35,900
     Sales per employee                                     135            184            227           256
</TABLE>



                                                                           

<PAGE>


                                       17


Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations.

Overview

         Rofin-Sinar  is a  leader  in  the  design,  development,  engineering,
manufacture and marketing of laser-based products used for cutting,  welding and
marking a wide range of industrial materials.  During fiscal 1996, approximately
72% of the Company's  revenues  were from sales and servicing of laser  products
for cutting and welding  applications and  approximately 28% were from sales and
servicing of laser products for marking applications.

Restructuring

         The Machine Tool industry experienced a significant downturn during the
global  recession in the early 1990's as  end-users,  particularly  in the heavy
manufacturing  industries,  reduced  their  investment in new  technologies  and
postponed  modernizing  their  production  facilities  in the  face  of  adverse
business conditions.  In light of this change in market conditions,  in 1993 the
Company  undertook  a major  restructuring  program to reduce its  manufacturing
costs,  fixed costs and overhead and better position the Company to benefit from
improving business conditions. This restructuring was completed in fiscal 1995.

         With the  improvement  of economic  conditions  in the United States in
1994 and in Europe in 1995, manufacturers of lasers for material processing have
experienced  rapid  growth,  driven  primarily by pent-up  demand as  industrial
end-users  worldwide   modernize  their   manufacturing   facilities  to  reduce
production costs and increase  efficiency.  The Company experienced  significant
financial improvement during 1994, 1995 and 1996, primarily reflecting improving
economic  conditions,  the benefits of the restructuring  undertaken in 1993 and
1994  and  the  implementation  of  the  Company's  current  business  strategy.
Rofin-Sinar's  worldwide  sales increased from $60.0 million for the fiscal year
ended  September 30, 1993 to $115.9 million for the fiscal year ended  September
30, 1996,  representing a compounded annual growth rate of approximately 25% per
annum. This increase was due principally to growth in sales across the Company's
entire product range and in all three  principal  geographic  markets,  with the
strongest  growth  in sales  of the  Company's  laser  marking  products,  which
increased from $10.1 million to $32.0 million over such three-year  period.  The
growth in the  Company's  net sales since fiscal 1993 has allowed the Company to
realize  improved  operating  leverage by  producing  larger unit  volumes  over
relatively  lower costs and by negotiating more favorable terms for purchases of
components  and  subassemblies.  While the  Company  expects to  continue to see
growth  in fiscal  1997 and  1998,  with the  strongest  long-term  gains in the
Asia/Pacific region principally in laser cutting and marking applications, there
can be no assurance that the Company's recent rate of growth will be maintained.

         The laser industry  continues to be characterized by significant  price
competition.  As part of its ongoing  strategy,  the Company is  continuing  its
efforts to contain costs in order to improve its cost structure.

Currency Exchange Rates

         The Company's  Consolidated  Financial  Statements are prepared in U.S.
dollars. Although the Company reports its results in U.S. dollars, approximately
two-thirds of its sales are denominated in other currencies, including primarily
German marks, as well as French francs, Italian lire and Japanese yen. 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  United  States  dollars  are
accumulated  as  a  separate  component  of  equity.  The  currency  translation
adjustment  component of shareholders' equity changed from a $1.5 million credit
at September  30, 1994 to a $5.4 million  credit at September  30, 1995 and from
the $5.4  million  credit at  September  30,  1995 to a $2.2  million  credit at
September 30, 1996. These changes arose primarily from the strengthening of the

                                                                           

<PAGE>


                                       18

German mark and such other functional  currencies against the U.S. dollar during
the fiscal  1994-1995  period and the  strengthening  of the U.S. dollar against
such foreign currencies during the fiscal 1995-1996, and reflect the fact that a
high proportion of the Company's  capital is invested in its German  operations,
whose functional currency is the German mark.

         The  fluctuation of the German mark 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 and
gross margin and selling,  general and administrative  expenses,  denominated in
such foreign  currencies when translated into U.S.  dollars as compared to prior
periods.

         The following  table  illustrates the effect of the changes in exchange
rates on the Company's  fiscal 1994,  1995 and 1996 net sales,  gross profit and
income from operations,  which have been  recalculated to show what such amounts
would have been  applying  1993 average  exchange  rates to 1994  amounts,  1994
average exchange rates to 1995 amounts,  and 1995 average exchange rates to 1996
amounts.

<TABLE>
<CAPTION>
                                        Fiscal 1994               Fiscal 1995               Fiscal 1996
                                  -----------------------   -----------------------   -----------------------
                                                In 1993                   In 1994                   In 1995
                                                Exchange                  Exchange                  Exchange
                                    Actual       Rates       Actual        Rates        Actual       Rates
                                    ------      --------     ------       --------      ------      --------
                                                                        (in millions)
<S>                                 <C>          <C>         <C>           <C>          <C>          <C>   
Net sales                           $69.2        $69.8       $92.5         $85.4        $115.9       $117.2
Gross profit                         22.2         22.5        35.3          32.2          43.8         44.3
Income (loss) from operations        (1.7)        (1.7)        7.9           7.2          13.2         13.4
</TABLE>



         Between fiscal 1993 and 1994, the German mark weakened against the U.S.
dollar by  approximately  1.9%.  The impact of this weakening of the German mark
was to decrease  net sales and gross  profit by $0.6  million and $0.3  million,
respectively,  with no impact on loss from  operations.  Between fiscal 1994 and
1995, the German mark strengthened against the U.S. dollar by approximately 14%.
The impact of this  strengthening  of the German mark was to increase net sales,
gross profit and income from  operations by $7.1 million,  $3.1 million and $0.7
million,  respectively.  Between  fiscal 1995 and 1996, the German mark weakened
against the U.S. dollar by  approximately  1.7%. The impact of this weakening of
the German  mark was to  decrease  net  sales,  gross  profit  and  income  from
operations by $1.3 million, $0.5 million and $0.2 million, respectively.

         The  Company  has  implemented  a policy  to hedge up to 50% of its net
foreign currency exposure utilizing forward exchange contracts, forward exchange
options and currency swap contracts.  The Company has also  implemented a policy
to  continue to borrow in each  operating  subsidiary's  functional  currency to
reduce  its  exposure  to foreign  currency  gains and  losses.  There can be no
assurance,  however,  that  changes in currency  exchange  rates will not have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

Taxes

         The  Company's  subsidiaries  pay taxes in many  jurisdictions  and the
provisions for income taxes in the Company's  Consolidated  Financial Statements
are based on separate  local tax  computations.  On a consolidated  basis,  this
practice may result in the Company  incurring  income tax expense even though it
may not have consolidated pre-tax income or in paying taxes in excess of pre-tax
income if some of its subsidiaries are not profitable while others are. See Note
9 of the Notes to the Consolidated Financial Statements. In particular,  because
of the Company's substantial operations in Germany, the Company historically has
had a higher  effective  tax rate than many of its  competitors  who do not have
operations in Germany.


                                                                           

<PAGE>


                                       19

         The Company currently generates taxable income,  principally in Germany
and the United States.  German  corporate tax law applies the imputation  system
with regard to the  taxation of the income of a  corporation  (such as RSL).  In
general,  retained  corporate  income is subject to a municipal trade tax (which
for Hamburg and Gunding on a combined  basis is 16.7%),  which is deductible for
federal  corporate income tax purposes,  a federal  corporate income tax rate of
45% (50% prior to January 1, 1994) and,  effective  January 1, 1995, a surcharge
of 7.5% on the federal corporate income tax amount.

         Profits which are distributed by a German  corporate  taxpayer (such as
RSL) in the form of a dividend are subject to a reduced federal corporate income
tax rate of 30% (36% prior to January  1, 1994) plus the 7.5%  surcharge  on the
federal  corporate income tax amount  calculated at the reduced rate.  Dividends
paid by RSL to Rofin-Sinar  Technologies Inc. will be subject to withholding tax
at a rate of 5% pursuant to the income tax treaty  currently  in effect  between
the United States and Germany.

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,
                                                 -------------------------------
                                                 1994         1995         1996
                                                 ----         ----         ----
Net sales                                       100.0%       100.0%       100.0%
Cost of goods sold                               67.9%        61.8%        62.2%
Gross profit                                     32.1%        38.2%        37.8%
Selling, general and administrative expenses     24.6%        22.4%        18.3%
Research and development expenses                 9.9%         7.3%         8.1%
Income (loss) from operations                    (2.4%)        8.6%        11.4%
Income (loss) before income taxes                (4.5%)        6.8%        10.6%
Net income (loss)                                (2.4%)        3.5%         6.3%


Fiscal 1996 Compared to Fiscal 1995

         Net Sales.  Net sales of $115.9  million for fiscal 1996  increased  by
$23.4 million, or 25.3%, over the prior year. The improvement  resulted from net
sales  increases  of $15.2  million,  or 24.9%,  in Europe and the  Asia/Pacific
region and $8.3 million,  or 26.2%,  in the United States.  The growth in Europe
and the Asia/Pacific  region resulted from continuing  increases in sales volume
of  the  Company's   integrated   circuit  laser  marking   application  in  the
Asia/Pacific region, the introduction of the Company's Slab-Series laser product
and the recovery of the Machine Tool market in Japan.  The increase in net sales
in the United States was due  principally to increased  shipments to the Machine
Tool and Automotive markets,  with the largest portion of growth attributable to
increased  sales volume of CO2 lasers for cutting  applications  and spare parts
and the  introduction  of the  Company's  laser  marking  products in the United
States. The effect of currency translation on net sales was immaterial.

         Cost of Goods Sold.  Cost of goods sold of $72.1 million in fiscal 1996
increased by $14.9  million,  or 26.1%,  over the prior year,  and reflected the
increase in net sales.


                                                                           

<PAGE>


                                       20

         Gross Profit.  The  Company's  gross profit of $43.8 million for fiscal
1996 increased by $8.5 million, or 24.1%, over the prior year as a result of the
increase  in net sales in  fiscal  1996 as  compared  to the  prior  year.  As a
percentage  of net sales,  gross profit  decreased  from 38.2% in fiscal 1995 to
37.8% in fiscal 1996, primarily due to the change in the product mix.

         Selling,  General and  Administrative  Expenses.  Selling,  general and
administrative  expenses (which include the cost of application  development) of
$21.2  million for fiscal 1996  increased by 2.8% over the prior year due to the
increase in net sales. However, as a percentage of net sales,  selling,  general
and  administrative  expenses  declined  from  22.4% in fiscal  1995 to 18.3% in
fiscal 1996, reflecting the Company's continuing control of these expenses. Cost
efficiencies  were  gained via a higher mix of both  multiple  unit orders and a
higher  percentage  of sales  through the direct sales force versus  independent
sales representatives.

         Research and Development Expenses. Research and development expenses of
$9.3 million for fiscal 1996 (which are  incurred  primarily in German marks and
are net of government grants) increased $2.6 million, or 38.9% over fiscal 1995.
This represents an increase in research and development expenses as a percentage
of sales from 7.3% in fiscal 1995 to 8.1% in fiscal 1996 attributable in part to
the  commencement  of the Company's  diode pumped solid state laser program.  In
1995,  research  and  development  expenses  were  below  average  due to higher
government grants.

         Income from  Operations.  The Company's income from operations of $13.2
million for fiscal 1996  increased  by $5.3  million,  or 67.2%,  over the prior
year. As a percentage of sales,  income from operations was 11.4% in fiscal 1996
as compared to 8.6% in the prior year, primarily as a result of the reduction in
selling,  general and administrative  expenses as a percentage of net sales. The
effect of currency  translation on income from  operations was  immaterial.  Net
sales per employee  increased from $227,000 in fiscal 1995 to $256,000 in fiscal
1996, a productivity increase of 12.8%.

         Income Before Income Taxes. The Company's income before income taxes of
$12.2 million in fiscal 1996 increased by $6 million over the prior period. As a
percentage of net sales, income before income taxes was 10.6% in fiscal 1996, as
compared to 6.8% in the prior period, as a result of the increase in income from
operations  and the decrease in interest  expense  accrued  under the  Company's
intercompany  lines of credit with the  Company's  former  parent and  borrowing
facilities  utilized  by its  joint  venture  subsidiary  in Japan  due to lower
interest rates.

         Income Tax Expense.  Income tax expense was $5.0 million in fiscal 1996
compared  to an income  tax  expense  of $3.1  million  in the prior  year.  The
effective tax rates for fiscal 1996 and 1995 were 40.5% and 48.7%, respectively.
The  effective  tax  rates  were  higher  than  the U.S.  statutory  rate of 35%
principally as a result of earnings taxed at higher foreign  statutory rates and
foreign operating losses for which no benefit was recognized in fiscal 1995.

         Net Income.  As a result of the  foregoing  factors,  the Company's net
income of $7.3 million  (pro forma $0.84 per share) in fiscal 1996  increased by
$4.1  million  over the prior year's net income of $3.2 million (pro forma $0.37
per share).

Fiscal 1995 Compared to Fiscal 1994

         Net Sales.  Net sales of $92.5  million  for fiscal 1995  increased  by
$23.2 million, or 33.6%, over the prior year. The improvement  resulted from net
sales  increases  of $20.6  million,  or 51.2%,  in Europe and the  Asia/Pacific
region and $2.6 million,  or 9%, in the United States.  The growth in Europe and
the Asia/Pacific region resulted primarily from the substantial  increase in the
sales volume of the Company's laser marking products in the Asia/Pacific region,
as well as the strong  recovery  in Europe of the  Machine  Tool and  Automotive
markets due to pent-up  demand,  which  resulted  in higher  volume as well as a
shift in product mix toward higher-margin high-power

                                                                           

<PAGE>


                                       21

products.  In addition,  approximately $7.5 million, or 36.4% of the increase in
Europe and the  Asia/Pacific  region, resulted from currency  translation as the
German mark  strengthened  against the U.S.  dollar.  The increase in the United
States was due principally to the increased volume of shipments to the improving
Machine Tool and Automotive markets, with the largest portion of growth in sales
of CO2 lasers for  cutting  applications  and related  service and spare  parts.
Because  the  recovery  in both  these  markets  began in 1994,  the  percentage
increase in the United States was lower in 1995 compared to 1994.

         Cost of Goods Sold. Cost of goods sold of $57.2 million for fiscal 1995
increased by $10.2 million,  or 21.6%,  over the prior year, but as a percentage
of net sales  declined  from 67.9% in fiscal 1994 to 61.8% in fiscal  1995.  The
decrease in the cost of goods sold as a percentage of net sales reflected higher
capacity utilization in Germany during the period, as the Company recognized the
benefits of the restructuring  undertaken in Germany in fiscal 1993 and 1994, as
well as the outsourcing of the German subsidiary's machine shop operation.

         Gross Profit.  The  Company's  gross profit of $35.3 million for fiscal
1995 increased by $13.1 million,  or 58.9%,  over the prior year, as a result of
the  increase  in net sales in fiscal  1995 as  compared  to fiscal 1994 and the
decrease in cost of goods sold as a percentage of net sales.  As a percentage of
net sales,  gross profit  increased from 32.1% in fiscal 1994 to 38.2% in fiscal
1995.

         Selling,  General and  Administrative  Expenses.  Selling,  general and
administrative expenses (which include the costs of application  development) of
$20.7 million for fiscal 1995 increased by $3.6 million,  or 21.2%,  over fiscal
1994. However, as a percentage of net sales, selling, general and administrative
expenses  declined  from  24.6% in fiscal  1994 to 22.4% in  fiscal  1995 as the
Company  continued to control these expenses  despite a significant  increase in
marketing  activity in the  Asia/Pacific  region related to the Company's  laser
marking  products  and the launch of the  Company's HF  cross-flow  laser in the
United States.

         Research and Development Expenses. Research and development expenses of
$6.7  million  (which are  incurred  principally  in German marks and are net of
government  grants)  remained  essentially  unchanged from fiscal 1994 to fiscal
1995,   decreasing  by  only  $0.1  million,  or  1.7%.  Although  research  and
development  expenses declined as a percentage of sales from 9.9% in fiscal 1994
to 7.3% in  fiscal  1995 due to the  increase  in sales in  fiscal  1995,  total
research and development  spending rose due to an increase in government  grants
in fiscal 1995.

         Income (Loss) from Operations.  The Company's income from operations of
$7.9 million for fiscal 1995  increased  by $9.6 million over fiscal 1994.  As a
percentage  of net sales,  income  from  operations  was 8.6% in fiscal  1995 as
compared to (2.4%) in fiscal 1994,  as a result of higher gross  margins and the
reductions  in selling,  general and  administrative  expenses  and research and
development  expenses as a percentage of net sales.  Approximately $0.7 million,
or 7.3%,  of the  increase  in income from  operations  resulted  from  currency
translation  as  the  German  mark  and  other  relevant  functional  currencies
strengthened  against the U.S.  dollar.  Net sales per employee  increased  from
$184,000 in fiscal 1994 to $227,000 in fiscal 1995, a  productivity  increase of
23.4%.

         Income (Loss) Before Income Taxes.  The Company's  income before income
taxes of $6.3 million in fiscal 1995 increased by $9.4 million over fiscal 1994.
As a  percentage  of net sales,  income  before  income taxes was 6.8% in fiscal
1995,  as  compared  to (4.5%) in fiscal  1994,  as a result of the  increase in
income from  operations,  which was offset by a slight increase in other expense
of $0.2 million over fiscal 1994.

         Income Tax Expense  (Benefit).  Income tax expense was $3.1  million in
fiscal 1995 compared to ($1.4 million) in fiscal 1994. As a percentage of income
(loss) before income taxes, income tax expense was 48% in fiscal 1995 and income
tax benefit was (45%) in fiscal 1994, respectively,  and reflected the fact that
in fiscal 1995 all of the Company's operations except its Japanese joint venture
reported  pre-tax  income.  The  effective  tax rate in fiscal 1995 of 48.7% was
higher than the U.S.  statutory rate of 35%  principally as a result of earnings
taxed at higher foreign  statutory rates and foreign  operating losses for which
no tax benefit was recognized.

                                                                           

<PAGE>


                                       22


         Net Income (Loss).  As a result of the foregoing  factors,  the Company
recorded net income of $3.2 million in fiscal 1995 as compared to ($1.7 million)
in fiscal 1994.

Liquidity and Capital Resources

         The Company has historically funded its cash requirements  through cash
flow from  operations,  capital  contributions  and advances  from the Company's
former parent and its affiliates  pursuant to intercompany  lines of credit,  as
well as through borrowings under credit facilities guaranteed by a former parent
affiliate. At September 30, 1996, the amount outstanding under such intercompany
lines of credit from the former parent and its affiliates was $18.4 million.  At
such date, the Company also had outstanding bank debt of $6.4 million.

         The Company  completed its initial public offering of 11,500,000 shares
of its Common  Stock on September  30, 1996 for net  proceeds of $102.7  million
(before  deduction of other offering expenses borne  proportionately  by Siemens
and the  Company).  Of such  amount,  approximately  $82  million  of the  gross
proceeds  ($77.1  million  of the  net  proceeds)  were  used  to  purchase  all
outstanding  shares of RSL and RSI from Siemens and its  affiliates and to repay
certain indebtedness owed to Siemens and its affiliates.

         Net cash provided by (used in) operating  activities  was $6.1 million,
($0.2  million) and $5.9 million in fiscal  1996,  1995 and 1994,  respectively.
Cash flow from  operations in fiscal 1996 increased by $6.3 million  compared to
the prior year  primarily due to increased  net income,  as well as increases in
income taxes payable, accrued liabilities and pension obligation. Cash flow from
operations  in fiscal 1995  decreased  $6.0  million  compared to the prior year
despite the improvement in the Company's results of operations, principally as a
result of increased  receivables and  inventories,  offset by increases in trade
payables, deferred income taxes, accrued liabilities and pension obligation.

         Trade accounts receivable, net of allowances, increased $6.1 million to
$31.2 million at September 30, 1996 from  September 30, 1995 and $7.3 million to
$25.1  million at  September  30,  1995 from  September  30,  1994.  Inventories
increased $6.2 million to $34.4 million at September 30, 1996 from September 30,
1995 and $7.5 million to $28.2 million at September 30, 1995 from  September 30,
1994.  The increase in  receivables  was due primarily to growth in net sales. A
portion  of the  increase  in  receivables  was  attributable  to the  increased
proportion  of sales to customers  in Japan,  where  payment  terms are normally
longer.  Inventories increased primarily to support the growth in net sales, and
also included  increases in inventory  levels related to the introduction of new
products such as the Slab-Series  laser  (including units held by the Company in
its  applications  centers  and  for  demonstration  to  customers),  as well as
rescheduling of delivery dates on sales of laser markers.

         Cash used in investing  activities was $1.9 million,  $1.4 million, and
$0.3 million in fiscal 1996, 1995, and 1994, respectively.  The increase in cash
used for investing activities in periods subsequent to fiscal 1994 was primarily
attributable to increased  capital  expenditures,  offset by sales of equipment.
Capital expenditures were $2.0 million, $1.9 million, and $0.5 million in fiscal
1996,  1995, and 1994,  respectively.  The increase in fiscal 1996 was primarily
due to the expansion of production  facilities  for the Company's  Laser Marking
Division in Gunding,  Germany,  by $0.6  million.  In general,  these  increases
reflect the acquisition of additional manufacturing and research and development
equipment, as well as investment in computers and telecommunications equipment.

         Cash  provided by (used in)  financing  activities  primarily  reflects
payments on borrowings  from the  Company's  former  parent,  as well as the net
proceeds from the Company's initial public offering.

         The  Company  has  obtained a credit  line for a one-year  $25  million
revolving  loan facility with Deutsche Bank AG ("Deutsche  Bank") to support its
working capital needs (the "Credit  Facility").  Borrowings  under such facility
will be made at market rates of interest at the time of each such borrowing.  As
is customary for German banks in their commercial lending practices,  the Credit
Facility will be governed by the General Business Conditions

                                                                           

<PAGE>


                                       23

of Deutsche Bank (the "General Business Conditions").  Although the terms of the
credit line relating to the Credit  Facility do not require that any security be
granted  by the  Company  to  Deutsche  Bank  initially,  the  General  Business
Conditions  provide that Deutsche Bank may  nonetheless  make such a demand at a
later time in the event that the  economic  status of the Company has changed or
threatens to change in a negative manner.

Recently Issued Accounting Standards

         During October 1995, the Financial  Accounting  Standards  Board issued
Statement No. 123,  "Accounting  for  Stock-Based  Compensation."  Effective for
fiscal years  beginning  after  December 15, 1995,  Statement No. 123 encourages
companies to include the fair value of any stock awards  issued as  compensation
expense  within their income  statements.  Companies  that choose to remain with
Accounting  Principles  Board  Opinion  No. 25 (which uses the  intrinsic  value
method to  account  for stock  awards)  must  disclose  pro forma net income and
earnings  per  share as if the fair  value of the  award  had been  included  as
compensation expense. The Company anticipates remaining with the intrinsic value
method.

         On March 31, 1995,  the  Financial  Accounting  Standards  Board issued
Statement No. 121,  "Accounting for the Impairment of Long-Lived  Assets and for
Long-Lived  Assets to be Disposed  of." This  Statement  provides  guidance  for
recognition  and  measurement  of  impairment  of  long-lived  assets,   certain
identifiable intangibles and goodwill related both to assets to be held and used
and assets to be disposed of. The Company  intends to adopt this Statement as of
the first  quarter of its next  fiscal year and  anticipates  that the effect of
such adoption will be immaterial.

Pension Plan Liabilities

         The Company has defined benefit pension plans for  substantially all of
its German and U.S. employees.  As is the normal practice with German companies,
the  German  plan is  unfunded.  In  accordance  with the terms of an  agreement
between Rofin-Sinar, Inc. and the Company's former parent, the Projected Benefit
Obligation  of the U.S.  Plan was  funded  by the  Company's  former  parent  in
December of 1996.  At  September  30,  1996,  the amount of the accrued  pension
liability for both the German and U.S. plans was approximately $3.5 million.


Item 8.  Financial Statements and Supplementary Data

         See Item 14(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 and Disagreements with Accountants on Accounting and Financial
         Disclosure

         Not applicable.



                                                                           

<PAGE>


                                       24

                                    PART III


Item 10.  Directors and Executive Officers of the Registrant

         The  information  required by this Item is included in the "Election of
Directors",  "Directors and Executive  Officers" and "Section  16(a)  Beneficial
Ownership Reporting  Compliance" sections of the Company's Proxy Statement to be
filed in connection  with the Company's 1997 Annual Meeting of  Stockholders  to
held in March 1997 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 1997 Annual Meeting of Stockholders
to held in March 1997 and is incorporated by reference herein.


Item 12.  Security Ownership of Certain Beneficial Owners and Management

         The  information  required by this Item 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  1997
Annual  Meeting of  Stockholders  to held in March 1997 and is  incorporated  by
reference herein.


Item 13.  Certain Relationships and Related Transactions

         The information  required by this Item is included in the "Compensation
Committee",  "Interlocks and Insider  Participation" and "Certain  Transactions"
sections of the Company's  Proxy  Statement to be filed in  connection  with the
Company's  1997  Annual  Meeting  of  Stockholders  to held in March 1997 and is
incorporated by reference herein.


                                     PART IV


Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

a.    1.  Consolidated Financial Statements

          The following financial statements are filed as part of this
annual report.

          Independent Auditors' Report                                       F-1

          Consolidated Balance Sheets as of September 30, 1995 and 1996      F-2

          Consolidated Statements of Operations for the years ended
          September 30, 1994, 1995, and 1996                                 F-3



<PAGE>


                                       25

          Consolidated Statements of Stockholders' Equity for the years ended
          September 30, 1994, 1995 and 1996                                  F-4

          Consolidated Statements of Cash Flows for the years ended
          September 30, 1994, 1995 and 1996                                  F-5

          Notes to Consolidated Financial Statements                         F-6

      2.  Financial Statement Schedules

          Independent Auditors' Report                                      F-17

          Schedule II--Valuation and Qualifying Accounts                    F-18

          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 is filed or
      incorporated by reference as part of this annual report.

b.    Reports on Form 8-K

          The  Registrant  filed a  report  on Form  8-K on  November  22,  1996
      reporting  its  financial  results  for the  quarter and fiscal year ended
      September 30, 1996.

c.    Exhibits

         The exhibits listed in the accompanying index to exhibits are filed or
incorporated by reference as part of this annual report.

Exhibit
Number    Description                                                      Page

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*


<PAGE>

                                       26

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 June 14, 1989, between DR Group and Rofin-Sinar
          Incorporated (Mast Street property)*

10.10 --  Lease Agreement, dated March 25, 1993 between DR Group and Rofin-Sinar
          Incorporated (Plymouth Oaks Drive property)*

10.11 --  Rofin-Sinar Laser GmbH Pension Plan (in German, English summary
          provided)*

10.12 --  Form of 1996 Equity Incentive Plan*

10.13 --  Form of 1996 Non-Employee Directors' Stock Plan*

10.14 --  Deutsche Bank AG Commitment Letter dated August 22, 1996*

10.15 --  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)*

10.16 --  Form of Employment Agreement, dated as of September 2, 1996, among
          Hinrich Martinen, Rofin-Sinar Laser GmbH and Rofin-Sinar Technologies
          Inc. (in German, English summary provided)*

10.17 --  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)*

11.1  --  Statement of earnings per share

21.1  --  List of Subsidiaries of the Registrant*

23.1  --  Consent of KMPG Peat Marwick LLP

27.1  --  Financial Data Schedule for fiscal year ended September 30, 1996

------------------------------
*        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.


<PAGE>



                                   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:  December 30, 1996               ROFIN-SINAR TECHNOLOGIES INC.

                                       By:           /s/ Peter Wirth
                                          _____________________________________
                                                         Peter Wirth
                                          Chairman of the Board, Chief Executive
                                                   Officer and President

         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 of          December 30, 1996
    Peter Wirth              Directors, Chief Executive
                             Officer and President
/s/ Hinrich Martinen
------------------------     Executive Vice President,         December 30, 1996
    Hinrich Martinen         Research and Development/
                             Operations, Chief Technical
                             Officer and Director
/s/ Gunther Braun
------------------------     Executive Vice President,         December 30, 1996
    Gunther Braun            Finance and Administration,
                             Chief Financial Officer,
                             Principal Accounting Officer
                             and Director
/s/ William R. Hoover
------------------------     Director                          December 30, 1996
    William R. Hoover

/s/  Ralph E. Reins
------------------------     Director                          December 30, 1996
     Ralph E. Reins

/s/  Gary K. Willis
------------------------     Director                          December 30, 1996
     Gary K. Willis


                                                                           

<PAGE>



                          Independent Auditors' Report


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


We have audited the  accompanying  consolidated  balance  sheets of  Rofin-Sinar
Technologies  Inc. and  Subsidiaries  as of September 30, 1995 and 1996, and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for each of the years in the three-year  period ended  September 30, 1996.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material  respects,  the  financial  position  of  Rofin-Sinar
Technologies  Inc. and  Subsidiaries  as of September 30, 1995 and 1996, and the
results  of their  operations  and their cash flows for each of the years in the
three-year  period  ended  September  30, 1996,  in  conformity  with  generally
accepted accounting principles.

KPMG Peat Marwick LLP
Detroit, Michigan

November 6, 1996

                                                                           
                                       F-1

<PAGE>



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

<TABLE>
<CAPTION>
                                                            September 30,  September 30,
                                                                1995           1996
                                                            -------------  -------------
<S>                                                           <C>           <C>      
ASSETS
Current assets:
     Cash and cash equivalents                                $     691     $  34,869
     Trade accounts receivable                                   26,404        32,198
     Less allowance for doubtful accounts                        (1,252)         (963)
                                                              ---------     ---------
         Trade accounts receivable, net                          25,152        31,235

     Other accounts receivable                                    1,264         1,448
     Inventories (note 2)                                        28,169        34,353
     Prepaid expenses                                               184           247
     Deferred income tax assets - current (note 9)                6,614         5,494
                                                              ---------     ---------
         Total current assets                                    62,074       107,646

Property and equipment, at cost (note 3)                         41,352        40,333
     Less accumulated depreciation                              (14,237)      (15,598)
                                                              ---------     ---------
         Property and equipment, net                             27,115        24,735

Deferred income tax assets - noncurrent (note 9)                  1,574           624
Other assets                                                        232           142
                                                              ---------     ---------

     Total assets                                             $  90,995     $ 133,147
                                                              =========     =========

LIABILITIES AND STOCKHOLDERS' EQUITY                                      
Current liabilities:                                                      
     Line of credit (note 6)                                  $  18,900     $  18,426
     Bank loans (note 5)                                          2,905         6,354
     Advances from former Parent (note 6)                         7,000          --
     Accounts payable, trade                                      5,640         5,508
     Income taxes payable (note 9)                                 --           3,636
     Accrued liabilities (note 4)                                11,496        17,086
     Deferred income tax liability - current (note 9)             1,603           498
                                                              ---------     ---------
         Total current liabilities                               47,544        51,508

Pension obligations (note 8)                                      3,762         3,518
Deferred income tax liability - noncurrent (note 9)                --              95
Minority interests                                                   16            26
                                                              ---------     ---------
         Total liabilities                                       51,322        55,147

Commitments and contingencies (note 7)                                    
Stockholders' equity:                                                     
     Preferred stock, 5,000,000 shares authorized, none                   
       issued or outstanding                                       --            --
     Common stock, $0.01 par value, 50,000,000 shares                     
       authorized, 11,510,500 shares issued and outstanding        --             115
     Additional paid-in capital                                    --          75,700
     Parent's capital                                            34,224          --
                                                                          
     Cumulative foreign currency translation adjustment           5,449         2,185
                                                              ---------     ---------

     Total stockholders' equity                                  39,673        78,000
                                                              ---------     ---------

     Total liabilities and stockholders' equity               $  90,995     $ 133,147
                                                              =========     =========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       F-2

<PAGE>



                 ROFIN-SINAR TECHNOLOGIES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                (dollars in thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                     Years ended September 30,
                                              ----------------------------------------
                                                 1994           1995          1996
                                              -----------    -----------   -----------
<S>                                           <C>            <C>           <C>        
Net sales                                     $    69,217    $    92,466   $   115,903
Cost of goods sold                                 46,993         57,162        72,096
                                              -----------    -----------   -----------

     Gross profit                                  22,224         35,304        43,807
                                                                           -----------

Selling, general, and administrative expenses      16,228         19,124        20,762
Provision for doubtful accounts                       831          1,549           484
Research and development expenses                   6,834          6,719         9,335
                                              -----------    -----------   -----------

     Income (loss) from operations                 (1,669)         7,912        13,226

Other expense (income):
     Interest expense, net (notes 5 and 6)          1,308          1,272         1,010
     Minority interest                                  5              9            10
     Miscellaneous                                    134            366           (38)
                                              -----------    -----------   -----------

         Total other expense, net                   1,447          1,647           982
                                              -----------    -----------   -----------

         Income (loss) before income taxes         (3,116)         6,265        12,244

Income tax expense (benefit) (note 9)              (1,422)         3,052         4,956
                                              -----------    -----------   -----------

         Net income (loss)                    $    (1,694)   $     3,213   $     7,288
                                              ===========    ===========   ===========

Pro forma net income per share                               $      0.37   $      0.84
                                                             ===========   ===========

Weighted average shares used in computing
       pro forma net income per share                          8,631,578     8,639,498
                                                             ===========   ===========
</TABLE>




          See accompanying notes to consolidated financial statements.


                                                                           
                                       F-3

<PAGE>



                 ROFIN-SINAR TECHNOLOGIES INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  Years ended September 30, 1994, 1995 and 1996
                             (dollars in thousands)

<TABLE>
                                                                                             Cumulative
                                                                                              Foreign
                                                   Common      Additional                     Currency          Total
                                                   Stock         Paid-in        Parent's     Translation    Stockholders'
                                                 Par Value       Capital        Capital      Adjustment         Equity
                                                 ---------     ----------      ---------     -----------    -------------
<S>                                               <C>          <C>              <C>           <C>             <C>
BALANCES at September 30, 1993                    $  --        $     --         $36,006          $(169)       $35,837
Foreign currency translation adjustment              --              --            --            1,638          1,638
Capital distributions to former Parent               --              --          (5,198)          --           (5,198)
Net loss                                             --              --          (1,694)          --           (1,694)
                                                  =======      ==========      ========       ========       ========
BALANCES at September 30, 1994                       --              --          29,114          1,469         30,583
Foreign currency translation adjustment              --              --            --            3,980          3,980
Capital contributions from former Parent             --              --           1,897           --            1,897
Net income                                           --              --           3,213           --            3,213
                                                  =======      ==========      ========       ========       ========
BALANCES at September 30, 1995                       --              --          34,224          5,449         39,673
Foreign currency translation adjustment              --              --            --           (3,264)        (3,264)
Capital contributions from former Parent             --              --           1,938           --            1,938
Net income                                           --              --           7,288           --            7,288
Public sale of common stock, net of expenses          115          75,700       (43,450)          --           32,365
                                                  -------      ----------      --------       --------       --------
BALANCES at September 30, 1996                       $115         $75,700      $   --           $2,185        $78,000
                                                  =======      ==========      ========       ========       ========

</TABLE>

          See accompanying notes to consolidated financial statements.


                                       F-4

<PAGE>



                 ROFIN-SINAR TECHNOLOGIES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (dollars in thousands)

<TABLE>

                                                                     Years ended September 30,
                                                             -----------------------------------------
                                                                1994            1995            1996
                                                             ---------       ---------       ---------
<S>                                                          <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                                       $  (1,694)      $   3,213       $   7,288
     Adjustments to reconcile net income (loss) to net
       cash provided (used) by operating activities:
          Depreciation and amortization                          2,527           2,364           2,449
          Provision for doubtful accounts                          831           1,549            (484)
          Loss on disposal of property and equipment                32             214               7
          Deferred income taxes                                 (1,328)          2,476           1,118
          Minority interest in gains of subsidiary                   5               9              10
          Change in operating assets and liabilities:
             Trade accounts receivable                           3,138          (8,232)         (6,387)
             Other accounts receivable                              (5)           (184)           (373)
             Inventories                                         3,846          (6,204)         (6,976)
             Prepaid expenses and other                             60             235               8
             Accounts payable, trade                            (1,961)          2,782            (249)
             Income taxes payable                                 --              --             3,636
             Accrued liabilities and pension obligation            414           1,619           6,049
                                                             ---------       ---------       ---------
                  Net cash provided (used) by operating
                  activities                                     5,865            (159)          6,096
                                                             ---------       ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Additions to furniture and equipment                         (452)         (1,936)         (1,955)
     Proceeds from sale of furniture and equipment                 201             553              91
     Investment in subsidiary                                     --               (19)           --
                                                             ---------       ---------       ---------
                  Net cash used by investing activities           (251)         (1,402)         (1,864)
                                                             ---------       ---------       ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Increase (decrease) in parent capital                      (5,198)          1,897           1,938
     Repayment of former parent loans                             --              --            (7,473)
     Public sale of common stock, net of expenses                 --              --           102,445
     Purchase of RSI and RSL stock                                --              --           (70,080)
     Borrowings from bank                                         --              --             6,318
     Repayments to bank                                            (79)           (515)         (3,129)
                                                             ---------       ---------       ---------

             Net cash provided (used) by financing
             activities                                         (5,277)          1,382          30,019
                                                             ---------       ---------       ---------

Effect of foreign currency translation on cash                     (88)             31             (72)
                                                             ---------       ---------       ---------
Net increase (decrease) in cash and cash equivalents               249            (148)         34,179
Cash and cash equivalents at beginning of year                     590             839             691
                                                             ---------       ---------       ---------
Cash and cash equivalents at end of year                     $     839       $     691       $  34,869
                                                             =========       =========       =========

Cash paid during the period for interest                     $     125       $     139       $     134
                                                             =========       =========       =========

Cash paid during the period for income taxes                 $    --         $    --         $    --
                                                             =========       =========       =========

</TABLE>


          See accompanying notes to consolidated financial statements.


                                       F-5

<PAGE>


                 ROFIN-SINAR TECHNOLOGIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1994, 1995 and 1996
                             (dollars in thousands)



1.       SUMMARY OF ACCOUNTING POLICIES

         (a)      Description of the Company and Business

                  The accompanying  financial  statements present the historical
                  financial   information  of  Rofin-Sinar   Technologies   Inc.
                  (Rofin-Sinar or the Company) and its wholly owned consolidated
                  subsidiaries,  Rofin-Sinar  Inc.  (a  United  States  company)
                  (RSI),  and  Rofin-Sinar  Laser  GmbH (a Federal  Republic  of
                  Germany limited liability  company) (RSL).  These subsidiaries
                  were formerly the  industrial  laser  businesses of Siemens AG
                  (Siemens or former  Parent).  RSL  includes  the  consolidated
                  accounts of its 99.97  percent-owned  subsidiary,  Rofin-Sinar
                  France S.A.;  its 90.65 percent  (83.5 percent in  1994)-owned
                  subsidiary,   Rofin-Sinar   Italiana   S.r.L.;   and   its  51
                  percent-owned subsidiary,  Rofin Marubeni Laser Corporation (a
                  Japanese entity).  All significant  intercompany  balances and
                  transactions have been eliminated in consolidation.

                  On September  30,  1996,  Rofin-Sinar  consummated  an initial
                  public  offering of its common stock  (IPO).  Prior to the IPO
                  the  common  stock  of  Rofin-Sinar,  a newly  formed  holding
                  company, RSI and RSL were each owned directly or indirectly by
                  Siemens AG.  Concurrent  with the IPO the stock of RSI and RSL
                  (together,   Rofin  Sinar   Group),   including  all  business
                  operations,  assets and liabilities,  were sold to the Company
                  (reorganization).  Approximately $82,000 of the gross proceeds
                  ($77,080 of the net proceeds)  from  the public  offering were
                  used to purchase such stock of Rofin-Sinar  Group from Siemens
                  AG and its subsidiaries  and to repay certain  indebtedness to
                  Siemens.   The  reorganization  constitutes a  combination  of
                  entities  under common  control and, for financial  statements
                  purposes,  has been  accounted for by combining the historical
                  accounts of  Rofin-Sinar  Group and  Rofin-Sinar,  in a manner
                  similar to pooling-of-interests accounting.

                  The  combined  financial   statements  are  derived  from  the
                  historical   financial   statements  of   Rofin-Sinar   Group.
                  Management believes the accompanying  historical statements of
                  operations include a reasonable allocation of all expenses the
                  Company will incur as an independent company.

                  The   primary   business   of   Rofin-Sinar   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,
                  semiconductor,  and electronics  industries and are located in
                  the  United  States,  Europe,  and  Asia.  For the year  ended
                  September 30, 1996,  Rofin-Sinar  generated  approximately  75
                  percent of its revenues from the sale and  installation of new
                  lasers and  approximately 25 percent from aftermarket  support
                  for the Company's existing laser products.

         (b)      Cash Equivalents

                  Cash  equivalents   consist  of  liquid  instruments  with  an
                  original maturity of three months or less.


                                       F-6

<PAGE>


         (c)      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.

         (d)      Property and Equipment

                  Property and  equipment  are recorded at cost and  depreciated
                  over their useful lives,  except for  leasehold  improvements,
                  which are  amortized  over the lesser of their 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
                Machinery and equipment                   3-10 years
                Furniture and fixtures                    3-10 years
                Computers and software                     3-4 years
                Leasehold improvements                    5-15 years

         (e)      Revenue Recognition

                  Revenues  are  recognized  when a laser  product is shipped or
                  services are performed.

         (f)      Income Taxes

                  Income  taxes  are  accounted   for  following   Statement  of
                  Financial  Accounting standards No. 109, Accounting for Income
                  Taxes (Statement 109). Under the asset and liability method of
                  Statement  109,  deferred  income taxes 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.  Deferred tax
                  assets and  liabilities  are measured  using enacted tax rates
                  expected  to apply to  taxable  income  in the  years in which
                  those  temporary  differences  are expected to be recovered or
                  settled.  Under Statement 109, the effect on deferred taxes of
                  a change in tax rates is  recognized  in income in the  period
                  that includes the enactment date.

                  The  Company's  results  through  September 30, 1996 have been
                  included  in the  consolidated  federal  income  tax return of
                  Siemens  Corporation  in the U.S.  and,  for periods  prior to
                  October 1, 1995,  Siemens AG in Germany.  For periods from and
                  after September 30, 1996 and October 1, 1995, the Company will
                  file   separate   tax  returns  in  the  U.S.   and   Germany,
                  respectively.  For  purposes  of these  financial  statements,
                  income taxes are computed on a separate tax return basis.

         (g)      Accounting for Warranties

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


                                                                           
                                       F-7

<PAGE>



         (h)      Foreign Currency Translation

                  In accordance with Statement of Financial Accounting Standards
                  No.  52,  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 translating foreign
                  currency  financial  statements  are  recorded  in a  separate
                  component of shareholders'  equity.  Gains or losses resulting
                  from foreign currency transactions are included in net income.

         (i)      Research and Development Expenses

                  Research and development  costs are expensed when incurred and
                  are net of government grants of $611, $1,400 and $822 received
                  for the  years  ended  September  30,  1994,  1995  and  1996,
                  respectively. The Company has no future obligations under such
                  grants.

         (j)      Financial Instruments

                  Financial instruments of the Company,  consisting  principally
                  of  cash,  accounts  receivable,  accounts  payable,  and bank
                  loans,  are recorded at amounts  which  approximate  estimated
                  fair value. The estimated fair value amounts are determined by
                  the Company using available  market  information and available
                  valuation methodologies.

         (k)      Use of Estimates

                  Management  of the  Company  makes a number of  estimates  and
                  assumptions   relating   to  the   reporting   of  assets  and
                  liabilities  and the  disclosure of contingent  liabilities to
                  prepare  these   financial   statements  in  conformity   with
                  generally accepted accounting principles. Actual results could
                  differ from these estimates.

         (l)      Earnings per Share

                  Pro  forma  net  income  per  share is  based on the  weighted
                  average number of common and common  equivalent  shares (stock
                  options and preferred shares) outstanding in each period. Such
                  shares  prior to the IPO  represent a pro-rata  portion of the
                  number of shares issued pursuant to the offering  (8,631,578),
                  the  proceeds  from which were used to purchase  the shares of
                  RSI  and RSL  and to  repay  $7,000  of  indebtedness  owed to
                  Siemens.

2.       INVENTORIES

         Inventories are summarized as follows:

                                         September 30,
                                    -----------------------
                                      1995           1996
                                    --------      ---------
Finished goods                      $  8,243      $   6,586
Work in progress                       5,595          8,027
Raw materials and supplies             7,337          8,087
Demo inventory                         2,754          5,015
Service parts                          4,240          6,638
                                    --------      ---------
        Total inventories, net      $ 28,169      $  34,353
                                    ========      =========


                                       F-8

<PAGE>


3.     PROPERTY AND EQUIPMENT

       Property and equipment include the following:

                                                     September 30,
                                                -----------------------
                                                  1995           1996
                                                --------      ---------
Buildings                                       $ 26,159      $  24,140
Technical machinery and equipment                  5,491          5,542
Furniture and fixtures                             5,907          5,998
Computers and software                             2,828          3,314
Leasehold improvements                               967          1,339
                                                --------      ---------
     Total property and equipment, at cost      $ 41,352      $  40,333
                                                ========      =========

4.       ACCRUED LIABILITIES                    

         At September 30, 1995 and 1996,  accrued  liabilities  are comprised of
         the following:

                                                     September 30,     
                                                -----------------------
                                                  1995           1996
                                                --------      ---------
Employee compensation                           $  4,256      $   5,274
Warranty reserves                                  4,020          4,427
Deferred revenue                                     488          2,548
Other taxes payable                                   99          1,563
Customer deposits                                    395            402
Other                                              2,238          2,872
                                                --------      ---------
                                                $ 11,496      $  17,086
                                                ========      =========

5.       BANK AND AFFILIATE LOANS

         The Company's  Japanese  subsidiary had loans with Bank of Yokohama and
         Sakura  Bank  totaling  $2,905 at  September  30,  1995.  The  floating
         interest  rates to the banks  ranged from 1.6 percent to 2.6 percent in
         1995. Such loans were guaranteed by Siemens affiliates.

         In fiscal 1996 the Company's Japanese  subsidiary repaid its bank loans
         first  refinancing  with  an  affiliate  of  Siemens  and  subsequently
         refinancing  with  Citibank.  Japanese  bank  debt  totaled  $6,318  at
         September 30, 1996.  Interest on the loans is at a floating market rate
         which was 0.7 percent at September 30, 1996.

6.       LINE OF CREDIT

         The line of credit represents  intercompany borrowings outstanding from
         Siemens of $18,900 and $18,426 at September 30, 1995 and 1996. Interest
         expense has been  calculated  at floating  market rates for each of the
         periods presented, which were 6.2 percent and 4.9 percent for the years
         ended  September  30, 1995 and 1996,  respectively.  Subsequent to year
         end, the Company paid off its outstanding  line of credit  balance.  In
         addition,  the Company  obtained a credit  line for a one year  $25,000
         revolving  loan  facility  with Deutsche Bank AG to support its working
         capital needs (the "Credit Facility").


                                                                           
                                       F-9

<PAGE>


         The 1995 financial  statements  include  non-interest  bearing advances
         from  Siemens AG of $7,000  which were repaid by the  Company  from the
         proceeds of the offering.

7.       LEASE COMMITMENTS

         The Company leases  operating  facilities and equipment under operating
         leases which expire at various dates through 2001. The lease agreements
         require  payment  of real  estate  taxes,  insurance,  and  maintenance
         expenses by the Company.

         Minimum  lease  payments for future  fiscal  years under  noncancelable
         operating leases as of September 30, 1996 are:

         Fiscal Year Ending September 30,                               Total
         --------------------------------                              ------

         1997                                                          $1,345
         1998                                                           1,092
         1999                                                             688
         2000                                                             535
         2001 and thereafter                                              358
                                             
         Rent expense  charged to operations  for the years ended  September 30,
         1994,  1995  and  1996,   approximates  $1,306,   $1,300,  and  $1,568,
         respectively.

8.       EMPLOYEE BENEFIT PLANS

         Substantially   all  of  the  Company's   U.S.  and  German   employees
         participate in defined benefit  pension plans.  The Company's U.S. plan
         began in fiscal 1995. As is the normal practice with German  companies,
         the German plan is unfunded.

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

                                                            September 30,     
                                                       -----------------------
                                                         1995           1996  
                                                       --------      ---------
Actuarial present value of benefit obligation:
         Vested employees                              $  1,946      $   2,389
         Nonvested employees                              1,126          1,040
                                                       --------      ---------
            Accumulated benefit obligation                3,072          3,429
Effects of assumed future compensation increase             880            987
                                                       --------      ---------
            Projected benefit obligation                  3,952          4,416
Plan assets                                                --              709
                                                       --------      ---------
            Projected benefit obligation in excess
               of plan assets                             3,952          3,707
Unrecognized net gain                                       465            403
Unrecognized prior service cost                            (655)          (592)
                                                       --------      ---------
         Accrued Pension Cost                          $  3,762      $   3,518
                                                       ========      =========


                                      F-10

<PAGE>


         Pension costs consist of the following components:

                                                   Years ended September 30,
                                                   -------------------------
                                                   1994      1995      1996
                                                   -----     -----     -----

Service cost                                       $ 203     $ 391     $ 431
Interest on projected benefit obligations            144       229       275
Amortization of unrecognized prior service cost       --        63        64
Amortization of unrecognized gain                     (2)      (32)      (11)
                                                   -----     -----     -----
Net pension cost                                   $ 345     $ 651     $ 759
                                                   =====     =====     =====



         Pensions  generally  provide  benefits  based on years  of  service.  A
         discount  rate for the U.S.  of 8.0  percent  (7.0  percent for foreign
         plan) as of September  30,  1996,  7.5 percent (7.0 percent for foreign
         plan) as of  September  30,  1995,  and 8.0  percent  (7.5  percent for
         foreign plan) as of September 30, 1994, is assumed. Increases in future
         compensation  levels for the U.S.  plan are  projected  at 6 percent (3
         percent for foreign plan).  Prior service costs and actuarial gains and
         losses are  generally  amortized  over the  average  remaining  service
         period of active employees.

         The Plan assets of $709 represent the amount Siemens  Corporation  will
         transfer to a separate trust pursuant to Section 414(I) of the Internal
         Revenue  Code of 1986,  as amended,  to satisfy the pension  obligation
         relating to the RSI participants in the Siemens Corporation  Retirement
         Plan in favor of such participants.

         RSI has a 401(k) plan for the benefit of all eligible  U.S.  employees,
         as defined by the plan. Participating employees may contribute up to 16
         percent of their qualified annual compensation.  The Company matches 50
         percent  of  the  first  6  percent  of  the  employees'   compensation
         contributed as a salary deferral.  Company  contributions for the years
         ended  September  30,  1994,  1995 and 1996  are  $95,  $115 and  $119,
         respectively.

9.       INCOME TAXES

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

                                             Years ended September 30,
                                         ----------------------------------
                                           1994         1995         1996
                                         --------     --------     --------

         United States                   $  1,315     $    649     $  3,680
         Germany                           (3,845)       5,631        8,186
         France                               140          289          169
         Italy                                 93          193          109
         Japan                               (819)        (497)         100
                                         --------     --------     --------

                                         $ (3,116)    $  6,265     $ 12,244
                                         ========     ========     ========


                                      F-11

<PAGE>



         The  provision  for income tax expense  (benefit)  is  comprised of the
following amounts:

                                               Years ended September 30,
                                             ------------------------------
                                              1994        1995       1996
                                             -------     -------    -------
Current:
     United States                           $  --       $  --      $  --
     Foreign                                     (94)        576      3,838
                                             -------     -------    -------
          Total current                          (94)        576      3,838
Deferred:                                 
                                          
     United States                               465         249      1,316
     Foreign                                  (1,793)      2,227       (198)
                                             -------     -------    ------- 
             Total deferred                   (1,328)      2,476      1,118
                                             -------     -------    -------
                                          
             Total income tax expense     
             (benefit)                       $(1,422)    $ 3,052    $ 4,956
                                             =======     =======    =======
                                      


         Statutory tax rates in the U.S., Italy,  France,  and Japan approximate
         35  percent,  52  percent,  37 percent  (33  percent  in 1994),  and 52
         percent,  respectively, for all periods presented. German corporate tax
         law applies the  imputation  system with regard to the  taxation of the
         income of a corporation (such as RSL). In general,  retained  corporate
         income is subject to a  municipal  trade tax  (which  for  Hamburg  and
         Gunding on a combined basis is 16.7%),  which is deductible for federal
         corporate income tax purposes,  a federal  corporate income tax rate of
         45% (50% prior to January 1, 1994) and,  effective  January 1, 1995,  a
         surcharge of 7.5% on the federal corporate income tax amount.

         Profits which are distributed by a German  corporate  taxpayer (such as
         RSL)  in the  form of a  dividend  are  subject  to a  reduced  federal
         corporate  income  tax rate of 30% (36%  prior to January 1, 1994) plus
         the  7.5%  surcharge  on  the  federal   corporate  income  tax  amount
         calculated at the reduced rate.  Dividends  paid by RSL to  Rofin-Sinar
         Technologies Inc. ("RST") are subject to a withholding tax at a rate of
         5% pursuant to the income tax treaty  currently  in effect  between the
         United States and Germany.

         The  difference  between  actual  income  tax  expense  and the  amount
         computed by applying the U.S.  federal income tax rate of 35 percent is
         as follows:

<TABLE>
                                                               Years ended September 30,
                                                             -------------------------------
                                                              1994        1995        1996
                                                             -------     -------     -------

<S>                                                          <C>         <C>         <C>    
Computed "expected" tax expense (benefit)                    $(1,060)    $ 2,193     $ 4,285
Foreign operating loss for which no benefit is recognized        421         257        --
Difference between U.S. and foreign statutory rates             (387)        446         741
Change in foreign tax rate                                      (365)        147        --
Other                                                            (31)         (9)        (70)
                                                             -------     -------     -------

Actual tax expense (benefit)                                 $(1,422)    $ 3,052     $ 4,956
                                                             =======     =======     =======

</TABLE>

                                      F-12

<PAGE>


         The tax  effects  of  temporary  differences  that give rise to the net
         deferred tax assets are as follows:

                                                          September 30,
                                                      ---------------------
                                                        1995         1996
                                                      --------     --------
Deferred tax assets:
    Foreign:                                              
                                                    
             German reorganization benefits           $  3,621     $  2,826
             Net operating loss carryforwards            2,157        1,687
             Pension accrual                              --            247
             Inventory                                    --            701
             Other, net                                    283          198
                                                      --------     --------   
                                                         6,061        5,659
    United States:                                  
             Bad debt allowance                            105          105
             Accrued liabilities                           980          811
             Inventory                                   1,300          613 
             Net operating loss carryforward             4,340        3,914
             Other                                          60          155
                                                      --------     --------
                                                    
             Gross deferred tax assets                  12,846       11,257
             Less:  Valuation allowance                 (2,028)      (1,741)
                                                      --------     --------
                                                    
                      Net deferred tax assets           10,818        9,516
                                                    
    Deferred tax liabilities:                       
             Foreign:                               
                      Depreciation                      (2,501)      (2,449)
                      Inventory                           (916)        (941)
                      Bad debt allowance                  (297)        (129)
                      Accrued liabilities                 (519)        (273)
                                                      --------     --------
                                                    
                                                        (4,233)      (3,792)
                                                    
             United States:                         
                      Pension accrual                     --           (200)
                      Deferred tax liabilities          (4,233)      (3,992)
                                                    
             Net deferred income tax assets           $  6,585     $  5,524
                                                      ========     ========
                                            

         In  assessing  the  realizability  of deferred  tax assets,  management
         considers  whether it is more likely than not that some  portion or all
         of  the  deferred  tax  assets  will  not  be  realized.  The  ultimate
         realization  of deferred tax assets is dependent upon the generation of
         future  taxable  income  during the  periods in which  those  temporary
         differences  become  deductible.  Management  considers  the  scheduled
         reversal of deferred tax liabilities,  projected future taxable income,
         and tax planning  strategies in making this assessment.  Based upon the
         level of historical  taxable income and  projections for future taxable
         income  over  the  periods  in  which  the   deferred  tax  assets  are
         deductible,  management  believes  it is more  likely than not that the
         Company will realize the benefits of these deductible differences,  net
         of the existing valuation allowances at September 30, 1996.

         At September 30, 1996, the Company has U.S.  federal net operating loss
         carryforwards  available of $11,200, which expire in 2008, and Japanese
         net operating loss  carryforwards of $3,300,  which expire in 2000. The
         annual  utilization  by the  Company  of its U.S.  net  operating  loss
         carryforwards  will be subject to  limitation  under Section 382 of the
         Internal  Revenue  Code  of  1986,  as  amended,  as a  result  of  the
         occurrence of a change of ownership within the meaning of Section 382.


                                      F-13

<PAGE>


10.      RELATED PARTY TRANSACTIONS

         The Company  purchases  certain  goods and services from Siemens AG and
         its affiliates, which were considered related parties through September
         26, 1996, the effective date of the IPO. The amounts of such purchases,
         which are primarily  raw material  inventories,  is $2,704,  $2,445 and
         $4,379  for  the  years  ended  September  30,  1994,  1995  and  1996,
         respectively.  The Company  also  recorded  sales to Siemens AG and its
         affiliates  totaling  $2,890,  $1,241 and  $5,420  for the years  ended
         September 30, 1994, 1995 and 1996, respectively.

         The  Company  also had sales to one of its joint  venture  partners  in
         Japan  amounting to $1,323,  $2,172 and $1,969 in 1994,  1995 and 1996,
         respectively.

         The  Company's  purchases  from  and  sales  to  related  parties  have
         generally  been on terms  comparable  to those  available in connection
         with purchases from or sales to unaffiliated parties.

11.      GEOGRAPHIC INFORMATION

         Assets,  revenues and income (loss) before taxes, by geographic region,
         at September  30, 1995 and 1996 and for the years ended  September  30,
         1994, 1995 and 1996, are summarized below:

                                                      September 30,
Assets                                             1995          1996
                                                 ---------     ---------

        United States                            $  28,129     $  60,168
        Germany                                     59,678        65,493
        Other                                        9,524        13,184
        Intercompany eliminations                   (6,336)       (5,698)
                                                 ---------     ---------

        Total                                    $  90,995     $ 133,147
                                                 =========     =========

<TABLE>

                             Total Business                         Intercompany Revenues                 External Revenues        
                        Years Ended September 30,                 Years Ended September 30,           Years Ended September 30,    
Revenues             1994         1995         1996         1994         1995         1996         1994         1995         1996 
                     ----         ----         ----         ----         ----         ----         ----         ----         ---- 
                                                                                                                                  
<S>              <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>      
United States    $  30,627    $  35,189    $  45,227    $   1,668    $   3,595    $   5,347    $  28,959    $  31,594    $  39,880
Germany             44,479       70,020       88,433       12,884       21,419       28,083       31,595       48,601       60,350
Other                8,936       12,534       16,350          273          263          677        8,663       12,271       15,673
Intercompany                                                                                                                      
  eliminations     (14,825)     (25,277)     (34,107)     (14,825)     (25,277)     (34,107)        --           --           --  
                 ---------    ---------    ---------    ---------    ---------    ---------    ---------    ---------    ---------
         Total   $  69,217    $  92,466    $ 115,903    $    --      $    --      $    --      $  69,217    $  92,466    $ 115,903
                 =========    =========    =========    =========    =========    =========    =========    =========    =========
                                                                                            
</TABLE>

                                            Years Ended September 30,
                                         -------------------------------
Income (loss) before income taxes         1994        1995        1996
                                         -------     -------     -------

    United States                        $ 1,315     $   649     $ 3,680
    Germany                               (3,845)      5,631       8,186
    Other                                   (586)        (15)        378
                                         -------     -------     -------

    Total                                $(3,116)    $ 6,265     $12,244
                                         =======     =======     =======


                                      F-14

<PAGE>


12.      STOCK INCENTIVE PLANS

         Directors' Plan

         The  Company  has  reserved  100,000  shares  of  common  stock for the
         Directors'  Plan,  which  covers  non-employee  members of the Board of
         Directors. Under this plan each member of the Board of Directors who is
         not an employee of the  Company  and who is elected or  continues  as a
         member of the Board of  Directors  is  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  provides  that
         non-employee  directors  aged 65 or older,  upon their  appointment  or
         election  to the  Board of  Directors,  will  receive,  in lieu of such
         initial and annual  grants of shares of common  stock,  7,500 shares of
         restricted  stock  which shall vest in five equal  installments  on the
         date of grant and each of the  following  four  anniversaries  thereof.
         Prior  to  vesting,   no  shares  of  restricted  stock  may  be  sold,
         transferred,  assigned,  pledged,  encumbered or otherwise disposed of,
         subject to certain  exceptions.  The  Directors'  Plan will continue in
         effect  until the earlier of ten years from the date of the first grant
         or the termination of the Directors' Plan by the Board of Directors.  A
         total of 10,500  shares are issued  and  outstanding  under the plan at
         September 30, 1996, of which 6,000 vest in future periods.

         Equity Incentive Plan

         The  Company  has an  Equity  Incentive  Plan,  whereby  incentive  and
         nonqualified stock options, restricted stock and performance shares may
         be 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.  There have been no incentive  stock
         options,  restricted stock or performance shares granted in the current
         year. On September 26, 1996, nonqualified stock options were granted to
         officers  and other key  employees.  Options will expire not later than
         ten  years  after  the  date on  which  they are  granted,  and  become
         exercisable at such times and in such installments as determined by the
         Compensation  Committee  of the  Board of  Directors.  The  balance  of
         outstanding  stock  options as of September  30, 1996,  and all options
         activity for the period then ended are as follows:

                                            Number          Average
                                           of Shares     Option Price
                                           ---------     ------------

    Granted September 26, 1996               282,000        $ 9.50
    Options Exercised                              0     
                                           ---------        ------
    September 30, 1996                                   
    Outstanding                              282,000        $ 9.50
                                           ---------        ------
                                                         
    Exercisable                                    0          N/A
                                           ---------        ------
                                                         
    Available for future grants            1,218,000
                                           ---------        ------


13.     RECENTLY ISSUED ACCOUNTING STANDARDS

        During October 1995,  the Financial  Accounting  Standards  Board issued
        Statement No. 123, "Accounting for Stock-Based  Compensation." Effective
        for fiscal years  beginning  after December 15, 1995,  Statement No. 123
        encourages  companies  to  include  the fair  value of any stock  awards
        issued as compensation expense within their income statements. Companies
        that choose to remain with  Accounting  Principles  Board Opinion No. 25
        (which uses the intrinsic value method to account for stock awards) must
        disclose  pro forma net  income  and  earnings  per share as if the fair
        value of the  award  had been  included  as  compensation  expense.  The
        Company anticipates remaining with the intrinsic value method.

                                      F-15

<PAGE>


        On March 31,  1995,  the  Financial  Accounting  Standards  Board issued
        Statement No. 121,  "Accounting for the Impairment of Long-Lived  Assets
        and for Long-Lived  Assets to be Disposed of." This  Statement  provides
        guidance for  recognition  and  measurement  of impairment of long-lived
        assets,  certain  identifiable  intangibles and goodwill related both to
        assets to be held and used and assets to be  disposed  of.  The  Company
        intends  to adopt  this  Statement  as of the first  quarter of its next
        fiscal year and  anticipates  that the effect of such  adoption  will be
        immaterial.

                                      F-16

<PAGE>

                          Independent Auditors' Report


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

Under date of November 6, 1996, we reported on the consolidated balance sheets
of Rofin-Sinar Technologies Inc. and Subsidiaries as of September 30, 1995 and
1996, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three year period ended
September 30, 1996, which are included in the annual report on Form 10-K. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related financial statement schedule in the
annual report on Form 10-K. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audit.

In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.


                                          KPMG PEAT MARWICK LLP



Detroit, Michigan
November 6, 1996



                                      F-17
<PAGE>
                                                                     SCHEDULE II

                 ROFIN-SINAR TECHNOLOGIES INC. AND SUBSIDIARIES
                        Valuation and Qualifying Accounts
               Years ended September 30, 1993, 1994, 1995 and 1996
                             (thousands of dollars)


                           Balance at    Charged to                   Balance at
                           Beginning     Costs and      Deductions      End of
                           of Period      Expenses                      Period
                           ----------    ----------     ----------    ----------

September 30, 1993            1,035         1,513          (553)          1,995

September 30, 1994            1,995           831        (1,821)          1,005

September 30, 1995            1,005         1,549        (1,302)          1,252

September 30, 1996            1,252           484          (773)            963

                                      F-18

<PAGE>

                                INDEX TO EXHIBITS

Exhibit No.                   Exhibit
-----------                   -------
   11.1                  Earnings Per Share Table
   23.1                  Independent Auditors' Consent
   27.1                  Financial Data Schedule